UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172018
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
tmuslogo.jpg
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 98006-1350
(Address of principal executive offices) (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 Name of Each Exchange on Which Registered
Common Stock, $0.00001 par value per share The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨x No x¨
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to ItemRule 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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     x                        Accelerated filer             ¨
Non-accelerated filer     ¨(Do not check if a smaller reporting company)    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 x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of June 30, 2017,2018, the aggregate market value of the registrant’svoting and non-voting common stockequity held by non-affiliates of the registrant was $17.8$18.3 billion based on the closing sale price as reported on the NASDAQ. Global Select Market. As of February 2, 2018,4, 2019, there were 854,428,593850,221,464 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporateswill be incorporated by reference from certain portions of the definitive Proxy Statement for the registrant’sRegistrant’s Annual Meeting of Stockholders, which definitive Proxy Statement shallwill be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal yearpursuant to whichRegulation 14A or will be included in an amendment to this Report relates.Report.


T-Mobile US, Inc.
Form 10-K
For the Year Ended December 31, 20172018

Table of Contents
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
  
  


Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K (“Form 10-K”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including information concerning our future results of operations, are forward-looking statements. These forward-looking statements are generally identified by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could” or similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties and may cause actual results to differ materially from the forward-looking statements. The following important factors, along with the Risk Factors included in Part I, Item 1A of this Form 10-K, could affect future results and cause those results to differ materially from those expressed in the forward-looking statements:

the failure to obtain, or delays in obtaining, required regulatory approvals for the merger (the “Merger”) with Sprint Corporation (“Sprint”), pursuant to the Business Combination Agreement with Sprint and other parties therein (the “Business Combination Agreement”) and the other transactions contemplated by the Business Combination Agreement (collectively, 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 operating results because of a failure to complete the Merger 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 of Sprint or that may arise;
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 (“IT”) and data security;security, resulting in unauthorized access to customer confidential information;

natural disasters, terrorist attacks or similar incidents;
unfavorable outcomes of existing or future litigation;
any changes in the regulatory environments in which we operate, including any increase in restrictions on the ability to operate our networks;networks and changes in data privacy laws;
any disruption or failure of our third parties’ or key suppliers’ provisioning of products or services;
material adverse changes in labor matters, including labor campaigns, negotiations or additional organizing activity, and any resulting financial, operational and/or reputational impact;
the ability to make payments on our debt or to repay our existing indebtedness when due or to comply with the covenants contained therein;
adverse change in the ratings of our debt securities or adverse conditions in the credit markets;
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 Deutsche Telekom results in changes to the royalty rates for our trademarks.trademarks;
the possibility that we may be unable to adequately protect our intellectual property rights or be accused of infringing the intellectual property rights of others;
our business, investor confidence in our financial results and stock price may be adversely affected if our internal controls are not effective; and
interests of a majority stockholder may differ from the interests of other stockholders.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. In this Form 10-K, unless the context indicates otherwise, references to “T-Mobile,” “T-Mobile US,” “our Company,” “the Company,” “we,” “our,” and “us” refer to T-Mobile US, Inc., a Delaware corporation, and its wholly-owned subsidiaries.

Investors and others should note that we announce material financial and operational information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to also use the @TMobileIR Twitter account (https://twitter.com/TMobileIR) and the @JohnLegere Twitter (https://twitter.com/JohnLegere), Facebook and Periscope accounts, which Mr. Legere also uses as means for personal communications and observations, as means of disclosing information about the Companyus and itsour services and for complying with itsour disclosure obligations under Regulation FD. The information we post through these social media channels may be deemed material. Accordingly, investors

should monitor these social media channels in addition to following the Company’sour press releases, SEC filings and public conference calls and webcasts. The social media channels that we intend to use as a means of disclosing the information described above may be updated from time to time as listed on the Company’sour investor relations website.

PART I.

Item 1. Business

Business Overview and Strategy

Un-carrier Strategy

We are the Un-carrier. Through our Un-carrier strategy, we’ve disrupted the wireless communicationscommunication services industry by listening to our customers and providing them with added value and an exceptional experience. We introduced our Un-carrier strategy in 2013 and have since announced 14experience, including implementing signature initiatives that changed the wireless industry forever. We ended annual service contracts, overages, unpredictable international roaming fees, data buckets and more. Customer response to our Un-carrier strategy has allowed T-Mobileus to grow into the third largest wireless provider in the United States. We will continue our relentless focus on customers and are determined to bring the Un-carrier to every potential customer in the United States.

Our relentless focus on customer experience through increased investment in network expansion, customer care, distribution expansion, and digital initiatives has strengthened our customer growth and increased customer retention and satisfaction.satisfaction, including the growing success of new customer segments and rate plans such as T-Mobile ONE 55+, T-Mobile ONE Military, T-Mobile for Business and T-Mobile Essentials as well as continued growth in existing and Greenfield markets. We continue to invest and innovate in these areas to deliver our customers the best value in the industry. Everything we do is powered by our nationwide 4G LTELong-Term Evolution (“LTE”) network, and we are rapidly preparing for the next generation of 5G services. Going forward, it is this network that will allow us to deliver innovative new products and services with the same customer focused and industry disrupting mentality that has redefined wireless service in the United States.

History

T-Mobile USA, Inc. (“T-Mobile USA”), a Delaware corporation, was formed in 1994 as VoiceStream Wireless PCS (“VoiceStream”), a subsidiary of Western Wireless Corporation (“Western Wireless”). VoiceStream was spun off from Western Wireless in 1999, acquired by Deutsche Telekom AG (“Deutsche Telekom”DT”) in 2001 and renamed T-Mobile USA, Inc. in 2002.

In 2013, T-Mobile US, Inc., a Delaware corporation, was formed through the business combination betweenof T-Mobile USA and MetroPCS Communications, Inc. (“MetroPCS”). The business combination was accounted for as a reverse acquisition with T-Mobile USA as the accounting acquirer. Accordingly, T-Mobile USA’s historical financial statements became the historical financial statements of the combined company.

Our common stock trades onIn September 2018, we announced the NASDAQ Global Select Marketrebranding of The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “TMUS.”our prepaid brand, MetroPCS, as Metro™ by T-Mobile.

Business

We provide wireless services to 72.679.7 million customers in the postpaid, prepaid and wholesale marketscustomers and generate revenue by providing affordable wireless communication services to these customers, as well as a wide selection of wireless devices and accessories. Our most significant expenses are relatedrelate to acquiring and retaining high-quality customers, providing a full range of devices, compensating employees, and operating and expanding our network. We provide service, devices and accessories across our flagship brands, T-Mobile and MetroPCS,Metro by T-Mobile, through our owned and operated retail stores, third party distributors andas well as through our websites (www.T-Mobile.com and www.MetroPCS.com). and customer care channels. In addition, we sell devices to dealers and other third-party distributors for resale through independent third-party retail outlets and a variety of third-party websites. The information on our websites is not part of this Form 10-K. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additionadditional information.

In 2018, we completed the acquisition of television innovator Layer3 TV, Inc. (“Layer3 TV”). This transaction represented an opportunity to acquire a complementary service to our existing wireless service to advance our video strategy. For more information, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

On April 29, 2018, we entered into the Business Combination Agreement with Sprint to merge in an all-stock transaction. The combined company will be named “T-Mobile,” and as a result of the Merger, is expected to be able to rapidly launch a nationwide 5G network, accelerate innovation and increase competition in the U.S. wireless, video and broadband industries. The Merger is subject to regulatory approvals and certain other customary closing conditions. We expect to receive regulatory approval in the first half of 2019. For more information regarding our Business Combination Agreement, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

Customers

We provide wireless communication services to three primary categories of customers:

Branded postpaid customers generally include customers thatwho are qualified to pay after receiving wireless communication services utilizing phones, mobile broadbandDIGITS or connected devices (including tablets), or DIGITS;

which includes tablets, wearables and SyncUp DRIVE™;
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;Metro by T-Mobile; and
Wholesale customers include Machine-to-Machine (“M2M”) and MVNOMobile Virtual Network Operator (“MVNO”) customers that operate on our network but are managed by wholesale partners.

We generate the majority of our service revenues by providing wireless communication services to branded postpaid and branded prepaid customers. Our ability to acquire and retain branded postpaid and prepaid customers is important to our business in the generation of service revenues, equipment revenues and other revenues. In 2017,2018, our service revenues generated by providing wireless communication services by customer category were:

65% Branded postpaid customers;
31%30% Branded prepaid customers; and
4%5% Wholesale customers and Roaming and other services.

Segment and Geographic Information

We operate as a single operating segment. See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

All of our revenues for the years ended December 31, 2018, 2017, 2016, and 20152016 were earned in the United States, including Puerto Rico and the U.S. Virgin Islands. All of our long-lived assets are located in the United States, including Puerto Rico and the U.S. Virgin Islands.

Services and Products

We provide wireless communication services through a variety of service plan options. We also offer a wide selection of wireless devices, including smartphones, tablets and other mobile communication devices, which are manufactured by various suppliers. Services, devices and accessories are offered directly to consumers through the retail stores we operate, as well as through our websites and customer care channels. In addition, we sell devices to dealers and other third-party distributors for resale through independent third-party retail outlets and a variety of third-party websites.

Our primary service plan offerings,offering, which allowallows customers to subscribe for wireless communication services separately from the purchase of a device include:

Ouris our T-Mobile ONE plan (“T-Mobile ONE”), which gives our customers unlimited calls,includes:

Unlimited talk, unlimited text and unlimited high-speed 4G LTE data on their device, where monthly wireless service fees and sales taxes are included in the advertised monthly recurring charge. On T-Mobile ONE, videocharge;
Video that typically streams at DVD (480p) quality and tethering is at maximum 3G speeds. Customers on T-Mobile ONE canspeeds;
The ability for customers to keep their price for service until they decide to change it and participating customers who use 2 GB or less of data in a month will get up to a $10 credit per qualifying line on their next month’s bill. Additionally,it;
The ability for qualifying T-Mobile ONE customers on family plans canto opt in for a standard monthly Netflix service plan at no additional cost. Customers cancost; and
The ability for customers to choose to add on additional features for an additional cost as follows:
Onon T-Mobile ONE Plus, where customers also receive unlimited High Definitionreceive:
Unlimited high definition video streaming, 10streaming;
20 GB of high-speed 4G LTE tethering, tethering;
Voicemail to Text, NameID and unlimited Gogo in-flight internet passes on capable domestic flightsflights; and up
Up to two times faster speeds when traveling abroad in 140+210+ countries and destinations.
On T-Mobile ONE Plus International, customers receive the benefits of T-Mobile ONE Plus as well as free and reduced calling from the U.S., Mexico, and Canada to foreign countries and unlimited high-speed 4G LTE tethering.
Simple Choice plans, which were launched in 2013 as part of phase 1.0 of our Un-carrier initiatives, eliminated annual service contracts and simplified the lineup of consumer rate plans to one affordable plan for unlimited voice and messaging services with the option to add data services. On January 25, 2017, we streamlined our Simple Choice plan offerings to new customers into our T-Mobile ONE plan.

Depending on their credit profile, customers are qualified either for postpaid or prepaid service.


Our device options for customers on T-Mobile ONE, and previously on Simple Choice plans, include:

Dependingfor qualifying customers, depending on their credit profile, qualifying customers who purchase a device from us have the option of financing all or a portion of the device purchase price at the time of sale over an installment period of up to 2436 months using our Equipment Installment Plan (“EIP”).an EIP.
In addition,for qualifying customers who finance their initial device with an EIP, canan option to enroll in our Just Upgrade My Phone (“JUMP!®) program to later upgrade their device. Upon a qualifying JUMP! upgrade, the customer’s remaining EIP balance is settled provided they trade-in their used device at the time of upgrade in good working condition and purchase a new device from us on a new EIP.
In 2015, we introduced JUMP! On Demand. With JUMP! On Demand,Demand™ includes a low monthly payment that covers the cost of leasing a new device and gives qualified customers the freedom to exchange it for a new device up to one time per month for no extra fee. Upon device upgrade or at lease end, customers must return their device in good working condition or purchase their device. Customers that choose to purchase their device have the option to finance their device over a nine-month EIP.

Network

The speedWe continue to expand the footprint and increase the capacity of our LTE network allows us to offer “America’s Best Unlimited Network” tobetter serve our customers. Our advancements in network technology and our spectrum resources ensure we can continue to increase the breadth and depthcapabilities of our 4G LTE network as the industry moves towardswe prepare for our nationwide deployment of 5G.

Spectrum Growth

We provide mobilewireless communication services utilizing mid-band spectrum licenses, such as Advanced Wireless Services (“AWS”) and Personal Communications Service (“PCS”), and low-band spectrum licenses utilizing our 600 MHz and 700 MHz spectrum.

We owned an average of 110 MHz of spectrum nationwide as of December 31, 2017,2018, comprised of an average of 31 MHz in the 600 MHz band, 10 MHz in the 700 MHz band, 29 MHz in the 1900 MHz PCS band and 40 MHz in the AWS band. This is compared toWe also own millimeter wave spectrum that comprises an average of 79264 MHz covering over 110 million points of presence (“POPs”) in the 28 GHz band and 105 MHz covering nearly 45 million POPs in the 39 GHz band.

We will evaluate future spectrum nationwide as of December 31, 2016.purchases in current and upcoming auctions and in the secondary market to augment our current spectrum position.
In April 2017, the Federal Communications Commission (the “FCC”) announced the results of the broadcast incentive auction which showed that we purchased a nationwide average of 31 MHz of 600 MHz low-band spectrum for $8.0 billion. This spectrum covered 328 million points of presence (“POPs”) as of December 31, 2017. See Note 5 - Goodwill, Spectrum Licenses and Other Intangible Assets included in Part II, Item 8 of this Form 10-K for further information.

As of December 31, 2017, T-Mobile2018, we owned a nationwide average of 31 MHz of 600 MHz low-band spectrum. We now own approximately 41 MHz of low-band spectrum (600 MHz and 700 MHz), quadruple its pre-auction low-band holdings. The purchased spectrum coverscovering 100% of the U.S.
We are building out 5G across the US, including deployment in six of the top 10 markets, including New York and Los Angeles, in 2018. This network will be ready for the introduction of the first standards-based 5G smartphones in 2019. We plan on the delivery of a nationwide standards-based network next year.
In 2018, we entered into two multi-year contracts that will support the deployment of a nationwide 5G network. In July 2018, we and Nokia entered into a multi-year $3.5 billion contract for Nokia to provide us with complete end-to-end 5G technology, software and services. In September 2018, we and Ericsson announced a multi-year $3.5 billion contract in which Ericsson will provide us with the latest 5G New Radio hardware and software compliant with 3rd Generation Partnership Project (“3GPP”) standards.
We have started deployment of 600 MHz spectrum on an aggressive schedule. As of December 31, 2017, at least 10 MHz2018, we were live in more than 2,700 cities and towns in 43 states and Puerto Rico covering hundreds of thousands of square miles. Combining 600 and 700 MHz spectrum, covering over 1.2we have deployed low band spectrum to 301 million square miles and approximately 62 million POPs was clear and available for deployment.POPs.
T-Mobile hasWe have actively engaged with broadcasters to accelerate FCCthe Federal Communications Commission (“FCC”) spectrum clearance timelines, entering into approximately 4095 agreements with several parties. These agreements will,are expected to, in aggregate, accelerate clearing, bringing the total clearing target to over 100 million POPs expected by year-end 2018. We expect to reach a clearing target of 250approximately 272 million POPs by year-end 2019. T-Mobile remainsAs of December 31, 2018, we had cleared approximately 135 million POPs. We remain committed to assisting broadcasters occupying 600 MHz spectrum to move to new frequencies.
In addition to spectrum clearing, T-Mobile aggressively started deployments ofWe currently have 29 devices compatible with 600 MHz spectrum, lighting up spectrum in 586 cities and towns in 28 states acrossincluding the country, covering 300,000 square miles as of December 31, 2017.latest iPhone generation.
We had two new 600 MHz-capable devices inexpect our retail distribution for the 2017 holiday season (LG V30 and Samsung GS8 Active). We expect more than a dozen new smartphones to be rolled out in 2018 to be 600 MHz-capable.
Our 600 MHz spectrum holdings will be used to deploy America'sAmerica’s first nationwide standards-based 5G network expected by 2020.next year. 600 MHz 4G LTE radios are software upgradeable to support 5G as it becomes available later this year.
Over the last year, we have entered into and closed on various agreements for the acquisition and exchange of 700 MHz A-Block, AWS and PCS spectrum licenses. See Note 56 – Goodwill, Spectrum LicensesLicense Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

We intend to opportunistically acquire spectrum licenses in private party transactions and future FCC spectrum license auctions.
Our wireless infrastructure included approximately 61,000 macro sites and approximately 18,000 distributed antenna system (DAS) and small cell sites as of December 31, 2017.

Network Coverage Growth

We continue to expand our coverage breadth and, as of December 31, 2018, covered 322more than 325 million people with 4G LTE asLTE.
As of December 31, 2017.
By the end of 2018, we are targeting a population coverage of 325 millionhad equipment deployed on approximately 64,000 macro towers and a geographic coverage of 2.5 million square miles.21,000 distributed antenna system (“DAS”) and small cell sites. We remain on plan to roll out approximately 20,000 small cells through 2019.

Network Speed Leadership

As “America��s Best Unlimited Network,” weWe offer the fastest nationwide 4G LTE upload and download speeds in the United States. The fourth quarter of 20172018 is the 16th20th consecutive quarter we have led the industry in both categories and this is based on the results of millions of user-generated speed tests.

Network Capacity Growth

We continue to expand our capacity through the re-farming of existing spectrum and implementation of new technologies including Voice over LTE (“VoLTE”), Carrier Aggregation, 4x4 MIMO,multiple-input and multiple-output (“MIMO”), 256 Quadrature Amplitude Modulation (“QAM”) and Licensed Assisted Access (“LAA”).

VoLTE comprised almost 80%87% of total voice calls as of December 31, 2017,2018, compared to 64%80% as of December 31, 2016.2017. Moving voice traffic to VoLTE frees up spectrum and allows for the transition of spectrum currently used for 2G and 3G to 4G LTE. We are leading the U.S. wireless industry in the rate of VoLTE adoption.
Carrier aggregation is live for our customers in over 875923 markets. This advanced technology delivers superior speed and

performance by bonding multiple discrete spectrum channels together.
4x4 MIMO is currently available in over 475564 markets. This technology effectively delivers twice the speed and incremental network capacity to customers by doubling the number of data paths between the cell site and a customer's device. We plan to startstarted deploying massive MIMO (FD-MIMO)(FD-capable and 5G with future software upgrades) in selected locations later in late 2018.
We have rolled out 256 QAM in over 925988 markets. 256 QAM increases the number of bits delivered per transmission to enable faster speed. T-Mobile isspeeds. We are the first carrier globally to have rolled out the combination of carrier aggregation, 4x4 MIMO and 256 QAM.
T-Mobile is implementing a significant small cell program. We plan to roll out 25,000 small cells in 2018 and early 2019. This is on toptrifecta of the approximately 18,000 small cells and DAS nodes alreadystandards has been rolled out as of the end of 2017. In conjunction with the small cell rollout, weto more than 500 markets.
We have also started rolling out License Assisted Access.LAA, a technology which utilizes unlicensed 5 GHz spectrum to augment available bandwidth. The first LAA small cell went live in New York City in the fourth quarter of 2017.

Distribution

Our network expansion2017 and the technology has provided a unique opportunitysince been rolled out to grow our distribution footprint by over 30 million POPs fromnearly 1,700 cell sites, the beginningvast majority being small cells. Deployments of 2016 through year-end 2017, bringing our total distribution footprint to over 260 million people.LAA have also commenced in 28 cities including Los Angeles, Philadelphia, Washington DC, Atlanta, Houston, Las Vegas, San Diego and New Orleans. In 2017, we built nearly 1,500 new T-Mobile stores and over 1,300 net new MetroPCS stores. Many of these additional stores are in geographic areas where T-Mobile had not previously competed. In 2017, we opened T-Mobile stores in more than 600 cities and towns where we did not previously have a retail presence.

As of December 31, 2017, we had approximately 20,100 total points of distribution, including approximately 2,200 direct owned stores, 13,300 exclusive third party locations and 4,600 non-exclusive third-party locations as well as distribution through our websites and customer care channels. Our distribution density in major metropolitan areas providesLAA has been deployed, customers with capable handsets have observed real-life speeds in excess of 500 Mbps.
In July 2018, we launched our Narrowband Internet of Things (“NB-IoT”) service nationwide, making us the conveniencefirst to launch NB-IoT in the U.S. and the first in the world to launch NB-IoT in the guard bands for improved efficiency. Built on the 3GPP standard, NB-IoT is a low power, wide area network LTE-advanced technology that provides a pathway to 5G Internet of having retailThings and service locations close to where they liveenables many comparable benefits like low power usage, long battery life and work.

Expansion of our distribution footprint will continue in 2018. In 2018, our retail store expansion will be exclusively focused on Greenfield markets, building on this significant future growth opportunity.

low device cost.

Competition

The wireless telecommunications industry is highly competitive. We are the third largest provider of postpaid service plans and the largest provider of prepaid service plans in the U.S. as measured by customers. Our competitors include other national carriers, such as AT&T Inc. (“AT&T”), Verizon Communications, Inc. (“Verizon”) and Sprint Corporation (“Sprint”).Sprint. AT&T and Verizon are significantly larger than us and enjoy greater resources and scale advantages as compared to us. In addition, our competitors include numerous smaller regional carriers, existing MVNOs,mobile virtual network operators (“MVNOs”), including TracFone Wireless, Inc. and, Comcast Corporation (“Comcast”) and Charter Communications, Inc., and future MVNOs, such as Charter Communications,Altice USA, Inc., many of which offer or plan to offer no-contract, postpaid and prepaid service plans. Competitors also include providers who offer similar communication services, such as voice, messaging and data services, using alternative technologies or services. Competitive factors within the wireless telecommunications industry include pricing, market saturation, service and product offerings, customer experience, network investment and quality, development and deployment of technologies, availability of additional spectrum licenses and regulatory changes. Some competitors have shown a willingness to use aggressive pricing as a source of differentiation. Other competitors have sought to add ancillary services, like mobile video, to enhance their offerings. Taken together, the competitive factors we face continue to put pressure on growth and margins as companies compete to retain the current customer base and continue to add new customers.

Employees

As of December 31, 2017,2018, we employed approximately 51,00052,000 full-time and part-time employees, including network, retail, administrative and customer support functions.

Regulation

The FCC regulates many key aspects of our business, including licensing, construction, the operation and use of our network, modifications of our network, control and ownership of our licenses and authorizations, the sale, transfer and acquisition of certain licenses, domestic roaming arrangements and interconnection agreements, pursuant to its authority under the Communications Act of 1934, as amended (“Communications Act”). The FCC has a number of complex requirements and proceedings that affect our operations and that could increase our costs or diminish our revenues. For example, the FCC has rules regarding provision of 911 and E-911 services, porting telephone numbers, interconnection, roaming, internet openness or net neutrality, disabilities access, privacy and cybersecurity, consumer protection, and the universal service and Lifeline programs. Many of these and other issues are being considered in ongoing proceedings, and we cannot predict whether or how such actions will affect our business, financial condition or results of operations. Our ability to provide services and generate revenues could be harmed by adverse regulatory action or changes to existing laws and regulations. In addition, regulation of companies that offer competing services can impact our business indirectly.

Wireless communications providers must be licensed by the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the rules and policies governing the use of the spectrum as

adopted by the FCC. The FCC issues each license for a fixed period of time, typically 1010-15 years independing on the case of cellular, PCS and point-to-point microwaveparticular licenses. AWS licenses have an initial term of 15 years, with successive 10-year terms thereafter. While the FCC has generally renewed licenses given to operating companies like us, the FCC has authority to both revoke a license for cause and to deny a license renewal if a renewal is not in the public interest. Furthermore, we could be subject to fines, forfeitures and other penalties for failure to comply with FCC regulations, even if any such non-compliance was unintentional. In extreme cases, penalties can include revocation of our licenses. The loss of any licenses, or any related fines or forfeitures, could adversely affect our business, results of operations and financial condition.

Additionally, Congress’ and the FCC’s allocation of additional spectrum for broadband commercial mobile radio service (“CMRS”), which includes cellular, PCS, miscellaneous wireless services and specialized mobile radio, could significantly increase competition. We cannot assess the impact that any developments that may occur in the U.S. economy or any future spectrum allocations by the FCC may have on license values. FCC spectrum auctions and other market developments may adversely affect the market value of our licenses in the future. A significant decline in the value of our licenses could adversely affect our financial condition and results of operations. In addition, the FCC periodically reviews its policies on how to evaluate carriers’ spectrum holdings. A change in these policies could affect spectrum resources and competition among us and other carriers.

Congress and the FCC have imposed limitations on foreign ownership of CMRS licensees that exceed 20% direct ownership or 25% indirect ownership. The FCC has ruled that higher levels of indirect foreign ownership, even up to 100%, are presumptively consistent with the public interest albeit subject to review. Consistent with that established policy, the FCC has issued a declaratory ruling authorizing up to 100% ownership of our companyCompany by Deutsche Telekom.DT. This declaratory ruling, and our licenses, are conditioned on Deutsche Telekom’sDT’s and the Company’s compliance with a network security agreement

with the Department of Justice, the Federal Bureau of Investigation and the Department of Homeland Security. Failure to comply with the terms of this agreement could result in fines, injunctions and other penalties, including potential revocation of our spectrum licenses.

While the Communications Act generally preempts state and local governments from regulating the entry of, or the rates charged by, wireless communication providers, certain state and local governments regulate other terms and conditions of wireless service, including billing, termination of service arrangements and the imposition of early termination fees, advertising, network outages, the use of devices while driving, zoning and land use. Additionally, after the FCC’s adoption of the 2017 “Restoring Internet Freedom” Order, a number of states have sought to impose state-specific net neutrality and privacy requirements on providers’ broadband services. The FCC ruling broadly preempts such state efforts, which are inconsistent with the FCC’s federal deregulatory approach, and there are pending court challenges that will determine if such state enactments are lawful. While most states are largely seeking to codify the repealed federal rules, there are differences in some states, notably California, which has passed separate privacy and net neutrality legislation. There are efforts on the Hill to push for federal legislation to codify uniform federal privacy and net neutrality requirements, while also ensuring the preemption of separate state requirements, including the California laws. If not rescinded, separate state requirements will impose significant business costs and could also result in increased litigation costs and enforcement risks. State authority over wireless broadband services will remain unsettled until final action by the courts or Congress.

In addition, the Federal Trade Commission (“FTC”) and other federal agencies have asserted that they have jurisdiction over some consumer protection and elimination and prevention of anticompetitive business practices with respect to the provision of non-common carrier services. Further, the FCC and the Federal Aviation Administration regulate the siting, lighting and construction of transmitter towers and antennae. Tower siting and construction are also subject to state and local zoning, as well as federal statutes regarding environmental and historic preservation. The future costs to comply with all relevant regulations are to some extent unknown and changes to regulations, or the applicability of regulations, could result in higher operating and capital expenses, or reduced revenues in the future.

Available Information

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically at www.sec.gov. Our Form 10-K and all other reports and amendments filed with or furnished to the SEC are also publicly available free of charge on the Investor Relationsinvestor relations section of our website at investor.t-mobile.com or at www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC. Our corporate governance guidelines, code of ethics for senior financial officers, code of business conduct, and charters for the audit, compensation, nominating and corporate governance and executive committees of our Board of Directors are also posted on the Investor Relationsinvestor relations section of our website at investor.t-mobile.com. The information on our websites is not part of this or any other report we file with, or furnishesfurnish to, the SEC.


Item 1A. Risk Factors

In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating T-Mobile.our Company. Our business, financial condition, liquidity, or operating results, as well as the price of our common stock and other securities, could be materially adversely affected by any of these risks.

Risks Related to Our Business and the Wireless Industry

Competition, industry consolidation, and changes in the market for wireless services could negatively affect our ability to attract and retain customers and adversely affect our business, financial condition, and operating results.

We have multiple wireless competitors, some of which have greater resources than us and compete for customers based principally on service/device offerings; price; network coverage, speed and quality;quality and customer service. We expect market saturation to continue to cause the wireless industry’s customer growth rate to be moderate in comparison with historical growth rates, or possibly negative, leading to ongoing competition for customers. We also expect that our customers’ appetite for data services will place increasing demands on our network capacity. This competition and our capacity will continue to put pressure on pricing and margins as companies compete for potential customers. Our ability to compete will depend on, among other things, continued absolute and relative improvement in network quality and customer service, effective marketing and selling of products and services, innovation, attractive pricing, and cost management, all of which will involve significant expenses.

Joint ventures, mergers, acquisitions and strategic alliances in the wireless sector have resulted in and are expected to result in larger competitors competing for a limited number of customers. The two largest national wireless communication providers currently serve a significant percentage of all wireless customers and hold significant spectrum and other resources. Our largest competitors may be able to enter into exclusive handset, device, or content arrangements, execute pervasive advertising and marketing campaigns, or otherwise improve their cost position relative to ours. In addition, refusal of our large competitors to provide critical access to resources and inputs, such as roaming services on reasonable terms could improve their position within the wireless broadband mobile services industry.

We face intense and increasing competition from other service providers as industry sectors converge, such as cable, telecom services and content, satellite, and other service providers. Companies like Comcast and AT&T (and AT&T’s proposed acquisition(with acquisitions of DirecTV and Time Warner, Inc.) will have the scale and assets to aggressively compete in a converging industry. Verizon, through theits acquisitions of AOL, Inc. and Yahoo! Inc. is also a significant competitor focusing on premium content offerings to diversify outside of core wireless. Further, some of our competitors now provide content services in addition to voice and

broadband services, and consumers are increasingly accessing video content from Internet-based providers and applications, all of which create increased competition in this area. These factors, together with the effects of the increasing aggregate penetration of wireless services in all metropolitan areas and the ability of our larger competitors to use resources to build out their networks and to quickly deploy advanced technologies, such as 5G, could make it more difficult for us to continue to attract and retain customers, and may adversely affect our competitive position and ability to grow, which would have a material adverse effect on our business, financial condition and operating results.

The scarcity and cost of additional wireless spectrum, and regulations relating to spectrum use, may adversely affect our business, strategy and financial condition and operating results.

We will need to acquire additional spectrum in order to continue our customer growth, expand and deepen our coverage, maintain our quality of service, meet increasing customer demands and deploy new technologies. We will be at a competitive disadvantage and possibly experience erosion in the quality of service in certain markets if we fail to gain access to necessary spectrum before reaching network capacity. As a result, we are actively seeking to make additional investment in spectrum, which could be significant.

The continued interest in, and acquisition of, spectrum by existing carriers and others may reduce our ability to acquire and/or increase the cost of acquiring spectrum in the secondary market or negatively impact our ability to gain access to spectrum through other means, including government auctions. We may need to enter into spectrum sharing or leasing arrangements, which are subject to certain risks and uncertainties and may involve significant expenditures. Gaining access to the spectrum we won in the FCC 600 MHz auction in 2017 may take up to three years or more. Any material delay could adversely impact our ability to implement our plans and efforts to improve our network. In addition, our return on investment in spectrum depends on our ability to attract additional customers and to provide additional services and usage to existing customers. As a result, the return on any investment in spectrum that we make may not be as much as we anticipate or take longer than

expected. Additionally, we may be unable to secure the spectrum we need in any auction we may elect to participate in or in the secondary market, on favorable terms or at all.

The FCC may impose conditions on the use of new wireless broadband mobile spectrum that may negatively impact our ability to obtain spectrum economically or in appropriate configurations or coverage areas. Additional conditions that may be imposed by the FCC include heightened build-out requirements, limited license terms or renewal rights, and clearing obligations that may make it less attractive or less economical to acquire spectrum. In addition, rules may be established for future government spectrum auctions that may negatively impact our ability to obtain spectrum economically or in appropriate configurations or coverage areas.

If we cannot acquire needed spectrum from the government or otherwise, if competitors acquire spectrum that will allow them to provide services competitive with our services, or if we cannot deploy services over acquired spectrum on a timely basis without burdensome conditions, at reasonable cost, and while maintaining network quality levels, then our ability to attract and retain customers and our associatedbusiness, financial condition and operating results could be materially adversely affected.

If we are unable to take advantage of technological developments on a timely basis, we may experience a decline in demand for our services or face challenges in implementing or evolving our business strategy.

Significant technological changes continue to impact the communications industry. In general, these technological changes enhance communications and enable a broader array of companies to offer services competitive with ours. In order to grow and remain competitive with new and evolving technologies in our industry, we will need to adapt to future changes in technology, continually invest in our network, increase network capacity, enhance our existing offerings, and introduce new offerings to address our current and potential customers’ changing demands. Enhancing our network, such as deploying 5G, is subject to risk from equipment changes and migration of customers from existing spectrum bands and the potential inability to secure spectrum necessary to deploy advanced technologies. Adopting new and sophisticated technologies may result in implementation issues such as scheduling and supplier delays, unexpected or increased costs, technological constraints, regulatory permitting issues, customer dissatisfaction, and other issues that could cause delays in launching new technological capabilities, which in turn could result in significant costs or reduce the anticipated benefits of the upgrades. In general, the development of new services in the wireless telecommunications industry will require us to anticipate and respond to the continuously changing demands of our customers, which we may not be able to do accurately or timely. If our new services fail to retain or gain acceptance in the marketplace or if costs associated with these services are higher than anticipated, this could have a material adverse effect on our business, financial condition and operating results.


We could be harmed by data loss or other security breaches, whether directly or by way of third parties.indirectly.

Our business, like that of most retailers and wireless companies, involves the receipt, storage, and transmission of our customers’ confidential information, including sensitive personal information and payment card information, confidential information about our employees and suppliers, and other sensitive information about our Company, such as our business plans, transactions and intellectual property (“confidential information”Confidential Information”). Unauthorized access to confidential informationConfidential Information may be difficult to anticipate, detect, or prevent, particularly given that the methods of unauthorized access constantly change and evolve. We may experienceare subject to the threat of unauthorized access or distributiondisclosure of confidential informationConfidential Information by state-sponsored parties, malicious actors, third parties or employees, errors or breaches by third partythird-party suppliers, or other breaches of security incidents that could compromise the confidentiality and integrity of confidentialConfidential Information. In August 2018, we notified affected customers of an incident involving unauthorized access to certain customer contact information and such(not involving credit card information, financial data, social security numbers or passwords). While we do not believe the August 2018 security incident was material, we expect to continue to be the target of cyber-attacks, data breaches, canor security incidents, which may in the future have a materiallymaterial adverse effect on our business, or damage our reputation.reputation, financial condition, and operating results.

Cyber-attacks, such as denial of service and other malicious attacks, could disrupt our internal systems and applications, impair our ability to provide services to our customers, and have other adverse effects on our business and that of others who depend on our services. As a telecommunications carrier, we are considered a critical infrastructure provider and therefore may be more likely to be the target of such attacks. Such attacks against companies may be perpetrated by a variety of groups or persons, including those in jurisdictions where law enforcement measures to address such attacks are ineffective or unavailable, and such attacks may even be perpetrated by or at the behest of foreign governments.

In addition, we provide confidential, proprietary and personal information to third-party service providers when it is necessary to pursueas part of our business objectives. We and ouroperations. These third-party service providers have been subject toexperienced data breaches and other attacks that included unauthorized access to confidential informationConfidential Information in the past, includingand face security challenges common to all parties that collect and process information. Past data breaches include a breach atof the networks of one of our credit checkdecisioning providers in

September 2015, induring which a subset of records containing current and potential customer information was compromisedacquired by an external party.

Our procedures and safeguards to prevent unauthorized access to sensitive data and to defend against attacks seeking to disrupt our services must be continually evaluated and revised to address the ever-evolving threat landscape. We cannot make assurances that all preventive actions taken will adequately repel a significant attack or prevent information security breaches or the misuses of data, unauthorized access by third parties or employees, or exploits against third-party supplier environments. If we or our third-party suppliers are subject to such attacks or security breaches, we may incur significant costs or other material financial impact, which may not be covered by, or may exceed the coverage limits of, our cyber insurance, be subject to regulatory investigations, sanctions and private litigation, experience disruptions to our operations or suffer damage to our reputation. Any future cyber-attacks, data breaches, or security breachesincidents may materially adversely affecthave a material adverse effect on our business, financial condition, and operating results.

System failures and business disruptions may allow unauthorized use of or interference with our network and other systems which could be materially adversely affect our reputation and financial condition.

To be successful, we must provide our customers with reliable, trustworthy service and protect the communications, location, and personal information shared or generated by our customers. We rely upon both our systems and networks and the systems and networks of other providers and suppliers to provide and support our services and, in some cases, protect our customers’ information and our information. Failure of our or others’ systems, networks, or infrastructure may prevent us from providing reliable service or may allow for the unauthorized use of or interference with our networks and other systems or for the compromise of customer information. Examples of these risks include:

human error such as responding to deceptive communications or unintentionally executing malicious code;
physical damage, power surges or outages, or equipment failure, including those as a result of severe weather, natural disasters, terrorist attacks, political instability and volatility, and acts of war;
theft of customer and/or proprietary information offered for sale for competitive advantage or corporate extortion;
unauthorized access to our IT and business systems or to our network and critical infrastructure and those of our suppliers and other providers;
supplier failures or delays; and
system failures or outages of our business systems or communications network.

Such events could cause us to lose customers, lose revenue, incur expenses, suffer reputational damage, and subject us to litigation or governmental investigation. Remediation costs could include liability for information loss, repairing infrastructure and systems, and/or costs of incentives offered to customers. Our insurance may not cover, or be adequate to fully reimburse us for, costs and losses associated with such events.


We are in the process of implementing a new billing system, which will support a portion of our subscribers, while maintaining our legacy billing system. Any unanticipated difficulties, disruption, or significant delays could have adverse operational, financial, and reputational effects on our business.

We are currently implementing a new customer billing system, which involves a new third-party supported platform and utilization of a phased deployment approach. Post implementation, we plan to operate both the existing and new billing systems in parallel to aid in the transition to the new system until all phases of the conversion are complete.

The implementation may cause major system or business disruptions, or we may fail to implement the new billing system in a timely or effective manner. In addition, the third-party billing services supporting vendor may experience errors, cyber-attacks, or other operational disruptions that could negatively impact us and over which we may have limited control. Interruptions and/or failure of this new billing services system could disrupt our operations and impact our ability to provide or bill for our services, retain customers, attract new customers, or negatively impact overall customer experience. Any occurrence of the foregoing could cause material adverse effects on our operations and financial condition, material weaknesses in our internal control over financial reporting, and reputational damage.

We rely on third parties to provide products orand services for the operation of our business, and athe failure or inability byof such parties to provide these products or services could adversely affect our business, financial condition, and operating results.

We depend heavily on suppliers, their subcontractors, and other third parties in order for us to efficiently operate our business. Due to the complexity of our business, it is not unusual for multiple vendors located in multiple locationsto engage a diverse set of suppliers to help us to develop, maintain, and

troubleshoot products and services such as network components, software development services, and billing and customer service support. OurSome of our suppliers may provide services from outside of the United States, which carries associated additional regulatory and legal obligations. We commonly rely upon theon suppliers to provide us with contractual assurances and to disclose accurate information regarding risks associated with their provision of products or services in accordance with our expectationspolicies and standards, such asincluding our supplier codeSupplier Code of conductConduct and our third party-risk management standards. Failurepractices. The failure of suchour suppliers to comply with our expectations and standards could have a material adverse effect on our business, financial condition, and operating results.

There are multiple sources forMany of the types of products and services we purchase or use.use are available through multiple sources and suppliers. However, there are a limited number of suppliers forwho can support or provide billing services, voice and data communications transport services, network infrastructure, equipment, handsets, other devices, and payment processing services, among other products and services. Disruptions or failure of such suppliers to adequately perform could have a material adverse effect on our business, financial condition, and operating results.

In the past, our suppliers, contractors, service providers and third-party retailers may not have always performed at the levels we expected or at the levels required by their contracts. Our business could be severely disrupted if keycritical suppliers, contractors, service providers, or third-party retailers fail to comply with their contracts or become unable to continue provision of servicesproviding goods or supplies.services. Our business could also be disrupted if we experience delays or service degradation during any transition to a new outsourcing provider or other supplier or if we are required to replace the supplied products or services with those from another source, especially if the replacement becomes necessary on short notice. Any such disruptions could have a material adverse effect on our business, financial condition, and operating results.

Economic, political, and market conditions may adversely affect our business, financial condition, and operating results, as well as our access to financing on favorable terms or at all.

Our business, financial condition, and operating results are sensitive to changes in general economic conditions, including interest rates, consumer credit conditions, consumer debt levels, consumer confidence, rates of inflation (or concerns about deflation), unemployment rates, economic growth, energy costs, and other macro-economic factors. Difficult, or worsening, general economic conditions could have a material adverse effect on our business, financial condition, and operating results.

Market volatility, political and economic uncertainty, and weak economic conditions, such as a recession or economic slowdown, may materially adversely affect our business, financial condition, and operating results in a number of ways. Our services and device financing plans are available to a broad customer base, a significant segment of which may be more vulnerable to weak economic conditions.conditions, particularly our subprime customers. We may have greater difficulty in gaining new customers within this segment, and existing customers may be more likely to terminate service and default on device financing plans due to an inability to pay.

Weak economic conditions and credit conditions may also adversely impact our suppliers and dealers, some of which have filed for or may be considering bankruptcy, or may experience cash flow or liquidity problems, or are unable to obtain or refinance

credit such that they may no longer be able to operate. Any of these could adversely impact our ability to distribute, market, or sell our products and services.

In addition, instability in the global financial markets could lead to periodic volatility in the credit, equity, and fixed income markets. This volatility could limit our access to the credit markets, leading to higher borrowing costs or, in some cases, the inability to obtain financing on terms that are acceptable to us or at all.

The agreements governing our indebtedness and other financing arrangements include restrictive covenants that limit our operating flexibility.

The agreements governing our indebtedness and other financing arrangements impose significant operating and financial restrictions on us. These restrictions, subject in certain cases to customary baskets, exceptions, and incurrence-based ratio tests, may limit our or our subsidiaries’ ability to pursue strategic business opportunities and engage in somecertain transactions, including the following:

incurring additional indebtedness and issuing preferred stock;
paying dividends, redeeming capital stock, or making other restricted payments or investments;
selling or buying assets, properties, or licenses, including participating in future FCC auctions of spectrum or private sales of spectrum;licenses;
developing assets, properties, or licenses that we have or in the future may procure;
creating liens on assets;assets securing indebtedness or other obligations;

participating in future FCC auctions of spectrum or private sales of spectrum;
engaging in mergers, acquisitions, business combinations, or other transactions;
entering into transactions with affiliates; and
placing restrictions on the ability of subsidiaries to pay dividends or make other payments.

These restrictions could limit our ability to obtain debt financing, engage in share repurchases, refinance or pay principal on our outstanding indebtedness, complete acquisitions for cash or indebtedness or react to business, economic, market and industry conditions and other changes in our operating environment or the economy. Any future indebtedness that we incur may contain similar or more restrictive covenants. Any failure to comply with the restrictions of our debt agreements and other financing arrangements may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these agreements and other agreements, giving our lenders the right to terminate any commitments they had made to provide us with further funds and to require us to repay all amounts then outstanding. Any of these events wouldcould have a material adverse effect on our business, financial condition, and operating results.

Our significant indebtedness could adversely affect our business, financial condition and operating results.

Our ability to make payments on our debt, to repay our existing indebtedness when due, and to fund our capital-intensive business and operations, and to make significant planned capital expenditures will depend on our ability to generate cash in the future, which is in turn subject to the operational risks described elsewhere in this report. Our debt service obligations could have material adverse effects on our business, financial condition, and operating results, including by:

limiting our flexibility in planning for, or reacting to, changes in our business or the communications industry or pursuing growth opportunities;
reducing the amount of cash available for other operational or strategic needs; and
placing us at a competitive disadvantage to competitors who are less leveraged than we are.

Some of our debt also has a floatingvariable rate of interest linked to various indices.indices and only some of our exposure is hedged. If the changechanges in indices result in interest rate increases, our debt service requirements will increase, which could adversely affect our cash flow and operating results. In particular, some or all of our variable-rate indebtedness may use the London Inter-Bank Offered Rate (“LIBOR”) or similar rates as a benchmark for establishing the rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequence of these developments cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness. In addition, any hedging agreements we have and may continue to enter into to limit our exposure to interest rate increases or foreign currency fluctuations may not offer complete protection from this risk,these risks or may be unsuccessful, and consequently may effectively increase the interest rate we pay on our debt or the exchange rate with respect to such debt, and any portion not subject to such hedging agreements would have full exposure to interest rate increases.increases or foreign currency fluctuations, as applicable. If any financial institutions that are parties to our hedging agreements were to default on their payment obligations to us, declare bankruptcy or become insolvent, we would be unhedged against the underlying exposures. Any of these risks could have a material adverse effect on our business, financial condition and operating results.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could result in a loss of investor confidence regarding our financial statements or may have a material adverse effect on our business.

Under Section 404 of the Sarbanes-Oxley Act of 2002, we along with our independently registered public accounting firm are required to report on the effectiveness of our internal control over financial reporting. We rely heavily on IT systems as an important part of our internal controls in order to operate, transact, and otherwise manage our business, as well as provide

effective and timely reporting of our financial results. Failure to design and maintain effective internal controls, including those over our IT systems, could constitute a material weakness that could result in inaccurate financial statements, inaccurate disclosures, or failure to prevent fraud. If we or our independent registered public accounting firm were unable to conclude that we have effective internal control over financial reporting, investor confidence regarding our financial statements and our business could be materially adversely affected.


Our financial condition and operating results will be impaired if we experience high fraud rates related to device financing, credit cards, dealers, or subscriptions.

Our operating costs could increase substantially as a result of fraud, including device financing, customer credit card, subscription, or dealer fraud. If our fraud detection strategies and processes are not successful in detecting and controlling fraud, whether directly or by way of the systems, processes, and operations of third parties such as national retailers, dealers, and others, the resulting loss of revenue or increased expenses could have a material adverse effect on our financial condition and operating results.

We rely on highly-skilled personnel throughout all levels of our business. Our business could be harmed if we are unable to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture.

The market for highly-skilled workers and leaders in our industry is extremely competitive. We believe that our future success depends in substantial part on our ability to recruit, hire, motivate, develop, and retain talented and highly-skilled personnel for all areas of our organization. Doing so may be difficult due to many factors, including fluctuations in economic and industry conditions, changes to U.S. immigration policy, competitors’ hiring practices, employee tolerance for the significant amount of change within and demands on our Company and our industry, and the effectiveness of our compensation programs. Our continued ability to compete effectively depends on our ability to retain and motivate our existing employees and to attract new employees. If we do not succeed in retaining and motivating our existing key employees and attracting new key personnel, we may not be able to meet our business plan and, as a result, our revenue growth and profitability may be materially adversely affected.

Any acquisition, investment, or merger may subject us to significant risks, any of which may harm our business.

We may pursue acquisitions of, investments in or mergers with businesses, technologies, services and/or products that complement or expand our business. Some of these potential transactions could be significant relative to the size of our business and operations. Any such transaction would involve a number of risks and could present financial, managerial and operational challenges, including:

diversion of management attention from running our existing business;
increased costs to integrate the networks, spectrum, technology, personnel, customer base and business practices of the business involved in any such transaction with our business;
difficulties in effectively integrating the financial and operational reporting systems of the business involved in any such transaction into (or supplanting such systems with) our financial and operational reporting infrastructure and internal control framework in an effective and timely manner;
potential exposure to material liabilities not discovered in the due diligence process or as a result of any litigation arising in connection with any such transaction;
significant transaction expenses in connection with any such transaction, whether consummated or not;
risks related to our ability to obtain any required regulatory approvals necessary to consummate any such transaction;
acquisition financing may not be available on reasonable terms or at all and any such financing could significantly increase our outstanding indebtedness or otherwise affect our capital structure or credit ratings; and
any business, technology, service, or product involved in any such transaction may significantly under-perform relative to our expectations, and we may not achieve the benefits we expect from ourthe transaction, which could, among other things, also result in a write-down of goodwill and other intangible assets associated with such transaction.

For any or all of these reasons, our pursuit of an acquisition, investment, or merger may have a material adverse effect on our business, financial condition, and operating results.


Risks Related to Legal and Regulatory Matters

Changes in regulations or in the regulatory framework under which we operate could adversely affect our business, financial condition and operating results.

The FCC regulates the licensing, construction, modification, operation, ownership, sale, and interconnection of wireless communicationscommunication systems, as do some state and local regulatory agencies. In particular, the FCC imposes significant regulation on licensees of wireless spectrum with respect to how radio spectrum is used by licensees, the nature of the services that licensees may offer and how the services may be offered, and the resolution of issues of interference between spectrum bands. Additionally, the FTC and other federal and state agencies have asserted that they have jurisdiction over some consumer protection, and elimination and prevention of anticompetitive business practices with respect to the provision of wireless

products and services. We are subject to regulatory oversight by various federal, state and local agencies, as well as judicial review and actions, on issues related to the wireless industry that include, but are not limited to: roaming, interconnection, spectrum allocation and licensing, facilities siting, pole attachments, intercarrier compensation, Universal Service Fund (“USF”), net neutrality, 911 services, consumer protection, consumer privacy, and cybersecurity. We are also subject to regulations in connection with other aspects of our business, including handset financing and insurance activities.

We cannot assure you that the FCC or any other federal, state or local agencies will not adopt regulations or take enforcement or other actions that would adversely affect our business, impose new costs, or require changes in current or planned operations. For example, under the Obama administration, the FCC established new net neutrality and privacy regimes that applied to our operations. Both sets of rules potentially subjected some of our initiatives and practices to more burdensome requirements and heightened scrutiny by federal and state regulators, the public, edge providers, and private litigants regarding whether such initiatives or practices are compliant. While the FCC rules are now largely rolled back under the Trump administration, some state legislators and regulators are seeking to replace them with state laws, perpetuating uncertainty regarding the regulatory environment around these issues.

In addition, states are increasingly focused on the quality of service and support that wireless communication providers provide to their customers and several states have proposed or enacted new and potentially burdensome regulations in this area. We also face potential investigations by, and inquiries from or actions by state Public Utility Commissions.public utility commissions. We also cannot assure you that Congress will not amend the Communications Act, from which the FCC obtains its authority, and which serves to limit state authority, or enact other legislation in a manner that could be adverse to our business. Additionally, California passed the California Consumer Privacy Act (the “CCPA”) in June 2018, putting into place new data privacy rights for consumers, effective in January 2020. Legislators have stated that they intend to propose amendments to the CCPA before it goes into effect, and it remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted. We will likely have to incur significant implementation costs to ensure compliance with the CCPA, and we could see increased litigation costs once the law goes into effect. If we are unable to put proper controls and procedures in place to ensure compliance, it could have an adverse effect on our business. Other states are considering similar legislation, which, if passed, could create more risks and potential costs for us.

Failure to comply with applicable regulations could have a material adverse effect on our business, financial condition and operating results. We could be subject to fines, forfeitures, and other penalties (including, in extreme cases, revocation of our spectrum licenses) for failure to comply with FCC or other governmental regulations, even if any such non-compliance was unintentional. The loss of any licenses, or any related fines or forfeitures, could adversely affect our business, financial condition, and operating results.

Unfavorable outcomes of legal proceedings may adversely affect our business, financial condition and operating results.

We are regularly involved in a number of legal proceedings before various state and federal courts, the FCC, the FTC, other federal agencies, and state and local regulatory agencies, including state attorneys general. Such legal proceedings can be complex, costly, and highly disruptive to our business operations by diverting the attention and energiesenergy of management and other key personnel. The assessment of the outcome of legal proceedings, including our potential liability, if any, is a highly subjective process that requires judgments about future events that are not within our control. The amounts ultimately received or paid upon settlement or pursuant to final judgment, order or decree may differ materially from amounts accrued in our financial statements. In addition, litigation or similar proceedings could impose restraints on our current or future manner of doing business. Such potential outcomes including judgments, awards, settlements or orders could have a material adverse effect on our business, financial condition and operating results.

We offer highly regulated financial services products. These products expose us to a wide variety of state and federal regulations.

The financing of devices, through our EIP and JUMP! On Demand programs, has expanded our regulatory compliance obligations. Failure to remain compliant with applicable regulations, may increase our risk exposure in the following areas:

consumer complaints and potential examinations or enforcement actions by federal and state regulatory agencies, including but not limited to the Consumer Financial Protection Board,Bureau, state attorneys general, the FCC and the FTC; and

regulatory fines, penalties, enforcement actions, civil litigation, and/or class action lawsuits.

Failure to comply with applicable regulations and the realization of any of these risks could have a material adverse effect on our business, financial condition, and operating results.

We may not be able to adequately protect the intellectual property rights on which our business depends or may be accused of infringing intellectual property rights of third parties.

We rely on a combination of patent, service mark, trademark, and trade secret laws and contractual restrictions to establish and protect our proprietary rights, all of which offer only limited protection. The steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary rights. We may not have the ability in certain jurisdictions to adequately protect intellectual property rights. Moreover, others may independently develop processes and technologies that are competitive to ours. Also, we may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Unauthorized use of our intellectual property rights may increase the cost of protecting these rights or reduce our revenues. We cannot be sure that any legal actions against such infringers will be successful, even when our rights have been infringed. We cannot assure you that our pending or future patent applications will be granted or enforceable, or that the rights granted under any patent that may be issued will provide us with any competitive advantages. In addition, we cannot assure you that any trademark or service mark registrations will be issued with respect to pending or future applications or will provide adequate protection of our brands. We do not have insurance coverage for intellectual property losses, and as such, a charge for an anticipated settlement or an adverse ruling awarding damages represents an unplanned loss event. Any of these factors could have a material adverse effect on our business, financial condition, and operating results.

Third parties may claim we infringe their intellectual property rights. We are a defendant in numerous intellectual property lawsuits, including patent infringement lawsuits, which exposes us to the risk of adverse financial impact either by way of significant settlement amounts or damage awards. As we adopt new technologies and new business systems and provide customers with new products and/or services, we may face additional infringement claims. These claims could require us to cease certain activities or to cease selling relevant products and services. These claims can be time-consuming and costly to defend, and divert management resources, and expose us to significant damages awards or settlements, any or all of which could have a material adverse effect on our operations and financial condition. In addition to litigation directly involving our Company, our vendors and suppliers can be threatened with patent litigation and/or subjected to the threat of disruption or blockage of sale, use, or importation of products, posing the risk of supply chain interruption to particular products and associated services which could have a material adverse effect on our business, financial condition and operating results.

Our business may be impacted by new or changingamended tax laws or regulations, andjudicial interpretations of same or administrative actions by federal, state, and/or local agencies, or how judicial authorities apply tax laws.taxing authorities.

In connection with the products and services we sell, we calculate, collect, and remit various federal, state, and local taxes, surchargesfees and regulatory feescharges (“tax” or “taxes”) to numerous federal, state and local governmental authorities, including federal USF contributions and common carrier regulatory fees. In addition, we incur and pay state and local taxes and fees on purchases of goods and services used in our business.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In many cases, the application of existing, newly enacted or amended tax laws (including(such as the recently enactedU.S. Tax Cuts and Jobs Act of 2017 in the United States) is2017) may be uncertain and subject to differing interpretations, especially when evaluated against new technologies and telecommunications services, such as broadband internet access and cloud related services. Changes in tax laws could also impact revenue reported on tax inclusive plans.

In the event that we have incorrectly described, disclosed, determined, calculated, assessed, or remitted amounts that were due to governmental authorities, we could be subject to additional taxes, fines, penalties, or other adverse actions, which could materially impact our business, financial condition and operating results. In the event that federal, state, and/or local municipalities were to significantly increase taxes on our network, operations, or services, or seek to impose new taxes, it could have a material adverse effect on our business, financial condition and operating results.

Our wireless licenses are subject to renewal and may be revoked in the event that we violate applicable laws.

Our existing wireless licenses are subject to renewal upon the expiration of the 10-year or 15-year period for which they are granted. Historically, the FCC has approved our license renewal applications. However, the Communications Act provides that licenses may be revoked for cause and license renewal applications denied if the FCC determines that a renewal would not serve the public interest. In addition, our licenses are subject to our compliance with the terms set forth in the agreement

pertaining to national security among Deutsche Telekom,us, DT, the Federal Bureau of Investigation, the Department of Justice and the Department of Homeland Security and the Company.Security. The failure of Deutsche TelekomDT or the Company to comply with the terms of this agreement could result in fines, injunctions and other penalties, including potential revocation or non-renewal of our spectrum licenses. If we fail to timely file to renew any wireless license or fail to meet any regulatory requirements for renewal, including construction and

substantial service requirements, we could be denied a license renewal. Many of our wireless licenses are subject to interim or final construction requirements and there is no guarantee that the FCC will find our construction, or the construction of prior licensees, sufficient to meet the build-out or renewal requirements. The FCC has pending a rulemaking proceeding to reevaluate, among other things, its wireless license renewal showings and standards and may in this or other proceedings promulgate changes or additional substantial requirements or conditions to its renewal rules, including revising license build-out requirements. Accordingly, we cannot assure you that the FCC will renew our wireless licenses upon their expiration. If any of our wireless licenses were to be revoked or not renewed upon expiration, we would not be permitted to provide services under that license, which could have a material adverse effect on our business, financial condition, and operating results.

Our business could be adversely affected by findings of product liability for health/health or safety risks from wireless devices and transmission equipment, as well as by changes to regulations/regulations or radio frequency emission standards.

We do not manufacture the devices or other equipment that we sell, and we depend on our suppliers to provide defect-free and safe equipment. Suppliers are required by applicable law to manufacture their devices to meet certain governmentally imposed safety criteria. However, even if the devices we sell meet the regulatory safety criteria, we could be held liable with the equipment manufacturers and suppliers for any harm caused by products we sell if such products are later found to have design or manufacturing defects. We generally seek to enter into indemnification agreements with the manufacturers who supply us with devices to protect us from losses associated with product liability, but we cannot guarantee that we will be fully protected against all losses associated with a product that is found to be defective.

Allegations have been made that the use of wireless handsets and wireless transmission equipment, such as cell towers, may be linked to various health concerns, including cancer and brain tumors. Lawsuits have been filed against manufacturers and carriers in the industry claiming damages for alleged health problems arising from the use of wireless handsets. In addition, the FCC has from time to time gathered data regarding wireless handset emissions and its assessment of this issue may evolve based on its findings. The media has also reported incidents of handset battery malfunction, including reports of batteries that have overheated. These allegations may lead to changes in regulatory standards. There have also been other allegations regarding wireless technology, including allegations that wireless handset emissions may interfere with various electronic medical devices (including hearing aids and pacemakers), airbags and anti-lock brakes. Defects in the products of our suppliers, such as the 2016 recall by a handset Original Equipment Manufacturer (“OEM”)original equipment manufacturer on one of its smartphone devices, could have a material adverse effect on our business, financial condition and operating results.

Additionally, there are safety risks associated with the use of wireless devices while operating vehicles or equipment. Concerns over any of these risks and the effect of any legislation, rules or regulations that have been and may be adopted in response to these risks could limit our ability to sell our wireless services.

Risks Related to Ownership of our Common Stock

We are controlled by Deutsche Telekom,DT, whose interests may differ from the interests of our other stockholders.

Deutsche TelekomDT beneficially owns and possesses majority voting power of the fully diluted shares of our common stock.

Through its control of the voting power of our common stock and the rights granted to Deutsche TelekomDT in our certificate of incorporation and the Stockholder’s Agreement, Deutsche TelekomDT controls the election of our directors and all other matters requiring the approval of our stockholders. By virtue of Deutsche Telekom’sDT’s voting control, we are a “controlled company,” as defined in theThe NASDAQ Stock Market LLC (“NASDAQ”) listing rules, and are not subject to NASDAQ requirements that would otherwise require us to have a majority of independent directors, a nominating committee composed solely of independent directors or a compensation committee composed solely of independent directors. Accordingly, our stockholders will not be afforded the same protections generally as stockholders of other NASDAQ-listed companies with respect to corporate governance for so long as we rely on these exemptions from the corporate governance requirements.


In addition, our certificate of incorporation and the Stockholder’s Agreement restrict us from taking certain actions without Deutsche Telekom’sDT’s prior written consent as long as Deutsche TelekomDT beneficially owns 30% or more of the outstanding shares of our common stock, including:

the incurrence of debt (excluding certain permitted debt) if our consolidated ratio of debt to cash flow, as defined in the indenture dated April 28, 2013, for the most recently ended four full fiscal quarters for which financial statements are available would exceed 5.25 to 1.0 on a pro forma basis;
the acquisition of any business, debt or equity interests, operations or assets of any person for consideration in excess of $1.0 billion;
the sale of any of our or our subsidiaries’ divisions, businesses, operations or equity interests for consideration in excess of $1.0 billion;
the incurrence of secured debt (excluding certain permitted secured debt);

any change in the size of our Board of Directors;
the issuances of equity securities in excess of 10% of our outstanding shares or to repurchase debt held by Deutsche Telekom;DT;
the repurchase or redemption of equity securities or the declaration of extraordinary or in-kind dividends or distributions other than on a pro rata basis; orand
the termination or hiring of our chief executive officer.

These restrictions could prevent us from taking actions that our Board of Directors may otherwise determine are in the best interests of the Company and our stockholders or that may be in the best interests of our other stockholders.

Deutsche TelekomDT effectively has control over all matters submitted to our stockholders for approval, including the election or removal of directors, changes to our certificate of incorporation, a sale or merger of our Company and other transactions requiring stockholder approval under Delaware law. Deutsche Telekom’sDT’s controlling interest may have the effect of making it more difficult for a third party to acquire, or discouraging a third party from seeking to acquire, the Company. Deutsche TelekomDT may have strategic, financial, or other interests different from our other stockholders, including as the holder of a substantial amount of our indebtedness and as the counter-party in a number of commercial arrangements, and may make decisions adverse to the interests of our other stockholders.

In addition, we license certain trademarks from Deutsche Telekom,DT, including the right to use the trademark “T-Mobile” as a name for the Company and our flagship brand, under a trademark license agreement between Deutsche Telekom and the Company.with DT. As described in more detail in our proxy statement under the heading “Transactions with Related Persons and Approval”, we are obligated under the trademark license agreement to pay Deutsche TelekomDT a royalty in an amount equal to 0.25%, which we refer to as the royalty rate, of the net revenue (as defined in the trademark license) generated by products and services sold by the Companywe sell under the licensed trademarks. However, theThe trademark license agreement includes a royalty rate adjustment mechanism that will occurwould have occurred in early 2018 and potentially resultresulted in a new royalty rate effective in January 2019. The license agreement includes a royalty rate adjustment mechanism that has been postponed until the conclusion of the proposed Sprint Merger. The current royalty rate will remain effective until that time. The royalty rate under the license agreement will be adjusted retroactively if the Business Combination Agreement is terminated. We also have the right to terminate the trademark license upon one year’s prior notice. An increase in the royalty rate or termination of the trademark license could have a material adverse effect on our business, financial condition and operating results.

Future sales or issuances of our common stock, including sales by Deutsche Telekom,DT, could have a negative impact on our stock price.

We cannot predict the effect, if any, that market sales of shares or the availability of shares of our common stock will have on the prevailing trading price of our common stock from time to time. Sales or issuances of a substantial number of shares of our common stock could cause our stock price to decline and could result in dilution of your shares.

We and Deutsche TelekomDT are parties to the Stockholder’s Agreement pursuant to which Deutsche TelekomDT is free to transfer its shares in public sales without notice, as long as such transactions would not result in the transferee owning 30% or more of the outstanding shares of our common stock. If a transfer would exceed the 30% threshold, it is prohibited unless the transferee makes a binding offer to purchase all of the other outstanding shares on the same price and terms. The Stockholder’s Agreement does not otherwise impose any other restrictions on the sales of common stock by Deutsche Telekom.DT. Moreover, we have filed a shelf registration statement with respect to the common stock and certain debt securities held by Deutsche Telekom,DT, which would facilitate the resale by Deutsche TelekomDT of all or any portion of the shares of our common stock it holds. The sale of shares of our common stock by Deutsche TelekomDT (other than in transactions involving the purchase of all of our outstanding shares) could significantly increase the number of shares available in the market, which could cause a decrease

in our stock price. In addition, even if Deutsche TelekomDT does not sell a large number of its shares into the market, its right to transfer a large number of shares into the market may depress our stock price.

Our stock price may be volatile and may fluctuate based upon factors that have little or nothing to do with our business, financial condition and operating results.

The trading prices of the securities of communications companies historically have been highly volatile, and the trading price of our common stock may be subject to wide fluctuations. Our stock price may fluctuate in reaction to a number of events and factors that may include, among other things:

our or our competitors’ actual or anticipated operating and financial results;
introduction of new products and services by us or our competitors or changes in service plans or pricing by us or our competitors;
analyst projections, predictions and forecasts, analyst target prices for our securities and changes in, or our failure to meet, securities analysts’ expectations;

transaction in our common stock by major investors;
share repurchases by us or purchases by Deutsche Telekom;DT;
Deutsche Telekom’sDT’s financial performance, results of operation, or actions implied or taken by Deutsche Telekom;DT;
entry of new competitors into our markets or perceptions of increased price competition, including a price war;
our performance, including subscriber growth, and our financial and operational metric performance;
market perceptions relating to our services, network, handsets, and deployment of our LTE platform and our access to iconic handsets, services, applications, or content;
market perceptions of the wireless communications industry and valuation models for us and the industry;
conditions or trends in the Internet and the industry sectors in which we operate in;operate;
changes in our credit rating or future prospects;
changes in interest rates;
changes in our capital structure, including issuance of additional debt or equity to the public;
the availability or perceived availability of additional capital in general and our access to such capital;
actual or anticipated consolidation, or other strategic mergers or acquisition activities involving us or our competitors, or other participants in related or adjacent industries, or market speculations regarding such activities;activities, including the pending Merger and views of market participants regarding the likelihood the conditions to the Merger will be satisfied and the anticipated benefits of the Merger will be realized;
disruptions of our operations or service providers or other vendors necessary to our network operations;
the general state of the U.S. and world politics and economies; and
availability of additional spectrum, whether by the announcement, commencement, bidding and closing of auctions for new spectrum or the acquisition of companies that own spectrum, and the extent to which we or our competitors succeed in acquiring additional spectrum.

In addition, the stock market has been volatile in the recent past and has experienced significant price and volume fluctuations, which may continue for the foreseeable future. This volatility has had a significant impact on the trading price of securities issued by many companies, including companies in the communications industry. These changes frequently occur irrespective of the operating performance of the affected companies. Hence, the trading price of our common stock could fluctuate based upon factors that have little or nothing to do with our business, financial condition and operating results.

We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any cash dividends on our common stock in the foreseeable future.

We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any cash dividends on our common stock in the foreseeable future. Our credit facilities and the indentures and supplemental indentures governing our long-term debt to affiliates and third parties contain covenants that, among other things, restrict our ability to declare or pay dividends on our common stock. We currently intend to use future earnings, if any, to invest in our business and to fund our existingpreviously authorized stock repurchase program.

program if the Merger fails to close.

Our previously announced stock repurchase program, and any subsequent stock purchase program put in place from time to time, could affect the price of our common stock, increase the volatility of our common stock and could diminish our cash reserves. Such repurchase program may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.

We may have in place from time to time, a stock repurchase program. Any such stock repurchase program adopted will not obligate the Company to repurchase any dollar amount or number of shares of common stock and may be suspended or discontinued at any time, which could cause the market price of our common stock to decline. The timing and actual number of shares repurchased under any such stock repurchase program depends on a variety of factors including the timing of open trading windows, the price of our common stock, corporate and regulatory requirements and other market conditions. We may effect repurchases under any stock repurchase program from time to time in the open market, in privately negotiated transactions or otherwise, including accelerated stock repurchase arrangements. Repurchases pursuant to any such stock repurchase program could affect our stock price and increase its volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock. Although our stock repurchase program is intended to enhance stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness. Additionally, our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Note 10 -12 – Repurchases of Common Stock of the Notes to the Consolidated Financial Statements included in Part II of this Form 10-K for further information.

Risks Related to the Proposed Transactions

The closing of the Transactions is subject to a number of conditions, including the receipt of approvals from various governmental entities, which may not approve the Transactions, may delay the approvals for, or may impose conditions or restrictions on, jeopardize or delay completion of, or reduce or delay the anticipated benefits of, the Transactions, and if these conditions are not satisfied or waived, the Transactions will not be completed.

The completion of the Transactions is subject to a number of conditions, including, among others, obtaining certain governmental authorizations, consents, orders or other approvals, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the receipt of required approvals from the FCC and any state and territorial public utility commissions or similar state and foreign regulatory bodies, and the absence of any injunction prohibiting the Transactions or any legal requirements enacted by a court or other governmental entity preventing the completion of the Transactions. There is no assurance that these required authorizations, consents, orders or other approvals will be obtained or that they will be obtained in a timely manner, or whether they will be subject to required actions, conditions, limitations or restrictions on the combined company’s business, operations or assets. If any such required actions, conditions, limitations or restrictions are imposed, they may jeopardize or delay completion of the Transactions, reduce or delay the anticipated benefits of the Transactions or allow the parties to the Business Combination Agreement to terminate the Business Combination Agreement, which could result in a material adverse effect on our or the combined company’s business, financial condition or operating results. In addition, the completion of the Transactions is also subject to T-Mobile USA having specified minimum credit ratings on the closing date of the Transactions (after giving effect to the Merger) from at least two of three specified credit rating agencies, subject to certain qualifications. In the event that we terminate the Business Combination Agreement in connection with a failure to satisfy the closing condition related to the specified minimum credit ratings, then in certain circumstances, we may be required to pay Sprint an amount equal to $600 million. If the Transactions are not completed by April 29, 2019 (subject to extension to July 29, 2019, and further extension to October 29, 2019, if the only conditions not satisfied or waived (other than those conditions that by their terms are to be satisfied at the closing, which conditions are then capable of being satisfied) are conditions relating to the required regulatory and other governmental consents and the absence of restraints), either we or Sprint may terminate the Business Combination Agreement. The Business Combination Agreement may also be terminated if the other conditions to closing are not satisfied, and we and Sprint may also mutually decide to terminate the Business Combination Agreement.

Failure to complete the Merger could negatively impact us and our business, assets, liabilities, prospects, outlook, financial condition or results of operations.

If the Merger is not completed for any reason, we may be subject to a number of material risks. The price of our common stock may decline to the extent that its current market price reflects a market assumption that the Merger will be completed. In addition, some costs related to the Transactions must be paid by us whether or not the Transactions are completed. Furthermore, we may experience negative reactions from our stockholders, customers, employees, suppliers, distributors, retailers, dealers and others who deal with us, which could have an adverse effect on our business, financial condition and results of operations.

In addition, it is expected that if the Merger is not completed, we will continue to lack the network, scale and financial resources of the current market share leaders in, and other companies that have more recently begun providing, wireless services. Further, if the Merger is not completed, it is expected that we will not be able to deploy a nationwide 5G network on the same scale and on the same timeline as the combined company, and therefore will continue to be limited in their respective abilities to compete effectively in the 5G era.

We are subject to various uncertainties, including litigation and contractual restrictions and requirements while the Transactions are pending that could disrupt our or the combined company’s business and adversely affect our or the combined company’s business, assets, liabilities, prospects, outlook, financial condition and results of operations.

Uncertainty about the effect of the Transactions on employees, customers, suppliers, vendors, distributors, dealers and retailers may have an adverse effect on us or the combined company. These uncertainties may impair the ability to attract, retain and motivate key personnel during the pendency of the Transactions and, if the Transactions are completed, for a period of time thereafter, as existing and prospective employees may experience uncertainty about their future roles with the combined company. If key employees depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with the combined company, the combined company’s business following the completion of the Transactions could be negatively impacted. We or the combined company may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent. Additionally, these uncertainties could cause customers, suppliers, distributors, dealers, retailers and others to seek to change or cancel existing business relationships

with us or the combined company or fail to renew existing relationships. Suppliers, distributors and content and application providers may also delay or cease developing for us or the combined company new products that are necessary for the operations of its business due to the uncertainty created by the Transactions. Competitors may also target our existing customers by highlighting potential uncertainties and integration difficulties that may result from the Transactions.
The Business Combination Agreement also restricts us, without Sprint’s consent, from taking certain actions outside of the ordinary course of business while the Transactions are pending, including, among other things, certain acquisitions or dispositions of businesses and assets, entering into or amending certain contracts, repurchasing or issuing securities, making capital expenditures and incurring indebtedness, in each case subject to certain exceptions. These restrictions may have a significant negative impact on our business, results of operations and financial condition.

Management and financial resources have been diverted and will continue to be diverted toward the completion of the Transactions. We have incurred, and expect to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the Transactions. These costs could adversely affect our or the combined company’s financial condition and results of operations.

In addition, we and our affiliates are involved in various disputes, governmental and/or regulatory inspections, investigations and proceedings and litigation matters that arise from time to time, and it is possible that an unfavorable resolution of these matters could adversely affect us and our results of operations, financial condition and cash flows and the results of operations, financial condition and cash flows of the combined company.

The Business Combination Agreement contains provisions that restrict the ability of our Board to pursue alternatives to the Transactions.

The Business Combination Agreement contains non-solicitation provisions that restrict our ability to solicit, initiate, knowingly encourage or knowingly take any other action designed to facilitate, any inquiries regarding, or the making of, any proposal the completion of which would constitute an alternative transaction for purposes of the Business Combination Agreement. In addition, the Business Combination Agreement does not permit us to terminate the Business Combination Agreement in order to enter into an agreement providing for, or to complete, such an alternative transaction.

Our directors and officers may have interests in the Transactions different from the interests of our stockholders.

Certain of our directors and executive officers negotiated the terms of the Business Combination Agreement. Our directors and executive officers may have interests in the Transactions that are different from, or in addition to, those of our stockholders. These interests include, but are not limited to, the continued service of certain of our directors as directors of the combined company, the continued employment of certain of our executive officers by the combined company, severance agreements and amended employment terms and other rights held by our directors and executive officers, and provisions in the Business Combination Agreement regarding continued indemnification of and advancement of expenses to our directors and officers.

Risks Related to Integration and the Combined Company

Although we expect that the Transactions will result in synergies and other benefits, those synergies and benefits may not be realized or may not be realized within the expected time frame.

Our ability to realize the anticipated benefits of the Transactions will depend, to a large extent, on the combined company’s ability to integrate our and Sprint’s businesses in a manner that facilitates growth opportunities and achieves the projected standalone cost savings and revenue growth trends identified by each company without adversely affecting current revenues and investments in future growth. In addition, some of the anticipated synergies are not expected to occur for a significant time period following the completion of the Transactions and will require substantial capital expenditures in the near term to be fully realized. Even if the combined company is able to integrate the two companies successfully, the anticipated benefits of the Transactions, including the expected synergies and network benefits, may not be realized fully or at all or may take longer to realize than expected.

Our business and Sprint’s business may not be integrated successfully or such integration may be more difficult, time consuming or costly than expected. Operating costs, customer loss and business disruption, including difficulties in maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected following the Transactions. Revenues following the Transactions may be lower than expected.

The combination of two independent businesses is complex, costly and time-consuming and may divert significant management attention and resources to combining our and Sprint’s business practices and operations. This process may disrupt

our business. The failure to meet the challenges involved in combining the two businesses and to realize the anticipated benefits of the Transactions could cause an interruption of, or a loss of momentum in, the activities of the combined company and could adversely affect the results of operations of the combined company. The overall combination of our and Sprint’s businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships. The difficulties of combining the operations of the companies include, among others:

the diversion of management attention to integration matters;
difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure and financial reporting and internal control systems;
challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;
differences in control environments, cultures, and auditor expectations may result in future weaknesses and deficiencies while we work to integrate the companies and align guidelines and practices;
alignment of key performance measurements may result in a greater need to communicate and manage clear expectations while we work to integrate the companies and align guidelines and practices;
difficulties in integrating employees and attracting and retaining key personnel;
challenges in retaining existing customers and obtaining new customers;
difficulties in achieving anticipated cost savings, synergies, accretion targets, business opportunities, financing plans and growth prospects from the combination;
difficulties in managing the expanded operations of a significantly larger and more complex company;
the impact of the additional debt financing expected to be incurred in connection with the Transactions;
the transition of management to the combined company management team, and the need to address possible differences in corporate cultures and management philosophies;
contingent liabilities that are larger than expected; and
potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Transactions.

Some of these factors are outside of our control and/or will be outside the control of the combined company, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact the business, financial condition and results of operations of the combined company. In addition, even if the operations of our and Sprint’s businesses are integrated successfully, the full benefits of the Merger may not be realized, including, among others, the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. Further, additional unanticipated costs may be incurred in the integration of our and Sprint’s businesses. All of these factors could cause dilution to the earnings per share of the combined company, decrease or delay the projected accretive effect of the Merger, and negatively impact the price of our common stock following the Merger. As a result, it cannot be assured that the combination of T-Mobile and Sprint will result in the realization of the full benefits expected from the Transactions within the anticipated time frames or at all.

The indebtedness of the combined company following the completion of the Transactions will be substantially greater than the indebtedness of each of T-Mobile and Sprint on a standalone basis prior to the execution of the Business Combination Agreement. This increased level of indebtedness could adversely affect the combined company’s business flexibility and increase its borrowing costs.

In connection with the Transactions, we and Sprint have conducted, and expect to conduct, certain pre-Merger financing transactions, which will be used in part to prepay a portion of our and Sprint’s existing indebtedness and to fund liquidity needs. After giving effect to the pre-Merger financing transactions and the Transactions, we anticipate that the combined company will have consolidated indebtedness of up to approximately $75.0 billion to $77.0 billion, based on estimated December 31, 2018 debt and cash balances and excluding tower obligations.

Our substantially increased indebtedness following the Transactions will have the effect, among other things, of reducing our flexibility to respond to changing business, economic, market and industry conditions and increasing the amount of cash required to meet interest payments. In addition, this increased level of indebtedness following the Transactions may reduce funds available to support efforts to combine our and Sprint’s businesses and realize the expected benefits of the Transactions, and may also reduce funds available for capital expenditures, share repurchases and other activities that may put the combined company at a competitive disadvantage relative to other companies with lower debt levels. Further, it may be necessary for the combined company to incur substantial additional indebtedness in the future, subject to the restrictions contained in its debt instruments, which could increase the risks associated with the capital structure of the combined company.


Because of the substantial indebtedness of the combined company following the completion of the Transactions, there is a risk that the combined company may not be able to service its debt obligations in accordance with their terms.

The ability of the combined company to service its substantial debt obligations following the Transactions will depend in part on future performance, which will be affected by business, economic, market and industry conditions and other factors, including the ability of the combined company to achieve the expected benefits of the Transactions. There is no guarantee that the combined company will be able to generate sufficient cash flow to service its debt obligations when due. If the combined company is unable to meet such obligations or fails to comply with the financial and other restrictive covenants contained in the agreements governing such debt obligations, it may be required to refinance all or part of its debt, sell important strategic assets at unfavorable prices or make additional borrowings. The combined company may not be able to, at any given time, refinance its debt, sell assets or make additional borrowings on commercially reasonable terms or at all, which could have a material adverse effect on its business, financial condition and results of operations after the Transactions.

Some or all of the combined company’s variable-rate indebtedness may use the LIBOR as a benchmark for establishing the rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequence of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness. In addition, any hedging agreements we have and may continue to enter into to limit our exposure to interest rate increases or foreign currency fluctuations may not offer complete protection from these risks or may be unsuccessful, and consequently may effectively increase the interest rate we pay on our debt or the exchange rate with respect to such debt, and any portion not subject to such hedging agreements would have full exposure to interest rate increases or foreign currency fluctuations, as applicable. If any financial institutions that are parties to our hedging agreements were to default on their payment obligations to us, declare bankruptcy or become insolvent, we would be unhedged against the underlying exposures. Any of these risks could have a material adverse effect on our business, financial condition and operating results.

The agreements governing the combined company’s indebtedness and other financings will include restrictive covenants that limit the combined company’s operating flexibility.

The agreements governing the combined company’s indebtedness and other financings will impose material operating and financial restrictions on the combined company. These restrictions, subject in certain cases to customary baskets, exceptions and maintenance and incurrence-based financial tests, may limit the combined company’s ability to engage in transactions and pursue strategic business opportunities, including the following:

incurring additional indebtedness and issuing preferred stock;
paying dividends, redeeming capital stock or making other restricted payments or investments;
selling or buying assets, properties or licenses;
developing assets, properties or licenses which the combined company has or in the future may procure;
creating liens on assets securing indebtedness or other obligations;
participating in future FCC auctions of spectrum or private sales of spectrum;
engaging in mergers, acquisitions, business combinations or other transactions;
entering into transactions with affiliates; and
placing restrictions on the ability of subsidiaries to pay dividends or make other payments.

These restrictions could limit the combined company’s ability to obtain debt financing, make share repurchases, refinance or pay principal on its outstanding indebtedness, complete acquisitions for cash or indebtedness or react to business, economic, market and industry conditions and other changes in its operating environment or the economy. Any future indebtedness that the combined company incurs may contain similar or more restrictive covenants. Any failure to comply with the restrictions of the combined company’s debt agreements may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these and other agreements, giving the combined company’s lenders the right to terminate any commitments they had made to provide it with further funds and to require the combined company to repay all amounts then outstanding.

The financing of the Transactions is not assured.

Although we have received debt financing commitments from lenders to provide various financing arrangements to facilitate the Transactions, the obligation of the lenders to provide these facilities is subject to a number of conditions and the financing of the Transactions may not be obtained on the expected terms or at all.


In particular, we have received commitments for $30.0 billion in debt financing to fund the Transactions which is comprised of (i) a $4.0 billion secured revolving credit facility, (ii) a $7.0 billion term loan credit facility and (iii) a $19.0 billion secured bridge loan facility. Our reliance on the financing from the $19.0 billion secured bridge loan facility commitment is intended to be reduced through one or more secured note offerings or other long-term financings prior to the merger closing. However, there can be no assurance that we will be able to issue any such secured notes or other long-term financings on terms we find acceptable or at all, especially in light of the recent debt market volatility, in which case we may have to exercise some or all of the commitments under the secured bridge facility to fund the Transactions. Accordingly, the costs of financing for the Transactions may be higher than expected.

Credit rating downgrades could adversely affect the businesses, cash flows, financial condition and operating results of T-Mobile and, following the Transactions, the combined company.

Credit ratings impact the cost and availability of future borrowings, and, as a result, cost of capital. Our current ratings reflect each rating agency’s opinion of our financial strength, operating performance and ability to meet our debt obligations or, following the completion of the Transactions, obligations to the combined company’s obligors. Each rating agency reviews these ratings periodically and there can be no assurance that such ratings will be maintained in the future. A downgrade in the rating of us and/or Sprint could adversely affect the businesses, cash flows, financial condition and operating results of T-Mobile and, following the Transactions, the combined company.

We have incurred, and will incur, direct and indirect costs as a result of the Transactions.

We have incurred, and will incur, substantial expenses in connection with and as a result of completing the Transactions, and over a period of time following the completion of the Transactions, the combined company also expects to incur substantial expenses in connection with integrating and coordinating our and Sprint’s businesses, operations, policies and procedures. A portion of the transaction costs related to the Transactions will be incurred regardless of whether the Transactions are completed. While we have assumed that a certain level of transaction expenses will be incurred, factors beyond our control could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. These expenses will exceed the costs historically borne by us. These costs could adversely affect our financial condition and results of operations prior to the Transactions and the financial condition and results of operations of the combined company following the Transactions.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2017,2018, our significant properties that we primarily leasedlease and were useduse in connection with switching centers, data centers, call centers and warehouses were as follows:
Approximate Number Approximate Size in Square FeetApproximate Number Approximate Size in Square Feet
Switching centers61
 1,300,000
61
 1,300,000
Data centers6
 500,000
6
 500,000
Call center17
 1,400,000
17
 1,300,000
Warehouses15
 500,000
21
 500,000

As of December 31, 2017,2018, we primarily leased:

Approximately 61,00064,000 macro sitestowers and approximately 18,00021,000 distributed antenna system and small cell sites.
Approximately 2,200 T-Mobile and MetroPCSMetro by T-Mobile retail locations, including stores and kiosks ranging in size from approximately 100 square feet to 17,000 square feet.
Office space totaling approximately 900,0001,000,000 square feet for our corporate headquarters in Bellevue, Washington. In January 2019, we executed leases totaling approximately 170,000 additional square feet for our corporate headquarters. We use these offices for engineering and administrative purposes.
Office space throughout the U.S., totaling approximately 1,700,000 square feet, as of December 31, 2017, for use by our regional offices primarily for administrative, engineering and sales purposes.

In February 2018, we extended the leases related to our corporate headquarters facility.

Item 3. Legal Proceedings

See Note 13 -15 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding certain legal proceedings in which we are involved.


Item 4. Mine Safety Disclosures

None.

PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol “TMUS.” As of December 31, 2017,2018, there were 269265 registered stockholders of record of our common stock, but we estimate the total number of stockholders to be much higher as a number of our shares are held by brokers or dealers for their customers in street name.

The high and low common stock sales prices per share were as follows:
 High Low
Year Ended December 31, 2017   
First quarter$65.41
 $55.30
Second quarter68.88
 59.59
Third quarter65.47
 59.13
Fourth quarter64.64
 54.60
Year Ended December 31, 2016   
First quarter$41.23
 $33.23
Second quarter44.13
 37.93
Third quarter48.11
 42.71
Fourth quarter59.19
 44.91

Dividends

We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any cash dividends on our common stock in the foreseeable future. Our credit facilities and the indentures and supplemental indentures governing our long-term debt to affiliates and third parties, excluding capital leases, contain covenants that, among other things, restrict our ability to declare or pay dividends on our common stock. In addition, no dividend may be declared or paid on our common stock, other than dividends payable solely in shares of our common stock, unless all accrued dividends for all completed dividend periods have been declared and paid on our preferred stock. As of December 15, 2017, 20 million shares of our preferred stock converted to approximately 32 million shares of our common stock at a conversion rate of 1.6119 common shares for each share of previously outstanding preferred stock and certain cash-in-lieu of fractional shares. There are no preferred shares outstanding as of December 31, 2017. We currently intend to use future earnings, if any, to invest in our business and to fund our existing stock repurchase program. Subject to Delaware law, our Board of Directors will determine the payment of future dividends on our common stock, if any, and the amount of any dividends in light of:

any applicable contractual or charter restrictions limiting our ability to pay dividends;
our earnings and cash flows;
our capital requirements;
our future needs for cash;
our financial condition; and
other factors our Board of Directors deems relevant.


Repurchases of Common Stock

On December 6, 2017, our Board of Directors authorized a stock repurchase program for up to $1.5 billion of our common stock through December 31, 2018. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The repurchase program does not obligate us to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at our discretion. Repurchased shares are retired.

We also understand that Deutsche Telekom AG, our majority stockholder, or its affiliates, is considering plans to purchase additional shares of our common stock. Such purchases would likely take place through December 31, 2018, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements.

The following table summarizes information regarding shares repurchased during the quarter ended December 31, 2017:

 Total Number of Shares Repurchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in millions)
10/1/2017 - 10/31/2017
 $
 
 $
11/1/2017 - 11/30/2017
 
 
 
12/1/2017 - 12/31/20177,010,889
 63.34
 7,010,889
 1,056
 7,010,889
   7,010,889
 1,056

From the inception of the repurchase program through February 5, 2018, we repurchased approximately 12.3 million shares at an average price per share of $63.68 for a total purchase price of approximately $783 million. As of February 5, 2018, there was approximately $717 million of repurchase authority remaining.

Performance Graph

The graph below compares the five-year cumulative total returns of T-Mobile, the S&P 500 index, the NASDAQ Composite index and the Dow Jones US Mobile Telecommunications TSM index. The graph tracks the performance of a $100 investment, with the reinvestment of all dividends, from December 31, 20122013 to December 31, 2017. For periods prior to the closing of the business combination with MetroPCS, our stock price performance represents the stock price of MetroPCS, adjusted to reflect the 1-for-2 reverse stock split effected on April 30, 2013.2018.

tmus12312018stockperform.jpg


At December 31,At December 31,
2012 2013 2014 2015 2016 20172013 2014 2015 2016 2017 2018
T-Mobile US, Inc.$100.00
 $210.69
 $168.73
 $245.01
 $360.19
 $397.77
$100.00
 $80.08
 $116.29
 $170.96
 $188.79
 $189.09
S&P 500100.00
 132.39
 150.51
 152.59
 170.84
 208.14
100.00
 113.69
 115.26
 129.05
 157.22
 150.33
NASDAQ Composite100.00
 141.63
 162.09
 173.33
 187.19
 242.29
100.00
 114.62
 122.81
 133.19
 172.11
 165.84
Dow Jones US Mobile Telecommunications TSM100.00
 132.12
 118.02
 123.77
 157.74
 161.29
100.00
 89.33
 93.68
 119.39
 122.09
 145.29

The stock price performance included in this graph is not necessarily indicative of future stock price performance.




Item 6. Selected Financial Data

The following selected financial data are derived from our consolidated financial statements. In connection with the business combination with MetroPCS, the selected financial data prior to May 1, 2013 represents T-Mobile USA’s historical financial data. The data below should be read together with Risk Factors included in Part I, Item 1A, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 and Financial Statements and Supplementary Data included in Part II, Item 8 of this Form 10-K.

Selected Financial Data
(in millions, except per share and customer amounts)As of and for the Year Ended December 31,As of and for the Year Ended December 31,
2017 2016 2015 2014 2013
2018 (1)
 2017 2016 2015 2014
Statement of Operations Data                  
Total service revenues$30,160
 $27,844
 $24,821
 $22,375
 $19,068
$31,992
 $30,160
 $27,844
 $24,821
 $22,375
Total revenues (1)
40,604
 37,490
 32,467
 29,920
 24,605
43,310
 40,604
 37,490
 32,467
 29,920
Operating income (1)
4,888
 4,050
 2,479
 1,772
 1,181
5,309
 4,888
 4,050
 2,479
 1,772
Total other expense, net (1)
(1,727) (1,723) (1,501) (1,359) (1,130)(1,392) (1,727) (1,723) (1,501) (1,359)
Income tax benefit (expense)1,375
 (867) (245) (166) (16)
Income tax (expense) benefit(2)
(1,029) 1,375
 (867) (245) (166)
Net income4,536
 1,460
 733
 247
 35
2,888
 4,536
 1,460
 733
 247
Net income attributable to common stockholders4,481
 1,405
 678
 247
 35
2,888
 4,481
 1,405
 678
 247
Earnings per share:         
Earnings per share         
Basic$5.39
 $1.71
 $0.83
 $0.31
 $0.05
$3.40
 $5.39
 $1.71
 $0.83
 $0.31
Diluted$5.20
 $1.69
 $0.82
 $0.30
 $0.05
3.36
 5.20
 1.69
 0.82
 0.30
Balance Sheet Data                  
Cash and cash equivalents$1,219
 $5,500
 $4,582
 $5,315
 $5,891
$1,203
 $1,219
 $5,500
 $4,582
 $5,315
Property and equipment, net22,196
 20,943
 20,000
 16,245
 15,349
23,359
 22,196
 20,943
 20,000
 16,245
Spectrum licenses35,366
 27,014
 23,955
 21,955
 18,122
35,559
 35,366
 27,014
 23,955
 21,955
Total assets70,563
 65,891
 62,413
 56,639
 49,946
72,468
 70,563
 65,891
 62,413
 56,639
Total debt, excluding tower obligations28,319
 27,786
 26,243
 21,946
 20,182
27,547
 28,319
 27,786
 26,243
 21,946
Stockholders’ equity22,559
 18,236
 16,557
 15,663
 14,245
Stockholders' equity24,718
 22,559
 18,236
 16,557
 15,663
Statement of Cash Flows and Operational Data                  
Net cash provided by operating activities(3)$7,962
 $6,135
 $5,414
 $4,146
 $3,545
$3,899
 $3,831
 $2,779
 $1,877
 $1,957
Purchases of property and equipment(5,237) (4,702) (4,724) (4,317) (4,025)(5,541) (5,237) (4,702) (4,724) (4,317)
Purchases of spectrum licenses and other intangible assets, including deposits(5,828) (3,968) (1,935) (2,900) (381)(127) (5,828) (3,968) (1,935) (2,900)
Net cash (used in) provided by financing activities(1,179) 463
 3,413
 2,524
 4,044
Total customers (in thousands)(2)
72,585
 71,455
 63,282
 55,018
 46,684
Proceeds related to beneficial interests in securitization transactions (3)
5,406
 4,319
 3,356
 3,537
 2,228
Net cash (used in) provided by financing activities (3)
(3,336) (1,367) 463
 3,413
 2,485
Total customers (in thousands)(4)
79,651
 72,585
 71,455
 63,282
 55,018
(1)
EffectiveOn January 1, 2017,2018, we changed an accounting principle. The imputed discount on Equipment Installment Planadopted Accounting Standards Update (“EIP”ASU”) receivables, which is amortized over2014-09, “Revenue from Contracts with Customers (Topic 606)” and all the financed installment termrelated amendments (collectively, the “new revenue standard”), using the effective interestmodified retrospective method and was previously presented within Interest income in our Consolidated Statements of Comprehensive Income, is now presented within Other revenues in our Consolidated Statements of Comprehensive Income. We have applied this change retrospectively and presentedwith the cumulative effect of $280 million, $248 million, $414 million, $356 millioninitially applying the guidance recognized at the date of initial application. Comparative information has not been restated and $185 million oncontinues to be reported under the years ended December 31, 2017, 2016, 2015, 2014 and 2013, respectivelystandards in the table above.effect for those periods. See Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
(2)In December 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was signed into legislation. The TCJA included numerous changes to existing tax law, including a permanent reduction in the federal corporate income tax rate from 35% to 21%. The rate reduction took place on January 1, 2018. We recognized a net tax benefit of $2.2 billion associated with the enactment of the TCJA in Income tax (expense) benefit in our Consolidated Statements of Comprehensive Income in the fourth quarter of 2017, primarily due to a re-measurement of deferred tax assets and liabilities.
(3)On January 1, 2018, we adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (the “new cash flow standard”) which impacted the presentation of our cash flows related to our beneficial interests in securitization transactions, which is the deferred purchase price, resulting in a reclassification of cash inflows from Operating activities to Investing activities of approximately $5.4 billion, $4.3 billion, $3.4 billion, $3.5 billion and $2.2 billion for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively, in our Consolidated Statements of Cash Flows. The new cash flow standard also impacted the presentation of our cash payments for debt prepayment and debt extinguishment costs, resulting in a reclassification of cash outflows from Operating activities to Financing activities of $212 million, $188 million and $39 million for the years ended December 31, 2018, 2017 and 2014, respectively, in our Consolidated Statements of Cash Flows. There were no cash payments for debt prepayment and debt extinguishment costs during the years ended December 31, 2016 and 2015. We have applied the new cash flow standard retrospectively to all periods presented.
(4)We believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical. We will continue to support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base resulting in the removal of 4,528,000 reported wholesale customers in 2017.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are to provide users of our consolidated financial statementsConsolidated Financial Statements with the following:

A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results;
Context to the financial statements; and
Information that allows assessment of the likelihood that past performance is indicative of future performance.

Our MD&A is provided as a supplement to, and should be read together with, our audited consolidated financial statementsConsolidated Financial Statements for the three years ended December 31, 20172018, included in Part II, Item 8 of this Form 10-K. Except as expressly stated, the financial condition and results of operations discussed throughout our MD&A are those of T-Mobile US, Inc. and its consolidated subsidiaries.

Business Overview

Change in Accounting Principle

Effective January 1, 2017, the imputed discount on EIP receivables, which is amortized over the financed installment term using the effective interest method and was previously recognized within Interest income in our Consolidated Statements of Comprehensive Income, is recognized within Other revenues in our Consolidated Statements of Comprehensive Income. We believe this presentation is preferable because it provides a better representation of amounts earned from the Company’s major ongoing operations and aligns with industry practice thereby enhancing comparability. We have applied this change retrospectively and the effect of this change for the years ended December 31, 2016 and 2015, was a reclassification of $248 million and $414 million, respectively, from Interest income to Other revenues. The amortization of imputed discount on our EIP receivables for the year ended December 31, 2017 was $280 million. For additional information, see Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Un-carrier Strategy

The Un-carrier is about adding value toWe are the customer relationship by changing the rules of the industry and giving our customers more. We introducedUn-carrier. Through our Un-carrier strategy, in 2013 with the objective of eliminating customer pain points from the unnecessary complexity ofwe’ve disrupted the wireless communication industry. Sinceservices industry by listening to our customers and providing them with added value and an exceptional experience, including implementing signature initiatives that time, we have continued our efforts withchanged the launch of additionalwireless industry forever. These Un-carrier initiatives of our Un-carrier strategy. During 2017, we launchedinclude the following Un-carrier initiatives:launched during 2018:

In January 2017,August 2018, we introduced Un-carrier Next, where monthly wirelessa new initiative that radically changes the structure of our customer service feesdepartment and sales taxes are included in the advertised monthly recurring chargesolves several significant pain points for T-Mobile ONE. We also unveiled Kickback on T-Mobile ONE, where participatingcustomers. Postpaid customers who use 2 GB or less of data in a month, will get updirectly through to a $10 credit per qualifying line onhuman when they call customer support, and that human will be one member of a “Team of Experts” devoted to that customer and other customers in their next month’s bill.geographic region. No bots, no bouncing, no BS.
Un-carrier Next also provided customers exclusive access to a free one-year Pandora Plus subscription via the T-Mobile Tuesdays App in August 2018. In addition, we introducedannounced an exclusive multi-year partnership with Live Nation, the Un-contract for T-Mobile ONE with the first-ever price guarantee on an unlimited 4G LTE plan which allows current T-Mobile ONEworld’s largest live entertainment company, giving Un-carrier customers rock star status at Live Nation amphitheater and arena concerts, including access to keep their price for service until they decide to change it.last-minute reserve seats in sold-out sections and discounted tickets.

In September 2017,2018, in connection with the rebranding of our prepaid brand, MetroPCS, as Metro by T-Mobile, we introduced Un-carrier Next: Netflix On Us, throughnew unlimited rate plans with tiers that feature added benefits of Google One and Amazon Prime as well as an exclusive new partnershipexpanded selection of the latest and greatest smartphones. Gone are the outdated perceptions that prepaid service is synonymous with Netflix where qualifying T-Mobile ONE customers on family plans can opt in for a standard monthly Netflix service plan at no additional cost.limited coverage, cheap flip phones or bad credit.

Our ability to acquire and retain branded customers is important to our business in the generation of revenues and we believe our Un-carrier strategy, along with ongoing network improvements, has been successful in attracting and retaining customers as evidenced by continued branded customer growth and improved branded postpaid phone and branded prepaid customer churn.


Year Ended December 31, 2017 Versus 2016 2016 Versus 2015Year Ended December 31, 2018 Versus 2017 2017 Versus 2016
(in thousands)2017 2016 2015# Change % Change # Change % Change2018 2017 2016# Change % Change # Change % Change
Net customer additions                          
Branded postpaid customers3,620
 4,097
 4,510
 (477) (12)% (413) (9)%4,459
 3,620
 4,097
 839
 23 % (477) (12)%
Branded prepaid customers855
 2,508
 1,315
 (1,653) (66)% 1,193
 91 %460
 855
 2,508
 (395) (46)% (1,653) (66)%
Total branded customers4,475
 6,605
 5,825
 (2,130) (32)% 780
 13 %4,919
 4,475
 6,605
 444
 10 % (2,130) (32)%


Year Ended December 31, Bps Change 2017 Versus 2016 Bps Change 2016 Versus 2015Year Ended December 31, Bps Change 2018 Versus 2017 Bps Change 2017 Versus 2016
2017 2016 2015 2018 2017 2016 
Branded postpaid phone churn1.18% 1.30% 1.39% -12 bps -9 bps1.01% 1.18% 1.30% -17 bps -12 bps
Branded prepaid churn4.04% 3.88% 4.45% 16 bps -57 bps3.96% 4.04% 3.88% -8 bps 16 bps

Proposed Sprint Transaction

On SeptemberApril 29, 2018, we entered into the Business Combination Agreement to merge with Sprint in an all-stock transaction at a fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock. The combined company will be named “T-Mobile” and, as a result of the Merger, is expected to be able to rapidly launch a nationwide 5G network, accelerate innovation and increase competition in the U.S. wireless, video and broadband industries. Immediately following the Merger, it is anticipated that DT and SoftBank Group Corp. will hold, directly or indirectly, on a fully diluted basis, approximately 41.7% and 27.4%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 30.9% of the outstanding T-Mobile common stock held by other stockholders, based on closing share prices and certain other assumptions as of December 31, 2018. The Merger is subject to regulatory approvals and certain other customary closing conditions. We expect to receive regulatory approval in the first half of 2019.

For more information regarding our Business Combination Agreement, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

Acquisitions

On January 1, 2016,2018, we soldclosed on our marketingpreviously 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 in Other income, net in 2018.

On January 22, 2018, we completed our acquisition of television innovator Layer3 TV for cash consideration of $318 million. 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 customers, offering direct to home digital television and multi-channel video programming distribution rightsservices. This transaction represented an opportunity to certainacquire a complementary service to our existing T-Mobile co-branded customerswireless service to advance our video strategy. We accounted for the purchase of Layer3 TV as a current MVNO partnerbusiness combination and recognized $218 million of goodwill as part of our purchase price allocation.

For more information regarding our acquisitions, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

Accounting Pronouncements Adopted During the Current Year

Revenue Recognition

On January 1, 2018, we adopted the new revenue standard. See Note 10 – Revenue from Contracts with Customers of the Notes to the Consolidated Financial Statements for nominal consideration (the “MVNO Transaction”). Uponinformation regarding the sale,new revenue standard and Note 1 – Summary of Significant Accounting Policies of the MVNO Transaction resultedNotes to the Consolidated Financial Statements for information regarding recently issued accounting standards.


The impact of our adoption of the new revenue standard is presented in Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements and in the following table which presents a comparison of selected financial information under both the new revenue standard and the previous revenue standard for the year ended December 31, 2018:
 Year Ended December 31, 2018
 Previous Revenue Standard New Revenue Standard Change
GAAP financial measures     
Branded postpaid service revenues (in millions)$20,887
 $20,862
 $(25)
Branded prepaid service revenues (in millions)9,608
 9,598
 (10)
Net income (in millions)2,593
 2,888
 295
Performance measures     
Branded postpaid phone ARPU$46.45
 $46.40
 $(0.05)
Branded postpaid ABPU58.49
 58.44
 (0.05)
Branded prepaid ARPU38.56
 38.53
 (0.03)
Non-GAAP financial measure     
Adjusted EBITDA (in millions)$12,000
 $12,398
 $398

Statement of Cash Flows

On January 1, 2018, we adopted the new cash flow standard which impacted the presentation of our cash flows related to our beneficial interests in securitization transactions, which is the deferred purchase price, resulting in a transferreclassification of 1,365,000 branded postpaid phone customers and 326,000 branded prepaid customerscash inflows from Operating activities to wholesale customers. Prospectively from September 1, 2016, revenue for these customers is recorded within wholesale revenuesInvesting activities in our Consolidated Statements of Comprehensive Income. Additionally,Cash Flows. The new cash flow standard also impacted the impactpresentation of the MVNO Transaction resulted in improvements to branded postpaid phone churnour cash payments for year ended December 31, 2016.

We believe currentdebt prepayment 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 basedebt extinguishment costs, resulting in the removala reclassification of 4,528,000 reported wholesale customers in 2017.

During the year ended December 31, 2016, a handset OEM announced recalls on certain of its smartphone devices. As a result, in 2016 we recorded no revenue associated with the device salescash outflows from Operating activities to customers and impaired the devices to their net realizable value. The OEM agreed to reimburse T-Mobile for direct and indirect costs associated with the recall, as such, we recorded an amount due from the OEM as an offset to the loss recorded in Cost of equipment sales and the costs incurred within Selling, general and administrativeFinancing activities in our Consolidated Statements of Comprehensive IncomeCash Flows. We have applied the new cash flow standard retrospectively to all periods presented. For additional information regarding the new cash flow standard and the impact of our adoption, see “Selected Financial Data” and Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements.

Financial Instruments

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, “Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities.” The standard addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard became effective for us, and we adopted the standard, on January 1, 2018. The standard requires the impact of adoption to be recorded to retained earnings under a reduction to Accounts payable and accrued liabilities inmodified retrospective approach. The implementation of this standard did not have a material impact on our Consolidated Balance Sheets.Financial Statements.

Income Taxes

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory.” The reimbursement was received fromstandard requires that the OEM in 2017.income tax impact of intra-entity sales and transfers of property, except for inventory, be recognized when the transfer occurs. The standard became effective for us, and we adopted the standard, on January 1, 2018. The standard requires any deferred taxes not yet recognized on intra-entity transfers to be recorded to retained earnings under a modified retrospective approach. The implementation of this standard did not have a material impact on our Consolidated Financial Statements.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvement to Accounting for Hedging Activities.” The standard modified the guidance for the designation and measurement of qualifying hedging relationships and the presentation of hedge results. We adopted this standard on October 1, 2018, and have applied the standard to hedging transactions prospectively.


Hurricane Impacts

During the third and fourth quarters of 2017, our operations2018, we recognized $61 million in Texas, Florida andcosts related to hurricanes, including $36 million in incremental costs to maintain services primarily in Puerto Rico experienced losses related to hurricanes. The impacthurricanes that occurred in 2017 and $25 million related to operating income for the year ended December 31, 2017, from lost revenue, assets damaged or destroyed and otherhurricanes that occurred in 2018. Additional costs related to a hurricane related coststhat occurred in 2018 are included in the table below. We expect additional expensesexpected to be incurred and customer activity to be impactedimmaterial in the first quarter of 2019.

During 2018, primarilywe received reimbursement payments from our insurance carriers of $307 million related to our operations in Puerto Rico. hurricanes, of which $93 million was previously accrued for as a receivable as of December 31, 2017.

We have recognizedaccrued insurance recoveries related to thosea hurricane lossesthat occurred in the amount2018 of approximately $93$5 million for the year ended December 31, 20172018 as an offset to the costs incurred within Cost of services in our Consolidated Statements of Comprehensive Income and as an increase to Other current assets in our Consolidated Balance Sheets. We continue

The following table shows the impacts of hurricanes to assessour results, operating metrics and non-GAAP financial measures for the damage of the hurricanesyears ended December 31, 2018 and work with our insurance carriers to submit claims for property damage and business interruption. We expect to record additional insurance recoveries related to these hurricanes2017. There were no significant hurricane impacts in future periods.2016.
(in millions, except per share amounts, ARPU, ABPU, and bad debt expense as a percentage of total revenues)Year Ended December 31, 2017
Gross Reimbursement Net
Year Ended December 31, 2018 Year Ended December 31, 2017
(in millions, except per share amounts)Gross Reim-
bursement
 Net Gross Reim-
bursement
 Net
Increase (decrease)                
Revenues                
Branded postpaid revenues$(37) $
 $(37)$
 $
 $
 $(37) $
 $(37)
Of which, branded postpaid phone revenues(35) 
 (35)
 
 
 (35) 
 (35)
Branded prepaid revenues(11) 
 (11)
 
 
 (11) 
 (11)
Total service revenues(48) 
 (48)
 
 
 (48) 
 (48)
Equipment revenues(8) 
 (8)
 
 
 (8) 
 (8)
Other revenues
 71
 71
 
 
 
Total revenues(56) 
 (56)
 71
 71
 (56) 
 (56)
     
Operating expenses                
Cost of services198
 (93) 105
59
 (135) (76) 198
 (93) 105
Cost of equipment sales4
 
 4
1
 
 1
 4
 
 4
Selling, general and administrative36
 
 36
1
 (13) (12) 36
 
 36
Of which, bad debt expense20
 
 20

 
 
 20
 
 20
Total operating expense238
 (93) 145
     
Total operating expenses61
 (148) (87) 238
 (93) 145
Operating income (loss)$(294) $93
 $(201)(61) 219
 158
 (294) 93
 (201)
Net income (loss)$(193) $63
 $(130)$(41) $140
 $99
 $(193) $63
 $(130)
     
Earnings per share - basic$(0.23) $0.07
 $(0.16)
Earnings per share - diluted(0.22) 0.07
 (0.15)
     
Operating measures     
Bad debt expense as a percentage of total revenues0.05% % 0.05%
Earnings per share           
Basic$(0.05) $0.17
 $0.12
 $(0.23) $0.07
 $(0.16)
Diluted(0.05) 0.17
 0.12
 (0.22) 0.07
 (0.15)
Operating metrics           
Bad debt expense and losses from sales of receivables as a percentage of total revenues
 
 
 0.05% % 0.05%
Branded postpaid phone ARPU$(0.09) $
 $(0.09)$
 $
 $
 $(0.09) $
 $(0.09)
Branded postpaid ABPU(0.08) 
 (0.08)
 
 
 (0.08) 
 (0.08)
Branded prepaid ARPU(0.05) 
 (0.05)
 
 
 (0.05) 
 (0.05)
     
Non-GAAP financial measures                
Adjusted EBITDA$(294) $93
 $(201)$(61) $219
 $158
 $(294) $93
 $(201)


Results of Operations

Highlights for the yearyears ended December 31, 2017,2018, compared to the same period in 20162017

Total revenues of $40.6$43.3 billion for the year ended December 31, 2018 increased $3.1$2.7 billion, or 8%. The increase was7%, primarily driven by growth in service and equipment revenues as further discussed below. On September 1, 2016, we sold our marketing and distribution rights to certain existing T-Mobile co-branded customers to a current MVNO partner for nominal consideration. The MVNO Transaction shifted Branded postpaid revenues to Wholesale revenues, but did not materially impact total revenues.

Service revenues of $30.2$32.0 billion for the year ended December 31, 2018 increased $2.3$1.8 billion, or 8%. The increase was6%, primarily due to growth in our average branded customer base driven by the continued growth in existing and Greenfield markets including the growing success of new customer segments and rate plans such as a result of strong customer response to our Un-carrier initiatives, promotionsT-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for Business and T-Mobile Essentials, along with lower churn, growth in connected devices and the success of our MetroPCSMetro by T-Mobile brand.

Equipment revenues of $9.4$10.0 billion for the year ended December 31, 2018 increased $648$634 million, or 7%. The increase was, primarily due to a higher average revenue per device sold and an increasea positive impact from customer purchasesthe new revenue standard of $393 million, partially offset by a decrease in the number of devices sold, excluding purchased leased devices, lower volumes of purchased leased devices at the end of the lease term partially offset byand lower lease revenues.

Operating income of $4.9$5.3 billion for the year ended December 31, 2018 increased $838$421 million, or 21%. The increase was9%, primarily due to higher Total service revenues, and lower Depreciation and amortization, partially offset by higher Selling, general and administrative lower Gains on disposalexpenses, Depreciation and amortization, Cost of spectrum licenses and higherequipment sales, Cost of services expenses.

Net income of $4.5 billion increased $3.1 billion, or 211%. The increase was primarily due to the impact of the Tax Cuts and Jobs Act of 2017 (the "TCJA"), which resulted in a net tax benefit of $2.2 billion in 2017, and higher operating income driven by the factors described above, partially offset by the negative impact from hurricanes. Net income included net, after-tax spectrum gains of $174 million and $509 million, for the years ended December 31, 2017 and 2016, respectively.

Adjusted EBITDA, a non-GAAP financial measure, of $11.2 billion increased $574 million, or 5%. 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. Adjusted EBITDAOperating income for the year ended December 31, 2018 included pre-taxthe positive impacts from the adoption of the new revenue standard of $398 million and from insurance reimbursements related to hurricanes, net of costs incurred, of $158 million as well as the negative impact of Costs associated with the Transactions of $196 million. Operating income also included gains on disposal of spectrum gainslicenses of $235 million and $835the negative impact from hurricanes of $201 million for the yearsyear ended December 31, 2017 and 2016, respectively.
2017.

Net cash provided by operating activitiesincome of $8.0$2.9 billion increased $1.8for the year ended December 31, 2018 decreased $1.6 billion, or 30%. See “Liquidity36%, primarily due to higher Income tax (expense) benefit, partially offset by higher Operating income and Capital Resources” sectionlower Other income (expense), net. Net income for additional information.the year ended December 31, 2018 included the positive impacts from the adoption of the new revenue standard of $295 million and from insurance reimbursements related to hurricanes, net of costs, of $99 million as well as the negative impact of Costs associated with the Transactions of $180 million. Net income also included the negative impact from hurricanes of $130 million and net, after-tax gains on disposal of spectrum licenses of $174 million for the year ended December 31, 2017.

Adjusted EBITDA of $12.4 billion for the year ended December 31, 2018 increased $1.2 billion, or 11%, primarily due to higher Operating income driven by the factors described above. See “Performance Measures” for additional information.
Free Cash Flow, a non-GAAP financial measure, of $2.7 billion increased $1.3 billion, or 90%. See “Liquidity and Capital Resources” section for additional information.
Net cash provided by operating activities of $3.9 billion for the year ended December 31, 2018 increased $68 million, or 2%. See “Liquidity and Capital Resources” for additional information.

Free Cash Flow of $3.6 billion for the year ended December 31, 2018 increased $827 million, or 30%. See “Liquidity and Capital Resources” for additional information.


Set forth below is a summary of our consolidated financial results:
Year Ended December 31, 2017 Versus 2016 2016 Versus 2015
2017 2016 2015 $ Change % Change $ Change % ChangeYear Ended December 31, 2018 Versus 2017 2017 Versus 2016
(in millions)  
(As Adjusted - See Note 1)
        2018 2017 2016 $ Change % Change $ Change % Change
Revenues                          
Branded postpaid revenues$19,448
 $18,138
 $16,383
 $1,310
 7 % $1,755
 11 %$20,862
 $19,448
 $18,138
 $1,414
 7 % $1,310
 7 %
Branded prepaid revenues9,380
 8,553
 7,553
 827
 10 % 1,000
 13 %9,598
 9,380
 8,553
 218
 2 % 827
 10 %
Wholesale revenues1,102
 903
 692
 199
 22 % 211
 30 %1,183
 1,102
 903
 81
 7 % 199
 22 %
Roaming and other service revenues230
 250
 193
 (20) (8)% 57
 30 %349
 230
 250
 119
 52 % (20) (8)%
Total service revenues30,160
 27,844
 24,821
 2,316
 8 % 3,023
 12 %31,992
 30,160
 27,844
 1,832
 6 % 2,316
 8 %
Equipment revenues9,375
 8,727
 6,718
 648
 7 % 2,009
 30 %10,009
 9,375
 8,727
 634
 7 % 648
 7 %
Other revenues1,069
 919
 928
 150
 16 % (9) (1)%1,309
 1,069
 919
 240
 22 % 150
 16 %
Total revenues40,604
 37,490
 32,467
 3,114
 8 % 5,023
 15 %43,310
 40,604
 37,490
 2,706
 7 % 3,114
 8 %
Operating expenses          
 

             
Cost of services, exclusive of depreciation and amortization shown separately below6,100
 5,731
 5,554
 369
 6 % 177
 3 %6,307
 6,100
 5,731
 207
 3 % 369
 6 %
Cost of equipment sales11,608
 10,819
 9,344
 789
 7 % 1,475
 16 %12,047
 11,608
 10,819
 439
 4 % 789
 7 %
Selling, general and administrative12,259
 11,378
 10,189
 881
 8 % 1,189
 12 %13,161
 12,259
 11,378
 902
 7 % 881
 8 %
Depreciation and amortization5,984
 6,243
 4,688
 (259) (4)% 1,555
 33 %6,486
 5,984
 6,243
 502
 8 % (259) (4)%
Cost of MetroPCS business combination
 104
 376
 (104) (100)% (272) (72)%
 
 104
 
 NM
 (104) (100)%
Gains on disposal of spectrum licenses(235) (835) (163) 600
 (72)% (672) NM

 (235) (835) 235
 (100)% 600
 (72)%
Total operating expense35,716
 33,440
 29,988
 2,276
 7 % 3,452
 12 %38,001
 35,716
 33,440
 2,285
 6 % 2,276
 7 %
Operating income4,888
 4,050
 2,479
 838
 21 % 1,571
 63 %5,309
 4,888
 4,050
 421
 9 % 838
 21 %
Other income (expense)          
 

             
Interest expense(1,111) (1,418) (1,085) 307
 (22)% (333) 31 %(835) (1,111) (1,418) 276
 (25)% 307
 (22)%
Interest expense to affiliates(560) (312) (411) (248) 79 % 99
 (24)%(522) (560) (312) 38
 (7)% (248) 79 %
Interest income17
 13
 6
 4
 31 % 7
 117 %19
 17
 13
 2
 12 % 4
 31 %
Other expense, net(73) (6) (11) (67) NM
 5
 (45)%
Other income (expense), net(54) (73) (6) 19
 (26)% (67) NM
Total other expense, net(1,727) (1,723) (1,501) (4)  % (222) 15 %(1,392) (1,727) (1,723) 335
 (19)% (4)  %
Income before income taxes3,161
 2,327
 978
 834
 36 % 1,349
 138 %3,917
 3,161
 2,327
 756
 24 % 834
 36 %
Income tax benefit (expense)1,375
 (867) (245) 2,242
 (259)% (622) 254 %
Income tax (expense) benefit(1,029) 1,375
 (867) (2,404) (175)% 2,242
 (259)%
Net income$4,536
 $1,460
 $733
 $3,076
 211 % $727
 99 %$2,888
 $4,536
 $1,460
 $(1,648) (36)% $3,076
 211 %
          
 
Statement of Cash Flows Data             
Net cash provided by operating activities$7,962
 $6,135
 $5,414
 $1,827
 30 % $721
 13 %$3,899
 $3,831
 $2,779
 $68
 2 % $1,052
 38 %
Net cash used in investing activities(11,064) (5,680) (9,560) (5,384) 95 % 3,880
 (41)%(579) (6,745) (2,324) 6,166
 (91)% (4,421) 190 %
Net cash (used in) provided by financing activities(1,179) 463
 3,413
 (1,642) (355)% (2,950) (86)%(3,336) (1,367) 463
 (1,969) 144 % (1,830) (395)%
          
 
Non-GAAP Financial Measures          
 
             
Adjusted EBITDA$11,213
 $10,639
 $7,807
 $574
 5 % $2,832
 36 %$12,398
 $11,213
 $10,639
 $1,185
 11 % $574
 5 %
Free Cash Flow2,725
 1,433
 690
 1,292
 90 % 743
 108 %3,552
 2,725
 1,433
 827
 30 % 1,292
 90 %
NM - Not Meaningful



The following discussion and analysis is for the year ended December 31, 2017,2018, compared to the same period in 20162017 unless otherwise stated.

Total revenues increased $3.1$2.7 billion, or 8%7%, primarily due to higher revenues from branded postpaid and prepaid customers as well as higher equipment revenues as discussed below.

Branded postpaid revenues increased $1.3$1.4 billion, or 7%, primarily from:

A 7% increase inHigher average branded postpaid phone customers, primarily from growth in our customer base driven by the continued strong customer response to our Un-carrier initiativesgrowth in existing and promotions for services and devices,Greenfield markets including the growing success of our business channel,new customer segments and rate plans such as T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for Business;Business and
T-Mobile Essentials, along with lower churn; and
The positive impact from a decrease in the non-cash net revenue deferral for Data Stash;Higher average branded postpaid other customers; partially offset by
Lower branded postpaid phone Average Revenue Per User (“ARPU”). See “Branded Postpaid Phone ARPU” in the “Performance Measures” section of this MD&A; and
A 1% decreaseThe negative impact of the new revenue standard of $25 million, primarily due to the impact of certain promotions previously recognized as a reduction in equipment revenues now recognized as a reduction in branded postpaid phone ARPU primarily drivenrevenues, partially offset by dilution from promotions targeting families and new segments;
The MVNO Transaction; and
The negative impact from hurricanes of approximately $37 million.certain equipment revenues reclassified to branded postpaid revenues.

Branded prepaid revenuesincreased $827$218 million, or 10%2%, primarily from:

A 7% increase inHigher average branded prepaid customers primarily driven by growth in the customer base; and
A 2% increase in branded prepaid ARPU from the success of our MetroPCS brand and the optimization of our third-party distribution channels;Metro by T-Mobile brand; partially offset by
Lower branded prepaid ARPU. See “Branded Prepaid APRU” in the “Performance Measures” section of this MD&A; and
The negative impact from hurricanes of approximately $11 million.the new revenue standard of $10 million, primarily due to the impact of certain promotions previously recognized as a reduction in equipment revenues now recognized as a reduction in branded prepaid revenues.

Wholesale revenues increased $199$81 million, or 22%7%, primarily from the impactcontinued success of theour MVNO Transaction, growth in MVNO customers and higher minimum commitment revenues.partnerships.

Roaming and other service revenues decreased $20increased $119 million, or 8%.52%, primarily from an increase in international and domestic roaming revenues.

Equipment revenues increased$648 $634 million, or 7%, primarily from:

An increase of $445 million$1.1 billion in device sales revenues, excluding purchased leaseleased devices, primarily due to:
Higher average revenue per device sold due to an increase in the high-end device mixmix; and the impacts of an OEM recall of its smartphone devices in 2016, partially offset by an increase in promotions and device-related commissions spending; partially offset by
A 2%positive impact from the new revenue standard of $393 million primarily related to:
Commission costs of $438 million previously recorded as a reduction in Equipment revenues now recorded as Selling, general and administrative expenses and certain promotions previously recorded as a reduction in Equipment revenues now recorded as a reduction in Service revenues; partially offset by
Certain promotional bill credits now capitalized as contract assets and certain Equipment revenues now recognized as Service revenues; partially offset by
A 6% decrease in the number of devices sold, excluding purchased lease devices, drivenleased devices; partially offset by a lower branded postpaid handset upgrade rate. Device sales revenue is recognized at the time
A decrease of sale;
An increase of $395$310 million from customers' purchaselower volumes of purchased leased devices at the end of the lease term;
An increase of $231 million primarily related to proceeds from liquidation of returned customer handsets in 2017; and
An increase of $130 million in SIM and upgrade revenue; partially offset by
A decrease of $539$185 million in lease revenues from declining JUMP! On Demand population due tocustomers preferring affordable device options on leasing programs with lower monthly lease payments and shifting focus to our EIP financing option beginning in the first quarter of 2016;
A decrease of $18 million in accessory revenue primarily related to the decrease in device sales volume; and
The negative impact from hurricanes of approximately $8 million.for high-end devices.

Under our JUMP! On Demand program, upon device upgrade or at lease end, customers must return or purchase their device. Revenue for purchased leased devices is recorded as equipment revenues when revenue is recognition criteria have been met.

Gross EIP device financing to our customers increased by $437 million for the year ended December 31, 2017, primarily due to growth in the gross amount of equipment financed on EIP. The increase was also due to certain customers on leased devices reaching the end of lease term who financed their devices over a nine-month EIP.

Other revenues increased $150$240 million, or 16%22%, primarily due to higher revenue from revenue share agreements with third parties.parties, the positive impact from $71 million in insurance reimbursements related to the hurricanes, and higher amortized imputed discount on EIP receivables due to continued growth in EIP sales.


Our operating expenses consist of the following categories:

Cost of services primarily includes costs directly attributable to providing wireless service through the operation of our network, including direct switch and cell site costs, such as rent, network access and transport costs, utilities, maintenance, associated labor costs, long distance costs, regulatory program costs, roaming fees paid to other carriers and data content costs. In addition, certain costs for customer appreciation programs are included in Cost of services.

Cost of equipment sales primarily includes costs of devices and accessories sold to customers and dealers, device costs to fulfill insurance and warranty claims, costs related to returned and purchased leased devices, write-downs of inventory related to shrinkage and obsolescence, and shipping and handling costs.

Selling, general and administrative primarily includes costs not directly attributable to providing wireless service for the operation of sales, customer care and corporate activities. These include commissions paid to dealers and retail employees for activations and upgrades, labor and facilities costs associated with retail sales force and administrative space, marketing and promotional costs, customer support and billing, bad debt expense, losses from sales of receivables and back office administrative support activities.

Operating expenses increased $2.3 billion, or 7%6%, primarily from higher Cost of services,Selling, general and administrative expenses, Depreciation and amortization expense, Cost of equipment sales, Selling, general and administrativeCost of services, and lower Gains on disposal of spectrum licenses partially offset by lower Depreciation and amortization as discussed below.

Cost of services increased $369$207 million, or 6%3%, primarily from:

Higher lease, engineeringemployee-related and employee-relatedrepair and maintenance expenses associated with network expansion; and
The negative impact from hurricanesthe new revenue standard of $105$74 million netprimarily related to certain contract fulfillment costs reclassified to Cost of insurance recoveries;services from Selling, general and administrative expenses; partially offset by
Lower long distance and toll costs as we continue to renegotiate contracts with vendors;regulatory program costs; and
Lower regulatory expenses.The positive impact from insurance reimbursements related to hurricanes, net of costs, of $76 million in the year ended December 31, 2018, compared to costs incurred related to hurricanes, net of insurance recoveries, of $105 million for the year ended December 31, 2017.

Cost of equipment sales increased $789$439 million, or 7%4%, primarily from:

An increase of $806$947 million in device cost of equipment sales, excluding purchased leased devices, primarily due to:
A higher average cost per device sold, primarily fromdue to an increase in the high-end device mix and from the impact of an OEM recall of its smartphone devices in 2016;mix; partially offset by
A 2%6% decrease in the number of devices sold, excluding purchased lease devices, drivendevices. This increase was partially offset by a lower branded postpaid handset upgrade rate.
An increaseA decrease of $201$342 million in leaseleased device cost of equipment sales, primarily due to:
An increase infrom lower volumes of purchased leased devices at the end of the lease buyouts as leases began reaching their term dates in 2017; partially offset by
A decrease in write downs to market value of devices returned to inventory resulting from a decrease in the number of leased device upgrades.
These increases are partially offset by a decrease of $159 million primarily related to:
A decrease in insuranceterm; and warranty claims;
Higher proceeds from liquidation of returned customer handsets under our insurance programs; and
Lower inventory adjustments related to physical adjustments and obsolete inventory; partially offset by
Higher costs from an increase in the volume of liquidated returned customer handsets outside of our insurance programs.
A decrease of $57$178 million in accessory cost primarily driven by the decrease in device sales volume.due to lower inventory adjustments and lower warranty program costs.

Under our JUMP! On Demand program, upon device upgrade or at the end of the lease term, customers must return or purchase their device. The cost of purchased leased devices is recorded as Cost of equipment sales. Returned devices transferred from Property and equipment, net are recorded as inventory and are valued at the lower of cost or market with any write-down to market recognized as Cost of equipment sales.


Selling, general and administrative expenses increased $881$902 million, or 8%7%, primarily from higher commissions,from:

Higher employee-related costs, promotional and advertising costs and costs related to outsourced functionsmanaged services;
Higher commissions driven by compensation structure and managed services to support our growing customer base,channel mix changes; and
Costs associated with the Transactions of $196 million; partially offset by lower
The positive impact from the new revenue standard of $96 million, primarily due to:
Capitalized commission costs in excess of the related amortization of $495 million; and
Certain contract fulfillment costs reclassified to Cost of services from Selling, general and administrative expenses partially offset by
Commission costs of $438 million previously recorded as a reduction in Equipment revenues now recognized in Selling, general and administrative expense;
Lower bad debt expense and losses from sales of receivables reflecting our ongoing focus on managing customer quality;
Lower promotional and advertising costs;
Lower handset repair services cost. Additionally,costs due to lower demand for repaired phones for the negativefulfillment of warranty and insurance claims following the introduction of the AppleCare+ Program in the third quarter of 2017; and
The positive impact from insurance reimbursements related to hurricanes, net of costs, of $12 million in the year ended December 31, 2018, compared to costs incurred related to hurricanes of approximately $36 million contributed tofor the increase.year ended December 31, 2017.

Depreciation and amortization decreased $259increased $502 million, or 4%8%, primarily from:

The continued build-out of our 4G LTE network and deployment of low band spectrum and 5G compatible radios; and
The implementation of the first component of our new billing system; partially offset by
Lower depreciation expense related to our JUMP! On Demand program resulting from a lower number of devices under lease.an increase in the affordable device mix. 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; partially offset by
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.

Cost of MetroPCS business combination decreased $104 million. On July 1, 2015, we officially completed the shutdown of the MetroPCS CDMA network. Network decommissioning costs primarily relate to the acceleration of lease costs for cell sites that would have otherwise been recognized as cost of services over the remaining lease term had we not decommissioned the cell sites. We do not expect to incur significant additional network decommissioning costs in 2018.us.

Gains on disposal of spectrum licenses decreased $600were $0 for the year ended December 31, 2018, as compared to $235 million or 72%, primarily fromfor the year ended December 31, 2017, due to gains of $636 million and $191 million on disposal of spectrum licenses with AT&T and Sprint during the first quarter and third quarter of 2016, respectively. These 2016 gains were partially offset by gains of $235 million from spectrum license transactions with AT&T and Verizon in 2017.

Net income increased $3.1 billion, primarily due to the Tax Cuts and Jobs Act of 2017 ("TCJA") as discussed below, higher operating income and a net decrease in interest expense, partially offset by the negative impact from hurricanes of approximately $130 million, net of insurance recoveries.

Operating income, the components of which are discussed above, increased $838$421 million, or 21%. The negative impact from the hurricanes9%, for the year ended December 31, 2017 was approximately2018 and included:

The net positive impacts from the new revenue standard of $398 million; and
The positive impact from insurance reimbursements related to hurricanes, net of costs, of $158 million, compared to a negative impact of $201 million netin the same period in 2017; partially offset by
Gains on disposal of insurance recoveries.spectrum licenses of $235 million in 2017. There were no gains on disposal of spectrum licenses in 2018; and
Costs associated with the Transactions of $196 million.

Income tax benefit (expense)Interest expense changed $2.2 billion, from an expense of $867decreased $276 million, in 2016 to a benefit of $1.4 billion in 2017or 25%, primarily from:

Redemption in April 2017 of aggregate principal amount of $6.8 billion of Senior Notes, with various interest rates and maturity dates;
Redemption in January 2018 of $1.0 billion of 6.125% Senior Notes due 2022;
Redemption in April 2018 of aggregate principal amount of $2.4 billion of Senior Notes due 2023, with various interest rates and maturity dates; and
Increase in capitalized interest costs of $100 million primarily due to the build out of our network to utilize our 600 MHz spectrum licenses in the year ended December 31, 2018, compared to the year ended December 31, 2017;

partially offset by
Issuance in March 2017 of aggregate principal amount of $1.5 billion of Senior Notes, with various interest rates and maturity dates;
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.
See Note 8 – Debt of the Notes to the Consolidated Financial Statements for further information.

Interest expense to affiliates decreased $38 million, or 7%, primarily from:

A decrease from lower effective tax rate. The effective tax rate wasinterest rates achieved through refinancing in April 2017 of a benefittotal of 43.5%$2.5 billion of Senior Reset Notes;
A decrease from lower interest rates achieved through refinancing in 2017, compared to an expenseApril 2018 of 37.3%a total of $2.5 billion of Senior Reset Notes; and
Increase in 2016. The decrease in the effective income tax rate wascapitalized interest costs of $126 million primarily due to build out of our network to utilize our 600 MHz spectrum licenses in the year ended December 31, 2018, compared to the year ended December 31, 2017; partially offset by
Issuance in January 2017 of $4.0 billion of Incremental Secured Term Loan facility, which refinanced $1.98 billion of outstanding senior secured term loans;
Issuance in May 2017 of aggregate principal amount of $4.0 billion of Senior Notes, with various interest rates and maturity dates;
Issuance in April 2017 of aggregate principal amount of $3.0 billion of Senior Notes, with various interest rates and maturity dates; and
Issuance in September 2017 of aggregate principal amount of $500 million of 5.375% Senior Notes due 2027.

See Note 8 – Debt of the Notes to the Consolidated Financial Statements for further information.

Other income (expense), net decreased $19 million, or 26%, primarily from:

A $30 million gain on sale of certain investments;
A $25 million bargain purchase gain as part of our purchase price allocation of the IWS acquisition; and
A $15 million gain on our previously held equity interest in IWS; partially offset by
A $36 million increase in losses on early redemption of debt, including:
An $86 million loss on early redemption of $2.5 billion in DT Senior Reset Notes in April 2018; and
A $32 million loss on early redemption of $1.0 billion of 6.125% Senior Notes due 2022 in January 2018; partially offset by
A $73 million net loss on early redemption of aggregate principal amount of $8.25 billion in Senior Notes, with various interest rates and maturity dates, during the year ended December 31, 2017; and
A $13 million loss on refinancing of $1.98 billion of outstanding senior secured term loans in January 2017.

Income tax expense increased $2.4 billion, or 175%, primarily from:

The impact of the TCJA, which resulted in a net tax benefit of $2.2 billion in 2017, substantially due to a re-measurement of deferred tax assets and liabilities; and
A $319 million reduction in the valuation allowance against deferred tax assets in certain state jurisdictions in 2017; partially offset by
Higher income before income taxes.

The TCJA was enacted December 22, 2017 and is generally effective beginning January 1,taxes in 2018. The TCJA includes numerous changes to existing tax law, which have been reflected in the 2017 consolidated financial statements. The state corporate income tax impact of the TCJA is complex and will continue to evolve as jurisdictions evaluate conformity to the numerous federal tax law changes. As such, a re-measurement of state deferred tax assets and liabilities and the associated net tax benefit or expense may result within the next 12 months. The TCJA resulted in a net tax benefit of $2.2 billion in 2017.

See Note 11 -13 – Income Taxes of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Interest expenseNet income, the components of which are discussed above, decreased $307 million,$1.6 billion, or 22%36%, primarily from:

A decrease from the early redemption of our $1.98 billion Senior Secured Term Loans and $8.3 billion of Senior Notes; partially offset by

An increase from the issuance of the $1.5 billion of Senior Notes in March 2017; and
An increase from the issuance of the $1.0 billion of Senior Notes in April 2016.

Interest expense to affiliates increased $248 million, or 79%, primarily from:

Issuance of $4.0 billion secured term loan facility with Deutsche Telekom AG ("DT") entered into in January 2017;
Issuance of a total of $4.0 billion in Senior Notes in May 2017;
An increase in drawings on our Revolving Credit Facility; and
Issuance of $500 million in Senior Notes 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.

See Note 7 – Debt of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.included:

Other expense, net increased $67 million primarily from:

A $73 million net loss recognized from the early redemption of certain Senior Notes; and
A $13 million net loss recognized from the refinancing of our outstanding Senior Secured Term Loans.

See Note 7 – DebtThe impact of the Notes toTCJA as discussed above;
Costs associated with the Consolidated Financial Statements included in Part II, Item 8Transactions of this Form 10-K for further information.$180 million; and

Net income included net, after-tax gainsGains on disposal of spectrum licenses of $174 million in 2017. There were no gains on disposal of spectrum licenses in 2018; partially offset by
The net positive impact from the new revenue standard of $295 million; and $509
Insurance reimbursements related to the hurricanes, net of costs, of $99 million, forcompared to costs of $130 million in the years ended December 31, 2017 and 2016, respectively.same period in 2017.

Guarantor Subsidiaries

The financial condition and results of operations of the Parent, Issuer and Guarantor Subsidiaries is substantially similar to our consolidated financial condition. The most significant components of the financial condition of our Non-Guarantor Subsidiaries were as follows:
December 31,
2017
 December 31,
2016
 ChangeDecember 31,
2018
 December 31,
2017
 Change
(in millions)$ %$ %
Other current assets$628
 $565
 $63
 11 %$645
 $628
 $17
 3 %
Property and equipment, net306
 375
 (69) (18)%297
 306
 (9) (3)%
Goodwill218
 
 218
 NM
Tower obligations2,198
 2,221
 (23) (1)%2,173
 2,198
 (25) (1)%
Total stockholders' deficit(1,454) (1,374) (80) 6 %(1,142) (1,454) 312
 (21)%
NM - Not Meaningful

The most significant components of the results of operations of our Non-Guarantor Subsidiaries were as follows:
Year Ended December 31, ChangeYear Ended December 31, Change
(in millions)2017 2016$ %2018 2017$ %
Service revenues$2,113
 $2,023
 $90
 4 %$2,339
 $2,113
 $226
 11%
Cost of equipment sales1,003
 1,027
 (24) (2)%1,011
 1,003
 8
 1%
Selling, general and administrative856
 868
 (12) (1)%985
 856
 129
 15%
Total comprehensive income28
 24
 4
 17 %193
 28
 165
 589%

The change to the results of operations of our Non-Guarantor Subsidiaries for the year ended December 31, 2018 was primarily from:

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;base and higher average revenue related to the new device protection product launched at the end of August 2018; partially offset by
LowerHigher Selling, general and administrative expenses primarily due to operating costs from the non-guarantor Layer3 TV subsidiary acquired in the first quarter of 2018, an increase in customer notification expenses related to the new insurance product launched at the end of August 2018, and an increase in program expenses related to Apple Care Service Fees, partially offset by lower valuation losses in the non-guarantor subsidiary involved in the EIP sale arrangement; and
Higher Cost of equipment sales expenses primarily due to a decrease in device insurance claims and a decreasean increase in higher cost devices used for device insurance claims fulfillment, partially offset by an increase in device liquidations and a decrease in device non-return fees charged to customers; and

Lower Selling, general and administrative expenses primarily due to a decrease in device insurance program service fees, partially offset by higher costs to support our growing customer base.customers.

All other results of operations of the Parent, Issuer and Guarantor Subsidiaries are substantially similar to the Company’s consolidated results of operations. See Note 1617 – Guarantor Financial Information of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information..

The following discussion and analysis is for the year ended December 31, 2016, compared to the same period in 2015 unless otherwise stated.

Certain prior year amounts relating to the change in accounting principle which presents the imputed discount on EIP receivables, which is amortized over the financed installment term using the effective interest method, and was previously presented within Interest income in our Consolidated Statements of Comprehensive Income, is now presented within Other revenues in our Consolidated Statements of Comprehensive Income have been reclassified to conform to the current presentation. See Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Total revenues increased $5.0 billion, or 15%, primarily due to:

Branded postpaid revenues increased $1.8 billion, or 11%, primarily from:

A 13% increase in the number of average branded postpaid phone and mobile broadband customers, driven by strong customer response to our Un-carrier initiatives and promotions for services and devices;
Higher device insurance program revenues primarily from customer growth; and
Higher regulatory program revenues; partially offset by
An increase in the non-cash net revenue deferral for Data Stash; and
The MVNO Transaction.

Branded prepaid revenues increased $1.0 billion, or 13%, primarily from:

A 13% increase in the number of average branded prepaid customers driven by the success of our MetroPCS brand; and
Continued growth in new markets.

Wholesale revenues increased $211 million, or 30%, primarily from:

The MVNO Transaction;
Growth in customers of certain MVNO partners; and
An increase in data usage per customer.

Roaming and other service revenues increased $57 million, or 30%, primarily due to higher international roaming revenues driven by an increase in inbound roaming volumes.

Equipment revenues increased$2.0 billion, or 30%, primarily from:

An increase of $1.2 billion in lease revenues resulting from the launch of our JUMP! On Demand program at the end of the second quarter of 2015. Revenues associated with leased devices are recognized over the lease term; and
An increase of $570 million in device sales revenues, primarily due to a 9% increase in the number of devices sold. Device sales revenue is recognized at the time of sale.

Gross EIP device financing to our customers increased by $923 million to $6.1 billion primarily due to an increase in devices financed due to our focus on EIP sales in 2016, compared to focus on devices financed on JUMP! On Demand after the launch of the program at the end of the second quarter of 2015.


Other revenues decreased $9 million, or 1%, primarily due to:

An increase in sales of certain EIP receivables pursuant to our EIP receivables sales arrangement resulting from an increase in the maximum funding commitment in June 2016. Interest associated with EIP receivables is imputed at the time of a device sale and then recognized over the financed installment term. See Note 2 - Receivables and Allowance for Credit Losses of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information; and
Focus on devices financed on JUMP! On Demand in the third and fourth quarters of 2015 following the launch of the program of at the end of the second quarter 2015; partially offset by
Higher revenue from revenue share agreements with third parties; and
An increase in co-location rental income from leasing space on wireless communication towers to third parties.

Operating expenses increased $3.5 billion, or 12%, primarily due to:

Cost of services increased $177 million, or 3%, primarily from:

Higher regulatory program costs and expenses associated with network expansion and the build-out of our network to utilize our 700 MHz A-Block spectrum licenses, including higher employee-related costs; partially offset by
Lower long distance and toll costs; and
Synergies realized from the decommissioning of the MetroPCS CDMA network.

Cost of equipment sales increased $1.5 billion, or 16%, primarily from:

A 9% increase in the number of devices sold; and
An increase in the impact from returned and purchased leased devices.

Under our JUMP! On Demand program, the cost of the leased wireless device is capitalized and recognized as depreciation expense over the term of the lease rather than recognized as cost of equipment sales when the device is delivered to the customer. Additionally, upon device upgrade or at lease end, customers must return or purchase their device. Returned devices transferred from Property and equipment, net are recorded as inventory and are valued at the lower of cost or market with any write-down to market recognized as Cost of equipment sales.

Selling, general and administrative increased $1.2 billion, or 12%, primarily from strategic investments to support our growing customer base including higher:

Employee-related costs;
Commissions driven by an increase in branded customer additions; and
Promotional costs.

Depreciation and amortization increased $1.6 billion, or 33%, primarily from:

$1.5 billion in depreciation expense related to devices leased under our JUMP! On Demand program launched at the end of the second quarter of 2015. Under our JUMP! On Demand program, the cost of a leased wireless device is depreciated over the lease term to its estimated residual value. The total number of devices under lease was higher year-over-year, resulting in higher depreciation expense; and
The continued build-out of our 4G LTE network.

Cost of MetroPCS business combination decreased $272 million, or 72%, primarily from lower network decommissioning costs. In 2014, we began decommissioning the MetroPCS CDMA network and certain other redundant network cell sites as part of the business combination. On July 1, 2015, we officially completed the shutdown of the MetroPCS CDMA network. Network decommissioning costs, which are excluded from Adjusted EBITDA, primarily relate to the acceleration of lease costs for cell sites that would have otherwise been recognized as cost of services over the remaining lease term had we not decommissioned the cell sites.

Gains on disposal of spectrum licenses increased $672 million primarily from a $636 million gain from a spectrum license transaction with AT&T recorded in the first quarter of 2016 and $199 million from other transactions in 2016, compared to

$163 million in 2015. See Note 5 – Goodwill, Spectrum Licenses and Other Intangible Assets of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Net income increased $727 million, or 99%, primarily from:

Operating income, the components of which are discussed above, increased $1.6 billion, or 63%.

Interest expense to affiliates decreased $99 million, or 24%, primarily from:

Changes in the fair value of embedded derivative instruments associated with our Senior Reset Notes issued to Deutsch Telekom in 2015; partially offset by
Higher interest rates on certain Senior Reset Notes issued to Deutsch Telekom, which were adjusted at reset dates in the second quarter of 2016 and in 2015.

Income tax expense increased $622 million, or 254%, primarily from:

Higher income before income taxes; and
A higher effective tax rate. The effective tax rate was 37.3% in 2016, compared to 25.1% in 2015. The increase in the effective income tax rate was primarily due to income tax benefits for discrete income tax items recognized in 2015 that did not impact 2016; partially offset by the recognition of $58 million of excess tax benefits related to share-based payments following the adoption of ASU 2016-09 as of January 1, 2016.

Interest expense increased $333 million, or 31%, primarily from:

Higher average debt balances with third parties; and
Lower capitalized interest costs of $83 million primarily due to a higher level of build out of our network to utilize our 700 MHz A-Block spectrum licenses in 2015, compared to 2016.

Net income during 2016 and 2015 included net, after-tax gains on disposal of spectrum licenses of $509 million and $100 million, respectively.

Guarantor Subsidiaries

The financial condition and results of operations of the Parent, Issuer and Guarantor Subsidiaries is substantially similar to our consolidated financial condition.

The most significant components of the financial condition of our Non-Guarantor Subsidiaries were as follows:
 December 31,
2016
 December 31,
2015
 Change
(in millions)$ %
Other current assets$565
 $400
 $165
 41 %
Property and equipment, net375
 454
 (79) (17)%
Tower obligations2,221
 2,247
 (26) (1)%
Total stockholders' deficit(1,374) (1,359) (15) (1)%

The most significant components of the results of operations of our Non-Guarantor Subsidiaries were as follows:
 Year Ended December 31, Change
(in millions)2016 2015$ %
Service revenues$2,023
 $1,669
 $354
 21 %
Cost of equipment sales1,027
 720
 307
 43 %
Selling, general and administrative868
 733
 135
 18 %
Total comprehensive income24
 60
 (36) (60)%

The change to the results of operations of our Non-Guarantor Subsidiaries was primarily from the increases in Service revenues, Cost of equipment sales and Selling, general and administrative were primarily the result of an increase in activity of the non-guarantor subsidiary that provides device insurance, primarily driven by growth in our customer base. All other results

of operations of the Parent, Issuer and Guarantor Subsidiaries are substantially similar to the Company’s consolidated results of operations. See Note 16 – Guarantor Financial Information of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Performance Measures

In managing our business and assessing financial performance, we supplement the information provided by our financial statements with other operating or statistical data and non-GAAP financial measures. These operating and financial measures are utilized by our management to evaluate our operating performance and, in certain cases, our ability to meet liquidity requirements. Although companies in the wireless industry may not define each of these measures in precisely the same way, we believe that these measures facilitate comparisons with other companies in the wireless industry on key operating and financial measures.

Total Customers

A customer is generally defined as a SIM number with a unique T-Mobile identifier which is associated with an account that generates revenue. Branded customers generally include customers that are qualified either for postpaid service utilizing phones, mobile broadbandDIGITS or connected devices (including tablets), or DIGITS,which includes tablets, wearables and SyncUp DRIVE, where they generally pay after receiving service, or prepaid service, where they generally pay in advance. Wholesale customers include M2M and MVNO customers that operate on our network but are managed by wholesale partners.

The following table sets forth the number of ending customers:
 December 31,
2017
 December 31,
2016
 December 31,
2015
 2017 Versus 2016 2016 Versus 2015
(in thousands)# Change % Change# Change % Change
Customers, end of period             
Branded postpaid phone customers (1)
34,114
 31,297
 29,355
 2,817
 9 % 1,942
 7%
Branded postpaid other customers (1)
3,933
 3,130
 2,340
 803
 26 % 790
 34%
Total branded postpaid customers38,047
 34,427
 31,695
 3,620
 11 % 2,732
 9%
Branded prepaid customers20,668
 19,813
 17,631
 855
 4 % 2,182
 12%
Total branded customers58,715
 54,240
 49,326
 4,475
 8 % 4,914
 10%
Wholesale customers (2)
13,870
 17,215
 13,956
 (3,345) (19)% 3,259
 23%
Total customers, end of period72,585
 71,455
 63,282
 1,130
 2 % 8,173
 13%
Adjustments to branded postpaid phone customers (3)

 (1,365) 
 1,365
 (100)% (1,365) NM
Adjustments to branded prepaid customers (3)

 (326) 
 326
 (100)% (326) NM
Adjustments to wholesale customers (3)

 1,691
 
 (1,691) (100)% 1,691
 NM
NM - Not Meaningful
 December 31,
2018
 December 31,
2017
 December 31,
2016
 2018 Versus 2017 2017 Versus 2016
(in thousands) # Change % Change # Change % Change
Customers, end of period             
Branded postpaid phone customers (1)(2)
37,224
 34,114
 31,297
 3,110
 9% 2,817
 9 %
Branded postpaid other customers (2)
5,295
 3,933
 3,130
 1,362
 35% 803
 26 %
Total branded postpaid customers42,519
 38,047
 34,427
 4,472
 12% 3,620
 11 %
Branded prepaid customers (1)
21,137
 20,668
 19,813
 469
 2% 855
 4 %
Total branded customers63,656
 58,715
 54,240
 4,941
 8% 4,475
 8 %
Wholesale customers (3)
15,995
 13,870
 17,215
 2,125
 15% (3,345) (19)%
Total customers, end of period79,651
 72,585
 71,455
 7,066
 10% 1,130
 2 %
Adjustments to branded postpaid phone customers (4)

 
 (1,365) 
 % 1,365
 (100)%
Adjustments to branded prepaid customers (4)

 
 (326) 
 % 326
 (100)%
Adjustments to wholesale customers (4)

 
 1,691
 
 % (1,691) (100)%
(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)During 2017, we retitled our “Branded postpaid mobile broadband customers” category to “Branded postpaid other customers” and reclassified 253,000 DIGITS customers from our “Branded postpaid phone customers” category for the second quarter of 2017, when the DIGITS product was released.
(2)(3)We believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical. We will continue to support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base resulting in the removal of 4,528,000 reported wholesale customers in 2017.
(3)(4)TheAs a result of the MVNO Transaction resulted in a transfertransaction, we included an adjustment of Branded1,365,000 branded postpaid phone customers and Branded326,000 branded prepaid customers to Wholesalewholesale customers on September 1, 2016. Prospectively from September 1, 2016, net customer additions for these customers are included within Wholesalewholesale customers.

Branded Customers

Total branded customers increased 4,475,000,4,941,000, or 8%, in 20172018 primarily from:

Higher branded postpaid phone customers driven by the continued strong customer response to our Un-carrier initiatives and promotional activities, the growing success of our business channel,new customer segments and rate plans such as T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for Business and T-Mobile Essentials and continued growth in existing markets and distribution expansion to new Greenfield markets, andalong with lower churn, partially offset by increased competitive activity in the marketplace with all competitors having launched Unlimited rate plans in the first quarter of 2017;
activity;
Higher branded postpaid other customers primarily due to higher gross customer additions from wearables; and
Higher branded prepaid customers driven by the continued success of our Metro PCSby T-Mobile brand and continued growth from distribution expansion, partially offset by the optimization of our third-party distribution channels; and
Higher branded postpaid other customers primarily due to higher connected devicesand DIGITS.

Total branded customers increased 4,914,000, or 10%, in 2016 primarily from:

Higher branded prepaid customers driven by the success of our MetroPCS brand, continued growth in new markets and distribution expansion, partially offset by the optimization of our third-party distribution channels; and
Higher branded postpaid customers driven by strong customer response to our Un-carrier initiatives and promotional activities partially offset by higher deactivations on a growing customer base.and rate plan offers.

Wholesale

Wholesale customers decreased 3,345,000,increased 2,125,000, or 19%15%, in 2018 primarily due to Lifeline subscribers, which were excluded from our reported wholesale subscriber base as of the beginning of the second quarter of 2017. This decrease was partially offset by the continued success of our M2M partnerships.

Wholesale customers increased 3,259,000, or 23%, in 2016 primarily due the continued success of our M2M partnerships and the MVNO transaction.partnerships.

Net Customer Additions

The following table sets forth the number of net customer additions:
Year Ended December 31, 2017 Versus 2016 2016 Versus 2015Year Ended December 31, 2018 Versus 2017 2017 Versus 2016
(in thousands)2017 2016 2015# Change % Change# Change % Change2018 2017 2016 # Change
% Change # Change % Change
Net customer additions                          
Branded postpaid phone customers (1)
2,817
 3,307
 3,511
 (490) (15)% (204) (6)%
Branded postpaid phone customers (1) (2)
3,097
 2,817
 3,307
 280
 10 % (490) (15)%
Branded postpaid other customers (1)(2)
803
 790
 999
 13
 2 % (209) (21)%1,362
 803
 790
 559
 70 % 13
 2 %
Total branded postpaid customers3,620
 4,097
 4,510
 (477) (12)% (413) (9)%4,459
 3,620
 4,097
 839
 23 % (477) (12)%
Branded prepaid customers(1)855
 2,508
 1,315
 (1,653) (66)% 1,193
 91 %460
 855
 2,508
 (395) (46)% (1,653) (66)%
Total branded customers4,475
 6,605
 5,825
 (2,130) (32)% 780
 13 %4,919
 4,475
 6,605
 444
 10 % (2,130) (32)%
Wholesale customers (2)(3)
1,183
 1,568
 2,439
 (385) (25)% (871) (36)%2,125
 1,183
 1,568
 942
 80 % (385) (25)%
Total net customer additions5,658
 8,173
 8,264
 (2,515) (31)% (91) (1)%7,044
 5,658
 8,173
 1,386
 24 % (2,515) (31)%
(1)
As a result of the acquisition of IWS and Layer3 TV, customer activity post acquisition was included in our net customer additions beginning in the first quarter of 2018.
(2)During 2017, we retitled our “Branded postpaid mobile broadband customers” category to “Branded postpaid other customers” and included DIGITS customers and reclassified 253,000 DIGITS customer net additions from our “Branded postpaid phone customers” category for the second quarter of 2017, when the DIGITS product was released.
(2)(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.

Branded Customers

Total branded net customer additions decreased 2,130,000,increased 444,000, or 32%10%, in 20172018 primarily from:

Lower branded prepaid net customer additions primarily due to higher deactivations from a growing customer base, increased competitive activity in the marketplace and de-emphasis of the T-Mobile prepaid brand. Additional decreases resulted from the optimization of our third-party distribution channels; and
Lower branded postpaid phone net customer additions primarily due to increased competitive activity in the marketplace partially offset by the continued strong customer response to our Un-carrier initiatives and promotional activities, the growing success of our business channel, T-Mobile for Business, continued growth in new markets and distribution expansion to new Greenfield markets, and lower churn; partially offset by
Higher branded postpaid other net customer additions primarily due to higher gross customer additions from connected deviceswearables and DIGITS, offset by higher deactivations from a growing customer base.

Total branded net customer additions increased 780,000, or 13%, in 2016 primarily from:

Higher branded prepaid net customer additions primarily due to the success of our MetroPCS brand, continued growth in new markets and distribution expansion,lower churn, partially offset by an increase in the number of qualified branded prepaid customers migrating to branded postpaid plans; partially offset by
Lower branded postpaid mobile broadband netlower gross customer additions primarily due to higher deactivations resulting from churn on a growing branded postpaid mobile broadband customer base, partially offset by higher gross customer

additions;other connected devices; and
LowerHigher branded postpaid phone net customer additions primarily due to lower grosschurn and continued growth in existing and Greenfield markets including the growing success of new customer segments and rate plans such as T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for Business and T-Mobile Essentials, partially offset by the impact from more aggressive service promotions and the launch of Un-carrier Next - All Unlimited with taxes and fees in the first quarter of 2017. These increases were partially offset by
Lower branded prepaid net customer additions from higher deactivations on a growing customer base,primarily due to increased competitive activity, partially offset by lower churn as well as an increase in the number of qualified branded prepaid customers migratingmigrations to branded postpaid plans as well as the optimization of our third-party distribution channels.plans.

Wholesale

Wholesale net customer additions decreased 385,000,increased 942,000, or 25%80%, in 20172018 primarily from lower gross customer additions, partially offset bydue to lower deactivations driven by the removal of the Lifeline program customers. While we continue to focus on more profitable wholesale opportunities, we believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical. We will continue to support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base resulting in the removal of 4,528,000 reported wholesale customers in 2017.

Wholesale net customer additions decreased 871,000, or 36%, in 2016 primarily due to higher MVNO deactivations from certain MVNO partners..

Customers Per Account

Customers per account is calculated by dividing the number of branded postpaid customers as of the end of the period by the number of branded postpaid accounts as of the end of the period. An account may include branded postpaid phone mobile broadband,customers and branded postpaid other customers which includes DIGITS customers.and connected devices such as tablets, wearables and SyncUp DRIVE. We believe branded postpaid customers per account provides management, investors and analysts with useful information to evaluate our branded postpaid customer base on a per account basis.

The following table sets forth the branded postpaid customers per account:
 December 31,
2017
 December 31,
2016
 December 31,
2015
 Change Change
# %# %
Branded postpaid customers per account2.93
 2.86
 2.54
 0.07
 2% 0.32
 13%
 December 31,
2018
 December 31,
2017
 December 31,
2016
 2018 Versus 2017 2017 Versus 2016
 # Change % Change # Change % Change
Branded postpaid customers per account3.03
 2.93
 2.86
 0.10
 3% 0.07
 2%

Branded postpaid customers per account increased 2%3% in 20172018 primarily from promotions targeting families.

Branded postpaid customers per account increased 13% in 2016 primarily fromcontinued growth of customers on family plan promotionsnew customer segments and increased penetrationrate plans such as T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for Business and T-Mobile Essentials, promotional activities targeting families and the success of mobile broadbandconnected devices. In addition, the increase in 2016 was impacted by the MVNO Transaction.

Churn

Churn represents the number of customers whose service was disconnected as a percentage of the average number of customers during the specified period. The number of customers whose service was disconnected is presented net of customers that subsequently have their service restored within a certain period of time. We believe that churn provides management, investors and analysts with useful information to evaluate customer retention and loyalty.

The following table sets forth the churn:
Year Ended December 31, Bps Change 2017 Versus 2016 Bps Change 2016 Versus 2015Year Ended December 31, Bps Change 2018 Versus 2017 Bps Change 2017 Versus 2016
2017 2016 20152018 2017 2016 
Branded postpaid phone churn1.18% 1.30% 1.39% -12 bps -9 bps1.01% 1.18% 1.30% -17 bps -12 bps
Branded prepaid churn4.04% 3.88% 4.45% 16 bps -57 bps3.96% 4.04% 3.88% -8 bps 16 bps

Branded postpaid phone churn decreased 1217 basis points in 20172018, primarily from:

The MVNO Transaction as the customers transferred had a higher rate of churn; and
Increased customer satisfaction and loyalty from ongoing improvements to network quality, customer service and the overall value of our offerings in the marketplace.

Branded postpaid phone churn decreased 9 basis points in 2016 primarily from:

The MVNO Transaction as the customers transferred had a higher rate of churn; and
Increased customer satisfaction and loyalty from ongoing improvements to network quality, customer service and the overall value of our offerings in the marketplace.

Branded prepaid churn increased 16 basis points in 2017 primarily due to higher churn from increased competitive activity in the marketplace, partially offset by increased customer satisfaction and loyalty from ongoing improvements to network quality, industry-leading customer service and the overall value of our offerings in the marketplace.offerings.

Branded prepaid churn decreased 578 basis points in 20162018, primarily from:

A decrease in certain customers,due to the continued impact from the optimization of our third-party distribution channels which have a higher rate of branded prepaid churn;
Strong performance ofwas substantially completed during the MetroPCS brand; and
A methodology change in the thirdfirst quarter of 2015 as discussed below.

During 2015, we had2017, partially offset by higher deactivations from a methodology change that had no impact on our reported branded prepaid ending customers or netgrowing customer additions, but resulted in computationally lower gross customer additionsbase and deactivations.increased competitive activity.

Average Revenue Per User, Average Billings Per User

ARPUAverage Revenue Per User (“ARPU”) represents the average monthly service revenue earned from customers. We believe ARPU provides management, investors and analysts with useful information to assess and evaluate our service revenue realization per customer and assist in forecasting our future service revenues generated from our customer base. Branded postpaid phone ARPU excludes mobile broadband and DIGITSBranded postpaid other customers and related revenues.revenues which includes DIGITS and connected devices such as tablets, wearables and SyncUp DRIVE.

Average Billings Per User (“ABPU”) represents the average monthly customer billings, including monthly lease revenues and EIP billings before securitization, per customer. We believe Branded Postpaid ABPU was an important metric during the transition from classic plans to EIP based plans as it helped explain the customer billing relationship in a period which had shifts in customer billings from branded postpaid service revenues to equipment sales revenues. We believe the usefulness of ABPU providesto management, investors and analysts has decreased in recent periods as the remaining classic plan base is immaterial and Branded postpaid service revenue and Branded postpaid phone ARPU metrics in periods presented are now comparable. We therefore plan to discontinue reporting ABPU beginning with useful information to evaluate average branded postpaid customer billings as it is indicative of estimated cash collections, including device financing payments, from our customers each month.the quarter ending March 31, 2019.




The following tables illustrate the calculation of our operating measures ARPU and ABPU and reconcile these measures to the related service revenues:
(in millions, except average number of customers, ARPU and ABPU)Year Ended December 31, 2017 Versus 2016 2016 Versus 2015
2017 2016 2015$ Change % Change$ Change % Change
Calculation of Branded Postpaid Phone ARPU             
Branded postpaid service revenues$19,448
 $18,138
 $16,383
 $1,310
 7 % $1,755
 11 %
Less: Branded postpaid other revenues(1,077) (773) (588) (304) 39 % (185) 31 %
Branded postpaid phone service revenues$18,371
 $17,365
 $15,795
 $1,006
 6 % $1,570
 10 %
Divided by: Average number of branded postpaid phone customers (in thousands) and number of months in period32,596
 30,484
 27,604
 2,112
 7 % 2,880
 10 %
Branded postpaid phone ARPU (1)
$46.97
 $47.47
 $47.68
 $(0.50) (1)% $(0.21)  %
       

 

    
Calculation of Branded Postpaid ABPU      

 

    
Branded postpaid service revenues$19,448
 $18,138
 $16,383
 $1,310
 7 % $1,755
 11 %
EIP billings5,866
 5,432
 5,494
 434
 8 % (62) (1)%
Lease revenues877
 1,416
 224
 (539) (38)% 1,192
 532 %
Total billings for branded postpaid customers$26,191
 $24,986
 $22,101
 $1,205
 5 % $2,885
 13 %
Divided by: Average number of branded postpaid customers (in thousands) and number of months in period36,079
 33,184
 29,341
 2,895
 9 % 3,843
 13 %
Branded postpaid ABPU$60.49
 $62.75
 $62.77
 $(2.26) (4)% $(0.02)  %
       

 

    
Calculation of Branded Prepaid ARPU      

 

    
Branded prepaid service revenues$9,380
 $8,553
 $7,553
 $827
 10 % $1,000
 13 %
Divided by: Average number of branded prepaid customers (in thousands) and number of months in period20,204
 18,797
 16,704
 1,407
 7 % 2,093
 13 %
Branded prepaid ARPU$38.69
 $37.92
 $37.68
 $0.77
 2 % $0.24
 1 %
(1)Branded postpaid phone ARPU includes the reclassification of 43,000 DIGITS average customers and related revenue to the “Branded postpaid other customers” category for the second quarter of 2017.

(in millions, except average number of customers, ARPU and ABPU)Year Ended December 31, 2018 Versus 2017 2017 Versus 2016
2018 2017 2016$ Change % Change$ Change % Change
Calculation of Branded Postpaid Phone ARPU             
Branded postpaid service revenues$20,862
 $19,448
 $18,138
 $1,414
 7 % $1,310
 7 %
Less: Branded postpaid other revenues(1,117) (1,077) (773) (40) 4 % (304) 39 %
Branded postpaid phone service revenues$19,745
 $18,371
 $17,365
 $1,374
 7 % $1,006
 6 %
Divided by: Average number of branded postpaid phone customers (in thousands) and number of months in period35,458
 32,596
 30,484
 2,862
 9 % 2,112
 7 %
Branded postpaid phone ARPU$46.40
 $46.97
 $47.47
 $(0.57) (1)% $(0.50) (1)%
Calculation of Branded Postpaid ABPU      

 

    
Branded postpaid service revenues$20,862
 $19,448
 $18,138
 $1,414
 7 % $1,310
 7 %
EIP billings6,548
 5,866
 5,432
 682
 12 % 434
 8 %
Lease revenues692
 877
 1,416
 (185) (21)% (539) (38)%
Total billings for branded postpaid customers$28,102
 $26,191
 $24,986
 $1,911
 7 % $1,205
 5 %
Divided by: Average number of branded postpaid customers (in thousands) and number of months in period40,075
 36,079
 33,184
 3,996
 11 % 2,895
 9 %
Branded postpaid ABPU$58.44
 $60.49
 $62.75
 $(2.05) (3)% $(2.26) (4)%
Calculation of Branded Prepaid ARPU      

 

    
Branded prepaid service revenues$9,598
 $9,380
 $8,553
 $218
 2 % $827
 10 %
Divided by: Average number of branded prepaid customers (in thousands) and number of months in period20,761
 20,204
 18,797
 557
 3 % 1,407
 7 %
Branded prepaid ARPU$38.53
 $38.69
 $37.92
 $(0.16)  % $0.77
 2 %

Branded Postpaid Phone ARPU

Branded postpaid phone ARPU decreased $0.50,$0.57, or 1%, in 20172018 primarily from:due to:

Dilution from promotions targeting familiesThe growing success of new customer segments and new segments;rate plans such as T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for Business and T-Mobile Essentials;
The ongoing growth in our Netflix offering, which totaled $0.35 for 2018 and decreased branded postpaid phone ARPU by $0.32 compared to full-year 2017;
A reduction in certain non-recurring charges;
The negative impact from hurricanes of approximately $0.09;the new revenue standard of $0.05; partially offset by
The MVNO Transaction as those customers had a lower ARPU; and
A decreasenet reduction in the non-cash net revenue deferral for Data Stash.promotional activities.

Under existing revenue standards, T-Mobile continuesWe continue to expect that Branded postpaid phone ARPU in full-year 20182019 will be generally stable compared to full-year 2017, with some quarterly variations.

We adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), as amended, on January 1, 2018. Adoption of the standard will impact the timing, amount and allocation of our revenue and is expected to impact ARPU. We will provide additional disclosures comparing results to previous GAAP in our 2018 consolidated financial statements. See Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding recently issued accounting standards.

Branded postpaid phone ARPU decreased $0.21 in 2016 primarily from:

Decreases due to an increase in the non-cash net revenue deferral for Data Stash; and
Dilution from promotional activities; partially offset by
Higher data attach rates;
The positive impact from our T-Mobile ONE rate plans prior to the release of Un-carrier Next in 2017 which began including taxes and fees;
The transfer of customers as part of the MVNO Transaction as those customers had lower ARPU;
Continued growth of our insurance programs; and
Higher regulatory program revenues.

Branded Postpaid ABPU

Branded postpaid ABPU decreased $2.26,$2.05, or 4%3%, in 20172018 primarily from:

Lower branded postpaid phone ARPU;
Lower lease revenues; and
Growth in the branded postpaid other customer base with a lower ARPU; and
The negative impact from hurricanes of approximately $0.08.ARPU than branded postpaid phone.

Branded postpaid ABPU decreased $0.02 in 2016 primarily from:

Lower EIP billings due to the impact of our JUMP! On Demand program launched at the end of the second quarter of 2015;
Lower branded postpaid phone ARPU, as described above; and
Dilution from increased penetration of mobile broadband devices; partially offset by
An increase in lease revenues.

Branded Prepaid ARPU

Branded prepaid ARPU increased $0.77, or 2%,decreased $0.16 in 20172018 primarily from:

Continuedfrom dilution from promotional rate plans, partially offset by the continued growth of MetroPCS customers who generate higher ARPU; and
The optimization of our third-party distribution channels; partially offsetMetro by
The negative impact from hurricanes of approximately $0.05.


Branded prepaid ARPU increased $0.24, or 1%, in 2016 primarily from:

A decrease in certain customers that had lower average branded prepaid ARPU, as well as higher data attach rates; partially offset by
Dilution from growth of customers on rate plan promotions. T-Mobile customers.

Adjusted EBITDA

Adjusted EBITDA represents earnings before Interest expense, net of Interest income, Income tax expense, Depreciation and amortization, non-cash Stock-based compensation and certain income and expenses not reflective of T-Mobile’sour operating performance. Net income margin represents Net income divided by Service revenues. Adjusted EBITDA margin represents Adjusted EBITDA divided by Service revenues.

Adjusted EBITDA is a non-GAAP financial measure utilized by our management to monitor the financial performance of our operations. We use Adjusted EBITDA internally as a metricmeasure to evaluate and compensate our personnel and management for their performance, and as a benchmark to evaluate our operating performance in comparison to our competitors. Management believes analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate overall operating performance and facilitate comparisons with other wireless communications companies because it is indicative of our ongoing operating performance and trends by excluding the impact of interest expense from financing, non-cash depreciation and amortization from capital investments, non-cash stock-based compensation, network decommissioning costs and costs related to the Transactions, as they are not indicative of our ongoing operating performance, andas well as certain other nonrecurring income and expenses. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for income from operations, net income or any other measure of financial performance reported in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

The following table illustrates the calculation of Adjusted EBITDA and reconciles Adjusted EBITDA to Net income, which we consider to be the most directly comparable GAAP financial measure:
Year Ended December 31, 2017 Versus 2016 2016 Versus 2015Year Ended December 31, 2018 Versus 2017 2017 Versus 2016
(in millions)2017 2016 2015$ Change % Change$ Change % Change2018 2017 2016$ Change % Change$ Change % Change
Net income$4,536
 $1,460
 $733
 $3,076
 211 % $727
 99 %$2,888
 $4,536
 $1,460
 $(1,648) (36)% $3,076
 211 %
Adjustments:      

 

 

 

      

 

 

 

Interest expense1,111
 1,418
 1,085
 (307) (22)% 333
 31 %835
 1,111
 1,418
 (276) (25)% (307) (22)%
Interest expense to affiliates560
 312
 411
 248
 79 % (99) (24)%522
 560
 312
 (38) (7)% 248
 79 %
Interest income (1)
(17) (13) (6) (4) 31 % (7) 117 %(19) (17) (13) (2) 12 % (4) 31 %
Other (income) expense, net73
 6
 11
 67
 1,117 % (5) (45)%54
 73
 6
 (19) (26)% 67
 1,117 %
Income tax expense (benefit)(1,375) 867
 245
 (2,242) (259)% 622
 254 %1,029
 (1,375) 867
 2,404
 (175)% (2,242) (259)%
Operating income (1)
4,888
 4,050
 2,479
 838
 21 % 1,571
 63 %5,309
 4,888
 4,050
 421
 9 % 838
 21 %
Depreciation and amortization5,984
 6,243
 4,688
 (259) (4)% 1,555
 33 %6,486
 5,984
 6,243
 502
 8 % (259) (4)%
Cost of MetroPCS business combination (2)

 104
 376
 (104) (100)% (272) (72)%
 
 104
 
 NM
 (104) (100)%
Stock-based compensation (3)(1)
307
 235
 222
 72
 31 % 13
 6 %389
 307
 235
 82
 27 % 72
 31 %
Other, net (4)
34
 7
 42
 27
 386 % (35) (83)%
Adjusted EBITDA (1)
$11,213
 $10,639
 $7,807
 $574
 5 % $2,832
 36 %
Cost associated with the Transactions196
 
 
 196
 NM
 
 NM
Other, net (2)
18
 34
 7
 (16) (47)% 27
 386 %
Adjusted EBITDA$12,398
 $11,213
 $10,639
 $1,185
 11 % $574
 5 %
Net income margin (Net income divided by service revenues)15% 5% 3% 

 1000 bps
   200 bps
9% 15% 5% 

 -600 bps
   1000 bps
Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues) (1)
37% 38% 31% 

 -100 bps
   700 bps
Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues)39% 37% 38% 

 200 bps
   -100 bps
(1)
The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively re-classified as Other revenues. See the table below and Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
(2)Beginning in the first quarter of 2017, the Company will no longer separately present Cost of MetroPCS business combination as it is insignificant.
(3)Stock-based compensation includes payroll tax impacts and may not agree to stock-based compensation expense in the consolidated financial statements.Consolidated Financial Statements.
(4)(2)Other, net may not agree to the Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are therefore excluded in Adjusted EBITDA.


Adjusted EBITDA increased $574 million,$1.2 billion, or 5%11%, in 20172018 primarily from:

An increase in branded postpaid and prepaidHigher service revenues, primarily due to strong customer response to our Un-carrier initiatives,as further discussed above;

The positive impact from the ongoing successnew revenue standard of our promotional activities, and the continued strength of our MetroPCS brand;$398 million;
Higher wholesale revenues; and
Higher other revenues;revenues, as further discussed above;
Lower losses on equipment;
The positive impact of the reimbursements from our insurance carriers, net of costs incurred related to hurricanes, for the year ended December 31, 2018 of $158 million, compared to costs incurred related to hurricanes, net of insurance recoveries, of $201 million in the year ended December 31, 2017; partially offset by
Higher selling, general and administrative expenses;
Lower gains on disposal of spectrum licenses of $600$235 million; gains on disposal were $235 million for the year ended December 31, 2017, compared to $835 million in the same period in 2016;and
Higher cost of services expense;
Higher net losses on equipment; and
The negative impact from hurricanes of approximately $201 million, net of insurance recoveries.

Adjusted EBITDA increased $2.8 billion, or 36%, in 2016 primarily from:

Increased branded postpaid and prepaid service revenues primarily due to strong customer response to our Un-carrier initiatives and the ongoing success of our promotional activities;
Higher gains on disposal of spectrum licenses of $672 million; gains on disposal were $835 million in 2016 compared to $163 million in 2015;
Lower losses on equipment; and
Focused cost control and synergies realized from the MetroPCS business combination, primarily in cost of services; partially offset by
Higher selling, general and administrative.

Effective January 1, 2017, the imputed discount on EIP receivables, which was previously recognized within Interest income in our Consolidated Statements of Comprehensive Income, is recognized within Other revenues in our Consolidated Statements of Comprehensive Income. Due to this presentation, the imputed discount on EIP receivables is included in Adjusted EBITDA. See Note 1 - Summary of Significant Accounting Policies of Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

We have applied this change retrospectively and presented the effect on the years ended December 31, 2016 and 2015, in the table below.
 Year Ended December 31, 2016 Year Ended December 31, 2015
(in millions)As Filed Change in Accounting Principle As Adjusted As Filed Change in Accounting Principle As Adjusted
Operating income$3,802
 $248
 $4,050
 $2,065
 $414
 $2,479
Interest income261
 (248) 13
 420
 (414) 6
Net income1,460
 
 1,460
 733
 
 733
Net income as a percentage of service revenue5% % 5% 3% % 3%
Adjusted EBITDA$10,391
 $248
 $10,639
 $7,393
 $414
 $7,807
Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues)37% 1% 38% 30% 1% 31%
services.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations, proceeds from issuance of long-term debt and common stock, capital leases, the sale of certain receivables, financing arrangements of vendor payables which effectively extend payment terms and secured and unsecured revolving credit facilities with DT.

Upon consummation of the Transactions, we will incur substantial third-party indebtedness which will increase our future financial commitments, including aggregate interest payments on higher total indebtedness, and may adversely impact our liquidity. Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt under the terms governing our existing and future indebtedness, which may make it more difficult for us to incur new debt in the future to finance our business strategy.

Cash Flows

On January 1, 2018, we adopted the new cash flow standard which impacted the presentation of our cash flows related to our beneficial interests in securitization transactions, which is the deferred purchase price, resulting in a reclassification of cash inflows from Operating activities to Investing activities of approximately $5.4 billion, $4.3 billion and $3.4 billion for the years ended December 31, 2018, 2017 and 2016, respectively, in our Consolidated Statements of Cash Flows. The new cash flow standard also impacted the presentation of our cash payments for debt prepayment and debt extinguishment costs, resulting in a reclassification of cash outflows from Operating activities to Financing activities of $212 million and $188 million for the years ended December 31, 2018 and 2017, respectively, in our Consolidated Statements of Cash Flows. There were no cash payments for debt prepayment and debt extinguishment costs during the year ended December 31, 2016. We have applied the new cash flow standard retrospectively to all periods presented.

For additional information regarding the new cash flow standard and the impact of our adoption, see “Selected Financial Data” and Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements.

The following is an analysisa condensed schedule of our cash flows for the years ended December 31, 2018, 2017 2016 and 2015:2016:
Year Ended December 31, 2017 Versus 2016 2016 Versus 2015Year Ended December 31, 2018 Versus 2017 2017 Versus 2016
(in millions)2017 2016 2015 $ Change % Change $ Change % Change2018 2017 2016 $ Change % Change $ Change % Change
Net cash provided by operating activities$7,962
 $6,135
 $5,414
 $1,827
 30 % $721
 13 %$3,899
 $3,831
 $2,779
 $68
 2 % $1,052
 38 %
Net cash used in investing activities(11,064) (5,680) (9,560) (5,384) 95 % 3,880
 (41)%(579) (6,745) (2,324) 6,166
 (91)% (4,421) 190 %
Net cash (used in) provided by financing activities(1,179) 463
 3,413
 (1,642) (355)% (2,950) (86)%(3,336) (1,367) 463
 (1,969) 144 % (1,830) (395)%

Operating Activities

Net cash provided by operating activities increased $1.8 billion,$68 million, or 30%2%, in 2017 primarily from:

$3.1 billion increase in Net income;
$2.0 billion decrease infrom higher net non-cash adjustments to Net income, primarily due to changes in Deferred income tax expense and Depreciation and amortization, partially offset by lower Net income and higher net cash outflows from working capital changes.

The change in Net income and the net non-cash adjustments to Net income were primarily from the impacts of the TCJA in 2017 and the absence of Gains on disposal of spectrum licenses; and
licenses in 2018.
$757 million decrease inThe higher net cash outflows from changesuse in working capital was primarily due to improvements infrom a paydown of Accounts payable and accrued liabilities, Deferred purchase price from sales of receivables andchanges in Accounts receivable, partially offset by changes in Equipment installment plan receivablesInventories and Other current and long-term assets and liabilities.The change in EIP receivables was primarily due to a decrease in net cash proceeds from the sale of EIP receivables as the year ended December 31, 2016 benefited from net cash proceeds of $361 million related to upsizing of the EIP securitization facility.
receivables.

Cash provided by operating activities increased $721 million, or 13%, in 2016 primarily from:

$727 million increase in Net income;
$1.4 billion increase in net non-cash income and expenses included in Net income primarily due to changes in Depreciation and amortization, Deferred income tax expense and Gains on disposal of spectrum licenses; partially offset by
$1.4 billion increase in net cash outflows from changes in working capital primarily due to changes in Accounts payable and accrued liabilities of $1.9 billion as well as the change in Equipment installment plan receivables, including inflows from the sale of certain EIP receivables, partially offset by the change in Inventories. Net cash used for Accounts payable and accrued liabilities was $1.2 billion in 2016 as compared to net cash provided by Accounts payable and accrued liabilities of $693 million in 2015. Net cash proceeds from the sale of EIP and service receivables was $536 million in 2016 as compared to $884 million in 2015.

Investing Activities

Net cash used in investing activities increased $5.4decreased $6.2 billion, or 95%91%, in 2017to a use of $579 million for 2018.

The use of cash for the year ended December 31, 2018 was primarily from:

A $3.0$5.5 billion decrease in Sales of short-term investments;
A $1.9 billion increase in Purchases of spectrum licenses and other intangible assets, including deposits, primarily driven by our winning bid for 1,525 licenses in the 600 MHz spectrum auction during the second quarter of 2017; and
A $535 million increase 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 beginningthe continued deployment of 600 MHz.

Cash used in investing activities decreased $3.9 billion, or 41%, in 2016, to a use of $5.7 billion primarily from:

MHz, and started laying the groundwork for 5G; and
$4.7 billion338 million of cash consideration paid, net of cash acquired, for Purchasesthe acquisitions of propertyLayer3 TV and equipment, including capitalized interest of $142 million primarily related to the build-out of our 4G LTE network;
$4.0 billion for Purchases of spectrum licenses and other intangible assets, including a $2.2 billion deposit made to a third party in connection with a potential asset purchase;IWS; partially offset by
$3.05.4 billion in Sales of short-term investments.

Proceeds related to beneficial interest in securitization transactions.

Financing Activities

Net cash used in and(used in) provided by financing activities changed by $1.6increased $2.0 billion, or 144%, to a use of $1.2$3.3 billion in 2017for 2018.

The use of cash for the year ended December 31, 2018 was primarily from:

$10.26.3 billion for Repayments of long-term debt;
$2.9 billion for Repayments of our revolving credit facility;
$486 million3.3 billion for Repayments of long-term debt;
$1.1 billion for Repurchases of common stock; and
$700 million for Repayments of capital lease obligations;
$427 million for Repurchases of common shares; and
$300 million for Repayments of short-term debt for purchases of inventory, property and equipment, net; partially offset by
$10.56.3 billion in Proceeds from issuance of long-term debt; and
$2.9 billion in Proceeds from borrowing on our revolving credit facility.

Cash provided by financing activities decreased $3.0 billion, or 86%, in 2016, to an inflow of $463 million primarily from:

facility; and
$997 million2.5 billion in Proceeds from issuance of long-term debt; partially offset by
$205 million for Repayments of capital lease obligations;
$150 million for Repayments of short-term debt for purchases of inventory, property and equipment, net; and
$121 million for Tax withholdings on share-based awards.debt.

Cash and Cash Equivalents

As of December 31, 2017,2018, our Cash and cash equivalents were $1.2 billion.

Free Cash Flow

Free Cash Flow represents netNet cash provided by operating activities less payments for purchasesPurchases of property and equipment.equipment, including Proceeds related to beneficial interests in securitization transactions and less Cash payments for debt prepayment or debt extinguishment costs. Free Cash Flow is a non-GAAP financial measure utilized by our management, investors and analysts of T-Mobile’sour financial information to evaluate cash available to pay debt and provide further investment in the business.

The followingIn the first quarter of 2018, we redefined our non-GAAP financial measure Free Cash Flow to reflect the adoption of the new cash flow standard to present cash flows on a consistent basis for investor transparency. We have applied the change in definition retrospectively in the table below, which illustrates the calculation of Free Cash Flow and reconciles Free Cash Flow to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure:
Year Ended December 31, 2017 Versus 2016 2016 Versus 2015Year Ended December 31, 2018 Versus 2017 2017 Versus 2016
(in millions)2017 2016 2015 $ Change % Change $ Change % Change2018 2017 2016 $ Change % Change $ Change % Change
Net cash provided by operating activities$7,962
 $6,135
 $5,414
 $1,827
 30% $721
 13 %$3,899
 $3,831
 $2,779
 $68
 2% $1,052
 38%
Cash purchases of property and equipment(5,237) (4,702) (4,724) (535) 11% 22
  %(5,541) (5,237) (4,702) (304) 6% (535) 11%
Proceeds related to beneficial interests in securitization transactions5,406
 4,319
 3,356
 1,087

25% 963
 29%
Cash payments for debt prepayment or debt extinguishment costs(212) (188) 
 (24)
13% (188) NM
Free Cash Flow$2,725
 $1,433
 $690
 $1,292
 90% $743
 108 %$3,552
 $2,725
 $1,433
 $827
 30% $1,292
 90%


Free Cash Flow increased $1.3 billion in 2017 primarily $827 million, or 30%, for 2018 from:

Higher proceeds related to our deferred purchase price from securitization transactions and net cash provided by operating activities, as described above;activities; partially offset by
Higher Purchases of property and equipment, net of capitalized interest of $362 million and $136 million for the years ended December 31, 2018 and 2017, respectively. The increase in cash purchases of property and equipment was primarily due to growth in network build as we deployed 700continued deployment of low band spectrum, including the continued deployment of 600 MHz, spectrum and began to deploy 600 MHz. Cash purchases of property and equipment includes capitalized interest of $136 million and $142 millionstarted laying the groundwork for 2017 and 2016, respectively.5G.

Free Cash Flow increased $743 million in 2016 primarily from:

Higher net cash provided by operating activities, as described above;Borrowing Capacity and
Lower purchases of property and equipment from the build-out of our 4G LTE network in 2016, as described above. Cash purchases of property and equipment includes capitalized interest of $142 million and $246 million for 2016 and 2015, respectively.

We adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” on January 1, 2018. The standard will require a retrospective approach and impact the presentation of cash flows related to beneficial interests in securitization transactions, which is the deferred purchase price, resulting in a reclassification of cash Debt Financing

inflows from Operating activities to Investing activities of approximately $4.3 billion and $3.5 billion for the years ended December 31, 2017 and 2016, respectively, in our Consolidated Statements of Cash Flows. The standard will also impact the presentation of cash payments for debt prepayment or debt extinguishment costs, resulting in a reclassification of cash outflows from Operating activities to Financing activities of $188 million for the year ended December 31, 2017, in our consolidated financial statements. In the first quarter of 2018, we plan to redefine Free Cash Flow to reflect the above changes in classification and present cash flows on a consistent basis for investor transparency. See Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding recently issued accounting standards.

Debt

As of December 31, 2017,2018, our total debt was $28.3$27.5 billion, excluding our tower obligations, of which $26.7 billion was classified as long-term debt. Significant debt-related activity during 2017 included:See Note 8 – Debt of the Notes to the Consolidated Financial Statements for a detailed discussion of our debt to third parties and debt to affiliates.

Debt to Third Parties

Issuances and Borrowings

During the year endedIn December 31, 2017, we issued the following Senior Notes:
(in millions)Principal Issuances Issuance Costs Net Proceeds from Issuance of Long-Term Debt
4.000% Senior Notes due 2022$500
 $2
 $498
5.125% Senior Notes due 2025500
 2
 498
5.375% Senior Notes due 2027500
 1
 499
Total of Senior Notes issued$1,500
 $5
 $1,495

On March 16, 2017,2016, T-Mobile USA and certain of its affiliates, as guarantors, issuedentered into a total of $1.5$2.5 billion of public Senior Notes with various interest rates and maturity dates. Issuance costs related to the public debt issuance totaled $5 million for the year ended December 31, 2017. We used the net proceeds of $1.495 billion from the transaction to redeem callable high yield debt.

On January 25, 2018, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $1.0 billion of public 4.500% Senior Notes due 2026 and (ii) issued $1.5 billion of public 4.750% Senior Notes due 2028. We intend to use the net proceeds of $2.493 billion from the transaction to redeem up to $1.75 billion of 6.625% Senior Notes due 2023, and up to $600 million of 6.836% Senior Notes due 2023, with the balance to be used for general corporate purposes, including partial pay down of borrowings under our revolving credit facility with DT. Issuance costs relatedDT which is comprised of (i) a three-year $1.0 billion unsecured revolving credit agreement and (ii) a three-year $1.5 billion secured revolving credit agreement. In January 2018, we utilized proceeds under the revolving credit facility to the public debt issuance totaled approximately $7 million.


Notes Redemptions

During the year ended December 31, 2017, we made the following note redemptions:
(in millions)Principal Amount 
Write-off of Premiums, Discounts and Issuance Costs (1)
 
Call Penalties (1) (2)
 Redemption
Date
 Redemption Price
6.625% Senior Notes due 2020$1,000
 $(45) $22
 February 10, 2017 102.208%
5.250% Senior Notes due 2018500
 1
 7
 March 4, 2017 101.313%
6.250% Senior Notes due 20211,750
 (71) 55
 April 1, 2017 103.125%
6.464% Senior Notes due 20191,250
 
 
 April 28, 2017 100.000%
6.542% Senior Notes due 20201,250
 
 21
 April 28, 2017 101.636%
6.633% Senior Notes due 20211,250
 
 41
 April 28, 2017 103.317%
6.731% Senior Notes due 20221,250
 
 42
 April 28, 2017 103.366%
Total note redemptions$8,250
 $(115) $188
    
(1)Write-off of premiums, discounts, issuance costs and call penalties are included in Other expense, net in our 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 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 operating activities in our Consolidated Statements of Cash Flows.

Prior to December 31, 2017, we delivered a notice of redemption onredeem $1.0 billion in aggregate principal amount of our 6.125% Senior Notes due 2022. The notes2022 and for general corporate purposes. On January 29, 2018, the proceeds utilized under our revolving credit facility with DT were redeemed on January 15, 2018, at a redemption price equal to 103.063% of the principal amount of the notes (plus accrued and unpaid interest thereon). The redemption premium was approximately $31 million and the write-off of issuance costs was approximately $1 million. The outstanding principal amount was reclassified from Long-term debt to Short-term debt in our Consolidated Balance Sheets asrepaid. As of December 31, 2017.

Debt to Affiliates

Issuances2018 and Borrowings

During2017, there were no outstanding borrowings under the year ended December 31, 2017,revolving credit facility. In November 2018, we madeamended the following borrowings:
(in millions)Net Proceeds from Issuance of Long-Term Debt Extinguishments 
Write-off of Discounts and Issuance Costs (1)
LIBOR plus 2.00% Senior Secured Term Loan due 2022$2,000
 $
 $
LIBOR plus 2.00% Senior Secured Term Loan due 20242,000
 
 
LIBOR plus 2.750% Senior Secured Term Loan (2)

 (1,980) 13
Total$4,000
 $(1,980) $13
(1)Write-off of discounts and issuance costs are included in Other expense, net in our Consolidated Statements of Comprehensive Income and Other, net within Net cash provided by operating activities in our Consolidated Statements of Cash Flows.
(2)
Our Senior Secured Term Loan extinguished during the year endedDecember 31, 2017 was Third Party debt.

On January 25, 2017, T-Mobile USA, Inc. (“T-Mobile USA”), and certainterms of its affiliates, as guarantors, entered into an agreement to borrow $4.0 billion under a secured term loanthe revolving credit facility (“Incremental Term Loan Facility”) with DT our majority stockholder, to refinance $1.98 billion of outstanding senior secured term loans under its Term Loan Credit Agreement dated November 9, 2015, withextend the remaining net proceeds from the transaction usedmaturity date to redeem callable high yield debt. The Incremental Term Loan Facility increased DT’s incremental term loan commitment provided to T-Mobile USA under that certain First Incremental Facility Amendment dated as of December 29, 2016, from $660 million to $2.0 billion and provided T-Mobile USA with an additional $2.0 billion incremental term loan commitment.

On January 31, 2017, the loans under the Incremental Term Loan Facility were drawn in two tranches: (i) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.00% and matures on November 9, 2022, and (ii) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.25% and matures on January 31, 2024. In July 2017, we repriced the $2.0 billion Incremental Term Loan Facility maturing on January 31, 2024, with DT by reducing the interest rate to a per annum rate of LIBOR plus a margin of 2.00%. No issuance fees were incurred related to this debt agreement for the year ended December 31, 2017.


On March 31, 2017, the Incremental Term Loan Facility was amended to waive all interim principal payments. The outstanding principal balance will be due at maturity.

During the year ended December 31, 2017, we issued the following Senior Notes to DT:
(in millions)Principal Issuances (Redemptions) 
Discounts (1)
 Net Proceeds from Issuance of Long-Term Debt
4.000% Senior Notes due 2022$1,000
 $(23) $977
5.125% Senior Notes due 20251,250
 (28) 1,222
5.375% Senior Notes due 2027 (2)
1,250
 (28) 1,222
6.288% Senior Reset Notes due 2019(1,250) 
 (1,250)
6.366% Senior Reset Notes due 2020(1,250) 
 (1,250)
Total$1,000
 $(79) $921
(1)Discounts reduce Proceeds from issuance of long-term debt and are included within Net cash (used in) provided by financing activities in our Consolidated Statements of Cash Flows.
(2)In April 2017, we issued to DT $750 million in aggregate principal amount of the 5.375% Senior Notes due 2027, and in September 2017, we issued to DT the remaining $500 million in aggregate principal amount of the 5.375% Senior Notes due 2027.

On March 13, 2017, DT agreed to purchase a total of $3.5 billion in aggregate principal amounts of Senior Notes with various interest rates and maturity dates (the “new DT Notes”).

Through net settlement in April 2017, we issued to DT a total of $3.0 billion in aggregate principal amount of the new DT Notes and redeemed the $2.5 billion in outstanding aggregate principal amount of Senior Reset Notes with various interest rates and maturity dates (the “old DT Notes”).

The redemption prices of the old DT Notes were 103.144% and 103.183%, resulting in a total of $79 million in early redemption fees. These early redemption fees were recorded as discounts on the issuance of the new DT Notes.

In September 2017, we issued to DT $500 million in aggregate principal amount of 5.375% Senior Notes due 2027, which is the final tranche of the new DT Notes. We were not required to pay any underwriting fees or issuance costs in connection with the issuance of the notes.

Net proceeds from the issuance of the new DT Notes were $921 million and are included in Proceeds from issuance of long-term debt in our Consolidated Statements of Cash Flows.

On May 9, 2017, we exercised our option under existing purchase agreements and issued the following Senior Notes to DT:
(in millions)Principal Issuances Premium Net Proceeds from Issuance of Long-Term Debt
5.300% Senior Notes due 2021$2,000
 $
 $2,000
6.000% Senior Notes due 20241,350
 40
 1,390
6.000% Senior Notes due 2024650
 24
 674
Total$4,000
 $64
 $4,064

The proceeds were used to fund a portion of the purchase price of spectrum licenses won in the 600 MHz spectrum auction. Net proceeds from these issuances include $64 million in debt premiums. See Note 5 - Goodwill, Spectrum Licenses and Other Intangible Assets of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

On January 22, 2018, DT agreed to purchase $1.0 billion in aggregate principal amount of 4.500% Senior Notes due 2026 and $1.5 billion in aggregate principal amount of 4.750% Senior Notes due 2028 directly from T-Mobile USA and certain of its affiliates, as guarantors, with no underwriting discount (the “DT Notes”).

DT has agreed that the payment for the DT notes will be made by delivery of $1.25 billion in aggregate principal amount of 8.097% Senior Reset Notes due 2021 and $1.25 billion in aggregate principal amount of 8.195% Senior Reset Notes due 2022 (collectively, the “DT Senior Reset Notes”) held by DT and which T-Mobile USA will have called for redemption, in exchange for the DT notes. In connection with such exchange, we will pay DT in cash the premium portion of the redemption price set

forth in the indenture governing the DT Senior Reset Notes, plus accrued but unpaid interest on the DT Senior Reset Notes to, but not including, the exchange date.

The closing of the issuance and sale of the DT notes to DT, and exchange of the DT Senior Reset Notes, is expected to occur on or about April 30, 2018.

Financing Arrangements2021.

We maintain a handset financing arrangement with Deutsche Bank AG (“Deutsche Bank”), which allows for up to $108 million in borrowings. Under the handset financing arrangement, we can effectively extend payment terms for invoices payable to certain handset vendors. The interest rate on the handset financing arrangement is determined based on LIBOR plus a specified margin per the arrangement. Obligations under the handset financing arrangement are included in Short-term debt in our Consolidated Balance Sheets. In 2016, we utilized and repaid $100 million under the financing arrangement. As of December 31, 20172018 and 2016,2017, there was no outstanding balance.

We maintain vendor financing arrangements with our primary network equipment suppliers. Under the respective agreements, we can obtain extended financing terms. The interest rate on the vendor financing arrangements is determined based on the difference between LIBOR and a specified margin per the agreements. Obligations under the vendor financing arrangements are included in Short-term debt in our Consolidated Balance Sheets. In 2017, we utilized and repaid $300 million under the financing arrangement. As of December 31, 20172018 and 2016,2017, there was no outstanding balance.

RevolvingConsents on Debt to Third Parties

On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement, we obtained consents necessary to effect certain amendments to our Senior Notes to third parties in connection with the Business Combination Agreement. Pursuant to the Consent Solicitation Statement, third-party note holders agreed, among other things, to consent to increasing the amount of Secured Indebtedness under Credit FacilityFacilities that can be incurred from the greater of $9 billion and 150% of Consolidated Cash Flow to the greater of $9 billion and an amount that would not cause the Secured Debt to Cash Flow Ratio (calculated net of cash and cash equivalents) to exceed 2.00x (the “Ratio Secured Debt Proposed Amendments”) and in each case as such capitalized term is defined in the Indenture. In connection with receiving the requisite consents for the Ratio Secured Debt Proposed Amendments, we made upfront payments to third-party note holders of $17 million during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets. These upfront payments increased the effective interest rate of the related debt.

In addition, note holders agreed, among other things, to allow certain entities related to Sprint’s existing spectrum securitization notes program (“Existing Sprint Spectrum Program”) to be non-guarantor Restricted Subsidiaries, provided that the principal amount of the spectrum notes issued and outstanding under the Existing Sprint Spectrum Program does not exceed $7.0 billion and that the principal amount of such spectrum notes reduces the amount available under the Credit Facilities ratio basket, and to revise the definition of GAAP to mean generally accepted accounting principles in effect from time to time, unless the Company elects to “freeze” GAAP as of any date, and to exclude the effect of the changes in the accounting treatment of lease obligations (the “Existing Sprint Spectrum and GAAP Proposed Amendments,” and together with the Ratio Secured Debt Proposed Amendments, the “Proposed Amendments”). In connection with receiving the requisite consents for the Existing Sprint Spectrum and GAAP Proposed Amendments, we made upfront payments to third-party note holders of $14 million during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets. These upfront payments increased the effective interest rate of the related debt.

In connection with obtaining the requisite consents, on May 20, 2018, T-Mobile USA, the guarantors and Deutsche Bank Trust Company Americas, as trustee, executed and delivered the 37th supplemental indenture to the Indenture, pursuant to which, with respect to each of the Notes, the Proposed Amendments will become effective immediately prior to the consummation of the Merger.

We had an unsecured revolving credit facilitypaid third-party bank fees associated with Deutsche Telekomobtaining the requisite consents related to the Proposed Amendments of $6 million during the second quarter of 2018, which allowed for up to $500 million in borrowings. In December 2016, we terminated our $500 million unsecured revolving credit facility with Deutsche Telekom.

In December 2016, T-Mobile USA entered into a $2.5 billion revolving credit facility with Deutsche Telekom which comprised of (i) a three-year $1.0 billion unsecured revolving credit agreementrecognized as Selling, general and (ii) a three-year $1.5 billion secured revolving credit agreement. The applicable margin for the Unsecured Revolving Credit Facility ranges from 2.00% to 3.25% per annum for Eurodollar Rate loans. The applicable margin for the Secured Revolving Credit Facility ranges from 1.00% to 1.75% per annum for Eurodollar Rate loans. As of December 31, 2017 and 2016, there were no outstanding borrowings under the revolving credit facility.

In January 2018, we utilized proceeds under the revolving credit facility to redeem $1.0 billion in aggregate principal amount of our 6.125% Senior Notes due 2022 and for general corporate purposes. As of February 5, 2018, there were no outstanding borrowings on the revolving credit facility. The Proceeds and borrowings from the revolving credit facility are presented in Proceeds from borrowing on revolving credit facility and Repayments of revolving credit facility within Net cash (used in) provided by financing activitiesadministrative expenses in our Consolidated Statements of Cash Flows.Comprehensive Income. If the Merger is consummated, we will make additional payments to third-party note holders for requisite consents related to the Ratio Secured Debt Proposed Amendments of up to $54 million and additional payments to third-party note holders for requisite consents related to the Existing Sprint Spectrum and GAAP Proposed Amendments of up to $41 million. We have not accrued these payments as of December 31, 2018.

See Note 7 -8 – Debt of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Future Sources and Uses of Liquidity

We couldmay seek additional sources of liquidity, including through the issuance of additional long-term debt in 2018,2019, to continue to opportunistically acquire spectrum licenses or other assets in private party transactions or for the refinancing of existing long-term debt on an opportunistic basis. Excluding liquidity that could be needed for spectrum acquisitions, or for other assets, we expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the next 12 months.months as well as our longer-term liquidity needs. Our intended use of any such funds is for general corporate purposes, including for capital expenditures, spectrum purchases, opportunistic investments and acquisitions, redemption of high yield callable debt and stock purchases.

We determine future liquidity requirements, for both operations and capital expenditures, based in large part upon projected financial and operating performance, and opportunities to acquire additional spectrum. We regularly review and update these projections for changes in current and projected financial and operating results, general economic conditions, the competitive landscape and other factors. There are a number of risks and uncertainties that could cause our financial and operating results and capital requirements to differ materially from our projections, which could cause future liquidity to differ materially from our assessment.

The indentures and credit facilities governing our long-term debt to affiliates and third parties, excluding capital leases, contain covenants that, among other things, limit the ability of the Issuer and the Guarantor Subsidiaries (each as defined in Note 16 – Guarantor Financial Information of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form

10-K) to: incur more debt; pay dividends and make distributions on our common stock; make certain investments; repurchase stock; create liens or other encumbrances; enter into transactions with affiliates; enter into transactions that restrict dividends or distributions from subsidiaries; and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. Certain provisions of each of the credit facilities, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties restrict the ability of the Issuer to loan funds or make payments to the Parent. However, the Issuer is allowed to make certain permitted payments to the Parent under the terms of each of the credit facilities, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties. We were in compliance with all restrictive debt covenants as of December 31, 2017.2018.

Capital Lease Facilities

We have entered into uncommitted capital lease facilities with certain partners, which provide us with the ability to enter into capital leases for network equipment and services. As of December 31, 2017,2018, we have committed to $2.1$3.0 billion of capital leases under these capital lease facilities, of which $887$885 million was executed during the year ended December 31, 2017.2018.

Capital Expenditures

Our liquidity requirements have been driven primarily by capital expenditures for spectrum licenses and the construction, expansion and upgrading of our network infrastructure. Property and equipment capital expenditures primarily relate to our network transformation, including the build outbuild-out of 700600 MHz A-Block and 600 MHzlow-band spectrum licenses. We expect cash purchases of property and equipment, excluding capitalized interest of approximately $400 million, to be in the range$5.4 to $5.7 billion and cash purchases of $4.9 billionproperty and equipment, including capitalized interest, to $5.3be to be $5.8 to $6.1 billion in 2018.2019. This includes expenditures for 5G deployment. Similar to 2017, cash capital expenditures will be front-end loaded in 2018 due to the build out of 600 MHz spectrum licenses.and 5G deployment. This does not include property and equipment obtained through capital lease agreements, leased wireless devices transferred from inventory or any additional purchases of spectrum licenses.

InShare Repurchases

On December 6, 2017, our Board of Directors authorized a stock repurchase program for up to $1.5 billion of our common stock through December 31, 2018 (the “2017 Stock Repurchase Program”). Repurchased shares are retired. The 2017 Stock Repurchase Program completed on April 2017, the FCC announced that we were the winning bidder29, 2018.

On April 27, 2018, our Board of 1,525 licensesDirectors authorized an increase in the 600 MHz spectrum auction for an aggregate price of $8.0 billion. At the inceptiontotal stock repurchase program to $9.0 billion, consisting of the auction$1.5 billion in June 2016, we deposited $2.2repurchases previously completed and up to an additional $7.5 billion withof repurchases of our common stock. The additional $7.5 billion repurchase authorization is contingent upon the FCC which, based on the outcometermination of the auction, was sufficient to cover our down payment obligation due in April 2017. In May 2017, we paidBusiness Combination Agreement and the FCC the remaining $5.8 billionabandonment of the purchase price using cash reserves and by issuing debt to DT, our majority stockholder, pursuant to existing debt purchase commitments.Transactions contemplated under the Business Combination Agreement. See Note 7 - Debt12 – Repurchases of Common Stock of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

The $5.8 billion payment of the purchase price is included in Purchases of spectrum licenses and other intangible assets, including deposits within NetDividends

We have never paid or declared any cash used in investing activities in our Consolidated Statements of Cash Flows. The licenses are included in Spectrum licenses as of December 31, 2017,dividends on our Consolidated Balance Sheets. We began deployment of these licensescommon stock, and we do not intend to declare or pay any cash dividends on our networkcommon stock in the foreseeable future. Our credit facilities and the indentures and supplemental indentures governing our long-term debt to affiliates and third quarter of 2017. See Note 5 - Goodwill, Spectrum Licenses and Other Intangible Assets of the Notesparties, excluding capital leases, contain covenants that, among other things, restrict our ability to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.declare or pay dividends on our common stock.


Contractual Obligations

The following table summarizes our contractual obligations and borrowings as of December 31, 20172018 and the timing and effect that such commitments are expected to have on our liquidity and capital requirements in future periods:
(in millions)Less Than 1 Year 1 - 3 Years 4 - 5 Years More Than 5 Years TotalLess Than 1 Year 1 - 3 Years 4 - 5 Years More Than 5 Years Total
Long-term debt (1)
$1,000
 $
 $8,000
 $17,450
 $26,450
$
 $2,000
 $5,400
 $18,200
 $25,600
Interest on long-term debt1,501
 2,939
 2,539
 1,976
 8,955
1,366
 2,679
 2,273
 1,950
 8,268
Capital lease obligations, including interest and maintenance682
 972
 218
 172
 2,044
909
 1,020
 168
 106
 2,203
Tower obligations (2)
189
 379
 381
 1,006
 1,955
195
 391
 392
 835
 1,813
Operating leases (3)
2,448
 4,083
 2,686
 2,251
 11,468
2,698
 4,684
 3,290
 3,762
 14,434
Purchase obligations (4)
2,146
 2,216
 1,492
 960
 6,814
3,377
 2,800
 1,786
 1,367
 9,330
Network decommissioning (5)
101
 123
 60
 21
 305
79
 79
 39
 5
 202
Total contractual obligations$8,067
 $10,712
 $15,376
 $23,836
 $57,991
$8,624
 $13,653
 $13,348
 $26,225
 $61,850
(1)
Represents principal amounts of long-term debt to affiliates and third parties at maturity, excluding unamortized premium from purchase price allocation fair value adjustment, capital lease obligations and vendor financing arrangements. See Note 78 – Debt of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
(2)
Future minimum payments, including principal and interest payments and imputed lease rental income, related to the tower obligations. See Note 89 – Tower Obligations of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
(3)Future minimum lease payments for all cell site leases presented above to include payments due for the initial non-cancelable lease term only as they represent the payments which we cannot avoid at our option and also corresponds to our lease term assessment for new leases.
(4)
The minimum commitment for certain obligations is based on termination penalties that could be paid to exit the contracts. Termination penalties are included in the above table as payments due as of the earliest we could exit the contract, typically in less than one year. For certain contracts that include fixed volume purchase commitments and fixed prices for various products, the purchase obligations are calculated using fixed volumes and contractually fixed prices for the products that are expected to be purchased. This table does not include open purchase orders as of December 31, 20172018 under normal business purposes. See Note 13 -15 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
(5)Represents future undiscounted cash flows related to decommissioned MetroPCS CDMA network and certain other redundant cell sites as of December 31, 2017.2018.

Certain commitments and obligations are included in the table based on the year of required payment or an estimate of the year of payment. Other long-term liabilities, excluding network decommissioning, have been omitted from the table above due to the uncertainty of the timing of payments, combined with the absence of historical trending to be used as a predictor of such payments. See Note 1416 – Additional Financial Information of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

The purchase obligations reflected in the table above are primarily commitments to purchase handsets and accessories, equipment, software, programming and network services and marketing activities, which will be used or sold in the ordinary course of business. These amounts do not represent T-Mobile’sour entire anticipated purchases in the future, but represent only those items for which T-Mobile iswe are contractually committed. Where T-Mobile iswe are committed to make a minimum payment to the supplier regardless of whether it takeswe take delivery, T-Mobile haswe have included only that minimum payment as a purchase obligation. Additionally, included within purchase obligations are amounts for the acquisition of spectrum licenses, which are subject to regulatory approval and other customary closing conditions.


In JanuaryOctober 2018, we closed on a Unit Purchase Agreemententered into, and designated, interest rate lock derivatives as cash flow hedges to acquirereduce variability in cash flows due to changes in interest payments attributable to increases or decreases in the remaining equitybenchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. The fair value of interest rate lock derivatives as of December 31, 2018 was $447 million and is included in INS, a 54% owned unconsolidated subsidiary, for a purchase priceOther current liabilities in our Consolidated Balance Sheets. Balances related to the cash flow hedges have been omitted from the table above due to the uncertainty of $25 million.the amount and timing of settlements. See Note 13 - Commitments and Contingencies7 – Fair Value Measurements of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

In January 2018, we closed on our previously announced acquisition of Layer3 TV, Inc. (“Layer3 TV”) for consideration of approximately $325 million, subject to customary working capital and other post-closing adjustments. Upon closing of the transaction, Layer3 TV became a wholly-owned consolidated subsidiary. See Note 13 - Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Off-Balance Sheet Arrangements

In 2015, we entered into an arrangement,We have arrangements, as amended from time to time, to sell certain EIP accounts receivable and service accounts receivable on a revolving basis as an additionala source of liquidity. In August 2017, the arrangement was amended to reduce the maximum funding commitment to $1.2As of December 31, 2018, we derecognized net receivables of $2.6 billion and extend the scheduled expiration date to November 2018. In December 2017, the arrangement was again

amended to increase the maximum funding commitment to $1.3 billion.upon sale through these arrangements. See Note 34 – Sales of Certain Receivables of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

In 2014, we entered into an arrangement, as amended, to sell certain service accounts receivable on a revolving basis as an additional source of liquidity. In November 2016, the arrangement was amended to increase the maximum funding commitment to $950 million and extend the scheduled expiration date to March 2018. In February 2018, the arrangement was again amended to extend the scheduled expiration date to March 2019. As of December 31, 2017, T-Mobile derecognized net receivables of $2.7 billion upon sale through these arrangements. See Note 3 – Sales of Certain Receivables of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

Related-PartyRelated Party Transactions

During the year ended December 31, 2017,2018, we entered into certain debt relateddebt-related transactions with affiliates. See Note 78 – Debt of the Notes to the Consolidated Financial Statements includedfor further information.

In the first quarter of 2018, DT, our majority stockholder and an affiliated purchaser, purchased 3.3 million additional shares of our common stock at an aggregate market value of $200 million in Part II, Item 8the public market or from other parties, in accordance with the rules of this Form 10-Kthe SEC and other applicable legal requirements. There were no purchases in the remainder of 2018. We did not receive proceeds from these purchases. See Note 12 – Repurchases of Common Stock of the Notes to the Consolidated Financial Statements for further information.

We also have related party transactions associated with DT or its affiliates in the ordinary course of business, including intercompany servicing and licensing.

Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act of 1934, as amended (“Exchange Act”). Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction. Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the year ended December 31, 2017,2018, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with DT. We have relied upon DT for information regarding their activities, transactions and dealings.

DT, through certain of its non-U.S. subsidiaries, is party to roaming and interconnect agreements with the following mobile and fixed line telecommunication providers in Iran, some of which are or may be government-controlled entities: Gostaresh Ertebatat Taliya, Irancell Telecommunications Services Company, (“MTN Irancell”), Telecommunication Kish Company, Mobile Telecommunication Company of Iran, and Telecommunication Infrastructure Company of Iran. In addition, DT, through certain of its non-U.S. subsidiaries, provided basic telecommunications services in 2018 to Telecommunication Company of Iran and to three customers in Germany identified on the Specially Designated Nationals and Blocked Persons List maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control: Bank Melli, Bank Sepah, and Europäisch-Iranische Handelsbank. These services have been terminated or are in the process of being terminated. For the year ended December 31, 2017,2018, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with Iranthe Iranian parties identified herein were less than $4$1 million, and the estimated net profits were less than $4$1 million.

In addition, DT, through certain of its non-U.S. subsidiaries, operating a fixed linefixed-line network in their respective European home countries (in particular Germany), provides telecommunications services in the ordinary course of business to the Embassy of Iran in those European countries. Gross revenues and net profits recorded from these activities for the year ended December 31, 20172018 were less than $0.4$0.1 million. We understand that DT intends to continue these activities.

Critical Accounting Policies and Estimates

Our significant accounting policies are fundamental to understanding our results of operations and financial condition as they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

SixSeven of these policies, below, are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.assumptions or inputs. Actual results could differ from those estimates.
Management and the Audit Committee of the Board of Directors have reviewed and approved these critical accounting policies.

Revenue Recognition

We primarily generate our revenue from providing wireless services to customers and selling or leasing devices and accessories. Our contracts with customers may involve multiple performance obligations, which include wireless services, wireless devices or a combination thereof, and we allocate the transaction price between each performance obligation based on its relative standalone selling price.

Significant Judgments

The most significant judgments affecting the amount and timing of revenue from contracts with our customers include the following items:

Revenue for service contracts that we assess are not probable of collection is not recognized until the contract is completed and cash is received. Collectibility is re-assessed when there is a significant change in facts or circumstances. Our assessment of collectibility considers whether we may limit our exposure to credit risk through our right to stop transferring additional service in the event the customer is delinquent as well as certain contract terms such as down payments that reduce our exposure to credit risk. Customer credit behavior is inherently uncertain. See “Allowances,” below, for more discussion on how we assess credit risk.
Promotional EIP bill credits offered to a customer on an equipment sale that are paid over time and are contingent on the customer maintaining a service contract may result in an extended service contract based on whether a substantive penalty is deemed to exist. Determining whether contingent EIP bill credits result in a substantive termination penalty may require significant judgment.
The identification of distinct performance obligations within our service plans may require significant judgment.
Revenue is recorded net of costs paid to another party for performance obligations where we arrange for the other party to transfer goods or services to the customer (i.e., when we are acting as an agent). For example, performance obligations relating to services provided by third-party content providers where we neither controls a right to the content provider’s service nor controls the underlying service itself are presented net because we are acting as an agent. The determination of whether we control the underlying service or right to the service prior to our transfer to the customer requires, at times, significant judgment.
For transactions where we recognize a significant financing component, judgment is required to determine the discount rate. For EIP sales, the discount rate used to adjust the transaction price primarily reflects current market interest rates and the estimated credit risk of the customer. Customer credit behavior is inherently uncertain. See “Allowances”, below, for more discussion on how we assess credit risk.
Our products are generally sold with a right of return, which is accounted for as variable consideration when estimating the amount of revenue to recognize. Device return levels are estimated based on the expected value method as there are a large number of contracts with similar characteristics and the outcome of each contract is independent of the others. Historical return rate experience is a significant input to our expected value methodology.
Sales of equipment to indirect dealers who have been identified as our customer (referred to as the sell-in model) often include credits subsequently paid to the dealer as a reimbursement for any discount promotions offered to the end consumer. These credits (payments to a customer) are accounted for as variable consideration when estimating the amount of revenue to recognize from the sales of equipment to indirect dealers and are estimated based on historical experience and other factors, such as expected promotional activity.
The determination of the standalone selling price for contracts that involve more than one performance obligation may require significant judgment, such as when the selling price of a good or service is not readily observable.
For capitalized contract costs, determining the amortization period over which such costs are recognized as well as assessing the indicators of impairment may require significant judgment.

Allowances

We maintain an allowance for credit losses, which is management’s estimate of such losses inherent in theour receivables portfolio, comprised of accounts receivable and EIP receivable segments. Changes in the allowance for credit losses and, therefore, in related provision for credit losses (“bad debt expense”) can materially affect earnings. Credit risk characteristics are assessed for each receivable segment. In applying the judgment and review required to determine the allowance for credit losses, management considers a number of factors, including customer behavior, credit quality of the customer basereceivable volumes, receivable delinquency status, historical loss experience and other qualitative factorsconditions influencing loss expectations, such as macro-economic conditions. While our methodology attributes portions of the allowance to specific portfolio segments, the entire allowance for credit losses is available to absorb credit losses inherent in the total receivables portfolio.

Management also considers an amount that represents management’s judgment of risks inherent in the process and assumptions used in establishing the allowance for credit losses, including process risk and other subjective factors, including industry trends and emerging risk assessments.

To the extent that actual loss experience differs significantly from historical trends or assumptions, the appropriate allowance levels for realized credit losses could differ from the estimate. We write off account balances if collection efforts are unsuccessful and the receivable balance is deemed uncollectible, based on customer credit ratings and the length of time from the original billing date.

We offer certain retail customers the option to pay for their devices and other purchases in installments over a period of up to 2436 months using a zero interestan EIP. EIP receivables not held for sale are reported in our Consolidated Balance Sheets at outstanding principal adjusted for any charge-offs, allowance for credit losses and unamortized discounts. Receivables held for sale are reported at the lower of amortized cost or fair value. At the time of an installment sale, we impute a discount for interest and recordif the EIP term exceeds 12 months as there is no stated rate of interest on the EIP receivables. The EIP receivables are recorded at their present value, which is determined by discounting future cash payments at the imputed interest rate. The difference between the present valuerecorded amount of the EIP receivables and their faceunpaid principal balance (i.e., the contractual amount due from the customer) results in a discount which is recorded as a direct reduction in transaction price and allocated to the carrying valueperformance obligations of the EIP receivable with a corresponding reduction to equipment revenue. Thearrangement. We determine the imputed discount rate isbased primarily comprised ofon current market interest rates and the estimated credit risk on the EIP receivables. As a result, we do not recognize a separate valuationcredit loss allowance at the time of issuance as the effects of uncertainty about future cash flows resulting from credit risk are included in the initial present value measurement of the EIP receivable. The imputed discount on EIP receivables is amortized over the financed installment term using the effective interest method and recognized as Other revenues in our Consolidated Statements of Comprehensive Income.

Subsequent to the initial determination of the imputed discount, we assess the need for and, if necessary, recognize an allowance for credit losses to the extent the amount of estimated creditprobable losses on the gross EIP receivable segmentbalances exceed the remaining unamortized imputed discount balances. 

Total imputed discount and allowances as of December 31, 2017 and 2016 was approximately 8.1% and 8.0%, respectively, of the total amount of gross accounts receivable, including EIP receivables.receivables at both December 31, 2018 and 2017.

Deferred Purchase Price Assets

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

Depreciation

Depreciation commences once assets have been placed in service. We generally depreciate property and equipment over the period the property and equipment provide economic benefit. Leased wireless devices are depreciated to their estimated residual value over the period expected to provide utility to T-Mobile,us, which is generally shorter than the lease term and considers expected losses. Depreciable life studies are performed periodically to confirm the appropriateness of depreciable lives for certain categories of property, plant and equipment. These studies consider actual usage, physical wear and tear, replacement history and assumptions about technology evolution. When these factors indicate that an asset’sthe useful life of an asset is different from the previous assessment, the remaining book values are depreciated prospectively over the adjusted remaining estimated useful

life. See Note 1 – Summary of Significant Accounting Policies and Note 45 – Property and Equipment of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding depreciation of assets, including management’s underlying estimates of useful lives.

Evaluation of Goodwill and Indefinite-Lived Intangible Assets for Impairment

We assess the carrying value of our goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, for potential impairment annually as of December 31, or more frequently if events or changes in circumstances indicate thatsuch assets might be impaired.

When assessing goodwill for impairment we may elect to first perform a qualitative assessment for a reporting unit to determine if athe quantitative impairment test is necessary. If we do not perform a qualitative assessment, or if the qualitative

assessment indicates it is more likely than not the fair value of the reporting unit is less than its carrying amount, we perform a quantitative test. We recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

The fair value of the reporting unit is determined using a market approach, which is based on market capitalization. We recognize market capitalization is subject to volatility and will monitor changes in market capitalization to determine whether declines, if any, necessitate an interim impairment review. In the event market capitalization does decline below its book value, we will consider the length, severity and reasons for the decline when assessing whether potential impairment exists, including considering whether a control premium should be added to the market capitalization. We believe short-term fluctuations in share price may not necessarily reflect the underlying aggregate fair value.

We test spectrum licenses for impairment on an aggregate basis, consistent with theour management of the overall business at a national level. We may elect to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an intangible asset is less than its carrying value. If we do not perform the qualitative assessment, or if the qualitative assessment indicates it is more likely than not the fair value of the intangible asset is less than its carrying amount, we calculate the estimated fair value of the intangible asset. If the carrying amountestimated fair value of the spectrum licenses exceeds the fair value,is lower than their carrying amount, an impairment loss is recognized. We estimate the fair value of the spectrum licenses using the Greenfield approach,methodology, which is an income approach, that estimatesto estimate the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions. The Greenfield approachmethodology values the spectrum licenses by calculating the cash flow generating potential of a hypothetical start-up company that goes into business with no assets except the asset to be valued (in this case, spectrum licenses). The value of the spectrum licenses can be considered as equal to the present value of the cash flows of this hypothetical start-up company. We base the assumptions underlying the Greenfield approachmethodology on a combination of market participant data and our historical results, trends and business plans. Future cash flows in the Greenfield approachmethodology are based on estimates and assumptions of market participant revenues, EBITDA margin, network build-out period and a long-term growth rate for a market participant. The cash flows are discounted using a weighted average cost of capital.

The valuation approaches utilized to estimate fair value for the purposes of the impairment tests of goodwill and spectrum licenses require the use of assumptions and estimates, which involve a degree of uncertainty. If actual results or future expectations are not consistent with the assumptions, this may result in the recording of significant impairment charges on goodwill or spectrum licenses. The most significant assumptions within the valuation models are the discount rate, revenues, EBITDA margins, capital expenditures and the long-term growth rate. See Note 1 – Summary of Significant Accounting Policies and Note 56 – Goodwill, Spectrum Licenses and Other Intangible Assets of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding our annual impairment test and impairment charges.

Guarantee Liabilities

We offer a device trade-in program, JUMP!, which provides eligible customers a specified-price trade-in right to upgrade their device. Upon enrollment, participating customers must finance the purchase of a device on an EIP and have a qualifying T-Mobile monthly wireless service plan, which is treated as a single multiple-element arrangement when entered into at or near the same time. Upon qualifying JUMP! program upgrades, the customers’ remaining EIP balance is settled provided they trade-in their eligible used device in good working condition and purchase a new device from us on a new EIP.

For customers who enroll in JUMP!, we establish a liability through the reduction of revenue, for the portion of revenue which represents the estimated fair value of the specified-price trade-in right guarantee. The guarantee liability is valued based on various economic and customer behavioral assumptions, which requires judgment, including estimating the customer's remaining EIP balance at trade-in, the expected fair value of the used device at trade-in, and the probability and timing of trade-in. When customers upgrade their device, the difference between the EIP balance credit to the customer and the fair value of the returned device is recorded against the guarantee liabilities. All assumptions are reviewed periodically.

Rent Expense

MostWe have operating leases for cell sites, retail locations, corporate offices and dedicated transportation lines, some of which have escalating rentals during the initial lease term and during subsequent optional renewal periods. We recognize rent expense on a straight-line basis, over the non-cancelable lease term and renewal periods that are considered reasonably assured at the inception of the leases on our tower sites have fixed rent escalations which provide for periodic increases in the amount of rent payable over time. We calculate straight-line rent expense for each of these leases based on the fixed non-cancellable term of the lease plus all periods, if any, for which failure to renew the lease imposes a penalty on us in such amount that a renewal appears, at lease inception or significant modification, to be reasonably assured.lease. We consider several factors in assessing whether renewal periods are reasonably assured of being exercised, including the continued maturation of our network nationwide, technological advances within the telecommunications industry and the availability of alternative sites. We make

significant assumptions at lease inception in determining and assessing the factors that constitute a “penalty.” In doing so, we primarily consider costs incurred in acquiring and developing new sites, the useful life of site improvements and equipment costs, future economic conditions and the extent to which improvements in wireless technologies can be incorporated into a current assessment of whether an economic compulsion will exist in the future to renew a lease.

Income Taxes

We recognize deferredDeferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax basisbases of assets and liabilities using enacted tax rates expected to be in effect when these differences are realized. A valuation allowance is maintained against deferred tax assetsrecorded when it is more likely than not that some portion or all of thea deferred tax assetsasset will not be realized. The ultimate realization of a deferred tax asset depends on the ability to generate sufficient taxable income of the appropriate character and in the appropriate taxing jurisdictions within the carryforward periods available. We consider many factors when determining whether a valuation allowance is needed, including recent cumulative earnings experience by taxing jurisdiction, expectations of future income, the carryforward periods available for tax reporting purposes and other relevant factors.

We account for uncertainty in income taxes recognized in the financial statements in accordance with the accounting guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We assess whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position and adjust the unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law.

Accounting Pronouncements Not Yet Adopted

See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for information regarding recently issued accounting standards.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to economic risks in the normal course of business, primarily from changes in interest rates, including changes in investment yields and changes in spreads due to credit risk and other factors. These risks, along with other business risks, impact our cost of capital. Our policy is to manage exposure related to fluctuations in interest rates in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. We have established interest rate risk limits that are closely monitored by measuring interest rate sensitivities of our debt portfolio. We do not foresee significant changes in the strategies used to manage market risk in the near future.

We are exposed to changes in interest rates on our Incremental Term Loan Facility with DT, our majority stockholder. See Note 78 – Debt of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.

To perform the sensitivity analysis, we selected hypothetical changes in market rates that are expected to reflect reasonably possible near-term changes in those rates. We assessed the risk of a change in the fair value from the effect of a hypothetical interest rate change for 30-day LIBOR rates of positive 150 and negative 50 basis points. In cases where the debt is redeemable and the fair value calculation results in a liability greater than the cost to replace the debt, the maximum liability is assumed to be no greater than the current cost to redeem the debt. As of December 31, 2017,2018, the change in the fair value of our Incremental Term Loan Facility, based on this hypothetical change, is shown in the table below:

 Carrying Amount Fair Value Fair Value Assuming
(in millions)+150 Basis Point Shift -50 Basis Point Shift
LIBOR plus 2.00% Senior Secured Term Loan due 2022$2,000
 $2,000
 $1,914
 $2,000
LIBOR plus 2.00% Senior Secured Term Loan due 20242,000
 2,020
 1,868
 2,020
 Carrying Amount Fair Value Fair Value Assuming
(in millions)+150 Basis Point Shift -50 Basis Point Shift
LIBOR plus 1.50% Senior Secured Term Loan due 2022$2,000
 $1,991
 $1,933
 $2,011
LIBOR plus 1.75% Senior Secured Term Loan due 20242,000
 1,985
 1,913
 2,010

We are exposed to changes in the benchmark interest rate associated with our interest rate lock derivatives. See Note 7 – Fair Value Measurements of the Notes to the Consolidated Financial Statements for further information.

To perform the sensitivity analysis, we selected hypothetical changes in market rates that are expected to reflect reasonably possible near-term changes in those rates. We assessed the risk of a change in fair value from the effect of a hypothetical interest rate change for eight and 10-year LIBOR swap rates of positive 200 and negative 100 basis points. As of December 31, 2018, the change in the fair value of our interest rate lock derivatives, based on this hypothetical change, is show in the table below:
 Fair Value Fair Value Assuming
(in millions)+200 Basis Point Shift -100 Basis Point Shift
Interest rate lock derivatives$(447) $1,007
 $(1,303)

Item 8. Financial Statements and Supplementary Data

Financial Statements

Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of T-Mobile US, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of T-Mobile US, Inc. and its subsidiaries as of December 31, 20172018 and 2016,2017, and the related consolidated statements of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2017,2018, including the related notes (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2017,2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 20172018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the presentation of imputed discount on Equipment Installment Plan (“EIP”) receivables.

manner in which it accounts for revenues and the manner in which it accounts for cash receipts and cash payments in 2018.
Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB"(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 7, 20186, 2019

We have served as the Company’s auditor since 2001.


T-Mobile US, Inc.
Consolidated Balance Sheets


(in millions, except share and per share amounts)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Assets      
Current assets      
Cash and cash equivalents$1,219
 $5,500
$1,203
 $1,219
Accounts receivable, net of allowances of $86 and $1021,915
 1,896
Accounts receivable, net of allowances of $67 and $861,769
 1,915
Equipment installment plan receivables, net2,290
 1,930
2,538
 2,290
Accounts receivable from affiliates22
 40
11
 22
Inventories1,566
 1,111
1,084
 1,566
Asset purchase deposit
 2,203
Other current assets1,903
 1,537
1,676
 1,903
Total current assets8,915
 14,217
8,281
 8,915
Property and equipment, net22,196
 20,943
23,359
 22,196
Goodwill1,683
 1,683
1,901
 1,683
Spectrum licenses35,366
 27,014
35,559
 35,366
Other intangible assets, net217
 376
198
 217
Equipment installment plan receivables due after one year, net1,274
 984
1,547
 1,274
Other assets912
 674
1,623
 912
Total assets$70,563
 $65,891
$72,468
 $70,563
Liabilities and Stockholders' Equity      
Current liabilities      
Accounts payable and accrued liabilities$8,528
 $7,152
$7,741
 $8,528
Payables to affiliates182
 125
200
 182
Short-term debt1,612
 354
841
 1,612
Deferred revenue779
 986
698
 779
Other current liabilities414
 405
787
 414
Total current liabilities11,515
 9,022
10,267
 11,515
Long-term debt12,121
 21,832
12,124
 12,121
Long-term debt to affiliates14,586
 5,600
14,582
 14,586
Tower obligations2,590
 2,621
2,557
 2,590
Deferred tax liabilities3,537
 4,938
4,472
 3,537
Deferred rent expense2,720
 2,616
2,781
 2,720
Other long-term liabilities935
 1,026
967
 935
Total long-term liabilities36,489
 38,633
37,483
 36,489
Commitments and contingencies (Note 13)

 

Commitments and contingencies (Note 15)

 

Stockholders' equity      
5.50% Mandatory Convertible Preferred Stock Series A, par value $0.00001 per share, 100,000,000 shares authorized; 0 and 20,000,000 shares issued; 0 and 20,000,000 shares outstanding; $0 and $1,000 aggregate liquidation value
 
Common Stock, par value $0.00001 per share, 1,000,000,000 shares authorized; 860,861,998 and 827,768,818 shares issued, 859,406,651 and 826,357,331 shares outstanding
 
Common Stock, par value $0.00001 per share, 1,000,000,000 shares authorized; 851,675,119 and 860,861,998 shares issued, 850,180,317 and 859,406,651 shares outstanding
 
Additional paid-in capital38,629
 38,846
38,010
 38,629
Treasury stock, at cost, 1,455,347 and 1,411,487 shares issued(4) (1)
Treasury stock, at cost, 1,494,802 and 1,455,347 shares issued(6) (4)
Accumulated other comprehensive income8
 1
(332) 8
Accumulated deficit(16,074) (20,610)(12,954) (16,074)
Total stockholders' equity22,559
 18,236
24,718
 22,559
Total liabilities and stockholders' equity$70,563
 $65,891
$72,468
 $70,563

The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.

T-Mobile US, Inc.
Consolidated Statements of Comprehensive Income


Year Ended December 31,
2017 2016 2015Year Ended December 31,
(in millions, except share and per share amounts) 
(As Adjusted - See Note 1)
2018 2017 2016
Revenues          
Branded postpaid revenues$19,448
 $18,138
 $16,383
$20,862
 $19,448
 $18,138
Branded prepaid revenues9,380
 8,553
 7,553
9,598
 9,380
 8,553
Wholesale revenues1,102
 903
 692
1,183
 1,102
 903
Roaming and other service revenues230
 250
 193
349
 230
 250
Total service revenues30,160
 27,844
 24,821
31,992
 30,160
 27,844
Equipment revenues9,375
 8,727
 6,718
10,009
 9,375
 8,727
Other revenues1,069
 919
 928
1,309
 1,069
 919
Total revenues40,604
 37,490
 32,467
43,310
 40,604
 37,490
Operating expenses          
Cost of services, exclusive of depreciation and amortization shown separately below6,100
 5,731
 5,554
6,307
 6,100
 5,731
Cost of equipment sales11,608
 10,819
 9,344
12,047
 11,608
 10,819
Selling, general and administrative12,259
 11,378
 10,189
13,161
 12,259
 11,378
Depreciation and amortization5,984
 6,243
 4,688
6,486
 5,984
 6,243
Cost of MetroPCS business combination
 104
 376

 
 104
Gains on disposal of spectrum licenses(235) (835) (163)
 (235) (835)
Total operating expense35,716
 33,440
 29,988
38,001
 35,716
 33,440
Operating income4,888
 4,050
 2,479
5,309
 4,888
 4,050
Other income (expense)          
Interest expense(1,111) (1,418) (1,085)(835) (1,111) (1,418)
Interest expense to affiliates(560) (312) (411)(522) (560) (312)
Interest income17
 13
 6
19
 17
 13
Other expense, net(73) (6) (11)
Other income (expense), net(54) (73) (6)
Total other expense, net(1,727) (1,723) (1,501)(1,392) (1,727) (1,723)
Income before income taxes3,161
 2,327
 978
3,917
 3,161
 2,327
Income tax benefit (expense)1,375
 (867) (245)
Income tax (expense) benefit(1,029) 1,375
 (867)
Net income4,536
 1,460
 733
2,888
 4,536
 1,460
Dividends on preferred stock(55) (55) (55)
 (55) (55)
Net income attributable to common stockholders$4,481
 $1,405
 $678
$2,888
 $4,481
 $1,405
          
Net income$4,536
 $1,460
 $733
$2,888
 $4,536
 $1,460
Other comprehensive income (loss), net of tax     
Unrealized gain (loss) on available-for-sale securities, net of tax effect $2, $1 and $(1)7
 2
 (2)
Other comprehensive income (loss)7
 2
 (2)
Other comprehensive (loss) income, net of tax     
Unrealized gain on available-for-sale securities, net of tax effect of $0, $2 and $1
 7
 2
Unrealized loss on cash flow hedges, net of tax effect of ($115), $0 and $0(332) 
 
Other comprehensive (loss) income(332) 7
 2
Total comprehensive income$4,543
 $1,462
 $731
$2,556
 $4,543
 $1,462
Earnings per share          
Basic$5.39
 $1.71
 $0.83
$3.40
 $5.39
 $1.71
Diluted$5.20
 $1.69
 $0.82
3.36
 5.20
 1.69
Weighted average shares outstanding          
Basic831,850,073
 822,470,275
 812,994,028
849,744,152
 831,850,073
 822,470,275
Diluted871,787,450
 833,054,545
 822,617,938
858,290,174
 871,787,450
 833,054,545

The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.

T-Mobile US, Inc.
Consolidated Statements of Cash Flows

Year Ended December 31,Year Ended December 31,
(in millions)2017 2016 20152018 2017 2016
Operating activities          
Net income$4,536
 $1,460
 $733
$2,888
 $4,536
 $1,460
Adjustments to reconcile net income to net cash provided by operating activities          
Depreciation and amortization5,984
 6,243
 4,688
6,486
 5,984
 6,243
Stock-based compensation expense306
 235
 201
424
 306
 235
Deferred income tax (benefit) expense(1,404) 914
 256
Deferred income tax expense (benefit)980
 (1,404) 914
Bad debt expense388
 477
 547
297
 388
 477
Losses from sales of receivables299
 228
 204
157
 299
 228
Deferred rent expense76
 121
 167
26
 76
 121
Losses on redemption of debt122
 86
 
Gains on disposal of spectrum licenses(235) (835) (163)
 (235) (835)
Change in fair value of embedded derivatives(52) (25) 148
Changes in operating assets and liabilities          
Accounts receivable(444) (603) (259)(4,617) (3,931) (3,459)
Equipment installment plan receivables(894) 97
 1,089
(1,598) (1,812) (673)
Inventories(844) (802) (2,495)(201) (844) (802)
Deferred purchase price from sales of receivables(86) (270) (185)
Other current and long-term assets(575) (133) (217)(181) (575) (133)
Accounts payable and accrued liabilities1,079
 (1,201) 693
(867) 1,079
 (1,201)
Other current and long-term liabilities(233) 158
 22
(69) (233) 158
Other, net61
 71
 (15)52
 111
 46
Net cash provided by operating activities7,962
 6,135
 5,414
3,899
 3,831
 2,779
Investing activities          
Purchases of property and equipment, including capitalized interest of $136, $142 and $246(5,237) (4,702) (4,724)
Purchases of property and equipment, including capitalized interest of $362, $136 and $142(5,541) (5,237) (4,702)
Purchases of spectrum licenses and other intangible assets, including deposits(5,828) (3,968) (1,935)(127) (5,828) (3,968)
Purchases of short-term investments
 
 (2,997)
Proceeds related to beneficial interests in securitization transactions5,406
 4,319
 3,356
Acquisition of companies, net of cash acquired(338) 
 
Sales of short-term investments
 2,998
 

 
 2,998
Other, net1
 (8) 96
21
 1
 (8)
Net cash used in investing activities(11,064) (5,680) (9,560)(579) (6,745) (2,324)
Financing activities          
Proceeds from issuance of long-term debt10,480
 997
 3,979
2,494
 10,480
 997
Proceeds from tower obligations
 
 140
Proceeds from borrowing on revolving credit facility2,910
 
 
6,265
 2,910
 
Repayments of revolving credit facility(2,910) 
 
(6,265) (2,910) 
Repayments of capital lease obligations(486) (205) (57)(700) (486) (205)
Repayments of short-term debt for purchases of inventory, property and equipment, net(300) (150) (564)(300) (300) (150)
Repayments of long-term debt(10,230) (20) 
(3,349) (10,230) (20)
Proceeds from exercise of stock options21
 29
 47
Repurchases of common shares(427) 
 
Repurchases of common stock(1,071) (427) 
Tax withholdings on share-based awards(166) (121) (156)(146) (166) (121)
Dividends on preferred stock(55) (55) (55)
 (55) (55)
Cash payments for debt prepayment or debt extinguishment costs(212) (188) 
Other, net(16) (12) 79
(52) 5
 17
Net cash (used in) provided by financing activities(1,179) 463
 3,413
(3,336) (1,367) 463
Change in cash and cash equivalents(4,281) 918
 (733)(16) (4,281) 918
Cash and cash equivalents          
Beginning of period5,500
 4,582
 5,315
1,219
 5,500
 4,582
End of period$1,219
 $5,500
 $4,582
$1,203
 $1,219
 $5,500
Supplemental disclosure of cash flow information          
Interest payments, net of amounts capitalized, $79, $0 and $0 of which recorded as debt discount (Note 7)$2,028
 $1,681
 $1,298
Interest payments, net of amounts capitalized, $0, $79 and $0 of which recorded as debt discount$1,525
 $2,028
 $1,681
Income tax payments31
 25
 54
51
 31
 25
Noncash beneficial interest obtained in exchange for securitized receivables4,972
 4,063
 3,411
Noncash investing and financing activities    
Changes in accounts payable for purchases of property and equipment313
 285
 46
$65
 $313
 $285
Leased devices transferred from inventory to property and equipment1,131
 1,588
 2,451
1,011
 1,131
 1,588
Returned leased devices transferred from property and equipment to inventory(742) (602) (166)(326) (742) (602)
Issuance of short-term debt for financing of property and equipment292
 150
 500
291
 292
 150
Assets acquired under capital lease obligations887
 799
 470
885
 887
 799

The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.

T-Mobile US, Inc.
Consolidated Statement of Stockholders’ Equity

(in millions, except shares)Preferred Stock Outstanding Common Stock Outstanding Treasury Shares at Cost Par Value and Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' EquityPreferred Stock Outstanding Common Stock Outstanding Treasury Shares at Cost Par Value and Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity
Balance as of December 31, 201420,000,000
 807,468,603
 $
 $38,503
 $1
 $(22,841) $15,663
Net income
 
 
 
 
 733
 733
Other comprehensive loss
 
 
 
 (2) 
 (2)
Stock-based compensation
 
 
 227
 
 
 227
Exercise of stock options
 2,381,650
 
 47
 
 
 47
Stock issued for employee stock purchase plan
 761,085
 
 21
 
 
 21
Issuance of vested restricted stock units
 11,956,345
 
 
 
 
 
Shares withheld related to net share settlement of stock awards and stock options
 (4,176,464) 
 (156) 
 
 (156)
Excess tax benefit from stock-based compensation
 
 
 79
 
 
 79
Dividends on preferred stock
 
 
 (55) 
 
 (55)
Balance as of December 31, 201520,000,000
 818,391,219
 
 38,666
 (1) (22,108) 16,557
20,000,000
 818,391,219
 $
 $38,666
 $(1) $(22,108) $16,557
Net income
 
 
 
 
 1,460
 1,460

 
 
 
 
 1,460
 1,460
Other comprehensive income
 
 
 
 2
 
 2

 
 
 
 2
 
 2
Stock-based compensation
 
 
 264
 
 
 264

 
 
 264
 
 
 264
Exercise of stock options
 982,904
 
 29
 
 
 29

 982,904
 
 29
 
 
 29
Stock issued for employee stock purchase plan
 1,905,534
 
 63
 
 
 63

 1,905,534
 
 63
 
 
 63
Issuance of vested restricted stock units
 7,712,463
 
 
 
 
 

 7,712,463
 
 
 
 
 
Shares withheld related to net share settlement of stock awards and stock options
 (2,605,807) 
 (122) 
 
 (122)
 (2,605,807) 
 (122) 
 
 (122)
Transfer RSU to NQDC plan
 (28,982) (1) 1
 
 
 

 (28,982) (1) 1
 
 
 
Dividends on preferred stock
 
 
 (55) 
 
 (55)
 
 
 (55) 
 
 (55)
Prior year Retained Earnings
 
 
 
 
 38
 38

 
 
 
 
 38
 38
Balance as of December 31, 201620,000,000
 826,357,331
 (1) 38,846
 1
 (20,610) 18,236
20,000,000
 826,357,331
 (1) 38,846
 1
 (20,610) 18,236
Net income
 
 
 
 
 4,536
 4,536

 
 
 
 
 4,536
 4,536
Other comprehensive income
 
 
 
 7
 
 7

 
 
 
 7
 
 7
Stock-based compensation
 
 
 344
 
 
 344

 
 
 344
 
 
 344
Exercise of stock options
 450,493
 
 19
 
 
 19

 450,493
 
 19
 
 
 19
Stock issued for employee stock purchase plan
 1,832,043
 
 82
 
 
 82

 1,832,043
 
 82
 
 
 82
Issuance of vested restricted stock units
 8,338,271
 
 
 
 
 

 8,338,271
 
 
 
 
 
Shares withheld related to net share settlement of stock awards and stock options
 (2,754,721) 
 (166) 
 
 (166)
 (2,754,721) 
 (166) 
 
 (166)
Mandatory conversion of preferred shares to common shares(20,000,000) 32,237,983
 
 
 
 
 
(20,000,000) 32,237,983
 
 
 
 
 
Repurchases of common stock
 (7,010,889) 
 (444) 
 
 (444)
 (7,010,889) 
 (444) 
 
 (444)
Transfer RSU to NQDC plan
 (43,860) (3) 3
 
 
 

 (43,860) (3) 3
 
 
 
Dividends on preferred stock
 
 
 (55) 
 
 (55)
 
 
 (55) 
 
 (55)
Balance as of December 31, 2017
 859,406,651
 $(4) $38,629
 $8
 $(16,074) $22,559

 859,406,651
 (4) 38,629
 8
 (16,074) 22,559
Net income
 
 
 
 
 2,888
 2,888
Other comprehensive income
 
 
 
 (332) 
 (332)
Stock-based compensation
 
 
 473
 
 
 473
Exercise of stock options
 187,965
 
 3
 
 
 3
Stock issued for employee stock purchase plan
 2,011,794
 
 103
 
 
 103
Issuance of vested restricted stock units
 7,448,148
 
 
 
 
 
Issuance of restricted stock awards
 225,799
          
Shares withheld related to net share settlement of stock awards and stock options
 (2,321,827) 
 (146) 
 
 (146)
Repurchases of common stock
 (16,738,758) 
 (1,054) 
 
 (1,054)
Transfer RSU to NQDC plan
 (39,455) (2) 2
 
 
 
Prior year Retained Earnings(1)

 
 
 
 (8) 232
 224
Balance as of December 31, 2018
 850,180,317
 $(6) $38,010
 $(332) $(12,954) $24,718

(1) On January 1, 2018, we adopted three ASUs which resulted in adjustments to Accumulated other comprehensive income and Accumulated deficit. The adoption of the new revenue standard resulted in an adjustment to Accumulated deficit of $213 million. The adoption of ASU 2016-01 resulted in a reclassification of Accumulated other comprehensive income to Accumulated deficit of $8 million. The adoption of ASU 2016-16 resulted in an adjustment to Accumulated deficit of $11 million. See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.


T-Mobile US, Inc.
Index for Notes to the Consolidated Financial Statements



T-Mobile US, Inc.
Notes to the Consolidated Financial Statements


Note 1 – Summary of Significant Accounting Policies

Description of Business

T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”), together with its consolidated subsidiaries, is a leading provider of mobile communications services, including voice, messaging and data, under its flagship brands, T-Mobile and MetroPCS,Metro™by T-Mobile (“Metro by T-Mobile”), in the United States (“U.S.”), Puerto Rico and the U.S. Virgin Islands. All of our revenues were earned in, and all of our long-lived assets are located in, the U.S., Puerto Rico and the U.S. Virgin Islands. We provide mobile communications services primarily using 4G Long-Term Evolution (“LTE”) technology. We also offer a wide selection of wireless devices, including handsets, tablets and other mobile communication devices, and accessories for sale, as well as financing through Equipment Installment Plans (“EIP”) and leasing through JUMP! On Demand™. Additionally, we provide reinsurance for handset insurance policies and extended warranty contracts offered to our mobile communications customers.

Basis of Presentation

The consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated subsidiaries. We operate as a single operating segment. We consolidate majority-owned subsidiaries over which we exercise control, as well as variable interest entities (“VIE”) where we are deemed to be the primary beneficiary and VIEs, which cannot be deconsolidated, such as those related to Tower obligations. Intercompany transactions and balances have been eliminated in consolidation.

Certain prior year amounts have been reclassified, such as those relating to the imputed discount on EIP receivables reclassified from Interest income to Other revenues in our Consolidated Statements of Comprehensive Income, to conform to the current year’s presentation. See “Change in Accounting Principle” below.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions which affect the financial statements and accompanying notes. Examples include service revenues earned but not yet billed, service revenues billed but not yet earned, relative standalone selling prices, allowances for credit losses and sales returns, discounts for imputed interest on EIP receivables, guarantee liabilities, losses incurred but not yet reported, tax liabilities, deferred income taxes including valuation allowances, useful lives of long-lived assets, costfair value estimates of asset retirement obligations, residual values on leased handsets, reasonably assured renewal terms for operating leases, stock-based compensation forfeiture rates, and fair value measurements, including those related to goodwill, spectrum licenses, intangible assets, beneficial interests in factoring and securitization transactions and derivative financial instruments. Estimates are based on historical experience, where applicable, and other assumptions which our management believes are reasonable under the circumstances. These estimates are inherently subject to judgment and actual results could differ from thosethese estimates. We operate as a single operating segment.

Certain prior year amounts have been reclassified to conform to the current year’s presentation. See “Accounting Pronouncements Adopted in the Current Year” below.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid money market funds and U.S. Treasury securities with remaining maturities of three months or less at the date of purchase.

Receivables and Allowance for Credit Losses

Accounts receivable consist primarily of amounts currently due from customers, other carriers and third-party retail channels. Accounts receivable not held for sale are reported in the balance sheetour Consolidated Balance Sheets at outstanding principal adjusted for any charge-offs and the allowance for credit losses. Accounts receivable held for sale are reported at the lower of amortized cost or fair value. We have an arrangement to sell the majority of service accounts receivable on a revolving basis, which are treated as sales of financial assets.

We offer certain retail customers the option to pay for their devices and other purchases in installments over a period of up to 2436 months using an EIP. EIP receivables not held for sale are reported in the balance sheetour Consolidated Balance Sheets at outstanding principal adjusted for any charge-offs, allowance for credit losses and unamortized discounts. Receivables held for sale are reported at the lower of amortized cost or fair value. At the time of an installment sale, we impute a discount for interest if the EIP term exceeds 12 months as there is no stated rate of interest on the EIP receivables and record thereceivables. The EIP receivables are recorded at their present value, which is determined by discounting future cash payments at the imputed interest rate. The difference between the present valuerecorded amount of the EIP receivables and their faceunpaid principal balance (i.e., the contractual amount due from the customer) results in a discount which is allocated to the performance obligation of the arrangement and recorded as a direct reduction to the carrying value with a corresponding reduction to equipment

in transaction price in Total service revenues and Equipment revenues in our Consolidated Statements of Comprehensive Income. We determine the imputed discount rate based primarily on current market interest rates and the estimated credit risk on the EIP receivables. As a result, we do not recognize a separate valuationcredit loss allowance at the time of

issuance as the effects of uncertainty about future cash flows resulting from credit risk are included in the initial present value measurement of the receivable. The imputed discount on EIP receivables is amortized over the financed installment term using the effective interest method and recognized as Other revenues in our Consolidated Statements of Comprehensive Income.

Subsequent to the initial determination of the imputed discount, we assess the need for and, if necessary, recognize an allowance for credit losses to the extent the amount of estimated probable losses on the gross EIP receivable balances exceed the remaining unamortized imputed discount balances.

Total imputed discount and allowances was approximately 8.1% of the total amount of gross accounts receivable, including EIP receivables at both December 31, 2018 and 2017.

The current portion of the EIP receivables is included in Equipment installment plan receivables, net and the long-term portion of the EIP receivables is included in Equipment installment plan receivables due after one year, net in our Consolidated Balance Sheets. We have an arrangement to sell certain EIP receivables on a revolving basis, which are treated as sales of financial assets.

We maintain an allowance for credit losses and determine its appropriateness through an established process that assesses the losses inherent in our receivables portfolio. We develop and document our allowance methodology at the portfolio segment level - accounts receivable portfolio and EIP receivable portfolio segments. While we attribute portions of the allowance to our respective accounts receivable and EIP portfolio segments, the entire allowance is available to absorb credit losses inherent in the total receivables portfolio.

Our process involves procedures to appropriately consider the unique risk characteristics of our accounts receivable and EIP receivable portfolio segments. For each portfolio segment, losses are estimated collectively for groups of receivables with similar characteristics. Our allowance levels are influenced by receivable volumes, receivable delinquency status, historical loss experience and other conditions influencing loss expectations, such as macro-economic conditions.

Inventories

Inventories consist primarily of wireless devices and accessories, which are valued at the lower of cost or market. Cost is determined using standard cost which approximates average cost. Shipping and handling costs paid to wireless device and accessories vendors, and costs to refurbish used devices recovered through our device upgrade programs are included in the standard cost of inventory. We record inventory write-downs to net realizable value for obsolete and slow-moving items based on inventory turnover trends and historical experience.

Long-Lived Assets

Long-lived assets include assets that do not have indefinite lives, such as property and equipment and other intangible assets. All of our long-lived assets are located in the U.S., including Puerto Rico and the U.S. Virgin Islands. We assess potential impairments to our long-lived assets when events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If any indicators of impairment are present, we test recoverability. The carrying value of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated from the use and eventual disposition of the asset or asset group. If the undiscounted cash flows do not exceed the asset or asset group’s carrying amount, then an impairment loss is recorded, measured as the amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value.

Property and Equipment

Property and equipment consists of buildings and equipment, wireless communication systems, leasehold improvements, capitalized software, leased wireless devices and construction in progress. Buildings and equipment include certain network server equipment. Wireless communication systems include assets to operate our wireless network and IT data centers, including tower assets and leasehold improvements, assets related to the liability for the retirement of long-lived assets and capital leases. Leasehold improvements include asset improvements other than those related to the wireless network.

Property and equipment are recorded at cost less accumulated depreciation and impairments, if any, in Property and equipment, net on our Consolidated Balance Sheets. We generally depreciate property and equipment over the period the property and equipment provide economic benefit. Depreciable life studies are performed periodically to confirm the appropriateness of usefuldepreciable lives for certain categories of property and equipment. These studies take into account actual usage, physical wear and tear, replacement history and assumptions about technology evolution. When these factors indicate the useful life of an

asset is different from the previous assessment, the remaining book value is depreciated prospectively over the adjusted remaining

estimated useful life. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease term.

We introduced JUMP! On Demand which allows customers to lease a device over a period of up to 18 months and upgrade it for a new device up to one time per month. To date, all of our leased devices were classified as operating leases. At operating lease inception, leased wireless devices are transferred from inventory to property and equipment. Leased wireless devices are depreciated to their estimated residual value over the period expected to provide utility to us, which is generally shorter than the lease term and considers expected losses. Revenues associated with the leased wireless devices, net of incentives, are generally recognized over the lease term. Upon device upgrade or at lease end, customers must return or purchase their device. Returned devices transferred from Property and equipment, net are recorded as inventory and are valued at the lower of cost or market with any write-down to market recognized as Cost of equipment sales in our Consolidated Statements of Comprehensive Income.

Costs of major replacements and improvements are capitalized. Repair and maintenance expenditures which do not enhance or extend the asset’s useful life are charged to operating expenses as incurred. Construction costs, labor and overhead incurred in the expansion or enhancement of our wireless network are capitalized. Capitalization commences with pre-construction period administrative and technical activities, which includes obtaining leases, zoning approvals and building permits, and ceases at the point at which the asset is ready for its intended use. We capitalize interest associated with the acquisition or construction of certain property and equipment. Capitalized interest is reported as a reduction in interest expense and depreciated over the useful life of the related assets.

Future obligations related to capital leases are included in Short-term debt and Long-term debt in our Consolidated Balance Sheets. Depreciation of assets held under capital leases is included in Depreciation and amortization expense in our Consolidated Statements of Comprehensive Income.

We record an asset retirement obligation for the fair value of legal obligations associated with the retirement of tangible long-lived assets and a corresponding increase in the carrying amount of the related asset in the period in which the obligation is incurred. In periods subsequent to initial measurement, we recognize changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate. Over time, the liability is accreted to its present value and the capitalized cost is depreciated over the estimated useful life of the asset. Our obligations relate primarily to certain legal obligations to remediate leased property on which our network infrastructure and administrative assets are located.

We capitalize certain costs incurred in connection with developing or acquiring internal use software. Capitalization of software costs commences once the final selection of the specific software solution has been made and management authorizes and commits to funding the software project. Capitalized software costs are included in Property and equipment, net in our Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the asset. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

Other Intangible Assets

Intangible assets that do not have indefinite useful lives are amortized over their estimated useful lives. Customer lists are amortized using the sum-of-the-years-digits method over the expected period in which the relationship is expected to contribute to future cash flows. The remaining finite-lived intangible assets are amortized using the straight-line method.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.

Spectrum Licenses

Spectrum licenses are carried at costs incurred to acquire the spectrum licenses and the costs to prepare the spectrum licenses for their intended use, such as costs to clear acquired spectrum licenses. The Federal Communications Commission
(“FCC”) issues spectrum licenses which provide us with the exclusive right to utilize designated radio frequency spectrum within specific geographic service areas to provide wireless communication services. While spectrum licenses are issued for a fixed period of time, typically for up to fifteen years, the FCC has granted license renewals routinely and at a nominal cost. The spectrum licenses held by us expire at various dates. We believe we will be able to meet all requirements necessary to secure

renewal of our spectrum licenses at nominal costs. Moreover, we determined there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our spectrum licenses. Therefore, we determined the spectrum licenses should be treated as indefinite-lived intangible assets.

At times, we enter into agreements to sell or exchange spectrum licenses. Upon entering into the arrangement, if the transaction has been deemed to have commercial substance, spectrum licenses are reviewed for impairment and transferred at their carrying value, net of any impairment, to assets held for sale included in Other current assets in our Consolidated Balance Sheets until approval and completion of the exchange or sale. Upon closing of the transaction, spectrum licenses acquired as part of an exchange of nonmonetary assets are valued at fair value and the difference between the fair value of the spectrum licenses obtained, book value of the spectrum licenses transferred and cash paid, if any, is recognized as a gain and included in Gains on disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income. Our fair value estimates of spectrum licenses are based on information for which there is little or no observable market data. If the transaction lacks commercial substance or the fair value is not measurable, the acquired spectrum licenses are recorded at the book value of the assets transferred or exchanged.

Impairment

We assess the carrying value of our goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, for potential impairment annually as of December 31, or more frequently if events or changes in circumstances indicate such assets might be impaired.

When assessing goodwill for impairment we may elect to first perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. If we do not perform a qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of the singletwo reporting unitunits, wireless business and Layer3 TV, is less than its carrying amount, we perform a quantitative test. We recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

We test our spectrum licenses for impairment on an aggregate basis, consistent with our management of the overall business at a national level. We may elect to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an intangible asset is less than its carrying value. If we do not perform the qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying amount, we calculate the estimated fair value of the intangible asset. If the estimated fair value of the spectrum licenses is lower than their carrying amount, an impairment loss is recognized for the difference. We estimate fair value using the Greenfield methodology, which is an income approach, to estimate the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions.

Guarantee Liabilities

We offer a device trade-in program, Just Upgrade My Phone (“JUMP!”), which provides eligible customers a specified-price trade-in right to upgrade their device. Upon enrollment, participating customers must finance the purchase of a device on an EIP and have a qualifying T-Mobile monthly wireless service plan, which is treated as a single multiple-element arrangement when entered into at or near the same time. Upon a qualifying JUMP! program upgrade, the customer’s remaining EIP balance is settled provided they trade-in their eligible used device in good working condition and purchase a new device from us on a new EIP.

For customers who enroll in JUMP!, we recognize a liability and reduce revenue for the portion of revenue which represents the estimated fair value of the specified-price trade-in right guarantee. The guarantee liability is valued based on various economic and customer behavioral assumptions, which requires judgment, including estimating the customer's remaining EIP balance at trade-in, the expected fair value of the used device at trade-in, and the probability and timing of trade-in. We assess our guarantee liability at each reporting date to determine if facts and circumstances would indicate the incurrence of an incremental contingent liability is probable and if so, reasonably estimable. The recognition and subsequent adjustments of the contingent guarantee liability as a result of these assessments are recorded as adjustments to revenue. When customers upgrade their device, the difference between the EIP balance credit to the customer and the fair value of the returned device is recorded against the guarantee liabilities. All assumptions are reviewed periodically.


Fair Value Measurements

We carry certain assets and liabilities at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows:

Level 1Quoted prices in active markets for identical assets or liabilities;
Level 2Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and
Level 3Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what market participants would use in pricing the asset or liability.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of assets and liabilities being measured within the fair value hierarchy.

The carrying values of cash and cash equivalents, short-term investments, accounts receivable, accounts receivable from affiliates and accounts payable approximate fair value due to the short-term maturities of these instruments. The carrying values of EIP receivables approximate fair value as the receivables are recorded at their present value, net of unamortized discount and allowance for credit losses. There were no financial instruments with a carrying value materially different from their fair value, based on quoted market prices or rates for the same or similar instruments, or internal valuation models.

Derivative Financial Instruments

Derivative financial instruments primarily relate toare recognized as either assets or liabilities and are measured at fair value. We do not use derivatives for trading or speculative purposes.

For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of Accumulated other comprehensive income (“AOCI”) until reclassified into Interest expense in the same period the hedged transaction affects earnings, generally over the life of the related debt. Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities.
We have embedded derivatives for certain components of the reset feature of the Senior Reset Notes to affiliates, which are required to be bifurcated and are recorded on the Consolidated Balance Sheets at fair value. Changes in fair value are recognized in Interest expense to affiliates in our Consolidated Statements of Comprehensive Income. We do not enter into derivative positions for trading or speculative purposes.

Revenue Recognition (effective January 1, 2018)

We primarily generate our revenue from providing wireless services to customers and selling or leasing devices and accessories. We offer our wireless services and devices toOur contracts with customers which may be comprised of multiple contracts entered into with a customer at or near the same time. In recognizing revenue, we assess such agreements as a single bundled arrangement that may involve multiple deliverables,performance obligations, which include wireless services, wireless devices or a combination thereof, and we allocate revenuethe transaction price between each deliverableperformance obligation based on its relative standalone selling price.

Significant Judgments

The most significant judgments affecting the amount and timing of revenue from contracts with our customers include the following items:

Revenue for service contracts that we assess are not probable of collection is not recognized until the contract is completed and cash is received. Collectibility is re-assessed when there is a significant change in facts or circumstances. Our assessment of collectibility considers whether we may limit our exposure to credit risk through our right to stop transferring additional service in the event the customer is delinquent as well as certain contract terms such as down payments that reduce our exposure to credit risk. Customer credit behavior is inherently uncertain. See “Receivables and Allowance for Credit Losses”, above, for more discussion on how we assess credit risk.
Promotional EIP bill credits offered to a customer on an equipment sale that are paid over time and are contingent on the customer maintaining a service contract may result in an extended service contract based on whether a substantive penalty is deemed to exist. Determining whether contingent EIP bill credits result in a substantive termination penalty may require significant judgment.

The identification of distinct performance obligations within our service plans may require significant judgment.
Revenue is recorded net of costs paid to another party for performance obligations where we arrange for the other party to transfer goods or services to the customer (i.e., when we are acting as an agent). For example, performance obligations relating to services provided by third-party content providers where we neither controls a right to the content provider’s service nor controls the underlying service itself are presented net because we are acting as an agent. The determination of whether we control the underlying service or right to the service prior to our transfer to the customer requires, at times, significant judgment.
For transactions where we recognize a significant financing component, judgment is required to determine the discount rate. For EIP sales, the discount rate used to adjust the transaction price primarily reflects current market interest rates and the estimated credit risk of the customer. Customer credit behavior is inherently uncertain. See “Receivables and Allowance for Credit Losses”, above, for more discussion on how we assess credit risk.
Our products are generally sold with a right of return, which is accounted for as variable consideration when estimating the amount of revenue to recognize. Device return levels are estimated based on the relative selling pricesexpected value method as there are a large number of contracts with similar characteristics and the outcome of each deliverablecontract is independent of the others. Historical return rate experience is a significant input to our expected value methodology.
Sales of equipment to indirect dealers who have been identified as our customer (referred to as the sell-in model) often include credits subsequently paid to the dealer as a reimbursement for any discount promotions offered to the end consumer. These credits (payments to a customer) are accounted for as variable consideration when estimating the amount of revenue to recognize from the sales of equipment to indirect dealers and are estimated based on historical experience and other factors, such as expected promotional activity.
The determination of the standalone selling price for contracts that involve more than one performance obligation may require significant judgment, such as when the selling price of a standalone basis.good or service is not readily observable.
For capitalized contract costs, determining the amortization period over which such costs are recognized as well as assessing the indicators of impairment may require significant judgment.

Wireless Services Revenue

We generate our wireless serviceservices revenues from providing access to, and usage of, our wireless communications network. Service revenues also include revenues earned for providing value added services to customers, such as handset insurance services. Service revenuescontracts are billed monthly either in advance or arrears, or are prepaid. Generally, service revenue is recognized as we satisfy our performance obligation to transfer service to our customers. We typically satisfy our stand-ready performance obligations, including unlimited wireless services, evenly over the contract term. For usage-based and prepaid andwireless services, we satisfy our performance obligations when services are recognized when therendered.

Revenue for service is rendered and all other revenue recognition criteria have been met. Revenuescontracts that we assess are not reasonably assuredprobable of collection is not recognized until the contract is completed and cash is received. Collectibility is re-assessed when there is a significant change in facts or circumstances. Our assessment of collectibility considers whether we may limit our exposure to be collectible are recorded oncredit risk through our right to stop transferring additional service in the event the customer is delinquent.

Consideration payable to a cash basis as payments are received. The recognition of prepaid revenuecustomer is deferred until services are rendered or the customer’s rights to service expire unused. Generally, incentives given to customers are recordedtreated as a reduction of the total transaction price, unless the payment is in exchange for a distinct good or service, such as certain commissions paid to revenue. We recognize service revenues for Data Stash plans when such services are delivered and the data is consumed, or at time of forfeiture or expiration. Revenues relating to unused data that is carried over to the following month are deferred and valued based on their relative standalone selling price. dealers.
Revenue is recorded gross for arrangements involving the resale of third-party services where we are considered the primary obligor and is recorded net of associated costs incurredpaid to another party for performance obligations where we arrange for the other party to transfer goods or services wherebyto the customer (i.e., when we are not consideredacting as an agent). For example, performance obligations relating to services provided by third-party content providers where we neither controls a right to the primary obligor.content provider’s service nor controls the underlying service itself are presented net because we are acting as an agent.

Federal Universal Service Fund (“USF”) and other regulatory fees are assessed by various governmental authorities in connection with the services we provide to our customers.customers and are included in Cost of services. When we separately bill and collect these regulatory fees from customers, they are recorded gross in Total service revenues and cost of services in our Consolidated Statements of Comprehensive Income. For the years ended December 31, 2018, 2017 2016 and 2015,2016, we recorded approximately $161 million, $258 million $409 million and $334$409 million, respectively, of USF fees on a gross basis.

We have made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer (for example, sales, use, value added, and some excise taxes).


Equipment Revenues

We generate equipment revenues from the sale or lease of mobile communication devices and accessories. Device and accessory sales revenues are generally recognizedFor performance obligations related to equipment contracts, we typically transfer control at a point in time when the products aredevice or accessory is delivered to, and accepted by, the customer or dealer. We defer a portionhave elected to account for shipping and handling activities that occur after control of equipment revenues and costthe related good transfers as fulfillment activities instead of equipment sales for expectedassessing such activities as performance obligations. We estimate variable consideration (e.g., device returns or certain payments to indirect dealers) primarily based on historical experience. Equipment sales not probable of collection are generally recorded as payments are received. Our assessment of collectibility considers contract terms such as down payments that reduce our exposure to credit risk.

We offer certain customers the option to pay for devices and accessories in installments using an EIP. Equipment salesGenerally, we recognize as a reduction of the total transaction price the effects of a financing component in contracts where customers purchase their devices and accessories on an EIP with a term of more than one year, including those financing components that are not reasonably assuredconsidered to be collectible are recorded onsignificant to the contract. However, we have elected the practical expedient to not recognize the effects of a cash basis as payments are received.significant financing component for contracts where we expect, at contract inception, that the period between the transfer of a performance obligation to a customer and the customer’s payment for that performance obligation will be one year or less.

In addition, for customers enrolledwho enroll in our JUMP!, program, we separaterecognize a liability based on the JUMP! trade-in right from the multiple element arrangement at its fair value and defer the portion of revenue which represents theestimated fair value of the specified-price trade-in right.right guarantee. The fair value of the guarantee is deducted from the transaction price and the remaining transaction price is allocated to other elements of the contract, including service and equipment performance obligations. See Guarantee Liabilities section“Guarantee Liabilities” above for further information.

We introduced JUMP! On Demand which allows customers to lease a device over a period of up to 18 months and upgrade their leased wireless deviceit for a new device up to one time per month. LeasedTo date, all of our leased wireless devices are accounted for as operating leases and estimated contract consideration is allocated between lease elements and non-lease elements (such as service and equipment performance obligations) based on the relative standalone selling price of each performance obligation in the contract. Lease revenues are recorded as equipment revenues and recognized as earned on a straight-line basis over the lease term. The residual valueLease revenues on contracts not probable of purchased leased devices is recorded as equipment revenuescollection are limited to the amount of payments received. See “Property and cost of equipment sales. See Property and Equipment sectionEquipment” above for further information.

Contract Balances

Generally, our devices and service plans are available at standard prices, which are maintained on price lists and published on our website and/or within our retail stores.

For contracts that involve more than one product or service that are identified as separate performance obligations, the transaction price is allocated to the performance obligations based on their relative standalone selling prices. The standalone selling price is the price at which we would sell the good or service separately to a customer and is most commonly evidenced by the price at which we sell that good or service separately in similar circumstances and to similar customers.

A contract asset is recorded when revenue is recognized in advance of our right to receive consideration (i.e., we must perform additional services in order to receive consideration). Amounts are recorded as receivables when our right to consideration is unconditional. When consideration is received, or we have an unconditional right to consideration in advance of delivery of goods or services, a contract liability is recorded. The transaction price can include non-refundable upfront fees, which are allocated to the identifiable performance obligations.

Contract assets are included in Other current assets and Other assets and contract liabilities are included in Deferred revenue in our Consolidated Balance Sheets.

Contract Modifications

Our service contracts allow customers to frequently modify their contracts without incurring penalties in many cases. Each time a contract is modified, we evaluate the change in scope or price of the contract to determine if the modification should be treated as a separate contract, as if there is a termination of the existing contract and creation of a new contract, or if the modification should be considered a change associated with the existing contract. We typically do not have significant impacts from contract modifications.


Contract Costs

We incur certain incremental costs to obtain a contract that we expect to recover, such as sales commissions. We record an asset when these incremental costs to obtain a contract are incurred and amortize them on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

We amortize deferred costs incurred to obtain service contracts on a straight-line basis over the term of the initial contract and anticipated renewal contracts to which the costs relate, currently 24 months. However, we have elected the practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less.

Incremental costs to obtain equipment contracts (e.g., commissions paid on device and accessory sales) are recognized when the equipment is transferred to the customer.

See Note 1 - Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2017 for more discussion regarding the accounting policies that governed revenue recognition prior to January 1, 2018.

Rent Expense

We have operating leases for cell sites, retail locations, corporate offices and dedicated transportation lines, some of which have escalating rentals during the initial lease term and during subsequent optional renewal periods. We recognize rent expense on a straight-line basis, over the non-cancelable lease term and renewal periods that are considered reasonably assured at the inception of the lease. We consider several factors in assessing whether renewal periods are reasonably assured of being exercised, including the continued maturation of our network nationwide, technological advances within the telecommunications industry and the availability of alternative sites.

Advertising Expense

We expense the cost of advertising and other promotional expenditures to market our services and products as incurred. For the years ended December 31, 2018, 2017 2016 and 2015,2016, advertising expenses included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income were $1.7 billion, $1.8 billion and $1.7 billion and $1.6 billion,, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect when these differences are realized. A valuation allowance is recorded when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of a deferred tax asset depends on the ability to generate sufficient taxable income of the appropriate character and in the appropriate taxing jurisdictions within the carryforward periods available.

We account for uncertainty in income taxes recognized in the financial statements in accordance with the accounting guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We assess whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position and adjust the unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of adjustments, net of tax, related to unrealized gains (losses) on cash flow hedges and available-for-sale securities. This is reported in Accumulated other comprehensive incomeAOCI as a separate component of stockholders’ equity until realized in earnings.

Stock-Based Compensation

Stock-based compensation cost for stock awards, which include restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”), is measured at fair value on the grant date and recognized as expense, net of expected forfeitures, over the related service period. The fair value of stock awards is based on the closing price of our common stock on the date of grant. RSUs are recognized as expense using the straight-line method. PRSUs are recognized as expense following a graded vesting schedule.


Earnings Per Share

Basic earnings per share is computed by dividing Net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by giving effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of outstanding stock options, RSUs and PRSUs, calculated using the treasury stock method, and prior to the conversion of our preferred stock, potentially dilutive common shares included mandatory convertible preferred stock calculated using the if-converted method. See Note 12 -14 – Earnings Per Share for further information.

Our Board of Directors authorized a share repurchase program during the fourth quarter of 2017.2017 and increased the repurchase program in the second quarter of 2018. Repurchased shares are retired and reduce the number of shares issued and outstanding. See Note 10 -12 – Repurchases of Common Stock for further information.

Variable Interest Entities

VIEsVariable Interest Entities (“VIEs”) are entities which lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, have equity investors which do not have the ability to make significant decisions relating to the entity's operations through voting rights, do not have the obligation to absorb the expected losses or do not have the right to receive the residual returns of the entity. The most common type of VIE is a special purpose entity (“SPE”). SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are generally structured to insulate investors from claims on the SPE'sSPE’s assets by creditors of other entities, including the creditors of the seller of the assets.

The primary beneficiary is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party which has both the power to direct the activities of an entity that most significantly impact the VIE'sVIE’s economic performance, and through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE. We consolidate VIEs when we are deemed to be the primary beneficiary or when the VIE cannot be deconsolidated.

In assessing which party is the primary beneficiary, all the facts and circumstances are considered, including each party’s role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance;performance, and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (such as asset managers and servicers) or have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.

Change in Accounting Principle

Effective January 1, 2017, the imputed discount on EIP receivables, which is amortized over the financed installment term using the effective interest method, and was previously presented within Interest income in our Consolidated Statements of Comprehensive Income, is now presented within Other revenues in our Consolidated Statements of Comprehensive Income. We believe this presentation is preferable because it provides a better representation of amounts earned from our major ongoing operations and aligns with industry practice thereby enhancing comparability. We have applied this change retrospectively and presented the effect on the years ended December 31, 2017, 2016 and 2015, in the tables below:

 Year Ended December 31, 2017
(in millions)Unadjusted Change in Accounting Principle As Adjusted
Other revenues$789
 $280
 $1,069
Total revenues40,324
 280
 40,604
Operating income4,608
 280
 4,888
Interest income297
 (280) 17
Total other expense, net(1,447) (280) (1,727)
Net income4,536
 
 4,536

 Year Ended December 31, 2016
(in millions)As Filed Change in Accounting Principle As Adjusted
Other revenues$671
 $248
 $919
Total revenues37,242
 248
 37,490
Operating income3,802
 248
 4,050
Interest income261
 (248) 13
Total other expense, net(1,475) (248) (1,723)
Net income1,460
 
 1,460
 Year Ended December 31, 2015
(in millions)As Filed Change in Accounting Principle As Adjusted
Other revenues$514
 $414
 $928
Total revenues32,053
 414
 32,467
Operating income2,065
 414
 2,479
Interest income420
 (414) 6
Total other expense, net(1,087) (414) (1,501)
Net income733
 
 733

The change in accounting principle did not have an impact on basic or diluted earnings per share for the years ended December 31, 2017, 2016 and 2015 or Accumulated deficit as of December 31, 2017 and 2016.

Accounting Pronouncements Adopted During the Current Year

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendments in this update eliminate the requirement to perform step two of the goodwill impairment test, which requires a hypothetical purchase price allocation consistent with the principles in determining fair values of assets acquired and liabilities assumed in a business combination, when an impairment is determined to have occurred. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit. We adopted this new guidance in the fourth quarter of 2017. The implementation of this standard did not have an impact on our consolidated financial statements.

Accounting Pronouncements Not Yet AdoptedRevenue

In May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”), and has since modified the standard with several ASUs.ASUs (collectively, the “new revenue standard”). The standard is effective for us, and we adopted the standard, on January 1, 2018.

Thenew revenue standard requires entities to recognize revenue through the application of a five-step model, which includes: identification of the contract; identification of the performance obligations; determination of the transaction price; allocation of the transaction price to the performance obligations; and recognition of revenue as the entity satisfies the performance obligations.

The guidance permits two methods of adoption, We adopted the full retrospective method applying thenew revenue standard to each prior reporting period presented, oron January 1, 2018, using the modified retrospective method with athe cumulative effect of initially applying the guidance recognized at the date of initial application. The standard also allows entitiesComparative information has not been restated and continues to apply certain practical expedients at their discretion.be reported under the standards in effect for those periods. We will adopt the standard using the modified retrospective method with a cumulative catch up adjustment and will provide additional disclosures comparing results to previous GAAP in our 2018 consolidated financial statements. We plan to applyhave applied the new revenue standard only to contracts not completed as of the date of initial application, referred to as open contracts.

The most significant judgments and impacts upon adoption of the standard include the following items:

Upon adoption, we will defer (i.e. capitalize) incremental contract acquisition costs and recognize (i.e. amortize) them over the term of the initial contract and anticipated renewal contracts to which the costs relate. Deferred contract costs We have an average amortization period of approximately 24 months, subject to being monitored every period to reflect any significant change in assumptions. In addition, the deferred contract cost asset is assessed for impairment on a

periodic basis. We are utilizingelected the practical expedient permitting expensingthat permits an entity to reflect the aggregate effect of costs to obtainall of the modifications (on a contract whencontract-by-contract basis) that occurred before the expected amortization period is one year or less which typically resultsdate of initial application in expensing commissions paid to acquire branded prepaid service contracts. As a result, incremental contract acquisition costs paid on open contracts of approximately $150 million are expected to be capitalizeddetermining the transaction price, identifying the satisfied and subsequently amortized upon adoption on January 1, 2018 as a cumulative effect adjustment to equity, which consists primarily of commissions paid to acquire branded postpaid service contracts. Contract costs capitalized for new contracts will accumulate during 2018 as deferred assets. As a result, we expect there to be a net benefit to operating income during 2018. As capitalized costs amortize into expense over time the accretive benefit to operating income anticipated in 2018 is expected to moderate in 2019 and become insignificant in 2020 as the timing benefits of deferring these costs dissipate.
Under the new standard, certain commissions paid to dealers previously recognized as a reduction to revenues will be recorded as commission costs in Selling, general and administrative expense. During 2017 such commission costs were approximately $425 million.
Promotional bill credits offered to customers on equipment sales that are paid over time and are contingent on the customer maintaining a service contract results in an extended service contract term with multipleunsatisfied performance obligations, which impactsand allocating the allocation and timing of revenue recognition between service revenue and equipment revenue. A contract asset will be recorded when control of the equipment transferstransaction price to the customer, and subsequently recognized asperformance obligations. Electing this practical expedient does not have a reduction to service revenue over the extended contract term. Contract assets of approximately $140 million are expected to be capitalized upon adoptionsignificant impact on January 1, 2018 as a cumulative effect adjustment.
We are recognizing the financing component in our EIP contracts, including those financing components that are not considered to be significantfinancial statements due to the contract. This application is consistent withshort-term duration of most of our current practicecontracts and the nature of imputing interest.our contract modifications.

We have implemented significant new revenue accounting systems, processes and internal controls over revenue recognition to assist us in the application of the new revenue standard.


Financial Statement Impacts of Applying the New Revenue Standard

The cumulative effect of initially applying the new revenue standard to all open contracts as of January 1, 2018 is as follows:
 January 1, 2018
(in millions)Beginning Balance Cumulative Effect Adjustment Beginning Balance, As Adjusted
Assets     
Other current assets$1,903
 $140
 $2,043
Other assets912
 150
 1,062
Liabilities and Stockholders’ Equity     
Deferred revenue$779
 $4
 $783
Deferred tax liabilities3,537
 73
 3,610
Accumulated deficit(16,074) 213
 (15,861)

The most significant impacts upon adoption of the new revenue standard on January 1, 2018 include the following items:

A deferred contract cost asset of $150 million was recorded at transition in Other assets in our 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 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.

Financial statement results as reported under the new revenue standard as compared to the previous revenue standard for the year ended December 31, 2018 are as follows:
 Year Ended December 31, 2018
(in millions, except per share amounts)Previous Revenue Standard New Revenue Standard Change
Revenues     
Branded postpaid revenues$20,887
 $20,862
 $(25)
Branded prepaid revenues9,608
 9,598
 (10)
Wholesale revenues1,183
 1,183
 
Roaming and other service revenues349
 349
 
Total service revenues32,027
 31,992
 (35)
Equipment revenues9,616
 10,009
 393
Other revenues1,309
 1,309
 
Total revenues42,952
 43,310
 358
Operating expenses     
Cost of services, exclusive of depreciation and amortization shown separately below6,233
 6,307
 74
Cost of equipment sales12,065
 12,047
 (18)
Selling, general and administrative13,257
 13,161
 (96)
Depreciation and amortization6,486
 6,486
 
Total operating expenses38,041
 38,001
 (40)
Operating income4,911
 5,309
 398
Total other expense, net(1,392) (1,392) 
Income before income taxes3,519
 3,917
 398
Income tax expense(926) (1,029) (103)
Net income$2,593
 $2,888
 $295
Earnings per share     
Basic earnings per share$3.05
 $3.40
 $0.35
Diluted earnings per share$3.02
 $3.36
 $0.34


 December 31, 2018
(in millions)Previous Revenue Standard New Revenue Standard Change
Assets     
Other current assets$1,625
 $1,676
 $51
Other assets979
 1,623
 644
Liabilities and Stockholders’ Equity     
Deferred revenue$685
 $698
 $13
Deferred tax liabilities4,297
 4,472
 175
Accumulated deficit(13,461) (12,954) 507

The most significant impacts to financial statement results as reported under the new revenue standard as compared to the previous revenue standard for the current reporting period are as follows:

Under the new revenue standard, certain commissions paid to dealers previously recognized as a reduction to Equipment revenues in our Consolidated Statements of Comprehensive Income are now recorded as commission costs in Selling, general and administrative expense.
Contract costs capitalized for new contracts accumulated in Other assets in our Consolidated Balance Sheets during 2018. As a result, there was a net benefit to Operating income in our Consolidated Statements of Comprehensive Income during 2018 as capitalization of costs exceeded amortization. As capitalized costs amortize into expense over time, the accretive benefit to Operating income is estimatedexpected to moderate in 2019 and normalize in 2020.
Certain promotions previously recognized as a reduction in Equipment revenues in our Consolidated Statements of Comprehensive Income are now recorded as a reduction in Service revenues.
Certain revenues previously recognized as Equipment revenues in our Consolidated Statements of Comprehensive Income are now recorded as Service revenues.
Certain contract fulfillment costs have been reclassified to Cost of services in our Consolidated Statements of Comprehensive Income from Selling, general and administrative expenses.
Wholesale revenues for minimum guaranteed amounts (guarantee shortfall) are recognized when it is probable that a reversal of such revenue will not occur, which may impact the timing of recognition as compared to the previous standard.
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 amortized as a reduction to Total service revenues in our Consolidated Statements of Comprehensive Income over the extended contract term.

See disclosures related to Contracts with Customers under the new revenue standard in Note 10 – Revenue from Contracts with Customers.

Statement of Cash Flows

On January 1, 2018, we adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (the “new cash flow standard”) which impacted the presentation of our cash flows related to our beneficial interests in securitization transactions, which is the deferred purchase price, resulting in a reclassification of cash inflows from Operating activities to Investing activities of approximately $5.4 billion, $4.3 billion, and $3.4 billion for the years ended December 31, 2018, 2017 and 2016, respectively, in our Consolidated Statements of Cash Flows. The new cash flow standard also impacted the presentation of our cash payments for debt prepayment and debt extinguishment costs, resulting in a reclassification of cash outflows from Operating activities to Financing activities of $212 million and $188 million for the years ended December 31, 2018 and 2017, respectively, in our Consolidated Statements of Cash Flows. There were no cash payments for debt prepayment and debt extinguishment costs during the year ended December 31, 2016. We have applied the new cash flow standard retrospectively to all periods presented.

Financial Instruments

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities,” and has since modified the standard in February 2018 with ASU 2018-03,

“Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The standard addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard became effective for us, and we adopted the standard, on January 1, 2018. The standard requires the impact of adoption to be recorded to retained earnings under a decreasemodified retrospective approach, resulting in a reclassification of Accumulated other comprehensive income to Accumulated deficit of approximately $220$8 million.

Income Taxes

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The standard requires that the income tax impact of intra-entity sales and transfers of property, except for inventory, be recognized when the transfer occurs. The standard became effective for us, and we adopted the standard, on January 1, 2018. The standard requires any deferred taxes not yet recognized on intra-entity transfers to be recorded to retained earnings under a modified retrospective approach, resulting in an adjustment to Accumulated deficit of $11 million.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvement to Accounting for Hedging Activities” (the “new derivatives and hedging standard”). The standard modified the guidance for the designation and measurement of qualifying hedging relationships and the presentation of hedge results. We adopted this standard on October 1, 2018 and have applied the standard to hedging transactions prospectively.

Accounting Pronouncements Not Yet Adopted

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” and has since modified the standard with several ASUs (collectively, the “new lease standard”). The standard is effective for us, and we adopted the standard, on January 1, 2019.

The new lease standard requires allmost lessees to report a right-of-use asset and a lease liability for most leases.liability. The income statement recognition is similar to existing lease accounting and is based on lease classification. The new lease standard requires lessees and lessors to classify most leases using principles similar to existing lease accounting. For lessors, the new lease standard modifies the classification criteria and the accounting for sales-type and direct financing leases. The new lease standard provides entities two options for applying the modified retrospective approach, either (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented or (2) retrospectively at the beginning of the period of adoption (January 1, 2019) through a cumulative-effect adjustment. We are currently evaluatingplan to adopt the standard which will requireby recognizing and measuring leases at the beginningadoption date with a cumulative effect of initially applying the earliest period presented usingguidance recognized at the date of initial application.

The new standard provides for a modified retrospective approach. Our evaluation includes assessing whichnumber of our arrangements qualifyoptional practical expedients in transition. We do not expect to elect the “package of practical expedients” and as a result we would be required to reassess under the new standard our prior accounting conclusions about lease identification, lease classification and aggregatinginitial direct costs. We do expect to elect the use of hindsight for determining the reasonably certain lease data and related informationterm. We do not expect to elect the practical expedient pertaining to land easements as well as determining whether previous conclusions for certain transactions, such as failed sale leaseback arrangements under Topic 840, would change under Topic 842. We planit is not applicable to adopt the standard when it becomes effective for us beginning January 1, 2019, and expectus.

Upon the adoption of the new lease standard will resultentities are required to reassess any previous failed sale-leaseback transactions that remain failed as of the effective date of the new standard. This reassessment should consider if a sale would have occurred as of the beginning of the reporting period in which the entity applies the new lease standard. Under the new lease standard, a sale is assessed using the transfer of control criteria in the recognitionnew revenue standard. If the revised sale-leaseback guidance criteria are met and a sale has occurred as of the effective date, the gain or loss on the sale of the underlying asset is recognized as an adjustment to equity and the accounting for the leaseback will follow the transition provisions provided for all other operating leases.

We expect the most significant judgments and impacts upon adoption of the standard to include the following items:

Upon adoption on January 1, 2019, we will recognize right-of-use assets and lease liabilities that have not previously been recorded,recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments. The right-of-use asset for operating leases is based on the lease liability adjusted for the reclassification of certain balance sheet amounts such as deferred rent, subsequent to re-measurement from the assessment of lease term

described below, and prepaid rent. Deferred and prepaid rent will not be presented separately after the adoption of the new lease standard.

We expect to elect the use of hindsight in determining the expected lease term for all cell sites and have generally concluded to include only payments due for the initial non-cancelable lease term. This assessment of expected lease term corresponds to our lease term assessment for new leases and aligns with the payments that have been disclosed as lease commitments in prior years. As a result, the average remaining lease term for cell sites has decreased from approximately 9 years to 4 years based on lease contracts in effect at transition on January 1, 2019.

We are also required to reassess the previously failed sale-leaseback of certain T-Mobile-owned wireless communication tower sites and determine whether the transfer of the assets to the tower operator under the arrangement met the transfer of control criteria in the new revenue standard and whether a sale should be recognized. We are continuing to finalize our assessment of the previously failed sale-leaseback. If we conclude a sale should be recognized, upon adoption on January 1, 2019, we would derecognize our existing long-term financial obligation and the net book value of the tower-related property and equipment associated with the previously failed sale-leaseback transaction. A change in the sale-leaseback accounting conclusion would also result in the recognition of a lease liability and right of use asset for the leaseback, decreases in Other revenues and Interest expense and a reclassification of certain cash payments from financing outflows to operating outflows in our Consolidated Statements of Cash Flows.

Excluding the impacts of a potential change in the accounting conclusion around the previously failed sale leaseback, the cumulative effects of initially applying the new lease standard on January 1, 2019 and for fiscal year 2019 would be as follows:

The cumulative effect of initially applying the new lease standard on January 1, 2019 is estimated to be an increase in total assets of $8.5 billion to $9.4 billion, an increase in total liabilities of $8.2 billionto $8.9 billion and a decrease to Accumulated deficit of $300 millionto $500 million.

The aggregate impact is expected to result in a decrease in Total operating expenses of $190 million to $230 million and an increase to Net income of $140 million to $180 million in fiscal year 2019.

Including the impacts that would result from a change in the accounting conclusion on the previously failed sale-leaseback, the cumulative effects of initially applying the new lease standard on January 1, 2019 and for fiscal year 2019 would be as follows:

The cumulative effect of initially applying the new lease standard on January 1, 2019 is estimated to be an increase in total assets of $9.1 billion to $10.0 billion, an increase in total liabilities of $7.0 billionto $7.5 billion and a decrease to Accumulated deficit of $2.1 billionto $2.5 billion.

The aggregate impact is expected to result in a decrease in Other revenues of $230 million to $250 million, a decrease in Interest expense of $200 million to $240 million, a decrease in Total operating expenses of $220 million to $260 million and an increase to Net income of $140 million to $180 million in fiscal year 2019.

The expected impact on our Consolidated Statements of Cash Flows in fiscal year 2019 is a decrease in Net cash provided by operating activities of $20 millionto$40 million and a decrease in Net cash used in financing activities of $20 millionto$40 million.

The new lease standard provides practical expedients and policy elections for an entity’s ongoing accounting. We currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases. We do not expect to elect the short-term lease recognition exemption, which willincludes the recognition of right-of-use assets and lease liabilities for existing short-term leases at transition.

For arrangements where we are the lessor, we do not expect the adoption of the new lease standard to have a material impact on our consolidated financial statements.statements as all of our leases are operating leases. The new lease standard provides a practical expedient for lessors in which the lessor may elect, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for these components as a single component if both of the following are met: (1) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same and (2) the lease component, if accounted for separately, would be classified as an operating lease. We do not expect to elect this expedient for leased wireless devices under our JUMP! On Demand program.


We are in the process of implementing significant new lease accounting systems and are updating processes and implementing new internal controls over lease recognition which will ultimatelyto assist in the application of the new lease standard.

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” which amends the scope and transition requirements of ASU 2016-13. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectibility of the reported amount. The standard will become effective for us beginning January 1, 2020 and will require a cumulative-effect adjustment to Accumulated deficit as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). Early adoption is permitted for us as of January 1, 2019. We are currently evaluating the impact this guidance will have on our consolidated financial statementsConsolidated Financial Statements and the timing of adoption.

Cloud Computing Arrangements

In August 2016,2018, the FASB issued ASU 2016-15, “Statement of Cash Flows2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Topic 230)350): Classification of Certain Cash Receipts and Cash Payments.Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” The standard is intended to reduce current diversity in practice and provides guidance on how certain cash receipts and payments are presented and classified inaligns the statement of cash flows. The standard is effectiverequirements for us, and we adopted the standard, on January 1, 2018. The standard will require a retrospective approach. The standard will impact the presentation of cash flows related to beneficial interests in securitization transactions, which is the deferred purchase price,

resultingcapitalizing implementation costs incurred in a reclassification of cash inflows from Operating activitieshosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to Investing activities of approximately $4.3 billion and $3.5 billion for the years ended December 31, 2017 and 2016, respectively, in our Consolidated Statements of Cash Flows. The standard will also impact the presentation of cash payments for debt prepaymentdevelop or debt extinguishment costs, resulting in a reclassification of cash outflows from Operating activities to Financing activities of $188 million for the year ended December 31, 2017, in our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory.” The standard requires that the income tax impact of intra-entity sales and transfers of property, except for inventory, be recognized when the transfer occurs.obtain internal-use software. The standard will become effective for us beginning January 1, 2018,2020 and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted for us at any time. We are currently evaluating the impact this guidance will require any deferred taxeshave on our Consolidated Financial Statements and the timing of adoption.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not yet recognized on intra-entity transfers to be recorded to retained earnings under a modified retrospective approach. The implementation of this standard ishave, or are not expectedbelieved by management to have, a materialsignificant impact on our consolidated financial statements.present or future Consolidated Financial Statements.

Note 2 – Business Combinations

Proposed Sprint Transactions

On April 29, 2018, we entered into a Business Combination Agreement to merge with Sprint in an all-stock transaction at a fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock (the “Merger”). The combined company will be named “T-Mobile” and, as a result of the Merger, is expected to be able to rapidly launch a nationwide 5G network, accelerate innovation and increase competition in the U.S. wireless, video and broadband industries. Neither T-Mobile nor Sprint on its own could generate comparable benefits to consumers.

The Transactions have been approved by the boards of directors of T-Mobile and Sprint and the required approvals of each of T-Mobile and Sprint have been obtained. Immediately following the Merger, it is anticipated that Deutsche Telekom (“DT”) and SoftBank Group Corp. will hold, directly or indirectly, on a fully diluted basis, approximately 41.7% and 27.4%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 30.9% of the outstanding T-Mobile common stock held by other stockholders, based on closing share prices and certain other assumptions as of December 31, 2018.

In connection with the entry into the Business Combination Agreement, T-Mobile USA, Inc. (“T-Mobile USA”) entered into a commitment letter, dated as of April 29, 2018 (as amended and restated on May 15, 2018, the “Commitment Letter”). The funding of the debt facilities provided for in the Commitment Letter is subject to the satisfaction of the conditions set forth therein, including consummation of the Merger. The proceeds of the debt financing provided for in the Commitment Letter will be used to refinance certain existing debt of us, Sprint and our and Sprint’s respective subsidiaries and for post-closing working capital needs of the combined company. See Note 8 – Debt for further information.

In connection with the entry into the Business Combination Agreement, DT and T-Mobile USA entered into a financing matters agreement, dated as of April 29, 2018 (the “Financing Matters Agreement”). See Note 8 – Debt for further information.


On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement dated as of May 14, 2018, (the “Consent Solicitation Statement”) we obtained consents necessary to effect certain amendments to certain existing debt of us and our subsidiaries. In connection with receiving the requisite consents, we made upfront payments to third-party note holders of approximately $31 million during 2018. These payments were recognized as a reduction to Long-term debt. We paid third-party bank fees associated with obtaining the requisite consents of $6 million during 2018, which we recognized as Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

Under the terms of the Business Combination Agreement, Sprint may be required to reimburse us for 33% of the upfront consent and related bank fees we paid, or $14 million, if the Business Combination Agreement is terminated. There was no reimbursement accrued as of December 31, 2018. On May 18, 2018, Sprint also obtained consents necessary to effect certain amendments to certain existing debt of it and its subsidiaries. In connection with receiving the requisite consents, Sprint made upfront payments to third-party note holders and related bank fees of $241 million during 2018. Under the terms of the Business Combination Agreement, we may also be required to reimburse Sprint for 67% of the upfront consent and related bank fees it paid, or $161 million, if the Business Combination Agreement is terminated. There was no fee accrued as of December 31, 2018.

For the year ended December 31, 2018, we recognized costs associated with the Transactions of $196 million. These costs generally included bank fees associated with obtaining the requisite consents on debt to third parties, consulting and legal fees and were recognized as Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

The consummation of the Transactions is subject to regulatory approvals and certain other customary closing conditions. We expect to receive regulatory approval in the first half of 2019. The Business Combination Agreement contains certain termination rights for both Sprint and us. If we terminate the Business Combination Agreement in connection with a failure to satisfy the closing condition related to specified minimum credit ratings for the combined company on the closing date of the Merger (after giving effect to the Merger) from at least two of the three credit rating agencies, then in certain circumstances, we may be required to pay Sprint an amount equal to $600 million.

On June 18, 2018, we filed the Public Interest Statement and applications for approval of our Merger with Sprint with the FCC. On July 18, 2018, the FCC issued a Public Notice formally accepting our applications and establishing a period for public comment. The FCC is reviewing the modeling provided by us and Sprint under its informal 180-day transaction shot clock. On July 30, 2018, we filed a registration statement on Form S-4 with the SEC related to the Merger. The registration statement became effective on October 29, 2018.

Acquisition of Layer3 TV

On January 22, 2018, we completed our acquisition of television innovator Layer3 TV, Inc. (“Layer3 TV”) for cash consideration of $318 million. The consideration included a $5 million payment that was made after the closing date in the second quarter of 2018. 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 customers, 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. Costs related to this acquisition were immaterial to our Consolidated Statements of Comprehensive Income. The grant-date fair value of cash-based and share-based incentive compensation awards attributable to post-combination services was approximately $37 million.


The following table shows the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed and the resultant purchase price allocation:
(in millions)January 22,
2018
Assets acquired 
Cash and cash equivalents$2
Other current assets14
Property and equipment, net11
Intangible assets100
Goodwill218
Deferred tax assets2
Total assets acquired$347
Liabilities assumed 
Accounts payable and accrued liabilities$27
Short-term debt2
Total liabilities assumed29
Total consideration transferred$318

We recognized a liability of $21 million within Accounts payable and accrued liabilities in our Consolidated Balance Sheets and an associated indemnification asset of $12 million in our Consolidated Balance Sheets related to minimum commitments under acquired content agreements. As of December 31, 2018, the $12 million had been received.

Goodwill of $218 million is calculated as the excess of the purchase price paid over the net assets acquired. The goodwill recorded as part of the Layer3 TV acquisition primarily reflects industry knowledge of the retained management team, as well as intangible assets that do not qualify for separate recognition. None of the goodwill is deductible for tax purposes. See Note 6 – Goodwill, Spectrum Licenses and Other Intangible Assets for further information.

As part of the transaction, we acquired an identifiable intangible asset of developed technology with an estimated fair value of $100 million, which is being amortized on a straight-line basis over a useful life of 5 years.

The financial results from the acquisition of Layer3 TV since the closing date through December 31, 2018 were not material to our Consolidated Statements of Comprehensive Income.

Acquisition of Iowa Wireless

On January 1, 2018 (the “IWS Acquisition Date”), 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.

Prior to the IWS Acquisition Date, we accounted for our previously-held investment in IWS under the equity method as we had significant influence, but not control. Authoritative guidance on accounting for business combinations requires that an acquirer re-measure its previously held equity interest in the acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. As such, we valued our previously held equity interest in IWS at $56 million as of the IWS Acquisition Date and recognized a gain of $15 million.

The following table highlights the consideration transferred, the fair value of our previously held equity interest and bargain purchase:
(in millions)January 1,
2018
Consideration transferred: 
Cash paid$25
Previously held equity interest: 
Acquisition date fair value of previously held equity interest56
Bargain purchase gain25
Net assets acquired$106


As part of the acquisition of IWS, we recognized a bargain purchase gain of approximately $25 million, which represents the fair value of the identifiable net assets acquired, primarily IWS spectrum licenses, in excess of the purchase price and fair value of our previously held equity interest. We were in a favorable position to acquire the remaining shares of IWS as a result of our previously held 54% equity interest in IWS, an unprofitable business with valuable spectrum holdings.

The following table shows the amounts recognized as of the IWS Acquisition Date for each major class of assets acquired and liabilities assumed and the resultant purchase price allocation:
(in millions)January 1,
2018
Assets acquired 
Current assets 
Cash and cash equivalents$3
Accounts receivable, net6
Equipment installment plan receivables, net3
Inventories1
Other current assets2
Current assets, total15
Property and equipment, net36
Spectrum licenses87
Total assets acquired$138
Liabilities assumed 
Accounts payable and accrued liabilities$6
Deferred revenue2
Current liabilities, total8
Deferred tax liabilities17
Other long-term liabilities7
Total long-term liabilities24
Net assets acquired$106

We included both the gain on our previously held equity interest in IWS and the bargain purchase gain within Other income (expense), net for the year ended December 31, 2018.

Pro Forma Information

The acquisitions of Layer3 TV and IWS were not material to our prior period consolidated results on a pro forma basis.

Note 23 – Receivables and Allowance for Credit Losses

Our portfolio of receivables is comprised of two portfolio segments, accounts receivable and EIP receivables. Our accounts receivable segment primarily consists of amounts currently due from customers, including service and leased device receivables, other carriers and third-party retail channels.

Based upon customer credit profiles, we classify the EIP receivablereceivables segment into two customer classes of “Prime” and “Subprime.” Prime customer receivables are those with lower delinquency risk and Subprime customer receivables are those with higher delinquency risk. Subprime customersCustomers may be required to make a down payment on their equipment purchases. In addition, certain customers within the Subprime category are required to pay an advance deposit.

To determine a customer’s credit profile, we use a proprietary credit scoring model that measures the credit quality of a customer at the time of application for wireless communications service using several factors, such as credit bureau information, consumer credit risk scores and service and device plan characteristics.


The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
EIP receivables, gross$3,960
 $3,230
$4,534
 $3,960
Unamortized imputed discount(264) (195)(330) (264)
EIP receivables, net of unamortized imputed discount3,696
 3,035
4,204
 3,696
Allowance for credit losses(132) (121)(119) (132)
EIP receivables, net$3,564
 $2,914
$4,085
 $3,564
   
Classified on the balance sheet as:      
Equipment installment plan receivables, net$2,290
 $1,930
$2,538
 $2,290
Equipment installment plan receivables due after one year, net1,274
 984
1,547
 1,274
EIP receivables, net$3,564
 $2,914
$4,085
 $3,564

To determine the appropriate level of the allowance for credit losses, we consider a number of credit quality indicators, including historical credit losses and timely payment experience as well as current collection trends such as write-off frequency and severity, aging of the receivable portfolio, credit quality of the customer base and other qualitative factors such as macro-economic conditions.

We write off account balances if collection efforts are unsuccessful and the receivable balance is deemed uncollectible, based on customer credit quality and the aging of the receivable.

For EIP receivables, subsequent to the initial determination of the imputed discount, we assess the need for and, if necessary, recognize an allowance for credit losses to the extent the amount of estimated probable losses on the gross EIP receivable balances exceed the remaining unamortized imputed discount balances.

The EIP receivables had weighted average effective imputed interest rates of 10.0%, 9.6% and 9.0% as of December 31, 2018, 2017 and 2016, respectively.


Activity for the years ended December 31, 2018, 2017 2016, and 2015,2016 in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivablereceivables segments were as follows:
December 31, 2017 December 31, 2016 December 31, 2015December 31, 2018 December 31, 2017 December 31, 2016
(in millions)Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance TotalAccounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total
Allowance for credit losses and imputed discount, beginning of period$102
 $316
 $418
 $116
 $333
 $449
 $83
 $448
 $531
$86
 $396
 $482
 $102
 $316
 $418
 $116
 $333
 $449
Bad debt expense104
 284
 388
 227
 250
 477
 182
 365
 547
69
 228
 297
 104
 284
 388
 227
 250
 477
Write-offs, net of recoveries(120) (273) (393) (241) (277) (518) (149) (333) (482)(88) (240) (328) (120) (273) (393) (241) (277) (518)
Change in imputed discount on short-term and long-term EIP receivablesN/A
 252
 252
 N/A
 186
 186
 N/A
 (84) (84)N/A
 250
 250
 N/A
 252
 252
 N/A
 186
 186
Impact on the imputed discount from sales of EIP receivablesN/A
 (183) (183) N/A
 (176) (176) N/A
 (63) (63)N/A
 (185) (185) N/A
 (183) (183) N/A
 (176) (176)
Allowance for credit losses and imputed discount, end of period$86
 $396
 $482
 $102
 $316
 $418
 $116
 $333
 $449
$67
 $449
 $516
 $86
 $396
 $482
 $102
 $316
 $418


Management considers the aging of receivables to be an important credit indicator. The following table provides delinquency status for the unpaid principal balance for receivables within the EIP portfolio segment, on a gross basis, which we actively monitor as part of our current credit risk management practices and policies:
December 31, 2017 December 31, 2016December 31, 2018 December 31, 2017
(in millions)Prime Subprime Total EIP Receivables, gross Prime Subprime Total EIP Receivables, grossPrime Subprime Total EIP Receivables, gross Prime Subprime Total EIP Receivables, gross
Current - 30 days past due$1,727
 $2,133
 $3,860
 $1,375
 $1,735
 $3,110
$1,987
 $2,446
 $4,433
 $1,727
 $2,133
 $3,860
31 - 60 days past due17
 29
 46
 27
 38
 65
15
 32
 47
 17
 29
 46
61 - 90 days past due6
 16
 22
 7
 16
 23
6
 19
 25
 6
 16
 22
More than 90 days past due8
 24
 32
 10
 22
 32
7
 22
 29
 8
 24
 32
Total receivables, gross$1,758
 $2,202
 $3,960
 $1,419
 $1,811
 $3,230
$2,015
 $2,519
 $4,534
 $1,758
 $2,202
 $3,960

Note 34 – Sales of Certain Receivables

We have entered into transactions to sell certain service and EIP accounts receivables. The transactions, including our continuing involvement with the sold receivables and the respective impacts to our consolidated financial statements,Consolidated Financial Statements, are described below.

Sales of Service ReceivablesAccounts Receivable

Overview of the Transaction

In 2014, we entered into an arrangement to sell certain service accounts receivablesreceivable on a revolving basis and in November 2016, the arrangement was amended to increase the maximum funding commitment to $950 million (the “service receivable sale arrangement”) and extend the scheduled expiration date to March 2018. In February 2018, the service receivable sale arrangement was again amended and restated to extend the scheduled expiration date to March 2019. In November 2018, the service receivable sale arrangement was again amended to extend the maturity of certain third-party credit support under the arrangement until March 2019. As of December 31, 20172018 and 2016,2017, the service receivable sale arrangement provided funding of $880$774 million and $907$880 million, respectively. Sales of receivables occur daily and are settled on a monthly basis. The receivables consist of service charges currently due from customers and are short-term in nature.

In connection with the service receivable sale arrangement, we formed a wholly-owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivablesreceivable (the “Service BRE”). The Service BRE does not qualify as a VIE, and due to the significant level of control we exercise over the entity, it is consolidated. Pursuant to the service receivable sale arrangement, certain of our wholly-owned subsidiaries transfer selected receivables to the Service BRE. The Service BRE then sells the receivables to an unaffiliated entity (the “Service VIE”), which was established to facilitate the sale of beneficial ownership interests in the receivables to certain third parties.

Variable Interest Entity

We determined that the Service VIE qualifies as a VIE as it lacks sufficient equity to finance its activities. We have a variable interest in the Service VIE but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Service VIE’s economic performance. Those activities include committing the Service VIE to legal agreements to purchase or sell assets, selecting which receivables are purchased in the service receivable sale arrangement, determining whether the Service VIE will sell interests in the purchased service receivables to other parties, funding of the entity and servicing of receivables. We do not hold the power to direct the key decisions underlying these activities. For example, while we act as the servicer of the sold receivables, which is considered a significant activity of the Service VIE, we are acting as an agent in our capacity as the servicer and the counterparty to the service receivable sale arrangement has the ability to remove us as the servicing agent of the receivables at will with no recourse available to us. As we have determined we are not the primary beneficiary, the balances and results of the Service VIE are not included in our consolidated financial statements.Consolidated Financial Statements.


The following table summarizes the carrying amounts and classification of assets, which consists primarily of the deferred purchase price and liabilities included in our Consolidated Balance Sheets that relate to our variable interest in the Service VIE:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Other current assets$236
 $207
$339
 $236
Accounts payable and accrued liabilities25
 17
59
 25
Other current liabilities180
 129
149
 180

Sales of EIP Receivables

Overview of the Transaction

In 2015, we entered into an arrangement to sell certain EIP accounts receivablesreceivable on a revolving basis and inbasis. In August 2017, the EIP sale arrangement was amended to reduce the maximum funding commitment to $1.2 billion (the “EIP sale arrangement”) and extend the scheduled expiration date to November 2018. In December 2017, the EIP sale arrangement was again amended to increase the maximum funding commitment to $1.3 billion. In October 2018, we amended and restated the EIP sale arrangement to, among other things, extend the scheduled expiration date to November 2020 and expand the types of EIP receivables that may be sold. In December 2018, we amended the EIP sale arrangement to increase the term of EIP accounts receivables relating to handset devices that may be sold in the EIP sale arrangement to expand the eligibility criteria for longer tenor EIP loans.

As of both December 31, 20172018 and 2016,2017, the EIP sale arrangement provided funding of $1.3 billion and $1.2 billion, respectively.billion. Sales of EIP receivables occur daily and are settled on a monthly basis. The receivables consist of customer EIP balances, which require monthly customer payments for up to 24 months.

In connection with this EIP sale arrangement, we formed a wholly-owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). Pursuant to the EIP sale arrangement, our wholly-owned subsidiary transfers selected receivables to the EIP BRE. The EIP BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity for which we do not exercise any level of control, nor does the third-party entity qualify as a VIE.

Variable Interest Entity

We determined that the EIP BRE is a VIE as its equity investment at risk lacks the obligation to absorb a certain portion of its expected losses. We have a variable interest in the EIP BRE and determined that we are the primary beneficiary based on our ability to direct the activities which most significantly impact the EIP BRE’s economic performance. Those activities include selecting which receivables are transferred into the EIP BRE and sold in the EIP sale arrangement and funding of the EIP BRE. Additionally, our equity interest in the EIP BRE obligates us to absorb losses and gives us the right to receive benefits from the EIP BRE that could potentially be significant to the EIP BRE. Accordingly, we determined that we are the primary beneficiary, and include the balances and results of operations of the EIP BRE in our consolidated financial statements.Consolidated Financial Statements.

The following table summarizes the carrying amounts and classification of assets, which consists primarily of the deferred purchase price and liabilities included in our Consolidated Balance Sheets that relate to the EIP BRE:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Other current assets$403
 $371
$321
 $403
Other assets109
 83
88
 109
Other long-term liabilities3
 4
22
 3

In addition, the EIP BRE is a separate legal entity with its own separate creditors who will be entitled, prior to any liquidation of the EIP BRE, to be satisfied prior to any value in the EIP BRE becoming available to us. Accordingly, the assets of the EIP BRE may not be used to settle our general obligations and creditors of the EIP BRE have limited recourse to our general credit.


Sales of Receivables

The transfers of service receivables and EIP receivables to the non-consolidated entities are accounted for as sales of financial assets. Once identified for sale, the receivable is recorded at the lower of cost or fair value. Upon sale, we derecognize the net carrying amount of the receivables.

We recognize the net cash proceeds received upon sale in Net cash provided by operating activities in our Consolidated Statements of Cash Flows.

The We recognize proceeds are net of the deferred purchase price, consisting of a receivable from the purchasers that entitles us to certain collections on the receivables. We recognize the collection of the deferred purchase price in Net cash provided by operatingused in investing activities in our Consolidated Statements of Cash Flows as it is dependent on collection of the customer receivables and is not subjectProceeds related to significant interest rate risk. beneficial interests in securitization transactions.

The deferred purchase price represents a financial asset that is primarily tied to the creditworthiness of the customers and which can be settled in such a way that we may not recover substantially all of our recorded investment, due to default by the customers on the underlying receivables. We elected, at inception, to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expense in our Consolidated Statements of Comprehensive Income. The fair value of the deferred purchase price is determined based on a discounted cash flow model which uses primarily unobservable inputs (Level 3 inputs), including customer default rates. As of December 31, 20172018 and 2016,2017, our deferred purchase price related to the sales of service receivables and EIP receivables was $745$746 million and $659$745 million, respectively.

The following table summarizes the impacts of the sale of certain service receivables and EIP receivables in our Consolidated Balance Sheets:Sheets:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Derecognized net service receivables and EIP receivables$2,725
 $2,502
$2,577
 $2,725
Other current assets639
 578
660
 639
of which, deferred purchase price636
 576
658
 636
Other long-term assets109
 83
88
 109
of which, deferred purchase price109
 83
88
 109
Accounts payable and accrued liabilities25
 17
59
 25
Other current liabilities180
 129
149
 180
Other long-term liabilities3
 4
22
 3
Net cash proceeds since inception2,058
 2,030
1,879
 2,058
Of which:      
Change in net cash proceeds during the year-to-date period28
 536
(179) 28
Net cash proceeds funded by reinvested collections2,030
 1,494
2,058
 2,030

We recognized losses from sales of receivables, of $299 million, $228 million and $204 million for the years ended December 31, 2017, 2016 and 2015, respectively. These losses from sales of receivables were recognized in Selling, general and administrative expense in our Consolidated Statements of Comprehensive Income. Losses from sales of receivables includeincluding adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price.price, of $157 million, $299 million and $228 million for the years ended December 31, 2018, 2017 and 2016, respectively, in Selling, general and administrative expense in our Consolidated Statements of Comprehensive Income.

Continuing Involvement

Pursuant to the sale arrangements described above, we have continuing involvement with the service receivables and EIP receivables we sell as we service the receivables and are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where write-off is imminent. We continue to service the customers and their related receivables, including facilitating customer payment collection, in exchange for a monthly servicing fee. As the receivables are sold on a revolving basis, the customer payment collections on sold receivables may be reinvested in new receivable sales. While servicing the receivables, we apply the same policies and procedures to the sold receivables as we apply to our owned receivables, and we continue to maintain normal relationships with our customers. Pursuant to the EIP sale arrangement, under certain circumstances, we are required to deposit cash or replacement EIP receivables primarily for contracts terminated by customers under our JUMP! Program.


In addition, we have continuing involvement with the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the sale arrangements. Our maximum exposure to loss related to the involvement with the service receivables

and EIP receivables sold under the sale arrangements was $1.3$1.2 billion as of December 31, 2017.2018. The maximum exposure to loss, which is a required disclosure under GAAP, represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby we would not receive the deferred purchase price portion of the contractual proceeds withheld by the purchasers and would also be required to repurchase the maximum amount of receivables pursuant to the sale arrangements without consideration for any recovery. As we believe the probability of these circumstances occurring is remote, the maximum exposure to loss is not an indication of our expected loss.

Note 45 – Property and Equipment

The components of property and equipment were as follows:
(in millions)Useful Lives December 31,
2017
 December 31,
2016
Useful Lives December 31,
2018
 December 31,
2017
Buildings and equipmentUp to 40 years $2,066
 $1,657
Up to 40 years $2,423
 $2,066
Wireless communications systemsUp to 20 years 32,706
 29,272
Up to 20 years 35,282
 32,706
Leasehold improvementsUp to 12 years 1,182
 1,068
Up to 12 years 1,299
 1,182
Capitalized softwareUp to 10 years 10,563
 8,488
Up to 10 years 11,712
 10,563
Leased wireless devicesUp to 18 months 1,209
 2,624
Leased devicesUp to 18 months 1,164
 1,209
Construction in progress 1,771
 2,613
 2,776
 1,771
Accumulated depreciation and amortization (27,301) (24,779) (31,297) (27,301)
Property and equipment, net $22,196
 $20,943
 $23,359
 $22,196

Wireless communication systems include capital lease agreements for network equipment with varying expiration terms through 2031.2033. Capital lease assets and accumulated amortization were $3.1 billion and $867 million, and $2.4 billion and $533 million, and $1.6 billion and $300 million, as of December 31, 20172018 and 2016,2017, respectively.

We capitalize interest associated with the acquisition or construction of certain property and equipment and spectrum intangible assets. We recognized capitalized interest of $362 million, $136 million $142 million and $230$142 million for the years ended December 31, 2018, 2017 2016 and 2015,2016, respectively.

The components of leased wireless devices under our JUMP! On Demand program were as follows:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Leased wireless devices, gross$1,209
 $2,624
$1,159
 $1,209
Accumulated depreciation(417) (1,193)(622) (417)
Leased wireless devices, net$792
 $1,431
$537
 $792

Future minimum payments expected to be received over the lease term related to the leased wireless devices, which exclude optional residual buy-out amounts at the end of the lease term, are summarized below:
(in millions)TotalTotal
Year Ended December 31,  
2018$485
2019104
$419
202059
Total$589
$478

Total depreciation expense relating to property and equipment was $6.4 billion, $5.8 billion $6.0 billion and $4.4$6.0 billion for the years ended December 31, 2018, 2017 2016 and 2015,2016, respectively. Included in the total depreciation expense for the years ended December 31, 2018, 2017 and 2016 and 2015 was $940 million, $1.0 billion and $1.5 billion, and $312 million, respectively, related to leased wireless devices.

For the years ended December 31, 2018, 2017 2016 and 2015,2016, we recorded additional depreciation expense of $60 million, $63 million $101 million and $85$101 million, respectively, as a result of adjustments to useful lives of network equipment expected to be replaced in connection with our network transformation and decommissioning the MetroPCS CDMA network and redundant network cell sites.


Asset retirement obligations are primarily for certain legal obligations to remediate leased property on which our network infrastructure and administrative assets are located.

 
Activity in our asset retirement obligations was as follows:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Asset retirement obligations, beginning of year$539
 $483
$562
 $539
Liabilities incurred25
 50
26
 25
Liabilities settled(16) (67)(9) (16)
Accretion expense27
 24
30
 27
Changes in estimated cash flows(13) 49

 (13)
Asset retirement obligations, end of year$562
 $539
$609
 $562
   
Classified on the balance sheet as:      
Other current liabilities$3
 $16
$
 $3
Other long-term liabilities559
 523
609
 559
Asset retirement obligations$562
 $539
$609
 $562

The corresponding assets, net of accumulated depreciation, related to asset retirement obligations were $220$194 million and $258$220 million as of December 31, 20172018 and 2016,2017, respectively.

Note 56 – Goodwill, Spectrum LicensesLicense Transactions and Other Intangible Assets

Goodwill

There were noThe changes in the carrying valuesamount of goodwill for the years ended December 31, 2018 and 2017 are as follows:
(in millions)Goodwill
Historical goodwill$12,449
Accumulated impairment losses at December 31, 2017(10,766)
Balance as of December 31, 20171,683
Goodwill from acquisition of Layer3 TV218
Balance as of December 31, 2018$1,901
Accumulated impairment losses at December 31, 2018$(10,766)

On January 22, 2018, we completed our acquisition of Layer3 TV. This purchase was accounted for as a business combination resulting in $218 million in goodwill. Layer3 TV is a separate reporting unit and 2016.the acquired goodwill is tested for impairment at this level. See Note 2 – Business Combinations for further information.

Spectrum Licenses

The following table summarizes our spectrum license activity for the years ended December 31, 20172018 and 2016:2017:
(in millions)December 31, 2017 December 31, 20162018 2017
Spectrum licenses, beginning of year$27,014
 $23,955
$35,366
 $27,014
Spectrum license acquisitions8,599
 3,334
138
 8,599
Spectrum licenses transferred to held for sale(271) (324)(1) (271)
Costs to clear spectrum24
 49
56
 24
Spectrum licenses, end of year$35,366
 $27,014
$35,559
 $35,366

We had the following spectrum license transactions during 2018:

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 2 – Business Combinations for further information.


We closed on multiple spectrum purchase agreements in which we acquired total spectrum licenses of approximately $50 million for cash consideration.

In September 2018, we signed a reciprocal long-term lease agreement with Sprint in which both parties have the right to use a portion of spectrum owned by the other party. This executory agreement does not qualify as an acquisition of spectrum licenses, and we have not capitalized amounts related to the lease. The reciprocal long-term lease is a distinct transaction from the Merger. See Note 15 – Commitments and Contingencies for further information.

We had the following spectrum license transactions during 2017:

In March 2017, we closed on an agreement with a third party for the exchange of certain AWS and PCS spectrum licenses. Upon closing of the transaction, we recorded the spectrum licenses received at their estimated fair value of approximately $123 million and recognized a gain of $37 million included in Gains on disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income.

In April 2017, the FCC announced that we were the winning bidder of 1,525 licenses in the 600 MHz spectrum auction for an aggregate price of $8.0 billion. At inception of the auction in June 2016, we deposited $2.2 billion with the FCC which, based on the outcome of the auction, was sufficient to cover our down payment obligation due in April 2017. In May 2017, we paid the FCC the remaining $5.8 billion of the purchase price using cash reserves and by issuing debt to Deutsche Telekom AG (“DT”), our majority stockholder, pursuant to existing purchase commitments. See Note 7 - Debt for further information. The licenses are included in Spectrum licenses as of December 31, 2017, in our Consolidated Balance Sheets.
In April 2017, the FCC announced that we were the winning bidder of 1,525 licenses in the 600 MHz spectrum auction for an aggregate price of $8.0 billion. At inception of the auction in June 2016, we deposited $2.2 billion with the FCC which, based on the outcome of the auction, was sufficient to cover our down payment obligation due in April 2017. In May 2017, we paid the FCC the remaining $5.8 billion of the purchase price using cash reserves and by issuing debt to Deutsche Telekom AG (“DT”), our majority stockholder, pursuant to existing purchase commitments.
The licenses are included in Spectrum licenses as of December 31, 2017, in our Consolidated Balance Sheets. We began deployment of these licenses on our network in the third quarter of 2017.

In September 2017, we closed on an agreement with a third party for the exchange of certain AWS and PCS spectrum licenses. Upon closing of the transaction, we recorded the spectrum licenses received at their estimated fair value of

approximately $115 million and recognized a gain of $29 million included in Gains on disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income.

In September 2017, we entered into a Unit Purchase Agreement (“UPA”) 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 1, 2018, we closed on the purchase agreement and received the IWS spectrum licenses, among other assets. As of December 31, 2017, we accounted for our existing investment in IWS under the equity method as we had significant influence, but not control.

In December 2017, we closed on an agreement with a third party for the exchange of certain AWS and PCS spectrum licenses. Upon closing of the transaction, we recorded the spectrum licenses received at their estimated fair value of approximately $352 million and recognized a gain of $168 million included in Gains on disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income.

We had the following spectrum license transactions during 2016:

We closed on an agreement with AT&T Inc. for the acquisition and exchange of certain spectrum licenses. Upon closing of the transaction during the first quarter of 2016, we recorded the spectrum licenses received at their estimated fair value of approximately $1.2 billion and recognized a gain of $636 million included in Gains on disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income.

We closed on agreements with multiple third parties for the purchase and exchange of certain spectrum licenses for $1.3 billion in cash. Upon closing of the transactions, we recorded spectrum licenses received at their estimated fair values totaling approximately $1.7 billion and recognized gains of $199 million included in Gains on disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income.

We closed on an agreement with a third party for the purchase of certain spectrum licenses covering approximately 11 million people for approximately $420 million during the fourth quarter of 2016.

Goodwill and Other Intangible Assets Impairment Assessments

Our impairment assessment of goodwill and other indefinite-lived intangible assets (spectrum licenses) resulted in no impairment as of December 31, 20172018 and 2016.2017.

Other Intangible Assets

The components of Other intangible assets were as follows:
Useful Lives December 31, 2017 December 31, 2016Useful Lives December 31, 2018 December 31, 2017
(in millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount
Customer listsUp to 6 years $1,104
 $(1,016) $88
 $1,104
 $(894) $210
Up to 6 years $1,104
 $(1,086) $18
 $1,104
 $(1,016) $88
Trademarks and patentsUp to 19 years 307
 (192) 115
 303
 (156) 147
Up to 19 years 312
 (225) 87
 307
 (192) 115
OtherUp to 28 years 49
 (35) 14
 50
 (31) 19
Up to 28 years 149
 (56) 93
 49
 (35) 14
Other intangible assets $1,460
 $(1,243) $217
 $1,457
 $(1,081) $376
 $1,565
 $(1,367) $198
 $1,460
 $(1,243) $217

Amortization expense for intangible assets subject to amortization was $124 million, $163 million $220 million and $276$220 million for the years ended December 31, 2018, 2017 2016 and 2015,2016, respectively.


The estimated aggregate future amortization expense for intangible assets subject to amortization are summarized below:
(in millions)Estimated Future AmortizationEstimated Future Amortization
Year Ending December 31,  
2018$105
201952
$73
202035
55
202114
35
20224
25
20236
Thereafter7
4
Total$217
$198

Note 67 – Fair Value Measurements and Derivative Instruments

The carrying values of Cash and cash equivalents, Accounts receivable, Accounts receivable from affiliates, Accounts payable and accrued liabilities, and borrowings under our revolving credit facility with DT, our majority stockholder, approximate fair value due to the short-term maturities of these instruments.

Derivative Financial Instruments

Interest rate lock derivatives
On October 1, 2018, we adopted the new derivatives and hedging standard and have applied the standard to hedging transactions prospectively. See Note 1 – Summary of Significant Accounting Policies for further discussion on the adoption of this standard.
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 (cash flow hedge) to help minimize significant, unplanned fluctuations in cash flows caused by interest rate volatility. We do not use derivatives for trading or speculative purposes.
We enter into and designate interest rate lock derivatives (forward-starting swap instruments) as cash flow hedges to reduce variability in cash flows due to changes in interest payments attributable to increases or decreases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt.
We record interest rate lock derivatives on our Consolidated Balance Sheets at fair value that is derived primarily from observable market data, including yield curves. Interest rate lock derivatives were classified as Level 2 in the fair value hierarchy. Cash flows associated with derivative instruments are presented in the same category on the Consolidated Statements of Cash Flows as the item being hedged.
In October 2018, we entered into interest rate lock derivatives with notional amounts of $9.6 billion. The fair value of interest rate lock derivatives as of December 31, 2018 was $447 million and is included in Other current liabilities in our Consolidated Balance Sheets. As of and for the year ended December 31, 2018, no amounts were accrued or amortized into Interest expense in the Consolidated Statements of Comprehensive Income while changes in fair value, net of tax, of $332 million are presented in AOCI.
Embedded Derivative Instrumentsderivatives

In connection with theour business combination with MetroPCS, we issued senior reset notes to Deutsche Telekom. DT. We determined certain components of the reset feature are required to be bifurcated from the senior reset notes and separately accounted for as embedded derivative instruments.

The interest rates on our senior reset notes to DT were adjusted at the reset dates to rates defined in the applicable supplemental indentures to manage interest rate risk related to the senior reset notes. We determined certain components of the reset feature are required to be bifurcated from the senior reset notes and separately accounted for as embedded derivative instruments. As of December 31, 2017 and 2016, there were noOur embedded derivatives subject to interest rate volatility related to the Senior Reset Notes to affiliates.

Theare recorded at fair value of our embedded derivatives was determined using a lattice-based valuation model by determining the fair value of the senior reset notes with and without the embedded derivatives included. The fair value of the senior reset notes with the embedded derivatives utilizes the contractual term of each senior reset note, reset rates calculatedprimarily based on the spread between specified yield curvesunobservable inputs and the yield curve on certain T-Mobile long-term debt adjusted pursuant to the applicable supplemental indentures and interest rate volatility. Interest rate volatility is a significant unobservable input (Level 3) as it is derived based on weighted risk-free rate volatility and credit spread volatility. Significant increases or decreases in the weighting of risk-free volatility and credit spread volatility, in isolation, would result in a higher or lower fair value of the embedded derivatives. The embedded derivatives were classified as Level 3 in the fair value hierarchy.hierarchy for 2018 and 2017.

The fair value of embedded derivative instruments by balance sheet locationwas $19 million and level were$66 million as follows:of December 31, 2018 and 2017, respectively, and is included in Other long-term liabilities in our Consolidated Balance Sheets. For the years ended December
 December 31, 2017
(in millions)Level 1 Level 2 Level 3 Total
Other long-term liabilities$
 $
 $66
 $66

 December 31, 2016
(in millions)Level 1 Level 2 Level 3 Total
Other long-term liabilities$
 $
 $118
 $118

The following table summarizes31, 2018, 2017 and 2016, we recognized $29 million, $52 million and $25 million from the gain (loss) activity related to embedded derivatives instruments recognized in Interest expense to affiliates:affiliates in our Consolidated Statements of Comprehensive Income.
 Year Ended December 31,
(in millions)2017 2016 2015
Embedded derivatives$52
 $25
 $(148)
Deferred Purchase Price Assets


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

The carrying amounts and fair values of our assets and liabilities measured at fair value on a recurring basis included in our Consolidated Balance Sheets were as follows:
 Level within the Fair Value Hierarchy December 31, 2017 December 31, 2016
(in millions) Carrying Amount Fair Value Carrying Amount Fair Value
Assets:         
Deferred purchase price assets3 $745
 $745
 $659
 $659
Liabilities:         
Guarantee liabilities3 105
 105
 135
 135

The principal amounts and fair values of our short-term and long-term debt included in our Consolidated Balance Sheets were as follows:
 Level within the Fair Value Hierarchy December 31, 2017 December 31, 2016
(in millions) Principal Amount Fair Value Principal Amount Fair Value
Liabilities:         
Senior Notes to third parties1 $11,850
 $12,540
 $18,600
 $19,584
Senior Notes to affiliates2 7,500
 7,852
 
 
Incremental Term Loan Facility to affiliates2 4,000
 4,020
 
 
Senior Reset Notes to affiliates2 3,100
 3,260
 5,600
 5,955
Senior Secured Term Loans2 
 
 1,980
 2,005
 Level within the Fair Value Hierarchy December 31, 2018 December 31, 2017
(in millions) Carrying Amount Fair Value Carrying Amount Fair Value
Assets:         
Deferred purchase price assets3 $746
 $746
 $745
 $745

Long-term Debt

The fair value of our Senior Notes to third parties was determined based on quoted market prices in active markets, and therefore was classified as Level 1 within the fair value hierarchy. The fair values of theour Senior Notes to affiliates, Incremental Term Loan Facility to affiliates and Senior Reset Notes to affiliates and Senior Secured Term Loans were determined based on a discounted cash flow approach using quoted pricesmarket interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk. Accordingly, our Senior Notes to affiliates, Incremental Term Loan Facility to affiliates and Senior Reset Notes to affiliates and Senior Secured Term Loans were classified as Level 2 within the fair value hierarchy.

Although we have determined the estimated fair values using available market information and commonly accepted valuation methodologies, considerable judgment was required in interpreting market data to develop fair value estimates for the Senior Notes to affiliates, Incremental Term Loan Facility to affiliates and Senior Reset Notes to affiliates and Senior Secured Term Loans to affiliates. The fair value estimates were based on information available as of December 31, 20172018 and 2016.2017. As such, our estimates are not necessarily indicative of the amount we could realize in a current market exchange.

Deferred Purchase Price AssetsThe carrying amounts and fair values of our short-term and long-term debt included in our Consolidated Balance Sheets were as follows:

In connection with the sales of certain service and EIP receivables 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 3 – Sales of Certain Receivables for further information.
 Level within the Fair Value Hierarchy December 31, 2018 December 31, 2017
(in millions) Carrying Amount Fair Value Carrying Amount Fair Value
Liabilities:         
Senior Notes to third parties1 $10,950
 $10,945
 $11,910
 $12,540
Senior Notes to affiliates2 9,984
 9,802
 7,486
 7,852
Incremental Term Loan Facility to affiliates2 4,000
 3,976
 4,000
 4,020
Senior Reset Notes to affiliates2 598
 640
 3,100
 3,260

Guarantee Liabilities

We offer certaina device trade-in programs, includingprogram, JUMP!, which provideprovides eligible customers a specified-price trade-in right to upgrade their device. For customers who are enrolledenroll in JUMP!, we recognize a device trade-in program, we deferliability and reduce revenue for the portion of equipment revenuesrevenue which represents the estimated fair value of the specified-price trade-in right guarantee, incorporating the expected probability and timing of the handset upgrade and the estimated fair value of the used handset which is returned. Accordingly, our guarantee liabilities were classified as Level 3 within the fair value hierarchy. When customers upgrade their device, the difference between the trade-inEIP balance credit to the customer and the fair value of the returned device is recorded against the guarantee liabilities. Guarantee liabilities are included in Other current liabilities in our Consolidated Balance Sheets.

The carrying amounts of our guarantee liabilities measured at fair value on a non-recurring basis included in our Consolidated Balance Sheets. were $73 million and $105 million as of December 31, 2018 and 2017, respectively.

The total estimated remaining gross EIP receivable balances of all enrolled handset upgrade program customers, which are the

remaining EIP amounts underlying the JUMP! guarantee, including EIP receivables that have been sold, was $2.5$3.0 billion as of December 31, 2017.2018. This is not an indication of our expected loss exposure as it does not consider the expected fair value of the used handset or the probability and timing of the trade-in.

Note 78 – Debt

Debt was as follows:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
5.250% Senior Notes due 2018$
 $500
6.464% Senior Notes due 2019
 1,250
6.288% Senior Reset Notes to affiliates due 2019
 1,250
6.542% Senior Notes due 2020
 1,250
6.625% Senior Notes due 2020
 1,000
6.366% Senior Reset Notes to affiliates due 2020
 1,250
6.250% Senior Notes due 2021
 1,750
6.633% Senior Notes due 2021
 1,250
8.097% Senior Reset Notes to affiliates due 2021$
 $1,250
5.300% Senior Notes to affiliates due 20212,000
 
2,000
 2,000
8.097% Senior Reset Notes to affiliates due 20211,250
 1,250
8.195% Senior Reset Notes to affiliates due 2022
 1,250
4.000% Senior Notes to affiliates due 20221,000
 1,000
4.000% Senior Notes due 2022500
 500
6.125% Senior Notes due 20221,000
 1,000

 1,000
6.731% Senior Notes due 2022
 1,250
4.000% Senior Notes due 2022500
 
4.000% Senior Notes to affiliates due 20221,000
 
8.195% Senior Reset Notes to affiliates due 20221,250
 1,250
Incremental term loan facility to affiliates due 20222,000
 
2,000
 2,000
6.000% Senior Notes due 20231,300
 1,300
1,300
 1,300
6.625% Senior Notes due 20231,750
 1,750

 1,750
6.836% Senior Notes due 2023600
 600

 600
9.332% Senior Reset Notes to affiliates due 2023600
 600
600
 600
6.000% Senior Notes due 20241,000
 1,000
1,000
 1,000
6.500% Senior Notes due 20241,000
 1,000
1,000
 1,000
6.000% Senior Notes to affiliates due 20241,350
 
1,350
 1,350
6.000% Senior Notes to affiliates due 2024650
 
650
 650
Incremental term loan facility to affiliates due 20242,000
 
2,000
 2,000
5.125% Senior Notes to affiliates due 20251,250
 1,250
5.125% Senior Notes due 2025500
 
500
 500
6.375% Senior Notes due 20251,700
 1,700
1,700
 1,700
5.125% Senior Notes to affiliates due 20251,250
 
6.500% Senior Notes due 20262,000
 2,000
2,000
 2,000
4.500% Senior Notes due 20261,000
 
4.500% Senior Notes to affiliates due 20261,000
 
5.375% Senior Notes due 2027500
 
500
 500
5.375% Senior Notes to affiliates Due 20271,250
 
Senior Secured Term Loans
 1,980
5.375% Senior Notes to affiliates due 20271,250
 1,250
4.750% Senior Notes due 20281,500
 
4.750% Senior Notes to affiliates due 20281,500
 
Capital leases1,824
 1,425
2,015
 1,824
Unamortized premium from purchase price allocation fair value adjustment78
 212

 78
Unamortized premium on debt to affiliates59
 
52
 59
Unamortized discount on Senior Secured Term Loans
 (8)
Unamortized discount on affiliates Senior Notes(73) 
Debt issuance cost(19) (23)
Unamortized discount on Senior Notes to affiliates(64) (73)
Debt issuance costs and consent fees(56) (19)
Total debt28,319
 27,786
27,547
 28,319
Less: Current portion of Senior Secured Term Loans
 20
Less: Current portion of Senior Notes999
 

 999
Less: Current portion of capital leases613
 334
841
 613
Total long-term debt$26,707
 $27,432
$26,706
 $26,707
   
Classified on the balance sheet as:      
Long-term debt$12,121
 $21,832
$12,124
 $12,121
Long-term debt to affiliates14,586
 5,600
14,582
 14,586
Total long-term debt$26,707
 $27,432
$26,706
 $26,707


Debt to Third Parties

IssuancesDuring the year ended December 31, 2018 we issued the following Senior Notes:
(in millions)Principal Issuances Issuance Costs Net Proceeds from Issuance of Long-Term Debt Issue Date
4.500% Senior Notes due 2026$1,000
 $2
 $998
 January 25, 2018
4.750% Senior Notes due 20281,500
 4
 1,496
 January 25, 2018
Total of Senior Notes issued$2,500
 $6
 $2,494
  

We used the net proceeds of $2.494 billion from the public debt issuance to redeem our $1.750 billion of 6.625% Senior Notes due 2023 on April 1, 2018, and Borrowingsto redeem our $600 million of 6.836% Senior Notes due 2023 on April 28, 2018, and for general corporate purposes, including the partial repayment of borrowings under our revolving credit facility with DT.

During the year ended December 31, 2017, we issued the following Senior Notes:
(in millions)Principal Issuances Issuance Costs Net Proceeds from Issuance of Long-Term Debt
4.000% Senior Notes due 2022$500
 $2
 $498
5.125% Senior Notes due 2025500
 2
 498
5.375% Senior Notes due 2027500
 1
 499
Total of Senior Notes issued$1,500
 $5
 $1,495

On March 16, 2017, T-Mobile USA and certain of its affiliates, as guarantors, issued a total of $1.5 billion of public Senior Notes with various interest rates and maturity dates. Issuance costs related to the public debt issuance totaled $5 million for the year ended December 31, 2017. We used the net proceeds of $1.495 billion from the transaction to redeem callable high yield debt.

On January 25, 2018 T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $1.0 billion of public 4.500% Senior Notes due 2026 and (ii) issued $1.5 billion of public 4.750% Senior Notes due 2028. We intend to use the net proceeds of $2.493 billion from the transaction to redeem up to $1.75 billion of 6.625% Senior Notes due 2023, and up to $600 million of 6.836% Senior Notes due 2023, with the balance to be used for general corporate purposes, including partial pay down of borrowings under our revolving credit facility with DT. Issuance costs related to the public debt issuance totaled approximately $7 million.

Notes Redemptions

During the year ended December 31, 2017, we made the following note redemptions:
(in millions)Principal Amount 
Write-off of Premiums, Discounts and Issuance Costs (1)
 
Call Penalties (1) (2)
 Redemption
Date
 Redemption Price
6.625% Senior Notes due 2020$1,000
 $(45) $22
 February 10, 2017 102.208%
5.250% Senior Notes due 2018500
 1
 7
 March 4, 2017 101.313%
6.250% Senior Notes due 20211,750
 (71) 55
 April 1, 2017 103.125%
6.464% Senior Notes due 20191,250
 
 
 April 28, 2017 100.000%
6.542% Senior Notes due 20201,250
 
 21
 April 28, 2017 101.636%
6.633% Senior Notes due 20211,250
 
 41
 April 28, 2017 103.317%
6.731% Senior Notes due 20221,250
 
 42
 April 28, 2017 103.366%
Total note redemptions$8,250
 $(115) $188
    
(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%
6.625% Senior Notes due 20231,750
 (75) 58
 April 1, 2018 103.313%
6.836% Senior Notes due 2023600
 
 21
 April 28, 2018 103.418%
(1)Write-off of premiums, discounts, issuance costs and call penalties are included in Other expense,income (expense), net in our Consolidated Statements of Comprehensive Income. Write-off of premiums, discounts and issuance costs are included in Other, netLosses on redemption of debt within Net cash provided by operating activities in our 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 operating activities in our Consolidated Statements of Cash Flows.

Prior to December 31, 2017, we delivered a notice of redemption on $1.0 billion aggregate principal amount of our 6.125% Senior Notes due 2022. The notes were redeemed on January 15, 2018, at a redemption price equal to 103.063% of the principal amount of the notes (plus accrued and unpaid interest thereon). The redemption premium was approximately $31 million and the write-off of issuance costs was approximately $1 million. The outstanding principal amount was reclassified from Long-term debt to Short-term debt in our Consolidated Balance Sheets as of December 31, 2017.


Debt to Affiliates

Issuances and Borrowings

During the year ended December 31, 2017, we made the following borrowings:
(in millions)Net Proceeds from Issuance of Long-Term Debt Extinguishments 
Write-off of Discounts and Issuance Costs (1)
LIBOR plus 2.00% Senior Secured Term Loan due 2022$2,000
 $
 $
LIBOR plus 2.00% Senior Secured Term Loan due 20242,000
 
 
LIBOR plus 2.750% Senior Secured Term Loan (2)

 (1,980) 13
Total$4,000
 $(1,980) $13
(1)Write-off of discounts and issuance costs are included in Other expense, net in our Consolidated Statements of Comprehensive Income and Other, net within Net cash provided by operating activities in our Consolidated Statements of Cash Flows.
(2)
Our Senior Secured Term Loan extinguished during the year endedDecember 31, 2017 was Third Party debt.

On January 25, 2017, T-Mobile USA, Inc. (“T-Mobile USA”), and certain of its affiliates, as guarantors, entered into an agreement to borrow $4.0 billion under a secured term loan facility (“Incremental Term Loan Facility”) with DT, our majority stockholder, to refinance $1.98 billion of outstanding senior secured term loans under its Term Loan Credit Agreement dated November 9, 2015, with the remaining net proceeds from the transaction used to redeem callable high yield debt. The Incremental Term Loan Facility increased DT’s incremental term loan commitment provided to T-Mobile USA under that certain First Incremental Facility Amendment dated as of December 29, 2016, from $660 million to $2.0 billion and provided T-Mobile USA with an additional $2.0 billion incremental term loan commitment.

On January 31, 2017, the loans under the Incremental Term Loan Facility were drawn in two tranches: (i) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.00% and matures on November 9, 2022, and (ii) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.25% and matures on January 31, 2024. In July 2017, we repriced the $2.0 billion Incremental Term Loan Facility maturing on January 31, 2024, with DT by reducing the interest rate to a per annum rate of LIBOR plus a margin of 2.00%. No issuance fees were incurred related to this debt agreement for the year ended December 31, 2017.

On March 31, 2017, the Incremental Term Loan Facility was amended to waive all interim principal payments. The outstanding principal balance will be due at maturity.

During the year ended December 31, 2017, we issued the following Senior Notes to DT:
(in millions)Principal Issuances (Redemptions) 
Discounts (1)
 Net Proceeds from Issuance of Long-Term Debt
4.000% Senior Notes due 2022$1,000
 $(23) $977
5.125% Senior Notes due 20251,250
 (28) 1,222
5.375% Senior Notes due 2027 (2)
1,250
 (28) 1,222
6.288% Senior Reset Notes due 2019(1,250) 
 (1,250)
6.366% Senior Reset Notes due 2020(1,250) 
 (1,250)
Total$1,000
 $(79) $921
(1)Discounts reduce Proceeds from issuance of long-term debt and are included within Net cash (used in) provided by financing activities in our Consolidated Statements of Cash Flows.
(2)In April 2017, we issued to DT $750 million in aggregate principal amount of the 5.375% Senior Notes due 2027, and in September 2017, we issued to DT the remaining $500 million in aggregate principal amount of the 5.375% Senior Notes due 2027.

On March 13, 2017, DT agreedDebt to purchase a total of $3.5 billion in aggregate principal amounts of Senior Notes with various interest rates and maturity dates (the “new DT Notes”).

Through net settlement in April 2017, we issued to DT a total of $3.0 billion in aggregate principal amount of the new DT Notes and redeemed the $2.5 billion in outstanding aggregate principal amount of Senior Reset Notes with various interest rates and maturity dates (the “old DT Notes”).


The redemption prices of the old DT Notes were 103.144% and 103.183%, resulting in a total of $79 million in early redemption fees. These early redemption fees were recorded as discounts on the issuance of the new DT Notes.

In September 2017, we issued to DT $500 million in aggregate principal amount of 5.375% Senior Notes due 2027, which is the final tranche of the new DT Notes. We were not required to pay any underwriting fees or issuance costs in connection with the issuance of the notes.

Net proceeds from the issuance of the new DT Notes were $921 million and are included in Proceeds from issuance of long-term debt in our Consolidated Statements of Cash Flows.Affiliates

On May 9, 2017, we exercised our option under existing purchase agreements and issued the following Senior Notes to DT:
(in millions)Principal Issuances Premium Net Proceeds from Issuance of Long-Term Debt
5.300% Senior Notes due 2021$2,000
 $
 $2,000
6.000% Senior Notes due 20241,350
 40
 1,390
6.000% Senior Notes due 2024650
 24
 674
Total$4,000
 $64
 $4,064

The proceeds were used to fund a portion of the purchase price of spectrum licenses won in the 600 MHz spectrum auction. Net proceeds from these issuances include $64 million in debt premiums. See Note 5 - Goodwill, Spectrum Licenses and Other Intangible Assets for further information.

On January 22,April 30, 2018, DT agreed to purchasepurchased (i) $1.0 billion in aggregate principal amount of 4.500% Senior Notes due 2026 and (ii) $1.5 billion in aggregate principal amount of 4.750% Senior Notes due 2028 directly from T-Mobile USA and certain of its affiliates, as guarantors, with no underwriting discount (the “DT“New DT Notes”).

We used the net proceeds of $2.5 billion from the transaction to refinance existing indebtedness to DT has agreed thatas follows:
(in millions)Principal Amount 
Write -off of Embedded Derivatives (1)
 
Other (2)
 Redemption
Date
 Redemption Price
8.097% Senior Notes due 2021$1,250
 $(8) $51
 April 28, 2018 104.0485%
8.195% Senior Notes due 20221,250
 (8) 51
 April 28, 2018 104.0975%
Total$2,500
 $(16) $102
    
(1)Certain components of the reset features were required to be bifurcated from the DT Senior Reset Notes and separately accounted for as embedded derivative instruments. Write-off of embedded derivatives are included in Losses on redemption of debt within Net cash provided by operating activities in our Consolidated Statements of Cash Flows.
(2)Cash for the premium portion of the redemption price set forth in the indenture governing the DT Senior Reset Notes, plus accrued but unpaid interest on the DT Senior Reset Notes to, but not including, the exchange date.

Incremental Term Loan Facility

In March 2018, we amended the payment forterms of our secured term loan facility (“Incremental Term Loan Facility”) with DT, our majority stockholder. Following this amendment, the DT notes will be made by deliveryapplicable margin payable on LIBOR indexed loans is 1.50% under the $2.0 billion Incremental Term Loan Facility maturing on November 9, 2022 and 1.75% under the $2.0 billion Incremental Term Loan Facility maturing on January 31, 2024. The amendment also modified the Incremental Term Loan Facility to (i) include a soft-call prepayment premium of $1.25 billion in aggregate1.00% of the outstanding principal amount of 8.097%the loans under the Incremental Term Loan Facility payable to DT upon certain refinancings of such loans by us with lower priced debt prior to a date that is six months after March 29, 2018 and (ii) update certain covenants and other provisions to make them substantially consistent, subject to certain additional carve outs, with our most recently issued public notes. No issuance fees were incurred related to this debt facility for the years ended December 31, 2018 or 2017.

Commitment Letter

Under the Commitment Letter in connection with the Merger, certain financial institutions named therein have committed to provide up to $30.0 billion in secured and unsecured debt financing, including a $4.0 billion secured revolving credit facility, a $7.0 billion secured term loan facility and a $19.0 billion secured bridge loan facility. In connection with the financing provided for in the Commitment Letter, we expect to incur certain fees if the Merger closes, including fees for the financial institutions structuring and providing the commitments for the secured term loan facility, secured revolving loan facility and the secured bridge loan, and certain take-out fees associated with the issuance of permanent secured bond debt in lieu of the secured bridge loan. We expect to incur up to approximately $340 million if the closing date occurs on or after April 29, 2019. There was no fee accrued as of December 31, 2018. We also may be required to draw down on the $7.0 billion secured term loan facility on May 1, 2019, and would be required to place the proceeds in escrow and pay interest thereon until the Merger closes.

Financing Matters Agreement

Pursuant to the Financing Matters Agreement, DT agreed, among other things, to consent to the incurrence by T-Mobile USA of secured debt in connection with and after the consummation of the Merger, and to provide a lock up on sales thereby as to certain senior notes of T-Mobile USA held thereby. In addition, T-Mobile USA agreed, among other things, to repay and terminate, upon closing of the Merger, the Incremental Term Loan Facility and the revolving credit facility of T-Mobile USA which are provided by DT, as well as $2.0 billion of T-Mobile USA’s 5.300% Senior Reset Notes due 2021 and $2.0 billion of T-Mobile USA’s 6.000% Senior Notes due 2024. In addition, T-Mobile USA and DT agreed, upon closing of the Merger, to amend the $1.25 billion of T-Mobile USA’s 5.125% Senior Notes due 2025 and $1.25 billion of T-Mobile USA’s 5.375% Senior Notes due 2027 to change the maturity dates thereof to April 15, 2021 and April 15, 2022, respectively (the “2025 and 2027 Amendments”). In connection with receiving the requisite consents, we made upfront payments to DT of $7 million during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt to affiliates in aggregateour Consolidated Balance Sheets. In accordance with the consents received from DT, on December 20, 2018, T-Mobile USA, the guarantors and Deutsche Bank Trust Company Americas, as trustee, executed and delivered the 38th supplemental indenture to the Indenture, pursuant to which, with respect to certain T-Mobile USA Senior Notes held by DT, the Proposed Amendments (as defined below under “Consents on Debt to Third Parties”) and the 2025 and 2027 Amendments will become effective immediately prior to the consummation of the Merger. If the Merger is consummated, we will make additional payments for requisite consents to DT of $20 million. There was no additional payment accrued as of December 31, 2018.

Consents on Debt to Third Parties

On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement, we obtained consents necessary to effect certain amendments to our Senior Notes to third parties in connection with the Business Combination Agreement. Pursuant to the Consent Solicitation Statement, third-party note holders agreed, among other things, to consent to increasing the amount of Secured Indebtedness under Credit Facilities that can be incurred from the greater of $9.0 billion and 150% of Consolidated Cash Flow to the greater of $9.0 billion and an amount that would not cause the Secured Debt to Cash Flow Ratio (calculated net of cash and cash equivalents) to exceed 2.00x (the “Ratio Secured Debt Proposed Amendments”) and in each case as such capitalized term is defined in the Indenture. In connection with receiving the requisite consents for the Ratio Secured Debt Proposed Amendments, we made upfront payments to third-party note holders of $17 million during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets. These upfront payments increased the effective interest rate of the related debt.

In addition, note holders agreed, among other things, to allow certain entities related to Sprint’s existing spectrum securitization notes program (“Existing Sprint Spectrum Program”) to be non-guarantor Restricted Subsidiaries, provided that the principal amount of 8.195% Senior Reset Notes due 2022 (collectively, the “DT Senior Reset Notes”) held by DTspectrum notes issued and which T-Mobile USA will have called for redemption,outstanding under the Existing Sprint Spectrum Program does not exceed $7.0 billion and that the principal amount of such spectrum notes reduces the amount available under the Credit Facilities ratio basket, and to revise the definition of GAAP to mean generally accepted accounting principles in exchange foreffect from time to time, unless the DT notes.Company elects to “freeze” GAAP as of any date, and to exclude the effect of the changes in the accounting treatment of lease obligations (the “Existing Sprint Spectrum and GAAP Proposed Amendments,” and together with the Ratio Secured Debt Proposed Amendments, the “Proposed Amendments”). In connection with such exchange,receiving the requisite consents for the Existing Sprint Spectrum and GAAP Proposed Amendments, we made upfront payments to third-party note holders of $14 million during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets. These upfront payments increased the effective interest rate of the related debt.

In connection with obtaining the requisite consents, on May 20, 2018, T-Mobile USA, the guarantors and Deutsche Bank Trust Company Americas, as trustee, executed and delivered the 37th supplemental indenture to the Indenture, pursuant to which,

with respect to each of the Notes, the Proposed Amendments will become effective immediately prior to the consummation of the Merger.

We paid third-party bank fees associated with obtaining the requisite consents related to the Proposed Amendments of $6 million during the second quarter of 2018, which we recognized as Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income. If the Merger is consummated, we will pay DT in cashmake additional payments to third-party note holders for requisite consents related to the premium portionRatio Secured Debt Proposed Amendments of up to $54 million and additional payments to third-party note holders for requisite consents related to the redemption price set forth in the indenture governing the DT Senior Reset Notes, plusExisting Sprint Spectrum and GAAP Proposed Amendments of up to $41 million. There was no payment accrued but unpaid interest on the DT Senior Reset Notes to, but not including, the exchange date.

The closingas of the issuance and sale of the DT notes to DT, and exchange of the DT Senior Reset Notes, is expected to occur on or about April 30,December 31, 2018.

Capital Leases

Capital lease agreements primarily relate to network equipment with varying expiration terms through 2031. Future minimum payments required under capital leases, including interest and maintenance, over their remaining terms are summarized below:
(in millions)Future Minimum Payments
Year Ended December 31, 
2018$682
2019634
2020338
2021151
202267
Thereafter172
Total$2,044
Included in Total 
Interest$169
Maintenance51


Financing Arrangements

We maintain a handset financing arrangement with Deutsche Bank AG (“Deutsche Bank”), which allows for up to $108 million in borrowings. Under the handset financing arrangement, we can effectively extend payment terms for invoices payable to certain handset vendors. The interest rate on the handset financing arrangement is determined based on LIBOR plus a specified margin per the arrangement. Obligations under the handset financing arrangement are included in Short-term debt in our Consolidated Balance Sheets. In 2016,2017, we utilized and repaid $100 million under the financing arrangement. As of December 31, 20172018 and 2016,2017, there was no outstanding balance.

We maintain vendor financing arrangements with our primary network equipment suppliers. Under the respective agreements, we can obtain extended financing terms. The interest rate on the vendor financing arrangements is determined based on the difference between LIBOR and a specified margin per the agreements. Obligations under the vendor financing arrangements are included in Short-term debt in our Consolidated Balance Sheets. In 2017,2018, we utilized and repaid $300 million under the financing arrangement. As of December 31, 20172018 and 2016,2017, there was no outstanding balance.

Revolving Credit Facility and Standby Letters of Credit

We had an unsecured revolving credit facility with Deutsche Telekom which allowed for up to $500 million in borrowings. In December 2016, we terminated our $500 million unsecured revolving credit facility with Deutsche Telekom.

In December 2016, T-Mobile USA entered intohave a $2.5 billion revolving credit facility with Deutsche Telekom whichDT that is comprised of (i) a three-year $1.0 billion unsecured revolving credit agreement (“Unsecured Revolving Credit Facility”) and (ii) a three-year $1.5 billion secured revolving credit agreement. The applicable margin for the Unsecured Revolving Credit Facility ranges from 2.00% to 3.25% per annum for Eurodollar Rate loans. The applicable margin for the agreement (“Secured Revolving Credit Facility ranges from 1.00% to 1.75% per annum for Eurodollar Rate loans. As of December 31, 2017 and 2016, there were no outstanding borrowings under the revolving credit facility.

Facility”). In January 2018, we utilized proceeds under theour revolving credit facility with DT to redeem $1.0 billion in aggregate principal amount of our 6.125% Senior Notes due 2022 and for general corporate purposes. AsOn January 29, 2018, the proceeds utilized under our revolving credit facility with DT were repaid.

In March 2018, we amended the terms of February 5, 2018, there were no outstanding borrowings onour Unsecured Revolving Credit Facility and our Secured Revolving Credit Facility. Following these amendments, (i) the range of the applicable margin payable under the Unsecured Revolving Credit Facility is 2.05% to 3.05%, (ii) the range of applicable margin payable under the Secured Revolving Credit Facility is 1.05% to 1.80%, (iii) the range of the undrawn commitment fee applicable to the Unsecured Revolving Credit Facility is 0.20% to 0.575%, (iv) the range of the undrawn commitment fee applicable to the Secured Revolving Credit Facility is 0.25% to 0.45%, and (v) the maturity date of the revolving credit facility.facility with DT is December 29, 2020. The Proceedsamendments also modify the facility to update certain covenants and other provisions to make them substantially consistent, subject to certain additional carve outs, with our most recently issued public notes.

In November 2018, we amended the terms of the revolving credit facility with DT to extend the maturity date to December 29, 2021.

The proceeds and borrowings from the revolving credit facility are presented in Proceeds from borrowing on revolving credit facility and Repayments of revolving credit facility within Net cash (used in) provided by financing activities in our Consolidated Statements of Cash Flows. As of December 31, 2018 and 2017, there were no outstanding borrowings under the revolving credit facility.


Capital Leases

Capital lease agreements primarily relate to network equipment with varying expiration terms through 2033. Future minimum payments required under capital leases, including interest and maintenance, over their remaining terms are summarized below:
(in millions)Future Minimum Payments
Year Ended December 31, 
2019$909
2020631
2021389
2022102
202366
Thereafter106
Total$2,203
Included in Total 
Interest$143
Maintenance45

Standby Letters of Credit

For the purposes of securing our obligations to provide handset insurance services, we maintain an agreement for standby letters of credit with JP Morgan Chase Bank, N.A. (“JP Morgan Chase”). For purposes of securing our general purpose obligations, we maintain a letter of credit reimbursement agreement with Deutsche Bank.

The following table summarizes the outstanding standby letters of credit under each agreement:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
JP Morgan Chase$20
 $20
$20
 $20
Deutsche Bank59
 54
66
 59
Total outstanding balance$79
 $74
$86
 $79

Note 8 -9 – Tower Obligations

In 2012, we conveyed to Crown Castle International Corp. (“CCI”) the exclusive right to manage and operate approximately 7,100 T-Mobile-owned wireless communication tower sites (“CCI Tower Sites”) in exchange for net proceeds of $2.5 billion (“2012(the “2012 Tower Transaction”). Rights to approximately 6,200 of the tower sites were transferred to CCI via a Master Prepaid Leasemaster prepaid lease with site lease terms ranging from 23 to 37 years (“CCI Lease Sites”), while the remaining tower sites were sold to CCI (“CCI Sales Sites”). CCI has fixed-price purchase options for these towers totaling approximately $2.0 billion, based on the estimated fair market value at the end of the lease term. We lease back space at certain tower sites for an initial term of ten years, followed by optional renewals at customary terms.

In 2015, we conveyed to Phoenix Tower International (“PTI”) the exclusive right to manage and operate approximately 600 T-Mobile-owned wireless communication tower sites (“PTI Tower Sites”) in exchange for net proceeds of approximately $140 million (“2015(the “2015 Tower Transaction”). As of December 31, 2017,2018, rights to approximately 200150 of the tower sites remain operated

by PTI under a management agreement (“PTI Managed Sites”). We lease back space at certain tower sites for an initial term of ten years, followed by optional renewals at customary terms.

Assets and liabilities associated with the operation of certain of the tower sites were transferred to SPEs. Assets included ground lease agreements or deeds for the land on which the towers are situated, the towers themselves and existing subleasing agreements with other mobile network operator tenants, who lease space at the tower sites. Liabilities included the obligation to pay ground lease rentals, property taxes and other executory costs. Upon closing of the 2012 Tower Transaction, CCI acquired all of the equity interests in the SPEs containing CCI Sales Sites and an option to acquire the CCI Lease Sites at the end of their respective lease terms and entered into a master lease agreement under which we agreed to lease back space at certain of the tower sites. Upon closing of the 2015 Tower Transaction, PTI acquired all of the equity interests in the SPEs containing PTI Sales Sites and entered into a master lease agreement under which we agreed to lease back space at certain of the tower sites.


We determined the SPEs containing the CCI Lease Sites (“Lease Site SPEs”) are VIEs as the Company'sour equity investment lacks the power to direct the activities that most significantly impact the economic performance of the VIEs. These activities include managing tenants and underlying ground leases, performing repair and maintenance on the towers, the obligation to absorb expected losses and the right to receive the expected future residual returns from the purchase option to acquire the CCI Lease Sites. As we determined that we are not the primary beneficiary and do not have a controlling financial interest in the Lease Site SPEs, the balances and operating results of the Lease Site SPEs are not included in our consolidated financial statements.Consolidated Financial Statements.

Due to our continuing involvement with the tower sites, we determined that we were precluded from applying sale-leaseback accounting. We recorded long-term financial obligations in the amount of the net proceeds received and recognized interest on the tower obligations at a rate of approximately 8% for the 2012 Tower Transaction and 5% for the 2015 Tower Transaction using the effective interest method. The tower obligations are increased by interest expense and amortized through contractual leaseback payments made by us to CCI or PTI and through estimated future net cash flows generated and retained by CCI or PTI from operation of the tower sites. Our historical tower site asset costs continue to be reported in Property and equipment, net in our Consolidated Balance Sheets and are depreciated.

The following table summarizes the impacts to the Consolidated Balance Sheets:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Property and equipment, net$402
 $485
$329
 $402
Long-term financial obligation2,590
 2,621
2,557
 2,590

Future minimum payments related to the tower obligations are expected to be approximately $189$195 million in 2018, $3792019, $391 million in total for 20192020 and 2020, $3812021, $392 million in total for 2021 and 2022 and $1.0 billion2023 and $835 million in total for years thereafter.

We are contingently liable for future ground lease payments through the remaining term of the CCI Lease Sites. These contingent obligations are not included in the above table as any amount due is contractually owed by CCI based on the subleasing arrangement. See Note 1315 – Commitments and Contingencies for further information.

If we conclude a sale should be recognized, upon adoption of the new lease standard on January 1, 2019, we would derecognize our existing long-term financial obligation and the net book value of the tower-related property and equipment associated with the previous failed sale-leaseback transaction. See Note 1 – Summary of Significant Accounting Policies for further information.

Note 10 – Revenue from Contracts with Customers

Disaggregation of Revenue

We provide wireless communication services to three primary categories of customers:

Branded postpaid customers generally include customers who are qualified to pay after receiving wireless communication services utilizing phones, mobile broadband devices (including tablets), DIGITS, SyncUP DRIVE™ or other devices including wearables;
Branded prepaid customers generally include customers who pay for wireless communication services in advance. Our branded prepaid customers include customers of T-Mobile and Metro by T-Mobile; and
Wholesale customers include M2M and MVNO customers that operate on our network but are managed by wholesale partners.



Branded postpaid service revenues, including branded postpaid phone revenues and branded postpaid other revenues, were as follows:
 Year Ended December 31,
(in millions)2018 2017 2016
Branded postpaid service revenues     
Branded postpaid phone revenues$19,745
 $18,371
 $17,365
Branded postpaid other revenues1,117
 1,077
 773
Total branded postpaid service revenues$20,862
 $19,448
 $18,138

We operate as a single operating segment. The balances presented within each revenue line item in our Consolidated Statements of Comprehensive Income represent categories of revenue from contracts with customers disaggregated by type of product and service. Service revenues also include revenues earned for providing value added services to customers, such as handset insurance services. Revenue generated from the lease of mobile communication devices and accessories is included within Equipment revenues in our Consolidated Statements of Comprehensive Income.

Equipment revenues from the lease of mobile communication devices and accessories were as follows:
 Year Ended December 31,
(in millions)2018 2017 2016
Equipment revenues from the lease of mobile communication devices and accessories$692
 $877
 $1,416

Contract Balances

The opening and closing balances of our contract asset and contract liability balances from contracts with customers as of January 1, 2018 and December 31, 2018, were as follows:
(in millions)Contract Assets Included in Other Current Assets Contract Liabilities Included in Deferred Revenue
Balance as of January 1, 2018$140
 $718
Balance as of December 31, 201851
 645
Change$(89) $(73)

Contract assets primarily represent revenue recognized for equipment sales with promotional bill credits offered to customers that are paid over time and are contingent on the customer maintaining a service contract. The change in the contract asset balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment which is recognized as bad debt expense.

Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services. The change in contract liabilities is primarily related to customer activity associated with our prepaid plans including the receipt of cash payments and the satisfaction of our performance obligations.

Revenues for the year ended December 31, 2018, include the following:
(in millions)Year Ended December 31, 2018
Amounts included in the January 1, 2018 contract liability balance$710
Amounts associated with performance obligations satisfied in previous periods2

Remaining Performance Obligations

As of December 31, 2018, the aggregate amount of transaction price allocated to remaining service performance obligations for branded postpaid contracts with promotional bill credits that result in an extended service contract is $308 million. We expect to recognize this revenue as service is provided over the extended contract term in the next 24 months.

Certain of our wholesale, roaming and other service contracts include variable consideration based on usage. This variable consideration has been excluded from the disclosure of remaining performance obligations. As of December 31, 2018, the

aggregate amount of the contractual minimum consideration allocated to remaining service performance obligations for wholesale, roaming and other service contracts is $1.1 billion, $1.0 billion and $1.5 billion for 2019, 2020 and 2021 and beyond, respectively. These contracts have a remaining duration of less than one year to six years.

Information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less have been excluded from the above, which primarily consists of monthly service contracts. The aggregate amount of the transaction price allocated to remaining service performance obligations includes the estimated amount to be invoiced to the customer.

Contract Costs

The total balance of deferred incremental costs to obtain contracts as of December 31, 2018 was $644 million. Deferred contract costs incurred to obtain postpaid service contracts are amortized over a period of 24 months. The amortization period is monitored to reflect any significant change in assumptions. Amortization of deferred contract costs was $267 million for the year ended December 31, 2018.

The deferred contract cost asset is assessed for impairment on a periodic basis. There were no impairment losses recognized on deferred contract cost assets for the year ended December 31, 2018.

Note 911 – Employee Compensation and Benefit Plans

UnderOn February 14, 2018, our Board of Directors adopted, and on June 13, 2018, our stockholders approved an amendment (the “Amendment”) to the 2013 Omnibus Incentive Plan (the “Incentive Plan”(as amended, the “Plan”), which increased the number of shares authorized for issuance under the Plan by 18,500,000 shares. On June 18, 2018, we are authorizedfiled a Form S-8 to issue up to 63 million sharesregister a total of our common stock. Under the Incentive Plan, we can grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), and performance awards to eligible employees, consultants, advisors and non-employee directors. As of December 31, 2017, there were 15 million19,345,005 shares of common stock available for future grants underpursuant to the Incentive Plan.

In January 2018, we closed on our previously announcedPlan, representing those covered by the Amendment, certain other predecessor plans, and certain equity arrangements assumed in connection with the acquisition of Layer3 TV Inc.in January 2018.
During the year ended December 31, 2018, we granted or assumed an aggregate of 6,259,169 RSUs and restricted stock awards (“Layer3 TV”RSAs”). Upon closing, the Layer3 TV 2013 Stock Plan and stock restriction agreements between Layer3 and certain employees were added to the Registration Statement related to the Incentive Plan. See Note 15 - Subsequent Events for further information regarding the Layer3 TV acquisitions.

We grant RSUs to eligible employees, and certain non-employee directors, and performance-based restricted stock units (“PRSUs”) to eligible key executives.executives, which primarily included annual awards. RSUs entitle the grantee to receive shares of our common stock at the end of a vesting period of generally up to 3three years, subject to continued service through the applicable vesting date.

During the year ended December 31, 2018, we granted an aggregate of 3,364,629 PRSUs to eligible key executives, which primarily included annual awards and an aggregate of 1,317,386 PRSUs to certain executive officers in connection with the entry into the Business Combination Agreement with Sprint. PRSUs entitle the holder to receive shares of our common stock at the end of a vestingperformance period of generally up to 3three years, ifbased on the attainment of the applicable performance goals are achieved and generally subject to continued employment through the vestingapplicable performance period. The number of shares ultimately

received by the holder of PRSUs is dependent on our business performance against the specified performance goal(s) over a pre-established performance period. We also maintain an employee stock purchase plan (“ESPP”)

As discussed in Note 2 – Business Combinations, under which eligible employees can purchasein January 2018 we completed our common stock at a discounted price.acquisition of Layer3 TV. The fair value of share-based incentive compensation awards attributable to post-combination services was approximately $30 million.

Stock-based compensation expense and related income tax benefits were as follows:
(in millions, except shares, per share and contractual life amounts)December 31,
2017
 December 31,
2016
 December 31,
2015
December 31,
2018
 December 31,
2017
 December 31,
2016
Stock-based compensation expense$306
 $235
 $201
$424
 $306
 $235
Income tax benefit related to stock-based compensation73
 80
 71
81
 73
 80
Realized excess tax benefit
 
 79
Weighted average fair value per stock award granted60.21
 45.07
 35.56
61.52
 60.21
 45.07
Unrecognized compensation expense445
 389
 327
547
 445
 389
Weighted average period to be recognized (years)1.9
 2.0
 2.0
1.8
 1.9
 2.0
Fair value of stock awards vested503
 354
 445
471
 503
 354


Stock Awards

RSUTime-Based Restricted Stock Units and PRSURestricted Stock Awards

The following activity occurred under the RSU and PRSU awards:
(in millions, except shares, per share and contractual life amounts)
Number of Units(1)
 Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic ValueNumber of Units or Awards Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value
Nonvested, December 31, 201615,715,391
 $37.93
 1.1 $904
Nonvested, December 31, 201712,061,608
 $50.69
 1.1 $766
Granted7,133,359
 60.21
  6,259,169
 60.44
  
Vested(8,338,271) 35.47
  6,455,617
 47.89
  
Forfeited(814,936) 49.02
  854,525
 56.90
  
Nonvested, December 31, 201713,695,543
 50.38
 1.1 870
Nonvested, December 31, 201811,010,635
 57.66
 1.0 $700
(1)PRSUs included in the table above are shown at target. Share payout can range from 0 to 200% based on different performance outcomes.

Performance-Based Restricted Stock Units and Restricted Stock Awards
(in millions, except shares, per share and contractual life amounts)Number of Units or Awards Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value
Nonvested, December 31, 20171,633,935
 $48.06
 1.1 $104
Granted3,364,629
 63.54
    
Vested1,006,769
 36.47
    
Forfeited140,241
 64.14
    
Nonvested, December 31, 20183,851,554
 64.03
 1.6 $245
PRSUs included in the table above are shown at target. Share payout can range from 0% to 200% based on different performance outcomes.

Payment of the underlying shares in connection with the vesting of stock awards generally triggers a tax obligation for the employee, which is required to be remitted to the relevant tax authorities. We have agreed to withhold shares of common stock otherwise issuable under the award to cover certain of these tax obligations, with the net shares issued to the employee accounted for as outstanding common stock. We withheld 2,754,7212,321,827 and 2,605,8072,754,721 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $166$146 million and $121$166 million to the appropriate tax authorities for the years ended December 31, 20172018 and 2016,2017, respectively.

Employee Stock Purchase Plan

Our ESPPemployee stock purchase plan (“ESPP”) allows eligible employees to contribute up to 15% of their eligible earnings toward the semi-annual purchase of our common stock at a discounted price, subject to an annual maximum dollar amount. Employees can purchase stock at a 15% discount applied to the closing stock price on the first or last day of the six-month offering period, whichever price is lower. The number of shares issued under our ESPP was 1,832,0432,011,794 and 1,905,5341,832,043 for the years ended December 31, 20172018 and 2016,2017, respectively.

Stock Options

PriorStock options outstanding relate to the business combination, MetroPCS had established the MetroPCSMetro Communications, Inc. 2010 Equity Incentive Compensation Plan, the Amended and Restated MetroPCSMetro Communications, Inc. 2004 Equity Incentive Compensation Plan, and the Second Amended and Restated 1995 Stock Option Plan (“Predecessorand the Layer3 TV, Inc. 2013 Stock Plan (collectively, the “Stock Option Plans”). Following stockholder approval of the Incentive Plan, noNo new awards have been or may be granted under the PredecessorStock Option Plans.


The following activity occurred under the PredecessorStock Option Plans:
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years)Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years)
Outstanding and exercisable, December 31, 2016833,931
 $31.75
 2.3
Outstanding and exercisable, December 31, 2017373,158
 $16.36
 2.8
Assumed through acquisition of Layer3 TV118,645
 15.51
 
Exercised(450,873) 44.18
 187,965
 18.28
 
Expired(9,900) 45.76
 
Outstanding and exercisable, December 31, 2017373,158
 16.36
 2.8
Expired/canceled19,027
 18.81
 
Outstanding at December 31, 2018284,811
 14.58
 3.8
Exercisable at December 31, 2018244,224
 14.18
 3.1

Stock options exercised under the PredecessorStock Option Plans generated proceeds of approximately $21$3 million and $29$21 million for the years ended December 31, 20172018 and 2016,2017, respectively.

Employee Retirement Savings Plan

We sponsor a retirement savings plan for the majority of our employees under sectionSection 401(k) of the Internal Revenue Code and similar plans. The plans allow employees to contribute a portion of their pretax income in accordance with specified guidelines. The plans provide that we match a percentage of employee contributions up to certain limits. Employer matching contributions were $102 million, $87 million $83 million and $73$83 million for the years ended December 31, 2018, 2017 2016 and 2015,2016, respectively.

Legacy Long-Term Incentive Plan

Prior to the business combination with MetroPCS Communications, Inc., we maintained a performance-based Long-Term Incentive Plan (“LTIP”) which aligned to our long-term business strategy. As of December 31, 20172018 and 2016,2017, there were no LTIP awards outstanding and no new awards are expected to be granted under the LTIP.

Compensation There was no compensation expense reported within operating expenses related to our LTIP for the years ended December 31, 2018, 2017 and 2016. There were no payments to participants related to our LTIP for the years ended December 31, 2018 and 2017. Payments were as follows:
(in millions)December 31,
2017
 December 31,
2016
 December 31,
2015
Compensation expense$
 $
 $27
Payments
 52
 57
$52 million for the year ended December 31, 2016.

Note 1012 – Repurchases of Common Stock

2017 Stock Repurchase Program

On December 6, 2017, our Board of Directors authorized a stock repurchase program for up to $1.5 billion of our common stock through December 31, 2018 (the “2017 Stock Repurchase Program”). Repurchased shares are retired. The 2017 Stock Repurchase Program completed on April 29, 2018.

The following table summarizes information regarding repurchases of our common stock under the 2017 Stock Repurchase Program:
(In millions, except shares and per share price)
Year ended December 31Number of Shares Repurchased Average Price Paid Per Share Total Purchase Price
201816,738,758
 $62.96
 $1,054
20177,010,889
 63.34
 444
 23,749,647
 63.07
 $1,498

2018 Stock Repurchase Program

On April 27, 2018, our Board of Directors authorized an increase in the total stock repurchase program to $9.0 billion, consisting of the $1.5 billion in repurchases previously completed and for up to an additional $7.5 billion of repurchases of our common stock, allocated as up to $500 million of shares of common stock through December 31, 2018, up to $3.0 billion of shares of common stock for the year ending December 31, 2019 and up to $4.0 billion of shares of common stock for the year ending December 31, 2020, with any authorized but unutilized repurchase capacity for any of the foregoing periods increasing

the authorized repurchase capacity for the succeeding period by the amount of such unutilized repurchase capacity. The additional $7.5 billion repurchase authorization is contingent upon the termination of the Business Combination Agreement and the abandonment of the transactions contemplated under the Business Combination Agreement.

Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the Securities and Exchange CommissionSEC and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The repurchase program does not obligate us to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at our discretion. Repurchased shares are retired.

We also understand that Deutsche Telekom AG,Stock Purchases by Affiliate

In the first quarter of 2018, DT, our majority stockholder or its affiliates, is considering plans to purchaseand an affiliated purchaser, purchased 3.3 million additional shares of our common stock. Such purchases would likely take place through December 31, 2018, allstock at an aggregate market value of $200 million in the public market or from other parties, in accordance with the rules of the Securities and Exchange CommissionSEC and other applicable legal requirements.

The following table summarizes information regarding repurchases There were no purchases in the remainder of our common stock:
(In millions, except shares and per share price)Number of Shares Repurchased Average Price Paid Per Share Total Purchase Price
Year Ended December 31, 20177,010,889
 $63.34
 $444

From the inception of the repurchase program through February 5, 2018, we repurchased approximately 12.3 million shares at an average price per share of $63.68 for a total purchase price of approximately $783 million. As of February 5, 2018, there was approximately $717 million of repurchase authority remaining.2018. We did not receive proceeds from these purchases.

Note 1113 – Income Taxes

Our sources of Income before income taxes were as follows:
Year Ended December 31,Year Ended December 31,
(in millions)2017 2016 20152018 2017 2016
U.S.$3,274
 $2,286
 $898
$3,686
 $3,274
 $2,286
Puerto Rico(113) 41
 80
231
 (113) 41
Income before income taxes$3,161
 $2,327
 $978
$3,917
 $3,161
 $2,327

Income tax expense is summarized as follows:
Year Ended December 31,Year Ended December 31,
(in millions)2017 2016 20152018 2017 2016
Current tax benefit (expense)          
Federal$
 $66
 $30
$39
 $
 $66
State(28) (29) (2)(63) (28) (29)
Puerto Rico(1) 10
 (17)(25) (1) 10
Total current tax benefit (expense)(29) 47
 11
(49) (29) 47
Deferred tax benefit (expense)          
Federal1,182
 (804) (281)(750) 1,182
 (804)
State173
 (96) 37
(160) 173
 (96)
Puerto Rico49
 (14) (12)(70) 49
 (14)
Total deferred tax benefit (expense)1,404
 (914) (256)
Total income tax benefit (expense)$1,375
 $(867) $(245)
Total deferred tax (expense) benefit(980) 1,404
 (914)
Total income tax (expense) benefit$(1,029) $1,375
 $(867)

The reconciliation between the U.S. federal statutory income tax rate and our effective income tax rate is as follows:
Year Ended December 31,Year Ended December 31,
2017 2016 20152018 2017 2016
Federal statutory income tax rate35.0 % 35.0 % 35.0 %21.0 % 35.0 % 35.0 %
Effect of the Tax Cuts and Jobs Act(68.9) 
 
Effect of law and rate changes1.9
 (68.9) 0.8
Change in valuation allowance(11.4) 1.0
 (3.2)(1.6) (11.4) 1.0
State taxes, net of federal benefit4.8
 4.0
 (1.1)4.8
 4.8
 3.2
Equity-based compensation(2.4) (2.2) 
(0.6) (2.4) (2.2)
Puerto Rico taxes, net of federal benefit(1.5) 
 3.3
2.4
 (1.5) 
Permanent differences0.5
 0.6
 1.6
1.3
 0.5
 0.6
Federal tax credits, net of reserves0.3
 (0.5) (9.5)(2.9) 0.3
 (0.5)
Other, net0.1
 (0.6) (1.0)
 0.1
 (0.6)
Effective income tax rate(43.5)% 37.3 % 25.1 %26.3 % (43.5)% 37.3 %

Significant components of deferred income tax assets and liabilities, tax effected, are as follows:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Deferred tax assets      
Loss carryforwards$1,576
 $1,442
$1,526
 $1,576
Deferred rents759
 1,153
784
 759
Reserves and accruals667
 1,058
668
 667
Federal and state tax credits298
 284
340
 298
Debt fair market value adjustment
 83
Other403
 430
620
 403
Deferred tax assets, gross3,703
 4,450
3,938
 3,703
Valuation allowance(273) (573)(210) (273)
Deferred tax assets, net3,430
 3,877
3,728
 3,430
Deferred tax liabilities      
Spectrum licenses5,038
 6,952
5,494
 5,038
Property and equipment1,840
 1,732
2,434
 1,840
Other intangible assets41
 119
40
 41
Other48
 12
232
 48
Total deferred tax liabilities6,967
 8,815
8,200
 6,967
Net deferred tax liabilities$3,537
 $4,938
$4,472
 $3,537
      
Classified on the balance sheet as:      
Deferred tax liabilities$3,537
 $4,938
$4,472
 $3,537

On December 22,In 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 (“TCJA”) into legislation. The TCJA includes numerous changes to existing tax law, including a permanent reduction in the federal corporate income tax rate from 35% to 21%. The rate reduction takes effect on January 1, 2018. We recognized a net tax benefit of $2.2 billion associated with enactment of the TCJA in Income tax benefit (expense) in our Consolidated Statements of Comprehensive Income in the fourth quarter of 2017, primarily due to a re-measurement of deferred tax assets and liabilities.

The SEC has issued Staff Accounting Bulletin (“SAB”) No. 118 which permitspermitted the recording of provisional amounts related to the impact of the TCJAU.S. Tax Cuts and Jobs Act of 2017 (the “TCJA”) during a measurement period which is not to exceed one year from the enactment date of the TCJA. We have recorded an immaterial amount for provisional items related to the TCJA in our Consolidated Statements of Comprehensive Income.Income for the year ended December 31, 2017. Our accounting for these items is now complete. Current period adjustments related to the provisional items were immaterial.

As of December 31, 2017,2018, we have tax effected net operating loss (“NOL”) carryforwards of $1.0$1.1 billion for federal income tax purposes and $832$797 million for state income tax purposes, expiring through 2037.2038. Federal NOLs and certain state NOLs generated in 2018 do not expire. As of December 31, 2017,2018, our tax effected federal and state NOL carryforwards for financial reporting purposes were approximately $123$119 million and $242$261 million, respectively, less than our NOL carryforwards for federal and state income tax purposes, due to unrecognized tax benefits of the same amount. The financial reporting amounts exclude indirect tax effects in other jurisdictions.

As of December 31, 2017,2018, we have available Alternative Minimum Tax (“AMT”) credit carryforwards of $86$48 million. Under the TCJA, the AMT credits will be fully recovered by 2021. We also have research and development and foreign tax credit carryforwards with a combined value of $198$312 million for federal income tax purposes, which begin to expire in 2018.2019.


As of December 31, 2018, 2017 and 2016, our valuation allowance was $210 million, $273 million and $573 million, respectively. The change from December 31, 2017 to December 31, 2018 primarily related to a reduction in the valuation allowance isagainst deferred tax assets in certain state jurisdictions from a change in tax status of certain subsidiaries. The change from December 31, 2016 to December 31, 2017 primarily related to a net reduction in the valuation allowance against deferred tax assets in state jurisdictions that resulted in the recognition of $359 million, in net tax benefits in 2017, partially offset by a $26 million valuation allowance established during 2017 for the impact of the TCJA on certain tax credits and a $33 million increase in the valuation allowance associated with the reduced federal benefit of state items.

During 2017, due to ongoing analysis of positive and negative evidence related to the utilization of the deferred tax assets, we determined that $319 million of the valuation allowance in certain state jurisdictions was no longer necessary. Positive evidence supporting the release of a portion of the valuation allowance included reaching a position of cumulative income over a three-year period in certain state jurisdictions as well as projecting sustained earnings in those jurisdictions. Due to this positive evidence, we reduced the valuation allowance which resulted in a decrease to Deferred tax liabilities in our Consolidated

Balance Sheets. We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided. It is possible that our valuation allowance may change within the next twelve months.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in Puerto Rico. We are currently under a scope-limited examination by the U.S. Internal Revenue Service (“IRS”) and separate examinations by various states. Management does not believe the resolution of any of the audits will result in a material change to our financial condition, results of operations or cash flows. The IRS has concluded its audits of our federal tax returns through the 2013 tax year; however, NOL and other carryforwards for certain audited periods remain open for examination. We are generally closed to U.S. federal, state and Puerto Rico examination for years prior to 1998.1999.

A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
Year Ended December 31,Year Ended December 31,
(in millions)2017 2016 20152018 2017 2016
Unrecognized tax benefits, beginning of year$410
 $411
 $388
$412
 $410
 $411
Gross decreases to tax positions in prior periods(10) (5) (112)
Gross increases (decreases) to tax positions in prior periods6
 (10) (5)
Gross increases due to current period business acquisitions10
 
 
Gross increases to current period tax positions12
 4
 135
34
 12
 4
Unrecognized tax benefits, end of year$412
 $410
 $411
$462
 $412
 $410

As of December 31, 20172018 and 2016,2017, we had $254$315 million and $168$254 million, respectively, in unrecognized tax benefits that, if recognized, would affect our annual effective tax rate. Included in the 2018 increase to unrecognized tax benefits is $10 million related to tax positions acquired through the acquisition of Layer3 TV. Penalties and interest on income tax assessments are included in Selling, general and administrative expenses and Interest expense, respectively, in our Consolidated Statements of Comprehensive Income. The accrued interest and penalties associated with unrecognized tax benefits are insignificant.

Note 1214 – Earnings Per Share

The computation of basic and diluted earnings per share was as follows:
Year Ended December 31,Year Ended December 31,
(in millions, except shares and per share amounts)2017 2016 20152018 2017 2016
Net income$4,536
 $1,460
 $733
$2,888
 $4,536
 $1,460
Less: Dividends on mandatory convertible preferred stock(55) (55) (55)
 (55) (55)
Net income attributable to common stockholders - basic4,481
 1,405
 678
2,888
 4,481
 1,405
Add: Dividends related to mandatory convertible preferred stock55
 
 

 55
 
Net income attributable to common stockholders - diluted$4,536
 $1,405
 $678
$2,888
 $4,536
 $1,405
          
Weighted average shares outstanding - basic831,850,073
 822,470,275
 812,994,028
849,744,152
 831,850,073
 822,470,275
Effect of dilutive securities:          
Outstanding stock options and unvested stock awards9,200,873
 10,584,270
 9,623,910
8,546,022
 9,200,873
 10,584,270
Mandatory convertible preferred stock30,736,504
 
 

 30,736,504
 
Weighted average shares outstanding - diluted871,787,450
 833,054,545
 822,617,938
858,290,174
 871,787,450
 833,054,545
          
Earnings per share - basic$5.39
 $1.71
 $0.83
$3.40
 $5.39
 $1.71
Earnings per share - diluted$5.20
 $1.69
 $0.82
$3.36
 $5.20
 $1.69
          
Potentially dilutive securities:          
Outstanding stock options and unvested stock awards33,980
 3,528,683
 4,842,370
148,422
 33,980
 3,528,683
Mandatory convertible preferred stock
 32,238,000
 32,238,000

 
 32,238,000


As of December 15, 2017, 2031, 2018, we had authorized 100 million shares of our5.50% mandatory convertible preferred stock converted to approximately 32 millionseries A, with a par value of $0.00001 per share. There were no preferred shares outstanding as of our common stock at a conversion rate of 1.6119 common shares for each share of previously outstanding preferred stockDecember 31, 2018 and certain cash-in-lieu of fractional shares.2017, respectively.

Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been anti-dilutive.


Note 1315 – Commitments and Contingencies

Commitments

Operating Leases

We have non-cancellable operating leases for cell sites, switch sites, retail stores and office facilities with contractual terms expiring through 2027.2028. The majority of cell site leases have an initial non-cancelable term of five to ten years with several renewal options. In addition, we have operating leases for dedicated transportation lines with varying expiration terms through 2024.2027. Our commitments under these leases are approximately $2.4$2.7 billion in 2018, $4.1for the year ending December 31, 2019, $4.7 billion in total for 2019the years ending December 31, 2020 and 2020, $2.72021, $3.3 billion in total for 2021 andthe years ending December 31, 2022 and $2.32023 and $3.8 billion in total for years thereafter.

As of December 31, 2017,2018, we were contingently liable for future ground lease payments related to the tower obligations. These contingent obligations are not included in the above table as the amounts due are contractually owed by CCI based on the subleasing arrangement. See Note 89 – Tower Obligations for further information.

Total rent expense under operating leases, including dedicated transportation lines, was $2.9$3.0 billion, $2.8$2.9 billion and $2.8 billion for the years ended December 31, 2018, 2017 2016 and 2015,2016, respectively, and is classified as Cost of services and Selling, general and administrative expense in our Consolidated Statements of Comprehensive Income.

In February 2018, we extended the leases related to our corporate headquarters facility. These agreements will increase our minimum lease payments by approximately $400 million in the aggregate.

Purchase Commitments

We have commitments for non-dedicated transportation lines with varying expiration terms through 2028.2029. In addition, we have commitments to purchase and lease spectrum licenses, wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business, with various terms through 2028.2043. These amounts are not reflective of our entire anticipated purchases under the related agreements but are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated.

We have contractual obligations to purchase certain goods and services from various other parties. Our purchase obligations are approximately $2.1$3.4 billion in 2018, $2.2for the year ending December 31, 2019, $2.8 billion in total for 2019the years ending December 31, 2020 and 2020, $1.52021, $1.8 billion in total for 2021 andthe years ending December 31, 2022 and $1.02023 and $1.4 billion in total for the years thereafter.

In September 2017,June 2018, we entered into a UPA to acquirean agreement for the remaining equity in IWS, a 54% owned unconsolidated subsidiary, for a purchase price of $25 million. network equipment totaling approximately $3.5 billion. Based on unavoidable spend, the minimum commitment under this agreement is $377 million as of December 31, 2018.

In JanuarySeptember 2018, we closedamended an agreement with a third party to increase the total amount of network equipment to purchase by approximately $3.5 billion. Based on unavoidable spend, the purchaseminimum commitment under this agreement is $259 million as of December 31, 2018.

In September 2018, we signed a reciprocal long-term spectrum lease with Sprint that included a total commitment of $535 million and an offsetting amount to be received from Sprint for the IWS spectrum licenses, among other assets.lease of our spectrum. Lease payments began in the fourth quarter of 2018. The reciprocal long-term lease is a distinct transaction from the Merger.

In October 2018, we entered into agreements with a third-party associated with a device upgrade program, trade-in services, and device protection products and services offered to our mobile communications customers, with initial terms of one to three years. Device protection products and services include reinsurance for device insurance policies and extended warranty contracts, mobile security applications, and technical support services.

Interest rate lock derivatives
In October 2018, we entered into interest rate lock derivatives with notional amounts of $9.6 billion These interest rate lock derivatives were designated as cash flow hedges to reduce variability in cash flows due to changes in interest payments

attributable to increases or decreases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. The fair value of interest rate lock derivatives as of December 31, 2018 was $447 million and is included in Other current liabilities in our Consolidated Balance Sheets. See Note 5 - Goodwill, Spectrum Licenses and Other Intangible Assets7 – Fair Value Measurements for further information.

On January 22, 2018, we completed our acquisition of television innovator Layer3 TV for consideration of approximately $325 million, subject to customary working capital and other post-closing adjustments. Upon closing of the transaction, Layer3 TV became a wholly-owned consolidated subsidiary. This transaction represents an opportunity for us to acquire a unique and complementary service and represents a progression in our video strategy, which began with Binge On, was strengthened with Netflix On Us, and will expand further with Layer3 TV’s management, technology, and content relationships which will enable us to bring the Un-carrier philosophy to video.

Our first-quarter 2018 operating results will include the results of Layer3 TV from the date of acquisition. Our consolidated balance sheet will include the assets and liabilities of Layer3 TV, such as intangibles assets acquired, which are being appraised by a third-party and include various assumptions in determining fair value.

Renewable Energy Purchase Agreements

In January 2017,During 2018, T-Mobile USA entered into a REPAfour renewable energy purchase agreements (“REPAs”) with Red Dirt Wind Project, LLC.third parties. The agreement isREPAs are based on the expected operation of a wind energy-generating facility located in Oklahomafacilities and will remain in effect untilfor terms of between 15 and 20 years from the twelfth anniversarycommencement of the facility’s entry into commercial operation. The facility began commercialCommercial operations in January 2018. Theare set to begin at the end of 2019 or 2020. Each REPA consists of two components: (1) an energy forward agreement that is net settled based on energy prices and the energy output generated by the facility and (2) a commitment to purchase the renewable energy credits (“RECs”) associated with the energy output generated by the facility. T-Mobile USA will net settle the forward agreement and acquire the RECs monthly by paying, or receiving, an aggregate net payment based on two variables (1) the facility’s energy output, which has an estimated

maximum capacity of approximately 160 megawatts and (2) the difference between (a) an initial fixed price, subject to annual escalation, and (b) current local marginal energy prices during the monthly settlement period. We have determined that each of the REPAREPAs does not meet the definition of a derivative because the expected energy output of the facility may not be reliably estimated (the arrangement lacks a notional amount). The REPA doesREPAs do not contain any unconditional purchase obligations because amounts under the agreement are not fixed and determinable. Our participationparticipations in the REPAREPAs did not require an upfront investmentinvestments or capital commitment.commitments. We do not control the activities that most significantly impact the energy-generating facilityfacilities, nor do we receive specific energy output from it. No amounts were settled under the agreement during the year ended December 31, 2017.

In August 2017, T-Mobile USA entered into a REPA with Solomon Forks Wind Project, LLC. The agreement is based on the expected operation of a wind energy-generating facility located in Kansas and will remain in effect until the fifteenth anniversary of the facility’s entry into commercial operation. Commercial operation of the facility is expected to occur by the end of 2018. The REPA consists of two components: (1) an energy forward agreement that is net settled based on energy prices and the energy output generated by the facility and (2) a commitment to purchase the environmental attributes (“EACs”) associated with the energy output generated by the facility. T-Mobile USA will net settle the forward agreement and acquire the EACs monthly by paying, or receiving, an aggregate net payment based on two variables (1) the facility’s energy output, which has an estimated maximum capacity of approximately 160 megawatts and (2) the difference between (a) an initial fixed price, subject to annual escalation, and (b) current local marginal energy prices during the monthly settlement period. We have determined that the REPA does not meet the definition of a derivative because the expected energy output of the facility may not be reliably estimated (the arrangement lacks a notional amount). The REPA does not contain any unconditional purchase obligations because amounts under the agreement are not fixed and determinable. Our participation in the REPA did not require an upfront investment or capital commitment. We do not control the activities that most significantly impact the energy-generating facility nor do we receive specific energy output from it. No amounts were settled under the agreement during the year ended December 31, 2017.them.

Contingencies and Litigation

Litigation Matters

We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation Matters”) that arise in the ordinary course of business, which include claims of patent infringement (most of which are asserted by non-practicing entities primarily seeking monetary damages), class actions, and proceedings to enforce FCC rules and regulations. The Litigation Matters described above have progressed to various stages and some of them may proceed to trial, arbitration, hearing or other adjudication that could result in fines, penalties, or awards of monetary or injunctive relief in the coming 12 months if they are not otherwise resolved. We have established an accrual with respect to certain of these matters, where appropriate, which is reflected in the consolidated financial statementsConsolidated Financial Statements but that we do not consider, individually or in the aggregate, material. An accrual is established when we believe it is both probable that a loss has been incurred and an amount can be reasonably estimated. For other matters, where we have not determined that a loss is probable or because the amount of loss cannot be reasonably estimated, we have not recorded an accrual due to various factors typical in contested proceedings, including but not limited to:to uncertainty concerning legal theories and their resolution by courts or regulators;regulators, uncertain damage theories and demands;demands, and a less than fully developed factual record. While we do not expect that the ultimate resolution of these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, an unfavorable outcome of some or all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future.



Note 1416 – Additional Financial Information

Supplemental Consolidated Balance Sheets Information

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are summarized as follows:
(in millions)December 31,
2017
 December 31,
2016
December 31,
2018
 December 31,
2017
Accounts payable$6,182
 $5,163
$5,487
 $6,182
Payroll and related benefits614
 559
709
 614
Property and other taxes, including payroll620
 525
642
 620
Interest253
 423
227
 253
Commissions324
 159
243
 324
Network decommissioning92
 101
65
 92
Toll and interconnect109
 85
157
 109
Advertising46
 44
76
 46
Other288
 93
135
 288
Accounts payable and accrued liabilities$8,528
 $7,152
$7,741
 $8,528

Book overdrafts included in accounts payable and accrued liabilities were $455$630 million and $356$455 million as of December 31, 20172018 and 2016,2017, respectively.

Hurricane Impacts

During the third and fourth quarters of 2017, our operations2018, we recognized $61 million in Texas, Florida andcosts related to hurricanes, including $36 million in incremental costs to maintain services primarily in Puerto Rico experienced losses related to hurricanes. The impacthurricanes that occurred in 2017 and $25 million related to operating income for the year ended December 31, 2017, from lost revenue, assets damaged or destroyed and otherhurricanes that occurred in 2018. Additional costs related to a hurricane related costs was a decrease of $201 million, net of insurance recoveries. We expect additional expensesthat occurred in 2018 are expected to be incurred and customer activity to be impactedimmaterial in the first quarter of 2019.

During 2018, primarilywe received reimbursement payments from our insurance carriers of $307 million related to our operations in Puerto Rico. hurricanes, of which $93 million was previously accrued for as a receivable as of December 31, 2017.

We have recognizedaccrued insurance recoveries related to thosea hurricane lossesthat occurred in the amount2018 of approximately $93$5 million for the year ended December 31, 20172018 as an offset to the costs incurred within Cost of services in our Consolidated Statements of Comprehensive Income and as an increase to Other current assets in our Consolidated Balance Sheets. We continue to assess


The following table shows the damagehurricane impacts in our Consolidated Statements of Comprehensive Income for the hurricanesyears ended December 31, 2018 and work with our insurance carriers to submit claims for property damage and business interruption. We expect to record additional insurance recoveries related to these hurricanes2017. There were no significant hurricane impacts in future periods.2016.

 Year Ended December 31, 2018 Year Ended December 31, 2017
(in millions, except per share amounts)Gross Reim-
bursement
 Net Gross Reim-
bursement
 Net
Increase (decrease)           
Revenues           
Branded postpaid revenues$
 $
 $
 $(37) $
 $(37)
    Of which, postpaid phone revenues
 
 
 (35) 
 (35)
Branded prepaid revenues
 
 
 (11) 
 (11)
    Total service revenues
 
 
 (48) 
 (48)
Equipment revenues
 
 
 (8) 
 (8)
Other revenues
 71
 71
 
 
 
Total revenues
 71
 71
 (56) 
 (56)
Operating expenses           
Cost of services59
 (135) (76) 198
 (93) 105
Cost of equipment sales1
 
 1
 4
 
 4
Selling, general and administrative1
 (13) (12) 36
 
 36
    Of which, bad debt expense
 
 
 20
 
 20
Total operating expenses61
 (148) (87) 238
 (93) 145
Operating income (loss)$(61) $219
 $158
 $(294) $93
 $(201)
Net income (loss)$(41) $140
 $99
 $(193) $63
 $(130)
            
Earnings per share - basic$(0.05) $0.17
 $0.12
 $(0.23) $0.07
 $(0.16)
Earnings per share - diluted$(0.05) $0.17
 $0.12
 $(0.22) $0.07
 $(0.15)

Supplemental Consolidated Statements of Comprehensive Income Information

Related Party Transactions

We have related party transactions associated with Deutsche TelekomDT or its affiliates in the ordinary course of business, which are included in the consolidated financial statements.Consolidated Financial Statements.

The following table summarizes the impact of significant transactions with Deutsche TelekomDT or its affiliates included in operatingOperating expenses in the Consolidated Statements of Comprehensive Income:
Year Ended December 31,Year Ended December 31,
(in millions)2017 2016 20152018 2017 2016
Discount related to roaming expenses$
 $(15) $(21)$
 $
 $(15)
Fees incurred for use of the T-Mobile brand79
 74
 65
84
 79
 74
Expenses for telecommunications and IT services12
 25
 23

 12
 25
International long distance agreement55
 60
 
36
 55
 60

We have an agreement with Deutsche TelekomDT for the reimbursement of certain administrative expenses, which were $11 million $11 million, and $2 million for each of the years ended December 31, 2018, 2017 2016 and 2015, respectively.


Note 15 – Subsequent Events

On January 1, 2018, we closed on a UPA to acquire the remaining equity in IWS, a 54% owned unconsolidated subsidiary, for a purchase price of $25 million. See Note 5 - Goodwill, Spectrum Licenses and Other Intangible Assets for further information.

On January 22, 2018, we completed our acquisition of television innovator Layer3 TV for consideration of approximately $325 million, subject to customary working capital and other post-closing adjustments. See Note 13 - Commitments and Contingencies for further information.

In January 2018, we redeemed $1.0 billion aggregate principal amount of our 6.125% Senior Notes due 2022 and issued $1.0 billion of public 4.500% Senior Notes due 2026 and issued $1.5 billion of public 4.750% Senior Notes due 2028. Additionally in January 2018, DT agreed to purchase $1.0 billion in aggregate principal amount of 4.500% Senior Notes due 2026 and $1.5 billion in aggregate principal amount of 4.750% Senior Notes due 2028 directly from T-Mobile USA and certain of its affiliates, as guarantors, with no underwriting discount. See Note 7 - Debt for further information.

In February 2018, the service receivable sale arrangement was amended to extend the scheduled expiration date to March 2019. See Note 3 - Sales of Certain Receivables for further information.

In February 2018, we extended the leases related to our corporate headquarters facility. See Note 13 - Commitments and Contingencies for further information.

Through February 5, 2018, we made additional repurchases of our common stock. See Note 10 - Repurchases of Common Stock for further information.2016.

Note 1617 – Guarantor Financial Information

Pursuant to the applicable indentures and supplemental indentures, the long-term debt to affiliates and third parties excluding Senior Secured Term Loans and capital leases, issued by T-Mobile USA (“Issuer”) is fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile (“Parent”) and certain of the Issuer’s 100% owned subsidiaries (“Guarantor Subsidiaries”).

In January 2017, T-Mobile USA, and certain of its affiliates, as guarantors, borrowed $4.0 billion under the Incremental Term Loan Facility to refinance $1.98 billion of outstanding secured term loans under its Term Loan Credit Agreement dated November 9, 2015, with the remaining net proceeds from the transaction intended to be used to redeem callable high yield debt.

In March 2017, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $500 million in aggregate principal amount of public 4.000% Senior Notes due 2022, (ii) issued $500 million in aggregate principal amount of public 5.125% Senior Notes due 2025 and (iii) issued $500 million in aggregate principal amount of public 5.375% Senior Notes due 2027.

In April 2017, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $1.0 billion in aggregate principal amount of 4.000% Senior Notes due 2022, (ii) issued $1.25 billion in aggregate principal amount of 5.125% Senior Notes due 2025 and (iii) issued $750 million in aggregate principal amount of 5.375% Senior Notes due 2027. Additionally, T-Mobile USA and certain of its affiliates, as guarantors, redeemed through net settlement, the $1.25 billion outstanding aggregate principal amount of the 6.288% Senior Reset Notes to affiliates due 2019 and $1.25 billion in aggregate principal amount of the 6.366% Senior Reset Notes to affiliates due 2020.

In May 2017, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $2.0 billion in aggregate principal amount of 5.300% Senior Notes due 2021, (ii) issued $1.35 billion in aggregate principal amount of 6.000% Senior Notes due 2024 and (iii) issued $650 million in aggregate principal amount of 6.000% Senior Notes due 2024.

In September 2017, T-Mobile USA and certain of its affiliates, as guarantors, issued the remaining $500 million in aggregate principal amount of 5.375% Senior Notes due 2027.

See Note 7 -8 – Debt for further information.

The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The indentures and credit facilities governing the long-term debt contain covenants that, among other

things, limit the ability of the Issuer and the Guarantor Subsidiaries to:to incur more debt;debt, pay dividends and make distributions;distributions, make certain investments;investments, repurchase stock;stock, create liens or other encumbrances;encumbrances, enter into transactions with affiliates;affiliates, enter

into transactions that restrict dividends or distributions from subsidiaries;subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. Certain provisions of each of the credit facilities, indentures and supplemental indentures relating to the long-term debt restrict the ability of the Issuer to loan funds or make payments to Parent. However, the Issuer and Guarantor Subsidiaries are allowed to make certain permitted payments to the Parent under the terms of the indentures and the supplemental indentures.

DuringOn October 23, 2018, SLMA LLC was formed as a limited liability company in Delaware to serve as an escrow subsidiary to facilitate the preparationcontemplated issuance of notes by Parent in connection with the condensed consolidating financial informationTransactions. SLMA LLC is an indirect, 100% owned finance subsidiary of T-Mobile US, Inc.Parent, as such term is used in Rule 3-10(b) of Regulation S-X, and Subsidiaries for the year ended December 31, 2017, it was determinedhas been designated as an unrestricted subsidiary under Issuer’s existing debt securities. Any debt securities that certain intercompany advances were misclassified in Net cash providedmay be issued from time to time by (used in) operating activitiesSLMA LLC will be fully and Net cash (used in) providedunconditionally guaranteed by financing activities in the Condensed Consolidating Statement of Cash Flows Information for the years ended December 31, 2016 and 2015, as filed in our 2016 Form 10-K. We have revised the Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries columns of the Condensed Consolidating Statement of Cash Flows Information to reclassify Intercompany advances, net from Net cash provided by (used in) operating activities to Net cash (used in) provided by financing activities. The impacts to the Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries columns for the year ended December 31, 2016 were $696 million, $625 million and $71 million, respectively. The impacts to the Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries columns for the year ended December 31, 2015 were $3.4 billion, $3.3 billion and $69 million, respectively. The revisions, which we have determined are not material, are eliminated upon consolidation and have no impact on our consolidated cash flows.Parent.

Presented below is the condensed consolidating financial information as of December 31, 20172018 and December 31, 2016,2017, and for the years ended December 31, 2018, 2017 2016, and 2015.2016.



Condensed Consolidating Balance Sheet Information
December 31, 2018
(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Assets           
Current assets           
Cash and cash equivalents$2
 $1
 $1,079
 $121
 $
 $1,203
Accounts receivable, net
 
 1,510
 259
 
 1,769
Equipment installment plan receivables, net
 
 2,538
 
 
 2,538
Accounts receivable from affiliates
 
 11
 
 
 11
Inventories
 
 1,084
 
 
 1,084
Other current assets
 
 1,031
 645
 
 1,676
Total current assets2
 1
 7,253
 1,025
 
 8,281
Property and equipment, net (1)

 
 23,062
 297
 
 23,359
Goodwill
 
 1,683
 218
 
 1,901
Spectrum licenses
 
 35,559
 
 
 35,559
Other intangible assets, net
 
 116
 82
 
 198
Investments in subsidiaries, net25,314
 46,516
 
 
 (71,830) 
Intercompany receivables and note receivables
 5,174
 
 
 (5,174) 
Equipment installment plan receivables due after one year, net
 
 1,547
 
 
 1,547
Other assets
 7
 1,540
 221
 (145) 1,623
Total assets$25,316
 $51,698
 $70,760
 $1,843
 $(77,149) $72,468
Liabilities and Stockholders' Equity           
Current liabilities           
Accounts payable and accrued liabilities$
 $228
 $7,240
 $273
 $
 $7,741
Payables to affiliates
 157
 43
 
 
 200
Short-term debt
 
 841
 
 
 841
Deferred revenue
 
 698
 
 
 698
Other current liabilities
 447
 164
 176
 
 787
Total current liabilities
 832
 8,986
 449
 
 10,267
Long-term debt
 10,950
 1,174
 
 
 12,124
Long-term debt to affiliates
 14,582
 
 
 
 14,582
Tower obligations (1)

 
 384
 2,173
 
 2,557
Deferred tax liabilities
 
 4,617
 
 (145) 4,472
Deferred rent expense
 
 2,781
 
 
 2,781
Negative carrying value of subsidiaries, net
 
 676
 
 (676) 
Intercompany payables and debt598
 
 4,234
 342
 (5,174) 
Other long-term liabilities
 20
 926
 21
 
 967
Total long-term liabilities598
 25,552
 14,792
 2,536
 (5,995) 37,483
Total stockholders' equity (deficit)24,718
 25,314
 46,982
 (1,142) (71,154) 24,718
Total liabilities and stockholders' equity$25,316
 $51,698
 $70,760
 $1,843
 $(77,149) $72,468
(1)
Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See Note 9 – Tower Obligations for further information.


Condensed Consolidating Balance Sheet Information
December 31, 2017
(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 assets74
 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, net22,534
 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 liabilities17
 
 192
 205
 
 414
Total current liabilities17
 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 debt32
 
 8,201
 270
 (8,503) 
Other long-term liabilities
 65
 866
 4
 
 935
Total long-term liabilities32
 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 89 – Tower Obligations for further information.


Condensed Consolidating Balance Sheet Information
December 31, 2016
(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Assets           
Current assets           
Cash and cash equivalents$358
 $2,733
 $2,342
 $67
 $
 $5,500
Accounts receivable, net
 
 1,675
 221
 
 1,896
Equipment installment plan receivables, net
 
 1,930
 
 
 1,930
Accounts receivable from affiliates
 
 40
 
 
 40
Inventories
 
 1,111
 
 
 1,111
Asset purchase deposit
 
 2,203
 
 
 2,203
Other current assets
 
 972
 565
 
 1,537
Total current assets358
 2,733
 10,273
 853
 
 14,217
Property and equipment, net (1)

 
 20,568
 375
 
 20,943
Goodwill
 
 1,683
 
 
 1,683
Spectrum licenses
 
 27,014
 
 
 27,014
Other intangible assets, net
 
 376
 
 
 376
Investments in subsidiaries, net17,682
 35,095
 
 
 (52,777) 
Intercompany receivables and note receivables196
 6,826
 
 
 (7,022) 
Equipment installment plan receivables due after one year, net
 
 984
 
 
 984
Other assets
 7
 600
 262
 (195) 674
Total assets$18,236
 $44,661
 $61,498
 $1,490
 $(59,994) $65,891
Liabilities and Stockholders' Equity           
Current liabilities           
Accounts payable and accrued liabilities$
 $423
 $6,474
 $255
 $
 $7,152
Payables to affiliates
 79
 46
 
 
 125
Short-term debt
 20
 334
 
 
 354
Deferred revenue
 
 986
 
 
 986
Other current liabilities
 
 258
 147
 
 405
Total current liabilities
 522
 8,098
 402
 
 9,022
Long-term debt
 20,741
 1,091
 
 
 21,832
Long-term debt to affiliates
 5,600
 
 
 
 5,600
Tower obligations (1)

 
 400
 2,221
 
 2,621
Deferred tax liabilities
 
 5,133
 
 (195) 4,938
Deferred rent expense
 
 2,616
 
 
 2,616
Negative carrying value of subsidiaries, net
 
 568
 
 (568) 
Intercompany payables and debt
 
 6,785
 237
 (7,022) 
Other long-term liabilities
 116
 906
 4
 
 1,026
Total long-term liabilities
 26,457
 17,499
 2,462
 (7,785) 38,633
Total stockholders' equity (deficit)18,236
 17,682
 35,901
 (1,374) (52,209) 18,236
Total liabilities and stockholders' equity$18,236
 $44,661
 $61,498
 $1,490
 $(59,994) $65,891
(1)
Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See Note 8 – Tower Obligations for further information.




Condensed Consolidating Statement of Comprehensive Income Information
Year Ended December 31, 20172018

(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments ConsolidatedParent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Revenues                      
Service revenues$
 $
 $28,894
 $2,113
 $(847) $30,160
$
 $
 $30,631
 $2,339
 $(978) $31,992
Equipment revenues
 
 9,620
 
 (245) 9,375

 
 10,208
 2
 (201) 10,009
Other revenues
 3
 879
 212
 (25) 1,069

 29
 1,113
 228
 (61) 1,309
Total revenues
 3
 39,393
 2,325
 (1,117) 40,604

 29
 41,952
 2,569
 (1,240) 43,310
Operating expenses                      
Cost of services, exclusive of depreciation and amortization shown separately below
 
 6,076
 24
 
 6,100

 
 6,257
 50
 
 6,307
Cost of equipment sales
 
 10,849
 1,003
 (244) 11,608

 
 11,238
 1,011
 (202) 12,047
Selling, general and administrative
 
 12,276
 856
 (873) 12,259

 11
 13,203
 985
 (1,038) 13,161
Depreciation and amortization
 
 5,914
 70
 
 5,984

 
 6,396
 90
 
 6,486
Gains on disposal of spectrum licenses
 
 (235) 
 
 (235)
 
 
 
 
 
Total operating expense
 
 34,880
 1,953
 (1,117) 35,716

 11
 37,094
 2,136
 (1,240) 38,001
Operating income
 3
 4,513
 372
 
 4,888
Operating (loss) income
 18
 4,858
 433
 
 5,309
Other income (expense)                      
Interest expense
 (811) (109) (191) 
 (1,111)
 (528) (114) (193) 
 (835)
Interest expense to affiliates
 (560) (23) 
 23
 (560)
 (522) (21) 
 21
 (522)
Interest income1
 29
 10
 
 (23) 17

 23
 16
 1
 (21) 19
Other (expense) income, net
 (88) 16
 (1) 
 (73)
 (87) 33
 
 
 (54)
Total other income (expense), net1
 (1,430) (106) (192) 
 (1,727)
Total other (expense) income, net
 (1,114) (86) (192) 
 (1,392)
Income (loss) before income taxes1
 (1,427) 4,407
 180
 
 3,161

 (1,096) 4,772
 241
 
 3,917
Income tax benefit (expense)
 
 1,527
 (152) 
 1,375
Earnings (loss) of subsidiaries4,535
 5,962
 (57) 
 (10,440) 
Income tax expense
 
 (981) (48) 
 (1,029)
Earnings of subsidiaries2,888
 3,984
 32
 
 (6,904) 
Net income4,536
 4,535
 5,877
 28
 (10,440) 4,536
2,888
 2,888
 3,823
 193
 (6,904) 2,888
Dividends on preferred stock(55) 
 
 
 
 (55)
 
 
 
 
 
Net income attributable to common stockholders$4,481
 $4,535
 $5,877
 $28
 $(10,440) $4,481
$2,888
 $2,888
 $3,823
 $193
 $(6,904) $2,888
                      
Net Income$4,536
 $4,535
 $5,877
 $28
 $(10,440) $4,536
Net income$2,888
 $2,888
 $3,823
 $193
 $(6,904) $2,888
Other comprehensive income, net of tax                      
Other comprehensive income, net of tax7
 7
 7
 
 (14) 7
(332) (332) 116
 
 216
 (332)
Total comprehensive income$4,543
 $4,542
 $5,884
 $28
 $(10,454) $4,543
$2,556
 $2,556
 $3,939
 $193
 $(6,688) $2,556


Condensed Consolidating Statement of Comprehensive Income Information
Year Ended December 31, 2017
(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Revenues           
Service revenues$
 $
 $28,894
 $2,113
 $(847) $30,160
Equipment revenues
 
 9,620
 
 (245) 9,375
Other revenues
 3
 879
 212
 (25) 1,069
Total revenues
 3
 39,393
 2,325
 (1,117) 40,604
Operating expenses           
Cost of services, exclusive of depreciation and amortization shown separately below
 
 6,076
 24
 
 6,100
Cost of equipment sales
 
 10,849
 1,003
 (244) 11,608
Selling, general and administrative
 
 12,276
 856
 (873) 12,259
Depreciation and amortization
 
 5,914
 70
 
 5,984
Gains on disposal of spectrum licenses
 
 (235) 
 
 (235)
Total operating expenses
 
 34,880
 1,953
 (1,117) 35,716
Operating income
 3
 4,513
 372
 
 4,888
Other income (expense)           
Interest expense
 (811) (109) (191) 
 (1,111)
Interest expense to affiliates
 (560) (23) 
 23
 (560)
Interest income1
 29
 10
 
 (23) 17
Other income (expense), net
 (88) 16
 (1) 
 (73)
Total other expense, net1
 (1,430) (106) (192) 
 (1,727)
Income (loss) before income taxes1
 (1,427) 4,407
 180
 
 3,161
Income tax expense
 
 1,527
 (152) 
 1,375
Earnings (loss) of subsidiaries4,535
 5,962
 (57) 
 (10,440) 
Net income4,536
 4,535
 5,877
 28
 (10,440) 4,536
Dividends on preferred stock(55) 
 
 
 
 (55)
Net income attributable to common stockholders$4,481
 $4,535
 $5,877
 $28
 $(10,440) $4,481
            
Net income$4,536
 $4,535
 $5,877
 $28
 $(10,440) $4,536
Other comprehensive income, net of tax           
Other comprehensive income, net of tax7
 7
 7
 
 (14) 7
Total comprehensive income$4,543
 $4,542
 $5,884
 $28
 $(10,454) $4,543





Condensed Consolidating Statement of Comprehensive Income Information
Year Ended December 31, 2016

(in millions)Parent Issuer 
Guarantor Subsidiaries (As adjusted - See Note 1)
 Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments 
Consolidated (As adjusted - See Note 1)
Revenues           
Service revenues$
 $
 $26,613
 $2,023
 $(792) $27,844
Equipment revenues
 
 9,145
 
 (418) 8,727
Other revenues
 3
 739
(1)195
 (18) 919
Total revenues
 3
 36,497
(1)2,218
 (1,228) 37,490
Operating expenses           
Cost of services, exclusive of depreciation and amortization shown separately below
 
 5,707
 24
 
 5,731
Cost of equipment sales
 
 10,209
 1,027
 (417) 10,819
Selling, general and administrative
 
 11,321
 868
 (811) 11,378
Depreciation and amortization
 
 6,165
 78
 
 6,243
Cost of MetroPCS business combination
 
 104
 
 
 104
Gains on disposal of spectrum licenses
 
 (835) 
 
 (835)
Total operating expenses
 
 32,671
 1,997
 (1,228) 33,440
Operating income
 3
 3,826
(1)221
 
 4,050
Other income (expense)           
Interest expense
 (1,147) (82) (189) 
 (1,418)
Interest expense to affiliates
 (312) 
 
 
 (312)
Interest income (expense)
 31
 (18)(1)
 
 13
Other income (expense), net
 2
 (8) 
 
 (6)
Total other expense, net
 (1,426) (108)(1)(189) 
 (1,723)
Income (loss) before income taxes
 (1,423) 3,718
 32
 
 2,327
Income tax expense
 
 (857) (10) 
 (867)
Earnings (loss) of subsidiaries1,460
 2,883
 (17) 
 (4,326) 
Net income1,460
 1,460
 2,844
 22
 (4,326) 1,460
Dividends on preferred stock(55) 
 
 
 
 (55)
Net income attributable to common stockholders$1,405
 $1,460
 $2,844
 $22
 $(4,326) $1,405
            
Net income$1,460
 $1,460
 $2,844
 $22
 $(4,326) $1,460
Other comprehensive income, net of tax           
Other comprehensive income, net of tax2
 2
 2
 2
 (6) 2
Total comprehensive income$1,462
 $1,462
 $2,846
 $24
 $(4,332) $1,462
(1)
The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively reclassified as Other revenues. See Note 1 - Summary of Significant Accounting Policies for further information.

(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Revenues           
Service revenues$
 $
 $26,613
 $2,023
 $(792) $27,844
Equipment revenues
 
 9,145
 
 (418) 8,727
Other revenues
 3
 739
 195
 (18) 919
Total revenues
 3
 36,497
 2,218
 (1,228) 37,490
Operating expenses           
Cost of services, exclusive of depreciation and amortization shown separately below
 
 5,707
 24
 
 5,731
Cost of equipment sales
 
 10,209
 1,027
 (417) 10,819
Selling, general and administrative
 
 11,321
 868
 (811) 11,378
Depreciation and amortization
 
 6,165
 78
 
 6,243
Cost of MetroPCS business combination
 
 104
 
 
 104
Gains on disposal of spectrum licenses
 
 (835) 
 
 (835)
Total operating expenses
 
 32,671
 1,997
 (1,228) 33,440
Operating income
 3
 3,826
 221
 
 4,050
Other income (expense)           
Interest expense
 (1,147) (82) (189) 
 (1,418)
Interest expense to affiliates
 (312) 
 
 
 (312)
Interest income
 31
 (18) 
 
 13
Other income (expense), net
 2
 (8) 
 
 (6)
Total other expense, net
 (1,426) (108) (189) 
 (1,723)
Income (loss) before income taxes
 (1,423) 3,718
 32
 
 2,327
Income tax expense
 
 (857) (10) 
 (867)
Earnings (loss) of subsidiaries1,460
 2,883
 (17) 
 (4,326) 
Net income1,460
 1,460
 2,844
 22
 (4,326) 1,460
Dividends on preferred stock(55) 
 
 
 
 (55)
Net income attributable to common stockholders$1,405
 $1,460
 $2,844
 $22
 $(4,326) $1,405
            
Net income$1,460
 $1,460
 $2,844
 $22
 $(4,326) $1,460
Other comprehensive income, net of tax           
Other comprehensive income, net of tax2
 2
 2
 2
 (6) 2
Total comprehensive income$1,462
 $1,462
 $2,846
 $24
 $(4,332) $1,462


Condensed Consolidating Statement of Comprehensive IncomeCash Flows Information
Year Ended December 31, 20152018
(in millions)Parent Issuer 
Guarantor Subsidiaries (As adjusted - See Note 1)
 Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments 
Consolidated (As adjusted - See Note 1)
Revenues           
Service revenues$
 $
 $23,748
 $1,669
 $(596) $24,821
Equipment revenues
 
 7,148
 
 (430) 6,718
Other revenues
 1
 770
(1)171
 (14) 928
Total revenues
 1
 31,666
(1)1,840
 (1,040) 32,467
Operating expenses           
Cost of services, exclusive of depreciation and amortization shown separately below
 
 5,530
 24
 
 5,554
Cost of equipment sales
 
 9,055
 720
 (431) 9,344
Selling, general and administrative
 
 10,065
 733
 (609) 10,189
Depreciation and amortization
 
 4,605
 83
 
 4,688
Cost of MetroPCS business combination
 
 376
 
 
 376
Gains on disposal of spectrum licenses
 
 (163) 
 
 (163)
Total operating expenses
 
 29,468
 1,560
 (1,040) 29,988
Operating income
 1
 2,198
(1)280
 
 2,479
Other income (expense)           
Interest expense
 (847) (50) (188) 
 (1,085)
Interest expense to affiliates
 (411) 
 
 
 (411)
Interest income
 2
 4
(1)
 
 6
Other expense, net
 (10) 
 (1) 
 (11)
Total other expense, net
 (1,266) (46)(1)(189) 
 (1,501)
Income (loss) before income taxes
 (1,265) 2,152
 91
 
 978
Income tax expense
 
 (214) (31) 
 (245)
Earnings (loss) of subsidiaries733
 1,998
 (48) 
 (2,683) 
Net income733
 733
 1,890
 60
 (2,683) 733
Dividends on preferred stock(55) 
 
 
 
 (55)
Net income attributable to common stockholders$678
 $733
 $1,890
 $60
 $(2,683) $678
            
Net income$733
 $733
 $1,890
 $60
 $(2,683) $733
Other comprehensive loss, net of tax           
Other comprehensive loss, net of tax(2) (2) (2) 
 4
 (2)
Total comprehensive income$731
 $731
 $1,888
 $60
 $(2,679) $731
(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Operating activities           
Net cash (used in) provided by operating activities$
 $(1,254) $10,483
 $(5,110) $(220) $3,899
Investing activities           
Purchases of property and equipment
 
 (5,505) (36) 
 (5,541)
Purchases of spectrum licenses and other intangible assets
 
 (127) 
 
 (127)
Proceeds related to beneficial interests in securitization transactions
 
 53
 5,353
 
 5,406
Acquisition of companies, net of cash acquired
 
 (338) 
 
 (338)
Equity investment in subsidiary
 
 (43) 
 43
 
Other, net
 (7) 28
 
 
 21
Net cash (used in) provided by investing activities
 (7) (5,932) 5,317
 43
 (579)
Financing activities           
Proceeds from issuance of long-term debt
 2,494
 
 
 
 2,494
Proceeds from borrowing on revolving credit facility, net
 6,265
 
 
 
 6,265
Repayments of revolving credit facility
 
 (6,265) 
 
 (6,265)
Repayments of capital lease obligations
 
 (698) (2) 
 (700)
Repayments of short-term debt for purchases of inventory, property and equipment, net
 
 (300) 
 
 (300)
Repayments of long-term debt
 
 (3,349) 
 
 (3,349)
Repurchases of common stock(1,071) 
 
 
 
 (1,071)
Intercompany advances, net995
 (7,498) 6,468
 35
 
 
Equity investment from parent
 
 
 43
 (43) 
Tax withholdings on share-based awards
 
 (146) 
 
 (146)
Cash payments for debt prepayment or debt extinguishment costs
 
 (212) 
 
 (212)
Intercompany dividend paid
 
 
 (220) 220
 
Other, net4
 
 (56) 
 
 (52)
Net cash (used in) provided by financing activities(72) 1,261
 (4,558) (144) 177
 (3,336)
Change in cash and cash equivalents(72) 
 (7) 63
 
 (16)
Cash and cash equivalents           
Beginning of period74
 1
 1,086
 58
 
 1,219
End of period$2
 $1
 $1,079
 $121
 $
 $1,203
(1)
The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively reclassified as Other revenues. See Note 1 - Summary of Significant Accounting Policies for further information.



Condensed Consolidating Statement of Cash Flows Information
Year Ended December 31, 2017
(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments ConsolidatedParent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Operating activities                      
Net cash provided by (used in) operating activities$1
 $(1,613) $9,616
 $58
 $(100) $7,962
$1
 $(1,613) $9,761
 $(4,218) $(100) $3,831
           
Investing activities                      
Purchases of property and equipment
 
 (5,237) 
 
 (5,237)
 
 (5,237) 
 
 (5,237)
Purchases of spectrum licenses and other intangible assets, including deposits
 
 (5,828) 
 
 (5,828)
Purchases of spectrum licenses and other intangible assets
 
 (5,828) 
 
 (5,828)
Proceeds related to beneficial interests in securitization transactions
 
 43
 4,276
 
 4,319
Equity investment in subsidiary(308) 
 
 
 308
 
(308) 
 
 
 308
 
Other, net
 
 1
 
 
 1

 
 1
 
 
 1
Net cash used in investing activities(308) 
 (11,064) 
 308
 (11,064)
           
Net cash (used in) provided by investing activities(308) 
 (11,021) 4,276
 308
 (6,745)
Financing activities                      
Proceeds from issuance of long-term debt
 10,480
 
 
 
 10,480

 10,480
 
 
 
 10,480
Proceeds from borrowing on revolving credit facility, net
 2,910
 
 
 
 2,910

 2,910
 
 
 
 2,910
Repayments of revolving credit facility
 
 (2,910) 
 
 (2,910)
 
 (2,910) 
 
 (2,910)
Repayments of capital lease obligations
 
 (486) 
 
 (486)
 
 (486) 
 
 (486)
Repayments of short-term debt for purchases of inventory, property and equipment, net
 
 (300) 
 
 (300)
 
 (300) 
 
 (300)
Repayments of long-term debt
 
 (10,230) 
 
 (10,230)
 
 (10,230) 
 
 (10,230)
Proceeds from exercise of stock options21
 
 
 
 
 21
Repurchases of common shares(427) 
 
 
 
 (427)
Repurchases of common stock(427) 
 
 
 
 (427)
Intercompany advances, net484
 (14,817) 14,300
 33
 
 
484
 (14,817) 14,300
 33
 
 
Equity investment from parent
 308
 
 
 (308) 

 308
 
 
 (308) 
Tax withholdings on share-based awards
 
 (166) 
 
 (166)
 
 (166) 
 
 (166)
Dividends on preferred stock(55) 
 
 
 
 (55)
Cash payments for debt prepayment or debt extinguishment costs
 
 (188) 
 
 (188)
Intercompany dividend paid
 
 
 (100) 100
 

 
 
 (100) 100
 
Dividends on preferred stock(55) 
 
 
 
 (55)
Other, net
 
 (16) 
 
 (16)21
 
 (16) 
 
 5
Net cash provided by (used in) financing activities23
 (1,119) 192
 (67) (208) (1,179)23
 (1,119) 4
 (67) (208) (1,367)
Change in cash and cash equivalents(284) (2,732) (1,256) (9) 
 (4,281)(284) (2,732) (1,256) (9) 
 (4,281)
Cash and cash equivalents                      
Beginning of period358
 2,733
 2,342
 67
 
 5,500
358
 2,733
 2,342
 67
 
 5,500
End of period$74
 $1
 $1,086
 $58
 $
 $1,219
$74
 $1
 $1,086
 $58
 $
 $1,219
Balances have been revised based on the guidance in ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” See Note 1 – Summary of Significant Accounting Policies for further information.


Condensed Consolidating Statement of Cash Flows Information
Year Ended December 31, 2016
(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Operating activities           
Net cash provided by (used in) operating activities$6
 $(1,335) $7,541
 $33
 $(110) $6,135
            
Investing activities           
Purchases of property and equipment
 
 (4,702) 
 
 (4,702)
Purchases of spectrum licenses and other intangible assets, including deposits
 
 (3,968) 
 
 (3,968)
Sales of short-term investments
 2,000
 998
 
 
 2,998
Other, net
 
 (8) 
 
 (8)
Net cash provided by (used in) investing activities
 2,000
 (7,680) 
 
 (5,680)
            
Financing activities           
Proceeds from issuance of long-term debt
 997
 
 
 
 997
Repayments of capital lease obligations
 
 (205) 
 
 (205)
Repayments of short-term debt for purchases of inventory, property and equipment, net
 
 (150) 
 
 (150)
Repayments of long-term debt
 
 (20) 
 
 (20)
Intercompany advances, net
 (696) 625
 71
 
 
Proceeds from exercise of stock options29
 
 
 
 
 29
Tax withholdings on share-based awards
 
 (121) 
 
 (121)
Intercompany dividend paid
 
 
 (110) 110
 
Dividends on preferred stock(55) 
 
 
 
 (55)
Other, net
 
 (12) 
 
 (12)
Net cash (used in) provided by financing activities(26) 301
 117
 (39) 110
 463
Change in cash and cash equivalents(20) 966
 (22) (6) 
 918
Cash and cash equivalents           
Beginning of period378
 1,767
 2,364
 73
 
 4,582
End of period$358
 $2,733
 $2,342
 $67
 $
 $5,500


Condensed Consolidating Statement of Cash Flows Information
Year Ended December 31, 20152016

(in millions)Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments ConsolidatedParent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating and Eliminating Adjustments Consolidated
Operating activities                      
Net cash provided by (used in) operating activities$(1) $(1,147) $6,652
 $85
 $(175) $5,414
$6
 $(1,335) $7,516
 $(3,298) $(110) $2,779
           
Investing activities                      
Purchases of property and equipment
 
 (4,724) 
 
 (4,724)
 
 (4,702) 
 
 (4,702)
Purchases of spectrum licenses and other intangible assets, including deposits
 
 (1,935) 
 
 (1,935)
 
 (3,968) 
 
 (3,968)
Purchases of short-term investments
 (1,999) (998) 
 
 (2,997)
Investment in subsidiaries(1,905) 
 
 
 1,905
 
Proceeds related to beneficial interests in securitization transactions
 
 25
 3,331
 

3,356
Sales of short-term investments
 2,000
 998
 
 

2,998
Other, net
 
 96
 
 
 96

 
 (8) 
 
 (8)
Net cash used in investing activities(1,905) (1,999) (7,561) 
 1,905
 (9,560)
           
Net cash provided by (used in) investing activities
 2,000
 (7,655) 3,331
 
 (2,324)
Financing activities                      
Proceeds from capital contribution
 1,905
 
 
 (1,905) 
Proceeds from issuance of long-term debt
 3,979
 
 
 
 3,979

 997
 
 
 
 997
Proceeds from tower obligations
 140
 
 
 
 140
Repayments of capital lease obligations
 
 (57) 
 
 (57)
 
 (205) 
 
 (205)
Repayments of short-term debt for purchases of inventory, property and equipment, net
 
 (564) 
 
 (564)
 
 (150) 
 
 (150)
Repayments of long-term debt
 
 (20) 
 
 (20)
Intercompany advances, net
 (3,357) 3,288
 69
 
 

 (696) 625
 71
 
 
Proceeds from exercise of stock options47
 
 
 
 
 47
Intercompany dividend paid
 
 
 (175) 175
 
Tax withholdings on share-based awards
 
 (156) 
 
 (156)
 
 (121) 
 
 (121)
Dividends on preferred stock(41) 
 (14) 
 
 (55)(55) 
 
 
 
 (55)
Intercompany dividend paid
 
 
 (110) 110
 
Other, net
 
 79
 
 
 79
29
 
 (12) 
 
 17
Net cash provided by (used in) financing activities6
 2,667
 2,576
 (106) (1,730) 3,413
Net cash (used in) provided by financing activities(26) 301
 117
 (39) 110
 463
Change in cash and cash equivalents(1,900) (479) 1,667
 (21) 
 (733)(20) 966
 (22) (6) 
 918
Cash and cash equivalents                      
Beginning of period2,278
 2,246
 697
 94
 
 5,315
378
 1,767
 2,364
 73
 
 4,582
End of period$378
 $1,767
 $2,364
 $73
 $
 $4,582
$358
 $2,733
 $2,342
 $67
 $
 $5,500
Balances have been revised based on the guidance in ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements, for further information.



Supplementary Data

Quarterly Financial Information (Unaudited)
(in millions, except shares and per share amounts)First Quarter Second Quarter Third Quarter Fourth Quarter Full Year
(in millions, except share and per share amounts)First Quarter Second Quarter Third Quarter Fourth Quarter Full Year
2018         
Total revenues$10,455
 $10,571
 $10,839
 $11,445
 $43,310
Operating income1,282
 1,450
 1,440
 1,137
 5,309
Net income671
 782
 795
 640
 2,888
Net income attributable to common stockholders671
 782
 795
 640
 2,888
Earnings per share         
Basic$0.78
 $0.92
 $0.94
 $0.75
 $3.40
Diluted0.78
 0.92
 0.93
 0.75
 3.36
Weighted average shares outstanding         
Basic855,222,664
 847,660,488
 847,087,120
 849,102,785
 849,744,152
Diluted862,244,084
 852,040,670
 853,852,764
 856,344,347
 858,290,174
2017                  
Total revenues$9,613
 $10,213
 $10,019
 $10,759
 $40,604
$9,613
 $10,213
 $10,019
 $10,759
 $40,604
Operating income1,037
 1,416
 1,323
 1,112
 4,888
1,037
 1,416
 1,323
 1,112
 4,888
Net income698
 581
 550
 2,707
 4,536
698
 581
 550
 2,707
 4,536
Dividends on preferred stock(14) (14) (13) (14) (55)(14) (14) (13) (14) (55)
Net income attributable to common stockholders684
 567
 537
 2,693
 4,481
684
 567
 537
 2,693
 4,481
Earnings per share                  
Basic$0.83
 $0.68
 $0.65
 $3.22
 $5.39
$0.83
 $0.68
 $0.65
 $3.22
 $5.39
Diluted0.80
 0.67
 0.63
 3.11
 5.20
0.80
 0.67
 0.63
 3.11
 5.20
Weighted average shares outstanding                  
Basic827,723,034
 830,971,528
 831,189,779
 837,416,683
 831,850,073
827,723,034
 830,971,528
 831,189,779
 837,416,683
 831,850,073
Diluted869,395,250
 870,456,447
 871,420,065
 871,501,578
 871,787,450
869,395,984
 870,457,181
 871,420,065
 871,501,578
 871,787,450
Net income includes:                  
Gains on disposal of spectrum licenses$(37) $(1) $(29) $(168) $(235)$(37) $(1) $(29) $(168) $(235)
2016         
Total revenues (1)
$8,664
 $9,287
 $9,305
 $10,234
 $37,490
Operating income (1)
1,168
 833
 1,048
 1,001
 4,050
Net income479
 225
 366
 390
 1,460
Dividends on preferred stock(14) (14) (13) (14) (55)
Net income attributable to common stockholders465
 211
 353
 376
 1,405
Earnings per share         
Basic$0.57
 $0.26
 $0.43
 $0.46
 $1.71
Diluted0.56
 0.25
 0.42
 0.45
 1.69
Weighted average shares outstanding         
Basic819,431,761
 822,434,490
 822,998,697
 824,982,734
 822,470,275
Diluted859,382,827
 829,752,956
 832,257,819
 867,262,400
 833,054,545
Net income includes:         
Cost of MetroPCS business combination$36
 $59
 $15
 $(6) $104
Gains on disposal of spectrum licenses(636) 
 (199) 
 (835)
(1)
The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively re-classified as Other revenues. See Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
In December 2017, the TCJA was signed into legislation. The TCJA included numerous changes to existing tax law, including a permanent reduction in the federal corporate income tax rate from 35% to 21%. The rate reduction took place on January 1, 2018. We recognized a net tax benefit of $2.2 billion associated with the enactment of the TCJA in Income tax (expense) benefit in our Consolidated Statements of Comprehensive Income in the fourth quarter of 2017, primarily due to a re-measurement of deferred tax assets and liabilities.

Earnings per share is computed independently for each quarter and the sum of the quarters may not equal earnings per share for the full year.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure information required to be disclosed in our periodic reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.


Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and

procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Form 10-K.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2, respectively, to this Form 10-K.

Changes in Internal Control over Financial Reporting

ThereBeginning January 1, 2018, we adopted the new revenue standard and implemented significant new revenue accounting systems, processes and internal controls over revenue recognition to assist us in the application of the new revenue standard. Other than as discussed above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during our most recently completed fiscal quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions;transactions, providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles;principles, providing reasonable assurance that receipts and expenditures are made in accordance with management authorization;authorization, and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2017.2018.

The effectiveness of our internal control over financial reporting as of December 31, 20172018 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report herein.


Item 9B. Other Information

None.


PART III.

Item 10. Directors, Executive Officers and Corporate Governance

We maintain a code of ethics applicable to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer, and Controller, which is a “Code of Ethics for Senior Financial Officers” as defined by applicable rules of the SEC. This code is publicly available on our website at investor.t-mobile.com. If we make any amendments to this code other than technical, administrative or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this code we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our website at investor.t-mobile.com or in a Current Report on Form 8-K filed with the SEC.

The remaining information required by this item, including information about our Directors, Executive Officers and Audit Committee, iswill be incorporated by reference to thefrom our definitive Proxy Statement for our 2018 Annual Meeting of Stockholders, which willto be filed with the SEC no later than 120 days after December 31, 2017.pursuant to Regulation 14A or be included in an amendment to this Report.


Item 11. Executive Compensation

The information required by this item iswill be incorporated by reference to thefrom our definitive Proxy Statement for our 2018 Annual Meeting of Stockholders, which willto be filed with the SEC no later than 120 days after December 31, 2017.pursuant to Regulation 14A or to be included in an amendment to this Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item iswill be incorporated by reference to thefrom our definitive Proxy Statement for our 2018 Annual Meeting of Stockholders, which willto be filed with the SEC no later than 120 days after December 31, 2017.pursuant to Regulation 14A or to be included in an amendment to this Report.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item iswill be incorporated by reference to thefrom our definitive Proxy Statement for our 2018 Annual Meeting of Stockholders, which willto be filed with the SEC no later than 120 days after December 31, 2017.pursuant to Regulation 14A or to be included in an amendment to this Report.

Item 14. Principal Accounting Fees and Services

The information required by this item iswill be incorporated by reference to thefrom our definitive Proxy Statement for our 2018 Annual Meeting of Stockholders, which willto be filed with the SEC no later than 120 days after December 31, 2017.pursuant to Regulation 14A or to be included in an amendment to this Report.

PART IV.

Item 15. Exhibits, Financial Statement Schedules

(a) Documents filed as a part of this Form 10-K:

1. Financial Statements

The following financial statements are included in Part II, Item 8 of this Form 10-K:

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statement of Stockholders’ Equity
Notes to the Consolidated Financial Statements

2. Financial Statement Schedules

All other schedules have been omitted because they are not required, not applicable, or the required information is otherwise included.

3. Exhibits

See the Index to Exhibits immediately following Item“Item 16. Form 10-K SummarySummary” of this Form 10-K.

Item 16. Form 10–K Summary

None.


INDEX TO EXHIBITS
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
2.1  8-K 10/3/2012 2.1 
2.2  8-K 12/7/2012 2.1 
2.3  8-K 4/15/2013 2.1 
3.1  8-K 5/2/2013 3.1 
3.2  8-K 5/2/2013 3.2 
3.3  8-K 12/15/2014 3.1 
4.1  8-K 9/21/2010 4.1 
4.2  8-K 9/21/2010 4.2 
4.3  8-K 11/17/2010 4.1 
4.4  10-K 3/1/2011  10.19(d) 
4.5  10-K 3/1/2011 10.19(e) 
4.6  8-K 12/17/2012 4.1 
4.7  8-K 12/17/2012 4.2 
4.8  8-K 5/2/2013 4.15 
4.9  10-Q 8/8/2013 4.19 
4.10  10-Q 10/28/2014 4.2 
4.11  10-Q 10/27/2015 4.2 
4.12  10-Q 10/24/2016 4.1 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
2.1  8-K 10/3/2012 2.1  
2.2  8-K 12/7/2012 2.1  
2.3  8-K 4/15/2013 2.1  
2.4  8-K 04/30/2018 2.1  
3.1  8-K 5/2/2013 3.1  
3.2  8-K 5/2/2013 3.2  
3.3  8-K 12/15/2014 3.1  
3.4 

 8-K 2/22/2018 3.1  
4.1  8-K 5/2/2013 4.1  
4.2  8-K 5/2/2013 4.2  
4.3  8-K 5/2/2013 4.3  
4.4  8-K 5/2/2013 4.4  
4.5  8-K 5/2/2013 4.5  
4.6  8-K 5/2/2013 4.6  
4.7  8-K 5/2/2013 4.7  
4.8  8-K 5/2/2013 4.8  
4.9  8-K 5/2/2013 4.9  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.13  8-K 3/22/2013 4.1 
4.14  8-K 3/22/2013 4.2 
4.15  8-K 3/22/2013 4.3 
4.16  8-K 3/22/2013 4.4 
4.17  8-K 3/22/2013 4.5 
4.18  10-Q 8/8/2013 4.17 
4.19  8-K 5/2/2013 4.16 
4.20  10-Q 8/8/2013 4.20 
4.21  10-Q 10/28/2014 4.1 
4.22  10-Q 10/27/2015 4.1 
4.23  10-Q 10/24/2016 4.2 
4.24  
 
 
 X
4.25  8-K 5/2/2013 4.1 
4.26  8-K 5/2/2013 4.2 
4.27  8-K 5/2/2013 4.3 
4.28  8-K 5/2/2013 4.4 
4.29  8-K 5/2/2013 4.5 
4.30  8-K 5/2/2013 4.6 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.10  8-K 5/2/2013 4.10  
4.11  8-K 5/2/2013 4.11  
4.12  8-K 5/2/2013 4.12  
4.13  10-Q 8/8/2013 4.18  
4.14  8-K 8/22/2013 4.1  
4.15  8-K 11/22/2013 4.1  
4.16  8-K 11/22/2013 4.2  
4.17  10-Q 10/28/2014 4.3  
4.18  8-K 9/5/2014 4.1  
4.19  8-K 9/5/2014 4.2  
4.20  10-Q 10/27/2015 4.3  
4.21  8-K 11/5/2015 4.1  
4.22  8-K 4/1/2016 4.1  
4.23  10-Q 10/24/2016 4.3  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.31  8-K 5/2/2013 4.7 
4.32  8-K 5/2/2013 4.8 
4.33  8-K 5/2/2013 4.9 
4.34  8-K 5/2/2013 4.10 
4.35  8-K 5/2/2013 4.11 
4.36  8-K 5/2/2013 4.12 
4.37  10-Q 8/8/2013 4.18 
4.38  8-K 8/22/2013 4.1 
4.39  8-K 11/22/2013 4.1 
4.40  8-K 11/22/2013 4.2 
4.41  10-Q 10/28/2014 4.3 
4.42  8-K 9/5/2014 4.1 
4.43  8-K 9/5/2014 4.2 
4.44  10-Q 10/27/2015 4.3 
4.45  8-K 11/5/2015 4.1 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.24  8-K 3/16/2017 4.1  
4.25  8-K 3/16/2017 4.2  
4.26  8-K 3/16/2017 4.3  
4.27  8-K 4/28/2017 4.1  
4.28  8-K 4/28/2017 4.2  
4.29  8-K 4/28/2017 4.3  
4.30  8-K 5/9/2017 4.1  
4.31  8-K 5/9/2017 4.2  
4.32  10-K 2/8/2018 4.56  
4.33  8-K 1/25/2018 4.1  
4.34  8-K 1/25/2018 4.2  
4.35  8-K 5/2/2013 4.13  
4.36  10-Q 5/1/2018 4.5  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.46  8-K 4/1/2016 4.1 
4.47  10-Q 10/24/2016 4.3 
4.48  8-K 3/16/2017 4.1 
4.49  8-K 3/16/2017 4.2 
4.50  8-K 3/16/2017 4.3 
4.51  8-K 4/28/2017 4.1 
4.52  8-K 4/28/2017 4.2 
4.53  8-K 4/28/2017 4.3 
4.54  8-K 5/9/2017 4.1 
4.55  8-K 5/9/2017 4.2 
4.56  
 
 
 X
4.57  8-K 1/25/2018 4.1 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.37  8-K 5/4/2018 4.1  
4.38  8-K 5/4/2018 4.2  
4.39  8-K 5/21/2018 4.1  
4.40  8-K 12/21/2018 4.1  
4.41        X
10.1  10-Q 8/8/2013 10.1  
10.2  10-Q 8/8/2013 10.2  
10.3        X
10.4  10-Q 8/8/2013 10.3  
10.5  10-Q 8/8/2013 10.4  
10.6  10-Q 8/8/2013 10.5  
10.7 

       X

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
4.58  8-K 1/25/2018 4.2 
4.59  8-K 5/2/2013 4.13 
10.1  10-Q 8/8/2013 10.1 
10.2  10-Q 8/8/2013 10.2 
10.3  10-Q 8/8/2013 10.3 
10.4  10-Q 8/8/2013 10.4 
10.5  10-Q 8/8/2013 10.5 
10.6  10-Q 8/8/2013 10.6 
10.7  10-Q 8/8/2013 10.7 
10.8  10-Q 8/8/2013 10.8 
10.9  8-K 5/2/2013 10.1 
10.10  10-Q 8/8/2013 10.10 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.8  10-Q 8/8/2013 10.6  
10.9  10-Q 8/8/2013 10.7  
10.10        X
10.11        X
10.12  10-Q 8/8/2013 10.8  
10.13  8-K 5/2/2013 10.1  
10.14  10-Q 8/8/2013 10.10  
10.15  8-K 5/2/2013 10.2  
10.16  8-K 1/6/2014 10.1  
10.17  8-K 1/6/2014 10.2  
10.18  8-K 3/4/2014 10.1  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.11  8-K 5/2/2013 10.2 
10.12  8-K 5/2/2013 4.14 
10.13  8-K 11/20/2013 10.1 
10.14  8-K 9/5/2014 10.1 
10.15  8-K 11/5/2015 10.2 
10.16  8-K 3/22/2013 10.1 
10.17  8-K 8/22/2013 10.1 
10.18  8-K 1/6/2014 10.1 
10.19  8-K 1/6/2014 10.2 
10.20  10-K 2/14/2017 10.29 
10.21  8-K 3/4/2014 10.1 
10.22  10-K 2/19/2015 10.55 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.19  10-K 2/19/2015 10.55  
10.20  10-Q 4/28/2015 10.5  
10.21  8-K 3/4/2014 10.2  
10.22  10-K 2/19/2015 10.56  
10.23  10-Q 4/28/2015 10.6  
10.24  10-K 2/14/2017 10.33  
10.25  10-Q 7/20/2017 10.1  
10.26  8-K 12/6/2016 10.1  
10.27  10-Q 7/20/2017 10.2  
10.28  10-K 2/8/2018 10.31  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.23  10-Q 4/28/2015 10.5 
10.24  8-K 3/4/2014 10.2 
10.25  10-K 2/19/2015 10.56 
10.26  10-Q 4/28/2015 10.6 
10.27  10-K 2/14/2017 10.33 
10.28  10-Q 7/20/2017 10.1 
10.29  8-K 12/6/2016 10.1 
10.30  10-Q 7/20/2017 10.2 
10.31  
 
 
 X
10.32  8-K 11/12/2015 10.1 
10.33  10-Q 4/24/2017 10.3 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.29  10-Q 5/1/2018 10.13  
10.30        X
10.31  8-K 11/12/2015 10.1  
10.32  10-Q 4/24/2017 10.3  
10.33  10-Q 4/24/2017 10.4  
10.34  10-Q 4/24/2017 10.5  
10.35  8-K 7/27/2017 10.1  
10.36  8-K 3/30/2018 10.1  
10.37  8-K 12/30/2016 10.3  
10.38  8-K 1/25/2017 10.1  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.34  10-Q 4/24/2017 10.4 
10.35  10-Q 4/24/2017 10.5 
10.36  8-K 7/27/2017 10.1 
10.37  8-K 12/30/2016 10.3 
10.38  8-K 1/25/2017 10.1 
10.39  8-K 6/8/2016 10.1 
10.40  10-K 2/14/2017 10.41 
10.41  10-Q 10/23/2017 10.2 
10.42  8-K 6/8/2016 10.2 
10.43  10-Q 10/24/2016 10.1 
10.44  10-K 2/14/2017 10.46 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.39  10-Q 10/23/2017 10.2  
10.40 

 10-Q 10/30/2018 10.2  
10.41  10-Q 10/23/2017 10.3  
10.42 

 10-K 2/8/2018 10.48  
10.43 

 10-Q 5/1/2018 10.14  
10.44  10-Q 10/30/2018 10.1  
10.45        X
10.46  8-K 3/7/2016 1.1  
10.47  8-K 11/2/2016 10.1  
10.48  8-K 4/26/2016 1.1  
10.49  8-K 11/2/2016 10.2  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.45  10-K 2/14/2017 10.47 
10.46  10-Q 7/20/2017 10.3 
10.47  10-Q 10/23/2017 10.3 
10.48        X
10.49  8-K 3/7/2016 1.1 
10.50  8-K 11/2/2016 10.1 
10.51  8-K 4/26/2016 1.1 
10.52  8-K 11/2/2016 10.2 
10.53  8-K 4/29/2016 1.1 
10.54  8-K 11/2/2016 10.3 
10.55  8-K 3/16/2017 10.1 
10.56  8-K 12/30/2016 10.1 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.50  8-K 4/29/2016 1.1  
10.51  8-K 11/2/2016 10.3  
10.52  8-K 3/16/2017 10.1  
10.53  8-K 1/25/2018 10.1  
10.54  8-K 12/30/2016 10.1  
10.55  8-K 3/30/2018 10.3  
10.56  8-K 12/30/2016 10.2  
10.57  8-K 3/30/2018 10.2  
10.58*  S-1/A 2/27/2007  10.1(a)  
10.59*  Schedule 14A 4/19/2010  Annex A  
10.60*  10-Q 8/9/2010 10.2  
10.61*  10-Q 10/30/2012 10.1  
10.62*  10-K 3/1/2013  10.9(a)  
10.63*  10-Q 8/9/2010 10.5  
10.64*  10-K 2/29/2012 10.12  
10.65*  10-K 2/8/2018 10.69  
10.66* 

 10-Q 5/1/2018 10.12  

    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.57  8-K 12/30/2016 10.2 
10.58  8-K 1/25/2018 10.1 
10.59*  S-1/A 2/27/2007  10.1(a) 
10.60*  Schedule 14A 4/19/2010  Annex A 
10.61*  10-Q 8/9/2010 10.2 
10.62*  10-Q 10/30/2012 10.1 
10.63*  10-K 3/1/2013  10.9(a) 
10.64*  10-K 3/1/2013  10.9(b) 
10.65*  10-Q 8/9/2010 10.5 
10.66*  10-K 2/29/2012 10.12 
10.67*  10-K 3/1/2013  10.12(b) 
10.68*  8-K 5/2/2013 10.3 
10.69*  
 
 
 X
10.70*  8-K 5/2/2013 10.4 
10.71*  10-Q 8/8/2013 10.17 
10.72*  10-K 2/25/2014 10.35 
10.73*  8-K 2/26/2015 10.1 
10.74*  10-Q 4/24/2017 10.7 
10.75*  10-Q 4/24/2017 10.6 
10.76*  
 
 
 X
10.77*  10-K 2/25/2014 10.39 
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.67*  8-K 5/2/2013 10.4  
10.68*  10-Q 4/24/2017 10.7  
10.69*  10-Q 5/1/2018 10.10  
10.70*  10-Q 4/24/2017 10.6  
10.71*  10-Q 5/1/2018 10.11  
10.72*  10-Q 5/1/2018 10.9  
10.73*  10-K 2/8/2018 10.76  
10.74*  10-K 2/25/2014 10.39  
10.75* 

       X
10.76*  8-K 10/25/2013 10.1  
10.77*  10-Q 8/8/2013 10.20  
10.78*  Schedule 14A 4/26/2018 Annex A  
10.79*  10-Q 8/8/2013 10.21  
10.80*  10-K 2/25/2014 10.45  
10.81*  8-K 6/4/2013 10.2  
10.82*  10-Q 8/8/2013 10.24  
10.83*  10-Q 8/8/2013 10.25  
10.84*  10-K 2/19/2015 10.43  
10.85*  10-K 2/19/2015 10.44  
10.86*  S-8 2/19/2015 99.1  
10.87*  10-Q 7/20/2017 10.4  
10.88  8-K 04/30/2018 10.1  

Incorporated by Reference
Exhibit No.Exhibit DescriptionFormDate of First FilingExhibit NumberFiled Herein
10.78*8-K10/25/201310.1
10.79*10-Q8/8/201310.20
10.80*10-Q8/8/201310.21
10.81*10-K2/25/201410.45
10.82*8-K6/4/201310.2
10.83*10-Q8/8/201310.24
10.84*10-Q8/8/201310.25
10.85*10-K2/19/201510.43
10.86*10-K2/19/201510.44
10.87*S-82/19/201599.1
10.88*10-Q7/20/201710.4
12.1


X
21.1


X
23.1


X
24.1Power of Attorney, pursuant to which amendments to this Form 10-K may be filed (included on the signature page contained in Part IV of the Form 10-K).


X
31.1


X
31.2


X
32.1**



32.2**



101.INSXBRL Instance Document.


X
101.SCHXBRL Taxonomy Extension Schema Document.


X
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.


X
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.


X
101.LABXBRL Taxonomy Extension Label Linkbase Document.


X
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.


X
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed Herein
10.89  8-K 04/30/2018 10.2  
10.90  8-K 05/17/2018 10.1  
10.91  8-K 04/30/2018 10.3  
21.1        X
23.1        X
24.1  10-K 02/08/2018 24.1  
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
* Indicates a management contract or compensatory plan or arrangement.
** Furnished herein.


  SIGNATURES 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  T-MOBILE US, INC. 
    
February 7, 20186, 2019 /s/ John J. Legere 
  
John J. Legere
President and Chief Executive Officer
 

Each person whose signature appears below constitutes and appoints John J. Legere and J. Braxton Carter, and each or either of them, his or her true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements (including post-effective amendments) to this Report, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of February 7, 2018.

6, 2019.
Signature Title
   
/s/ John J. Legere President and Chief Executive Officer and
John J. Legere Director (Principal Executive Officer)

/s/ G. Michael SievertPresident and Chief Operating Officer
G. Michael SievertDirector

   
/s/ J. Braxton Carter Executive Vice President and Chief Financial Officer
J. Braxton Carter (Principal Financial Officer)

   
/s/ Peter Osvaldik Senior Vice President, Finance and Chief Accounting
Peter Osvaldik Officer (Principal Accounting Officer)

   
/s/ Timotheus Höttges Chairman of the Board
Timotheus Höttges  

   
/s/ W. Michael BarnesDirector
W. Michael Barnes

/s/ Thomas DannenfeldtDirector
Thomas Dannenfeldt

/s/ Srikant Datar Director
Srikant Datar  

   
/s/ Lawrence H. Guffey Director
Lawrence H. Guffey

/s/ Christian P. IllekDirector
Christian P. Illek  

   
/s/ Bruno Jacobfeuerborn Director
Bruno Jacobfeuerborn  

   
/s/ Raphael Kübler Director
Raphael Kübler  

   
/s/ Thorsten Langheim Director
Thorsten Langheim  

   
/s/ Olaf SwanteeDirector
Olaf Swantee

/s/ Teresa A. Taylor Director
Teresa A. Taylor  

   
/s/ Kelvin R. Westbrook Director
Kelvin R. Westbrook  


120130