T-Mobile USA Reports Fourth Quarter 2012 Financial Results

  T-Mobile USA Reports Fourth Quarter 2012 Financial Results

    Successful Execution of Challenger Strategy Leads to Improved Customer
                        Development and Reduced Churn

Business Wire

BELLEVUE, Wash. -- February 28, 2013

T-Mobile USA, Inc. (“T-Mobile”) today reported its fourth quarter 2012 results
which were highlighted by a year-on-year increase in net customers,
improvement in branded contract churn, the continued investment in more
customer-focused Value plans and an accelerated network modernization program.
T-Mobile ended the fourth quarter of 2012 with 33.4 million customers,
representing net additions of 61,000 customers compared to the prior quarter
and 203,000 more customers than the end of 2011. The sequential and
year-on-year improvement in net customer additions was driven primarily by the
continued expansion of the branded prepaid and wholesale segments, in
particular, with growth from the Mobile Virtual Network Operator (MVNO)
component of the wholesale segment, and a year-on-year improvement in branded
contract churn.

In the quarter, the Company reported adjusted OIBDA of $1.0 billion, compared
to $1.2 billion in the prior quarter and $1.4 billion in the fourth quarter of
2011. As expected, the decline in fourth quarter 2012 adjusted OIBDA reflects
higher advertising and promotional expenditures related to the Company’s brand
re-launch, partially offset by benefits from continued cost management
programs in operational areas such as network optimization and overall Company
overhead.

                    Fourth Quarter 2012 Financial Summary

                                                                  
Customer Results                                                  
                           Quarter Ended
                                                    
(thousands)                Dec 31,        Sept 30,       Dec 31,        Y-o-Y
                           2012           2012           2011           %∆
Customers, end of
period ^ 1,2
Branded contract           20,293         20,809         22,367         (9  %)
customers
Branded prepaid            5,826         5,659         4,819         21  %
customers
Total branded              26,119        26,468        27,186        (4  %)
customers
M2M customers              3,090          2,954          2,429          27  %
MVNO customers             4,180         3,905         3,569         17  %
Total wholesale            7,270         6,859         5,999         21  %
customers
Total T-Mobile USA
customers, end of          33,389        33,327        33,185        1   %
period
Thereof, contract          23,383         23,763         24,797         (6  %)
customers
Thereof, prepaid           10,006         9,564          8,389          19  %
customers
                                                                        
Net customer
additions/(losses)
Branded contract           (515    )      (492    )      (706    )      27  %
customers
Branded prepaid            166           365           220           (25 %)
customers
Total branded              (349    )      (127    )      (486    )      28  %
customers
M2M customers              135            168            (95     )      NM
MVNO customers             275           119           56            NM
Total wholesale            410           287           (40     )      NM
customers
Total T-Mobile USA
net customer               61            160           (526    )      NM
additions/(losses)
Thereof, contract
net customer               (380    )      (324    )      (802    )      53  %
additions/(losses)
Thereof, prepaid net
customer                   441            483            276            60  %
additions/(losses)
                                                                        
NM - Not meaningful
Note: Certain customer numbers may not add due to rounding.


Branded Customers

  *Branded contract net customer losses were 515,000 in the fourth quarter of
    2012, compared to 492,000 in the third quarter of 2012 and 706,000 in the
    fourth quarter of 2011.

       *Sequentially, branded contract gross additions increased by 5% to
         over 1 million. The Company’s churn reduction efforts including its
         network improvements and expanded value priced offerings continue to
         have positive impacts on customer deactivations. However, aggressive
         competitor promotions and the iPhone 5 launch in late September drove
         a slight increase in branded contract customer losses
         quarter-over-quarter.
       *Year-on-year, the significant improvement in the fourth quarter
         branded contract net customer losses was due to fewer branded
         contract deactivations resulting from significant customer retention
         programs in the quarter, partially offset by lower gross customer
         additions. The lower gross additions were in part a result of the
         Company’s credit risk optimization initiatives introduced earlier in
         2012.

  *Branded prepaid net customer additions were 166,000 in the fourth quarter
    of 2012, down from 365,000 in the third quarter of 2012 and down from
    220,000 in the fourth quarter of 2011.

       *The Monthly4G plans continue to be popular with branded prepaid gross
         additions up significantly year-on-year and stable compared to the
         third quarter of 2012. The overall sequential and year-on-year
         decline in net customer additions were due to increased churn related
         to aggressive handset pricing, unlimited data rate plan offerings
         from competitors and a maturing Monthly4G customer base.

Wholesale

  *The Company’s wholesale base, which includes the M2M and MVNO customer
    segments, had net customer additions of 410,000 in the fourth quarter of
    2012, compared to 287,000 additions in the third quarter of 2012 and net
    losses of 40,000 in the fourth quarter of 2011.

       *The M2M customer segment, which has significantly lower ARPU than
         branded contract customers, had net customer additions of 135,000 for
         the quarter and totaled 3.1 million customers at the end of the
         fourth quarter of 2012, an increase of 27% compared to the end of
         2011.
       *The MVNO customer segment experienced net customer additions of
         275,000 in the fourth quarter of 2012 and was up significantly from
         the 119,000 additions in the third quarter of 2012. This increase was
         due in part to the launch of new MVNO partners, such as Spot Mobile,
         Solavei and UltraMobile and from higher activation volumes from
         existing MVNO partners driven in part by growth in the
         government-subsidized Lifeline support program.


Churn Results
                    Quarter Ended                              
                                                 
                       Dec 31,         Sept 30,       Dec 31,        Y-o-Y
                       2012            2012           2011           bps∆
Branded churn^3        3.50%           3.10%          3.60%          -10 bps
Branded contract       2.50%           2.30%          3.00%          -50 bps
churn^3
Branded prepaid     7.00%         6.20%        6.70%        +30 bps
churn^3
                                                                     

  *Branded customer churn was 3.5% in the fourth quarter of 2012, up 40 basis
    points from the third quarter of 2012 but an improvement of 10 basis
    points from the fourth quarter of 2011.

       *Branded contract churn of 2.5% in the fourth quarter of 2012
         increased 20 basis points from the prior quarter but improved 50
         basis points from the fourth quarter of 2011.

            *The sequential increase in branded contract churn was due to
              seasonality and the launch of the iPhone 5 by competitors late
              in the third quarter of 2012.
            *Year-on-year, branded contract churn decreased as a result of
              initiatives focused on improving the overall quality of the
              Company’s branded contract customer base. These initiatives
              include credit risk optimization programs and efforts in
              re-contracting the Company’s most loyal branded contract
              customers.

       *Branded prepaid churn of 7.0% in the fourth quarter of 2012 increased
         80 basis points from the third quarter of 2012 and 30 basis points
         from the fourth quarter of 2011.

            *The sequential increase in branded prepaid churn was primarily
              due to impacts from the iPhone 5 launch and aggressive pricing
              on unlimited data plans and promotional handset pricing by
              competitors.
            *The year-on-year increase in branded prepaid churn was driven
              primarily by higher churn from a maturing Monthly4G customer
              base and a more competitive environment in this market segment.


ARPU Results
                              Quarter Ended                     
                                                     
                                 Dec 31,     Sept 30,     Dec 31,     Y-o-Y %∆
                                 2012        2012         2011
($)
ARPU (branded contract)^4        55.47       56.59        58.23       (4.7  %)
ARPU (branded prepaid)^4         27.69       27.35        24.90       11.2  %
ARPU (blended)^4                 41.31       42.78        45.52       (9.2  %)
Data ARPU (branded               20.07       19.45        18.13       10.7  %
contract)^5
Data ARPU (branded)^5         17.83     17.40      16.45     8.4   %
                                                                      

  *Branded contract Average Revenue Per User (ARPU), was $55.47 in the fourth
    quarter of 2012, down from $56.59 in the third quarter of 2012 and down
    from $58.23 in the fourth quarter of 2011.

       *Sequentially and year-on-year, branded contract ARPU declined
         primarily due to lower voice revenues which was due in part to a
         customer shift to the Company’s Value plans. Value plans result in
         recording lower service revenues from lower monthly recurring charges
         while recognizing higher equipment revenues at the time of sale.
       *Branded contract data ARPU was $20.07 in the fourth quarter of 2012
         which increased 3.2% from the prior quarter and increased 10.7% from
         the fourth quarter of 2011. The overall increases were the result of
         higher smartphone penetration and customer’s continued adoption of
         data plans including the successful introduction of the Company’s
         Unlimited Nationwide 4G Data plan in the third quarter of 2012.
       *At the end of the fourth quarter 2012, non-iPhone 3G/4G smartphones
         used by branded contract customers accounted for 12.4 million or 61%
         of total branded contract customers compared to 11.8 million or 57%
         at the end of the third quarter of 2012 and 11 million or 49% in the
         fourth quarter of 2011. In addition to the Company’s branded customer
         smartphones, the Company’s network supported 1.8 million iPhone
         customers at the end of the fourth quarter of 2012, of which, 900,000
         were branded contract customers using the “bring your own device”
         (BYOD) program. The total number of iPhones at the end of the fourth
         quarter of 2012 includes customers in the Company’s MVNO base. When
         the 900,000 branded contract customers using BYOD iPhones are
         included, over 66% of the T-Mobile branded contract customers are
         using smartphones as of year end.

  *Branded prepaid ARPU, was $27.69 in the fourth quarter of 2012, up 1.2%
    from the third quarter of 2012 and up 11.2% from the fourth quarter of
    2011.

       *Year-on-year, branded prepaid ARPU increased primarily due to the
         continued success of the Monthly4G products which have higher ARPU
         than the Company’s Pay-As-You-Go prepaid products.

  *Branded data ARPU in the fourth quarter of 2012 was $17.83 per branded
    customer, an increase of 2.5% from the third quarter of 2012 and an
    increase of 8.4% from the fourth quarter of 2011.

       *3G/4G smartphone sales were 2.8 million units in the fourth quarter
         of 2012, up 21.7% from 2.3 million units in the prior quarter and a
         7.7% increase from 2.6 million units sold in the fourth quarter of
         2011. Smartphone sales accounted for 79% of units sold, and 95% of
         handset sales revenues in the fourth quarter of 2012, up from 77% of
         units sold and 94% of handset sales revenues in the prior quarter and
         73% of units sold and 92% of handset sales revenues in the fourth
         quarter of 2011. This result reflects strong sales of the Samsung
         Galaxy S^® III, in particular.

  *Blended ARPU was $41.31 in the fourth quarter of 2012, down from $42.78 in
    the third quarter of 2012 and down from $45.52 in the fourth quarter of
    2011. These declines are primarily due to customer shifts towards Value
    plans and branded prepaid programs and increases in wholesale customers.
    Branded prepaid, wholesale and Value plan customers now make up 57% of the
    customer base compared to 52% in the prior quarter and 40% in the fourth
    quarter of 2011.


Financial Results
                         Quarter Ended                          
                                                   
($ millions)                Dec 31,       Sept 30,      Dec 31,       Y-o-Y %∆
                            2012          2012          2011
Service revenues^4          4,127         4,261         4,565         (9.6  %)
Branded Revenues^4          3,890         4,021         4,316         (9.9  %)
Thereof, branded            3,416         3,571         3,966         (13.9 %)
contract revenues
Thereof, branded            474           450           350           35.4  %
prepaid revenues
                                                                            
Total revenues              4,909         4,893         5,179         (5.2  %)
Adjusted OIBDA^6            1,048         1,226         1,400         (25.1 %)
Adjusted OIBDA              25     %      29     %      31     %      -6 pp
margin^7
Capital                  898        717        551        63.0  %
expenditures^8
                                                                      

Revenue

  *Service revenues were $4.1 billion in the fourth quarter of 2012, down
    3.1% from the third quarter of 2012 and down 9.6% from the fourth quarter
    of 2011.

       *Sequentially and year-on-year, quarterly service revenues decreased
         primarily due to branded contract customer losses. The decrease,
         however, was partially offset by the increased adoption of data plans
         in both the contract and prepaid customer base. Additionally, branded
         prepaid revenues increased compared to the prior quarter and the
         fourth quarter of 2011 as a result of the continued success of the
         Monthly4G plans. Adoption of the Company’s Value plans, which do not
         include handset equipment subsidies, adversely impacts service
         revenues but results in higher equipment revenues when compared to
         traditional bundled pricing plans.
       *Data service revenues, including messaging, were $1.5 billion in the
         fourth quarter of 2012, consistent with both the prior quarter and
         the fourth quarter of 2011. Data service revenues in the fourth
         quarter of 2012, excluding messaging revenues, accounted for over 70%
         of total data service revenues and increased 10.5% year-on-year.

  *Total revenues, including service, equipment sales, and other revenues,
    were $4.9 billion in the fourth quarter of 2012, up slightly from the
    third quarter of 2012 but declined from $5.2 billion in the fourth quarter
    of 2011.

       *Total revenues declined less than service revenues compared to the
         fourth quarter of 2011 despite losses in branded contract customers
         as equipment revenues increased year-on-year due to stronger
         smartphone sales and handset program changes in connection with the
         Company’s Value plans.
       *The Company’s Value plans, which were first introduced in the third
         quarter of 2011, allow customers to subscribe to wireless services
         without the purchase of or upfront payment for a bundled handset.
         This results in a reduction of initial subsidies and benefits
         adjusted OIBDA and net income within the quarter of purchase.
         Qualifying customers may separately purchase handsets at any time,
         either deferring payments over 20-month installment contracts or
         paying the full price at the point-of-sale. Compared to traditional
         bundled price plans, Value plans have lower monthly recurring charges
         which result in lower service revenues over the service contract
         period, while recognizing higher equipment revenues at the time of
         the sale. In the fourth quarter of 2012, Value plan customers
         accounted for over 50% of the branded contract gross additions, which
         is consistent with the third quarter of 2012. Additionally, Value
         plans made up 30% of the branded contract customer base at the end of
         the fourth quarter of 2012. This is up from 23% at the end of the
         third quarter of 2012.

Adjusted OIBDA and OIBDA

  *The Company reported adjusted OIBDA of $1.0 billion in the fourth quarter
    of 2012, compared to $1.2 billion in the third quarter of 2012 and $1.4
    billion in the fourth quarter of 2011. Adjusted OIBDA margin was 25% in
    the fourth quarter of 2012, down from 29% in the third quarter of 2012 and
    31% in the fourth quarter of 2011.

       *Adjusted OIBDA in the fourth quarter of 2012 excludes one-time
         non-recurring expenses of $5 million, primarily related to spectrum
         exchanges and transaction related activities. The prior quarter
         excludes a net benefit of $140 million, primarily as a result of a
         spectrum swap gain that was partially offset by costs associated with
         restructuring initiatives. The fourth quarter of 2011 excludes
         special transaction related charges of $123 million primarily related
         to the terminated AT&T transaction.
       *Sequentially, adjusted OIBDA decreased primarily as a result of
         planned higher advertising expenses associated with the Company’s
         re-branding initiatives and lower service revenues. Year-on-year,
         adjusted OIBDA decreased as a result of lower service revenues due
         primarily to branded contract customer losses and increased expenses
         associated with the Company’s rebranding initiatives.

Operating Expenses

  *Total operating expenses were $4.7 billion in the fourth quarter of 2012
    and included non-recurring costs associated with spectrum exchanges and
    acquisition related activities. Excluding these non-recurring items, total
    operating expenses in the fourth quarter 2012 increased $220 million or
    4.9% from the third quarter of 2012 and increased $157 million or 3.4%
    from the fourth quarter of 2011. Sequentially and year-on-year, the
    increase is primarily attributable to higher advertising expenses
    partially offset by benefits from continued cost management programs in
    operational areas such as network optimization, customer roaming, improved
    customer collection rates, and better management of customer acquisition
    and retention costs.

       *Losses from equipment subsidies in the fourth quarter of 2012 were
         $263 million (equipment revenues of $718 million, less cost of
         equipment sales of $981 million), down 15.7% from the prior quarter
         and down 19.1% from the fourth quarter of 2011. The
         quarter-on-quarter decrease in net subsidies is primarily the result
         of increased margin per unit from sales of more expensive smartphone
         devices. The year-on-year decrease in net subsidies was due primarily
         to handset program changes from the Company’s Value plans.

            *Equipment subsidies related to customer acquisition were $23
              million in the fourth quarter of 2012, compared to $79 million
              in the prior quarter and $108 million in the fourth quarter of
              2011. The decreasing trend in equipment subsidies is primarily
              attributable to the increase in Value plan activations and
              associated unsubsidized smartphone sales.
            *Equipment subsidies related to customer retention were $240
              million in the fourth quarter of 2012, compared to $233 million
              in the prior quarter and $218 million in the fourth quarter of
              2011. Sequentially and year-on-year, the increase in equipment
              subsidies is primarily due to the increase in handset sales in
              indirect retail channels and the associated incentive payments
              to dealers.

       *Network expenses of $1.1 billion in the fourth quarter of 2012, were
         consistent with the prior quarter and decreased 4.7% from the fourth
         quarter of 2011. This year-on-year decrease was due primarily to
         lower roaming expenses and reduced rates for providing long distance
         service to customers partially offset by increased lease expenses
         associated with network modernization. Additionally, due to the
         transition to enhanced backhaul (e.g. fiber) over the past year, the
         Company was able to accommodate higher data volumes year-on-year
         without significant increases in network costs.
       *Customer acquisition expenses of $963 million in the fourth quarter
         of 2012 increased 17.0% from the prior quarter and 17.3% from the
         fourth quarter of 2011. Compared to the prior quarter and fourth
         quarter 2011, the increase was primarily due to higher advertising
         expenses associated with new promotional campaigns and the Company’s
         rebranding initiatives.
       *General and administrative expenses of $829 million in the fourth
         quarter of 2012 were slightly lower than the prior quarter and
         decreased 7.9% from the fourth quarter of 2011. The year-on-year
         decrease was primarily due to lower bad debt expense related to
         improved customer collection rates from credit optimization
         initiatives.
       *Depreciation and amortization expenses of $796 million in the fourth
         quarter of 2012 decreased 3.5% from the prior quarter and increased
         4.6% from the fourth quarter of 2011. The year-on-year increase was
         primarily due to assets placed into service and accelerated
         depreciation related to network modernization initiatives.
         Sequentially, depreciation expense was lower driven by changes in the
         deployment schedule of the Company’s ongoing network modernization
         efforts.

Capital Expenditures

  *Cash capital expenditures (excluding spectrum licenses) were $898 million
    in the fourth quarter of 2012, compared to $717 million in the third
    quarter of 2012 and $551 million in the fourth quarter of 2011.

       *Sequentially and year-on-year, higher cash capital expenditures were
         a result of the network modernization transformation.

Other Transactions

  *During the fourth quarter of 2012, T-Mobile conveyed to Crown Castle
    International Corp. (“CCI”) the exclusive rights to manage and operate
    approximately 7,100 T-Mobile owned wireless communication tower sites. In
    exchange, T-Mobile received net proceeds of $2.5 billion of which the
    Company subsequently distributed $2.4billion as an equity distribution to
    its parent, Deutsche Telekom. T-Mobile contemporaneously entered into a
    lease back for part of the space at each of the tower sites required for
    continued operation of T-Mobile’s network equipment installed at the
    sites. Under US GAAP accounting rules pertaining to sales of real estate
    operations, T-Mobile was precluded from derecognizing the tower assets and
    the transaction has been accounted for as a financing. As a result, during
    the fourth quarter of 2012, T-Mobile recorded on its balance sheet a
    long-term financial obligation in the amounts of the cash proceeds from
    CCI.


T-MOBILE USA
Condensed Consolidated Balance Sheets
(dollars in millions)
(unaudited)

                                              December 31,   December 31,
                                                 2012             2011
Assets
Current assets
Cash and cash equivalents                        $  394           $  390
Accounts receivable, net of allowances of           2,678            2,697
$289 and $347, respectively
Accounts receivables from affiliates                682              1,820
Inventory                                           457              455
Current portion of net deferred tax                 655              668
assets, net
Other current assets                               675            572     
Total current assets                                5,541            6,602
Property and equipment, net of accumulated
depreciation of $17,744 and $15,599,                12,807           12,703
respectively
Goodwill                                            -                8,134
Spectrum licenses                                   14,550           12,814
Other intangible assets, net of
accumulated amortization of $243 and $216,          79               61
respectively
Long-term investments and other assets             645            295     
Total assets                                     $  33,622       $  40,609  
                                                                  
Liabilities and Stockholder's equity
Current liabilities
Accounts payable and accrued liabilities         $  3,475         $  3,058
Current payables to affiliates                      1,619            1,046
Deferred revenue                                    290              257
Other current liabilities                          208            143     
Total current liabilities                          5,592          4,504   
Long-term payables to affiliates                    13,655           15,049
Long-term financial obligation                      2,461            -
Deferred tax liabilities                            3,618            3,282
Deferred rents                                      1,884            1,672
Other long-term liabilities                        297            317     
Total long-term liabilities                        21,915         20,320  
                                                                  
Stockholder's equity
Common stock and additional paid-in                 29,197           31,600
capital
Accumulated other comprehensive income              41               (28     )
(loss)
Accumulated deficit                                (23,123 )       (15,787 )
Total stockholder's equity                         6,115          15,785  
Total liabilities and stockholder's equity       $  33,622       $  40,609  
                                                                  

T-MOBILE USA
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(dollars in millions)
(unaudited)

                      Quarter Ended                             Year Ended
                         December    September    December       December     December
                         31,           30,            31,            31,            31,
                         2012          2012           2011           2012           2011
                                                                                    
Revenues
Branded contract         $ 3,416       $ 3,571        $ 3,966        $ 14,521       $ 16,230
revenues
Branded prepaid           474         450          350          1,715        1,307  
revenues
Total branded              3,890         4,021          4,316          16,236         17,537
revenues
Wholesale revenues         137           134            128            544            443
Roaming and other         100         106          121          433          501    
service revenues
Total service              4,127         4,261          4,565          17,213         18,481
revenues
Equipment sales            718           554            549            2,242          1,901
Other revenues            64          78           65           264          236    
Total revenues            4,909       4,893        5,179        19,719       20,618 
Operating expenses
Network costs,
excluding                  1,146         1,141          1,202          4,661          4,952
depreciation and
amortization
Cost of equipment          981           866            874            3,437          3,646
sales
Customer
acquisition,
excluding                  963           823            821            3,286          3,185
depreciation and
amortization
General and
administrative,
excluding                  829           840            900            3,510          3,543
depreciation and
amortization
Depreciation and           796           825            761            3,187          2,982
amortization
Impairment charges         -             8,134          6,420          8,134          6,420
Restructuring              (5    )       36             -              85             -
costs
Other, net*               (48   )      (179   )      105          (184   )      169    
Total operating           4,662       12,486       11,083       26,116       24,897 
expenses
Operating income           247           (7,593 )       (5,904 )       (6,397 )       (4,279 )
(loss)
                                                                                    
Other expense, net        (177  )      (130   )      (178   )      (589   )      (655   )
Income (loss)
before income              70            (7,723 )       (6,082 )       (6,986 )       (4,934 )
taxes
                                                                                    
Income tax                (78   )      (12    )      685          (350   )      216    
(expense) benefit
Net (loss)               $ (8    )     $ (7,735 )     $ (5,397 )     $ (7,336 )     $ (4,718 )
                                                                                    
Other
comprehensive
income, net of tax
Unrealized gain on
cash flow hedges
and foreign                49            23             94             68             2
currency
translation
Unrealized gain on
available-for-sale        1           1            -            1            9      
securities
Total
comprehensive            $ 42         $ (7,711 )     $ (5,303 )     $ (7,267 )     $ (4,707 )
income (loss)
                                                                                    
* Certain prior year items have been reclassified to conform to current year presentation.


T-MOBILE USA
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
(unaudited)
                                              Year Ended
                                                 December 31,   December 31,
                                                 2012             2011
Operating activities
Net (loss)                                       $  (7,336  )     $  (4,718  )
Adjustments to reconcile net (loss) to net
cash provided by operating activities
Impairment charges                                  8,134            6,420
Depreciation and amortization                       3,187            2,982
Income tax expense (benefit)                        350              (216    )
Amortization of debt discount and premium,          (81     )        (84     )
net
Bad debt expense                                    702              713
Deferred rent expense                               206              218
(Gains)/losses and other, net                       (258    )        (43     )
Changes in operating assets and
liabilities
Accounts receivable                                 (700    )        (558    )
Inventory                                           (2      )        166
Other current and long-term assets                  (316    )        (182    )
Accounts payable and accrued liabilities           (24     )       282     
Net cash provided by operating activities          3,862          4,980   
Investing activities
Purchases of property and equipment                 (2,901  )        (2,729  )
Expenditures related to spectrum licenses           (387    )        (23     )
Short-term affiliate loan receivable, net           (651    )        (2,005  )
Other, net                                         24             58      
Net cash used in investing activities              (3,915  )       (4,699  )
Financing activities
Proceeds from financial obligation                  2,469            -
Repayments to financial obligation                  (9      )        -
Equity distribution to affiliate                    (2,403  )        -
Other, net                                         -              -       
Net cash provided by financing activities          57             -       
Change in cash and cash equivalents                 4                281
Cash and cash equivalents
Beginning of period                                390            109     
End of period                                    $  394          $  390     
                                                                  

T-MOBILE USA
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
(dollars in millions)
(unaudited)


This press release includes non-GAAP financial measures. The non-GAAP
financial measures should be considered in addition to, but not as a
substitute for, the information provided in accordance with GAAP.
Reconciliations from the non-GAAP financial measures to the most directly
comparable GAAP financial measures are provided below following Selected Data
and the financial statements.

Adjusted OIBDA is reconciled to operating income as follows:

                                                                                                                                      
                          Full Year      Q4            Q3             Q2            Q1            Full Year      Q4             Q3            Q2            Q1
                          2012           2012          2012           2012          2012          2011           2011           2011          2011          2011
Adjusted OIBDA            $ 4,886        $ 1,048       $ 1,226        $ 1,338       $ 1,274       $ 5,310        $ 1,400        $ 1,445       $ 1,277       $ 1,188
                                                                                                                                                                    
Depreciation and           (3,187 )      (796  )      (825   )      (819  )      (747  )      (2,982 )      (761   )      (731  )      (755  )      (735  )
amortization
Adjusted operating
income (excl.
impairment,
restructuring and           1,699          252           401            519           527           2,328          639            714           522           453
other
transaction-related
costs)
                                                                                                                                                                    
Impairment charges          (8,134 )       -             (8,134 )       -             -             (6,420 )       (6,420 )       -             -             -
Restructuring costs         (85    )       5             (36    )       (48   )       (6    )       -              -              -             -             -
Other*                     123          (10   )      176          (19   )      (24   )      (187   )      (123   )      (51   )      (13   )      -     
Operating (loss)          $ (6,397 )     $ 247        $ (7,593 )     $ 452        $ 497        $ (4,279 )     $ (5,904 )     $ 663        $ 509        $ 453   
income
                                                                                                                                                            
*Primarily represents transaction related costs, gains/losses on intangible assets, and other material transactions. Other may not agree in total to the Other, net
classification in the Statement of Operations due to certain routine operating activities that are not excluded from Adjusted OIBDA.


Forward-Looking Statements

This news release includes “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. The statements in this
news release regarding the business outlook, expected performance and
forward-looking guidance, as well as other statements that are not historical
facts, are forward-looking statements. The words “estimate,” “project,”
“forecast,” “intend,” “expect,” “believe,” “target,” “providing guidance” and
similar expressions are intended to identify forward-looking statements.

Forward-looking statements are estimates and projections reflecting
management’s judgment based on currently available information and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements. With
respect to these forward-looking statements, management has made assumptions
regarding, among other things, customer and network usage, customer growth and
retention, pricing, operating costs, the timing of various events and the
economic and regulatory environment.

About T-Mobile USA

Based in Bellevue, Wash., T-Mobile USA, Inc. is the U.S. wireless operation of
Deutsche Telekom AG (OTCQX: DTEGY). By the end of the fourth quarter of 2012,
approximately 132.3 million mobile customers were served by the mobile
communication segments of the Deutsche Telekom group — 33.4 million by
T-Mobile USA — all via a common technology platform based on GSM and UMTS and
additionally HSPA+ 21/HSPA+ 42. T-Mobile USA’s innovative wireless products
and services help empower people to connect to those who matter most. Multiple
independent research studies continue to rank T-Mobile USA among the highest
in numerous regions throughout the U.S. in wireless customer care and call
quality.

In order to provide comparability with the results of other US wireless
carriers, all financial amounts are in US dollars and are based on accounting
principles generally accepted in the United States (“GAAP”). T-Mobile USA
results are included in the consolidated results of Deutsche Telekom, but
differ from the information contained herein as, among other things; Deutsche
Telekom reports financial results in Euros and in accordance with
International Financial Reporting Standards (IFRS).

For more information, please visit http://www.T-Mobile.com. T-Mobile is a
federally registered trademark of Deutsche Telekom AG. For further information
on Deutsche Telekom, please visit www.telekom.de/investor-relations.

                             Definitions of Terms

Since all companies do not calculate these figures in the same manner, the
information contained in this press release may not be comparable to similarly
titled measures reported by other companies.

1.A customer is defined as a SIM card with a unique T-Mobile USA mobile
    identity number which generates revenue. Additionally, machine-to-machine
    customers (also known as M2M) are included within contract customers, some
    of which may not have monthly recurring charges required under contract.
    Mobile virtual network operators (MVNO) are classified as prepaid
    customers as they most closely align with this customer segment.
2.Prior quarter amounts have been restated to conform to current period
    customer reporting classifications. In Q2 2011, partner branded customers
    (Wal-Mart Family Mobile) were reclassified to branded contract customers
    from branded prepaid customers.
3.Churn is defined as the number of customers whose service was
    discontinued, expressed as a rounded monthly percentage of the average
    number of customers during the specified period. We believe that churn,
    which is a measure of customer retention and loyalty, provides relevant
    and useful information and is used by our management to evaluate the
    operating performance of our business.
4.Average Revenue Per User (ARPU) represents the average monthly service
    revenue earned from customers. ARPU is calculated by dividing service
    revenues for the specified period by the average customers during the
    period, and further dividing by the number of months in the period. We
    believe ARPU provides management with useful information to evaluate the
    revenues generated from our customer base.

    Service revenues include contract, prepaid, and roaming and other service
    revenues, and do not include equipment sales and other revenues. Data
    services revenues (including messaging and non-messaging revenue) are a
    non-GAAP financial measure and are included in the various components of
    service revenues. Handset insurance revenues are included in contract
    service revenues.

    Branded revenues include contract and prepaid revenues, and do not include
    wholesale (M2M and MVNO), roaming, other service revenues, equipment
    sales, and other revenues.
5.Data ARPU is defined as total data revenues divided by average total
    customers during the period. Total data revenues include data revenues
    from contract customers, prepaid customers, Wi-Fi revenues and data
    roaming revenues. Branded data revenues exclude data revenues from M2M
    customers, MVNO, Wi-Fi revenues and data roaming revenues. The relative
    value of data revenues from bundled unlimited voice and data plans
    (including a relative value for messaging and non-messaging data revenue)
    are included in total data revenues.
6.Operating Income Before Interest, Depreciation, Amortization and
    Impairment (OIBDA) is a non-GAAP financial measure, which we define as
    operating income before depreciation, amortization and impairment charges.
    In a capital-intensive industry such as wireless telecommunications, we
    believe OIBDA, as well as the associated percentage margin calculation, to
    be meaningful measures of our operating performance. OIBDA should not be
    construed as an alternative to operating income or net income as
    determined in accordance with GAAP, as an alternative to cash flows from
    operating activities as determined in accordance with GAAP or as a measure
    of liquidity. We use OIBDA as an integral part of our planning and
    internal financial reporting processes, to evaluate the performance of our
    business by senior management and to compare our performance with that of
    many of our competitors. We believe that operating income is the financial
    measure calculated and presented in accordance with GAAP that is the most
    directly comparable to OIBDA. OIBDA is adjusted to exclude transactions
    that are not reflective of our ongoing operating performance and is
    detailed in the Reconciliation of Non-GAAP Financials Measures to GAAP
    Financial Measures schedule.
7.Adjusted OIBDA margin is a non-GAAP financial measure, which we define as
    adjusted OIBDA (as described in Note 6 above) divided by service revenues.
8.Capital expenditures consist of amounts paid for construction and the
    purchase of property and equipment.
9.High speed packet access plus (HSPA+ 21 and HSPA+ 42 technologies) offers
    customers a 4G experience, including data speeds comparable to other 4G
    network speeds currently available to mobile device users in the United
    States.
10.Smartphones are defined as UMTS/HSPA/HSPA+ 21/HSPA+ 42 enabled converged
    devices distributed by T-Mobile USA, which integrate voice and data
    services.


Supplementary Operating and Financial Data – US GAAP

                        Full                                                   Full                                       
                           Year                                                             Year
(thousands)                2012         Q4 2012      Q3 2012      Q2 2012      Q1 2012      2011         Q4 2011      Q3 2011      Q2 2011      Q1 2011
Customers, end of
period ^1,2
Branded contract           20,293       20,293       20,809       21,300       21,857       22,367       22,367       23,074       23,463       23,999
customers
Branded prepaid            5,826       5,826       5,659       5,295       5,068       4,819       4,819       4,599       4,345       4,416  
customers
Total branded              26,119      26,119      26,468      26,595      26,925      27,186      27,186      27,673      27,808      28,415 
customers
M2M customers              3,090        3,090        2,954        2,786        2,691        2,429        2,429        2,525        2,321        2,065
MVNO customers             4,180       4,180       3,905       3,787       3,756       3,569       3,569       3,514       3,456       3,154  
Total wholesale            7,270       7,270       6,859       6,573       6,448       5,999       5,999       6,038       5,777       5,220  
customers
Total T-Mobile USA
customers, end of          33,389      33,389      33,327      33,168      33,373      33,185      33,185      33,711      33,585      33,635 
period
Thereof, contract          23,383       23,383       23,763       24,086       24,548       24,797       24,797       25,598       25,784       26,065
customers
Thereof, prepaid           10,006       10,006       9,564        9,082        8,824        8,389        8,389        8,113        7,801        7,570
customers
                                                                                                                                                
Net customer
additions/(losses)^2
Branded contract           (2,074 )     (515   )     (492   )     (557   )     (510   )     (2,206 )     (706   )     (389   )     (536   )     (574   )
customers
Branded prepaid            1,007       166         365         227         249         321         220         254         (71    )     (82    )
customers
Total branded              (1,067 )     (349   )     (127   )     (330   )     (262   )     (1,885 )     (486   )     (135   )     (608   )     (656   )
customers
M2M customers              660          135          168          95           262          556          (95    )     204          256          192
MVNO customers             610         275         119         30          187         780         56          57          302         365    
Total wholesale            1,270       410         287         125         449         1,336       (40    )     261         558         557    
customers
Total T-Mobile USA
net customer               203         61          160         (205   )     187         (549   )     (526   )     126         (50    )     (99    )
additions/(losses)
Thereof, contract
net customer               (1,414 )     (380   )     (324   )     (462   )     (248   )     (1,650 )     (802   )     (186   )     (281   )     (382   )
additions/(losses)
Thereof, prepaid net
customer                   1,617        441          483          257          436          1,101        276          312          231          283
additions/(losses)
                                                                                                                                                
Note: Certain customer numbers may not add due to rounding.
                                                                                                                                                
Branded contract           2.40   %     2.50   %     2.30   %     2.10   %     2.50   %     2.70   %     3.00   %     2.60   %     2.60   %     2.60   %
churn^3
Branded prepaid            6.40   %     7.00   %     6.20   %     6.00   %     6.40   %     6.70   %     6.70   %     6.50   %     6.60   %     7.00   %
churn^3
Branded churn^3            3.20   %     3.50   %     3.10   %     2.90   %     3.20   %     3.30   %     3.60   %     3.20   %     3.20   %     3.30   %
Contract churn^3           2.30   %     2.40   %     2.30   %     2.20   %     2.30   %     2.60   %     3.10   %     2.40   %     2.40   %     2.40   %
Blended churn^3            3.40   %     3.70   %     3.40   %     3.20   %     3.30   %     3.60   %     4.00   %     3.50   %     3.30   %     3.40   %
($)
ARPU (branded              56.79        55.47        56.59        57.35        57.68        57.56        58.23        58.50        57.26        56.34
contract) ^ 4
ARPU (contract) ^ 4        50.30        48.47        49.95        50.90        51.81        52.57        52.52        53.05        52.52        52.21
ARPU (branded              26.85        27.69        27.35        26.81        25.39        24.27        24.90        24.31        23.60        24.23
prepaid) ^ 4
ARPU (prepaid) ^ 4         20.28        20.59        20.60        20.58        19.29        18.38        19.12        18.23        17.99        18.13
ARPU (blended)^4           43.12        41.31        42.78        43.88        44.52        45.86        45.52        46.22        45.86        45.82
Data ARPU                  14.52        14.72        14.53        14.45        14.38        13.71        14.16        13.98        13.56        13.13
(blended)^5
Data ARPU                  17.34        17.83        17.40        17.21        16.94        15.54        16.45        15.97        15.25        14.55
(branded)^5
Data ARPU (branded         19.37        20.07        19.45        19.16        18.84        17.07        18.13        17.62        16.72        15.91
contract)^5
($ millions)
Service revenues^4         17,213       4,127        4,261        4,381        4,444        18,481       4,565        4,666        4,620        4,630
Total revenues             19,719       4,909        4,893        4,883        5,034        20,618       5,179        5,228        5,050        5,161
Adjusted OIBDA^6           4,886        1,048        1,226        1,338        1,274        5,310        1,400        1,445        1,277        1,188
Adjusted OIBDA             28     %     25     %     29     %     31     %     29     %     29     %     31     %     31     %     28     %     26     %
margin^7
Capital                    2,901        898          717          539          747          2,729        551          741          688          749
expenditures^8

Contact:

Deutsche Telekom
Press Contacts:
Philipp Kornstaedt, +49 228-181-94053
or
Andreas Leigers, +49 228-181-4949
or
Investor Relations Contacts:
Investor Relations Bonn, +49 228-181-88880
or
Investor Relations New York
Nils Paellmann, +1 212-424-2951
+1 877-DT SHARE (toll-free)