The following table presents selected unaudited prospective financial data of the combined company made available to the T-Mobile board of directors and the financial advisors to the T-Mobile independent committee and T-Mobile, as well as (except as noted below) to Sprint and the financial advisors to the Sprint independent committee and Sprint (which we refer to as the “combined company forecasts”):
| (in millions) | Year Ended December 31, | |||||||||||||||||||||||||||||||
| 2019E | 2020E | 2021E | 2022E | 2023E | 2024E | 2025E | 2026E | |||||||||||||||||||||||||
| Service revenues |
$ | 56,256 | $ | 57,498 | $ | 59,070 | $ | 60,910 | $ | 62,944 | $ | 65,005 | $ | 66,941 | $ | 68,527 | ||||||||||||||||
| Total revenues |
78,837 | 80,736 | 83,229 | 86,485 | 90,157 | 93,410 | 95,933 | 97,855 | ||||||||||||||||||||||||
| EBITDA(1) |
22,397 | 24,197 | 26,559 | 28,046 | 30,881 | 35,263 | 36,685 | 37,839 | ||||||||||||||||||||||||
| Adjusted EBITDA(2) |
22,841 | 24,644 | 27,009 | 28,502 | 31,341 | 35,728 | 37,154 | 38,313 | ||||||||||||||||||||||||
| Cash capital expenditures(3) |
(12,849 | ) | (10,398 | ) | (11,725 | ) | (9,205 | ) | (8,622 | ) | (8,628 | ) | (8,716 | ) | (8,825 | ) | ||||||||||||||||
| Unlevered free cash flow(4) |
3,413 | 7,152 | 7,658 | 10,025 | 11,871 | 14,870 | 15,619 | 16,439 | ||||||||||||||||||||||||
| (1) | EBITDA is a non-GAAP measure, which is calculated as earnings before interest expense, net of interest income, income tax expense, depreciation and amortization expense and includes non-cash stock-based compensation and other special factors as expenses. |
| (2) | Adjusted EBITDA is a non-GAAP measure, which is calculated as earnings before interest expense, net of interest income, income tax expense, depreciation and amortization expense and does not include non-cash stock-based compensation and other special factors as expenses. For the purposes of the combined company forecasts, costs to achieve synergies are not presented as a special factor and are included in adjusted EBITDA. |
| (3) | Calculated as cash capital expenditures related to the purchase of tangible assets. |
| (4) | Unlevered free cash flow is a non-GAAP measure, which is calculated as EBITDA less cash taxes, capital expenditures (including estimated spectrum related expenditures), changes in net working capital, cash payments for debt prepayment or debt extinguishment costs, plus proceeds related to beneficial interests in securitization transactions, and other cash items. The unlevered free cash flow data of the combined company in the combined company forecasts was not provided to Sprint or the financial advisors to the Sprint independent committee or Sprint. |
The following table presents the estimated synergies on a run rate basis (and is not reflective of the phase in of estimated synergies during preceding years):
| (in billions) | Run Rate, Year Ended December 31, 2026E(1) |
|||
| Network(2) |
$ | 4.2 | ||
| Sales, services & marketing |
1.4 | |||
| Back office(3) |
1.1 | |||
| Customer impact and other growth opportunities(4) |
1.7 | |||
| (1) | Calculated on a pre-tax basis. |
| (2) | Includes $0.4 billion of network capital expenditure synergies. |
| (3) | Includes $0.1 billion of back office capital expenditure synergies. |
| (4) | Includes $(0.5) billion of customer impact and other growth opportunities capital expenditures synergies. |
Although presented with numerical specificity, the unaudited prospective financial information (including the T-Mobile management Sprint forecasts below) and estimated synergies reflect numerous assumptions and estimates as to future events made by the management of T-Mobile (in the case of the combined company forecasts and the estimated synergies, based in part on inputs from and discussions with Sprint management). In preparing the unaudited prospective financial information and estimated synergies, T-Mobile made assumptions and estimates regarding, among other things, total customers and revenues per customer, pricing and volume of products and services sold, network, spectrum and other capital expenditures, interest rates, corporate financing activities, including the amount and timing of the issuance of debt, the timing and amount of equity issuances or repurchases, the effective tax rate, the regulatory and legal environment in which T-Mobile operates, and the amount of general and administrative costs. At the time such unaudited prospective financial information and
estimated synergies were prepared, T-Mobile’s management believed such assumptions and estimates were reasonable.
The unaudited prospective financial information and the estimated synergies constitute forward-looking statements and no assurances can be given that the assumptions made in preparing the unaudited prospective financial information and estimated synergies will accurately reflect future conditions. The estimates and assumptions underlying the unaudited prospective financial information and estimated synergies involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions, future tax rates and future business decisions which may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, risks and uncertainties described under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict and many of which are beyond the control of T-Mobile and/or Sprint and will be beyond the control of the combined company. In addition, the unaudited prospective financial information and estimated synergies will be affected by T-Mobile’s or the combined company’s, as applicable, ability to achieve strategic goals, objectives and targets over the applicable periods. As a result, there can be no assurance that the underlying assumptions will prove to be accurate or that the projected results or synergies will be realized, and actual results or synergies likely will differ, and may differ materially, from those reflected in the unaudited prospective financial information and the estimated synergies, whether or not the merger transactions are completed.
T-Mobile stockholders and Sprint stockholders are urged to review T-Mobile’s most recent SEC filings for a description of T-Mobile’s results of operations and financial condition and capital resources during 2016, 2017 and 2018, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in T-Mobile’s Annual Report on Form 10-K for the year ended December 31, 2017, as updated by the Current Report on Form 8-K filed with the SEC on June 18, 2018, along with the unaudited condensed consolidated financial statements of T-Mobile contained in T-Mobile’s Quarterly Report on Form 10-Q for the three month period ended March 31, 2018, which are incorporated by reference into this joint consent solicitation statement/prospectus.
In light of, among other matters, the foregoing factors and the uncertainties inherent in the unaudited prospective financial information and the estimated synergies, readers of this joint consent solicitation statement/prospectus are cautioned not to place undue, if any, reliance on the unaudited prospective financial information and the estimated synergies included in this joint consent solicitation statement/prospectus. No representation is made by T-Mobile, Sprint, Deutsche Telekom, SoftBank, any of their respective affiliates, any of their respective financial advisors or any other person to any T-Mobile stockholder or any Sprint stockholder regarding the ultimate performance of T-Mobile or the combined company compared to the information included in the unaudited prospective financial information and estimated synergies. In particular, T-Mobile has made no representation to Sprint, SoftBank or any other party to the business combination agreement concerning the unaudited prospective financial information or the estimated synergies. None of T-Mobile, Sprint, Deutsche Telekom, SoftBank, any of their respective affiliates or any of their respective financial advisors can provide assurance of the validity, reasonableness, accuracy or completeness of the unaudited prospective financial information or the estimated synergies included in this joint consent solicitation statement/prospectus. The inclusion of unaudited prospective financial information and estimated synergies in this joint consent solicitation statement/prospectus should not be regarded as an indication that such unaudited prospective financial information will be an accurate prediction of future events, and such information should not be relied on as such.
T-MOBILE DOES NOT INTEND TO, AND DISCLAIMS ANY OBLIGATION TO, UPDATE, CORRECT OR OTHERWISE REVISE THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION AND ESTIMATED SYNERGIES TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH UNAUDITED PROSPECTIVE FINANCIAL INFORMATION OR ESTIMATED SYNERGIES ARE NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM).
Sprint Unaudited Prospective Financial Information
Sprint does not publicly disclose long-term projections as to future performance, revenues, earnings or other results due to, among other reasons, the uncertainty and subjectivity of the underlying assumptions and estimates. As a result, Sprint does not endorse the unaudited prospective financial information or the estimated synergies as a reliable indication of future results. Sprint is including certain unaudited prospective financial information in this section of this joint consent solicitation statement/prospectus solely because it was among the financial information made available to the Sprint board of directors, Sprint’s financial advisors, T-Mobile and/or T-Mobile’s financial advisors in connection with their respective evaluations of the merger transactions and the other transactions contemplated by the business combination agreement. The unaudited prospective financial information is not being included in this joint consent solicitation statement/prospectus in order to influence any Sprint stockholder or T-Mobile stockholder to make an investment decision with respect to the merger transactions or to influence any Sprint stockholder or T-Mobile stockholder as to whether or how such stockholder should deliver a written consent or act with respect to the Sprint proposals, the T-Mobile proposals, the merger transactions or the other transactions contemplated by the business combination agreement or any other matter. The unaudited prospective financial information presented below as the Sprint management Sprint forecasts and the adjusted Sprint management Sprint forecasts was prepared by Sprint’s management for internal planning purposes from January through April 2018. Such unaudited prospective financial information was based solely upon information available to Sprint’s management at the time of their preparation. Such unaudited prospective financial information was based on estimates and assumptions made by Sprint’s management from January through April 2018 and speaks only as of that time. Sprint has not updated the unaudited prospective financial information included in this joint consent solicitation statement/prospectus and does not intend to do so.
The inclusion of the unaudited prospective financial information in this joint consent solicitation statement/prospectus should not be regarded as an indication that any of Sprint, T-Mobile, SoftBank, Deutsche Telekom, any of their respective affiliates, any of their respective financial advisors or any other person considered, or now considers, this information to be necessarily predictive of actual future results or events, and it should not be relied upon as such. There can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated.
Because the unaudited prospective financial information covers multiple years, such information by its nature becomes less predictive with each successive year. Sprint stockholders and T-Mobile stockholders are urged to review the SEC filings of Sprint incorporated by reference into this joint consent solicitation statement/prospectus for a description of risk factors with respect to the business of Sprint. See “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements” and “Where You Can Find More Information.” The unaudited prospective financial information of Sprint was not prepared with a view toward public disclosure and was not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The unaudited prospective financial information presented below as the Sprint management Sprint forecasts and the adjusted Sprint management Sprint forecasts was prepared by Sprint’s management and is the responsibility of Sprint’s management. Neither the independent registered public accounting firm of Sprint nor any other independent accountant has audited, reviewed, compiled, examined or applied agreed-upon procedures with respect to the unaudited prospective financial information, and accordingly, neither the independent registered public accounting firm of Sprint nor any other independent accountant expresses any opinion or any other form of assurance on such information or its achievability, and assumes no responsibility for, and disclaims any association with, the unaudited prospective financial information. The report of the independent registered public accounting firm of Sprint contained in Sprint’s Annual Report on Form 10-K for the year ended March 31, 2018, which is incorporated by reference into this joint consent solicitation statement/prospectus, relates to Sprint’s previously issued financial statements. It does not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not necessarily reflect Sprint’s current estimates and does not take into account any circumstances or events occurring after the date it was prepared, and some or all of the assumptions
