2Q16 Review: The UnCarrier Continues

July MONTH 28, 2016 DD, YYYY 04:01 HH:MM AM GMT AM/PM GMT T-Mobile US, Inc. 2Q16 Review: The UnCarrier Continues Stock Rating Overweight Industry View Cautious Price Target $52.00 T-Mobile reported strong 2Q16 financial metrics, highlighted by record churn, and >100% of industry postpaid phone adds. We remain encouraged by the consistent growth despite intense competition. Our PT increases to $52 (from $47). 2Q16 results broadly ahead of MSe/consensus. 2Q16 was the 13th consecutive quarter of 1m+ customer net adds, and 10th consecutive quarter of industryleading postpaid phone adds. T-Mobile's success mirrors its network achievements, as the company now covers 311m LTE POPs. The deployment of the 700 Mhz A-block remains ahead of schedule, with 350 markets and 200m people under coverage. T-Mobile now has low-band spectrum in the top ten metro markets & 29 out of 30 of the top markets. In sum, results continue to support our thesis that T-Mobile has a sustainable competitive advantage, and substantial additional market share opportunity. Financial metrics: Service revenue, total revenue, and Adj. EBITDA (EBITDA margins expanded 620 bps Y/Y) all came in above consensus. FCF missed consensus, but beat MSe, as capex came in higher than expected (management reiterated 2016 capex guidance). Still, FCF improved $729m sequentially from improving OCF (+$743m Q/Q), helped by the sale of EIP receivables. The $2.2b asset deposit suggests a potential of 30Mhz+ of bidding in broadcast auction. Subscriber metrics: ARPU, churn, postpaid net adds, postpaid phone net adds, and prepaid net adds, all beat MSe/consensus. Postpaid net adds benefited from a +210k transfer from prepaid. Notably, the 1.27% postpaid phone churn (- 6bps Y/Y) marked the best quarterly performance in company history. Excluding the subs from the WalMart co-branded venture, churn was 1.09% as bad debts remained under control and 700 MHz spectrum reaches 200m covered pops (headed to nearly 270m). T-Mobile claims they remain net port positive against all carriers, including Sprint. Through July 17, T-Mobile has over 200k of postpaid phone adds. 2016 Guidance: For the second consecutive quarter, T-mobile is raising guidance for 2016 branded postpaid net customer additions to between 3.4 and 3.8m (previously 3.2 to 3.6 million and MSe +3,879). Management narrowed 2016 reported EBITDA guidance, to $9.8 to $10.1b, from $9.7 to $10.2 billion, leaving the midpoint unchanged at $9.9b (MSe $10.1b). Guidance includes the aggregate impact from leasing and Data Stash of $0.8 to $1.0b (from $0.7 to $1.0b), and the spectrum gain of $636m. Updated guidance implies $50m lower cash EBITDA that the previous range ($9.00b vs $9.05b previously). MORGAN STANLEY & CO. LLC Simon Flannery EQUITY ANALYST Simon.Flannery@morganstanley.com Spencer Gantsoudes, CFA RESEARCH ASSOCIATE Spencer.Gantsoudes@morganstanley.com T-Mobile US, Inc. ( TMUS.O, TMUS US ) Telecom Services / United States of America +1 212 761-6432 +1 212 761-5374 Stock Rating Overweight Industry View Cautious Price target $52.00 Shr price, close (Jul 27, 2016) $45.64 Mkt cap, curr (mm) $39,222 52-Week Range $45.64-33.23 Fiscal Year Ending 12/15 12/16e 12/17e 12/18e ModelWare EPS ($) 1.29 1.54 2.12 2.68 Prior ModelWare EPS 1.29 1.23 1.44 1.79 ($) P/E 30.4 29.7 21.5 17.0 Consensus EPS ($) 0.65 1.23 1.78 2.58 Div yld (%) - - - - Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare framework = Consensus data is provided by Thomson Reuters Estimates e = Morgan Stanley Research estimates QUARTERLY MODELWARE EPS ($) 2016e 2016e 2017e 2017e Quarter 2015 Prior Current Prior Current Q1 0.06-0.59a - - Q2 0.46 0.22 0.33 - - Q3 0.39 0.18 0.23 - - Q4 0.37 0.25 0.38 - - e = Morgan Stanley Research estimates, a = Actual Company reported data Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. 1

Risk Reward T-Mobile US, Inc. (TMUS, Overweight, PT: $47) Source: Morgan Stanley Research, Thomson Reuters. Priced as of February 11, 2016. Price Target $52 Our ~7x 2017e target multiple is above the current ~6.3x cash EBITDA multiple, and a slight discount to our target 7.2x cash EBITDA multiple for Sprint. We believe our TMUS multiple is conservative given healthier growth profile and balance sheet relative to Sprint. Bull $72 ~7.0x 2019e EV / EBITDA (6.6% discount rate) ~20% of Postpaid Subscribers + Strategic Value. T-Mobile takes substantial share and holds ~20% postpaid subscriber share by 2019. A refreshed branding strategy, superior network performance, cost efficiencies and synergies drive substantial value creation. T-Mobile could hold strategic value in an industry that has seen much consolidation. Base $52 ~7.0x 2017e EV / Cash EBITDA Strong Operational + Financial Results. We believe that T-Mobile can continue to pursue UnCarrier initiatives. In particular, we are focused on distribution (with LTE coverage > 300M POPs), MetroPCS expansion, iphone penetration, and opportunity to take share in the business segment. Bear $31 ~5.5x 2017e EV / EBITDA Competitive Wireless Industry. Risks include strong position of the Bells, limited impact from future UnCarrier announcements, network capacity, and customer credit. The prepaid arena becomes more crowded limiting the growth potential of MetroPCS. Investment Thesis Operational Momentum: T-Mobile has ~14% market share (of postpaid subscribers + wireless service revenues) among the Big 4 wireless carriers (v. ~22% of postpaid gross adds in 1Q15). In our view, there is an opportunity to continue to take market share, from the expansion of LTE to 300M POPs (v. distribution to 230M - 240M POPs), expansion of MetroPCS, iphone penetration, and business customers. Valuation: Spectrum holdings provide valuation support, with 82 MHz @ $1.93 per MHz / POP (paired spectrum in the recent AWS-3 spectrum auction) exceeding the Enterprise Value. Strategic Optionality: Deutsche Telekom has shown a willingness to consider offers. Key Value Drivers Most spectrum per subscriber, with ~1.5 Hz / subscriber (v. ~1.1 Hz / subscriber at AT&T and Verizon). UnCarrier initiatives have positioned T- Mobile as the customer friendly carrier, attracting millennials and business customers, without competing on price. $9 billion to $10 billion of cost synergies from the acquisition of MetroPCS, or an annual run rate of ~$1.5 billion Investments in better coverage / reliability. Potential Catalysts UnCarrier announcements Subscriber momentum ARPU stabilization EBITDA growth / FCF generation Merger reports Risks to Achieving Price Target Network capacity Response from competitors Customer credit High leverage / capital raises Heavy spectrum spend 2

Results at a Glance Exhibit 1: T-Mobile Reported 2Q16 Results 2Q15 1Q16 MSe Actual Diff Pos./ Cons. 2Q16 2Q16 (Neg.) 2Q16 Financial Metrics ($ in Millions) Service Revenues $6,144 $6,578 $6,904 $6,888 ($16) $6,852 % y/y growth 12.0% 13.0% 12.4% 12.1% (27 bps) 11.5% Total Revenues $8,179 $8,599 $9,098 $9,222 $124 $8,980 % y/y growth 13.8% 10.6% 11.2% 12.8% 152 bps 9.8% Adj. EBITDA $1,817 $2,749 $2,387 $2,464 $77 $2,370 % service margin 29.6% 41.8% 34.6% 35.8% 120 bps 34.6% % total margin 22.2% 32.0% 26.2% 26.7% 48 bps 26.4% Capex $1,191 $1,335 $1,156 $1,349 ($193) $1,141 % service margin 19.4% 20.3% 16.8% 19.6% (283 bps) 16.7% Free Cash Flow (OCF - Capex) ($30) ($310) ($22) $419 $441 Subscriber Metrics (in 000s) Total Branded Postpaid Net Adds 1,008 1,041 887 890 3 841 Branded Postpaid Phone 760 877 637 646 9 637 Branded Postpaid Mobile Broadband 248 164 250 244 (6) 204 Branded Prepaid Net Adds 178 807 363 476 113 366 Branded Postpaid Phone Churn 1.32% 1.33% 1.30% 1.27% 3 bps 1.33% Branded Prepaid Churn 4.93% 3.84% 4.50% 3.91% 59 bps Branded Postpaid Phone ARPU $48.19 $46.21 $47.08 $47.11 $0.03 $46.96 % y/y growth (2.3%) (0.5%) (2.3%) (2.2%) 6 bps (2.6%) Branded Prepaid ARPU $37.83 $37.58 $37.64 $37.86 $0.22 % y/y growth 1.8% (0.6%) (0.5%) 0.1% 58 bps Source: Company Data, Morgan Stanley Research, Thomson Reuters. Consensus Estimates from IR as of 6/24/16 3

Exhibit 2: Strong Financials Metrics, Ahead of MSe/consensus Source: Company data, Morgan Stanley Research Exhibit 3: We remain above guidance of EBITDA and Postpaid Net Adds T-Mobile 2016 Guidance (updated) Mse (previous) Mse (new) Consensus Low Mid High Adj. EBITDA $9,800 $9,950 $10,100 $10,115 $10,255 $10,143 Cash Capex $4,500 $4,650 $4,800 $4,845 $4,790 $4,776 Branded Postpaid Net Adds (000s) 3,400 3,600 3,800 3,877 4,079 3,773 Source: Company data, Morgan Stanley Research. Consensus Numbers from IR as of 6/24/16 Exhibit 4: Our Reported EBITDA Increases with Guidance to Reflect Spectrum Swap Gain, Core EBITDA Declines 1% to Reflect Increased Leasing Impact 2016 Guidance (at midpoint) Reported Leasing + Data Stash Impact Spectrum Swap Core EBITDA T-Mobile $9,950 ($900) ($636) $8,414 Consensus ('E) $10,143 ($1,125) ($636) $8,382 Morgan Stanley (Prior Estimate) $10,115 ($1,101) ($636) $8,378 Morgan Stanley (New Estimate) $10,255 ($999) ($636) $8,620 Source: Company data, Morgan Stanley Research. Consensus Numbers from IR as of 6/24/16 4

Charts Exhibit 5: Industry Remains Competitive, But Verizon Price Hikes a Welcome Sign 5

Exhibit 6: Phone Net Adds Came in Above MSe Exhibit 7: Record Postpaid Phone Churn Note, Sprint, AT&T & Verizon = postpaid churn whlie T-Mobile = phone postpaid churn only 6

Exhibit 8: Another Strong Quarter of Prepaid Adds Exhibit 9: ARPU Improves Sequentially 7

Exhibit 10: Service Revenues +12% Year-Over-Year, Beats consensus Exhibit 11: Margins Improve 620 bps Y/Y 8

Exhibit 12: T-Mobile's Porting Trends Remain Strong, Disputes that Sprint is Porting Positively Against the Company T-Mobile Porting Ratios 4Q15 1Q16 2Q16 1.92 1.75 1.64 1.44 1.56 1.34 1.43 1.35 1.15 1.67 1.50 1.43 AT&T Verizon Sprint Overall Source: Company data, Morgan Stanley Research 9

What's Changed Exhibit 13: We Have Increased 2016 Revenue and Reported EBITDA. We Increased Outer Year Revenue, EBITDA, and FCF 1Q16A NEW Financial Metrics ($ in Millions) Service Revenues $6,578 $27,974 $30,190 $32,043 $6,536 $27,693 $29,982 $31,832 $42 $282 $208 $211 % y/y growth 7.1% 12.7% 7.9% 6.1% 6.4% 11.6% 8.3% 6.2% 69 bps 113 bps -35 bps -3 bps Total Revenues $8,599 $35,869 $38,094 $40,452 $8,413 $35,052 $36,479 $38,426 $186 $817 $1,615 $2,026 % y/y growth 5.1% 11.9% 6.2% 6.2% 2.9% 9.4% 4.1% 5.3% 227 bps 255 bps 213 bps 85 bps Adj. EBITDA $2,749 $10,227 $11,312 $12,460 $2,022 $9,430 $10,612 $11,440 $727 $797 $700 $1,020 % service margin 41.8% 36.6% 37.5% 38.9% 30.9% 34.1% 35.4% 35.9% 1085 bps 251 bps 207 bps 295 bps % total margin 32.0% 28.5% 29.7% 30.8% 24.0% 26.9% 29.1% 29.8% 793 bps 161 bps 60 bps 103 bps Capex $1,335 $4,864 $5,283 $5,447 $1,144 $4,974 $5,247 $5,411 $191 ($110) $36 $36 % service margin 20.3% 17.4% 17.5% 17.0% 17.5% 18.0% 17.5% 17.0% 279 bps -58 bps 0 bps 0 bps Free Cash Flow (OCF - Capex) (310) $1,444 $3,227 $3,998 378 1,004 1,846 2,837 (688) 440 1,381 1,160 Operational Metrics (Adds in 000s) Total Branded Postpaid Net Adds 1,041 4,003 3,190 2,537 957 3,927 3,133 2,493 84 76 58 44 Branded Postpaid Phone 877 3,024 2,311 1,758 807 2,962 2,268 1,728 70 62 44 30 Branded Postpaid Mobile Broadband 164 979 879 779 150 965 865 765 14 14 14 14 Branded Prepaid Net Adds 807 1,685 1,383 1,098 252 1,306 1,028 860 555 379 355 238 Branded Postpaid Phone Churn 1.33% 1.35% 1.34% 1.33% 1.27% 1.33% 1.32% 1.31% 6 bps 2 bps 2 bps 2 bps Branded Prepaid Churn 3.84% 4.09% 3.99% 3.89% 4.27% 4.21% 4.11% 4.01% -43 bps -11 bps -11 bps -11 bps Branded Postpaid Phone ARPU $46.21 $47.48 $47.01 $46.61 $45.97 $47.41 $47.17 $46.98 $0.24 $0.07 ($0.16) ($0.38) % y/y growth (0.5%) (0.4%) (1.0%) (0.9%) (1.0%) (0.6%) (0.5%) (0.4%) 53 bps 15 bps -50 bps -45 bps Branded Prepaid ARPU $37.58 $37.21 $37.36 $37.51 $37.43 $37.30 $37.49 $37.67 $0.15 ($0.09) ($0.12) ($0.16) % y/y growth (0.7%) 0.1% 0.4% 0.4% (1.1%) 0.4% 0.5% 0.5% 39 bps -23 bps -10 bps -10 bps Source: Company data, Morgan Stanley Research OLD 2016E 2017E 2018E 1Q16A 2016E 2017E 2018E 1Q16A 2016E 2017E 2018E DIFF. 10

Valuation Exhibit 14: Our $52 PT is Based on 7x 2017 Cash EBITDA, Discounted Back 6 months SENSITIVITY ANALYSIS EV / Adj. EBITDA Morgan Stanley Base Case on 2017E Adj. EBITDA ( ~$1.2 billion for leasing/ds benefit) Adj. EBITDA $9,489 $9,689 $9,889 $10,089 $10,289 $10,489 $10,689 $10,889 $11,089 8.0x $58 $60 $62 $64 $66 $68 $70 $72 $74 7.8x $55 $57 $59 $61 $63 $65 $67 $68 $70 7.5x $53 $54 $56 $58 $60 $62 $63 $65 $67 7.3x $50 $52 $53 $55 $57 $58 $60 $62 $64 7.0x $47 $49 $50 $52 $54 $55 $57 $59 $60 6.8x $44 $46 $47 $49 $51 $52 $54 $55 $57 6.5x $41 $43 $44 $46 $48 $49 $51 $52 $54 6.3x $38 $40 $41 $43 $44 $46 $47 $49 $50 5.5x $30 $31 $33 $34 $35 $37 $38 $39 $40 Source: Company data, Morgan Stanley Research Exhibit 15: 12-MONTH FORWARD VALUE PER SHARE 31-Dec-16 31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 EV / EBITDA Multiple 7.0x 7.0x 7.0x 7.0x 7.0x Adj. EBITDA $10,256 $10,289 $11,721 $13,004 $14,212 Discount Period 0.4 1.4 2.4 3.4 4.4 Discount Factor 0.97 0.90 0.84 0.78 0.72 Discount Rate 8% 8% 8% 8% 8% 12-Month Value Per Share on Target Multiple $52 $48 $55 $59 $62 % Upside from Current Price 13% 6% 20% 30% 36% Levered FCF Yield Yield 7.7% 7.7% 7.7% 7.7% 7.7% Levered FCF $3,475 $3,905 $5,002 $6,058 $7,107 Implied Market Cap $45,132 $50,719 $64,966 $78,676 $92,299 Discount Period 0.4 1.4 2.4 3.4 4.4 Discount Factor 0.97 0.90 0.84 0.78 0.72 Discount Rate 8% 8% 8% 8% 8% 12 Month Forward Value per Share $52 $54 $63 $72 $81 % Upside from Current Price 14.3% 17.4% 37.5% 57.8% 77.0% Source: Company data, Morgan Stanley Research 11

Financials Exhibit 16: T-Mobile: Income Statement ($MM) 12

Exhibit 17: T-Mobile: Balance Sheet ($MM) Exhibit 18: T-Mobile: Cash Flow Statement ($MM) 13

Exhibit 19: T-Mobile: Subscribers ('000s) 14

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