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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

OR

o	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 000-29667

T-MOBILE USA, INC.

(425) 378-4000

VOICESTREAM WIRELESS CORPORATION

     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 o

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

     This registrant meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

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T-MOBILE USA, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2002

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T-MOBILE USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)

See accompanying notes to condensed consolidated financial statements.

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T-MOBILE USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(dollars in thousands)
(unaudited)

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T-MOBILE USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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T-MOBILE USA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION

     T-Mobile USA, Inc., (“T-Mobile,” “we” or “us,” as described in Note 2 below), formerly known as VoiceStream Wireless Corporation (“VoiceStream”), provides personal communications services (“PCS”) under the T-Mobile brand primarily in urban markets in the United States using the Global System for Mobile Communications, or GSM, technology. T-Mobile is the brand name under which Deutsche Telekom AG’s (“Deutsche Telekom”) principal wireless subsidiaries operate.

     On May 31, 2001, Deutsche Telekom acquired 100% of the common shares of VoiceStream in a transaction that qualified as a tax-free reorganization. VoiceStream shareholders received for each VoiceStream common share either 3.6693 shares of Deutsche Telekom stock and $15.7262 in cash, 3.6683 shares of Deutsche Telekom stock and $15.9062 in cash or 3.7647 shares of Deutsche Telekom stock (hereafter referred to as the “T-Mobile merger”). Following the closing of the merger, Deutsche Telekom transferred all of its VoiceStream common shares to T-Mobile International AG (“T-Mobile International”). T-Mobile International is a wholly-owned subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom’s principal GSM wireless operations in Europe and the United States.

     Upon consummation of the T-Mobile merger and the transfer by Deutsche Telekom of all of its VoiceStream common shares to T-Mobile International, VoiceStream common shares were deregistered and delisted from NASDAQ and are no longer publicly traded. We are now relying on funding from T-Mobile International, Deutsche Telekom or its affiliates to meet our working capital, capital expenditure, debt service and other obligations.

     Simultaneous with the T-Mobile merger, Deutsche Telekom also acquired 100% of the common shares of Powertel, Inc. (“Powertel”), a GSM service provider in the southeastern United States. Following the closing of the merger, Deutsche Telekom transferred all of its Powertel common shares to T-Mobile International. Powertel now provides and bills for its services under the T-Mobile brand name. Powertel’s wireless network is fully integrated with ours such that, from a customer’s perspective, its services are indistinguishable from ours (see Note 7 for a description of certain cost sharing agreements).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Consolidation and basis of presentation

     The condensed consolidated financial statements (the “interim financial statements”) of T-Mobile include the accounts of all majority and minority-owned subsidiaries that are either controlled by T-Mobile or for which accounting principles generally accepted in the United States (“GAAP”) require consolidation. Affiliates that are 20 percent to 50 percent owned are generally accounted for using the equity method of accounting. Affiliates that are less than 20 percent owned and for which control does not otherwise exist are accounted for under the cost method.

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     We have prepared the interim financial statements pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations for interim reporting. These rules and regulations allow certain information required under GAAP to be condensed or omitted, provided that the interim financial statements, when read in conjunction with our annual audited financial statements included in our most recent Form 10-K, provide a fair presentation of our interim financial position, results of operations and cash flows. The interim financial statements presented herein are unaudited; however, we believe that the interim financial statements reflect all adjustments necessary for a fair presentation of our financial position, results of operations and cash flows. Such adjustments include those of a normal, recurring nature and those related to the T-Mobile merger as described below. The results for interim periods are not necessarily indicative of expected operating results for the full fiscal year or any future periods.

     The T-Mobile merger was accounted for as a purchase business combination and resulted in adjustment of the basis of our assets, liabilities and shareholder’s equity to reflect fair value on the closing date of the merger. As a result of this new basis, our interim statements of financial position, results of operations and cash flows for periods subsequent to May 31, 2001, the closing date of the merger, are not necessarily comparable to periods prior to the merger.

     Long-lived assets

     On January 1, 2002, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement replaces SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for recognition and measurement of the impairment of long-lived assets to be held and used. This statement requires recognition of an impairment loss only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying value of an asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment loss shall be measured as the amount by which the carrying amount exceeds the fair value. The adoption of SFAS No. 144 did not have a material impact on our financial position, results of operations or cash flows.

     On January 1, 2002, we changed the useful lives of our towers and related assets from 10 years to 20 years, which we believe more accurately represents the economic lives of these assets. This change in estimate resulted in a decrease in depreciation and amortization expense of $37.2 million and $123.6 million for the three and nine months ended September 30, 2002, respectively.

     Intangible assets

     On January 1, 2002, we adopted SFAS No. 142 “Goodwill and Other Intangible Assets.” Upon adoption, we discontinued amortizing goodwill. Additionally, we discontinued amortizing our spectrum licenses as we determined that these assets meet the definition of indefinite life intangible assets under SFAS No. 142. Upon adoption, the standard requires that we determine the fair value of our goodwill and spectrum licenses in order to assess the carrying value of these assets for potential impairment. The standard further requires that we assess these assets for impairment annually, or when indications of impairment exist. Under SFAS No. 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its fair value. Similarly, other indefinite life intangible assets are deemed to be impaired if the net book value of the assets exceeds fair value. In the first quarter of 2002, we completed this assessment and determined that there was no indication of such impairment.

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     The discontinuance of amortization of our spectrum licenses upon adoption of SFAS No. 142 resulted in a change to the reported deferred taxes related to the spectrum licenses. The realization of income, as defined under SFAS No. 109 (“Accounting for Income Taxes”), from the reversal of the spectrum license-related deferred tax liabilities is no longer assured within the carryforward periods of our existing net operating losses (“NOL’s”). As a result, they cannot be treated as a realization of income and applied against the deferred tax assets arising from our NOL’s. Accordingly, we recorded a non-cash charge to income tax expense of $3.3 billion in the first quarter of 2002 to establish a valuation allowance against our deferred tax assets. The valuation allowance does not affect our NOL’s for tax purposes and does not reflect a change in our expectations regarding the ability to utilize them in the future.

     We completed our annual tests for impairment of our indefinite life intangible assets based on the carrying values at September 30, 2002 and recorded non-cash pretax impairment charges of $6.4 billion and $9.2 billion for goodwill and spectrum licenses, respectively. We recorded a related non-cash deferred income tax benefit of $3.7 billion to reduce the deferred tax liability related to the reduced book/tax differential of our spectrum licenses. The impairment tests were completed using fair value measurement techniques as required under SFAS No. 142. In testing goodwill, we utilized a discounted cash flow approach to determine enterprise fair value. We assessed the reasonableness of our valuation by considering other information available such as the market capitalization of other wireless carriers and associated implied enterprise fair values, projected industry trends and investment analyst reports on us and other wireless carriers, and information regarding recent acquisitions in the industry. The current valuation reflects recent changes in expectations regarding future industry growth rates, future funding commitments from Deutsche Telekom and the resulting impact on our future operating results and cash flows.

     We also used a discounted cash flow approach to estimate the fair value of spectrum licenses. The use of this valuation method represents a change in valuation methodology, as previously we used a market approach based primarily on the prices for spectrum licenses established in the Federal Communications Commission’s (“FCC”) Auction 35. However, due to the length of time that has elapsed since Auction 35, and the current status of that auction, along with the general lack of an active marketplace for spectrum license transactions, there is insufficient evidence to use a market-based approach at this time.

     In the future, we will assess the value of our indefinite life intangible assets as of the end of the third quarter of each fiscal year, or when indications of impairment exist. Such indications of impairment would include the impacts of significant adverse changes in legal factors, market and economic conditions, the results of our operational performance and strategic plans; adverse actions by regulators; unanticipated changes in competition and market share; the potential for the sale or disposal of all or a significant portion of our business; and the cost and continued availability of funding from T-Mobile International, Deutsche Telekom or its affiliates for the expansion and enhancement of our wireless network and funding of our operations.

     Recently issued accounting standards

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This statement requires entities to record the fair value of future liabilities for asset retirement obligations as an increase in the carrying amount of the related long-lived asset if a reasonable estimate of fair value can be made. Over time, the liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. We are currently assessing the impact of this statement on our financial position, results of operations and cash flows. We will adopt this statement effective January 1, 2003.

     On April 30, 2002, we adopted SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” SFAS No. 145 eliminates the requirement in SFAS No. 4 that gains and losses from the extinguishment of debt be aggregated and classified as extraordinary items, net of the related income tax effect. Adoption of SFAS No. 145 did not have a material impact on our financial position, results of operations or cash flows.

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     Reclassifications

     Certain of the comparative figures in the prior period financial statements have been reclassified to conform to the current period presentation. Net operating results have not been affected by these reclassifications.

     Use of estimates

     The preparation of the accompanying interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent amounts at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ materially from such estimates.

3. GOODWILL, SPECTRUM LICENSES AND OTHER INTANGIBLE ASSETS

     Adjusted net loss

     The following table reconciles our reported net loss to adjusted net loss, which excludes depreciation and amortization expense related to goodwill and spectrum licenses, assuming the adoption of SFAS No. 142 had occurred on January 1 of each of the years presented:

     Other intangible assets

     At September 30, 2002, in connection with the rebranding of all our markets to T-Mobile, we retired the fully amortized VoiceStream Wireless tradename. The tradename was recorded at a cost of $124.0 million in conjunction with the T-Mobile merger at May 31, 2001.

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     Amortization expense

     The following table presents current and expected amortization expense for the current year and the subsequent five years:

4. BUSINESS COMBINATIONS AND INVESTMENTS

     CIVS IV and PCS One

     During April 2002, we acquired the remaining outstanding 16.35% interest in Cook Inlet/VS GSM IV PCS Holdings, LLC (“CIVS IV”) and the remaining outstanding 50% interest in PCS One Corporation (“PCS One”). We have accounted for the acquisitions in accordance with SFAS No. 141, “Business Combinations.” The aggregate purchase price of the remaining interests in these entities consisted of $85.3 million in cash and 1,277,048 Deutsche Telekom shares with a fair market value of $18.5 million. The Deutsche Telekom shares were issued on our behalf in return for a note payable of $18.5 million to Deutsche Telekom. Additionally, we assumed $78.5 million in long-term debt in connection with the purchase of PCS One, which we repaid immediately following the acquisition. These acquisitions resulted in our recording $20.6 million of goodwill. The results of CIVS IV and PCS One are included in our results on a consolidated basis since their respective dates of acquisition.

     Prior to acquiring these entities, we accounted for our ownership interests in CIVS IV and PCS One using the equity method. As of the acquisition dates, our combined investment in the two entities totaled $306.1 million. In performing the purchase price allocations, the consideration, including the existing investment balances, was principally allocated to spectrum licenses.

     Pro forma information relating to these acquisitions is not material to our results of operations and financial position, and has been omitted.

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     Infrastructure Venture with Cingular (GSM Facilities)

     We entered into an agreement with Cingular Wireless LLC (“Cingular”) in November 2001 to share in the ownership and operation of GSM network infrastructures in specified markets. We contributed our network assets in the New York Basic Trading Area (“BTA”), and Cingular contributed its network assets in the Los Angeles and San Francisco Major Trading Areas (“MTAs”), which cover most of California and parts of Nevada, to a newly formed joint venture entity, GSM Facilities, LLC (“GSM Facilities”). In July 2002 we began marketing our commercial service in and around the major population centers of California and Nevada, including San Francisco, Los Angeles and Las Vegas (“the California/Nevada market”), and Cingular began marketing its commercial service in the New York City market. The monthly cash operating expenses of GSM Facilities are charged to T-Mobile and Cingular based on each party’s proportionate share of spectrum in each market. Through a separate reciprocal home roaming agreement, Cingular and T-Mobile charge each other for usage that differs from the spectrum based allocations in each market. GSM Facilities typically generates losses equal to depreciation on assets in the joint venture and interest charges on certain tower leases. Our economic interest in the joint venture at September 30, 2002 was 20%. For the three and nine months ended September 30, 2002, we recorded equity in net losses of unconsolidated affiliates of $18.7 million and $54.9 million, respectively, related to our share of the unreimbursed non-cash expenses of GSM Facilities.

     The capital expenditure requirements of the joint venture are funded through capital contributions from T-Mobile and Cingular. Each party’s proportionate share of the contributions varies depending on the nature of the capital expenditure. Contributions to fund capacity increases are allocated based on each party’s incremental growth in minutes of use. Contributions to fund technology upgrades and footprint expansion generally are allocated evenly. Under the terms of the agreement, Cingular is obligated to contribute up to $450 million of capital expenditures through 2003.

     Microcell

     In June 2002, we recorded a write-down of $65.1 million in our investment in Microcell Telecommunications Inc. (“Microcell”), a Canadian GSM provider, based on our assessment that the decline in value of the investment was other than temporary. The non-cash charge is included in equity in net losses of unconsolidated affiliates in our condensed consolidated statement of operations and comprehensive loss. As of September 30, 2002, our investment in Microcell has been written down to zero. We no longer recognize additional losses related to this investment as we have not guaranteed obligations or otherwise committed to provide further financial support for Microcell.

5. LONG-TERM DEBT AND NOTES PAYABLE TO AFFILIATES

     During the nine months ended September 30, 2002, we purchased on the open market and retired outstanding debt as follows: $322.3 million of our 10 3/8% Senior Notes due in 2009, together with premiums of $31.2 million; $182.0 million of our 11 7/8% Senior Notes due in 2009, together with discounts of $28.0 million; and $49.7 million of our 11 1/2% Senior Notes due in 2009, together with premiums of $5.9 million. These repayments were funded by borrowings from Deutsche Telekom.

     The weighted average effective interest rate for all outstanding long-term debt and long-term notes payable to affiliates was 7.2% and 6.8% for the three and nine months ended September 30, 2002, respectively, as compared with 6.5% and 8.7% for the same periods in 2001.

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6. COMMITMENTS AND CONTINGENCIES

     Western Wireless

     On May 3, 1999, Western Wireless Corporation (“Western Wireless”) distributed its entire 80.1% interest in our common shares to its stockholders. Prior to this “spin-off,” Western Wireless obtained a favorable ruling from the IRS indicating that the spin-off would not result in the recognition of a gain or taxable income to Western Wireless or its stockholders. However, Western Wireless could still recognize a gain upon the spin-off, notwithstanding the favorable IRS ruling, if it is determined that the spin-off was part of a “prohibited plan,” that is, a plan or series of related transactions in which one or more persons acquire, directly or indirectly, 50% or more of our stock. Acquisitions of 50% or more of our stock occurring during the four-year period beginning two years before the spin-off could give rise to a rebuttable presumption that the spin-off was part of a prohibited plan. Although it is not assured, we believe that the spin-off, subsequent mergers, including the T-Mobile merger in 2001, and certain investments by Hutchison Telecommunications PCS (USA) Limited and Sonera Corporation in 2000 were not pursuant to a “prohibited plan.”

     We have agreed to indemnify Western Wireless on an after-tax basis for any taxes, penalties, interest and various other expenses incurred by Western Wireless if it is required to recognize such a gain. The amount of such gain that Western Wireless would recognize would be equal to the difference between the fair market value of our common shares at the time of the spin-off and Western Wireless’ adjusted tax basis in such shares at the time. The estimated range of our possible liability, not including interest and penalties, if any, is from zero to $400 million.

     FCC Auction 35

     We, along with Cook Inlet/VS GSM V PCS Holdings, LLC (“CIVS V”), a consolidated affiliate in which we hold a non-controlling interest, participated in FCC Auction 35, which concluded in January 2001. Certain of the spectrum licenses that were included in the auction have not yet been granted to the high bidders pending administrative and judicial challenges related to the auction process. A federal appeals court has held that the FCC erroneously cancelled certain of these spectrum licenses when the owners of the spectrum licenses failed to make installment payments upon declaring bankruptcy. This decision is being reviewed by the United States Supreme Court, which heard arguments on October 8, 2002 and is expected to render a decision in the first half of 2003.

     We, along with CIVS V, had winning bids totaling $989.0 million related to these spectrum licenses and had previously paid the FCC deposits totaling $196.3 million. Pursuant to an order released by the FCC on March 27, 2002, $166.6 million of these deposits was refunded in April 2002, and the FCC has retained $29.7 million of our and CIVS V’s original deposits pending the outcome of the litigation. We distributed $42.3 million of this refund to Cook Inlet Region Inc. (“CIRI”), a member of CIVS V, in April 2002. Since we consolidate CIVS V for accounting purposes, the distribution to CIRI is included in other financing activities in the interim statement of cash flows and is a reduction of minority interest. However, by the same March 27, 2002 order, the FCC declared that if it prevailed before the United States Supreme Court, the auction winners would be required to pay the full amount of their winning bids. Verizon Wireless (“Verizon”) has filed lawsuits in a federal court of appeals and in a federal court of claims seeking to force the FCC to return 100% of the deposits that Verizon paid in connection with the spectrum licenses in Auction 35 that have not yet been granted and to release the auction winners from their obligations to purchase the spectrum licenses. We have preserved our right to make a similar assertion. Further, on September 12, 2002, the FCC released a public notice seeking comment on whether the FCC should fully refund all of these deposits and voluntarily dismiss all pending applications or, in the alternative, voluntarily dismiss applications for selected spectrum licenses. If the FCC is successful before the Supreme Court and the challenges to the validity of Auction 35 fail, we and CIVS V could be required to purchase spectrum licenses with an outstanding balance due of $959.3 million.

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7. RELATED PARTY TRANSACTIONS

     Following the T-Mobile merger, employees of Powertel, a wholly owned subsidiary of T-Mobile International, became employees of T-Mobile. While Powertel’s results are not consolidated with ours, we are reimbursed by Powertel for the compensation and benefit costs of our employees working on Powertel business. We also charge Powertel for certain centralized services and functions, including accounting and other administrative functions. These centralized services and functions are charged to Powertel in a manner that intends to reflect the relative time and associated costs devoted to it. Powertel was charged $10.6 million and $39.3 million for the costs of these centralized services and functions for the three and nine months ended September 30, 2002. At September 30, 2002, we have a receivable from Powertel of $304.6 million including $140.0 million related to our funding of a credit facility repayment on behalf of Powertel in the first quarter of 2002. The remainder is a result of the charges as discussed above and transfers in the ordinary course of business including fixed assets and inventory. The receivable is included in investments in and advances to unconsolidated affiliates in our condensed consolidated balance sheet. Deutsche Telekom is incurring the expenses to develop T-Mobile as a brand name and will charge us royalties for our use of the T-Mobile brand in the future.

     We rely on funding from T-Mobile International, Deutsche Telekom or its affiliates to meet our working capital, capital expenditure, debt service and other obligations. At September 30, 2002, we have long-term notes payable to Deutsche Telekom of $6.1 billion, net of a $56.2 million receivable from Deutsche Telekom for the reimbursement of the direct expenses incurred in connection with the rebranding of VoiceStream to T-Mobile.

     T-Mobile is party to an agreement with Cingular through GSM Facilities (see note 4). We were charged market related operating expenses based on minutes of use of $25.0 million and $53.8 million for the three and nine months ended September 30, 2002. At September 30, 2002, we have a payable to GSM Facilities of $18.0 million.

     T-Mobile is party to technical service, system access and reciprocal wholesale agreements with certain affiliates, controlled by CIRI, through its subsidiaries. The agreements entitle each party to utilize airtime on the other’s spectrum, and/or utilize wireless system infrastructure in certain agreed upon markets. The agreements are structured such that each party re-sells airtime purchased from the other, and related fees are charged and paid between the parties. We earned revenues and incurred expenses relative to these agreements as follows (dollars in thousands):

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     (Abbreviated pursuant to General Instruction H as our equity securities are owned indirectly by Deutsche Telekom, who is a registered filer under the Securities Exchange Act of 1934.)

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE LITIGATION REFORM ACT OF 1995.

     Information contained or incorporated by reference herein that is not based on historical fact, including without limitation, statements containing the words “believes,” “may,” “will,” “estimate,” “continue,” “anticipates,” “intends,” “expects” and words of similar import, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and regionally; technology changes; competition; changes in business strategy or development plans; the leverage of T-Mobile USA Inc. (“T-Mobile”); the availability of funding from Deutsche Telekom AG (“Deutsche Telekom”); the ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted against T-Mobile; industry consolidation; ability to acquire and cost of acquiring additional spectrum licenses; and other factors referenced in T-Mobile’s filings with the Securities and Exchange Commission (“SEC”). GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. T-Mobile disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

     Unless the context requires otherwise, “T-Mobile,” “we,” “our” and “us” includes us, our predecessors and consolidated subsidiaries.

     The following discussion and analysis is based upon our interim condensed consolidated financial statements (“interim financial statements”), which have been prepared pursuant to SEC rules and regulations for interim reporting. These rules and regulations allow certain information required under accounting principles generally accepted in the United States (“GAAP”) to be condensed or omitted, provided that the interim financial statements, when read in conjunction with the annual audited financial statements included in our most recent Form 10-K, provide a fair presentation of the financial position, results of operations and cash flows. Accordingly, this discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto and any other financial information included herein and in our Form 10-K for the year ended December 31, 2001.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The preparation of our interim financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities during the periods reported. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates due to changing conditions or the validity of our assumptions. The critical accounting policies and estimates used in the preparation of our interim financial statements include the following:

•

We recognize service revenues based upon minutes of use processed and contracted fees, net of credits and adjustments for service discounts. Because our customer billings are cycle-based with cut-offs throughout each month, we make estimates for service revenues earned but not yet billed at the end of each period.

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	•		We maintain allowances for doubtful accounts for estimated losses resulting from our inability to collect balances due from our customers. We base our estimates on the aging of our accounts receivable balances and our historical write-off experience, net of recoveries. If collections are lower or more customers elect to terminate their service than we expect, actual write-offs may be different than expected.
	•		When recording depreciation expense associated with our wireless communications equipment, we use estimated useful lives. As a result of changes in technology and industry conditions, we periodically evaluate the useful lives of our wireless communications equipment. These evaluations could result in a change in estimated useful lives in future periods.
	•		We review long-lived assets, consisting primarily of property, plant and equipment and intangible assets with finite lives, for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.
	•		We review goodwill and intangible assets with indefinite lives for impairment on an annual basis or when an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets”. The determination of fair values, generally based on either appraised value or discounted estimated future cash flows, is critical to assessing impairment under SFAS No. 142 and requires the use of significant assumptions and estimates. The determination of fair values is sensitive to the assumptions and estimates used. Accordingly, any changes in such assumptions or estimates could have a material impact on the determination of fair values and thus in the assessment of impairment. Likewise, any decrease in appraised values or discounted estimate of future cash flows resulting from future events or performance could result in additional impairment charges.
	•		We hold non-controlling investments in several entities for which we apply the equity or cost method of accounting. We record impairment charges associated with these investments when we determine that the fair value of the investment is below our net book value and the decline is deemed to be other than temporary.
	•		We record accruals associated with sales and marketing promotions and incentives. These accruals are based primarily on historical take-rates of similar promotions or offers.
	•		We account for acquisitions in accordance with SFAS No. 141, “Business Combinations” which requires the purchase price to be allocated to the identifiable tangible and intangible assets based upon their fair value. The allocation of a purchase price is highly judgmental and requires extensive use of estimates and fair value assumptions, which can have a significant impact on operating results.

OVERVIEW

     We provide personal communications services (“PCS”) using the Global System for Mobile Communications, or GSM, technology primarily in urban markets in the United States through the ownership and operation of our spectrum licenses, through contractual relationships with entities in which we have non-controlling ownership interests and through arrangements with third parties that own and operate similar spectrum licenses. During the third quarter of 2002, as part of Deutsche Telekom’s plan to develop a global brand name for its wireless operations, all of the VoiceStream markets were substantially rebranded to T-Mobile. We now operate under the T-Mobile brand name, which is the brand under which Deutsche Telekom’s and T-Mobile International AG’s (“T-Mobile International”) wireless subsidiaries operate. We are relying on funding from T-Mobile International, Deutsche Telekom or its affiliates to meet our working capital, capital expenditure, debt service and other obligations.

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     Powertel, Inc. (“Powertel”), also a subsidiary of T-Mobile International, now provides the same service under the T-Mobile brand in the southeastern United States. While Powertel’s results are not consolidated with ours, we are directly reimbursed by Powertel for the compensation and benefit costs of our employees working on Powertel business. We also charge Powertel for certain centralized services and functions including accounting and other administrative functions. These centralized services and functions are charged to Powertel in a manner that is intended to reflect the relative time and associated costs devoted to it.

     The following discussion and analysis highlights the key events for the three and nine months ended September 30, 2002, as compared to the same periods in 2001:

     T-Mobile merger

     On May 31, 2001, Deutsche Telekom acquired 100% of the common shares of VoiceStream Wireless Corporation (“VoiceStream”) in a transaction that qualified as a tax-free reorganization (hereafter referred to as the “T-Mobile merger”). Following the closing of the merger, Deutsche Telekom transferred all of its VoiceStream shares to T-Mobile International. T-Mobile International is a wholly-owned subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom’s principal GSM wireless operations in Europe and the United States.

     The T-Mobile merger was accounted for as a purchase business combination and resulted in adjustment of the basis of our assets, liabilities and shareholder’s equity to reflect fair value on the closing date of the merger. As a result of this new basis, our financial position, results of operations and cash flows for periods subsequent to May 31, 2001, the closing date of the merger, are not necessarily comparable to periods prior to the merger. The following discussion and analysis refers to the results and activities for the three and nine months ended September 30, 2002, as compared to the same periods in 2001. Where necessary, we have provided explanations to improve comparability between the pre-merger and post-merger activity.

     Other factors affecting comparability between periods

     We commenced operations in 1996 in various markets in the western United States and have expanded operations through the addition of numerous new markets in subsequent years. We launched major markets at various times in 2001, including Chicago, St. Louis, Cincinnati-Dayton, Milwaukee and New Orleans. In July 2002, we began marketing our commercial service in and around the major population centers of California and Nevada, including San Francisco, Los Angeles and Las Vegas (“the California/Nevada market”), with a covered population of approximately 35 million people. We also launched the Cleveland, Richmond and Buffalo/Rochester markets during the third quarter of 2002. The addition of these markets substantially completes the national footprint for the T-Mobile brand, including Powertel. We cover 23 of the top 25 markets and 41 of the top 50 markets, and including Powertel, 24 of the top 25 markets and 45 of the top 50 markets.

     We also acquired significant operational markets at varying stages of maturity, primarily in 2000, and converted the acquired markets to our brand and otherwise integrated the operations of the acquired businesses.

     Due to these factors, revenues and expenses recognized during any period may not be comparable to other periods and may not be representative of future operations.

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RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

     The following table lists certain financial data as it relates to our operations (dollars in thousands):