10-Q 1 v77110e10-q.txt FORM 10-Q QUARTER ENDING SEPTEMBER 30, 2001 ================================================================================ 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, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ______________ COMMISSION FILE NUMBER 000-27442 OMNIPOINT CORPORATION --------------------- (Exact name of registrant as specified in its charter) DELAWARE 04-2969720 -------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 12920 - 38TH STREET S.E. BELLEVUE, WASHINGTON 98006 ------------------------ ----- (Address of principal executive offices) (Zip Code) (425) 378-4000 -------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title Shares Outstanding as of November 1, 2001 ----- ----------------------------------------- Common Stock 65,000,000 DOCUMENTS INCORPORATED BY REFERENCE Quarterly Report on Form 10-Q of VoiceStream Wireless Corporation for its Fiscal Quarter Ended September 30, 2001 ================================================================================ OMNIPOINT CORPORATION FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001 TABLE OF CONTENTS

1 OMNIPOINT CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and per share amounts)

See accompanying notes to consolidated financial statements. 2 OMNIPOINT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (dollars in thousands) (unaudited)

See accompanying notes to consolidated financial statements 3 OMNIPOINT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)

See accompanying notes to consolidated financial statements 4 OMNIPOINT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Organization Omnipoint Corporation ("Omnipoint" or "we") provides personal communication services ("PCS") in urban markets in the United States including New York, NY, Detroit, MI, Boston, MA, Philadelphia, PA, Miami, FL and Indianapolis, IN using the Global System for Mobile Communications, or GSM technology. On February 25, 2000, Omnipoint completed a merger with VoiceStream Wireless Corporation ("VoiceStream"), (the "VoiceStream/Omnipoint Merger"), and is now a subsidiary of VoiceStream. References to "VoiceStream" refer to VoiceStream and its subsidiaries, including Omnipoint, unless the context requires otherwise. VoiceStream also provides PCS services in urban markets in the United States using GSM. On May 31, 2001, Deutsche Telekom AG ("Deutsche Telekom") acquired 100% of the common shares of VoiceStream. The merger 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. After the acquisition, Deutsche Telekom transferred all of its VoiceStream shares to T-Mobile International AG ("T-Mobile"). T-Mobile is a wholly owned subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom's GSM wireless operations primarily in Europe and the United States. Upon consummation of the merger and the transfer by Deutsche Telekom of all of its Omnipoint common shares to T-Mobile (hereafter referred to as "the T-Mobile merger"), VoiceStream common shares were deregistered and delisted from NASDAQ and are no longer publicly traded. 2. Summary of Significant Accounting Policies Consolidation and Financial Statement Presentation The unaudited consolidated financial statements of Omnipoint and its consolidated subsidiaries include the accounts of all majority-owned subsidiaries that are controlled by Omnipoint. Affiliates that are 20 percent to 50 percent owned are generally accounted for using the equity method. Intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements of Omnipoint for the three and nine months ended September 30, 2001 and 2000 reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. Such adjustments include those of a normal, recurring nature and those related to the T-Mobile merger as described below. The operating results for the interim periods presented herein are not necessarily indicative of results of operations for the entire year. Reference should be made to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2000. The T-Mobile merger and the VoiceStream/Omnipoint merger were accounted for as purchase business combinations and resulted in an adjustment of the basis of our assets, liabilities and shareholders' equity to reflect fair value on the closing date of the mergers. As a result of these new bases, our consolidated balance sheets, results of operations and cash flows for periods subsequent to May 31, 2001 and February 25, 2000, the closing dates of the mergers, are not comparable to periods prior to the mergers. The consolidated financial statements of Omnipoint for the nine months ended September 30, 2001 are presented as two distinct periods, the five months prior to the T-Mobile merger, and the period from June 1, 2001 to September 30, 2001, subsequent to the merger. The consolidated financial statements of Omnipoint for the nine months ended September 30, 2000 are presented as two distinct periods, the period from January 1, 2000 to February 24, 2000, prior to the VoiceStream/Omnipoint merger, and the period from February 25, 2000 to September 30, 2000, subsequent to the merger. Loss per Common Share Omnipoint no longer presents loss per share information as Omnipoint's common shares are not publicly traded. 5 OMNIPOINT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (unaudited) Recently Issued Accounting Standards In June 2001, the Financial Accounting Standards Board ("FASB") approved Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires companies to cease amortizing goodwill and other intangible assets with indefinite lives that existed at June 30, 2001. The amortization of existing goodwill will cease on December 31, 2001. Any goodwill and other intangible assets with indefinite lives resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The test for goodwill impairment under the new standard will begin in the first quarter of 2002, and could have an adverse non-cash effect on our future results of operations if an impairment occurs. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The statement provides accounting and reporting standards for recognizing obligations related to asset retirement costs associated with the retirement of tangible long-lived assets. Under this statement, legal obligations associated with the retirement of long-lived assets are to be recognized at their fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The fair value of the asset retirement costs is capitalized as part of the carrying amount of the long-lived asset and expensed using a systematic and rational method over the assets' useful life. Any subsequent changes to the fair value of the liability will be expensed. We will be required to adopt this statement no later than January 1, 2003. We are currently assessing the impact of this statement on our results of operations, financial position and cash flows. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning after December 15, 2001. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and replaces the provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of Segments of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of segments of a business. SFAS 144 retains the fundamental provisions of SFAS No. 121 for the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. Impairment on goodwill is not included in the scope of SFAS No. 144 and will be treated in accordance with the accounting standards established in SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 144, long-lived assets are to be measured at the lower of carrying amount or fair value less cost to sell. We will be required to adopt this statement no later than January 1, 2002. We are currently assessing the impact of this statement on our results of operations, financial position and cash flows. Reclassifications Certain of the comparative figures in the prior period financial statements have been reclassified to conform to the current period presentation. 6 OMNIPOINT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (unaudited) 3. Business Combinations and Other Transactions T-Mobile Merger As a result of the T-Mobile merger, we adjusted the basis of our assets, liabilities and shareholder's equity to reflect the purchase allocations recorded by T-Mobile (see Note 2). These non-cash adjustments, which have not been finalized and may be subject to change, resulted in the following balance sheet allocations as of May 31, 2001, the acquisition date (dollars in thousands): ASSETS Other current assets $ (17,537) Licenses and other intangibles (excluding goodwill) 7,408,202 Goodwill 3,099,839 Other long-term assets (47,143) ------------ $ 10,443,361 ============ LIABILITIES AND SHAREHOLDER'S EQUITY Other current liabilities $ 3,638 Long-term debt 19,015 Deferred tax liability 1,920,512 Common stock and additional paid-in capital 7,241,240 Deferred compensation (11,452) Accumulated other comprehensive loss 1,405 Deficit 1,269,003 ------------ $ 10,443,361 ============

Effective June 1, 2001, we changed our amortization period for licenses from 40 to 20 years. Cingular Joint Venture On November 1, 2001, we entered into a joint venture with Cingular Wireless LLC ("Cingular") that will allow the companies to share urban GSM network infrastructures in the New York Basic Trading Area ("BTA"), and the Los Angeles and San Francisco Major Trading Areas ("MTAs"). We will each continue to hold and control our respective licenses and certain equipment in those markets, and independently market our services and utilize our own brand names, sales, marketing, billing and customer care operations. We expect our services in the Los Angeles and San Francisco MTAs to be fully launched by mid 2002. Cingular License Exchange On May 11, 2001, we completed the exchange of licenses covering approximately 35 million people with Cingular. Cingular acquired from Omnipoint 10 MHz of spectrum in the New York, NY MTA, as well as 10 MHz in each of the St. Louis, MO and Detroit, MI BTAs. Omnipoint acquired from Cingular 10 MHz of spectrum in the Los Angeles and San Francisco MTAs, that cover most of California and Nevada. No gain or loss was recognized from this transaction. 7 OMNIPOINT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (unaudited) Unaudited Pro Forma Operating Results The following are the unaudited pro forma operating results, assuming that the T-Mobile and the VoiceStream/Omnipoint mergers occurred on January 1 of each of the respective years (dollars in thousands):

4. Long-Term Debt The carrying values of our long-term debt were adjusted to fair value at May 31, 2001 (see Note 2) resulting in a premium of $19.0 million. The premium will be amortized to interest expense over the remaining terms of the related debt.

We formerly shared a credit facility with VoiceStream. During the quarter ended September 30, 2001 we repaid all outstanding borrowings under our credit facilities and cancelled the related lending agreements. We also repaid the $4.6 million 11 5/8% Senior Notes due in 2006. These repayments were funded by $2.0 billion in borrowings from affiliates. The notes related to these borrowings, which are due in 2010, bear interest at 4.85% through December 15, 2001 and thereafter will bear interest at the six-month LIBOR rate plus 0.95%. Maturities All of our long-term debt and long-term notes payable to affiliates mature after 2005. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 in the regions in which Omnipoint operates; technology changes; competition; changes in business strategy or development plans; the high leverage of Omnipoint; 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 Omnipoint; and other factors referenced in Omnipoint's filings with the Securities and Exchange Commission. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. Omnipoint 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. The following is a discussion and analysis of the consolidated financial condition and results of operations of Omnipoint and should be read in conjunction with our consolidated financial statements and notes thereto and other financial information included herein and in our Form 10-K for the year ended December 31, 2000. Due to the stage of development of our PCS operations and the significance of recent mergers, including the change in control due to the T-Mobile merger, and other transactions, our operating results for prior periods may not be indicative of future performance. Unless the context requires otherwise, "Omnipoint", "we", "our" and "us" include us and our predecessors and subsidiaries. References to "VoiceStream" refer to VoiceStream and its subsidiaries, including Omnipoint, unless the context requires otherwise. Overview We provide PCS service in urban markets in the United States through the ownership and operation of PCS licenses and through our minority interests in entities that own and operate similar licenses. The following chronology highlights the key events in the periods covered by these financial statements: - On February 25, 2000, we merged with VoiceStream. Each outstanding Omnipoint common share was exchanged for 0.825 of a VoiceStream common share plus $8.00 in cash, and we became a subsidiary of VoiceStream. Omnipoint's operations are directly controlled by VoiceStream. Since the merger, all of Omnipoint's markets have been relaunched under the VoiceStream brand. We market, provide and bill our services under the VoiceStream brand, and do not compete with VoiceStream in the markets we serve. Our wireless network is also fully integrated with VoiceStream's network such that, from a customer's perspective, our services are indistinguishable from VoiceStream's. Additionally, immediately prior to the VoiceStream/Omnipoint merger, certain of our licenses, assets and operations were transferred to VS GSM II and VS GSM III, in which we hold a 49.9% minority interest. - On May 31, 2001, Deutsche Telekom acquired 100% of the common shares of VoiceStream. The merger 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. Deutsche Telekom transferred all of its VoiceStream shares to T-Mobile. T-Mobile is a wholly owned subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom's GSM wireless operations primarily in Europe and the United States. Upon consummation of the merger and the transfer by Deutsche Telekom of all of its Omnipoint common shares to T-Mobile (hereafter referred to as the "T-Mobile Merger"), VoiceStream common shares were deregistered and deleted from NASDAQ and are no longer publicly traded. 9 The T-Mobile merger and the VoiceStream/Omnipoint merger were recorded as purchase business combinations and resulted in an adjustment of the basis of our assets, liabilities and shareholder's equity to reflect fair value on the closing dates of the mergers. As a result of these new bases, our consolidated balance sheets, results of operations and cash flows for periods subsequent to May 31, 2001 and February 25, 2000, the closing dates of the mergers, are not comparable to periods prior to the mergers. The consolidated financial statements of Omnipoint for the nine months ended September 30, 2001 are presented as two distinct periods, the five months prior to the T-Mobile merger, and the period from June 1, 2001 to September 30, 2001, subsequent to the merger. The consolidated financial statements of Omnipoint for the nine months ended September 30, 2000 are presented as two distinct periods, the period from January 1, 2000 to February 24, 2000, prior to the VoiceStream/Omnipoint merger, and the period from February 25, 2000 to September 30, 2000, subsequent to the merger. The following discussion and analysis refers to the results and activities for the three and nine months ended September 30, 2001. Where necessary, we have provided explanations to improve comparability between the pre-merger and post-merger activity. In addition to purchase price adjustments related to the mergers, results prior to February 25, 2000 are not comparable with subsequent periods due to the transfer of Omnipoint's C and F Block licenses, assets and liabilities associated with these licenses and operations (primarily Philadelphia, Atlantic City and certain non-operating licenses) to VS GSM II and VS GSM III. Subsequent to February 24, 2000, these operations were accounted for using the equity method. Operating Markets The following operational markets, shown by the years they were initially launched, are currently owned and operated by us or by joint ventures in which we hold interests:

Results of Operations for the Three and Nine Months Ended September 30, 2001 and 2000 We had approximately 2,179,000 customers at September 30, 2001, of which 1,423,500 were post pay subscribers and 755,500 were prepaid customers. As of September 30, 2000, we had approximately 1,165,100 customers, of which approximately 511,000 were post pay subscribers and approximately 654,100 were prepaid customers. Revenues Service revenues, which include subscriber, prepaid and roamer revenues, were $291.3 million and $784.1 million for the three and nine months ended September 30, 2001, respectively, as compared to revenues of $145.1 million and $427.5 million for the same periods in 2000, respectively. The increase was primarily due to growth in our customer base during these periods. Equipment revenues were $35.8 million and $119.7 million for the three and nine months ended September 30, 2001, respectively, as compared to revenues of $37.0 million and $81.3 million for the same periods in 2000, respectively. The increase was primarily attributable to the increased number of handsets sold and correlates to the growth in our customer base. 10 Operating Expenses Cost of service expense was $76.0 million and $234.4 million for the three and nine months ended September 30, 2001, respectively, as compared to expenses of $48.4 million and $139.8 million for the same periods in 2000, respectively. The increase was primarily the result of additional costs associated with supporting a larger customer base. Cost of equipment sales was $65.9 million and $204.6 million for the three and nine months ended September 30, 2001, respectively, as compared to $69.8 million and $171.5 million for the same periods in 2000, respectively. The increase for the nine months was a result of increased handset sales. General and administrative costs were $108.5 million and $310.3 million for the three and nine months ended September 30, 2001, respectively, as compared to $64.4 million and $180.7 million for the same periods in 2000, respectively. The increase was due to a combination of integration expenses related to the VoiceStream/Omnipoint merger and increased costs associated with supporting a larger customer base. Sales and marketing costs were $129.1 million and $375.8 million for the three and nine months ended September 30, 2001, respectively, as compared to $114.6 million and $217.8 million for the same periods in 2000, respectively. The increase was primarily due to continued subscriber growth in our markets during 2001. Depreciation and amortization expenses were $220.4 million and $444.1 million for the three and nine months ended September 30, 2001, respectively, as compared to $77.8 million and $225.2 million for the same periods in 2000, respectively. The increase was primarily due to the increase in intangibles, including goodwill relating to purchase accounting for the T-Mobile merger. Other Income (Expense) Interest and financing expenses were $34.0 million and $130.9 million for the three and nine months ended September 30, 2001, respectively, as compared to $70.6 million and $229.3 million for the same periods in 2000, respectively. The decrease is primarily the result of paying off a portion of our outstanding debt facilities which were replaced with notes payable to affiliates with significantly lower interest rates. Other income (expense) also includes equity in net losses of unconsolidated affiliates of $32.4 million and $85.0 million for the three and nine months ended September 30, 2001, respectively, as compared to $28.2 million and $53.0 million for the same periods in 2000, respectively. These amounts primarily represent our portion of VS GSM II and VS GSM III net losses. Net Loss Our net loss was $236.4 million and $707.8 million for the three and nine months ended September 30, 2001, respectively, as compared to $268.3 million and $665.6 million for the same periods in 2000, respectively. The increase in 2001 was partly due to increases to the cost basis of our assets and the related amortization charges associated with T-Mobile merger. Additionally, we incurred significant incremental costs related to customer growth together with the related expenditures in sales and marketing necessary to support this growth. Liquidity and Capital Resources Mergers, Acquisitions, Investments and Capital Expenditures Cingular Joint Venture On November 1, 2001, we entered into a joint venture with Cingular that will allow the companies to share urban GSM network infrastructures in the New York BTA, and the Los Angeles and San Francisco MTAs. We will each continue to hold and control our respective licenses and certain equipment in those markets, and independently market our services and utilize our own brand names, sales, marketing, billing and customer care operations. We expect our services in the Los Angeles and San Francisco MTAs to be fully launched by mid 2002. 11 Cingular License Exchange On May 11, 2001, we completed the exchange of licenses covering approximately 35 million people with Cingular. Cingular acquired from Omnipoint 10 MHz of spectrum in the New York, NY MTA, as well as 10 MHz in each of the St. Louis, MO and Detroit, MI BTAs. Omnipoint acquired from Cingular 10 MHz of spectrum in the Los Angeles and San Francisco MTA's, that cover most of California and Nevada. No gain or loss was recognized from this transaction. VoiceStream On February 25, 2000, we completed our merger with VoiceStream. Pursuant to the merger agreement, 0.825 of a VoiceStream common share plus $8.00 in cash were exchanged for each outstanding Omnipoint common share. Total consideration for the merger including liabilities assumed was $6.25 billion. In conjunction with the merger agreement signed on June 23, 1999, VoiceStream invested a total of $150 million in Omnipoint, of which $102.5 million was invested in Omnipoint preferred shares upon signing of the merger agreement, and the remaining $47.5 million was invested in Omnipoint preferred shares on October 1, 1999. Capital Expenditures We spent $337.9 million on capital expenditures during the nine months ended September 30, 2001 primarily for the continuing build out of our wireless network. We expect to incur significant further capital expenditures through 2001, directly and through VS GSM II and VS GSM III, for license purchases and capital expansion of operating markets. Actual capital expenditures could vary considerably depending on opportunities that arise over the course of the year and on funding availability. We expect that future funding of our on-going cash requirements will be provided by VoiceStream, Deutsche Telekom or its affiliates. Financing Activities We formerly shared a credit facility with VoiceStream. During the quarter ended September 30, 2001, we repaid all outstanding borrowings under our credit facilities and cancelled the related lending agreements. We also repaid the $4.6 million 11 5/8% Senior Notes due in 2006. These repayments were funded by $2.0 billion in borrowings from affiliates. The notes related to these borrowings, which are due in 2010, bear interest at 4.85% through December 15, 2001 and thereafter will bear interest at the six-month LIBOR rate plus 0.95%. We expect continued use of cash in operating activities due to operating losses and increased working capital requirements together with continuing investments in network infrastructure and FCC licenses to grow and support our customer base. The cost of completing the build-out in any particular market, the magnitude of operating losses, debt service requirements and the funding requirements of license or operating business acquisitions could vary significantly from current estimates. We plan to use cash on hand and borrowings from Deutsche Telekom or its related parties to fund these activities and expenditures. We are a 100% owned subsidiary of VoiceStream, which is a 100% owned subsidiary of T-Mobile, which is a 100% owned subsidiary of Deutsche Telekom. In the past, we have received funding from VoiceStream. If such financing is not fully available, we may be required to curtail our rate of growth or our service operations. Cash Flow Information Net cash used in operating activities was $403.0 million for the nine months ended September 30, 2001. Adjustments to the $707.8 million net loss to reconcile to net cash used in operating activities included $444.1 million of depreciation and amortization expense. We recorded a $137.5 million non-cash income tax benefit based on our operating loss for the period and $85.0 million in non-cash equity in net losses of unconsolidated affiliates. Net cash used in operating activities was $410.9 million for the nine months ended September 30, 2000. Net cash used in investing activities was $371.6 million for the nine months ended September 30, 2001. Investing activities consisted primarily of fixed asset purchases of $337.9 million related to the expansion of our wireless network and other investing activities of $34.2 million primarily the result of cash proceeds received on the sale of investments. Net cash used in investing activities was $312.4 million for the nine months ended September 30, 2000. 12 Net cash provided by financing activities was $660.9 million for the nine months ended September 30, 2001. We retired approximately $2.0 billion in credit facilities using funds provided by Deutsche Telekom. Net cash provided by financing activities was $463.9 million for the nine months ended September 30, 2000. Recently Issued Accounting Standards In June 2001, the FASB approved SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires companies to cease amortizing goodwill and other intangible assets with indefinite lives that existed at June 30, 2001. The amortization of existing goodwill will cease on December 31, 2001. Any goodwill and other intangible assets with indefinite lives resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The test for goodwill impairment under the new standard will begin in the first quarter of 2002, and could have an adverse non-cash effect on our future results of operations if an impairment occurs. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The statement provides accounting and reporting standards for recognizing obligations related to asset retirement costs associated with the retirement of tangible long-lived assets. Under this statement, legal obligations associated with the retirement of long-lived assets are to be recognized at their fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The fair value of the asset retirement costs is capitalized as part of the carrying amount of the long-lived asset and expensed using a systematic and rational method over the assets' useful life. Any subsequent changes to the fair value of the liability will be expensed. We will be required to adopt this statement no later than January 1, 2003. We are currently assessing the impact of this statement on our results of operations, financial position and cash flows. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning after December 15, 2001. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and replaces the provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of Segments of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of segments of a business. SFAS 144 retains the fundamental provisions of SFAS No. 121 for the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. Impairment on goodwill is not included in the scope of SFAS No. 144 and will be treated in accordance with the accounting standards established in SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 144, long-lived assets are to be measured at the lower of carrying amount or fair value less cost to sell. We will be required to adopt this statement no later than January 1, 2002. We are currently assessing the impact of this statement on our results of operations, financial position and cash flows. Item 3. Quantitative and Qualitative Disclosures About Market Risk Market Sensitive Financial Instrument Risk Management During the nine months ended September 30, 2001, there were no material events that have occurred that could require a change to the qualitative or quantitative disclosures about market risks presented in the Annual Report on Form 10-K for the year ended December 31, 2000. 13 PART II -- OTHER INFORMATION Item 1. Legal Proceedings Except as referenced in the Form 10-K for the year ended December 31, 2000, there are no material, pending legal proceedings to which we or any of our subsidiaries or affiliates is a party or of which any of their property is subject which, if adversely decided, would have a material adverse effect on their financial position, results of operations or cash flows. Item 2. Changes in Securities and Use of Proceeds (a) None. (b) None. (c) None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K: Omnipoint filed a Current Report on Form 8-K dated August 31, 2001, in which Omnipoint reported under Item 4 that on August 29, 2001, Omnipoint engaged PricewaterhouseCoopers LLP as its new independent accountant, replacing Arthur Andersen LLP. Omnipoint filed a Current Report on Form 8-K dated August 15, 2001, in which Omnipoint reported under Item 5 that on August 15, 2001, Omnipoint issued notices of redemption to redeem on September 14, 2001, all of its outstanding 11 5/8% Senior Notes due 2006 at a redemption price of 105.81%, together with accrued and unpaid interest to the redemption date, and all of its 11 5/8% Series A Senior Notes due 2006 at a redemption price of 105.81%, together with accrued and unpaid interest to the redemption date. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Omnipoint Corporation By /s/ BRIAN W. KIRKPATRICK By /s/ ALLYN P. HEBNER ------------------------------ --------------------------------- Brian W. Kirkpatrick Allyn P. Hebner Executive Vice President, Vice President and Controller Chief Financial Officer (Principal Accounting Officer) (Principal Financial Officer) Dated: November 14, 2001 15

OMNIPOINT CORP \DE\ 10-Q