<PAGE>   1

                                  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, 2000

                                       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 000-29667

                        VOICESTREAM WIRELESS CORPORATION

             (Exact name of registrant as specified in its charter)

               DELAWARE                                91-1983600
    (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.
<TABLE>
<CAPTION>

                  Title                        Shares Outstanding as of October 31, 2000
                  -----                        -----------------------------------------
<S>                                            <C>
      Common Stock, $0.001 par value                          227,908,356
</TABLE>
<PAGE>   2
                        VOICESTREAM WIRELESS CORPORATION
                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                              PAGE
                                                                                                                              ----
<S>                                                                                                                          <C>
PART I - FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS

               Consolidated Balance Sheets
               as of September 30, 2000, and December 31, 1999..............................................................    3

               Consolidated Statements of Operations
               for the Three and Nine Months Ended September 30, 2000, and September 30, 1999...............................    4

               Consolidated Statements of Cash Flows
               for the Nine Months Ended September 30, 2000, and September 30, 1999.........................................    5

               Notes to Consolidated Financial Statements...................................................................    6

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................................   17

PART II - OTHER INFORMATION.................................................................................................   27

ITEM 1.        LEGAL PROCEEDINGS............................................................................................   27

ITEM 2.        CHANGES IN SECURITIES........................................................................................   27

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES..............................................................................   27

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................................................   27

ITEM 5.        OTHER INFORMATION............................................................................................   27

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K.............................................................................   28
</TABLE>
<PAGE>   3
                        VOICESTREAM WIRELESS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                               September 30,        December 31,
                                                                                                   2000                 1999
                                                                                               ------------         ------------
                                                                                                (Unaudited)
<S>                                                                                            <C>                  <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents                                                                   $  4,107,518         $    235,433
   Accounts receivable, net of allowance for doubtful accounts
      of $58,664 and $17,482, respectively                                                          324,028               97,739
   Inventory                                                                                        232,033               63,072
   Prepaid expenses and other current assets                                                         67,630               14,332
                                                                                               ------------         ------------
      Total current assets                                                                        4,731,209              410,576

Property and equipment, net of accumulated depreciation
   of $541,084 and $284,670, respectively                                                         2,497,426              931,792
Goodwill, net of accumulated amortization
   of $225,181 and $0, respectively                                                               9,022,948
Licensing costs and other intangible assets, net of accumulated
   amortization of $84,889 and $21,815, respectively                                              1,953,433              450,261
Investments in and advances to unconsolidated affiliates                                          1,167,548              409,721
Other assets and investments                                                                         57,089               19,563
                                                                                               ------------         ------------
                                                                                               $ 19,429,653         $  2,221,913
                                                                                               ============         ============
                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                            $    172,966         $     22,878
   Accrued liabilities                                                                              437,998              114,534
   Deferred revenue                                                                                  42,962                4,275
   Construction accounts payable                                                                    154,973               61,398
   Current portion of long-term debt                                                                 63,616
                                                                                               ------------         ------------
      Total current liabilities                                                                     872,515              203,085

Long-term debt                                                                                    5,031,699            2,011,451

Commitments and contingencies (Note 7)

Preferred stock of consolidated subsidiary                                                          307,446

VoiceStream preferred stock; $0.001 par value; 100,000,000 shares authorized:
      Convertible voting preferred; 3,906,250 shares issued and outstanding                       5,000,000
      2.5% convertible junior preferred; 3,952 shares issued and outstanding                        400,963

Shareholders' equity:
   Common stock, $0.001 par value, and paid in capital; 1.0 billion shares
      authorized; 227,639,725 and 96,305,360 shares issued
      and outstanding, respectively                                                              10,224,619            1,095,539
   Deferred compensation                                                                            (39,019)             (25,264)
   Accumulated other comprehensive loss                                                             (30,793)
   Deficit                                                                                       (2,337,777)          (1,062,898)
                                                                                               ------------         ------------
      Total shareholders' equity                                                                  7,817,030                7,377
                                                                                               ------------         ------------
                                                                                               $ 19,429,653         $  2,221,913
                                                                                               ============         ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                       3
<PAGE>   4
                        VOICESTREAM WIRELESS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                       Three months ended September 30,          Nine months ended September 30,
                                                      -----------------------------------      -----------------------------------
                                                          2000                  1999               2000                  1999
                                                      -------------         -------------      -------------         -------------
<S>                                                   <C>                   <C>                <C>                   <C>
Revenues:
     Subscriber revenues                              $     336,247         $     106,811      $     780,708         $     243,349
     Prepaid revenues                                        69,617                   427            162,253                 1,860
     Roamer revenues                                         35,844                 2,645             74,174                 6,205
     Equipment sales                                         87,917                18,203            177,673                48,554
     Affiliate and other revenues                            32,617                 6,846             77,989                11,725
                                                      -------------         -------------      -------------         -------------
          Total revenues                                    562,242               134,932          1,272,797               311,693
                                                      -------------         -------------      -------------         -------------

Operating expenses:
     Cost of service                                        145,117                31,752            328,818                74,100
     Cost of equipment sales                                154,507                32,996            317,174                93,904
     Cost of engineering and R&D                                                                       2,867
     General and administrative                             216,760                35,542            440,709                83,938
     Sales and marketing                                    271,809                48,883            502,006               134,689
     Depreciation and amortization                          260,293                40,866            541,197                96,280
     Stock-based compensation                                21,194                 6,632             30,729                53,935
                                                      -------------         -------------      -------------         -------------
          Total operating expenses                        1,069,680               196,671          2,163,500               536,846
                                                      -------------         -------------      -------------         -------------

Operating loss                                             (507,438)              (61,739)          (890,703)             (225,153)
                                                      -------------         -------------      -------------         -------------

Other income (expense):
     Interest and financing expense                        (141,580)              (26,919)          (343,679)              (58,800)
     Equity in net losses of unconsolidated
       affiliates                                           (49,133)               (8,967)           (96,380)              (25,260)
     Interest income and other, net                          45,899                 4,591             67,889                 6,176
     Accretion of preferred stock of
       consolidated subsidiary                               (5,073)                                 (12,006)
                                                      -------------         -------------      -------------         -------------
          Total other income (expense)                     (149,887)              (31,295)          (384,176)              (77,884)
                                                      -------------         -------------      -------------         -------------
Net loss                                                   (657,325)              (93,034)        (1,274,879)             (303,037)

     Preferred dividends attributable to
       2.5% junior preferred stock                           (3,992)                                 (10,330)
                                                      -------------         -------------      -------------         -------------
Net loss attributable to common
     shareholders                                          (661,317)              (93,034)        (1,285,209)             (303,037)

     Other comprehensive losses                             (30,793)                                 (30,793)
                                                      -------------         -------------      -------------         -------------

Comprehensive loss attributable to common
     shareholders                                     $    (692,110)        $     (93,034)     $  (1,316,002)        $    (303,037)
                                                      =============         =============      =============         =============
Basic and diluted loss per common share               $       (3.02)        $       (0.97)     $       (7.21)        $       (3.17)
                                                      =============         =============      =============         =============
Weighted average common shares used in
     computing basic and diluted loss per common
     share                                              218,776,000            95,694,000        178,181,000            95,595,000
                                                      =============         =============      =============         =============
</TABLE>

           See accompanying notes to consolidated financial statements


                                       4
<PAGE>   5
                        VOICESTREAM WIRELESS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                    Nine months ended September 30,
                                                                    -------------------------------
                                                                        2000                1999
                                                                    -----------         -----------
<S>                                                                 <C>                 <C>
Operating activities:
   Net loss                                                         $(1,274,879)        $  (303,037)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                     541,197              96,280
      Amortization of debt discount and premium                          35,013
      Equity in net loss of unconsolidated affiliates                    96,380              25,260
      Stock-based compensation                                           30,729              53,935
      Allowance for bad debts                                            11,631               5,952
      Other, net                                                         13,024               1,104
      Changes in operating assets and liabilities, net of
         effects from consolidating acquired interests:
           Accounts receivable                                         (140,914)            (57,117)
           Inventory                                                   (148,986)               (829)
           Prepaid expenses and other current assets                    (25,016)             (6,890)
           Accounts payable                                             135,415              15,254
           Accrued liabilities                                          171,656              53,335
                                                                    -----------         -----------
      Net cash used in operating activities                            (554,750)           (116,753)
                                                                    -----------         -----------

Investing activities:
   Purchases of property and equipment                                 (914,244)           (245,042)
   Additions to licensing costs and other intangible assets              (1,364)             (2,808)
   Acquisitions of wireless properties, net of cash acquired           (469,366)
   Investments in and advances to unconsolidated affiliates            (411,770)           (169,487)
   Other                                                                 (3,743)            (14,110)
                                                                    -----------         -----------
      Net cash used in investing activities                          (1,800,487)           (431,447)
                                                                    -----------         -----------

Financing activities:
   Net proceeds from issuance of common and preferred stock           6,347,133                 888
   Long-term debt borrowings                                          3,540,000             895,000
   Long-term debt repayments                                         (3,591,669)           (270,000)
   Net payments to Western Wireless                                                         (24,379)
   Deferred financing costs                                             (68,142)            (12,500)
                                                                    -----------         -----------
      Net cash provided by financing activities                       6,227,322             589,009
                                                                    -----------         -----------

Change in cash and cash equivalents                                   3,872,085              40,809

Cash and cash equivalents, beginning of period                          235,433               8,057
                                                                    -----------         -----------

Cash and cash equivalents, end of period                            $ 4,107,518         $    48,866
                                                                    ===========         ===========
</TABLE>


           See accompanying notes to consolidated financial statements


                                       5
<PAGE>   6
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.  ORGANIZATION

    VoiceStream Wireless Corporation ("VoiceStream" or "we") provides personal
communication services ("PCS") in urban markets in the United States using the
Global System for Mobile Communications, or GSM, technology. VoiceStream was
incorporated in June 1999 as a Delaware corporation to act as the parent company
for business combinations involving our predecessor, now named VS Washington
Corporation ("VS Washington").

    On August 28, 2000 we announced a definitive merger agreement with Powertel,
Inc. a GSM provider based in West Point, Georgia servicing the Southeastern
United States (the "Powertel Agreement"). Pursuant to the Powertel Agreement,
holders of Powertel common and preferred stock will receive VoiceStream common
shares at a conversion ratio ranging from .65, if the average closing price of
VoiceStream common stock is $130.77 or above, to .75 if the average closing
price of VoiceStream common stock is $113.33 or below. Between these two prices
the ratio adjusts to yield $85 in VoiceStream common stock for each Powertel
common share equivalent. The merger is subject to the customary closing
conditions, including approval by VoiceStream's and Powertel's shareholders and
legal and regulatory approvals.

    On July 24, 2000 we announced a definitive merger agreement with Deutsche
Telekom AG, a German telecommunication provider (the "Deutsche Telekom
Agreement"). Pursuant to the Deutsche Telekom Agreement, which was approved by
the Boards of Directors of both companies, each VoiceStream shareholder will
receive 3.2 Deutsche Telekom shares and $30 in cash for each VoiceStream common
share, subject to certain adjustments. VoiceStream shareholders are able to
elect either an all-share or all-cash option, subject to the proration terms of
the Deutsche Telekom Agreement. In connection with the merger, Deutsche Telekom
will assume all of our outstanding debt, currently totaling $5.1 billion. The
merger is expected to qualify as a tax-free reorganization for VoiceStream
shareholders receiving Deutsche Telekom shares. The merger is subject to the
customary closing conditions, including approval by VoiceStream's shareholders
and legal and regulatory approvals and is expected to be completed in the first
half of 2001.

    On September 5, 2000 Deutsche Telekom made a $5.0 billion investment in
VoiceStream in exchange for preferred stock convertible into common stock at a
price of $160 per share. Deutsche Telekom's $5.0 billion investment is
independent of the merger.

    To facilitate the combination of the three companies, Deutsche Telekom and
Powertel have entered into a separate definitive agreement for Deutsche Telekom
to acquire Powertel and for the Powertel shareholders to receive 2.6353 Deutsche
Telekom shares for each Powertel common share, subject to certain adjustments.
The Deutsche Telekom/Powertel merger is expected to close immediately after the
Deutsche Telekom/VoiceStream merger closes. The VoiceStream/Powertel merger will
not close if the Deutsche Telekom/VoiceStream merger is consummated. Thus,
Powertel shareholders will receive Deutsche Telekom shares unless the merger
between VoiceStream and Deutsche Telekom is terminated. The merger is expected
to be completed in the first half of 2001.

    On February 25, 2000, pursuant to a reorganization agreement approved by the
shareholders of VS Washington and Omnipoint Corporation ("Omnipoint"),
VoiceStream, as a holding company, became the parent of VS Washington and of
Omnipoint. On May 4, 2000, VoiceStream completed the acquisition by merger of
Aerial Communications, Inc. ("Aerial"). VoiceStream's current business
activities consist of the combined businesses of VS Washington, Omnipoint and
Aerial.

    Prior to May 3, 1999, VS Washington was an 80.1% owned subsidiary of Western
Wireless Corporation ("Western Wireless"). The remaining 19.9% was owned by
Hutchison Telecommunications PCS (USA) Limited ("Hutchison"), a subsidiary of
Hutchison Whampoa Limited, a Hong Kong company. On May 3, 1999, VS Washington
was formally separated in a spin-off transaction from Western Wireless' other
operations.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The accompanying interim consolidated financial statements and the
financial information included herein are unaudited, but reflect all adjustments
which are, in our opinion, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented. All
such adjustments are of a normal, recurring nature. Results of operations for
interim periods presented herein are not necessarily indicative of results of
operations for the entire year.

    Cash and cash equivalents

    Cash and cash equivalents are stated at cost, which approximates market.
We consider all highly liquid debt instruments purchased with an original
maturity at time of purchase of three months or less to be cash equivalents.


                                       6
<PAGE>   7
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:

    Capitalized interest

    Our PCS licenses and wireless communications systems represent qualified
assets pursuant to Statement of Financial Accounting Standards ("SFAS") No. 34,
"Capitalization of Interest Cost." Our policy is to capitalize interest in new
markets during the build-out phase until service is initiated for customers. We
have not capitalized interest in the nine months ended September 30, 2000. We
had capitalized interest in the amount of $0.1 million and $1.7 million during
the three months and nine months ended September 30, 1999, respectively.

    Intangible assets and amortization

    Goodwill consists of the excess of the purchase price over the fair value of
assets acquired in the Aerial and Omnipoint mergers (see Note 3) and is being
amortized over a useful life of 20 years. Licensing costs, including those
acquired from Aerial and Omnipoint, are amortized over a useful life of 40
years.

    Revenue recognition

    Service revenues based on customer usage are recognized at the time the
service is provided. Access and special feature service revenue are recognized
when earned. Sales of equipment, primarily handsets, are recognized upon
delivery to the customer. Prepaid coupon sales are deferred until service is
provided.

    Supplemental cash flow disclosure

    Cash paid for interest (net of any amounts capitalized) was $229.3 million
for the nine months ended September 30, 2000 and $38.6 million for the same
period in 1999.

    Reclassifications

    Certain amounts in the prior period financial statements have been
reclassified to conform to the 2000 presentation.

    Recently issued accounting pronouncements

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the consolidated statements of
operations, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that are subject to hedge accounting.

    Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB No. 133 - an
Amendment to FASB Statement No. 133", the effective date of SFAS No. 133 has
been deferred until fiscal years beginning after January 15, 2000. SFAS 133
cannot be applied retroactively. SFAS 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid contracts
that were issued, acquired, or substantively modified after December 31, 1998
(and, at our election, before January 1, 1999).

    We have not yet quantified the impact of adopting SFAS 133 on our
financial statements and have not determined the timing or method of adoption
of SFAS 133. However, the statement could increase volatility in earnings and
other comprehensive income.

    In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin Number 101, "Revenue Recognition in Financial
Statements." This bulletin is effective for the quarter ended December 31, 2000,
with retroactive adoption to January 1, 2000. This bulletin establishes more
clearly defined revenue recognition criteria than previously existing accounting
pronouncements, and specifically addresses revenue recognition requirements for
non-refundable fees, such as activation fees collected by a company upon
entering into a contractual arrangement with a customer, such as an arrangement
to provide telecommunication services. We do not anticipate that adoption of
this bulletin will have a material impact on our financial statements.

    In July 2000, the FASB released Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25," which provides clarification of APB No. 25 for certain issues
such as the determination of an employee, the criteria for determining whether a
plan qualifies as a non-compensatory plan and the accounting consequences of
various modifications to the terms of a previously fixed stock option or award.
Our practices are in conformity with this guidance.

                                       7
<PAGE>   8
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

3.  MERGERS AND ACQUISITIONS

    STPCS Asset and License Purchase

    On September 13, 2000 VoiceStream entered into asset purchase agreements
with STPCS Joint Venture, LLC ("STPCS") which is awaiting approval by the FCC.
STPCS owns certain D and F block licenses in Texas and a subsidiary of
VoiceStream owns an 18% interest in STPCS. Under the terms of the agreement,
STPCS has agreed to sell its D Block licenses in the Victoria, Brownsville,
Laredo and Eagle Pass BTA's to a VoiceStream affiliate for $9 million and
certain F block licenses and assets in the McAllen, Corpus Christi, Brownsville
and Laredo BTAs to VoiceStream, or its affiliate for $330 million. A portion of
the F Block license will be transferred to CVIS IV, a Designated Entity created
subsequent to the original transaction. The purchase price paid by VoiceStream
may be reduced by the amount paid by CIVS IV for the F Block licenses. This
transaction is expected to close in the first quarter of 2001.

     Aerial and Omnipoint Mergers

    On May 4, 2000, we completed the merger with Aerial and accordingly,
subsequent to this date, Aerial results are included in VoiceStream's
consolidated results. Prior to the closing of the merger, Aerial provided PCS
services in urban United States markets including Columbus, OH, Houston, TX,
Kansas City, MO, Minneapolis, MN, Pittsburgh, PA, and Tampa-St. Petersburg, FL.
The merger was accounted for using the purchase method. Pursuant to the merger
agreement, we exchanged 0.455 of a share of VoiceStream common stock for each
outstanding share of Aerial common stock.

    In connection with the Aerial merger agreement, prior to closing of the
merger, Telephone and Data Systems, Inc ("TDS") replaced $420.0 million of
Aerial debt owed to TDS with equity of Aerial at $22 per Aerial common share. In
addition, Sonera, Ltd, ("Sonera") a Finnish telecommunications company, which
held an investment in Aerial Operating Company ("AOC"), a subsidiary of Aerial,
invested $230.0 million in Aerial equity, also at $22 per Aerial common share.
Prior to the closing of the Aerial merger, Sonera converted its interest in AOC
into Aerial common stock.

    On February 25, 2000, we completed the merger with Omnipoint and
accordingly, subsequent to this date, Omnipoint results are included in
VoiceStream's consolidated results. Prior to the closing of the merger,
Omnipoint, directly and through joint ventures, provided PCS services in urban
markets including New York, NY, Detroit, MI, Boston, MA, Philadelphia, PA,
Miami, FL, and Indianapolis, IN. The merger was accounted for using the purchase
method. Pursuant to the merger agreement, we exchanged 0.825 of a share of
VoiceStream common stock plus $8.00 in cash for each outstanding Omnipoint
common share. In conjunction with the merger agreement, VoiceStream committed to
invest a total of $150.0 million in Omnipoint, of which $102.5 million was
invested in Omnipoint preferred stock upon signing of the merger agreement in
June 1999. The remaining $47.5 million was invested in Omnipoint preferred stock
on October 1, 1999.

    In connection with the Omnipoint merger agreement, Hutchison made an
investment of $957.0 million into the combined company for common and redeemable
convertible preferred securities. Hutchison invested $102.5 million directly in
Omnipoint preferred stock subsequent to finalizing the merger agreement in June
1999 and invested an additional $47.5 million in Omnipoint preferred stock in
October 1999. The remaining $807.0 million was invested in VoiceStream upon the
closing of the merger. Upon completion of the merger, Hutchison exchanged its
$150.0 million investment in Omnipoint preferred stock for VoiceStream common
stock at $29 per share. Additionally, Sonera invested $500.0 million in
VoiceStream at the closing of the Omnipoint merger, purchasing VoiceStream
common shares at $57 per share.

    The components of the purchase price of these merger transactions and the
preliminary purchase price allocations are as follows (dollars in thousands):
<TABLE>
<CAPTION>

                                                                     Aerial          Omnipoint
                                                                   ----------        ----------
<S>                                                                <C>               <C>
          Consideration and merger costs:
             Total value of shares issued in merger (a)            $5,703,500        $1,538,000
             Cash payments                                            113,900           627,000
             Fair value of options and warrants converted               6,100           859,000
             Fair value of liabilities assumed inclusive of
               minority interest                                      471,600         3,167,400
             Merger related costs                                      20,500            19,000
             Cook Inlet exchange rights (See Note 5)                                     28,000
                                                                   ----------        ----------
                   Total consideration                              6,315,600         6,238,400

          Preliminary allocation of purchase price:
             Current assets                                            93,800           200,300
             Property, plant and equipment                            363,000           473,000
             Investments in unconsolidated affiliates                   3,500           679,900
             Licenses and other intangibles                           550,900           939,000
                                                                   ----------        ----------
                   Preliminary goodwill                            $5,304,400        $3,946,200
                                                                   ==========        ==========
</TABLE>

    (a) VoiceStream issued 52,325,301 and 52,952,399 shares, respectively, in
conjunction with the Aerial and Omnipoint mergers.



                                       8
<PAGE>   9
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

3.  AERIAL AND OMNIPOINT MERGERS - CONTINUED:

    The above allocations reflect the estimated fair value of assets and
liabilities acquired. Some allocations are based on valuations which are
currently being finalized. VoiceStream does not believe that the final purchase
price allocations will produce materially different results than those reflected
above.

    Unaudited pro forma operating results, assuming both the Aerial and
Omnipoint mergers occurred on January 1 of each of the respective years are as
follows (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
                                                           Nine months ended September 30,
                                                             2000                 1999
                                                         ------------        --------------
<S>                                                      <C>                 <C>
          Total revenues                                 $ 1,462,000          $    694,000
          Net loss                                       $(1,556,000)         $ (1,131,000)
          Basic and diluted loss per common share        $     (6.84)         $      (5.56)
</TABLE>


4.  PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>

                                                     September 30, 2000     December 31, 1999
                                                     ------------------     -----------------
<S>                                                  <C>                    <C>
          (Dollars in thousands)
          Land, buildings, and improvements              $    66,889           $    24,590
          Wireless communications systems                  1,705,965               849,148
          Furniture and equipment                            276,348               109,576
                                                         -----------           -----------
                                                           2,049,202               983,314
          Less accumulated depreciation                     (541,084)             (284,670)
                                                         -----------           -----------
                                                           1,508,118               698,644
          Construction in progress                           989,308               233,148
                                                         -----------           -----------
                                                         $ 2,497,426           $   931,792
                                                         ===========           ===========
</TABLE>

    Depreciation expense was $109.3 million and $39.1 million for the three
months ended September 30, 2000 and 1999, respectively, and $259.1 million and
$91.1 million during the nine months ended September 30, 2000 and 1999,
respectively.

5.  INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

    Cook Inlet Designated Entities

    In connection with its authority to regulate the sale and use of radio wave
spectrum used to provide PCS service in the United States, the FCC adopted rules
that granted a narrow category of entities ("Designated Entities") the exclusive
right to bid for and own C and F Block licenses for the initial five year period
following award of the licenses. VoiceStream did not qualify as a Designated
Entity. In order to continue expansion of service to VoiceStream customers,
VoiceStream obtained 49.9% minority interests in four joint ventures controlled
by Cook Inlet Region, Inc. ("Cook Inlet"), each of which qualified under the
Designated Entity rules to own and operate licenses that VoiceStream could not
directly obtain. Through reseller and other contractual arrangements between
VoiceStream and the four joint ventures, VoiceStream customers are able to
obtain service in the ventures' territories.

    On entering into these joint ventures Cook Inlet was granted exchange rights
whereby Cook Inlet has certain rights, but not the obligation, to exchange their
joint venture interests for approximately 12.6 million VoiceStream common
shares. The rights are conditioned upon the FCC's Designated Entity rules and
VoiceStream's legal ability to own the C and F block licenses at the time of the
exchange under such rules.

    The initial fair value of these exchange rights totaled $65.6 million and
was recorded as an increase to investments in and advances to unconsolidated
affiliates and additional paid-in capital. The exchange rights are being
amortized over the remaining FCC restricted holding periods for the respective
licenses. For the three and nine months ended September 30, 2000, $5.5 million
and $14.5 million, respectively, in amortization expense was recognized for
these rights.



                                       9
<PAGE>   10
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

5.  INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES - CONTINUED:

    In August, 2000, through a subsection of the Department of Defense
Appropriations Act of 2001, the Designated Entity rules were amended such that,
effective upon the date of enactment, Cook Inlet could transfer or assign its C
and F Block licenses to non-designated entities without penalty. Cook Inlet has
subsequently indicated its intention to exercise its exchange rights in the
joint ventures and has filed applications with the FCC for approval for the
transfer of control of its wireless licenses to VoiceStream. As a result of
this exchange, upon exercise of these exchange rights VoiceStream will record
goodwill which will result in additional amortization expense. We expect the
exercise of the exchange rights to occur in the fourth quarter of 2000.

    The four Cook Inlet joint ventures affected by this application are
identified below.

    Cook Inlet VoiceStream PV/SS PCS, LP

    A subsidiary of VoiceStream holds a 49.9% interest in Cook Inlet VoiceStream
PV/SS PCS, LP ("Cook Inlet PCS"). VoiceStream funded the operations of Cook
Inlet PCS during the nine months ended September 30, 2000 through loans
evidenced by promissory notes which are due 180 days after the date of issuance.
The weighted average interest rate was 15% for the third quarter 2000. All
promissory notes that have come due have been replaced with new promissory
notes. The total investment in Cook Inlet PCS, including advances under such
promissory notes, was $80.3 million at September 30, 2000 and $61.9 million at
December 31, 1999, respectively.

    Cook Inlet/VoiceStream PCS, LLC

    A subsidiary of VoiceStream holds a 49.9% interest in Cook Inlet/VoiceStream
PCS, LLC ("CIVS"). This entity owns, among others, the Dallas and Chicago FCC
BTA licenses. Service was launched in the Dallas BTA in September 2000, while it
is expected that the Chicago market will launch service within the first quarter
2001. In January 2000, CIVS reached an agreement with an infrastructure
equipment vendor to provide CIVS with credit facilities of up to $735 million,
composed of a $160 million revolving credit agreement, term loans of $325
million, consisting of $125 million in Tranche A and $200 million in Tranche B,
$100 million of 13% Series A Senior Discount Notes, and up to $150 million of
13% Series A Subordinated Notes. These facilities are not guaranteed by
VoiceStream but are secured by certain assets of CIVS. The net proceeds will be
used to finance capital expenditures, permitted investments, and for working
capital. The amount available for borrowing pursuant to the senior credit
facilities, consisting of the revolving credit agreement and term loans, is
based upon certain equipment purchases by CIVS up to the maximum $485 million
available. The total investment in CIVS including advances under promissory
notes, was $181.4 million at September 30, 2000 and $181.4 million at December
31, 1999, respectively.

    Cook Inlet/VoiceStream PCS II and III, LLC

    Immediately prior to VoiceStream's merger with Omnipoint, Omnipoint's C and
F Block licenses, assets and liabilities associated with these licenses and
operations were transferred to two new joint venture entities controlled by Cook
Inlet. As of September 30, 2000, the results of operations of CIVS II reflect
the operating markets of Philadelphia, Atlantic City, and Dover, DE; all other
PCS licenses held by CIVS II and CIVS III are not operating. We have accounted
for this transfer of non-monetary assets as an investment at VoiceStream's
historical cost, which equates to the fair value of these assets and liabilities
as determined in the purchase price allocation performed for the merger with
Omnipoint. The excess purchase price attributed to these assets has been
allocated between license costs and goodwill and is being amortized into the
loss of unconsolidated affiliates over 40 and 20 years, respectively. Each of
these joint venture entities, Cook Inlet/VoiceStream GSM II PCS, LLC ("CIVS II")
and Cook Inlet/VoiceStream GSM III PCS, LLC ("CIVS III"), qualifies as a
Designated Entity.

    Cook Inlet contributed a total of $75 million in cash to these joint venture
entities for its 50.1% ownership and exchange rights and Omnipoint contributed
the combination of non-cash assets and liabilities described above for its 49.9%
ownership. Cook Inlet holds the majority of voting power in each of these joint
venture entities. The total investment in CIVS II and III, including advances
under promissory notes, was $641.9 million and $55.0 million, respectively, as
of September 30, 2000.


                                       10
<PAGE>   11
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

5.   INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES - CONTINUED:

     Microcell Investment

     On February 28, 2000, VoiceStream completed the purchase of 9,590,000 newly
issued Class A shares of Microcell Telecommunications Inc. ("Microcell"), a
Canadian GSM operator for approximately $275 million. The per share transaction
price was equal to the closing market price of Microcell's publicly traded Class
B Non-Voting shares on the Nasdaq National Market System on January 6, 2000.

     The Class A shares constitute approximately 15% of the issued and
outstanding equity securities of Microcell. Class A shares are non-voting but
are convertible at any time into common shares, which are voting (subject to
Canadian foreign ownership restrictions). If fully converted, these common
shares would represent a 22.6% voting interest in Microcell. Additionally,
VoiceStream is entitled to designate two members of Microcell's Board of
Directors. The investment is being accounted for using the equity method. The
total consideration paid by VoiceStream in excess of Microcell's assets, net of
liabilities amounted to $277,494 is allocated to licenses and goodwill.
Amortization expense recognized since February 28, 2000 was $7.1 million and is
included in equity in net losses of unconsolidated affiliates.

     Included in other comprehensive loss for the nine months ended September
30, 2000 are adjustments to VoiceStream's recorded investment in Microcell of
$4.1 million for currency translation adjustment loss due to the effect of
changes in foreign currency exchange rates and $19.0 million equity in
unrealized loss on investments recorded by Microcell.

6.   LONG-TERM DEBT
<TABLE>
<CAPTION>

                                                                   September 30,        December 31,
             (dollars in thousands)                                     2000                1999
                                                                  --------------        -----------
<S>                                                               <C>                   <C>
          New credit facility:
             Vendor facility                                      $   750,000
             Term loans                                             1,900,000
          Previous credit facility:
             Revolver                                                                   $   250,000
             Term loan                                                                      250,000
          10 3/8 % Senior Notes                                     1,725,510             1,100,000
          11 7/8 % Senior Discount Notes                              720,000               720,000
          11 5/8% Senior Notes and Series A Senior Notes                6,832
          11 1/2% Senior Notes                                        205,000
          FCC license obligations                                      63,616
                                                                  -----------           -----------
                                                                    5,370,958             2,320,000
          Less unamortized discount and premium, net                 (275,643)             (308,549)
          Less current portion of long-term debt                      (63,616)
                                                                  -----------           -----------
                                                                  $ 5,031,699           $ 2,011,451
                                                                  ===========           ===========
</TABLE>

     Credit and Vendor Infrastructure Facilities

     On February 25, 2000, immediately following the completion of the Omnipoint
merger, VoiceStream entered into a new credit facility with a consortium of
lenders. Pursuant to the new credit facility, the lenders have made available
revolving credit loans and term loans in an aggregate principal amount totaling
$3.25 billion. The revolving credit portion of the new credit facility is a
$1.35 billion reducing revolving credit. Immediately following the completion of
the Omnipoint merger, VoiceStream used the proceeds of draws on the new credit
facility to repay certain long-term debt of Omnipoint. Additionally, a portion
of the cash equity investments received from Hutchison and Sonera, described in
Note (3), were used to pay off the remaining balance on the previous credit
facility.



                                       11
<PAGE>   12
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


6.   LONG-TERM DEBT - CONTINUED:

     The new credit facility permits up to $1.5 billion of additional
indebtedness, including up to $1 billion for a vendor facility, which would
become part of the new credit facility, by amendment, subject to the same
covenants and secured by the same collateral. On April 28, 2000, we entered into
a vendor facility with an infrastructure equipment vendor and a bank that
provides up to $1 billion in senior credit facilities and VoiceStream has agreed
to acquire certain equipment, software and services from the vendor. The vendor
facility has a maturity of 9.25 years and is available in multiple draws,
including $500 million that was drawn on April 28, 2000, $250 million that was
drawn in July 2000, and $250 million that can be drawn by June 30, 2001. Net
proceeds of the vendor facilities will be used for the same purposes as other
proceeds under the new credit facility.

     The availability of the revolving credit portion of the new credit facility
declines over the period commencing three years after the closing date through
the eighth anniversary of the closing date in the following percentages: 10% in
year four, 15% in year five, 20% in year six, 20% in year seven and 35% in year
eight. The term loan portion of the new credit facility is comprised of a $900
million Tranche A and a $1 billion Tranche B. Tranche A is required to be
amortized at the same rate that the availability under the revolving credit
portion of the new credit facility reduces with a final maturity on the eighth
anniversary of the closing date. Tranche B is required to be amortized in the
following amounts during the period commencing three years after the closing
date through the ninth anniversary: $10 million in each of years four through
eight and the remaining balance in year nine.

     Borrowings under Tranche A bear interest, at VoiceStream's option, at an
annual rate of interest equal to either (1) the greater of (a) the prime rate,
or (b) the Federal Funds rate plus 1/2%, or (2) a Eurodollar rate, in each
instance plus an applicable margin. Such applicable margin will range to a
maximum of 1.50%, in the case of loans based on the prime rate or Federal Funds
rate, and to a maximum of 2.75%, in the case of loans based on a Eurodollar
rate, in each case based upon certain factors including the ratio of total
indebtedness to operating cash flow, as defined in the new credit facility.

     The $1 billion Tranche B and the vendor facility tranches bear interest, at
VoiceStream's option, at an annual rate of interest equal to either (1) the
greater of (a) the prime rate, or (b) the Federal Funds rate plus 1/2%, or (2) a
Eurodollar rate, plus an applicable margin. Such applicable margin is a fixed
percentage of 1.75%, in the case of loans based on the prime rate or Federal
Funds rate, and 3.0% in the case of loans based on a Eurodollar rate. The
applicable margin on the final $250 million vendor facility tranche, that can
be drawn by June 30, 2001, may be subject to adjustment at any time before
disbursement of the funds.

     The credit facility requires VoiceStream to enter into interest rate
hedging agreements to manage the interest rate exposure pertaining to borrowings
under the credit facility. VoiceStream had entered into interest rate caps,
collars and swaps with a total notional amount of $325.0 million at September
30, 2000. Generally these instruments have initial terms ranging from six months
to four years and effectively convert variable rate debt to fixed rate. The
amount of unrealized gain or loss attributable to changing interest rates at
September 30, 2000 was not material.

     The new credit facility contains affirmative and negative covenants, with
which we must comply, including financial covenants, and provides for
various events of default. The repayment of the loans is secured by, among other
things, the grant of a security interest in the capital stock and assets of
VoiceStream and certain of its subsidiaries. As of September 30, 2000, we were
in compliance with respect to these affirmative and negative covenants.

     During the second and third quarters of 2000, VoiceStream issued additional
debt in exchange for certain debt outstanding of Omnipoint (dollars in
millions):
<TABLE>
<CAPTION>
                         Omnipoint debt exchanged                                         VoiceStream debt
      -------------------------------------------------------------    -----------------------------------------------------------
        Balance        Rate           Description           Due          Balance       Rate            Description         Due
      ------------  ----------   -----------------------  ---------    -----------  -----------  --------------------    ---------
<S>                 <C>         <C>                       <C>          <C>          <C>          <C>                     <C>
      (Second quarter 2000 exchanges)

      $142.8        14%         Senior Notes              2003         $149.7       10 3/8%      Senior Notes            2009

      $102.3        11 1/2%     Senior Notes              2009         $102.3       11 1/2%      Senior Notes            2009

      (Third quarter 2000 exchanges)

      $193.5        11 5/8%     Senior Notes              2006         $475.8       10 3/8%      Senior Notes            2009

      $242.5        11 5/8%     Series A Senior Notes     2006
</TABLE>



                                       12
<PAGE>   13
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

6.   LONG-TERM DEBT - CONTINUED:

     Following the completion of these exchanges, $6.8 million of the Omnipoint
11 5/8% Senior Notes and Series A Senior Notes and $102.7 million of the
Omnipoint 11-1/2% Senior Notes remain outstanding. The differences in the total
value of debt exchanged represented adjustments to fair value of debt assumed
in the Omnipoint merger and therefore were treated as adjustments to the total
purchase price of Omnipoint and are reflected in additional goodwill recorded.

     The aggregate amounts of principal maturities of long-term debt at
September 30, 2000 are as follows (dollar in thousands):
<TABLE>
<S>                                                        <C>
          Twelve months ending September 30, 2001          $   63,616
              Remainder of 2001
              Year ending December 31,
              2002
              2003                                            100,000
              2004                                            145,000
              Thereafter                                    5,062,342
                                                           ----------
                                                           $5,370,958
                                                           ==========
</TABLE>

7.   COMMITMENTS AND CONTINGENCIES

     Commitments

     Future minimum payments required under operating leases and agreements that
have initial or remaining non-cancelable terms in excess of one year as of
September 30, 2000, are summarized below (dollar in thousands):
<TABLE>
<S>                                                          <C>
          Three months ending December 31, 2000              $ 41,145
          Year ending December 31,
              2001                                            162,119
              2002                                            153,152
              2003                                            147,990
              2004                                            140,125
              Thereafter                                      295,379
                                                             --------
                                                             $939,910
                                                             ========
</TABLE>

     Aggregate rental expense for all operating leases was approximately $42.7
million and $8.1 million for the three months ended September 30, 2000 and 1999,
respectively, and $95.5 million and $22.6 million for the nine months ended
September 30, 2000 and 1999, respectively.

     In order to ensure adequate supply and availability of certain
infrastructure equipment and services, VoiceStream has committed to purchase PCS
equipment from various suppliers. These commitments total approximately $1.5
billion. At September 30, 2000, VoiceStream has ordered approximately $1 billion
under these agreements, of which approximately $209.3 million has not been
delivered.

     VoiceStream and its affiliates have various other purchase commitments for
materials, supplies and other items incident to the ordinary course of business
which are neither significant individually nor in the aggregate. Such
commitments are not at prices in excess of current market value.

     Contingencies

     As a result of the Aerial and Omnipoint mergers, VoiceStream may have to
make substantial tax indemnity payments to Western Wireless. In the spin-off
transaction effected on May 3, 1999, Western Wireless distributed its entire
80.1% interest in VS Washington's common stock to its shareholders. Western
Wireless will recognize a gain as a result of the spin-off if the spin-off is
considered to be part of a plan or series of related transactions pursuant to
which one or more persons acquire, directly or indirectly, 50% or more of VS
Washington's common stock, considered under IRS rules a "prohibited
transaction". VoiceStream has 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 VS Washington common stock at the
time of the spin-off and Western Wireless' adjusted tax basis in such stock at
that time.



                                       13
<PAGE>   14
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

7.  COMMITMENTS AND CONTNGENCIES - CONTINUED:

    In the absence of direct authority, and although the issue is not free from
doubt, we believe that we should be able to establish that the spin-off and
VoiceStream's acquisition of VS Washington's stock pursuant to the mergers, in
conjunction with the related transactions and Hutchison's original investment in
VS Washington stock within two years prior to the spin-off, are not pursuant to
a prohibited plan. However, if the IRS were to take the position that a
prohibited plan did occur, the estimated range of possible liability of
VoiceStream, not including interest and penalties, if any, is from zero to $400
million.

    Additionally, 14 C Block licenses won by Cook Inlet/VoiceStream PCS LLC and
11 C Block licenses won by Omnipoint were issued subject to the outcome of the
bankruptcy proceeding of the original licensee, a subsidiary of Pocket
Communications, Inc., which was conditionally granted 43 C Block licenses in
1996. Pursuant to an FCC order, the bankruptcy debtors elected to relinquish
certain licenses, which subsequently were reauctioned, and the bankruptcy court
issued an order making the election effective. Pacific Eagle, a secured
creditor of the debtors, filed with the court a motion for reconsideration of
the election order. The motion was denied, and Pacific Eagle appealed the
denial to the U.S. District Court for Northern Maryland. As a result, the
bankruptcy court stayed its order denying the motion for reconsideration
pending appeal. Because the appeal of the election order is still pending,
there is uncertainty as to the referenced C Block licenses of the Cook Inlet
joint ventures. The district court could order the return of these licenses to
the jurisdiction of the bankruptcy court. Further, in the event that these
licenses are so returned, it is unlikely that the Cook Inlet joint ventures
will be able to recoup the costs incurred by them in connection with the
construction and development of systems related to such licenses.

8.  CONVERTIBLE VOTING PREFERRED STOCK

    On September 6, 2000, VoiceStream issued and sold to Deutsche Telekom
3,906,250 shares of its Convertible Voting Preferred Stock, par value $0.001 per
share, for an aggregate purchase price of $5 billion. Each share of Convertible
Voting Preferred Stock has a liquidation preference of $1,280 per share. If the
Deutsche Telekom/VoiceStream merger agreement is terminated, each share of
Convertible Voting Preferred Stock will become convertible into the number of
shares of VoiceStream common stock equal to the liquidation preference divided
by $160. The liquidation preference and conversion price are adjustable for
splits of the Convertible Voting Preferred Stock or other comparable
transactions. Assuming no such adjustment, the total outstanding shares of
Convertible Voting Preferred Stock will become convertible into 31,250,000
shares of VoiceStream common stock in the event the Deutsche Telekom/VoiceStream
merger agreement is terminated.

    Each share of Convertible Voting Preferred Stock is entitled to one vote.
The Convertible Voting Preferred Stock votes together with the VoiceStream
common stock as a single class and is entitled to receive dividends and other
distributions made by VoiceStream on its common stock on an as-converted basis.
Until the Deutsche Telekom/VoiceStream merger agreement is terminated, the
Convertible Voting Preferred Stock may only be transferred by Deutsche Telekom
to a controlled subsidiary. The Convertible Voting Preferred Stock ranks senior
in rights upon liquidation or dissolution to VoiceStream's common stock and
2 1/2% Convertible Junior Preferred Stock, and will rank junior to any other
VoiceStream Preferred Stock. VoiceStream may at its option redeem the
Convertible Voting Preferred Stock at the liquidation preference thereof after
December 31, 2020, and VoiceStream shall upon the request of the holder thereof
redeem the Convertible Voting Preferred Stock at the liquidation preference
thereof after December 31, 2030; provided, however, that VoiceStream may not
make such redemption if prohibited from doing so by law or agreement or if doing
so would make it insolvent.

9.  SALE OF OMNIPOINT TECHNOLOGIES, INC.

    On June 27, 2000 we sold a wholly-owned subsidiary, Omnipoint Technologies,
Inc. ("OTI"), to Xircom, Inc. ("Xircom"). Pursuant to the terms of the sales
agreement, we exchanged all of the outstanding common shares of OTI for
approximately 1.2 million common shares of Xircom. The sale was accounted for as
a tax-free reorganization and VoiceStream did not recognize any gain or loss on
the transaction. The Xircom shares received were valued at approximately $40.4
million, representing the market price per share at the time of the sale, after
discounting for trading restrictions. The operations of OTI were immaterial to
the consolidated operations of VoiceStream.



                                       14
<PAGE>   15
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

9.   SALE OF OMNIPOINT TECHNOLOGIES, INC. - CONTINUED:

     Included in other comprehensive loss for the three months ended September
30, 2000 is a mark to market adjustment of $7.8 million to recognize the
unrealized loss on the Xircom shares held as of September 30, 2000.

10.  RELATED PARTY TRANSACTIONS

     VoiceStream and the Cook Inlet joint ventures have entered into reciprocal
technical services agreements which allow each 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 performs as a reseller for
the other and related fees are charged and paid between the parties. During the
three months ended September 30, 2000, we earned revenues of $30.5 million and
incurred expenses of $37.9 million related to these agreements as compared to
revenues of $6.8 million and expenses of $8.1 million during the same period in
1999. For the nine months ended September 30, 2000, we earned revenues of $74.1
million and incurred expenses of $89.2 million, as compared to revenues of $11.7
million and expenses of $13.8 million during the same period in 1999.


11.  SUBSEQUENT EVENTS

     Cook Inlet/VoiceStream GSM IV PCS Holdings, LLC

     On October 5, 2000, a VoiceStream affiliate entered into a joint venture
agreement with Cook Inlet Mobile Corporation ("Cook Mobile") to form Cook
Inlet/VoiceStream GSM IV PCS Holding, LLC ("CIVS IV") for the purposes of
acquiring and operating licenses subject to the FCC's Designated Entity rules.
On formation of CIVS IV the VoiceStream affiliate and Cook Mobile made capital
investments of $99,800 and $100,200 respectively representing ownership
percentages of 49.9% and 50.1%.

     On entering into the joint venture agreement, VoiceStream granted Cook
Mobile the right, but not the obligation, to exchange its joint venture
interests for a total of 382,686 shares of VoiceStream common stock for a 30 day
period beginning after the FCC restricted holding period has expired for any
such licenses acquired (currently five years after the issuance date of licenses
acquired). These rights are conditioned by the FCC's Designated Entity rules and
VoiceStream's legal ability to own C and F block licenses at the time of the
exchange under such rules.

     Additionally, VoiceStream loaned $195 million to CIVS IV as evidenced by a
promissory note, bearing interest at 15 percent. CIVS IV paid $19.5 million of
these proceeds (10% of the purchase price) into an escrow account as a deposit
for the purchase of 12 C Block licenses owned by Pocket Communications, Inc. The
sale of these licenses will be subject to approval of the bankruptcy court and
Pocket Communications, Inc.'s former creditors. In a separate agreement, we have
agreed to sell 8 of these licenses to Leap Wireless, Inc. for $60 million. The
transaction with Leap Wireless, Inc. is subject to the successful completion of
our purchase of these licenses from Pocket Communications, Inc.


                                       15
<PAGE>   16
                        VOICESTREAM WIRELESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

11. SUBSEQUENT EVENTS - CONTINUED:

    The transactions described below were entered into in order to comply with
FCC spectrum ownership limits for PCS licenses. These transactions will not
have a material impact on VoiceStream's operations.

    Burst Wireless, Inc.

    On November 1, 2000 VoiceStream entered into an agreement to sell certain D
and E Block 10 MHz licenses to Burst Wireless, Inc. ("Burst") for consideration
of $8.0 million. As consideration, VoiceStream will receive from Burst a
combination of shares and a convertible promissory note depending on the outcome
of certain future financing transactions by Burst. The sale is subject to FCC
approval and is expected to close in the fourth quarter of 2000.

    License exchange between AT&T Wireless and Omnipoint Holdings, LLC

    On July 21, 2000 a VoiceStream subsidiary, Omnipoint Holdings, Inc.
("OHI"), entered into an agreement with AT&T Wireless PCS, LLC ("AT&T") for the
exchange of certain D and E Block 10 MHz licenses held by OHI in Detroit and St.
Louis for certain A Block 10 MHz licenses held by AT&T in Phoenix and Puerto
Rico. The population covered by the AT&T licenses is approximately 7.2 million,
as compared to 8.7 million for the licenses traded by OHI. AT&T has agreed to
pay OHI $11.7 million as additional consideration for the additional covered
population of the licenses received from OHI. Under the terms of the agreement,
neither party assumes any liabilities related to the licenses being transferred.
The parties have filed applications with the FCC requesting approval of the
exchange.

    License exchange between VoiceStream and Cingular Wireless

    In November 2000, VoiceStream entered into an agreement with Cingular
Wireless ("Cingular") for the exchange of licenses covering approximately 35
million people. Cingular will acquire from VoiceStream 10 MHz of spectrum for
the New York MTA, as well as 10 MHz in each of the St. Louis, MO and Detroit,
MI BTAs. VoiceStream will acquire from Cingular 10 MHz of spectrum in the Los
Angeles and San Francisco, CA MTA's, which include the entire states of
California and Nevada. The transaction is expected to close in mid-2001, and is
structured as a tax free exchange and no cash or other consideration is
involved in the exchange. The agreement is subject to FCC approval.


                                       16
<PAGE>   17
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, constitutes "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 VoiceStream operates;
technology changes; competition; changes in business strategy or development
plans; the high leverage of VoiceStream; 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 VoiceStream; and other factors referenced in VoiceStream's
filings with the Securities and Exchange Commission. GIVEN THESE UNCERTAINTIES,
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING
STATEMENTS. VoiceStream 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 VoiceStream and should be read in
conjunction with our consolidated financial statements and notes thereto and
other financial information included herein as well as our Form 10-Q for the
quarters ended March 31 and June 30, 2000, and in our Form 10-K for the year
ended December 31, 1999. Due to the phase of the business cycle of VoiceStream's
PCS operations, our operating results for prior periods may not be indicative of
future performance.

    OVERVIEW

    We provide personal communications services in urban markets in the United
States through the ownership and operation of PCS licenses and through our
minority interests in joint ventures that own and operate similar licenses. We
also hold a minority investment in a Canadian PCS operator.

    We were formed in 1994 as Western PCS Corporation. Prior to May 3, 1999, we
were an 80.1% owned subsidiary of Western Wireless Corporation. The remaining
19.9% was owned by Hutchison, a subsidiary of Hutchison Whampoa Limited, a Hong
Kong company. As the result of a spin-off transaction affected May 3, 1999, we
formally separated from Western Wireless' other operations.

    On February 25, 2000, we merged with Omnipoint. Omnipoint, directly and
through joint ventures in which it has interests, provides PCS services in urban
markets, including New York, NY, Detroit, MI, Boston, MA, Philadelphia, PA,
Miami, FL, and Indianapolis, IN. As a result, the reported results of
operations for the three months ended September 30, 2000, include the results
of Omnipoint's operations for the entire period, and the reported results of
operations for the nine months ended September 30, 2000, include the results of
Omnipoint's operations for the period February 26, 2000, through September 30,
2000.

    On May 4, 2000, we completed our merger with Aerial. Aerial provides PCS
services in urban markets including Columbus, OH, Houston, TX, Kansas City, MO,
Minneapolis, MN, Pittsburgh, PA, and Tampa-St. Petersburg, FL. As a result, the
reported results of operations for the three months ended September 30, 2000,
include the results of Aerial's operations for the entire period, and the
reported results of operations for the nine months ended September 30, 2000,
include the results of Aerial's operations for the period May 5, 2000, through
September 30, 2000.

    On July 24, 2000 we announced a definitive merger agreement with Deutsche
Telekom AG, a German telecommunication provider. Pursuant to the Deutsche
Telekom Agreement, which was approved by the Boards of Directors of both
companies, each VoiceStream shareholder will receive 3.2 Deutsche Telekom shares
and $30 in cash for each VoiceStream common share, subject to certain
adjustments. VoiceStream shareholders are able to elect either an all-share or
all-cash option, subject to the proration terms of the Deutsche Telekom
Agreement. In connection with the merger, Deutsche Telekom will assume all of
our outstanding debt, currently totaling $5.1 billion. The


                                       17
<PAGE>   18
merger is subject to the customary closing conditions, including approval by
VoiceStream's shareholders and legal and regulatory approvals. The merger is
expected to be completed in the first half of 2001. The merger is expected to
qualify as a tax-free reorganization for VoiceStream shareholders receiving
Deutsche Telekom stock.

    On September 5, 2000 Deutsche Telekom made a $5.0 billion investment in
VoiceStream in exchange for preferred stock convertible into common stock at a
price of $160 per share. Deutsche Telekom's $5.0 billion investment is
independent of the merger.

    On August 28, 2000 we announced a definitive merger agreement with
Powertel, Inc. a GSM provider based in West Point, Georgia servicing the
Southeastern United States. Pursuant to the Powertel Agreement, holders of
Powertel common and preferred stock will receive VoiceStream common shares at a
conversion ratio ranging from .65, if the average closing price of VoiceStream
common stock is $130.77 or above, to .75 if the average closing price of
VoiceStream common stock is $113.33 or below. Between these two prices the ratio
adjusts to yield $85 in VoiceStream common stock for each Powertel common share
equivalent. The merger is subject to the customary closing conditions, including
approval by VoiceStream's and Powertel's shareholders and legal and regulatory
approvals.

    To facilitate the combination of the three companies, Deutsche Telekom and
Powertel have entered into a separate definitive agreement for Deutsche Telekom
to acquire Powertel and for the Powertel shareholders to receive 2.6353 Deutsche
Telekom shares for each Powertel common share, subject to certain adjustments.
The Deutsche Telekom/Powertel merger is expected to close immediately after the
Deutsche Telekom/VoiceStream merger closes. The VoiceStream/Powertel merger will
not close if the Deutsche Telekom/VoiceStream merger is consummated. Thus,
Powertel shareholders will receive Deutsche Telekom shares unless the merger
between VoiceStream and Deutsche Telekom is terminated. The merger is expected
to be completed in the first half of 2001.

    We did not commence operations in any of our markets until February 1996.
From that date on we have launched service in a variety of our markets as
follows:
<TABLE>
<CAPTION>

            1996                    1997                 1998                            1999
  --------------------------    --------------    --------------------      --------------------------------
<S>                             <C>               <C>                       <C>
  Honolulu                      El Paso           Phoenix/Tucson            Seattle/Tacoma
  Portland                      Boise                                       San Antonio/Austin
  Salt Lake City                Denver                                      Washington DC/Baltimore
  Albuquerque
  Oklahoma City
  Des Moines
</TABLE>

The following operational markets were acquired as a result of the Omnipoint
merger in February of 2000:

           New York                                  Indianapolis
           Detroit                                   Hartford
           Boston/Providence                         Albany
           Miami/Ft. Lauderdale                      New Haven

Additionally, the following operational markets were acquired as a result of the
Aerial merger in May of 2000:

           Minneapolis                          Kansas City
           Tampa/St. Petersburg                 Columbus
           Pittsburgh                           Houston

    Due to the varying dates at which each of the markets became operational,
the expenses and revenues incurred during any period may not be comparable to
another period and may not be representative of future operations. Due to the
launch of the "Get More" strategy in the acquired markets of Omnipoint and
Aerial and the resulting increase in subscribers as well as general and
administrative and sales and marketing expenses, the operating results may not
be comparable to prior periods or indicative of future operating results.
Additionally, during each period being discussed, a portion of the operating
expenses were start-up costs incurred before the commencement of operations in
each of the markets. Exclusive of depreciation and amortization expense, which
was not material, approximately $1.8 million and $1.0 million of start-up costs
were incurred during the three months ended September 30, 2000 and 1999,
respectively, and $3.0 million and $2.2 million of start-up costs were incurred
during the nine month periods ended September 30, 2000 and 1999, respectively.

    We hold minority interests in joint ventures that have operations in five
markets. Our financial accounting for these minority interests differs from that
of markets we own because we account for them as investments using the equity
method of accounting. Our net share of the revenues and expenses of markets
operated by joint ventures is reflected on a single line in our consolidated
statements of operations. Additionally, our portion of the assets and
liabilities of each joint venture is reflected, net of our portion of each joint
ventures' cumulative net income or loss, in one line on our balance sheet.



                                       18
<PAGE>   19
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
1999

    The following table sets forth certain financial data as it relates to our
operations:
<TABLE>
<CAPTION>

(Dollars in thousands)                      THREE MONTHS ENDED SEPTEMBER 30,              NINE MONTHS ENDED SEPTEMBER 30,
                                       ------------------------------------------    -------------------------------------------
                                                           %                                              %
                                            2000         CHANGE           1999           2000          CHANGE            1999
                                        -----------    -----------    -----------    -----------     -----------     -----------
<S>                                     <C>            <C>            <C>            <C>             <C>             <C>
Revenues:
      Subscriber revenues               $   336,247            215    $   106,811    $   780,708             221     $   243,349
      Prepaid revenues                       69,617         16,204            427        162,253           8,623           1,860
      Roamer revenues                        35,844          1,255          2,645         74,174           1,095           6,205
      Equipment sales                        87,917            383         18,203        177,673             266          48,554
      Affiliate and other
      revenues                               32,617            376          6,846         77,989             565          11,725
                                        -----------    -----------    -----------    -----------     -----------     -----------
          Total revenues                    562,242            317        134,932      1,272,797             308         311,693

Operating expenses:
      Cost of service                       145,117            357         31,752        328,818             344          74,100
      Cost of equipment sales               154,507            368         32,996        317,174             238          93,904
      Cost of engineering
      services and R&D                                                                     2,867            N.M.
      General and
      administrative                        216,760            510         35,542        440,709             425          83,938
      Sales and marketing                   271,809            456         48,883        502,006             273         134,689
      Depreciation and
      amortization                          260,293            537         40,866        541,197             462          96,280
      Stock based compensation               21,194            220          6,632         30,729             (43)         53,935
                                        -----------    -----------    -----------    -----------     -----------     -----------
          Total operating
          expenses                        1,069,680            444        196,671      2,163,500             303         536,846
                                        -----------    -----------    -----------    -----------     -----------     -----------
Operating loss                             (507,438)           722        (61,739)      (890,703)            296        (225,153)

Other income (expense)                     (149,887)           379        (31,295)      (384,176)            393         (77,884)
                                        -----------    -----------    -----------    -----------     -----------     -----------

Net Loss                                $  (657,325)           607    $   (93,034)   $(1,274,879)            321     $  (303,037)
                                        ===========    ===========    ===========    ===========     ===========     ===========

Adjusted EBITDA loss                    $  (225,951)         1,487    $   (14,241)   $  (318,777)            325     $   (74,938)
                                        ===========    ===========    ===========    ===========     ===========     ===========

Cash flows provided by (used in):
      Operating activities              $  (323,457)                  $   (41,636)   $  (554,750)                    $  (116,753)
                                        ===========                   ===========     ===========                    ===========
      Investing activities              $  (533,556)                  $  (136,317)   $(1,800,487)                    $  (431,447)
                                        ===========                   ===========    ===========                     ===========
      Financing activities              $ 4,893,053                   $   146,963    $ 6,227,322                     $   589,009
                                        ===========                   ===========    ===========                     ===========
</TABLE>

    REVENUES

    The increase in service revenues (subscriber, prepaid and roamer revenues)
is due in part to the growth in the number of subscribers and the Aerial and
Omnipoint mergers (the acquired markets). Included in the results for the three
months and nine months ended September 30, 2000 was $227.4 million and $457.3
million, respectively, in service revenues generated by the acquired markets.

    We had 3,067,900 subscribers at September 30, 2000, representing an increase
of 501,200 or 19.5% from June 30, 2000, and a 258.7% increase from December 31,
1999. At September 30, 1999, we had 675,700 subscribers, representing an
increase of 122,500 or 22.1% from June 30, 1999, and a 109.6% increase from
December 31, 1998. The year over year increase in subscribers during the three
month periods ended September 30 is due primarily to the launch of our "Get
More" marketing strategy, featuring Jamie Lee Curtis in our advertising, in many
of the former Aerial and Omnipoint markets and continuing growth in the ten
markets operating during both three month periods. In addition, third quarter
2000 results included subscribers in the San Antonio/Austin and Washington
DC/Baltimore markets that became operational subsequent to the second quarter of
1999. The year over year increase in subscribers during the nine month periods
ended September 30, 2000 and 1999 is due primarily to subscribers acquired in
the Omnipoint and Aerial mergers and the same factors contributing to third
quarter growth. We believe our "Get More" marketing strategy, that was initiated
in the second quarter of 1998, has contributed to the rapid subscriber growth
throughout all of our markets. We intend to continue the "Get More" marketing
strategy, including launching it in the remaining Omnipoint and Aerial markets,
and expect a continued positive effect on subscriber growth.

    Total subscriber revenue per average subscriber ("ARPU") was $48.02 and
$58.18 for the three months ended September 30, 2000 and 1999, respectively, and
$53.41 and $54.59 for the nine months ended September 30, 2000 and 1999,
respectively. The decline in ARPU is largely the result of the lower ARPU
prepaid business acquired in the Aerial and Omnipoint mergers. During the
current quarter, we experienced an ARPU decline in the post-pay businesses
acquired in the Omnipoint and Aerial mergers similar to the decline experienced
with the original launch of the "Get More" strategy in 1998. We expect a similar
recovery in ARPU as subscribers adjust usage patterns to the "Get More" rate
plans.


                                       19
<PAGE>   20
    The substantial increase in prepaid revenues is largely due to the
acquisition of Omnipoint and Aerial, which had more mature prepaid programs than
VoiceStream. We expect to continue the prepaid program, with certain
modifications to the supporting systems and marketing plan, and expect continued
revenue growth through the remainder of 2000.

    Roamer revenues are primarily the result of adding the Omnipoint and Aerial
markets. These markets contributed $26.4 million and $50.7 million of the
increase for the three months and nine months ended September 30, 2000,
respectively. The remaining increase is a result of our continuing effort to
procure domestic and international roaming agreements with other carriers. We
expect roamer revenues to continue to increase during 2000 due to further growth
in subscribers.

    Equipment revenues increased as a result of more handsets sold. The increase
in handsets sold is due primarily to continuing subscriber growth as described
above. The addition of the Omnipoint and Aerial markets contributed $22.8
million and $58.9 million to equipment sales for the three and nine months ended
September 30, 2000, respectively. We anticipate continued growth in equipment
sales as a result of continued growth in subscribers.

    Other revenues consist primarily of revenue earned as part of the reciprocal
technical services agreements and resale agreements we have entered into with
the Cook Inlet joint venture entities. These agreements allow each of
VoiceStream and the Cook Inlet joint venture entities to utilize air time on the
others' spectrum and/or wireless system infrastructure, in certain agreed upon
markets. The agreements are structured such that each performs as a reseller for
the other and related fees are charged and paid between the parties. With the
addition of the Omnipoint and Aerial markets, the number of these agreements has
increased. We expect the exchange rights of the Cook entities to be exercised in
the fourth quarter of 2000. Once these exchange rights are exercised the Cook
entities will be 100% owned by VoiceStream and the majority of these revenues
will be eliminated in consolidation.

    OPERATING EXPENSES

    Cost of service expenses represent expenses incurred only by operational
markets. The Omnipoint and Aerial mergers contributed $67.5 million to the
increase in cost of service for the three months ended September 30, 2000, and
$138.2 million for the nine months ended September 30, 2000. The remaining
increase in cost of service is primarily attributable to the increased costs of
maintaining the expanding wireless network and supporting a growing customer
base. Cost of service as a percentage of total revenue less equipment sales
increased to 30.6% from 27.2% for the three months ended September 30, 2000 and
1999, respectively and 30.0% from 28.2% for the nine months ended September 30,
2000 and 1999, respectively. The increase is due to the higher costs of serving
customers in the markets acquired in the Omnipoint and Aerial mergers. While
cost of service expenses are expected to grow due to continuing growth in
subscribers, we expect the cost of service as a percentage of service revenue
to decline as greater economies of scale are realized.

    Cost of equipment sales increased primarily due to the increase in handsets
sold. The Omnipoint and Aerial markets contributed approximately $47.2 million
and $127.2 million to the increase in the three months and nine months ended
September 30, 2000, respectively. Although subscribers generally are responsible
for purchasing or otherwise obtaining their own handsets, we have historically
sold handsets below cost to respond to competition and general industry
practice, and we expect to continue to do so in the future.

    The increase in general and administrative expenses is primarily
attributable to the increased costs associated with supporting the larger
subscriber base, but also reflects expenses associated with integrating the
operations of Omnipoint and Aerial and certain expenses related to the planned
merger with Deutsche Telekom. General and administrative costs per average
subscriber were $25.65 and $19.28 for the three months ended September 30, 2000
and 1999, respectively, and $24.96 and $18.69 for the nine months ended
September 30, 2000 and 1999, respectively. The increased cost per subscriber in
the current quarter is due to the Omnipoint and Aerial merger integration costs
and certain executive compensation arrangements related to the Deutsche Telekom
transaction. The Omnipoint and Aerial integration activities include
implementing a common billing and customer care system and implementing a
nationwide call blending strategy for customer calls. While general and
administrative expenses are expected to grow due to the continuing growth in
subscribers, we expect the cost per average subscriber to decline as greater
economies of scale are realized. The efficiencies we expect to gain due to the
increased subscriber base may be partially offset during the remainder of 2000
by the costs associated with completing the integration of our back-office
operations with those of Omnipoint and Aerial.


                                       20
<PAGE>   21
    Sales and marketing costs increased as a result of the increased subscriber
growth and the introduction of the VoiceStream brand name and "Get More"
marketing strategies to most of the Omnipoint and Aerial markets. The Omnipoint
and Aerial markets contributed $188.8 million and $270.4 million to the
increases in the three months and nine months ended September 30, 2000,
respectively. Sales and marketing cost per net subscriber added, including the
loss on equipment sales, increased to $675 from $520 for the three months ended
September 30, 2000 and 1999, respectively, and to $646 from $510 for the nine
months ended September 30, 2000 and 1999, respectively. This increase is largely
due to higher subscriber turnover or churn rates for the prepaid businesses
acquired in the Aerial and Omnipoint mergers. The cost per gross subscriber
added which has been on a downward trend since 1998 to approximately $350 at the
end of the second quarter of 2000, increased by ten percent in the current
quarter due to the costs of rebranding activities and launching the "Get More"
marketing strategy in many of the Omnipoint and Aerial markets.  We expect sales
and marketing cost per net subscriber added to decline for the remainder of 2000
due to the anticipated growth in subscriber additions.

    The increase in depreciation and amortization expense is attributable to the
tangible and intangible assets acquired in the Omnipoint and Aerial mergers
and the continued expansion of our wireless network. These mergers contributed
$55.3 million to depreciation and $121.9 million to amortization for the third
quarter of 2000. The additional merger related depreciation and amortization was
$106.3 and $244.5, respectively, for the nine months ended September 30, 2000.
FCC licenses are not amortized until the related market is operational.

    A non-cash charge for stock based compensation of $47.3 million was
recognized during the second quarter of 1999, as a result of restructuring stock
options in connection with the spin-off from Western Wireless. The remaining
$39.0 million of deferred compensation as of September 30, 2000, is being
recognized as expense over the future periods in which the remaining unvested
options vest. Additionally, restricted stock was granted to certain executives
of VoiceStream relative to the Deutsche Telekom merger. Deferred compensation
related to these grants is being amortized to the expected closing date of the
merger. In the third quarter of 2000 and for the year to date, $21.2 million and
$30.7 million of deferred compensation expense was recorded, respectively.

    PCS TECHNOLOGY

    Cost of engineering services and research and development represent
operating costs of a technology subsidiary acquired in the Omnipoint merger in
the first quarter of 2000. This subsidiary was sold to Xircom in the second
quarter of 2000 (see Note 8 to the financial statements).

    ADJUSTED EBITDA

    Adjusted EBITDA represents operating loss before depreciation, amortization
and stock-based compensation. We believe Adjusted EBITDA provides meaningful
additional information on our operating results and on our ability to service
our long-term debt and other fixed obligations, and to fund our continued
growth. Adjusted EBITDA is considered by many financial analysts to be a
meaningful indicator of an entity's ability to meet its future financial
obligations, and growth in Adjusted EBITDA is considered to be an indicator of
future profitability, especially in a capital-intensive industry such as
wireless telecommunications. Adjusted EBITDA should not be construed as an
alternative to operating income (loss) as determined in accordance with United
States generally accepted accounting principles ("GAAP"), as an alternate to
cash flows from operating activities (as determined in accordance with GAAP), or
as a measure of liquidity. Because Adjusted EBITDA is not calculated in the same
manner by all companies, our presentation may not be comparable to other
similarly titled measures of other companies.

    Adjusted EBITDA loss increased to $226.0 million for the three months ended
September 30, 2000, from a loss of $14.2 million for the three months ended
September 30, 1999. This increase is due primarily to the Aerial and Omnipoint
mergers and the high rate of subscriber growth we are experiencing. In addition
to the customer acquisition costs associated with the high growth rate, we are
also incurring costs to integrate the acquired operations into VoiceStream while
having not yet achieved all the expected synergies from consolidating
administrative, customer care and other similar functions. The increase in
Adjusted EBITDA loss to $318.8 million for the nine months ended September 30,
2000 compared to a loss of $74.9 million for the nine months ended September 30,
1999 and is attributable to the same factors.

    OTHER INCOME (EXPENSE)

    Interest and financing expense increased to $141.6 million from $26.9
million for the three months ended September 30, 2000 compared with 1999 and to
$343.7 million from $58.8 million for the nine months ended September 30, 2000
compared with 1999, due to the increase in debt. We assumed $3.1 billion of
debt in the Omnipoint and Aerial mergers

                                       21
<PAGE>   22
and have incurred additional debt primarily to fund capital expenditures to
build-out our wireless systems and to fund operating losses. The weighted
average interest rate, before any capitalized interest, was 10.3% and 10.6% for
the three months ended September 30, 2000 and 1999, respectively, and 10.4% and
9.7% for the nine months ended September 30, 2000 and 1999, respectively.

    NET LOSS

    The increase in net loss to $657.3 million from $93.0 million for the
quarter ended September 30, 2000, compared with the same period in 1999, is
attributable to the increases in depreciation and amortization, the Adjusted
EBITDA loss and the increase in interest expense described above. Additionally,
equity in the net losses of unconsolidated affiliates has increased due to
higher subscriber growth and associated customer acquisition costs in the
operating markets of our joint ventures and to the loss associated with the
Microcell investment, which totaled $15.0 million in the third quarter of 2000
and $22.6 million for the year to date 2000.

    LIQUIDITY AND CAPITAL RESOURCES

    Financing and Merger Activities

    During the third quarter of 2000, we received $5.0 billion in proceeds from
the sale of convertible preferred stock to Deutsche Telekom, $810 million of
which was used to pay down the revolving credit portion of the new credit
facility. The remainder of the proceeds from this investment will be used to
fund expenditures to expand our wireless network, acquisitions of additional
spectrum and operating losses.

    On February 25, 2000, immediately following the completion of the Omnipoint
merger, we entered into a new credit facility with a consortium of lenders.
Pursuant to the new credit facility, the lenders have made available revolving
credit loans and term loans in an aggregate principal amount totaling $3.25
billion. The revolving credit portion of the new credit facility is a $1.35
billion reducing revolving credit. Immediately following the completion of the
Omnipoint merger, we used the proceeds of draws on the new credit facility to
repay certain long-term debt of Omnipoint. Additionally, portions of the cash
equity investments received from Hutchison and Sonera, described below, were
used to pay off the remaining balance on the previous credit facility.

    The new credit facility permits up to $1.5 billion of additional
indebtedness, including up to $1 billion for a vendor facility, which would
become part of the new credit facility, by amendment, subject to the same
covenants and secured by the same collateral. On April 28, 2000, we entered into
a new vendor facility with an infrastructure equipment vendor and a bank that
provides up to $1 billion in senior credit facilities and we have agreed to
acquire certain equipment, software and services from the vendor. The vendor
facility has a maturity of 9.25 years and is available in multiple draws,
including $500 million that was drawn on April 28, 2000, $250 million that was
drawn in July 2000, and $250 million that can be drawn by June 30, 2001. Net
proceeds of the vendor facility will be used for the same purposes as other
proceeds under the new credit facility.

    The availability of the revolving credit portion of the new credit facility
declines over the period commencing three years after the closing date through
the eighth anniversary of the closing date in the following percentages: 10% in
year four, 15% in year five, 20% in year six, 20% in year seven and 35% in year
eight. The term loan portion of the new credit facility is comprised of a $900
million tranche and a $1 billion tranche. The $900 million tranche is required
to be amortized at the same rate that the availability under the revolving
credit portion of the new credit facility reduces with a final maturity on the
eighth anniversary of the closing date. The $1 billion is required to be
amortized in the following amounts during the period commencing three years
after the closing date through the ninth anniversary: $10 million in each of
years four through eight and the remaining balance in year nine.

    Borrowings under the $900 million Tranche A bear interest, at our option, at
an annual rate of interest equal to either (1) the greater of (a) the prime
rate, or (b) the Federal Funds rate plus 1/2%, or (2) a Eurodollar rate, in each
instance plus an applicable margin. Such applicable margin will range to a
maximum of 1.50%, in the case of loans based on the prime rate or Federal Funds
rate, and to a maximum of 2.75%, in the case of loans based on a Eurodollar
rate, in each case based upon certain factors including the ratio of total
indebtedness to operating cash flow, as defined in the new credit facility.

     The $1 billion Tranche B and the vendor facility bear interest, at our
option, at an annual rate of interest equal to either (1) the greater of (a) the
prime rate, or (b) the Federal Funds rate plus 1/2%, or (2) a Eurodollar rate,
plus an

                                       22
<PAGE>   23
applicable margin. Such applicable margin is a fixed percentage of 1.75%, in the
case of loans based on the prime rate or Federal Funds rate, and 3.0% in the
case of loans based on a Eurodollar rate. The applicable margin on the final
$250 million vendor facility tranche, which must be drawn prior to June 30,
2001, may be subject to adjustment at any time before disbursement of the funds.

     The new credit facility contains affirmative and negative covenants,
including financial covenants, and will provide for various events of default.
The repayment of the loans is secured by, among other things, the grant of a
security interest in the capital stock and assets of VoiceStream and certain of
its subsidiaries. As of September 30, 2000 we were in compliance with these
affirmative and negative covenants.

     During the second and third quarters of 2000, VoiceStream issued additional
debt in exchange for certain debt outstanding of Omnipoint (in millions):
<TABLE>
<CAPTION>
                      Omnipoint debt exchanged                                           VoiceStream debt
    -------------------------------------------------------------    -------------------------------------------------------------
      Balance       Rate           Description           Due          Balance       Rate           Description             Due
   ------------  ----------  -----------------------    ---------    ----------   --------     ---------------------     ---------
<S>               <C>         <C>                       <C>          <C>          <C>          <C>                       <C>

    (Second quarter 2000 exchanges)

    $142.8        14%         Senior Notes              2003         $149.7       10 3/8%      Senior Notes              2009

    $102.3        11 1/2 %    Senior Notes              2009         $102.3       11 1/2%      Senior Notes              2009


    (Third quarter 2000 exchanges)

    $193.5        11 5/8%     Senior Notes              2006         $475.8       10 3/8%      Senior Notes              2009

    $242.5        11 5/8%     Series A Senior Notes     2006
</TABLE>


     Following the completion of these exchanges, $6.8 million of the Omnipoint
11 5/8% Senior Notes and Series A Senior Notes and $102.7 million of the
Omnipoint 11-1/2% Senior Notes remain outstanding. The differences in the total
value of debt exchanged represent adjustments to the fair value of debt
assumed in the Omnipoint merger and therefore were treated as adjustments to the
total purchase price of Omnipoint and are reflected in additional goodwill
recorded.

     On February 25, 2000, we completed our merger with Omnipoint. 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. There was a cash or
share election option available to shareholders of Omnipoint subject to
proration. In conjunction with the merger agreement signed on June 23, 1999, we
invested a total of $150 million in Omnipoint, of which $102.5 million was
invested in Omnipoint preferred stock upon signing of the merger agreement, and
the remaining $47.5 million was invested in Omnipoint preferred stock on October
1, 1999.

     In connection with the Omnipoint merger agreement, Hutchison made an
investment of $957 million into the combined company for common and convertible
preferred securities. Upon signing of the merger agreement on June 23, 1999,
$102.5 million of this investment was invested directly in Omnipoint preferred
stock. An additional $47.5 million was invested in Omnipoint preferred stock in
October 1999. The remaining $807.0 million was invested in VoiceStream 2.5%
convertible junior preferred stock upon closing of the merger. In August 2000,
a portion of these preferred shares were converted to VoiceStream common stock.

     Our merger with Aerial was completed on May 4, 2000. Under the terms of the
agreement, 0.455 of a VoiceStream common share was exchanged for each
outstanding Aerial Series A common share. In connection with the Aerial merger
agreement, immediately prior to the merger, TDS replaced $420 million of Aerial
debt owed to TDS with equity of Aerial at $22 per share. Sonera invested an
additional $230 million in Aerial equity, also at $22 per Aerial share.

     We expect a reduction of overall interest expense for the remainder of 2000
due to the repayment of the revolver and the investment of the remaining $4.1
billion received from Deutsche Telekom. Future interest rates may be more or
less favorable which could significantly impact future interest expense and
interest income. Interest income may be expected to decline as the funds
received from Deutsche Telekom are used to fund acquisitions, capital
expenditures, and operating losses.


                                       23
<PAGE>   24
     Investments and Capital Expenditures

     For the remainder of 2000, we anticipate spending approximately $700
million for capacity expansion of operating markets and the development and
expansion of new markets (amount includes anticipated spending by us and our
Cook Inlet joint ventures). We have also committed to provide $195 million to
CIVS IV to fund license acquisitions, and $330 million to a VoiceStream
subsidiary to acquire additional wireless assets and licenses. In addition we
plan to participate in the upcoming 1900 MHz spectrum reauction later this year
or early 2001. We will use the $4.1 billion of cash on hand and amounts
available for borrowing under the new credit facility for such purposes. The
joint ventures will use cash on hand and amounts available under their various
credit agreements to fund capital activity. Further funds (which may be
significant) will be required to finance the continued growth of operations,
working capital and debt service. The capital cost of completing the build-out
in any particular market, and overall, could vary materially from current
estimates. If adequate funds are not available from our existing capital
resources, we may be required to curtail our service operations or to obtain
additional funds. The terms of any additional funds may be less favorable than
those contained in current arrangements.

     A subsidiary of VoiceStream holds a 49.9% interest in Cook Inlet PCS. We
funded the operations of Cook Inlet PCS during the three months ended September
30, 2000 through loans evidenced by promissory notes which are due 180 days
after the date of issuance. The weighted average interest rate was 15% for the
third quarter of 2000. All promissory notes that have come due were replaced
with new promissory notes. The total investment in Cook Inlet PCS, including
advances under such promissory notes, was $80.3 million at September 30, 2000
and $61.9 million at December 31, 1999.

     In July 1997, and subsequently amended in June 1999 and thereafter,
Omnipoint through its wholly-owned subsidiary OPCS Philadelphia Holdings LLC
("Philadelphia Holdings") entered into a credit facility agreement with a
telecommunications equipment manufacturer to provide financing to Philadelphia
Holdings up to $150 million for the purpose of financing the build out of
networks in the Philadelphia and Dover markets. On May 4, 2000 Cook
Inlet/VoiceStream GSM II, LLC ("CIVS II") through Philadelphia Operating Company
("Philadelphia Operating"), a wholly-owned subsidiary of Philadelphia Holdings,
entered into an agreement to refinance this $350 million facility with the same
lender ("New CIVS Credit Facility") for the purpose of financing the continued
build out of networks and the operations of the Philadelphia, Atlantic City and
Dover markets. Under the terms of the New Ericsson Credit Facility, Philadelphia
Operating is subject to certain financial and operational covenants, including
restrictions on levels of indebtedness, minimum annualized revenues and cash
flows and certain other financial maintenance requirements. Additionally, the
New CIVS Credit Facility provides that, among other events, failure to pay
amounts due to the FCC shall constitute an event of default. The New CIVS Credit
Facility is collateralized by substantially all of the assets of Philadelphia
Operating and its license subsidiaries, including a pledge of all capital stock
of each license subsidiary.

     The New CIVS Credit Facility consists of a revolving credit facility of up
to $150 million and a $200 million term loan. The principal amount of the New
CIVS Credit Facility is payable in quarterly installments beginning in 2004,
with a final payment for the revolving portion of the facility due on March 31,
2008 and the final payment for the term loan due on March 31, 2009. Interest on
the New CIVS Credit Facility is payable at varying interest rates at a base rate
or LIBOR plus, in each case, a set margin and commitment fee based on
Philadelphia Operating's revolver utilization rate.

     A subsidiary of VoiceStream holds a 49.9% interest in CIVS. This entity
owns, among others, the Dallas and Chicago FCC BTA licenses. In January 2000,
CIVS reached an agreement with an infrastructure equipment vendor providing CIVS
with credit facilities up to $735 million, composed of a $160 million revolving
credit agreement, term loans of $325 million, consisting of $125 million in
Tranche A and $200 million in Tranche B, $100 million of 13% Series A Senior
Discount Notes, and up to $150 million 13% Series A Subordinated Notes. These
facilities are not guaranteed by VoiceStream but are secured by certain assets
of CIVS. The net proceeds will be used to finance capital expenditures,
permitted investments, and for working capital. The amount available for
borrowing pursuant to the senior credit facilities, consisting of the revolver
and term loans, is based upon certain equipment purchases by CIVS up to the
maximum $485 million available. Prior to obtaining this credit facility,
VoiceStream had funded the initial operations of CIVS in a similar manner to
that described above for Cook Inlet PCS with the same rates and terms. The total
investment in CIVS, including advances under such promissory notes, was $181.4
million at September 30, 2000, and $181.4 million at December 31, 1999,
respectively.


                                       24
<PAGE>   25
     In February 2000, VoiceStream completed an investment of approximately
$275 million in newly issued Class A shares of Microcell Telecommunications,
Inc., a Canadian GSM operator.

     Cash Flow Information

     Net cash used in operating activities was $554.8 million for the nine
months ended September 30, 2000. Adjustments to the $1.3 billion net loss to
reconcile to net cash used in operating activities included $541.2 million of
depreciation and amortization, $96.4 million of equity in the net loss of
unconsolidated affiliates and $30.7 million for stock based compensation.
Other adjustments included changes in operating assets and liabilities,
including: (i) an increase of $140.9 million in accounts receivable due to the
growth in revenues; (ii) an increase of $149.0 million in inventory, due to
increased equipment sales expected in the fourth quarter; (iii) an increase
in accounts payable of $135.4 million due to the increase in equipment purchases
and other operating expenses; (iv) an increase in accrued liabilities of $171.7
million due to the increase in accrued interest on long-term debt. Net cash used
in operating activities was $116.8 million for the nine months ended September
30, 1999.

     Net cash used in investing activities was $1.8 billion for the nine months
ended September 30, 2000. Investing activities consisted primarily of: (i) the
acquisition of Omnipoint and Aerial for $469.4 million; (ii) investments in and
advances to unconsolidated affiliates of $411.8 million, primarily attributable
to our $275 million investment in Microcell, and (iii) purchases of property and
equipment of $914.2 million, largely related to the continuing build-out of the
wireless network. Net cash used in investing activities was $431.4 million for
the same period in 1999.

     Net cash provided by financing activities was $6.2 billion for the nine
months ended September 30, 2000. Financing activities consisted primarily of net
proceeds from the issuance of preferred and common stock in private placements,
totaling $6.4 billion. Long-term debt borrowings were $3.5 billion for the nine
months ended September 30, 2000, of which $2.3 billion was used to refinance
Omnipoint and Aerial debt. Net cash provided by financing activities was $589.0
million for the same period in 1999.

     In the ordinary course of business, we continue to evaluate acquisitions,
joint ventures and other potential business transactions. Any such transactions
would be financed with cash on hand, borrowings under the new credit facility,
or through the issuance of additional debt or the sale of additional equity.
There can be no assurance that such additional funds will be available to us on
acceptable or favorable terms.

     Recently issued accounting pronouncements

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the consolidated statements of
operations, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that are subject to hedge accounting.

    Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB No. 133 - on Amendment to
FASB Statement No. 133", the effective date of SFAS No. 133 has been deferred
until fiscal years beginning after January 15, 2000. SFAS 133 cannot be applied
retroactively. SFAS 133 must be applied to (a) derivative instruments and (b)
certain derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1998 (and, at our
election, before January 1, 1999).

     We have not yet quantified the impact of adopting SFAS 133 on our
financial statements and have not determined the timing or method of adoption
of SFAS 133. However, the statement could increase volatility in earnings and
other comprehensive income.

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin Number 101, "Revenue Recognition in Financial Statements."
This bulletin is effective for the quarter ended December 31, 2000, with
retroactive adoption to January 1, 2000. This bulletin establishes more clearly
defined revenue recognition criteria than previously existing accounting
pronouncements, and specifically addresses revenue recognition requirements for
non-refundable fees, such as activation fees collected by a company upon
entering into a contractual arrangement with a customer, such as an arrangement
to provide telecommunication services. We do not anticipate that adoption of
this bulletin will have a material impact on our financial statements.

     In July 2000, the FASB released Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25," which provides clarification of APB No. 25 for certain issues
such as the determination of an employee, the criteria for determining whether a
plan qualifies as a non-compensatory plan and the accounting consequences of
various modifications to the terms of a previously fixed stock option or award.


                                       25
<PAGE>   26
We believe that our practices are in conformity with this guidance, and
therefore Interpretation No. 44 will have no impact on the our financial
statements.

     Seasonality

     VoiceStream, and the wireless communications industry in general, have
historically experienced significant subscriber growth during the fourth
calendar quarter. Accordingly, during such quarter we have experienced greater
losses on equipment sales and increases in sales and marketing expenses. We
expect this trend to continue.


                                       26
<PAGE>   27
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    There are no material, pending legal proceedings to which VoiceStream or
    any of its 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 VoiceStream.

ITEM 2. CHANGES IN SECURITIES

    (a) None.

    (b) None.

    (c) On September 6, 2000, VoiceStream issued and sold to Deutsche Telekom
        3,906,250 shares of its Convertible Voting Preferred Stock, par value
        $0.001 per share, in return for an aggregate purchase price of $5
        billion. Each share of Convertible Voting Preferred Stock has a
        liquidation preference of $1,280 per share. Unless the Deutsche
        Telekom/VoiceStream merger agreement is terminated, the Convertible
        Voting Preferred Stock does not become convertible. If the Deutsche
        Telekom/VoiceStream merger agreement is terminated, each share of
        Convertible Voting Preferred Stock will become convertible into the
        number of shares of VoiceStream common stock equal to the liquidation
        preference divided by $160. The liquidation preference and conversion
        price are adjustable for splits of the Convertible Voting Preferred
        Stock or other comparable transactions. Assuming no such adjustment, the
        total outstanding shares of Convertible Voting Preferred Stock will
        become convertible into 31,250,000 shares of VoiceStream common stock
        in the event the Deutsche Telekom/VoiceStream merger agreement is
        terminated. Each share of Convertible Voting Preferred Stock is entitled
        to one vote. The Convertible Voting Preferred Stock votes together with
        the VoiceStream common stock as a single class and is entitled to
        receive dividends and other distributions made by VoiceStream on its
        common stock on an as-converted basis. Until the Deutsche
        Telekom/VoiceStream merger agreement is terminated, the Convertible
        Voting Preferred Stock may only be transferred by Deutsche Telekom to a
        controlled subsidiary. The Convertible Voting Preferred Stock ranks
        senior in rights upon liquidation or dissolution to VoiceStream's common
        stock and 2 -1/2 % Convertible Junior Preferred Stock, and will rank
        junior to any other VoiceStream Preferred Stock. VoiceStream may at its
        option redeem the Convertible Voting Preferred Stock at the liquidation
        preference thereof after December 31, 2020, and VoiceStream shall upon
        the request of the holder thereof redeem the Convertible Voting
        Preferred Stock at the liquidation preference thereof after December 31,
        2030; provided, however, that VoiceStream may not make such redemption
        if prohibited from doing so by law or agreement or if doing so would
        make it insolvent.

        The Convertible Voting Preferred Stock was issued and sold to Deutsche
        Telekom in a private placement exempt from registration under
        Section 4(2) of the Securities Act of 1933, as amended.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

    None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

ITEM 5. OTHER INFORMATION

    None.


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<PAGE>   28
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

    (a)   27.1    Financial Data Schedule

    (b) Reports on Form 8-K


      A Form 8-K was filed on July 28, 2000, announcing that VoiceStream
      Wireless Corporation has entered into a definitive merger agreement with
      Deutsche Telekom AG ("DT") providing for the merger of VoiceStream and DT.

      A Form 8-K was filed on August 31, 2000, announcing that VoiceStream
      Wireless Corporation had entered into a definitive merger agreement to
      acquire Powertel, Inc.

      A Form 8-K was filed on September 8, 2000, announcing that Deutsche
      Telekom AG's $5 billion investment in VoiceStream Wireless Corporation
      preferred stock had been completed.

      A Form 8-K was filed on September 29, 2000, filing the audited financial
      statements of Omnipoint Corporation for the years ended December 1999,
      1998 and 1997.

      A Form 8-K was filed on October 11, 2000, attaching as exhibits the
      Amended and Restated Bylaws and Certificate of Designation for VoiceStream
      Wireless Corporation.


                                       28
<PAGE>   29
                                   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.


                                         VoiceStream Wireless Corporation


By   /s/ Cregg Baumbaugh                    By  /s/ Allyn Hebner
     -----------------------------------      ---------------------------------
Cregg Baumbaugh                             Allyn P. Hebner
Executive V.P. - Finance/Corporate          Vice President, Controller and
Development (Principal Financial Officer)   Principal Accounting Officer

                            Dated: November 14, 2000



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