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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)



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

OR



|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

COMMISSION FILE NUMBER 000-29667

VOICESTREAM WIRELESS CORPORATION

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(Exact name of registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|DELAWARE                                                       |  | 91-1983600                       
|                                                               |  |                                  
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification No.)

|                                               |  |           
|---------------------------------------------- |  | ----------
|12920 - 38 TH STREET S.E.
BELLEVUE, WASHINGTON |  | 98006     
|                                               |  |           
|(Address of principal executive offices)       |  | (Zip Code)

(425) 378-4000

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(Registrants telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o

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

|                                           |  |                                         |             | 
|------------------------------------------ |  | --------------------------------------- | ----------- | 
|Title                                      |  | Shares Outstanding as of August 1, 2002
|                                           |  |                                        
|Common Stock, par value $.000001 per share |  |                                         | 269,738,185 | 

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



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TABLE OF CONTENTS



|                            |                                                                                               |                                                                        |  |  |  |  |  | 
|--------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- |  |  |  |  |  | 
|                            |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                                 
|                            |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|                            |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                       
|                            |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                  
|                            | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II  OTHER INFORMATION
|                            | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                            | ITEM 2. CHANGES IN SECURITIES                                                                
|                            | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                            | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                            | ITEM 5. OTHER INFORMATION                                                                    
|                            | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                 



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##### Table of Contents



VOICESTREAM WIRELESS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2002

TABLE OF CONTENTS

|                               |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                         |    |      |   | 
|------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                         |    | Page
|                               |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                         |    |     
|PART I  FINANCIAL INFORMATION |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                         |    |     
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                                                                      |                                                                                                                                                                                                                                                                                                         |    |      |  
|                               |                                                                                                                                                   | Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001                                                                                                                                                                                                                         |    |      | 3 | 
|                               |                                                                                                                                                   | Condensed Consolidated Statements of Operations and Comprehensive Loss for the
three and six months ended June 30, 2002, for the period from April 1, 2001
through May 31, 2001 and the one month ended June 30, 2001, and for the five
months ended May 31, 2001 and the one month ended June 30, 2001 |    |      | 4 | 
|                               |                                                                                                                                                   | Condensed Consolidated Statements of Cash Flows for the six months ended June
30, 2002 and for the five months ended May 31, 2001 and the one month ended
June 30, 2001                                                                                                                                 |    |      | 5 | 
|                               |                                                                                                                                                   | Notes to Condensed Consolidated Financial Statements                                                                                                                                                                                                                                                    |    |      | 6 | 
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Abbreviated
pursuant to General Instruction H(2).) |                                                                                                                                                                                                                                                                                                         |    | 12   |  
|PART II  OTHER INFORMATION    |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                         |    |     
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                                                                         |                                                                                                                                                                                                                                                                                                         |    | 20   |  
|                               | ITEM 2. CHANGES IN SECURITIES                                                                                                                     |                                                                                                                                                                                                                                                                                                         |    | 20   |  
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                                                                           |                                                                                                                                                                                                                                                                                                         |    | 20   |  
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                       |                                                                                                                                                                                                                                                                                                         |    | 20   |  
|                               | ITEM 5. OTHER INFORMATION                                                                                                                         |                                                                                                                                                                                                                                                                                                         |    | 20   |  
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                                                          |                                                                                                                                                                                                                                                                                                         |    | 20   |  
|SIGNATURES                     |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                         | 21 |     

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VOICESTREAM WIRELESS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS(dollars in thousands, except share and per share amounts)

|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |            |            | 
|---------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ----------- | ---------- | ------------ | ---------- | ---------- | ---------- | 
|                                                                                                                 |                                                                                                                                  |                             |            | June 30,    |            | December 31,
|                                                                                                                 |                                                                                                                                  |                             |            | 2002        |            | 2001        
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |             
|                                                                                                                 |                                                                                                                                  |                             |            | (unaudited) |            |              |            |           
|ASSETS                                                                                                           |                                                                                                                                  |                             |            |             |            |              |            |           
|Current assets:                                                                                                  |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 | Cash and cash equivalents                                                                                                        |                             | $          | 21,811      |            |              | $          |           |           
|                                                                                                                 | Accounts receivable, net of allowance for doubtful accounts
of $128,775 and $119,794, respectively                               |                             |            | 613,381     |            |              |            | 602,767    |           
|                                                                                                                 | Inventory                                                                                                                        |                             |            | 154,481     |            |              |            | 153,432    |           
|                                                                                                                 | Other current assets including FCC license deposits                                                                              |                             |            | 204,965     |            |              |            | 308,528    |           
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 |                                                                                                                                  | Total current assets        |            |             | 994,638    |              |            |            | 1,064,727  | 
|Property and equipment, net of accumulated depreciation of
$770,171 and $384,372, respectively                   |                                                                                                                                  |                             | 3,753,196  |             |            |              | 3,390,103  |           
|Goodwill                                                                                                         |                                                                                                                                  |                             | 16,286,755 |             |            |              | 16,265,790 |           
|Licensing costs                                                                                                  |                                                                                                                                  |                             | 19,148,423 |             |            |              | 18,791,696 |           
|Other intangible assets, net of accumulated amortization of $341,819 and $184,057, respectively                  |                                                                                                                                  |                             | 537,811    |             |            |              | 695,573    |           
|Investments in and advances to unconsolidated affiliates                                                         |                                                                                                                                  |                             | 1,196,542  |             |            |              | 994,976    |           
|Other assets and investments                                                                                     |                                                                                                                                  |                             | 73,966     |             |            |              | 37,055     |           
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 |                                                                                                                                  | $                           | 41,991,331 |             |            | $            | 41,239,920 |           
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                             |                                                                                                                                  |                             |            |             |            |              |            |           
|Current liabilities:                                                                                             |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 | Accounts payable                                                                                                                 |                             | $          | 181,505     |            |              | $          | 198,530    |           
|                                                                                                                 | Accrued liabilities                                                                                                              |                             |            | 662,255     |            |              |            | 647,590    |           
|                                                                                                                 | Deferred revenue                                                                                                                 |                             |            | 93,070      |            |              |            | 75,996     |           
|                                                                                                                 | Construction accounts payable                                                                                                    |                             |            | 191,865     |            |              |            | 348,600    |           
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 |                                                                                                                                  | Total current liabilities   |            |             | 1,128,695  |              |            |            | 1,270,716  | 
|Long-term debt                                                                                                   |                                                                                                                                  |                             | 1,636,313  |             |            |              | 1,861,518  |           
|Long-term notes payable to affiliates                                                                            |                                                                                                                                  |                             | 5,900,777  |             |            |              | 4,110,393  |           
|Deferred tax liabilities                                                                                         |                                                                                                                                  |                             | 6,852,959  |             |            |              | 3,565,286  |           
|Other long-term liabilities                                                                                      |                                                                                                                                  |                             | 2,632      |             |            |              | 24,336     |           
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 |                                                                                                                                  | Total long-term liabilities |            |             | 14,392,681 |              |            |            | 9,561,533  | 
|Minority interest in equity of consolidated subsidiaries                                                         |                                                                                                                                  |                             | 8,725      |             |            |              | 51,287     |           
|Voting preferred stock; $0.001 par value;
100,000,000 shares authorized; 3,906,250 shares issued and outstanding |                                                                                                                                  |                             | 5,000,000  |             |            |              | 5,000,000  |           
|Commitments and contingencies (see Note 6)                                                                       |                                                                                                                                  |                             |            |             |            |              |            |           
|Shareholders equity:                                                                                            |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 | Common stock, $0.000001 par value, and paid-in capital; 1.0 billion shares
authorized, 269,738,185 shares issued and outstanding |                             |            | 26,851,821  |            |              |            | 26,851,821 |           
|                                                                                                                 | Deferred stock compensation                                                                                                      |                             |            | (28,465     | )          |              |            | (35,891    | )         
|                                                                                                                 | Accumulated other comprehensive income (loss)                                                                                    |                             |            | (142        | )          |              |            | 655        |           
|                                                                                                                 | Accumulated deficit                                                                                                              |                             |            | (5,361,984  | )          |              |            | (1,460,201 | )         
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 |                                                                                                                                  | Total shareholders equity  |            |             | 21,461,230 |              |            |            | 25,356,384 | 
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           
|                                                                                                                 |                                                                                                                                  | $                           | 41,991,331 |             |            | $            | 41,239,920 |           
|                                                                                                                 |                                                                                                                                  |                             |            |             |            |              |            |           

See accompanying notes to condensed consolidated financial statements.

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VOICESTREAM WIRELESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(dollars in thousands)
(unaudited)

|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |          |           |   |  | 
|---------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | -------- | ------------------- | --------- | ----------------- | -------- | ------------ | ------- | - | -------------- | ------------- | -------- | -------- | - | ------------ | --------- | ------------ | - | -------- | ------- | ---------- | - | - | ---------- | -------- | --------- | - |  | 
|                                   |                                                                                                                             |                                         |          | Three month periods |           | Six month periods
|                                   |                                                                                                                             |                                         |          |                     |           |                  
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          | June 1, 2001 |         |   |                | April 1, 2001 |          |          |   |              |           | June 1, 2001 |   |          |         | January 1,
|                                   |                                                                                                                             |                                         |          | Three months        |           | through           |          |              | through |   | Six months     |               | through  |          |   | 2001 through
|                                   |                                                                                                                             |                                         |          | ended June 30,      |           | June 30,          |          |              | May 31, |   | ended
June 30, |               | June 30, |          |   | May 31,     
|                                   |                                                                                                                             |                                         |          | 2002                |           | 2001              |          |              | 2001    |   | 2002           |               | 2001     |          |   | 2001        
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |             
|Revenues:                          |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   | Post pay revenues                                                                                                           |                                         | $        | 849,247             |           |                   | $        | 183,224      |         |   |                | $             | 368,464  |          |   | $            | 1,578,435 |              |   | $        | 183,224 |            |   |   | $          | 868,667  |          
|                                   | Prepaid revenues                                                                                                            |                                         |          | 91,991              |           |                   |          | 34,763       |         |   |                |               | 64,984   |          |   |              | 204,208   |              |   |          | 34,763  |            |   |   |            | 158,893  |          
|                                   | Roaming revenues                                                                                                            |                                         |          | 56,321              |           |                   |          | 16,850       |         |   |                |               | 29,113   |          |   |              | 106,639   |              |   |          | 16,850  |            |   |   |            | 73,128   |          
|                                   | Equipment sales                                                                                                             |                                         |          | 126,147             |           |                   |          | 33,642       |         |   |                |               | 68,525   |          |   |              | 226,149   |              |   |          | 33,642  |            |   |   |            | 150,958  |          
|                                   | Affiliate and other revenues                                                                                                |                                         |          | 18,991              |           |                   |          | 10,245       |         |   |                |               | 7,428    |          |   |              | 42,833    |              |   |          | 10,245  |            |   |   |            | 18,922   |          
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   |                                                                                                                             | Total revenues                          |          |                     | 1,142,697 |                   |          |              | 278,724 |   |                |               |          | 538,514  |   |              |           | 2,158,264    |   |          |         | 278,724    |   |   |            |          | 1,270,568 |  
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|Operating expenses:                |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |           
|                                   | Cost of service (excludes stock-based
compensation of $891, $297, $244, $1,782, $297 and
$610, respectively)                |                                         |          | 215,308             |           |                   |          | 70,550       |         |   |                |               | 122,410  |          |   |              | 431,511   |              |   |          | 70,550  |            |   |   |            | 286,897  |          
|                                   | Cost of equipment sales                                                                                                     |                                         |          | 200,493             |           |                   |          | 62,161       |         |   |                |               | 107,135  |          |   |              | 384,864   |              |   |          | 62,161  |            |   |   |            | 265,629  |          
|                                   | General and administrative (excludes stock-based compensation of
$2,079, $449, $813, $4,159, $449 and $2,298, respectively) |                                         |          | 278,000             |           |                   |          | 94,675       |         |   |                |               | 191,368  |          |   |              | 553,278   |              |   |          | 94,675  |            |   |   |            | 466,641  |          
|                                   | Sales and marketing (excludes stock-based
compensation of $743, $248, $203, $1,485, $248 and
$508, respectively)            |                                         |          | 322,359             |           |                   |          | 102,171      |         |   |                |               | 185,547  |          |   |              | 618,818   |              |   |          | 102,171 |            |   |   |            | 466,513  |          
|                                   | Depreciation and amortization                                                                                               |                                         |          | 263,852             |           |                   |          | 225,804      |         |   |                |               | 228,238  |          |   |              | 528,775   |              |   |          | 225,804 |            |   |   |            | 559,409  |          
|                                   | Stock-based compensation                                                                                                    |                                         |          | 3,713               |           |                   |          | 994          |         |   |                |               | 1,260    |          |   |              | 7,426     |              |   |          | 994     |            |   |   |            | 3,416    |          
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   |                                                                                                                             | Total operating expenses                |          |                     | 1,283,725 |                   |          |              | 556,355 |   |                |               |          | 835,958  |   |              |           | 2,524,672    |   |          |         | 556,355    |   |   |            |          | 2,048,505 |  
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|Operating loss                     |                                                                                                                             |                                         | (141,028 | )                   |           |                   | (277,631 | )            |         |   |                | (297,444      | )        |          |   | (366,408     | )         |              |   | (277,631 | )       |            |   |   | (777,937   | )       
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|Other income (expense):            |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   | Interest and financing expense                                                                                              |                                         |          | (60,487             | )         |                   |          | (39,433      | )       |   |                |               | (88,826  | )        |   |              | (109,268  | )            |   |          | (39,433 | )          |   |   |            | (224,471 | )        
|                                   | Equity in net losses of unconsolidated affiliates                                                                           |                                         |          | (95,209             | )         |                   |          | (4,789       | )       |   |                |               | (20,561  | )        |   |              | (122,767  | )            |   |          | (4,789  | )          |   |   |            | (63,477  | )        
|                                   | Interest income and other, net                                                                                              |                                         |          | 17,367              |           |                   |          | 1,791        |         |   |                |               | 6,813    |          |   |              | 17,678    |              |   |          | 1,791   |            |   |   |            | 35,968   |          
|                                   | T-Mobile merger related costs                                                                                               |                                         |          |                    |           |                   |          | (477         | )       |   |                |               | (102,271 | )        |   |              |          |              |   |          | (477    | )          |   |   |            | (118,885 | )        
|                                   | Accretion of preferred stock of consolidated subsidiary                                                                     |                                         |          |                    |           |                   |          |             |         |   |                |               |         |          |   |              |          |              |   |          |        |            |   |   |            | (4,699   | )        
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   |                                                                                                                             | Total other income (expense)            |          |                     | (138,329  | )                 |          |              | (42,908 | ) |                |               |          | (204,845 | ) |              |           | (214,357     | ) |          |         | (42,908    | ) |   |            |          | (375,564  | )
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|Net loss before income taxes       |                                                                                                                             |                                         | (279,357 | )                   |           |                   | (320,539 | )            |         |   |                | (502,289      | )        |          |   | (580,765     | )         |              |   | (320,539 | )       |            |   |   | (1,153,501 | )       
|Income tax benefit (expense)       |                                                                                                                             |                                         | (16,889  | )                   |           |                   | 101,256  |              |         |   |                |              |          |          |   | (3,321,018   | )         |              |   | 101,256  |         |            |   |   |           |         
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|Net loss                           |                                                                                                                             |                                         | (296,246 | )                   |           |                   | (219,283 | )            |         |   |                | (502,289      | )        |          |   | (3,901,783   | )         |              |   | (219,283 | )       |            |   |   | (1,153,501 | )       
|Other comprehensive income (loss): |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   | Foreign currency translation adjustment                                                                                     |                                         |          | 1,977               |           |                   |          |             |         |   |                |               | (4,308   | )        |   |              | (533      | )            |   |          |        |            |   |   |            | (8,013   | )        
|                                   | Equity in unrealized income on investment in securities held by unconsolidated
affiliate                                    |                                         |          | 744                 |           |                   |          |             |         |   |                |               | 791      |          |   |              | 17        |              |   |          |        |            |   |   |            | 21,727   |          
|                                   | Net unrealized income (loss) on available-for-
sale securities                                                              |                                         |          | (179                | )         |                   |          |             |         |   |                |               | (139     | )        |   |              | (281      | )            |   |          |        |            |   |   |            | 15,333   |          
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|                                   |                                                                                                                             | Total other comprehensive income (loss) |          |                     | 2,542     |                   |          |              |        |   |                |               |          | (3,656   | ) |              |           | (797         | ) |          |         |           |   |   |            |          | 29,047    |  
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         
|Comprehensive loss                 |                                                                                                                             | $                                       | (293,704 | )                   |           | $                 | (219,283 | )            |         |   | $              | (505,945      | )        |          | $ | (3,902,580   | )         |              | $ | (219,283 | )       |            |   | $ | (1,124,454 | )       
|                                   |                                                                                                                             |                                         |          |                     |           |                   |          |              |         |   |                |               |          |          |   |              |           |              |   |          |         |            |   |   |            |         

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents






VOICESTREAM WIRELESS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in thousands)
(unaudited)

|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |            |          |         |         |   | 
|---------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------- | ---------- | -------------- | -------- | ---------------- | -------- | -------- | --------------- | --------------- | ---------- | -------- | ------- | ------- | - | 
|                                               |                                                                               |                                                     |                                                                                     |                      |            | Six months     |          | June 1, 2001     |          |          |                 | January 1, 2001
|                                               |                                                                               |                                                     |                                                                                     |                      |            | ended June 30, |          | through June 30, |          |          | through May 31,
|                                               |                                                                               |                                                     |                                                                                     |                      |            | 2002           |          | 2001             |          |          | 2001           
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                
|Operating activities:                          |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|                                               | Net loss                                                                      |                                                     | $                                                                                   | (3,901,783           | )          |                | $        | (219,283         | )        |          |                 | $               | (1,153,501 | )       
|                                               | Adjustments to reconcile net loss to net cash used in
operating activities:   |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |            |         
|                                               |                                                                               |                                                     | Depreciation and amortization                                                       |                      |            | 528,775        |          |                  |          | 225,804  |                 |                 |            |          | 559,409 |        
|                                               |                                                                               |                                                     | Income tax expense (benefit)                                                        |                      |            | 3,321,018      |          |                  |          | (101,256 | )               |                 |            |          |        |        
|                                               |                                                                               |                                                     | Amortization of debt discount and premium, net                                      |                      |            | 10,045         |          |                  |          | 610      |                 |                 |            |          | 22,783  |        
|                                               |                                                                               |                                                     | Equity in net losses of unconsolidated affiliates                                   |                      |            | 122,767        |          |                  |          | 4,789    |                 |                 |            |          | 63,477  |        
|                                               |                                                                               |                                                     | Stock-based compensation                                                            |                      |            | 7,426          |          |                  |          | 994      |                 |                 |            |          | 3,416   |        
|                                               |                                                                               |                                                     | Allowance for bad debts                                                             |                      |            | 8,981          |          |                  |          | (2,053   | )               |                 |            |          | 1,776   |        
|                                               |                                                                               |                                                     | Other, net                                                                          |                      |            | (8,973         | )        |                  |          | (1,712   | )               |                 |            |          | (25,119 | )      
|                                               |                                                                               |                                                     | Changes in operating assets and liabilities, net of
effects of purchase accounting: |                      |            |                |          |                  |          |          |                 |                 |            |          |         |        
|                                               |                                                                               |                                                     |                                                                                     | Accounts receivable  |            |                | (15,359  | )                |          |          | (13,869         | )               |            |          |         | (6,264  | )
|                                               |                                                                               |                                                     |                                                                                     | Inventory            |            |                | (89      | )                |          |          | 33,659          |                 |            |          |         | 107,957 |  
|                                               |                                                                               |                                                     |                                                                                     | Other current assets |            |                | (75,791  | )                |          |          | (1,920          | )               |            |          |         | 1,766   |  
|                                               |                                                                               |                                                     |                                                                                     | Accounts payable     |            |                | (31,449  | )                |          |          | (21,683         | )               |            |          |         | (52,429 | )
|                                               |                                                                               |                                                     |                                                                                     | Accrued liabilities  |            |                | 30,804   |                  |          |          | (383            | )               |            |          |         | 56,797  |  
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|                                               |                                                                               | Net cash used in operating activities               |                                                                                     |                      | (3,628     | )              |          |                  | (96,303  | )        |                 |                 |            | (419,932 | )      
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|Investing activities:                          |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|                                               | Purchases of property and equipment                                           |                                                     |                                                                                     | (839,611             | )          |                |          | (123,347         | )        |          |                 |                 | (809,983   | )       
|                                               | Acquisitions of wireless properties, net of cash acquired                     |                                                     |                                                                                     | (77,819              | )          |                |          | (205,079         | )        |          |                 |                 | (299,292   | )       
|                                               | Sales of short-term investments, net                                          |                                                     |                                                                                     |                     |            |                |          |                 |          |          |                 |                 | 1,175,636  |         
|                                               | Investments in and advances to unconsolidated affiliates, net                 |                                                     |                                                                                     | (635,494             | )          |                |          | 8,919            |          |          |                 |                 | (37,193    | )       
|                                               | Refund of deposits held by FCC                                                |                                                     |                                                                                     | 166,563              |            |                |          |                 |          |          |                 |                 | 49,589     |         
|                                               | Other, net                                                                    |                                                     |                                                                                     | (595                 | )          |                |          | 47               |          |          |                 |                 | 26,863     |         
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|                                               |                                                                               | Net cash provided by (used in) investing activities |                                                                                     |                      | (1,386,956 | )              |          |                  | (319,460 | )        |                 |                 |            | 105,620  |        
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|Financing activities:                          |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|                                               | Net proceeds from issuance of common and preferred stock                      |                                                     |                                                                                     |                     |            |                |          |                 |          |          |                 |                 | 43,468     |         
|                                               | Long-term debt repayments                                                     |                                                     |                                                                                     | (312,146             | )          |                |          | (325,000         | )        |          |                 |                 | (32,113    | )       
|                                               | Long-term debt borrowings from affiliates                                     |                                                     |                                                                                     | 1,766,840            |            |                |          |                 |          |          |                 |                 |           |         
|                                               | Other                                                                         |                                                     |                                                                                     | (42,299              | )          |                |          |                 |          |          |                 |                 | 27,470     |         
|                                               | Cash entitlements on conversion of preferred stock of
consolidated subsidiary |                                                     |                                                                                     |                     |            |                |          |                 |          |          |                 |                 | (81,711    | )       
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|                                               |                                                                               | Net cash provided by (used in) financing activities |                                                                                     |                      | 1,412,395  |                |          |                  | (325,000 | )        |                 |                 |            | (42,886  | )      
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|Change in cash and cash equivalents            |                                                                               |                                                     | 21,811                                                                              |                      |            |                | (740,763 | )                |          |          |                 | (357,198        | )         
|Cash and cash equivalents, beginning of period |                                                                               |                                                     |                                                                                    |                      |            |                | 797,698  |                  |          |          |                 | 1,154,896       |           
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           
|Cash and cash equivalents, end of period       |                                                                               | $                                                   | 21,811                                                                              |                      |            | $              | 56,935   |                  |          |          | $               | 797,698         |           
|                                               |                                                                               |                                                     |                                                                                     |                      |            |                |          |                  |          |          |                 |                 |           

See accompanying notes to condensed consolidated financial statements.

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VOICESTREAM WIRELESS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION

VoiceStream Wireless Corporation (VoiceStream, we or us, as
described in Note 2 below) provides personal communications services
(PCS) primarily in urban markets in the United States using the
Global System for Mobile Communications, or GSM, technology.

On May 31, 2001, Deutsche Telekom AG (Deutsche Telekom) acquired
100% of the common shares of VoiceStream. The merger qualified as a
tax-free reorganization. VoiceStream shareholders received for each
VoiceStream common share either 3.6693 shares of Deutsche Telekom stock
and $15.7262 in cash, 3.6683 shares of Deutsche Telekom stock and
$15.9062 in cash or 3.7647 shares of Deutsche Telekom stock. Deutsche
Telekom transferred all of its VoiceStream common shares to T-Mobile
International AG (T-Mobile). T-Mobile is a wholly-owned subsidiary of
Deutsche Telekom and is the holding company for Deutsche Telekoms
principal GSM wireless operations in Europe and the United States.

Upon consummation of the VoiceStream merger and the transfer by
Deutsche Telekom of all of its VoiceStream common shares to T-Mobile
(hereafter referred to as the T-Mobile merger), VoiceStream common
shares were deregistered and delisted from NASDAQ and are no longer
publicly traded. VoiceStream is now relying on funding from Deutsche
Telekom and/or T-Mobile to meet its working capital, capital
expenditure, debt service and other obligations.

Simultaneous with the VoiceStream merger, Deutsche Telekom also
acquired 100% of the common shares of Powertel, Inc. (Powertel), a
GSM provider in the southeastern United States. Powertel provides and
bills for its services under the VoiceStream brand. Powertels wireless
network is fully integrated with ours such that, from a customers
perspective, their services are indistinguishable from ours (see Note 7
for a description of certain cost sharing agreements).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation and basis of presentation

The condensed consolidated financial statements of VoiceStream
include the accounts of all majority and minority-owned subsidiaries
controlled by VoiceStream. Affiliates that are 20 percent to 50 percent
owned are generally accounted for using the equity method. Intercompany
accounts and transactions have been eliminated in consolidation.

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

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

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Long-lived assets

In accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, we periodically evaluate whether there has been any
indication of impairment of our long-lived assets. As of June 30, 2002
there has been no such indication of impairment.

On January 1, 2002, we changed the useful lives of our towers and
related assets from 10 years to 20 years, which we believe more
accurately represents the economic lives of these assets. This change
in estimate resulted in a decrease in depreciation and amortization
expense of $44.1 million and $86.4 million for the three and six month
periods ended June 30, 2002, respectively.

Intangible assets

On January 1, 2002, we adopted SFAS No. 142 Goodwill and Other Intangible
Assets. Upon adoption, we ceased amortizing goodwill. Additionally, we ceased
amortizing our spectrum licenses as we determined that these assets meet the
definition of indefinite life intangible assets under SFAS No. 142. Upon
adoption, that standard required that we determine the fair value of our
goodwill and spectrum licenses in order to assess our carrying value of these
assets for potential impairment. As of March 31, 2002, we had completed this
assessment and determined that these assets were not impaired.

We are required to assess these assets for impairment annually, or when
indications of impairment exist. In assessing the existence of impairment, our
considerations include the impacts of significant adverse changes in legal
factors, market and economic conditions, the results of our operational
performance and strategic plans; adverse actions by regulators; unanticipated
competition and changes in market share; the potential for the sale or disposal
of all or a significant portion of our business; and the cost and continued
availability of funding from our parent company for expansion and enhancement
of our wireless network and to conduct our operations. While VoiceStreams
equity securities are not publicly traded such that VoiceStream does not have a
market capitalization, we consider, among other things, the market
capitalization of other wireless carriers to the extent that stock market price
trends are reflective of current industry conditions and expected long-term
industry performance.

The estimated fair value of our business, as determined on a discounted cash
flow basis at January 1, 2002, exceeded the carrying value; however, it appears
that a value based solely on the current general share price level of other
publicly traded US wireless carriers would be substantially lower. Other
wireless carriers lower market capitalizations may be indicative of impairment
of our goodwill, licenses, or both, to the extent their share prices reflect
lower long-term prospects for the industry rather than short-term market forces
and the specific competitive and financial prospects of those companies. Our
assessment is that the lower market capitalizations of US wireless carriers
does not currently constitute sufficient evidence of changes in general
industry circumstances that would more likely than not reduce the fair value of
our business below its carrying value, thus triggering the need for an
impairment test. Over time, we expect that the underlying assumptions used and
the fair values determined using discounted cash flow and market price
valuation methods will tend to converge as more information becomes available.
It is possible that future assessments of impairment could lead us to the
conclusion that an impairment charge is required.

In connection with our adoption of SFAS No. 142, our spectrum
licenses are no longer being amortized on a scheduled basis and the
reversal of the deferred tax liabilities related to spectrum licenses
is no longer assured within the carryforward periods of our existing
net operating losses (NOLs). As a result of this change, under SFAS
No. 109 Accounting for Income Taxes, the deferred tax liabilities
related to the spectrum licenses cannot be treated as a realization of
income and applied against the deferred tax assets arising from our
NOLs. Accordingly, we recorded a non-cash charge to income tax expense
of $3.3 billion in the first quarter of 2002 to establish a valuation
allowance against our deferred tax assets. The valuation allowance does
not affect our NOLs for tax purposes and does not reflect a change in
the expectations regarding the companys ability to utilize them in the
future.

Recently issued accounting standards

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

Reclassifications

Certain of the comparative figures in the prior period financial
statements have been reclassified to conform to the current period
presentation.

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3. GOODWILL, LICENSING COSTS AND OTHER INTANGIBLE ASSETS

Adjusted net loss

The following table reconciles our reported net loss to adjusted
net loss, which excludes depreciation and amortization expense related
to goodwill and licensing costs, assuming the adoption of SFAS No.
142 had occurred on January 1, 2001 (dollars in thousands):

|                  |                                    |                 |            |              |   |             |          |   |              |              |   |            |   |         |  | 
|----------------- | ---------------------------------- | --------------- | ---------- | ------------ | - | ----------- | -------- | - | ------------ | ------------ | - | ---------- | - | ------- |  | 
|                  |                                    |                 |            | 2002         |   | 2001       
|                  |                                    |                 |            |              |   |            
|                  |                                    |                 |            | For the six  |   | For the one |          |   |              | For the five
|                  |                                    |                 |            | months ended |   | month ended |          |   | months ended
|                  |                                    |                 |            | June 30      |   | June 30     |          |   | May 31      
|                  |                                    |                 |            |              |   |             |          |   |             
|Reported net loss |                                    | $               | (3,901,783 | )            |   | $           | (219,283 | ) |              |              | $ | (1,153,501 | )
|                  | Add back amortization, net of tax: |                 |            |              |   |             |          |   |              |              |   |            |   |        
|                  |                                    | Goodwill        |            |              |  |             |          |   | 66,100       |              |   |            |   | 196,300 | 
|                  |                                    | Licensing costs |            |              |  |             |          |   | 66,500       |              |   |            |   | 85,300  | 
|                  |                                    |                 |            |              |   |             |          |   |              |              |   |            |  
|Adjusted net loss |                                    | $               | (3,901,783 | )            |   | $           | (86,683  | ) |              |              | $ | (871,901   | )
|                  |                                    |                 |            |              |   |             |          |   |              |              |   |            |  

Other intangible assets

|                                           |               |       |           |      |          |         |              |   |   |         |          |   | 
|------------------------------------------ | ------------- | ----- | --------- | ---- | -------- | ------- | ------------ | - | - | ------- | -------- | - | 
|                                           |               |       | Useful    |      | June 30, |         | December 31,
|(dollars in thousands)                     |               | Lives |           | 2002 |          | 2001   
|                                           |               |       |           |      |          |        
|Intangible assets subject to amortization: |               |       |           |      |          |         |              |   |   |         |          |  
|                                           | Customer list |       | 3 years   |      | $        | 579,630 |              |   | $ | 579,630 |         
|                                           | Tradename     |       | 1-4 years |      |          | 300,000 |              |   |   | 300,000 |         
|                                           |               |       |           |      |          |         |              |   |   |         |          |  
|                                           |               |       |           |      |          |         | 879,630      |   |   |         | 879,630  |  
|Accumulated amortization                   |               |       |           |      |          |         | (341,819     | ) |   |         | (184,057 | )
|                                           |               |       |           |      |          |         |              |   |   |         |          |  
|                                           |               |       |           |      |          | $       | 537,811      |   |   | $       | 695,573  |  
|                                           |               |       |           |      |          |         |              |   |   |         |          |  

Amortization expense

The following table presents current and expected amortization
expense for the current year and the subsequent five years (dollars in
thousands):

|                                |                                        |      |   |         |         | 
|------------------------------- | -------------------------------------- | ---- | - | ------- | ------- | 
|Aggregate amortization expense: |                                        |      |   |        
|                                | For the six months ended June 30, 2002 |      | $ | 157,762 |        
|Expected amortization expense:  |                                        |      |   |        
|                                | For the remainder of 2002              |      | $ | 157,763 |        
|                                | For the years ending December 31,      |      |   |         |        
|                                |                                        | 2003 |   | $       | 237,210 | 
|                                |                                        | 2004 |   | $       | 124,504 | 
|                                |                                        | 2005 |   | $       | 18,333  | 
|                                |                                        | 2006 |   | $       |        | 
|                                |                                        | 2007 |   | $       |        | 

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4. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS

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

Prior to acquiring these entities, we accounted for our ownership
interests in CIVS IV and PCS One using the equity method. At the time
of the acquisitions, our investment balance was $306.1 million. This
investment balance was principally allocated to licensing costs.

Auction 35

Certain licenses included in the Federal Communications
Commissions (FCC) Auction 35 were originally held by NextWave
Communications Inc. and NextWave Power Partners Inc. (collectively
NextWave), and Urban Comm-North Carolina, Inc. (Urban), all of
which had previously declared bankruptcy. The FCC has not granted these
licenses to the high bidders in the auction due to pending
administrative and judicial challenges related to the auction process,
including a decision issued by the United States Court of Appeals for
the District of Columbia Circuit on June 22, 2001. That court held that
the FCC had erroneously cancelled the licenses previously acquired by
NextWave and Urban in earlier auctions when NextWave and Urban, upon
declaring bankruptcy, failed to make installment payments for those
licenses. The FCC, as well as VoiceStream, Cook Inlet/VS GSM V PCS
Holdings, LLC (CIVS V), a consolidated affiliate in which we hold a
non-controlling interest, and other Auction 35 winning bidders, filed
petitions with the United States Supreme Court seeking review of the
Court of Appeals decision. On March 4, 2002, the Supreme Court granted
the petitions. Pending the outcome of the Supreme Court case, 85% of
the original deposits were refunded to the winning bidders, and the FCC
continues to hold the remaining 15% of the original deposits, which
equals three percent of the total winning bids. On March 27, 2002, the
FCC also declared that the auction winners would be required to pay the
full amount of their winning bids if the FCC prevailed in the pending
litigation. Separately, Verizon Wireless (Verizon) has
filed lawsuits in the
federal court of appeals and in the federal court of claims seeking
to force the FCC to return 100% of the deposits that Verizon paid in
connection with the re-auction of the NextWave licenses and to declare
the re-auction void. VoiceStream has preserved the right to assert in
the court of appeals lawsuit that their deposits should be returned and
the re-auction should be voided. VoiceStream and CIVS Vs total winning bids for licenses which have not been granted
as discussed above totaled
$989.0 million.

On April 29, 2002, we and CIVS V, a consolidated affiliate in
which we hold a non-controlling interest, received refunds of 85% of
the FCC deposits discussed above for a combined total of $166.6
million. Subsequent to receipt of the FCC deposits, we distributed
$42.3 million of the refund to Cook Inlet Region Inc. (CIRI), a
member of CIVS V, which has been included in other financing activities
in our condensed consolidated statement of cash flows for the six
months ended June 30, 2002. This refund caused a decrease in CIRIs
percentage ownership in CIVS V.

Microcell

In June 2002, we
recorded a write-down of $65.1 million in our investment in Microcell
Telecommunications Inc., a publicly traded Canadian GSM provider. We
wrote the investment down to its current market value of $3.5 million
based on our assessment that the decline in value of the investment
is other than temporary. The non-cash charge is included in equity in
net losses of unconsolidated affiliates.

5. LONG-TERM DEBT AND NOTES PAYABLE TO AFFILIATES

During the six months ended June 30, 2002, we purchased on the
open market and retired outstanding debt as follows: $134.5 million of
our 10 3/8% Senior Notes due in 2009, together with premiums of $21.7
million; $70.0 million of our 11 7/8% Senior Notes due in 2009,
together with discounts of $10.1 million; and $15.0 million of our 11
1/2% Senior Notes due in 2009, together with premiums of $2.7 million.
These repayments were funded by borrowings from Deutsche Telekom, which
are due in 2005, and bear interest at a fixed rate of 5.9%.

The weighted average effective interest rate for all outstanding
long-term debt and long-term notes payable to affiliates was 7.0% and
6.5% for the three and six months ended June 30, 2002, respectively, as
compared with 9.2% and 9.8% for the same periods in 2001, respectively.

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6. COMMITMENTS AND CONTINGENCIES

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

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 VoiceStream common shares at the time of the spin-off and
Western Wireless adjusted tax basis in such shares at the time. The
estimated range of possible liability of VoiceStream, not including
interest and penalties, if any, is from zero to $400 million.

Should the FCC
prevail in litigation related to Auction 35 (see Note 4), we
could be required to purchase licenses totaling $989.0 million of
which $29.7 million has been paid as a deposit to the FCC.

7. RELATED PARTY TRANSACTIONS

VoiceStream is party to technical
service, system access and reciprocal wholesale agreements with certain affiliates, controlled by
CIRI through its subsidiaries. The agreements entitle each party to
utilize airtime on the others spectrum, and/or utilize wireless system
infrastructure in certain agreed upon markets. The agreements are
structured such that each party re-sells airtime purchased from the
other, and related fees are charged and paid between the parties. We earned
revenues and incurred expenses relative to these agreements as follows
(dollars in thousands):

|         |  |                     |       |                   |  |   |         |          |          |     |          |         |  |         |   |            |  |  |   |       |  |  |  |   |       |  |  | 
|-------- |  | ------------------- | ----- | ----------------- |  | - | ------- | -------- | -------- | --- | -------- | ------- |  | ------- | - | ---------- |  |  | - | ----- |  |  |  | - | ----- |  |  | 
|         |  | Three month periods |       | Six month periods
|         |  |                     |       |                  
|         |  | Three               |       | June 1,           |  |   |         | April 1, |          | Six |          | June 1, |  |         |   | January 1,
|         |  | months              |       | 2001              |  |   | 2001    |          | months   |     | 2001     |         |  | 2001   
|         |  | ended               |       | through           |  |   | through |          | ended    |     | through  |         |  | through
|         |  | June 30,            |       | June 30,          |  |   | May 31, |          | June 30, |     | June 30, |         |  | May 31,
|         |  | 2002                |       | 2001              |  |   | 2001    |          | 2002     |     | 2001     |         |  | 2001   
|         |  |                     |       |                   |  |   |         |          |          |     |          |         |  |        
|Revenues |  | $                   | 4,218 |                   |  | $ | 7,279   |          |          |     | $        | 1,887   |  |         | $ | 23,961     |  |  | $ | 7,279 |  |  |  | $ | 3,625 | 
|Expenses |  | $                   | 5,724 |                   |  | $ | 8,309   |          |          |     | $        | 3,800   |  |         | $ | 30,544     |  |  | $ | 8,309 |  |  |  | $ | 3,804 | 

Following the T-Mobile merger, employees of Powertel, a wholly
owned subsidiary of T-Mobile, became employees of VoiceStream. While
Powertels results are not consolidated with ours, we directly charge Powertel for the
compensation and benefit costs of our employees working on Powertel
business. We also charge Powertel for certain centralized services and
functions, including accounting and other administrative functions. The
cost of these centralized services and functions are charged to
Powertel in a manner that reflects the relative time and associated costs devoted
to it. Powertel was charged $13.9 million and $28.7 million for the
costs of these centralized services and functions for the three and six
months ended June 30, 2002. At June 30, 2002, we have an intercompany
receivable due from Powertel of $634.1 million. The receivable balance is included in
investments in and advances to unconsolidated affiliates.

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##### Table of Contents



8. SUBSEQUENT EVENTS

During July 2002, we purchased on the open market and retired
outstanding debt as follows: $162.7 million of our 10 3/8% Senior notes
due in 2009, together with premiums of $8.5 million; $84.7 million of
our 11 7/8% Senior Notes due in 2009, together with discounts of $13.8
million; and $39.7 million of our 11 1/2% Senior Notes due in 2009,
together with premiums of $3.5 million. These repayments were funded by
borrowings from Deutsche Telekom.

In July 2002, we launched commercial service under the T-Mobile
brand in and around the major population centers of California,
including San Francisco and Los Angeles, as well as in Las Vegas,
Nevada.

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##### Table of Contents






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

(Abbreviated pursuant to General Instruction H (2).)

CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF
THE PRIVATE LITIGATION REFORM ACT OF 1995.

Information contained or incorporated by reference herein that is
not based on historical fact, including without limitation, statements
containing the words believes, may, will, estimate, continue,
anticipates, intends, expects and words of similar import,
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, events or developments to be
materially different from any future results, events or developments
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: general economic and business
conditions, both nationally and regionally; technology changes;
competition; changes in business strategy or development plans; the
leverage of 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.

Unless the context requires otherwise, VoiceStream, we, our
and us include us and our predecessors and consolidated subsidiaries.

The following discussion and analysis is based upon our condensed
consolidated financial statements, which have been prepared pursuant to
the Securities and Exchange Commission (SEC) rules and regulations
for interim reporting. These rules and regulations allow certain
information required under accounting principles generally accepted in
the United States to be condensed or omitted, provided that the
condensed financial statements, when read in conjunction with the
annual audited financial statements included in our most recent Form
10-K, provide a fair presentation of the financial position, results of
operations and cash flows. Accordingly, this discussion and analysis
should be read in conjunction with our consolidated financial
statements and notes thereto and other financial information included
herein and in our Form 10-K for the year ended December 31, 2001. The
preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of revenue
and expenses, and assets and liabilities during the periods reported.
Estimates are used when accounting for certain items such as unbilled
revenues, allowance for doubtful accounts, sales and marketing programs
and incentives, employee compensation programs, depreciation and
amortization periods, taxes, inventory values, and valuations of
investments and intangible assets. We base our estimates on historical
experience, where applicable, and other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from our
estimates due to changing conditions or the validity of our
assumptions.

We believe that the following critical accounting policies affect
our more significant judgments and estimates used in the preparation of
our condensed consolidated financial statements. We recognize service
revenues based upon minutes of use processed and contracted fees, net
of credits and adjustments for service discounts. We maintain
allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. We base our
estimates on the aging of our accounts receivable balances and our
historical write-off experience, net of recoveries. If the financial
condition of our customers were to deteriorate, actual write-offs may
be higher than expected. We record accruals associated with sales and
marketing promotions and incentives. These accruals are based primarily
on historical take-rates of similar promotions or offers. When
recording depreciation expense associated with our wireless
communications equipment, we use estimated useful lives. As a result of
changes in technology and industry conditions, we periodically evaluate
the useful lives of our wireless communications equipment. These
evaluations could result in a change in useful lives in future periods.
On January 1, 2002, we adopted SFAS No. 142 Goodwill
and Other Intangible Assets, which resulted in the cessation of amortization of
goodwill and spectrum licenses, and established a new impairment
testing process for goodwill and intangible assets with indefinite
lives on an annual basis or on an interim basis if an event occurs or
circumstances change that would reduce the fair value of a reporting
unit below its carrying value. We hold non-controlling investments in
several entities for which we apply the equity or cost method of
accounting. We record impairments associated with these investments
when we determine that the fair value of the investment is below our
net book value and the decline is deemed to be other than temporary.
Volatility in market prices of these investments, or poor operating
performance of these entities could cause the market value of these
investments to decline below our carrying value.

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Overview

We provide personal communications services (PCS) using the
Global System for Mobile Communications, or GSM, technology primarily
in urban markets in the United States through the ownership and
operation of our PCS licenses, through contractual relationships with
entities in which we have non-controlling ownership interests and
through arrangements with third parties that own
and operate similar licenses. Powertel, Inc. (Powertel), also a
subsidiary of T-Mobile, provides the same service under the VoiceStream
brand in the southeastern United States. While Powertels results are
not consolidated with ours, we directly charge Powertel for the compensation and benefit
costs of our employees working on Powertel business. We also charge
Powertel for certain centralized services and functions including
accounting and other administrative functions. The cost of these
centralized services and functions are charged to Powertel in a manner
that reflects the relative time and associated costs devoted to it.

The following discussion highlights the key events in the periods
covered by these financial statements:

On May 31, 2001, Deutsche Telekom acquired 100% of the common
shares of VoiceStream in a transaction that qualified as a tax-free
reorganization. Following the closing of the merger, Deutsche Telekom
transferred all of its VoiceStream shares to T-Mobile (referred to
herein as the T-Mobile merger). T-Mobile is a wholly-owned subsidiary
of Deutsche Telekom and is the holding company for Deutsche Telekoms
principal GSM wireless operations in Europe and the United States.

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

Operating markets

We commenced operations in 1996 in various markets in the western
United States and have expanded operations through the addition of
numerous new markets in subsequent years. We have added significant
operational markets through acquisitions at varying stages of maturity
and have converted the acquired markets to the VoiceStream brand and
otherwise integrated the operations of the acquired businesses. In July
2002, we launched service under the T-Mobile brand in and around the
major population centers of California, including San Francisco and Los
Angeles, as well as in Las Vegas, Nevada. All existing VoiceStream
markets will be converted to the T-Mobile brand by the end of 2002. Due
to these factors, revenues and expenses recognized during any period
may not be comparable to other periods and may not be representative of
future operations.

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##### Table of Contents



Results of Operations for the Three and Six Months Ended June 30, 2002 and
2001

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

|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |        |      |      | 
|--------------------------------- | ----------------------------- | ------------------------ | ------------------ | ----------- | --------------------------- | ------- | ------------------------- | ----------- | --------- | -------- | ----- | ------ | -------- | ---- | ---------- | ----------- | --------- | ------- | ---------- | ----------- | --------- | -------- | ----- | ------ | ---- | ---- | 
|                                  |                               |                          |                    |             | Three months ended June 30, |         | Six months ended June 30,
|                                  |                               |                          |                    |             |                             |         |                          
|                                  |                               |                          |                    |             | 2002                        |         | 2001 (1)                  |             | % Change  |          | 2002  |        | 2001 (2) |      | % Change  
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |           
|Revenues:                         |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Post pay revenues             |                          | $                  | 849,247     |                             |         | $                         | 551,688     |           |          |       | 53.9   | %        |      | $          | 1,578,435   |           |         | $          | 1,051,891   |           |          |       | 50.1   | %   
|                                  | Prepaid revenues              |                          |                    | 91,991      |                             |         |                           | 99,747      |           |          |       | (7.8   | %)       |      |            | 204,208     |           |         |            | 193,656     |           |          |       | 5.4    | %   
|                                  | Roaming revenues              |                          |                    | 56,321      |                             |         |                           | 45,963      |           |          |       | 22.5   | %        |      |            | 106,639     |           |         |            | 89,978      |           |          |       | 18.5   | %   
|                                  | Equipment sales               |                          |                    | 126,147     |                             |         |                           | 102,167     |           |          |       | 23.5   | %        |      |            | 226,149     |           |         |            | 184,600     |           |          |       | 22.5   | %   
|                                  | Affiliate and other revenues  |                          |                    | 18,991      |                             |         |                           | 17,673      |           |          |       | 7.5    | %        |      |            | 42,833      |           |         |            | 29,167      |           |          |       | 46.9   | %   
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  |                               | Total revenues           |                    |             | 1,142,697                   |         |                           |             | 817,238   |          |       |        | 39.8     | %    |            |             | 2,158,264 |         |            |             | 1,549,292 |          |       |        | 39.3 | %   
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|Operating expenses:               |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Cost of service               |                          |                    | 215,308     |                             |         |                           | 192,960     |           |          |       | 11.6   | %        |      |            | 431,511     |           |         |            | 357,447     |           |          |       | 20.7   | %   
|                                  | Cost of equipment sales       |                          |                    | 200,493     |                             |         |                           | 169,296     |           |          |       | 18.4   | %        |      |            | 384,864     |           |         |            | 327,790     |           |          |       | 17.4   | %   
|                                  | General and administrative    |                          |                    | 278,000     |                             |         |                           | 286,043     |           |          |       | (2.8   | %)       |      |            | 553,278     |           |         |            | 561,316     |           |          |       | (1.4   | %)  
|                                  | Sales and marketing           |                          |                    | 322,359     |                             |         |                           | 287,718     |           |          |       | 12.0   | %        |      |            | 618,818     |           |         |            | 568,684     |           |          |       | 8.8    | %   
|                                  | Depreciation and amortization |                          |                    | 263,852     |                             |         |                           | 454,042     |           |          |       | (41.9  | %)       |      |            | 528,775     |           |         |            | 785,213     |           |          |       | (32.7  | %)  
|                                  | Stock-based compensation      |                          |                    | 3,713       |                             |         |                           | 2,254       |           |          |       | 64.7   | %        |      |            | 7,426       |           |         |            | 4,410       |           |          |       | 68.4   | %   
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  |                               | Total operating expenses |                    |             | 1,283,725                   |         |                           |             | 1,392,313 |          |       |        | (7.8     | %)   |            |             | 2,524,672 |         |            |             | 2,604,860 |          |       |        | (3.1 | %)  
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|Operating Loss                    |                               |                          | (141,028           | )           |                             |         | (575,075                  | )           |           |          | (75.5 | %)     |          |      | (366,408   | )           |           |         | (1,055,568 | )           |           |          | (65.3 | %)    
|Other income (expense)            |                               |                          | (138,329           | )           |                             |         | (247,753                  | )           |           |          | (44.2 | %)     |          |      | (214,357   | )           |           |         | (418,472   | )           |           |          | (48.8 | %)    
|Income tax expense                |                               |                          | (16,889            | )           |                             |         | 101,256                   |             |           |          | N.M.  |        |          |      | (3,321,018 | )           |           |         | 101,256    |             |           |          | N.M.  |       
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|Net loss                          |                               | $                        | (296,246           | )           |                             | $       | (721,572                  | )           |           |          | (58.9 | %)     |          | $    | (3,901,783 | )           |           | $       | (1,372,784 | )           |           |          | 184.2 | %     
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  |                               |                          | Adjusted
EBITDA(3) |             | $                           | 126,537 |                           |             | $         | (118,779 | )     |        |          | N.M. |            |             | $         | 169,793 |            |             | $         | (265,945 | )     |        |      | N.M. | 
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|Cash
flows provided by (used in): |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Operating activities          |                          | $                  | 78,224      |                             |         | $                         | (338,615    | )         |          |       | 123.1  | %        |      | $          | (3,628      | )         |         | $          | (516,235    | )         |          |       | 99.3   | %   
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Investing activities          |                          | $                  | (865,588    | )                           |         | $                         | (395,816    | )         |          |       | (118.7 | %)       |      | $          | (1,386,956  | )         |         | $          | (213,840    | )         |          |       | (548.6 | %)  
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Financing activities          |                          | $                  | 758,764     |                             |         | $                         | (285,860    | )         |          |       | 365.4  | %        |      | $          | 1,412,395   |           |         | $          | (367,886    | )         |          |       | 483.9  | %   
|                                  |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|Other Data:                       |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Licensed population           |                          |                    | 242,160,000 |                             |         |                           | 235,537,000 |           |          |       | 2.8    | %        |      |            | 242,160,000 |           |         |            | 235,537,000 |           |          |       | 2.8    | %   
|                                  | Covered population            |                          |                    | 143,445,000 |                             |         |                           | 126,444,000 |           |          |       | 13.4   | %        |      |            | 143,445,000 |           |         |            | 126,444,000 |           |          |       | 13.4   | %   
|Customers:                        |                               |                          |                    |             |                             |         |                           |             |           |          |       |        |          |      |            |             |           |         |            |             |           |          |       |       
|                                  | Post pay                      |                          |                    | 5,721,600   |                             |         |                           | 3,667,000   |           |          |       | 56.0   | %        |      |            | 5,721,600   |           |         |            | 3,667,000   |           |          |       | 56.0   | %   
|                                  | Prepaid                       |                          |                    | 1,110,000   |                             |         |                           | 1,103,900   |           |          |       | 0.6    | %        |      |            | 1,110,000   |           |         |            | 1,103,900   |           |          |       | 0.6    | %   



---

|N.M. |  | Not meaningful.                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(1)  |  | Reflects the combination of results for the two months
ended May 31, 2001, and the one month ended June 30, 2001.                                                                                                                                                                                                                                                                                                                 
|    
|    
|    
|    
|(2)  |  | Reflects the combination of results for the five months
ended May 31, 2001, and the one month ended June 30, 2001.                                                                                                                                                                                                                                                                                                                
|    
|    
|    
|    
|(3)  |  | Adjusted EBITDA represents operating income (loss) before
depreciation, amortization and non-cash stock-based compensation.
Adjusted EBITDA should not be construed as an alternative to
operating income (loss) as determined in accordance with 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.

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##### Table of Contents



Revenues

The overall $300.2 million (43.0%) and $553.8 million (41.5%)
increases in service revenues (post pay, prepaid and roaming revenues)
to $997.6 million and $1.9 billion for the three and six months ended
June 30, 2002 are due primarily to internal growth in existing
VoiceStream markets and new market launches during 2001.

Post pay revenues increased $297.6 million (53.9%)
and $526.5 million (50.1%) to $849.2 million and $1.6 billion for the three and six months
ended June 30, 2002. These increases result primarily from growth in
our post pay customer base from 3,667,000 at June 30, 2001 to 5,721,600
at June 30, 2002. There were 643,200 and 1,163,800 net additions during
the three and six month periods ended June 30, 2002, of which 45,000
were from acquisitions with the remainder due to internal growth. There
were 323,300 and 732,600 net additions during the three and six month
periods ended June 30, 2001, of which 26,400 were from acquisitions
with the remainder due to internal growth. The high rate of post pay
customer growth is attributable primarily to our competitive rate plan
offerings, the success of our advertising campaigns and lower churn
rates.

We believe our Get More marketing strategy and the popularity of
our competitive rate plans, including our Whenever, Wherever Get More
and Nation Wide Family Time rate plans, have contributed
significantly to our rapid customer growth. In addition, in connection
with our merger with T-Mobile, we introduced Global Wireless by
T-Mobile as part of the VoiceStream brand logo. We plan to phase out
the VoiceStream brand name by the end of 2002, forming a cohesive
international wireless brand using the T-Mobile name. Also, our
association with T-Mobile has allowed us to offer our customers with
multi-band phones the ability to roam internationally in over 80
countries at a flat rate usage fee per minute through our WorldClass
Roaming plan.

Prepaid revenues decreased $7.8 million (7.8%) to $92.0 million
and increased $10.6 million (5.4%) to $204.2 million for the three and
six months ended June 30, 2002, as compared to the same periods in
2001. Although our prepaid customer base of 1,110,000 has not changed
significantly from June 30, 2001, during the three and six months ended
June 30, 2002, our prepaid customer base decreased by 127,200 and
151,100 compared to increases of 57,200 and 132,900 during the same
periods in 2001. The reductions in prepaid customers reflects changes
in our prepaid offering aimed at attracting longer-term customers and
our business strategy that emphasizes post pay customer growth.

Total service revenue per average customer (ARPU) was $50.42 and
$49.87 for the three and six months ended June 30, 2002, as compared to
$50.75 and $51.05 for the same periods in 2001. Post pay ARPU was
$52.43 and $51.62 for the three and six months ended June 30, 2002, and
$52.46 and $52.84 for the same periods in 2001. The year over year
decreases in post pay ARPU are due to the continuing popularity of the
Get More pooling plans that allow multiple users to share minutes on
one plan at a lower overall cost. The pooling plans generate lower ARPU
than our other principal rate plans. Prepaid ARPU was $25.64 and $27.95
for the three and six months ended June 30, 2002, and $30.92 and $30.97
for the same periods in 2001. The decreases in prepaid ARPU in 2002,
as compared to 2001, are largely due to the settlement of a dispute
with a large regional prepaid coupon dealer in the second quarter of
2002.

Roaming revenues increased $10.4 million (22.5%) and $16.7 million
(18.5%) to $56.3 million and $106.6 million for the three and six
months ended June 30, 2002. These increases are due to the introduction
of the T-Mobile WorldClass Roaming plan as described above, and to the
expansion of our network and new market launches in mid 2001, which
expanded our coverage area in 2002.

Equipment sales increased $24.0 million (23.5%) and $41.5 million
(22.5%) to $126.1 million and $226.1 million for the three and six
months ended June 30, 2002. These increases are due to our having
raised the prices on our handsets, effectively reducing subsidies to
our dealers in the three months ended June 30, 2002.

Affiliate and other revenues increased $1.3 million (7.5%) and
$13.7 million (46.9%) to $19.0 million and $42.8 million for the three
and six months ended June 30, 2002. This revenue is primarily related
to technical service, system access and reciprocal wholesale agreements
with certain unconsolidated affiliates. Each party re-sells airtime
purchased from the other, and related fees are charged and paid between the parties.
These increases in 2002 are primarily due to increased usage on our
network related to these agreements through April 30, 2002, when we
acquired the remaining outstanding interest in Cook Inlet/VS GSM IV PCS
Holdings, LLC (CIVS IV). As of June 30, 2002, we have one remaining
unconsolidated affiliate with which we have these agreements. This
affiliate does not currently generate significant revenues or expenses
under the technical service agreements.

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##### Table of Contents



Operating expenses

Cost of service expense represents network operating expenses
incurred in operational markets including the cost of interconnection
with local exchange carrier facilities, direct cell site costs
(insurance, property taxes, repair and maintenance expenses, site
leases and utilities), third party roaming costs and long distance toll
costs. The increases of $22.3 million (11.6%) and $74.1 million (20.7%)
to $215.3 million and $431.5 million for the three and six months ended
June 30, 2002 are primarily due to the geographic expansion of our
network and increases in network capacity to service our growing
customer base. Cost of service as a percentage of service revenues
decreased to 21.6% and 22.8% for the three and six months ended June
30, 2002 from 27.7% and 26.8% for the same periods in 2001. Excluding
the technical service, system access and reciprocal wholesale agreements
with certain unconsolidated affiliates as discussed above, cost of
service as a percentage of service revenues was 21.0% and 21.2% for the
three and six months ended June 30, 2002 compared with 25.9% for the
same periods in 2001. These decreases are due to efficiencies gained
relative to our growing customer base. While cost of service expenses
are expected to increase due to continuing growth in our customer base,
we expect cost of service as a percentage of service revenues to
generally trend downward as more customers are added in both existing
and newly launched markets and greater economies of scale are realized.

Cost of equipment sales increased $31.2 million (18.4%) and $57.1
million (17.4%) to $200.5 million and $384.9 million for the three and
six months ended June 30, 2002 primarily due to an increase in our
cost per handset sold. We generally
offer equipment to our customers below our cost as an incentive for new
customers and to respond to competition. While the amount of the
subsidy can vary, we expect these subsidies to remain common industry
practice for the foreseeable future.

General and administrative expenses decreased $8.0 million (2.8%)
and $8.0 million (1.4%) to $278.0 million and $553.3 million for the
three and six months ended June 30, 2002. On an average per customer
basis, monthly general and administrative expenses decreased to $14.05
and $14.61 for the three and six months ended June 30, 2002 from $20.82
and $21.46 for the same periods in 2001. These decreases in 2002
reflect improved economies of scale realized in our administrative
functions, a reduction in customer bad debt expense due to improvements
in our credit, collections and billing processes and decreases in post
pay customer churn. While general and administrative expenses are
generally expected to increase due to continuing growth in our customer
base, we expect the cost per customer to continue trending downward as
greater economies of scale are realized and as we complete the full
integration of our acquisitions.

Sales and marketing costs increased $34.6 million (12.0%) and
$50.1 million (8.8%) to $322.4 million and $618.8 million for the
three and six months ended June 30, 2002. These increases are
attributable to additional sales commissions and other selling costs
associated with our continued customer growth, together with marketing
costs associated with advertising in additional markets launched in
2001. Sales and marketing costs per customer added, commonly referred
to as Cost per Gross Add (CPGA), which includes the loss on equipment
sales, totaled $331 and $319 for the three and six months ended June
30, 2002, as compared to $350 and $342 for the same periods in 2001.
CPGA has generally been on a downward trend since 1998 with the current
year decline reflecting the economies of marketing on a national scale,
a decrease in equipment subsidies provided to customers and the absence
of any major market launches during or immediately preceding the 2002
period. In July 2002 we launched service in and around the major urban
markets of California and Nevada, which is expected to increase CPGA in
the third quarter of 2002 due to significant advertising and
promotional costs connected with the launch.

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Depreciation and amortization expense decreased $190.2 million
(41.9%) and $256.4 million (32.7%) to $263.9 million and $528.8 million
for the three and six months ended June 30, 2002. These decreases are
primarily due to the adoption of SFAS No. 142 on January 1, 2002. Upon adoption,
we ceased amortizing goodwill. Additionally, we ceased amortizing our
spectrum licenses as we determined that these assets meet the definition of indefinite
life intangible assets under SFAS No. 142. We also recognized a decrease in depreciation expense due to
changing the estimated useful lives of certain non-electronic fixed
assets from 10 years to 20 years on January 1, 2002. With the exception
of the changes described above, our depreciation charges are trending
upward due to our increasing asset base from acquisitions and capital
expenditures related to the on-going expansion of our wireless network.

The following table reconciles our reported depreciation and
amortization expense assuming the adoption of SFAS No. 142 and the
change in useful lives of certain non-electronic fixed assets from 10
years to 20 years as described above had occurred on January 1, 2001
(dollars in thousands):

|                                               |                                      |   |                                     |   |                                   |   |         |          |      |   |         |   |  |   |         |          |  
|---------------------------------------------- | ------------------------------------ | - | ----------------------------------- | - | --------------------------------- | - | ------- | -------- | ---- | - | ------- | - |  | - | ------- | -------- | -
|                                               |                                      |   | For
the three months ended June 30, |   | For
the six months ended June 30,
|                                               |                                      |   |                                     |   |                                  
|                                               |                                      |   | 2002                                |   | 2001                              |   | 2002    |          | 2001
|                                               |                                      |   |                                     |   |                                   |   |         |          |     
|Reported depreciation and amortization
expense |                                      | $ | 263,852                             |   |                                   | $ | 454,042 |          |      | $ | 528,775 |   |  | $ | 785,213 |         
|                                               | Effect of the adoption of SFAS 142   |   |                                     |  |                                   |   |         | (234,200 | )    |   |         |  |  |   |         | (414,200 | )
|                                               | Effect of the change in useful lives |   |                                     |  |                                   |   |         | (37,200  | )    |   |         |  |  |   |         | (74,400  | )
|                                               |                                      |   |                                     |   |                                   |   |         |          |      |   |         |   |  |   |         |         
|Adjusted depreciation and amortization
expense |                                      | $ | 263,852                             |   |                                   | $ | 182,642 |          |      | $ | 528,775 |   |  | $ | 296,613 |         
|                                               |                                      |   |                                     |   |                                   |   |         |          |      |   |         |   |  |   |         |         

Other income (expense) and income tax expense

Interest and financing expense was $60.5 million and $109.3
million for the three and six months ended June 30, 2002 and $128.3
million and $263.9 million for the same periods in 2001, net of
capitalized interest of $64.1 million and $108.7 million for the three
and six months ended June 30, 2002 and $5.1 million and $16.9 million
for the same periods in 2001. These increases in capitalized interest
reflect the interest capitalized related to the build-out of the
California market in anticipation of the California launch in mid 2002.
The overall reduction in interest expense before capitalized interest
is primarily due to a decrease in the average interest rate of our debt
beginning in the second half of 2001, as we replaced third party debt
with notes payable to Deutsche Telekom bearing interest at lower rates.
The weighted average effective interest rate, before capitalized
interest, was 6.9% and 6.4% for the three and six months ended June 30,
2002, as compared to 9.2% and 9.8% for the same periods in 2001.

Equity in net losses of unconsolidated affiliates increased $69.9
million (275.6%) and $54.5 million (79.8%) to $95.2 million and $122.8
million for the three and six months ended June 30, 2002. These
increases are primarily due to a writedown in June 2002 of our
investment in Microcell Telecommunications Inc., a Canadian GSM
operator, down to its current market value of $3.5 million.

In connection with our adoption of SFAS No. 142, our spectrum
licenses are no longer being amortized on a scheduled basis and the
reversal of the deferred tax liabilities related to spectrum licenses
is no longer assured within the carryforward periods of our existing
net operating losses (NOLs). As a result of this change, under SFAS
No. 109 Accounting for Income Taxes, the deferred tax liabilities
related to the spectrum licenses cannot be treated as a realization of
income and applied against the deferred tax assets arising from our
NOLs. Accordingly, we recorded a non-cash charge to income tax expense
of $3.3 billion in the first quarter of 2002 to establish a valuation
allowance against our deferred tax assets. The valuation allowance does
not affect our NOLs for tax purposes and does not reflect a change in
the expectations regarding the companys ability to utilize them in the
future.

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Net loss

Our net loss decreased $425.3 million and increased $2.5 billion
for the three and six months ended June 30, 2002, to $296.2 million and
$3.9 billion, respectively. The increase in 2002 is primarily due to
the $3.3 billion income tax expense related to the adoption of SFAS No.
142 as described above. Excluding the non-cash income tax expense
charge for the first quarter of 2002, our three and six month net loss
was $296.2 million and $597.6 million, respectively, representing
decreases of $425.3 million and $775.1 million from the same periods in
2001. These decreases are primarily due to a reduction in amortization
expense of intangible assets of $401.6 million and $803.2 million for
the three and six month periods ended June 30, 2002, also as a result
of the adoption of SFAS No. 142.

Adjusted EBITDA and operating cash flow

Adjusted EBITDA represents operating income (loss) before
depreciation, amortization and non-cash stock-based compensation. We
believe Adjusted EBITDA provides meaningful additional information
regarding our operating results, 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 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 reported by other
companies.

Our Adjusted EBITDA was $126.5 million and $169.8 million for the
three and six months ended June 30, 2002, representing improvements of
$245.3 million and $435.7 million as compared to the same periods in
2001. Our Adjusted EBITDA as a percentage of total revenue was 11.1%
and 7.9% for the three and six months ended June 30, 2002, compared to
an Adjusted EBITDA loss of 14.5% and 17.2% of total revenue for the
same periods in 2001. Adjusted EBITDA is net of $11.2 million and $19.7
million in retention and bonus expenses related to the T-Mobile merger
for the three and six months ended June 30, 2002, and $26.6 million and
$39.5 million for the same periods in 2001. These increases in Adjusted
EBITDA in 2002 are due to several factors including increased economies
of scale, reduced costs associated with the integration of acquired
companies and the earnings leverage achieved as the number of new
customers added becomes proportionately smaller relative to the greater
size of our customer base. This last factor results in sales and
marketing costs growing at a slower rate than revenues, increasing
Adjusted EBITDA.

The following table reconciles Adjusted EBITDA as discussed above
to our net loss (dollars in thousands):

|                       |                               |   |                                     |          |                                   |   |          |          |      |   |            |            |   |   |            |          |  
|---------------------- | ----------------------------- | - | ----------------------------------- | -------- | --------------------------------- | - | -------- | -------- | ---- | - | ---------- | ---------- | - | - | ---------- | -------- | -
|                       |                               |   | For
the three months ended June 30, |          | For
the six months ended June 30,
|                       |                               |   |                                     |          |                                  
|                       |                               |   | 2002                                |          | 2001                              |   | 2002     |          | 2001
|                       |                               |   |                                     |          |                                   |   |          |          |     
|Adjusted EBITDA (loss) |                               | $ | 126,537                             |          |                                   | $ | (118,779 | )        |      | $ | 169,793    |            |   | $ | (265,945   | )       
|                       | Depreciation and amortization |   |                                     | (263,852 | )                                 |   |          | (454,042 | )    |   |            | (528,775   | ) |   |            | (785,213 | )
|                       | Stock-based compensation      |   |                                     | (3,713   | )                                 |   |          | (2,254   | )    |   |            | (7,426     | ) |   |            | (4,410   | )
|                       | Other income (expense)        |   |                                     | (138,329 | )                                 |   |          | (247,753 | )    |   |            | (214,357   | ) |   |            | (418,472 | )
|                       | Income tax benefit (expense)  |   |                                     | (16,889  | )                                 |   |          | 101,256  |      |   |            | (3,321,018 | ) |   |            | 101,256  |  
|                       |                               |   |                                     |          |                                   |   |          |          |      |   |            |            |   |   |            |         
|Net loss               |                               | $ | (296,246                            | )        |                                   | $ | (721,572 | )        |      | $ | (3,901,783 | )          |   | $ | (1,372,784 | )       
|                       |                               |   |                                     |          |                                   |   |          |          |      |   |            |            |   |   |            |         

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Net cash provided by operating activities was $78.2 million for
the three months ended June 30, 2002 and net cash used in operating
activities was $3.6 million for six months ended June 30, 2002 as
compared to net cash used in operating activities of $338.6 million and
$516.2 million for the same periods in 2001. These increases are due to
working capital growing at a slower rate as a result of improvements in
our credit, collections and billing processes.

Capital expenditures

Capital expenditures increased $62.9 million (17.0%) to $432.6
million for the three months ended June 30, 2002 and decreased $93.7
million (10.0%) to $839.6 million for the six months ended June 30,
2002, as compared to the same periods in 2001. The decrease in the six
month period ended June 30, 2002 is due to reduced build-out activity
in the first quarter of 2002, while in the first half of 2001 we were
building out two major markets, Chicago and New Orleans. We were able
to launch service under the T-Mobile brand in and around the major
population centers of California, including San Francisco and Los
Angeles, as well as in Las Vegas, Nevada without major pre-launch
network build-out due to our joint venture with Cingular Wireless LLC
(Cingular), which allows us to utilize the Cingular GSM network in
California and Nevada and allows Cingular to utilize our existing GSM
network in the New York City metropolitan area. We expect to incur significant capital
expenditures in the second half of 2002 for coverage and capacity
expansion of operating markets and the development and expansion of new
markets. The level of our actual capital expenditures and acquisitions
of licenses and wireless properties are dependent on opportunities that
arise over the course of the year and on funding availability. We
expect to continue to rely on our parent company T-Mobile, Deutsche
Telekom, or its affiliates for our future funding requirements.

Recently issued accounting standards

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

On January 1, 2002, we adopted SFAS No. 142. Upon adoption, we ceased amortizing goodwill. Additionally, we ceased
amortizing our spectrum licenses as we determined that these assets meet the
definition of indefinite life intangible assets under SFAS No. 142. Upon
adoption, that standard required that we determine the fair value of our
goodwill and spectrum licenses in order to assess our carrying value of these
assets for potential impairment. As of March 31, 2002, we had completed this
assessment and determined that these assets were not impaired.

We are required to assess these assets for impairment annually, or when
indications of impairment exist. In assessing the existence of impairment, our
considerations include the impacts of significant adverse changes in legal
factors, market and economic conditions, the results of our operational
performance and strategic plans; adverse actions by regulators; unanticipated
competition and changes in market share; the potential for the sale or disposal
of all or a significant portion of our business; and the cost and continued
availability of funding from our parent company for expansion and enhancement
of our wireless network and to conduct our operations. While VoiceStreams
equity securities are not publicly traded such that VoiceStream does not have a
market capitalization, we consider, among other things, the market
capitalization of other wireless carriers to the extent that stock market price
trends are reflective of current industry conditions and expected long-term
industry performance.

The estimated fair value of our business, as determined on a discounted cash
flow basis at January 1, 2002, exceeded the carrying value; however, it appears
that a value based solely on the current general share price level of other
publicly traded US wireless carriers would be substantially lower. Other
wireless carriers lower market capitalizations may be indicative of impairment
of our goodwill, licenses, or both, to the extent their share prices reflect
lower long-term prospects for the industry rather than short-term market forces
and the specific competitive and financial prospects of those companies. Our
assessment is that the lower market capitalizations of US wireless carriers
does not currently constitute sufficient evidence of changes in general
industry circumstances that would more likely than not reduce the fair value of
our business below its carrying value, thus triggering the need for an
impairment test. Over time, we expect that the underlying assumptions used and
the fair values determined using discounted cash flow and market price
valuation methods will tend to converge as more information becomes available.
It is possible that future assessments of impairment could lead us to the
conclusion that an impairment charge is required.

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PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Except as referenced in our Form 10-K for the year ended December
31, 2001, there are no material, pending legal proceedings to which we
or our affiliates is a party or of which any of our or their property
is subject which, if adversely decided, would have a material adverse
effect on our financial position, results of operations or cash flows.




ITEM 2. CHANGES IN SECURITIES

(Omitted under the provisions of General Instruction H.)




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(Omitted under the provisions of General Instruction H.)




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

(Omitted under the provisions of General Instruction H.)




ITEM 5. OTHER INFORMATION

None.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

There were no Current Reports on Form 8-K filed during the quarter
ended June 30, 2002.

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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.



|August 13, 2002 | VOICESTREAM WIRELESS CORPORATION
|--------------- | --------------------------------

|                                                   |  |                                                                                 |  |                
|-------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ---------------
|Signatures                                         |  | Title                                                                           |  | Date           
|                                                   |  |                                                                                 |  |                
|                                                  
|By:   /s/ BRIAN W. KIRKPATRICKBrian W. Kirkpatrick |  | Executive Vice President, Chief Financial Officer
(Principal Financial Officer) |  | August
13, 2002
|                                                  
|By:   /s/ ALLYN P. HEBNERAllyn P. Hebner           |  | Vice President and Controller
(Principal Accounting Officer)                    |  | August 13, 2002

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