UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_______________________________________ 
FORM 8-K
 _______________________________________ 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 26, 2012
 
_______________________________________ 
SPRINT NEXTEL CORPORATION
(Exact name of Registrant as specified in its charter)
 
_______________________________________ 
 
 
 
 
 
 
Kansas
  
1-04721
  
48-0457967
(State of Incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)
 
 
 
 
6200 Sprint Parkway, Overland Park, Kansas
  
66251
(Address of principal executive offices)
  
(Zip Code)
Registrant’s telephone number, including area code (800) 829-0965
(Former name or former address, if changed since last report)
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02 Results of Operations and Financial Condition.

On July 26, 2012, Sprint Nextel Corporation announced its results for the second quarter of 2012. The press release is furnished as Exhibit 99.1.
 
Item 9.01 Financial Statements and Exhibits.

(d) Exhibits
The following exhibit is furnished with this report:
 
 
 
 
Exhibit No.
  
Description
99.1

  
Press Release Announcing Second Quarter 2012 Results






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 hereunto duly authorized.
 
 
 
 
 
SPRINT NEXTEL CORPORATION
 
 
 
 
Date: July 26, 2012
 
 
 
 
 
/s/ Timothy O’Grady
 
 
 
 
 
 
By:
 
Timothy O’Grady
 
 
 
 
 
 
 
 
Assistant Secretary






EXHIBIT INDEX
 
 
 
 
Number
  
Exhibit
99.1

  
Press Release Announcing Second Quarter 2012 Results


Sprint 2Q12 Earnings Release

News Release
Contacts:
Media Relations        
Scott Sloat
240-855-0164
scott.sloat@sprint.com

Investor Relations
Brad Hampton
800-259-3755
investor.relations@sprint.com
SPRINT NEXTEL REPORTS SECOND QUARTER 2012
RESULTS AND UPDATES FULL YEAR FORECAST
 

Best ever Sprint platform postpaid ARPU of $63.38 drives Sprint platform wireless service revenue growth of 16 percent year-over-year

Best ever Sprint platform postpaid churn of 1.69 percent

Continued strong iPhone sales of nearly 1.5 million - 40 percent to new postpaid customers

Network Vision deployment continues on track
Launched 4G LTE in five major markets and 15 cities on July 15
Continue to expect 12,000 sites on air by the end of 2012
Shutdown of 9,600 Nextel sites now complete
60 percent of postpaid subscribers leaving Nextel platform recaptured on Sprint platform

Operating loss of $629 million; Adjusted OIBDA* of $1.45 billion increases 10 percent year-over-year and includes Network Vision and iPhone dilution    
Year-over-year increase in Adjusted OIBDA* is the highest in more than five years
Sequential quarterly increase in Adjusted OIBDA* of 20 percent

2012 Adjusted OIBDA* forecast increased to between $4.5 billion and $4.6 billion

The company's second quarter 2012 earnings conference call will be held at 8 a.m. ET today. Participants may dial 800-938-1120 in the U.S. or Canada (706-634-7849 internationally) and provide the following ID: 83798759 or may listen via the Internet at www.sprint.com/investors.

OVERLAND PARK, Kan. - July 26, 2012 - Sprint Nextel Corp. (NYSE: S) today reported a net loss of $1.4 billion and a diluted net loss of $.46 per share for the second quarter of 2012 as compared to a net loss of $847 million and a diluted net loss of $.28 per share in the second quarter of 2011. Sprint's second quarter 2012 results include accelerated depreciation of $782 million, or negative $.26 per share (pre-tax), primarily related to Network Vision, including the expected shutdown of the Nextel platform; $184 million, or negative $.06 per share (pre-tax), for the recognition of lease exit costs for the remaining lease obligations associated with certain Nextel sites shut down; and an impairment of $204 million, or negative $.07 per share (pre-tax), related to Sprint's investment in Clearwire.

The company reported wireless service revenues of $7.3 billion during the quarter, an increase of more than 8 percent year-over-year, driven primarily by Sprint platform postpaid ARPU growth of $4.31 - the largest quarterly year-over-year increase on record for the U.S. wireless industry.


1


Sprint platform postpaid net additions of 442,000 improved by 68 percent sequentially driven by best ever quarterly churn performance of 1.69 percent, a Nextel postpaid recapture rate of 60 percent and the continued strength of iPhone® sales. Sprint recorded nearly 1.5 million iPhone sales in the second quarter with 40 percent going to new postpaid customers.

“The Sprint platform achieved best ever postpaid ARPU and customer churn that, combined with disciplined customer acquisition and cost management, contributed to our Adjusted OIBDA* of $1.45 billion,” said Dan Hesse, Sprint CEO. “Based on this performance, we are raising the 2012 Adjusted OIBDA* forecast to between $4.5 billion and $4.6 billion.”

NETWORK VISION HIGHLIGHTS
Sprint's Network Vision initiative remains on track. The company has taken 9,600 Nextel sites off air to date - earlier than previous guidance. To date, the company has completed leasing agreements for more than 12,700 Network Vision sites and zoning requirements are completed for nearly 13,900 sites. In addition, nearly 6,300 sites are either ready for construction or already underway and more than 2,000 sites are on air and meeting speed and coverage enhancement targets. Sprint expects to bring 12,000 sites on air by the end of 2012 and to complete the majority of its Network Vision roll-out by the end of 2013.

As part of Network Vision, Sprint launched 4G LTE in five major markets and 15 cities on July 15 including Houston, Dallas, San Antonio, Atlanta and Kansas City. Sprint launched its first four 4G LTE smartphones during the second quarter - Galaxy Nexus™, LG Viper™ 4G LTE, HTC EVO 4G LTE™ and Samsung Galaxy S® III. Sprint also significantly expanded the coverage area of its Sprint Direct Connect push-to-talk service with the addition of roaming and Sprint 1xRTT coverage areas.

LIQUIDITY
During the second quarter, Sprint entered into a new $1 billion secured credit facility contingent on equipment-related purchases from Ericsson for Network Vision with a cost of funding of approximately 6 percent based on expected drawdowns. This followed debt offerings of $2 billion raised in the first quarter of 2012 and $4 billion raised in the fourth quarter of 2011 to help fund the Network Vision deployment, debt maturities and working capital requirements. The company also retired $1 billion of 2013 debt maturities during the quarter. Sprint's next scheduled debt maturities include $300 million due in May 2013 and $473 million due in October 2013. As of June 30, 2012, the company's liquidity was approximately $8 billion consisting of $6.8 billion in cash, cash equivalents and short-term investments and $1.2 billion of undrawn borrowing capacity available under its revolving bank credit facility. Additionally, the company had $1 billion of undrawn availability under the equipment financing credit facility. Sprint generated $1.2 billion of net cash provided by operating activities and $209 million of Free Cash Flow* in the quarter.

CUSTOMER EXPERIENCE AND BRAND HIGHLIGHTS
Sprint's leading customer experience continued to garner third-party accolades. In particular, the American Customer Satisfaction Index ranked Sprint number one among all national carriers in customer satisfaction and most improved, across all 47 industries, over the last four years. Sprint is the only U.S. company to go from last place to first place in its industry during this time. Sprint was the only telecom provider ranked in the top 50 by the Environmental Protection Agency Green Power Partners Fortune 500 list and for the third consecutive year Sprint won the International Electronics Recycling Conference and Expo Sustainability Leadership Award.

In addition to the new 4G LTE device launches, Sprint continued to strengthen its portfolio of products and services during the second quarter. Sprint's Virgin Mobile USA brand began offering the iPhone to prepaid customers. Virgin Mobile also launched HTC EVO™ V 4G and Boost Mobile launched HTC EVO Design 4G™ bringing the combination of 4G WiMax and the award-winning EVO family of devices to prepaid customers. Sprint also announced Sprint Wholesale Cloud Services, a unique combination of platform services, a full suite of enablement applications and one-on-one support for wireless resellers. Additionally, earlier this month Sprint announced an exclusive relationship with CSC to deliver cloud computing, cloud-based email, managed hosting and co-location services in the U.S. to commercial customers. The company also introduced Sprint Guardian, a collection of mobile safety and device security bundles that provide families relevant tools to help stay safe and secure.





2



CONSOLIDATED RESULTS 
 
TABLE NO. 1 Selected Consolidated Financial Data (Unaudited) (dollars in millions, except per share data)
 
 
Quarter To Date
 
 
 
Year To Date
 
 
Financial Data
 
June 30,
2012
 
June 30,
2011
 
%
r
 
June 30,
2012
 
June 30,
2011
 
%
r
Net operating revenues
 
$
8,843

 
$
8,311

 
6
 %
 
$
17,577

 
$
16,624

 
6
 %
Operating (loss) income
 
$
(629
)
 
$
79

 
NM

 
$
(884
)
 
$
338

 
NM

Adjusted OIBDA*
 
$
1,451

 
$
1,314

 
10
 %
 
$
2,664

 
$
2,828

 
(6
)%
Adjusted OIBDA margin*
 
17.9
%
 
17.2
%
 
 
 
16.6
%
 
18.6
%
 
 
Net loss (1)
 
$
(1,374
)
 
$
(847
)
 
(62
)%
 
$
(2,237
)
 
$
(1,286
)
 
(74
)%
Diluted net loss per common share (1)
 
$
(0.46
)
 
$
(0.28
)
 
(64
)%
 
$
(0.75
)
 
$
(0.43
)
 
(74
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures (2)
 
$
1,158

 
$
640

 
81
 %
 
$
1,958

 
$
1,195

 
64
 %
Net cash provided by operating activities
 
$
1,177

 
$
1,075

 
9
 %
 
$
2,155

 
$
1,994

 
8
 %
Free Cash Flow*
 
$
209

 
$
267

 
(22
)%
 
$
347

 
$
445

 
(22
)%
 
Consolidated net operating revenues of $8.8 billion for the quarter were 6 percent higher than in the second quarter of 2011 and 1 percent higher than the first quarter of 2012. The quarterly year-over-year improvement was primarily due to higher wireless service revenues, partially offset by a reduction in wireline revenues. Revenue grew sequentially primarily due to higher Sprint platform wireless service revenues.
Operating loss was $629 million compared to operating income of $79 million for the second quarter of 2011 and an operating loss of $255 million for the first quarter of 2012. The quarterly year-over-year and sequential impacts to operating loss were driven by items identified below in Adjusted OIBDA* coupled with a second quarter 2012 increase in depreciation expense resulting primarily from accelerated depreciation related to the expected shut down of the Nextel network. Additionally, quarterly operating loss was increased by the recognition of lease exit expenses associated with the remaining lease obligations related to certain Nextel cell sites taken off air in the second quarter. Sequentially, the change in operating loss was due to a one-time net gain in the first quarter of 2012 associated with the termination of our spectrum hosting contract.
Adjusted OIBDA* was $1.45 billion for the quarter, compared to $1.3 billion for the second quarter of 2011 and $1.2 billion in the first quarter of 2012. The quarterly year-over-year increase in Adjusted OIBDA* was primarily due to higher postpaid and prepaid wireless service revenues, partially offset by an increase in equipment net subsidy and lower wireline revenues. Sequentially, Adjusted OIBDA* increased primarily as a result of higher wireless service revenues and lower equipment net subsidy expense primarily associated with fewer handset sales.
Capital expenditures(2), excluding capitalized interest of $102 million, were $1.2 billion in the quarter, compared to $640 million in the second quarter of 2011 and $800 million in the first quarter of 2012. Wireless capital expenditures were $1 billion in the second quarter of 2012, compared to $546 million in the second quarter of 2011 and $710 million in the first quarter of 2012. During the quarter, the company invested $704 million for Network Vision and approximately $230 million in data capacity related to both legacy network and Network Vision equipment. Wireline capital expenditures were $79 million in the second quarter of 2012, compared to $35 million in the second quarter of 2011 and $45 million in the first quarter of 2012. Corporate capital expenditures were $67 million in the second quarter of 2012, compared to $59 million in the second quarter of 2011 and $45 million in the first quarter of 2012, primarily related to IT infrastructure to support our Wireless and Wireline businesses.
Net cash provided by operating activities was $1.2 billion for the quarter, compared to $1.1 billion for the second quarter of 2011 and $978 million for the first quarter of 2012.
Free Cash Flow* was $209 million for the quarter, compared to $267 million for the second quarter of 2011 and $138 million for the first quarter of 2012.

3



WIRELESS RESULTS
 

Wireless Customers

The company served more than 56 million customers at the end of the second quarter of 2012. This includes nearly 32.6 million postpaid subscribers (29.4 million on the Sprint platform and 3.1 million on the Nextel platform), 15.4 million prepaid subscribers (14.1 million on the Sprint platform and 1.3 million on the Nextel platform) and approximately 8.4 million wholesale and affiliate subscribers, all of whom utilize the Sprint platform.
The Sprint platform added 442,000 net postpaid customers during the quarter. The Nextel platform lost 688,000 net postpaid customers in the quarter. Sprint platform postpaid net additions and Nextel platform postpaid net subscriber losses include 431,000 net subscribers from the Nextel platform acquired on the Sprint platform.
The company added 141,000 net prepaid subscribers during the quarter, which includes net additions of 451,000 prepaid Sprint platform customers, offset by net losses of 310,000 prepaid Nextel platform customers. Sprint platform prepaid net additions and Nextel platform prepaid net losses include 143,000 net subscribers from the Nextel platform acquired on the Sprint platform.
For the quarter, the company reported net additions of 388,000 wholesale and affiliate subscribers (all of whom are on the Sprint platform) as a result of growth in MVNOs reselling prepaid services.
The credit quality of Sprint's end-of-period postpaid customers was 82 percent prime compared to approximately 83 percent for the year-ago period and flat as compared to the first quarter of 2012.    


Sprint Platform Churn and Nextel Recapture

For the quarter, the company reported Sprint platform postpaid churn of 1.69 percent, compared to 1.72 percent for the year-ago period and 2.00 percent for the first quarter of 2012. Sprint platform quarterly postpaid churn decreased year-over-year primarily due to a reduction in voluntary churn. The sequential decrease in Sprint platform postpaid churn was driven primarily by seasonality as well as a reduction in both voluntary and involuntary deactivation rates. Involuntary deactivations occur when Sprint disconnects a customer due to lack of payment or violations of terms and conditions. Higher levels of involuntary deactivations were realized during the first quarter of 2012 largely due to pricing actions taken in the second and third quarters of 2011, primarily through indirect channels. Sprint tightened its credit standards during the third and fourth quarters of 2011 to stem further impacts of these types of promotional activities by our indirect dealers.
60 percent of total subscribers who left the postpaid Nextel platform during the period were recaptured on the postpaid Sprint platform as compared to 27 percent in the second quarter of 2011 and 46 percent in the first quarter of 2012.
Approximately 9 percent of Sprint platform postpaid customers upgraded their handsets during the second quarters of 2012 and 2011 and 8 percent in the first quarter of 2012. The sequential increase was primarily driven by new device launches and subscribers who left the Nextel platform and were acquired on the Sprint platform. The year-over-year period was relatively flat due to changes in our upgrade eligibility policies offset by an increase in subscribers leaving the Nextel platform and being acquired on the Sprint platform.
Sprint platform prepaid churn for the second quarter was 3.16 percent, compared to 3.25 percent for the year-ago period and 2.92 percent for the first quarter of 2012. The quarterly year-over-year improvement in Sprint platform prepaid churn was primarily a result of improvements in the Virgin Mobile and Boost brands, partially offset by higher churn for Assurance Wireless®. The sequential increase in churn was also primarily related to higher Assurance Wireless churn.



4



TABLE NO. 2 Wireless Operating Statistics (Unaudited)
 
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Net Additions (Losses) (in thousands)
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
Postpaid (a)
 
442

 
263

 
226

 
705

 
479

Prepaid (b)
 
451

 
870

 
1,149

 
1,321

 
2,555

Wholesale and affiliate
 
388

 
785

 
519

 
1,173

 
908

Total Sprint platform
 
1,281

 
1,918

 
1,894

 
3,199

 
3,942

Nextel platform:
 
 
 
 
 
 
 
 
 
 
Postpaid (a)
 
(688
)
 
(455
)
 
(327
)
 
(1,143
)
 
(694
)
Prepaid (b)
 
(310
)
 
(381
)
 
(475
)
 
(691
)
 
(1,035
)
Total Nextel platform
 
(998
)
 
(836
)
 
(802
)
 
(1,834
)
 
(1,729
)
 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid net losses
 
(246
)
 
(192
)
 
(101
)
 
(438
)
 
(215
)
Total retail prepaid net additions
 
141

 
489

 
674

 
630

 
1,520

Total wholesale and affiliate net additions
 
388

 
785

 
519

 
1,173

 
908

Total Wireless Net Additions
 
283

 
1,082

 
1,092

 
1,365

 
2,213

 
 
 
 
 
 
 
 
 
 
 
End of Period Subscribers (in thousands)
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
Postpaid (a)
 
29,434

 
28,992

 
27,925

 
29,434

 
27,925

Prepaid (b)
 
14,149

 
13,698

 
11,090

 
14,149

 
11,090

Wholesale and affiliate
 
8,391

 
8,003

 
5,429

 
8,391

 
5,429

Total Sprint platform
 
51,974

 
50,693

 
44,444

 
51,974

 
44,444

Nextel platform:
 
 
 
 
 
 
 
 
 
 
Postpaid (a)
 
3,142

 
3,830

 
4,972

 
3,142

 
4,972

Prepaid (b)
 
1,270

 
1,580

 
2,707

 
1,270

 
2,707

Total Nextel platform
 
4,412

 
5,410

 
7,679

 
4,412

 
7,679

 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid end of period subscribers
 
32,576

 
32,822

 
32,897

 
32,576

 
32,897

Total retail prepaid end of period subscribers
 
15,419

 
15,278

 
13,797

 
15,419

 
13,797

Total wholesale and affiliate end of period subscribers
 
8,391

 
8,003

 
5,429

 
8,391

 
5,429

Total End of Period Subscribers
 
56,386

 
56,103

 
52,123

 
56,386

 
52,123

 
 
 
 
 
 
 
 
 
 
 
Supplemental Data - Connected Devices
 
 
 
 
 
 
 
 
 
 
End of Period Subscribers (in thousands)
 
 
 
 
 
 
 
 
 
 
Retail postpaid
 
809

 
791

 
727

 
809

 
727

Wholesale and affiliate
 
2,361

 
2,217

 
1,920

 
2,361

 
1,920

Total
 
3,170

 
3,008

 
2,647

 
3,170

 
2,647

 
 
 
 
 
 
 
 
 
 
 
Churn
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
Postpaid
 
1.69
%
 
2.00
%
 
1.72
%
 
1.85
%
 
1.75
%
Prepaid
 
3.16
%
 
2.92
%
 
3.25
%
 
3.04
%
 
3.32
%
Nextel platform:
 
 
 
 
 
 
 
 
 
 
Postpaid
 
2.56
%
 
2.09
%
 
1.92
%
 
2.31
%
 
1.93
%
Prepaid
 
7.18
%
 
8.73
%
 
7.29
%
 
8.04
%
 
7.10
%
 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid churn
 
1.79
%
 
2.01
%
 
1.75
%
 
1.90
%
 
1.78
%
Total retail prepaid churn
 
3.53
%
 
3.61
%
 
4.14
%
 
3.57
%
 
4.25
%
 
 
 
 
 
 
 
 
 
 
 
ARPU (c)
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
Postpaid
 
$
63.38

 
$
62.55

 
$
59.07

 
$
62.96

 
$
58.80

Prepaid
 
$
25.49

 
$
25.64

 
$
25.53

 
$
25.57

 
$
25.64

Nextel platform:
 
 
 
 
 
 
 
 
 
 
Postpaid
 
$
40.25

 
$
40.94

 
$
43.68

 
$
40.62

 
$
44.03

Prepaid
 
$
37.20

 
$
35.68

 
$
34.63

 
$
36.37

 
$
35.08

 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid ARPU
 
$
60.88

 
$
59.88

 
$
56.67

 
$
60.38

 
$
56.42

Total retail prepaid ARPU
 
$
26.59

 
$
26.82

 
$
27.53

 
$
26.70

 
$
27.95

 
 
 
 
 
 
 
 
 
 
 
Postpaid Nextel Recapture Rate (d)
 
60
%
 
46
%
 
27
%
 
55
%
 
27
%
Prepaid Nextel Recapture Rate (d)
 
32
%
 
23
%
 
21
%
 
27
%
 
24
%
(a) Postpaid subscribers on the Sprint platform are defined as retail postpaid subscribers on the CDMA network, including subscribers with PowerSource devices, and those utilizing WiMax technology. Postpaid subscribers on the Nextel platform are defined as retail postpaid subscribers on the iDEN network.
(b) Prepaid subscribers on the Sprint platform are defined as retail prepaid subscribers who utilize CDMA technology via our multi-brand offerings. Prepaid subscribers on the Nextel platform are defined as retail prepaid subscribers who utilize iDEN technology via our multi-brand offerings.
(c) ARPU is calculated by dividing service revenue by the sum of the average number of subscribers in the applicable service category. Changes in average monthly service revenue reflect subscribers for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage, the amount of service credits which are offered to subscribers, plus the net effect of average monthly revenue generated by new subscribers and deactivating subscribers.
(d) The Postpaid and Prepaid Nextel Recapture Rates are defined as the portion of total subscribers that left the postpaid or prepaid Nextel platform, as applicable, during the quarter and were retained on the postpaid or prepaid Sprint platform, respectively.

5



TABLE NO. 3 Selected Wireless Financial Data (Unaudited) (dollars in millions)
 
 
Quarter To Date
 
 
 
Year To Date
 
 
Financial Data
 
June 30,
2012
 
June 30,
2011
 
%
r
 
June 30,
2012
 
June 30,
2011
 
%
r
Net operating revenues
 
$
8,067

 
$
7,452

 
8
%
 
$
16,017

 
$
14,865

 
8
 %
Operating (loss) income
 
$
(681
)
 
$
(27
)
 
NM

 
$
(1,012
)
 
$
113

 
NM

Adjusted OIBDA*
 
$
1,299

 
$
1,102

 
18
%
 
$
2,351

 
$
2,385

 
(1
)%
Adjusted OIBDA margin*
 
17.8
%
 
16.3
%
 
 
 
16.2
%
 
17.7
%
 
 
Capital expenditures (2)
 
$
1,012

 
$
546

 
85
%
 
$
1,722

 
$
995

 
73
 %

Wireless Service Revenues

Wireless retail service revenues of $7.2 billion for the quarter represent an increase of 7 percent compared to the second quarter of 2011 and an increase of 1 percent compared to the first quarter of 2012. The quarterly year-over-year improvement was primarily due to higher postpaid ARPU as well as an increased number of net prepaid subscribers due to continued growth of Assurance Wireless customers, partially offset by lower Nextel postpaid subscribers. Sequentially, wireless retail service revenues increased, primarily as a result of higher postpaid ARPU, partially offset by a decreased number of Nextel postpaid subscribers.
Wireless postpaid ARPU increased year-over-year from $56.67 to $60.88, the largest quarterly year-over-year postpaid ARPU growth in the company's history, while sequentially ARPU increased from $59.88 to $60.88. Quarterly year-over-year and sequential ARPU benefited from higher monthly recurring revenues primarily as a result of the premium data add-on charges for smartphones introduced in the first quarter of 2011 and a reduction in the mix of customers eligible for certain plan discounts due to policy changes.
Prepaid ARPU of $26.59 for the quarter declined from $27.53 in the second quarter of 2011 and declined slightly from $26.82 in the first quarter of 2012. The decline in the year-over-year period is a result of a greater mix of Assurance Wireless customers who on average have lower ARPU than the remainder of our prepaid subscriber base, partially offset by improvements in Boost and Virgin Mobile ARPU.
Quarterly wholesale, affiliate and other revenues of $124 million increased by $70 million, compared to the year-ago period and increased by $21 million sequentially, resulting primarily from growth in MVNOs reselling prepaid services.


Wireless Operating Expenses
 
Total wireless net operating expenses were $8.7 billion in the second quarter, compared to $7.5 billion in the year-ago period and $8.3 billion in the first quarter of 2012.
Wireless equipment net subsidy in the second quarter was approximately $1.5 billion (equipment revenue of $753 million, less cost of products of $2.2 billion), compared to approximately $1.1 billion in the year-ago period and approximately $1.6 billion in the first quarter of 2012. The quarterly year-over-year increase in net subsidy is primarily due to the launch of the iPhone, which on average carries a higher subsidy rate per handset as compared to other handsets. The sequential decline in net subsidy is primarily due to lower postpaid and prepaid gross additions.
Wireless cost of service increased approximately 2 percent year-over-year primarily due to higher costs associated with increased data volume and Network Vision related expenses, partially offset by lower service and repair expenses. Wireless cost of service was flat sequentially, primarily due to lower service and repair expenses, offset by seasonally higher roaming expenses.
Wireless SG&A expenses were flat year-over-year and decreased by approximately 2 percent sequentially. Quarterly year-over-year increases in sales expenses were offset by reductions in customer care and marketing expenses. Sales expenses increased year-over-year primarily due to

6



iPhone point-of-sale discounts (subsidy) for devices directly sold by the manufacturer to indirect dealers in which Sprint does not take device title. Sequentially, SG&A expenses decreased primarily as a result of lower customer care expenses. Customer care expense declined year-over-year and sequentially due primarily to lower call volumes.
Wireless depreciation and amortization expense increased $667 million year-over-year and $232 million sequentially, primarily related to accelerated depreciation expense associated with the expected shutdown of the Nextel platform.



WIRELINE RESULTS
 
TABLE NO. 4 Selected Wireline Financial Data (Unaudited) (dollars in millions)
 
 
Quarter To Date
 
 
 
Year To Date
 
 
Financial Data
 
June 30,
2012
 
June 30,
2011
 
%
r
 
June 30,
2012
 
June 30,
2011
 
%
r
Net operating revenues
 
$
995

 
$
1,090

 
(9
)%
 
$
1,993

 
$
2,210

 
(10
)%
Operating income
 
$
45

 
$
105

 
(57
)%
 
$
123

 
$
224

 
(45
)%
Adjusted OIBDA*
 
$
149

 
$
210

 
(29
)%
 
$
310

 
$
438

 
(29
)%
Adjusted OIBDA margin*
 
15.0
%
 
19.3
%
 
 
 
15.6
%
 
19.8
%
 
 
Capital expenditures (2)
 
$
79

 
$
35

 
NM

 
$
124

 
$
88

 
41
 %
 
Wireline revenues of $1 billion for the quarter declined 9 percent year-over-year primarily as a result of an intercompany rate reduction based on current market prices for voice and IP services sold to the wireless segment as well as the migration of wholesale cable VoIP customers off of Sprint's IP platform. Sequentially, second quarter wireline revenues were flat.
Total wireline net operating expenses were $950 million in the second quarter of 2012. Net operating expenses declined approximately 4 percent year-over-year due to lower cost of service from continued declines in voice and cable IP volumes and improvement in SG&A expenses. Sequentially, net operating expenses increased 3 percent as a result of cost of service.
  
 
Forecast

The company is raising the 2012 Adjusted OIBDA* forecast to between $4.5 billion and $4.6 billion. Within that Adjusted OIBDA* expectation, we continue to anticipate full year consolidated net service revenue growth of 4 to 6 percent (consolidated revenue less wireless equipment revenue). Sprint continues to expect full year capital expenditures of approximately $6 billion in 2012, excluding capitalized interest.





7



Sprint Nextel Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per Share Data)
TABLE NO. 5
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Net Operating Revenues
 
$
8,843

 
$
8,734

 
$
8,311

 
$
17,577

 
$
16,624

Net Operating Expenses
 
 
 
 
 
 
 
 
 
 
Cost of services
 
2,788

 
2,787

 
2,751

 
5,575

 
5,335

Cost of products
 
2,223

 
2,298

 
1,838

 
4,521

 
3,650

Selling, general and administrative
 
2,381

 
2,436

 
2,408

 
4,817

 
4,811

Depreciation and amortization
 
1,896

 
1,666

 
1,235

 
3,562

 
2,490

Other, net
 
184

 
(198
)
 

 
(14
)
 

Total net operating expenses
 
9,472

 
8,989

 
8,232

 
18,461

 
16,286

Operating (Loss) Income
 
(629
)
 
(255
)
 
79

 
(884
)
 
338

Interest expense
 
(321
)
 
(298
)
 
(239
)
 
(619
)
 
(488
)
Equity in losses of unconsolidated investments and other, net (3)
 
(398
)
 
(273
)
 
(588
)
 
(671
)
 
(1,000
)
Loss before Income Taxes
 
(1,348
)
 
(826
)
 
(748
)
 
(2,174
)
 
(1,150
)
Income tax expense
 
(26
)
 
(37
)
 
(99
)
 
(63
)
 
(136
)
Net Loss (1)
 
$
(1,374
)
 
$
(863
)
 
$
(847
)
 
$
(2,237
)
 
$
(1,286
)
Basic and Diluted Net Loss Per Common Share (1)
 
$
(0.46
)
 
$
(0.29
)
 
$
(0.28
)
 
$
(0.75
)
 
$
(0.43
)
Weighted Average Common Shares outstanding
 
3,000

 
2,999

 
2,994

 
3,000

 
2,993

Effective Tax Rate
 
-1.9
 %
 
-4.5
 %
 
-13.2
 %
 
-2.9
 %
 
-11.8
 %

NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED OIBDA* (Unaudited)
(Millions)
TABLE NO. 6
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Net Loss (1)
 
$
(1,374
)
 
$
(863
)
 
$
(847
)
 
$
(2,237
)
 
$
(1,286
)
Income tax expense
 
(26
)
 
(37
)
 
(99
)
 
(63
)
 
(136
)
Loss before Income Taxes
 
(1,348
)
 
(826
)
 
(748
)
 
(2,174
)
 
(1,150
)
Equity in losses of unconsolidated investments and other, net (3)
 
398

 
273

 
588

 
671

 
1,000

Interest expense
 
321

 
298

 
239

 
619

 
488

Operating (Loss) Income
 
(629
)
 
(255
)
 
79

 
(884
)
 
338

Depreciation and amortization
 
1,896

 
1,666

 
1,235

 
3,562

 
2,490

OIBDA*
 
1,267

 
1,411

 
1,314

 
2,678

 
2,828

Lease exit costs (4)
 
184

 

 

 
184

 

Gains from asset dispositions and exchanges (5)
 

 
(29
)
 

 
(29
)
 

Asset impairments and abandonments (6)
 

 
18

 

 
18

 

Spectrum hosting contract termination, net (7)
 

 
(170
)
 

 
(170
)
 

Access costs (8)
 

 
(17
)
 

 
(17
)
 

Adjusted OIBDA*
 
1,451

 
1,213

 
1,314

 
2,664

 
2,828

Capital expenditures (2)
 
1,158

 
800

 
640

 
1,958

 
1,195

Adjusted OIBDA* less Capex
 
$
293

 
$
413

 
$
674

 
$
706

 
$
1,633

Adjusted OIBDA Margin*
 
17.9
%
 
15.2
%
 
17.2
%
 
16.6
%
 
18.6
%
Selected item:
 
 
 
 
 
 
 
 
 
 
Deferred tax asset valuation allowance
 
$
554

 
$
348

 
$
337

 
$
902

 
$
533



8



Sprint Nextel Corporation
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
TABLE NO. 7
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Net Operating Revenues
 
 
 
 
 
 
 
 
 
 
Service revenue
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
Postpaid (a)
 
$
5,540

 
$
5,408

 
$
4,922

 
$
10,948

 
$
9,764

Prepaid (b)
 
1,064

 
1,016

 
806

 
2,080

 
1,518

Wholesale, affiliate and other
 
124

 
103

 
54

 
227

 
123

Total Sprint platform
 
6,728

 
6,527

 
5,782

 
13,255

 
11,405

Nextel platform:
 
 
 
 
 
 
 
 
 
 
Postpaid (a)
 
425

 
500

 
672

 
925

 
1,401

Prepaid (b)
 
161

 
188

 
308

 
349

 
674

Total Nextel platform
 
586

 
688

 
980

 
1,274

 
2,075

 
 
 
 
 
 
 
 
 
 
 
Equipment revenue
 
753

 
735

 
690

 
1,488

 
1,385

Total net operating revenues
 
8,067

 
7,950

 
7,452

 
16,017

 
14,865

Net Operating Expenses
 
 
 
 
 
 
 
 
 
 
Cost of services
 
2,279

 
2,289

 
2,237

 
4,568

 
4,284

Cost of products
 
2,223

 
2,298

 
1,838

 
4,521

 
3,650

Selling, general and administrative
 
2,266

 
2,311

 
2,275

 
4,577

 
4,546

Depreciation and amortization
 
1,796

 
1,564

 
1,129

 
3,360

 
2,272

Other, net
 
184

 
(181
)
 

 
3

 

Total net operating expenses
 
8,748

 
8,281

 
7,479

 
17,029

 
14,752

Operating (Loss) Income
 
$
(681
)
 
$
(331
)
 
$
(27
)
 
$
(1,012
)
 
$
113

 
 
 
 
 
 
 
 
 
 
 
Supplemental Revenue Data
 
 
 
 
 
 
 
 
 
 
Total retail service revenue
 
$
7,190

 
$
7,112

 
$
6,708

 
$
14,302

 
$
13,357

Total service revenue
 
$
7,314

 
$
7,215

 
$
6,762

 
$
14,529

 
$
13,480

(a) Postpaid subscribers on the Sprint platform are defined as retail postpaid subscribers on the CDMA network, including subscribers with PowerSource devices, and those utilizing WiMax technology. Postpaid subscribers on the Nextel platform are defined as retail postpaid subscribers on the iDEN network.
(b) Prepaid subscribers on the Sprint platform are defined as retail prepaid subscribers who utilize CDMA technology via our multi-brand offerings. Prepaid subscribers on the Nextel platform are defined as retail prepaid subscribers who utilize iDEN technology via our multi-brand offerings.

NON-GAAP RECONCILIATION
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Operating (Loss) Income
 
$
(681
)
 
$
(331
)
 
$
(27
)
 
$
(1,012
)
 
$
113

Lease exit costs (4)
 
184

 

 

 
184

 

Gains from asset dispositions and exchanges (5)
 

 
(29
)
 

 
(29
)
 

Asset impairments and abandonments (6)
 

 
18

 

 
18

 

Spectrum hosting contract termination, net (7)
 

 
(170
)
 

 
(170
)
 

Depreciation and amortization
 
1,796

 
1,564

 
1,129

 
3,360

 
2,272

Adjusted OIBDA*
 
1,299

 
1,052

 
1,102

 
2,351

 
2,385

Capital expenditures (2)
 
1,012

 
710

 
546

 
1,722

 
995

Adjusted OIBDA* less Capex
 
$
287

 
$
342

 
$
556

 
$
629

 
$
1,390

Adjusted OIBDA Margin*
 
17.8
%
 
14.6
%
 
16.3
%
 
16.2
%
 
17.7
%



9



Sprint Nextel Corporation
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
TABLE NO. 8
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Net Operating Revenues
 
 
 
 
 
 
 
 
 
 
Voice
 
$
426

 
$
417

 
$
480

 
$
843

 
$
966

Data
 
99

 
108

 
117

 
207

 
233

Internet
 
449

 
453

 
475

 
902

 
972

Other
 
21

 
20

 
18

 
41

 
39

Total net operating revenues
 
995

 
998

 
1,090

 
1,993

 
2,210

Net Operating Expenses
 
 
 
 
 
 
 
 
 
 
Cost of services and products
 
730

 
716

 
747

 
1,446

 
1,506

Selling, general and administrative
 
116

 
121

 
133

 
237

 
266

Depreciation
 
104

 
100

 
105

 
204

 
214

Other, net
 

 
(17
)
 

 
(17
)
 

Total net operating expenses
 
950

 
920

 
985

 
1,870

 
1,986

Operating Income
 
$
45

 
$
78

 
$
105

 
$
123

 
$
224

NON-GAAP RECONCILIATION
 
 Quarter To Date
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Operating Income
 
$
45

 
$
78

 
$
105

 
$
123

 
$
224

Access costs (8)
 

 
(17
)
 

 
(17
)
 

Depreciation
 
104

 
100

 
105

 
204

 
214

Adjusted OIBDA*
 
149

 
161

 
210

 
310

 
438

Capital expenditures (2)
 
79

 
45

 
35

 
124

 
88

Adjusted OIBDA* less Capex
 
$
70

 
$
116

 
$
175

 
$
186

 
$
350

Adjusted OIBDA Margin*
 
15.0
%
 
16.1
%
 
19.3
%
 
15.6
%
 
19.8
%


10



Sprint Nextel Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
TABLE NO. 9
 
Year to Date
 
 
June 30,
2012
 
June 30,
2011
Operating Activities
 
 
 
 
Net loss
 
$
(2,237
)
 
$
(1,286
)
Asset impairments
 
18

 

Depreciation and amortization
 
3,562

 
2,490

Provision for losses on accounts receivable
 
269

 
199

Share-based compensation expense
 
39

 
37

Deferred income taxes
 
84

 
115

Equity in losses of unconsolidated investments and other, net (3)
 
671

 
1,000

Gains from asset dispositions and exchanges
 
(29
)
 

Contribution to pension plan
 
(92
)
 
(112
)
Spectrum hosting contract termination, net (7)
 
(170
)
 

Other working capital changes, net
 
(33
)
 
(610
)
Other, net
 
73

 
161

Net cash provided by operating activities
 
2,155

 
1,994

Investing Activities
 
 
 
 
Capital expenditures (2)
 
(1,711
)
 
(1,403
)
Expenditures relating to FCC licenses
 
(107
)
 
(128
)
Change in short-term investments, net
 
(752
)
 
(15
)
Investment in Clearwire
 
(128
)
 

Other, net
 
10

 
(18
)
Net cash used in investing activities
 
(2,688
)
 
(1,564
)
Financing Activities
 
 
 
 
Proceeds from debt and financings
 
2,000

 

Debt financing costs
 
(57
)
 
(3
)
Repayments of debt and capital lease obligations
 
(1,004
)
 
(1,653
)
Other, net
 
7

 
9

Net cash provided by (used in) financing activities
 
946

 
(1,647
)
Net Increase (Decrease) in Cash and Cash Equivalents
 
413

 
(1,217
)
Cash and Cash Equivalents, beginning of period
 
5,447

 
5,173

Cash and Cash Equivalents, end of period
 
$
5,860

 
$
3,956


RECONCILIATION TO FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
TABLE NO. 10
 
 
 
 
 
 
 
 
 
 
 
 
 Quarter Ended
 
 Year To Date
 
 
June 30,
2012
 
March 31,
2012
 
June 30,
2011
 
June 30,
2012
 
June 30,
2011
Net Cash Provided by Operating Activities
 
$
1,177

 
$
978

 
$
1,075

 
$
2,155

 
$
1,994

Capital expenditures (2)
 
(928
)
 
(783
)
 
(759
)
 
(1,711
)
 
(1,403
)
Expenditures relating to FCC licenses, net 
 
(51
)
 
(56
)
 
(54
)
 
(107
)
 
(128
)
Other investing activities, net
 
11

 
(1
)
 
5

 
10

 
(18
)
Free Cash Flow*
 
209

 
138

 
267

 
347

 
445

Debt financing costs
 
(21
)
 
(36
)
 

 
(57
)
 
(3
)
(Decrease) increase in debt and other, net
 
(1,002
)
 
1,998

 
(1
)
 
996

 
(1,653
)
Investment in Clearwire
 

 
(128
)
 

 
(128
)
 

Other financing activities, net
 
4

 
3

 
7

 
7

 
9

Net (Decrease) Increase in Cash, Cash Equivalents and
 
 
 
 
 
 
 
 
 
 
   Short-Term Investments
 
$
(810
)
 
$
1,975

 
$
273

 
$
1,165

 
$
(1,202
)

11



Sprint Nextel Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
TABLE NO. 11
 
 
 
 
 
 
June 30,
2012
 
December 31,
2011
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
5,860

 
$
5,447

Short-term investments
 
902

 
150

Accounts and notes receivable, net
 
3,320

 
3,206

Device and accessory inventory
 
766

 
913

Deferred tax assets
 
87

 
130

Prepaid expenses and other current assets
 
669

 
491

Total current assets
 
11,604

 
10,337

Investments and other assets
 
2,042

 
2,609

Property, plant and equipment, net
 
12,961

 
14,009

Goodwill
 
359

 
359

FCC licenses and other
 
20,588

 
20,453

Definite-lived intangible assets, net
 
1,470

 
1,616

Total
 
$
49,024

 
$
49,383

Liabilities and Shareholders' Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
3,387

 
$
2,495

Accrued expenses and other current liabilities
 
3,669

 
3,996

Current portion of long-term debt, financing and capital lease obligations
 
307

 
8

Total current liabilities
 
7,363

 
6,499

Long-term debt, financing and capital lease obligations
 
20,957

 
20,266

Deferred tax liabilities
 
7,038

 
6,986

Other liabilities
 
4,439

 
4,205

Total liabilities
 
39,797

 
37,956

Shareholders' equity
 
 
 
 
Common shares
 
5,999

 
5,992

Paid-in capital
 
46,735

 
46,716

Accumulated deficit
 
(42,726
)
 
(40,489
)
Accumulated other comprehensive loss
 
(781
)
 
(792
)
Total shareholders' equity
 
9,227

 
11,427

Total
 
$
49,024

 
$
49,383


NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
TABLE NO. 12
 
 
 
 
 
 
June 30,
2012
 
December 31,
2011
Total Debt
 
$
21,264

 
$
20,274

Less: Cash and cash equivalents
 
(5,860
)
 
(5,447
)
Less: Short-term investments
 
(902
)
 
(150
)
Net Debt*
 
$
14,502

 
$
14,677




12



Sprint Nextel Corporation
SCHEDULE OF DEBT (Unaudited)
(Millions)
TABLE NO. 13
 
 
 
 
 
 
 
 
June 30,
2012
ISSUER
 COUPON
 MATURITY
 
 PRINCIPAL
Sprint Nextel Corporation
 
 
 
 
Export Development Canada Facility (Tranche 2)
5.486%
12/15/2015
 
$
500

6% Senior Notes due 2016
6.000%
12/01/2016
 
2,000

9.125% Senior Notes due 2017
9.125%
03/01/2017
 
1,000

8.375% Senior Notes due 2017
8.375%
08/15/2017
 
1,300

9% Guaranteed Notes due 2018
9.000%
11/15/2018
 
3,000

7% Guaranteed Notes due 2020
7.000%
03/01/2020
 
1,000

11.5% Senior Notes due 2021
11.500%
11/15/2021
 
1,000

9.25% Debentures due 2022
9.250%
04/15/2022
 
200

Sprint Nextel Corporation
 
 
 
10,000

Sprint Capital Corporation
 
 
 
 
6.9% Senior Notes due 2019
6.900%
05/01/2019
 
1,729

6.875% Senior Notes due 2028
6.875%
11/15/2028
 
2,475

8.75% Senior Notes due 2032
8.750%
03/15/2032
 
2,000

Sprint Capital Corporation
 
 
 
6,204

Nextel Communications Inc.
 
 
 
 
6.875% Senior Serial Redeemable Notes due 2013
6.875%
10/31/2013
 
473

5.95% Senior Serial Redeemable Notes due 2014
5.950%
03/15/2014
 
1,170

7.375% Senior Serial Redeemable Notes due 2015
7.375%
08/01/2015
 
2,137

Nextel Communications Inc.
 
 
 
3,780

iPCS Inc.
 
 
 
 
First Lien Senior Secured Floating Rate Notes due 2013
2.591%
05/01/2013
 
300

Second Lien Senior Secured Floating Rate Notes due 2014
3.716%
05/01/2014
 
181

iPCS Inc.
 
 
 
481

Tower financing obligation
9.500%
01/15/2030
 
698

Capital lease obligations and other
 
2014 - 2022
 
81

TOTAL PRINCIPAL
 
 
 
21,244

Net premiums
 
 
 
20

TOTAL DEBT
 
 
 
$
21,264


Supplemental information:
The Company had $1.2 billion of borrowing capacity available under our revolving bank credit facility as of June 30, 2012. Our revolving bank credit facility expires in October 2013.
In May 2012, certain of our subsidiaries entered into a $1.0 billion secured equipment credit facility to finance equipment-related purchases for Network Vision. The facility is equally divided into two consecutive tranches of $500 million, with the drawdown availability contingent upon Sprint's acquisition of equipment-related purchases from Ericsson, up to the maximum of each tranche, ending on May 31, 2013 and May 31, 2014, for the first and second tranche, respectively. Interest and principal are payable semi-annually with a final maturity of March 2017 for both tranches.



13



Sprint Nextel Corporation
NOTES TO THE FINANCIAL INFORMATION (Unaudited)

(1) Results include pre-tax, non-cash "Equity in losses of unconsolidated investments and other, net" of $398 million ($.13 per share), $273 million ($.09 per share) and $671 million ($.22 per share) in the second and first quarters and year-to-date periods of 2012, respectively, and $588 million ($.20 per share) and $1.0 billion ($.33 per share) in the second quarter and year-to-date periods of 2011.
(2) Capital expenditures is an accrual based amount that includes the changes in unpaid capital expenditures and excludes capitalized interest. Cash paid for capital expenditures includes total capitalized interest of $102 million, $115 million and $217 million for the second and first quarters and year-to-date periods of 2012, respectively, and $102 million and $201 million for the second quarter and year-to-date periods of 2011, and can be found in the condensed consolidated cash flow information on Table No. 9 and the reconciliation to Free Cash Flow* on Table No. 10.
(3) The second quarter 2012 includes a non-cash impairment of $204 million to reflect a reduction of our investment in Clearwire to its estimated fair value.
(4) For the second quarter 2012, lease exit costs are primarily associated with the shutdown of Nextel platform sites.
(5) For the first quarter 2012, gains from asset dispositions and exchanges are primarily due to spectrum exchange transactions.
(6) For the first quarter 2012, asset impairments and abandonments relate to a change in our backhaul architecture in connection to our Network Vision design from microwave to a more cost effective fiber backhaul.
(7) On March 16, 2012, we elected to terminate the arrangement with LightSquared LP and LightSquared, Inc. (LightSquared). As we have no future service obligations with respect to the arrangement with LightSquared, we recognized $236 million of the advanced payments as other operating income in the first quarter of 2012. As a result of the termination of the hosting agreement, we impaired capitalized costs specific to LightSquared's 1.6 GHz spectrum that the Company no longer intends to deploy which totaled $66 million.
(8) Favorable developments during the first quarter of 2012 relating to disagreements with local exchange carriers resulted in a reduction in expected access costs of $17 million.



14



*FINANCIAL MEASURES
 

Sprint Nextel provides financial measures determined in accordance with accounting principles generally accepted in the United States (GAAP) and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies.

Sprint Nextel provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint Nextel does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint Nextel does not provide reconciliations to GAAP of its forward-looking financial measures.


The measures used in this release include the following:

OIBDA is operating income/(loss) before depreciation and amortization. Adjusted OIBDA is OIBDA excluding severance, exit costs, and other special items. Adjusted OIBDA Margin represents Adjusted OIBDA divided by non-equipment net operating revenues for Wireless and Adjusted OIBDA divided by net operating revenues for Wireline. We believe that Adjusted OIBDA and Adjusted OIBDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, spectrum acquisitions and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted OIBDA and Adjusted OIBDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry.

Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments and equity method investments during the period. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and if any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.







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SAFE HARBOR