Sprint - Nextel 2005 Annual Report Download - page 123

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SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 5. Investments
Specific investment types and the related carrying amounts include:
December 31,
2005 2004
(in millions)
Investments in debt securities ................................................. $ 1,172 $ 536
Investments in equity securities ............................................... 734 157
Equity method investments
Nextel Partners .......................................................... 2,346 —
Virgin Mobile USA, LLC .................................................. (180) 20
Other investments .......................................................... 60 9
4,132 $ 722
Less amounts included as marketable securities ................................. (1,763) (445)
$ 2,369 $ 277
Investments in Debt Securities
Our investments in debt securities, including auction rate securities, with original or remaining maturities at
purchase of greater than 90 days but less than one year, are classified in current assets as marketable securities on
the accompanying consolidated balance sheets. We also invested in debt securities with original or remaining
maturities at purchase of 90 days or less. These securities were included in cash and cash equivalents on the
accompanying consolidated balance sheets.
Interest on debt securities is reinvested and recognized in interest income in the accompanying consolidated
statements of operations. We recognized approximately $96 million of interest income on these investments in
2005 compared to $11 million in 2004. Accumulated unrealized holding gains and losses were immaterial in both
2005 and 2004.
Investments in Equity Securities
As of December 31, 2005, $617 million of our marketable equity securities relates to our investment in NII
Holdings Inc. common stock and is reflected in current assets as marketable securities on the accompanying
consolidated balance sheets. We acquired this investment as part of the merger with Nextel in the third quarter
2005 at a fair value of $892 million. In 2005, we received approximately $376 million in cash and recognized a
$15 million gain on the sale of a portion of our holdings in NII Holdings common stock. We continue to hold
14.7 million shares, following a two-for-one stock split in November 2005, or less than 10% of the outstanding
common stock of NII Holdings. We have entered into a series of option contracts associated with the planned
sale of our remaining investment in NII Holdings, which will mature during the fourth quarter 2006. See note 12
for additional information.
In 2005, in connection with the maturity of the remaining EarthLink variable prepaid forward contracts,
10.5 million shares of EarthLink common stock were used to settle approximately $90 million of the forward
contracts recorded in outstanding long-term debt. We recognized a $9 million gain on these transactions. In 2004,
in connection with the maturity of certain EarthLink variable prepaid forward contracts, 5.6 million shares were
used to settle approximately $48 million of the forward contracts recorded in outstanding long-term debt. We
sold an additional 1.0 million shares in the open market upon settlement of the contracts. We recognized an $11
million gain on these transactions. As of December 31, 2005, we held 1.8 million shares of EarthLink common
stock, valued at $20 million. See note 12 for additional information.
F-28