Sprint - Nextel 2005 Annual Report Download - page 124

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We hold approximately $97 million in other investments at December 31, 2005 which are included in
investments on the accompanying consolidated balance sheets.
Accumulated unrealized holding gains, net of tax, resulting from our investments in equity securities of $90
million as of December 31, 2005 and $42 million as of December 31, 2004 were included in accumulated other
comprehensive loss on the accompanying consolidated balance sheets.
Equity Method Investments
As of December 31, 2005, investments accounted for using the equity method consisted primarily of our
investments in Nextel Partners and Virgin Mobile USA, LLC. These investments were reflected in investments
on the accompanying consolidated balance sheets.
Nextel Partners, Inc.
We owned approximately 30% of the outstanding common stock of Nextel Partners with a carrying value of
$2.3 billion as of December 31, 2005. In 2005, we recorded $137 million of equity in earnings associated with
our ownership interest in Nextel Partners, the majority of which related to a release by Nextel Partners of a
significant portion of its deferred tax valuation allowance.
As a result of the merger with Nextel, the shareholders of Nextel Partners in October 2005, exercised their right
to require us to purchase, at fair market value, the 70% of the outstanding shares of Nextel Partners stock that we
do not already own. In December 2005, we and Nextel Partners announced that the purchase price for each share
of Nextel Partners stock under this right had been determined to be $28.50. As a result, the aggregate amount
payable to shareholders of Nextel Partners at closing will be about $6.5 billion including amounts payable upon
conversion of debt securities and settlement of options. The purchase is subject to customary regulatory
approvals and is currently expected to be completed by the end of the second quarter 2006.
Virgin Mobile USA, LLC
As of December 31, 2005, we held a 49% ownership interest in Virgin Mobile USA. Since Virgin Mobile USA’s
inception, we have contributed approximately $180 million to the venture in the form of cash and discounted
network services, thereby satisfying 100% of our original commitments. In 2004, we advanced $10 million to
Virgin Mobile USA in the form of a loan to be repaid in 2005. An additional $10 million was advanced in the
form of a loan in January 2005. Applying equity method accounting, we have recognized losses to the extent of
our investment, except that under the terms of the joint venture agreement, we were guaranteed a $20 million
distribution in the event of liquidation.
In July 2005, we received approximately $200 million from Virgin Mobile USA representing a loan repayment
of $20 million and a return of capital of $180 million resulting in a negative investment balance of $180 million
as of December 31, 2005. Virgin Mobile USA funded the distribution with proceeds from a loan. Although we
have no obligation to provide future funding to the joint venture or to return the distribution, we have accounted
for the return of capital as a negative investment. As a result of this repayment, under the terms of the joint
venture agreement, we no longer hold any right to a guaranteed distribution in liquidation. Our investment in
Virgin Mobile USA was $20 million as of December 31, 2004.
Rogers Communications, Inc.
In July 2005, Rogers Communications, Inc., or RCI, acquired Call-Net Enterprises, Inc. in a stock for stock
transaction, including the common shares and Class B shares of Call-Net owned by us. Prior to Call-Net’s
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