Sprint - Nextel 2005 Annual Report Download - page 128

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Substantially all of the goodwill is allocated to the wireless segment. Goodwill includes a portion of value for
assembled workforce, which is not separately classified from goodwill in accordance with SFAS No. 141.
The changes in the carrying value of goodwill are as follows:
(in millions)
Balance, December 31, 2004 .............................................. $ 4,401
Goodwill acquired through Nextel merger ................................ 15,573
Goodwill acquired through PCS Affiliate acquisitions ...................... 1,341
Balance, December 31, 2005 .............................................. $ 21,315
We hold several kinds of licenses to deploy our services: 1.9 gigahertz, or GHz, PCS licenses utilized in our
CDMA network, 800 megahertz, or MHz, and 900 MHz licenses utilized in our iDEN network, and 2.5 GHz
licenses that we use for first generation wireless internet access services. We also hold 2.5 GHz, 1.9 GHz and
other FCC licenses that we currently do not utilize in our networks or operations. As long as we act within the
requirements and constraints of the regulatory authorities, the renewal and extension of our licenses is reasonably
certain at minimal cost. Spectrum licenses authorize wireless carriers to use radio frequency spectrum. That
spectrum is a renewable, reusable resource that does not deplete or exhaust over time. At present there is no
competing technology on the horizon that would render spectrum obsolete. Currently, there are no changes in the
competitive or legislative environments that would put in question the future need for spectrum licenses.
The Sprint and Boost Mobile trademarks are highly respected brands with positive connotations. We have no
legal, regulatory or contractual limitations associated with our trademarks. We cultivate and protect the use of
our brands.
Definite Life Intangibles
Definite life intangibles consist primarily of customer relationships of which $9.5 billion was acquired through
our merger with Nextel. Customer relationships are amortized over three to five years using the sum of the years’
digits method, which we believe best reflects the estimated pattern in which the economic benefits will be
consumed. Other definite life intangibles primarily include the Nextel and Direct ConnectSM trade names, which
will be amortized over 10 years on a straight-line basis. Based on the definite life intangibles as of December 31,
2005, amortization expense will be $3.2 billion in 2006, $2.5 billion in 2007, $1.8 billion in 2008, $1.1 billion in
2009 and $0.5 billion in 2010.
Spectrum Reconfiguration Obligations
On February 7, 2005, Nextel accepted the terms and conditions of the Report and Order of the FCC, which
implemented a spectrum reconfiguration plan designed to eliminate interference with public safety operators in
the 800 MHz band. Under the terms of the Report and Order, prior to the August 12, 2005 merger date, Nextel
surrendered its spectrum rights in the 700 MHz spectrum band and certain portions of its spectrum rights in the
800 MHz band, and received spectrum rights in the 1.9 GHz band and spectrum rights in a different part of the
800 MHz band and undertook to pay the costs incurred by Nextel and third parties in connection with the
reconfiguration plan. Based on the FCC’s determination of the values of the spectrum rights received and
relinquished by Nextel, the minimum obligation incurred under the Report and Order is $2.8 billion. The Report
and Order also provides that qualifying costs we incur as part of the reconfiguration plan, including costs to
reconfigure our own infrastructure and spectrum positions, can be used to offset the minimum obligation of $2.8
billion; however, we are obligated to pay the full amount of the costs relating to the reconfiguration plan, even if
those costs exceed that amount.
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