Sprint - Nextel 2005 Annual Report Download - page 14

• reduced network operating costs primarily arising out of co-location of cell sites, process efficiencies and
migration of Nextel backhaul and other telecommunications traffic to our long distance network;
• reduced selling, general and administrative expenses primarily arising out of consolidation of customer
care, billing and other information technology, or IT, functions, increased scale and volume discounts and
reduced sales and marketing costs and general administrative expenses; and
• marketing, sales and fulfillment savings as a result of headcount savings, the rationalization of distribution
channels, greater volume discounts on devices and other scale benefits.
We began to realize some synergies in 2005, and expect to realize additional synergies over a number of years.
However, we believe that our operating results for at least the next several quarters will be negatively impacted
by costs that will be incurred to achieve these synergies. The ability to achieve these synergies and the timing in
which the benefits can be realized will depend in large part on the ability to integrate our networks, business
operations, back-office functions and other support systems and infrastructure.
Contemplated Spin-off of Local Telecommunications Business
At the time that we announced the merger with Nextel, we also announced that we intend to spin-off our local
communications business to our shareholders on a tax-free basis. The business being spun-off, which is the
business reported as the local segment in our financial statements, will be known as Embarq Corporation, and we
refer to this business as Embarq, or Local.
We anticipate that the common stock of Embarq will trade on the NYSE under the symbol “EQ” and that the
spin-off will be completed in the second quarter 2006.
Nextel Partners Purchase Right and Acquisitions of PCS Affiliates
As a result of the merger with Nextel, in October 2005, the shareholders of Nextel Partners 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 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.
In the second half of 2005, we acquired the following three PCS Affiliates for a total of $1.4 billion:
• US Unwired, Inc., which, at the time of acquisition, provided wireless service to more than 500,000 direct
subscribers in nine Southeast region states, for $968 million;
• Gulf Coast Wireless Limited Partnership, which, at the time of acquisition, provided wireless service to
more than 95,000 direct subscribers in southern Louisiana and Mississippi, for $211 million, net of the
13.4% ownership interest held by us; and
• IWO Holdings, Inc., which, at the time of acquisition, provided wireless service to more than 240,000
direct subscribers in five Northeast region states, for $192 million.
In the first quarter 2006, we also acquired the following two PCS Affiliates for a total of $3.5 billion:
• Alamosa Holdings, Inc., which, at the time of acquisition, provided wireless service to more than
1.5 million direct subscribers in 19 states, for $3.4 billion of net cash paid; and
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