Sprint - Nextel 2005 Annual Report Download - page 154

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SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Assumed health care cost trend rates:
As of December 31,
2005 2004
Health care cost increases assumed for next year ................................... 9.3% 10.0%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) ........... 5.0% 5.0%
Year that the rate reaches the ultimate trend rate ................................... 2012 2012
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend rates would have the following effects (in
millions):
One-percentage-point
Increase
One-percentage-point
Decrease
Effect on total of service and interest cost ........................ $ 2 $ (2)
Effect on postretirement benefit obligation ....................... 37 (32)
Plan assets totaled $42 million and $43 million as of December 31, 2005 and 2004. We target a 60% allocation to
equities and a 40% allocation to debt. The plans hold no Sprint Nextel securities.
We plan to contribute to the postretirement benefit plan an amount equal to the value of benefits and premiums
paid.
The expected benefit payments, which reflect expected future service, as appropriate are as follows (in millions):
2006 ............................................................................... $ 66
2007 ............................................................................... 63
2008 ............................................................................... 63
2009 ............................................................................... 64
2010 ............................................................................... 65
2011 – 2015 ......................................................................... 323
Note 19. Communication Towers Lease Transaction
In May 2005, we closed a transaction with Global Signal, Inc. under which Global Signal acquired exclusive
rights to lease or operate approximately 6,560 communications towers owned by us for a negotiated lease term,
which is the greater of the remaining terms of the underlying ground leases, approximately 17 years at present, or
up to 32 years, assuming successful renegotiation of the underlying ground leases at the end of their current lease
terms.
We have subleased space on approximately 6,350 of the towers from Global Signal. This sublease arrangement is
accounted for as an operating lease. See note 15 for additional information. We will maintain ownership of the
towers, and we will continue to reflect the towers on our accompanying consolidated balance sheet.
At closing, we received proceeds of approximately $1.2 billion, which we recorded in other liabilities on our
accompanying consolidated balance sheet. The deferred rental income is being recognized as a reduction of lease
expense related to our subleasing arrangement on a straight-line basis over the remaining terms of the underlying
ground leases.
Note 20. Segment Footnote
We are divided into three main lines of business: Wireless, Long Distance and Local.
We generally manage our segments to the operating income (loss) level of reporting. Items below operating
income (loss) are managed at a corporate level. The reconciliation from operating income to net income is shown
on the face of the accompanying consolidated statements of operations.
F-59