Sprint - Nextel 2005 Annual Report Download - page 38

If Motorola is unable or unwilling to provide us with equipment and handsets in support of our Nextel
branded services, as well as anticipated handset and infrastructure improvements for those services, our iDEN
operations will be adversely affected.
Motorola is our sole source for most of the equipment that supports the iDEN network and for all of the handsets
we offer under the Nextel brand except BlackBerry devices. Although our handset supply agreement with
Motorola is structured to provide competitively priced handsets, the cost of iDEN handsets is generally higher
than handsets that do not incorporate a similar multi-function capability. This difference may make it more
difficult or costly for us to offer handsets at prices that are attractive to potential customers. In addition, the
higher cost of iDEN handsets requires us to absorb a larger part of the cost of offering handsets to new and
existing customers. These increased costs and handset subsidy expenses may reduce our growth and profitability.
Also, we must rely on Motorola to develop handsets and equipment capable of supporting the features and
services we plan to offer to subscribers of services on our iDEN network, including a dual-mode handset. A
decision by Motorola to discontinue manufacturing, supporting or enhancing our iDEN-based infrastructure and
handsets would have a material adverse effect on us. In addition, because iDEN technology is not as widely
adopted and has fewer subscribers than other wireless technologies and because we expect that over time more of
our customers will utilize service offered on our CDMA network, it is less likely that manufacturers other than
Motorola will be willing to make the significant financial commitment required to license, develop and
manufacture iDEN infrastructure equipment and handsets. Further, our ability to timely and efficiently
implement the spectrum reconfiguration plan in connection with the FCC’s Report and Order is dependent, in
part, on Motorola.
The reconfiguration process contemplated by the FCC’s Report and Order may adversely affect our business
and operations, which could adversely affect our future growth and operating results.
As part of an ongoing FCC proceeding to eliminate interference with public safety operations in the 800 MHz
band, the FCC released the Report and Order, which provides for the exchange of a portion of the FCC licenses
used in our iDEN network for other licenses, including 10 MHz of spectrum in the 1.9 GHz band. In order to
accomplish the reconfiguration of the 800 MHz spectrum band that is contemplated by the Report and Order, in
most cases we will need to cease our use of a portion of the 800 MHz spectrum on our iDEN network in a
particular market before we are able to commence use of replacement 800 MHz spectrum in that market. To
mitigate the temporary loss of the use of this spectrum, in many markets we will need to construct additional
transmitter and receiver sites or acquire additional spectrum in the 800 MHz or 900 MHz bands. This spectrum
may not be available to us on acceptable terms. In markets where we are unable to construct additional sites or
acquire additional spectrum as needed, the decrease in capacity may adversely affect the performance of our
iDEN network, require us to curtail subscriber additions in those markets until the capacity limitation can be
corrected, or a combination of the two. Degradation in network performance in any market could result in higher
subscriber churn in that market, the effect of which could be exacerbated if we are forced to curtail subscriber
additions in that market. A resulting loss of a significant number of subscribers could adversely affect our results
of operations. We expect that the reconfiguration process will have at least some adverse impact on the capacity
and performance of our iDEN network, particularly in some of our more capacity constrained markets. In
addition, the Report and Order gives the FCC the authority to suspend our use of the 1.9 GHz spectrum that we
received under the Report and Order if we do not comply with our obligations under the Report and Order.
Government regulation could adversely affect our prospects and results of operations; the FCC and state
regulatory commissions may adopt new regulations or take other actions that could adversely affect our
business prospects or results of operations.
The FCC and other federal, state and local governmental authorities have jurisdiction over our business and could
adopt regulations or take other actions that would adversely affect our business prospects or results of operations.
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