Sprint - Nextel 2005 Annual Report Download - page 51

• the combination of Nextel’s strength in business and government wireless services with our position in
consumer wireless and data services, including services supported by our global IP network, which
enables us to serve a broader customer base;
• the size and scale of the combined company, which is comparable to that of our two largest competitors, is
expected to enable more operating efficiencies than either company could achieve on its own; and
• the ability to position us strategically in the fastest growing areas of the communications industry.
We expect to recognize significant synergies associated with this merger, which include:
• revenue and subscriber synergies primarily arising out of cross-selling opportunities and the accelerated
deployment of new features and services;
• reduced capital spending due to the elimination of the need to build a data overlay network as had been
planned by Nextel, reduced construction costs, expected volume discounts and benefits of increased
purchasing capacity and reduced and consolidated facilities and back-office functions;
• 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 IT functions, increased scale and volume discounts and reduced combined 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. Such costs are generally not expected to be recurring in
nature, and will include costs associated with the spin-off of Embarq, costs associated with integrating back
office systems, severance costs associated with the termination of the employment of certain employees, and
lease and other contract termination costs. In addition, our results will be negatively impacted by significant
additional non-cash amortization charges associated primarily with the value of the customer relationships that
were acquired in the merger, as well as additional non-cash charges for stock-based compensation associated
with the Nextel employees. 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.
Business
We offer a comprehensive suite of wireless and wireline communications products and services that are designed
to meet the needs of our two targeted customer groups: individuals, and businesses and government agencies. We
conduct our operations through three segments referred to as: Wireless, Long Distance and Local.
We, together with the PCS Affiliates and Nextel Partners, offer digital and wireless services in all 50 states,
Puerto Rico and the U.S. Virgin Islands and provide wireless coverage to a total domestic population of about
277 million. The PCS Affiliates, through commercial arrangements with us, provide wireless services under the
Sprint brand name in certain mid-sized and tertiary U.S. markets on wireless networks built and operated at their
expense, in most instances using spectrum licensed to, and controlled by, us. Nextel Partners provides digital
wireless communications services under the Nextel brand name in certain mid-sized and tertiary U.S. markets on
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