Sprint - Nextel 2006 Annual Report Download - page 109

Definite Lived Intangibles
Useful Lives
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
December 31, 2006 December 31, 2005
(in millions)
Customer relationships. . 3 to 5 years $12,224 $(4,968) $7,256 $ 9,953 $(1,302) $8,651
Trademarks .......... 10years 900 (125) 775 900 (34) 866
Reacquired rights ..... 9to14years 1,203 (82) 1,121 — — —
Other .............. 1to14years 79 (13) 66 73 (10) 63
$14,406 $(5,188) $9,218 $10,926 $(1,346) $9,580
2007 2008 2009 2010 2011
(in millions)
Estimated amortization expense ........................ $3,317 $2,415 $1,535 $715 $233
Definite lived intangible assets consist primarily of customer relationships that 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 lived intangible assets primarily include certain rights
under affiliation agreements that we reacquired in connection with the acquisitions of the PCS Affiliates and
Nextel Partners, which are being amortized over the remaining terms of those affiliation agreements on a
straight-line basis, and the Nextel and Direct Connect trade names, which are being amortized over ten years
from the date of the Sprint-Nextel merger on a straight-line basis. The weighted average amortization period
for the acquired definite lived intangibles is seven years for 2006 and six years for 2005. See note 3 for
information regarding the increases in the gross carrying value of definite lived intangible assets.
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, Nextel surrendered certain spectrum rights and
received certain other spectrum rights, and undertook to pay the costs incurred by Nextel and third parties in
connection with the reconfiguration plan, which is required to be completed within a 36-month period, subject
to certain exceptions particularly with respect to markets that border Mexico and Canada. We assumed these
obligations when we merged with Nextel in August 2005. If, as a result of events within our control, we fail
to complete the reconfiguration plan within the 36-month period, the FCC could take actions against us to
enforce the Report and Order. These actions could have adverse operating or financial impacts on us, some of
which could be material. We believe that, based on our experiences to date, we will not complete this
reconfiguration process within the applicable FCC designated time period due primarily to circumstances
largely outside of our control. We do not believe at this time that the impact from this delay will be material
to our results of operations or financial condition, although there can be no assurances. Recognizing the
current limitations in the reconfiguration process, both Sprint Nextel and the public safety community jointly
filed a letter with the FCC on February 15, 2007, requesting that the FCC direct the independent Transition
Administrator, or TA, through working closely with the affected parties, to develop a schedule and benchmarks
for completing the second phase of the 800 MHz reconfiguration.
Based on the FCC’s determination of the values of the spectrum rights received and surrendered by Nextel, the
minimum obligation to be incurred under the Report and Order is $2.8 billion. The Report and Order 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. In addition, a financial reconciliation is required to be completed at the end of the
F-32
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)