Sprint - Nextel 2006 Annual Report Download - page 110

reconfiguration implementation, at which time we will be required to make a payment to the U.S. Treasury to
the extent that the value of the spectrum rights received exceeds the total of (i) the value of the spectrum
rights that are surrendered and (ii) the qualifying costs referred to above. As a result of the uncertainty with
regard to the calculation of the credit for our internal network costs, as well as the significant number of
variables outside of our control, particularly with regard to the 800 MHz reconfiguration licensee costs, we do
not believe that we can reasonably estimate what amount, if any, will be paid to the U.S. Treasury.
As of December 31, 2006, we had a remaining liability of $138 million associated with the estimated portion
of the reconfiguration costs that represents our best estimate of amounts to be paid under the Report and Order
that would not benefit our infrastructure or spectrum positions. All other costs incurred pursuant to the Report
and Order that relate to the spectrum and infrastructure, when expended, are accounted for either as property,
plant and equipment or as additions to the FCC licenses intangible asset, consistent with our accounting
policies. The following table represents expenditures incurred directly attributable to our performance under
the Report and Order from the inception of the program:
Through
December 31, 2005
2006
Expenditures
Through
December 31, 2006
(in millions)
FCC licenses ............................ $120 $308 $428
Property, plant and equipment ............... 69 69 138
Costs not benefiting our infrastructure or
spectrum positions ...................... 44 111 155
Total ................................ $233 $488 $721
Balances Acquired in
Sprint-Nextel Merger
2005 Expenditures
Subsequent to
Sprint-Nextel
Merger
Through
December 31, 2005
(in millions)
FCC licenses ............................ $39 $ 81 $120
Property, plant and equipment ............... 29 40 69
Costs not benefiting our infrastructure or
spectrum positions ...................... 26 18 44
Total ................................ $94 $139 $233
In addition, not included in the table above are estimated reconfiguration costs incurred to date that are
included in property, plant and equipment on our consolidated balance sheet, which are based on allocations
between reconfiguration activities and our normal network growth. These estimated allocations may vary
depending on key assumptions, including subscribers, call volumes and other factors over the life of the
reconfiguration program. As a result, the amount allocated to reconfiguration activity is subject to change
based on additional assessments made over the course of the reconfiguration program. Since we, the TA and
the FCC have not yet reached an agreement on our methodology for calculating the amount to be submitted
for credit, we cannot provide assurance that we will be granted full credit for certain of these allocated
network costs.
Note 8. Severance, Lease Exit Costs and Asset Impairments
In 2006, total severance, lease exit costs and asset impairment costs, which have been expensed in the
consolidated statement of operations, aggregated $207 million compared to $43 million for 2005 and
$3.7 billion for 2004.
F-33
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)