Sprint - Nextel 2006 Annual Report Download - page 37

Overview
We are a global communications company offering a comprehensive range of wireless and wireline commu-
nications products and services that are designed to meet the needs of individual consumers, businesses and
government customers. We have organized our operations to meet the needs of our targeted customer groups
through focused communications solutions that incorporate the capabilities of our wireless and wireline
services to meet their specific needs. We are one of the three largest wireless companies in the United States
based on the number of wireless subscribers. We own extensive wireless networks and a global long distance,
Tier 1 Internet backbone.
Nextel Merger and Local Communications Business Spin-off
On August 12, 2005, a subsidiary of our company merged with Nextel Communications, Inc. and, as a result,
we acquired Nextel. We merged with Nextel to secure a number of potential strategic and financial benefits,
including those arising from the combination of our networks, spectrum assets, and diverse customer bases and
services, the size and scale of the combined company and the opportunity to focus on the fastest growing
areas of the communications industry. We also believe that the merger provides significant opportunities to
achieve operating efficiencies by realizing revenue, operating cost and capital spending synergies.
We have begun to realize cost savings and other synergies as a result of the merger and over a number of
years expect to continue to realize significant cost savings and other synergies associated with the merger.
However, we believe that our operating results for at least the next several quarters will be impacted negatively
by costs that will be incurred to achieve these benefits and other synergies. Such costs are generally not
expected to be recurring in nature, and include 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. The merger and integration costs that we incur will be dependent on a number of business
or strategic decisions whose timing cannot be predicted with certainty, which could cause merger and
integration costs, and our realization of benefits from the merger and integration efforts, to vary from period to
period. The ability to achieve these cost savings and other 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.
At the time that we announced the merger, we also announced our plans to spin-off to our shareholders our
local communications business, which is now known as Embarq Corporation and is comprised primarily of
what was our Local segment prior to the spin-off. We completed the spin-off on May 17, 2006. In the spin-off,
we distributed pro rata to our shareholders one Embarq common share for every 20 shares of our voting and
non-voting common stock, or about 149 million shares of Embarq common stock, and received net cash
consideration and net proceeds from the sale of Embarq senior notes totaling about $6.3 billion. Cash was
paid for fractional shares. As a result of the spin-off, we no longer own any shares of Embarq. The results of
Embarq for periods prior to the spin-off are presented as discontinued operations.
We received a ruling from the Internal Revenue Service that, based on certain facts, assumptions, representa-
tions and undertakings set forth in the ruling, for U.S. federal income tax purposes, the distribution of Embarq
common shares is not taxable to us or U.S. holders of our common shares, except cash payments made in lieu
of fractional shares, which generally are taxable.
Business
We offer a comprehensive range of wireless and wireline communications products and services that are
designed to meet the needs of individual consumers, businesses and government customers. We conduct our
operations through two segments referred to as Wireless and Long Distance.
We, together with the PCS Affiliates, offer digital wireless services in all 50 states, Puerto Rico and the U.S.
Virgin Islands under the Sprint brand name utilizing wireless code division multiple access, or CDMA,
technology. The PCS Affiliates, through commercial arrangements with us, provide wireless services mainly in
and around smaller U.S. metropolitan areas on wireless networks built and operated at their expense, in most
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