Sprint - Nextel 2006 Annual Report Download - page 38

instances using spectrum licensed to and controlled by us. During 2005, we acquired three PCS Affiliates and
in 2006 we acquired three additional PCS Affiliates. We also offer digital wireless services under the Nextel
and Boost brand names using iDEN technology. During 2006, we acquired Nextel Partners which provides
digital wireless communications services under the Nextel brand name in certain mid-sized and tertiary U.S.
markets. The acquisitions of these PCS Affiliates and Nextel Partners gave us more control of the distribution
of services under our Sprint and Nextel brands, and provide us with the strategic and financial benefits
associated with a larger customer base and expanded network coverage. We also are one of the largest
providers of long distance services and one of the largest carriers of Internet traffic in the nation.
We believe the communications industry has been and will continue to be highly competitive on the basis of
price, the types of services offered and quality of service. Although we believe that many of our targeted
customers base their purchase decisions on quality of service and the availability of differentiated features and
services, competitive pricing, both in terms of the monthly recurring charges and the number of minutes or
other features available under a particular rate plan, and handset offerings are often important factors in
potential customers’ purchase decisions.
Our industry has been and continues to be subject to consolidation and dynamic change as well as intense
competition. To maintain our operating margins in a price-competitive environment, we continually seek ways
to create or improve capital and operating efficiencies in our business. Consequently, we routinely reassess our
business strategies and their implications on our operations, and these assessments may continue to impact the
future valuation of our long-lived assets. As part of our overall business strategy, we regularly evaluate
opportunities to expand and complement our business and may at any time be discussing or negotiating a
transaction that, if consummated, could have a material effect on our business, financial condition, liquidity or
results of operations.
The FCC regulates the licensing, operation, acquisition and sale of the licensed radio spectrum that is essential
to our business. The FCC and state Public Utilities Commissions, or PUCs, also regulate the provision of
communications services. Future changes in regulations or legislation related to spectrum licensing or other
matters related to our business could impose significant additional costs on us either in the form of direct
out-of-pocket costs or additional compliance obligations.
Management Overview
Wireless
We offer a wide array of wireless mobile telephone and wireless data transmission services on networks that
utilize CDMA and iDEN technologies to meet the needs of individual consumers, businesses and government
customers. Through our Wireless segment, we, together with the four remaining PCS Affiliates, offer digital
wireless service in all 50 states, Puerto Rico and the U.S. Virgin Islands, and provide wireless coverage in
over 300 metropolitan markets, including 297 of the 300 largest U.S. metropolitan areas, where more than
280 million people live or work. We offer wireless international voice roaming for subscribers of both CDMA
and iDEN-based services in numerous countries. We, together with the PCS Affiliates and resellers of our
wholesale wireless services, served about 53.1 million wireless subscribers at the end of 2006.
We offer wireless mobile telephone and data transmission services and features in a variety of pricing plans,
including prepaid service plans. We offer these services, other than those offered under prepaid service plans,
typically on a contract basis, for one or two year periods, with services billed on a monthly basis according to
the applicable pricing plan. We market our prepaid services under the Boost Mobile brand, as a means to
directly target the youth and prepaid wireless service markets. We also offer wholesale wireless services to
resellers, commonly known as mobile virtual network operators, or MVNOs, such as Embarq, Modiva
Communications, Inc., Helio Inc., Qwest Communications International, Inc., The Walt Disney Company and
Virgin Mobile USA, which purchase wireless services from us at wholesale rates and resell the services to
their customers under their own brand names. Under these MVNO arrangements, the operators bear the costs
of acquisition, billing and customer service.
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