Sprint - Nextel 2006 Annual Report Download - page 4

Our Series 1 voting common stock trades on the New York Stock Exchange, or NYSE, under the symbol “S.”
Local Communications Business Spin-off
On May 17, 2006, we completed the spin-off of Embarq. In the spin-off, we distributed pro rata to our
shareholders one share of Embarq common stock for every 20 shares of our voting and non-voting common
stock, or about 149 million shares of Embarq common stock. Cash was paid for fractional shares. The
distribution of Embarq common stock is considered a tax free transaction for us and for our shareholders,
except for cash payments made in lieu of fractional shares which are generally taxable.
In connection with the spin-off, Embarq transferred to our parent company $2.1 billion in cash and about
$4.5 billion of Embarq senior notes in partial consideration for, and as a condition to, our transfer to Embarq
of the local communications business. Embarq also retained about $665 million in debt obligations of its
subsidiaries. Our parent company transferred the cash and senior notes to our finance subsidiary, Sprint Capital
Corporation, in satisfaction of indebtedness owed by our parent company to Sprint Capital. On May 19, 2006,
Sprint Capital sold the Embarq senior notes to the public, and received about $4.4 billion in net proceeds.
In connection with the spin-off, we entered into a separation and distribution agreement and related agreements
with Embarq, which provide that generally each party will be responsible for its respective assets, liabilities
and businesses following the spin-off and that we and Embarq will provide each other with certain transition
services relating to our respective businesses for specified periods at cost-based prices. We also entered into
agreements pursuant to which we and Embarq will provide each other with specified services at commercial
rates. Further, the agreements provide for a settlement process surrounding the transfer of certain assets and
liabilities. It is possible that adjustments will occur in future periods as these matters are settled.
Business Combinations
On August 12, 2005, a subsidiary of ours merged with Nextel and, as a result, we acquired Nextel. The
aggregate consideration paid for the merger was about $37.8 billion, which consisted of $969 million in cash
and 1.452 billion shares of Sprint Nextel voting and non-voting common stock, or $0.84629198 in cash and
1.26750218 shares of Sprint Nextel stock in exchange for each then-outstanding share of Nextel stock.
We merged with Nextel to secure a number of potential strategic and financial benefits. These benefits include
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 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 generally are 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 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.
In 2005 and 2006, we acquired six entities, each of which had been a PCS Affiliate until the time of its
acquisition:
kUS Unwired, Inc., which, at the time of acquisition, provided wireless service to more than 500,000
direct subscribers in nine Southeast region states;
kGulf Coast Wireless Limited Partnership, which, at the time of acquisition, provided wireless service
to more than 95,000 direct subscribers in southern Louisiana and Mississippi;
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