Sprint - Nextel 2006 Annual Report Download - page 98

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contracts, which, when finalized, may result in additional adjustments to the purchase price allocation for the
acquired assets and assumed liabilities of these PCS Affiliates, Nextel Partners and Velocita Wireless. See
note 7 for information regarding the useful lives of acquired definite lived intangible assets as well as other
information regarding intangible assets.
Sprint-Nextel Merger
On August 12, 2005, a subsidiary of ours merged with Nextel and, as a result, we acquired 100% of the
outstanding common shares of Nextel. Nextel, now a wholly owned subsidiary of Sprint Nextel, provides
wireless voice and data services in the United States. This transaction was consummated as part of our overall
strategy to offer a comprehensive selection of voice, data and multimedia products and services.
The aggregate consideration paid for the merger was approximately $37.8 billion, which included $969 million
in cash, 1.452 billion shares of our voting and non-voting common stock worth $35.6 billion, $1.1 billion of
converted Nextel stock-based awards, and other costs. The value of the newly issued shares was calculated
using the average of the per share closing sales prices of our Series 1 common stock on the NYSE for the
period two business days before and through the two business days after the December 15, 2004 announcement
of the merger. The fair value of the converted awards was calculated on the merger date by applying the fair
value methods prescribed under SFAS No. 123, Accounting for Stock-Based Compensation.
We paid a premium (i.e., goodwill) over the fair value of the net tangible and identified intangible assets of
Nextel for a number of potential strategic and financial benefits that we believe will be realized as a result of
the merger, including, but not limited to, the following:
kthe combination of extensive network and spectrum assets, which we believe will enable us to offer
consumers, businesses and government agencies a wide array of broadband wireless and integrated
communications services;
kthe combination of Nextel’s strength in business and government wireless services with our position
in consumer wireless and data services, including services supported by our global IP network, which
we believe will enable us to serve a broader customer base;
kthe size and scale of the combined company, which is comparable to that of our two largest
competitors, which we believe will enable us to achieve more operating efficiencies than either
company could achieve on its own; and,
kthe ability to position us strategically in the fastest growing areas of the communications industry.
Under the purchase method of accounting, the assets and liabilities of Nextel were recorded at their respective
fair values as of the date of the merger. Changes to the initial purchase price allocations for Nextel have
occurred based on further analysis and valuations of certain assets and liabilities, and are summarized in the
table below along with the respective total fair value amounts.
F-21
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)