Sprint - Nextel 2007 Annual Report Download - page 105

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
All suppliers of our CDMA handsets license intellectual property from QUALCOMM Incorporated. Some
of this QUALCOMM intellectual property has been found to infringe on certain patents owned by Broadcom
Corporation. A district court recently enjoined QUALCOMM from further infringement of the patents at issue
and from certain other activities. The injunction is effective immediately. However, the ruling contains a sunset
provision that expires on January 31, 2009, which provides time for QUALCOMM to modify its infringing
products to avoid infringement. If QUALCOMM does not modify its products so as to avoid infringement of
Broadcom’s patents at issue by January 31, 2009, QUALCOMM will be unable to sell or support those products
that were found to infringe and we may be unable to use CDMA handsets that are the subject of these claims,
including handsets that utilize QUALCOMM’s QChat®technology, which we intend to use to provide walkie-
talkie services on our CDMA network.
Note 2. Business Combinations
We have accounted for our acquisitions in the Wireless segment under the purchase method as required by
SFAS No. 141. SFAS No. 141 requires that the total purchase price of each of the acquired entities be allocated
to the assets acquired and liabilities assumed based on their fair values at the respective acquisition dates. The
allocation process requires an analysis of intangible assets, such as FCC licenses, customer relationships, trade
names, rights under affiliation agreements, acquired contractual rights and assumed contractual commitments and
legal contingencies to identify and record all assets acquired and liabilities assumed at their fair value. In valuing
acquired assets and assumed liabilities, fair values are based on, but are not limited to: quoted market prices,
where available; our intent with respect to whether the assets purchased are to be held, sold or abandoned;
expected future cash flows; current replacement cost for similar capacity for certain property, plant and
equipment; market rate assumptions for contractual obligations; and appropriate discount rates and growth rates.
The results of operations for all acquired companies are included in our consolidated financial statements either
from the date of acquisition or from the start of the month closest to the acquisition date.
Sprint-Nextel Merger and PCS Affiliate and Nextel Partners Acquisitions
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. 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. As a result of the Nextel merger, we paid a premium of $15.6 billion over the fair value of the
assets acquired and liabilities assumed for a number of potential strategic and financial benefits that we believed
would result from the merger including: (1) the combination of extensive network and spectrum assets which
would enable us to offer consumers, businesses and government agencies a wide array of broadband wireless and
integrated communications services; (2) the 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 Internet Protocol network that would enable us to serve a broader customer base; (3) the size and scale of
the combined company which would be comparable to that of our two largest competitors which would enable us
to achieve more operating efficiencies than what either company could achieve on its own; and (4) the ability to
position us strategically in the fastest growing areas of the communications industry
In the second half of 2005, we acquired US Unwired Inc., Gulf Coast Wireless Limited Partnership and
IWO Holdings, Inc. for about $1.4 billion in cash, net of cash acquired. During 2006, we acquired Enterprise
Communications Partnership, Alamosa Holdings, Inc., Velocita Wireless Holding Corp., UbiquiTel, Inc. and the
remaining 72% of Nextel Partners, Inc. for about $10.5 billion in cash, net of cash acquired. These acquisitions
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