Sprint - Nextel 2007 Annual Report Download - page 122

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The carrying amounts and estimated fair values of our financial instruments at year-end were as follows:
December 31,
2007(1) 2006(1)
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
(in millions)
Marketable securities and other investments .................... $ 294 $ 294 $ 106 $ 106
Derivative instruments ..................................... 15 15 (17) (17)
Debt, including current portion .............................. 22,130 22,019 22,154 22,993
(1) Cash and cash equivalents, accounts receivable, deposits, accounts payable and accrued expenses and
other items have been excluded from the table above, as the carrying amount on the consolidated balance
sheets approximate their carrying amounts due to their short term nature.
Financial Instruments Valuation Method
Marketable securities and other investments .......... Primarily quoted market prices
Derivative instruments ........................... Estimates using available market information and
appropriate valuation methodologies
Debt ......................................... Available market prices and estimates using available
market data information and appropriate valuation
methodologies
Letters of Credit
Outstanding letters of credit totaled $2.6 billion as of December 31, 2007 and 2006. Pursuant to the terms of
the Report and Order described in note 13 below, we were required to establish a letter of credit in the amount of
$2.5 billion to provide assurance that funds will be available to pay the relocation costs of the incumbent users of
the 800 megahertz, or MHz, spectrum in connection with the band reconfiguration process. This letter of credit is
outstanding under our $6.0 billion revolving credit facility. The letter of credit is subject to fees competitively
determined in the market place. We also use letters of credit to provide credit support for various financial
obligations.
Note 9. Derivative Instruments and Hedging Activities
Risk Management Policies
Our derivative instruments typically include interest rate swaps, stock warrants, option contracts, and
foreign currency forward and option contracts. We primarily use derivative instruments to hedge our exposure to
the market risks associated with unfavorable movements in interest rates, equity prices, and foreign currencies.
Our board of directors has authorized us to enter into derivative transactions, and all transactions comply with
our risk management policies.
Interest rate risk is caused by potential adverse movements in interest rates that affect earnings or cash
flows. Specific interest rate risks include the risk of increasing interest rates on variable-rate debt, and the risk of
increasing interest rates for new or refinanced fixed-rate debt.
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