Sprint - Nextel 2007 Annual Report Download - page 134

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 13. Commitments and Contingencies
In September 2004, the U.S. District Court for the District of Kansas denied a motion to dismiss a
shareholder lawsuit alleging that our 2001 and 2002 proxy statements were false and misleading in violation of
federal securities laws to the extent they described new employment agreements with certain senior executives
without disclosing that, according to the allegations, replacement of those executives was inevitable. These
allegations, made in an amended complaint in a lawsuit originally filed in 2003, are asserted against us and
certain current and former officers and directors, and seek to recover any decline in the value of our tracking
stocks during the class period. The parties have stipulated that the case can proceed as a class action. All
defendants have denied plaintiffs’ allegations and intend to defend this matter vigorously. Allegations in the
original complaint, which asserted claims against the same defendants and our former independent auditor, were
dismissed by the Court in April 2004. We have recently filed a motion to dismiss the amended complaint, or for
summary judgment. We are awaiting a decision on that motion. Our motion to dismiss the amended complaint
was denied, and the parties are engaged in discovery.
Various other suits, proceedings and claims, including purported class actions, typical for a large business
enterprise, are pending against us or our subsidiaries. While it is not possible to determine the ultimate
disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect
that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on
our financial condition or results of operations.
Spectrum Reconfiguration Obligations
In recent years, the operations of a number of public safety communications systems in the 800 MHz block
of spectrum have experienced interference that is believed to be a result of the operations of commercial mobile
radio service, or CMRS, providers operating on adjacent frequencies in the same geographic area.
In 2001, Nextel filed a proposal with the FCC that would result in a more efficient use of spectrum through
the reconfiguration of spectrum licenses and spectrum allocations in the 700, 800 and 900 MHz bands and,
thereby, resolve many of these interference problems. In 2004, following a rulemaking to consider proposals to
solve the public safety interference issue, the FCC adopted a Report and Order that included new rules regarding
interference in the 800 MHz band and a comprehensive plan to reconfigure the 800 MHz band. In February 2005,
Nextel accepted the Report and Order, which was necessary before the order became effective, because the
Report and Order required Nextel to undertake a number of obligations and accept modifications to its FCC
licenses. We assumed these obligations when we merged with Nextel in August 2005.
The Report and Order provides for the exchange of a portion of our FCC spectrum licenses, which the FCC
is implementing through modifications to these licenses. Specifically, the Report and Order modified a number
of FCC licenses in the 800 MHz band, including many of our licenses, and implemented rules to reconfigure
spectrum in the 800 MHz band in a 36-month phased transition process. It also obligated us to surrender all of
our holdings in the 700 MHz spectrum band and certain portions of our holdings in the 800 MHz spectrum band,
and to fund the cost incurred by public safety systems and other incumbent licensees to reconfigure the 800 MHz
spectrum band. Under the Report and Order, we received licenses for 10 MHz of nationwide spectrum in the 1.9
GHz band, but we are required to relocate and reimburse the incumbent licensees in this band for their costs of
relocation to another band designated by the FCC.
The reconfiguration process is to be completed by geographic region and involves reaching agreement and
coordinating numerous processes with the incumbent licensees in that region, as well as vendors and contractors
that will be performing much of the reconfiguration. We are permitted to continue to use the spectrum in the 800
MHz band that was surrendered under the Report and Order during the reconfiguration process; however, as part
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