Sprint - Nextel 2007 Annual Report Download - page 137

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2007, we had a remaining liability of $59 million associated with the estimated portion
of the reconfiguration costs that represents our best estimate of amounts to be paid under the Report and Order
that would not benefit our infrastructure or spectrum positions. All other costs incurred pursuant to the Report
and Order that relate to the spectrum and infrastructure, when expended, are accounted for either as property,
plant and equipment or as additions to the FCC licenses intangible asset, consistent with our accounting policies.
See note 3 for more information.
Operating Leases
We lease various equipment, office facilities, retail outlets and kiosks, switching facilities, transmitter and
receiver sites under operating leases. The non-cancelable portion of these leases ranges from monthly up to
25 years. These leases, with few exceptions, provide for automatic renewal options and escalations that are either
fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the
computation of rent expense calculated on a straight-line basis over the lease term. Our lease term for most leases
includes the initial non-cancelable term plus at least one renewal period, as the exercise of the related renewal
option or options is reasonably assured. Our cell site leases generally provide for an initial non-cancelable term
of five to seven years with up to five renewal options for five years each.
As of December 31, 2007, our rental commitments for operating leases, including lease renewals that are
reasonably assured, consisted mainly of leases for cell and switch sites, real estate, information technology and
network equipment and office space. These commitments in future years are as follows:
(in millions)
2008 ............................................................ $1,567
2009 ............................................................ 1,638
2010 ............................................................ 1,493
2011 ............................................................ 1,347
2012 ............................................................ 1,224
Thereafter ....................................................... 9,007
Total rental expense was $2.0 billion in 2007, $1.8 billion in 2006 and $1.2 billion in 2005.
Communication Towers Lease Transaction
In May 2005, we closed a transaction with Global Signal, Inc. under which Global Signal acquired exclusive
rights to lease or operate about 6,500 communications towers owned by us for a negotiated lease term, which is
the greater of the remaining terms of the underlying ground leases, about 15 years at present, or up to 32 years,
assuming successful renegotiation of the underlying ground leases at the end of their current lease terms.
We have subleased space on about 6,400 of the towers from Global Signal. This sublease arrangement is
accounted for as an operating lease. Since we maintain ownership of the towers, we continue to reflect the towers
on our consolidated balance sheet.
At closing, we received proceeds of about $1.2 billion, which we recorded in other liabilities on our
consolidated balance sheet. The deferred rental income is being recognized as a reduction of lease expense
related to our subleasing arrangement on a straight-line basis over the remaining terms of the underlying ground
leases.
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