Sprint - Nextel 2007 Annual Report Download - page 44

IP-based services and de-emphasizing stand-alone voice services and non-IP-based data services. For example, in
addition to increased emphasis on selling IP and managed services, we are converting existing customers from
ATM and frame relay to more advanced IP technologies. This conversion has and will continue to result in
decreases in revenue from frame relay and ATM service offset by increases in IP and MPLS services. We also
are taking advantage of the growth in voice services provided by cable MSOs, by providing large cable MSOs
with wholesale voice local and long distance, which they offer as part of their bundled service offerings, as well
as traditional voice and data services for their enterprise use.
WiMAX Initiative
We plan to deploy a next generation broadband wireless network that will be designed to provide
significantly higher data transport speeds using our spectrum holdings in the 2.5 gigahertz, or GHz, band and
technology based on the Worldwide Inter-Operability for Microwave Access, or WiMAX, standard. We are
designing this network to support a wide range of high-speed IP-based wireless services in a mobile environment.
Our initial plans contemplate deploying the new network and introducing commercial service offerings in
Chicago, Baltimore and Washington, DC in mid-2008. We are exploring strategic initiatives and third party and
other financing alternatives related to this initiative. In 2007, operating expenses related to this initiative totaled
$193 million and capital expenditures totaled $384 million. Deployment of this network will continue to require
capital resources, without any meaningful revenues, for the foreseeable future.
Results of Operations
We present consolidated information, as well as separate supplemental financial information for our two
reportable segments, Wireless and Wireline. The disaggregated financial results for our two reportable segments
have been prepared in a manner that is consistent with the basis and manner in which our executives evaluate
segment performance and make resource allocation decisions. Consequently, segment earnings is defined as
wireless or wireline operating income before other segment expenses, such as depreciation, amortization,
severance, exit costs, asset impairments and other, goodwill impairment, and merger and integration expenses
solely and directly attributable to the segment. Expenses and income items excluded from segment earnings are
managed at the corporate level. Merger and integration expenses are generally non-recurring in nature and
primarily include costs for the launch of common customer interfacing systems, processes and other integration
and planning activities, certain costs to provide wireless devices that operate seamlessly between the CDMA and
iDEN networks, certain customer care costs, costs to retain employees, costs related to re-branding, and other
integration costs. See note 12 of the Notes to Consolidated Financial Statements for additional information on
our segments. For reconciliations of segment earnings to the closest generally accepted accounting principles
measure, operating income, see tables set forth in “—Wireless” and “—Wireline” below. We generally account
for transactions between segments based on fully distributed costs, which we believe approximate fair value. In
certain transactions, pricing is set using market rates.
Consolidated
Our consolidated and wireless results of operations include the results of the merged and acquired
companies from either the date of merger/acquisition or the start of the month closest to the acquisition date. As
such, the results of merged and acquired companies are included as of the following dates: Nextel
Communications and US Unwired from August 12, 2005; Gulf Coast Wireless Limited Partnership from
October 1, 2005; IWO Holdings, Inc. from November 7, 2005; Enterprise Communications Partnership and
Alamosa Holdings, Inc. from February 1, 2006; Nextel Partners and UbiquiTel Inc. from July 1, 2006 and
Northern PCS Services, LLC from August 1, 2007. The results of Velocita Wireless Holding Corporation are
included from the date of acquisition, March 1, 2006, through the date of sale, June 27, 2007. For further
information on business combinations, see note 2 of the Notes to Consolidated Financial Statements. These
transactions affect the comparability of our reported operating results with other periods.
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