Sprint - Nextel 2007 Annual Report Download - page 48

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subscribers, including over 400,000 subscribers in the fourth quarter, transferred from our iDEN subscriber base
to take advantage of these products and services, which include data cards, downloading music, global
positioning satellite, or GPS, enabled navigation services, instant messaging and emails, sending and receiving
pictures, playing on-line games, browsing the Internet wirelessly, and with our PowerSource handsets, using
CDMA-based voice and data applications and our iDEN-based walkie-talkie applications. Offsetting the increase
in CDMA subscribers, we have also experienced a continued decline in iDEN subscribers in addition to those
that transferred from the iDEN subscriber base to the CDMA subscriber base. We believe that this decline was
due in part to customer sentiment related to: the network, limited handset offerings at higher than market prices
and customer care experience. See subscriber trends discussed in “—Wireless Segment Earnings” below.
The average monthly service revenue per post-paid subscriber generally decreased year over year due
primarily to declines in voice revenue per subscriber. This decline is primarily due to the loss of subscribers with
higher priced service plans, while new subscribers and the subscribers acquired from the PCS Affiliates have
lower priced service plans. In addition, the decline is partly attributable to the migration of our existing
customers to family add-on plans or plans that include roaming in their service plan, as well as increased sales to
businesses and the government, which receive favorable volume-based pricing. This decline in the average voice
revenue per subscriber is partially offset by an increase in the average data revenue per post-paid subscriber,
which is attributable to our CDMA-based data offerings such as short message service, or SMS, connection cards
and our Sprint Vision and Power Vision service plans. The decrease in the average monthly service revenue per
prepaid subscriber in the year ended December 31, 2007 is due in part to a decrease in usage of wireless services
by our existing customers. See average monthly service revenue per post-paid subscriber trends discussed in
“—Wireless Segment Earnings” below.
Wholesale, Affiliate and Other Revenue
Wholesale, affiliate and other revenues consist primarily of revenues from the sale of wireless services to
companies that resell those services to their subscribers and net revenues retained from wireless subscribers
residing in PCS Affiliate territories. Wholesale, affiliate and other revenues increased 22% in 2007 as compared
to 2006 primarily due to increases in our wholesale operators’ subscribers. Wholesale, affiliate and other
revenues decreased 4% in 2006 as compared to 2005 primarily due to the PCS Affiliate acquisitions. In 2007,
wholesale subscriber additions were 1.3 million, resulting in about 7.7 million wholesale subscribers at
December 31, 2007, compared to about 6.4 million wholesale subscribers at December 31, 2006 and 5.2 million
wholesale subscribers at December 31, 2005.
Cost of Services
Cost of services consists primarily of:
• costs to operate and maintain our CDMA and iDEN networks, including direct switch and cell site
costs, such as rent, utilities, maintenance, payroll costs associated with our network engineering
employees and frequency leasing costs;
• fixed and variable interconnection costs, the fixed component of which consists of monthly flat-rate
fees for facilities leased from local exchange carriers based on the number of cell sites and switches in
service in a particular period and the related equipment installed at each site, and the variable
component of which generally consists of per-minute use fees charged by wireline and wireless
providers for calls terminating on their networks, which fluctuates in relation to the level and duration
of those terminating calls;
• long distance costs paid to the wireline business;
• costs to service and repair handsets and activate service for new subscribers;
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