Sprint - Nextel 2008 Annual Report Download - page 116

CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
We started operations on January 1, 2007 as a developmental stage company representing a collection of
assets, related liabilities and activities accounted for in various legal entities that were wholly-owned subsidiaries
of Sprint Nextel Corporation, which we refer to as Sprint or the Parent. The nature of the assets held by the Sprint
legal entities was primarily 2.5 GHz Federal Communications Commission, which we refer to as FCC, licenses
and certain property, plant and equipment related to the Worldwide Interoperability of Microwave Access, which
we refer to as WiMAX, network. The acquisition of the assets was funded by the Parent. As Sprint had acquired
significant amounts of FCC licenses on our behalf in the past, these purchases have been presented as part of the
opening business equity as principal operations did not commence until January 1, 2007, at which time the
operations qualified as a business pursuant to Rule 11-01(d) of Regulation S-X. From January 1, 2007 through
November 28, 2008, we conducted our business as the WiMAX Operations of Sprint, which we refer to as the
Sprint WiMAX Business, with the objective of developing a next generation wireless broadband network.
On May 7, 2008, Sprint announced that it had entered into a definitive agreement with the legacy Clearwire
Corporation, which we refer to as Old Clearwire, to combine both of their next generation wireless broadband
businesses to form a new independent company to be called Clearwire Corporation, which we refer to as
Clearwire. In addition, five independent partners, including Intel Corporation, Google Inc., Comcast Corporation,
Time Warner Cable Inc. and Bright House Networks LLC, collectively, whom we refer to as the Investors,
agreed to invest $3.2 billion in Clearwire and its subsidiary Clearwire Communications LLC, which we refer to
as Clearwire Communications. On November 28, 2008, which we refer to as the Closing, Old Clearwire and the
Sprint WiMAX Business completed the combination to form Clearwire and the Investors contributed a total of
$3.2 billion of new equity to Clearwire and Clearwire Communications. Prior to the Closing, the activities and
certain assets of the Sprint WiMAX Business were transferred to a single legal entity that was contributed to
Clearwire at close in exchange for an equity interest in Clearwire. The transactions described above are
collectively referred to as the Transactions. Immediately after the Transactions, we owned 100% of the voting
interests and 27% of the economic interests in Clearwire Communications, which we consolidate as a controlled
subsidiary. Clearwire holds no assets other than its interests in Clearwire Communications.
On the Closing, Old Clearwire, and the Sprint WiMAX Business, combined to form a new independent
company, Clearwire. The consolidated financial statements of Clearwire and subsidiaries are the results of the
Sprint WiMAX Business, from January 1, 2007 through November 28, 2008 and include the results of the
combined entities thereafter for the period from November 29, 2008 through December 31, 2009. For financial
reporting purposes, the Sprint WiMAX Business was determined to be the accounting acquirer and accounting
predecessor. The assets acquired and liabilities assumed of Old Clearwire have been accounted for at fair value in
accordance with the purchase method of accounting, and its results of operations have been included in our
consolidated financial results beginning on November 29, 2008.
The accounts and financial statements of Clearwire for the period from January 1, 2007 through
November 28, 2008 have been prepared from the separate records maintained by Sprint. Further, such accounts
and financial statements include allocations of expenses from Sprint and therefore may not necessarily be
indicative of the financial position, results of operations and cash flows that would have resulted had we
functioned as a stand-alone operation. Sprint directly assigned, where possible, certain costs to us based on our
actual use of the shared services. These costs include network related expenses, office facilities, treasury
services, human resources, supply chain management and other shared services. Cash management was
performed on a consolidated basis, and Sprint processed payables, payroll and other transactions on our behalf.
Assets and liabilities which were not specifically identifiable to us included:
• Cash, cash equivalents and investments, with activity in our cash balances being recorded through
business equity;
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