Sprint - Nextel 2008 Annual Report Download - page 20

The blurring of the traditional dividing lines among long distance, local, wireless, video and Internet services
contribute to increased competition.
The traditional dividing lines among long distance, local, wireless, video and Internet services are
increasingly becoming blurred. Through mergers, joint ventures and various service expansion strategies, major
providers are striving to provide integrated services in many of the markets we serve. This trend is also reflected
in changes in the regulatory environment that have encouraged competition and the offering of integrated
services.
We expect competition to intensify across all of our business segments as a result of the entrance of new
competitors or the expansion of services offered by existing competitors, and the rapid development of new
technologies, products and services. We cannot predict which of many possible future technologies, products, or
services will be important to maintain our competitive position or what expenditures we will be required to make
in order to develop and provide these technologies, products or services. To the extent we do not keep pace with
technological advances or fail to timely respond to changes in the competitive environment affecting our
industry, we could lose market share or experience a decline in revenue, cash flows and net income. As a result
of the financial strength and benefits of scale enjoyed by some of our competitors, they may be able to offer
services at lower prices than we can, thereby adversely affecting our revenues, growth and profitability.
If we are unable to improve our results of operations, we face the possibility of additional charges for
impairments of long-lived or indefinite-lived assets. In addition, if the fair market value of our investment in
Clearwire based on quoted prices continues to trade below its book value, it could result in an impairment
charge. Also, our future operating results will be impacted by our share of Clearwire’s net loss or net income,
which during this period of their network build-out will likely negatively affect our results of operations.
We review our wireless and wireline long-lived assets for impairment when changes in circumstances
indicate that the book amount may not be recoverable. If we are unable to improve our results of operations and
cash flows, a review could lead to a material impairment charge in our consolidated financial statements. In
addition, if we continue to have challenges retaining subscribers and as we continue to assess the impact of
rebanding the iDEN network, management may conclude in future periods that certain CDMA and iDEN assets
will never be either deployed or redeployed, in which case cash and non-cash charges that could be material to
our consolidated financial statements would be recognized.
We account for our investment in Clearwire using the equity method of accounting and, as a result, we
record our share of Clearwire’s net income or net loss, which could adversely affect our consolidated results of
operations. In addition, the trading price of Clearwire’s Class A common stock has been and may continue to be
volatile, and the estimated fair market value of our investment may continue to be below the book value of the
investment, which could result in a material impairment in our consolidated financial statements.
If Motorola is unable or unwilling to provide us with equipment and devices in support of our iDEN-based
services, as well as improvements, our operations will be adversely affected.
Motorola is our sole source for most of the equipment that supports the iDEN network and for all of the
devices we offer under the Nextel brand except for BlackBerry devices. Although our handset supply agreement
with Motorola is structured to provide competitively-priced devices, the cost of iDEN devices is generally higher
than devices that do not incorporate a similar multi-function capability. This difference may make it more
difficult or costly for us to offer devices at prices that are attractive to potential subscribers. In addition, the
higher cost of iDEN devices requires us to absorb a larger part of the cost of offering devices to new and existing
subscribers, which may reduce our growth and profitability. Also, we must rely on Motorola to develop devices
and equipment capable of supporting the features and services we offer to subscribers of services on our iDEN
network, including the dual-mode devices. A decision by Motorola to discontinue, or the inability of Motorola to
continue, manufacturing, supporting or enhancing our iDEN-based infrastructure and devices would have a
material adverse effect on us. In addition, because iDEN technology is not as widely adopted and has fewer
subscribers than other wireless technologies, it is less likely that manufacturers other than Motorola will be
willing to make the significant financial commitment required to license, develop and manufacture iDEN
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