Sprint - Nextel 2008 Annual Report Download - page 33

We expect these actions will have a favorable impact on net subscriber losses. Net post-paid subscriber
losses had not improved sustainably through the first quarter of 2009, in part due to circumstances in the general
economy, including higher deactivations of business customer accounts as companies reduced wireless service
lines resulting from their own workforce reductions. However, during 2009, the Company began to see
improvement in our net loss of post-paid subscribers. Net post-paid subscriber losses decreased by approximately
20% sequentially for each of the quarters ended June 30, 2009 and September 30, 2009 and by approximately
35% sequentially for the quarter ended December 31, 2009. Net post-paid subscriber losses during the
six-months ended December 31, 2009 decreased by more than 40% compared to the same period in the prior
year.
As discussed below under “Wireless Business—Service Revenue,” the net loss of post-paid subscribers
in 2009 can be expected to cause wireless service revenue in 2010 to be approximately $2.1 billion lower. If we
continue to experience similar losses of post-paid subscribers in 2010, it would have a significant negative
impact on Sprint’s financial condition, results of operations and liquidity in 2010 and beyond.
During 2009, wireless industry trends have included a significant industry-wide shift for new accounts
from post-paid wireless accounts to prepaid accounts. Sprint’s successful prepaid wireless offerings, as well as
the cost controls that have been implemented, will partially offset the effects of net post-paid subscriber losses,
but are unlikely to be sufficient to sustain the Company’s level of profitability and cash flows unless we are
successful in further reducing the decline in post-paid subscribers. The Company believes the actions that have
been taken, as described above, and that continue to be taken in marketing, customer service, device offerings,
and network quality, should reduce the number of net post-paid and total subscriber losses for 2010 as compared
to 2009.
RESULTS OF OPERATIONS
Year Ended December 31,
2009 2008(1) 2007
(in millions)
Wireless segment earnings ............................. $5,198 $ 6,776 $ 9,914
Wireline segment earnings ............................. 1,221 1,175 1,074
Corporate, other and eliminations ........................ (12) (287) (188)
Consolidated segment earnings ........................ 6,407 7,664 10,800
Depreciation and amortization .......................... (7,416) (8,407) (8,933)
Goodwill impairment ................................. — (963) (29,649)
Merger and integration expenses ......................... — (130) (516)
Other, net ........................................... (389) (806) (442)
Operating loss ..................................... (1,398) (2,642) (28,740)
Interest expense ...................................... (1,450) (1,362) (1,433)
Equity in losses of unconsolidated investments, net .......... (803) (145) (3)
Other income, net .................................... 157 89 401
Income tax benefit .................................... 1,058 1,264 331
Net loss .......................................... $(2,436) $(2,796) $(29,444)
(1) Consolidated results of operations include the results of our next-generation wireless broadband network,
which was contributed to Clearwire in a transaction that closed on November 28, 2008.
Consolidated segment earnings decreased $1.26 billion, or 16%, in 2009 compared to 2008 and $3.14
billion, or 29%, in 2008 compared to 2007. Consolidated segment earnings consist of our Wireless and Wireline
segments, which are discussed below, and Corporate, other and eliminations. Corporate, other and eliminations
improved $275 million for 2009 compared to 2008 and declined $99 million for 2008 compared to 2007
primarily as a result of costs incurred related to the build-up of WiMAX from 2007 to 2008 that are no longer
being incurred in 2009 due to the close of the transaction with Clearwire in late 2008.
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