Sprint - Nextel 2008 Annual Report Download - page 83

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma combined historical results of VMU and iPCS, giving effect to the
Acquisitions, assuming the transactions were consummated as of the beginning of the years ended December 31,
2009 and 2008 would not have been material to Sprint’s results of operations.
Note 4. Investments
December 31,
2009 2008
(in millions)
Marketable equity securities ................................... $ 43 $ 37
Equity method and other investments ............................ 4,581 4,204
$4,624 $4,241
Marketable equity securities
Investments in marketable equity securities are recognized at fair value and are considered
available-for-sale securities. Accordingly, unrealized holding gains and losses on these securities are recognized
in accumulated other comprehensive income (loss), net of related income tax. Realized gains or losses are
measured and reclassified from accumulated other comprehensive income (loss) into earnings based on
identifying the specific investments sold or where an other-than-temporary impairment exists. Gross unrealized
holding gains and losses were insignificant for 2009 and 2008.
Equity Method Investment in Clearwire
Clearwire
In November 2008, we closed a transaction with Clearwire to combine our next-generation wireless
broadband businesses. At closing, Sprint contributed assets with a carrying value of $3.3 billion, including our
2.5 gigahertz (GHz) spectrum and WiMAX related assets which, together with Clearwire’s existing business and
cash contributions from other investors, is being used to build and operate a next-generation wireless broadband
network that will provide entire communities with high-speed residential and mobile internet access services and
residential voice services. As part of the arrangement, we entered into various agreements with Clearwire,
including MVNO agreements under which Clearwire can purchase 3G CDMA, mobile voice and data
communication services from Sprint for resale to end users and Sprint can purchase 4G wireless broadband
services for resale to our end users. Amounts under these agreements were not yet material during 2009 as
Clearwire continues the build-out of its 4G network.
In conjunction with the transaction, Clearwire agreed to reimburse Sprint for certain cash expenditures
incurred prior to the closing of the transaction in the amount of $388 million. Approximately $213 million was
paid by Clearwire during 2008 and the remaining $175 million was provided through a variable interest bearing
note, maturing in May 2011, which is included in equity method and other investments. This reimbursement was
accounted for as a reduction to the initial investment in Clearwire. Also, during the quarter ended December 31,
2008, we recognized a pre-tax gain within shareholders’ equity of $684 million ($424 million after tax) related to
the difference between our share of Clearwire’s net assets upon close and the carrying value of the net assets we
contributed to Clearwire. Equity in losses of Clearwire was $803 million for the year ended December 31, 2009,
which represents our proportionate share of Clearwire’s net loss of $649 million and a pre-tax loss of $154
million ($96 million after tax) representing the finalization of ownership percentages, which was subject to
change based on the trading price of Clearwire stock during the 90 days subsequent to close.
On November 9, 2009, Sprint, in addition to other investors, entered into an agreement with Clearwire
to invest a total of approximately $1.56 billion in exchange for Class B voting common stock of Clearwire
Corporation and Class B non-voting common interests in Clearwire Communications LLC (together, “Class B
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