Sprint - Nextel 2008 Annual Report Download - page 87

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Goodwill Assessments
In 2007, we conducted our annual impairment assessment of our then $30.7 billion of goodwill. The majority
of our goodwill was recorded in connection with prior business combinations including Nextel Communications, Inc.,
Nextel Partners, Inc., and other acquisitions such as certain PCS affiliates that provide services on the CDMA network.
During the fourth quarter 2007, economic conditions began to decline and we experienced a sustained, significant
decline in our stock price. The reduced market capitalization reflected the Wireless segment’s lower than expected
performance, due in large part to net subscriber losses. Based on the results of our 2007 assessment, we estimated the
fair value of our goodwill to be $978 million resulting in a goodwill impairment of $29.6 billion during the fourth
quarter 2007.
During 2008, economic conditions continued to significantly deteriorate due, in part, to the ongoing credit
crisis in the financial markets. Our updated forecasted cash flows of the wireless reporting unit resulted in a further
reduction in the estimated fair value of the wireless reporting unit as compared to the 2007 estimate of fair value
primarily reflecting several factors including, among others, the discount rate, our ability to attract and retain
subscribers, particularly post-paid subscribers, expected reductions in average voice revenue per post-paid subscriber,
and the costs of operating our wireless networks. Based on the results of our 2008 assessment, the estimated fair value
of our goodwill was zero resulting in a goodwill impairment of $963 million during the fourth quarter 2008.
Intangible Assets Subject to Amortization
Sprint’s customer relationships are amortized over a period of two to five years using the sum of the years’
digits method. Other intangible assets primarily include certain rights under affiliation agreements that were reacquired
in connection with the acquisitions of PCS Affiliates, and Nextel Partners, Inc., which are being amortized over the
remaining terms of those affiliation agreements on a straight-line basis, and the Nextel, Direct Connect and Virgin
Mobile trade names, which are being amortized on a straight-line basis.
December 31, 2009 December 31, 2008
Useful Lives
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
(in millions)
Customer relationships ............. 2to5years $12,224 $(11,093) $1,131 $12,220 $(10,288) $1,932
Other intangible assets
Trademarks .................. 10to37years 1,169 (394) 775 889 (304) 585
Reacquired rights ............. 9to14years 1,572 (386) 1,186 1,268 (284) 984
Other ....................... 6to16years 126 (40) 86 95 (30) 65
Total other intangible assets ......... 2,867 (820) 2,047 2,252 (618) 1,634
$15,091 $(11,913) $3,178 $14,472 $(10,906) $3,566
2010 2011 2012 2013 2014
(in millions)
Estimated amortization expense ...................................... $1,163 $407 $283 $245 $239
In conjunction with our annual assessments of indefinite-lived intangibles for impairment, we performed a
recoverability test of the wireless long-lived assets. We included cash flow projections from wireless operations along
with cash flows associated with the eventual disposition of the long-lived assets, which included estimated proceeds
from the assumed sale of FCC licenses, trademarks and customer relationships. The estimated undiscounted future cash
flows of the wireless long-lived assets exceeded their carrying amount and, as a result, no impairment charge was
recorded. In addition, we re-assessed the remaining useful lives of these long-lived assets and concluded they were
appropriate.
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