Sprint - Nextel 2008 Annual Report Download - page 98

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table represents payments directly attributable to our performance under the Report and
Order from the inception of the program:
Through
December 31, 2008 Net Additions
Through
December 31, 2009
(in millions)
FCC licenses ........................................ $1,377 $579 $1,956
Property, plant and equipment(1) ......................... 150 7 157
Costs not benefiting our infrastructure or spectrum positions . . 238 37 275
$1,765 $623 $2,388
(1) Excluded from the table above are reconfiguration costs incurred to date which are based on allocations
between reconfiguration activities and our normal network improvements. The methodology with which we
have calculated these costs has not been approved by the independent Transition Administrator designated
by the FCC to review our expenditures. As a result, the amount allocated to reconfiguration activity is
subject to change based on additional assessments made over the course of the reconfiguration program.
When expended, these costs are generally accounted for either as property, plant and equipment or as
additions to the FCC licenses intangible asset. Total direct costs attributable to the spectrum reconfigurations are
estimated to exceed the minimum cash obligation of $2.8 billion. This estimate is dependent on significant
assumptions including the final licensee costs and costs associated with relocating licensees in the Canadian
border region under the border plan that was adopted by the FCC and the Mexican border region for which there
is currently no approved border plan. In addition, we are entitled to receive reimbursement from the mobile
satellite service licensees for their pro rata portion of our costs of clearing a portion of the 1.9 GHz spectrum.
Those licensees may be unable or unwilling to reimburse us for their share of the costs, which are estimated to be
approximately $200 million.
Completion of the 800 MHz band reconfiguration was initially required by June 26, 2008; however, the
FCC has issued a significant number of waivers to 800 MHz licensees giving them additional time to complete
their band reconfigurations, which may delay access to some of our 800 MHz replacement spectrum. Based on
progress to date, a significant number of additional extension requests have been filed and more are expected.
Under an October 2008 FCC Order, we may be required, on March 31, 2010, to relinquish some of our 800 MHz
spectrum on a region-by-region basis prior to receiving 800 MHz replacement spectrum. On January 27, 2010,
we asked the FCC to waive the requirement in certain regions where most public safety agencies have not yet
vacated our replacement channels. This request is pending before the FCC. The Report and Order also contained
an exception with respect to markets that border Mexico and Canada. The exception with respect to markets that
border Canada was clarified on May 9, 2008 when the FCC issued the Canadian border plans to include a
30-month deadline for completion.
Operating Leases
We lease various equipment, office facilities, retail outlets and kiosks, switching facilities, transmitter
and receiver sites under operating leases. The non-cancelable portion of these leases ranges from monthly up to
25 years. These leases, with few exceptions, provide for automatic renewal options and escalations that are either
fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the
computation of rent expense calculated on a straight-line basis over the lease term. Our lease term for most leases
includes the initial non-cancelable term plus at least one renewal period, as the exercise of the related renewal
option or options is reasonably assured. Our cell site leases generally provide for an initial non-cancelable term
of five to seven years with up to five renewal options for five years each.
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