Sprint - Nextel 2010 Annual Report Download - page 27

growing machine-to-machine space.
In addition to our brand and customer-oriented goals, we have also taken steps, beginning in 2008, to generate
increased operating cash flow through competitive new rate plans for postpaid and prepaid subscribers, multi-branded
strategies and reductions to our cost structure to align with the reduced revenues from fewer postpaid subscribers. Our cost
reductions are primarily attributable to reductions in capital spending, workforce reductions, call center closures as a result of
fewer calls per subscriber and limiting marketing spend to focused initiatives. We believe these actions, as well as our
continued efforts to reduce other operating expenses, will allow us to continue to maintain an adequate cash position.
Network Vision
In December 2010, Sprint announced Network Vision, a multi-year network infrastructure initiative intended to
provide customers with an enhanced network experience by improving voice quality and providing faster data speeds, while
creating network flexibility, reducing operating costs, and improving environmental sustainability by enabling the aggregation
of multiple spectrum bands onto a single multi-mode base station. In addition to implementing these multi-mode base stations,
this plan encompasses next-generation push-to-talk technology with broadband capabilities and the integration of multi-mode
chipsets into smartphones, tablets and other broadband devices, including machine-to-machine capabilities. Consolidating and
optimizing the use of Sprint's 800 MHz, 1.9GHz and potentially other spectrum (such as the 2.5GHz owned by Clearwire) into
multi-mode stations should allow Sprint to repurpose spectrum to enhance coverage, particularly around the in-building
experience. The multi-mode technology also utilizes software-based solutions with interchangeable hardware to provide greater
network flexibility, which allows for opportunities to evaluate new 4G technologies to better utilize Sprint's available spectrum.
The first stages of equipment testing are expected to begin in early 2011 and, if successful, broad scale deployment is
expected in the latter half of 2011 with an expected completion time of anywhere from three to five years. As Network Vision is
implemented, the size and power required to operate cell sites used by Sprint is expected to be reduced. Sprint expects the plan
to bring financial benefit to the company through convergence to one common network, which is expected to reduce network
maintenance and operating costs through capital efficiencies, reduced energy costs, lower roaming expenses, backhaul savings
and the eventual reduction in total cell sites and also by reducing the cost of handling expanded data traffic.
Sprint has entered into agreements relating to Network Vision to deploy a cost-effective, innovative network to
enhance the voice quality and data speeds by consolidating multiple technologies into one network. The successful testing and
deployment related to these changes in technology will result in incremental charges during the period of implementation
including, but not limited to, an increase in depreciation and amortization associated with existing iDEN assets due to changes
in our estimates of the remaining useful lives of long-lived assets, and the expected timing of asset retirement obligations,
which could have a material impact on our consolidated financial statements. The successful testing of push-to-talk technology
on the CDMA network in our test markets in 2011 would result in increased depreciation and amortization expense expected to
range from $1.0 billion to $1.5 billion if implementation can be completed by the end of 2014. Successful completion of
Network Vision earlier or later than the end of 2014 would result in an acceleration or delay, respectively, of these depreciation
and amortization costs.
Effects on our Wireless Business of Postpaid Subscriber Losses
The following table shows annual net additions (losses) of postpaid subscribers for the past five years, excluding
subscribers obtained through business combinations.
Total net additions (losses) of postpaid subscribers
Year Ended December 31,
2010
( in thousands)
(855)
2009
(3,546)
2008
(4,073)
2007
(1,224)
2006
279
As shown by the table below under “Results of Operations,” Wireless segment earnings represents approximately
80% of Sprint's total consolidated segment earnings. The wireless industry is subject to intense competition to acquire and
retain subscribers of wireless services. Most markets in which we operate have high rates of penetration for wireless services.
Wireless carriers accordingly must attract a greater proportion of new subscribers from competitors rather than from first time
subscribers. Within the Wireless segment, postpaid wireless voice and data services represent the most significant contributors
to earnings, and are driven by the number of postpaid subscribers to our services, as well as the average revenue per subscriber
or user (ARPU).
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