Sprint - Nextel 2010 Annual Report Download - page 28

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Beginning in 2008, in conjunction with changes in senior management, Sprint undertook steps to address and reduce
postpaid subscriber losses. Perceptions in the marketplace, in part as a result of the subscriber losses themselves, as well as
other factors, reduced the Sprint brand's effectiveness in attracting and retaining customers. Steps were taken to improve the
Sprint networks, as well as to improve the quality of Sprint's customer care experience, as confirmed by independent
comparisons with competitors. Steps were also taken to improve the credit quality mix of our subscriber base and to improve
our financial stability, including cost control actions, which have resulted in our continuing strong cash flow from operations.
In addition, beginning in 2008 and continuing through 2010, we have undertaken initiatives to strengthen the Sprint brand. We
continue to increase market awareness of the improvements that have been achieved in the customer experience, including the
speed and dependability of our networks. We have also introduced new devices improving our overall lineup and providing a
competitive portfolio for customer selection, as well as competitive new rate plans providing simplicity and value. We believe
these actions had a favorable impact on net postpaid subscriber losses in 2009 and 2010, and we expect these to further
improve our subscriber results.
Beginning in the second quarter 2009 and continuing through 2010, the Company has begun to see a reduction in our
net loss of postpaid subscribers. For the year ended December 31, 2010, net postpaid subscriber losses of 855,000 improved by
2.7 million, or 76% compared to losses of 3.5 million in 2009.
The net loss of postpaid subscribers in 2009 and 2010 can be expected to cause wireless service revenue in 2011 to be
approximately $2.4 billion lower than it would have been had those subscribers not been lost. Notwithstanding our historical
postpaid subscriber losses, consolidated service revenue has begun to stabilize primarily as a result of increased service revenue
associated with our prepaid wireless offerings, including the acquisition of Virgin Mobile in the fourth quarter of 2009. As a
result, Sprint's prepaid wireless offerings, as well as cost controls that have been implemented, will continue to partially offset
the effects of net postpaid subscriber losses, but are unlikely to be sufficient to sustain the Company's level of results from
operations and cash flows unless we are successful in further improving our postpaid subscriber results. If our trend of
improved postpaid subscriber results does not continue, it could have a material negative impact on our financial condition,
results of operations and liquidity in 2011 and beyond. 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 continue to
reduce the number of net postpaid subscriber losses experienced during 2011.
RESULTS OF OPERATIONS
Wireless segment earnings
Wireline segment earnings
Corporate, other and eliminations
Consolidated segment earnings
Depreciation and amortization
Goodwill impairment
Merger and integration expenses
Other, net
Operating loss
Interest expense, net
Equity in losses of unconsolidated investments, net
Other income, net
Income tax (expense) benefit
Net loss
Year Ended December 31,
2010
(in millions)
$ 4,531
1,090
12
5,633
(6,248)
—
—
20
(595)
(1,464)
(1,286)
46
(166)
$(3,465)
2009
$ 5,198
1,221
(12)
6,407
(7,416)
—
—
(389)
(1,398)
(1,450)
(803)
157
1,058
$(2,436)
2008(1)
$ 6,776
1,175
(287)
7,664
(8,407)
(963)
(130)
(806)
(2,642)
(1,362)
(145)
89
1,264
$(2,796)
________
(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 $774 million, or 12%, in 2010 compared to 2009 and $1.26 billion, or
16%, in 2009 compared to 2008. 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 primarily as a result of costs incurred related to the build-up of our next-generation wireless broadband
network in 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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