Sprint - Nextel 2010 Annual Report Download - page 38

compared to 2008 mainly due to fewer cell sites built in 2009, fewer IT and network development projects and costs incurred
related to the build-up of WiMAX in 2008 that are no longer being incurred in 2009 due to the close of the transaction with
Clearwire in November 2008. The decreases were offset by increased purchases of $599 million in short-term investments, a
$1.1 billion increase of Sprint's investment in Clearwire and $560 million used to acquire Virgin Mobile and iPCS in the fourth
quarter 2009.
Net cash used in investing activities for 2008 include expenditures of approximately $600 million related to capital
assets and FCC licenses that were contributed to Clearwire in November 2008.
Financing Activities
Net cash used in financing activities was $905 million during 2010 compared to net cash used by financing activities
of $919 million in 2009. Activities in 2010 included a $750 million debt payment in June 2010 and a $51 million payment for
debt financing costs associated with our new revolving credit facility. In addition, in the fourth quarter 2010, we exercised an
option to terminate our relationship with a variable interest entity, which resulted in the repayment of financing, capital lease
and other obligations of $105 million.
Net cash used in financing activities was $919 million during 2009 as compared to net cash used in financing
activities of $484 million in 2008. Activities in 2009 include debt repayments of $600 million of senior notes in May 2009, the
early redemption of $607 million of our convertible senior notes in September 2009, and a $1.0 billion payment on our
revolving bank credit facility in November 2009 offset by the issuance of $1.3 billion of senior notes in August 2009.
Net cash used in financing activities was $484 million during 2008. Activities in 2008 include the draw-down of $2.5
billion under our revolving bank credit facility in February 2008, the net proceeds from the financing obligation with TowerCo
Acquisition LLC related to a sale and subsequent leaseback of multiple tower locations in September 2008 of $645 million, and
proceeds from the issuance of commercial paper of $681 million, offset by the early redemption of $1.25 billion of our senior
notes in June 2008, the extinguishment in September 2008 of $235 million of US Unwired Inc.'s 10% Second Priority Senior
Secured Notes due 2012, the extinguishment in September 2008 of $250 million of Alamosa (Delaware), Inc.'s 8.5% Senior
Notes due 2012, the repayment of $1.5 billion of our revolving bank credit facility in the third and fourth quarters of 2008 and
maturities of commercial paper of $1.1 billion.
We received $8 million, $4 million and $57 million in 2010, 2009 and 2008, respectively, in proceeds from common
share issuances, primarily resulting from exercises of employee options.
Liquidity
As of December 31, 2010, our cash, cash equivalents and short-term investments totaled $5.5 billion. On May 21,
2010, we entered into a new $2.1 billion unsecured revolving credit facility that expires in October 2013. This new credit
facility replaced the $4.5 billion credit facility that was due to expire in December 2010. As of December 31, 2010, $1.4 billion
in letters of credit, including a $1.3 billion letter of credit required by the Report and Order to reconfigure the 800 MHz band,
were outstanding under our $2.1 billion revolving bank credit facility. As a result of the outstanding letters of credit, which
directly reduce the availability of the revolving bank credit facility, we had $700 million of borrowing capacity available under
our revolving bank credit facility as of December 31, 2010. Accordingly, Sprint's liquidity as of December 31, 2010, including
cash, cash equivalents, short-term investments and available borrowing capacity under our revolving credit facility was $6.2
billion. In addition, in January 2011, $1.65 billion of Sprint Capital Corporation 7.625% senior notes were repaid upon maturity
and we amended $500 million of our $750 million Export Development Canada loan to extend the maturity date from 2012 to
2015.
The terms and conditions of our revolving bank credit facility require the ratio of total indebtedness to trailing four
quarters earnings before interest, taxes, depreciation and amortization and certain other non-recurring items, as defined by the
credit facility (adjusted EBITDA), to be no more than 4.5 to 1.0. Beginning in April 2012, the ratio will be reduced to 4.25 to
1.0, and further reduced to 4.0 to 1.0 in January 2013. As of December 31, 2010, the ratio was 3.7 to 1.0 as compared to 3.5 to
1.0 as of December 31, 2009 resulting from our decline in adjusted EBITDA. Under this revolving bank credit facility, we are
currently restricted from paying cash dividends because our ratio of total indebtedness to adjusted EBITDA exceeds 2.5 to 1.0.
The terms of the revolving bank credit facility provide for an interest rate equal to the London Interbank Offered Rate
(LIBOR), plus a margin of between 2.75% and 3.50%, depending on our debt ratings. Certain of our domestic subsidiaries have
guaranteed the revolving bank credit facility.
A default under our borrowings could trigger defaults under our other debt obligations, which in turn could result in
the maturities being accelerated. Certain indentures that govern our outstanding notes also require compliance with various
covenants, including limitations on the incurrence of indebtedness and liens by the Company and its subsidiaries, as defined by
the terms of the indentures. As of December 31, 2010, we own a 54% economic interest in Clearwire. As a result, Clearwire
could be considered a subsidiary under certain agreements relating to our indebtedness. Whether Clearwire could be considered
a subsidiary under our debt agreements is subject to interpretation. In December 2010, as a result of an amendment to the
Clearwire equityholders' agreement, Sprint obtained the right to unilaterally surrender voting securities to reduce its voting
security percentage below 50%, which could eliminate the potential for Clearwire to be considered a subsidiary of Sprint.
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