Sprint - Nextel 2010 Annual Report Download - page 70

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Note 3. Investments
The components of investments were as follows:
Marketable equity securities
Equity method and other investments
December 31,
2010
(in millions)
$ 39
3,350
$ 3,389
2009
$ 43
4,581
$ 4,624
Marketable equity securities
Investments in marketable equity securities are recognized at fair value and are considered available-for-sale
securities. Accordingly, unrealized holding gains and losses on these securities are recognized in accumulated other
comprehensive income (loss), net of related income tax. Realized gains or losses are measured and reclassified from
accumulated other comprehensive income (loss) into earnings based on identifying the specific investments sold or where an
other-than-temporary impairment exists. Gross unrealized holding gains and losses were insignificant for 2010 and 2009.
Equity Method Investment in Clearwire
Sprint's Ownership Interest
Sprint's investment in Clearwire is part of our long-term plan to participate in the 4G wireless broadband market, and
to benefit from Clearwire's entry into that market. Sprint and other investors are offering 4G products utilizing Clearwire's 4G
wireless broadband network in available markets.
Sprint holds a 54% non-controlling interest in Clearwire, in the form of 532 million shares of Class B voting
common stock (Class B Voting) of Clearwire Corporation and 532 million Class B non-voting common interests (Class B Non-
voting) in Clearwire Communications LLC (together, “Class B Common Interests”) for which the carrying value, as of
December 31, 2010, totaled $3.1 billion. Each share of Clearwire Corporation Class B Voting, together with one Clearwire
Communications LLC Class B Non-voting, is exchangeable for one share of Clearwire Corporation's Class A common stock, a
publicly traded security. In addition to Class B Common Interests, as of December 31, 2010, Sprint holds a note receivable
from Clearwire with a carrying value of $177 million, a fixed interest rate of 12% and a maturity date of December 2015. The
note receivable carrying value as of December 31, 2009 was $175 million. The carrying value of Sprint's Class B Common
Interests, together with the carrying value of the note receivable, are included in the line item "Investments" in Sprint's
consolidated balance sheet. Equity in losses from Clearwire were $1.3 billion, $803 million and $142 million for the years
ended December 31, 2010, 2009 and 2008, respectively. Sprint's losses from its investment in Clearwire consists of Sprint's
share of Clearwire's net loss and other adjustments such as gains or losses associated with the dilution of Sprint's ownership
interest resulting from Clearwire's equity issuances. Equity in losses of Clearwire for 2009 included a pre-tax dilution loss of
$154 million ($96 million after tax), recognized in the first quarter, representing the finalization of ownership percentages
subsequent to the November 2008 formation.
Clearwire's Liquidity
As of September 30, 2010, Clearwire reported available cash and short-term investments of approximately $1.4
billion. Based on Clearwire's projections at that time, Clearwire did not expect its cash and short-term investments to be
sufficient to cover their estimated liquidity needs for the next twelve months. Without additional financing sources, Clearwire
forecasted that their cash and short-term investments would be depleted as early as the middle of 2011. Thus, Clearwire was
required to raise additional capital in the near-term in order to continue operations and reported that it also needs to raise
substantial additional capital over the long-term to fully implement its business plans. The amount of additional capital required
by Clearwire depends on a number of factors, many of which are difficult to predict and outside of its control, and may change
if its current projections prove to be incorrect. As a result of Clearwire's expected continued losses from operations and the
uncertainty about its ability to obtain sufficient additional capital, Clearwire reported that, as of September 30, 2010, there was
substantial doubt about its ability to continue as a going concern.
Table of Contents SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-13