Sprint - Nextel 2011 Annual Report Download - page 120

Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
We have entered into lease arrangements related to our network construction and equipment that meet the criteria for capital leases. At December 31, 2011 and
2010, we have recorded capital lease assets with an original cost of $81.2 million and $73.0 million, respectively, within network and base station equipment.
During the third quarter of 2011, as a result of our intent to deploy LTE on our network, we evaluated the remaining useful lives of our network equipment. We
concluded that, because WiMAX related network assets are expected to continue to be in service supporting our customers, no change to the remaining useful lives was
appropriate at this time. We will continue to monitor the estimated useful lives of our network equipment as our plans continue to evolve. Any further adjustments to
those lives would likely result in increased depreciation expense in future periods.
Construction in progress is primarily composed of costs incurred during the process of completing network projects not yet placed in service. In addition to costs
related to completing network projects not yet placed in service, the balance at December 31, 2011 also includes $134.4 million of network and base station equipment not
yet assigned to a project and $15.6 million of costs related to information technology, which we refer to as IT, and other corporate projects.
Charges associated with Property, plant and equipment
We periodically assess assets that have not yet been deployed in our networks, including equipment and cell site development costs, classified as construction in
progress. This assessment includes the provision for differences between recorded amounts and results of physical counts and the provisions for excessive and obsolete
equipment. During 2011, we evaluated the costs included in construction in progress in conjunction with our plan to deploy LTE alongside our existing WiMAX network,
and the shift in management's strategic network plans to focus on areas with high usage concentration. Any projects that no longer fit within these deployment plans were
abandoned and the related costs written down, and any network equipment not required to support these future network deployment plans was written down to expected
salvage value. This assessment resulted in the write-downs of network equipment and cell site development costs which are outlined in the table that follows. In addition,
during the fourth quarter of 2011, we reviewed the remaining costs in construction in progress in conjunction with the November 2011 4G MVNO Amendment, which
resulted in a shift from usage-based payments to a flat rate for unlimited access to our WiMAX network in 2012 and 2013. See Note 17, Related Party Transactions, for
further discussion.
We also periodically assess certain assets associated with our corporate operations that have not yet been placed in service. Any projects which are no longer
expected to be completed are written down to expected fair value. During 2011, certain internally-developed software projects were abandoned.
Additionally, in connection with our savings initiatives, during the year ended December 31, 2011, we identified, evaluated and terminated certain unutilized tower
leases that no longer fit within management's deployment plan, or when early termination was not available under the terms of the lease, we advised our landlords of our
intention not to renew. The costs for projects included in construction in progress related to leases for which we have initiated such terminations were written down. See
N
ote 3, Charges Resulting from Cost Savings Initiatives, for a discussion of the costs associated with lease terminations.
We incurred the following losses associated with PP&E for the years ended December 31, 2011, 2010 and 2009 (in thousands):
(1) Included in Cost of goods and services and network costs on the consolidated statements of operations.
F-53
Year Ended December 31,
2011 2010 2009
Abandonment of network projects no longer meeting strategic network plans $ 397,204 $ 180,001 $ 7,864
Abandonment of network projects associated with terminated leases 233,468
—
—
Abandonment of corporate projects 69,669
—
—
Total loss from abandonment of network and other assets 700,341 180,001 7,864
Charges for disposal and differences between recorded amounts and results of physical counts(1) 56,188 100,110 39,271
Charges for excessive and obsolete equipment(1) 209,912 65,616 13,358
Total losses on property, plant and equipment $ 966,441 $ 345,727 $ 60,493