Sprint - Nextel 2011 Annual Report Download - page 32

Table of Contents
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 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).
To address and reduce net postpaid subscriber losses, we have taken initiatives to strengthen the Sprint brand and 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,
including the iPhone in the fourth quarter of 2011, improving our overall lineup and providing a competitive portfolio for customer selection, as well as competitive rate
plans providing simplicity and value.
The Company has significantly improved net postpaid subscriber results subsequent to the first quarter 2009 as a result of actions taken to improve customer
service, device selection and value-oriented service offerings. In conjunction with Network Vision, the Company continues to focus on the growth of the Sprint platform
while simultaneously targeting retention of Nextel platform customers through competitive offerings on the Sprint platform, which includes Sprint Direct Connect. As a
result of our plans, we expect that customer churn on the Nextel platform, both postpaid and prepaid, will increase as we progress toward the decommissioning of the
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extel platform as well as increased competition for these subscribers. Although the Company continues to experience net losses of Nextel platform postpaid subscribers,
these subscribers generally have a lower ARPU and have been partially offset by net additions of Sprint platform postpaid subscribers which, on average, carry a higher
ARPU.
For the year ended December 31, 2011, net postpaid subscriber losses of 98,000 represent an improvement of 757,000, or 89% compared to the same period
one year ago and net prepaid subscriber additions of 2.5 million represent an improvement of 874,000, or 53% compared to the same period one year ago. Wireless retail
service revenue has begun to grow primarily due to the increased service revenue associated with our prepaid wireless offerings and increased postpaid ARPU due
primarily to the $10 premium data add-on charge associated with smartphones. 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 2012 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 improve net postpaid subscriber
results.
RESULTS OF OPERATIONS
Consolidated segment earnings decreased $561 million, or 10%, in 2011 compared to 2010 and $774 million, or 12%, in 2010 compared to 2009. Consolidated
segment earnings consist of our Wireless and Wireline segments, which are discussed below, and Corporate, other and eliminations.
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Year Ended December 31,
2011 2010 2009
(in millions)
Wireless segment earnings $ 4,267 $ 4,531 $ 5,198
Wireline segment earnings 800 1,090 1,221
Corporate, other and eliminations 5 12 (12)
Consolidated segment earnings 5,072 5,633 6,407
Depreciation and amortization (4,858) (6,248) (7,416)
Other, net (106) 20 (389)
Operating income (loss) 108 (595) (1,398)
Interest expense (1,011) (1,464) (1,450)
Equity in losses of unconsolidated investments, net (1,730) (1,286) (803)
Other (expense) income, net (3) 46 157
Income tax (expense) benefit (254) (166) 1,058
Net loss $ (2,890) $ (3,465) $ (2,436)