Sprint - Nextel 2011 Annual Report Download - page 35

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will be applied towards LTE usage over the remaining term of the contract. In addition, the agreements provided improved terms and competitive pricing for re-
wholesaling of WiMAX services by Sprint beginning in 2012. Lastly, as part of the agreements, on January 2, 2012, Sprint provided $150 million to Clearwire in
exchange for a promissory note with a stated interest rate of 11.5% that matures in two installments of $75 million plus accrued interest in January 2013 and in January
2014. Sprint, at its sole discretion, can choose to offset any amounts payable by Clearwire under this promissory note against amounts owed by Sprint under the MVNO
agreement.
Other (expense) income, net
The following table provides additional information of items included in “Other (expense) income, net” for each of the three years ended December 31, 2011.
Interest income remained relatively stable for each of the periods presented. Realized loss from investments was consistent in 2011, as compared to 2010, and
decreased $26 million, or 90%, in 2010 as compared to 2009 primarily due to fewer sales of marketable securities. As a result of the acquisition of Virgin Mobile, a non-
cash gain of $151 million ($92 million after tax) was recognized in the fourth quarter 2009 related to the estimated fair value over net carrying value of our previously
held non-controlling interest in Virgin Mobile. The loss on early retirement of debt in 2011 was due to the redemption of all of our outstanding $2.0 billion Sprint Capital
Corporation 8.375% senior notes due March 2012.
Income Tax (Expense) Benefit
The consolidated effective tax rate was an expense of approximately 10% and 5% in 2011 and 2010, respectively, and a benefit of approximately 30% in 2009.
The income tax expense for 2011 and 2010 and the benefit for 2009 include a $1.2 billion, $1.4 billion, and $281 million net increase to the valuation allowance for
federal and state deferred tax assets primarily related to net operating loss carryforwards generated during the respective periods. The 2011 increase to the valuation
allowance was also inclusive of $21 million associated with federal income tax effects of recently enacted changes in corporate state income tax laws, and resulted in a
total charge to income tax expense of $59 million. We do not expect to record significant tax benefits on future net operating losses until our circumstances justify the
recognition of such benefits. Additional information related to items impacting the effective tax rates can be found in the Notes to the Consolidated Financial Statements.
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Year Ended December 31,
2011 2010 2009
(in millions)
Interest income $36 $35 $34
Realized loss from investments (6) (3) (29)
Gain on previously held non-controlling interest in Virgin Mobile
—
—
151
Loss on early retirement of debt (33)
—
—
Other
—
14 1
Total $(3) $46 $ 157