Sprint - Nextel 2011 Annual Report Download - page 37

Table of Contents
Service Revenue
Our Wireless segment generates revenues from the sale of wireless services, the sale of wireless devices and accessories and the sale of wholesale and other
services. Service revenue consists of fixed monthly recurring charges, variable usage charges and miscellaneous fees such as activation fees, directory assistance,
roaming, equipment protection, late payment and early termination charges and certain regulatory related fees, net of service credits. The ability of our Wireless segment
to generate service revenues is primarily a function of:
Retail comprises those subscribers to whom Sprint directly provides wireless services, whether those services are provided on a postpaid or a prepaid basis.
Retail service revenue increased $1.5 billion, or 6%, in 2011 as compared to 2010 and increased $391 million, or 2% in 2010 as compared to 2009. The increase in retail
service revenue in 2011 as compared to 2010 reflects an increase in postpaid service revenue related to our $10 premium data add-on charge required for all smartphones
and greater popularity of unlimited and bundled plans, combined with other fee increases including an increase in our handset protection plan. The increase was also
driven by attracting more subscribers to our Boost and Virgin Mobile prepaid brands who are choosing higher rate plans to take advantage of international offerings as
well as the increased availability of smartphones and increased subscribers from new market launches for our Assurance Wireless brand. The majority of the increase in
2010 as compared to 2009 was primarily driven by attracting subscribers to the Company's National Boost Monthly Unlimited prepaid plan in addition to service revenue
related to the subscribers acquired through our fourth quarter 2009 acquisitions of Virgin Mobile and iPCS. This increase in retail service revenue was partially offset by a
decrease in postpaid service revenue driven by a reduction in the Company's average number of postpaid subscribers of approximately 1.4 million, or 4%, in 2010 as
compared to 2009.
Wholesale and affiliates are those subscribers who are served through 3G MVNO and affiliate relationships and other arrangements through which wireless
services are sold by Sprint to other companies that resell those services to subscribers. Wholesale, affiliate and other revenues increased $44 million, or 20%, for 2011 as
compared to 2010, and decreased $329 million, or 60%, for 2010 as compared to 2009. The majority of the increase in 2011 as compared to 2010 was primarily a result of
growth in our 3G MVNO relationships. Specifically, growth in subscribers on the Lifeline program offered through our MVNO's reselling prepaid services, which is
similar to our Assurance Wireless offering, contributed to revenue growth. The majority of the decrease in 2010 as compared to 2009 was due to the transfer of 5.4 million
subscribers from wholesale and affiliates into postpaid and prepaid classifications as a result of the fourth quarter 2009 acquisitions of Virgin Mobile and iPCS. The
remaining decline in 2010 as compared to 2009 was primarily due to losses from two of our large MVNOs throughout 2009 in addition to lower revenues received from
services provided through our machine-to-machine initiative. Approximately 29% of our wholesale and affiliate subscribers represent a growing number of connected
devices. These devices generate revenue from usage which varies depending on the solution being utilized. Average revenue per connected device is generally
significantly lower than revenue from other wholesale and affiliate subscribers; however, the cost to service these customers is also lower resulting in a higher profit
margin as a percent of revenue.
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• revenue generated from each subscriber, which in turn is a function of the types and amount of services utilized by each subscriber and the rates charged
for those services; and
• the number of subscribers that we serve, which in turn is a function of our ability to retain existing and acquire new subscribers.