Sprint - Nextel 2011 Annual Report Download - page 44

Table of Contents
market prices for services provided by our Wireline segment to our Wireless segment. This decline in wireline segment earnings related to intercompany pricing will not
affect our consolidated results of operations as our Wireless segment will benefit from an equivalent reduction in cost of service.
The following table provides an overview of the results of operations of our Wireline segment for the years ended December 31, 2011, 2010 and 2009.
Wireline Revenue
Voice Revenues
Voice revenues decreased $334 million, or 15%, in 2011 as compared to 2010 and $314 million, or 12%, in 2010 as compared to 2009. The 2011 decrease was
primarily driven by overall price declines of which $115 million was related to the decline in prices for the sale of services to our Wireless segment as well as volume
declines due to customer churn. The 2010 decrease was primarily driven by volume declines due to customer churn as well as overall price declines. Voice revenues
generated from the sale of services to our Wireless segment represented 34% of total voice revenues in 2011 as compared to 33% in 2010 and 31% in 2009.
Data Revenues
Data revenues reflect sales of data services, including ATM, frame relay and managed network services. Data revenues decreased $59 million, or 11%, in 2011
as compared to 2010 and $143 million, or 22%, in 2010 as compared to 2009 as a result of customer churn driven by the focus to no longer provide frame relay and ATM
services in each of those periods. Data revenues generated from the provision of services to the Wireless segment represented 35% of total data revenue in 2011 as
compared to 27% in 2010 and 19% in 2009.
Internet Revenues
Internet revenues reflect sales of IP-based data services, including MPLS, VoIP and SIP. Internet revenues decreased $297 million, or 14%, in 2011 from 2010
and $118 million, or 5%, in 2010 from 2009. Certain MSO's have decided to in-source their digital voice products resulting in a $181 million decrease in 2011 as
compared to 2010. In addition, Internet revenues generated from the sale of services to our Wireless segment declined by $94 million due to a decline in prices. The 2010
decrease was due to a decline in new IP customers with lower market rates as a result of increased competition. Internet revenues generated from the provision of services
to the Wireless segment represented 8% of total Internet revenues in 2011 as compared to 10% in 2010 and 11% in 2009.
Other Revenues
Other revenues, which primarily consist of sales of customer premises equipment, decreased $24 million, or 25% in 2011 as compared to 2010 and $14
million, or 13%, in 2010 as compared to 2009 as a result of fewer projects in 2011 and 2010.
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Year Ended December 31,
Wireline Earnings 2011 2010 2009
(in millions)
Voice $ 1,915 $ 2,249 $ 2,563
Data 460 519 662
Internet 1,878 2,175 2,293
Other 73 97 111
Total net service revenue 4,326 5,040 5,629
Cost of services and products (3,005) (3,319) (3,663)
Service gross margin 1,321 1,721 1,966
Service gross margin percentage 31% 34% 35%
Selling, general and administrative expense (521) (631) (745)
Wireline segment earnings $800 $ 1,090 $ 1,221