Sprint - Nextel 2011 Annual Report Download - page 84

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Indefinite-Lived Intangible Assets
_
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We hold 1.9 gigahertz (GHz), 800 megahertz (MHz), and 900 MHz FCC licenses authorizing the use of radio frequency spectrum to deploy our wireless
services. We also hold FCC licenses that are not yet placed in service but that we intend to use in accordance with FCC requirements. As long as the Company acts within
the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. We are not aware of any
technology being developed that would render this spectrum obsolete and have concluded that these licenses are indefinite-lived intangible assets. Our Sprint and Boost
Mobile trademarks have also been identified as indefinite-lived intangible assets. During 2011, we conducted our annual assessment of the estimated fair value of
indefinite-lived intangible assets other than goodwill and determined that no adjustment was necessary.
Goodwill
Goodwill represents the excess of consideration paid over the estimated fair value of net tangible and identifiable intangible assets acquired in business
combinations. During the fourth quarter 2009, we acquired Virgin Mobile and iPCS, which resulted in the recognition of $373 million of goodwill. During 2010, Sprint
finalized purchase price allocations associated with these acquisitions.
Goodwill Recoverability Assessment
The carrying value of Sprint's goodwill is included in the Wireless segment, which represents our wireless reporting unit. We estimate the fair value of the
wireless reporting unit using both discounted cash flow and market-based valuation models. If the fair value of the wireless reporting unit exceeds its net book value,
goodwill is not impaired, and no further testing is necessary. If the net book value of our wireless reporting unit exceeds its estimated fair value, we estimate the fair value
of goodwill to determine the amount of impairment loss, if any.
The determination of the estimated fair value of the wireless reporting unit requires significant estimates and assumptions. These estimates and assumptions
primarily include, but are not limited to, transactions within the wireless industry and related control premiums, discount rate, terminal growth rate, operating income
before depreciation and amortization (OIBDA) and capital expenditure forecasts. Due to the inherent uncertainty involved in making those estimates, actual results could
differ from those estimates. We evaluate the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the wireless
reporting unit for reasonableness. During 2011, we conducted our annual assessment of goodwill and determined that no adjustment was necessary.
F-17
Note 6. Intan
g
ible Assets
December 31,
2009 Net
Additions/ (Reductions) December 31,
2010 Net
Additions/ (Reductions) December 31,
2011
(in millions)
FCC licenses $ 19,502 $ 425 $ 19,927 $ 117 $ 20,044
Trademarks 409
—
409
—
409
Goodwill(1) 373 (14) 359
—
359
$ 20,284 $411
$ 20,695 $117
$ 20,812
(1) The net reduction to goodwill of $14 million was a result of purchase price allocation adjustments recognized in the first quarter of 2010 associated with the 2009
acquisitions of Virgin Mobile and iPCS primarily related to deferred tax assets and liabilities.