Sprint - Nextel 2011 Annual Report Download - page 94

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
We file income tax returns in the U.S. federal jurisdiction and each state jurisdiction which imposes an income tax. We also file income tax returns in a number
of foreign jurisdictions. However, our foreign income tax activity has been immaterial.
The Internal Revenue Service (IRS) is currently conducting an examination of our 2007, 2008 and 2009 consolidated income tax returns. Settlement agreements
were reached with the Appeals division of the IRS for examination issues in dispute for years prior to 2007. The issues were immaterial to our consolidated financial
position and results of operations.
We are involved in multiple state income tax examinations related to various years beginning with 1996, which are in various stages of the examination,
administrative review or appellate process. Based on our current knowledge of the examinations, administrative reviews and appellate processes, we believe it is
reasonably possible a number of our uncertain tax positions may be resolved during the next twelve months which could result in a reduction of up to $85 million in our
unrecognized tax benefits.
Our Network Vision multi-mode network technology is designed to utilize a single base station capable of handling various spectrum bands, including our 800
MHz and 1.9 GHz spectrum as well as spectrum bands owned or accessed by other parties. In June 2011, we entered into a 15-year arrangement with LightSquared LP
and LightSquared Inc. (collectively, “LightSquared”). Under the terms of the arrangement, and in conjunction with our Network Vision deployment, we agreed to deploy
and operate an LTE network capable of utilizing the 1.6 GHz spectrum licensed to or available to LightSquared during the term of the arrangement, a service we refer to
as “spectrum hosting.” The arrangement contains contingencies related to possible interference issues with LightSquared's spectrum, including the right of Sprint to
terminate the arrangement if certain conditions are not met by LightSquared. As of December 31, 2011, the Company had received $310 million of advanced payments
from LightSquared for future services to be performed under the spectrum hosting agreement.
Beginning in December 2011, through a series of amendments, the arrangement was modified to, among other things, extend the date in which Sprint has the
right to terminate the arrangement and suspend Sprint's obligation to incur any further cost or expense related to performance under the original agreement. Under the
amended arrangement, Sprint, for any reason, including but not limited to FCC action or inaction, or no reason at all, may terminate the agreement after March 15, 2012
and before April 30, 2012. If LightSquared secures lender's consent for modifications to the agreement, Sprint's right to terminate will be deferred until June 25, 2012 and
will continue through December 31, 2012. In addition, the parties definitively agreed that approximately $236 million of the total $310 million of advanced payments
made by LightSquared represent payment for incremental costs or obligations incurred by Sprint under the original agreement in support of LightSquared. The parties
agreed that this amount is irrevocably and unconditionally paid and will not be subject to dispute or claim by LightSquared. Accordingly, Sprint will refund up to
approximately $74 million of LightSquared's initial prepayments, of which
F-27
2011 2010
(in millions)
Balance at January 1 $228 $284
Additions based on current year tax positions 4 1
Additions based on prior year tax positions 4 13
Reductions for prior year tax positions (1) (21)
Reductions for settlements (2) (38)
Reductions for lapse of statute of limitations (8) (11)
Balance at December 31 $225 $228
Note 11. Spectrum Hosting