Sprint - Nextel 2012 Annual Report Download - page 136

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Acquisition of Assets from U.S. Cellular
On November 6, 2012, Sprint entered into a definitive agreement with United States Cellular Corporation (U.S. Cellular) to acquire PCS
spectrum and approximately
585,000 customers in parts of Illinois, Indiana, Michigan, Missouri and Ohio, including the Chicago and St. Louis markets,
for
$480 million in cash. Sprint has agreed, in connection with the acquisition, to reimburse U.S. Cellular for certain network shut - down costs in these
markets. These costs are expected to range from
$130 million to $150 million on a net present value basis, but in no event will Sprint's reimbursement
obligation exceed $200 million on an undiscounted basis. The additional spectrum will be used to supplement Sprint's coverage in these areas. Sprint
and U.S. Cellular will enter into transition services agreements as a condition to closing of the acquisition which will outline the terms of services to be
provided by U.S. Cellular during the period after closing and prior to the transfer of the acquired customers to Sprint's network. The transaction is
subject to customary regulatory approvals and is expected to close in mid
- 2013.
Acquisition of Remaining Stake in Clearwire
On December 17, 2012, Sprint entered into a merger agreement with Clearwire Corporation to acquire all of the remaining equity interests in
Clearwire Corporation that Sprint does not currently own for approximately
$2.2 billion in cash, or $2.97 per share (Clearwire Acquisition). In
connection with the Clearwire Acquisition, Clearwire Corporation and Sprint have entered into agreements that provide up to
$800 million of additional
financing for Clearwire in the form of exchangeable notes, which will be exchangeable for Clearwire common stock at
$1.50 per share, subject to certain
conditions and subject to adjustment. Under the financing agreements, Sprint has agreed to purchase $80 million of exchangeable notes per month for
up to ten months beginning in January 2013, with some of the monthly purchases subject to certain funding conditions, including conditions relating
to approval of the Clearwire Acquisition by Clearwire's shareholders and the parties agreeing to a network build out plan. On January 31, 2013 Sprint
and Clearwire entered into an amendment to the financing agreement which extended the date the parties were to agree to a network build out plan
from January 31, 2013 to February 28, 2013. The Clearwire Acquisition is subject to customary regulatory approvals, is contingent on the
consummation of the SoftBank Merger, and is expected to close in mid - 2013.
On February 26, 2013, Sprint and Clearwire amended the exchangeable notes agreement to remove the network build out condition to
Sprint's obligation to provide financing for the last three draws (in August, September and October 2013). Accordingly, Clearwire, at its option, is
eligible for the last three draws, totaling $240 million. In addition, Clearwire provided its first notification to Sprint of its election to draw $80 million,
under the terms of the financing agreements, in March 2013.
The components of investments were as follows:
Marketable equity securities
Investments in marketable equity securities are recognized at fair value and are considered available
- for - sale securities. Accordingly,
unrealized holding gains and losses on these securities are recognized in accumulated other comprehensive loss, net of related income tax. Realized
gains or losses are measured and reclassified from accumulated other comprehensive loss into "Other income (expense), net" in Sprint's consolidated
statement of comprehensive loss based on identifying the specific investments sold or where an other
- than - temporary impairment exists.
F - 15
Note 4.
Investments
December 31,
2012
2011
(in millions)
Marketable equity securities
$
45
$
43
Equity method and other investments
1,008
1,953
$
1,053
$
1,996