Sprint - Nextel 2012 Annual Report Download - page 151

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
$25 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 Sprint's
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 contained
contingencies related to possible interference issues with LightSquared's spectrum, including the right of Sprint to terminate the arrangement if certain
conditions were not met by LightSquared. As of December 31, 2011, we had received
$310 million of advanced payments from LightSquared for future
services to be performed under the spectrum hosting arrangement.
On March 16, 2012, because certain conditions were not met by LightSquared, we elected to terminate the arrangement. Because we have
no future performance obligations with respect to the arrangement, we recognized
$236 million of the advanced payments as other operating income
within "Other, net" during 2012. We also refunded $67 million in prepayments LightSquared made to cover costs that were not ultimately incurred by
Sprint and recognized the remaining
$7 million within operating income as finalization of all remaining outstanding items subject to the termination and
unwind provisions of the original arrangement. In addition, during 2012 we impaired approximately
$66 million of capitalized assets that the Company
no longer intends to deploy as a result of the termination of the spectrum hosting arrangement with LightSquared. The net gain of $170 million
recorded in 2012 will be substantially offset in future periods by operating expenses related to non
- cancellable executory contracts with vendors that
the Company entered into in contemplation of providing the spectrum hosting services.
Litigation, Claims and Assessments
In March 2009, a shareholder brought suit, Bennett v. Sprint Nextel Corp., in the U.S. District Court for the District of Kansas alleging that
the Company and three of our former officers violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b
- 5 by failing adequately to
disclose certain alleged operational difficulties subsequent to the Sprint
- Nextel merger, and by purportedly issuing false and misleading statements
regarding the write
- down of goodwill. The plaintiff seeks class action status for purchasers of our common stock from October 26, 2006 to February 27,
2008. On January 6, 2011, the Court denied our motion to dismiss. Subsequently, our motion to certify the January 6, 2011 order for an interlocutory
appeal was denied, and discovery has begun. The plaintiff moved to certify a class of bondholders as well as owners of common stock, and we have
opposed that motion. We believe the complaint is without merit and intend to defend the matter vigorously. We do not expect the resolution of this
matter to have a material adverse effect on our financial position or results of operations.
In addition, five related shareholder derivative suits were filed against the Company and certain of our present and/or former officers and
directors. The first, Murphy v. Forsee, was filed in state court in Kansas on April 8, 2009, was removed to federal court, and was stayed by the court
pending resolution of the motion to dismiss the Bennett case; the second, Randolph v. Forsee, was filed on July 15, 2010 in state court in Kansas, was
removed to federal court, and was remanded back to state court; the third, Ross
- Williams v. Bennett, et al., was filed in state court in Kansas on
February 1, 2011; the fourth, Price v. Forsee, et al., was filed in state court in Kansas on April 15, 2011; and the fifth, Hartleib v. Forsee, et. al., was
filed in federal court in Kansas on July 14, 2011. These cases
F - 30
Note 12.
Spectrum Hosting
Note 13.
Commitments and Contingencies