Sprint - Nextel 2012 Annual Report Download - page 176

Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
customers. USF recorded to revenue for the years ended December 31, 2012, 2011 and 2010 were
$2.8 million , $3.9 million and $2.7 million , respectively.
For 2012, substantially all of our wholesale revenues were derived from our agreements with Sprint. In November 2011, we entered into the
November 2011 4G MVNO Amendment. As a result, the minimum payments under the previous amendment to the 4G MVNO agreement entered into
with Sprint in April 2011 were replaced with the provisions of the November 2011 4G MVNO Amendment. Under the November 2011 4G MVNO
Amendment, Sprint is paying us
$925.9 million for unlimited 4G mobile WiMAX services for resale to its retail subscribers in 2012 and 2013,
approximately two
- thirds of which was paid for service provided in 2012, and the remainder will be paid for service provided in 2013. Of the $925.9
million , $175.9 million will be paid as an offset to principal and interest due under a $150.0 million promissory note (see Note 17, Related Party
Transactions) issued by us to Sprint. Of the amount due,
$900.0 million will be recognized on a straight - line basis over 2012 and 2013 and the remaining
$25.9 million will be recorded as an offset to the interest cost associated with the promissory note. As part of the November 2011 4G MVNO
Amendment, we also agreed to: the elimination of device minimum fees after 2011; and usage based pricing for WiMAX services after 2013 and for LTE
service beginning in 2012.
In 2011, revenues from wholesale subscribers were billed one month in arrears and were generally recognized as they are earned, based on terms
defined in our commercial agreements with our wholesale partners. For 2011, substantially all of our wholesale revenues were derived from our
agreement with Sprint. Under that agreement, revenues were earned as Sprint utilized our network, with usage
- based pricing that included volume
discounts.
Advertising Costs
—Advertising costs are expensed as incurred or the first time the advertising occurs. Advertising expense was $69.7 million ,
$76.4 million and $213.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.
Net Loss per Share
— Basic net loss per Class A common share is computed by dividing Net loss attributable to Clearwire Corporation by the
weighted - average number of Class A Common Stock outstanding during the period. Diluted net loss per Class A common share is computed by
dividing Net loss attributable to Clearwire Corporation by the weighted - average number of Class A Common Stock and dilutive Class A Common
Stock equivalents outstanding during the period. Class A Common Stock equivalents generally consist of the Class A Common Stock issuable upon
the exercise of outstanding stock options, warrants and restricted stock using the treasury stock method. The effects of potentially dilutive Class A
Common Stock equivalents are excluded from the calculation of Diluted net loss per Class A common share if their effect is antidilutive. We have two
classes of common stock, Class A and Class B. The potential exchange of Clearwire Communications LLC Class B common interests, which we refer to
as Class B Common Interests, together with Class B Common Stock, for Class A Common Stock may have a dilutive effect due to certain tax effects. On
an “if converted” basis, shares issuable upon the conversion of the exchangeable notes may also have a dilutive effect. See Note 16, Net Loss Per
Share, for further information.
Operating Leases
— We have operating leases for spectrum licenses, towers and certain facilities, and equipment for use in our operations.
Certain of our spectrum licenses are leased from third
- party holders of Educational Broadband Service, which we refer to as EBS, spectrum licenses
granted by the FCC. EBS licenses authorize the provision of certain communications services on the EBS channels in certain markets throughout the
United States. We account for these spectrum leases as executory contracts which are similar to operating leases. Signed leases which have unmet
conditions required to become effective are not amortized until such conditions are met and are included in spectrum licenses in the accompanying
consolidated balance sheets, if such leases require upfront payments. For leases containing scheduled rent escalation clauses, we record minimum
rental payments on a straight - line basis over the term of the lease, including the expected renewal periods as appropriate. For leases containing tenant
improvement allowances and rent incentives, we record deferred rent, which is a liability, and that deferred rent is amortized over the term of the lease,
including the expected renewal periods as appropriate, as a reduction to rent expense.
We periodically terminate unutilized tower leases, or when early termination is not available under the terms of the lease, we advise our landlords
of our intention not to renew. At the time we notify our landlords of our intention not to renew, we recognize a cease
- to - use tower lease liability based
on the remaining lease rentals adjusted for any prepaid or deferred rent recognized under the lease, reduced by estimated sublease rentals, if any, that
could be reasonably obtained for the property. See Note 3, Charges Related to Cost Savings Initiatives, for further discussion.
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