Sprint - Nextel 2012 Annual Report Download - page 210

Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
messaging services, location
- based systems and media server services. The Sprint Entities will provide a service level agreement that is consistent
with the service levels provided to similarly situated subscribers. Pricing is specified in separate product attachments for each type of service; in
general, the pricing is based on the mid
- point between fair market value of the service and the Sprint Entities ’ fully allocated cost for providing the
service. The term of the Master Agreement for Network Services is five years, but we will have the right to extend the term for an additional five years .
Additionally, in accordance with the Master Agreement for Network Services with the Sprint Entities, we assumed certain agreements for backhaul
services that contain commitments that extend up to five years
.
Ericsson, Inc —
Ericsson, provides network deployment services to us, including site acquisition and construction management services. In
addition, during the second quarter of 2011, we entered into a managed services agreement with Ericsson to operate, maintain and support our
network. Dr. Hossein Eslambolchi, who currently sits on our board of directors, had a consulting agreement with Ericsson. As part of his consulting
agreement, Dr. Eslambolchi received payments for his services from Ericsson. He has not received any compensation directly from us related to his
relationship with Ericsson. For the years ended December 31, 2012 and 2011, we paid $76.9 million and $41.1 million, respectively to Ericsson for
network management services.
IT Master Services Agreement — In November 2008, we entered into an IT master services agreement with the Sprint Entities pursuant to which
the Sprint Entities and we established the contractual framework and procedures for us to purchase IT application services from the Sprint Entities.
The term of the IT master services agreement is five years, but we have the right to extend the term for an additional five years
.
Intel Market Development Agreement — We entered into a market development agreement with Intel, which we refer to as the Intel Market
Development Agreement, pursuant to which we committed to deploy mobile WiMAX on our networks and to promote the use of certain notebook
computers and mobile Internet devices on our networks, and Intel would develop, market, sell and support WiMAX embedded chipsets for use in
certain notebook computers and mobile Internet devices that may be used on our networks. The Intel Market Development Agreement will last for a
term of seven years from the date of the agreement, with Intel having the option to renew the agreement for successive one year terms up to a
maximum of 13 additional years provided that Intel meets certain requirements.
As a result of a strategic decision to focus investment in the United States market, during the second quarter of 2011, we committed to sell our
operations in Belgium, Germany and Spain. These businesses comprised substantially all of the remaining operations previously reported in our
International segment. Associated results of operations and financial position are separately reported as discontinued operations for all periods
presented. Results of operations and financial position presented for periods prior to the second quarter of 2011 include other businesses that were
reported in our International segment. The sale of our businesses in Ireland, Poland, and Romania were individually immaterial for separate disclosure
in prior periods.
During the year ended December 31, 2012, we completed the sale of the operations in Germany, Belgium and Spain for total expected proceeds of
approximately $18.9 million. We have received approximately half of the expected proceeds and expect to receive the remainder by March 2013. In
connection, with the Belgium sale transaction, we have also extended a loan of approximately
$0.9 million to the purchaser and obtained an option to
utilize the proceeds from repayment of the loan to obtain a 10% equity interest in the purchaser at the maturity of the loan in April 2019. We recognized
a gain on the sale of these operations of approximately $22.3 million, net of tax benefits of $5.1 million and the reclassification of cumulative translation
adjustments of $8.7 million, in Net loss from discontinued operations.
During the third quarter of 2012, we made an insolvency filing with respect to our operations in Spain followed by its disposition in a sale. As a
result, certain intercompany loans related to our international operations were considered to be uncollectible for federal income tax purposes and, as a
result, there was an increase to the deferred tax liability of our discontinued operations of approximately $167.2 million along with a corresponding
deferred tax expense for our discontinued operations. See Note 9, Income taxes for further discussion.
F - 88
18.
Discontinued Operations