Sprint - Nextel 2012 Annual Report Download - page 25

Table of Contents
litigation that could cause our revenue to be reduced or our expenses to be increased resulting in a material adverse effect on our results of operations.
If Sprint is unable to improve Sprint's results of operations, it faces the possibility of charges for impairments of long
- lived assets. Further,
Sprint's future operating results will be impacted by Sprint's share of Clearwire's net loss as well as the potential Clearwire Acquisition, which
will likely negatively affect Sprint's results of operations for a period of time subsequent to the Clearwire Acquisition. The carrying value of
Sprint's current investment in Clearwire may be subject to further impairment if the Clearwire Acquisition does not close.
Sprint reviews its long
- lived assets for impairment whenever changes in circumstances indicate that the carrying amount may not be
recoverable. If Sprint continues to have operational challenges, including obtaining and retaining subscribers, Sprint's future cash flows may not be
sufficient to recover the carrying value of Sprint's long
- lived assets, and Sprint could record asset impairments that are material to Sprint's
consolidated results of operations and financial condition. If Sprint continues to have challenges retaining subscribers and as it assesses the
deployment of Network Vision, management may conclude, in future periods, that certain equipment assets will never be either deployed or
redeployed, in which case additional cash and/or non
- cash charges that could be material to Sprint's consolidated financial statements would be
recognized.
Sprint accounts for Sprint's current investment in Clearwire using the equity method of accounting and, as a result, it records its share of
Clearwire's net income or net loss, which could adversely affect Sprint's consolidated results of operations. Clearwire reported that it will need
substantial additional capital over the intermediate and long
- term. Clearwire's ability, however, to raise sufficient additional capital on acceptable terms,
or at all, will remain uncertain if the proposed Clearwire Acquisition does not close. In addition, Clearwire reported that if it fails to obtain additional
capital, its business prospects, financial condition and results of operations will likely be materially and adversely affected, and it will be forced to
consider all available alternatives. Declines in the estimated fair value of Clearwire resulting from potential declines in its stock price as a result of
failure to close the Clearwire Acquisition may require Sprint to reevaluate the decline in relation to the carrying value of its current investment in
Clearwire. A conclusion by Sprint that additional declines in the value of Clearwire are other than temporary could result in an additional impairment,
which could be material.
Each of Sprint and Clearwire has entered into agreements with unrelated parties for certain business operations. Any difficulties experienced by
Sprint or, to the extent the Clearwire Acquisition is consummated, Clearwire in these arrangements could result in additional expense, loss of
subscribers and revenue, interruption of Sprint's services or a delay in the roll
- out of new technology.
Sprint has entered into agreements with unrelated parties for the day
- to - day execution of services, provisioning and maintenance for
Sprint's wireless and wireline networks, for the implementation of Network Vision, and for the development and maintenance of certain software
systems necessary for the operation of Sprint's business. Clearwire has also entered into similar arrangements relating to its wireless networks. Sprint
also has agreements with unrelated parties to provide customer service and related support to its wireless subscribers and outsourced aspects of
Sprint's wireline network and back office functions to unrelated parties. In addition, Sprint has sublease agreements with unrelated parties for space on
communications towers. As a result, Sprint must rely on unrelated parties to perform certain of its operations and, in certain circumstances, interface
with Sprint's subscribers. If these unrelated parties were unable to perform to Sprint's or, to the extent the Clearwire Acquisition is consummated,
Clearwire's requirements, Sprint would have to pursue alternative strategies to provide these services and that could result in delays, interruptions,
additional expenses and loss of subscribers.
The products and services utilized by Sprint and its suppliers and service providers may infringe on intellectual property rights owned by others.
Some of Sprint's products and services use intellectual property that Sprint owns. Sprint also purchases products from suppliers, including
device suppliers, and outsources services to service providers, including billing and customer care functions, that incorporate or utilize intellectual
property. Sprint and some of its suppliers and service providers have received, and may receive in the future, assertions and claims from third parties
that the products or software utilized by Sprint or its suppliers and service providers infringe on the patents or other intellectual property rights of
these third parties. These claims could require Sprint or an infringing supplier or service provider to cease certain activities or to cease selling the
relevant products and services. These claims can be time
- consuming and costly to defend, and divert management resources. If these claims are
successful, Sprint could
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