Sprint - Nextel 2012 Annual Report Download - page 36

Table of Contents
OVERVIEW
Business Strategies and Key Priorities
Sprint is a communications company offering a comprehensive range of wireless and wireline communications products and services that
are designed to meet the needs of individual consumers, businesses, government subscribers and resellers. The communications industry has been
and will continue to be highly competitive on the basis of the quality and types of services and devices offered, as well as price. We are currently
undergoing a significant multi
- year program, Network Vision, to upgrade our existing wireless communication network, including the decommissioning
of our Nextel platform for which we expect to re
- purpose valuable spectrum resources that currently support that network (see “Overview - Network
Vision”
). To support our business strategy and expected capital requirements associated with Network Vision, as well as take advantage of a favorable
interest rate environment to refinance a portion of existing debt, we raised debt financing of approximately $8.9 billion during 2012 in addition to
executing a $1.0 billion secured equipment credit facility with remaining availability of up to
$704 million as of December 31, 2012 (see “Liquidity and
Capital Resources”
).
Wireless segment earnings represented approximately
86% of our total consolidated segment earnings as of December 31, 2012 . Within the
Wireless segment, postpaid wireless voice and data services represent the most significant contributors to earnings and are driven by the number of
postpaid subscribers to our services, as well as the average revenue per user (ARPU).
The following table shows our trend of end of period postpaid subscribers by platform for the past five years.
In the first quarter of 2012, we formalized our plans to decommission the Nextel platform and ceased using approximately one
- third, or 9,600,
of the Nextel platform cell sites in the middle of 2012 as part of Network Vision. We expect the remainder of the Nextel platform, or approximately 20,000
sites, to be shut
- down on June 30, 2013. During the Network Vision modernization program, as we execute on the planned shut - down of the Nextel
platform, we expect continued losses on the Nextel platform; however, we intend to achieve subscriber growth on the Sprint platform by focusing on
the addition of profitable subscribers as well as the recapture of subscribers from the Nextel platform. Despite the overall reduction in postpaid
subscribers, primarily as a result of our action to shut
- down the Nextel platform, we experienced growth in net operating revenue during the twelve
month period ended 2012 as compared to 2011, related primarily to the continued adoption of smartphones and the premium data add
- on charge.
During 2012, we achieved approximately
1.5 million net postpaid subscriber additions on the Sprint platform, of which substantially all represented
postpaid subscribers that deactivated service on the Nextel platform, while the Nextel postpaid platform incurred approximately
2.7 million net postpaid
subscriber losses.
During the year ended
December 31, 2012 , we achieved an annual recapture rate of approximately 55% of the Nextel platform postpaid
subscribers, based on net postpaid subscribers that terminated service on the Nextel platform during that same period and activated service on the
Sprint platform. In addition, recaptured Nextel platform subscribers, on average, carry a slightly higher average revenue per subscriber on the Sprint
platform as compared to the Nextel platform as a result of smartphone adoption by such subscribers. At
December 31, 2012 , there were approximately
2.1 million Nextel platform subscribers, of which approximately 1.6 million and 454,000 represent postpaid and prepaid, respectively. More than 80% of
the remaining
1.6 million Nextel platform postpaid subscribers represent business accounts. Although we will continue to pursue the recapture of
these subscribers, we expect the level of competition for these subscribers as well as the timing of business customer decisions to cause the rate of
recapture to decline to 30
- 40% during the six - month period ended June 30, 2013. Despite the continued reduction of Nextel platform subscribers as we
shut
- down the Nextel platform in 2013, we expect consolidated net operating revenue to benefit from Sprint platform growth in 2013. Prospectively, our
efforts are expected to continue
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Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
As of December 31,
2012
2011
2010
2009
2008
(in thousands)
Sprint platform
30,245
28,729
27,446
26.712
27,068
Nextel platform
1,632
4,285
5,666
7.255
9,610
Total end of period postpaid subscribers
31,877
33,014
33,112
33.967
36,678