Sprint - Nextel 2012 Annual Report Download - page 38

Table of Contents
On December 11, 2012, Sprint purchased the equity holdings of one of Clearwire's equityholders, Eagle River Holdings, LLC (Eagle River)
comprised of
30.9 million shares of Class A Common Stock and 2.7 million shares of Class B Interests, for a total purchase price of $100 million in cash.
In addition, on December 17, 2012, Sprint entered into a merger agreement with Clearwire Corporation to acquire all of the remaining equity
interests in Clearwire Corporation that we do not currently own for approximately $2.2 billion in cash, or $2.97 per share (Clearwire Acquisition). In
connection with the Clearwire Acquisition, Clearwire Corporation and Sprint have entered into agreements that provide up to $800 million of additional
financing for Clearwire in the form of exchangeable notes, which will be exchangeable for Clearwire common stock at $1.50 per share, subject to certain
conditions and subject to adjustment. Under the financing agreements, Sprint has agreed to purchase $80 million of exchangeable notes per month for
up to ten months beginning in January 2013, with some of the monthly purchases subject to certain funding conditions, including conditions relating
to approval of the Clearwire Acquisition by Clearwire's shareholders and the parties agreeing to a network build out plan. On January 31 2013 Sprint
and Clearwire entered into an amendment to the financing agreement which extended the date the parties were to agree to a network build out plan
from January 31, 2013 to February 28, 2013.
On February 26, 2013, Sprint and Clearwire amended the exchangeable notes agreement to remove the network build out condition to
Sprint's obligation to provide financing for the last three draws (in August, September and October 2013). Accordingly, Clearwire, at its option, is
eligible for the last three draws, totaling $240 million. In addition, Clearwire provided its first notification to Sprint of its election to draw $80 million,
under the terms of the financing agreements, in March 2013.
Network Vision
Network Vision will encompass approximately 38,000 cell sites. We had approximately 6,000 sites on air and had launched LTE in 49 markets
as of December 31, 2012. Further deployments of Network Vision technology, including LTE market launches and enhancements of our 3G technology,
are expected to continue through the middle of 2014. We expect Network Vision to bring financial benefit to the Company through migration to one
common network, which is expected to reduce network maintenance and operating costs through capital efficiencies, reduced energy costs, lower
roaming expenses, backhaul savings, and reduction in total cell sites. Our expectation of financial savings is affected by multiple variables, including
our expectation of the timeliness of deployment across our existing network footprint. We revised our plan to bring 12,000 multi
- mode base stations
on
- air by the end of 2012 to the first quarter of 2013. The deployment of multi - mode technology is managed by Sprint but dependent upon three
primary OEMs, each of which has responsibility for a geographical territory across the United States. During the second half of 2012, we experienced
delays with vendor execution, backhaul connectivity delays, shortages in equipment such as fiber cable and antennas, as well as other regulatory and
environmental issues. However, we expect that we will recover from these delays and we are still forecasting to have the majority of the sites on
- air by
the end of 2013 with expected completion of Network Vision deployment by the middle of 2014.
The deployment related to changes in technology have resulted in incremental charges during the period of implementation of our multi -
mode technology and Nextel platform decommissioning including, but not limited to, an increase in depreciation associated with existing assets related
to both the Nextel and Sprint platforms due to changes in our estimates of the remaining useful lives of long - lived assets, changes in the expected
timing and amount of asset retirement obligations, and lease exit and other contract termination costs. In the first quarter of 2012, we formalized our
plans to take off
- air roughly one - third, or 9,600 cell sites, of our total Nextel platform by the middle of 2012 with the remaining sites to be taken off - air
on June 30, 2013. As a result, in the first quarter 2012, we revised our estimates to shorten the expected useful lives of Nextel platform assets through
the expected benefit period of the underlying assets through 2013 and also revised the expected timing and amount of our asset retirement obligations.
During the second quarter 2012, as a result of progress in taking Nextel platform sites off
- air and progress toward notifying and transitioning
customers off the Nextel platform, we further reduced our estimated benefit period for the remaining Nextel platform assets through the middle of 2013
resulting in incremental depreciation expense. The amounts reflected as depreciation expense are dependent upon the expected useful lives of assets,
which includes our expectation of the timing of assets to be phased out of service, and could result in further revision during the decommissioning
period. The remaining net book value of Nextel platform assets as of
December 31, 2012 was approximately $1.0 billion, which we expect to recognize as
depreciation expense on an approximately ratable basis through June 30, 2013. We took approximately 9,600 cell sites off - air in 2012 which
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