Sprint - Nextel 2012 Annual Report Download - page 57

Table of Contents
As of the date the Merger Agreement was entered into, approximately $8.8 billion of our senior notes and guaranteed notes provided
holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in our indentures and supplemental
indentures governing applicable notes) occurred, which included both a change of control and a ratings decline of the applicable notes by each of
Moody's Investor Services and Standard & Poor's Rating Services. On November 20, 2012, Sprint announced that it had obtained the necessary
consents to amend the applicable provisions of the outstanding indentures such that the SoftBank Merger would not constitute a change of control
and, as a result, indebtedness outstanding under Sprint's applicable indentures will not become payable by reason of completion of the SoftBank
Merger.
Acquisition of Assets from U.S. Cellular
On November 6, 2012, Sprint entered into a definitive agreement with U.S. Cellular to acquire PCS spectrum and approximately
585,000
customers in parts of Illinois, Indiana, Michigan, Missouri and Ohio, including the Chicago and St. Louis markets, for
$480 million in cash. Sprint has
agreed, in connection with the acquisition, to reimburse U.S. Cellular for certain network shut
- down costs in these markets. These costs are expected
to range from $130 million to $150 million on a net present value basis, but in no event will Sprint's reimbursement obligation exceed $200 million on an
undiscounted basis. The additional spectrum will be used to supplement Sprint's coverage in these areas. Sprint and U.S. Cellular will enter into
transition services agreements as a condition to closing of the acquisition which will outline the terms of services to be provided by U.S. Cellular
during the period after closing and prior to the transfer of the acquired customers to Sprint's network. The transaction is subject to customary
regulatory approvals and is expected to close in mid
- 2013.
Clearwire
In January 2012, Clearwire issued a $150 million note receivable to us with a stated interest rate of 11.5% as a result of the additional
investment provided to Clearwire through our amended agreement in the fourth quarter 2011. The note receivable matures in two installments of $75
million plus accrued interest in January 2013 and in January 2014. Sprint, at its sole discretion, can choose to offset any amounts payable by Clearwire
under this promissory note against amounts owed by Sprint under the MVNO agreement, and this action was taken for the installment due in January
2013.
On December 17, 2012, Sprint entered into a merger agreement with Clearwire Corporation to acquire all of the remaining equity interests of
Clearwire Corporation that Sprint does 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. The Clearwire Acquisition is subject to customary regulatory approvals, is contingent on the
consummation of the SoftBank Merger, and is expected to close in mid
- 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.
The Clearwire Acquisition does not accelerate any of the stated maturity dates of Clearwire's debt; however, holders of Clearwire's
Exchangeable Notes will have the right to require Clearwire to repurchase all of the Exchangeable Notes at an amount equal to 100% of the principal
amount, plus any unpaid accrued interest at the repurchase date. If all holders required Clearwire to repurchase the Exchangeable Notes, the total
principal payment would be approximately $629 million.
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