Sprint - Nextel 2012 Annual Report Download - page 78

Table of Contents
Phase One
Through unrelenting focus on improving the customer experience, strengthening the brand and generating cash, we successfully
completed Phase One in 2011. Since the beginning of our turnaround efforts through the completion of Phase One, we increased net subscriber
additions, total service revenue, customer satisfaction and brand health. Our accomplishments in Phase One continued into 2012 with full year
consolidated operating revenue of $35.3 billion, the highest since 2008, rising postpaid average revenue per subscriber or user (ARPU), and continued
accolades on our brand and customer experience.
Phase Two
As we moved to Phase Two, our 2012 executive compensation program provided strong incentives for executives to remain focused on
improving the customer experience, strengthening the brand, and generating cash, while also concentrating on investment for future growth. During
2012, we made investments in Network Vision and launched 15 4G LTE devices including the iPhone®
5, Apple iPAD mini
® and iPAD® with Retina
display.
2012 STIC Plan
Our STIC plan is our annual cash bonus plan, which is intended to ensure that annual bonuses are tied to the successful achievement of
critical operating and financial objectives that are the leading drivers of sustainable increases in shareholder value. The table below summarizes our
key priorities in 2012, the metrics selected in support of these priorities, and the rationale for why each was chosen by the Compensation Committee.
The Compensation Committee approved the aggregate payout percentage for the 2012 STIC plan at 100.7% of the target award opportunity
for all eligible employees, including our named executive officers. Our STIC plan objectives, targets, and actual results are summarized in the table
below.
In establishing the weighting among the three STIC plan objectives, the Compensation Committee assigned the highest weighting to
Adjusted OIBDA. This was to emphasize and provide incentives to enhance operating performance and cash flow critically necessary for continued
investment in Phase Two of our turnaround.
We underperformed in 2012 on the challenging targets the Compensation Committee set for postpaid churn and total net subscriber
additions. However, a significant portion of our iPhone sales were to new postpaid customers, and we retained 55% of Nextel platform subscribers as
we continue our rapid shut
- down of the Nextel platform in a highly competitive environment. We did not fully deploy the iPad, a highly desirable
device that we believe creates an ability to acquire and retain subscribers, until the fourth quarter of 2012. However, we substantially outperformed our
Adjusted OIBDA target, which included our first full year of iPhone sales.
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Priority
Objective
Rationale
Customer Experience
Postpaid subscriber churn, which is a measure of our
ability to retain our customers who pay for their
wireless service on a contract basis, typically for one
-
or two
- year periods.
Measures the degree to which we retain our most
profitable customers.
Strengthening our Brand
Total Net Additions, which is a measure of the new
wireless customers we gain, net of deactivations.
Measures the degree to which we have attracted new
customers to our brands.
Generating Cash
Adjusted OIBDA, which means Adjusted Operating
Income Before Depreciation and Amortization less
severance, exit costs and other special items.
Measures our ability to generate cash and profit,
which are critical to our ability to invest in our
business and service our debt.
Objective
Weight
Target
Actual Results
Percent Payout
Postpaid Subscriber Churn
30%
1.95%
2.02%
69%
Total Net Additions
30%
4,526,000
(15,000)
0%
Adjusted OIBDA
40%
$4.2 billion
$4.8 billion
200%
Total Payout
100.7%