Sprint - Nextel 2013 Annual Report Download - page 158

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
million minimum for the letter of credit and allow further reductions based on quarterly estimates of remaining obligations. This Request for Declaratory Ruling is
pending before the FCC.
Future Minimum Commitments
As of
December 31, 2013 , the minimum estimated amounts due under operating leases, spectrum leases and service credits, and purchase orders and
other commitments were as follows:
Operating Leases
We lease various equipment, office facilities, retail outlets and kiosks, switching facilities and cell sites under operating leases. The non
- cancelable
portion of these leases generally ranges from monthly up to
15 years. These leases, with few exceptions, provide for automatic renewal options and escalations
that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense
calculated on a straight
- line basis over the lease term. Our lease term for most leases includes the initial non - cancelable term plus at least one renewal period, if
the non
- cancelable term is less than ten years, as the exercise of the related renewal option or options is reasonably assured. Our cell site leases generally
provide for an initial non
- cancelable term of five to twelve years with up to 5 renewal options for five years each.
During 2011 and 2012, we renegotiated cell site leases in connection with our network modernization and the shutdown of the Nextel platform. Our
rental commitments for operating leases, including lease renewals that are reasonably assured, consisted mainly of leases for cell and switch sites, real estate,
information technology and network equipment and office space. Total rental expense was
$1.3 billion for the Successor year ended 2013 , and $2.0 billion , and
$1.9 billion for the Predecessor years ended in 2012 and 2011 , respectively. Rental expense for the Predecessor 191 - day period ended July 10, 2013 was $1.0
billion . Total rent expense increased in 2012 as compared to 2011 primarily as a result of rent leveling charges associated with renegotiated cell site leases in 2011
and 2012.
Spectrum Leases and Service Credits
Certain of the spectrum leases provide for minimum lease payments, additional charges and escalation clauses. Leased spectrum agreements have
terms of up to
30 years and the weighted average remaining lease term at December 31, 2013 was approximately 23 years, including renewal terms. We expect that
all renewal periods in our spectrum leases will be renewed by us.
We also have commitments to provide services to certain lessors in launched markets, and to reimburse lessors for certain capital equipment and
third
- party service expenditures, over the term of the lease. We accrue a monthly obligation for the services and equipment based on the total estimated
available service credits divided by the term of the lease. The obligation is reduced as actual invoices are presented and paid to the lessors. During the
Successor period ended
December 31, 2013 we satisfied $1 million related to these commitments. The maximum remaining commitment at December 31, 2013 is
$100 million and is expected to be incurred over the term of the related lease agreements, which generally range from 15 to 30 years.
Purchase Orders and Other Commitments
We are a party to other commitments, which includes, among other things, service, spectrum, network equipment, devices and other executory
contracts in connection with conducting our business. Amounts actually paid under some of these agreements will likely be higher due to variable components
of these agreements. The more significant variable components that determine the ultimate obligation owed include such items as hours contracted, subscribers
and other factors. In addition, we are a party to various arrangements that are conditional in
F - 40
Total
2014
2015
2016
2017
2018
2019 and thereafter
(in millions)
Operating leases
16,651
2,250
1,989
1,893
1,819
1,776
6,924
Spectrum leases and service credits
6,855
189
190
196
214
212
5,854
Purchase orders and other commitments
22,164
11,954
5,679
2,360
765
591
815
Total
$
45,670
$
14,393
$
7,858
$
4,449
$
2,798
$
2,579
$
13,593