Sprint - Nextel 2013 Annual Report Download - page 30

Table of Contents
customer care. We implemented initiatives that are designed to improve call center processes and procedures, and standardized our performance measures
through various metrics, including customer satisfaction ratings with respect to customer care, first call resolution, and calls per subscriber.
We continue to strengthen our brand through offering a broad selection of some of the most desired and iconic devices, while focusing on
continued enhancements to our network and our upgrade to LTE. We distinguish the Sprint brand from other wireless providers through our offerings of
unlimited talk, text and data
- guaranteed for life and the recently launched Sprint Framily
SM
plan that allows subscribers to forgo traditional subsidized devices in
exchange for lower monthly service fees, early upgrade options, or both.
In addition to our brand and customer
- oriented goals, we continue to focus on generating increased operating cash flow through competitive rate
plans for postpaid and prepaid subscribers, multi
- branded strategies, and effectively managing our cost structure. Certain strategic decisions, such as our
network modernization plan and the availability of the iPhone®
, which on average carries a higher equipment net subsidy, have resulted in a reduction in cash
flows from operations. We also expect that the Framily plan will require a greater use of operating cash flows as compared to our traditional subsidized plans
because the subscriber is financing the device over 24 months. However, we believe these actions will generate long
- term benefits, including growth in valuable
postpaid subscribers, a reduction in variable cost of service per unit and long
- term accretion to cash flows from operations. See "Liquidity and Capital
Resources" for more information.
Significant Transactions
On May 17, 2013, Sprint Communications closed its transaction with United States Cellular Corporation (U.S. Cellular) to acquire personal
communications services (PCS) spectrum and subscribers in parts of Illinois, Indiana, Michigan, Missouri and Ohio, including the Chicago and St. Louis
markets, for $480 million in cash. Sprint Communications agreed, in connection with the acquisition, to reimburse U.S. Cellular for certain network shut
- down
costs in these markets, the majority of which is expected to be paid by the end of 2016. These costs are expected to be approximately $160 million on a net
present value basis, but in no event will Sprint Communications' reimbursement obligation exceed $200 million on an undiscounted basis. The additional
spectrum will be used to supplement Sprint's coverage in these areas.
On July 9, 2013, Sprint Communications completed the acquisition of the remaining equity interests in Clearwire Corporation and its consolidated
subsidiary Clearwire Communications LLC (together "Clearwire") that it did not previously own (Clearwire Acquisition) in an all cash transaction for
approximately
$3.5 billion , net of cash acquired of $198 million , which provides us with control of 2.5 gigahertz (GHz) spectrum and tower resources for use in
conjunction with our network modernization plan. The consideration paid was preliminarily allocated to assets acquired and liabilities assumed based on their
estimated fair values at the time of the Clearwire Acquisition. The allocation of consideration paid was based on management's judgment after evaluating several
factors, including a preliminary valuation assessment.
On July 10, 2013, SoftBank Corp. and certain of its wholly
- owned subsidiaries (together, "SoftBank") completed the merger (SoftBank Merger) with
Sprint Nextel Corporation (Sprint Nextel) contemplated by the Agreement and Plan of Merger, dated as of October 15, 2012 (as amended, the Merger Agreement)
and the Bond Purchase Agreement, dated as of October 15, 2012 (as amended, the Bond Agreement). Pursuant to the Bond Agreement Sprint Communications,
Inc. issued a convertible bond (Bond) to Starburst II with a principal amount of
$3.1 billion , interest rate of 1%, and maturity date of October 15, 2019, which was
converted into
590,476,190 shares of Sprint Communications, Inc. common stock at $5.25 per share immediately prior to the close of the SoftBank Merger. As a
result of the SoftBank Merger, Starburst II became the parent company of Sprint Nextel. Immediately thereafter, Starburst II changed its name to Sprint
Corporation and Sprint Nextel changed its name to Sprint Communications, Inc.
As a result of the completion of the SoftBank Merger and subsequent open market stock purchases, SoftBank owns approximately
80% of the
outstanding voting common stock of Sprint Corporation. The SoftBank Merger consideration totaled approximately
$22.2 billion , consisting primarily of cash
consideration of
$14.1 billion , net of cash acquired of $2.5 billion , and the estimated fair value of the 22% interest in Sprint Corporation issued to the then
existing stockholders of Sprint Communications, Inc. The preliminary allocation of consideration paid was based on management's judgment after evaluating
several factors, including a preliminary valuation assessment. The close of the transaction provided additional equity funding of $5.0 billion, consisting of
$3.1
billion received by Sprint Communications, Inc. in October 2012 related to the Bond, which automatically converted to
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