Sprint - Nextel 2013 Annual Report Download - page 32

Table of Contents
is managed by Sprint but is partly dependent upon three primary original equipment manufacturers (OEMs), each of which has responsibility for a geographical
territory across the U.S.
The Network Vision project and the related shut
- down of the Nextel platform has resulted in incremental charges, beginning in 2012, 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. The Nextel platform was successfully shut
- down on June 30, 2013, and the remaining infrastructure is expected to be completely
decommissioned by the end of 2016.
Installment Billing Programs
During 2013, wireless carriers introduced new plans that allow subscribers to forgo traditional device subsidies in exchange for lower monthly service
fees, early upgrade options, or both. In the later part of 2013, the Big 4 carriers each launched early upgrade programs that include the device installment
payment model. The objective of these plans is to attract subscribers away from device subsidies in exchange for greater upgrade flexibility and data usage
options. On January 10, 2014, Sprint replaced its recently launched Sprint One Up
SM
Plan, a device installment payment plan, with the Framily plan and
introduced Sprint Easy Pay for installment billing.
Under the Framily plan and Sprint Easy Pay installment billing program, we expect to recognize most of the future expected installment payments for
the device on an upfront basis. This accounting treatment allows Sprint to better align the equipment revenue with the cost of the device, and minimizes the
amount of subsidy recognized in our operating results. Additionally, Sprint is offering lower monthly service fees without a contract as an incentive to attract
subscribers to the Framily plan. With the roll
- out of the Sprint Framily plan and the Sprint Easy Pay installment billing program, we do expect declines in Sprint
platform postpaid ARPU to continue throughout 2014, but also expect reduced subsidy expenses to more than offset these declines. Therefore, the combination
of these two items is an expected net positive contribution to earnings before interest, taxes, depreciation and amortization (EBITDA). During 2013, the impact of
installment billing plans on our consolidated financial statements was not material. For 2014, we expect the Framily plan and Sprint Easy Pay to be accretive to
earnings as compared to our traditional plans, with the magnitude of the impact being dependent upon the rate of subscriber adoption. We also expect that the
Framily plan and Sprint Easy Pay will require a greater use of operating cash flows in the earlier part of the installment contract, if the subscriber pays less
upfront than traditional plans, because the subscriber is financing the device over 24 months.
RESULTS OF OPERATIONS
As discussed above, both the Clearwire Acquisition and the SoftBank Merger were completed in July 2013. As a result of these transactions, the
assets and liabilities of Sprint Communications and Clearwire were preliminarily adjusted to estimated fair value on the respective closing dates. The Company's
financial statement presentations distinguish between the predecessor period (Predecessor) relating to Sprint Communications for periods prior to the SoftBank
Merger and the successor period (Successor) relating to Sprint Corporation, formerly known as Starburst II, for periods subsequent to the incorporation of
Starburst II on October 5, 2012. The Successor financial information includes the activity and accounts of Sprint Corporation as of and for the year ended
December 31, 2013 , which includes the activity and accounts of Sprint Communications, inclusive of the consolidation of Clearwire Corporation, prospectively
for the 174
- day period following completion of the SoftBank Merger (Post - merger period), beginning on July 11, 2013. The accounts and operating activity for
the Successor periods from October 5, 2012 (date of inception) to December 31, 2012 and from January 1, 2013 to July 10, 2013 consist solely of the activity of
Starburst II prior to the close of the SoftBank Merger. The Predecessor financial information represents the historical basis of presentation for Sprint
Communications for all periods prior to the SoftBank Merger.
As a result of the SoftBank Merger, and in order to present Management's Discussion and Analysis in a way that offers investors a more
meaningful period to period comparison, in addition to presenting and discussing our historical results of operations as reported in our consolidated financial
statements in accordance with accounting principles generally accepted in the United States (U.S. GAAP), we have combined the
2013 Predecessor financial
information with the
2013 Successor financial information, on an unaudited combined basis. The unaudited combined data consists of Predecessor information
for the 191
- day period ended July 10, 2013 and Successor information for the year ended December 31, 2013 . The combined information for the year ended
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