Sprint - Nextel 2014 Annual Report Download - page 134

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-51
embedded derivative. Equity in losses from Clearwire for the Predecessor year ended December 31, 2012 included a $204
million pre-tax impairment reflecting a reduction in the carrying value of the investment in Clearwire to an estimated fair
value as well as a $41 million charge associated with Clearwire's write-off of certain network and other assets that no longer
met its strategic plans.
Subsequent to the Clearwire Acquisition, Clearwire is consolidated as a wholly-owned subsidiary of Sprint. In
connection with the acquisition, Sprint recorded a pre-tax gain of approximately $2.9 billion to "Gain on previously-held
equity interests" in its Predecessor consolidated statements of operations immediately preceding the Clearwire Acquisition
resulting from the difference between the estimated fair value of the interests owned prior to the acquisition ($5.00 per share
offer price less an estimated control premium of approximately $0.60) and the carrying value of approximately $325 million
for those previously-held equity interests.
Cost of services included in our consolidated statements of operations related to our agreement to purchase 4G
services from Clearwire totaled $207 million, $101 million and $417 million for the Predecessor 190-day period ended July
9, 2013, Predecessor unaudited three-month period ended March 31, 2013 and the Predecessor year ended December 31,
2012, respectively.
Summarized financial information for Clearwire for the 190-day period ended July 9, 2013, which preceded the
Clearwire Acquisition, is as follows:
190 Days
Ended July 9, Year Ended December 31,
2013 2012
(in millions)
Revenues $ 666 $ 1,265
Operating expenses (1,285) (2,644)
Operating loss $ (619) $ (1,379)
Net loss from continuing operations before non-controlling interests $ (1,102) $ (1,744)
Net loss from discontinued operations before non-controlling interests $ — $ (168)
SoftBank Related-Party Transactions
In addition to agreements arising out of or relating to the SoftBank Merger, Sprint has entered into various other
arrangements with SoftBank or its controlled affiliates (SoftBank Parties) or with third parties to which SoftBank Parties are
also parties, including for international wireless roaming, wireless and wireline call termination, real estate, device and
accessory purchasing, distribution and other services.
Specifically, we have arrangements with Brightstar US, Inc. (Brightstar), a wholly-owned subsidiary of SoftBank,
whereby Brightstar provides supply chain and inventory management services to us in our indirect channels and whereby
Sprint may sell new and used devices and new accessories to Brightstar for its own purposes. The supply chain and inventory
management arrangement contemplates that Brightstar will purchase inventory from the OEMs to sell directly to our indirect
dealers. As compensation for these services, we remit per unit fees to Brightstar for each device sold to dealers or retailers in
our indirect channels. During the year ended March 31, 2015, we incurred fees under this arrangement totaling $66 million.
Until Brightstar successfully negotiates contracts with, and procures credit from, our existing OEMs, Brightstar will purchase
device inventory from us in order to fulfill orders within our indirect channel. During the year ended March 31, 2015,
Brightstar primarily fulfilled indirect channel orders with inventory acquired from us. In October 2014, we provided a $1.0
billion credit line to Brightstar to facilitate certain of these arrangements. As a result, we shifted our concentration of credit
risk away from our indirect channel partners to Brightstar. As Brightstar is a wholly-owned subsidiary of SoftBank, we
expect SoftBank will provide the necessary support to ensure that Brightstar will fulfill its obligations to us under these
agreements. However, we have no assurance that SoftBank will provide such support.