Sprint - Nextel 2014 Annual Report Download - page 16

Table of Contents
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network quality levels, our ability to attract and retain subscribers could be adversely affected, which would negatively
impact our operating results.
If we fail to provide a competitive network, our ability to provide wireless services to our subscribers, to attract
and retain subscribers, and to maintain and grow our subscriber revenues could be adversely affected. For example, achieving
optimal broadband network speeds, capacity, and coverage using 2.5 GHz spectrum relies in significant part on
operationalizing a complex mixture of BRS and EBS spectrum licenses and leases in the desired service areas. The EBS is
subject to licensing limitations and the technical limitations of the frequencies in the 2.5 GHz range. See “Item 1. Business-
Legislative and Regulatory Developments-Regulation and Wireless Operations-2.5 GHz License Conditions.” If we are
unable to operationalize this mixture of licenses and leases, our targeted network modernization goals could be affected.
Using new and sophisticated technologies on a very large scale entails risks. For example, deployment of new
technologies from time to time has adversely affected, and in the future may adversely affect, the performance of existing
services on our network and result in increased churn. Should implementation of our modernized network be delayed or costs
exceed expected amounts, our margins could be adversely affected and such effects could be material. Should the delivery of
services expected to be deployed on our modernized network be delayed due to technological constraints or changes,
performance of third-party suppliers, regulatory restrictions, including zoning and leasing restrictions, or permit issues,
subscriber dissatisfaction, or other reasons, the cost of providing such services could become higher than expected, ultimately
increasing our cost to subscribers and resulting in decreases in net subscribers, which would adversely affect our revenues,
profitability, and cash flow from operations.
Our high debt levels and restrictive debt covenants could negatively impact our ability to access future financing at
attractive rates or at all, which could limit our operating flexibility.
As of March 31, 2015, our consolidated principal amount of indebtedness was $32.7 billion, and we had $3.3
billion of unused borrowing capacity or availability under our revolving bank credit facility and our Receivables Facility. Our
high debt levels and debt service requirements are significant in relation to our revenues and cash flow, which may reduce our
ability to respond to competition and economic trends in our industry or in the economy generally. In addition, certain
agreements governing our indebtedness impose operating restrictions on us, subject to exceptions, including our ability to:
• pay dividends;
• create liens on our assets;
• receive dividend or other payments from certain of our subsidiaries;
• enter into transactions with affiliates; and
• engage in certain asset sale or business combination transactions.
Our revolving bank credit facility and other financing facilities also require that we maintain certain financial
ratios, including a leverage ratio, which could limit our ability to incur additional debt. Our failure to comply with our debt
covenants would trigger defaults under those obligations, which could result in the maturities of those debt obligations being
accelerated and could in turn result in cross defaults with other debt obligations. Limitations on our ability to obtain suitable
financing when needed, or at all, could result in an inability to continue to expand our business, timely execute network
modernization plans, and meet competitive challenges.
Subscribers who purchase a device on an installment billing basis are no longer required to sign a fixed-term service
contract, which could result in higher churn and higher bad debt expense.
Our service plans allow certain subscribers to purchase an eligible device under an installment contract payable
over a period of up to 24 months. Subscribers who take advantage of these plans are no longer required to sign a fixed-term
service contract to obtain postpaid service; rather, their service is provided on a month to month contract basis with no early
termination fee. These service plans may not meet our subscribers’ or potential subscribers’ needs, expectations, or demands.
In addition, subscribers on these plans can discontinue their service at any time without penalty, other than the obligation of
any residual commitment they may have for unpaid service or for amounts due under the installment contract for the device.
We could experience a higher churn rate than we expect due to the ability of subscribers to more easily change service
providers, which could adversely affect our results of operations. Our operational and financial performance may be
adversely affected if we are unable to grow our customer base and achieve the customer penetration levels that we anticipate
with this business model.
Subscribers who have financed their devices through these plans have the option to pay for their devices in
installments over a period of up to 24 months. This program subjects us to increased risks relating to consumer credit issues,