Sprint - Nextel 2014 Annual Report Download - page 51

Table of Contents
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beginning of each fiscal year. Over the past several years, there has been an industry wide trend of lower rates due to
increased competition from other wireline and wireless communications companies as well as cable and Internet service
providers. For the fiscal year 2015, we expect wireline segment earnings to decline by approximately $50 to $75 million as
compared to fiscal year 2014 to reflect changes in market prices for services provided by our Wireline segment to our
Wireless segment. Declines in wireline segment earnings related to intercompany pricing rates do not affect our consolidated
results of operations as our Wireless segment benefits from an equivalent reduction in cost of service.
The following table provides an overview of the results of operations of our Wireline segment.
Successor Combined Successor Predecessor
Year Ended
March 31,
Three Months
Ended
March 31, Year Ended December 31, Year Ended December 31,
191 Days
Ended
July 10,
Three Months
Ended
March 31, Years Ended December 31,
Wireline Segment Earnings 2015 2014 2013 2013 2013 2013 2012
(in millions)
Voice $ 1,174 $ 352 $ 1,490 $ 719 $ 771 $ 352 $ 1,627
Data 213 62 326 138 188 94 398
Internet 1,353 345 1,660 747 913 434 1,781
Other 74 11 61 32 29 13 75
Total net service revenue 2,814 770 3,537 1,636 1,901 893 3,881
Cost of services (2,338) (668) (2,637) (1,235) (1,402) (661) (2,781)
Service gross margin 476 102 900 401 499 232 1,100
Service gross margin percentage 17% 13% 25% 25% 26% 26% 28%
Selling, general and administrative expense (363) (90) (406) (179) (227) (104) (451)
Wireline segment earnings $ 113 $ 12 $ 494 $ 222 $ 272 $ 128 $ 649
Wireline Revenue
Successor Year Ended March 31, 2015 and Successor Year Ended December 31, 2013
Voice Revenues
Voice revenues for the Successor year ended March 31, 2015 increased $455 million, or 63%, compared to the
year ended December 31, 2013. The increase was primarily due to comparing results for a full twelve-month period to a
shortened Post-merger period. Offsetting the increase were decreases driven by lower volume and overall rate declines,
primarily due to the decline in prices for the sale of services to our Wireless segment, combined with decreases in
international hubbing volumes, which resulted in an overall decrease in voice revenues when comparing the Successor year
ended March 31, 2015 to the Combined year ended December 31, 2013. Voice revenues generated from the sale of services to
our Wireless segment represented 31% of total voice revenues for the Successor year ended March 31, 2015 compared to
33% in the year ended December 31, 2013.
Data Revenues
Data revenues reflect sales of data services, primarily Private Line and managed network services bundled with
non-IP-based data access. Data revenues increased $75 million, or 54%, for the Successor year ended March 31, 2015
compared to the year ended December 31, 2013 primarily due to comparing results for a full twelve-month period to a
shortened Post-merger period. Offsetting the increase was a decrease as a result of customer churn, primarily related to
Private Line, which resulted in an overall decrease in data revenues when comparing the Successor year ended March 31,
2015 to the Combined year ended December 31, 2013. Data revenues generated from the provision of services to the Wireless
segment represented 41% of total data revenue for each of the Successor year ended March 31, 2015 compared to 50% in the
year ended December 31, 2013.
Internet Revenue
IP-based data services revenue reflects sales of Internet services, including MPLS, VoIP, SIP, and managed
services bundled with IP-based data access. IP-based data services increased $606 million, or 81%, for the Successor year
ended March 31, 2015 compared to the year ended December 31, 2013 primarily due to comparing results for a full twelve-
month period to a shortened Post-merger period. Offsetting the increase was a decrease primarily due to fewer IP customers,
and in particular, the final transition to in-sourcing at one of our larger cable multiple system operators (MSO's), which
resulted in an overall decrease in Internet revenues when comparing the Successor year ended March 31, 2015 to the
Combined year ended December 31, 2013. In addition, revenue was also impacted by a decline in the price of services sold to