Sprint - Nextel 2015 Annual Report Download - page 125

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business
enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including
those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by us.
While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect
that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations.
Spectrum Reconfiguration Obligations
In 2004, the FCC adopted a Report and Order that included new rules regarding interference in the 800 MHz band and a comprehensive plan to
reconfigure the 800 MHz band. The Report and Order provides for the exchange of a portion of our 800 MHz FCC spectrum licenses, and requires us to fund the
cost incurred by public safety systems and other incumbent licensees to reconfigure the 800 MHz spectrum band. Also, in exchange, we received licenses for 10
MHz of nationwide spectrum in the 1.9 GHz band.
The minimum cash obligation under the Report and Order is $2.8 billion . We are, however, obligated to pay the full amount of the costs relating to the
reconfiguration plan, even if those costs exceed $2.8 billion . As required under the terms of the Report and Order, a letter of credit has been secured to provide
assurance that funds will be available to pay the relocation costs of the incumbent users of the 800 MHz spectrum. The letter of credit was initially $2.5 billion , but
has been reduced during the course of the proceeding to $256 million as of March 31, 2016 . Since the inception of the program, we have incurred payments of
approximately $3.5 billion directly attributable to our performance under the Report and Order, including approximately $75 million during the year ended
March 31, 2016 . When incurred, substantially all costs are accounted for as additions to FCC licenses with the remainder as property, plant and equipment.
Although costs incurred through March 31, 2016 have exceeded $2.8 billion , not all of those costs have been reviewed and accepted as eligible by the transition
administrator. During the year ended March 31, 2015, we received a cash payment of approximately $95 million which represented a reimbursement of prior
reconfiguration costs incurred by us that also benefited spectrum recently auctioned by the FCC. We do not expect any further reimbursements.
Completion of the 800 MHz band reconfiguration was initially required by June 26, 2008 and public safety reconfiguration is nearly complete across
the country with the exception of the States of Washington, Arizona, California, Texas and New Mexico. The FCC continues to grant the remaining 800 MHz
public safety licensees additional time to complete their band reconfigurations which, in turn, delays our access to our 800 MHz replacement channels in these
areas. In the areas where band reconfiguration is complete, Sprint has received its replacement spectrum in the 800 MHz band and Sprint is deploying 3G CDMA
and 4G LTE on this spectrum in combination with its spectrum in the 1.9 GHz and 2.5 GHz bands.
Future Minimum Commitments
As of March 31, 2016 , the minimum estimated amounts due under operating leases, spectrum leases and service credits, handset sale-leaseback tranche
1 and purchase orders and other commitments were as follows:
Future Minimum Commitments
Total
Fiscal Year 2016
Fiscal Year 2017
Fiscal Year
2018
Fiscal Year
2019
Fiscal Year
2020
Fiscal Year
2021 and thereafter
(in millions)
Operating leases
$ 14,078
$ 2,195
$ 2,148
$ 2,072
$ 1,958
$ 1,820
$ 3,885
Spectrum leases and service credits
6,707
212
219
221
224
226
5,605
Handset sale-leaseback tranche 1
651
580
71
—
—
—
—
Purchase orders and other commitments
11,224
7,192
1,428
951
499
354
800
Total
$ 32,660
$ 10,179
$ 3,866
$ 3,244
$ 2,681
$ 2,400
$ 10,290
Operating Leases
We lease various equipment, office facilities, retail outlets and kiosks, switching facilities and cell sites under operating leases. The non-cancelable
portion of these leases generally ranges from monthly up to 15 years. These leases, with few exceptions, provide for automatic renewal options and escalations
that are either fixed or based on the consumer price
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