Sprint - Nextel 2015 Annual Report Download - page 17

Table of Contents
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, which could result in increased costs, including increases to our bad debt
expense and write-offs of installment billing receivables. These arrangements may be particularly sensitive to changes in general economic conditions, and any
declines in the credit quality of our subscriber base could have a material adverse effect on our financial position and results of operations.
Because we lease devices to subscribers, our device leasing program exposes us to new risks, including those related to the actual residual value realized on
returned devices, higher churn and increased losses on devices.
We also lease devices to certain of our subscribers. Our financial condition and results of operations depend, in part, on our ability to appropriately
assess the credit risk of our lease subscribers and the ability of our lease subscribers to perform under our device leases. In addition to monthly lease payments, we
expect to realize economic benefit from the estimated residual value of a leased device, which is the estimated value of a leased device at the time of the expiration
of the lease term. Changes in residual value assumptions made at lease inception would affect the amount of depreciation expense and the net amount of equipment
under operating leases. If estimated residual values, in the aggregate, significantly decline due to economic factors, obsolescence, or other circumstances, we may
not realize such residual value, which could have a material adverse effect on our financial position and results of operations. We may also suffer negative
consequences including increased costs and increased losses on devices as a result of a lease subscriber default , the related termination of a lease, and the
attempted repossession of the device, including failure of a lease subscriber to return a leased device at the end of the lease. Sustained failure of subscribers to
return leased devices could also negatively impact our ability to obtain financing based on leased devices in the future. In addition, subscribers who lease a device
are no longer required to sign a fixed-term service contract, which could result in higher churn, and increased losses on devices.
Adverse economic conditions may negatively impact our business and financial performance, as well as our access to financing on acceptable terms or at all.
Our business and financial performance are sensitive to changes in macro-economic conditions, including changes in interest rates, consumer credit
conditions, consumer debt levels, consumer confidence, inflation rates (or concerns about deflation), unemployment rates, energy costs, and other factors.
Concerns about these and other factors may contribute to market volatility and economic uncertainty.
Market turbulence and weak economic conditions may materially adversely affect our business and financial performance in a number of ways. Our
services are available to a broad customer base, a significant portion of which may be more vulnerable to weak economic conditions. We may have greater
difficulty in gaining new subscribers within this segment and existing subscribers may be more likely to terminate service due to an inability to pay.
We will need to reduce costs and raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our
commitments and execute our business strategy. Our ability to raise additional capital will depend on, among other things, conditions in the capital markets at that
time, which are outside of our control, and our financial performance. Instability in the global financial markets has resulted in periodic volatility in the credit,
equity, and fixed income markets. This volatility could limit our access to the credit markets, leading to higher borrowing costs or, in some cases, the inability to
obtain financing on terms that are acceptable to us, or at all.
Weak economic conditions and credit conditions may also adversely impact various third parties on which we rely, some of which have filed for or may
be considering bankruptcy, experiencing cash flow or liquidity problems, or are unable to obtain credit such that they may no longer be able to operate. Any of
these could adversely impact our ability to distribute, market, or sell our products and services.
Government regulation could adversely affect our prospects and results of operations; federal and state regulatory commissions may adopt new regulations or
take other actions that could adversely affect our business prospects, future growth, or results of operations.
The FCC, Federal Trade Commission, Consumer Financial Protection Bureau, and other federal, state and local, as well as international, governmental
authorities assert jurisdiction over our business and could adopt regulations or take other actions that would adversely affect our business prospects or results of
operations.
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