Sprint - Nextel 2015 Annual Report Download - page 20

Table of Contents
Negative outcomes of legal proceedings may adversely affect our business and financial condition.
We are regularly involved in a number of legal proceedings before various state and federal courts, the FCC, the FTC, the CFPB, and state and local
regulatory agencies. These proceedings may be complicated, costly, and disruptive to our business operations. We may incur significant expenses in defending
these matters and may be required to pay significant fines, awards, or settlements. In addition, litigation or other proceedings could result in restrictions on our
current or future manner of doing business. Any of these potential outcomes, such as judgments, awards, settlements, or orders could have a material adverse effect
on our business, financial condition, operating results, or ability to do business.
Our reputation and business may be harmed and we may be subject to legal claims if there is a loss, disclosure, misappropriation of, unauthorized access to, or
other security breach of our proprietary or sensitive information.
Our information technology and other systems—including those of our third-party service providers—that maintain and transmit our proprietary
information and our subscribers’ information, including credit card information, location data, or other personal information may be compromised by a malicious
third-party penetration of our network security or impacted by advertent or inadvertent actions or inactions by our employees and agents. As a result, our
subscribers’ information may be lost, disclosed, accessed, used, corrupted, destroyed, or taken without the subscribers’ consent. Cyber attacks, such as the use of
malware, computer viruses, denial of service attacks, or other means for disruption or unauthorized access, have increased in frequency, scope, and potential harm
in recent years. We also purchase equipment and software from third parties that could contain software defects, Trojan horses, malware, or other means by which
third parties could access our network or the information stored or transmitted on such network or equipment.
While to date, we have not been subject to cyber attacks or other cyber incidents which, individually or in the aggregate, have been material to our
operations or financial condition, the preventive actions we take to reduce the risk of cyber incidents and protect our information technology and networks may be
insufficient to repel a cyber attack in the future. In addition, the costs of such preventative actions may be significant, which may adversely affect our results of
operations. Any major compromise of our data or network security, failure to prevent or mitigate a loss of our services or network, our proprietary information, or
our subscribers’ information, and delays in detecting any such compromise or loss, could disrupt our operations, impact our reputation and subscribers' willingness
to purchase our service, and subject us to significant additional expenses. Such expenses could include incentives offered to existing subscribers and other business
relationships in order to retain their business, increased expenditures on cyber security measures and the use of alternate resources, lost revenues from business
interruption, and litigation, which could be material. Furthermore, the potential costs associated with any such cyber attacks could be greater than the insurance
coverage we maintain.
In addition to cyber attacks, major equipment failures, natural disasters, including severe weather, terrorist acts or other disruptions that affect our
wireline and wireless networks, including transport facilities, communications switches, routers, microwave links, cell sites, or other equipment or third-party
owned local and long-distance networks on which we rely, could disrupt our operations, require significant resources to remedy, result in a loss of subscribers or
impair our ability to attract new subscribers, which in turn could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to improve our results of operations and as we continue to modernize our networks, we may be required to recognize an impairment of our
long-lived assets, goodwill, or other indefinite-lived intangible assets, which could have a material adverse effect on our financial position and results of
operations.
As a result of the SoftBank Merger, Sprint recognized goodwill at its acquisition-date estimate of fair value of approximately $6.6 billion, which has
been entirely allocated to the wireless segment. Since goodwill was reflected at its estimate of fair value, there was no excess fair value over book value as of the
date of the close of the SoftBank Merger. Additionally, we recorded $14.6 billion and $41.7 billion of long-lived assets and indefinite-lived intangible assets,
respectively, as of the close of the SoftBank Merger. We evaluate the carrying value of our indefinite-lived assets, including goodwill, at least annually or more
frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit
is below its carrying amount. During the quarter ended December 31, 2014, we recorded an impairment loss of $1.9 billion and $233 million for the Sprint trade
name and Wireline long-lived assets, respectively. Continued, sustained declines in the Company’s operating results, future forecasted cash flows, growth rates and
other assumptions, as well as significant, sustained declines in the Company’s stock price and related market capitalization could impact the underlying key
assumptions and our estimated fair values, potentially leading to a future material impairment of long-lived assets, goodwill, or other indefinite-lived assets, which
could adversely affect our financial position and results of operations. In addition, as we continue to refine our network strategy, management may conclude, in
future periods, that certain equipment assets in use will not be utilized as long as originally intended, which
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