Sprint - Nextel 2015 Annual Report Download - page 46

Table of Contents
prepaid handsets, which resulted in an overall decrease in cost of products when comparing the Successor year ended March 31, 2015 to the Combined year ended
December 31, 2013.
SuccessorThree-MonthTransitionPeriodEndedMarch31,2014andPredecessorThree-MonthPeriodEndedMarch31,2013
Equipment revenue increased $186 million , or 23% , for the Successor three-month transition period ended March 31, 2014 compared to the same
Predecessor period in 2013 . The increase in equipment revenue was primarily due to higher average sales prices per postpaid and prepaid device sold combined
with the impact of a different revenue recognition model related to our installment billing program for device purchases. The increase was partially offset by fewer
postpaid and prepaid handsets sold. Cost of products declined $255 million , or 11% , for the Successor three-month transition period ended March 31, 2014
compared to the same Predecessor period in 2013 , primarily due to fewer postpaid and prepaid handsets sold, slightly offset by higher average cost per device sold
for postpaid and prepaid devices.
Selling, General and Administrative Expense
Sales and marketing costs primarily consist of subscriber acquisition costs, including commissions paid to our indirect dealers, third-party distributors
and retail sales force for new device activations and upgrades, residual payments to our indirect dealers, commission payments made to OEMs or other device
distributors for direct source handsets, payroll and facilities costs associated with our retail sales force, marketing employees, advertising, media programs and
sponsorships, including costs related to branding. General and administrative expenses primarily consist of costs for billing, customer care and information
technology operations, bad debt expense and administrative support activities, including collections, legal, finance, human resources, corporate communications,
strategic planning, and technology and product development.
SuccessorYearEndedMarch31,2016andSuccessorYearEndedMarch31,2015
Sales and marketing expense decreased $272 million , or 5% , for the Successor year ended March 31, 2016 compared to the Successor year ended
March 31, 2015 , primarily due to lower media spend and a decrease in payments to OEMs for direct source handsets as a result of lower volume of device sales,
partially offset by higher retail labor costs.
General and administrative costs decreased $766 million , or 20% , for the Successor year ended March 31, 2016 compared to the Successor year ended
March 31, 2015 , primarily due to a decrease in bad debt expense combined with declines in other general and administrative expenses due to reduced headcount
and other cost-savings initiatives. Bad debt expense decreased $446 million , or 50% , for the Successor year ended March 31, 2016 compared to the Successor
year ended March 31, 2015 primarily related to an improved aging as a result of customer credit profile improvement and fewer accounts written off due to
improvements in churn, partially offset by a higher average balance of accounts written off.
SuccessorYearEndedMarch31,2015andSuccessorYearEndedDecember31,2013
Sales and marketing expense was $5.3 billion for the Successor year ended March 31, 2015 representing an increase of $2.7 billion , or 102% ,
compared to the Successor year ended December 31, 2013 . The increase was primarily due to comparing results for a full twelve-month period ending March 31,
2015 to the shortened Post-merger period ending December 31, 2013 , combined with higher advertising costs related to new promotional campaigns. These
increases were offset by a reduction in labor-related costs due to our reduction in force and retail store closures in addition to lower commission expense as sales
shifted to more cost-effective channels, which resulted in an overall decrease in sales and marketing expense when comparing the Successor year ended March 31,
2015 to the Combined year ended December 31, 2013.
General and administrative costs were $3.9 billion for the Successor year ended March 31, 2015 representing an increase of $2.0 billion , or 104% ,
compared to the Successor year ended December 31, 2013 , primarily due to comparing results for a full twelve-month period ending March 31, 2015 to the
shortened Post-merger period ending December 31, 2013 , combined with an increase in bad debt expense primarily associated with the increase in installment
receivables. These increases were offset by a decrease in customer care costs primarily due to lower call volumes and labor-related initiatives, which resulted in an
overall decrease in general and administrative costs when comparing the Successor year ended March 31, 2015 to the Combined year ended December 31, 2013.
SuccessorThree-MonthTransitionPeriodEndedMarch31,2014andPredecessorThree-MonthPeriodEndedMarch31,2013
Sales and marketing expense was $1.4 billion representing an increase of $70 million , or 5% , for the Successor three-month transition period ended
March 31, 2014 compared to the same Predecessor period in 2013 . The increase was primarily due to higher media spend and commission expense, partially offset
by a reduction in labor related costs due to our reduction in force and retail store closures.
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