Sprint - Nextel 2015 Annual Report Download - page 6

Table of Contents
calling. AT&T, T-Mobile and Verizon Wireless offer competitive prepaid services and wholesale services to resellers. Competition may intensify as a result of
mergers and acquisitions, as new firms enter the market, and as a result of the introduction of other technologies, the availability of additional commercial
spectrum bands, such as the 600 megahertz (MHz) band, the AWS-3 band and the AWS-4 band, and the potential introduction of new services using unlicensed
spectrum. Wholesale services and products also contribute to increased competition. In some instances, resellers that use our network and offer similar services
compete against our offerings. The wireless industry also faces competition from other communications and technology companies seeking to increase their brand
recognition and capture customer revenue with respect to the provision of wireless products and services, in addition to non-traditional offerings in mobile data.
For example, Microsoft, Google, Apple and others are offering alternative means for making wireless voice calls that, in certain cases, can be used in lieu of the
wireless provider’s voice service, as well as alternative means of accessing video content.
Most markets in which we operate have high rates of penetration for wireless services, thereby limiting the growth of subscribers of wireless services.
As the wireless market has matured, it has become increasingly important to retain existing subscribers in addition to attracting new subscribers, particularly in less
saturated growth markets such as those with non-traditional data demands. Wireless carriers also try to appeal to subscribers by offering certain devices at prices
lower than their acquisition cost, which we refer to as our traditional subsidy program. We may offer higher cost devices at greater discounts than our competitors,
with the expectation that the loss incurred on the cost of the device will be offset by future service revenue. Wireless carriers now also offer plans that allow
subscribers to purchase or lease a device at or near full retail price in exchange for lower monthly service fees, early upgrade options, or both. AT&T, Verizon
Wireless and T-Mobile also offer programs that include an option to purchase a device using an installment billing program. Our installment billing and device
leasing programs do not require a service contract, provide for service plans at lower monthly rates compared to the traditional subsidy program and allow
qualified subscribers to either purchase a device by paying monthly installments generally over 24 months or lease a device and make payments for the device over
the term of the lease. At the end of the lease term, the subscriber has the option to turn in their device, continue leasing their device, or purchase the device. See
"Item 1A. Risk Factors—If we are not able to retain and attract profitable wireless subscribers, our financial performance will be impaired" and "—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 " and "—Subscribers who purchase a device on an installment billing basis are no longer required to sign a fixed-term
service contract, which could result in higher churn, and higher bad debt expense."
Wireline
We provide a broad suite of wireline voice and data communication services to other communications companies and targeted business subscribers. In
addition, our Wireline segment provides voice, data and IP communication services to our Wireless segment. We provide long distance services and operate all-
digital global long distance and Tier 1 IP networks.
Services and Products
Our services and products include domestic and international data communications using various protocols such as multiprotocol label switching
technologies (MPLS), IP, managed network services, Voice over Internet Protocol (VoIP), Session Initiated Protocol (SIP) and traditional voice services. Our IP
services can also be combined with wireless services. Such services include our Sprint Mobile Integration service, which enables a wireless handset to operate as
part of a subscriber's wireline voice network, and our DataLink SM service, which uses our wireless networks to connect a subscriber location into their primarily
wireline wide-area IP/MPLS data network, making it easier for businesses to adapt their network to changing business requirements. In addition to providing
services to our business customers, the wireline network is carrying increasing amounts of voice and data traffic for our Wireless segment as a result of growing
usage by our wireless subscribers.
We continue to assess the portfolio of services provided by our Wireline business and are focusing our efforts on IP-based data services and de-
emphasizing stand-alone voice services and non-IP-based data services. We also continue to provide voice services primarily to business subscribers. Our Wireline
segment markets and sells its services primarily through direct sales representatives.
Competition
Our Wireline segment competes with AT&T, Verizon Communications, CenturyLink, Level 3 Communications, Inc., other major local incumbent
operating companies and cable operators, as well as a host of smaller competitors in the provision of wireline services. Over the past few years, our voice services
have experienced an industry-wide trend of lower revenue from lower prices and increased competition from other wireline and wireless communications
companies, as well as cable multiple system operators (MSOs) and Internet service providers.
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