Sprint - Nextel 2015 Annual Report Download - page 66

Table of Contents
• the costs or potential customer impact of compliance with regulatory mandates including, but not limited to, compliance with the FCC's Report
and Order to reconfigure the 800 MHz band and government regulation regarding "net neutrality";
• equipment failure, natural disasters, terrorist acts or breaches of network or information technology security;
• one or more of the markets in which we compete being impacted by changes in political, economic, or other factors such as monetary policy, legal
and regulatory changes, or other external factors over which we have no control;
• the impact of being a "controlled company" exempt from many corporate governance requirements of the NYSE; and
• other risks referenced from time to time in this report and other filings of ours with the SEC.
The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan" and similar
expressions are intended to identify forward-looking statements. Forward-looking statements are found throughout this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and elsewhere in this report. Readers are cautioned that other factors, although not listed above, could also
materially affect our future performance and operating results. The reader should not place undue reliance on forward-looking statements, which speak only as of
the date of this report. We are not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this report, including
unforeseen events.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies, and equity prices. The risk
inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors.
Interest Rate Risk
The communications industry is a capital-intensive, technology-driven business. We are subject to interest rate risk primarily associated with our
borrowings. Interest rate risk is the risk that changes in interest rates could adversely affect earnings and cash flows. Specific interest rate risk includes: the risk of
increasing interest rates on variable rate debt and the risk of increasing interest rates for planned new fixed rate long-term financings or refinancings.
Approximately 83% of our debt as of March 31, 2016 was fixed-rate debt. While changes in interest rates impact the fair value of this debt, there is no
impact to earnings and cash flows because we intend to hold these obligations to maturity unless market and other conditions are favorable.
We perform interest rate sensitivity analyses on our variable rate debt. These analyses indicate that a one percentage point change in interest rates
would have had an annual pre-tax impact of $26 million on our consolidated statements of operations and cash flows for the Successor year ended March 31, 2016
. We also perform a sensitivity analysis on the fair market value of our outstanding debt. A 10% decline in market interest rates is estimated to result in a $1.2
billion increase in the fair market value of our debt to $29.9 billion.
Foreign Currency Risk
We may enter into forward contracts and options in foreign currencies to reduce the impact of changes in foreign exchange rates. Our foreign exchange
risk management program focuses on reducing transaction exposure to optimize consolidated cash flow. We use foreign currency derivatives to hedge our foreign
currency exposure related to settlement of international telecommunications access charges and the operation of our international subsidiaries. The dollar
equivalent of our net foreign currency receivables from international settlements was approximately $3 million and the net foreign currency receivables from
international operations was approximately $2 million as of March 31, 2016 . The potential immediate pre-tax loss to us that would result from a hypothetical 10%
change in foreign currency exchange rates based on these positions would be less than $1 million.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements required by this item begin on page F-1 of this annual report on Form 10-K and are incorporated herein by
reference. The financial statements of Clearwire up through the date of acquisition, as required under Regulation S-X, are included in Item 15 of this annual report
on Form 10-K and incorporated herein by reference.
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