Table of Contents     

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
—————————————————————
FORM 10-Q
—————————————————————
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to  
   
Commission File number 1-04721
—————————————————————
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
—————————————————————
Delaware
46-1170005
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
6200 Sprint Parkway, Overland Park, Kansas
66251
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (855) 848-3280
—————————————————————
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
 (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes   o     No   x
COMMON SHARES OUTSTANDING AT NOVEMBER 1, 2013 :
Sprint Corporation Common Stock
3,932,164,011

 

Table of Contents

SPRINT CORPORATION
TABLE OF CONTENTS
 
 
 
Page
Reference  
Item
PART I — FINANCIAL INFORMATION
 
1.
 
 
 
 
 
2.
3.
4.
 
 
 
 
 
 
 
PART II — OTHER INFORMATION
 
1.
1A.
2.
3.
4.
5.
6.




Table of Contents

PART I —FINANCIAL INFORMATION

Item 1.
Financial Statements (Unaudited)

SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS  
 
Successor
 
 
Predecessor
 
September 30,
2013
 
December 31,
2012
 
 
December 31,
2012
 
(in millions, except share and per share data)
ASSETS
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
$
6,058

 
$
5

 
 
$
6,351

Restricted cash
3,050

 
—

 
 
—

Short-term investments
1,436

 
—

 
 
1,849

Accounts and notes receivable, net of allowance for doubtful accounts of $95, $0 and $183
3,193

 
6

 
 
3,658

Device and accessory inventory
1,028

 
—

 
 
1,200

Deferred tax assets
167

 
—

 
 
1

Prepaid expenses and other current assets
498

 
—

 
 
700

Total current assets
15,430

 
11

 
 
13,759

Investments
137

 
3,104

 
 
1,053

Property, plant and equipment, net
15,312

 
—

 
 
13,607

Intangible assets
 
 
 
 
 
 
Goodwill
6,819

 
—

 
 
359

FCC licenses and other
41,459

 
—

 
 
20,677

Definite-lived intangible assets, net
8,483

 
—

 
 
1,335

Other assets
337

 
—

 
 
780

Total assets
$
87,977

 
$
3,115

 
 
$
51,570

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
 
 
 
Accounts payable
$
3,777

 
$
—

 
 
$
3,487

Accrued expenses and other current liabilities
6,042

 
4

 
 
5,008

Current portion of long-term debt, financing and capital lease obligations
1,131

 
—

 
 
379

Total current liabilities
10,950

 
4

 
 
8,874

Long-term debt, financing and capital lease obligations
32,420

 
—

 
 
23,962

Deferred tax liabilities
14,263

 
1

 
 
7,047

Other liabilities
3,861

 
—

 
 
4,600

Total liabilities
61,494

 
5

 
 
44,483

Commitments and contingencies

 
 
 
 

Stockholders' equity:
 
 
 
 
 
 
Common stock (Successor), voting, par value $0.01 per share, 9.0 billion authorized, 3.931 billion issued at September 30, 2013
39

 
—

 
 
—

Common stock (Predecessor), voting, par value $2.00 per share, 6.5 billion authorized, 3.010 billion issued at December 31, 2012
—

 
—

 
 
6,019

Paid-in capital
27,289

 
3,137

 
 
47,016

Accumulated deficit
(849
)
 
(27
)
 
 
(44,815
)
Accumulated other comprehensive income (loss)
4

 
—

 
 
(1,133
)
Total stockholders' equity
26,483

 
3,110

 
 
7,087

Total liabilities and stockholders' equity
$
87,977

 
$
3,115

 
 
$
51,570

See Notes to the Consolidated Financial Statements

1
Table of Contents

SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
2013
 
 
2013
 
2013
 
2012
 
2012
 
(in millions, except per share amounts)
Net operating revenues
$
7,749

 
$
7,749

 
 
$
18,602

 
$
932

 
$
26,340

 
$
8,763

Net operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services and products (exclusive of depreciation and amortization included below)
4,342

 
4,342

 
 
10,545

 
567

 
15,189

 
5,093

Selling, general and administrative
2,295

 
2,259

 
 
5,067

 
289

 
7,208

 
2,391

Severance, exit costs and asset impairments
103

 
103

 
 
652

 
(5
)
 
290

 
22

Depreciation
942

 
942

 
 
3,098

 
113

 
4,820

 
1,411

Amortization
461

 
461

 
 
147

 
8

 
230

 
77

Other, net
—

 
—

 
 
(22
)
 
—

 
(282
)
 
—

 
8,143

 
8,107

 
 
19,487

 
972

 
27,455

 
8,994

Operating loss
(394
)
 
(358
)
 
 
(885
)
 
(40
)
 
(1,115
)
 
(231
)
Other (expense) income:
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(416
)
 
(416
)
 
 
(1,135
)
 
(275
)
 
(996
)
 
(377
)
Equity in losses of unconsolidated investments, net
—

 
—

 
 
(482
)
 
(23
)
 
(927
)
 
(208
)
Gain on previously-held equity interests
—

 
—

 
 
2,926

 
2,926

 
—

 
—

Other income, net
18

 
165

 
 
19

 
2

 
144

 
96

 
(398
)
 
(251
)
 
 
1,328

 
2,630

 
(1,779
)
 
(489
)
(Loss) income before income taxes
(792
)
 
(609
)
 
 
443

 
2,590

 
(2,894
)
 
(720
)
Income tax expense
(30
)
 
(90
)
 
 
(1,601
)
 
(1,508
)
 
(110
)
 
(47
)
Net (loss) income
$
(822
)
 
$
(699
)
 
 
$
(1,158
)
 
$
1,082

 
$
(3,004
)
 
$
(767
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net (loss) income per common share
$
(0.25
)
 
$
(0.18
)
 
 
$
(0.38
)
 
$
0.35

 
$
(1.00
)
 
$
(0.26
)
Diluted net (loss) income per common share
$
(0.25
)
 
$
(0.18
)
 
 
$
(0.38
)
 
$
0.30

 
$
(1.00
)
 
$
(0.26
)
Basic weighted average common shares outstanding
3,318

 
3,802

 
 
3,027

 
3,086

 
3,001

 
3,003

Diluted weighted average common shares outstanding
3,318

 
3,802

 
 
3,027

 
3,640

 
3,001

 
3,003

 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding gains (losses) on securities and other
$
4

 
$
4

 
 
$
(12
)
 
$
(47
)
 
$
(5
)
 
$
1

Net unrecognized net periodic pension and other postretirement benefits
—

 
—

 
 
35

 
5

 
31

 
14

Other comprehensive income (loss)
4

 
4

 
 
23

 
(42
)
 
26

 
15

Comprehensive (loss) income
$
(818
)
 
$
(695
)
 
 
$
(1,135
)
 
$
1,040

 
$
(2,978
)
 
$
(752
)
 
See Notes to the Consolidated Financial Statements

2
Table of Contents

SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
 
191 Days Ended
 
Nine Months Ended
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
 
2013
 
2012
 
(in millions)
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
$
(822
)
 
 
$
(1,158
)
 
$
(3,004
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Asset impairments
—

 
 
—

 
84

Depreciation and amortization
1,403

 
 
3,245

 
5,050

Provision for losses on accounts receivable
119

 
 
194

 
413

Share-based and long-term incentive compensation expense
58

 
 
37

 
57

Deferred income tax expense
22

 
 
1,586

 
142

Equity in losses of unconsolidated investments, net
—

 
 
482

 
927

Gain on previously-held equity interests
—

 
 
(2,926
)
 
—

Interest expense related to beneficial conversion feature on convertible bond
—

 
 
247

 
—

Gains from asset dispositions and exchanges
—

 
 
—

 
(29
)
Contribution to pension plan
—

 
 
—

 
(108
)
Spectrum hosting contract termination
—

 
 
—

 
(236
)
Other changes in assets and liabilities:
 
 
 
 
 
 
Accounts and notes receivable
(65
)
 
 
150

 
(526
)
Inventories and other current assets
(72
)
 
 
298

 
(348
)
Accounts payable and other current liabilities
167

 
 
280

 
395

Non-current assets and liabilities, net
(153
)
 
 
207

 
55

Other, net
43

 
 
29

 
(89
)
Net cash provided by operating activities
700

 
 
2,671

 
2,783

Cash flows from investing activities:
 
 
 
 
 
 
Capital expenditures
(1,878
)
 
 
(3,140
)
 
(2,784
)
Expenditures relating to FCC licenses
(31
)
 
 
(125
)
 
(152
)
Acquisitions, net of cash acquired
(14,112
)
 
 
(4,039
)
 
—

Investment in Clearwire (including debt securities)
—

 
 
(308
)
 
(128
)
Proceeds from sales and maturities of short-term investments
479

 
 
2,445

 
958

Purchases of short-term investments
(815
)
 
 
(1,221
)
 
(1,492
)
Increase in restricted cash
(3,050
)
 
 
—

 
—

Other, net
—

 
 
3

 
13

Net cash used in investing activities
(19,407
)
 
 
(6,385
)
 
(3,585
)
Cash flows from financing activities:
 
 
 
 
 
 
Proceeds from debt and financings
6,826

 
 
204

 
3,577

Repayments of debt and capital lease obligations
(497
)
 
 
(362
)
 
(2,508
)
Debt financing costs
(107
)
 
 
(11
)
 
(90
)
Proceeds from issuance of common stock and warrants, net
18,552

 
 
60

 
21

Other, net
(14
)
 
 
—

 
—

Net cash provided by (used in) financing activities
24,760

 
 
(109
)
 
1,000

Net increase (decrease) in cash and cash equivalents
6,053

 
 
(3,823
)
 
198

Cash and cash equivalents, beginning of period
5

 
 
6,351

 
5,447

Cash and cash equivalents, end of period
$
6,058

 
 
$
2,528

 
$
5,645

See Notes to the Consolidated Financial Statements

3
Table of Contents

SPRINT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in millions)
 
 
Predecessor
 
Common Stock
 
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
Shares
 
Amount
 
Balance, December 31, 2012
3,010

 
$
6,019

 
$
47,016

 
$
(44,815
)
 
$
(1,133
)
 
$
7,087

Net loss
 
 
 
 
 
 
(1,158
)
 
 
 
(1,158
)
Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
23

 
23

Issuance of common stock, net
16

 
33

 
27

 
 
 
 
 
60

Share-based compensation expense
 
 
 
 
18

 
 
 
 
 
18

Conversion of convertible debt
590

 
1,181

 
1,919

 
 
 
 
 
3,100

Balance, July 10, 2013
3,616

 
$
7,233

 
$
48,980

 
$
(45,973
)
 
$
(1,110
)
 
$
9,130

 

 
 
 
 
 
 
 
 
 
 
 
 
 
Successor
 
Common Stock
 
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income
 
Total
 
Shares
 
Amount
 
Balance, December 31, 2012
—

 
$
—

 
$
3,137

 
$
(27
)
 
$
—

 
$
3,110

Expenses incurred by Softbank for the benefit of Sprint
 
 
 
 
97

 
 
 
 
 
97

Net loss
 
 
 
 
 
 
(822
)
 
 
 
(822
)
Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
4

 
4

Issuance of common stock to SoftBank upon acquisition
3,076

 
31

 
18,370

 
 
 
 
 
18,401

Issuance of common stock to Sprint stockholders upon acquisition
851

 
8

 
5,336

 
 
 
 
 
5,344

Conversion of Sprint vested stock-based awards upon acquisition
 
 
 
 
193

 
 
 
 
 
193

Issuance of warrant to Softbank prior to acquisition
 
 
 
 
139

 
 
 
 
 
139

Return of capital to Softbank prior to acquisition
 
 
 
 
(14
)
 
 
 
 
 
(14
)
Issuance of common stock, net
4

 
—

 
12

 
—

 
 
 
12

Share-based compensation expense
 
 
 
 
19

 
 
 
 
 
19

Balance, September 30, 2013
3,931

 
$
39

 
$
27,289

 
$
(849
)
 
$
4

 
$
26,483


See Notes to the Consolidated Financial Statements

4
Table of Contents

SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INDEX
 



5




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. All normal recurring adjustments considered necessary for a fair presentation have been included. Certain disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in the Sprint Nextel Corporation (Sprint Nextel) annual report on Form 10-K and the Starburst II Form S-4/A dated March 15, 2013 for the year ended December 31, 2012 and the subsequent Sprint Nextel and Sprint Corporation quarterly reports on Form 10-Q through June 30, 2013.
On July 10, 2013, SoftBank Corp., a kabushiki kaisha organized under the laws of Japan, and certain of its wholly-owned subsidiaries (together, “SoftBank”) completed the merger (SoftBank Merger) contemplated by the Agreement and Plan of Merger, dated as of October 15, 2012, as amended on November 29, 2012, April 12, 2013 and June 10, 2013 (as amended, the Merger Agreement) and the Bond Purchase Agreement, dated as of October 15, 2012, as amended on June 10, 2013 (as amended, the Bond Agreement) (See Note 3. Significant Transactions) . Pursuant to the Bond Agreement, Sprint Communications issued a convertible bond (Bond) to Starburst II, Inc. (Starburst II) with a principal amount of $3.1 billion , interest rate of 1% , and maturity date of October 15, 2019, which was converted into 590,476,190 shares of Sprint Communications common stock at $5.25 per share at consummation of the SoftBank Merger on July 10, 2013. As a result of the SoftBank Merger and subsequent open market stock purchases, SoftBank owned approximately 80% of the outstanding voting common stock of Sprint Corporation (formerly known as Starburst II, Inc., a wholly owned subsidiary of SoftBank prior to completion of the SoftBank Merger and the acquiring company in connection with the consummation of the SoftBank Merger). Following the consummation of the SoftBank Merger, Sprint Corporation became the parent company of Sprint Nextel and Sprint Nextel changed its name to Sprint Communications, Inc. (Sprint Communications). In connection with the consummation of the SoftBank Merger, Sprint Corporation became the successor registrant to Sprint Nextel under Rule 12g-3 of the Securities Exchange Act of 1934 (Exchange Act) and is the entity subject to the reporting requirements of the Exchange Act for filings with the Securities and Exchange Commission (SEC) subsequent to the consummation of the SoftBank Merger. As a result of the SoftBank Merger and the resulting change in ownership and control by SoftBank, Sprint Corporation applied the acquisition method of accounting as of the merger date, which resulted in a new basis of presentation based on the estimated fair values of assets acquired and liabilities assumed from Sprint Nextel for the successor period beginning as of the day following the consummation of the SoftBank Merger.
In connection with the change of control, as a result of the SoftBank Merger, Sprint Communications' assets and liabilities were adjusted to fair value on the closing date of the SoftBank Merger. The consolidated financial statements distinguish between the predecessor period relating to Sprint Communications for periods prior to the SoftBank Merger (Predecessor) and the successor period (Successor) relating to Sprint Corporation (formerly Starburst II). The Successor financial information includes the activity and accounts of Sprint Corporation as of and for the three and nine-month periods ended September 30, 2013, which includes the activity and accounts of Sprint Communications, prospectively, beginning on July 11, 2013. As a result of the SoftBank Merger, the Successor period results of operations for the three and nine-month periods ended September 30, 2013 primarily reflect the accounts and operating activities of Sprint Communications, inclusive of the consolidation of Clearwire, for an 82 day period (Post-merger period), representing the results of operations from July 11, 2013 through September 30, 2013. The accounts and operating activity for the Successor period from January 1, 2013 to July 10, 2013 consist solely of the activity of Starburst II prior to the consummation of the SoftBank Merger, which primarily relates to its investment in the Bond issued by Sprint Communications in connection with the SoftBank Merger. The Predecessor financial information represents the historical basis of presentation for Sprint Communications for all periods prior to the SoftBank Merger. As a result of the preliminary valuation of assets acquired and liabilities assumed at fair value at the time of the SoftBank Merger, the financial statements for the Successor period are presented on a measurement basis different than the Predecessor period (Sprint Communications historical cost) and are, therefore, not comparable. See Note 3. Significant Transactions for additional information regarding the SoftBank Merger.

6




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Unless the context otherwise requires, references to “Sprint,” “we,” “us,” “our” and the “Company” mean Sprint Corporation and its consolidated subsidiaries for all periods presented, inclusive of Successor and Predecessor periods, and references to "Sprint Communications" are to Sprint Communications, Inc. and its consolidated subsidiaries.
On July 9, 2013, Sprint Communications completed the acquisition of the remaining equity interests in Clearwire Corporation (Clearwire) that it did not already own (Clearwire Acquisition), in accordance with the merger agreement with Clearwire dated as of December 17, 2012, as amended as of April 18, 2013, May 21, 2013, and June 20, 2013 (Clearwire Merger Agreement). As a result of the Clearwire Acquisition, Sprint Communications acquired all of the remaining equity interests in Clearwire that it did not own for approximately $3.5 billion , net of cash acquired, or $5.00 per share. The consideration paid was allocated to assets acquired and liabilities assumed based on their estimated preliminary fair values at the time of the Clearwire Acquisition. The effects of the Clearwire Acquisition are included in the Predecessor period financial information and are therefore included in the allocation of the consideration transferred at the closing date of the SoftBank Merger.
The preparation of the unaudited interim consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements. These estimates are inherently subject to judgment and actual results could differ.
Certain prior period amounts have been reclassified to conform to the current period presentation.

Note 2.
New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (FASB) issued authoritative guidance regarding Disclosures about Offsetting Assets and Liabilities , which requires common disclosure requirements to allow investors to better compare and assess the effect of offsetting arrangements on financial statements prepared under U.S. GAAP with financial statements prepared under IFRS. The standard was effective beginning in the first quarter 2013, requires retrospective application, and only affects disclosures in the footnotes to the financial statements. In October 2012, the FASB tentatively decided to limit the scope of this authoritative guidance to derivatives, repurchase agreements, and securities lending and securities borrowing arrangements. In January 2013, the FASB issued additional clarifying guidance which limited the scope of the disclosure requirements to derivatives, repurchase agreements and reverse purchase agreements, and securities lending and securities borrowing transactions that are either offset in accordance with specific criteria contained in U.S. GAAP or subject to a master netting arrangement or similar agreement. Based on the scope revision, this authoritative guidance did not impact our existing disclosures.
In February 2013, the FASB issued authoritative guidance regarding Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income , which amends existing guidance and requires, in a single location, the presentation of the effects of certain significant amounts reclassified from each component of accumulated other comprehensive income based on its source and Statement of Comprehensive (Loss) Income line items affected by the reclassification. The guidance was effective beginning in the first quarter 2013 and did not have a material effect on our consolidated financial statements as amounts reclassified out of other comprehensive income, consisting primarily of the recognition of periodic pension costs and realized holding gains and losses, are immaterial for all periods presented.
In July 2013, the FASB issued authoritative guidance regarding Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) , which amends existing guidance related to the financial presentation of unrecognized tax benefits by requiring an entity to net its unrecognized tax benefits against the deferred tax assets for all available same-jurisdiction loss or other tax carryforwards that would apply in settlement of the uncertain tax positions. The amendments will be effective beginning in the first quarter of 2014 with early adoption permitted, will be applied prospectively to all unrecognized tax benefits that exist at the effective date, and are not expected to have a material effect on our consolidated financial statements.


7




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 3.
Significant Transactions
Acquisition of Assets from U.S. Cellular
On November 6, 2012, Sprint Communications entered into a definitive agreement with United States Cellular Corporation (U.S. Cellular) to acquire personal communications services (PCS) spectrum and customers in parts of Illinois, Indiana, Michigan, Missouri and Ohio, including the Chicago and St. Louis markets, for $480 million in cash. Sprint Communications agreed, in connection with the acquisition, to reimburse U.S. Cellular for certain network shut-down costs in these markets. These costs are expected to be approximately $160 million on a net present value basis, but in no event will Sprint Communications' reimbursement obligation exceed $200 million on an undiscounted basis. The additional spectrum will be used to supplement Sprint's coverage in these areas. In addition, Sprint Communications and U.S. Cellular entered into transition services agreements for services to be provided by U.S. Cellular during the period after closing and prior to the transfer of the acquired customers to Sprint's network. The transaction closed on May 17, 2013. Of the total purchase price, approximately $605 million and $32 million was allocated to spectrum and customer relationships, respectively.
Acquisition of Remaining Interest in Clearwire
In connection with the Clearwire Acquisition, Clearwire and Sprint Communications entered into a financing agreement that provided up to $800 million of additional financing for Clearwire in the form of 1% exchangeable notes (Clearwire Exchangeable Notes), due June 2018, which were exchangeable for Clearwire common stock at a conversion price of $1.50 per share, subject to certain conditions and subject to adjustment. Under the financing agreement, Sprint Communications agreed to purchase $80 million of Clearwire Exchangeable Notes per month for up to 10 months beginning in January 2013. Clearwire elected three draws under the terms of the Clearwire Exchangeable Notes, as amended, for a total of $240 million . This financing agreement was terminated upon consummation of the Clearwire Acquisition.
On July 9, 2013 (Clearwire Acquisition Date), Sprint Communications completed the Clearwire Acquisition. Immediately prior to the completion of the Clearwire Acquisition, Sprint Communications owned 739,010,818 shares of Clearwire Common Stock representing approximately 50.1% of a non-controlling voting interest of the total issued and outstanding common stock. As a result of the Clearwire Acquisition, each share of common stock of Clearwire, par value $0.0001 per share, other than shares owned by Sprint Communications, was converted into the right to receive $5.00 per share in cash. The cash consideration paid totaled approximately $3.5 billion , net of cash acquired of $198 million . Approximately $125 million of the cash consideration has been accrued as of September 30, 2013 for dissenting shares relating to stockholders who exercised their appraisal rights.
Consideration
The fair value of consideration, which is measured at the estimated fair value of each element of consideration transferred as of the Clearwire Acquisition Date, was determined as the sum of (a) cash transferred to Clearwire stockholders, which includes $125 million of cash held in escrow for dissenting shares, (b) the estimated fair value of Clearwire shares held by Sprint Communications immediately preceding the acquisition and (c) share-based payment awards (replacement awards) exchanged for awards held by Clearwire employees. The fair value of the consideration transferred was based on the most reliable measure for each element of consideration, which was determined to be the market price of Clearwire common shares as of the Clearwire Acquisition Date for all non-cash consideration.

8




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value of the consideration transferred, based on the market price of Clearwire common shares, as determined using the closing price on the NASDAQ as of the Clearwire Acquisition Date, consisted of the following:
Consideration:
 
Cash to acquire the remaining equity interests of Clearwire
$
3,681

Estimated value of Sprint's previously-held equity interests (1)
3,251

Liability to holders of Clearwire equity awards for services provided in the pre-acquisition period (2)
59

Total purchase price to be allocated
$
6,991

 _________________
(1)
Equals the estimated fair value of Sprint Communications' previously-held equity interest in Clearwire valued at $4.40 per share, which represented an approximate 12% discount to Sprint Communications' acquisition price for shares not held by Sprint Communications prior to the Clearwire Acquisition Date. The difference between $4.40 and the per share merger consideration of $5.00 represents an estimate of a control premium, which would not generally be included in the valuation of Sprint Communications' non-controlling interest.
(2)
$47 million of the liability was paid in cash pursuant to the Clearwire Merger Agreement.
Acquisition-related costs (included in selling, general and administrative in the results of operations) for the Clearwire Acquisition totaled approximately $19 million , of which $2 million were recognized in the three-month period ended December 31, 2012 and $11 million and $17 million were recognized in the 10-day and 191-day periods ended July 10, 2013, respectively.
Preliminary Purchase Price Allocation
The consideration transferred has been preliminarily allocated to assets acquired and liabilities assumed based on their estimated fair values at the time of the Clearwire Acquisition. The allocation of consideration transferred was based on management's judgment after evaluating several factors, including a preliminary valuation assessment. Additional analysis, including, but not limited to, the value of intangible assets, and any associated tax impacts, could result in a change in the total amount of goodwill. The preliminary allocation represents management's current best estimate of fair value, but these amounts could change as additional information is obtained and evaluated.
Of the total acquisition-related costs, the contingent acquisition-related costs paid by, or incurred by, Sprint Communications, approximately $7 million , were recorded as an expense in the Predecessor period. The following table summarizes the preliminary purchase price allocation of consideration in the Clearwire Acquisition:
Preliminary Purchase Price Allocation (in millions) :
Current assets
$
778

Property, plant and equipment
1,245

Identifiable intangibles
12,870

Goodwill
706

Other assets
25

Current liabilities
(1,063
)
Long-term debt
(4,319
)
Deferred tax liabilities
(2,400
)
Other liabilities
(851
)
Net assets acquired
$
6,991


9




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. Goodwill includes expected synergies from combining the businesses such as cost synergies from reduced network-related expenses through the elimination of redundant assets and enhanced spectrum positions, which are expected to provide greater network coverage. None of the goodwill resulting from the acquisition, which is allocated to the Wireless segment, is deductible for income tax purposes.
Identifiable intangible assets acquired in the Clearwire Acquisition include the following:
 
Estimated Fair
 Value
 
Weighted Average
Useful Life
 
(in millions)
 
(in years)
Indefinite-lived intangible assets:
 
 
 
Federal Communications Commission (FCC) licenses
$
11,884

 
n/a
 
 
 
 
Intangible assets subject to amortization:
 
 
 
Favorable spectrum and tower leases
986

 
21
 
$
12,870

 
 
FCC licenses consist of the 2.5 gigahertz (GHz) spectrum acquired. Favorable spectrum and tower leases resulted from the favorable difference between the terms of the Clearwire tower and spectrum leases acquired and the current market terms for those leases at the Clearwire Acquisition Date (see Note 7. Intangible Assets) .
Consolidated Statement of Comprehensive Loss for the period from July 10, 2013 to September 30, 2013
The following supplemental information presents the financial results of Clearwire operations included in the Consolidated Statement of Comprehensive (Loss) Income for the period from July 10, 2013 through September 30, 2013:
 
From July 10, 2013 through
September 30, 2013
 
(in millions)
Total revenues
$
169

Net loss
$
(415
)
SoftBank Transaction
On October 15, 2012, Sprint Communications entered into the Merger Agreement with SoftBank. In addition, on October 15, 2012, Sprint Communications and SoftBank entered into the Bond Agreement. In July 2013, all conditions to closing were complete and the SoftBank Merger was consummated on July 10, 2013 (SoftBank Merger Date). As a result, Starburst II, Inc. immediately changed its name to Sprint Corporation and Sprint Nextel Corporation changed its name to Sprint Communications, Inc. Pursuant to the Bond Agreement, Sprint Communications issued a Bond to Starburst II with a principal amount of $3.1 billion , interest rate of 1% , and maturity date of October 15, 2019, which was converted into 590,476,190 shares of Sprint Communications common stock at $5.25 per share at consummation of the SoftBank Merger. Sprint Communications stockholders received consideration in a combination of both cash and stock, subject to proration. As a result of the completion of the SoftBank Merger and subsequent open market stock purchases, SoftBank owns approximately 80% of the outstanding voting common stock of Sprint and other Sprint stockholders own the remaining 20% , which consisted of common shares issued pursuant to the SoftBank Merger Agreement. Cash consideration paid in the SoftBank Merger was $14.1 billion , net of cash acquired of $2.5 billion and the estimated fair value of the 22% interest in Sprint issued to former stockholders of Sprint Communications. SoftBank provided an equity contribution of $1.9 billion to Sprint at the close of the SoftBank Merger, which was not distributed to former stockholders and is intended to be used for general corporate purposes.

10




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Consideration Transferred
The fair value of consideration transferred, which is measured at the estimated fair value of each element of consideration transferred as of the SoftBank Merger Date, was determined as the sum of (a) cash transferred to Sprint Communications stockholders, (b) the number of shares of Sprint issued to Sprint Communications stockholders and (c) share-based payment awards (replacement awards) exchanged for awards held by Sprint employees. The fair value of the consideration transferred was based on the most reliable measure for each element of consideration, which was determined to be the market price of Sprint common shares as of July 11, 2013 for all non-cash consideration. The estimated fair value of the consideration transferred, based on the market price of Sprint common stock, as determined using the closing price on the New York Stock Exchange as of July 11, 2013, and the investments by SoftBank consisted of the following:
Consideration transferred and investments by SoftBank (in millions) :
 
Cash consideration paid to Sprint Communications stockholders
$
16,640

Issuance of Sprint Corporation common stock to former Sprint Communications stockholders
5,344

Estimated value of Sprint Corporation equity awards issued to holders of Sprint Communications equity awards for service provided in the pre-combination period
193

Total purchase price to be allocated
22,177

Convertible Bond
3,100

Additional capital contribution made by SoftBank
1,900

Total consideration transferred and investments by SoftBank
$
27,177

The fair value of the investments by SoftBank was determined based on the cash transferred, including $3.1 billion to purchase the Bond and $1.9 billion at the close of the SoftBank Merger. Merger-related costs (included in selling, general and administrative in the results of operations) for the SoftBank Merger totaled approximately $129 million , of which $32 million were recognized in the three-month period ended December 31, 2012 and $73 million and $97 million were recognized in the three and nine-month periods ended September 30, 2013, respectively.
Preliminary Purchase Price Allocation
The consideration transferred has been preliminarily allocated to assets acquired and liabilities assumed based on their estimated fair values as of the SoftBank Merger Date, inclusive of the Clearwire Acquisition described above. The allocation of consideration transferred was based on management's judgment after evaluating several factors, including a preliminary valuation assessment. Additional analysis, including, but not limited to, the value of property, plant and equipment and intangible assets, and any associated tax impacts, could result in a change in the total amount of goodwill. The preliminary allocation represents management's current best estimate of fair value, but these amounts could change as additional information is obtained and evaluated. In addition, because approximately $46 million of certain merger-related fees of Sprint Communications, the acquiree, were contingent upon the closing of the SoftBank Merger, these fees were not recorded as an expense subsequent to the close of the transaction. However, these fees were reflected in the preliminary purchase price allocation. Of the total acquisition-related costs, approximately $73 million of contingent merger-related costs paid by, or incurred by SoftBank on behalf of, the accounting acquirer (formerly Starburst II), were recorded as an expense in the three-month period ended September 30, 2013 Successor period.

11




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the preliminary purchase price allocation of consideration transferred:
Preliminary Purchase Price Allocation (in millions) :
Current assets
$
8,518

Investments
133

Property, plant and equipment
14,558

Identifiable intangibles
50,372

Goodwill
6,819

Other assets
235

Current liabilities
(10,705
)
Long-term debt
(29,512
)
Deferred tax liabilities
(14,257
)
Other liabilities
(3,984
)
Net assets acquired, prior to conversion of the Bond
22,177

Conversion of Bond
3,100

Net assets acquired, after conversion of the Bond
$
25,277

The excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. Goodwill includes expected synergies such as cost synergies related to scaled purchasing and other additional cost savings. Goodwill resulting from the SoftBank Merger is allocated to the Wireless segment and substantially all is not expected to be deductible for income tax purposes. Gross contractual receivables acquired and included within current assets above totaled approximately $3.4 billion for which the estimated fair value is $3.2 billion . The difference is the estimated amount of the Predecessor's allowance for doubtful accounts at the SoftBank Merger Date.
Identifiable intangible assets acquired in the SoftBank Merger include the following:
 
Estimated Fair
Value
 
Weighted Average
Useful Life
 
(in millions)
Indefinite-lived intangible assets:
 
 
 
FCC licenses
$
35,469

 
n/a
Trademarks
5,935

 
n/a
Intangible assets subject to amortization:
 
 
 
Customer relationships
6,923

 
8
Other definite-lived intangible assets
 
 
 
Favorable spectrum leases
884

 
23
Favorable tower leases
589

 
6
Trademarks
520

 
34
Other
52

 
10
 
$
50,372

 
 
Indefinite-lived intangible assets consist of 1.9 GHz, 800 megahertz (MHz), 900 MHz, and 2.5 GHz FCC licenses well as the Sprint and Boost Mobile trademarks. Intangible assets subject to amortization consist of customer relationships, favorable spectrum and tower leases resulting from the favorable difference between the terms of the tower and spectrum leases acquired and the current market terms for those leases, and the Virgin Mobile trade name (see Note 7. Intangible Assets) .

12




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Financial Information
The following unaudited pro forma consolidated results of operations assume that the SoftBank Merger and Clearwire Acquisition were completed as of January 1, 2012 for the nine-month periods ended September 30, 2013 and 2012, respectively.
 
Nine Months Ended
 
September 30,
 
2013
 
2012
 
(in millions)
Net operating revenues
$
26,810

 
$
26,749

Net loss
$
(3,188
)
 
$
(3,618
)
Basic loss per common share
$
(0.82
)
 
$
(0.94
)
The unaudited pro forma financial information was prepared to illustrate the pro forma effect of the combination of Sprint, Sprint Communications and Clearwire using the consideration transferred as of each acquisition date as though the acquisition date for each transaction occurred on January 1, 2012. The preparation of the pro forma financial information also assumed a preliminary purchase price allocation of the consideration transferred among the assets acquired and liabilities assumed for each acquiree. The pro forma financial information adjusts the actual combined results for items that are recurring in nature and directly attributable to the Clearwire Acquisition and SoftBank Merger. The pro forma net loss provided excludes certain non-recurring items such as Sprint's gain on it's previously held interest in Clearwire and transaction costs associated with the Clearwire Acquisition and SoftBank Merger. As a result, the pro forma financial information presented above excludes a net gain of $1.4 billion (See Note 4. Investments) and acquisition related costs of approximately $169 million .
This pro forma financial information has been prepared based on estimates and assumptions, which management believes are reasonable, and is not necessarily indicative of the consolidated financial position or results of operations that Sprint would have achieved had the Clearwire Acquisition and/or the SoftBank Merger actually occurred at January 1, 2012 or at any other historical date, nor is it reflective of our expected actual financial positions or results of operations for any future period.

Note 4.
Investments
T he components of investments were as follows:
 
Successor
 
 
Predecessor
 
September 30,
2013
 
December 31,
2012
 
 
December 31,
2012
 
(in millions)
Marketable equity securities
$
45

 
$
—

 
 
$
45

Equity method and other investments
92

 
—

 
 
1,008

Bond investment
—

 
2,929

 
 
—

Bond derivative
—

 
175

 
 
—

 
$
137

 
$
3,104

 
 
$
1,053

The bond investment, together with the bond derivative, for the Successor period relate to the convertible bond Sprint Communications issued (See Note 9. Long-term debt, financing and capital lease obligations) to Starburst II in connection with the Bond Agreement (See Note 3. Significant Transactions), which was accounted for as an available-for-sale investment carried at its estimated fair value by Starburst II.

13




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Consolidation of Clearwire
Sprint's Ownership Interest and Equity in Earnings/Losses
Immediately prior to the Clearwire Acquisition, Sprint Communications held approximately 50.1% of non-controlling voting interest and a 2.1% non-controlling economic interest in Clearwire Corporation as well as a 48.0% non-controlling economic interest in Clearwire Communications LLC, a wholly-owned subsidiary of Clearwire Corporation, (together, "Clearwire") for which the carrying value totaled $325 million . Prior to the consummation of the Clearwire Acquisition, we applied equity method accounting to the investment in Clearwire.
The equity in losses from our investment in Clearwire consisted of our share of Clearwire's net loss and other adjustments, if any, such as non-cash impairment of our investment, gains or losses associated with the dilution of our ownership interest resulting from Clearwire's equity issuances, derivative losses associated with the change in fair value of the embedded derivative included in the Clearwire Exchangeable Notes, and other items recognized by Clearwire Corporation that did not affect our economic interest. Equity in losses from Clearwire for the three-month period ended September 30, 2012 included a $204 million pre-tax impairment reflecting a reduction in the carrying value of the investment in Clearwire to an estimated fair value. The nine-month period ended September 30, 2012 also included charges of approximately $41 million , which were associated with Clearwire's write-off of certain network and other assets that no longer met its strategic plans. Sprint's equity in losses for the year-to-date period ended July 9, 2013, includes a $65 million derivative loss associated with the change in fair value of the embedded derivative included in the Clearwire Exchangeable Notes.
Subsequent to the Clearwire Acquisition, Clearwire is consolidated as a wholly-owned subsidiary of Sprint. In connection with the acquisition, Sprint recorded a pre-tax gain of approximately $2.9 billion to "Gain on previously-held equity interests" in its consolidated statement of comprehensive (loss) income immediately preceding the Clearwire Acquisition resulting from the difference between the estimated fair value of the interests owned prior to the acquisition ( $5.00 per share offer price less an estimated control premium of approximately $0.60) and the carrying value of approximately $325 million for those previously-held equity interests.
Summarized financial information for Clearwire for the periods preceding the Clearwire Acquisition is as follows:
 
January 1, -
 July 9,
 
July 1, -
 July 9,
 
Nine Months Ended
 
Three Months Ended
 
 
 
September 30,
 
2013
 
2013
 
2012
 
2012
 
(in millions)
Revenues
$
666

 
$
31

 
$
954

 
$
314

Operating expenses
(1,285
)
 
(62
)
 
(2,020
)
 
(647
)
Operating loss
$
(619
)
 
$
(31
)
 
$
(1,066
)
 
$
(333
)
Net loss from continuing operations before non-controlling interests
$
(909
)
 
$
(31
)
 
$
(1,312
)
 
$
(320
)
Net loss from discontinued operations before non-controlling interests
$
—

 
$
—

 
$
(179
)
 
$
(173
)
Clearwire Related-Party Transactions
Sprint's equity method investment in Clearwire included agreements by which we resold wireless data services utilizing Clearwire's 4G network. In addition, Clearwire utilized the third generation (3G) Sprint network to provide dual-mode service to its customers in those areas where access to its 4G network was not available. Cost of services and products included in our consolidated statements of comprehensive loss related to our agreement to purchase 4G services from Clearwire totaled $103 million and $312 million for the three and nine-month periods ended September 30, 2012 , respectively, and $11 million and $207 million for the periods from July 1, 2013 and January 1, 2013 to the Clearwire Acquisition, respectively.


14




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 5.
Financial Instruments
Cash and cash equivalents, restricted cash, accounts and notes receivable, and accounts payable are carried at cost, which approximates fair value. Short-term investments (consisting primarily of time deposits, commercial paper, and Treasury securities), totaling approximately $1.4 billion and $1.8 billion as of September 30, 2013 (Successor) and December 31, 2012 (Predecessor), respectively, are recorded at amortized cost, and the respective carrying amounts approximate fair value using quoted prices in active markets. The fair value of marketable equity securities totaling $45 million as of September 30, 2013 (Successor) and December 31, 2012 (Predecessor), respectively, is measured on a recurring basis using quoted prices in active markets.
The estimated fair value of the majority of our current and long-term debt, excluding the Bond and our credit facilities, is determined based on quoted prices in active markets or by using other observable inputs that are derived principally from or corroborated by observable market data. As of March 31, 2013, the outstanding carrying value under our credit facilities, which totaled $945 million (Predecessor) and approximated fair value at the time of transfer, was transferred out of estimated fair value using observable inputs and into estimated fair value using unobservable inputs due to the lack of an available pricing source. To estimate the fair value of our Clearwire Exchangeable Notes and the related embedded derivative, as well as the Bond issued by Sprint Communications to Starburst II (see Note 3. Significant Transactions) and its related bond derivative, a convertible bond pricing model was used based on the relevant interest rates, conversion feature and other significant inputs not observable in the market. The significant unobservable inputs used in the fair value measurement of the Company's exchangeable notes and related embedded derivative as well as the Bond and its related bond derivative are the credit condition of the companies, probability and timing of conversion, and discount for lack of marketability. Significant increases or decreases in any of those inputs, in isolation, would result or could have resulted in a significantly lower or higher fair value measurement. Immediately preceding the close of the SoftBank Merger on July 10, 2013, the Bond was converted into shares of Sprint Communications. As a result, there is no balance for the Bond or its related bond derivative as of September 30, 2013 .
The following table presents carrying amounts and estimated fair values of current and long-term debt, and the available-for-sale bond investment and its related bond derivative:  
 
Predecessor
 
Carrying amount at December 31, 2012
 
Estimated Fair Value Using Input Type
 
 
Quoted prices in active markets
 
Observable
 
Unobservable
 
Total estimated fair value
 
(in millions)
Current and long-term debt
$
23,569

 
$
17,506

 
$
6,118

 
$
3,104

 
$
26,728

 
Successor
 
Carrying amount at September 30, 2013
 
Estimated Fair Value Using Input Type
 
 
Quoted prices in active markets
 
Observable
 
Unobservable
 
Total estimated fair value
 
(in millions)
Current and long-term debt
$
33,001

 
$
25,900


$
5,797


$
1,215


$
32,912


Carrying amount at December 31, 2012
 
Estimated Fair Value Using Input Type
 
 
Quoted prices in active markets
 
Observable
 
Unobservable
 
Total estimated fair value
 
(in millions)
Bond investment
$
2,929

 
$
—

 
$
—

 
$
2,929

 
$
2,929

Bond derivative
$
175

 
$
—

 
$
—

 
$
175

 
$
175



15




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following is a reconciliation of recurring unobservable assets:

Successor
 
Balances as of December 31, 2012
 
Net purchases
 
Conversion of Convertible Bond
 
Accretion of bond discount recognized as interest income
 
Change in value of derivative
 
Realization of Gain on Bond recognized in other income, net
 
Transfers In (Out) of Unobservable Inputs
 
Balances as of September 30, 2013
 
(in millions)
Bond investment
$
2,929

 
$
—

 
$
(3,100
)
 
$
12

 
$
—

 
$
159

 
$
—

 
$
—

Bond derivatives
$
175

 
$
—

 
$
—

 
$
—

 
$
(175
)
 
$
—

 
$
—

 
$
—


Note 6.
Property, Plant and Equipment
Property, plant and equipment consists primarily of network equipment and other long-lived assets used to provide service to our subscribers. In the first quarter 2012, plans were formalized to take off-air roughly one-third, or 9,600 cell sites, of the total Nextel platform by the middle of 2012. The remaining sites, approximately 20,000 , were taken off-air on June 30, 2013. As a result, incremental depreciation expense was recorded through the period ended June 30, 2013. In addition, increasing data usage driven by more subscribers on the Sprint platform and a continuing shift in our subscriber base to smartphones is expected to require additional legacy 3G Sprint platform equipment that will not be utilized beyond the final deployment of Network Vision's multi-mode technology, which is expected to continue through the middle of 2014. As a result, the estimated useful lives of such equipment were shortened, as compared to similar prior capital expenditures, through the date on which Network Vision equipment is deployed and in-service. The incremental effect of accelerated depreciation expense totaled approximately $800 million for the 191-day period ended July 10, 2013, and $400 million and $1.7 billion for the three and nine-month periods ended September 30, 2012 , respectively, of which the majority related to shortened useful lives of Nextel platform assets for all periods.
Property, plant, and equipment as of September 30, 2013 includes non-cash additions for the nine-month period ended of approximately $500 million along with corresponding increases in accounts payable and accrued expenses and other current liabilities.
The components of property, plant and equipment, and the related accumulated depreciation for the Predecessor and Successor periods were as follows:
 
Successor
 
 
Predecessor
 
September 30,
2013
 
 
December 31,
2012
 
(in millions)
Land
$
265

 
 
$
330

Network equipment, site costs and related software
11,764

 
 
37,692

Buildings and improvements
711

 
 
4,893

Non-network internal use software, office equipment and other
655

 
 
1,860

Construction in progress
2,802

 
 
3,123

Less: accumulated depreciation
(885
)
 
 
(34,291
)
Property, plant and equipment, net
$
15,312

 
 
$
13,607



16




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 7.
Intangible Assets
Indefinite-Lived Intangible Assets
At September 30, 2013, we hold 1.9 GHz, 800 MHz, 900  MHz and 2.5 GHz FCC licenses authorizing the use of radio frequency spectrum to deploy our wireless services. As long as the Company acts within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. Accordingly, we have concluded that FCC licenses are indefinite-lived intangible assets.
 
Predecessor
 
December 31,
2012
 
Net
Additions
 
July 10,
2013
 
(in millions)
FCC licenses
$
20,268

 
$
12,580

 
$
32,848

Trademarks
409

 
—

 
409

Goodwill
359

 
715

 
1,074

 
$
21,036

 
$
13,295

 
$
34,331


 
Successor
 
July 11,
2013
 
Net
Additions
 
September 30,
2013
 
(in millions)
FCC licenses
$
35,469

 
$
55

 
35,524

Trademarks
5,935

 
—

 
5,935

Goodwill
6,819

 
—

 
6,819

 
$
48,223

 
$
55

 
48,278

During the period from January 1, 2013 through July 10, 2013 Sprint acquired approximately $605 million of 1.9 GHz spectrum and $11.9 billion of 2.5 GHz spectrum from U.S. Cellular and Clearwire, respectively (see Note 3. Significant Transactions) . The net additions during this Predecessor period also included approximately $91 million of costs related to our 2004 FCC Report and Order to reconfigure the 800 MHz band (Report and Order) (see Note 12. Commitments and Contingencies) .
The amounts reflected in the July 11, 2013 column represents the preliminary estimated fair value of each class of indefinite-lived intangible assets resulting from the SoftBank Merger. Trademarks, which include our Sprint and Boost Mobile tradenames, have also been identified as indefinite-lived intangible assets. The net additions for FCC licenses during the period from July 11, 2013 through September 30, 2013 were as a result of work related to our Report and Order (see Note 12. Commitments and Contingencies) .
Goodwill
Goodwill represents the excess of consideration paid over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations. We recognized $6.8 billion of goodwill associated with the SoftBank Merger in the Successor period ended September 30, 2013 (see Note 3. Significant Transactions) .
Goodwill Recoverability Assessment
The carrying value of Sprint's goodwill is included in the Wireless segment, which represents our wireless reporting unit. We estimate the fair value of the wireless reporting unit using both discounted cash flow and market-based valuation models. If the fair value of the wireless reporting unit exceeds its net book value, goodwill is not impaired, and no further testing is necessary. If the net book value of our wireless reporting unit exceeds its estimated fair value, we estimate the fair value of goodwill to determine the amount of impairment loss, if any. As a result of the preliminary remeasurement of assets acquired and liabilities assumed in connection with the SoftBank Merger, Sprint recognized goodwill at its estimate of fair value as of the SoftBank Merger Date. Since goodwill is reflected at its estimate of fair value, there is no cushion, or fair value in excess of carrying value as of the SoftBank

17




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Merger Date, and the risk associated with potential goodwill impairment in future reporting periods is heightened. The Company has not finalized the valuation associated with the SoftBank Merger. Any additional changes to the valuation and associated impact to our purchase price allocation could result in a change in the amount of goodwill reflected in these financial statements in future reporting periods.
The determination of the estimated fair value of the wireless reporting unit requires significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, transactions within the wireless industry and related control premiums, discount rate, terminal growth rate, earnings before interest, taxes, depreciation and amortization (EBITDA) and capital expenditure forecasts. Due to the inherent uncertainty involved in making those estimates, actual results could differ from those estimates. We evaluate the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the wireless reporting unit for reasonableness.
Intangible Assets Subject to Amortization
Customer relationships are amortized using the sum-of-the-months' digits method, while all other definite-lived intangible assets are amortized using the straight line method over the estimated useful lives of the respective assets. We reduce the gross carrying value and associated accumulated amortization when specified intangible assets become fully amortized. Amortization expense related to favorable spectrum and tower leases are recognized in cost of services. During the second quarter 2013, $32 million of customer relationships were recorded as a result of the acquisition of assets from U.S. Cellular (see Note 3. Significant Transactions) . In addition, during the second quarter 2013, the gross carrying value and accumulated amortization was reduced by approximately $234 million associated with fully amortized intangible assets primarily related to customer relationships in connection with the 2009 acquisition of iPCS. During the third quarter 2013, we recorded $6.9 billion of customer relationships, $884 million of favorable spectrum leases, $589 million of favorable tower leases, $520 million for trademarks and $52 million of other intangible assets as a result of the preliminary allocation of the SoftBank Merger and Clearwire Acquisition (see Note 3. Significant Transactions) .
 
 
 
Successor
 
 
Predecessor
 
 
 
September 30, 2013
 
 
December 31, 2012
 
Useful Lives
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net
Carrying
Value
 
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net
Carrying
Value
 
 
 
 
 
 
 
(in millions)
 
 
 
 
Customer relationships
4 to 8 years
 
$
6,923

 
$
(445
)
 
$
6,478

 
 
$
234

 
$
(230
)
 
$
4

Other intangible assets

 
 
 
 
 
 
 
 
 
 
 
 
 
Favorable spectrum leases
23 years
 
884

 
(10
)
 
874

 
 
—

 
—

 
—

Favorable tower leases
3 to 7 years
 
589

 
(26
)
 
563

 
 
—

 
—

 
—

Trademarks
34 years
 
520

 
(4
)
 
516

 
 
1,168

 
(681
)
 
487

Reacquired rights
9 to 14 years
 
—

 
—

 
—

 
 
1,571

 
(785
)
 
786

Other
4 to 10 years
 
54

 
(2
)
 
52

 
 
138

 
(80
)
 
58

Total other intangible assets
 
 
2,047

 
(42
)
 
2,005

 
 
2,877

 
(1,546
)
 
1,331

Total definite-lived intangible assets
 
 
$
8,970

 
$
(487
)
 
$
8,483

 
 
$
3,111

 
$
(1,776
)
 
$
1,335

 
2013
 
2014
 
2015
 
2016
 
2017
 
(in millions)
Estimated amortization expense
$
473


$
1,737


$
1,488


$
1,231


$
946


Note 8.
Accounts Payable
Accounts payable at September 30, 2013 and December 31, 2012 include liabilities in the amounts of $110 million and $117 million , respectively, for checks issued in excess of associated bank balances but not yet presented for collection.

18




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 9.
Long-Term Debt, Financing and Capital Lease Obligations
 
 
 
 
 
 
 
 
 
 
Successor
 
 
Predecessor
 
Interest Rates
 
Maturities
 
September 30,
2013
 
 
December 31,
2012
 
 
 
 
 
 
 
 
 
(in millions)
Notes
 
 
 
 
 
 
 
 
 
 
 
 
Senior notes
 
 
 
 
 
 
 
 
 
 
 
 
Sprint Corporation
7.25
-
7.88%
 
2021
-
2023
 
$
6,500

 
 
$
—

Sprint Communications, Inc.
6.00
-
11.50%
 
2016
-
2022
 
9,280

 
 
9,280

Sprint Capital Corporation
6.88
-
8.75%
 
2019
-
2032
 
6,204

 
 
6,204

Guaranteed notes
 
 
 
 
 
 
 
 
 
 
 
 
Sprint Communications, Inc.
7.00
-
9.00%
 
2018
-
2020
 
4,000

 
 
4,000

Secured notes
 
 
 
 
 
 
 
 
 
 
 
 
iPCS, Inc.
3.52%
 
2014
 
181

 
 
481

Clearwire Communications LLC
12.00
-
14.75%
 
2015
-
2017
 
3,150

 
 
—

Exchangeable notes
 
 
 
 
 
 
 
 
 
 
 
 
Clearwire Communications LLC
8.25%
 
2040
 
629

 
 
—

Convertible bonds
 
 
 
 
 
 
 
 
 
 
 
 
Sprint Communications, Inc.
1.00%
 
2019
 
—

 
 
3,100

Credit facilities
 
 
 
 
 
 
 
 
 
 
 
 
Bank credit facility
2.81%
 
2018
 
—

 
 
—

Export Development Canada
3.62%
 
2015
 
500

 
 
500

Secured equipment credit facility
2.03%
 
2017
 
715

 
 
296

Vendor financing notes
 
 
 
 
 
 
 
 
Clearwire Communications LLC
5.77
-
7.26%
 
2015
 
27

 
 
—

Financing obligation
6.09%
 
2021
 
351

 
 
698

Capital lease obligations and other
2.35
-
10.52%
 
2014
-
2023
 
199

 
 
74

Net discount from beneficial conversion feature on convertible bond
 
 
 
 
 
 
 
 
—

 
 
(247
)
Net premiums (discounts)
 
 
 
 
 
 
 
 
1,815

 
 
(45
)
 
 
 
 
 
 
 
 
 
33,551

 
 
24,341

Less current portion
 
 
 
 
 
 
 
 
(1,131
)
 
 
(379
)
Long-term debt, financing and capital lease obligations
 
 
 
 
 
 
 
 
$
32,420

 
 
$
23,962

As of September 30, 2013 , Sprint Corporation, the parent corporation, had $6.5 billion in principal amount of debt outstanding. In addition, as of September 30, 2013 , the outstanding principal amount of Senior notes issued by Sprint Communications, Inc. and Sprint Capital Corporation, Guaranteed notes issued by Sprint Communications, Inc., and Secured notes issued by iPCS, Inc. (iPCS), totaling $19.7 billion in principal amount of our long-term debt was issued by 100% owned subsidiaries was fully and unconditionally guaranteed by Sprint Corporation. The indentures and financing arrangements governing certain of our subsidiaries' debt contain provisions that limit cash dividend payments on subsidiary common stock. Except in the case of notes issued by and secured by assets of Clearwire Communications LLC, the transfer of cash in the form of advances from subsidiaries to the parent corporation generally is not restricted. Cash interest payments, net of amounts capitalized of $14 million and $269 million , respectively, totaled $309 million and $912 million during the nine-month periods ended September 30, 2013 and 2012 , respectively. Cash interest payments, net of amounts capitalized of $1 million and $29 million , totaled $6 million and $814 million during the 10-day and 191-day periods ended July 10, 2013, respectively. In the third quarter 2013, Sprint Corporation provided a guaranty in respect of the Senior notes and

19




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Guaranteed notes of Sprint Communications, Inc., the Senior notes of Sprint Capital Corporation, and the Secured notes of iPCS, Inc.
Notes
Notes consist of Senior notes, and Guaranteed notes, all of which are unsecured, as well as Secured notes of iPCS and Clearwire Communications LLC, which are secured solely by the respective underlying assets of iPCS and Clearwire Communications LLC. Cash interest on all of the notes is generally payable semi-annually in arrears. As of September 30, 2013 , approximately $29.1 billion aggregate principal amount of the notes were redeemable at the Company's discretion at the then-applicable redemption prices plus accrued interest.
As of September 30, 2013 , approximately $17.6 billion aggregate principal amount of our Senior notes and Guaranteed notes provide holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in the applicable indentures and supplemental indentures) occurs. As of September 30, 2013 , approximately $3.2 billion aggregate principal amount of Clearwire Communications LLC notes provide holders with the right to require us to repurchase the notes if a change of control occurs. If we are required to make such a change of control offer, we will offer a cash payment equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid interest.
Upon the consummation of the Clearwire Acquisition, the Clearwire Communications, LLC 8.25% Exchangeable Notes due 2040 became exchangeable at any time, at the holder’s option, for a fixed amount of cash equal to $706.21 for each $1,000 principal amount of notes surrendered. As a result, $444 million , which is the total cash consideration payable upon an exchange of all $629 million principal amount of notes outstanding, is now classified as a current debt obligation. The remaining carrying value of these notes is classified as a long-term debt obligation.
Debt Issuances
On September 11, 2013, Sprint Corporation issued $2.25 billion aggregate principal amount of 7.250% notes due 2021 and $4.25 billion aggregate principal amount of 7.875% notes due 2023 in a private placement (144A) transaction with registration rights. Interest on the notes is payable semi-annually on March 15 and September 15. The notes are guaranteed by Sprint Communications, Inc.
Sprint Communications' credit facilities contain a financial covenant requiring that, as of the last day of each fiscal quarter, Sprint Communications' ratio of total indebtedness to EBITDA (as defined) not exceed a threshold level, which was 6.25 to 1.0 at September 30, 2013. After giving effect to the offering of $6.5 billion aggregate principal amount of notes by the Company in September 2013, there was risk we would exceed the Leverage Ratio at September 30, 2013. Accordingly, we obtained a limited waiver from each of the lenders under the credit facilities that allows us to exclude $4.5 billion of indebtedness from our Leverage Ratio, which enables us to be in compliance with this financial covenant until December 31, 2013. However, as a requirement under the waivers, we must maintain a segregated reserve account of $3.5 billion until the earlier of 1) the time such funds are used to prepay, redeem or otherwise retire existing Clearwire indebtedness, or 2) December 31, 2013 at which time the waivers will have expired. Sprint intends to retire certain of Clearwire’s indebtedness prior to the expiration of the waiver, which would allow the Company to remain in compliance with its Leverage Ratio beyond the expiration of the waivers.
Debt Redemptions
On May 1, 2013, the Company paid $300 million in principal amount to redeem its outstanding iPCS, Inc. Secured Floating Rate Notes due 2013.
From September 11, 2013 through September 30, 2013, approximately $414 million in principal amount of Clearwire Communications LLC's 12% Senior Secured Notes due 2015 were retired. The funds used to retire these notes directly reduced the amount required to be segregated in the reserve account as those funds were used to redeem this Clearwire Communications LLC debt. Therefore, as of September 30, 2013 our restricted cash balance was approximately $3.1 billion ( See Note 15. Subsequent Events for additional subsequent redemptions).
On September 30, 2013, Sprint's wholly-owned subsidiaries, Clearwire Communications LLC and Clearwire Finance, Inc. (the Issuers) issued a notice to redeem $175 million , classified as a current debt obligation,

20




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of the $500 million principal amount outstanding of Clearwire Communications LLC's 12% second-priority secured notes due 2017, setting a redemption date of October 30, 2013. Furthermore, on October 24, 2013, the Issuers issued notices to redeem on December 1, 2013, all of the then outstanding principal amount of their 12% senior secured notes due 2015, as well as the remaining $325 million aggregate principal amount of 12% second-priority secured notes due 2017. As of September 30, 2013, the principal amount outstanding for Clearwire Communications LLC's 12% senior secured notes due 2015 was approximately $2.4 billion .
Credit Facilities
The Company has a $3.0 billion unsecured revolving bank credit facility that expires in February 2018 with an interest rate equal to the London Interbank Offered Rate (LIBOR) plus a spread that varies depending on the Company’s credit ratings. As of September 30, 2013 , approximately $915 million in letters of credit were outstanding under this credit facility, including the letter of credit required by the Report and Order. As a result of the outstanding letters of credit, which directly reduce the availability of borrowings under this facility, there was $2.1 billion of borrowing capacity available as of September 30, 2013 . The unsecured Export Development Canada (EDC) credit facility and secured equipment credit facility were amended on March 12, 2013, and June 24, 2013, respectively to provide for terms similar to those of the bank revolving credit facility, except that under the terms of the EDC credit facility and the secured equipment credit facility, repayments of outstanding amounts cannot be re-drawn. As of September 30, 2013 , the EDC credit facility was fully drawn.
As of September 30, 2013, we had fully drawn the first tranche of the secured equipment credit facility totaling $500 million and made two equal regularly scheduled principal repayments totaling $111 million during 2013. The second tranche of $500 million became available to draw upon through May 31, 2014, although the use of such funds is limited to equipment-related purchases from Ericsson Inc. (Ericsson). As of September 30, 2013 , we had drawn approximately $ 326 million on the second tranche of the facility. The cost of funds under this facility includes a fixed interest rate of 2.03% , and export credit agency premiums and other fees that, in total, equate to an expected effective interest rate of approximately 6% based on assumptions such as timing and amounts of drawdowns. The facility is secured by a lien on the equipment purchased and is fully and unconditionally guaranteed by Sprint Communications, Inc.
Financing, Capital Lease and Other Obligations
We have approximately 3,000 cell sites that we sold and subsequently leased back. Terms extend through 2021, with renewal options for an additional 20 years. These cell sites continue to be reported as part of our property, plant and equipment due to our continued involvement with the property sold and the transaction is accounted for as a financing. Our capital lease and other obligations are primarily for the use of wireless network equipment.
Covenants
Certain indentures that govern our outstanding notes also require compliance with various covenants, including covenants that limit the Company's ability to sell all or substantially all of its assets, to incur indebtedness, and to incur liens, as defined by the terms of the indentures.
As of September 30, 2013 , the Company was in compliance with all restrictive and financial covenants associated with its borrowings. A default under any of our borrowings could trigger defaults under our other debt obligations, which in turn could result in the maturities being accelerated.
We are currently restricted from paying cash dividends because our ratio of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and certain other non-recurring items (adjusted EBITDA), as defined in the credit facilities, exceeds 2.5 to 1.0 .

Note 10.
Severance, Exit Costs and Asset Impairments
Severance and Exit Costs Activity
For the three and nine-month periods ended September 30, 2013 as well as for the 191-day period ended July 10, 2013, we recognized lease exit costs associated with the decommissioning of the Nextel Platform. For the

21




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10-day period ended July 10, 2013, we recognized a benefit in lease exit costs due to the changes in estimates for lease exit costs previously recognized.
For the three and nine-month periods ended September 30, 2013 as well as for the 10-day and 191-day periods ended July 10, 2013, we also recognized severance costs associated with reductions in force and access exit costs related to payments that will continue to be made under our backhaul access contracts for which we will no longer be receiving any economic benefit.
As a result of Network Vision and the completion of the Significant Transactions (see Note 3. Significant Transactions) , we expect to incur additional exit costs in the future related to the transition of our existing backhaul architecture to a replacement technology for our network and the efforts associated with the integration of our Significant Transactions, such as the evaluation of future use of the Clearwire 4G broadband network, among other initiatives. These additional exit costs are expected to range between approximately $275 million to $375 million , of which the majority are expected to be incurred through first quarter 2016.
The following provides the activity in the severance and exit costs liability included in "Accounts payable," "Accrued expenses and other current liabilities" and "Other liabilities" within the consolidated balance sheets:
 
Predecessor
 
December 31,
2012
 
Purchase Price
Adjustments
 
Net
Expense
 
 
Cash Payments
and Other
 
July 10,
2013
 
(in millions)
Lease exit costs
$
190

 
$
131

 
$
478

(1)  
 
$
(33
)
 
$
766

Severance costs
11

 
—

 
58

(2)  
 
(15
)
 
54

Access exit costs
43

 
—

 
151

(3)  
 
(5
)
 
189

 
$
244

 
$
131

 
$
687

 
 
$
(53
)
 
$
1,009

 _________________
(1) For the 10-day and 191-day periods ended July 10, 2013, we recognized a benefit of $37 million due to the changes in estimates for lease exit costs previously recognized and net costs of $478 million (solely attributable to our Wireless segment), respectively.
(2) For the 10-day and 191-day periods ended July 10, 2013, we recognized $32 million (solely attributable to our Wireless segment) and $58 million ( $55 million Wireless, and $3 million was Wireline), respectively.
(3) For the 10-day period ended July 10, 2013, we did not record any access exit costs. Of the $151 million ( $133 million Wireless; $18 million Wireline) recognized for the 191-day period ended July 10, 2013, $35 million was recognized as "Cost of services and products" and $116 million was recognized in "Severance, exit costs and asset impairments."

 
Successor
 
July 11,
2013

 
Net
Expense


Cash Payments
and Other

September 30,
2013
 
(in millions)
Lease exit costs
$
772

(4)  
 
$
45

(5)  

$
46


$
863

Severance costs
54


 
41

(6)  

(17
)

78

Access exit costs
189


 
24

(7)  

(52
)

161


$
1,015


 
$
110



$
(23
)

$
1,102

 _________________
(4) The July 11, 2013 opening balance takes into account purchase price adjustments as it relates to the SoftBank Merger.
(5) For the three- and nine-month periods ended September 30, 2013, we recognized costs of $45 million ( $43 million Wireless, $2 million Wireline).
(6) For the three- and nine-month periods ended September 30, 2013, we recognized costs of $41 million ( $33 million Wireless, $8 million Wireline).
(7) For the three- and nine-month periods ended September 30, 2013, $7 million (solely attributable to Wireline) was recognized as "Cost of services and products" and $17 million (solely attributable to Wireless) was recognized in "Severance, exit costs and assets impairments."
Asset Impairments
There were no asset impairments for the three and nine-month periods ended September 30, 2013 or for the 10-day and 191-day period ended July 10, 2013 .


22




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 11.
Income Taxes
The differences that caused our effective income tax rates to vary from the 35% U.S. federal statutory rate for income taxes were as follows:
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
 
191 Days Ended
 
Nine Months Ended
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
 
2013
 
2012
 
(in millions)
Income tax benefit (expense) at the federal statutory rate
$
277

 
 
$
(155
)
 
$
1,013

Effect of:
 
 
 
 
 
 
State income taxes, net of federal income tax effect
35

 
 
(15
)
 
104

Change in valuation allowance
(327
)
 
 
(1,410
)
 
(1,210
)
Other, net
(15
)
 
 
(21
)
 
(17
)
Income tax expense
$
(30
)
 
 
$
(1,601
)
 
$
(110
)
Effective income tax rate
(3.8
)%
 
 
(361.4
)%
 
(3.8
)%
The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards and credits. However, our history of annual losses reduces our ability to rely on expectations of future income in evaluating the ability to realize our deferred tax assets. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. As a result, the Company recognized an increase in the valuation allowance of $327 million and $1.2 billion for the nine-month periods ended September 30, 2013 and 2012 , respectively, and $1.4 billion for the 191-day period ended July 10, 2013 on deferred tax assets primarily related to losses incurred during the period that are not currently realizable and expenses recorded during the period that are not currently deducted for income tax purposes. The valuation allowance was $7.0 billion and $5.7 billion as of September 30, 2013 and December 31, 2012 , respectively. We do not expect to record significant tax benefits on future net operating losses until our circumstances justify the recognition of such benefits.
Income tax expense of $30 million and $110 million for the nine-month periods ended September 30, 2013 and 2012 , respectively, and $1.6 billion for the 191-day period ended July 10, 2013, is primarily attributable to taxable temporary differences from the $2.9 billion gain on the previously-held equity interests in Clearwire for the 191-day period and from amortization of FCC licenses for all other periods. The gain on the previously-held equity interests in Clearwire was principally attributable to the increase in the fair value of FCC licenses held by Clearwire. FCC licenses are amortized over 15 years for income tax purposes but, because these licenses have an indefinite life, they are not amortized for financial statement reporting purposes. These temporary differences result in net deferred income tax expense since they cannot be scheduled to reverse during the loss carryforward period. In addition, during the nine-month period ended September 30, 2012 , a $33 million tax benefit was recorded as a result of the successful resolution of various state income tax uncertainties.
As of September 30, 2013 and December 31, 2012 , we maintained a liability related to unrecognized tax benefits of $183 million and $171 million , respectively. Cash received or paid for income taxes was insignificant during the nine-month periods ended September 30, 2013 and 2012 , as well as during the 191-day period ended July 10, 2013.

Note 12.
Commitments and Contingencies
Litigation, Claims and Assessments
In March 2009, a stockholder brought suit, Bennett v. Sprint Nextel Corp. , in the U.S. District Court for the District of Kansas, alleging that Sprint Communications and three of its former officers violated Section 10(b) of the Exchange Act and Rule 10b-5 by failing adequately to disclose certain alleged operational difficulties subsequent to the Sprint-Nextel merger, and by purportedly issuing false and misleading statements regarding the write-down of goodwill. The plaintiff seeks class action status for purchasers of Sprint Communications common stock from

23




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

October 26, 2006 to February 27, 2008. On January 6, 2011, the Court denied the motion to dismiss. Subsequently, its motion to certify the January 6, 2011 order for an interlocutory appeal was denied, and discovery is continuing. The plaintiff moved to certify a class of bondholders as well as owners of common stock, and Sprint Communications has opposed that motion. Sprint Communications believes the complaint is without merit and intend to continue to defend the matter vigorously. We do not expect the resolution of this matter to have a material adverse effect on our financial position or results of operations.
In addition, five related stockholder derivative suits were filed against Sprint Communications and certain of its present and/or former officers and directors. The first, Murphy v. Forsee , was filed in state court in Kansas on April 8, 2009, was removed to federal court, and was stayed by the court pending resolution of the motion to dismiss the Bennett case; the second, Randolph v. Forsee , was filed on July 15, 2010 in state court in Kansas, was removed to federal court, and was remanded back to state court; the third, Ross-Williams v. Bennett, et al. , was filed in state court in Kansas on February 1, 2011; the fourth, Price v. Forsee, et al., was filed in state court in Kansas on April 15, 2011; and the fifth, Hartleib v. Forsee, et. al ., was filed in federal court in Kansas on July 14, 2011. These cases are essentially stayed while the Bennett case is in the discovery phase. We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations.
On April 19, 2012, the New York Attorney General filed a complaint alleging that Sprint Communications has fraudulently failed to collect and pay more than $100 million in New York sales taxes on receipts from its sale of wireless telephone services since July 2005. The complaint seeks recovery of triple damages as well as penalties and interest. Sprint Communications moved to dismiss the complaint on June 14, 2012. On July 1, 2013, the court entered an order denying the motion to dismiss in large part, although it did dismiss certain counts or parts of certain counts. Sprint Communications has appealed that order and the parties are in the process of briefing the appeal. We believe the complaint is without merit and intend to continue to defend this matter vigorously. We do not expect the resolution of this matter to have a material adverse effect on our financial position or results of operations. On July 23, 2012, the SEC issued a formal order of investigation relating to Sprint Communications' sales tax collection. On July 2, 2013, the SEC notified Sprint Communications that it was closing its investigation and did not intend to recommend an enforcement action against it.
In addition, eight related stockholder derivative suits were filed against Sprint Communications and certain of its current and former officers and directors. Each suit alleges generally that the individual defendants breached their fiduciary duties to Sprint Communications and its stockholders by allegedly permitting, and failing to disclose, the actions alleged in the suit filed by the New York Attorney General. One suit, filed by the Louisiana Municipal Police Employees Retirement System, is pending in federal court in New York; two suits are pending in state court in Johnson County, Kansas; and five suits are pending in federal court in Kansas. Six of the Kansas suits have been stayed by agreement among the parties. The defendants filed a motion to dismiss the New York suit on September 19, 2012, and on July 26, 2013, the court granted the motion and dismissed the suit; plaintiff has appealed. We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations.
The Company has received several complaints purporting to assert claims on behalf of Sprint Communications stockholders, alleging that members of the board of directors breached their fiduciary duties in agreeing to the SoftBank Merger, and otherwise challenging that transaction. There are five cases consolidated in state court in Johnson County, Kansas:  UFCW Local 23 and Employers Pension Fund, et al. v. Bennett, et al ., filed on October 25, 2012; Iron Workers Mid-South Pension Fund, et al. v. Hesse, et al ., filed on October 25, 2012; City of Dearborn Heights Act 345 Police and Fire Retirement System v. Sprint Nextel Corp. , et al ., filed on October 29, 2012; Testani, et al. v. Sprint Nextel Corp., et al ., filed on November 1, 2012; and Patten, et al. v. Sprint Nextel Corp., et al ., filed on November 1, 2012. There are two cases filed in federal court in the District of Kansas, entitled Gerbino, et al. v. Sprint Nextel Corp., et al ., filed on November 15, 2012, and Steinberg, et al. v. Bennett, et al. , filed on May 16, 2013 (and now consolidated with Gerbino ). Plaintiffs in the state cases have indicated that they do not intend to challenge the transaction as completed, and have moved for an order granting attorneys' fees and expenses. Sprint Communications is opposing that motion and intends to defend these cases vigorously, and we do not expect the resolution of these matters to have a material effect on its financial position or results of operations.

24




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Sprint Communications is also a defendant in several complaints filed by stockholders of Clearwire Corporation asserting claims for breach of fiduciary duty by Sprint Communications, and related claims and otherwise challenging the Clearwire Acquisition. There were five suits filed in Chancery Court in Delaware:  Crest Financial Limited v. Sprint Nextel Corp., et al. , filed on December 12, 2012; Katsman v. Prusch, et al ., filed December 20, 2012; Feigeles, et al. v. Clearwire Corp., et al. , filed December 28, 2012; Litwin, et al. v. Sprint Nextel Corp., et al ., filed January 2, 2013; and ACP Master, LTD, et al. v. Sprint Nextel Corp., et al. , filed April 26, 2013. All suits except the ACP Master, LTD suit have been voluntarily dismissed by the plaintiffs. Plaintiffs in the ACP Master, LTD suit have also filed suit requesting an appraisal of the fair value of their Clearwire stock. There were three cases filed in state court in King County, Washington, and those cases have been dismissed with prejudice. Sprint Communications intends to defend the ACP Master, LTD cases vigorously, and, because these cases are still in the preliminary stages, we have not yet determined what effect the lawsuits will have, if any, on our financial position or results of operations.
Although a jury returned a verdict on August 2, 2013 related to the Ayyad v. Sprint Spectrum case, no judgment has yet been entered, and the Company does not expect final resolution of this matter to have a material adverse effect on our financial position or results of operation.
Sprint is currently involved in numerous court actions alleging that Sprint is infringing various patents. Most of these cases effectively seek only monetary damages. A small number of these cases are brought by companies that sell products and seek injunctive relief as well. These cases have progressed to various degrees and a small number may go to trial if they are not otherwise resolved. Adverse resolution of these cases could require us to pay significant damages, cease certain activities, or cease selling the relevant products and services. In many circumstances, we would be indemnified for monetary losses that we incur with respect to the actions of our suppliers or service providers. We do not expect the resolution of these cases to have a material adverse effect on our financial position or results of operations.
Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations.
Spectrum Reconfiguration Obligations
In 2004, the FCC adopted a Report and Order that included new rules regarding interference in the 800 MHz band and a comprehensive plan to reconfigure the 800 MHz band. The Report and Order provides for the exchange of a portion of our 800 MHz FCC spectrum licenses, and requires us to fund the cost incurred by public safety systems and other incumbent licensees to reconfigure the 800 MHz spectrum band. Also, in exchange, we received licenses for 10 MHz of nationwide spectrum in the 1.9 GHz band; however, we were required to relocate and reimburse the incumbent licensees in this band for their costs of relocation to another band designated by the FCC. We completed all of our 1.9 GHz incumbent relocation and reimbursement obligations in the second half of 2010.
The minimum cash obligation is $2.8 billion under the Report and Order. We are, however, obligated to pay the full amount of the costs relating to the reconfiguration plan, even if those costs exceed $2.8 billion . As required under the terms of the Report and Order, a letter of credit has been secured to provide assurance that funds will be available to pay the relocation costs of the incumbent users of the 800 MHz spectrum. Total payments directly attributable to our performance under the Report and Order, from the inception of the program, are approximately $3.3 billion , of which primarily all payments incurred during the nine-month period ended September 30, 2013 related to FCC licenses. When incurred, these costs are generally accounted for either as property, plant and equipment or as additions to FCC licenses. Although costs incurred to date have exceeded $2.8 billion , not all of those costs have been reviewed and accepted as eligible by the transition administrator.

25




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Completion of the 800 MHz band reconfiguration was initially required by June 26, 2008. The FCC continues to grant 800 MHz public safety licensees additional time to complete their band reconfigurations which, in turn, delays our access to some of our 800 MHz replacement channels. Accordingly, we will continue to transition to our 800 MHz replacement channels consistent with public safety licensees' reconfiguration progress. On May 24, 2012, the FCC revised its rules to authorize Sprint to deploy wireless broadband services, such as CDMA and LTE, on its 800 MHz spectrum, including channels that become available to Sprint upon completion of the 800 MHz band reconfiguration program.We anticipate that the continuing reconfiguration progress will be sufficient to support the 800 MHz portion of our Network Vision deployment. In January 2013, we submitted a Request for Declaratory Ruling to the FCC requesting two items: (i) that it declare that Sprint will not owe any anti-windfall payment to the US Treasury, because we have exceeded the $2.8 billion of required expenditures, and (ii) that the FCC remove the $850 million minimum for the letter of credit and allow further reductions based on quarterly estimates of remaining obligations. This Request for Declaratory Ruling is pending before the FCC.
Contractual Obligations
As a result of the Clearwire Acquisition, we assumed additional future contractual obligation commitments of approximately $9.6 billion , of which $2.7 billion is attributable to additional operating lease commitments, $6.8 billion is additional spectrum lease commitments, and $100 million is related to spectrum service credits.

Note 13.
Per Share Data
Basic net (loss) income per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per common share adjusts basic net (loss) income per common share, computed using the treasury stock method, for the effects of potentially dilutive common shares, if the effect is not antidilutive. Potentially dilutive common shares issuable under our equity-based compensation plans where the average market price exceeded the exercise price were 38 million and 12 million shares for the year-to-date periods ending September 30, 2013 and 2012 , respectively, and 33 million shares for the year-to-date period ending July 10, 2013 . In addition, as of September 30, 2013 , all 55 million shares issuable under the warrant with Softbank were treated as potentially dilutive securities. However, all such potentially dilutive shares were antidilutive for the three and nine-month periods ended September 30, 2013 and 2012 as well as the 191-day period ended July 10, 2013, and therefore, have no effect on our determination of dilutive weighted average number of shares outstanding. The computation of diluted net (loss) income per common share for the 10-day period ended July 10, 2013 includes the effect of dilutive securities consisting of approximately 22 million options and restricted stock units, in addition to 532 million shares issuable under the convertible bond prior to its conversion on July 10, 2013. Outstanding options to purchase shares totaling 12 million for the 10-day period ended July 10, 2013 were not included in the computation of diluted net (loss) income per common share because to do so would have been antidilutive.

Note 14.
Segments
Sprint operates two reportable segments: Wireless and Wireline.
•
Wireless primarily includes retail, wholesale, and affiliate revenue from a wide array of wireless voice and data transmission services and equipment revenue from the sale of wireless devices and accessories in the United States, Puerto Rico and the U.S. Virgin Islands.
•
Wireline primarily includes revenue from domestic and international wireline voice and data communication services, including services to the cable multiple systems operators that resell our local and long distance services and use our back office systems and network assets in support of their telephone services provided over cable facilities primarily to residential end-use subscribers.
We define segment earnings as wireless or wireline operating (loss) income before other segment expenses such as depreciation, amortization, severance, exit costs, goodwill impairments, asset impairments, and other items, if any, solely and directly attributable to the segment representing items of a non-recurring or unusual

26




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

nature. Expense and income items excluded from segment earnings are managed at the corporate level. Transactions between segments are generally accounted for based on market rates, which we believe approximate fair value. The Company generally re-establishes these rates at the beginning of each fiscal year. Over the past several years, there has been an industry-wide trend of lower rates due to increased competition from other wireline and wireless communications companies as well as cable and Internet service providers.
Segment financial information is as follows:  
Predecessor
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
191 Days Ended July 10, 2013
 
 
 
 
 
 
 
Net operating revenues
$
17,125

 
$
1,471

 
$
6

 
$
18,602

Inter-segment revenues (1)
—

 
430

 
(430
)
 
—

Total segment operating expenses
(14,355
)
 
(1,629
)
 
425

 
(15,559
)
Segment earnings
$
2,770

 
$
272

 
$
1

 
3,043

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(3,098
)
Amortization
 
 
 
 
 
 
(147
)
Other, net (2)
 
 
 
 
 
 
(683
)
Operating loss
 
 
 
 
 
 
(885
)
Interest expense
 
 
 
 
 
 
(1,135
)
Equity in losses of unconsolidated investments, net
 
 
 
 
$
(482
)
 
 
Gain on previously-held equity interests
 
 
 
 
2,926

 
2,444

Other income, net
 
 
 
 
 
 
19

Income before income taxes
 
 
 
 
 
 
$
443

 
 
 
 
 
 
 
 
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
10 Days Ended July 10, 2013
 
 
 
 
 
 
 
Net operating revenues
$
858

 
$
74

 
$
—

 
$
932

Inter-segment revenues (1)
—

 
24

 
(24
)
 
—

Total segment operating expenses
(777
)
 
(83
)
 
23

 
(837
)
Segment earnings
$
81

 
$
15

 
$
(1
)
 
95

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(113
)
Amortization
 
 
 
 
 
 
(8
)
Other, net (2)
 
 
 
 
 
 
(14
)
Operating loss
 
 
 
 
 
 
(40
)
Interest expense
 
 
 
 
 
 
(275
)
Equity in losses of unconsolidated investments, net
 
 
 
 
$
(23
)
 
 
Gain on previously-held equity interests
 
 
 
 
2,926

 
2,903

Other income, net
 
 
 
 
 
 
2

Income before income taxes
 
 
 
 
 
 
$
2,590

 
 
 
 
 
 
 
 

27




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
Net operating revenues
$
24,059

 
$
2,272

 
$
9

 
$
26,340

Inter-segment revenues (1)
—

 
660

 
(660
)
 
—

Total segment operating expenses
(20,590
)
 
(2,464
)
 
657

 
(22,397
)
Segment earnings
$
3,469

 
$
468

 
$
6

 
3,943

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(4,820
)
Amortization
 
 
 
 
 
 
(230
)
Other, net (2)
 
 
 
 
 
 
(8
)
Operating income
 
 
 
 
 
 
(1,115
)
Interest expense
 
 
 
 
 
 
(996
)
Equity in losses of unconsolidated investments, net
 
 
 
 
$
(927
)
 
(927
)
Other income, net
 
 
 
 
 
 
144

Loss before income taxes
 
 
 
 
 
 
$
(2,894
)
 
 
 
 
 
 
 
 
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
Three Months Ended September 30, 2012
 
 
 
 
 
 
 
Net operating revenues
$
8,042

 
$
717

 
$
4

 
$
8,763

Inter-segment revenues (1)
—

 
222

 
(222
)
 
—

Total segment operating expenses
(6,924
)
 
(781
)
 
221

 
(7,484
)
Segment earnings
$
1,118

 
$
158

 
$
3

 
1,279

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(1,411
)
Amortization
 
 
 
 
 
 
(77
)
Other, net (2)
 
 
 
 
 
 
(22
)
Operating income
 
 
 
 
 
 
(231
)
Interest expense
 
 
 
 
 
 
(377
)
Equity in losses of unconsolidated investments, net
 
 
 
 
$
(208
)
 
(208
)
Other income, net
 
 
 
 
 
 
96

Loss before income taxes
 
 
 
 
 
 
$
(720
)
 
 
 
 
 
 
 
 
Other Information
Wireless
 
Wireline
 
Corporate and
Other
 
Consolidated
 
(in millions)
Capital expenditures for the 191 days ended July 10, 2013
$
2,840

 
$
174

 
$
126

 
$
3,140

Capital expenditures for the nine months ended September 30, 2012
$
2,413

 
$
186

 
$
185

 
$
2,784

 
 
 
 
 
 
 
 


28




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Successor
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
Net operating revenues
$
7,159

 
$
586

 
$
4

 
$
7,749

Inter-segment revenues (1)
—

 
191

 
(191
)
 
—

Total segment operating expenses
(6,034
)
 
(660
)
 
157

 
(6,537
)
Segment earnings
$
1,125

 
$
117

 
$
(30
)
 
1,212

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(942
)
Amortization
 
 
 
 
 
 
(461
)
Other, net (2)
 
 
 
 
 
 
(203
)
Operating loss
 
 
 
 
 
 
(394
)
Interest expense
 
 
 
 
 
 
(416
)
Other income, net
 
 
 
 

 
18

Loss before income taxes
 
 
 
 
 
 
$
(792
)
 
 
 
 
 
 
 
 
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
Three Months Ended September 30, 2013
 
 
 
 
 
 
 
Net operating revenues
$
7,159

 
$
586

 
$
4

 
$
7,749

Inter-segment revenues (1)
—

 
191

 
(191
)
 
—

Total segment operating expenses
(6,034
)
 
(660
)
 
193

 
(6,501
)
Segment earnings
$
1,125

 
$
117

 
$
6

 
1,248

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(942
)
Amortization
 
 
 
 
 
 
(461
)
Other, net (2)
 
 
 
 
 
 
(203
)
Operating loss
 
 
 
 
 
 
(358
)
Interest expense
 
 
 
 
 
 
(416
)
Other income, net
 
 
 
 
 
 
165

Loss before income taxes
 
 
 
 
 
 
$
(609
)
 
 
 
 
 
 
 
 
Other Information
Wireless
 
Wireline
 
Corporate and
Other
 
Consolidated
 
(in millions)
Capital expenditures for the nine months ended September 30, 2013
$
1,743

 
$
73

 
$
62

 
$
1,878

 _________________
(1)
Inter-segment revenues consist primarily of wireline services provided to the Wireless segment for resale to or use by wireless subscribers.
(2)
Other, net for the three and nine-month periods ended September 30, 2013 consists of severance and exit costs of $103 million and $100 million , respectively, of business combination fees paid to unrelated parties in connection with the transactions with SoftBank and Clearwire ( $75 million included in our corporate segment and $25 million included in our wireless segment and classified in our consolidated statements of comprehensive income (loss) as selling, general and administrative expenses). Other, net for the 191-day period ended July 10, 2013 consists of severance and exit costs of $652 million and $53 million of business combination fees paid to unrelated parties in connection with the transactions with SoftBank and Clearwire (included in our corporate segment and classified in our consolidated statements of comprehensive income (loss) as selling, general and administrative expenses), partially offset by $22 million of favorable developments in connection with an E911 regulatory tax-related contingency. Other, net for the 10-day period ended July 10, 2013 consists of $32 million of severance costs primarily associated with the Clearwire Acquisition and $19 million of business combination fees paid to unrelated parties in connection with the transactions with SoftBank and Clearwire, partially offset by $37 million related to changes in estimates for lease exit costs previously recognized. Other, net for the nine-month period ended September 30, 2012 consists of net operating income of $236 million associated with the termination of the spectrum hosting arrangement with LightSquared, a gain of $29 million on spectrum swap transactions, and a benefit of $17 million resulting from favorable developments relating to access cost disputes associated with prior periods, partially offset by $206 million of lease exit costs and $84 million of asset impairment charges. Other, net for the three-month period ended September 30, 2012 consists of $22 million of lease exit costs associated with the shut-down of the Nextel platform.

29




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Predecessor
Operating Revenues by Service and Products
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations (1)
 
Consolidated
 
(in millions)
191 Days Ended July 10, 2013
 
 
 
 
 
 
 
Wireless services
$
15,139

 
$
—

 
$
—

 
$
15,139

Wireless equipment
1,707

 
—

 
—

 
1,707

Voice
—

 
771

 
(236
)
 
535

Data
—

 
188

 
(93
)
 
95

Internet
—

 
913

 
(100
)
 
813

Other
279

 
29

 
5

 
313

Total net operating revenues
$
17,125

 
$
1,901

 
$
(424
)
 
$
18,602

 
 
 
 
 
 
 
 
 
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations (1)
 
Consolidated
 
(in millions)
10 Days Ended July 10, 2013
 
 
 
 
 
 
 
Wireless services
$
769

 
$
—

 
$
—

 
$
769

Wireless equipment
74

 
—

 
—

 
74

Voice
—

 
42

 
(15
)
 
27

Data
—

 
7

 
(3
)
 
4

Internet
—

 
47

 
(5
)
 
42

Other
15

 
2

 
(1
)
 
16

Total net operating revenues
$
858

 
$
98

 
$
(24
)
 
$
932

 
 
 
 
 
 
 
 
 
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations (1)
 
Consolidated
 
(in millions)
Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
Wireless services
$
21,473

 
$
—

 
$
—

 
$
21,473

Wireless equipment
2,238

 
—

 
—

 
2,238

Voice
—

 
1,242

 
(388
)
 
854

Data
—

 
302

 
(132
)
 
170

Internet
—

 
1,330

 
(141
)
 
1,189

Other
348

 
58

 
10

 
416

Total net operating revenues
$
24,059

 
$
2,932

 
$
(651
)
 
$
26,340

 
 
 
 
 
 
 
 
 
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations (1)
 
Consolidated
 
(in millions)
Three Months Ended September 30, 2012
 
 
 
 
 
 
 
Wireless services
$
7,171

 
$
—

 
$
—

 
$
7,171

Wireless equipment
750

 
—

 
—

 
750

Voice
—

 
399

 
(131
)
 
268

Data
—

 
95

 
(45
)
 
50

Internet
—

 
428

 
(47
)
 
381

Other
121

 
17

 
5

 
143

Total net operating revenues
$
8,042

 
$
939

 
$
(218
)
 
$
8,763

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

30




SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Successor
Operating Revenues by Service and Products
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations (1)
 
Consolidated
 
(in millions)
Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
Wireless services
$
6,399

 
$
—

 
$
—

 
$
6,399

Wireless equipment
636

 
—

 
—

 
636

Voice
—

 
333

 
(120
)
 
213

Data
—

 
57

 
(23
)
 
34

Internet
—

 
373

 
(46
)
 
327

Other
124

 
14

 
2

 
140

Total net operating revenues
$
7,159

 
$
777

 
$
(187
)
 
$
7,749

 
 
 
 
 
 
 
 
 
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations (1)
 
Consolidated
 
(in millions)
Three Months Ended September 30, 2013
 
 
 
 
 
 
 
Wireless services
$
6,399

 
$
—

 
$
—

 
$
6,399

Wireless equipment
636

 
—

 
—

 
636

Voice
—

 
333

 
(120
)
 
213

Data
—

 
57

 
(23
)
 
34

Internet
—

 
373

 
(46
)
 
327

Other
124

 
14

 
2

 
140

Total net operating revenues
$
7,159

 
$
777

 
$
(187
)
 
$
7,749

 
 
 
 
 
 
 
 
_______________
(1)
Revenues eliminated in consolidation consist primarily of wireline services provided to the Wireless segment for resale to or use by wireless subscribers.

Note 15.
Subsequent Events
On October 17, 2013, Sprint's wholly-owned subsidiaries, Clearwire Communications LLC and Clearwire Finance, Inc. (the Issuers) entered into a supplemental indenture related to the 8.25% Exchangeable Notes due 2040 that 1) permitted the periodic reports filed by Sprint (rather than Clearwire Corporation) with the SEC to satisfy the Issuers' reporting and related obligations in the event that Sprint and Sprint Communications unconditionally guarantee the Notes and 2) agreed to use commercially reasonable efforts to obtain credit ratings for these Notes due 2040 by two national rating agencies.
On October 24, 2013, the Issuers issued notices to redeem on December 1, 2013, all of the remaining outstanding principal amount of Clearwire Communications LLC's 12% Senior secured notes due 2015, as well as the remaining $325 million 12% Second-priority secured notes due 2017. Furthermore, on October 30, 2013, the Issuers redeemed $175 million aggregate principal amount of the $500 million principal amount outstanding of Clearwire Communications LLC's 12% Second-priority secured notes due 2017. As of September 30, 2013, the principal amount outstanding of Clearwire Communications LLC's 12% Senior secured notes due 2015 was approximately $2.4 billion . These amounts directly reduce the $3.1 billion balance reported as of September 30, 2013 that is required to be segregated in the reserve account (See Note 9. Long-term debt, financing and capital lease obligations) .

31

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW     
Sprint Corporation, including its consolidated subsidiaries, is a communications company offering a comprehensive range of wireless and wireline communications products and services that are designed to meet the needs of individual consumers, businesses, government subscribers, and resellers. Unless the context otherwise requires, references to “Sprint,” “we,” “us,” “our” and the “Company” mean Sprint Corporation and its consolidated subsidiaries for all periods presented, inclusive of Successor and Predecessor periods, and references to "Sprint Communications" are to Sprint Communications, Inc. and its consolidated subsidiaries. The communications industry has been and will continue to be highly competitive on the basis of the quality and types of services and devices offered, as well as price. We are currently undergoing a significant multi-year program, Network Vision, to upgrade our existing wireless communication network, including the decommissioning of our Nextel platform, which was successfully shut-down on June 30, 2013 (see “Overview - Multi-Modal Nationwide LTE Network Development”). To support our business strategy and expected capital requirements, we entered into a $3.0 billion unsecured revolving credit facility and raised debt financing of approximately $6.5 billion in 2013. Additionally, we raised equity funding of approximately $5.0 billion in 2013, including the conversion of the $3.1 billion convertible Bond issued to Starburst II in 2012, through the SoftBank Merger (see Significant Transactions) . In 2012, we raised debt financing of approximately $8.9 billion in addition to executing a $1.0 billion secured equipment credit facility with a remaining borrowing capacity of up to $174 million available to draw through May 31, 2014 (see “Liquidity and Capital Resources”). 
Significant Transactions
On November 6, 2012, Sprint Communications entered into a definitive agreement with United States Cellular Corporation (U.S. Cellular) to acquire personal communications services (PCS) spectrum and customers in parts of Illinois, Indiana, Michigan, Missouri and Ohio, including the Chicago and St. Louis markets, for $480 million in cash. Sprint Communications agreed, in connection with the acquisition, to reimburse U.S. Cellular for certain network shut-down costs in these markets. These costs are expected to be approximately $160 million on a net present value basis, but in no event will Sprint Communications' reimbursement obligation exceed $200 million on an undiscounted basis. The additional spectrum will be used to supplement Sprint's coverage in these areas. The transaction closed on May 17, 2013. Of the total purchase price, approximately $605 million and $32 million was allocated to spectrum and customer relationships, respectively.
On July 9, 2013, Sprint Communications completed the acquisition of the remaining equity interests in Clearwire Corporation and its consolidated subsidiary Clearwire Communications LLC (together "Clearwire") that it did not previously own (Clearwire Acquisition) in an all cash transaction for approximately $3.5 billion , net of cash acquired of $198 million , which provides us with control of 2.5 gigahertz (GHz) spectrum and tower resources for use in conjunction with our Network Vision deployment and modernization project. We expect the Clearwire Acquisition will add approximately 10,000 sites bringing the total modernization project site count to be approximately 50,000. The consideration paid was preliminarily allocated to assets acquired and liabilities assumed based on their estimated fair values at the time of the Clearwire Acquisition. The allocation of consideration paid was based on management's judgment after evaluating several factors, including a preliminary valuation assessment.
On July 10, 2013, SoftBank Corp., a kabushiki kaisha organized under the laws of Japan, and certain of its wholly-owned subsidiaries (together, “SoftBank”) completed the merger (SoftBank Merger) contemplated by the Agreement and Plan of Merger, dated as of October 15, 2012, as amended as of November 29, 2012, April 12, 2013 and June 10, 2013 (as amended, the Merger Agreement) and the Bond Purchase Agreement, dated as of October 15, 2012, as amended on June 10, 2013 (as amended, the Bond Agreement). Pursuant to the Bond Agreement, Sprint Communications issued a convertible bond (Bond) to Starburst II, Inc. (Starburst II) with a principal amount of $3.1 billion , interest rate of 1% , and maturity date of October 15, 2019, which was converted into 590,476,190 shares of Sprint Communications common stock at $5.25 per share at consummation of the SoftBank Merger. As a result of the completion of the SoftBank Merger and subsequent open market stock purchases, SoftBank owned approximately 80% of the outstanding voting common stock of Sprint Corporation (formerly known as Starburst II), a wholly owned subsidiary of SoftBank prior to completion of the SoftBank Merger and the acquiring company in connection with the consummation of the SoftBank Merger). The SoftBank Merger consideration totaled approximately $22.2 billion , consisting primarily of cash consideration of $14.1 billion , net of cash acquired of $2.5 billion and the estimated fair value of the 22% interest in Sprint issued to stockholders of Sprint Communications.

32
Table of Contents

The allocation of consideration paid was based on management's judgment after evaluating several factors, including a preliminary valuation assessment. The consummation of the transaction provided additional equity funding of $5.0 billion, consisting of $3.1 billion received by Sprint Communications in October 2012 related to the Bond, which automatically converted to equity at closing, and $1.9 billion cash consideration at closing. Following the consummation of the SoftBank Merger, Sprint Corporation became the parent company of Sprint Nextel Corporation (Sprint Nextel) and Sprint Nextel changed its name to Sprint Communications, Inc. (Sprint Communications). In connection with the consummation of the SoftBank Merger, Sprint Corporation became the successor registrant to Sprint Nextel under Rule 12g-3 of the Securities Exchange Act of 1934 (Exchange Act) and is the entity subject to the reporting requirements of the Exchange Act for filings with the Securities and Exchange Commission (SEC) subsequent to the consummation of the SoftBank Merger.
Description of the Company
We are the third largest wireless communications company in the United States based on wireless revenue, one of the largest providers of wireline long distance services, and one of the largest Internet carriers in the nation. Our services are provided through our ownership of extensive wireless networks, an all-digital global long distance network and a Tier 1 Internet backbone. We offer wireless and wireline voice and data transmission services to subscribers in all 50 states, Puerto Rico and the U.S. Virgin Islands under the Sprint corporate brand, which includes our retail brands of Sprint ® , Boost Mobile ® , Virgin Mobile ® , and Assurance Wireless ® on networks that utilize third generation (3G) code division multiple access (CDMA), or Internet protocol (IP) technologies. We also offer fourth generation (4G) services utilizing Long Term Evolution (LTE) as well as Worldwide Interoperability for Microwave Access (WiMAX) technologies (which we expect to remove from our technology portfolio at the end of 2015). As a result of the Clearwire Acquisition, we expect to continue to migrate from Clearwire's wireless broadband technology to LTE technology through the deployment of Network Vision utilizing the 2.5 GHz spectrum acquired. We utilize these networks to offer our wireless and wireline subscribers differentiated products and services whether through the use of a single network or a combination of these networks. We offer wireless services on a postpaid and prepaid payment basis to retail subscribers and also on a wholesale and affiliate basis, which includes the sale of wireless services that utilize the Sprint network but are sold under the wholesaler's brand.
In our postpaid portfolio, we recently launched new pricing plans with the new Unlimited Guarantee SM on our Unlimited, My Way SM and My All-in SM plans to provide simplicity to consumers. With our Unlimited Guarantee, subscribers are guaranteed unlimited talk (to any wireline or mobile phone), text and data while on the Sprint network for the life of the line of service. The Unlimited My Way plan features unlimited talk, text and data and can add up to 10 lines all on the same account. The Unlimited My All-in plan features unlimited talk, text and data as well as 5GB of mobile hotspot usage. We also just announced Sprint One Up SM , a new upgrade program that gives select subscribers unlimited talk, text and data while on the Sprint network plus the ability to upgrade their smartphone every 12 months. To participate in Sprint One Up, subscribers purchase an eligible device with no down payment and agree to 24 monthly installment payments. After 12 consecutive device and service payments, subscribers can trade-in their current device in good working condition and upgrade to a new device. We also offer price plans tailored to business subscribers such as Business Advantage, which allows for the flexibility to mix and match plans that include voice, voice and messaging, or voice, messaging and data to meet individual business needs and also allows the Any Mobile Anytime SM feature with certain plans. In January 2013, we introduced Sprint As You Go SM which offers unlimited talk, text and data while on the Sprint network paired with the flexibility of a monthly no-contract plan, which is available with select devices. Our product strategy is to provide our customers with a broad array of device selections and applications and services that run on these devices to meet the growing needs of customer mobility. Our device portfolio includes many cutting edge devices from various original equipment manufacturers (OEMs). Our mobile broadband portfolio consists of devices such as hotspots, which allow the connection of multiple WiFi enabled devices to the Sprint platform. Our Sprint platform can also be accessed through our portfolio of embedded tablets and laptop devices.
Our prepaid portfolio currently includes multiple brands, each designed to appeal to specific subscriber segments. Boost Mobile serves subscribers who are voice and text messaging-centric with its popular Monthly Unlimited plan with Shrinkage service where bills are reduced after six on-time payments. Virgin Mobile serves subscribers who are device and data-oriented with our Beyond Talk ™ plans and our broadband plan, Broadband2Go SM , which offer subscribers control, flexibility, and connectivity through various communication vehicles. Virgin Mobile is also designated as a Lifeline-only Eligible Telecommunications Carrier in certain states which provides service for the Lifeline program under our Assurance Wireless brand. Assurance Wireless provides

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eligible subscribers who meet income requirements or are receiving government assistance with a free wireless phone and 250 free minutes of local and long-distance monthly service.
We have focused our wholesale business on enabling our diverse network of customers to successfully grow their business by providing them with an array of network, product, and device solutions. This allows our customers to customize this full suite of value-added solutions to meet the growing demands of their businesses. As part of these growing demands, some of our wholesale mobile virtual network operators (MVNO) are also selling prepaid services under the Lifeline program.
We continue to support the open development of applications, content, and devices on the Sprint platform through products and services such as Sprint ID ™ , which provides an easy way for users to discover content from leading brands and special interests as well as manage those experiences on certain Android devices and Sprint Zone, which allows customers to not only manage their account and self-service functions via their device but facilitates discovery of new content and personalization through recommendations for applications and entertainment content. We also support Sprint Guardian ™ , a collection of mobile safety and device security bundles that provide families relevant tools to help stay safe and secure, and Pinsight Media+ ™ , which gives advertisers the power to reach consumers on their mobile device by providing more relevant advertising based on information consumers choose to share about their location and mobile Web browsing history. In addition, we enable a variety of business and consumer third-party relationships through our portfolio of machine-to-machine solutions, which we offer on a retail postpaid and wholesale basis. Our machine-to-machine solutions portfolio provides a secure, real-time and reliable wireless two-way data connection across a broad range of connected devices such as the Chrysler Group's UConnect ® Access in-vehicle communications system powered through our Sprint Velocity ™ end-to-end telematics solution which enables hand free phone calls, and the ability to access music, navigation, and other applications and services through cell connections built into the vehicle. Other connected devices include OEM devices and after-market in-vehicle connectivity and electric vehicle charging stations, point-of-sale systems, kiosks and vending machines, asset tracking, digital signage, security, smartgrid utilities, medical equipment, and a variety of other consumer electronics and appliances.
We provide a broad suite of wireline voice and data communications services to other communications companies and targeted business and consumer subscribers. In addition, we provide voice, data, and IP communication services to our Wireless segment, and IP and other services to cable Multiple System Operators (MSOs) that resell our local and long distance services and use our back office systems and network assets in support of their telephone service provided over cable facilities primarily to residential end-use subscribers.
Business Strategy and Key Priorities
Our business strategy is to be responsive to changing customer mobility demands by being innovative and differentiated in the marketplace. Our future growth plans and strategy revolve around achieving the following three key priorities:
•
Improve the customer experience;
•
Strengthen our brands; and
•
Generate operating cash flow.    
To simplify and improve the customer experience, we continue to offer Ready Now SM , which educates our subscribers on how to use their mobile devices before they leave the store. For our business customers, we aim to increase their productivity by providing differentiated services that utilize the advantages of combining IP networks with wireless technology. This differentiation enables us to retain and acquire both wireline, wireless and combined wireline-wireless subscribers on our networks. We have also continued to focus on further improving customer care. We implemented initiatives that are designed to improve call center processes and procedures, and standardized our performance measures through various metrics, including customer satisfaction ratings with respect to customer care, first call resolution, and calls per subscriber.
In addition to our improvements in the customer experience, we continue to strengthen our brand through offering a broad selection of some of the most desired and iconic devices, while focusing on continued enhancements to our network and our upgrade to LTE. We distinguish the Sprint brand from other wireless providers through our offerings of unlimited talk, text and data - guaranteed for life. We have improved upon several key Sprint brand metrics including 'purchase consideration' and 'offers unlimited plans that are better' as compared to last year.

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In addition to our brand and customer-oriented goals, we continue to focus on generating increased operating cash flow through competitive rate plans for postpaid and prepaid subscribers, multi-branded strategies, and effectively managing our cost structure. Certain strategic decisions, such as Network Vision and the availability of the iPhone ® , which on average carries a higher equipment net subsidy, have resulted in a reduction in cash flows from operations. However, we believe these actions will generate long-term benefits, including growth in valuable postpaid subscribers, a reduction in variable cost of service per unit and long-term accretion to cash flows from operations. See “Liquidity and Capital Resources” for more information.
Multi-Modal Nationwide LTE Network Development
Network Vision
Prior to the consummation of the Clearwire Acquisition, the Network Vision initiative encompassed approximately 38,000 of our cell sites. As discussed in more detail below, we currently expect the Clearwire Acquisition will add approximately 10,000 cell sites, bringing the total Network Vision cell sites to approximately 50,000. As of September 30, 2013, we had more than 26,000 sites on-air and have launched LTE in 230 cities. Further deployments of Network Vision technology, including LTE market launches and enhancements of our 3G technology, are expected to continue through the middle of 2014. We expect Network Vision to bring financial benefit to the Company through migration to one common network, which is expected to reduce network maintenance and operating costs through capital efficiencies, reduced energy costs, lower roaming expenses, backhaul savings, and reduction in total cell sites. Our expectation of financial savings is affected by multiple variables, including our expectation of the timeliness of deployment across our existing network footprint, which is managed by Sprint but dependent upon three primary OEMs, each of which has responsibility for a geographical territory across the United States.
The deployment related to changes in technology has resulted in incremental charges during the period of implementation of our multi-mode technology and Nextel platform decommissioning, including, but not limited to, an increase in depreciation associated with existing assets related to both the Nextel and Sprint platforms due to changes in our estimates of the remaining useful lives of long-lived assets, changes in the expected timing and amount of asset retirement obligations, and lease exit and other contract termination costs. In the first quarter 2012, we formalized our plans to take off-air roughly one-third, or 9,600 cell sites, of our total Nextel platform by the middle of 2012. As a result, in the first quarter 2012, we revised our estimates to shorten the expected useful lives of Nextel platform assets through the expected benefit period of the underlying assets through 2013 and also revised the expected timing and amount of our asset retirement obligations. During the second quarter 2012, as a result of progress in taking Nextel platform sites off-air and progress toward notifying and transitioning customers off the Nextel platform, we further reduced our estimated benefit period for the remaining Nextel platform assets through the middle of 2013 resulting in incremental depreciation expense. The remainder of the Nextel platform, or approximately 20,000 sites, was successfully shut-down on June 30, 2013, with the remaining infrastructure expected to be completely decommissioned by the end of 2016. Now that the shut-down of the Nextel platform is complete, our efforts will continue to focus on profitable growth through service provided on an enhanced wireless network on the Sprint platform while continuing to achieve our key priorities.
As part of Network Vision, we are currently modifying our existing backhaul architecture to enable increased capacity to our nationwide network at a lower cost by utilizing ethernet as opposed to our existing Time Division Multiplexing (TDM) technology. We expect to incur termination costs associated with our TDM contractual commitments with third-party vendors ranging between approximately $200 million to $250 million, the majority of which we expect to record through the end of 2014.
Clearwire Integration
As a result of the Clearwire Acquisition, we expect to migrate from WiMAX technology to LTE technology by the end of 2015 utilizing the 2.5 GHz spectrum acquired. We are in the process of deploying a single nationwide network allowing the consolidation and optimization of our existing 800 megahertz (MHz) and 1.9 GHz spectrum, along with the 2.5 GHz spectrum into our multi-mode base stations.
We have evaluated our consolidated cell tower portfolio, including Clearwire's 17,000 cell towers, and identified approximately 4,300 redundant sites that we expect to decommission and terminate the underlying leases when we sunset the WiMAX technology in late 2015. The lease exit costs associated with these sites are expected to range between approximately $75 million to $125 million on a net present value basis. The timing of lease exit charges will be dependent upon the date we cease utilizing these sites without future economic benefit. We expect

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the acquisition of Clearwire will add approximately 10,000 cell sites to our nationwide network which will bring the total estimated Network Vision site count to approximately 50,000 cell sites. We are currently evaluating the remaining Clearwire sites to determine whether they will be utilized as part of Network Vision.

RESULTS OF OPERATIONS
As discussed above, both the Clearwire Acquisition and the SoftBank Merger were completed in July 2013. As a result of these transactions, the assets and liabilities of Sprint Communications and Clearwire were preliminarily adjusted to estimated fair value on the respective closing dates. The Company's financial statement presentations distinguish between the predecessor period relating to Sprint Communications for periods prior to the SoftBank Merger (Predecessor) and the successor period (Successor). The Successor information includes the activity and accounts of Sprint Corporation as of and for the three and nine-month periods ended September 30, 2013, which includes the activity and accounts of Sprint Communications, prospectively, beginning on July 11, 2013. The successor period results of operations for the three and nine-month periods ended September 30, 2013 primarily reflect the operating activities of Sprint Communications, inclusive of the consolidation of Clearwire, for an 82 day period (Post-merger period) representing the results of operations from July 11, 2013 through September 30, 2013. The operating activity for the Successor period from January 1, 2013 to July 10, 2013 consist solely of the activity of Starburst II prior to consummation of the SoftBank Merger, which primarily relates to its investment in the convertible bond issued by Sprint Communications in connection with the SoftBank Merger. The Predecessor period information represents the historical basis of presentation for Sprint Communications for all periods prior to the SoftBank Merger.
As a result of the SoftBank Merger, and in order to present Management's Discussion and Analysis in a way that offers investors a more meaningful period to period comparison, in addition to presenting and discussing our historical results of operations as reported in our consolidated financial statements in accordance with accounting principles generally accepted in the United States (U.S. GAAP), we have combined the current year Predecessor with the current year Successor operating information, on an unaudited combined basis. The unaudited combined data consists of unaudited Predecessor information for the 10-day and 191-day periods ended July 10, 2013 and unaudited Successor information for the three and nine-month periods ended September 30, 2013. The combined information for the three and nine-month periods ended September 30, 2013 does not comply with U.S. GAAP and is not intended to represent what our consolidated results of operations would have been if the Successor had actually been formed on January 1, 2013, nor have we made any attempt to either include or exclude expenses or income that would have resulted had the SoftBank Merger actually occurred on January 1, 2012.
The following discussion covers results for the Successor three and nine-month periods ended September 30, 2013 versus the Predecessor three and nine-month periods ended September 30, 2012 . Results for the combined nine-month period ended September 30, 2013 versus the Predecessor nine-month period ended September 30, 2012 are also discussed, to the extent necessary, to provide an analysis of results on comparable periods although the basis of presentation may not be comparable due to the application of the acquisition method of accounting. Additionally, in certain sections we discuss the activity of the 10-day and 191-day periods ended July 10, 2013 to the extent it provides useful information for the activity during that Predecessor period. We have provided information regarding certain of the elements of the acquisition method of accounting affecting the Successor period results to enable further comparability. Results for the combined three-month period ended September 30, 2013 are not discussed as the Successor versus Predecessor discussions for that period are considered sufficient to describe the significant trends in the business since the activity from July 1, 2013 through July 10, 2013 (10-day period ended July 10, 2013) is immaterial for the quarter ended September 30, 2013 (or is already described in the Predecessor Period of 10 and 191 Days Ended July 10, 2013 section below).

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Acquisition Method of Accounting Effects to the Three and Nine-month Successor Periods Ending September 30, 2013
The allocation of the consideration transferred to assets acquired and liabilities assumed were based on preliminary estimated fair values as of the date of the SoftBank Merger, as described further in the Notes to the Consolidated Financial Statements. As a result, the following are reflected in our results of operations for the Successor period ended September 30, 2013 as compared to the respective Predecessor period:
•
Reduced postpaid wireless revenue and wireless cost of service of approximately $28 million each as a result of preliminary purchase accounting adjustments to deferred revenue and deferred costs, respectively;
•
Reduced prepaid wireless revenue of approximately $96 million as a result of preliminary purchase accounting adjustments to eliminate deferred revenue;
•
Increased rent expense of $26 million, which is included in cost of service, primarily attributable to the write-off of deferred rents associated with our operating leases, offset by the amortization of our net unfavorable leases recorded in purchase accounting;
•
Increased cost of products sold of approximately $21 million as a result of preliminary purchase price account adjustments to accessory inventory;
•
Reduced depreciation expense of approximately $185 million as a result of preliminary purchase accounting adjustments reflecting a net decrease to property, plant and equipment;
•
Incremental amortization expense of approximately $397 million, which is primarily attributable to the recognition of customer relationships of approximately $6.9 billion;
•
Reduced interest expense of $50 million, resulting from the amortization of the net premium which resulted from adjusting our long-term debt to its estimated fair value in purchase accounting; and
•
The purchase accounting adjustment to unrecognized net periodic pension and other post-retirement benefits resulting in a decrease in pension expense of approximately $23 million which was primarily reflected in selling, general and administrative expense;
Predecessor Period of 10 and 191 Days Ended July 10, 2013
Significant changes in the underlying trends affecting the Company's consolidated results of operations and net loss for the 10 and 191 days ended July 10, 2013 were as follows:
•
We recorded a gain on previously-held Clearwire equity interests of approximately $2.9 billion for the difference between the estimated fair value of the equity interests owned prior to the acquisition ($5.00 per share offer price less an estimated control premium of approximately $0.60) and the carrying value of approximately $325 million for those previously-held equity interests.
•
Increased income tax expense was primarily attributable to taxable temporary differences as a result of the $2.9 billion gain on the previously-held equity interests in Clearwire, which was principally attributable to the increase in the fair value of Federal Communications Commission (FCC) licenses held by Clearwire and from amortization of FCC licenses. FCC licenses are amortized over 15 years for income tax purposes but, because these licenses have an indefinite life, they are not amortized for financial statement reporting purposes.
Consolidated Results of Operations
The following table provides the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 , the consolidated results of operations for the three and nine-month Successor periods ended September 30, 2013 , the Predecessor 191-day and 10-day periods ended July 10, 2013, and the Predecessor three and nine-month periods ended September 30, 2012 . The Predecessor information represents the historical basis of presentation for Sprint Communications for all periods prior to the SoftBank Merger. The Successor period includes the operating activity of Sprint Corporation for the three and nine-month periods ended

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September 30, 2013 as well as Sprint Communications, inclusive of Clearwire, prospectively from the date of the SoftBank Merger through September 30, 2013.
 
 
Combined
 
Successor
 
 
Predecessor
 
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended

10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
 
 
2013
 
2013
 
2013
 
2013
 
 
2013

2013
 
2012
 
2012
 
 
(in millions)
Wireless segment earnings
 
$
3,895

 
$
1,206

 
$
1,125

 
$
1,125

 
 
$
2,770

 
$
81

 
$
3,469

 
$
1,118

Wireline segment earnings
 
389

 
132

 
117

 
117

 
 
272

 
15

 
468

 
158

Corporate, other and eliminations
 
(29
)
 
5

 
(30
)
 
6

 
 
1

 
(1
)
 
6

 
3

Consolidated segment earnings
 
4,255

 
1,343

 
1,212

 
1,248

 
 
3,043

 
95

 
3,943

 
1,279

Depreciation
 
(4,040
)
 
(1,055
)
 
(942
)
 
(942
)
 
 
(3,098
)
 
(113
)
 
(4,820
)
 
(1,411
)
Amortization
 
(608
)
 
(469
)
 
(461
)
 
(461
)
 
 
(147
)
 
(8
)
 
(230
)
 
(77
)
Other, net
 
(886
)
 
(217
)
 
(203
)
 
(203
)
 
 
(683
)
 
(14
)
 
(8
)
 
(22
)
Operating loss
 
(1,279
)
 
(398
)
 
(394
)
 
(358
)
 
 
(885
)
 
(40
)
 
(1,115
)
 
(231
)
Interest expense
 
(1,551
)
 
(691
)
 
(416
)
 
(416
)
 
 
(1,135
)
 
(275
)
 
(996
)
 
(377
)
Equity in losses of unconsolidated investments, net
 
(482
)
 
(23
)
 
—

 
—

 
 
(482
)
 
(23
)
 
(927
)
 
(208
)
Gain on previously-held equity interests
 
2,926

 
2,926

 
—

 
—

 
 
2,926

 
2,926

 
—

 
—

Other income, net
 
37

 
167

 
18

 
165

 
 
19

 
2

 
144

 
96

Income tax expense
 
(1,631
)
 
(1,598
)
 
(30
)
 
(90
)
 
 
(1,601
)
 
(1,508
)
 
(110
)
 
(47
)
Net (loss) income
 
$
(1,980
)
 
$
383

 
$
(822
)
 
$
(699
)
 
 
$
(1,158
)
 
$
1,082

 
$
(3,004
)
 
$
(767
)
Depreciation Expense
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Depreciation expense decreased $469 million , or 33% , and $3.9 billion , or 80% , in the three and nine-month periods ended September 30, 2013 , respectively, compared to the same periods in 2012 primarily due to comparing results for the shortened Post-merger period to periods consisting of full calendar quarters. In addition, the decrease in depreciation expense was driven by the accelerated depreciation expense resulting from our Network Vision initiative. The incremental effect of accelerated depreciation due to the implementation of Network Vision was approximately $400 million and $1.7 billion during the three and nine-month periods ended September 30, 2012 , respectively, of which the majority related to the shut-down of the Nextel platform in June 2013. Depreciation also declined due to asset revaluations as a result of the SoftBank Merger. These decreases were partially offset by increased depreciation expense on assets acquired as a result of the Clearwire Acquisition.
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
In addition to the explanations above, the decrease in depreciation expense for the combined nine-month period ended September 30, 2013 was partially offset by increased depreciation expense primarily due to Network Vision asset additions in the 191-day Predecessor period.
Amortization Expense
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Amortization expense increased $384 million , or 499% , and $231 million , or 100% , in the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 , primarily due to the recognition of definite-lived intangible assets related to customer relationships of approximately $6.9 billion as a result of the SoftBank Merger. Customer relationship intangible assets are amortized using the sum-of-the-months'-digits method, which result in higher amortization rates in early periods that will decline over time.

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Other, net
The following table provides additional information of items included in “Other, net” for the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 , the three and nine-month Successor periods ended September 30, 2013 , the Predecessor 191-day and 10-day periods ended July 10, 2013, and the Predecessor three and nine-month periods ended September 30, 2012 .
 
Combined
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
2013
 
2013

2013
 
 
2013
 
2013
 
2012
 
2012
 
(in millions)
Severance, exit costs and asset impairments
$
(755
)
 
$
(98
)
 
$
(103
)
 
$
(103
)
 
 
$
(652
)
 
$
5

 
$
(290
)
 
$
(22
)
Spectrum hosting contract termination
—

 
—

 
—

 
—

 
 
—

 
—

 
236

 
—

Gains from asset dispositions and exchanges
—

 
—

 
—

 
—

 
 
—

 
—

 
29

 
—

Other
(131
)
 
(119
)
 
(100
)
 
(100
)
 
 
(31
)
 
(19
)
 
17

 
—

Total
$
(886
)
 
$
(217
)
 
$
(203
)
 
$
(203
)
 
 
$
(683
)
 
$
(14
)
 
$
(8
)
 
$
(22
)
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
"Other, net" represented an expense of $203 million in Successor periods, as compared to an expense of $22 million and $8 million in the three and nine-month periods ended September 30, 2012 . Severance, exit costs, and asset impairments of $103 million for both the three and nine-month periods ended September 30, 2013 included $41 million of severance primarily associated with reductions in force and $45 million of lease exit costs associated with the decommissioning of the Nextel platform. In addition, we recognized $24 million of payments that will continue to be made under our backhaul access contracts for which we will no longer be receiving any economic benefit, and of which $7 million was recognized as "Cost of services and products." Severance, exit costs, and asset impairments for the three and nine-month periods ended September 30, 2012 included lease exit costs of $206 million associated with taking certain Nextel platform sites off-air in the second and third quarter 2012 and asset impairments in the first quarter 2012, consisting of $18 million of assets associated with a decision to utilize fiber backhaul rather than microwave backhaul and $66 million of capitalized assets that we no longer intend to deploy as a result of the termination of the spectrum hosting arrangement with LightSquared. The spectrum hosting contract termination in the first quarter 2012 was due to the recognition of $236 million of the total $310 million paid by LightSquared in 2011 as operating income in "Other, net" due to the termination of our spectrum hosting arrangement with LiqhtSquared. The $100 million reflected in "Other" above for the Successor periods are business combination fees paid to unrelated parties in connection with the transactions with SoftBank and Clearwire and are classified within selling, general and administrative expense in our consolidated statement of comprehensive income (loss). The amount reflected in "Other" for 2012 includes a first quarter benefit that resulted from favorable developments relating to access cost disputes with certain exchange carriers.
Predecessor Period of 10 and 191 Days Ended July 10, 2013
During the Predecessor 10-day period ended July 10, 2013, the Company recognized a change in estimate associated with lease exit costs resulting in a benefit of $37 million partially offset by $32 million in severance costs primarily associated with reductions in force. "Other" consisted of $19 million of business combination fees paid to unrelated parties in connection with the transactions with SoftBank and Clearwire that are classified within selling, general and administrative expense in our consolidated statement of comprehensive income (loss). Exit costs in the Predecessor 191-day period ended July 10, 2013 include lease exit costs of $478 million primarily associated with taking certain Nextel platform sites off-air as of June 30, 2013 and $151 million related to payments that will continue to be made under our backhaul access contracts for which we will no longer be receiving any economic benefit. Of the $151 million, $35 million was recognized as "Cost of services and products" and $116 million (solely attributable to Wireless) was recognized in "Severance, exit costs and asset impairments." We also recognized $58 million of severance related to reductions in force in the Predecessor 191-day period ended July 10, 2013. "Other" for the Predecessor 191-day period ended July 10, 2013 included $53 million of business

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combination expenses as described above, partially offset by a favorable ruling by the Texas Supreme Court in connection with the taxation of E911 services resulted in a non-cash benefit of $22 million.
Interest Expense
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Interest expense increased $39 million , or 10% , and decreased $580 million , or 58% , in the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 . The increase in the three-month comparison is primarily due to reductions in the amount of interest capitalized as compared to the Predecessor period related to spectrum licenses that were being readied for their intended use and increases as a result of the debt assumed in the Clearwire Acquisition. These increases were partially offset by decreases associated with comparing the shortened Post-merger period to a full calendar quarter in the Predecessor period. The decrease in the nine-month comparison is primarily due to comparing a shortened Post-merger period to a Predecessor period representing nine months of activity. This decrease was partially offset by interest expense increases as a result of the debt assumed in the Clearwire Acquisition. See “Liquidity and Capital Resources” for more information on the Company's financing activities.
As a result of the Clearwire and SoftBank transactions, the Company's consolidated debt balance was approximately $33.6 billion as of September 30, 2013. The effective interest rate for the Combined nine-month period ended September 30, 2013 was 8.0% based on a weighted average long-term debt balance of $25.9 billion.
Equity in Losses of Unconsolidated Investments, net
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
As a result of the Clearwire Acquisition on July 9, 2013 and the resulting consolidation of Clearwire results of operations into the accounts of the Successor, the Successor period results of operations do not reflect any equity in losses of unconsolidated investments. The equity in losses of unconsolidated investments, net in the Predecessor periods primarily consists of our proportionate share of losses from our equity method investment in Clearwire. Sprint's equity in losses from Clearwire for the nine-month period ended September 30, 2012 includes a $204 million pre-tax impairment reflecting Sprint's reduction in the carrying value of its investment in Clearwire to an estimated fair value and includes charges of approximately $41 million , which are associated with Clearwire's write-off of certain network and other assets that no longer meet its strategic plans.
Other income, net
The following table provides additional information on items included in "Other income, net" for the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 , the three and nine-month Successor periods ended September 30, 2013 , the Predecessor 191-day and 10-day periods ended July 10, 2013, and the Predecessor three and nine-month periods ended September 30, 2012 .
 
Combined
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
2013
 
2013
 
2013
 
 
2013
 
2013
 
2012
 
2012
 
(in millions)
Interest income
$
64

 
$
5

 
$
31

 
$
4

 
 
$
33

 
$
1

 
$
47

 
$
15

(Loss) gain on early retirement of debt
(4
)
 
8

 
8

 
8

 
 
(12
)
 
—

 
46

 
33

Other, net
(23
)
 
154

 
(21
)
 
153

 
 
(2
)
 
1

 
51

 
48

Total
$
37

 
$
167

 
$
18

 
$
165

 
 
$
19

 
$
2

 
$
144

 
$
96

Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
"Other income, net" represented income of $165 million and $18 million in the Successor three and nine-month periods ended September 30, 2013 , as compared to income of $96 million and $144 million in the three and nine-month periods ended September 30, 2012 . Other, net in the Successor three and nine-month periods ended September 30, 2013 primarily consists of $159 million of income related to the recognition of the remaining unaccreted convertible bond discount. In addition, the Successor nine-month period ended September 30, 2013 includes a $175 million loss related to the embedded derivative associated with the convertible bond. Gain on early

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retirement of debt in the Predecessor three and nine-month periods ended September 30, 2012 is attributable to the early redemption of Nextel Communications, Inc. debt.
Income Tax Expense
The Successor period income tax expense for the three and nine-month periods ended September 30, 2013 of $90 million and $30 million, respectively, represent a consolidated effective tax rate of approximately 15% and 4%, respectively. The Predecessor period income tax expense for the three and nine-month periods ended September 30, 2012 of $47 million and $110 million, respectively, represent a consolidated effective tax rate of approximately 7% and 4%, respectively. The income tax expense for all periods presented was primarily attributable to taxable temporary differences from amortization of FCC licenses. The expense for the 10-day and 191-day period ended July 10, 2013 of approximately $1.5 billion and $1.6 billion, respectively, is primarily attributable to the recognition of tax expense on the $2.9 billion gain on previously-held equity interests in addition to the Predecessor period items noted above. We do not expect to record significant tax benefits on future net operating losses until circumstances justify the recognition of such benefits. Additional information related to items impacting the effective tax rates can be found in the Notes to the Consolidated Financial Statements.

Segment Earnings - Wireless
Wireless segment earnings are a function of wireless service revenue, the sale of wireless devices and accessories, costs to acquire subscribers, network and interconnection costs to serve those subscribers and other Wireless segment operating expenses. The costs to acquire our subscribers include the net cost at which we sell our devices, referred to as equipment net subsidies, as well as the marketing and sales costs incurred to attract those subscribers. Network costs primarily represent switch and cell site costs and interconnection costs, which generally consist of per-minute usage fees and roaming fees paid to other carriers. The remaining costs associated with operating the Wireless segment include the costs to operate our customer care organization and administrative support. Wireless service revenue, costs to acquire subscribers, and variable network and interconnection costs fluctuate with the changes in our subscriber base and their related usage, but some cost elements do not fluctuate in the short term with these changes.
As shown by the table above under “Results of Operations,” Wireless segment earnings represented over 90% of our total consolidated segment earnings for the Successor periods. The wireless industry is subject to competition to retain and acquire subscribers of wireless services. Most markets in which we operate have high rates of penetration for wireless services. Wireless carriers accordingly must attract a greater proportion of new subscribers from competitors rather than from first-time subscribers. Within the Wireless segment, postpaid wireless services represent the most significant contributors to earnings, and are driven by the number of postpaid subscribers to our services, as well as the average revenue per subscriber or user (ARPU). Wireless segment earnings have declined over the last several years, primarily resulting from subscriber losses associated with our Nextel platform postpaid offerings as well as increased equipment net subsidy from smartphones. Most recently, our decision to shut-down the Nextel platform accelerated the loss of subscribers on that platform; however, we focused our efforts on recapturing these subscribers on our Sprint platform, resulting in the recapture of approximately 2.6 million Nextel platform postpaid subscribers beginning with the first quarter 2011 through June 30, 2013, which was when the Nextel platform was shut-down. In addition, we have taken initiatives to strengthen the Sprint brand, continue to increase market awareness of the improvements that have been achieved in the customer experience, and provide a competitive portfolio of devices for customer selection.

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The following table provides an overview of the results of operations of our Wireless segment for the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 , the three and nine-month Successor periods ended September 30, 2013 , the Predecessor 191-day and 10-day periods ended July 10, 2013, and the Predecessor three and nine-month periods ended September 30, 2012 .
 
Combined
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
Wireless Segment Earnings
2013
 
2013
 
2013
 
2013
 
 
2013
 
2013
 
2012
 
2012
 
(in millions)
Sprint platform
$
17,443

 
$
5,835

 
$
5,201

 
$
5,201

 
 
$
12,242

 
$
634

 
$
16,573

 
$
5,626

Nextel platform
217

 
—

 
—

 
—

 
 
217

 
—

 
1,236

 
310

Total postpaid
17,660

 
5,835

 
5,201

 
5,201

 
 
12,459

 
634

 
17,809

 
5,936

Sprint platform
3,630

 
1,160

 
1,028

 
1,028

 
 
2,602

 
132

 
3,207

 
1,126

Nextel platform
50

 
—

 
—

 
—

 
 
50

 
—

 
457

 
109

Total prepaid
3,680

 
1,160

 
1,028

 
1,028

 
 
2,652

 
132

 
3,664

 
1,235

Other (1)
198

 
173

 
170

 
170

 
 
28

 
3

 
—

 
—

Retail service revenue
21,538

 
7,168

 
6,399

 
6,399

 
 
15,139

 
769

 
21,473

 
7,171

Wholesale, affiliate and other
403

 
139

 
124

 
124

 
 
279

 
15

 
348

 
121

Total service revenue
21,941

 
7,307

 
6,523

 
6,523

 
 
15,418

 
784

 
21,821

 
7,292

Cost of services (exclusive of depreciation and amortization)
(6,790
)
 
(2,327
)
 
(2,087
)
 
(2,087
)
 
 
(4,703
)
 
(240
)
 
(6,824
)
 
(2,256
)
Service gross margin
15,151

 
4,980

 
4,436

 
4,436

 
 
10,715

 
544

 
14,997

 
5,036

Service gross margin percentage
69
 %
 
68
 %
 
68
 %
 
68
 %
 
 
69
 %
 
69
 %
 
69
 %
 
69
 %
Equipment revenue
2,343

 
710

 
636

 
636

 
 
1,707

 
74

 
2,238

 
750

Cost of products
(6,744
)
 
(2,153
)
 
(1,872
)
 
(1,872
)
 
 
(4,872
)
 
(281
)
 
(6,912
)
 
(2,391
)
Equipment net subsidy
(4,401
)
 
(1,443
)
 
(1,236
)
 
(1,236
)
 
 
(3,165
)
 
(207
)
 
(4,674
)
 
(1,641
)
Equipment net subsidy percentage
(188
)%
 
(203
)%
 
(194
)%
 
(194
)%
 
 
(185
)%
 
(280
)%
 
(209
)%
 
(219
)%
Selling, general and administrative expense
(6,855
)
 
(2,331
)
 
(2,075
)
 
(2,075
)
 
 
(4,780
)
 
(256
)
 
(6,854
)
 
(2,277
)
Wireless segment earnings
$
3,895

 
$
1,206

 
$
1,125

 
$
1,125

 
 
$
2,770

 
$
81

 
$
3,469

 
$
1,118

___________________
(1 ) Represents service revenue related to the acquisition of certain assets of U.S. Cellular in the 2nd quarter 2013 and Clearwire in the 3rd quarter 2013.
Service Revenue
Our Wireless segment generates service revenue from the sale of wireless services and the sale of wholesale and other services. Service revenue consists of fixed monthly recurring charges, variable usage charges and miscellaneous fees such as activation fees, directory assistance, roaming, equipment protection, late payment and early termination charges, and certain regulatory related fees, net of service credits.
The ability of our Wireless segment to generate service revenue is primarily a function of:
•
revenue generated from each subscriber, which in turn is a function of the types and amount of services utilized by each subscriber and the rates charged for those services; and
•
the number of subscribers that we serve, which in turn is a function of our ability to retain existing subscribers and acquire new subscribers.
Retail comprises those subscribers to whom Sprint directly provides wireless services, whether those services are provided on a postpaid or a prepaid basis. Wholesale and affiliates are those subscribers who are served through MVNO and affiliate relationships and other arrangements through which wireless services are sold by Sprint to other companies that resell those services to subscribers.

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Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Retail service revenue decreased $772 million , or 11% , and $15.1 billion , or 70% , for the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. In addition, there was a decline of 1.2% and 1.5% in average retail subscribers in the three and nine-month Successor periods as compared to the Predecessor periods, respectively, primarily resulting from the shut-down of the Nextel platform on June 30, 2013. This decrease was partially offset by a higher average revenue per retail subscriber in the three and nine-month Successor periods as compared to the Predecessor periods primarily due to the $10 premium data add-on charge for postpaid subscribers, combined with increased postpaid and prepaid revenues resulting from acquisitions in 2013.
Wholesale, affiliate and other revenues increased $3 million , or 2% , and decreased $224 million , or 64% , for the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 . Decreases in the nine-month period resulted primarily from comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters, however these declines were offset by additional revenues in the three-month period resulting from acquisitions in 2013 combined with growth in our MVNO's reselling postpaid services and connected devices. Approximately 41% of our wholesale and affiliate subscribers represent connected devices. These devices generate revenue from usage which varies depending on the solution being utilized. Average revenue per connected device is generally significantly lower than revenue from other wholesale and affiliate subscribers; however, the cost to service these subscribers is also lower resulting in a higher gross margin as a percent of revenue.
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
In addition to the explanations above, retail service revenue for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 increased $65 million primarily from the consolidation of Clearwire and subscriber growth mainly in our Virgin prepaid brand as subscribers are choosing higher rate plans as a result of the increased availability of smartphones. In addition, Sprint platform postpaid service revenue increased due to our $10 premium data add-on charge required for all smartphones combined with a reduction in the number of customers eligible for certain plan discounts due to policy changes and fewer customer credits.
In addition to the explanations above, wholesale, affiliate and other revenue for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 increased due to slight growth in the reselling of prepaid services by MVNO's and affiliates.
Average Monthly Service Revenue per Subscriber and Subscriber Trends
The table below summarizes average number of retail subscribers for the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 , the three and nine-month Successor periods ended September 30, 2013 , the Predecessor 191-day and 10-day periods ended July 10, 2013, and the Predecessor three and nine-month periods ended September 30, 2012 . Additional information about the number of subscribers, net additions (losses) to subscribers, and average rates of monthly postpaid and prepaid subscriber churn for each quarter since the first quarter 2012 may be found in the tables on the following pages.
 
Combined
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
2013
 
2013
 
2013
 
 
2013
 
2013
 
2012
 
2012
 
(subscribers in thousands)
Average postpaid subscribers  
31,230

 
31,020

 
31,125

 
31,125

 
 
31,296

 
30,583

 
32,632

 
32,345

Average prepaid subscribers  
15,847

 
15,895

 
16,015

 
16,015

 
 
15,793

 
15,244

 
15,232

 
15,369

Average retail subscribers  
47,077

 
46,915

 
47,140

 
47,140

 
 
47,089

 
45,827

 
47,864

 
47,714


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Table of Contents

The table below summarizes ARPU for the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 , the three and nine-month Successor periods ended September 30, 2013 , the Predecessor 191-day and 10-day periods ended July 10, 2013, and the Predecessor three and nine-month periods ended September 30, 2012 . Additional information about ARPU for each quarter since the first quarter 2012 may be found in the tables on the following pages.
 
Combined
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
2013
 
2013
 
2013
 
 
2013
 
2013
 
2012
 
2012
ARPU (1) :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
$
63.24

 
$
63.69

 
$
63.48

 
$
63.48

 
 
$
63.10

 
$
64.55

 
$
60.64

 
$
61.18

Prepaid
$
26.38

 
$
26.04

 
$
25.86

 
$
25.86

 
 
$
26.57

 
$
26.96

 
$
26.73

 
$
26.77

Average retail
$
50.83

 
$
50.93

 
$
50.70

 
$
50.70

 
 
$
50.85

 
$
52.04

 
$
49.85

 
$
50.09

_______________________  
(1)
ARPU is calculated by dividing service revenue by the sum of the average number of subscribers in the applicable service category. Changes in average monthly service revenue reflect subscribers for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage, the amount of service credits which are offered to subscribers, plus the net effect of average monthly revenue generated by new subscribers and deactivating subscribers.   Combined ARPU for the three months ended September 30, 2013 aggregates service revenue from the Predecessor period 10 days ended July 10, 2013 and the Successor period three months ended September 30, 2013 divided by the sum of the average subscribers during the three months ended. Combined ARPU for the nine months ended September 30, 2013 period aggregates service revenue from the Predecessor period 191 days ended July 10, 2013 and the Successor period nine months ended September 30, 2013 divided by the sum of the average subscribers during the nine month ended.
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Postpaid ARPU for the three and nine-month periods ended September 30, 2013 as compared to the same periods in 2012 increased primarily due to increased revenues from the $10 premium data add-on charges for all smartphones combined with other fee increases and a reduction in the number of customers eligible for certain plan discounts due to policy changes and fewer customer credits. The increase in postpaid ARPU was partially offset by a lower revenue per subscriber carried by subscribers acquired in the Clearwire and U.S. Cellular acquisitions combined with a slight decrease due to the purchase price accounting impact. We expect Sprint platform ARPU growth during 2013, associated with the $10 premium data add-on charges for all smartphones, which was launched in January 2011, to increase at a slower rate than in 2012 as a significant portion of the Sprint platform subscriber base has adopted smartphones. Prepaid ARPU for Successor the three and nine-month periods ended September 30, 2013 as compared to the same periods in 2012 declined primarily as a result of the impact of purchase price accounting to eliminate deferred revenues, partially offset by the impact of a higher revenue per subscriber carried by subscribers acquired in the Clearwire Acquisition.
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
In addition to the explanations above, prepaid ARPU for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 declined primarily as a result of a decrease in ARPU for our Assurance Wireless brand due to a lower number of active Assurance subscribers as a percentage of the average number of Assurance subscribers, primarily as a result of the recertification process, partially offset by an increase in ARPU for the remaining prepaid brands as subscribers are choosing higher priced plans due to the increased availability of smartphones. ARPU as it relates to our Assurance Wireless brand was also impacted as a result of the recertification process because those subscribers no longer had a revenue impact after December 31, 2012, but continued to be included in the prepaid subscriber based until deactivation in the second quarter 2013.

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The following table shows (a) net additions (losses) of wireless subscribers, (b) our total subscribers, and (c) end of period connected device subscribers as of the end of each quarterly period beginning with the first quarter 2012 .
 
March 31,
2012
 
June 30,
2012
 
September 30,
2012
 
December 30,
2012
 
March 31,
2013
 
June 30,
2013
 
September 30,
2013
Net additions (losses) (in thousands) (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
263

 
442

 
410

 
401

 
12

 
194

 
(360
)
Prepaid
870

 
451

 
459

 
525

 
568

 
(486
)
 
84

Wholesale and affiliates (2)
785

 
388

 
14

 
(243
)
 
(224
)
 
(228
)
 
181

Total Sprint platform
1,918

 
1,281

 
883

 
683

 
356

 
(520
)
 
(95
)
Nextel platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
(455
)
 
(688
)
 
(866
)
 
(644
)
 
(572
)
 
(1,060
)
 
—

Prepaid
(381
)
 
(310
)
 
(440
)
 
(376
)
 
(199
)
 
(255
)
 
—

Total Nextel platform
(836
)
 
(998
)
 
(1,306
)
 
(1,020
)
 
(771
)
 
(1,315
)
 
—

Transactions (2) :
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
—

 
—

 
—

 
—

 
—

 
(179
)
 
(175
)
Prepaid
—

 
—

 
—

 
—

 
—

 
(20
)
 
(56
)
Wholesale
—

 
—

 
—

 
—

 
—

 
—

 
13

Total Transactions
—

 
—

 
—

 
—

 
—

 
(199
)
 
(218
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid
(192
)
 
(246
)
 
(456
)
 
(243
)
 
(560
)
 
(1,045
)
 
(535
)
Total retail prepaid
489

 
141

 
19

 
149

 
369

 
(761
)
 
28

Total wholesale and affiliate
785

 
388

 
14

 
(243
)
 
(224
)
 
(228
)
 
194

Total Wireless
1,082

 
283

 
(423
)
 
(337
)
 
(415
)
 
(2,034
)
 
(313
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
End of period subscribers (in thousands) (1)
 
 
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid (3)
28,992

 
29,434

 
29,844

 
30,245

 
30,257

 
30,451

 
30,091

Prepaid
13,698

 
14,149

 
14,608

 
15,133

 
15,701

 
15,215

 
15,299

Wholesale and affiliates (2)(3)(4)
8,003

 
8,391

 
8,405

 
8,162

 
7,938

 
7,710

 
7,862

Total Sprint platform
50,693

 
51,974

 
52,857

 
53,540

 
53,896

 
53,376

 
53,252

Nextel platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
3,830

 
3,142

 
2,276

 
1,632

 
1,060

 
—

 
—

Prepaid
1,580

 
1,270

 
830

 
454

 
255

 
—

 
—

Total Nextel platform
5,410

 
4,412

 
3,106

 
2,086

 
1,315

 
—

 
—

Transactions (2) :
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
—

 
—

 
—

 
—

 
—

 
173

 
815

Prepaid
—

 
—

 
—

 
—

 
—

 
39

 
704

Wholesale
—

 
—

 
—

 
—

 
—

 
—

 
106

Total Transactions
—

 
—

 
—

 
—

 
—

 
212

 
1,625

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid (3)
32,822

 
32,576

 
32,120

 
31,877

 
31,317

 
30,624

 
30,906

Total retail prepaid
15,278

 
15,419

 
15,438

 
15,587

 
15,956

 
15,254

 
16,003

Total wholesale and affiliates (3)(4)
8,003

 
8,391

 
8,405

 
8,162

 
7,938

 
7,710

 
7,968

Total Wireless
56,103

 
56,386

 
55,963

 
55,626

 
55,211

 
53,588

 
54,877

 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents

Supplemental data - connected devices
 
 
 
 
 
 
 
 
 
 
 
 
End of period subscribers (in thousands) (3)
 
 
 
 
 
 
 
 
 
 
 
 
Retail postpaid
791

 
809

 
817

 
813

 
824

 
798

 
834

Wholesale and affiliates
2,217

 
2,361

 
2,542

 
2,670

 
2,803

 
3,057

 
3,298

Total
3,008

 
3,170

 
3,359

 
3,483

 
3,627

 
3,855

 
4,132

_______________________ 
(1)
Subscribers that transfer from their original service category classification to another platform, or another service line within the same platform, are reflected as a net loss to the original service category and a net addition to their new service category. There is no net effect for such subscriber changes to the total wireless net additions (losses) or end of period subscribers.
(2)
We acquired approximately 352,000 postpaid subscribers and 59,000 prepaid subscribers through the acquisition of assets from U.S. Cellular when the transaction closed on May 17, 2013. We acquired approximately 788,000 postpaid subscribers (excluding 29,000 Sprint wholesale subscribers transferred to Transactions postpaid subscribers that were originally recognized as part of our Clearwire MVNO arrangement), 721,000 prepaid subscribers, and 93,000 wholesale subscribers as a result of the Clearwire Acquisition which closed on July 9, 2013.
(3)
Subscribers through some of our MVNO relationships have inactivity either in voice usage or primarily as a result of the nature of the device, where activity only occurs when data retrieval is initiated by the end-user and may occur infrequently. Although we continue to provide these subscribers access to our network through our MVNO relationships, approximately 1,053,000 subscribers at September 30, 2013 through these MVNO relationships have been inactive for at least six months, with no associated revenue during the six-month period ended September 30, 2013 .
(4)
End of period connected devices are included in total retail postpaid or wholesale and affiliates end of period subscriber totals for all periods presented.
The following table shows (a) our average rates of monthly postpaid and prepaid subscriber churn and (b) our recapture of Nextel platform subscribers that deactivated but remained as customers on the Sprint platform as of the end of each quarterly period beginning with the first quarter 2012 .
 
March 31,
2012
 
June 30,
2012
 
September 30,
2012
 
December 30,
2012
 
March 31,
2013
 
June 30,
2013
 
September 30,
2013
Monthly subscriber churn rate (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
2.00
%
 
1.69
%
 
1.88
%
 
1.98
%
 
1.84
%
 
1.83
%
 
1.99
%
Prepaid
2.92
%
 
3.16
%
 
2.93
%
 
3.02
%
 
3.05
%
 
5.22
%
 
3.57
%
Nextel platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
2.09
%
 
2.56
%
 
4.38
%
 
5.27
%
 
7.57
%
 
33.90
%
 
—

Prepaid
8.73
%
 
7.18
%
 
9.39
%
 
9.79
%
 
12.46
%
 
32.13
%
 
—

Transactions (2) :
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
—

 
—

 
—

 
—

 
—

 
26.64
%
 
6.38
%
Prepaid
—

 
—

 
—

 
—

 
—

 
16.72
%
 
8.84
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid
2.01
%
 
1.79
%
 
2.09
%
 
2.18
%
 
2.09
%
 
2.63
%
 
2.09
%
Total retail prepaid
3.61
%
 
3.53
%
 
3.37
%
 
3.30
%
 
3.26
%
 
5.51
%
 
3.78
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nextel platform subscriber recaptures
 
 
 
 
 
 
 
 
 
 
 
 
Rate (3) :
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
46
%
 
60
%
 
59
%
 
51
%
 
46
%
 
34
%
 
—

Prepaid
23
%
 
32
%
 
34
%
 
50
%
 
34
%
 
39
%
 
—

Subscribers (4) :
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
228

 
431

 
516

 
333

 
264

 
364

 
—

Prepaid
137

 
143

 
152

 
188

 
67

 
101

 
—

_______________________  
(1)
Churn is calculated by dividing net subscriber deactivations for the quarter by the sum of the average number of subscribers for each month in the quarter. For postpaid accounts comprising multiple subscribers, such as family plans and enterprise accounts, net deactivations are defined as deactivations in excess of subscriber activations in a particular account within 30 days. Postpaid and Prepaid churn consist of both voluntary churn, where the subscriber makes his or her own determination to cease being a subscriber, and involuntary churn, where the subscriber's service is terminated due to a lack of payment or other reasons.
(2)
Subscriber churn related to the acquisition of assets from U.S. Cellular and the Clearwire Acquisition.
(3)
Represents the recapture rate defined as the Nextel platform postpaid or prepaid subscribers, as applicable, that switched from the Nextel platform during each period but activated service on the Sprint platform over the total Nextel platform subscriber deactivations in the period for postpaid and prepaid, respectively.

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Table of Contents

(4)
Represents the Nextel platform postpaid and prepaid subscribers, as applicable, that switched from the Nextel platform during each period but remained with the Company as subscribers on the Sprint platform. Subscribers that deactivate service on the Nextel platform and activate service on the Sprint platform are included in the Sprint platform net additions for the applicable period.

47
Table of Contents

The following table shows our postpaid and prepaid ARPU as of the end of each quarterly period beginning with the first quarter 2012 .
 
Predecessor
 
 
 
 
Successor
 
Combined
 
March 31,
2012
 
June 30,
2012
 
September 30,
2012
 
December 30,
2012
 
March 31,
2013
 
June 30,
2013
 
10 Days Ended July 10, 2013
 
 
September 30,
2013
 
September 30,
2013
ARPU
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sprint platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
$
62.55

 
$
63.38

 
$
63.21

 
$
63.04

 
$
63.67

 
$
64.20

 
$
64.71

 
 
$
64.24

 
$
64.28

Prepaid
$
25.64

 
$
25.49

 
$
26.19

 
$
26.30

 
$
25.95

 
$
26.96

 
$
26.99

 
 
$
25.14

 
$
25.33

Nextel platform:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
$
40.94

 
$
40.25

 
$
38.65

 
$
37.27

 
$
35.43

 
$
36.66

 
$
—

 
 
$
—

 
$
—

Prepaid
$
35.68

 
$
37.20

 
$
34.73

 
$
35.59

 
$
31.75

 
$
34.48

 
$
—

 
 
$
—

 
$
—

Transactions (1) :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Postpaid
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
59.87

 
$
35.75

 
 
$
37.44

 
$
40.00

Prepaid
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
19.17

 
$
12.78

 
 
$
40.62

 
$
43.20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total retail postpaid
$
59.88

 
$
60.88

 
$
61.18

 
$
61.47

 
$
62.47

 
$
63.59

 
$
64.55

 
 
$
63.48

 
$
63.69

Total retail prepaid
$
26.82

 
$
26.59

 
$
26.77

 
$
26.69

 
$
26.08

 
$
27.02

 
$
26.96

 
 
$
25.86

 
$
26.04

_______________________
(1)
Subscriber ARPU related to the acquisition of assets from U.S. Cellular and the Clearwire acquisition.

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Subscriber Results
Sprint Platform Subscribers
Retail Postpaid — During the three-month period ended September 30, 2013 , net postpaid subscriber losses were 360,000 as compared to net additions of 194,000 in the three-month period ended June 30, 2013 and net additions of 410,000 in the three-month period ended September 30, 2012 . The change to net losses in the third quarter 2013 from net additions in the second quarter 2013 and third quarter 2012 is primarily related to the absence of Nextel platform recaptures in the third quarter 2013 as compared to 364,000 in the second quarter 2013 and 516,000 in the third quarter 2012. In addition, churn increased when comparing the third quarter 2013 to both the second quarter 2013 and third quarter 2012 and postpaid gross subscriber additions declined when comparing the third quarter 2013 to the third quarter 2012.
Retail Prepaid — During the three-month period ended September 30, 2013 , we added 84,000 net prepaid subscribers as compared to net losses of 486,000 in the three-month period ended June 30, 2013 and net additions of 459,000 in the three-month period ended September 30, 2012 . Our change from net losses in the second quarter 2013 to net additions in the third quarter 2013 is primarily due to Assurance Wireless net losses in the second quarter 2013 attributable to new recertification regulations as discussed in more detail below. Our decrease in net prepaid subscriber additions in the third quarter 2013 as compared to the same period in 2012 was primarily due to continued competitive pressures and promotions in the third quarter 2012 that drove increased net additions in that period. Also contributing to the decline in net additions in the third quarter 2013 was the absence of Nextel platform recaptures as compared to 101,000 in the second quarter 2013 and 152,000 in the third quarter 2012.
The federal Lifeline program under which Assurance Wireless operates requires applicants to meet certain eligibility requirements and existing subscribers must recertify as to those requirements annually. New regulations in 2012, which impact all Lifeline carriers, impose stricter rules on the subscriber eligibility requirements and recertification. These new regulations also required a one-time recertification of the entire June 1, 2012 subscriber base by December 31, 2012. Accounts of subscribers who failed to respond by December 31, 2012 were suspended and made subject to our prepaid churn rules as described below (or 365 days in a limited number of states). However, subscribers could re-apply prior to being deactivated and also had the ability to receive by-the-minute service at their own expense. We deactivated the accounts of approximately 1.2 million subscribers in the second quarter 2013 primarily related to the recertification process.
Prepaid subscribers are generally deactivated between 60 and 150 days from the later of the date of initial activation or replenishment; however, prior to account deactivation, targeted retention programs can be offered to qualifying subscribers to maintain ongoing service by providing up to an additional 150 days to make a replenishment. Subscribers targeted through these retention offers are not included in the calculation of churn until their retention offer expires without a replenishment to their account. As a result, end of period prepaid subscribers include subscribers engaged in these retention programs, however, the number of these subscribers as a percentage of our total prepaid subscriber base has remained consistent over the past four quarters. Assurance Wireless and Clearwire subscribers are excluded from these targeted retention programs.
Wholesale and Affiliate Subscribers — Wholesale and affiliate subscribers represent customers that are served on our networks through companies that resell our wireless services to their subscribers, customers residing in affiliate territories and connected devices that utilize our network. Of the 7.9 million Sprint Platform subscribers included in wholesale and affiliates, approximately 42% represent connected devices. Wholesale and affiliate subscriber net additions were 181,000 during the three-month period ended September 30, 2013 as compared to net losses of 228,000 three-month period ended June 30, 2013 and net additions of 14,000 for the same period in 2012 . Our change to net additions in the third quarter 2013 from net losses in the second quarter 2013 was primarily due to targeted efforts during the second quarter 2013 to reduce inactive subscriber accounts by our wholesale MVNO customers as well as net losses in the second quarter 2013 attributable to new Lifeline program recertification regulations as discussed in Retail Prepaid above. The increase in wholesale and affiliate subscriber net additions in the third quarter 2013 as compared to the same period in 2012 was primarily attributable to increases in connected devices and growth in wholesale postpaid resellers as well as fewer net subscriber losses from the Lifeline programs offered by our MVNO's selling prepaid services partially offset by net subscriber losses in other prepaid resellers.

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Transactions Subscribers
As part of the acquisition of assets from U.S. Cellular, which closed in May 2013, we acquired 352,000 postpaid subscribers and 59,000 prepaid subscribers. As part of the Clearwire Acquisition in July 2013, we acquired 788,000 postpaid subscribers (exclusive of Sprint platform wholesale subscribers acquired through our MVNO relationship with Clearwire that were transferred to postpaid subscribers within Transactions), 721,000 prepaid subscribers, and 93,000 wholesale subscribers. For the remainder of the three-month period ended September 30, 2013 , we had net postpaid subscriber losses of 175,000 , net prepaid subscriber losses of 56,000 and net wholesale subscriber additions of 13,000 , of which approximately 30,000 and 2,000 postpaid and prepaid subscribers, respectively, were recaptured on the Sprint platform.
Cost of Services
Cost of services consists primarily of:
•
costs to operate and maintain our networks, including direct switch and cell site costs, such as rent, utilities, maintenance, labor costs associated with network employees, and spectrum frequency leasing costs;
•
fixed and variable interconnection costs, the fixed component of which consists of monthly flat-rate fees for facilities leased from local exchange carriers based on the number of cell sites and switches in service in a particular period and the related equipment installed at each site, and the variable component of which generally consists of per-minute use fees charged by wireline providers for calls terminating on their networks, which fluctuate in relation to the level and duration of those terminating calls;
•
long distance costs paid to the Wireline segment;
•
costs to service and repair devices;
•
regulatory fees;
•
roaming fees paid to other carriers; and
•
fixed and variable costs relating to payments to third parties for the use of their proprietary data applications, such as messaging, music, TV, and navigation services by our subscribers.
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Cost of services decreased $169 million , or 7% , and $4.7 billion , or 69% , for the three and nine-month periods ended September 30, 2013 , as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. In addition, we had reduced network costs such as rent and utilities related to the shut-down of the Nextel platform combined with a decrease in service and repair costs due to a decline in the volume and frequency of repairs. These decreases partially were offset by additional network costs due to the deployment of Network Vision as well as the net impact of the Clearwire Acquisition.
Combined versus Predecessor Nine-Month Periods Ended September 30, 2013 and 2012
In addition to the explanations above, cost of services for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 decreased from a reduction in payments to third-party vendors for use of their proprietary data applications and premium services as a result of more favorable contract rates. These decreases were partially offset by higher backhaul costs primarily due to increased capacity.
Equipment Net Subsidy
We recognize equipment revenue and corresponding costs of devices when title and risk of loss passes to the indirect dealer or end-use customer, assuming all other revenue recognition criteria are met. Our marketing plans assume that devices typically will be sold at prices below cost, which is consistent with industry practice. We offer certain incentives to retain and acquire subscribers such as new devices at discounted prices. The cost of these incentives is recorded as a reduction to equipment revenue upon activation of the device with a service contract.
Cost of products includes equipment costs (primarily devices and accessories), order fulfillment related expenses, and write-downs of device and accessory inventory related to shrinkage and obsolescence. Additionally, cost of products is reduced by any rebates that are earned from the equipment manufacturers. Cost of products in excess of the net revenue generated from equipment sales is referred to in the industry as equipment net subsidy. We

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also make incentive payments to certain indirect dealers, who purchase the iPhone ® directly from Apple. Those payments are recognized as selling, general and administrative expenses when the device is activated with a Sprint service plan because Sprint does not recognize any equipment revenue or cost of products for those transactions. (See Selling, General and Administrative Expense below.)
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Equipment revenue decreased $114 million , or 15% , and $1.6 billion , or 72% , for the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. In addition, the decrease was due to fewer postpaid handsets sold, which was partially offset by higher average sales prices in both postpaid and prepaid as well as increases in prepaid handsets sold. Cost of products declined $519 million , or 22% , and $5.0 billion , or 73% , for the three and nine-month periods ended September 30, 2013 as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. In addition, the decrease was due to fewer postpaid handsets sold but at a higher average cost per handset, partially offset by increased prepaid handsets sold but at a slightly lower average cost per handset.
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
Equipment revenues for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 increased in the year to date period primarily due to higher average sales prices per postpaid and prepaid device sold as well as increases in prepaid volumes, partially offset by fewer postpaid handsets sold. Cost of products increased for the year to date period resulting primarily from an increase in average cost per prepaid handset due to increased sales of more expensive 4G and LTE devices combined with fewer sales of low cost Assurance wireless handsets, partially offset by fewer postpaid handsets sold although at a higher average cost per handset.
Selling, General and Administrative Expense
Sales and marketing costs primarily consist of customer 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, payments made to OEMs for direct source equipment, 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 versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Sales and marketing expense was $1.2 billion for both the three and nine-month periods ended September 30, 2013 representing a decrease of $88 million , or 7% , and $2.7 billion , or 69% , as compared to the same periods in 2012 , respectively, primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. In addition, we had a reduction in commissions expense resulting from our decrease in postpaid subscriber gross additions, which was was partially offset by increased costs resulting from the Clearwire Acquisition and higher media spend.
General and administrative costs were $926 million for both the three and nine-month periods ended September 30, 2013 representing a decrease of $89 million , or 9% , and $2.1 billion , or 69% , as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters, partially offset by additional IT and overhead costs as a result of the Clearwire Acquisition. Bad debt expense was $116 million for each of the three and nine-month periods ended September 30, 2013 representing a $17 million and $283 million decrease as compared to bad debt expense of $133 million and $399 million for the three and nine-month periods ended September 30, 2012 , respectively. In addition to the decrease related to comparing a shortened Post-merger period to periods consisting of full calendar quarters, the decrease in bad debt expense reflects a decrease in accounts written off as well as a decline in involuntary churn. We reassess our allowance for doubtful accounts quarterly. Changes in our allowance for doubtful accounts are largely attributable to the analysis of historical collection experience and changes, if any, in credit policies established for subscribers. On the Sprint platform, the mix of prime postpaid subscribers to total postpaid subscribers was 82% in

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both the three and nine-month periods ended September 30, 2013 and 81% and 80% for the three and nine-month periods ended September 30, 2012 .
Combined versus Predecessor Nine-Month Periods Ended September 30, 2013 and 2012
In addition to the increases in the explanations above, the increases in sales and marketing expense for the combined nine month period ended September 30, 2013 as compared to 2012 were partially offset by the reduction in commissions expense as a result of fewer gross additions.
In addition to the explanations above, general and administrative costs decreased for the combined nine month period ended September 30, 2013 as compared to 2012 also as a result of lower customer care costs primarily due to lower call volumes and fewer calls per subscriber.

Segment Earnings - Wireline
We provide a broad suite of wireline voice and data communications services to other communications companies and targeted business and consumer subscribers. In addition, we provide voice, data and IP communication services to our Wireless segment and IP and other services to cable MSOs. Cable MSOs resell our local and long distance services and use our back office systems and network assets in support of their telephone service provided over cable facilities primarily to residential end-use subscribers. We are one of the nation's largest providers of long distance services and operate all-digital global long distance and Tier 1 IP networks. 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 easy 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 provide wholesale voice local and long distance services to cable MSOs, which they offer as part of their bundled service offerings, as well as traditional voice and data services for their enterprise use. However, the digital voice services we provide to our cable MSO's have become large enough in scale that they have decided to in-source these services and, as a result, we expect this business to decline over time. We also continue to provide voice services to residential consumers. Our Wireline segment markets and sells its services primarily through direct sales representatives.
Wireline segment earnings are primarily a function of wireline service revenue, network and interconnection costs, and other Wireline segment operating expenses. Network costs primarily represent special access costs and interconnection costs, which generally consist of domestic and international per-minute usage fees paid to other carriers. The remaining costs associated with operating the Wireline segment include the costs to operate our customer care and billing organizations in addition to administrative support. Wireline service revenue and variable network and interconnection costs fluctuate with the changes in our customer base and their related usage, but some cost elements do not fluctuate in the short term with the changes in our customer usage. Our wireline services provided to our Wireless segment are generally accounted for based on market rates, which we believe approximate fair value. The Company generally re-establishes these rates at the beginning of each fiscal year. Over the past several years, there has been an industry wide trend of lower rates due to increased competition from other wireline and wireless communications companies as well as cable and Internet service providers. Declines in wireline segment earnings related to intercompany pricing rates do not affect our consolidated results of operations as our Wireless segment benefits from an equivalent reduction in cost of service.

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The following table provides an overview of the results of operations of our Wireline segment for the three and nine-month Successor periods ended September 30, 2013 as well as for the Predecessor 191-day and 10-day periods ended July 10, 2013, the Predecessor three and nine-month periods ended September 30, 2012 , and the combined consolidated results of operations for the three and nine-month periods ended September 30, 2013 .
 
 
Combined
 
Successor
 
 
Predecessor
 
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
 
191 Days Ended
 
10 Days Ended
 
Nine Months Ended
 
Three Months Ended
 
 
September 30,
 
September 30,
 
 
July 10,
 
September 30,
Wireline Segment Earnings
 
2013
 
2013
 
2013
 
2013
 
 
2013
 
2013
 
2012
 
2012
 
 
(in millions)
Voice
 
$
1,104

 
$
375

 
$
333

 
$
333

 
 
$
771

 
$
42

 
$
1,242

 
$
399

Data
 
245

 
64

 
57

 
57

 
 
188

 
7

 
302

 
95

Internet
 
1,286

 
420

 
373

 
373

 
 
913

 
47

 
1,330

 
428

Other
 
43

 
16

 
14

 
14

 
 
29

 
2

 
58

 
17

Total net service revenue
 
2,678

 
875

 
777

 
777

 
 
1,901

 
98

 
2,932

 
939

Cost of services and products
 
(1,978
)
 
(648
)
 
(576
)
 
(576
)
 
 
(1,402
)
 
(72
)
 
(2,113
)
 
(667
)
Service gross margin
 
700

 
227

 
201

 
201

 
 
499

 
26

 
819

 
272

Service gross margin percentage
 
26
%
 
26
%
 
26
%
 
26
%
 
 
26
%
 
27
%
 
28
%
 
29
%
Selling, general and administrative expense
 
(311
)
 
(95
)
 
(84
)
 
(84
)
 
 
(227
)
 
(11
)
 
(351
)
 
(114
)
Wireline segment earnings
 
$
389

 
$
132

 
$
117

 
$
117

 
 
$
272

 
$
15

 
$
468

 
$
158

Wireline Revenue
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Voice Revenues
Voice revenues decreased $66 million , or 17% , and $909 million , or 73% , for the three and nine-month periods ended September 30, 2013 as compared to the same periods in 2012 primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. Voice revenues generated from the sale of services to our Wireless segment represented 36% of total voice revenues for both the three and nine-month periods ended September 30, 2013 as compared to 33% and 31% for the three and nine-month periods ended September 30, 2012 , respectively.
Data Revenues
Data revenues reflect sales of data services, primarily Private Line, and also include asynchronous transfer mode (ATM), frame relay and managed network services bundled with non-IP-based data access. Data revenues decreased $38 million , or 40% , and $245 million , or 81% , for the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. Data revenues generated from the provision of services to the Wireless segment represented 40% of total data revenue for both the three and nine-month periods ended September 30, 2013 as compared to 47% and 44% for the three and nine-month periods ended September 30, 2012 , respectively.
Internet Revenue
IP-based data services revenue reflects sales of Internet services, including MPLS, VoIP, SIP, and managed services bundled with IP-based data access. IP-based data services decreased $55 million , or 13% , and $957 million , or 72% , for the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. Sale of services to our Wireless segment represented 12% of total Internet revenues in both the three and nine-month periods ended September 30, 2013 as compared to 11% for both the three and nine-month periods ended September 30, 2012 .

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Other Revenues
Other revenues, which primarily consist of sales of customer premises equipment, decreased $3 million , or 18% , and $44 million , or 76% , in the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters.
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
Voice Revenues
In addition to the explanations above, voice revenues for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 decreased in the year-to-date period driven by overall volume and price declines, of which $43 million was related to the decline in prices for the sale of services to our Wireless segment, as well as volume declines due to customer churn.
Data Revenues
In addition to the explanations above, data revenues for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 decreased in the year-to-date period as a result of customer churn driven by the focus to no longer provide frame relay and ATM services.
Internet Revenue
In addition to the explanations above, Internet revenues for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 decreased in the year to date period primarily due to fewer IP customers.
Costs of Services and Products
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Costs of services and products include access costs paid to local phone companies, other domestic service providers and foreign phone companies to complete calls made by our domestic subscribers, costs to operate and maintain our networks, and costs of equipment. Costs of services and products decreased $91 million , or 14% , and $1.5 billion , or 73% , in the three and nine-month periods ended September 30, 2013 , respectively, as compared to the same periods in 2012 primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. Service gross margin percentage decreased from 29% and 28% in the three and nine-month periods ended September 30, 2012 , respectively, to 26% in both the three and nine-month periods ended September 30, 2013 , primarily as a result of a decrease in net service revenue partially offset by a decrease in cost of services and products.
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
In addition to the explanations above, costs of services and products for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 decreased primarily due to lower access expense as a result of declining voice, data and Internet volumes.
Selling, General and Administrative Expense
Successor versus Predecessor Three and Nine-Month Periods Ended September 30, 2013 and 2012
Selling, general and administrative expense decreased $30 million , or 26% , and $267 million , or 76% , in the three and nine-month periods ended September 30, 2013 , as compared to the same periods in 2012 , primarily due to comparing operating results for the shortened Post-merger period to periods consisting of full calendar quarters. Total selling, general and administrative expense as a percentage of net services revenue was 11% in both the three and nine-month periods ended September 30, 2013 and 12% in both the three and nine-month periods ended September 30, 2012 .
Combined versus Predecessor Nine-Month Period Ended September 30, 2013 and 2012
In addition to the explanations above, selling, general and administrative expense for the combined nine-month period ended September 30, 2013 as compared to the same Predecessor period in 2012 decreased primarily due to a reduction in shared administrative and employee related costs required to support the Wireline segment as a result of the decline in revenue.


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LIQUIDITY AND CAPITAL RESOURCES
Cash Flow  
 
Combined
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
Nine Months Ended
 
 
191 Days Ended
 
Nine Months Ended
 
September 30,
 
 
July 10,
 
September 30,
 
2013
 
2013
 
 
2013
 
2012
 
(in millions)
Net cash provided by operating activities
$
3,371

 
$
700

 
 
$
2,671

 
$
2,783

Net cash used in investing activities
$
(25,792
)
 
$
(19,407
)
 
 
$
(6,385
)
 
$
(3,585
)
Net cash provided by (used in) financing activities
$
24,651

 
$
24,760

 
 
$
(109
)
 
$
1,000

Operating Activities
Net cash provided by operating activities of approximately $700 million in the first nine months of 2013 for the Successor decreased $2.1 billion from the same period in 2012 for the Predecessor. The decrease was primarily due to comparing a shortened Post-merger period to a nine-month period. Net cash provided by operating activities in the first nine months of 2013 , on a combined basis, of approximately $3.4 billion increased $588 million as compared to the Predecessor first nine months of 2012. This was primarily due to increased cash received from customers of $689 million partially offset by increased cash paid for interest of approximately $211 million primarily as a result of less interest capitalized related to spectrum licenses used for Network Vision. The Predecessor period nine months ended September 30, 2012 included $108 million of pension contribution payments with no comparable payments in the Successor period.
Subscriber revenue earned but not billed represented about 7% and 8% of our accounts receivable balance as of September 30, 2013 and 2012 , respectively.
Investing Activities
Net cash used in investing activities for the Successor period increased by approximately $15.8 billion as compared to the related Predecessor period, primarily due to increases related to the SoftBank Merger of $14.1 billion, net of cash acquired, and an increase of $3.1 billion in restricted cash associated with the limited waivers obtained from each of our lenders under our credit facilities. These increases were offset by a reduction in capital expenditures of approximately $900 million as a result of comparing a shortened Post-merger period to a nine-month period.
Financing Activities
Net cash provided by financing activities was $24.8 billion during the Successor period, which included proceeds from the issuance of common stock and warrants of approximately $18.6 billion related to the SoftBank Merger. In addition, on September 11, 2013, the Company issued $6.5 billion in unregistered debt with registration rights consisting of $2.25 billion aggregate principal amount of 7.250% notes due 2021 and $4.25 billion aggregate principal amount of 7.875% notes due 2023, each guaranteed by Sprint Communications, Inc. We also incurred approximately $107 million of debt issuance costs. These increases, along with net borrowings under our secured equipment credit facility of approximately $270 million, were offset by the retirement of approximately $414 million principal amount of Clearwire debt.
Net cash provided by financing activities was $1.0 billion for the first nine months of 2012 for the Predecessor, which included the issuances of $1.0 billion aggregate principal amount of 9.125% notes due 2017, $1.0 billion aggregate principal amount of 7.00% guaranteed notes due 2020, $1.5 billion aggregate principal amount of 7.00% notes due 2020 and borrowings of approximately $77 million under the first tranche of our secured equipment credit facility. The first nine months of 2012 also included redemptions of all outstanding $1.473 billion aggregate principal amount of Nextel Communications, Inc. 6.875% Notes due 2013 and $1.0 billion aggregate principal amount of the approximately $2.1 billion aggregate principal amount of then outstanding Nextel Communications, Inc. 7.375% notes due 2015. In addition, we incurred $90 million of debt financing costs in the first nine months of 2012 .

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Working Capital
As of September 30, 2013 , we had working capital of $4.5 billion compared to $4.9 billion as of December 31, 2012 (Predecessor). Our working capital as of September 30, 2013 and December 31, 2012 includes accrued capital expenditures for unbilled services totaling approximately $1.5 billion and $900 million, respectively, related to Network Vision.
Available Liquidity
As of September 30, 2013 , our liquidity was $9.6 billion , which included cash, cash equivalents, short-term investments and available borrowing capacity under our revolving bank credit facility and excludes restricted cash of $3.1 billion . Our cash, cash equivalents and short-term investments totaled $7.5 billion as of September 30, 2013 compared to $8.2 billion as of December 31, 2012 (Predecessor). As of September 30, 2013 , approximately $915 million in letters of credit were outstanding under our $3.0 billion revolving bank credit facility, including the letter of credit required by the 2004 FCC Report and Order to reconfigure the 800 MHz band (the "Report and Order"). Certain indentures that govern our outstanding notes also require compliance with various covenants, including covenants that limit the Company's ability to sell all or substantially all of its assets, limit the ability of the Company and its subsidiaries to incur indebtedness, and limit the ability of the Company and its subsidiaries to incur liens, as defined by the terms of the indentures and supplemental indentures. As a result of the outstanding letters of credit, which directly reduce the availability of the revolving bank credit facility, we had $2.1 billion of borrowing capacity available under the revolving bank credit facility as of September 30, 2013 . Our revolving bank credit facility expires in February 2018. In addition, as of September 30, 2013 , up to $174 million was available through May 31, 2014 under the second tranche of our secured equipment credit facility, although the use of such funds is limited to equipment-related purchases from Ericsson.
Strategic Initiatives
Apple Contract
Our commitment with Apple, Inc. requires us to purchase a minimum number of smartphones. Since our launch of the iPhone, we have sold in excess of 12.9 million iPhones and continue to project that we will meet our minimum obligation over the contract term.
Network Capital Expenditures
In October 2011, we announced our intention to accelerate the timeline associated with Network Vision. We are currently modernizing our network to deploy LTE multi-mode technology on our various spectrum bands, including spectrum recently acquired in the Clearwire Acquisition, and experiencing rapid growth in data usage driven by more subscribers on the Sprint platform and a continuing shift in our subscriber base to smartphones, which requires additional capital for legacy equipment to meet our customers' needs and to maintain customer satisfaction. Our expected timeline, our capital needs to maintain and operate our existing infrastructure, and our integration of Clearwire and deployment of the 2.5 GHz spectrum are expected to require substantial amounts of additional capital expenditures during the period of deployment. In addition to our expectation of increased capital expenditures, we also expect network operating expenditures to increase during the Network Vision deployment period, as well as expected cash requirements to meet existing obligations associated with the decommissioning of the Nextel platform.
Long-Term Debt
On May 1, 2013, the Company paid $300 million in principal plus accrued and unpaid interest on its outstanding iPCS, Inc. Secured Floating Rate Notes due 2013 as scheduled. On September 11, 2013, the Company issued $2.25 billion aggregate principal amount of 7.250% notes due 2021 and $4.25 billion aggregate principal amount of 7.875% notes due 2023, each series of which was guaranteed by Sprint Communications, Inc. In addition, $414 million aggregate principal amount of Clearwire debt plus accrued and unpaid interest was repaid in September 2013.
As of June 30, 2013, the first tranche of our secured equipment credit facility was fully drawn. We also made two equal regularly scheduled principal repayments totaling $111 million during the first and third quarters 2013 which left an outstanding balance of $389 million on the first tranche as of September 30, 2013 . Approximately $326 million was drawn on the second tranche of our secured equipment credit facility in the third quarter of 2013, which left $174 million available to be drawn as of September 30, 2013 , which can be drawn

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through May 31, 2014. The facility expires in March 2017 and may be used to finance equipment-related purchases from Ericsson for Network Vision. The facility is secured by a lien on the equipment purchased and is fully and unconditionally guaranteed by Sprint Communications. Repayments of outstanding amounts on the secured equipment credit facility cannot be re-drawn.
Liquidity and Capital Resource Requirements
To meet our short- and long-term liquidity requirements, we look to a variety of funding sources. Our existing liquidity balance and cash generated from operating activities is our primary source of funding. In addition to cash flows from operating activities, we rely on the ability to issue debt and equity securities, the ability to issue other forms of financing, and the borrowing capacity available under our credit facilities, to support our short- and long-term liquidity requirements. We believe our existing available liquidity and cash flows from operations will be sufficient to meet our funding requirements through the next twelve months, including debt service requirements and other significant future contractual obligations. To maintain an adequate amount of available liquidity and execute according to the timeline of our current business plan, which includes network deployment and maintenance, subscriber growth, data usage capacity needs and the expected achievement of a cost structure intended to achieve more competitive margins, we may need to raise additional funds from external resources. If we are unable to fund our remaining capital needs from external resources on terms acceptable to us, we would need to modify our existing business plan, which could adversely affect our expectation of long-term benefits to results from operations and cash flows from operations.
The terms and conditions of our revolving bank credit facility, which expires in February 2018, require that the ratio (Leverage Ratio) of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non-recurring items, as defined by the credit facility (adjusted EBITDA), not exceed 6.25 to 1.0 through June 30, 2014. After June 30, 2014, the Leverage Ratio declines on a scheduled basis, as determined by the credit agreement, until the ratio becomes fixed at 4.0 to 1.0 for the fiscal quarter ending December 31, 2016 and each fiscal quarter ending thereafter. The unsecured EDC agreement and secured equipment credit facility were amended on March 12, 2013 and June 24, 2013, respectively, to provide for terms similar to those of the amended revolving bank credit facility, except that under the terms of the EDC agreement and secured equipment credit facility, repayments of outstanding amounts cannot be re-drawn. As of September 30, 2013 , our Leverage Ratio, as defined by the amended revolving bank credit facility, EDC agreement, and secured equipment credit facility was 5.4 to 1.0 calculated taking into effect the waiver described below. To reflect the results for the three months ended September 30, 2013, the Leverage Ratio includes the Successor’s adjusted EBITDA for the quarter since July 11, 2013, as well as the Predecessor’s adjusted EBITDA for the 10 days ended July 10, 2013. As of December 31, 2012 , our Leverage Ratio, as defined by the prior revolving credit facility, EDC agreement, and secured equipment credit facility was 3.7 to 1.0.
After giving effect to the offering of $6.5 billion aggregate principal amount of notes by the Company in September 2013, there was risk we would exceed the Leverage Ratio at September 30, 2013. Accordingly, we obtained a limited waiver from each of the lenders under the credit facilities that allowed us to exclude $4.5 billion of indebtedness from our Leverage Ratio, which enabled us to be in compliance with this financial covenant until December 31, 2013. However, as a requirement under the waivers, we must maintain a segregated reserve account of $3.5 billion until the earlier of 1) the time such funds are used to prepay, redeem or otherwise retire existing Clearwire indebtedness, or 2) December 31, 2013 at which time the waivers will have expired. Sprint intends to retire certain of Clearwire’s indebtedness prior to the expiration of the waiver, as described below, which is expected to enable the Company to remain in compliance with its Leverage Ratio beyond the expiration of the waivers. Any funds used to retire Clearwire indebtedness directly reduce the $3.5 billion restricted cash balance. Approximately $414 million was redeemed through September 30, 2013, which resulted in an ending restricted cash balance of $3.1 billion for the third quarter 2013.
On October 24, 2013, Clearwire Communications LLC and Clearwire Finance, Inc. (the Issuers) issued notices to redeem on December 1, 2013, all of the then outstanding principal amount of Clearwire's 12% senior secured notes due 2015, as well as the remaining $325 million aggregate principal amount of 12% second-priority secured notes due 2017. Furthermore, on October 30, 2013, the Issuers redeemed $175 million of the $500 million principal amount outstanding of the Issuers 12% second-priority secured notes due 2017. As of September 30, 2013, the principal amount outstanding of the Issuers 12% senior secured notes due 2015 was approximately $2.4 billion.

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These amounts directly reduce the $3.1 billion balance reported as of September 30, 2013 that is required to be segregated in the reserve account.
In determining our expectation of future funding needs in the next twelve months and beyond, we have considered:
•
projected revenues and expenses relating to our operations;
•
continued availability of a revolving bank credit facility in the amount of $3.0 billion , which expires in February 2018;
•
any scheduled payments or anticipated redemptions related to capital lease and debt obligations assumed in the Clearwire Acquisition;
•
anticipated levels and timing of capital expenditures, including the capacity and upgrading of our networks and the deployment of new technologies in our networks, and FCC license acquisitions taking into consideration the 2.5 GHz spectrum acquired in the Clearwire Acquisition;
•
anticipated payments under the Report and Order, as supplemented;
•
any additional contributions we may make to our pension plan;
•
scheduled principal payments of $687 million; and
•
other future contractual obligations, including Network Vision, and general corporate expenditures.
Our ability to fund our capital needs from external sources is ultimately affected by the overall capacity and terms of the banking and securities markets, as well as our performance and our credit ratings. Given our recent financial performance as well as the volatility in these markets, we continue to monitor them closely and to take steps to maintain financial flexibility at a reasonable cost of capital.
The following outlooks and credit ratings from Moody's Investor Service, Standard & Poor's Ratings Services, and Fitch Ratings for certain of Sprint Corporation's outstanding obligations were:
 
 
Rating  
Rating Agency
 
Issuer Rating
 
Unsecured  Notes
 
Guaranteed Notes
 
Bank Credit
Facility
 
Outlook
Moody's
 
Ba3
 
B1
 
Ba2
 
Baa3
 
Stable
Standard and Poor's
 
BB-
 
BB-
 
BB+
 
BB+
 
Stable
Fitch
 
B+
 
B+
 
BB
 
BB
 
Stable
As a result of the waiver previously discussed and the announced retirement of certain Clearwire indebtedness, we expect to remain in compliance with our covenants through the next twelve months, although there can be no assurance that we will do so. Although we expect to improve our Sprint platform postpaid subscriber results, and execute on our Network Vision plan, if we do not meet our expectations, depending on the severity of any difference in actual results versus what we currently anticipate, it is possible that we would not remain in compliance with our covenants or be able to meet our debt service obligations, which could result in acceleration of our indebtedness. If such unforeseen events occur, we may engage with our lenders to obtain appropriate waivers or amendments of our credit facilities or refinance borrowings, although there is no assurance we would be successful in any of these actions.
A default under any of our borrowings could trigger defaults under our other debt obligations, which in turn could result in the maturities being accelerated. Certain indentures that govern our outstanding notes also require compliance with various covenants, including covenants that limit the Company's ability to sell all or substantially all of its assets, limit the Company and its subsidiaries' ability to incur indebtedness, and limit the ability of the Company and its subsidiaries to incur liens, as defined by the terms of the indentures. Under our revolving bank credit facility, we are currently restricted from paying cash dividends because our ratio of total indebtedness to adjusted EBITDA exceeds 2.5 to 1.0 .

CURRENT BUSINESS OUTLOOK     
The Company continues to expect 2013 consolidated segment earnings (inclusive of Predecessor and Successor activity) to be between $5.1 billion and $5.3 billion, inclusive of the dilutive effects of the SoftBank and Clearwire transactions, which are estimated to be approximate ly $300 million, subje ct to finalization of fair values.

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The Company also continues to expect 2013 capital expenditures (inclusive of Predecessor and Successor activity) of approximately $8 billion.
The above discussion is subject to the risks and other cautionary and qualifying factors set forth under “Forward-Looking Statements” below, Part II, Item 1A "Risk Factors" below, and the Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2012 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.  

FUTURE CONTRACTUAL OBLIGATIONS
As a result of the Clearwire Acquisition, we assumed additional future contractual obligations of approximately $9.6 billion of which $2.7 billion is attributable to additional operating lease commitments, $6.8 billion is attributable to additional spectrum lease commitments, and $100 million is related to spectrum service credits in addition to Clearwire debt. Below is a graph depicting our future principal maturities of debt (inclusive of the additional indebtedness assumed in the Clearwire Acquisition as well as our $6.5 billion debt issuance on September 11, 2013) as of September 30, 2013 .
* This table excludes (i) our unsecured revolving bank credit facility, which will expire in 2018 and has no outstanding balance, and under which $915 million in letters of credit are outstanding, (ii) any undrawn, available credit under our secured equipment credit facility, which will expire in 2017, (iii) vendor financing notes assumed in the Clearwire Acquisition, and (iv) all capital leases and other financing obligations. This table includes Clearwire debt that has either (i) been retired subsequent to September 30, 2013 or (ii) been subject to notification of redemption on December 1, 2013.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company applies those accounting policies that management believes best reflect the underlying business and economic events, consistent with accounting principles generally accepted in the United States. Inherent in such policies are certain key assumptions and estimates made by management. Management periodically updates its estimates used in the preparation of the consolidated financial statements based on its latest assessment of the current and projected business and general economic environment. Information regarding the Company's Critical Accounting Policies and Estimates is included in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2012 .


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FINANCIAL STRATEGIES
General Risk Management Policies
Our board of directors has adopted a financial risk management policy that authorizes us to enter into derivative transactions, and all transactions comply with the policy. We do not purchase or hold any derivative financial instruments for speculative purposes with the exception of equity rights obtained in connection with commercial agreements or strategic investments, usually in the form of warrants to purchase common shares.
Derivative instruments are primarily used for hedging and risk management purposes. Hedging activities may be done for various purposes, including, but not limited to, mitigating the risks associated with an asset, liability, committed transaction or probable forecasted transaction. We seek to minimize counterparty credit risk through stringent credit approval and review processes, credit support agreements, continual review and monitoring of all counterparties, and thorough legal review of contracts. Exposure to market risk is controlled by regularly monitoring changes in hedge positions under normal and stress conditions to ensure they do not exceed established limits.

OTHER INFORMATION
We routinely post important information on our website at www.sprint.com . Information contained on our website is not part of this quarterly report.

FORWARD-LOOKING STATEMENTS
We include certain estimates, projections and other forward-looking statements in our annual, quarterly and current reports, and in other publicly available material. Statements regarding expectations, including performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forward-looking statements.
These statements reflect management's judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, subscriber and network usage, subscriber growth and retention, pricing, operating costs, the timing of various events, and the economic and regulatory environment.
Future performance cannot be assured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include:
•
our ability to retain and attract subscribers; and to manage credit risks associated with our subscribers;
•
the ability of our competitors to offer products and services at lower prices due to lower cost structures;
•
our ability to operationalize the anticipated benefits from the SoftBank Merger and the Clearwire Acquisition;
•
the impacts of being a "controlled company" and exempt from many corporate governance requirements of the NYSE;
•
our ability to fully integrate the operations of Clearwire and utilize its spectrum;
•
the effects of vigorous competition on a highly penetrated market, including the impact of competition on the price we are able to charge subscribers for services and equipment we provide and on the geographic areas served by Sprint's wireless networks;
•
the impact of equipment net subsidy costs; the impact of increased purchase commitments; the overall demand for our service offerings, including the impact of decisions of new or existing subscribers between our postpaid and prepaid service offerings; and the impact of new, emerging and competing technologies on our business;
•
our ability to provide the desired mix of integrated services to our subscribers;
•
the ability to generate sufficient cash flow to fully implement our network modernization plan, Network Vision, to improve and enhance our networks and service offerings, improve our operating margins, implement our business strategies and provide competitive new technologies;

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•
the effective implementation of Network Vision, including timing, execution, technologies, costs, and performance of our network;
•
our ability to retain subscribers acquired during transactions and mitigate related increases in churn;
•
our ability to access additional spectrum capacity;
•
changes in available technology and the effects of such changes, including product substitutions and deployment costs;
•
our ability to obtain additional financing on terms acceptable to us, or at all;
•
volatility in the trading price of Sprint Corporation common stock, current economic conditions and our ability to access capital;
•
the impact of unrelated parties not meeting our business requirements, including a significant adverse change in the ability or willingness of such parties to provide devices or infrastructure equipment for our networks;
•
the costs and business risks associated with providing new services and entering new geographic markets;
•
the effects of mergers, acquisitions,and consolidations, including new entrants in the communications industry, and unexpected announcements or developments from others in the communications industry;
•
unexpected results of litigation filed against us or our suppliers or vendors;
•
the impact of adverse network performance;
•
the costs or potential customer impacts 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" and conflict minerals;
•
equipment failure, natural disasters, terrorist acts or other 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; and
•
other risks referenced from time to time in this report and other filings of ours with the SEC, including in Part II, Item 1A of this Form 10-Q, Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2012 and in Part II, Item 1A "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
The words “may,” “could,” "should," “estimate,” “project,” “forecast,” “intend,” “expect,” "anticipate," “believe,” “target,” “plan,” “providing guidance” 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 3.
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. There have been no material changes to our market risk policies or our market risk sensitive instruments as described in our Annual Report on Form 10-K for the year ended December 31, 2012 .


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Item 4.
Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports under the Securities Exchange Act of 1934, such as this Form 10-Q, is reported in accordance with the SEC's rules. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
In connection with the preparation of this Form 10-Q as of September 30, 2013 , under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the disclosure controls and procedures were effective as of September 30, 2013 in providing reasonable assurance that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and in providing reasonable assurance that the information is recorded, proce ssed, summarized, and reported within the time periods specified in the SEC's rules and forms.
Internal Control over Financial Reporting
Internal controls over our financial reporting continue to be updated as necessary to accommodate modifications to our business processes and accounting procedures. On July 9, 2013, Sprint Nextel completed the acquisition of the remaining equity interests in Clearwire Corporation. As a result of the Clearwire Acquisition, the Company has incorporated certain internal controls over significant processes. Over the next several quarters, as the Company further integrates Clearwire, it will continue to review the internal controls and take further steps to ensure that the internal controls are effective and integrated appropriately. There have been no other changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II —OTHER INFORMATION

Item 1.
Legal Proceedings
In March 2009, a stockholder brought suit, Bennett v. Sprint Nextel Corp. , in the U.S. District Court for the District of Kansas, alleging that Sprint Communications and three of its former officers violated Section 10(b) of the Exchange Act and Rule 10b-5 by failing adequately to disclose certain alleged operational difficulties subsequent to the Sprint-Nextel merger, and by purportedly issuing false and misleading statements regarding the write-down of goodwill. The plaintiff seeks class action status for purchasers of Sprint Communications common stock from October 26, 2006 to February 27, 2008. On January 6, 2011, the Court denied the motion to dismiss. Subsequently, its motion to certify the January 6, 2011 order for an interlocutory appeal was denied, and discovery is continuing. The plaintiff moved to certify a class of bondholders as well as owners of common stock, and Sprint Communications has opposed that motion. Sprint Communications believes the complaint is without merit and intend to continue to defend the matter vigorously. We do not expect the resolution of this matter to have a material adverse effect on our financial position or results of operations.
In addition, five related stockholder derivative suits were filed against Sprint Communications and certain of its present and/or former officers and directors. The first, Murphy v. Forsee , was filed in state court in Kansas on April 8, 2009, was removed to federal court, and was stayed by the court pending resolution of the motion to dismiss the Bennett case; the second, Randolph v. Forsee , was filed on July 15, 2010 in state court in Kansas, was removed to federal court, and was remanded back to state court; the third, Ross-Williams v. Bennett, et al. , was filed in state court in Kansas on February 1, 2011; the fourth, Price v. Forsee, et al., was filed in state court in Kansas on April 15, 2011; and the fifth, Hartleib v. Forsee, et. al ., was filed in federal court in Kansas on July 14, 2011. These cases are essentially stayed while the Bennett case is in the discovery phase. We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations.
Sprint Communications has received several complaints purporting to assert claims on behalf of Sprint Communications stockholders, alleging that members of the board of directors breached their fiduciary duties in agreeing to the SoftBank Merger, and otherwise challenging that transaction. There are five cases consolidated in state court in Johnson County, Kansas:  UFCW Local 23 and Employers Pension Fund, et al. v. Bennett, et al ., filed on October 25, 2012; Iron Workers Mid-South Pension Fund, et al. v. Hesse, et al ., filed on October 25, 2012; City of Dearborn Heights Act 345 Police and Fire Retirement System v. Sprint Nextel Corp. , et al ., filed on October 29, 2012; Testani, et al. v. Sprint Nextel Corp., et al ., filed on November 1, 2012; and Patten, et al. v. Sprint Nextel Corp., et al ., filed on November 1, 2012.There are two cases filed in federal court in the District of Kansas, entitled Gerbino, et al. v. Sprint Nextel Corp., et al ., filed on November 15, 2012, and Steinberg, et al. v. Bennett, et al. , filed on May 16, 2013 (and now consolidated with Gerbino ). Plaintiffs in the state cases have indicated that they do not intend to challenge the transaction as completed, and have moved for an order granting attorneys' fees and expenses. Sprint Communications is opposing that motion. The Company intends to defend these cases vigorously, and we do not expect the resolution of these matters to have a material effect on our financial position or results of operations.
Sprint Communications is also a defendant in several complaints filed by stockholders of Clearwire Corporation, asserting claims for breach of fiduciary duty by Sprint Communications, and related claims and otherwise challenging the Clearwire Acquisition. There were five suits filed in Chancery Court in Delaware:  Crest Financial Limited v. Sprint Nextel Corp., et al. , filed on December 12, 2012; Katsman v. Prusch, et al ., filed December 20, 2012; Feigeles, et al. v. Clearwire Corp., et al. , filed December 28, 2012; Litwin, et al. v. Sprint Nextel Corp., et al ., , filed January 2, 2013; and ACP Master, LTD, et al. v. Sprint Nextel Corp., et al. , filed April 26, 2013. All suits except the ACP Master, LTD suit have been voluntarily dismissed by the plaintiffs. The plaintiffs in the ACP Master, LTD suit have also filed suit requesting an appraisal of the fair value of their Clearwire stock. There were three cases filed in state court in King County, Washington, and those cases have been dismissed with prejudice . Sprint Communications intends to defend the ACP Master, LTD cases vigorously, and, because these cases are still in the preliminary stages, we have not yet determined what effect the lawsuits will have, if any, on our financial position or results of operations.
Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in

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payments by us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations. During the quarter ended September 30, 2013 , there were no material developments in the status of these legal proceedings.

Item 1A.
Risk Factors
The only material changes to the risk factors described in Sprint Nextel's Annual Report Form 10-K for the year ended December 31, 2012 and our Form 10-Q for the quarter ended June 30, 2013 are as follows:
We may be required to recognize an impairment of our goodwill, which could have a material adverse effect on our financial position and results of operations.
As a result of the SoftBank Merger and the remeasurement of assets acquired and liabilities assumed in connection with the transaction, Sprint recognized goodwill at its estimate of fair value of approximately $6.8 billion . Since goodwill is reflected at its estimate of fair value, there is no excess fair value over book value as of the date of the SoftBank Merger. We are required to perform goodwill impairment tests at least annually and whenever events or circumstances indicate that the carrying value may not be recoverable from estimated future cash flows. If any circumstances were to occur, such decline in stock price, a reduction in consumer demand, or for any other reason we were to experience a significant decrease in sales, which had a negative impact on our estimated cash flows associated with our Wireless reporting unit (our Wireless segment), our analysis of goodwill may conclude that a decrease in the implied fair value of goodwill has occurred. If this were to occur, we would be required to recognize an impairment which could have a material adverse effect on our financial position and results of operations.
Changes to the federal Lifeline Assistance Program could negatively impact the growth of the Assurance Wireless and wholesale subscriber base and the profitability of the Assurance Wireless and wholesale business overall.
Virgin Mobile USA, L.P., Sprint's wholly-owned subsidiary, offers service to low-income subscribers eligible for the federal Lifeline Assistance program under the brand Assurance Wireless, which we refer to as Assurance Wireless. Assurance Wireless provides a monthly discount to eligible subscribers in the form of a free block of minutes. Moreover, some of Sprint's wholesale customers also offer service to subscribers eligible for the federal Lifeline Assistance program. This discount is subsidized by the Low-Income Program of the federal USF and administered by the Universal Service Administrative Company. Lifeline service is offered by both wireline and wireless companies, but more recent wireless entry, particularly by prepaid carriers with a focus on lower income consumers, has caused a rapid increase in the amount of USF support directed toward the Lifeline program. The FCC recently adopted reforms to the Low Income program to increase program effectiveness and efficiencies, including a limit of one subsidized service per household. More stringent eligibility and certification requirements will make it more difficult for all Lifeline service providers to sign up and retain Lifeline subscribers. The growth in the Lifeline program has caused some regulators and legislators to question the structure of the current program and the FCC is continuing to review the growth of the program. Changes in the Lifeline program as a result of the ongoing FCC proceeding or other legislation, or potential enforcement actions, has or could continue to negatively impact growth in the Assurance Wireless and wholesale subscriber base and/or the profitability of the Assurance Wireless and wholesale business overall.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None

Item 3.
Defaults Upon Senior Securities
None

Item 4.
Mine Safety Disclosures
None


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Item 5.
Other Information
Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Securities Exchange Act of 1934. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, including, among other matters, transactions or dealings relating to the government of Iran. Disclosure is required even where the activities, transactions or dealings are conducted outside the United States by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.
After the SoftBank Merger, SoftBank acquired control of Sprint. During the quarter ended September 30, 2013, SoftBank, through one of its non-U.S. subsidiaries, provided telecommunications services in Iran to Telecommunications Services Company (MTN Irancell) and Mobile Telecommunication Company of Iran, one or both of which are or may be government-controlled entities. During the quarter ended September 30, 2013, SoftBank estimates that gross revenues were approximately $4,000 and no net profit was generated. This subsidiary also provided telecommunications services to the Embassy of Iran in Japan. During the quarter ended September 30, 2013, SoftBank estimates that gross revenues and net profit generated by such services were estimated to be under $1,000 and $500 respectively. In addition, SoftBank, through another one of its non-U.S. subsidiaries, provided international direct dialing services between Iran and Japan pursuant to an interconnection arrangement with Telecommunication of Iran, which is or may be a government-controlled entity. During the quarter ended September 30, 2013, SoftBank estimates that gross revenues were under $1,000 and no net profit was generated pursuant to the interconnection arrangement. Sprint was not involved in, and did not receive any revenue from, any of these activities. SoftBank, through one or more of its non-U.S. subsidiaries, intends to continue the activities disclosed above.

Item 6.
Exhibits
The Exhibit Index attached to this Form 10-Q is hereby incorporated by reference.



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
SPRINT CORPORATION
(Registrant)
 
/s/  Ryan H. Siurek
Ryan H. Siurek
Vice President and Controller 
(Principal Accounting Officer)
 
Dated: November 6, 2013

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Exhibit Index
Exhibit No.
 
Exhibit Description
 
Form
 
Incorporated by Reference
 
Filed/Furnished
Herewith
 
SEC
File No.
 
Exhibit
 
Filing Date
 
 
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
 
 
 
 
 
 
 
 
 
 
 
 
 
2.1**
 
Agreement and Plan of Merger, dated as of October 15, 2012, by and among Sprint Nextel Corporation, SoftBank Corp., Starburst I, Inc., Starburst II, Inc. and Starburst III, Inc.
 
8-K
 
001-04721
 
2.1

 
10/15/2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.2
 
First Amendment to Agreement and Plan of Merger, dated November 29, 2012, by and among Sprint Nextel Corporation, SoftBank Corp., Starburst I, Inc., Starburst II, Inc. and Starburst III, Inc.
 
10-Q
 
001-04721
 
2.5

 
5/6/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.3
 
Second Amendment to Agreement and Plan of Merger, dated April 12, 2013, by and among Sprint Nextel Corporation, SoftBank Corp., Starburst I, Inc., Starburst II, Inc. and Starburst III, Inc.
 
10-Q
 
001-04721
 
2.6

 
5/6/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.4**
 
Third Amendment to Agreement and Plan of Merger, dated June 10, 2013, by and among Sprint Nextel Corporation, SoftBank Corp., Starburst I, Inc., Starburst II, Inc. and Starburst III, Inc
 
8-K
 
001-04721
 
2.1

 
6/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5**
 
Agreement and Plan of Merger, dated as of December 17, 2012, by and among Sprint Nextel Corporation, Collie Acquisition Corp. and Clearwire Corporation
 
8-K
 
001-04721
 
2.1

 
12/18/2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.6**
 
First Amendment to Agreement and Plan of Merger, dated as of April 18, 2013, by and among the Company, Merger Sub and Clearwire
 
Sch. 13E-3/A
 
001-04721
 
d(2)

 
5/22/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.7**
 
Second Amendment to Agreement and Plan of Merger, dated as of May 21, 2013, by and among the Company, Merger Sub and Clearwire
 
8-K
 
001-04721
 
2.1

 
5/22/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.8**
 
Third Amendment to Plan of Merger, dated June 20, 2013, by and among Sprint Nextel Corporation, Collie Acquisition Corp. and Clearwire Corporation
 
8-K
 
001-04721
 
2.1

 
6/21/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) Articles of Incorporation and Bylaws
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.1
 
Amended and Restated Certificate of Incorporation
 
8-K
 
001-04721
 
3.1

 
7/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.2
 
Amended and Restated Bylaws
 
8-K
 
001-04721
 
3.2

 
8/7/2013
 
 
(4) Instruments Defining the Rights of Security Holders, including Indentures
 
 
 
 
 
 
 
 
 
 
 
 
 
4.1
 
Indenture, dated as of September 11, 2013, between Sprint Corporation and The Bank of New York Mellon Trust Company, N.A.
 
8-K
 
001-04721
 
4.1

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
4.2
 
First Supplemental Indenture, dated as of September 11, 2013, among Sprint Corporation, Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A.
 
8-K
 
001-04721
 
4.2

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 

67
Table of Contents

Exhibit No.
 
Exhibit Description
 
Form
 
Incorporated by Reference
 
Filed/Furnished
Herewith
 
SEC
File No.
 
Exhibit
 
Filing Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3
 
Second Supplemental Indenture, dated as of September 11, 2013, among Sprint Corporation, Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A.
 
8-K
 
001-04721
 
4.3

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
4.4
 
Eighth Supplemental Indenture, dated as of September 11, 2013, among Sprint Corporation, Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A.
 
8-K
 
001-04721
 
4.4

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.5
 
Third Supplemental Indenture, dated as of September 11, 2013, among Sprint Corporation, Sprint Capital Corporation, Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A.
 
8-K
 
001-04721
 
4.5

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(10) Material Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
10.1
 
Form of Indemnification Agreement to be entered into by and between Sprint Corporation and certain of its directors
 
8-K
 
001-04721
 
10.1

 
7/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2
 
Form of Indemnification Agreement to be entered into by and between Sprint Corporation and certain of its officers
 
8-K
 
001-04721
 
10.2

 
7/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.3
 
Form of Indemnification Agreement to be entered into by and between Sprint Corporation and certain individuals who serve as both a director and officer of Sprint Corporation
 
8-K
 
001-04721
 
10.3

 
7/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.4
 
Bond Purchase Agreement, dated as of October 15, 2012, by and between Sprint Nextel Corporation and Sprint Corporation (then known as “Starburst II, Inc.”)
 
8-K
 
001-04721
 
10.1

 
10/15/2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.5
 
First Amendment to Bond Purchase Agreement, dated as of October 15, 2012, entered into as of June 10, 2013, by and between Sprint Nextel Corporation and Sprint Corporation (then known as “Starburst II, Inc.”) (incorporated herein by reference to Exhibit 10.1 of Sprint Corporation’s Current Report on Form 8-K filed June 11, 2013) (File No. 333-186448)
 
8-K
 
001-04721
 
10.1

 
6/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.6
 
Warrant Agreement for Sprint Corporation Common Stock
 
8-K
 
001-04721
 
10.6

 
7/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.7
 
2021 Notes Registration Rights Agreement, dated September 11, 2013, among Sprint Corporation, Sprint Communications, Inc. and J.P. Morgan Securities LLC as representative of the initial purchasers
 
8-K
 
001-04721
 
10.1

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.8
 
2023 Notes Registration Rights Agreement, dated September 11, 2013, among Sprint Corporation, Sprint Communications, Inc. and J.P. Morgan Securities LLC as representative of the initial purchasers
 
8-K
 
001-04721
 
10.2

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

68
Table of Contents

Exhibit No.
 
Exhibit Description
 
Form
 
Incorporated by Reference
 
Filed/Furnished
Herewith
 
SEC
File No.
 
Exhibit
 
Filing Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.9
 
Waiver to Credit Agreement, dated as of September 9, 2013, by and among Sprint Communications, Inc., JPMorgan Chase Bank, N.A., as Administrative Agent and Lender, and the lenders party thereto
 
8-K
 
001-04721
 
10.3

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.10
 
Second Amendment to the Amended and Restated Employment Agreement, dated September 10, 2013, between Steven L. Elfman and Sprint Communications, Inc.
 
8-K
 
001-04721
 
10.1

 
9/11/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.11
 
Employment Agreement, dated September 18, 2013, between Daniel R. Hesse and Sprint Corporation
 
8-K
 
001-04721
 
10.1

 
9/20/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.12
 
Daniel R. Hesse - Stock Option Retention Award Agreement
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.13
 
Daniel R. Hesse - Restricted Stock Unit Retention Award Agreement
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.14
 
Sprint Corporation 2007 Omnibus Incentive Plan
 
8-K
 
001-04721
 
10.2

 
9/20/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.15
 
Sprint Corporation Change in Control Severance Plan
 
8-K
 
001-04721
 
10.3

 
9/20/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.16
 
Summary of 2013 Long Term Incentive Plan
 
8-K
 
001-04721
 
 
 
7/30/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.17
 
Summary of 2013 Long Term Incentive Plan
 
8-K/A
 
001-04721
 
 
 
9/20/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.18
 
Summary 2013 Short-Term Incentive Compensation Plan
 
8-K/A
 
001-04721
 
 
 
7/30/2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.19
 
Summary of Director Compensation Programs
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.20
 
Form of Evidence of Award Agreement (awarding restricted stock units) under the 2007 Omnibus Incentive Plan to Robert L. Johnson
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.21
 
Form of Evidence of Award Agreement (awarding restricted stock units) under the 2007 Omnibus Incentive Plan to Section 16 officers other than Robert L. Johnson
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.22
 
Form of Evidence of Award Agreement (awarding performance-based restricted stock units) under the 2007 Omnibus Incentive Plan to Robert L. Johnson
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.23
 
Form of Evidence of Award Agreement (awarding performance-based restricted stock units) under the 2007 Omnibus Incentive Plan to Section 16 officers other than Messrs. Robert L. Johnson and Joseph J. Euteneuer
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.24
 
Form of Evidence of Award Agreement (awarding performance-based restricted stock units) under the 2007 Omnibus Incentive Plan to Joseph J. Euteneuer
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 

69
Table of Contents

Exhibit No.
 
Exhibit Description
 
Form
 
Incorporated by Reference
 
Filed/Furnished
Herewith
 
SEC
File No.
 
Exhibit
 
Filing Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.25
 
Employment Agreement, effective September 6, 2013 between Sprint Corporation and Brandon Dow Draper
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.26
 
Brandon Dow Draper Sign-On Award of Restricted Stock Units
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
(12) Statement re Computation of Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
12
 
Computation of Ratio of Earnings to Fixed Charges
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
(31) and (32) Officer Certifications
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.1
 
Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
31.2
 
Certification of Chief Financial Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
32.1
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
32.2
 
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
(101) Formatted in XBRL (Extensible Business Reporting Language)
 
 
 
 
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
*
_________________
*
Filed or furnished, as required.
**
Schedules and/or exhibits not filed will be furnished to the SEC upon request, pursuant to Item 601(b)(2) of Regulation S-K.

70



Exhibit 10.12

Stock Option
Retention Award Agreement

Throughout this Award Agreement (the “Agreement”) we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Option Right
On August 1, 2013 (the “Date of Grant”), the Section 16 Sub-Committee of the Compensation Committee of the Board of Directors of the Corporation granted you an Option Right to purchase from us 1,733,102 shares of Sprint common stock, par value $.01 per share (the “Common Stock”) at an Option Price equal to the closing per share of the Common Stock on the Date of Grant. The Option Right is governed by the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”) and is subject to the terms and conditions of the Plan and this Agreement. The Option Right is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986 (the “Code”).

2. When the Option Right Becomes Exercisable; Forfeiture
Your Option Right becomes fully exercisable on the earlier of (a) August 1, 2018, and (b) the date vesting is accelerated as described in paragraph 3 below, conditioned on you continuously serving as our employee to such date (the “Vesting Date”). You will forfeit as of your Separation from Service your Option Right that is not vested pursuant to this paragraph. Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records. You will also forfeit your Option Right or we may recover any compensation related thereto to the extent the Board of Directors of the Corporation determines that its value is based on financial results or operating objectives impacted by your knowing or intentional fraudulent or illegal conduct and that such forfeiture or recovery is appropriate. You will also forfeit your Option Right immediately as of your breach of a restrictive covenant under your employment agreement.

3. Acceleration of Vesting
Your Option Right will vest fully on your Separation from Service under the following circumstances:

Event
Condition for Vesting Acceleration
Death
If you die.
Disability
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
Involuntary Termination without Cause or Resignation with Good Reason
If you have a Separation from Service under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor) the Sprint Change in Control Severance Plan (or its successor) or your employment agreement.





Hesse Stock Option Retention Award Agreement

4. Exercise of Option Right
To the extent it has vested, you may exercise your Option Right under this Award in whole or in part at the time or times as permitted by the Plan if the Option Right has not otherwise expired, been forfeited or terminated. To exercise you must:
•
deliver a written election under procedures we establish (including by approved electronic medium) and
•
pay the Option Price.

You may pay the Option Price by
•
check or by wire transfer of immediately available funds,
•
actual or constructive transfer of shares of Common Stock you have owned for at least six months having a market value on the Exercise Date equal to the total Option Price, or
•
any combination of cash, shares of Common Stock and other consideration as the Compensation Committee may permit.

If you pay the Option Price by delivery of funds or shares of Common Stock, the value per share for purposes of determining your taxable income from such an exercise will be the Market Value Per Share of the Common Stock on the immediately preceding day before the exercise except that we will use the average of the high and low prices on that date in lieu of the closing price.

To the extent permitted by law, you may pay the Option Price from the proceeds of a sale through a broker we designate. The Market Value Per Share for purposes of determining your taxable income from such an exercise will be the actual price at which the broker sold the shares.

5. Expiration of Option Right
Unless terminated earlier in accordance with the terms of this Agreement or the Plan, the Option Right granted herein will expire at 4:00 P.M., U.S. Eastern Time, on the tenth anniversary of the Grant Date (the “Expiration Date”). If the tenth anniversary of the Grant Date, however, is a Saturday, Sunday or any other day on which the market on which our Common Stock trades is closed (a “Non-Business Day”), then the Expiration Date will occur at 4:00 P.M., U.S. Eastern Time, on the first business day before the tenth anniversary of the Grant Date.

If the last day to exercise is a Non-Business Day, then you must exercise no later than the previous business day. You are solely responsible for managing the exercise of your Option Award in order to avoid inadvertent expiration.

6. Effect of your Separation from Service
The length of time you have to exercise your vested Option Right after your Separation from Service is described in the table below. The Option Right will expire as of the end of the applicable period. In no event, however, may you exercise your Option Right after the Expiration Date.





Page 2 of 4




Hesse Stock Option Retention Award Agreement

Termination Event
Time to Exercise Vested Options
Resignation or Involuntary termination (not for Cause)
May exercise up through the 90 th  day after your Separation from Service
Death
May exercise up through the 12 th  month after your Separation from Service
Disability - if you have a termination of employment under circumstances that would make you eligible for benefits under the company’s long-term disability plan
May exercise up through 60 months after your Separation from Service
Termination for Cause
Forfeited as of Separation from Service

7. Transfer of your Option Right and Designation of Beneficiaries
Your Option Right represents a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime. Upon your death, your Option Right may be exercised in accordance with the terms of the Award by any beneficiary you name in a beneficiary designation or, if you make no designation, by your estate.

8. Plan Terms
All capitalized terms used in this Agreement that are not defined in this Agreement have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available on line at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

9. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.

10. Amendment; Discretionary Nature of Plan
This Agreement is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Agreement may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by the Corporation, in its sole discretion, at any time. The grant of the Option Award under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of Option




Page 3 of 4




Hesse Stock Option Retention Award Agreement

Awards, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of shares underlying the Option Award granted, and vesting provisions.

11. Data Privacy
By entering into this agreement, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us or our subsidiaries such information and data as we or our subsidiaries request in order to facilitate the grant of the Option Right and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

12. Governing Law
This Agreement will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered upon the exercise of the Option Right unless counsel for the Corporation is satisfied that such delivery will be in compliance with all applicable laws.

13. Severability
The various provisions of this Agreement are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

14. Entire Agreement
You hereby acknowledge that you have read the Sprint Corporation 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available on line at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Agreement, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Agreement, along with the Information Statement and the Plan, contain the entire understanding of the parties.

Sprint Corporation                      Daniel R. Hesse
            

By: /s/ Sandra J. Price                      /s/ Daniel R. Hesse
                        
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933



Page 4 of 4






Exhibit 10.13
        
Restricted Stock Units
Retention Award Agreement


Throughout this Award Agreement, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On August 1, 2013 (the “Date of Grant”), the Section 16 Sub-Committee of the Compensation Committee of the Board of Directors of the Corporation granted you an Award of 1,733,102 Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”). Subject to the terms and conditions of the Plan and this Award Agreement, an RSU represents the right for you to receive from us one share of Common Stock.

2. Restriction Period; Forfeiture
Your RSUs will vest on the earlier of (a) August 1, 2018, and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”). You will forfeit as of your Separation from Service RSUs that are not vested pursuant to this paragraph. Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records. You will also forfeit your RSUs or we may recover any compensation related thereto to the extent the Board of Directors of the Corporation determines that their or its value is based on financial results or operating objectives impacted by your knowing or intentional fraudulent or illegal conduct and that such forfeiture or recovery is appropriate. You will also forfeit your RSU immediately as of your breach of a restrictive covenant under your employment agreement.

3 . Acceleration of Vesting
Your RSUs will vest fully on your Separation from Service under the following circumstances:

Event
Condition for Vesting Acceleration
Death
If you die.
Disability
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
Involuntary Termination without Cause or Resignation with Good Reason
If you have a Separation from Service under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor), the Sprint Change in Control Severance Plan (or its successor) or your employment agreement.

4. Dividends
If cash dividends are paid on the Common Stock underlying RSUs, which you hold on the dividend record date, you will receive a cash payment equal to the amount of









Hesse RSU Retention Award Agreement

the dividend that would be paid on such Common Stock, subject to the vesting provisions with respect to, and delivery at the same time as the shares underlying, your RSUs.

If non-cash dividends are paid on the Common Stock underlying your RSUs, and you hold the RSUs on the dividend record date, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 8 of this Award Agreement, or (2) provide for distribution of the property distributed in the non-cash dividend. The additional RSUs or property distributed is subject to vesting provisions with respect to, and delivery at the same time as the shares underlying, the original RSUs.

5. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your Vested RSUs) is the Vesting Date, or the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock underlying your Vested RSUs as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.

6. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

7. Plan Terms
All capitalized terms used in this Award Agreement that are not defined herein have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

8. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.




Page 2 of 4





Hesse RSU Retention Award Agreement



9. Amendment; Discretionary Nature of Plan
This Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

10. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

11. Governing Law
This Award Agreement will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

12. Severability
The various provisions of this Award Agreement are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

13. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
14. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/La




Page 3 of 4




Hesse RSU Retention Award Agreement

ndingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Award Agreement, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Award Agreement, along with the Information Statement and the Plan, contain the entire understanding of the parties.
    
Sprint Corporation                      Daniel R. Hesse
            

By: /s/ Sandra J. Price                      /s/ Daniel R. Hesse
                        
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933










































Page 4 of 4




Exhibit 10.19
Director Compensation Program for Members of the Board, other than those Directors
Affiliated with SoftBank
On July 10, 2013, New Sprint established the following compensation program for members of its board of directors, other than those directors that are affiliated with SoftBank, as follows:
Compensatory Item
  
Annual Director Compensation
 
 
Annual Cash Retainer
- Board Member
  
$80,000
 
 
Annual Cash Retainer
- Security Director
  
$155,000
 
 
Annual Cash Retainer
- Audit Committee Chairman
  
$20,000
 
 
Annual Cash Retainer
- Compensation
Committee Chairman
  
$15,000
 
 
Annual Cash Retainer
- Any Special
Committee Chairman
  
$10,000
 
 
Board and Committee
Meeting Fees
  
$2,000 per Meeting ($1,000 per Telephonic Meeting)
 
 
Annual Grant of
Restricted Stock Units
  
$110,000
 
 
Director Legacy
Program
  
Matching Charitable Contributions (capped)
 
 
Other
  
Telecommunications Services and Products
 
 
Stock Ownership Guidelines
  
Must hold equity or equity rights equal to at least three times the annual board retainer amount for directors other than the Security Director (i.e., $240,000 while the current $80,000 retainer is in place); providing that to the extent any Director has not met this minimum ownership level, each such Director is expected to retain at least half of his or her shares or share equivalents awarded by the Corporation. The Board retains flexibility to grant exceptions to the guidelines based on its consideration of individual circumstances.

Affiliate Director Compensation Program
On August 6, 2013, the Company’s Board determined Mr. Fisher’s compensation for serving as a member of the Board. The Board adopted an Affiliate Director compensation program for Mr. Fisher, to provide as follows:
 
(1)
Annual cash retainer of $500,000;
 
 
(2)
Annual grant of $500,000 in restricted stock units for 2013 to be granted as of August 6, 2013 and each year thereafter at the Annual Shareholders’ Meeting and vesting in full upon the earlier of the subsequent Annual Shareholders’ Meeting or the first anniversary of the grant; and
 
 
(3)
Telecommunications services and products and matching of Mr. Fisher’s charitable contributions, capped at reasonable levels.
Mr. Son does not receive a cash retainer for his service on the New Sprint board of directors.




Exhibit 10.20
Evidence of Award
2013 Long-term Incentive Plan
Restricted Stock Units

Throughout this Evidence of Award, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On [date], 2013 (the “Date of Grant”), the Section 16 Sub-Committee of Compensation Committee of the Board of Directors of the Corporation granted you an Award of [number] Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”). Subject to the terms and conditions of the Plan and this Evidence of Award, an RSU represents the right for you to receive from us one share of Common Stock.

2. Restriction Period
Subject to the terms and conditions of this Award, your RSUs will vest on the earlier of (a) February 27, 2016 and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”).

3 . Acceleration of Vesting
Unvested RSUs may vest before the time at which they would normally become vested - that is, the vesting of RSUs may accelerate. Your RSUs will vest fully on your Separation from Service under the following circumstances:
•
If you die.
•
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
•
If you have a Separation from Service under circumstances that you receive severance benefits under Section 9(b) of your employment agreement.

Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records.

Disability is defined in the Plan. Generally, it is your Separation from Service under circumstances that make you eligible to receive benefits under our long-term disability plan.

4. Forfeiture of RSUs
You will forfeit as of your Separation from Service RSUs that are not vested pursuant to the foregoing paragraphs.

5. Dividends
If cash dividends are paid on the Common Stock underlying RSUs, which you hold on the dividend record date, you will receive a cash payment equal to the amount of the dividend that would be paid on such Common Stock, subject to the vesting provisions with respect to, and delivery at the same time as the shares underlying, your RSUs.





2013 LTIP RSU Evidence of Award - Johnson

If non-cash dividends are paid on the Common Stock underlying your RSUs, and you hold the RSUs on the dividend record date, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 9 of this Evidence of Award, or (2) provide for distribution of the property distributed in the non-cash dividend. The additional RSUs or property distributed is subject to vesting provisions with respect to, and delivery at the same time as the shares underlying, the original RSUs.

6. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your Vested RSUs) is the Vesting Date, or the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock underlying your Vested RSUs as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.

7. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

8. Plan Terms
All capitalized terms used in this Evidence of Award that are not defined in this Evidence of Award have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

9. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.








Page 2 of 4





2013 LTIP RSU Evidence of Award - Johnson



10. Amendment; Discretionary Nature of Plan
This Evidence of Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Evidence of Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

11. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

12. Governing Law
This Evidence of Award will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

13. Severability
The various provisions of this Evidence of Award are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

14. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
15. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Evidence of Award, the terms of the Information Statement and the

Page 3 of 4




2013 LTIP RSU Evidence of Award - Johnson

Plan are hereby incorporated by reference. This Evidence of Award, along with the Information Statement and the Plan, contain the entire understanding of the parties.

                    
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933

















































Page 4 of 4




Exhibit 10.21

Evidence of Award
2013 Long-term Incentive Plan
Restricted Stock Units

Throughout this Evidence of Award, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On [date], 2013 (the “Date of Grant”), the Section 16 Sub-Committee of the Compensation Committee of the Board of Directors of the Corporation granted you an Award of [number] Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”).

2. Restriction Period
Subject to the terms and conditions of this Award, your RSUs will vest on the earlier of (a) February 27, 2016 and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”).

3 . Acceleration of Vesting
Unvested RSUs may vest before the time at which they would normally become vested - that is, the vesting of RSUs may accelerate. Your RSUs will vest fully, except as noted below, on your Separation from Service under the following circumstances:

Event
Condition for Vesting Acceleration
Death
If you die.
Disability
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
Change in Control
If you have a Separation from Service during the CIC Severance Protection Period under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor), the CIC Severance Plan, or your employment agreement (if applicable).
Retirement*
If you have a Separation from Service on or after the later of your 65 th  birthday and February 27, 2015
Non-CIC Involuntary Termination without Cause or Resignation with Good Reason*
If you have a Separation from Service other than during the CIC Severance Protection Period under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor) or your employment agreement (if applicable).

*The number of your RSUs that vests is your RSUs times the factor based on the period of your employment from February 27, 2013, inclusive, through your Separation from Service in relation to the period of February 27, 2013, inclusive, through February 27, 2016 (with the remainder of your RSUs forfeited as of your Separation from Service).





2013 LTIP RSU Evidence of Award

Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records.

Disability is defined in the Plan. Generally, it is your Separation from Service under circumstances that make you eligible to receive benefits under our long-term disability plan.

CIC Severance Plan means the Sprint Change in Control Severance Plan, as it may be amended from time to time, or any successor plan.

CIC Severance Protection Period is defined in the Plan. It means the time period commencing on the date of the first occurrence of a “Change in Control” (as defined in Exhibit A hereto) and continuing until the earlier of (i) the 18-month anniversary of such date or (ii) the Participant’s death. For purposes of the RSUs under this Award, the CIC Severance Protection Period applies only with respect to a Change in Control occurring after the Date of Grant.

4. Forfeiture of RSUs
You will forfeit as of your Separation from Service RSUs that are not vested pursuant to the foregoing paragraphs.

5. Dividends
If cash dividends are paid on the Common Stock underlying RSUs, which you hold on the dividend record date, you will receive a cash payment equal to the amount of the dividend that would be paid on such Common Stock, subject to the vesting provisions (including any applicable proration) with respect to, and delivery at the same time as the shares underlying, your RSUs.

If non-cash dividends are paid on the Common Stock underlying your RSUs, and you hold the RSUs on the dividend record date, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 9 of this Evidence of Award, or (2) provide for distribution of the property distributed in the non-cash dividend. The additional RSUs or property distributed is subject to vesting provisions (including any applicable proration) with respect to, and delivery at the same time as the shares underlying, the original RSUs.

6. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your Vested RSUs) is the Vesting Date, or the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock underlying your Vested RSUs as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.




Page 2 of 7





2013 LTIP RSU Evidence of Award

7. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

8. Plan Terms
All capitalized terms used in this Evidence of Award that are not defined in this Evidence of Award have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

9. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.

10. Amendment; Discretionary Nature of Plan
This Evidence of Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Evidence of Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

11. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.










Page 3 of 7





2013 LTIP RSU Evidence of Award

12. Governing Law
This Evidence of Award will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

13. Severability
The various provisions of this Evidence of Award are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

14. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
15. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Evidence of Award, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Evidence of Award, along with the Information Statement and the Plan, contain the entire understanding of the parties.

                    
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933
















Page 4 of 7




2013 LTIP RSU Evidence of Award
        
Exhibit A

For purposes of this Award, a “Change in Control” of the Corporation shall be deemed to have occurred upon the happening of any of the following events:
 
 (i)
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”), except SOFTBANK CORP. or any other entity that “controls,” is “controlled by” or is “under common control with” the Corporation or SOFTBANK CORP. within the meaning of Rule 405 of Regulation C under the Securities Act, becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; except , that:
 
(A)
for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition of Voting Stock of the Corporation directly from the Corporation that is approved by a majority of the Incumbent Directors, (2) any acquisition of Voting Stock of the Corporation by the Corporation or any Subsidiary, (3) any acquisition of Voting Stock of the Corporation by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary, and (4) any acquisition of Voting Stock of the Corporation by any Person pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of clause (ii) below;
 
 (B)
if any Person becomes the beneficial owner of thirty percent (30%) or more of combined voting power of the then-outstanding Voting Stock of the Corporation as a result of a transaction or series of transactions described in sub-clause (1) of clause (i)(A) above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Corporation representing one percent (1%) or more of the then-outstanding Voting Stock of the Corporation, other than as a result of (x) a transaction described in sub-clause (1) of clause (i)(A) above, or (y) a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Voting Stock are treated equally, then such subsequent acquisition shall be treated as a Change in Control;

 (C)
a Change in Control will not be deemed to have occurred if a Person becomes the beneficial owner of thirty percent (30%) or more of the Voting Stock of the Corporation as a result of a reduction in the number of shares of Voting Stock of the Corporation outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Incumbent Directors unless and until such Person thereafter becomes the beneficial owner of additional shares of Voting Stock of the Corporation representing one percent (1%) or more of the





Page 5 of 7






then-outstanding Voting Stock of the Corporation, other than as a result of a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Voting Stock are treated equally; and
 
 (D)
if at least a majority of the Incumbent Directors determine in good faith that a Person has acquired beneficial ownership of thirty percent (30%) or more of the Voting Stock of the Corporation inadvertently, and such Person divests as promptly as practicable, but no later than the date, if any, set by the Incumbent Directors, a sufficient number of shares so that such Person beneficially owns less than thirty percent (30%) of the Voting Stock of the Corporation, then no Change in Control shall have occurred as a result of such Person’s acquisition; or
 
 (ii)
the consummation of a reorganization, merger or consolidation of the Corporation with, or the acquisition of the stock or assets of the Corporation by, another Person, or similar transaction (each, a “Business Transaction”), unless, in each case, immediately following such Business Transaction (A) the Voting Stock of the Corporation outstanding immediately prior to such Business Transaction continues to represent, directly or indirectly, (either by remaining outstanding or by being converted into Voting Stock of the surviving entity or any parent thereof), more than fifty percent (50%) of the combined voting power of the then outstanding shares of Voting Stock or comparable equity interests of the entity resulting from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Corporation or SOFTBANK CORP. or any other entity that “controls,” is “controlled by” or is “under common control with” the Corporation or SOFTBANK CORP. within the meaning of Rule 405 of Regulation C under the Securities Act, such entity resulting from such Business Transaction, or any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary or such entity resulting from such Business Transaction) beneficially owns, directly or indirectly, thirty percent (30%) or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Transaction, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Transaction were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Transaction; or
 
 (iii)
during any consecutive 18-month period, more than thirty percent (30%) of the Board ceases to be comprised of Incumbent Directors;
 
 (iv)
consummation of a transaction that implements in whole or in part a resolution of the stockholders of the Corporation authorizing a sale of all or





Page 6 of 7




2013 LTIP RSU Evidence of Award

substantially all of Corporation’s assets or a complete liquidation or dissolution of the Corporation, except pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of clause (ii) above; or
        
(v)
the cessation of the listing of, or the cessation of the requirement to list, all classes of the Corporation’s equity securities on a national securities exchange.







































Page 7 of 7




Exhibit 10.22
        
Evidence of Award
2013 Long-term Incentive Plan
Performance-Based Restricted Stock Units

Throughout this Evidence of Award, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On July 24, 2013 (the “Date of Grant”), the Section 16 Sub-Committee (the “Sub-Committee”) of the Compensation Committee of the Board of Directors of the Corporation granted you an Award of [number] Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”). Subject to the terms and conditions of the Plan and this Evidence of Award, an RSU represents the right for you to receive from us one share of Common Stock.

2. Restriction Period
Subject to the terms and conditions of this Award, your RSUs will vest on the earlier of (a) February 27, 2016 and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”).

3 . Acceleration of Vesting
Unvested RSUs may vest before the time at which they would normally become vested - that is, the vesting of RSUs may accelerate. Your RSUs will vest fully, and will no longer be subject to adjustment under paragraph 5, on your Separation from Service under the following circumstances:
•
If you die.
•
If you have a Separation from Service under circumstances that make you eligible for benefits under the company’s long-term disability plan.
•
If you have a Separation from Service under circumstances that you receive severance benefits under Section 9(b) of your employment agreement.

Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records.

Disability is defined in the Plan. Generally, it is your Separation from Service under circumstances that make you eligible to receive benefits under our long-term disability plan.

4. Forfeiture of RSUs
You will forfeit as of your Separation from Service RSUs that are not vested pursuant to the foregoing paragraphs.

5. Performance Adjustment
Except as otherwise provided herein, your Vested RSUs are subject to the Corporation’s achievement against financial objectives, as established by the Compensation Committee of the Board of Directors of the Corporation, or a sub-




2013 LTIP Performance-Based RSU Evidence of Award - Johnson

committee thereof, for the performance period ending December 31, 2015. As soon as reasonably practicable following the performance period (the “Adjustment Date”), subject to the discretion of the Board of Directors of the Corporation, or a sub-committee thereof (excluding upward discretion with respect to the Section 162(m) objective results), your Vested RSUs will be adjusted by multiplying the number of your Vested RSUs by a payout percentage (0% up to 200%) based on achievement on the objectives.

6. Dividends
If cash dividends are paid on the Common Stock underlying your RSUs (as adjusted under paragraph 5 if applicable and determined retrospectively), which you hold on the dividend record date (the “Dividend RSUs”), you will receive a cash payment equal to the amount of the dividend that would be paid on such Common Stock, subject to the vesting provisions with respect to, and delivery at the same time as the shares underlying, your RSUs.

If non-cash dividends are paid on the Common Stock underlying your Dividend RSUs, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 10 of this Evidence of Award, or (2) provide for distribution of the property distributed in the non-cash dividend. The additional RSUs or property distributed is subject to vesting provisions with respect to, and delivery at the same time as the shares underlying, the original RSUs.

7. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your RSUs, as adjusted if applicable) is the later of the Vesting Date, the Adjustment Date if applicable, and the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.

8. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

9. Plan Terms
All capitalized terms used in this Evidence of Award that are not defined in this Evidence of Award have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at




Page 2 of 4




2013 LTIP Performance-Based RSU Evidence of Award - Johnson

http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

10. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.

11. Amendment; Discretionary Nature of Plan
This Evidence of Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Evidence of Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

12. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

13. Governing Law
This Evidence of Award will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

14. Severability
The various provisions of this Evidence of Award are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

15. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon


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2013 LTIP Performance-Based RSU Evidence of Award - Johnson

settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
16. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Evidence of Award, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Evidence of Award, along with the Information Statement and the Plan, contain the entire understanding of the parties.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933




























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Exhibit 10.23
        
Evidence of Award
2013 Long-term Incentive Plan
Performance-Based Restricted Stock Units

Throughout this Evidence of Award, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On July 24, 2013 (the “Date of Grant”), the Section 16 Sub-Committee of the Compensation Committee of the Board of Directors of the Corporation granted you an Award of [number] Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”). Subject to the terms and conditions of the Plan and this Evidence of Award, an RSU represents the right for you to receive from us one share of Common Stock.

2. Restriction Period
Subject to the terms and conditions of this Award, your RSUs will vest on the earlier of (a) February 27, 2016 and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”).

3 . Acceleration of Vesting
Unvested RSUs may vest before the time at which they would normally become vested - that is, the vesting of RSUs may accelerate. Your RSUs will vest fully, except as noted below, on your Separation from Service under the following circumstances:

Condition for Vesting Acceleration
Acceleration Criteria
If you die.
Vested RSUs are subject to paragraph 5 only if death is on or after December 31, 2015.
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
Vested RSUs are subject to paragraph 5 only if Separation from Service is on or after December 31, 2015.
If you have a Separation from Service during the CIC Severance Protection Period under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor), the CIC Severance Plan, or your employment agreement (if applicable).
Vested RSUs are no longer subject to paragraph 5.
If you have a Separation from Service on or after the later of your 65 th  birthday and February 27, 2015
*Prorated; Vested RSUs are subject to paragraph 5.
If you have a Separation from Service other than during the CIC Severance Protection Period under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor) or your employment agreement (if applicable).
*Prorated; Vested RSUs are subject to paragraph 5.










2013 LTIP Performance-Based RSU Evidence of Award - General Section 16

*The number of your RSUs that vests is your RSUs times the factor based on the period of your employment from February 27, 2013, inclusive, through your Separation from Service in relation to the period of February 27, 2013, inclusive, through February 27, 2016 (with the remainder of your RSUs forfeited as of your Separation from Service).

Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records.

Disability is defined in the Plan. Generally, it is your Separation from Service under circumstances that make you eligible to receive benefits under our long-term disability plan.

CIC Severance Plan means the Sprint Change in Control Severance Plan, as it may be amended from time to time, or any successor plan.

CIC Severance Protection Period is defined in the Plan. It means the time period commencing on the date of the first occurrence of a “Change in Control” (as defined in Exhibit A hereto) and continuing until the earlier of (i) the 18-month anniversary of such date or (ii) the Participant’s death. For purposes of the RSUs under this Award, the CIC Severance Protection Period applies only with respect to a Change in Control occurring after the Date of Grant.

4. Forfeiture of RSUs
You will forfeit as of your Separation from Service RSUs that are not vested pursuant to the foregoing paragraphs.

5. Performance Adjustment
Except as otherwise provided herein, your Vested RSUs are subject to the Corporation’s achievement against financial objectives, as established by the Compensation Committee of the Board of Directors of the Corporation, or a sub-committee thereof, for the performance period ending December 31, 2015. As soon as reasonably practicable following the performance period (the “Adjustment Date”), subject to the discretion of the Board of Directors of the Corporation, or a sub-committee thereof (excluding upward discretion with respect to the Section 162(m) objective results), your Vested RSUs will be adjusted by multiplying the number of your Vested RSUs by a payout percentage (0% up to 200%) based on achievement on the objectives.

6. Dividends
If cash dividends are paid on the Common Stock underlying your RSUs (as adjusted under paragraph 5 if applicable and determined retrospectively), which you hold on the dividend record date (the “Dividend RSUs”), you will receive a cash payment equal to the amount of the dividend that would be paid on such Common Stock, subject to the vesting provisions with respect to, and delivery at the same time as the shares underlying, your RSUs.

If non-cash dividends are paid on the Common Stock underlying your Dividend RSUs, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 10 of this Evidence of



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2013 LTIP Performance-Based RSU Evidence of Award - General Section 16

Award, or (2) provide for distribution of the property distributed in the non-cash dividend. The additional RSUs or property distributed is subject to vesting provisions with respect to, and delivery at the same time as the shares underlying, the original RSUs.

7. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your RSUs, as adjusted if applicable) is the latest of the Vesting Date, the Adjustment Date if applicable, and the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.

8. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

9. Plan Terms
All capitalized terms used in this Evidence of Award that are not defined in this Evidence of Award have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

10. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.

11. Amendment; Discretionary Nature of Plan
This Evidence of Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Evidence of Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in




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2013 LTIP Performance-Based RSU Evidence of Award - General Section 16

our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

12. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

13. Governing Law
This Evidence of Award will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

14. Severability
The various provisions of this Evidence of Award are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

15. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
16. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Evidence of Award, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Evidence of Award, along with the Information Statement and the Plan, contain the entire understanding of the parties.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933





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2013 LTIP Performance-Based RSU Evidence of Award - General Section 16

Exhibit A

For purposes of this Award, a “Change in Control” of the Corporation shall be deemed to have occurred upon the happening of any of the following events:
 
 (i)
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”), except SOFTBANK CORP. or any other entity that “controls,” is “controlled by” or is “under common control with” the Corporation or SOFTBANK CORP. within the meaning of Rule 405 of Regulation C under the Securities Act, becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; except , that:
 
 (A)
for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition of Voting Stock of the Corporation directly from the Corporation that is approved by a majority of the Incumbent Directors, (2) any acquisition of Voting Stock of the Corporation by the Corporation or any Subsidiary, (3) any acquisition of Voting Stock of the Corporation by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary, and (4) any acquisition of Voting Stock of the Corporation by any Person pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of clause (ii) below;
 
 (B)
if any Person becomes the beneficial owner of thirty percent (30%) or more of combined voting power of the then-outstanding Voting Stock of the Corporation as a result of a transaction or series of transactions described in sub-clause (1) of clause (i)(A) above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Corporation representing one percent (1%) or more of the then-outstanding Voting Stock of the Corporation, other than as a result of (x) a transaction described in sub-clause (1) of clause (i)(A) above, or (y) a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Voting Stock are treated equally, then such subsequent acquisition shall be treated as a Change in Control;

 (C)
a Change in Control will not be deemed to have occurred if a Person becomes the beneficial owner of thirty percent (30%) or more of the Voting Stock of the Corporation as a result of a reduction in the number of shares of Voting Stock of the Corporation outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Incumbent Directors unless and until such Person thereafter becomes the beneficial owner of additional shares of Voting Stock of the Corporation representing one percent (1%) or more of the





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2013 LTIP Performance-Based RSU Evidence of Award - General Section 16

then-outstanding Voting Stock of the Corporation, other than as a result of a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Voting Stock are treated equally; and
 
 (D)
if at least a majority of the Incumbent Directors determine in good faith that a Person has acquired beneficial ownership of thirty percent (30%) or more of the Voting Stock of the Corporation inadvertently, and such Person divests as promptly as practicable, but no later than the date, if any, set by the Incumbent Directors, a sufficient number of shares so that such Person beneficially owns less than thirty percent (30%) of the Voting Stock of the Corporation, then no Change in Control shall have occurred as a result of such Person’s acquisition; or
 
 (ii)
the consummation of a reorganization, merger or consolidation of the Corporation with, or the acquisition of the stock or assets of the Corporation by, another Person, or similar transaction (each, a “Business Transaction”), unless, in each case, immediately following such Business Transaction (A) the Voting Stock of the Corporation outstanding immediately prior to such Business Transaction continues to represent, directly or indirectly, (either by remaining outstanding or by being converted into Voting Stock of the surviving entity or any parent thereof), more than fifty percent (50%) of the combined voting power of the then outstanding shares of Voting Stock or comparable equity interests of the entity resulting from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Corporation or SOFTBANK CORP. or any other entity that “controls,” is “controlled by” or is “under common control with” the Corporation or SOFTBANK CORP. within the meaning of Rule 405 of Regulation C under the Securities Act, such entity resulting from such Business Transaction, or any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary or such entity resulting from such Business Transaction) beneficially owns, directly or indirectly, thirty percent (30%) or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Transaction, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Transaction were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Transaction; or
 
 (iii)
during any consecutive 18-month period, more than thirty percent (30%) of the Board ceases to be comprised of Incumbent Directors;
 
 (iv)
consummation of a transaction that implements in whole or in part a resolution of the stockholders of the Corporation authorizing a sale of all or





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2013 LTIP Performance-Based RSU Evidence of Award - General Section 16

substantially all of Corporation’s assets or a complete liquidation or dissolution of the Corporation, except pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of clause (ii) above; or
        
(v)
the cessation of the listing of, or the cessation of the requirement to list, all classes of the Corporation’s equity securities on a national securities exchange.















































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Exhibit 10.24
        
Evidence of Award
2013 Long-term Incentive Plan
Performance-Based Restricted Stock Units

Throughout this Evidence of Award, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On July 24, 2013 (the “Date of Grant”), the Section 16 Sub-Committee of the Compensation Committee of the Board of Directors of the Corporation granted you an Award of [number] Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”). Subject to the terms and conditions of the Plan and this Evidence of Award, an RSU represents the right for you to receive from us one share of Common Stock.

2. Restriction Period
Subject to the terms and conditions of this Award, your RSUs will vest on the earlier of (a) February 27, 2016 and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”).

3 . Acceleration of Vesting
Unvested RSUs may vest before the time at which they would normally become vested - that is, the vesting of RSUs may accelerate. Your RSUs will vest fully, except as noted below, on your Separation from Service under the following circumstances:

Condition for Vesting Acceleration
Acceleration Criteria
If you die.
Vested RSUs are subject to paragraph 5 only if death is on or after December 31, 2015.
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
Vested RSUs are subject to paragraph 5 only if Separation from Service is on or after December 31, 2015.
If you have a Separation from Service during the CIC Severance Protection Period under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor), the CIC Severance Plan, or your employment agreement (if applicable).
Vested RSUs are no longer subject to paragraph 5.
If you have a Separation from Service on or after the later of your 65 th  birthday and February 27, 2015
*Prorated; Vested RSUs are subject to paragraph 5.
If you have a Separation from Service other than during the CIC Severance Protection Period under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor) or your employment agreement (if applicable).
*Prorated; Vested RSUs are subject to paragraph 5.





2013 LTIP Performance-Based RSU Evidence of Award - Euteneuer

*The number of your RSUs that vests is your RSUs times the factor based on the period of your employment from February 27, 2013, inclusive, through your Separation from Service in relation to the period of February 27, 2013, inclusive, through February 27, 2016 (with the remainder of your RSUs forfeited as of your Separation from Service).

Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records.

Disability is defined in the Plan. Generally, it is your Separation from Service under circumstances that make you eligible to receive benefits under our long-term disability plan.

CIC Severance Plan means the Sprint Change in Control Severance Plan, as it may be amended from time to time, or any successor plan.

CIC Severance Protection Period is defined in the Plan. It means the time period commencing on the date of the first occurrence of a “Change in Control” (as defined in Exhibit A hereto) and continuing until the earlier of (i) the 18-month anniversary of such date or (ii) the Participant’s death. For purposes of the RSUs under this Award, the CIC Severance Protection Period applies only with respect to a Change in Control occurring after the Date of Grant.

4. Forfeiture of RSUs
You will forfeit as of your Separation from Service RSUs that are not vested pursuant to the foregoing paragraphs.

5. Performance Adjustment
Except as otherwise provided herein, your Vested RSUs are subject to the Corporation’s achievement against financial objectives, as established by the Compensation Committee of the Board of Directors of the Corporation, for the performance period ending December 31, 2015. As soon as reasonably practicable following the performance period (the “Adjustment Date”), subject to the discretion of the Board of Directors of the Corporation, or a sub-committee thereof, your Vested RSUs will be adjusted by multiplying the number of your Vested RSUs by a payout percentage (0% up to 200%) based on achievement on the objectives.

6. Dividends
If cash dividends are paid on the Common Stock underlying your RSUs (as adjusted under paragraph 5 if applicable and determined retrospectively), which you hold on the dividend record date (the “Dividend RSUs”), you will receive a cash payment equal to the amount of the dividend that would be paid on such Common Stock, subject to the vesting provisions with respect to, and delivery at the same time as the shares underlying, your RSUs.

If non-cash dividends are paid on the Common Stock underlying your Dividend RSUs, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 10 of this Evidence of Award, or (2) provide for distribution of the property distributed in the non-cash



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2013 LTIP Performance-Based RSU Evidence of Award - Euteneuer

dividend. The additional RSUs or property distributed is subject to vesting provisions with respect to, and delivery at the same time as the shares underlying, the original RSUs.

7. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your RSUs, as adjusted if applicable) is the latest of the Vesting Date, the Adjustment Date if applicable, and the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.

8. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

9. Plan Terms
All capitalized terms used in this Evidence of Award that are not defined in this Evidence of Award have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

10. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.

11. Amendment; Discretionary Nature of Plan
This Evidence of Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Evidence of Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit





Page 3 of 7




2013 LTIP Performance-Based RSU Evidence of Award - Euteneuer

and does not create any contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

12. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

13. Governing Law
This Evidence of Award will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

14. Severability
The various provisions of this Evidence of Award are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

15. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
16. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Evidence of Award, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Evidence of Award, along with the Information Statement and the Plan, contain the entire understanding of the parties.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933






Page 4 of 7




  2013 LTIP Performance-Based RSU Evidence of Award - Euteneuer

Exhibit A

For purposes of this Award, a “Change in Control” of the Corporation shall be deemed to have occurred upon the happening of any of the following events:

 (i)
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”), except SOFTBANK CORP. or any other entity that “controls,” is “controlled by” or is “under common control with” the Corporation or SOFTBANK CORP. within the meaning of Rule 405 of Regulation C under the Securities Act, becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; except , that:
 
 (A)
for purposes of this clause (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition of Voting Stock of the Corporation directly from the Corporation that is approved by a majority of the Incumbent Directors, (2) any acquisition of Voting Stock of the Corporation by the Corporation or any Subsidiary, (3) any acquisition of Voting Stock of the Corporation by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary, and (4) any acquisition of Voting Stock of the Corporation by any Person pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of clause (ii) below;
 
 (B)
if any Person becomes the beneficial owner of thirty percent (30%) or more of combined voting power of the then-outstanding Voting Stock of the Corporation as a result of a transaction or series of transactions described in sub-clause (1) of clause (i)(A) above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Corporation representing one percent (1%) or more of the then-outstanding Voting Stock of the Corporation, other than as a result of (x) a transaction described in sub-clause (1) of clause (i)(A) above, or (y) a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Voting Stock are treated equally, then such subsequent acquisition shall be treated as a Change in Control;

 (C)
a Change in Control will not be deemed to have occurred if a Person becomes the beneficial owner of thirty percent (30%) or more of the Voting Stock of the Corporation as a result of a reduction in the number of shares of Voting Stock of the Corporation outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Incumbent Directors unless and until such Person thereafter becomes the beneficial owner of additional shares of Voting Stock of the Corporation representing one percent (1%) or more of the





Page 5 of 7




2013 LTIP Performance-Based RSU Evidence of Award - Euteneuer

then-outstanding Voting Stock of the Corporation, other than as a result of a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Voting Stock are treated equally; and
 
 (D)
if at least a majority of the Incumbent Directors determine in good faith that a Person has acquired beneficial ownership of thirty percent (30%) or more of the Voting Stock of the Corporation inadvertently, and such Person divests as promptly as practicable, but no later than the date, if any, set by the Incumbent Directors, a sufficient number of shares so that such Person beneficially owns less than thirty percent (30%) of the Voting Stock of the Corporation, then no Change in Control shall have occurred as a result of such Person’s acquisition; or
 
 (ii)
the consummation of a reorganization, merger or consolidation of the Corporation with, or the acquisition of the stock or assets of the Corporation by, another Person, or similar transaction (each, a “Business Transaction”), unless, in each case, immediately following such Business Transaction (A) the Voting Stock of the Corporation outstanding immediately prior to such Business Transaction continues to represent, directly or indirectly, (either by remaining outstanding or by being converted into Voting Stock of the surviving entity or any parent thereof), more than fifty percent (50%) of the combined voting power of the then outstanding shares of Voting Stock or comparable equity interests of the entity resulting from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Corporation or SOFTBANK CORP. or any other entity that “controls,” is “controlled by” or is “under common control with” the Corporation or SOFTBANK CORP. within the meaning of Rule 405 of Regulation C under the Securities Act, such entity resulting from such Business Transaction, or any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary or such entity resulting from such Business Transaction) beneficially owns, directly or indirectly, thirty percent (30%) or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Transaction, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Transaction were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Transaction; or
 
 (iii)
during any consecutive 18-month period, more than thirty percent (30%) of the Board ceases to be comprised of Incumbent Directors;
 
 (iv)
consummation of a transaction that implements in whole or in part a resolution of the stockholders of the Corporation authorizing a sale of all or






Page 6 of 7




substantially all of Corporation’s assets or a complete liquidation or dissolution of the Corporation, except pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of clause (ii) above; or
        
(v)
the cessation of the listing of, or the cessation of the requirement to list, all classes of the Corporation’s equity securities on a national securities exchange.









































Page 7 of 7




Exhibit 10.25
        
 
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on September 10, 2013, and effective as of September 6, 2013 (the “Effective Date”), by and between Sprint Corporation, a Delaware corporation (the “Company”) on behalf of itself and any of its subsidiaries, affiliates and related entities, and Brandon Dow Draper (the “Executive”) (the Company and the Executive, collectively, the “Parties,” and each, a “Party”). Certain capitalized terms are defined in Section 29.
WITNESSETH :
WHEREAS, the Executive serves the Company as President - Prepaid; and
WHEREAS, the Executive and the Company desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements set forth herein and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Company and the Executive agree as follows:
1. Employment .

(a) The Company will continue to employ the Executive and the Executive will continue to be employed by the Company upon the terms and conditions set forth herein. The Executive hereby agrees to waive any eligibility for benefits under the Clearwire Corporation Executive Continuity Plan that might otherwise have been available to him as a result of the terms of this Agreement.
(b) The employment relationship between the Company and the Executive shall be governed by the general employment policies and practices of the Company, including without limitation, those relating to the Company’s Code of Conduct, confidential information and avoidance of conflicts, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.

2. Term . Subject to termination under Section 9, the Executive’s employment shall be for an initial term of 24 months commencing on the Effective Date and shall continue through the second anniversary of the Effective Date (the “Initial Employment Term”). At the end of the Initial Employment Term and on each succeeding anniversary of the Effective Date, the Employment Term will be automatically extended by an additional 12 months (each, a “Renewal Term”), unless, not less than 12 months prior to the end of the Initial Employment Term or any Renewal Term, either the Executive or the Company has given the other written notice (in accordance with Section 20) of nonrenewal. The Executive shall provide the Company with written notice of his intent to terminate employment with the Company at least 30 days prior to the effective date of such termination.





3. Position and Duties of the Executive.

(a) The Executive shall serve as President - Prepaid, and agrees to serve as an officer of any enterprise and/or agrees to be an employee of any Subsidiary as may be requested from time to time by the Board of Directors of the Company (the “Board”), any committee or person delegated by the Board or the Chief Executive Officer of the Company (the “Chief Executive Officer”). In such capacity, the Executive shall report directly to the Chief Executive Officer of the Company or such other officer of the Company as may be designated by the Chief Executive Officer. The Executive shall have such duties, responsibility and authority as may be assigned to the Executive from time to time by the Chief Executive Officer, the Board or such other officer of the Company as may be designated by the Chief Executive Officer or the Board.

(b) During the Employment Term, the Executive shall, except as may from time to time be otherwise agreed to in writing by the Company, during reasonable vacations (as set forth in Section 7 hereof) and authorized leave and except as may from time to time otherwise be permitted pursuant to Section 3(c), devote his best efforts, full attention and energies during his normal working time to the business of the Company, to any duties as may be delineated in the Company’s Bylaws for the Executive’s position and title and such other related duties and responsibilities as may from time to time be reasonably prescribed by the Board, any committee or person designated by the Board, or the Chief Executive Officer, in each case, within the framework of the Company’s policies and objectives.

(c) During the Employment Term, and provided that such activities do not contravene the provisions of Section 3(a) or (b) or Sections 10, 11, 12 or 13 hereof and, provided further , the Executive does not engage in any other substantial business activity for gain, profit or other pecuniary advantage which materially interferes with the performance of his duties hereunder, the Executive may participate in any governmental, educational, charitable or other community affairs and, subject to the prior approval of the Chief Executive Officer serve as a member of the governing board of any such organization or any private or public for-profit company. The Executive may retain all fees and other compensation from any such service, and the Company shall not reduce his compensation by the amount of such fees.

4. Compensation .

(a) Base Salary . During the Employment Term, the Company shall pay to the Executive an annual base salary of $375,000 (the “Base Salary”), which Base Salary shall be payable at the times and in the manner consistent with the Company’s general policies regarding compensation of the Company’s senior executives. The Base Salary will be reviewed periodically by Chief Executive Officer and may be increased (but not decreased, except for across-the-board reductions generally applicable to the Company’s senior executives) from time to time in the Chief Executive Officer’s sole discretion.






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(b) Incentive Compensation . The Executive will continue to be eligible to participate in any short-term and long-term incentive compensation plans, annual bonus plans and such other management incentive programs or arrangements of the Company approved by the Board that are generally available to the Company’s senior executives, including, but not limited to, the STIP and the LTSIP. Incentive compensation shall be paid in accordance with the terms and conditions of the applicable plans, programs and arrangements.

(i) Annual Performance Bonus . During the Employment Term, the Executive shall be entitled to participate in the STIP, with such opportunities as may be determined by the Chief Executive Officer in his sole discretion (“Target Bonuses”), and as may be increased (but not decreased, except for across-the-board reductions generally applicable to the Company’s senior executives) from time to time, and the Executive shall be entitled to receive full payment of any award under the STIP, determined pursuant to the STIP (a “Bonus Award”).

(ii) Long-Term Performance Bonus . During the Employment Term, the Executive shall be entitled to participate in the LTSIP with such opportunities, if any, as may be determined by the Chief Executive Officer (“LTSIP Target Award Opportunities”).

(iii) Incentive bonuses, if earned, shall be paid when incentive compensation is customarily paid to the Company’s senior executives in accordance with the terms of the applicable plans, programs or arrangements.

(iv) Pursuant to the Company’s applicable incentive or bonus plans as in effect from time to time, the Executive’s incentive compensation during the term of this Agreement may be determined according to criteria intended to qualify as performance-based compensation under Section 162(m) of the Code.

(c) Equity Compensation . The Executive shall continue to be eligible to participate in such equity incentive compensation plans and programs as the Company generally provides to its senior executives, including, but not limited to, the LTSIP. During the Employment Term, the Compensation Committee may, in its sole discretion, grant equity awards to the Executive, which would be subject to the terms of the respective award agreements evidencing such grants and the applicable plan or program.

(i) Restricted Stock Units . The Executive shall receive an award of Restricted Stock Units described in the form of Award Agreement attached hereto as Exhibit A.

5. Benefits .

(a) During the Employment Term, the Company shall make available to the Executive, subject to the terms and conditions of the applicable plans, participation for the Executive and his eligible dependents in: (i) Company-sponsored group health, major medical, dental, vision, pension and profit sharing, 401(k) and employee welfare benefit plans, programs and arrangements (the “Employee Plans”) and such other usual


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and customary benefits in which senior executives of the Company participate from time to time, and (ii) such fringe benefits and perquisites as may be made available to senior executives of the Company as a group.

(b) The Executive acknowledges that the Company may change its benefit programs from time to time, which may result in certain benefit programs being amended or terminated for its senior executives generally.

6. Expenses . The Company shall pay or reimburse the Executive for reasonable and necessary business expenses incurred by the Executive in connection with his duties on behalf of the Company in accordance with the Company’s Enterprise Financial Services-Employee Travel and Expense Policy, as may be amended from time to time, or any successor policy, plan, program or arrangement thereto and any other of its expense policies applicable to senior executives of the Company, following submission by the Executive of reimbursement expense forms in a form consistent with such expense policies.

7. Vacation . In addition to such holidays, sick leave, personal leave and other paid leave as is allowed under the Company’s policies applicable to senior executives generally, the Executive shall be entitled to participate in the Company’s vacation policy in accordance with the Company’s policy generally applicable to senior executives. The duration of such vacations and the time or times when they shall be taken will be determined by the Executive in consultation with the Company.

8. Place of Performance . In connection with his employment by the Company, the Executive shall be based at the principal executive offices of the Company in the vicinity of Overland Park, Kansas (the “Place of Performance”), except for travel reasonably required for Company business. The Executive will relocate the Executive’s residence to the area surrounding the Executive’s Place of Performance, in accordance with the Company’s relocation policy applicable to senior executives, on or before January 1, 2014. If the Company relocates the Executive’s Place of Performance more than 50 miles from his Place of Performance prior to such relocation, the Executive shall relocate to a residence within the greater of (a) 50 miles of such relocated Place of Performance or (b) such total miles that do not exceed the total number of miles the Executive commuted to his Place of Performance prior to relocation of the Executive’s Place of Performance. To the extent the Executive relocates his residence as provided in this Section 8, the Company will pay or reimburse the Executive’s relocation expenses in accordance with the Company’s relocation policy applicable to senior executives.

9. Termination .












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(a) Termination by the Company for Cause or Resignation by the Executive Without Good Reason . If, during the Employment Term, the Executive’s employment is terminated by the Company for Cause, or if the Executive resigns without Good Reason, the Executive shall not be eligible to receive Base Salary or to participate in any Employee Plans with respect to future periods after the date of such termination or resignation except for the right to receive accrued but unpaid cash compensation and vested benefits under any Employee Plan in accordance with the terms of such Employee Plan and applicable law.

(b) Termination by the Company Without Cause or Resignation by the Executive for Good Reason outside of the CIC Severance Protection Period . If, during the Employment Term, the Executive’s employment is terminated by the Company without Cause or the Executive terminates for Good Reason prior to, or following expiration of, the CIC Severance Protection Period and such termination constitutes a Separation from Service or the Executive is entitled to severance compensation and benefits under this Section 9(b) pursuant to the provisions of Section 9(c), the Executive shall be entitled to receive from the Company: (1) the Executive’s accrued, but unpaid, Base Salary through the date of termination of employment, payable in accordance with the Company’s normal payroll practices and any vested benefits under any Employee Plan in accordance with the terms of such Employee Plan and applicable law, and (2) conditioned upon the Executive executing a Release within the Release Consideration Period and delivering it to the Company with the Release Revocation Period expired without revocation, and in full satisfaction of the Executive’s rights and any benefits the Executive might be entitled to under the Separation Plan and this Agreement and any requirements of the Worker Adjustment and Retraining Notification Act or similar law, unless otherwise specified herein:

(i) periodic payments equal to his Base Salary in effect prior to the termination of his employment, which payments shall be paid to the Executive in equal installments on the regular payroll dates under the Company’s payroll practices applicable to the Executive on the date of this Agreement for the Payment Period, except that if the Executive is a Specified Employee, with respect to any amount payable by reason of the Separation from Service that constitutes deferred compensation within the meaning of Code Section 409A, such installments shall not commence until after the end of the six continuous month period following the date of the Executive’s Separation from Service, in which case, the Executive shall be paid a lump-sum cash payment equal to the aggregate amount of missed installments during such period on the first day of the seventh month following the date of the Executive’s Separation from Service;

(ii)      (A) receive a pro rata payment of the Bonus Award for the portion of the Company’s current fiscal year prior to the date of termination of his employment; (B) receive a pro rata payment of the Capped Bonus Award for the portion of the Company’s current fiscal year following the date of termination of his employment; (C) receive for the next fiscal year following the fiscal year during which his termination of employment occurs, the Capped Bonus Award, or if his Payment Period ends during such fiscal year, a pro rata portion of the

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Capped Bonus Award; and (D) if his Payment Period ends in the second year following the fiscal year during which the Executive’s termination of employment occurs, receive payment of a pro rata portion of the Capped Bonus Award for such fiscal year; provided , however , that to the extent the Executive’s employment is terminated for Good Reason due to a reduction of the Executive’s Target Bonus, in accordance with Section 29(x)(ii), the Executive’s Target Bonus for the purposes of this Section 9(b)(ii) shall be the Executive’s Target Bonus immediately prior to such reduction; and provided, further , that any pro rata payment shall be determined based on the methodology for determining pro rated awards under the STIP and each such payment shall be payable in accordance with the provisions of the STIP in the calendar year in which the Bonus Award or each Capped Bonus Award, as applicable, is determined, and in all events, not later than December 31 st of the year in which each such award is determined;  
(ii) continue from the date of Separation from Service for the number of months equal to the period of continuation coverage the Executive would be entitled to pursuant to Section 4980B of the Code participation in the Company’s group health plans at then-existing participation and coverage levels comparable to the terms in effect from time to time for the Company’s senior executives, including any co-payment and premium payment requirements, for which the Company shall deduct from each payment payable to the Executive pursuant to Section 9(b)(i) the amount of any employee contributions necessary to maintain such coverage for such period, except that (A) following such period, the Executive shall retain any rights to continue coverage under the Company’s group health plans under the benefits continuation provisions pursuant to Section 4980B of the Code by paying the applicable premiums of such plans; and (B) the Executive shall no longer be eligible to receive the benefits otherwise receivable pursuant to this Section 9(b)(iii) as of the date that the Executive becomes eligible to receive comparable benefits from a new employer;

(iii) continue for the Payment Period participation in the Company’s employee life insurance plans at then-existing participation and coverage levels, comparable to the terms in effect from time to time for the Company’s senior executives, including any premium payment requirements, for which the Company shall deduct from each payment payable to the Executive pursuant to Section 9(b)(i) the amount of any employee contributions necessary to maintain such coverage for such period, except that the Executive shall no longer be eligible to receive the benefits otherwise receivable pursuant to this Section 9(b)(iv) as of the date that the Executive becomes eligible to receive comparable benefits from a new employer; and

(iv) receive outplacement services by a firm selected by the Company at its expense in an amount not to exceed $35,000; provided , however , that all such outplacement services must be completed, and all payments by the Company must be made, by December 31 st of the second calendar year following the calendar year in which the Executive’s Separation from Service occurs.





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Notwithstanding anything in this Section 9(b) to the contrary, to the extent the Executive has not executed the Release within the Release Consideration Period and delivered it to the Company, or has revoked the executed Release within the Release Revocation Period, as determined at the end of such Release Revocation Period, the Executive will forfeit any right to receive the payments and benefits specified in this Section 9(b) (other than any accrued but unpaid payments and benefits through the date of termination of employment).
(c) Termination by the Company Without Cause or Resignation by the Executive for Good Reason During the CIC Severance Protection Period . Subject to (i)-(iv) below, if the Executive’s employment is terminated by the Company without Cause, or the Executive terminates employment for Good Reason, before the Employment Term expires and during the CIC Severance Protection Period, and the termination constitutes a Separation from Service, subject to the terms of the CIC Severance Plan, the Executive will become entitled to severance compensation and benefits under the CIC Severance Plan as of (x) the date the Separation from Service occurs, or (y) in the event of a Pre-CIC Termination, the date the Change in Control occurs, as of which date all rights to severance benefits under this Agreement will cease.

(i) The CIC Severance Plan will not apply and the Executive will be entitled to severance compensation and benefits under Section 9(b) of this Agreement if the Executive (x) as of his Separation from Service is not a Participant in, or (y) is otherwise not entitled to severance compensation and benefits under, the CIC Severance Plan.

(ii) If the Executive is entitled to severance benefits under the CIC Severance Plan as a result of a Pre-CIC Termination, any benefits payable before the Change in Control will be paid under this Agreement and any additional benefits payable after the Change in Control will be paid under the CIC Severance Plan.

(ii) In no event may there be duplication of benefits under this Agreement and the CIC Severance Plan.

(iv)      The terms “Change in Control” and “Pre-CIC Termination” are defined in the CIC Severance Plan.

(d) Termination by Death . If the Executive dies during the Employment Term, the Executive’s employment will terminate and the Executive’s beneficiary or if none, the Executive’s estate, shall be entitled to receive from the Company, the Executive’s accrued, but unpaid, Base Salary through the date of termination of employment and any vested benefits under any Employee Plan in accordance with the terms of such Employee Plan and applicable law.

(e) Termination by Disability . If the Executive becomes Disabled prior to the expiration of the Employment Term, the Executive’s employment will terminate, and provided that such termination constitutes a Separation from Service, the Executive shall be entitled to:




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(i) receive from the Company periodic payments equal to his Base Salary in effect prior to the termination of his employment (reduced by any amounts paid on a monthly basis under any long-term disability plan (the “LTD Plan”) now or hereafter sponsored by the Company), which payments shall be paid to the Executive commencing on the Separation from Service date for 12 months in equal installments on the regular payroll dates under the Company’s payroll practices applicable to the Executive on the date of this Agreement; provided , however , that in the event that the Executive is a Specified Employee, with respect to any amount payable by reason of the Executive’s Separation from Service that constitutes deferred compensation within the meaning of Code Section 409A, such installments shall not commence until the earlier to occur of (A) the first business day of the seventh month following the date of the Executive’s Separation from Service and (B) death, in which case the Executive (or the Executive’s estate in the event of Executive’s death) shall be paid on the earlier of (1) the first day of the seventh month following the date of the Executive’s Separation from Service and (2) the Executive’s death a lump-sum cash payment equal to the aggregate amount of any such payments that constitutes deferred compensation within the meaning of Code Section 409A that the Executive would have been entitled to receive during such period following the Executive’s Separation from Service; and

(ii) continue participation in the Company’s group health plans at then-existing participation and coverage levels for 12 months (measured from the Executive’s Separation from Service), comparable to the terms in effect from time to time for the Company’s senior executives, including any co-payment and premium payment requirements, and the Company shall deduct from each payment payable to the Executive pursuant to Section 9(e)(i), the amount of any employee contributions necessary to maintain such coverage for such period; except that following such period, the Executive shall retain any rights to continue coverage under the Company’s group health plans under the benefits continuation provisions pursuant to Code Section 4980B by paying the applicable premiums of such plans.

(f) No Mitigation Obligation . No amounts paid under Section 9 will be reduced by any earnings that the Executive may receive from any other source. The Executive’s coverage under the Company’s medical, dental, vision and employee life insurance plans will terminate as of the date that the Executive is eligible for comparable benefits from a new employer. The Executive shall notify the Company within 30 days after becoming eligible for coverage of any such benefits.

(g) Forfeiture . Notwithstanding the foregoing, any right of the Executive to receive termination payments and benefits hereunder shall be forfeited to the extent of any amounts payable after any breach of Section 10, 11, 12, 13 or 15 by the Executive.

10. Confidential Information; Statements to Third Parties.





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(a) During the Employment Term and on a permanent basis upon and following termination of the Executive’s employment, the Executive acknowledges that:

(i) all information, whether or not reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form) or maintained in the mind or memory of the Executive and whether compiled or created by the Company, any of its Subsidiaries or any affiliates of the Company or its Subsidiaries (collectively, the “Company Group”), which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, of a proprietary, private, secret or confidential (including, without exception, inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, sales strategies, plans, research data, clinical data, financial data, personnel data, computer programs, customer and supplier lists, trademarks, service marks, copyrights (whether registered or unregistered), artwork, and contacts at or knowledge of customers or prospective customers) nature concerning the Company Group’s business, business relationships or financial affairs (collectively, “Proprietary Information”) shall be the exclusive property of the Company Group;
 
(ii) the Proprietary Information of the Company Group gained by the Executive during the Executive’s association with the Company Group was or will be developed by and/or for the Company Group through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company Group;

(iii) reasonable efforts have been put forth by the Company Group to maintain the secrecy of its Proprietary Information;

(iv) such Proprietary Information is and will remain the sole property of the Company Group; and

(v) any retention or use by the Executive of Proprietary Information after the termination of the Executive’s services for the Company Group will constitute a misappropriation of the Company Group’s Proprietary Information.

(b) The Executive further acknowledges and agrees that he will take all affirmative steps reasonably necessary or required by the Company to protect the Proprietary Information from inappropriate disclosure during and after his employment with the Company.

(c) The Executive further agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, electronic, or other tangible material containing or constituting Proprietary Information, whether created by the Executive or others, which shall come into his custody or possession, regardless of medium, shall be and are the




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exclusive property of the Company to be used by him only in the performance of his duties for the Company. All such materials or copies thereof and all tangible things and other property of the Company Group in the Executive’s custody or possession shall be delivered to the Company (to the extent the Executive has not already returned) in good condition, on or before five business days subsequent to the earlier of: (i) a request by the Company or (ii) the Executive’s termination of employment for any reason or Cause, including for nonrenewal of this Agreement, Disability, termination by the Company or termination by the Executive. After such delivery, the Executive shall not retain any such materials or portions or copies thereof or any such tangible things and other property and shall execute any statements or affirmations of compliance under oath that the Company may require.

(d) The Executive further agrees that his obligation not to disclose or to use information and materials of the types set forth in Sections 10(a), 10(b) and 10(c) above, and his obligation to return materials and tangible property, set forth in Section 10(c) above, also extends to such types of information, materials and tangible property of customers of the Company Group, consultants for the Company Group, suppliers to the Company Group, or other third parties who may have disclosed or entrusted the same to the Company Group or to the Executive.

(e) The Executive further acknowledges and agrees that he will continue to keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Proprietary Information of the Company Group without limitation as to when or how the Executive may have acquired such Proprietary Information and that he will not disclose any Proprietary Information to any person or entity other than appropriate employees of the Company or use the same for any purposes (other than in the performance of his duties as an employee of the Company) without written approval of the Board, either during or after his employment with the Company.

(f) Further the Executive acknowledges that his obligation of confidentiality will survive, regardless of any other breach of this Agreement or any other agreement, by any party hereto, until and unless such Proprietary Information of the Company Group has become, through no fault of the Executive, generally known to the public. In the event that the Executive is required by law, regulation, or court order to disclose any of the Company Group’s Proprietary Information, the Executive will promptly notify the Company prior to making any such disclosure to facilitate the Company seeking a protective order or other appropriate remedy from the proper authority. The Executive further agrees to cooperate with the Company in seeking such order or other remedy and that, if the Company is not successful in precluding the requesting legal body from requiring the disclosure of the Proprietary Information, the Executive will furnish only that portion of the Proprietary Information that is legally required, and the Executive will exercise all legal efforts to obtain reliable assurances that confidential treatment will be accorded to the Proprietary Information.







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(g) The Executive’s obligations under this Section 10 are in addition to, and not in limitation of, all other obligations of confidentiality under the Company’s policies, general legal or equitable principles or statutes.

(h) During the Employment Term and following his termination of employment:

(i) the Executive shall not, directly or indirectly, make or cause to be made any statements, including but not limited to, comments in books or printed media, to any third parties criticizing or disparaging the Company Group or commenting on the character or business reputation of the Company Group. Without the prior written consent of the Board, unless otherwise required by law, the Executive shall not (A) publicly comment in a manner adverse to the Company Group concerning the status, plans or prospects of the business of the Company Group or (B) publicly comment in a manner adverse to the Company Group concerning the status, plans or prospects of any existing, threatened or potential claims or litigation involving the Company Group;

(ii) the Company shall comply with its policies regarding public statements with respect to the Executive and any such statements shall be deemed to be made by the Company only if made or authorized by a member of the Board or a senior executive officer of the Company; and

(iii) nothing herein precludes honest and good faith reporting by the Executive to appropriate Company or legal enforcement authorities.

(i) The Executive acknowledges and agrees that a violation of the foregoing provisions of this Section 10 would cause irreparable harm to the Company Group, and that the Company’s remedy at law for any such violation would be inadequate. In recognition of the foregoing, the Executive agrees that, in addition to any other relief afforded by law or this Agreement, including damages sustained by a breach of this Agreement and any forfeitures under Section 9(g), and without the necessity or proof of actual damages, the Company shall have the right to enforce this Agreement by specific remedies, which shall include, among other things, temporary and permanent injunctions, it being the understanding of the undersigned parties hereto that damages, the forfeitures described above and injunctions shall all be proper modes of relief and are not to be considered as alternative remedies.

11. Non-Competition . In consideration of the Company entering into this Agreement, for a period commencing on the Effective Date and ending on the expiration of the Restricted Period:

(a) The Executive covenants and agrees that the Executive will not, directly or indirectly, engage in any activities on behalf of or have an interest in any Competitor of the Company Group, whether as an owner, investor, executive, manager, employee, independent consultant, contractor, advisor, or otherwise. The Executive’s



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(b) ownership of less than one percent (1%) of any class of stock in a publicly traded corporation shall not be a breach of this paragraph.

(c) A “Competitor” is any entity doing business directly or indirectly (e.g., as an owner, investor, provider of capital or otherwise) in the United States including any territory of the United States (the “Territory”) that provides wireless products and/or services that are the same or similar to the wireless products and/or services that are currently being provided at the time of Executive’s termination or that were provided by the Company Group during the two-year period prior to the Executive’s separation from service with the Company Group.

(d) The Executive acknowledges and agrees that due to the continually evolving nature of the Company Group’s industry, the scope of its business and/or the identities of Competitors may change over time. The Executive further acknowledges and agrees that the Company Group markets its products and services on a nationwide basis, encompassing the Territory and that the restrictions imposed by this covenant, including the geographic scope, are reasonably necessary to protect the Company Group’s legitimate interests.

(e) The Executive covenants and agrees that should a court at any time determine that any restriction or limitation in this Section 11 is unreasonable or unenforceable, it will be deemed amended so as to provide the maximum protection to the Company Group and be deemed reasonable and enforceable by the court.

12. Non-Solicitation . In consideration of the Company entering into this Agreement, for a period commencing on the Effective Date and ending on the expiration of the Restricted Period, the Executive hereby covenants and agrees that he shall not, directly or indirectly, individually or on behalf of any other person or entity do or suffer any of the following:

(a) hire or employ or assist in hiring or employing any person who was at any time during the last 18 months of the Executive’s employment an employee, representative or agent of any member of the Company Group or solicit, aid, induce or attempt to solicit, aid, induce or persuade, directly or indirectly, any person who is an employee, representative, or agent of any member of the Company Group to leave his or her employment with any member of the Company Group to accept employment with any other person or entity;

(b) induce any person who is an employee, officer or agent of the Company Group, or any of its affiliated, related or subsidiary entities to terminate such relationship;

(c) solicit any customer of the Company Group, or any person or entity whose business the Company Group had solicited during the 180-day period prior to termination of the Executive’s employment for purposes of business which is competitive to the Company Group within the Territory; or






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(d) solicit, aid, induce, persuade or attempt to solicit, aid, induce or persuade any person or entity to take any action that would result in a Change in Control of the Company or to seek to control the Board in a material manner.

(e) For purposes of this Section 12, the term “solicit or persuade” includes, but is not limited to, (i) initiating communications with an employee of the Company Group relating to possible employment, (ii) offering bonuses or additional compensation to encourage an employee of the Company Group to terminate his employment, (iii) referring employees of the Company Group to personnel or agents employed by competitors, suppliers or customers of the Company Group, and (iv) initiating communications with any person or entity relating to a possible Change in Control.

13. Developments.

(a) The Executive acknowledges and agrees that he will make full and prompt disclosure to the Company of all inventions, improvements, discoveries, methods, developments, software, mask works, and works of authorship, whether patentable or copyrightable or not, (i) which relate to the Company’s business and have heretofore been created, made, conceived or reduced to practice by the Executive or under his direction or jointly with others, and not assigned to prior employers, or (ii) which have utility in or relate to the Company’s business and are created, made, conceived or reduced to practice by the Executive or under his direction or jointly with others during his employment with the Company, whether or not during normal working hours or on the premises of the Company (all of the foregoing of which are collectively referred to in this Agreement as “Developments”).

(b) The Executive further agrees to assign and does hereby assign to the Company (or any person or entity designated by the Company) all of the Executive’s rights, title and interest worldwide in and to all Developments and all related patents, patent applications, copyrights and copyright applications, and any other applications for registration of a proprietary right. This Section 13(b) shall not apply to Developments that the Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities, or Proprietary Information and that does not, at the time of conception or reduction to practice, have utility in or relate to the Company’s business, or actual or demonstrably anticipated research or development. The Executive understands that, to the extent this Agreement shall be construed in accordance with the laws of any Territory which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, this Section 13(b) shall be interpreted not to apply to any invention which a court rules or the Company agrees falls within such classes.

(c) The Executive further agrees to cooperate fully with the Company, both during and after his employment with the Company, with respect to the procurement, maintenance and enforcement of copyrights, patents and other intellectual property rights (both in the United States and other countries) relating to Developments. The Executive shall not be required to incur or pay any costs or expenses in connection




Draper Employment Agreement                                    Page 13 of 26





with the rendering of such cooperation. The Executive will sign all papers, including, without limitation, copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights, and powers of attorney, and do all things that the Company may reasonably deem necessary or desirable in order to protect its rights and interests in any Development.

(d) The Executive further acknowledges and agrees that if the Company is unable, after reasonable effort, to secure the Executive’s signature on any such papers, any executive officer of the Company shall be entitled to execute any such papers as the Executive’s agent and attorney-in-fact, and the Executive hereby irrevocably designates and appoints each executive officer of the Company as his agent and attorney-in-fact to execute any such papers on the Executive’s behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Development, under the conditions described in this sentence.

14. Remedies . The Executive and the Company agree that the covenants contained in Sections 10, 11, 12 and 13 are reasonable under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction any such covenant is not reasonable in any respect, such court will have the right, power and authority to sever or modify any provision or provisions of such covenants as to the court will appear not reasonable and to enforce the remainder of the covenants as so amended. The Executive acknowledges and agrees that the remedy at law available to the Company for breach of any of the Executive’s obligations under Sections 10, 11, 12 and 13 would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms. Accordingly, the Executive acknowledges, consents and agrees that, in addition to any other rights or remedies that the Company may have at law, in equity or under this Agreement, upon adequate proof of the Executive’s violation of any such provision of this Agreement, the Company will be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage. Without limiting the applicability of this Section 14 or in any way affecting the right of the Company to seek equitable remedies hereunder, in the event that the Executive breaches any of the provisions of Sections 10, 11, 12 or 13 or engages in any activity that would constitute a breach save for the Executive’s action being in a state where any of the provisions of Sections 10, 11, 12, 13 or this Section 14 is not enforceable as a matter of law, then the Company’s obligation to pay any remaining severance compensation and benefits that has not already been paid to Executive pursuant to Section 9 shall be terminated and within ten days of notice of such termination of payment, the Executive shall return all severance compensation and the value of such benefits, or profits derived or received from such benefits.

15. Continued Availability and Cooperation.

(a) Following termination of the Executive’s employment, the Executive shall cooperate fully with the Company and with the Company’s counsel in connection with any present and future actual or threatened litigation, administrative proceeding or investigation involving the Company that relates to events, occurrences or conduct occurring (or claimed to have occurred) during the period of the Executive’s employment by the Company. Cooperation will include, but is not limited to:


Draper Employment Agreement                                    Page 14 of 26






(i) Making himself reasonably available for interviews and discussions with the Company’s counsel as well as for depositions and trial testimony;

(ii) if depositions or trial testimony are to occur, making himself reasonably available and cooperating in the preparation therefore, as and to the extent that the Company or the Company’s counsel reasonably requests;

(iii) refraining from impeding in any way the Company’s prosecution or defense of such litigation or administrative proceeding; and

(iv) cooperating fully in the development and presentation of the Company’s prosecution or defense of such litigation or administrative proceeding.

(b) The Company will reimburse the Executive for reasonable travel, lodging, telephone and similar expenses, as well as reasonable attorneys’ fees (if independent legal counsel is necessary), incurred in connection with any cooperation, consultation and advice rendered under this Agreement after the Executive’s termination of employment.

16. Dispute Resolution .

(a) In the event that the Parties are unable to resolve any controversy or claim arising out of or in connection with this Agreement or breach thereof, either Party shall refer the dispute to binding arbitration, which shall be the exclusive forum for resolving such claims. Such arbitration will be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Employment Arbitration Rules and Procedures and governed by Kansas law. The arbitration shall be conducted by a single arbitrator selected by the Parties according to the rules of JAMS. In the event that the Parties fail to agree on the selection of the arbitrator within 30 days after either Party’s request for arbitration, the arbitrator will be chosen by JAMS. The arbitration proceeding shall commence on a mutually agreeable date within 90 days after the request for arbitration, unless otherwise agreed by the Parties, and in the location where the Executive worked during the six months immediately prior to the request for arbitration if that location is in Kansas or Virginia, and if not, the location will be Kansas, unless the Parties agree otherwise.

(b) The Parties agree that each will bear their own costs and attorneys’ fees. The arbitrator shall not have authority to award attorneys’ fees or costs to any Party.

(c) The arbitrator shall have no power or authority to make awards or orders granting relief that would not be available to a Party in a court of law. The arbitrator’s award is limited by and must comply with this Agreement and applicable federal, state, and local laws. The decision of the arbitrator shall be final and binding on the Parties.






Draper Employment Agreement                                    Page 15 of 26






(d) Notwithstanding the foregoing, no claim or controversy for injunctive or equitable relief contemplated by or allowed under applicable law pursuant to Sections 10, 11, 12 and 13 of this Agreement will be subject to arbitration under this Section 16, but will instead be subject to determination in a court of competent jurisdiction in Kansas, which court shall apply Kansas law consistent with Section 21 of this Agreement, where either Party may seek injunctive or equitable relief.

17. Other Agreements . No agreements (other than the agreements evidencing any grants of equity awards) or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or other agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, pertaining to the subject matter hereof, which are not embodied herein, and that no prior and/or contemporaneous agreement, statement or promise pertaining to the subject matter hereof that is not contained in this Agreement shall be valid or binding on either party.

18. Withholding of Taxes . The Company will withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling.

19. Successors and Binding Agreement.

(a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company, except that the Company may assign and transfer this Agreement and delegate its duties thereunder to a wholly owned Subsidiary.

(b) This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

(c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 19(a) and 19(b). Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any

Draper Employment Agreement                                    Page 16 of 26





attempted assignment or transfer contrary to this Section 19(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.

20. Notices . All communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express or UPS, addressed to the Company (to the attention of the General Counsel of the Company) at its principal executive offices and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

21. Governing Law and Choice of Forum.

(a) This Agreement will be construed and enforced according to the laws of the State of Kansas, without giving effect to the conflict of laws principles thereof.

(b) To the extent not otherwise provided for by Section 16 of this Agreement, the Executive and the Company consent to the jurisdiction of all state and federal courts located in Overland Park, Johnson County, Kansas, as well as to the jurisdiction of all courts of which an appeal may be taken from such courts, for the purpose of any suit, action, or other proceeding arising out of, or in connection with, this Agreement or that otherwise arise out of the employment relationship. Each Party hereby expressly waives any and all rights to bring any suit, action, or other proceeding in or before any court or tribunal other than the courts described above and covenants that it shall not seek in any manner to resolve any dispute other than as set forth in this paragraph. Further, the Executive and the Company hereby expressly waive any and all objections either may have to venue, including, without limitation, the inconvenience of such forum, in any of such courts. In addition, each of the Parties consents to the service of process by personal service or any manner in which notices may be delivered hereunder in accordance with this Agreement.

22. Validity/Severability . If any provision of this Agreement or the application of any provision is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. To the extent any provisions held to be invalid, unenforceable or otherwise illegal cannot be reformed, such provisions are to be stricken herefrom and the remainder of this Agreement will be binding on the parties and their successors and assigns as if such invalid or illegal provisions were never included in this Agreement from the first instance.

23. Survival of Provisions . Notwithstanding any other provision of this Agreement, the parties’ respective rights and obligations under Sections 10, 11, 12, 13, 14, 15, 16, 18, 22 and




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26 will survive any termination or expiration of this Agreement or the termination of the Executive’s employment.

24. Representations and Acknowledgements.

(a) The Executive hereby represents that he is not subject to any restriction of any nature whatsoever on his ability to enter into this Agreement or to perform his duties and responsibilities hereunder, including, but not limited to, any covenant not to compete with any former employer, any covenant not to disclose or use any non-public information acquired during the course of any former employment or any covenant not to solicit any customer of any former employer.

(b) The Executive hereby represents that, except as he has disclosed in writing to the Company, he is not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of the Executive’s employment with the Company or to refrain from competing, directly or indirectly, with the business of such previous employer or any other party.

(c) The Executive further represents that, to the best of his knowledge, his performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement with another party, including without limitation any agreement to keep in confidence proprietary information, knowledge or data the Executive acquired in confidence or in trust prior to his employment with the Company, and that he will not knowingly disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.

(d) The Executive acknowledges that he will not be entitled to any consideration or reimbursement of legal fees in connection with execution of this Agreement.

(e) The Executive hereby represents and agrees that, during the Restricted Period, if the Executive is offered employment or the opportunity to enter into any business activity, whether as owner, investor, executive, manager, employee, independent consultant, contractor, advisor or otherwise, the Executive will inform the offeror of the existence of Sections 10, 11, 12 and 13 of this Agreement and provide the offeror a copy thereof. The Executive authorizes the Company to provide a copy of the relevant provisions of this Agreement to any of the persons or entities described in this Section 24(e) and to make such persons aware of the Executive’s obligations under this Agreement.

25. Compliance with Code Section 409A . With respect to reimbursements or in-kind benefits provided under this Agreement: (a) the Company will not provide for cash in lieu of a right to reimbursement or in-kind benefits to which the Executive has a right under this Agreement, (b) any reimbursement or provision of in-kind benefits made during the Executive’s lifetime (or such shorter period prescribed by a specific provision of this Agreement) shall be




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made not later than December 31 st of the year following the year in which the Executive incurs the expense, and (c) in no event will the amount of expenses so reimbursed, or in-kind benefits provided, by the Company in one year affect the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. Each payment, reimbursement or in-kind benefit made pursuant to the provisions of this Agreement shall be regarded as a separate payment and not one of a series of payments for purposes of Section 409A of the Code. It is intended that any amounts payable under this Agreement and the Company’s and the Executive’s exercise of authority or discretion hereunder shall comply with the provisions of Section 409A of the Code and the Treasury regulations relating thereto so as not to subject the Executive to the payment of the additional tax, interest and any tax penalty which may be imposed under Section 409A of the Code. In furtherance of this interest, to the extent that any provision hereof would result in the Executive being subject to payment of the additional tax, interest and tax penalty under Section 409A of the Code, the parties agree to amend this Agreement in order to bring this Agreement into compliance with Section 409A of the Code; and thereafter interpret its provisions in a manner that complies with Section 409A of the Code. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section by the U.S. Department of Treasury or the Internal Revenue Service. Notwithstanding the foregoing, no particular tax result for the Executive with respect to any income recognized by the Executive in connection with the Agreement is guaranteed, and the Executive shall be responsible for any taxes, penalties and interest imposed on him under or as a result of Section 409A of the Code in connection with the Agreement.

26. Amendment; Waiver . Except as otherwise provided herein, this Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by both Parties hereto. No waiver by either Party at any time of any breach by the other Party hereto or compliance with any condition or provision of this Agreement to be performed by such other Party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

27. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

28. Headings . Unless otherwise noted, the headings of sections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

29. Defined Terms .

(a) “Agreement” has the meaning set forth in the preamble.

(b) “Base Salary” has the meaning set forth in Section 4(a).

(c) “Board” has the meaning set forth in Section 3(a).

(d) “Bonus Award” has the meaning set forth in Section 4(b)(i).


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(e) “Bylaws” means the Amended and Restated Sprint Corporation Bylaws, as may be amended from time to time.

(f) “Capped Bonus Award” shall mean the lesser of the annual Target Bonus or actual performance for such fiscal year in accordance with the then existing terms of the STIP, which shall not be payable until the Compensation Committee has determined that any incentive targets have been achieved and the subsequent designated payout date has arrived.

(g) “Cause” shall mean:

(i) any act or omission constituting a material breach by the Executive of any provisions of this Agreement;

(ii) the willful failure by the Executive to perform his duties hereunder (other than any such failure resulting from the Executive’s Disability), after demand for performance is delivered by the Company that identifies the manner in which the Company believes the Executive has not performed his duties, if, within 30 days of such demand, the Executive fails to cure any such failure capable of being cured;

(iii) any intentional act or misconduct materially injurious to the Company or any Subsidiary, financial or otherwise, or including, but not limited to, misappropriation, fraud including with respect to the Company’s accounting and financial statements, embezzlement or conversion by the Executive of the Company’s or any of its Subsidiary’s property in connection with the Executive’s duties or in the course of the Executive’s employment with the Company;

(iv) the conviction (or plea of no contest) of the Executive for any felony or the indictment of the Executive for any felony including, but not limited to, any felony involving fraud, moral turpitude, embezzlement or theft in connection with the Executive’s duties or in the course of the Executive’s employment with the Company;

(v) the commission of any intentional or knowing violation of any antifraud provision of the federal or state securities laws;

(vi) the Board reasonably believes in its good faith judgment that the Executive has committed any of the acts referred to in this Section 29(g)(v);

(vii) a final, non-appealable order in a proceeding before a court of competent jurisdiction or a final order in an administrative proceeding finding that the Executive committed any willful misconduct or criminal activity (excluding minor traffic violations or other minor offenses) which commission is materially inimical to the interests of the Company or any Subsidiary, whether for his personal benefit or in connection with his duties for the Company or any Subsidiary;




Draper Employment Agreement                                    Page 20 of 26







(viii) current alcohol or prescription drug abuse affecting work performance;

(ix) current illegal use of drugs; or

(x) violation of the Company’s Code of Conduct, with written notice of termination by the Company for Cause in each case provided under this Section 29(g).

For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed “intentional” if it was due primarily to an error in judgment or negligence, but shall be deemed “intentional” only if done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company.
(h) “Change in Control” has the meaning set forth in the CIC Severance Plan.

(i) “Chief Executive Officer” has the meaning set forth in Section 3(a).

(j) “CIC Severance Plan” means the Company’s Change in Control Severance Plan, as may be amended from time to time, or any successor plan, program or arrangement thereto.

(k) “CIC Severance Protection Period” has the meaning set forth in the CIC Severance Plan.

(l) “Certificate of Incorporation” means the Amended and Restated Articles of Incorporation of Sprint Corporation, as may be amended from time to time.

(m) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including any rules and regulations promulgated thereunder, along with Treasury and IRS Interpretations thereof. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

(n) “Company” has the meaning set forth in the preamble.

(o) “Company Group” has the meaning set forth in Section 10(a)(i).

(p) “Compensation Committee” means the Compensation Committee of the Board.

(q) “Competitor” has the meaning set forth in Section 11(b).

(r) “Developments” has the meaning set forth in Section 13(a).



Draper Employment Agreement                                    Page 21 of 26





(s) “Disability” or “Disabled” shall mean:

(i) the Executive’s incapacity due to physical or mental illness to substantially perform his duties and the essential functions of his position, with or without reasonable accommodation, on a full-time basis for six months as determined by the Board in its reasonable discretion, and within 30 days after a notice of termination is thereafter given by the Company, the Executive shall not have returned to the full-time performance of the Executive’s duties; and, further,

(ii) the Executive becomes eligible to receive benefits under the LTD Plan;

provided , however , if the Executive shall not agree with a determination to terminate his employment because of Disability, the question of the Executive’s disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive. The costs of such qualified medical doctor shall be paid for by the Company.
(t) “Effective Date” has the meaning set forth in the preamble.

(u) “Employee Plans” has the meaning set forth in Section 5(a).

(v) “Employment Term” means the Initial Employment Term and any Renewal Term.

(w) “Executive” has the meaning set forth in the preamble.

(x) “Good Reason” means the occurrence of any of the following without the Executive’s written consent, unless within 30 days of the Executive’s written notice of termination of employment for Good Reason, the Company cures any such occurrence:

(i) the Company’s material breach of this Agreement;

(ii) a material reduction in the Executive’s Base Salary (that is not agreed to by the Executive), as compared to the corresponding circumstances in place on the Effective Date as may be increased pursuant to Section 4, except for across-the-board reductions generally applicable to all senior executives; or

(iii) relocation of the Executive’s Place of Performance more than 50 miles without the Executive’s consent.

Any occurrence of Good Reason shall be deemed to be waived by the Executive unless the Executive provides the Company written notice of termination of employment for Good Reason within 60 days of the event giving rise to Good Reason.
(y) “Initial Employment Term” has the meaning set forth in Section 2.




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(z) “JAMS” has the meaning set forth in Section 16.

(aa) “LTD Plan” has the meaning set forth in Section 9(e).

(bb)    “LTSIP” means the Company’s 2007 Omnibus Incentive Plan, effective May 8, 2007, as may be amended from time to time, or any successor plan, program or arrangement thereto.

(cc)    “LTSIP Target Award Opportunities” has the meaning set forth in Section 4(b)(ii).

(dd)    “Participant” has the meaning set forth in the CIC Severance Plan.

(ee)    “Parties” has the meaning set forth in the preamble.

(ff)    “Party” has the meaning set forth in the preamble.

(gg)    “Payment Period” means the period of 18 continuous months, as measured from the Executive’s Separation from Service.

(hh)    “Place of Performance” has the meaning set forth in Section 8.

(ii)     “Proprietary Information” has the meaning set forth in Section 10(a)(i).

(jj)    “Release” means a release of claims in a form provided to the Executive by the Company in connection with the payment of benefits under this Agreement.

(kk)    “Release Consideration Period” means the period of time pursuant to the terms of the Release afforded the Executive to consider whether to sign it.

(ll)    “Release Revocation Period” means the period pursuant to the terms of an executed Release in which it may be revoked by the Executive.

(mm)    “Renewal Term” has the meaning set forth in Section 2.

(nn)    “Restricted Period” means the 18-month period following the Executive’s date of termination of employment with the Company for any reason or Cause, including for nonrenewal of this Agreement, Disability, termination by the Company or termination by the Executive.

(oo)    “Separation from Service” means “separation from service” from the Company and its subsidiaries as described under Code Section 409A and the guidance and Treasury regulations issued thereunder. Separation from Service will occur on the date on which the Executive’s level of services to the Company decreases to 21 percent or less of the average level of services performed by the Executive over the immediately preceding 36-month period (or if providing services for less than 36 months,

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such lesser period) after taking into account any services that the Executive provided prior to such date or that the Company and the Executive reasonably anticipate the Executive may provide (whether as an employee or as an independent contractor) after such date. For purposes of the determination of whether the Executive has had a Separation from Service, the term “Company” shall mean the Company and any affiliate with which the Company would be considered a single employer under Code Section 414(b) or 414(c), provided that in applying Code Sections 1563(a)(1), (2), and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Code Sections 1563(a)(1), (2) and (3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)-2. In addition, where the use of such definition of “Company” for purposes of determining a Separation from Service is based upon legitimate business criteria, in applying Code Sections 1563(a)(1), (2), and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 20 percent” is used instead of “at least 80 percent” at each place it appears in Code Sections 1563(a)(1), (2) and (3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), “at least 20 percent” is used instead of “at least 80 percent” at each place it appears in Treasury Regulation Section 1.414(c)-2.

(pp)    “Separation Plan” means the Company’s Separation Plan Amended and Restated Effective August 13, 2006, as may be amended from time to time or any successor plan, program, arrangement or agreement thereto.

(qq)    “Specified Employee” shall mean an Executive who is a “specified employee” for purposes of Code Section 409A, as administratively determined by the Board in accordance with the guidance and Treasury regulations issued under Code Section 409A.

(rr)     “STIP” means the Company’s short-term incentive plan under Section 8 of the Company’s 2007 Omnibus Incentive Plan, effective May 8, 2007, as may be amended from time to time, or any successor plan, program or arrangement thereto.

(ss)    “Subsidiary” shall mean any entity, corporation, partnership (general or limited), limited liability company, entity, firm, business organization, enterprise, association or joint venture in which the Company directly or indirectly controls ten percent (10%) or more of the voting interest. Notwithstanding the foregoing, for purposes of Section 3(a), “Subsidiary” shall mean any affiliate with which the Company would be considered a single employer as described in the definition of Separation from Service.

(tt)    “Target Bonuses” has the meaning set forth in Section 4(b)(i).






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(uu)    “Territory” has the meaning set forth in Section 11(b).
_____________________________________
Signature Page Follows






















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IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by an officer pursuant to the authority of its Board, and the Executive has executed this Agreement, as of the day and year first written above.

SPRINT CORPORATION
By: /s/ Sandra J. Price
Sandra J. Price
Senior Vice President - Human Resources



/s/ Brandon Dow Draper
Brandon Dow Draper





































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Exhibit 10.26

Exhibit A to Draper Employment Agreement                                

Award Agreement
Sign-On Award Restricted Stock Units

Throughout this Award Agreement, we sometimes refer to Sprint Corporation (the “Corporation”) and its subsidiaries as “we” or “us.”

1. Award of Restricted Stock Units
On September 10, 2013 (the “Date of Grant”), the Section 16 Sub-Committee of the Compensation Committee of the Board of Directors of the Corporation granted you an Award of 131,579 Restricted Stock Units (the “RSUs”) under the terms of the Sprint Corporation 2007 Omnibus Incentive Plan (the “Plan”). Subject to the terms and conditions of the Plan and this Award Agreement, an RSU represents the right for you to receive from us one share of Common Stock.

2. Restriction Period; Forfeiture
Your RSUs will vest 25% on (a) each of the first, second, third and fourth anniversaries of the Date of Grant, and (b) the date vesting is accelerated as described in paragraph 3 below (“Vested RSUs”), conditioned on you continuously serving as our employee to such date (the “Vesting Date”). You will forfeit as of your Separation from Service RSUs that are not vested pursuant to this paragraph. Separation from Service is defined in the Plan. Generally, it means the last day of your relationship with us as a common-law employee as reflected on our payroll records.

3 . Acceleration of Vesting
Your RSUs will vest fully on your Separation from Service under the following circumstances:

Event
Condition for Vesting Acceleration
Death
If you die.
Disability
If you have a Separation from Service under circumstances that make you eligible for benefits under the Sprint Long-Term Disability Plan.
Involuntary Termination without Cause or Resignation with Good Reason
If you have a Separation from Service under circumstances that you receive severance benefits under the Sprint Separation Plan (or its successor), the Sprint Change in Control Severance Plan (or its successor) or your employment agreement.

4. Dividends
If cash dividends are paid on the Common Stock underlying RSUs, which you hold on the dividend record date, you will receive a cash payment equal to the amount of the dividend that would be paid on such Common Stock, subject to the vesting provisions with respect to, and delivery at the same time as the shares underlying, your RSUs. If non-cash dividends are paid on the Common Stock underlying your RSUs, and you hold the RSUs on the dividend record date, the Board of Directors of the Corporation, or a sub-committee thereof, in its sole discretion, may (1) adjust your RSUs as described in paragraph 8 of this Award Agreement, or (2) provide for distribution of the property distributed in the non-cash dividend. The additional RSUs or property distributed is






subject to vesting provisions with respect to, and delivery at the same time as the shares underlying, the original RSUs.

5. Delivery Date; Market Value Per Share
The Delivery Date (the date as of which we distribute to you the Common Stock underlying your Vested RSUs) is the Vesting Date, or the day after the Six-Month Payment Delay if that delay applies to your RSUs. We calculate your taxable income on the Delivery Date using the Market Value Per Share on the immediately preceding trading day, but we use the average of the high and low reported prices of our Common Stock instead of the closing price. We will distribute the Common Stock underlying your Vested RSUs as soon as practicable after the Delivery Date, but in no event later than 45 days after the Delivery Date. Six-Month Payment Delay is defined in the Plan to mean the required delay in payment to a Participant who is a “specified employee” of amounts subject to Section 409A of the Internal Revenue Code (the “Code”) that are paid upon Separation from Service.

6. Transfer of your RSUs and Designation of Beneficiaries
Your RSUs represent a contract between the Corporation and you, and your rights under the contract are not assignable to any other party during your lifetime nor do they give you a preferred claim to any particular assets or shares of the Corporation. Upon your death, shares of Common Stock underlying your RSUs will be delivered in accordance with the terms of the Award to any beneficiaries you name in a beneficiary designation or, if you make no designation, to your estate.

7. Plan Terms
All capitalized terms used in this Award Agreement that are not defined herein have the same meaning as those terms have in the Plan. The terms of the Plan are hereby incorporated by this reference. The Plan is available online at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI .

8. Adjustment
In the event of any change in the number or kind of outstanding shares of our Common Stock by reason of a recapitalization, merger, consolidation, spin-off, reorganization, separation, liquidation, stock split, stock dividend, combination of shares or any other change in our corporate structure or shares of our Common Stock, an appropriate adjustment will be made consistent with applicable provisions of the Code and applicable Treasury Department rulings and regulations in the number and kind of shares subject to outstanding Awards and any other adjustments as the Board deems appropriate.

9. Amendment; Discretionary Nature of Plan
This Award is subject to the terms of the Plan, as may be amended from time to time, except that the Award which is the subject of this Award may not be materially impaired by any amendment or termination of the Plan approved after the Date of Grant without your written consent. You acknowledge and agree that the Plan is discretionary in nature and may be amended, cancelled, or terminated by us, in our sole discretion, at any time. The grant of RSUs under the Plan is a one-time benefit and does not create any





Page 2 of 3




contractual or other right to receive a grant of RSUs, other types of grants under the Plan, or benefits in lieu of such grants in the future. Future grants, if any, will be at the sole discretion of the Corporation, including, but not limited to, the timing of any grant, the number of RSUs granted, the payment of dividend equivalents, and vesting provisions.

10. Data Privacy
By accepting this Award, you (i) authorize us, and any agent of ours administering the Plan or providing Plan recordkeeping services, to disclose to us such information and data as we request in order to facilitate the grant of the RSUs and the administration of the Plan; (ii) waive any data privacy rights you may have with respect to such information; and (iii) authorize us to store and transmit such information in electronic form.

11. Governing Law
This Award Agreement will be governed by the laws of the State of Kansas. No shares of Common Stock will be delivered to you upon the vesting of the RSUs unless our counsel is satisfied that such delivery will be in compliance with all applicable laws.

12. Severability
The various provisions of this Award Agreement are severable, and any determination of invalidity or unenforceability of any one provision shall have no effect on the remaining provisions.

13. Taxes
You are liable for any and all taxes, including withholding taxes, arising out of this grant or the issuance of the Common Stock on vesting of RSUs. We are authorized to deduct the amount of the tax withholding from the amount payable to you upon settlement of the RSUs. We will withhold from the total number of shares of Common Stock you are to receive a number of shares the value of which is sufficient to satisfy any such withholding obligation at the minimum applicable withholding rate. In addition, if you become subject to FICA or Medicare tax, but you are not yet entitled to delivery of the shares of Common Stock underlying the RSUs, you hereby authorize us to withhold the resulting FICA or Medicare tax from other income payable to you.
14. Entire Agreement
You hereby acknowledge that you have read the 2007 Omnibus Incentive Plan Information Statement dated July, 2013 (the “Information Statement”) available at http://iconnect.corp.sprint.com/portal/iland/?dochome=iw&docpath=IntranetDirectory/LandingPage/20080605_1650_10367056#LTI . To the extent not inconsistent with the provisions of this Award Agreement, the terms of the Information Statement and the Plan are hereby incorporated by reference. This Award Agreement, along with the Information Statement and the Plan, contain the entire understanding of the parties.
    
Sprint Corporation                      Brandon Dow Draper
            
By: /s/ Sandra J. Price                      /s/ Brandon Dow Draper

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933




Page 3 of 3




Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
 
 
Successor
 
 
Predecessor
 
Nine Months Ended
 
 
191 Days Ended
 
Nine Months Ended
 
For the Years Ended December 31,
 
September 30, 2013
 
 
July 10, 2013
 
September 30, 2012
 
2012
 
2011
 
2010
 
2009
 
2008
 
(in millions)
Earnings (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations before income taxes
$
(792
)
 
 
$
443

 
$
(2,894
)
 
$
(4,172
)
 
$
(2,636
)
 
$
(3,299
)
 
$
(3,494
)
 
$
(4,060
)
Equity in losses of unconsolidated investments, net
—

 
 
482

 
927

 
1,114

 
1,730

 
1,286

 
803

 
64

Fixed charges
619

 
 
1,501

 
1,765

 
2,365

 
2,068

 
2,081

 
2,047

 
2,094

Interest capitalized
(14
)
 
 
(29
)
 
(269
)
 
(278
)
 
(413
)
 
(13
)
 
(12
)
 
(123
)
Amortization of interest capitalized
26

 
 
71

 
48

 
81

 
48

 
85

 
85

 
80

Earnings (loss), as adjusted
(161
)
 
 
2,468

 
(423
)
 
(890
)
 
797

 
140

 
(571
)
 
(1,945
)
Fixed charges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
416

 
 
1,135

 
996

 
1,428

 
1,011

 
1,464

 
1,450

 
1,362

Interest capitalized
14

 
 
29

 
269

 
278

 
413

 
13

 
12

 
123

Portion of rentals representative of interest
189

 
 
337

 
500

 
659

 
644

 
604

 
585

 
609

Fixed charges
619

 
 
1,501

 
1,765

 
2,365

 
2,068

 
2,081

 
2,047

 
2,094

Ratio of earnings to fixed charges
— (1)

 
 
1.6 (2)

 
— (3)

 
— (4)

 
— (5)

 
— (6)

 
— (7)

 
— (8)


(1)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $780 million at September 30, 2013 .
(2)
The income from continuing operations before taxes for the 191-day period ended July 10, 2013 included a pretax gain of $2.9 billion as a result of acquisition of our previously-held equity interest in Clearwire.
(3)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $2.2 billion at September 30, 2012 .
(4)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $3.3 billion in 2012.
(5)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $1.3 billion in 2011.
(6)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $1.9 billion in 2010.
(7)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $2.6 billion in 2009.
(8)
Earnings (loss), as adjusted were inadequate to cover fixed charges by $4.0 billion in 2008.

 




Exhibit 31.1
CERTIFICATION
I, Daniel R. Hesse, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Sprint Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

 
 

Date: November 6, 2013
/s/ Daniel R. Hesse
Daniel R. Hesse
Chief Executive Officer






Exhibit 31.2
CERTIFICATION
I, Joseph J. Euteneuer, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Sprint Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

 
 

Date: November 6, 2013
/s/Joseph J. Euteneuer
Joseph J. Euteneuer
Chief Financial Officer






Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Sprint Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2013 , as filed with the Securities and Exchange Commission (the “Report”), I, Daniel R. Hesse, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 

Date: November 6, 2013
 
/s/ Daniel R. Hesse
Daniel R. Hesse
Chief Executive Officer






Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Sprint Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2013 , as filed with the Securities and Exchange Commission (the “Report”), I, Joseph J. Euteneuer, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 

Date: November 6, 2013
 
/s/ Joseph J. Euteneuer
Joseph J. Euteneuer
Chief Financial Officer