Company Sprint Nextel Corporation
You will write a 2 \u2013 3 page paper, single spaced, one inch margins, 12-pt font, with double space between paragraphs. Your paper should comment on the financial statements for your company as they relate to the information presented in chapters 12 \u2013 17 of your textbook, including the notes to the financial statements. Do not consider information from chapters 18 \u2013 25 in your paper.
\u2022At a minimum, use the following headings to organize your paper: ?Introduction
?Balance Sheet
?Income Statement
?Statement of Cash Flows
?Conclusion
?References
?Exhibits<\/p>\n
\u2022You will also be required to include the Income Statement, Balance Sheet and Cash Flow Statement as an attachment to your report under the Exhibits heading (you can cut and paste directly from the 10-K report).
\u2022Avoid academic dishonesty. Write your paper, read it, and edit. Use your own words, and don\u2019t steal from another student or the internet.
\u2022APA style is required for in-text citations and the reference list. Purdue University\u2019s Online Writing Lab has a good website that summarizes APA citations that you can consult.
\u2022Ask questions if any of the requirements are unclear.
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Successor Y
ear Ended December 31, 2013 and Pr
edecessor Y
ear Ended December 31, 2012
Postpaid
ARPU for the year ended December 31, 2013 compared to the Predecessor period in 2012 increased
primarily due to higher monthly recurring revenues, including the $10 premium data add-on char
ges for all smartphones and
device protection fees, combined with other fee increases and a reduction in the number of subscribers eligible for certain
plan discounts due to policy changes and fewer customer care credits.
The increase in postpaid
ARPU was partially of
fset by
lower variable usage-based revenues due to the popularity of unlimited plan options, combined with a lower revenue per
subscriber carried by subscribers acquired in the Clearwire and U.S. Cellular acquisitions and growth in sales of tablets,
which also carry a lower revenue per subscriber
. Prepaid
ARPU for the Successor year ended December 31, 2013 compared
to the Predecessor year ended December 31, 2012 declined primarily as a result of the impact of purchase price accounting to
eliminate deferred revenues, partially of
fset by the impact of a higher revenue per subscriber carried by subscribers acquired
in the Clearwire
Acquisition.
Combined Y
ear Ended December 31, 2013 and Pr
edecessor Y
ear Ended December 31, 2012
In addition to the explanations above, prepaid
ARPU for the Combined year ended December 31, 2013 compared
to the Predecessor year ended December 31, 2012 declined primarily as a result of a decrease in
ARPU for our
Assurance
W
ireless 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.
This decrease was partially of
fset by an increase in
ARPU for
primarily the
V
ir
gin prepaid brands as subscribers are choosing higher priced plans due to the increased availability of
smartphones.
ARPU as it relates to our
Assurance
W
ireless 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 quarter ended June 30, 2013.
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Supplemental data \u2013 connected devices
End of period subscribers (in thousands)
(3)
Retail postpaid
791
809
817
813
824
798
834
922
968
988
1,039
1,180
1,320
Wholesale and affiliates
2,217
2,361
2,542
2,670
2,803
3,057
3,298
3,578
3,882
4,192
4,635
5,175
5,832
Total
3,008
3,170
3,359
3,483
3,627
3,855
4,132
4,500
4,850
5,180
5,674
6,355
7,152
_______________________
(1)
A
subscriber is defined as an individual line of service associated with each device activated by a customer
. Subscribers that transfer fr
om their original service category classification to another platform, or
another service line within the same platform, ar
e r
eflected as a net loss to the original service category and a net addition to their new service category
. Ther
e is no net effect for such subscriber changes to
the total wir
eless net additions (losses) or end of period subscribers.
(2)
W
e acquir
ed appr
oximately 352,000 postpaid subscribers and 59,000 pr
epaid subscribers thr
ough the acquisition of assets fr
om U.S. Cellular when the transaction closed on May 17, 2013. W
e acquir
ed
appr
oximately
788,000
postpaid subscribers (excluding
29,000
Sprint wholesale subscribers transferr
ed to T
ransactions postpaid subscribers that wer
e originally r
ecognized as part of our Clearwir
e MVNO
arrangement),
721,000
pr
epaid subscribers, and
93,000
wholesale subscribers as a r
esult of the Clearwir
e
Acquisition when the transaction closed on July 9, 2013.
(3)
Subscribers thr
ough some of our MVNO r
elationships have inactivity either in voice usage or primarily as a r
esult of the natur
e of the device, wher
e activity only occurs when data r
etrieval is initiated by the
end-user and may occur infr
equently
.
Although we continue to pr
ovide these subscribers access to our network thr
ough our MVNO r
elationships, appr
oximately
1,788,000
subscribers at
Mar
ch 31, 2015
thr
ough these MVNO r
elationships have been inactive for at least six months, with no associated r
evenue during the six-month period ended
Mar
ch 31, 2015
.
(4)
End of period connected devices ar
e included in total r
etail postpaid or wholesale and affiliates end of period subscriber totals for all periods pr
esented.
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 subscribers on the Sprint platform as of the end of each quarterly period beginning with the quarter ended March 31, 2012.
March 31,
2012
June 30,
2012
Sept 30,
2012
Dec 31,
2012
March 31,
2013
June 30,
2013
Sept 30,
2013
Dec 31,
2013
March 31,
2014
June 30,
2014
Sept 30,
2014
Dec 31,
2014
March 31,
2015
Monthly subscriber
churn rate
(1)
Sprint platform:
Postpaid
2.00
%
1.69
%
1.88
%
1.98
%
1.84
%
1.83
%
1.99
%
2.07
%
2.11
%
2.05
%
2.18
%
2.30
%
1.84
%
Prepaid
2.92
%
3.16
%
2.93
%
3.02
%
3.05
%
5.22
%
3.57
%
3.01
%
4.33
%
4.44
%
3.76
%
3.94
%
3.84
%
Nextel platform:
Postpaid
2.09
%
2.56
%
4.38
%
5.27
%
7.57
%
33.90
%
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Prepaid
8.73
%
7.18
%
9.39
%
9.79
%
12.46
%
32.13
%
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
T
ransactions
(2)
:
Postpaid
\u2014
\u2014
\u2014
\u2014
\u2014
26.64
%
6.38
%
5.48
%
5.48
%
4.15
%
4.66
%
4.09
%
3.87
%
Prepaid
\u2014
\u2014
\u2014
\u2014
\u2014
16.72
%
8.84
%
8.18
%
5.11
%
6.28
%
5.70
%
4.95
%
3.77
%
Total retail postpaid
2.01
%
1.79
%
2.09
%
2.18
%
2.09
%
2.63
%
2.09
%
2.15
%
2.18
%
2.09
%
2.22
%
2.33
%
1.87
%
Total retail prepaid
3.61
%
3.53
%
3.37
%
3.30
%
3.26
%
5.51
%
3.78
%
3.22
%
4.35
%
4.50
%
3.81
%
3.97
%
3.84
%
Nextel platform subscriber recaptures
Rate
(3)
:
Postpaid
46
%
60
%
59
%
51
%
46
%
34
%
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Prepaid
23
%
32
%
34
%
50
%
34
%
39
%
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Subscribers
(4)
:
Postpaid
228
431
516
333
264
364
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Prepaid
137
143
152
188
67
101
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
_______________________
(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 ar
e defined as deactivations in excess of subscriber activations in a particular account within 30 days. Postpaid and Pr
epaid churn
consist of both voluntary churn, wher
e the subscriber makes his or her own determination to cease being a subscriber
, and involuntary churn, wher
e the subscriber\u2019s service is terminated due to a lack of
payment or other r
easons.
(2)
Subscriber churn r
elated to the acquisition of assets fr
om U.S. Cellular and the Clearwir
e
Acquisition.
(3)
Repr
esents the r
ecaptur
e rate defined as the Nextel platform postpaid or pr
epaid subscribers, as applicable, that switched fr
om the Nextel platform but activated service on the Sprint platform during each
period over the total Nextel platform subscriber deactivations in the period for postpaid and pr
epaid, r
espectively
.
(4)
Repr
esents the Nextel platform postpaid and pr
epaid subscribers, as applicable, that switched fr
om the Nextel platform during each period but r
emained with the Company as subscribers on the Sprint
platform. Subscribers that deactivated service on the Nextel platform and activated service on the Sprint platform ar
e included in the Sprint platform net additions for the applicable period.
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43
The following table shows our postpaid and prepaid
ARPU as of the end of each quarterly period beginning with the quarter ended March 31, 2012.
Predecessor
Successor
Combined
(2)
Successor
March 31,
2012
June 30,
2012
Sept 30,
2012
Dec 31,
2012
March 31,
2013
June 30,
2013
10 Days Ended
July 10, 2013
Sept 30,
2013
Sept 30,
2013
Dec 31,
2013
March 31,
2014
June 30,
2014
Sept 30,
2014
Dec 31,
2014
March 31,
2015
ARPU
Sprint platform:
Postpaid
$
62.55
$
63.38
$
63.21
$
63.04
$
63.67
$
64.20
$
64.71
$
64.24
$
64.28
$
64.11
$
63.52
$
62.07
$
60.58
$
58.90
$
56.94
Prepaid
$
25.64
$
25.49
$
26.19
$
26.30
$
25.95
$
26.96
$
26.99
$
25.14
$
25.33
$
26.78
$
26.45
$
27.38
$
27.19
$
27.12
$
27.50
Nextel platform:
Postpaid
$
40.94
$
40.25
$
38.65
$
37.27
$
35.43
$
36.66
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
Prepaid
$
35.68
$
37.20
$
34.73
$
35.59
$
31.75
$
34.48
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
T
ransactions
(1)
:
Postpaid
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
59.87
$
35.75
$
37.44
$
40.00
$
36.30
$
37.26
$
39.16
$
39.69
$
39.85
$
40.28
Prepaid
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
\u2014
$
19.17
$
12.78
$
40.62
$
43.20
$
40.80
$
43.80
$
45.15
$
45.52
$
45.80
$
46.68
Total retail
postpaid
$
59.88
$
60.88
$
61.18
$
61.47
$
62.47
$
63.59
$
64.55
$
63.48
$
63.69
$
63.44
$
62.98
$
61.65
$
60.24
$
58.63
$
56.72
Total retail
prepaid
$
26.82
$
26.59
$
26.77
$
26.69
$
26.08
$
27.02
$
26.96
$
25.86
$
26.04
$
27.34
$
27.07
$
27.97
$
27.73
$
27.61
$
27.95
_______________________
(1)
Subscriber
ARPU r
elated to the acquisition of assets fr
om U.S. Cellular and the Clearwir
e
Acquisition.
(2)
Combined
ARPU for the quarterly period ending September 30, 2013 aggr
egates service r
evenue fr
om the Pr
edecessor 10-day period ended July 10, 2013 and the Successor thr
ee-month period ended
September 30, 2013 divided by the sum of the monthly average subscribers during the thr
ee months ended September 30, 2013.
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44
Subscriber Results
Sprint Platform Subscribers
Retail Postpaid
\u2014
During the Successor year ended
March 31, 2015
, net postpaid subscriber losses were
212,000
as compared to net losses of
96,000
in the Combined year ended
December 31, 2013
and net additions of
1,516,000
in the
Predecessor year ended
December 31, 2012
, inclusive of
1,334,000
,
564,000
and
76,000
net additions of tablets, respectively
,
which generally have a significantly lower
ARPU as compared to other wireless subscribers. During the Successor three-
month transition period ended March 31, 2014, net postpaid subscriber losses were
231,000
as compared to net additions of
12,000 in the Predecessor three-month period ended March 31, 2013, inclusive of
516,000
and
16,000
net additions of tablet
devices, respectively
.
The primary driver for the net losses in the Successor year ended
March 31, 2015
, the Successor three-
month transition period ended March 31, 2014 and the Combined year ended
December 31, 2013
was an increase in churn,
primarily due to increased competition and network-related churn impacted by our network modernization program. Other
wireless carriers continue various aggressive marketing ef
forts, including price reductions, to incent subscribers to switch
carriers.
As a result, we believe these ef
forts are also negatively impacting churn, which has a negative ef
fect on earnings.
The change to net losses in the Combined year ended
December 31, 2013
from net additions in the Predecessor year ended
December 31, 2012
was also impacted by the absence of Nextel platform recaptures in the second half of 2013 as the
shutdown of that network was completed on June 30, 2013. Nextel platform and U. S. Cellular recaptures in the Combined
year ended December 31, 2013 totaled 734,000.
Retail Prepaid
\u2014
During the Successor year ended
March 31, 2015
, we added
449,000
net prepaid subscribers as
compared to adding
488,000
and
2,305,000
net prepaid subscribers in the years ended
December 31, 2013
(Combined) and
December 31, 2012
(Predecessor), respectively
. Net additions in the Successor year ended
March 31, 2015
is primarily due to
subscriber growth in our Boost brand as a result of new promotions in our indirect channels, partially of
fset by subscriber
losses in the
V
ir
gin Mobile prepaid brands primarily due to continued competition. During the Successor three-month
transition period ended March 31, 2014, we lost
364,000
net prepaid subscribers as compared to adding
568,000
in the
Predecessor three-month period ended March 31, 2013, primarily due to the timing and impact of churn related to the annual
recertification of
Assurance
W
ireless subscribers occurring earlier in calendar year 2014 compared to calendar year 2013,
combined with a decline in gross subscriber additions across all prepaid brands. In combination with the significant impact of
reduced subscriber additions due to the
Assurance
W
ireless recertification, our decline in net additions in the Combined year
ended December 31, 2013 compared to the Predecessor year ended December 31, 2012 was also due to continued
competitive pressures in 2012 resulting in promotional of
ferings that drove increased net additions.
Also contributing to the
decline in net additions in the Combined year ended December 31, 2013 was the absence of Nextel platform recaptures in the
second half of calendar year 2013 as the shutdown of that network was completed.
Approximately
168,000
prepaid
subscriber additions deactivated service on the Nextel platform in the Successor year ended
December 31, 2013
as compared
to
620,000
in the Predecessor year ended December 31, 2012.
The federal Lifeline program under which
Assurance
W
ireless operates requires applicants to meet certain
eligibility requirements and existing subscribers must recertify as to those requirements annually
. New regulations in calendar
year 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.
W
e
deactivated the accounts of approximately 1.2 million subscribers in the quarter ended June 30, 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, tar
geted retention programs can be of
fered to qualifying
subscribers to maintain ongoing service by providing up to an additional 150 days to make a replenishment. Subscribers
tar
geted through these retention of
fers are not included in the calculation of churn until their retention of
fer 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
W
ireless and Clearwire subscribers are excluded from these tar
geted
retention programs.
Wholesale and
Af
filiate Subscribers \u2014
Wholesale and af
filiate subscribers represent customers that are served on
our networks through companies that resell our wireless services to their subscribers, customers residing in af
filiate territories<\/p>\n","protected":false},"excerpt":{"rendered":"
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