SPRINT Corp | 2013 | FY | 3

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 U.S., 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 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)
2012
 
 
 
 
 
 
 
Net operating revenues
$
32,355

 
$
2,999

 
$
12

 
$
35,366

Inter-segment revenues(1)
—

 
882

 
(882
)
 
—

Total segment operating expenses
(28,208
)
 
(3,232
)
 
877

 
(30,563
)
Segment earnings
$
4,147

 
$
649

 
$
7

 
4,803

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(6,240
)
Amortization
 
 
 
 
 
 
(303
)
Business combination and hurricane-related charges(3)
 
 
 
 
 
 
(64
)
Other, net(2)
 
 
 
 
 
 
(16
)
Operating loss
 
 
 
 
 
 
(1,820
)
Interest expense
 
 
 
 
 
 
(1,428
)
Equity in losses of unconsolidated investments, net
 
 
 
 
$
(1,114
)
 
(1,114
)
Other income, net
 
 
 
 
 
 
190

Loss before income taxes
 
 
 
 
 
 
$
(4,172
)
 
 
 
 
 
 
 
 
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
2011
 
 
 
 
 
 
 
Net operating revenues
$
30,301

 
$
3,370

 
$
8

 
$
33,679

Inter-segment revenues(1)
—

 
956

 
(956
)
 
—

Total segment operating expenses
(26,034
)
 
(3,526
)
 
953

 
(28,607
)
Segment earnings
$
4,267

 
$
800

 
$
5

 
5,072

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(4,455
)
Amortization
 
 
 
 
 
 
(403
)
Other, net(2)
 
 
 
 
 
 
(106
)
Operating income
 
 
 
 
 
 
108

Interest expense
 
 
 
 
 
 
(1,011
)
Equity in losses of unconsolidated investments, net
 
 
 
 
$
(1,730
)
 
(1,730
)
Other expense, net
 
 
 
 
 
 
(3
)
Loss before income taxes
 
 
 
 
 
 
$
(2,636
)
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
2012
 
 
 
 
 
 
 
Capital expenditures 
$
3,753

 
$
240

 
$
268

 
$
4,261

Total assets
$
38,297

 
$
2,195

 
$
11,078

 
$
51,570

 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
Capital expenditures 
$
2,702

 
$
168

 
$
260

 
$
3,130

Total assets
$
37,606

 
$
2,355

 
$
9,422

 
$
49,383

 
 
 
 
 
 
 
 

Successor
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
2013
 
 
 
 
 
 
 
Net operating revenues
$
15,642

 
$
1,240

 
$
9

 
$
16,891

Inter-segment revenues(1)
—

 
396

 
(396
)
 
—

Total segment operating expenses
(13,464
)
 
(1,414
)
 
353

 
(14,525
)
Segment earnings
$
2,178

 
$
222

 
$
(34
)
 
2,366

Less:
 
 
 
 
 
 
 
Depreciation
 
 
 
 
 
 
(2,026
)
Amortization
 
 
 
 
 
 
(908
)
Other, net(2)
 
 
 
 
 
 
(402
)
Operating loss
 
 
 
 
 
 
(970
)
Interest expense
 
 
 
 
 
 
(918
)
Other income, net
 
 
 
 

 
73

Loss before income taxes
 
 
 
 
 
 
$
(1,815
)
 
 
 
 
 
 
 
 
Statement of Operations Information
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations
 
Consolidated
 
(in millions)
2012
 
 
 
 
 
 
 
Net operating revenues
$
—

 
$
—

 
$
—

 
$
—

Inter-segment revenues(1)
—

 
—

 
—

 
—

Total segment operating expenses
—

 
—

 
(33
)
 
(33
)
Segment earnings
$
—

 
$
—

 
$
(33
)
 
(33
)
Other income, net
 
 
 
 
 
 
10

Loss before income taxes
 
 
 
 
 
 
$
(23
)
 
 
 
 
 
 
 
 
Other Information
Wireless
 
Wireline
 
Corporate and
Other
 
Consolidated
 
(in millions)
2013
 
 
 
 
 
 
 
Capital expenditures 
$
3,535

 
$
153

 
$
159

 
$
3,847

Total assets
$
75,128

 
$
1,548

 
$
9,419

 
$
86,095

 
 
 
 
 
 
 
 
2012
 
 
 
 
 
 
 
Total assets
$
—

 
$
—

 
$
3,115

 
$
3,115

 _________________
(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 Successor year ended December 31, 2013 consists of $309 million of severance and exit costs and $100 million 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 as selling, general and administrative expenses), partially offset by $7 million of insurance reimbursement towards 2012 hurricane-related charges (included in our wireless segment and classified as a contra-expense in cost of services expense). Other, net for the Predecessor 191-day period ended July 10, 2013 consists of $652 million of severance and exit costs 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 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 Predecessor year ended December 31, 2012 consists of $196 million of lease exit costs and $102 million of asset impairment charges, partially offset by 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. Other, net for the Predecessor year ended December 31, 2011 consists of $106 million of severance, exit costs and asset impairments associated with the shut-down of the Nextel platform.
(3)
Includes $45 million of hurricane-related charges for the Predecessor year ended December 31, 2012, which are classified in our consolidated statements of comprehensive loss as follows: $21 million as contra-revenue in net operating revenues of Wireless, $20 million as cost of services and products ($17 million Wireless; $3 million Wireline), and $4 million as selling, general and administrative expenses in our Wireless segment. Also includes $19 million of business combination charges for fees paid to unrelated parties necessary for the proposed transactions with SoftBank and Clearwire, which is included in our corporate segment and classified as selling, general and administrative expenses.
  
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)
2012
 
 
 
 
 
 
 
Wireless services(2)
$
28,624

 
$
—

 
$
—

 
$
28,624

Wireless equipment
3,248

 
—

 
—

 
3,248

Voice
—

 
1,627

 
(515
)
 
1,112

Data
—

 
398

 
(176
)
 
222

Internet
—

 
1,781

 
(190
)
 
1,591

Other
483

 
75

 
11

 
569

Total net operating revenues
$
32,355

 
$
3,881

 
$
(870
)
 
$
35,366

 
 
 
 
 
 
 
 
 
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations(1)
 
Consolidated
 
(in millions)
2011
 
 
 
 
 
 
 
Wireless services
$
27,129

 
$
—

 
$
—

 
$
27,129

Wireless equipment
2,911

 
—

 
—

 
2,911

Voice
—

 
1,915

 
(643
)
 
1,272

Data
—

 
460

 
(163
)
 
297

Internet
—

 
1,878

 
(151
)
 
1,727

Other
261

 
73

 
9

 
343

Total net operating revenues
$
30,301

 
$
4,326

 
$
(948
)
 
$
33,679

 
 
 
 
 
 
 
 
Successor
Operating Revenues by Service and Products
Wireless
 
Wireline
 
Corporate,
Other and
Eliminations(1)
 
Consolidated
 
(in millions)
2013
 
 
 
 
 
 
 
Wireless services
$
13,579

 
$
—

 
$
—

 
$
13,579

Wireless equipment
1,797

 
—

 
—

 
1,797

Voice
—

 
719

 
(240
)
 
479

Data
—

 
138

 
(69
)
 
69

Internet
—

 
747

 
(81
)
 
666

Other
266

 
32

 
3

 
301

Total net operating revenues
$
15,642

 
$
1,636

 
$
(387
)
 
$
16,891

 
 
 
 
 
 
 
 

_______________
(1)
Revenues eliminated in consolidation consist primarily of wireline services provided to the Wireless segment for resale to or use by wireless subscribers.
(2)
Wireless services related to the Wireless segment for the Predecessor year ended December 31, 2012 excludes $21 million of hurricane-related contra-revenue charges reflected in net operating revenues in our consolidated statement of comprehensive loss.

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