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Sprint Nextel Corporation (S)

October 07, 2011 9:30 am ET

Executives

Fared Adib - Vice President of Product Development

Steven L. Elfman - President of Network Operations & Wholesale

Steven M. Mollenkopf - Executive Vice President and Group President of Cdma Technologies

Daniel R. Hesse - Chief Executive Officer, President, Director and Chairman of Executive Committee

Scott Willis -

Tom Jasny -

Robert Azzi -

Joseph J. Euteneuer - Chief Financial Officer

Unknown Executive -

Yijing Brentano - Vice President Investor Relations

Analysts

John C. Hodulik - UBS Investment Bank, Research Division

Timothy K. Horan - Oppenheimer & Co. Inc., Research Division

Michael Rollins - Citigroup Inc, Research Division

Kevin Smithen - Macquarie Research

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Simon Flannery - Morgan Stanley, Research Division

David W. Barden - BofA Merrill Lynch, Research Division

Sanjay Jha

David Michael Dixon - FBR Capital Markets & Co., Research Division

Unknown Analyst -

Operator

Ladies and gentlemen, please welcome to the stage Yijing Brentano, VP Investor Relations.

Yijing Brentano

Good morning, everyone. On behalf of all the employees at Sprint, I want to welcome you to Sprint's Network Vision strategy update. Before we get underway, I would like to remind you that today's event is being webcast. So the links to that webcast with supporting materials are all in the Investor Relations page of the Sprint website. I also need to cover our cautionary statement. In our remarks today, we will be discussing forward-looking information, which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. We provide a comprehensive list of risk factors in our SEC filings, which I encourage you to review, including Part 1 Item 1A risk factors of our annual report on Form 10-K, and Part 2 Item 1A risk factors of our quarterly report on Form 10-Q for the quarter ended June 30, 2011, and for the quarter ended September 30, 2011, when filed. Our presentation today may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on our website.

With that, I would like to invite our CEO, Dan Hesse, to the stage.

Daniel R. Hesse

Thank you, Yijing. Now it works. Good morning, everybody. Thanks for joining us here in New York, and welcome also to those of you who are on the phone or online. First of all, I want to let you know we didn't choose October 7 so we could celebrate the Detroit Tigers moving on, sorry about that. But we have a good day, we hope for you today -- oh we heard some hisses, I'm sorry. A good day for you today where we have an opportunity to talk about our Network Vision plan, which is really our strategy for our evolution of 3G and 4G. And also give you an update on our progress, as well as the financial benefits and ramifications.

So, the agenda. My team really didn't want the first guy speaking but I insisted. Second, we have Steve Elfman, who will give you an overview of Network Vision or the strategy and the plan. Bob Aussie will give you a more detailed perspective with respect to where we are, our progress and our rollout plan. We have a partner panel. We have 3 important infrastructure partners, Alcatel-Lucent, Samsung, Ericsson. And they are going to talk about what they bring to the party. Then the highlight of the morning, the break. Then Fared is going to come up and talk about the devices that are crucial in supporting our Network Vision plan. Joe Euteneuer will then talk about the financial ramifications and benefits of Network Vision. He's going to hit cleanup and he's got the longest segment because I don't know what it is with these groups, most of the questions tend to be around the numbers. So he's going to talk about that. And finally, some time for Q&A.

So let's talk about Sprint and our strategy and particularly, our brand and what it stands for both internally and externally. A company is like a person. You can try to pretend this is who you are on the outside if you're different on the inside. Our brand stands for simplicity in value. And we're trying to simplify the customer experience relentlessly. We're also trying to simplify the company because you never know, one of these guys in the front row might be running it someday.

But seriously, simplicity -- I'm really building them up. But seriously, simplicity costs less. So if you take a look at what we've done over the last few years, we start with the offers. In early 2008, we came out with Simply Everything, then Ready Now, Any Mobile, Anytime, and now we're maintaining the only unlimited position. The reason we do that is customers will pay more for simplicity. Customers like simplicity. We were able to reduce 85% of our rate plan combinations, which gets us to #2 in terms of how we simplify the business, again, simplicity costing less. You take a look at retail. We've had 5 JD Power awards so far in 2011. We're the current reigning leader, in terms of the retail experience, for both postpaid Sprint, but also prepaid Boost. A lot of that has to do with the simplicity of the sales process, as well as on the other end, on the care process. You take a look at customer care, 14 consecutive quarters have improved CSAT in Customer Care last quarter, a 60% reduction since the beginning of 2008, and the number of credits we need to give customers. A 42% reduction in the number of calls to customer care per subscriber. So it costs a lot less, simplifying the business. But the third piece that's so important to simplifying the business is the network. Running 2 networks is complicated. So what you'll see today is an architecture that makes running perhaps our most important valuable core asset, our network simpler.

So let's start with our performance objectives, and I like to use an Omar Bradley quote that we set our course by the stars, not by the light of every passing ship. You could call it boring. We've had the same 3 performance objectives that we've talked about on every single call with you for 3.5 years: Improving the customer experience, strengthening the brand, generating cash. What these things do is they contribute to our assets of lasting value. Tangible assets. Our brand value. Brand clearly has value. You look at brands like Ferrari, Apple or what have you, there is a significant financial value that comes with a good brand. The other thing I'll talk about with brand, brand is the key to gross ads and our businesses is all about subscribers. I'll talk about gross ads and churn, which of course lead to net ads.

The workforce, a very important element in terms of assets. You walk into a Sprint store, you talk to somebody on the phone. It doesn't matter what the industry is. You go to an airline, you can tell the difference sometimes between an employee of Southwest Airlines versus other airlines. It makes a big difference. And finally, the network. To oversimplify. Again, because I like to oversimplify, simplification's very important in terms of the way we describe our business as well to our people. The middle thing, if you will, the workforce, engaged workforces uses these 2 other core assets, if you will, a strong brand to attract new customers and a strong network to keep them.

So let's talk about the first item, the first objective, the customer experience. Sprint, in terms of the American Customer Satisfaction Index -- by the way, over the 3-year period, the only wireless company to improve its score over the 3 years. So it's not like all boats are floating, but in all 47 industries that they look at, every single U.S. company, Sprint is the most improved U.S. company in customer satisfaction over the last 3 years. One thing you see about this chart, and Joe will have some charts as well when you look at Sprint, if it's a chart with quarterly numbers it tends to be a U. If it's more smooth, if you just have one data point per year, it looks like a V. When I got here around Christmas time of 2007, it was like catching a falling knife. And I'll go through a number of slides, but what you'll see is a steady decline in Sprint's performance across a number of metrics that typically begins, perhaps a year or so after the merger, and continued heading south and usually hit a bottom around late '08 or early '09 and we're gradually moving our way back out. One thing I will say here, just like Consumer Reports where we're tied with Verizon for #1 in terms of customer satisfaction here, to give Verizon their props, that's typically who we're fighting with to get that top spot in the industry in terms of the brand and customer satisfaction.

Moving to brand. The Reputation Institute is perhaps the best-known survey company that worldwide looks at major companies and their reputation, or a holistic view of their brand. It's things like trust, esteem, positive attributes that people have with respect to a brand. Clearly, the customer experience is an element because they talk to customers, but also business leaders, opinion leaders, government officials, the esteem in which they hold your company.

In 2010, they then, again, the RI looks at the 1,500 largest companies in the world. In 2010, Sprint's reputation improved more than any company in the world out of 1,500, and we were the only wireless company -- by the way, even with all that, and again, you look at these views, whether it's CSAT or ads or what have you, we were not only in fourth place in kind of the 2008 timeframe, but way behind. So even as being the most improved company in the world in 2010, we were still in fourth place. But we were the only company to improve in 2011, so we're now in second place in terms of the major U.S. wireless companies.

Total subscribers. It's all about the subs. Now subs are probably the best tangible evidence of how strong your brand is because at the end of the day, it's are you attracting customers and are you keeping customers. There are lots of other brand metrics like these surveys, but the one that's most important is total subscribers.

Total subscribers you'll see came down for 11 consecutive quarters, and now they've increased for 5 consecutive quarters. So we're, again, we're on our way back.

Within total subs and the subs that you all seem to care the most about, and you should, because all subscribers are not created equal in terms of customer lifetime value, is postpaid. And one of the things that was the most frustrating for me when I got here, and you'll see this on the next chart, kind of quarter-over-quarter year-after-year, with all these press reports about customers leaving in droves. As you'll see, churn improved every single year but the problem was the declining gross ads, and that was a brand problem. We were a doing better and better job of keeping the customers we had, but gross ads declined over the period of 3 years by 2 million gross ads a quarter. I mean, that's 8 million a year if you annualize it. This was our problem, declined for 12 out of 13 quarters, with the exception of one quarter where the credit scores or credit metrics were [indiscernible].

So this is the other half of the net ad story, and that's churn. And as you'll see, Sprint is the only company that improved its postpaid churn every year. But as you'll see on the next chart when I show improvement in net ads, the big improvement began in 2010 because basically, 2009 was largely the story of 2 halves where a lot of metrics continued to decline in the first of '09. It was really the second half of '09 where they started to improve.

So here's -- again, this is a journey toward improvement. So we tend to look at improvement quarter-after-quarter, year-after-year. Postpaid net add change is something we look at very, very closely. A lot of people don't realize that the biggest decline sequentially for us year-over-year in net ads as a company was 2006 from 2005. That was the biggest single annual drop in net ads for Sprint. But '07 and '08 were very tough years. '09 and '10, we were the only company to improve our net ad performance year-over-year. Now from a pretty bad spot in terms of where we were, but still sequential improvement year-over-year, a huge improvement in 2010. And in 2011, you're seeing Verizon also improving through the first half year-over-year with 4G and with the iPhone.

So we talked about the brand in terms of core assets. Let's move to #2 which is our people. In 2008 in terms of our employee surveys, the numbers were terrible when compared to external benchmarks. The improvement has been nothing short of dramatic in morale. And it's bit of a virtuous cycle. The big numbers, if you will, the big numbers of employees in our company are people in the front-line, people in care, people in retail. So they know how we're performing for customers. They know what it's like to talk to customers every day, they're taking the calls. We've seen a dramatic -- we've been doing the survey for 10 years. These are the highest numbers that the company has ever achieved in spite of major layoffs in 2008 and 2009. So this is a tangible asset, a competitive advantage, we believe, versus our competitors.

Cash is, if you will, #3 of the we'll call it key priorities. I talked about the brand and customer experience. Joe's going to talk more about cash. But solid free cash flow in recent years, but I've been told it's like an eraser, kind of erase everything in the sentence before it. Our margins are still well below the benchmark margins of our 2 big competitors, Verizon and AT&T, and the 2 biggest disadvantages we have in margin. And opportunities, you can look at it as glass half-full, are #1 network, because we're running 2 networks with less volume. But 2 networks and our competitors are running 1, that's #1. And that's really the focus of today's discussion and the other is churn. Churn is the -- improvements in churn that is the quickest, fastest, most significant way of improving your bottom line is if you can improve that churn number.

So how do we take churn and brand to the next level, churn being your DX because again it's all about customers. It's all about subscribers. So churn of the customers leaving, brand is how you attract the new ones. And again, we're making progress, but not as much progress as we would like to. By the way, on gross ads you saw the previous chart. Our decline in gross ads was so significant, it really blew right through seasonality. And every quarter was worse, even with seasonal benefits that you'd often get in terms of gross ads. And now what you're seeing is they're up, but you're seeing up and down which is more normal, like you'd see for most carriers, there's seasonality. But how do we take both of these to the next level, and that's the iPhone.

We've gotten to the point where when customers leave, without question and by itself, the #1 reason for postpaid churn is no iPhone. It has been. So this should help us take churn to the next level. Also, when you're building a great brand, you want to be associated with great brands. And I don't think anybody would debate whether Apple is a great brand or not. Arguably, the best global brand in the tech space, very important to us, also from a profitability perspective. There have been some questions or concerns about that. Yes, subsidies are higher on the iPhone than they are on generally other devices. But our expectation, based upon customer lifetime value, so you might be out more early on, is that this will be one of our most profitable devices that we run. This combination of how many gross ads you're bringing in, how much network do they use and what your churn characteristics are. Those are really the things that drive your profitability. So we're expecting this to be quite accretive to our cash flow and profitability over time.

So the last of the 3 major asset buckets. We've gone through brand, people, now it's network.

Getting back to what we've done to get to the place that we're at today, you may remember we ran a process in 2009 to see if perhaps we could sell the iDEN network. There were no significant legitimate offers we had for that, so we announced in the fourth quarter of 2008 that we were going to retain the iDEN network. And we also announced in that quarter a partnership with Clearwire.

In the first quarter of 2009, given we had the iDEN network, we launched Boost Unlimited on the iDEN network. Since we launched Boost Unlimited prepaid on the iDEN network, because we had spare capacity, we had a network sitting there with extra capacity, we didn't have to put any capital in that network. We generated almost $5 billion in revenue on the iDEN network from prepaid. And what that has done is help offset those costs of running the network, but it has given us time. It bought us time to come up with a elegant, technical solution to moving to one network that you'll hear about today. And also a very valuable asset to us are those button pushers, as we call them, heavy push-to-talk users. We needed to have a world-class, iDEN class, push-to-talk capability on CDMA, which heretofore has not existed. And this gives us a place to bring them as well. So had Network Vision been around 6 years ago in 2005, I think Sprint's history would be very different. And the way the acquisition of Nextel, how that's written would be very different. So we are in a very good position today and we'll talk about that.

So in the fourth quarter of 2010 we announced Network Vision. Five major objectives are actually -- there are others as well, other benefits and you'll hear some of those today. But the most important is number one, the customer experience both on 3G and 4G. It'll provide our 3G customers with better call quality, better coverage, more speed for 4G. Reduce our costs. You'll hear about that, whether it's roaming or fewer cell sites. Utilization of our assets. We have spectrum assets that we own at 800 and 1900. And what makes the most sense from a financial point of view is use those assets to their fullest extent before you begin using the capacity of others. So utilizing your existing assets the best way you can. Flexibility, whether it's LightSquared or any other network hosting opportunities, this technology gives us flexibility to bring in additional margin, if you will, additional cash in other ways to the company. And finally, sustainability. As you may know, we're ranked by Newsweek as the sixth greenest company in America, which is 93 spots ahead of our closest wireless competitor. This is an important part of us reducing our greenhouse gas emissions as well going forward because the new network capabilities are much more energy efficient.

So finally, why October 7? Again, not to celebrate how things are going in baseball, but what we wanted to do is be at a point where Network Vision was no longer slideware [ph] where we could show you things working, talk about things working. We have our network infrastructure partners up here that'll talk about that. The same goes with handsets. We wanted to be able to show that the network's working in the handsets are working, what we call tangibility.

The third was we wanted to talk about the iPhone 4 and the 4S because they have important usage characteristics in terms of our network that are different than our other high-selling smartphones. So it has this impact on our analysis with respect to network utilization, spectrum utilization, et cetera. And we could not talk about those products before this week.

So without further ado, I will turn it over to Steve Elfman.

Steven L. Elfman

Thanks, Dan. Many of you have spent about 15 years following Dan and hopefully, this will be good for everyone. I'm sorry, Dave Dixon was interested in me doing the Safe Harbor announcement like I typically do and Yijing took that from me. But what I want to do here basically is for many in the room, they've been through Network Vision with a few of us, a couple I want to really go over some of the highlights of it again. I want to tell you about, yes, the aggressive rollout of LTE. That's certainly what we're announcing here today on our 1900 spectrum. So we'll get into that. I want to talk about our path in spectrum and capacity. And also reaffirm the economic benefits that I've talked to many of you about in the $10 billion to $11 billion in value to the company.

So if I go back, the objectives was that we really put together a Network Vision strategy based on number one, as Dan talked about, our cost structure was really not competitive. We had 2 networks. We needed to really reduce that cost structure and we had an opportunity here. But as important and more important was really improving the performance and the coverage for our customers. This is the way we reduce churn and we get more customers. Wanted to optimize the use of our spectrum assets. We had 800 with iDEN, we've got 1900 in CDMA and we wanted the capability to be able to, as I say, later eliminate the iDEN network and harvest the 800 spectrum. And then technology flexibility. We wanted something that we could put both our CDMA, LTE in the future. And also think of ideas of being able to, what we call spectrum hosting that I'll talk about. So it does give us much more flexibility to get scale. And we wanted to eliminate the iDen network. As Dan said, we have to. The cost structure was really much higher than our competitor. And so we planned, as I've said before, to get our customers migrated by 2013. And we've started that this year and made a lot of great progress.

The 2 key attributes of Network Vision really break into 2 sides. Multimode network platforms that we'll talk about that allows us to have multiple spectrums, multiple technologies in one base station and radio head. The other is integrated chipsets to really power the devices to work with the multiple spectrums and multiple technologies.

And by the way, you're going to hear more about it from, perhaps, the smartest guy in tech today in terms of product, and the guy that actually didn't make the list of smart people was Bob Azzi, who'll talk about the network side.

But I remind you of the multimode site. Currently, this is what it looks like, really, our 4G and our CDMA, a large footprint, a lot of it energy use, more maintenance. And then with our new multimode technology, this is a 3G, 4G. And what you see -- I don't have a pointer, but think of that as CDMA, LTE at 1.9 and LTE at 1.6. That's what it looks like. A lot less utility requirement, a lot less footprint, a lot less maintenance required, a lot less cost.

Then at the top of the tower, if you take the antenna view of this, what we've got there is radio heads that basically in the same radio, we're going to have 1.9 LTE, 1.9 CDMA, 800 CDMA, and hopefully, in the future 800 LTE common antenna. And with our partners, LightSquared, we have 1600 at LTE FTD.

The benefits of this, the new structure, of course, is additional coverage and the results that we've had in the field and in the labs, and then a great improvement in coverage. Bob will talk more about that.

But also, we are in a unique position with this technology to offer spectrum hosting, the announcement we made earlier this year with LightSquared is made doable by Network Vision and by our aggressive rollout over the next couple of years. So the strategic value to us to get scale, to get access to new spectrum for ourselves. But on top of that, wholesale, a really important part of our business and part of our DNA, is a way for us to generate revenue for ourselves by having the customers of others be running over our network. This is also evidence of a key tenant for Sprint is open, whether it's development capability for developers, but now it's an open network architecture and allowing us to spectrum host, allow us to get scale. And as we said before, our first hosting relationship is with LightSquared.

So the LTE deployment. It is going to be rapid. We're building as we're speaking and our first markets will be coming up in mid-2012. And we really will, as Bob will tell you, expect to be largely complete by the end of 2013. So our original discussion with you on a 3 to 5-year plan is more like a 2 to 3-year plan. And our devices, we've been working with our partners Qualcomm and others. We'll have LTE devices for the launch of these markets mid-2012. But at the same time, we have a lot of customers on WiMAX. We're still committed to supporting those customers on WiMAX, and we'll be selling devices through 2012.

So when you look at our spectrum requirements, we look in a priority of using it based on the economics. Our owned spectrum at 1900 and at 800 priority #1. That's where we go first. Priority #2, because we can host and the economics are good for us, that's where we go second. So pending the SEC approval, the sentence [ph] with LightSquared, we will be using 1.6 spectrum, see what happens there.

And then finally, wholesale. And at this point in time, wholesaling, we've got a wholesale agreement with Clearwire for WiMAX at this point in time, and that's where we go next. That's the priority of how we look at spectrum.

Additionally, what we've been very aggressive at is managing the data demand. I think that you all know and have all seen numbers of how the data growth, as we call it, the data tsunami. And we've been working very hard the last year on content optimization with various content partners, and also application developers through our development program, but also those that are working with Android. Video optimization, we put some gateways in this year. And WiFi offloading is a big part of our plan. And this quarter is our initial rollout of WiFi offloading technology. And at the same time, we're at the second gen of femtocells, an important part of our network architecture and really diverting traffic off the macro network. And our view and what we're seeing right now is that we can take about 20% of the traffic off our network through these kind of capabilities.

So we believe that we can handle the demand. We can handle the demand of the announcement that was made earlier this week with the iPhone by both our proactive work in optimizing the content and offloading but also more efficient devices, including the one that was announced this week. Very efficient use of our network with the iPhone. We're very happy with that. And also, the improvements that our other OEMs have been making on how their applications and their devices running Android are working on our network as well.

We're going to continue our network investment. The good news is increasing the capacity, which we all need to do, can be done at a much lower unit cost with Network Vision gear, about 30%, 35% of what legacy costs are. And for the first time, we now have backhaul flexibility. We were basically a T1 organization. Now we've got the opportunity to use fiber or microwave, and we choose site-by-site, and it's an economic decision, and at times, has to be a technology decision. But we see a very much improved cost structure.

So before I just remind you the economic benefits, I do want to say that our expectation with our own spectrum is that we will get into 2014 with our 1.9 spectrum. And if indeed the LightSquared spectrum becomes available to us, it'll take us through 2015. And through Network Vision and spectrum hosting, we still have more work to do to get additional spectrum for Sprint.

So the key economic benefits really, again, reaffirming our $10 billion to $11 billion economic value to Sprint, reducing the roaming, consolidating our networks, our site reduction. We've basically said before, can be approximately 40,000 cell sites, we're much more than that right now. We're in the 60s at this time. We expect reducing operating costs through utilities, through labor, through maintenance. And a more efficient use of CapEx, and this translates to approximately 50% reduction in cost per gigabyte, and 50% reduction in cost per minute. So we're extremely excited about Network Vision. This has been a year of doing a great deal of work to make this all work. Bob will get into the details, but now we're getting into the rhythm of the build and expect by midyear to make this announcement a reality for our customers.

So with that, I need to hand it over to actually, he's the second smartest guy in tech today, Bob Azzi.

Robert Azzi

Thank you. Well, good morning, everyone. Pleasure to be here. Okay. So what I want to talk about is really getting in a little bit of the nuts and bolts of where we're at with the program. First and foremost, give you a little update on what we've accomplished to-date and what we have in front of us. I'll be a little more descriptive and try to give you a flavor for how our customers will experience the improvements that we're delivering through the deployment process of this network. Give you a little bit of a framework around what this rapid LTE deployment looks like, and then talk a little bit in a couple of slides about the Sprint Direct Connect product, which is the push-to-talk capability on CDMA. And when I wrap up, I'm going to invite 3 individuals from the companies that I am very dependent on for the success of this program. We're going to have a short panel discussion just before the break.

So Steve showed you sort of the cell site-specific look of Network Vision, where a lot of the action really takes place. Today we've got essentially 3 networks that deliver all the wireless capabilities for our customers. We've got the iDEN network, a 2G network, that is really focused on delivering the fundamental capability of instant communications with the push-to-talk product. The CDMA network, which is core of our 3G business. And then through the relationship with Clearwire, the WiMAX network, owned and operated by Clearwire, our wholesale partner.

Tomorrow, meaning starting very soon in '12 and '13, this will all be consolidated down onto a single network platform. The 4G LTE capability done on our own spectrum will be built on this single architecture, along with improvements in the 3G capabilities. The Sprint Direct Connect product will ride on this, as well as the LightSquared spectrum after we get through the FCC approval process. So we've got a single network architecture that we're taking full advantage of to deliver all the capabilities for our customers on a single flexible platform.

So in terms of where we're at, since we announced this in December, we've made a lot of progress. First and foremost, we have to validate and test the technology in the lab and then in the field. So we're into the field testing stage, we have completed test calls on this equipment for the 3G service set. We've been testing the 4G LTE test calls. We've tested the core elements, some of the critical key elements of the core to ensure that they are performing as expected, hit every single milestone with the performance types that we've started to measure with our drive tests in the field.

To get ready for the deployment, we've gone through extensive planning with our partners. We've done detailed RF reviews, design plans. We've managed and setup all the governance processes we need to manage the deployment and the buildout. We've executed through how the various vendors and players will work with each other productively and cooperatively, and make sure that we can oversee the holistic view of the program and work through this very smoothly and easily. So we've really got all of that in place. We've already started work on 22,000 cell sites. That's a little more than half of our total network upgrade, so that's underway. And the balance will be started in the next few months. We did have to modify a lot of our MLAs with our tower companies. We needed to do that to get some cost predictability and the flexibility we needed to do not only the Network Vision upgrades, but also the spectrum hosting arrangement with LightSquared. And so we got those in place and a few are still remaining, but they're significantly close to being completed. We see no hurdles. We've really negotiated what we think are really good win-win deals for us and for the tower company supporting players that we have.

We're prepared for all the new device launches including the iPhone. Actually, we have been building into our capacity planning process the expected impact of the iPhone for quite a few months. So we're very well prepared to take the expected growth of that particular customer base, and we've actually been doing that for quite a few months as you'd expect, and those are all embedded not only in our current capacity plans for our current network, but also for the lower cost Network Vision platform moving forward.

And on October 2, we launched the Sprint Direct Connect product, which is push-to-talk over CDMA. So when you sum it all up, we have made a lot of progress since December. We've been on track. We've been meeting the milestone expectations we had at the beginning of the program, and most all the technical risks are really behind us. And another proof point of that is really these pictures here. This is the production equipment, our suppliers will not begin producing equipment that isn't baked and isn't ready for deployment in the network. These are the examples the equipment we are deploying that are going into the production network in the field as we speak. If you think about the picture that Steve showed before and you saw the comparison, one of the things you get from this is a much more efficient, power-consuming network infrastructure. This will be a large part between the lower power draw that these take, plus the fact that we're consolidating the 2 wireless networks. This is a significant contributor to reaching our goal of a 20% reduction in greenhouse gas emissions by 2017. This is a big piece of that program and is another benefit we're getting from the overall program.

So let me talk a little bit about Sprint Direct Connect, push-to-talk and CDMA. We launched it, as I said, on October 2. We expect to see iDEN-like performance, in fact, in our drive testing we've done, and we've done extensive drive testing to date. We're seeing a very close mimic of the type of performance that our existing iDEN base is experiencing today on the network. So we're really pleased with the performance we've seen. We've gotten some preliminary -- we've gotten the production handsets into the hands of some early customers, ones that find the item to be a key part of their business. We're getting really good feedback from them on a comparative performance between this product and the iDEN product that they knew and loved for a long time.

Now this product is built on a global set of standards. So not only can other carriers throughout the world adopt this type of technology and deploy overseas, but more importantly, it gives you a broader ecosystem of companies that can build to these global standards. So a lot more flexibility. And it's because it's based on a CDMA technology, we're able to expand the coverage from its current roughly 900,000 miles because remember, push-to-talk customers, it's only going to work if they're under iDEN coverage. Here we can extend it to other CDMA networks. We can roam with it and such. We can then expand this coverage to 3x the square miles, which is an important attribute for a number of our customers. They use this across the country.

Now as Network Vision unfolds it will just further improve all that performance and benefit and reach, not only within building penetration but fundamental reach in our markets.

Now over the last probably 18 months to 2 years, we have been continuing to migrate customers from iDen and CDMA. And the primary focus has been on customers where the button was not critical to their lifestyle or to their business. Now we have a product that's actually superior to the one that they have made a core piece of their business. So the customers are really dependent on the button to move to a product that not only provides the instant communications that they are used to today, also gives them mobile broadband in the same device and it gives them a -- and a broader footprint and a road map for the future to extend on the global standards I talked about. So we sum that all up, it really allows us to now accelerate the migration of the core users, the ones that are really dependent on that button, so that we can meet our goal of by mid of 2013 we'll be able to migrate those customers from iDen to CDMA, and once that's complete, obviously we can then decommission the network and then harvest that 800 spectrum for other purposes.

So I wanted to describe a little bit first the benefits and how they'll manifest themselves to the customers first with our 3G capability. We're making investment through Network Vision in the latest advancements and improvements for the 3G service set. This will give us better signal strength. It'll improve our data speeds. We'll get better in building performance. And notably, we do plan to start with putting 3G voice on the 800 spectrum, we just have to finish some FCC licensing approvals. We've got wavers in place already. It'll also expand our coverage again, because of the better link budget, the better signal strength that adds up to all these benefits and improvements.

So if you step back and think about that, we're making this reinvestment, we're committed to 3G and it's important for our customer base. It's important for our prospective future iPhone users. These benefits will accrue to them as they enjoy the service from us and as they sign up for our service. And if you look at kind of what happens in the markets, so we sit here in New York City we have about 1,100 cell sites that cover the greater metropolitan New York area and I'll be first tell you shouldn't expect us to have a big switch like the easy button that I punch and all of a sudden 1,100 circuits light up with Network Vision. I wish it would be that simple, not quite but in order to manage the transition and avoiding a disruption to our customers, the basic plan is that we will turn up the network in clusters. And you'd think about it here, it's like a block-by-block, borough-by-borough type of upgrade. And every time we convert over to the new system, the new Network Vision equipment, like I'm depicting with the green highlighted hexagons here, benefits immediately accrue to all customers. We begin seeing the benefits of a better link budget for customers that have our newest and latest and greatest handsets. They get the full benefits. All customers will get partial to full benefits, depending on the vintage of their handsets to take full advantage of it all.

And so finally over a period of months, we'll have upgraded the entire market. So even though as you think about it holistically, you see the full benefit later in the program. After we complete markets, we begin accruing those benefits even during the market deployment and launches. So that's sort of the 3G and what the 3G customer experience will be like. Again, the commitment to 3G we find is also very important to enterprise customers that are looking at not decisions that are 18 months in duration, but they really want to make decisions around wireless services for their enterprise applications for 3 to 5 years. So it's important for us to use this capability and this investment to bring some of that benefit to them, and extend the life of the decisions they're making. It's also very important for M2M-type applications because those may even be 7 to 10-year decisions. So this investment's very important to us. We think it's very important to our customers and it's going to be delivered with the Network Vision program

Now here's New York again. So this will give you a flavor of what the coverage looks like today. And if you look, the yellow, think of that as very good coverage, very good in building coverage, one to 2 walls in, that's the yellow. The green or dark green there is really excellent coverage. So think 3 to 4 walls in. Think into your brownstones here in Manhattan and that sort of thing really deep into the basements and that sort of thing.

And the gray areas are areas that we actually roam. So those are our roaming partners. It's where we provide the coverage in that area. So that's the current. When we finish New York City, notice how much the yellow's gone and how dark green this whole market is. So before on the left, after on the right. Notice even how a lot of the gray areas have now shrunk and gone away. So when Steve talked about reductions in roaming costs, these are the ways we get it. And again, think about how I'm deploying in New York City. Every time I light up a cluster, I'm getting partial benefits, customers immediately will experience benefits. And I think that'll almost be like a viral type of improvement that they'll see throughout the course of the deployment process. So it doesn't have to wait until the end, it happens steadily throughout the course of the program.

So let's talk about 4G. Now as you'd expect, we were the early launchers of the 4G product. Established ourselves as very important. We're now deploying a LTE technology and the speeds will be faster than WiMAX. As you would expect, LTE was not available, that's why we selected WiMAX for deployment. It was available, it was important to get to the market. We've had great success with that deployment. Think of this as the next generation. So you'd expect it, fundamentally, to be a bit faster than the WiMAX speeds that we're seeing today and that customers are enjoying today from us. You will see in a moment a much broader nationwide coverage footprint.

And we also wanted to bring this benefit for our 4G customers as quickly as we could and give us flexibility on how we might launch the LTE services to different markets and bring some of the benefits quickly to markets. And in order to do that, we wanted to make sure there was a very seamless transition, whether you're in 3G and 4G. So during the course of the transition buildout of the network, we can have different approaches. So for example, we can light up smaller clusters, if we chose to really tackle places where we saw a high demand and continue to fill out the market similar to what I did with 3G, but with a little more flexibility because we have this ability for the seamless handoff that's inherent to the technology.

But over time, when the whole network fills in, it'll be a little less important because our footprints you'll find are going to be basically matching. So where we have 3G coverage, we're going to have 4G LTE coverage in our spectrum. And naturally, we are deploying the latest and most advanced LTE technology when we do this deployment. And coming back to my now favorite city, New York City, here you see our current 4G coverage footprint in New York City in the greater metropolitan area. And this is what it looks like when we complete the program. I'll let you absorb that.

On a national basis, so how does this look like? Steven mentioned that we had announced 3 to 5 years back in December, now we're on the 3-year end of that. That's what we're working towards. And as it applies to the 4G, it gives us the opportunity to very rapidly expand our 4G service capabilities. So by the end of 2012, we'll have about 176 million total 4G pops, that's a combination of WiMAX and LTE. So about 123 million LTE pops, 120 million WiMAX pops nationally and about 67 million will overlap in the markets where we've already launched our 4G services.

By the end of the program, we will be closer to 277 million. By the end of 2013, will be at 250 million pops, the entire WiMAX footprint virtually covered. And then in the early part of 2014, we'll be wrapping up some of the smaller markets going in a few places to some of the other markets, and the grand total will be in the range of 275 million to 277 million pops on a national basis. And it will completely, again, overlap all of the WiMAX coverage that we have today.

So again very aggressive, very rapid program. It's one that will get us improving market by market very quickly, and it's all being done in concert. Our whole deployment strategy is really centered on a single trip to the site, mount the radios, mount the antennas so that all future capabilities can be done via card plug-ins or software upgrades to increase the capabilities of the network.

At this point, we're going to do a little bit of a transition. And while our supporting cast here is going to bring some stools up, as I said, we can't do this without the help and support and commitment of 3 very important partners in the program. And I asked folks from those 3 players to come up and join us here on stage to have a short panel discussion. First, I want to introduce Jim Bray [ph], Vice President from Alcatel-Lucent. Jim, thank you for coming.

Unknown Executive

Thank you.

Robert Azzi

He's followed by Tom Jasny, Vice President at Samsung. And Scott Willis, Executive Vice President at Ericsson. And while they're getting settled in -- there we go. Just to give you an idea of where their territories have been assigned, as you recall we did about 1/3 assignments across the country for each of them. This is the geographies that they're accountable for and, we'll leave that up while we're having a short discussion between us in the break. So thanks again for coming.I described for the audience the program, the aggressiveness of the program, the deployment of the program. So same question for all 3 of you, and we'll start with Jim. What are you guys doing to help pull this off in concert with us and meet the type of deployment plans that I just described?

Question-and-Answer Session

Unknown Analyst -

Absolutely, and there's 2 points that I'd like to highlight, Bob. The first is the long partnership as a vendor partner that Alcatel-Lucent has with Sprint. We've been with you since your initial wireless buildout as you've upgraded from 2G to 3G, as you've gone through your network refreshes. We know how to carry on big programs on your behalf, so we know how to get the job done and we're applying that same experience that we've had over the last 15 years to Network Vision. The second point I'd like to make is the focus from Alcatel-Lucent on this program. This is a showcase globally for Alcatel-Lucent. We have the most senior leadership directly involved in the success of Network Vision, and we have mustered all the resources on R&D, on deployment and in the factory in order to make sure that we meet your timeframes, as well as your quality expectations.

Robert Azzi

Tom?

Tom Jasny

Similarly, it's also one of our largest, most important projects. I'd like to take repeat a point that you made earlier, we have successfully lab trialed, field trialed and are delivering commercial and implementing commercial product for this program. The other point that I think is very important, we have over 6 years at Samsung and field deployment experience with 4G networks around the world. We have over 4 years of 4G network deployment experience in the United States. We have successfully deployed thousands of LTE sites in the United States of America. So we started with a very robust organization with all the appropriate skill sets. We've also expanded our facilities and engineering centers of excellence in Kansas City and in Western Virginia near Sprint facilities. We continue to build our telecom headquarters in Dallas. We've recently added a brand new technical support and training center in Frisco, Texas north of Dallas that provide 7 by 24 support for this program. We have a lot of experience in this area, and this is a very important project to us.

Robert Azzi

Okay. Scott?

Scott Willis

Yes. Similar to Jim and Tom's comments, obviously, this is a very critical project for Ericsson and it's strategically very important. Steve and Bob both have talked about originally kind of accelerating from a 5-year down to 3-year plan. And we think, from an Ericsson's perspective, this is a significant advantage that we're going to bring to Sprint that Sprint's going to be able to leverage. Ericsson is clearly a market leader globally, technology, as well as within North America. A significant part of that is our services business. And I think one of the things that we bring to bear in this environment is Ericsson has a history of deploying large-scale, very complex networks. We have a track record. We've got services organization in North America with thousands of employees that have tremendous experience in this environment. We've got an ecosystem of third party partners that we're going to bring to bear on this. And we think by leveraging those competencies, those skill sets and that experience, we're going to be able to bring that success and help Sprint deploy this network in a rapid fashion.

Robert Azzi

And then let me stay with you, Scott, for a second, because about 2.5 years ago, we announced Network Advantage. For those who aren't familiar, it's an engagement that commenced on September 22, 2009, between us and Ericsson, where they provide managed services for us to do the daily execution of service assurance activities, deployment activities and engineering activities. It's an engagement that Ericsson has performed across the world for 80 to 100 telecom customers, but it was certainly the first in the U.S. and a very large engagement. Can you talk a little bit about how that relationship relates to Network Vision and how the 2 kind of support each other, not only within Ericsson but across all 3 of the partners for Network Vision?

Scott Willis

So I mentioned previously Ericsson's leadership in the services space globally, a significant part of that is our Managed Services business. If you really think about what that's built upon, that is built upon a foundation of global processes, global procedures and global tools that we leverage across the globe that we bring that advantage in the customers. Clearly, as you take a look at the deployment of Network Vision, we've been in this business now for about 2 years in managing Sprint's network, the amount of synergy that will be brought to that, I think, is already becoming evident within the Ericsson portfolio and within our footprint as we integrate from a legacy network into the next-generation network. Equally, I think, as you take a look at what I said earlier, the foundation of what that's built on, it's built on a partner or a technology agnostic platform. And we've demonstrated that with working with Sprint's current technology partners, and I think we will be able to consistently leverage that as we deploy Network Vision and move into that next-generation network with our Managed Services operations.

Robert Azzi

Tom, a lot people in the audience, the public thinks about Samsung as a consumer electronics company. May not be as familiar with the capabilities Samsung has as a network infrastructure provider. Maybe you talked a bit about it in your opening comments, can you talk a little bit more about Samsung and the network infrastructure business that we are using for our Network Vision deployment?

Tom Jasny

Sure. Samsung does make some of the best products in the world for both consumer electronics and telecommunications. We also have a very long relationship with Sprint on the device and the network side. But part of what I want to emphasize is as the largest electronics company in the world, Samsung has a strategic commitment to 4G. And as I mentioned earlier, we have long-term investment. So we've been involved in standards since the very beginning, both in leadership roles and as a major contributor to LTE standards. A lot of involvement in the design of the technology and the implementation. We did launch the first commercial LTE network in the United States of America last year, that was FTD. And it featured, not only our radio products but also our devices including the first LTE smartphone, that was a surprise to the marketplace. We've also added 4 new commercial LTE networks around the world in Asia and in the Middle East during the second half of 2011. And we've got a number of commercial networks poised for introduction in 2012. We've been very active in a number of markets. In addition to the U.S. and the Americas, Western Europe where we're working with some multinational service providers and trial activity, Latin America and Asia with other multinational service providers. And we're doing network implementation and pre-commercial deployment in a large number of Asian markets in Russia, in Japan, Middle East and the Americas.

Robert Azzi

Okay. And, Jim, the whole program is centered on the multimode concept. Can you talk a little bit about how we're deploying multimode here in the States, and how it relates to what's going around the globe as you know it from the ALU prospective?

Unknown Executive

Absolutely. So let me, first of all, just reinforce some of the points that you and Steve made earlier about the benefits of a multimode product. Really, it coalesces down to 3 main points in my mind. The first is the flexibility that the product gives you, allowing you to deploy whatever frequency band and whatever technology you need. That gives you the ability to be very flexible in going out with your spectrum hosting partners to deploy when you need, where you need. The second point is the performance gains that you get. You mentioned the roaming reduction, you mentioned the improvement in signal that you get on the street and in building. And that's very, very tangible to the end-user in terms of voice performance and data performance. And then the last thing is the cost point. It's the fact that this is a brand new architecture driving your cost to serve for any unit of voice or data capacity down to a new industry low. So it really offers economic benefits to Sprint. What I can tell you is we've had many customers globally that have deployed piece parts of this technology around the world. But Sprint, for the very first time, has pulled all of these 3 benefits together and leveraging everything you have in terms of your spectrum holdings, your site location and all of the assets that you have in terms of leveraging the capabilities that the multimodal product gives to you.

Robert Azzi

Again, I want to thank you guys for making the trip out here. I had asked them to actually bring the equipment. And though it's small, it wasn't going to fit in the overhead. So they were relieved that I was just asking for pictures. Just in summary, hopefully what you got out of the last 30-or-so minutes is the sense of where we're at with the program, the type of partners that are supporting us to really help execute this program and the success we're really anticipating and looking forward to over the next few years.

So with that, the one thing I don't know is I think break is next, but where's Yijing? Can you -- I'll turn it back over to you to describe the logistics here.

Operator

At this time, we do have time for a 20-minute break. Please be back in your seats in 20 minutes. Thank you.

Robert Azzi

Thank you very much. All right.

[Break]

Operator

Ladies and gentlemen, please welcome Fared Adib, Vice President Product Development.

Fared Adib

Everyone having fun yet? You guys all look so happy to be here. I wanted to start off by saying I have my own little Safe Harbor that I'll do here. I'm not going to divulge any new products that we're going to be launching in accordance to what you've heard today. So this is going to be very disappointing. I'm typically the guy who has the blingy new objects and announces them. So -- but what I am going to do is I'm going to talk to you a little bit about what the device strategy means in terms of Network Vision and what it's all about. And before I do that, I just want to give a little bit of context to our device strategy. First of all, this has been a very happy week for me personally because for the first time I can answer the question when are you going to get the iPhone. So that's been one that we get every day and I'm sure many of you have asked multiple times. So we're very happy about that.

The one thing that I wanted to set context with for the whole discussion is we are talking about 4G deployments and 4G products and devices and chipsets and multimodal base stations. And sometimes it can actually be quite overwhelming for a lot of customers to really even know and understand this. And what we found with the deployment of a lot of our 4G products to date is a lot of customers really don't know the difference between the different types of network technology. It doesn't really mean much to them. What they do understand though is what they experience on a device when they see it. And it's amazing, you look at a product like the Samsung Galaxy SII, Epic Touch that we just recently launched. And the amount of complexity that goes into this product is sometimes lost on us and the industry, as well as on our customers. I mean, when you look at this product, there's about 2,000 individual parts that go into making this product and one of those is the radio. In fact, to be very specific there's actually 5 radios in this product today. There's a Bluetooth radio, there's a Wi-Fi radio, there's a 1x radio, there's a CDMA EVDO radio and so on. So the amount of complexity that we have delivered to the marketplace today is quite outstanding. And when you really look at per square inch, there's probably no product more complicated on the planet than what you have in these modern-day smartphones.

So we've talked about Network Vision and Network Vision is really about the future of the network that we're delivering today. But there is also a lot of -- the device vision that actually follows on and is in accordance with what you've seen here is really where it's going to come together for the customer.

I'm going to briefly just cover a few elements. One is I'm going to talk about LTE and what it means to the device ecosystem, which is quite important when you talk about economies of scale. Then, I'll give you a similar road map to what Bob had shown on kind of the progress we've made. Unbeknownst to many of you, we very quietly have been integrating a lot of these technologies into the devices we've actually launched in the second half of this year and have been going out the door to a lot of our customers. And then finally, I'm going to talk a little bit about our LTE device road map, but also our push-to-talk road map and what that means. And then very similarly to what Bob did, I'm also going to talk about what we're doing with our partners because at the end of the day, if we don't have these partners who can help us execute, this really doesn't mean anything.

So Network Vision is really about the future, but many customers will experience the output of this. And the work on the devices that they have will buy into Network Vision by having actually devices that can carry forward all of these different elements and do it a distinct [ph] way. We're excited about what Network Vision will deliver and have already been in the process over the last 12 months of not only just launching products that have these elements built in. But we're very excited about the different LTE products that we're going to have delivered here in the second -- by the second half of next year.

What the customers will really see with Network Vision and when it comes to the devices, they're really going to see broader coverage, increased capacity, a new push-to-talk in LTE services, also better voice quality and improved data speeds.

So when you look at LTE, the stats are clear both here, domestically; and then globally, LTE is really the global standard for 4G when it comes to the future. Sprint's decision to leverage this technology will allows us to take the advantage of the global ecosystem that LTE actually delivers. Specifically, in our device portfolio, we'll take advantage of this with the OEM global platforms that leverage this development, and we'll also provide the benefit in terms of speed to market, ensure that we have a global product ecosystem that we can actually deliver that drives down cost in a lot of the LTE products that we are going to be putting out by the second half of next year.

We've made significant progress in this, and one of the things is we've actually had our 1900 spectrum approved by the LTE standards for being utilized for LTE deployment. This may seem like a very trivial thing, but there's -- when you look at the global ecosystem around LTE, there's a lot of different bands as they're referred to that play into LTE. In fact, LTE for the first time, will probably be the most kind of consolidated view that you'll get around a radio technology and ecosystem that will be actually pretty global in deployment. And you'll also see that it will actually rival in the next few years to what you're seeing in GSM today and CDMA and it will hopefully be a unifying element across a lot different carriers and a lot of different OEM partners in deployment.

A lot is made around the different band classes in a lot of different technologies that we're supporting with Network Vision. We are going to be, as we roll out these different these base stations as Bob had alluded, to be supporting band class 10 for CDMA voice in those same devices. But really what we've done today, actually in the second half of this year, we had several of the products we've actually launched that actually support this or are future-proof for this as we start to roll off iDen customers off of that spectrum and start to roll on CDMA customers. So it actually starts to become kind of a future proof for us in the deployment of that technology.

We have actually launched a couple of Direct Connect products from Kyocera. We're also going to be officially launching by the end of the quarter, a product and smartphone for Motorola. And one of the most important things that was really kind of not available for a lot of our customers in the iDen world was the ability to use smartphones and broadband. What we're really going to be able to do now is we're going to be able to have a portfolio of products in the push-to-talk world that deliver on both and I'll talk about that in a little bit later in the slides. One nice advance of the technology that actually is -- think of it as a better CDMA voice and data technology that we'll be delivering in the network that coincides with all of these different LTE deployments we have, CDMA technology has been around for a lot of years. And in that time frame, there's been a lot of progress in updating that technology and making it more efficient, not only from a base station and radio and antenna technology standpoint but also from the handset standpoint. So that you can actually be more efficient in the way that you use despite the [ph] spectrum that you have for that designated technology.

And then from an LTE road map standpoint, every OEM manufacturer we have is going to be moving to LTE or is already in that space. And so it makes it easier for us to adopt a lot of these different products and it brings speed to market in the way that we deploy products and get buy in on utilizing different product platforms from our partners like Samsung, LG, HTC and Motorola.

And then finally, something that's in progress is we're looking at all of the different things that come with LTE that are still standards that are being developed or are features that can be deployed and we're evaluating what that means to the handset. So we are continuing to look at things like HD voice, which gives people a richer voice experience. That's something that we can ride the rails of the LTE deployment we're doing and take advantage of. We're also looking at a lot of the other advancements that come in the LTE road map that still have not been solidified but continue to be development around LTE advanced and carrier aggregation, and things that will help actually advance even the LTE platform beyond the initial implementation that carriers are doing around the world.

So I get this question a lot and it's primarily around what costs more LTE or WiMAX? And actually -- when initially a technology first rolls out, no matter what that radio technology is, there's typically a cost curve that comes with it. And the great thing about what we're seeing with LTE is as we roll it out, we're kind of catching it at the right point of the cost curve where the second generation and third generation LTE radios are coming out from things like what Qualcomm has announced like the 8960, which is a product that will be delivered in a lot of the LTE products that will be out next year. It's not only an application processor, but it also supports multiple bands from multiple carriers and it will, of course, support our 1900 megahertz band A through F as well as G. And it will give us the ability to actually address delivering those products at the time where the cost curve is actually crossing over with what we actually see today from the third and fourth generation WiMAX chips that we have in a lot of our products today.

So there's a lot and I want caveat this that goes into the cost of what a product is delivered to market with. And the radio is just one of many elements, the displays are a big element of those costs, the types of processors that are in them. So I'm not saying that LTE products are going to be immediately at the same cost curve that you see from a 3G only product today. But what you are going to see is that we will be able to do with LTE what we've done with WiMAX today is we're going to be able to deliver products at all different types of price points based on the different chipsets and technologies that will be involved in that.

And obviously, the other thing is we continue to ride the cost curves of the WiMAX radio and the ecosystem that's already been created around that, and we're going to continue to deliver products for our customers that live in those WiMAX markets throughout 2012. And it's very important for me to stress that to you is that WiMAX continues to be an important part of our product strategy. We will continue to deliver products to our customers. A lot of customers will not initially know the difference between whether it's 4G WiMAX or 4G LTE. But we believe, for them, there are other indicators of why they choose devices as well, as Dan alluded it may be the brand. Maybe it's the application processor, maybe it's the type of operating system on it. So we don't want to oversimplify how customers make decisions and we want to be able to provide them products across multiple networks and multiple technologies like we have been doing for multiple years.

So just very briefly, what are going to be doing next year? This is probably the big news that we haven't talked about publicly before. We will be delivering dual-mode, CDMA LTE products by the first half of next year. We're going to see about 15-plus devices. We're still solidifying a lot of our roadmaps, but we're giving you kind of the conservative number here of 15 products in different categories around different price points. You're going to see tablets, you're going to see smartphones. You'll see those in high-tier iconic devices, as well as mid-tier products. We're very excited about all the partners in the ecosystem that we'll be able to attract to delivering these products. They're all world class leaders in what they do, and we'll talk a little bit about them in a second.

We're also going to continue to deliver an M2M module strategy. M2M has been talked about quite a bit as being the future growth where we're going to continue to drive gross ads and find new ways of delivering revenue to the industry. And we've been playing a very good role in that space, whether it's in the telematics world, whether it's partnerships we've had with a lot of the M2M providers in this the space for vertical applications like utilities, as well as public safety. And we believe that the M2M module road map will follow the same kind of continuum of advancements we're making in the network from 1x advanced to EVDO to WiMAX and as well as LTE.

And finally, we'll continue to deliver CDMA WiMAX products through 2012, and you'll see these being on par, same quality and same build that you've seen us deliver to date whether it's Evo 4G or the Evo 3D or the Samsung Epic Touch II. You'll see products of that caliber that will continue to support those customers throughout that period of time.

On the push-to-talk, Bob really talked about what is the difference between the push-to-talk we're delivering now versus the push-to-talk that we've delivered in the past. And one of the things to keep in mind in terms of the portfolio, we're really limited in the days of iDEN on really the amount of OEMs we can have deliver that technology and primarily Motorola was the primary OEM that we went for all -- to for all of our different products to the marketplace.

The great thing about the new Sprint Direct Connect technology that we're adopting is that we now have the ability to apply it to a broader set of products so that we can start to reignite and create an ecosystem again for creating that network effect that push-to-talk really relies on. Your push-to-talk is only good when you have a network of people, friends, family and coworkers that you can use it with, and having it proliferate in more devices is really what's key for us in this strategy. So one of the things that we're doing is we are delivering dedicated rugged products that serve vertical and business and public safety customers like we have traditionally from companies like Motorola that meet military specification and dust and intrusion and moisture requirements and a lot of these different vertical industries. But we're also doing something pretty innovative. We've seen in the smartphone world, applications has really taken off. People download apps very commonly. Most people have anywhere from 5 to 12 applications on their device. And forms of communication have been quite ubiquitous as well, messaging has been more advanced. Facebook, social networking has really driven a lot of adoption as well in different forms of communication.

But one of the things we're going to be able to do for the first time by the end of this year and continued into the future road map is we'll have a downloadable application for customers that don't have specifically developed push-to-talk devices in that rugged space. They'll be for more casual usage. And it will be interoperable with those push-to-talk products that we will deliver to the marketplace. So immediately what you'll see is in our Android products, this capability in this downloadable client that will be available for a lot larger base of customers than what you've seen today. And hopefully also, with the broadband capabilities that you're seeing delivered with Network Vision and the enhancement to the amount of square miles that you'll be able to utilize push-to-talk, this is truly going to be kind of a game changer and kind of reigniting and allowing customers to use push-to-talk in new innovative ways.

Also because we're using a lot of this on smartphones, we also have the ability to extend that push-to-talk capability and deliver what we call as push-to-X. And what push-to-X will do is it will help us to integrate that push-to-talk application and its services into other types of communication, and rich communication, whether it's Facebook, whether it's rich messaging, whether it's the address book within the phone and something just as simple as that. So it will actually help us deliver an improved experience from the limited type of experience that you had on a lot of the feature phones and messaging phones that have been in the market today.

One of the ways that we're delivering this is I wanted to just -- we didn't bring any partners here with us, but I wanted to introduce a couple of different partners and have them tell you what they think about Network Vision. So first off is Steven Mollenkopf who is the EVP of the QCT group, CEO of the QCT Group now. He is the -- one of our close partners and Qualcomm has a 15-plus year relationship with Sprint, whether it was delivering one of the first 3G CDMA networks in the country or whether it was delivering EVDO to our networks and along that continuum of different types of network transitions we've done. They've been there along our side and they've been a very good partner on the handset space in delivering different types of technologies.

So let me let Steven tell you what he thinks.

Steven M. Mollenkopf

I'm Steve Mollenkopf, Executive Vice President and Group President of Qualcomm. Qualcomm is proud to collaborate with Sprint on Network Vision, helping deliver cutting-edge devices and network capabilities today and in the future. Network Vision gives Sprint flexibility in technology and spectrum, and Qualcomm is working with Sprint to take advantage of these capabilities. Sprint's Network Vision showed its leadership in leveraging next-generation technologies to provide unique services. We have worked with Sprint on both their transition to next-generation IP-based, push-to-talk technology and their LTE strategy. We are building products and chipsets, including Qualcomm modems and Snapdragon processors with integrated 3G plus LTE that support their vision. We are uniquely involved from the network side, the device chipset components and even applications that will make Network Vision a reality. We believe Sprint's vision will be highly successful and we are pleased with our relationship of more than 16 years of Sprint. And we continue to work together to be on the forefront of wireless technologies.

Fared Adib

So it's not only chipset providers, we also have a lot of our OEMs that we've been very successful in working with. One of the ones that's been an amazing story is the relationship we have with HTC, one of our great partners. This is a quote from Jason Mackenzie, the head of all of global sales and marketing for HTC. He says, we've had the firsthand view of Sprint's innovative wireless network rollouts, initially with its WiMAX network and now with its 4G LTE roll out. Like we've done with Evo franchise, we plan to continue playing a key role in delivering iconic LTE devices to Sprint customers. One of the key aspects that Jason brings up here is we're not new to 4G. We actually learned quite a few lessons when we delivered the first 4G handset to the market. We learned about how do you optimize battery life, how do you deliver devices that have multiple radios in them that inter-operate at the same time.

So I think that knowledge and expertise we have is very important to our using that information, using that experience in the deployment of what we're going to be doing with LTE.

And finally, I wanted you guys to hear from our good friend Sanjay Jha from Motorola.

Sanjay Jha

Good afternoon. I'm Sanjay Jha, Chairman and CEO of Motorola Mobility. Motorola Mobility is excited about Sprint's Network Vision. And with Sprint as our partner, we've brought some groundbreaking devices to market this year, including the Motorola PHOTON 4G, which PC Magazine labeled as Sprint's best multimedia phone and gave it an Editors' Choice Award. We also launched Motorola XPRT; Motorola Titanium; and Motorola Xoom Wi-Fi, our first tablet device. We are also looking forward to launching Motorola's first push-to-talk device on Sprint's CDMA network later this quarter.

We believe in Sprint's Network Vision. It shows the way forward in leveraging next-generation technologies to provide unique services that meet consumers' needs. We have of course, worked with Sprint on their LTE strategy and we plan to deliver LTE smartphones to Sprint in 2012. We have made a significant investment in LTE and believe Sprint's vision is the future. We look forward to continuing our more than 15-year-old partnership. Thank you.

Fared Adib

So partnerships are very important. And it may sound like, well, a lot of these partners of course, they're going to come out in support of you. But it's very important to tie together for you that without all these different partners really investing in the billions of dollars of R&D it takes to deliver these products to market, a lot of this wouldn't be possible, whether it's from the network side or the device side and think of the device as just a small multimodal cell site. It really requires a lot of technology to really cram in all the different support, whether it's the CDMA technology, WiMAX technology or LTE technology.

And it's a serious investment for all these companies to come out and say that they're going to come out and support what our strategy is and deliver great world-class devices for us along the way.

So I wanted to thank all of you and obviously, we'll have a Q&A session later. Thank you.

Daniel R. Hesse

Good afternoon, everyone. Thank you all for coming. You can tell how smart the management team is because nobody wanted to follow Fared after all of this glitz here. A couple of things before we get started. One, I want to recognize Yijing Brentano. As you know, she's moving to an operating role from her IR role. I just wanted to thank her for all her hard work over the past couple years and especially for the 6 months that I've been here. So thanks, Yijing, we really appreciate that.

The second thing I'd like to do is really recognize the entire production crew and the finance people and everyone that helped put all of this together. PR, IR it was a very collaborative team. I really want to thank everyone for their efforts, the people that are here and all the people back at home in Kansas City. So thanks, everybody. Appreciate that.

Okay. Well, let's get started. So you've just heard from all of our operating guys about our Network Vision plans and progress. So let me tell you how all of those efforts are going to drive financial results and deliver shareholder value. I should note before I get started that I'm not going to talk about third quarter or full year results today.

So first, let's talk about our key financial objectives. Our #1 objective is to grow shareholder value. We will do that principally by improving operating margins. Our Network Vision, we expect to achieve greater efficiency; consolidate the networks and site reductions; reduce our operating cost; and reduce our roaming cost, which you've heard a little bit about and I'll try to quantify it for you in a second.

In our core business, we expect additional margin improvements through continued growth in subscribers and improved expense efficiencies. We have a flexible investment schedule that will allow us to pace our CapEx spending, balanced with our liquidity. We expect strong return on investment from Network Vision, and we believe we will create long-term shareholder value.

So let me walk you through the agenda real quick, and I'll walk you through sort of the update on a couple of our initiatives. I'll walk you through the financial impact and the benefits of Network Vision and I'll discuss opportunities we have to grow margins within our core business. And finally, I will review our liquidity position in the context of near-term maturities and how we plan to support Network Vision through the completion of the deployment of the network.

So you heard from Dan and team talk about the iPhone. We are excited about this opportunity and we believe it will level the playing field with our biggest peers in regards to devices. You've all heard me tell the story about walking into the Sprint stores being the new employee and just watching the interaction of the sales people, and somewhere in the first 1.5 minutes to 3 minutes in the conversation, the customer ultimately asked, do you carry the iPhone? So now we finally do, and we feel -- and we have a compelling proposition with what you saw in the press release yesterday and we believe this new device will add tremendous value to our businesses. It will help our brand; it will help our churn; and obviously, expense reduction as we go forward.

Clearly in the near term, there is a financial impact. But we believe the overall benefits I just mentioned will help grow shareholder value. So regarding Clearwire, there's really no update. However, we continue to work with them on other ways to help our joint businesses. They're a strategic partner. We continue to work with them and they continue to be of value to us and we'll continue to try to figure out other things we can do on a going-forward basis.

Regarding LightSquared, there is no change to what you already know, the continued support with them. We continue to wait for GPS approval but don't forget, this business case that we put together is pure upside. So this option we have with LightSquared is pure upside for us, not only in our ability to grow OIBDA but also in overall profitability for the company. And in regards to other spectrum options we discussed over the course of time, we continue to explore all those additional opportunities as we move forward.

So now let's spend a few minutes looking at the financial side of our Network Vision strategy. So earlier this morning, you heard from the operating guys on the benefits of Network Vision, the highlights included. We are launching LTE on our own spectrum. We have a flexible deployment schedule, we have the current view to complete the plan within 2 years. Network Vision testing is substantially done with many technical risks now behind us, so we're ready to go.

We have a unique operational and financial opportunity in spectrum hosting. We have enough capacity to meet near-term demands, push-to-talk on CDMA is on track and launched just this past weekend. And we are building a technology platform that has a competitive advantage and allows for growth.

So when you think about Network Vision, it's about investing in growth technology to drive overall subscriber growth on an integrated single platform. The key components of this platform are Sprint Direct Connect, and enhanced 3G and 4G LTE.

We have been criticized for underspending on capital. But when you look at our historical pattern, you realize this isn't true because just as we increased our capacity, we went through a phase of losing subscribers, which you see back in 2007 and 2008. And so therefore, we did not need to make the additional investment after just rolling out 3G.

But that doesn't tell the whole story. This green line shows that we invested in 4G with our partnership with Clearwire. The truth is we would have spent that money anyway in the absence of Clearwire if we had the financial capability at the time. And as you recall, we didn't so we made this choice to enter into the relationship with Clearwire so that we could be first to market with 4G and that's what we accomplished.

So looking at our 3 competitors and the 3 phases of our capital, so you see the 3G, the WiMAX and now the rollout of LTE. You'll see that we are in line with capital as a percent of revenue in regards to our competitors.

So given our total capital spends have been in line with the industry, let me talk to you not only about our incremental Network Vision capital spend but also our total capital spend. We said incremental cost would be $4 billion to $5 billion of which 50% would be CapEx. Before we announced Network Vision, the plan was to spend about $7.5 billion, relating to the 2-year period, which included maintaining iDen and the 3G network, along with this growing capacity on the 3G network. Now that we've decided to move forward with Network Vision, we are reallocating $4.5 billion of the capital we would have spent to the support of 4G.

So what you see here is what I'm trying to explain to you is that when you re-purpose the $4.5 billion we were going to spend, that difference between $4.5 billion and the $7 billion we're going to spend on Network Vision creates the incremental CapEx that we're going to be incurring over this period of time. And lastly, what we said that overall, we think over the next 2 years, we're talking about spending about $10 billion. And we will continue to provide you updates as we move forward in regards to this plan.

So an integral part of Network Vision as Steve mentioned is the $10 billion to $11 billion of estimated savings over the next 7 years including 2011, and we are reconfirming that range today as Steve has already done. These numbers reflect net benefits related to capital, OIBDA and non-operating items. These savings come from 2 major categories. First, rolling out 4G LTE on our own spectrum and the modernization of our 3G network will drive about $7 billion of financial benefit. Second, the replacement of iDEN technology with Sprint Direct Connect will come as a result of customer acceptance and will generate approximately $4 billion in savings because we will no longer need to maintain the iDen network.

So now let me get you into some of the details. I committed to provide you clarity on these benefits in the past. And so now let me provide those for you.

Okay, if you go all the way to the bottom left, what you see here is the cost associated or the capital avoidance associated with not doing the upgrades relating to iDen. In the middle section, I'm trying to walk you through the component pieces associated with operating expense. So -- and then lastly, on the far right is the IDD commissioning and that number actually appears below OIBDA in our financial statements as it gets incurred. So when you look at this middle piece, let me walk you through the components. First and foremost is network OpEx, which basically is the reduction of towers that Steve talked about, net of the added cost that we get for -- were associated with rolling out of Network Vision and the benefit of utilities, et cetera.

There's another $3 billion of value associated with excess and backhaul. And then obviously, 3G, roaming as Steve mentioned and as Bob mentioned will happen over time as we continue to turn on the network. And then as you move to the right, you see the improved CDMA retention as a result of upgrading the network there. Fared did talk to you about the cost curve associated with devices. And then lastly, the impact on the subscriber base of iDen as this is our sort of estimate on what we think churn will be over the short term. So that gives you some of the specificity in regards to the planned $10 billion to $11 billion of benefits.

So now let's talk about return to growth and margin expansion from the operating side. So let's move to the core business. When you think about our recent history, several years ago, we had declining metrics. Now we're at an inflection point. And as I'm about to show you, we are getting some momentum back, which will allow us to deliver additional margin improvements. The good news in the industry is that the customer decisions have remained fairly stable over time. And at the same time, there's an increasing mix of prepaid decision, which we think works in our favor. Going forward, we expect to see good continued stability if not moderate growth for both overall decisions and prepaid.

As you heard from Dan discuss earlier, Sprint share of gross ads is trending up in terms of both prepaid and postpaid and we are headed back to where we were in 2006. Our share of postpaid is already close to 2006 levels, and with the iPhone, we believe there's still more opportunity for us to gain going forward. We have a big advantage with our unlimited plans and our other postpaid plans that we offer. In addition, our prepaid plans are very attractive in today's tough environment. And now with Network Vision, with the iPhone and with the improvements in our core business, we are confident that we can not only get back to prior levels, but we can exceed them.

So goal #1 is to get back to where we were in 2006. Goal #2 is really once we regain our ground, it is to capitalize on the significant opportunity presented by Network Vision and accelerate our growth.

You already know about the improvements we've gotten in churn and Dan has sort of gone over those with you. So this comes from all of our efforts to improve our brand, perfect the customer experience in retail stores, whether it's over the phone or on the web. And our compelling handset lineup that Fared just talked to you about is also another major contributor in continuing to reduce churn.

So this really is a testament of the integration of the management team and focus on a statistic that can actually improve the overall profitability of the company.

So when you think about regaining momentum, what you see here is that after this post slide, the buildup back to gain where we were in 2006, while we had a period of negative retail ads a few years ago, with strong improvement in our brand and our service we are now soundly reporting positive growth in our overall subscriber base. I'd like to add that retail net ads for the first half of 2011 already are exceeding the full year of 2010.

So breaking apart postpaid and retail net ads, we can see continued momentum in postpaid and our first half of 2011 prepaid numbers are almost equal to all of 2010. When you think about our ARPU efforts, we believe there's still continued upside. We recently implemented a $10 rate increase for premium data, which shows us there are many other opportunities to drive postpaid ARPU. Over the short term, our prepaid ARPU will continue to be a function of the mix of our brands and offers in the marketplace.

When you think about all of these individual operating trends together, there are a few key takeaways. The company has come a long way, momentum is going in the right direction. Our first priority is to get back to where we were in 2006. And from there, we are focused on accelerating our continued improvement and taking advantage of the growth opportunities presented in Network Vision.

So let's talk about core business margin improvement. So what I put on the slide here for you are a number of things that we're focused on internally to really do one thing, is really to improve our operating margins by some 400 to 600 basis points by 2014. So whether it's continued efforts in regards to churn reduction, whether it's focusing on high ARPU, customer value, customer life, value customers, whether it's capturing additional opportunities in regards to our rates in prepaid or postpaid or family plan, working on our handset subsidies and focusing on expense reduction are all things we think we can do in the coming years to get another 400 to 600 basis points in improved operating margins. And remember, this is in addition to the margin improvement expected from Network Vision.

So before we go through the liquidity side, I'd like to refresh your memory that we've had a strong cash position and have maintained healthy liquidity and it is still a top priority for us. Here's a quick review of our maturity schedule. We have total liquidity of approximately $5.2 billion as of 2Q 2012 made up of $4.3 billion in cash and just under $1 billion in our revolver. When you look at our long-term profile, we have really no major concentrations of debt maturities. And as you look at the schedule, there are clear windows to place additional debt or refinancing existing debt. As a reminder, we have reduced our total debt by more than $3 billion on a net basis since 2008.

Under that, it is a focus to reduce our leverage over time following the successful completion of Network Vision.

So now let's move to the short term. So when you look at our near-term maturities, we have enough cash to cover March of 2012. Post this maturity, we do not have any material maturities until the end of 2013. So we have a lot of one-way room to work our financing plan and complete Network Vision deployment in a disciplined manner.

So now let's discuss liquidity during the Network Vision deployment. While Steven and his team are focused on successful deployment, that deployment will be done in conjunction with our liquidity. This balanced approach to flexibility and timing of spend gives us -- determines the most opportunistic times to access the debt marks. To help put all of this in context, we put this waterfall chart together to show the various components. As noted on the prior slide, our total liquidity as of the second quarter is about $5.2 billion.

So equally important is our is our cash generation. The cash generation bar is mainly comprised of OIBDA, as an example and by no means, guidance. If you consider our first half 2011 OIBDA and multiply it by 5 semi-annual periods through the end of 2013 and assumes the minor benefits from our core operations during the same period you get to about $15 billion of cash generation. However, as we noted on the slide, the chart does not include the impact of the iPhones because we just got it.

So you also remember that our expected total CapEx will be about $10 billion for 2012 and 2013. We'll work very closely with Steve's team and explore all options to deploy Network Vision in a balanced manner that provides an appropriate return for investment while maintaining healthy liquidity. The cash interest in debt maturities are fixed and you already know those numbers. The projected financing, we know we'll have to go to the market for financing, but what we're trying to do is create the flexibility. And as you can see that with the flexibility we have here with our cash generation, et cetera, we want to make sure that we access the marketplace at the most opportunistic time.

So when we think about growing shareholder value in margin improvement, it's really going to come from 2 places: First, it's going to come from Network Vision in all of the ways we just showed you on that waterfall slide in regards to reduce roaming, elimination of the iDen network. And then secondly, we'll get another 400 and 600 basis points by actually driving operations, by improving subscriber growth, improving our churn rates and focusing on expense efficiency. Network Vision, we are totally focused on making sure that we get an adequate return on invested capital. And lastly, as Dan talked about, you can't accomplish any of the things on the left without making sure that you're focused on your customer, that you have a strong brand and that you make cash your #1 priority.

So with that, we're going to turn it over to Yijing and we're going to start the Q&A that'll be led by Dan and the management team if you all want to come on up now.

Yijing Brentano

All right. As we get situated here on the stage, we'll move into the Q&A session. There are going to be a few mic runners in the audience. So they will bring a microphone to you if you raise your hand and get their attention. It's important that we get the microphone to you, so that the question can be heard by those on the webcast and we can hear clearly on the stage as well. I would ask you for your cooperation and please limit your questions to just one question, so as many of you will get the opportunity to ask a question as possible. We are now ready for the management team to come on the stage.

Yijing Brentano

All right. To make things a little bit easier, I'm going to try to go with the sections of the room. Maybe I'll try -- I see some hands here in the middle. So we'll start the question with Dave Barden here in the back.

David W. Barden - BofA Merrill Lynch, Research Division

It doesn't seem fair that we only get to ask one question but I'll try to limit it to maybe just this one which is maybe for you, Joe. Obviously, I'd be lying if I said I followed a lot of what was going on in those slides. But I think that the issue, maybe one of the issues would be it's unclear to me kind of the iPhone impact and how that gets layered into the 400 to 600 basis points of assumed operational margin improvement over the next couple of years. And just to clarify it's not part of the financing slide that through out there. And so it's unclear whether with the iPhone you get more subscriber growth and more margin improvement? Or there's more subsidies and more expenses? Could you kind of elaborate on how we look at those slides and change that with the iPhone?

Joseph J. Euteneuer

We do believe that the iPhone will provide us better subscriber growth, better churn, et cetera. The numbers we showed you are really excluding any impacts to the iPhone.

Yijing Brentano

So I see John's hand's up. So, John, you want to take the next question?

John C. Hodulik - UBS Investment Bank, Research Division

I've got a follow-up to David's question. I guess, Joe, back again to that slide, that last waterfall slide, it looks like before the iPhone impact I would say, that if you look at the -- I guess you were looking cumulatively 2Q now through the end of 2013. It looked like if you look at the cash you generated minus the CapEx and the interest, that you would be free cash negative over that period, cumulatively now or through 2013. And then you layer on the iPhone on top of that I guess would make it more so, given all the benefits are further out. But could you help us quantify maybe how much of that sort of on a net basis the cash flow, again, forgetting the financing, and maybe layered in a little bit. I mean, we're basically sort of looking -- trying to figure out what the free cash flow losses might be in 2012, and if they swing back towards positive in 2013?

Joseph J. Euteneuer

Sure. So the ultimate timing, the reason we put it in 2 years is because when we look at the marketplace today and try to find that most opportunistic time, we wanted to make sure we had flexibility of when we access the markets. So rather than tying ourselves down to a specific forecast over the next 4 quarters or the next 8 quarters, what we're trying to show you is do we need to access the markets? Yes. But we have flexibility on the timing are we're going to utilize all of those levers to sort of look to get the most opportunistic time to access the markets for the cash flow.

Yijing Brentano

Let's go to David here.

David Michael Dixon - FBR Capital Markets & Co., Research Division

Just switching gears to your organic LTE play. Gentlemen, perhaps a question for Steve and Bob. Your capacity to make new-term demands I think is a key focus for investors. And I'm curious if you could give us some more depth to clarity on how much spectrum you got at 1.9 to play with and then how we think about the options you have to improve your data position as you go forward through that 2011 to 2014 period.

Steven L. Elfman

Okay. So the initial deployment we have at G-Block that's available nationally, and it's clear. So that's where we start. It will be combined with our other -- 1.9 holdings, which I think averaged around 20 to 25 megahertz on average across the market. And of course, we've managed the spectrum on a market-by-market basis in concert with the kind of demands we have. The other area, after we complete the migration as we talked about of the iDen customer base, which now puts us in a position to re-harvest the 800 spectrum and there, we have some work to do between the standards and the FCC. Initially, we're on a good path and as Fared had mentioned, we have band [ph] class 10 in the phones. So CDMA voice, we have waivers in place for the work we've done to date. And then we will continue to work on how we use the balance of the spectrum and that's another opportunity for us that we're working on.

David Michael Dixon - FBR Capital Markets & Co., Research Division

[indiscernible]

Steven L. Elfman

It's -- David, the average is -- yes, I don't know off the top of my head what our national average is. It's in the -- I think it's like 27 or something like that but...

David Michael Dixon - FBR Capital Markets & Co., Research Division

[indiscernible]

Steven L. Elfman

For LTE. Again, we're starting with the G-Block. And then as we see the mix of 3G, 4G capacity, that gives us some opportunities to potentially re-harvest other 1.9 positions and add it to the -- add it to our spectrum position 1.9.

Yijing Brentano

Tim's got a question in the back.

Timothy K. Horan - Oppenheimer & Co. Inc., Research Division

One clarification and one quick question. Joe, on that slide again, on the cash flows, sorry, it looked like the EBITDA over the next couple of years in the $12 billion range, $13 billion. It's hard to tell. I know you have the $10 billion of CapEx. I just kind of wanted to clarify that. The real question was on push-to-talk maybe. How proprietary or unique is that technology at this point?

Joseph J. Euteneuer

I'll let you answer the question [indiscernible] on your question. So basically I wasn't trying to give you guidance today. What I was trying to do was help you look for yourself about the flexibility we have on liquidity on a going-forward basis. Once we get our year end results, we'll give you a whole update in regards to guidance going forward, et cetera. But I wanted to give you something anecdotal that allows you to see the flexibility so that no one thought that we needed to go walk out of this room and go raise money tomorrow.

Joseph J. Euteneuer

And then on the push-to-talk question that the underlying technology developed by Qualcomm is -- we do not have exclusivity, it is not proprietary, but it is a Qualcomm product and other carriers across the globe are looking at it for deployment.

Unknown Analyst -

A question for Dan. So it sounds both from Joe's financing chart and from your comments that there is an expectation to either finance or to shift more traffic onto Clearwire. Given that, what gives you confidence that Clearwire can be sustained as a going concern? And if it can't, then what happens to the roughly 25% of your subs that currently have Evo devices?

Daniel R. Hesse

Well, what we've said today is that we will continue to sell additional WiMAX devices through the end of 2012. So that's selling and we didn't say anything about supporting. So one could expect clearly, supporting to be much longer than that. That also should not be construed as meaning devices that run on a Clearwire network because as you know, Clearwire has announced plans to go to LTE TDD 4G, and we still are waiting for results or more from them on what their specific plans are. You'll have to ask Clearwire specific questions with respect to their financials. But let me make another statement with respect to Clearwire because I just want to make sure that there's no misunderstanding. And that is in April, we announced $1 billion 2-year deal with Clearwire for capacity, so for 2011 and through the end of 2012. What you should only read into our relationship with Clearwire is we have nothing beyond 2012 to announce. We'll continue to work with Clearwire on extending our relationship and actually working with them on what is the technology architecture they will be deploying because it's their decision, and as you know, they have again, decided or at least announced an intention to move to LTE TDD as well. So what we were talking about is WiMAX devices, we will continue to sell them through 2012. And from a, we call it a capacity agreement perspective, we have the agreement in place that runs us through the end of 2012.

Yijing Brentano

I'm actually going to move over to that side for a little bit. So let's give the mic to Simon.

Simon Flannery - Morgan Stanley, Research Division

There was a press report recently talking about as part of the iPhone launch, you've made a significant financial and product commitment to the company over the next 4 years. Could you comment on the sort of financial implications of that and if indeed the press report is true?

Daniel R. Hesse

We don't comment on media speculation and we never have and we're not going to continue today.

Yijing Brentano

Next question, Jonathan.

Unknown Analyst -

So, Joe, I think in your comments, you characterized LightSquared as being all upside. But in earlier comments, you talked about the need to rely on LightSquared spectrum and the capacity you get from LightSquared lasting you to 2015 and then you'll need more spectrum. So I guess, my questions are what happens -- what's the plan if LightSquared spectrum doesn't prove usable in a reasonable time frame? And why isn't Clearwire part of the network build in a similar fashion of LightSquared? Why doesn't it make sense to give yourself access to all of that capacity as you're building out Network Vision?

Joseph J. Euteneuer

What I said is we can go into 2014 with our own spectrum. If LightSquared passes the FCC, then we'll go into 2015 with them. But we're in a unique position with Network Vision to be able to look at other sources of spectrum, which we clearly need, which we've laid out and there is no other announcements to be made, as Dan said. And Clearwire is one of those opportunities to increase our spectrum capacities. So that's really what you need to understand.

Yijing Brentano

Anna?

Unknown Analyst -

Just a follow-up to that question on LightSquared. You said, if it gets the FCC approval on the GPS that can take you into 2015. But I guess, this is really more for Joe potentially. The next hurdle is really is LightSquared getting this financing and I would [indiscernible] that the experience of investors who helped to fund the Clearwire build has not worked out well really kind of every pool of investor capital that helped to fund what Sprint said at the time was going to be its 4G network? So if LightSquared is unable to raise financing but does get the GPS clearance, would you be willing to actually help fund or guarantee funding for LightSquared?

Joseph J. Euteneuer

We haven't made any commitments. Right now the idea is that they're going to go raise their own financing. It's a total prepaid build for us and it's totally accretive. I mean, it's only been a positive, and it's profitable for us. So I think the first burden is on them. Will we be supportive of them and being able to raise the financing, I would think it'll be a lot easier to raise financing once you have GPS clearance knowing that everybody needs spectrum.

Unknown Executive

Because of those concerns to get back to the earlier question, I just want to make clear. In the -- when we talked about spectrum, we were only talking about phone spectrum and in terms of margins and financing going forward, we assumed no LightSquared. So if LightSquared were to get funding and approval, it would be upside on the cash side as well as one additional year of network capacity. So we -- again, I just want to make sure we -- the assumptions in what you saw today did not include them and it would be all upside.

Yijing Brentano

Romeo, back in the room here and then I'm going to move on to this a little bit. It's actually that gentlemen right there. Yes?

Unknown Analyst -

Can you talk a little bit about how you arrived at the decision that LightSquared, I mean, I think you showed a slide where you said that you had 3 different options with your respect to network capacity. Your own capacity was obviously the top priority then followed by LightSquared and then thirdly, Clearwire. Can you give us a sense as to kind of how you came at that prioritization when you look at -- is it a technology issue? Is it a spectrum quality issue? Is it an issue of LightSquared is actually paying you or as you're paying Clearwire? Is it all of the above? Can you give us a sense of how you're thinking evolved?

Daniel R. Hesse

Okay. I think that when you -- the criteria starts up with the economics of this and our own and the owners economics make you want you want to start there. Going to spectrum hosting, the economics also good as Joe said if LightSquared were to go, then the revenue that comes to us is very beneficial. And so that's why we've set up the capability for spectrum hosting that we want to look at others. As I also said earlier, we are a wholesale company; it's in our DNA. But #1 is the economics in choosing the spectrum that we want.

Yijing Brentano

Okay. Jason's got a question over here.

Jason Armstrong - Goldman Sachs Group Inc., Research Division

A quick clarification and then I guess a broader question. First, on the clarification. Can you help us with the margin improvement commentary, just help set the baseline. There's been a lot of volatility in margins in recent quarters. Is this improvement off of the 2Q results? Is it 2011? Maybe just level set for us and I guess, well, go ahead.

Daniel R. Hesse

Yes, sure. It's literally going forward from our current results now moving forward through the end of 2013.

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Okay. So 16% 2Q wireless margins.

Daniel R. Hesse

Yes. If you think about it, if you can get the full 600 basis points in Network Vision and the core operations, you're going to get close to 30%.

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Okay. Great. And then I guess just back to the incremental financing. I think a lot of people have kind of assumed you've had a little bit of a disclosure issue over the last several months and because of that, haven't been able to tap the markets. I understand your point about having flexibility in being able to go into next year. But why wouldn't you want to clear up the disclosure issue at this point? Give a little bit more granularity and forecast because with -- several months have gone by. This has cost you hundreds of basis points potentially in the capital markets. Why not clear it up right now?

Daniel R. Hesse

You mean clear up our forecast in regards to the fact that we just got the iPhone or...

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Yes. Well, the assumption was you had a disclosure issue and that prevented you from tapping high-yield markets. Why not clear that up to a greater extent right now?

Daniel R. Hesse

Well, all the areas are clear right now. So we do have the ability, as a result of this meeting, to go forward.

Yijing Brentano

Sure. We'll go right there.

Unknown Analyst -

I maybe wanted to follow up on that. You showed the liquidity bridge over a 2-year period 2012 and 2013 and I think timing is important in that. If we ignore the revolver for a second, I think it was like $900-or-so million of availability. And then we look at cash, it was $4.2 million. I think the expectation given off the slides that you showed today is that free cash flow will probably be negative due to iPhone pressure of subsidies and then obviously, the higher CapEx spend and then the maturity is about $2 billion. So theoretically after March of 2012, your liquidity could be down to a relatively low number. So I guess, I just wanted to sort ask that concept. You made the comment that you didn't feel like you needed to run out and raise capital very quickly. What are your thoughts really in a more granular way about what is the minimum liquidity level that you'd be comfortable with to have in place to complete Network Vision and what type of other financing options have you looked at?

Daniel R. Hesse

Sure. Well, there's a whole host of other financing options that we're looking at. But if you remember over the last couple of months since I've been here, I've talked about the whole concept that as we move through Network Vision, we can start bringing down our cash balance and use our revolver as the added liquidity if needed. So as you start clearing Network Vision, you don't have that replacement need for that cash. So you're able to bring your cash balances down and that's the whole purpose. If you saw the chart, at the end and 2013, you saw that my liquidity came down just because I don't need to maintain that much cash. And the cash that you'll generate from operations that you won't need for Network Vision then can be used for de-leveraging, et cetera on a go-forward basis.

Yijing Brentano

Okay. I think Kevin's got a question back there.

Kevin Smithen - Macquarie Research

Shifting gears a little bit, more of a strategic question. You've made a large commitment now to Apple for the iPhone and I guess, you had Jason and Sanjay and people like Andy Rubin speaking in your presentation. What's the reaction been since you made the Apple announcement? Your Android partners, what is your commitment to Android and I guess, from a wholesale long-term perspective, you talked about the importance of wholesaler model. Have you potentially closed doors with people like Amazon who are offering bundling 3G, 4G capacity in with their tablets? Because you've made this bet with Apple, have you closed off potential equity or spectrum or wholesale partners?

Daniel R. Hesse

So I'll take it. So we want to be very clear. Although we're very excited about the announcement that took place this week in our partnership with Apple, we have a lot of existing partners that we've been in business with for over 15 years that we're not just going to forget and put to wayside. And in fact, if you look at the market dynamics, Android is just as popular if not growing faster in most markets around their world then iOS. And so as you remember, our strategy for this year from a product portfolio standpoint, was to make a heavy investment in Android to follow that growth. And I think we've delivered that, we've had some of the -- many of you have stated the best product portfolio when it comes to Android in the marketplace whether it's the Evo line, the Epic line, Galaxy S2 line from Samsung or whether it's our renewed relationship with Motorola, those partnerships don't go away. We continue to develop products to fulfill a whole portfolio needs across tablets, modems, as well as handsets. And so we're good partners with all those companies stated. And as far as wholesale relation just on the devices part, I can talk about that. Do you want to talk about that?

Unknown Executive

We have Matt Carter [ph] here who's the President of our Wholesale division. There are no implications of this agreement, Apple, with our wholesale business at all. I mean, if you understand wholesale, you not only have customers that compete with each other, but we have customers that compete with us. So the competitive dynamic is quite frankly, an irrelevant issue with respect to wholesale. So there are no implications. And the wholesale business is a very good one for us and one we intend to continue to grow.

Yijing Brentano

Mike Rollins has a question over here. Mike, if you can stand up they can see you.

Michael Rollins - Citigroup Inc, Research Division

Joe, can you talk about with regards to the potential for savings of 400 to 600 basis points organically, can you talk about whether there's an opportunity over the next 12 or 18 months to drive a specific level of savings from what you've described before as getting more efficiencies out of the company? And just help us think through maybe what kind of tools you're using to control costs as you just have a variety of different buckets to manage through, whether it's the iPhone, Vision, et cetera?

Joseph J. Euteneuer

Sure. Well, obviously, we've spent enough time talking about the benefits that we see through the iPhone in regards to reducing churn, et cetera. But the control committees, I mean, Steve and I, along with Bob L. Johnson, have a cost committee where all of the expenses have to come and get approved by us to make sure that we're challenging, do we need to spend the money, et cetera. When you looked at those 5 items out there, our efforts in regards to churn and our efforts in regards to targeting the right markets where we think we can put on additional customers, our efforts in regards to looking at how to reduce roaming, if you remember is one of Steve's slides, was irrespective of the things that we're doing. There's a number of things, Wi-Fi off-loading, et cetera, that he thought he could do, and additionally, to continue to reduce our cost. So those are the efforts that we're working on to try to make -- to deliver those 400 to 600 basis points over the next couple of years.

Yijing Brentano

Right there.

Unknown Analyst -

Bill Bowler [ph] from Maryland Securities. Wondering if you could help us understand, if you have to adapt to a different spectrum source, what incremental capital cost that could mean to you if you need to step up to the extent that LightSquared is furnishing you with cash up front and progress payments to defer the cost of Network Vision for you? If you did have to go ahead and bring on a separate spectrum source, what would be the cost to you on a go-forward basis? Well, it's really a backdoor question, too. When you -- with the multimode antenna and the multimode capability, how flexible is it in terms of adapting to other spectrum types along the way?

Steven L. Elfman

Right, yes. Actually, that is the point. It's very flexible to add additional spectrum onto it, additional radios, both with the bass and the radio head. And also, with our approach to spectrum hosting, we want to focus a lot on that to minimize cash outlay that we have to make.

Yijing Brentano

We've got a question right here in the middle [indiscernible]

Unknown Analyst -

A quick question in terms of Clearwire. I think by the end of 2012, you'll have something like 17 million, 18 million customers on Clearwire's network. And given that you are looking to raise financing and the debt maybe on the equity markets, how do you plan on raising money when one of your largest partners may be bust by that time?

Daniel R. Hesse

Well, first of all, we're not aware of any plans. You'll have to talk to Clearwire about -- I think you're implying that Clearwire, when you say bust might be -- mean bankrupt. We don't know anything in that regard. So I don't know if you want to add anything to that, Joe.

Joseph J. Euteneuer

I was going to say, look, the fact of the matter is we continue to pay them. We got $1 billion commitment with them through the end of 2012. You act like we're just going to like stop talking to them. We've been talking with them all along to look at other ways to work with them. But the fact of the matter is we have a responsibility to our shareholders here to improve our margins and drive down our cost. And so the whole purpose of the multi-mobile technology is to have that flexibility to continue to drive down cost over the long term. And their spectrum is a viable option. We'll continue to talk to them and we'll continue to try to find a solution.

Yijing Brentano

Rick's got a question, James got a question over there, yes.

Unknown Analyst -

Maybe the unpopular subject, but as you look at the liquidity dropping over the next couple of years, there's a major transaction that you're protesting to the Federal Government. If they do agree to any kind of merger agreements, it's felt that there could be some divestitures that might be absolutely required. With this plan that you've laid out today, would it take you off to the sidelines as far as being able to participate in that possibility?

Daniel R. Hesse

I'll take that. First of all, I think what Joe was just describing is we have more flexibility, I believe, in terms of when we go to the markets. Then a lot of people believe we do, and that was really the point. Not that we wouldn't, but we have more flexibility. And I can't comment on the specific proceeding that you're describing. Our position has always been pretty straightforward, and that is we just believe the merger should be stopped, period.

Yijing Brentano

And I guess you can pass the mic to Ben right next to you, any other question. No, Ben is actually right next to you. Never mind.

Unknown Analyst -

I keep it when I have it?

Yijing Brentano

Sure. Go ahead.

Unknown Analyst -

Okay. Back to Clearwire, I don't think it does you a service to suggest you're not aware of their financial condition. Without additional funding, it's highly probable they file probably before the end of 2012. If they cannot raise additional money, if they cannot raise it outside of Sprint, would Sprint be willing to finance it in some form or another? If not, what's the probability that current WiMAX subscribers in the Sprint network get turned off?

Daniel R. Hesse

First of all, as I mentioned earlier, you will have to ask Clearwire with respect to what their plans are and we're not aware of that. Secondly, if there were any bankruptcy, we would expect it to be constructive and that we'd be part of the discussion. Third, there has been no wireless bankruptcy that we're aware of that has ever led to service being turned off. So we feel confident that we will be able to support our 4G WiMAX customers.

Unknown Analyst -

And that includes something potentially Clearwire, if necessary?

Daniel R. Hesse

I don't want to speculate on what we may or may not do in that regard.

Yijing Brentano

And James got a question in the back.

Unknown Analyst -

If you could talk a little bit about how important, if at all, top line or subscriber growth is to the 400 and 600 basis points of non-Network Vision margin improvement, do we take that to say you can actually take 4% to 6% of the current revenue rate in cost out of the business? Or does it require the top line to grow to get to that sort of level?

Joseph J. Euteneuer

Sure. It's a combination. It's really going to be a timing. I mean, could we get it all from subscriber growth? Of course, we could. I think the issue is getting the balance between those items is what we're looking for over the short period of time. But with the new iconic device, we got to look at what the upside of that potential is. We're just getting started. So I think, James, when you think about it, those items I put there are just a microcosm to all of the things we're looking at in the company to drive margin improvement. But what we tried to do for you today was be specific and say that we're going to try to deliver a minimum of 400 to 600 basis points over the short term here to get closer to that 30% mark. And it's coming from non-Network Vision, and then you get the balance from Network Vision. So I think we've given you a lot of specificity that you've not seen today and a lot of commitment to drive the growth in that margin over the short term.

Yijing Brentano

Yes, go ahead. There's microphone in the front for that lady.

Unknown Analyst -

I am curious. You talk about Clearwire as a partner and not as a, essentially subsidiary of which you own 54%. So that alters the whole -- every comment that you've made. It makes it seem ridiculous, to be honest. So the question is, since you're a majority holder, why is the bankruptcy for them a good thing for you? Why would you not risk losing access to that huge spectrum, which you so dearly need in the Bankruptcy Court? And why would you spend 6 or 8 or 10 or however many billion dollars you're going to spend to build out a brand new network when $600 million would take their network up to LTE? I mean, why would you spend 10 times as much? It makes no sense.

Joseph J. Euteneuer

Yes. I mean, look, I think that what you have to remember is it's about a return on investment to our shareholders.

Unknown Analyst -

I don't know. But can you speak into the microphone?

Joseph J. Euteneuer

Yes. Just can you hear me now? Can you hear me now?

Unknown Analyst -

[indiscernible]

Joseph J. Euteneuer

Okay. Good. All right. Well, the fact of the matter is that we need to continue to drive down our operating cost and improve our margins. We pay Clearwire for that, and what we're trying to do is look for optionality on a going-forward basis. The fact that we're a 54% shareholder, we have had no control or governance in the decisions they made as an independent entity. That was their choices and we suffered from it accordingly.

Unknown Analyst -

No, they still have the [indiscernible] much lower than you're going to have.

Joseph J. Euteneuer

I don't think you're correct there. I don't think you know your facts.

Unknown Analyst -

And you didn't answer why you would spend $6 billion when $600 million would do.

Joseph J. Euteneuer

You got to -- we got to think about owner economics.

Steven L. Elfman

Yes, I'll answer that.

Joseph J. Euteneuer

Go ahead.

Steven L. Elfman

$600 million will not do, number one. $600 million gets their 120 million pops of WiMAX over to LTE is the number that they're giving, not to giving nationwide coverage. So I think you need to get your facts straight.

Unknown Analyst -

And what about the risk that you have lots of frequency and spectrum, you say, going to bankruptcy and you are [indiscernible]?

Daniel R. Hesse

I think we're finished. What I've described -- said earlier, we don't know that they are. We would expect to be involved. We would expect to participate in the process. There has never been a wireless bankruptcy that has resulted in service disruptions to customers and, of course, the SEC is involved in those issues as well. And beyond that, we don't want to comment.

Yijing Brentano

David can ask the last question and then we're going to close.

Unknown Analyst -

It's a question but more of an observation. I just would like your opinion on the fact that when we look at the FCC, we see the decisions that they make when they're making license transfer decisions and granting waivers. They seemed to be tying, build their conditions to any player that buys spectrum that may come on the market. Is that something that you would expect to see continue independent of whatever [indiscernible] we've seen with LightSquared? We've got a dish proceeding in front of them right now. The question is really do you see that there's an incentive for these players to drive to your network in terms of the spectrum hosting play that you've got?

Steven L. Elfman

I think that's a really good point and a really good observation, Dave. But the government believes there's more broadband needed. And therefore, if they're going to grant licenses, they want to -- they'll want to see it used. And we're giving players a lower-cost option to get their spectrum in use expeditiously.

Yijing Brentano

Thanks. Before we close, I'd like to point out that you may access an audio replay or webcast of our presentation today on the Investor Relations page of the Sprint website. Thank you very much for your participation today.

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Source: Sprint Nextel Corp. - Special Call
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