Sprint Nextel's CEO Discusses Q4 2011 Results - Earnings Call Transcript

| About: Sprint Corporation (S)

Sprint Nextel (NYSE:S)

Q4 2011 Earnings Call

February 08, 2012 8:00 am ET


Brad Hampton -

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

Steven L. Elfman - President of Network Operations & Wholesale

Joseph J. Euteneuer - Chief Financial Officer


Michael Rollins - Citigroup Inc, Research Division

Jonathan Chaplin - Crédit Suisse AG, Research Division

David W. Barden - BofA Merrill Lynch, Research Division

Kevin Smithen - Macquarie Research

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

Jason Armstrong - Goldman Sachs Group Inc., Research Division

John C. Hodulik - UBS Investment Bank, Research Division

Brett Feldman - Deutsche Bank AG, Research Division


Good morning. My name is Gina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprint Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Brad Hampton, Vice President of Investor Relations. Sir, you may begin.

Brad Hampton

Thank you, Gina. Good morning, and welcome to Sprint Nextel's Fourth Quarter 2011 Earnings Call. Thanks for joining us this morning. For the format of the call, Dan Hesse, our CEO, will discuss operational performance in the quarter; then Steve Elfman, our President of Network Operations and Wholesale, will provide an update on Network Vision; and finally, our CFO, Joe Euteneuer, will cover the financial aspects of the quarter. Before we get underway, let me remind you that our release and the presentation slides that accompany this call are both available on the Investor Relations page of the Sprint website.

Slide 2 is our cautionary statement. I want to point out that in our remarks this morning, 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 our Part II, Item 1A, Risk Factors of our quarterly report on Form 10-Q for the quarter ended September 30, 2011 and when filed, Part I, Item 1A, Risk Factors of our annual report on Form 10-K.

Turning to Slide 3. Throughout our call, we will refer to several non-GAAP metrics. Reconciliation of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found on the attachments to our earnings release and also at the end of today's presentation.

Turning to Slide 4, with today's earnings release, we are providing a number of new disclosures related to our network platforms. We are providing this new disclosure to give you a better understanding of the underlying trends of our operations and the growth of our core Sprint platform business. In our disclosure and throughout today's call, Nextel platform refers to our iDEN business, which we’ll begin decommissioning in 2012 and Sprint platform refers to our core ongoing business, which includes CDMA, WiMAX, LTE and other network technologies.

Let's move to earnings per share on Slide 5. Basic and diluted loss per common share for the fourth quarter were $0.43 compared to $0.10 in the third quarter and $0.31 in the year-ago period. Basic and diluted loss per common share for the full year 2011 were $0.96 compared to $1.16 in the full year 2010. The loss per share increased as compared to the third quarter partly due to drivers that also impacted the sequential change in adjusted OIBDA, which Joe will discuss in more detail later on the call. In addition, loss per share increased sequentially due to higher equity losses in unconsolidated investments and other, as well as higher net tax expense. The current period net loss per share includes $0.04 pretax loss per share related to an impairment of our holding in Clearwire as well as $0.03 pretax loss per share related to the impairment of certain network assets related to Network Vision. The fourth quarter net loss per share also included a $0.01 pretax loss per share impact due to severance costs.

We recorded a net tax expense of $106 million in 4Q '11, which included $6 million related to changes in corporate income tax laws enacted in the quarter. For the full year 2012, we expect our net tax expense to be approximately $150 million to $200 million. Also, please keep in mind that Clearwire's fourth quarter 2011 results from operations have not yet been finalized. Please refer to the press release and our form 10-K, when it is filed, for additional detail.

I will now turn the call over to Sprint CEO, Dan Hesse.

Daniel R. Hesse

Thanks, Brad, and thank you for joining us this morning. Sprint has shown continued momentum in recent quarters, and Q4 is no exception. Before I recap our overall performance in 2011 in the context of our broader turnaround effort, let me take a moment and touch on some of the key highlights from the fourth quarter.

Turning to Slide 7. I am pleased to report today that we had a very successful launch of the iPhone, with total activations in the quarter of over 1.8 million, above our expectations. 40% of those activations were new customers to Sprint, a proof point of the renewed strength of the Sprint brand. I'm also pleased to report today a year-over-year growth of $3.69 in our Sprint platform postpaid ARPU rate, which is the largest increase on record in U.S. wireless industry history. This historic ARPU growth was achieved in the same quarter that we delivered our best postpaid voluntary churn number for any quarter since 2005 and in which we also delivered our highest postpaid gross add volume for any quarter in 4 years.

As you know, voluntary churn is churn based on the customers' choice, churn determined by the strength of the brand, the customer experience and comparative pricing. To improve postpaid churn in 2011 more than any major U.S. carrier and delivering the best annual postpaid churn in Sprint history while simultaneously increasing prices to an extent that delivered industry record-breaking ARPU in the same year is nothing short of remarkable.

The significant upfront costs associated with the introduction of the iPhone in the beginning of the ramp-up in Network Vision operating expense lowered adjusted OIBDA below historical levels, but the $842 million of adjusted OIBDA in the quarter topped the high end of our forecast and analyst estimates. This marked the third time in 2011 that quarterly OIBDA exceeded Street consensus estimates and, on a pro forma basis, full year 2011 adjusted OIBDA topped analyst consensus by over 5%.

Finally, I'm also pleased to announce continued progress on our Network Vision deployment. Today we're adding Baltimore and Kansas City to the list of cities that are expected to have Sprint LTE service plus improved 3G service by the middle of this year, bringing the major cities to be launched by midyear to 6.

As we closed the fourth quarter of 2011, I completed my fourth year at Sprint. I told you on my first call that our turnaround would be difficult and not quick. Although we're far from finished, our progress, nevertheless, has been very significant. 2011 caps what I would consider the first phase of our turnaround, the recovery and strengthening of the business to the point that we're ready to enter the second phase in 2012, investment for future growth. I will organize the balance of my remarks today, as usual, around our 3 unchanging priorities: improving the customer experience, strengthening the brand and generating cash. Given our special focus on OIBDA and cash generation, I'm going to change the order today, however, and start with cash. Please turn to Slide 8.

We maintained our strong liquidity position by generating $275 million of positive free cash flow for the quarter in addition to raising $4 billion of cash through our recent debt offerings. Joe will provide more details on the impacts of Network Vision and iPhone on this quarter's OIBDA. But absent the estimated impacts of these 2 investments and excluding 2006, which had a onetime blip associated with adding the first year of full year Nextel results, 2011 full year pro forma OIBDA performance reflects year-over-year improvement for the first time in 7 years. The growth in our core Sprint platform business finally overtook the declines on the Nextel platform and wireline.

Driven by strength in postpaid ARPU, Q4 represents our sixth consecutive quarter of year-over-year improvement in total operating revenues, and the 4.7% growth from Q3 to Q4 represents our largest sequential increase in over 5 years. As mentioned, the Sprint platform postpaid ARPU increase of $3.69 for the fourth quarter of 2010 is the largest quarterly year-over-year improvement on record for the U.S. wireless industry.

Please turn to Slide 9. 2011 culminates the efforts of our cash strategy over the last 4 years as we prepared for the investment that lies ahead with Network Vision. We focused first, from 2008 to 2010, on slowing down the subscriber and top line revenue declines that followed the merger. We also focused intensely on reducing both capital and operating expenses these past 4 years. We minimized our CapEx investments in 2G and early 3G radio technology to keep our powder dry for investment in our new world-class Sprint Direct Connect service and in 4G LTE.

Compared to our CapEx run rate in 2007, between 2008 and 2011, we saved an estimated $15 billion in capital. Even when you consider our cash investments in Clearwire and the increase in OIBDA-reducing roaming expenses we incurred over this period, which are effectively a tradeoff with our decision to spend less on 2G and 3G CapEx, we achieved estimated savings in the last 4 years of over $10 billion of cash. Whether the accountants classify $1 as OpEx or CapEx, it's all cash in our view. From 2008 to 2011, our wireless CapEx investments were approximately 1/3 the spend of Verizon, 1/3 of AT&T’s spend and 1/2 the spend of T-Mobile U.S.A.

Additionally, compared to our run rate in 2007, our total cost of service and SG&A in 2011, excluding roaming expense and subsidy, which is really driven by competitive pricing versus spending behavior, are down by approximately $5 billion per year with G&A expenses down almost 50%, marketing and product down 32% even though we have invested more in increasing and improving Sprint retail and IT and billing expenses are down by 1/3. Over the same time period, our total labor expense is down by 33%.

A primary tool in previous years used to satisfy customers and stem churn was for our care organization to provide credits on customer bills. Not only did Sprint offer the lowest level of care credits in our history in 2011, but customer care credits have decreased by $1 billion on an annual basis since 2007. So we're not buying improvements in customer satisfaction in churn. During 2011, based on the improvements in our customer experience and in our brand, we were in a position for the first time to increase prices. We implemented an increase of $10 for our smartphone data plans in the first quarter of 2011. We also increased our other prices and fees during the year, eliminated our loyalty program and lengthened upgrade eligibility, all actions aimed at improving our OIBDA and cash generation.

Please turn to Slide 10. Improving the customer experience has been our top objective and the most important contributor to our turnaround. In the 2011 American Customer Satisfaction Index, we're the most improved U.S. company, period, across all 47 industries studied by the ACSI over the past 3 years. Sprint was in a statistical tie for first place for best overall choice by Consumer Reports in 2011, up from a distant last place in 2007 and in 2008, among major wireless carriers. Sprint was recognized 5 times in 2011 by J.D. Power and Associates, and we were recently informed that Virgin will receive the J.D. Power award for the highest customer satisfaction among non-contract brands. Boost placed second. ATLANTIC-ACM just awarded Sprint a network award for global wholesale excellence, and Frost & Sullivan just awarded Sprint the North American Customer Value Enhancement Award for the machine-to-machine space.

Our customer service organization continued their momentum to achieve customer service excellence. Sprint achieved best ever results in 2011 for customer satisfaction with customer care, customer satisfaction with repair and customer satisfaction with retail. We also achieved best ever results for the number of calls per subscriber to Care and for First Call Resolution in addition to the best ever performance in fewest care credits given, as previously mentioned.

In spite of some temporary pressure on involuntary churn, which we mentioned on last quarter's call and which Joe will describe in more detail, we continued to make steady progress on postpaid voluntary churn, which is an important indicator of customer satisfaction. 2011 represents our best ever annual total postpaid churn at 1.86%. And in Q4, we delivered our best postpaid voluntary churn performance for any quarter since 2005. Like we did in 2010, we again improved voluntary postpaid churn year-over-year in every quarter of 2011. Prepaid churn of 4.05% for the year is also best ever, and Q4 prepaid churn was Sprint's best in the last 24 quarters. Churn improved sequentially for each of our prepaid brands: Boost, Virgin and Assurance.

Turning now to brand on Slide 11. I'm very pleased to report that once again, all Sprint brand metrics or health metrics are record highs. As measured by an outside third party, most want to investigate, purchase consideration, positive brand momentum and first brand preference are all at best ever levels in 2011. In a well-known independent survey, net promoter scores again indicate Sprint is the only 1 of the 4 major carriers to show improvement sequentially. And our improvement has been so significant, we have moved up 2 spots in the major carrier rankings in the past 2 years.

Perhaps Q4 2011 will be most remembered for the collapse in December of AT&T's proposed acquisition of T-Mobile U.S.A. We believe the industry outlook would have been bleak had this takeover succeeded, and we also believe that Sprint's successful championing of a healthy industry and customer choice will have lasting benefits for the way business customers and consumers view Sprint.

Please turn to Slide 12. Driven by the improvements in the customer experience and the brand, our total net subscriber additions in the fourth quarter of 1.6 million are the best in 6 years, bringing our full year number to 5.1 million net adds, which is Sprint's highest number of net adds since 2001. Total customer served in the Sprint and Nextel network platforms reached 55 million at the end of 2011, yet another new all-time company record. I'm pleased to report that for the Sprint postpaid platform, 2011 is our second consecutive year of being net port positive against our competition, which means more customers switched to Sprint from our competitors than switched from Sprint to competitors. And total postpaid net adds are our best since 2006.

Our 161,000 postpaid net adds in the quarter represent our 10th consecutive quarter of year-over-year improvement. We entered the fourth quarter expecting an even better performance, but during the quarter we saw unprecedented discounting on devices, especially for Apple products, which we decided not to participate in. We made a conscious decision not to chase meeting our net add guidance under these unforeseen circumstances, believing it was more prudent to shoot for delivering an OIBDA result exceeding the top end of the OIBDA guidance range we had provided instead. This was a tough decision for us to make during the fourth quarter. Not only had Sprint never missed a single guidance metric in the past 4 years, but for me, personally, I had never missed one guidance number during my long career. So Sprint’s streak and my streak are now broken, but we believe we made the right decision.

Sprint's 40% iPhone gross add mix far outpaced our competitors. The gross add mix of sales is the best early indicator of long-term profitability with the iPhone, and we are pleased with the early results. We continue to believe the iPhone will bring significant value to Sprint over the long term, and early results are in line with or better than our business case assumptions.

Turning to Slide 13. In addition to success with the iPhone, we continue to see strong demand for other compelling devices, including our industry-leading portfolio of 4G devices. The Samsung Galaxy SII Epic 4G Touch not only has the longest device name in wireless industry history, but it was recently named the best Android phone by Kiplinger's Personal Finance and America's #1 smartphone by PC World. In the fourth quarter, 86% of our Sprint postpaid handset sales were smartphones, and penetration of our Sprint platform base reached 66%, both all-time highs. We also had a strong quarter and year in wholesale and in prepaid, which Joe will cover later.

Turning to Slide 14. In conclusion, we've come a long way in 4 years. Our top line is growing again. Our customer experience has gone from the worst to arguably the best in the industry, and our once battered brand is strengthening and gaining momentum. Offsetting the downward revenue and earnings pressures of a subscale wireline business and a declining business on Nextel platform, we have a vibrant growing Sprint platform that will fuel our continued growth. Since 2007, Nextel platform annual revenues are down approximately $9 billion annually, and wireline revenues are down another approximately $2 billion annually, but our Sprint platform revenues are up over $4 billion annually since 2007.

We've exercised financial discipline in the past 4 years, including large reductions in CapEx and OpEx, to gain the financial stability to give us the confidence to begin the investment phase of our turnaround. 2011 marks not only the first annual service revenue increase but also our first positive operating income since 2006. And as mentioned, excluding the onetime events of the Nextel acquisition of last quarter's iPhone and Network Vision overlays and in spite of the continued declines associated with our Nextel platform and wireline, 2011 delivered our first sequential improvement in pro forma adjusted OIBDA in 7 years.

Since I arrived 4 years ago, we have known we eventually needed to deal with the ever increasing cost string of running an additional 2G network. During this period, we simultaneously improved network performance but also saved every dollar possible so we can invest our money, not in the technology available in those years but in new technology not available till now. To help buy time, we launched Boost Unlimited in the first quarter of 2009 using our spare item capacity. Boost has generated $5 billion in incremental revenues on the iDEN platform since that time. We waited until network infrastructure was developed that was one, multimodal so that we could re-farm the valuable iDEN 800 megahertz frequencies; two, that could also provide an iDEN-quality push-to-talk experience on the new network, what we now call Sprint Direct Connect; and three, which was capable of providing 4G LTE service on our FD or frequency division spectrum.

Steve Elfman will speak next to give an update on our deployment status and plans for this year, but I am pleased with our progress today. I periodically discussing Network Vision support with my CEO peers at our key partners, and I am very confident in their commitment to this effort and the significant opportunities it provides Sprint. I'm proud of the accomplishments we have made in this first phase of our turnaround, and I look forward to the call 2 years from now when we'll be looking back on the second turnaround phase or investment phase, the successful deployment of Network Vision and looking forward to Phase 3, the margin expansion, which will follow.

I will now turn the call over to Steve to discuss our Network Vision progress. Steve?

Steven L. Elfman

Thank you, Dan, and turning to Slide 16. We are pleased with the progress of Network Vision, which continues to be on schedule and on budget. In fact, as Dan mentioned, I'm pleased that we announced today the launch of our fifth and sixth major cities, Kansas City and Baltimore by midyear 2012.

I want to remind you of the objective of Network Vision and then discuss our progress and some milestones. Network Vision is expected to allow us to achieve several key objectives. First, we expect to greatly improve our cost structure through the consolidation of our networks as well as improving the coverage within our 3G footprint and reducing our in-footprint roaming expenses. Second, we expect the program will allow us to optimize our spectrum assets through the redeployment of our 800 spectrum to both 3G and ultimately, 4G LTE, which is expected to improve the performance of our network and improve customer experience. Third, our multimodal technology is both more cost effective and provides the flexibility to enable spectrum hosting. Lastly, through the implementation of new PTT, push-to-talk technology and devices on the Sprint platform, we can maintain our leadership and eliminate the Nextel platform.

Turning to Slide 17. We're excited about the improvements to the customers' experience and the technological flexibility that Network Vision is expected to produce, but the greatest advantage to the company and to our shareholders is the expected financial benefits. The project should finally remove some of the duplicative fixed costs that come with running 2 wireless networks. We expect to reduce our total tower position by more than 44%, from approximately 68,000 towers down to 38,000 towers and at the same time, greatly reduce both 3G and 4G roaming costs. The consolidation is not only expected to improve our operating cost, it should also significantly improve Sprint's carbon footprint, reinforcing that Sprint's commitment to our green initiative is integral to cost efficiency. And Network Vision is expected to improve our capital efficiency, reducing our per-unit cost of both gigabytes and minutes by approximately 50%.

I also want to remind everyone of the high degree of cost certainty we have written into our vendor contracts to support Network Vision. Essentially, all labor and execution costs in our contracts are predetermined. In other words, the majority of the expense risk associated with getting the bill done lies with our vendors, and our only exposure to additional costs are scope changes.

Turning to Slide 17. So where are we? We are on track with our 2012 goals for deployment, and things are going very well. We have executed against all of our major 3G and 4G technical milestones. The detailed deployment and resource plans have been completed by our 3 vendors, and they have been staffing up to meet the build-out demand. We are well underway on leasing, zoning and tower construction on our 38,000 sites with the goal of having 12,000 higher-density sites on air by the end of this year. In addition, we expect that approximately 9,600 Nextel platform sites will be decommissioned by the end of 2012. We continue to expect that the build will be largely completed by the end of 2013 with some overflow of smaller markets in the first half of 2014.

During the first -- fourth quarter, our first true multimodal permanent site went on air, and the first cluster of cell sites launched in Kankakee, Illinois. And they are meeting our performance and coverage targets. The development and deployment is proceeding within our budget targets. Our agreements with the major tower companies were finalized in Q4. In January, we announced 4 major markets scheduled to launch LTE by midyear, to which we added 2 more today. In addition, we announced our first 3 LTE devices, which are coming by midyear 2012. And we have been launching phones that are "800 Band Class 10" compatible since the middle of last year. This means that as we redeploy our 800 spectrum, many of our 3G customers should get an immediate and very noticeable benefit.

And in the fourth quarter, we launched our Sprint Direct Connect product, including 3 new phones, on the Sprint platform, which we are confident is the best push-to-talk product that is available in the market today and is central to our customer recapture strategy as we decommission the Nextel platform. And while people are focused on build-out of LTE, it is -- it's important to remember that every site we build is expected to provide immediate improvement in the network experience for all our customers and roaming cost reduction for Sprint.

Going forward, in 2012, we plan to provide an update each quarter on cell sites on air, sites decommissioned on the Nextel platform and any significant build milestones. My entire team and I and our 3 vendors have a strong focus on cost containment and capital efficiency, and we'll continue to drive the program forward to remain on schedule and on budget. And I look forward to updating you next quarter with milestones achieved and new markets in the build plan.

Thank you. And I will now turn it over to Joe to review our detailed financial results.

Joseph J. Euteneuer

Thank you, Steve. Good morning, everyone, and thank you for joining us today. As Dan outlined, the past 4 years, culminating with 2011, have been years of recovery and which Sprint has worked hard to put in place the operational and financial improvements we needed to support our next phase of investment. The recovery effort has been very successful. In a highly competitive market, these successes were hard won and do not come without a huge amount of work and ingenuity. We have effectively turned our core business around, producing the financial and operational stability and now allows us to invest for future OIBDA growth and margin expansion.

I will go through the detailed Q4 results in a moment, but first, I want to discuss how we are looking at 2012. As 2011 was a year of continued year-over-year improvement, 2012 will be a year of even greater focus on the bottom line. We expect to continue to grow the customer base in our core business on the Sprint platform while focusing on hitting our bottom line numbers as we invest in network architecture, which we expect will be the foundation of future margin expansion. We will provide additional visibility into our key metrics in 2012 to give you more detailed information on the operational components of our business. With the launch of the iPhone, the implementation of Network Vision and the thinning of the Nextel network, we have a lot of moving parts, and we want to give you more tools to understand the underlying dynamics of our business. This commitment is reflected in the new disclosures we have provided today. With that, I will review the fourth quarter and full year 2011 results.

Total service revenue for the fourth quarter were $7.8 billion, up 1% sequentially and up 5% for the fourth quarter of 2010. The growth of our total net service revenues is primarily due to the growth in postpaid subscribers and ARPU on the Sprint platform and as well as the strong growth of prepaid subscribers on the Sprint platform, partially offset by declines in our Nextel platform postpaid and prepaid subscriber basis and Nextel platform postpaid ARPU as well as wireline revenues.

In the full year 2011, wireline revenues declined by approximately $714 million, and revenues from the Nextel platform declined by almost $2 billion, which means that service revenues from our core ongoing Sprint platform wireless business grew by nearly $3.5 billion or 17%. Consolidated adjusted OIBDA for the fourth quarter was $842 million, which includes approximately $54 million in Network Vision-related expenses and an estimated $630 million in net OIBDA impact related to the launch of the iPhone. In order to provide appropriate comparables to our numbers, we have estimated the incremental impact of the iPhone launch to our adjusted OIBDA results for the fourth quarter. The estimate of $630 million includes only the cost of estimated incremental gross adds and upgrades as well as the subsidy rate variance resulting from the mix shift from other handsets and backs out the estimated incremental revenue benefit that comes from additional customers.

Going forward, it will become increasingly difficult to estimate the incremental impact as the iPhone becomes an integrated part of our handset sales. Thus, in the future, we will only provide the total impact of the iPhone on the quarter and will not attempt to estimate the incremental impact. Excluding the estimated $684 million of Network Vision and iPhone cost in Q4, pro forma adjusted OIBDA was over $1.5 billion, up $211 million or 16% year-over-year and up $89 million or 6% sequentially. Excluding these investments, consolidated pro forma adjusted OIBDA margin was 19.6% of net service revenues, a 100-basis-point sequential improvement and a 200-basis-point improvement from the fourth quarter of 2010.

Now let's turn to Slide 23 and discuss our wireless results in more detail. Total wireless service revenues for the fourth quarter were $7 billion, which is a 2% sequential increase and a 7% increase over the fourth quarter of 2010. Excluding the revenues from the Nextel platform, fourth quarter wireless service revenues from our core Sprint platform were $6.2 billion, up $207 million or 3% sequentially and up $912 million or 17% over the fourth quarter of 2010.

Dan has taken you through the trajectory of our very strong subscriber improvements over the past year and historically, and now I'd like to review our Q4 results in more detail.

Total company postpaid gross adds for the fourth quarter were just over 2.1 million, a 275,000 improvement sequentially and a 213,000 or 11% improvement from the fourth quarter of 2010. Total postpaid churn was 1.98%, which was 7 basis points higher than the third quarter and 12 basis points higher than the same period a year ago. As Dan mentioned, postpaid voluntary churn was at its best level for any quarter since 2005, so over 100% of the churn increase is involuntary churn.

The vast majority of the increase in involuntary churn was due to 2 related items. First, in the second and third quarters, some of our indirect partners self funded the retail price points of certain handsets down to 0. We tightened our credit standards during the third and fourth quarters to stem further impacts of these types of promotional activity. In the second and third quarters, we also launched an instant rebate promotion in the direct channel. While these actions were taken separately and attracted both prime and subprime customers, they both had the effect of significantly reducing the out-of-pocket expense for customers at the point of sale, which for subprime customers has a high correlation with early life involuntary churn.

Another lesser impact was due to higher customer balances. As we have steadily increased ARPU throughout the year, we have seen some increase in customers churning, because they are unable to make their monthly payments. This is the expected impact of the strong ARPU growth we have seen, and with these increases and ongoing customer revenues, we understood we would see some negative impact to customer churn. However, as expected, the strong ongoing revenue growth of the subscriber base more than offsets this impact.

So let me be clear. While we are experiencing some temporary impact to our involuntary churn due to the actions taken in the second and third quarters and due to our extraordinary ARPU growth, we believe the underlying fundamentals of our business are extremely sound, and we expect them to continue to improve. Our voluntary churn is the lowest since 2005, and we expect to see involuntary churn improve after Q1 once the impact of these items has had the time to move through our subscriber base.

Going forward, we expect the launch of the iPhone will continue to have a positive impact on our core Sprint platform postpaid churn. This benefit will happen over time as our customers hit their upgrade eligibility and the iPhone becomes available to them. As Dan mentioned, ahead of the iPhone launch, we strategically standardized the term of upgrade eligibility for 20 months, and we increased smartphone early termination fees in order to smooth the impact of upgrades and reduce the financial impact of the iPhone investment. This means that the churn benefits of the iPhone will layer in over time but also, that the profitability profile of our broader customer base should be improved as changes to ETFs and upgrade eligibility have been applied to many other devices, not just the iPhone.

The company's total postpaid net adds for the quarter were 161,000, comprised of 539,000 Sprint platform postpaid net adds, which included approximately 168,000 customers recaptured from the Nextel platform. This was offset by a net loss of 378,000 postpaid customers on the Nextel platform. We expect this negative trend on the Nextel platform to continue and to accelerate throughout 2012 as we commence decommissioning of the Nextel network and work to recapture customers on our core Sprint platform.

Concurrent with the strong postpaid subscriber growth we have seen on our core Sprint platform, we have also been very successful in growing our Sprint platform postpaid ARPU. Sprint platform postpaid ARPU is now over $61, which is 6% higher than the fourth quarter of 2010 due largely to the adoption of our $10 premium data smartphone charge. 86% of postpaid Sprint platform handset sales in the fourth quarter were smartphones. And the Sprint platform postpaid handset base penetration has now reached 66%, which means we expect to continue to see additional ARPU improvement in our core Sprint platform postpaid business throughout 2012.

Moving on to Slide 24. Prepaid ARPU for the full year 2011 was over $27, which was 1% lower than for the full year 2010. While total prepaid ARPU for 2011 was lower, the prepaid business had strong ARPU growth throughout the year on the Boost and Virgin Beyond Talk brands, offset by the growing mix of Assurance customers, which while lower in ARPU, have a very favorable churn and profitability profile. Boost, in particular, had very strong ARPU growth of 5% versus the fourth quarter of 2010.

One of the most positive trends in the prepaid business is our very strong results in prepaid churn. In the fourth quarter for 2011, total prepaid churn was 3.68% compared to 4.93% in the fourth quarter of 2010. While the growing mix of Assurance customers helps to keep our total prepaid churn rate low, it was not the biggest factor in the year-over-year decline in rate. Larger impacts were due to year-over-year rate reductions in both the Boost and the Virgin brands due to the shift from the Nextel platform to the Sprint platform on Boost and the shift from "pay by the minute" customers to monthly smartphone customers on Virgin. The prepaid business has been a strong and important growth mechanism for our company, and we expect to continue to show growth in subscribers and revenues in our prepaid business in the coming year.

We have also seen very strong growth during the year in our wholesale business. In the fourth quarter of 2011, we had 954,000 wholesale and affiliate net adds, which is a 143% growth from the fourth quarter of 2010 and a 14% sequential increase. This very strong growth in the fourth quarter was fueled by prepaid MVNO agreements made in 2011, which represents profitable growth for Sprint with little to no upfront investment.

Let's move on to wireless expenses on Slide 25. Sprint platform variable network expenses, which consists of roaming, long distance, backhaul and premium service expense, were $845 million for the fourth quarter of 2011 and were up approximately 20% over the fourth quarter of 2010. This increase is due to an increase in 3G and particularly, 4G roaming costs. 3G roaming costs in the fourth quarter of 2011 were $215 million, up 4% from the fourth quarter of 2010. 3G roaming cost increases are primary the result of the growth in the number of Sprint platform postpaid customers, the growth of data usage by our customer base and our strategic decision over the past 4 years to decrease our capital spending on legacy network improvements in order to reserve investment dollars for Network Vision.

4G WiMAX roaming costs in the fourth quarter were $162 million, up more than 500% from just the $26 million versus the fourth quarter of 2010. Because of the launch of Network Vision, our 2012 3G roaming expenses are expected to be capped at 2011 levels. As a result of the Clearwire agreements we announced in the fourth quarter, we now have cost certainty on our quarterly 4G roaming expense, which will decrease by approximately 25% from our 4Q exiting expense to Q1 and is expected to remain constant for the year. Despite these increases to roaming cost in the current period and because of our strong Sprint platform ARPU growth, we have been able to maintain stable variable network margins on the Sprint platform. With cost certainty on our WiMax-related 4G expenses in the next couple of years as well as significant 3G roaming savings as we light up Network Vision markets, we believe we have a clear pathway to margin improvement as we execute on our network improvement plans.

Total wireless cost of service in the fourth quarter was $2.3 billion, a $41 million or 2% improvement sequentially, due largely to seasonally lower data roaming cost and lower service and repair cost. Of our total cost of service in the fourth quarter, approximately $352 million or 15% were network costs related to Nextel platform, which we expect will be eliminated upon the completion of Network Vision. Total wireless subsidy expense increased $540 million or 46% from the fourth quarter of 2010 and $561 million or 48% sequentially. Approximately 20% of the sequential increase was due to higher volumes and approximately 80% of the sequential increase was rate related, largely associated with the launch of the iPhone. While the upfront investment in the iPhone is substantial, we expect that these customers will produce a strong return on investment in the later years.

Wireless selling general and administrative cost increased $136 million sequentially and $65 million over the fourth quarter of 2010. The sequential increase was largely associated with a $76 million higher cost in sales, $75 million of which was in new expense in the sales line due to reimbursements for point-of-sale discounts for iPhone, which are directly sourced by distributors, being accounted for as a sales expense. These kinds of handset discounts were not directly sourced by the retailer, are recognized as subsidy.

For the full year 2011, wireless SG&A increased by $257 million, due largely to an increase in selling expense as a result of higher postpaid and prepaid gross adds as well as the direct-sourced iPhone sales costs. This was offset by a $120 million decrease in customer care cost, which we have been able to streamline even as we've been making huge strides in the quality of our service. While total wireless SG&A has increased year-over-year, wireless SG&A, as a percent of revenue, has improved 100 basis points even with higher variable cost associated with higher volumes, reflecting our continued strong cost discipline.

Wireless adjusted OIBDA for the fourth quarter was $668 million, which was $546 million lower than the third quarter and $378 million lower than the fourth quarter of 2010. Excluding the estimated impacts of the iPhone and Network Vision, pro forma wireless segment adjusted OIBDA improved sequentially by 8% and showed year-over-year improvement of $306 million or 29%. Pro forma wireless adjusted OIBDA margins, excluding the impact of the iPhone and Network Vision, were 19.4% in the fourth quarter compared to 16% in the fourth quarter of 2010.

Wireline OIBDA in the fourth quarter declined $89 million or 33% from the fourth quarter of 2010 and $290 million or 27% for the full year 2010. Approximately 78% of the wireline OIBDA decrease is due to a decline in revenues related to resetting of our intercompany transfer rate to reflect current market prices at the beginning of 2011, which is neutral at the consolidated level. Wireline OIBDA in 2012 is expected to decline by approximately $350 million. Approximately $180 million to $220 million of this decline is expected to be due to intercompany rate changes, which are neutral to consolidated OIBDA and approximately $70 million to $80 million is related to cable, Voice over IP migrations.

Moving on to cash and liquidity on Slide 26. We ended the fourth quarter with a total liquidity position of approximately $6.7 billion, including $5.6 billion in cash and cash equivalents and $1.1 billion of undrawn borrowing capacity under our revolver. During the quarter, we raised approximately $4 billion through private placement, including $1 billion of 11.5% unsecured notes due in 2021 and approximately $3 billion of 9% guaranteed Notes due in 2018. The proceeds of these notes significantly enhanced our liquidity position, allowing us to pay down $2.25 billion of notes due in March 2012 ahead of schedule. Our next loan maturity totaling $300 million is due in May of 2013, followed by a $1.5 billion maturity in the fourth quarter of 2013.

We believe we have a clear runway to allow us to continue the investments in the iPhone and in Network Vision. I previously gave you guidance that we would be raising approximately $5 billion to $7 billion, excluding the Clearwire investment we announced in Q4, and this remains our intention. Our discussions regarding vendor financing are progressing well with all of our vendors. It is a time-consuming process because it involves multiple parties, but we are pleased with our progress to date. Our continued expectation is that we will have an agreement in place before the end of the second quarter. In the meantime, we continue to watch the debt markets, and we will be opportunistic with our options.

Our accrued capital expenditures, excluding capitalized interest of $109 million and including $370 million of Network Vision capital, were $900 million in the fourth quarter compared to $760 million in the third quarter and $608 million in the fourth quarter of 2010. Total capital expense for the full year 2011 were approximately $2.9 billion, which includes $590 million in capital expenses related to Network Vision.

Re-banding spend for the calendar year 2011 was approximately $123 million, net of $135 million MSS settlement from Dish, TerreStar. Inclusive of this settlement, total spend on the re-banding project to date has been approximately $2.95 billion. We estimate that we have approximately $600 million to $700 million of re-banding work remaining expected to be split between 2012 and 2013 and with the possibility of going into 2014 depending on the timing of the Mexican re-banding plan.

Free cash flow was $257 million in the fourth quarter of 2011 compared to negative $273 million in the third quarter of 2011 and to $913 million in the fourth quarter of 2010. The year-over-year decrease in free cash flow is primarily associated with lower OIBDA and higher capital expenditures. Free cash flow sequentially improved -- improvement of $530 million was primarily associated with the sequential decline in working capital of $1 billion, primarily associated with the timing of vendor payments and lower accrued dealer commissions and rebate reserves as we wound down our instant rebate promotions in our retail stores during Q3. Free cash flow in Q4 also benefited from the onetime payment of $135 million for the MSS settlement.

Finally, I want to outline our expectations for 2012. Total adjusted OIBDA for the full year 2012 is expected to be between $3.7 billion and $3.9 billion, including the impact of the iPhone and approximately $1.1 billion of dilution associated with Network Vision. To achieve this, we expect total net service revenue growth of approximately 4% to 6%.

With the Network Vision project ramping up, the quarterly timing of OIBDA is expected to be somewhat fluid. However, our expectation is that OIBDA in the first half of the year will be slightly lower than in the second half. In general, our quarterly OIBDA will also be affected by the timing of the launch of any subsequent versions of the iPhone the expectation is that our OIBDA trough will be u-shaped through 2012 and then will start to ramp in 2013 followed by strong margin expansion in 2014.

As we've discussed previously, we expect that 2012 will be an aggressive investment year with regard to capital expenditures as we pursue a rapid and efficient execution of Network Vision. Total capital expenditures are expected to be approximately $6 billion, excluding capitalized interest. In addition, based on the plans outlined by Steve earlier, in the first quarter of 2012, we have revised our estimates of the expected useful lives of certain Nextel platform assets through the end of 2013.

Accordingly, approximately $2 billion in net book value of these assets is expected to be accelerated through depreciation expense, of which a disproportionate amount is expected to be recognized during 2012. The exact timing of the acceleration is dependent upon when the assets are expected to be phased out of service. These estimates are derived from our internal decommissioning plan, which is still evolving. We estimate the incremental effect of accelerated depreciation related to Nextel assets in our 2012 results to be in the range of approximately $1.2 billion to $1.5 billion, of which approximately $450 million to $550 million will be recognized in the first quarter of 2012. We will continue to update you on these amounts quarterly as we refine our plans for Nextel decommissioning.

I want to end by reiterating my confidence in the strength of our core underlying business and in the pathway we believe we have created to future OIBDA growth and margin expansion. We are confident in the steps we are taking to improve our profitability and in our ability to execute on our strategic plan. The entire management team has a sharp focus on execution and profitability through the next few quarters of investment, and we are excited about the future.

I want to thank you for all your support and I'll turn the call over back to Brad for Q&A.

Brad Hampton

Thanks, Joe. I want to point out that you may access an audio replay of our webcast on www.sprint.com/investors, and we'll now open the line for your questions. Gina, please instruct our participants.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Michael Rollins.

Michael Rollins - Citigroup Inc, Research Division

Two questions. First, just given the fast pace of iPhone sales in the fourth quarter now coming into the first, how should we think about that trending in terms of volumes or mix and the percent that comes from new versus existing subscribers? And then Dan, turning over to the strategic side, Slide 14 that you went through. You went through a lot of the operational progress for Sprint, but can you talk more about where Sprint is positioned strategically? With T-Mobile still in the market, cable choosing to work with Verizon, it seems like you have some real competition to go after the remaining partners through a spectrum capital or both. So can you just put in perspective for us what Sprint is doing to put the company in the best position to either partner or buy spectrum as you move forward over the next 12 to 24 months?

Daniel R. Hesse

Let me take the second part first, Michael. Now there's no question with our equity, where -- currently, where it is and the other investments we're making over the next couple of years, that we won't have perhaps as many options as we normally would have. We certainly will entertain any kinds of transactions, partnering opportunities or what have you that we believe are in the interest of our shareholders, and I still believe there will be a number of them that could present themselves over the next couple of years. The importance of the decision of AT&T to abandon its acquisition of T-Mobile is it clearly provides many more opportunities for us and for companies outside of the top 2 to become much stronger competitors over time. So we will continue to evaluate and look at all the opportunities that present themselves over the next couple of years. So the first question was -- I'll let Brad handle.

Brad Hampton

Yes. We're not going to give specific guidance on iPhone units or mix, but we continue to be pleased with the results we've seen, consistent with what we've told you about Q4.


Your next question comes from the line of Jonathan Chaplin.

Jonathan Chaplin - Crédit Suisse AG, Research Division

I'm wondering if you could give us a little bit more color, Joe, on the churn trends that you expect through the course of the year or so. As the temporary impact that you saw in churn in the fourth quarter eases, how should we expect churn to come down? And how does that translate into subscriber -- postpaid subscriber trends during the course of the year?

Joseph J. Euteneuer

So I think -- look, on churn, we said that once we get through the first quarter, which we think is the clearing period of the stuff that happened in 2011, we plan on having continued progress in the churn number. We haven't given any specific guidance, but when you think about the overall revenue growth we need to achieve to hit our OIBDA results, it's sort of blended in there.

Daniel R. Hesse

I'll hit the second part, Jonathan. This is Dan. We haven't provided a specific guidance with respect to postpaid net adds -- I think that was the second part of your question -- for the year. This will be the year that we really begin -- it already has begun but much more aggressive active migration of customers off of the iDEN platform. So what you can expect is continued strong performance in growth on the Sprint platform. That momentum will continue, but you'll see larger than historical declines on the iDEN platform as we start working toward -- we're going to be decommissioning iDEN cell sites during the year, which will save money, and we'll be overtly proactively migrating customers off the iDEN platform. So you'll see, if you will, iDEN platform churn go up. So you've really -- like what we've been describing today, you have these, if you will, these 3 buckets at Sprint. You've got a very healthy strong growing Sprint platform, and you have, if you will, declines on -- year-over-year on the wireline and on the iDEN platform or Nextel platform side. And those declines on the Nextel platform side will accelerate in '13 as we aggressively begin the migration efforts.


Your next question comes from the line of David Barden.

David W. Barden - BofA Merrill Lynch, Research Division

I guess 2, if I could. Just first, maybe Joe or Steve, if you're still on the line, just on the Network Vision kind of pacing. I guess we're targeting maybe 12,000 cell sites to be kind of on air and running in '12. But I think, Steve, you mentioned this idea that we're going to be actually taking the whole network and grinding it down from 68,000 down to 38,000 cell sites. So it sounds like there's quite a bit of work to do in 2013. But Joe, it sounds like you're expecting kind of the benefits to start coming through in 2013 even though the bulk of the work is still being done. I wonder if you guys could just kind of tie out the thought about how to think about Vision pacing and spending and how it all ties with guidance. And I think if I could just -- the second question, Joe. In the fourth quarter, you did a lot of work to try to pull out the Vision spend and the iPhone subsidies. It looked like something clearly had changed in the underlying cost structure of the company in 4Q versus 3Q, and I was wondering if you could talk about what levers got pulled to try and get the margins where they were net of those things.

Steven L. Elfman

This is Steve. I'll answer the first question for you. I think that, really, the way to look at it is the first 12,000 sites, if you will, what we're doing this year is in the -- really, the larger cities, densely populated, higher-used cell sites where we can get rather quick return on reduction in roaming and in coverage. So that's why the pacing is as it is in '12. But also, we will be decommissioning, as I said, 9,600 sites this year from our Nextel platform and getting the associated benefit in utilities and maintenance and certain amount of rent also in '12. So we're going to see good benefits starting to accrue this year, and we'll also improve in 2013 as a lot of our sites begin to go on air as well in 2013. Hopefully, that helps.

Joseph J. Euteneuer

And David, in regards to the second part of your question, I mean, we talked a little bit on the call about the service and repair, what happened on the cost of service line. But I think if you look across the expenses, we have been focused, not only in the last couple of quarters but over the last 4 years, of taking expenses out of the business as Dan demonstrated in his slide. And I think all you see is some additional culmination of the focus we put in the fourth quarter to deliver the strong OIBDA results we posted.


Your next question comes from the line of Kevin Smithen.

Kevin Smithen - Macquarie Research

I wondered if you could tell us when we could see an inflection point on the Network Vision dilution, i.e. when is the peak deficit quarter between the cost and some of the anticipated savings on both roaming and lower iDEN tower expense?

Joseph J. Euteneuer

Yes. I think on the call, I tried to tell you that it's pretty fluid as we time sort of all of the Network Vision activity. But -- and we anticipated it's going to be more like a U rather than a V. And it will be -- OIBDA will happen first, so it will be probably towards the latter part of 2012. And then sort of a quarter, give or take, we'll see then the free cash flow follow it. But it will clearly be definitely in a U pattern versus a V.


Your next question comes from the line of David Dixon.

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

Wondered, as we look at the churn strategy for FY '12, Joe, you tried to mention the impacts in the fourth quarter that we saw, the Radio Shack channel and the premium plan withdrawal and the pricing increase. So I was wondering if you could help us clarify each of those effects, concerned whether there’s any change in your credit policy. And then perhaps give us some insight, as we look forward on iPhone churn, leading indicators and perhaps just in terms of the customer satisfaction, network performance after the initial hiccups. That'd be terrific.

Daniel R. Hesse

And David, this is Dan. I think as far as the churn is concerned on the postpaid side, what -- and this, again, is really Sprint platform -- that we described is we saw some impact, as we mentioned, in Q3 involuntary that continuing, if you will, increasing in Q4 and then in Q1, and then we would expect to see that begin to lower. You asked a question about credit. We tightened credit in Q3 and in Q4 after we saw what was going on in the channels. So we have taken actions in that regard. With respect to the iPhone and churn, that obviously is a very important element of, we’ll call it, the overall profitability of the iPhone, the customer lifetime value, and we won't see that over time. What we've seen early on in terms of the profitability metrics are, first of all, a very high gross add percentage. The other thing from a churn perspective is, again, you have lifetime churn, but you also see, historically, what happens to Sprint voluntary churn in the quarters where iPhones are launched. And in each of the previous 5 quarters where -- when iPhones have been launched, our voluntary churn has gone in the wrong direction. And so this quarter, this past quarter, is the first quarter of the 6 quarters where the new iPhone has been launched, where we've seen both a sequential and a year-over-year improvement in voluntary churn. So early on, we definitely are seeing those churn characteristics. The other thing I would say is that from a cost to service perspective, not only are we seeing lower usage of the network on iPhone and Androids, so our business case is continuing to perform there, but our calls to care, early on -- again, it's only the first few months -- is lower than it's been for any of our high-end devices in the early months. So if you will, our operating costs are also looking good in terms of the investment and compared to our business case. So -- and again, the last piece on the iPhone is we also sold more of them than our initial plans had indicated as well, 1.8 million. So we see, at least early on, no reason to be concerned at all about our volume commitments, which has come up on previous calls. So we feel good about the early indications of the iPhone, especially the 40% gross add number, which is probably almost 2x the rate that we've seen on the other 2 major carriers.


Your next question comes from the line of Jason Armstrong.

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Dan, maybe first question, just on the handset upgrade percentage in the quarter. I guess I would have expected that to really hit an all-time high with the iPhone launch. But at 9%, more in line with sort of your average over time, definitely indicates some discipline on the handset upgrade cycle, but can you help us think through your ability to really keep this metric under control as you move through 2012? And then Joe, just quickly on the EBITDA guidance, just helping us think through the pacing through 2012. I think you're implying an average of about $950 a quarter. You mentioned first half lower than second half. Just maybe to put some parameters around it, do you think the fourth quarter result that we just had, the $842, represents sort of the trough for company EBITDA?

Daniel R. Hesse

The first part is, again, kind of getting back to the iPhone discussion as well. What we did in advance of the iPhone is we extended, if you will, the period of time that customers would have to stay with us before they'll be eligible for upgrades, and we did away with our loyalty program. In addition, what we did in the later part of the year and that we will continue that discipline in 2012 is be selective in terms of we'll call it customer outreach on upgrades. That has traditionally been a way that we keep churn low, is to get customers to sign new 2-year contracts. But our customers on contract is at a very strong level compared to historical levels, so we feel good about that. So you're exactly right. There's a discipline associated with upgrades, and that's another reason why 40% gross add mix on the iPhone is good to see. We'll watch this in 2012, but we're not providing any specific guidance with respect to what our upgrade percentages will be in '12.

Joseph J. Euteneuer

And in regards to your OIBDA question, you got to remember about the seasonality of the business. So as you're going into the first quarter, you're not really going to expect much. The second quarter, you might get a little more. Remember, the third quarter, you typically have those added expenses and then your fourth quarter ends up being sort of your strong one as you exit the year. So it is pretty fluid. Remember, I want to give you the caution, we don't know whether there's going to be another iPhone. So that can always throw off sort of the timing of what happens on our OIBDA. And as, again, we're just starting Network Vision, and we're working through that and trying to be on an accelerated pace. So I would look at the seasonal pattern as you try to market this out on a quarter-by-quarter basis.


Your next question comes from the line of John Hodulik.

John C. Hodulik - UBS Investment Bank, Research Division

I guess, Joe, first, a quick follow-up to that last question. So does the guidance at the second half OIBDA, expected to be stronger than the first half EBITDA, not include expectations for a fourth quarter refresh on the iPhone? I guess that's first. And then Dan, quick follow-up on some of your earlier comments. Can you just talk about the -- I think you said that you didn't hit the postpaid guidance for '11 because of discounting with the iPhone or Apple products. If you could just give a little bit more color on that. And then if you just talk about the competitive environment as we looked out to 2012, I think Jason touched on the upgrade rates and the eligibility changes that most of the major carriers have made, but he had a data price increase. Are you seeing any sort of lessening of the overall sort of competitive intensity in the industry as seemingly, carriers focus more on margins rather than market share?

Joseph J. Euteneuer

Yes. So in regards to your first question, remember, as we start getting through the year and Steve continues to execute as he's laying out, we're going to get the benefits and start seeing benefits towards the back half of the year. So we are considering the iPhone, the timing of which is really hard to determine. But as we start getting better on roaming and start eliminating sites on iDEN and stuff, we'll start seeing those benefits as we exit the year.

Daniel R. Hesse

For the second part, generally, you tend to see more promotional activity and more aggressive pricing in Q4, because it's the holiday period. You see in retail. You see it across all industries, and we're not immune to that. So as we talk about 2012, you're going to see some seasonality in terms of the aggressiveness of pricing. And we generally -- we'll probably see some of it come back in this Q4 as well in '12, but things get a little bit more rational now in Q1 and Q2 and perhaps in Q3. But what we saw in Q4 of 2011 was unusual even by traditional seasonality's history in that. Generally, you just don't see any discounting on iPhones, and we saw it be very common in both Verizon and AT&T to see $30 per device and up discounts from the -- if you will, the normal pricing, the $200 or the $100 or what have you. They would be, if you will, $170 and $70 instead, and that was unusual. We saw some 4G LTE devices at very low rates that we wouldn't -- that we don't normally see. So the device pricing in Q4 was much lower than we had anticipated and discounting on devices that traditionally have not been discounted, and we just decided that we weren't going to go there.


And your last question comes from the line of Brett Feldman.

Brett Feldman - Deutsche Bank AG, Research Division

And just a sort of follow-up to some of the handset discussions that we were having earlier. When you had your analyst meeting, you talked about how important the iPhone was going to be to the business going ahead. But since then, you signed a new deal with Clearwire. So basically, you have unlimited WiMAX access to their network. How has that influenced the way you're thinking about the way you're putting handsets into the market this year? Are you expecting to be maybe a bit more aggressive around the WiMAX devices? And if so, to what extent has that been factored into the EBITDA guidance you gave?

Daniel R. Hesse

Well, we obviously have a very large base on WiMAX. A lot of customers that currently use that use the -- if you will, the Clearwire or the WiMAX platform, and we'll continue to market and sell devices this year that operate on that platform. And as you know, what really distinguishes Sprint as well is the fact that our pricing for handsets is unlimited. It's not unlimited on data cards or on mobile hotspots, but it is on handsets. So this -- the pricing arrangement that we have with Clearwire is very helpful in that regard, that clarity, that assurety, that ability for us to continue that offer with these devices for the next couple of years. Our focus with Clearwire, really, going forward in terms of handsets and technologies has to do with LTE-TD, which they've announced that they'll be putting into their networks. So expect -- we hope, and these things are fluid. But probably, in the 2013 timeframe, you'd begin to see devices that we'll start offering that will work on Clearwire's new LTE network that they will begin to build in 2013. So we would be, if you will, using Clearwire's WiMAX network for a number of years as we have a lot of devices that are out there, but we'll begin introducing, in '13, devices on the new LTE network that will utilize that capability that Clearwire will be bringing to market. So we have a mix of those over time. And yes, that was all, if you will, considered as we built our OIBDA plan for '12 and going forward. But the big element, as what Joe mentioned in his remarks, was, if you will, both a reduction and a de-risking, if you will, the roaming expenses associated with Clearwire's 4G service in 2012, because it's a fixed amount. Thanks.

Brad Hampton

Thank you all very much for your interest and participation today. We're happy to take additional questions through the Investor Relations team. You can reach us at 1 (800) 259-3755. This concludes our call.


This concludes today's conference call. You may now disconnect.

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