S-4 1 d425100ds4.htm REGISTRATION STATEMENT ON FORM S-4 Registration Statement on Form S-4
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As filed with the Securities and Exchange Commission on February 4, 2013

Registration No. 333-            

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Starburst II, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   4813   46-1170005

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code)

 

(I.R.S. Employer

Identification Number)

38 Glen Avenue

Newton, Massachusetts 02459

(617) 928-9300

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

 

Ronald D. Fisher

President

Starburst II, Inc.

38 Glen Avenue

Newton, Massachusetts 02459

(617) 928-9300

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

Copies to:

 

Kenneth A. Siegel, Esq. Morrison & Foerster LLP Shin-Marunouchi Building,

29th Floor

5-1, Marunouchi 1-Chome

Chiyoda-ku, Tokyo 100-6529 Japan

011-81-3-3214-6522

 

Robert S. Townsend, Esq.

David A. Lipkin, Esq.

Brandon C. Parris, Esq.

Jackie Liu, Esq.

Morrison & Foerster LLP

425 Market Street

San Francisco, CA 94105-2482

(415) 268-7000

 

Charles R. Wunsch, Esq.

Sprint Nextel Corporation

6200 Sprint Parkway

Overland Park, KS 66251

(855) 848-3280

   Thomas H. Kennedy, Esq.

Jeremy D. London, Esq.

Skadden, Arps, Slate,
Meagher & Flom LLP

Four Times Square

New York, NY 10036

(212) 735-3000

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered

 

Proposed

Maximum

Offering Price

Per Share

 

Proposed

Maximum

Aggregate

Offering Price

 

Amount of

Registration Fee

Common Stock, par value $0.01 per share

  Shares(1)   Not Applicable   $4,976,074,707(2)   $678,737

 

 

(1) Represents the maximum number of shares of Starburst II, Inc. common stock estimated to be issuable at the effective time of the merger (as described in the accompanying proxy statement-prospectus) in respect of shares of Series 1 common stock, par value $2.00 per share, of Sprint Nextel Corporation (“Sprint”)
(2) Pursuant to rules 457(f) and 457(c) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is equal to the product obtained by (A) multiplying (1) $5.585, the average of the high and low sale prices of the Series 1 common stock of Sprint, par value $2.00 per share, as reported on the New York Stock Exchange, on January 28, 2013, by (2) 3,064,650,798, which represents the estimated number of shares of Series 1 common stock of Sprint, par value $2.00 per share, that would be outstanding immediately prior to the effective time of the merger described in this proxy statement-prospectus assuming the exercise of all Sprint stock options that are vested or that will vest prior to the effective time and the exchange of shares of Series 1 common stock of Sprint, par value $2.00 per share, underlying restricted stock units that will have vested prior to, or that will vest, at the effective time, and then (B) subtracting $12,140,000,000 (the amount of cash to be paid by the registrant to Sprint stockholders in the merger).

 

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

 

 

 


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The information contained in this proxy statement-prospectus is not complete and may be changed. We may not sell the securities offered by this proxy statement-prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement-prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED FEBRUARY 4, 2013

 

LOGO

MERGER AND OTHER PROPOSALS—YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Sprint Nextel Corporation:

You are cordially invited to attend a special stockholders’ meeting of Sprint Nextel Corporation, a Kansas corporation (referred to as “Sprint”), at [] on [], 2013, at [] [].m., local time.

We are pleased to inform you that the boards of directors of Sprint and SOFTBANK CORP., a Japanese kabushiki kaisha (“SoftBank”), have approved an Agreement and Plan of Merger, dated as of October 15, 2012, as amended on November 29, 2012 (the “Merger Agreement”) by and among Sprint, SoftBank, Starburst I, Inc., a Delaware corporation and a direct wholly owned subsidiary of SoftBank (“HoldCo”), Starburst II, Inc., a Delaware corporation and a direct wholly owned subsidiary of HoldCo (“Parent” or “New Sprint”) and Starburst III, Inc., a Kansas corporation and a direct wholly owned subsidiary of New Sprint (“Merger Sub”). Upon consummation of the merger pursuant to the terms of the Merger Agreement (the “SoftBank Merger”), Merger Sub will merge with and into Sprint, with Sprint surviving the SoftBank Merger as a wholly owned subsidiary of New Sprint. Upon consummation of the SoftBank Merger, New Sprint will be renamed “Sprint Corporation.”

At the special stockholders’ meeting you will be asked to adopt the Merger Agreement and approve certain other matters as set forth in the stockholder notice and accompanying proxy statement-prospectus.

If the Merger Agreement is adopted by Sprint’s stockholders, then upon the terms and subject to the conditions described in the Merger Agreement, upon the effectiveness of the SoftBank Merger, based on the elections made by Sprint stockholders, each outstanding share of Series 1 common stock, $2.00 par value per share, of Sprint (“Sprint common stock”), except as otherwise provided for in the Merger Agreement, will be converted into the right to receive either (i) cash in an amount equal to $7.30 for each share of Sprint common stock or (ii) one share of New Sprint common stock, par value $0.01 per share (“New Sprint common stock”) for each share of Sprint common stock. You will have the right to elect to receive cash or New Sprint common stock, or, to the extent you hold multiple shares of Sprint common stock, a combination of cash and New Sprint common stock, with respect to all or a portion of the Sprint common stock that you own. However, the number of shares of New Sprint common stock that you receive as a result of your stock elections, or the amount of cash you receive as a result of your cash elections, may be less than the number of shares or cash you requested, as the allocations of stock and cash are subject to proration to ensure that New Sprint will pay $12.14 billion in cash in the SoftBank Merger and the former stockholders and other Sprint equityholders will own approximately 30% of the fully diluted equity of New Sprint immediately following the SoftBank Merger. Stockholders who neither elect to receive stock nor to receive cash will be allocated and receive the type (or types) of consideration that remain after all stock and cash elections made by other Sprint stockholders have been made and taken into account. In order for your election to receive cash or stock consideration to be valid, you must submit a properly completed form of election by 5:00 p.m., Eastern time, on the date that is anticipated to be five business days immediately preceding the effective time of the SoftBank Merger, all as provided for in the accompanying proxy statement-prospectus. None of SoftBank (or any of its subsidiaries), New Sprint, Sprint or the Sprint board of directors is making any recommendation as to whether any Sprint stockholder should make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two, or no election. Your vote in favor of the adoption of the Merger Agreement does not constitute an election to receive stock or cash in the SoftBank Merger, and an election to receive stock or cash in the SoftBank Merger does not constitute a vote in favor of the adoption of the Merger Agreement.

New Sprint is applying to have the New Sprint common stock listed on the New York Stock Exchange (“NYSE”) under the proposed symbol “S,” the same ticker symbol currently used by Sprint.


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After careful consideration, Sprint’s board of directors has determined that the SoftBank Merger is in the best interests of Sprint and its stockholders and approved the Merger Agreement and the transactions contemplated by the Merger Agreement. The Sprint board of directors recommends that the stockholders of Sprint vote “FOR the adoption of the Merger Agreement, “FOR” the proposal to approve, by a non-binding advisory vote, certain compensation arrangements for Sprint’s named executive officers in connection with the SoftBank Merger and “FOR” the proposal to postpone or adjourn the special stockholders’ meeting, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement.

The accompanying proxy statement-prospectus provides you with detailed information about the proposed SoftBank Merger, the special stockholders’ meeting and New Sprint. Please give this material your careful attention. You may also obtain more information about Sprint and New Sprint from documents each of them has filed with the Securities and Exchange Commission.

Your vote is very important regardless of the number of shares you own. The SoftBank Merger cannot be completed unless holders of a majority of the outstanding shares of Sprint common stock entitled to vote at the special stockholders’ meeting vote for the adoption of the Merger Agreement. Failing to vote has the same effect as a vote against the adoption of the Merger Agreement. You are cordially invited to attend the special stockholders’ meeting; however, whether or not you plan to attend the special stockholders’ meeting, it is important that your shares be represented.

If you intend to vote by proxy, please complete, date, sign and return the enclosed proxy card. If your shares are held in “street name,” you should check the voting instruction card provided by your broker to see which voting options are available and the procedures to be followed. If you hold shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee. If you have any questions or need assistance in voting your shares, please call our proxy solicitor, Georgeson Inc., toll free at (866) 741-9588 (banks and brokers call (212) 440-9800).

Thank you for your continued support and we look forward to seeing you on [], 2013.

 

Sincerely,
Daniel R. Hesse
Chief Executive Officer

For a discussion of certain risk factors that you should consider in evaluating the transactions described above and an investment in New Sprint common stock, see “Risk Factors” beginning on page 44 of the accompanying proxy statement-prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying proxy statement-prospectus, or determined the accompanying proxy statement-prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The proxy statement-prospectus is dated [], 2013, and is first being mailed to stockholders on or about [], 2013.


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ADDITIONAL INFORMATION

This proxy statement-prospectus incorporates important business and financial information about Sprint from other documents that are not included in or delivered with this proxy statement-prospectus. This information is available to you without charge upon your written or oral request. This proxy statement-prospectus is available at Sprint’s website at www.sprint.com/investors, and you can obtain the documents incorporated by reference in this proxy statement-prospectus by requesting them in writing or by telephone or over the Internet from:

Sprint Nextel Corporation

Brad Hampton, Investor Relations

6200 Sprint Parkway

Overland Park, Kansas 66251

(800) 259-3755

email: investor.relations@sprint.com

If you would like to request any documents, please do so by [], 2013 in order to receive them before the special stockholders’ meeting.

This proxy statement-prospectus and its exhibits are also available for inspection at the public reference facilities of the Securities and Exchange Commission (the “SEC”) at 100 F Street, N.E., Washington, DC 20549. Copies of such information should be obtainable by mail, upon payment of the SEC’s customary charges, by writing to the SEC’s principal office at 100 F Street, N.E., Washington, DC 20549. You may also obtain information by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information relating to Sprint that have been filed via the EDGAR System.

See “Where You Can Find More Information” beginning on page [].


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LOGO

SPRINT NEXTEL CORPORATION

6200 Sprint Parkway

Overland Park, Kansas 66251

Notice of Special Meeting of the Sprint Nextel Corporation Stockholders

To be Held on [], 2013 at [] [].m., local time

To the stockholders of Sprint Nextel Corporation:

This is a notice that a special stockholders’ meeting of Sprint Nextel Corporation, a Kansas corporation (“Sprint”) will be held on [], 2013, beginning promptly at [] [].m., local time, at [], unless postponed or adjourned to a later date. This special stockholders’ meeting will be held to consider and vote upon the following matters:

 

1. to adopt the Agreement and Plan of Merger, dated as of October 15, 2012, as amended on November 29, 2012 (the “Merger Agreement”) by and among Sprint, SOFTBANK CORP., a Japanese kabushiki kaisha (“SoftBank”), Starburst I, Inc., a Delaware corporation and a direct wholly owned subsidiary of SoftBank (“HoldCo”), Starburst II, Inc., a Delaware corporation and a direct wholly owned subsidiary of HoldCo (“Parent” or “New Sprint”), and Starburst III, Inc., a Kansas corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”), a copy of which is attached as Annex A to the proxy statement-prospectus accompanying this notice (referred to as the “Merger Proposal”);

 

2. to approve, by a non-binding advisory vote, certain compensation arrangements for Sprint’s named executive officers in connection with the merger contemplated by the Merger Agreement (referred to as the “Merger-Related Compensation Proposal”); and

 

3. to approve any motion to postpone or adjourn the special stockholders’ meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the Merger Proposal (referred to as the “Adjournment Proposal”);

and to transact any other business as may properly come before the special stockholders’ meeting or any postponement or adjournment of such special stockholders’ meeting.

The Merger Proposal is not conditioned on the approval of the Merger-Related Compensation Proposal or the Adjournment Proposal. The Merger Proposal is the only proposal whose approval is required to adopt the Merger Agreement and consummate the merger.

Only holders of record of Sprint common stock at the close of business on [], 2013, the record date for the special stockholders’ meeting (the “meeting record date”), are entitled to receive this notice and to vote at the special stockholders’ meeting or at any postponement or adjournment of such special stockholders’ meeting.

The accompanying proxy statement-prospectus describes the proposals listed above in more detail. Please refer to the accompanying proxy statement-prospectus, including the Merger Agreement and all other Annexes, Exhibits and any documents incorporated by reference, for further information with respect to the business to be transacted at the special stockholders’ meeting. You are encouraged to read the entire document carefully before voting. In particular, review the section entitled “Risk Factors” beginning on page 44 carefully before voting.

Sprint’s board of directors has approved the Merger Agreement and the merger. Sprint’s board of directors recommends that you vote “FOR” the Merger Proposal, “FOR” the Merger-Related Compensation Proposal and “FOR” the Adjournment Proposal.

YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. The transactions contemplated by the Merger Agreement cannot be completed without the affirmative


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vote on the Merger Proposal by the holders of at least a majority of the outstanding shares of Sprint common stock entitled to vote as of the meeting record date. If you do not vote, the effect will be the same as a vote against the Merger Proposal. You may vote your shares by proxy via the Internet, by telephone, by sending in an appropriately completed paper proxy card or in person by ballot at the special stockholders’ meeting.

If you have any questions concerning the transactions or this proxy statement-prospectus or would like additional copies, please contact

Georgeson Inc.

199 Water Street, 26th Floor

New York, NY 10038

Toll Free: (866) 741-9588

Banks and Brokers: (212) 440-9800

 

   By order of the Board of Directors,
Overland Park, Kansas    James H. Hance, Jr.
[], 2013    Chairman of the Board of Directors

You are cordially invited to attend the special stockholders’ meeting in person. Whether or not you expect to attend the special stockholders’ meeting, please complete, date, sign and return the proxy mailed to you, or vote over the telephone or the Internet as instructed in these materials, as promptly as possible to ensure your representation at the special stockholders’ meeting. Even if you have voted by proxy, you may still vote in person if you attend the special stockholders’ meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the special stockholders’ meeting, you must obtain a proxy issued in your name from such record holder.

THIS PROXY STATEMENT-PROSPECTUS IS FIRST BEING SENT OR GIVEN TO SECURITY HOLDERS ON OR ABOUT [], 2013.


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE SOFTBANK MERGER, THE SPRINT SPECIAL STOCKHOLDERS’ MEETING AND NEW SPRINT

     Q-1   

SUMMARY OF THE PROXY STATEMENT-PROSPECTUS

     1   

The Companies

     1   

The Special Stockholders’ Meeting

     3   

Recommendation of the Sprint Board of Directors

     3   

Opinions of Sprint’s Financial Advisors

     4   

The Structure of the SoftBank Merger

     4   

Summary of the Material Terms of the SoftBank Merger

     6   

Summary of the Bond Purchase Agreement

     12   

Summary of the Warrant

     13   

Regulatory Approvals

     13   

Tax Consequences of the SoftBank Merger

     15   

Overview of the Comparison of Rights of Holders of Sprint Common Stock and New Sprint Common Stock

     15   

Limitations, Restrictions and Conditions on SoftBank’s Conduct of Business and Exercise of Rights

     17   

Share Ownership of Sprint Directors and Executive Officers

     18   

Appraisal Rights

     18   

Risks Associated with the SoftBank Merger, New Sprint and Sprint

     18   

Interests of Certain Sprint Directors and Executive Officers in the SoftBank Merger

     18   

Board of Directors and Management Following the SoftBank Merger

     19   

SUMMARY HISTORICAL FINANCIAL DATA

     21   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     23   

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     41   

MARKET PRICES AND DIVIDEND INFORMATION

     42   

RISK FACTORS

     44   

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

     68   

THE PARTIES TO THE SOFTBANK MERGER

     69   

Sprint Nextel Corporation

     69   

Parent, Merger Sub and HoldCo

     69   

SoftBank

     70   

THE SPECIAL STOCKHOLDERS’ MEETING

     71   

Date, Time and Place

     71   

Purpose of the Special Stockholders’ Meeting

     71   

Recommendations of the Sprint Board of Directors

     71   

Record Date; Stock Entitled to Vote

     71   

Quorum

     72   

Required Vote

     72   

Treatment of Abstentions; Failure to Vote

     72   

Voting of Proxies; Incomplete Proxies

     73   

Shares Held in “Street Name”

     73   

Employee Plan Shares

     74   

Revocation of Proxies and Changes to a Sprint Stockholder’s Vote

     74   

Solicitation of Proxies

     74   

Delivery of Proxy Materials to Households Where Two or More Stockholders Reside

     74   

Voting by Sprint Directors and Executive Officers

     75   

Attending the Sprint Special Stockholders’ Meeting

     75   

 

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SPRINT PROPOSALS

     76   

THE SOFTBANK MERGER

     78   

Background of the SoftBank Merger

     78   

Recommendation of the Sprint Board of Directors; Sprint’s Reasons for the SoftBank Merger

     85   

Opinions of Sprint’s Financial Advisors—Citigroup, Rothschild and UBS

     90   

Summary of Financial Analyses of Sprint’s Financial Advisors

     96   

Certain Financial Scenarios Prepared by the Management of Sprint

     102   

Interests of Certain Sprint Directors and Executive Officers in the SoftBank Merger

     105   

Financing

     109   

Regulatory Matters

     110   

Making the Cash/Stock Election

     112   

Cash/Stock Proration and Allocation Rules

     114   

Treatment of Stock Options, Restricted Stock Units, Performance Units, Employee Stock Purchase Plan and Deferred Compensation Plan Accounts

     117   

Advisory Vote Regarding Merger-Related Executive Compensation (Say-on-Golden-Parachute)

     118   

Appraisal Rights

     120   

Listing of New Sprint Common Stock on the NYSE

     123   

Delisting and Deregistration of Sprint Common Stock after the SoftBank Merger

     123   

Stockholder Lawsuits Challenging the SoftBank Merger

     123   

THE MERGER AGREEMENT

     124   

THE BOND PURCHASE AGREEMENT

     144   

THE WARRANT AGREEMENT

     149   

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SOFTBANK MERGER

     150   

ACCOUNTING TREATMENT OF THE SOFTBANK MERGER

     154   

DESCRIPTION OF NEW SPRINT COMMON STOCK

     155   

COMPARISON OF RIGHTS OF HOLDERS OF SPRINT COMMON STOCK AND NEW SPRINT COMMON STOCK

     156   

CONTROL AND MANAGEMENT OF NEW SPRINT AFTER THE SOFTBANK MERGER

     164   

SoftBank

     164   

Board of Directors of New Sprint

     164   

Directors and Executive Officers

     165   

Committees

     166   

Limitations, Restrictions and Conditions on SoftBank’s Conduct of Business and Exercise of Rights

     166   

Controlled Company

     168   

Certain Relationships and Related Transactions

     169   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SPRINT

     170   

LEGAL MATTERS

     172   

EXPERTS

     172   

SPRINT STOCKHOLDER PROPOSALS

     172   

WHERE YOU CAN FIND MORE INFORMATION

     173   

INDEX TO FINANCIAL STATEMENTS

     F-1   
Annex A—Agreement and Plan of Merger, as amended   
Annex B—Bond Purchase Agreement   
Annex C—Opinion of Citigroup Global Markets, Inc.   
Annex D—Opinion of Rothschild Inc.   
Annex E—Opinion of UBS Securities LLC   
Annex F—Section 17-6712 of the Kansas General Corporation Code   

 

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QUESTIONS AND ANSWERS ABOUT THE SOFTBANK MERGER, THE SPRINT SPECIAL STOCKHOLDERS’ MEETING AND NEW SPRINT

Questions and Answers About the SoftBank Merger

Q: Why is Sprint proposing the SoftBank Merger?

A: Sprint is proposing the SoftBank Merger pursuant to the terms of the Merger Agreement with SoftBank to create New Sprint, a financially stronger company that Sprint and SoftBank believe will be better able to compete in the U.S. telecommunications industry and that is anticipated to deliver significant benefits to U.S. consumers based on SoftBank’s expertise in the deployment of next-generation wireless networks, and track record of success in taking share in mature markets from larger telecommunications competitors.

With the $3.1 billion in cash that SoftBank has already invested in Sprint pursuant to a bond purchase agreement by and between Sprint and Parent (the “Bond Purchase Agreement”), and the $4.9 billion in cash that SoftBank will invest in New Sprint pursuant to the terms of the Merger Agreement at the effective time of the SoftBank Merger (the “Equity Contribution”), SoftBank and Sprint are significantly enhancing Sprint’s financial position to help make New Sprint a more robust competitor in the U.S. telecom market.

Additionally, Sprint is proposing the SoftBank Merger as part of the larger SoftBank investment because it is expected to:

 

   

give Sprint stockholders the opportunity to realize an attractive cash premium or hold shares in a stronger, better capitalized New Sprint, subject to proration rules which are more fully described in “Summary of the Proxy Statement-Prospectus” beginning on page [] and “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page [];

 

   

enable New Sprint to benefit from SoftBank’s global leadership in LTE;

 

   

improve the operating scale and create opportunities for collaborative innovation in consumer services and applications; and

 

   

provide other benefits and opportunities described in this proxy statement-prospectus.

Accordingly, the Sprint board of directors believes that the proposed SoftBank Merger is in the best interests of Sprint stockholders.

Q: As a Sprint stockholder, what will I receive in the SoftBank Merger?

A: Each share of Sprint common stock you hold will be exchanged for the right to receive either $7.30 in cash (the “Cash Consideration”) or one share of New Sprint common stock (the “Stock Consideration”), subject to proration and allocation rules which are more fully described in “Summary of the Proxy Statement-Prospectus” beginning on page [] and “The Merger Agreement—Cash/Stock Proration and Allocation Rules” beginning on page []. Each Sprint stockholder may elect to receive cash, or New Sprint common stock, or, to the extent the stockholder holds multiple shares, a combination of the two, in exchange for shares of Sprint common stock. In addition, because New Sprint will not issue fractional shares, you will receive a cash payment, without interest, instead of any fractional share of New Sprint common stock you would otherwise receive (after taking into account all shares of New Sprint common stock that a stockholder would otherwise receive in the SoftBank Merger). Please note that Sprint stockholders and other Sprint equityholders will not be receiving any interest in SoftBank or SoftBank’s ordinary shares in connection with the SoftBank Merger or the other transactions described herein.

Q: What will determine if I will receive New Sprint common stock, cash or a combination of the two?

A: You may elect to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two in exchange for your shares of Sprint common stock. However, depending on what type of consideration the other Sprint stockholders elect to receive as consideration and the proration rules, you may

 

Q-1


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not receive your preferred type of consideration with respect to all of your shares of Sprint common stock. The elections that you and other Sprint stockholders make regarding the receipt of cash or shares of New Sprint common stock in exchange for shares of Sprint common stock will determine the mix of consideration that you will receive in the SoftBank Merger. For a complete description of the proration and allocation rules, see “Summary of the Proxy Statement-Prospectus” beginning on page [] and “The Merger Agreement—Cash/Stock Proration and Allocation Rules” beginning on page [].

Q: How do I elect to receive cash or shares of New Sprint common stock? Can I change or revoke my election?

A: After you have determined whether you would like to receive cash or New Sprint common stock, or a combination of the two to the extent you hold multiple shares of Sprint common stock, you should properly complete the form of election, when delivered to you by Georgeson, Inc. (“Georgeson”), Sprint’s proxy solicitor, indicating your election. Sprint stockholders who fail to properly complete and return the form of election prior to the election deadline (as described below) will be considered non-electing stockholders for all purposes of the Merger Agreement, and accordingly will receive merger consideration (consisting of cash, shares of New Sprint common stock or a combination of the two) that cannot be predicted or determined until all elections by other Sprint stockholders have been made and taken into account, and will be determined based on the remaining mix of consideration available after giving effect to all such other elections (subject to prorations).

At least 20 business days prior to the anticipated effective time of the SoftBank Merger, or such other date as Parent and Sprint may mutually agree in writing, a form of election will be mailed to each of Sprint’s stockholders of record determined as of the most recent practicable date prior to the mailing date (the “election record date”). Your form of election must be returned to Computershare Trust Company, N.A. (“Computershare”), the exchange agent, no later than the election deadline, which is expected to be 5:00 p.m., Eastern time, on the date that is five business days immediately preceding the effective time of the SoftBank Merger. Sprint will publicly announce the election deadline by press release at least five business days prior to such date. Georgeson will make available the form of election upon request to any person who becomes a holder (or beneficial owner) of Sprint common stock between the election record date and the close of business on the day prior to the election deadline. You are encouraged to return your election form as promptly as practicable. SoftBank and Sprint anticipate that the SoftBank Merger will be completed in mid-2013.

Sprint stockholders who hold their shares in “street name,” that is, with a broker, dealer, bank or other financial institution, and who wish to make an election will have to instruct their broker, dealer, bank or other financial institution, that holds their shares to make an election on their behalf, or to change or revoke an election. For a more detailed description of the election procedures, see “The Merger Agreement—Making the Cash/Stock Election” beginning on page []. You may change your election by delivering a later dated form of election to Computershare before the election deadline. You may revoke your election by written notice of revocation to Computershare before the election deadline.

None of SoftBank (or any of its subsidiaries), New Sprint, Sprint or the Sprint board of directors makes any recommendation about whether any Sprint stockholder should make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two, or no election. Each holder of shares of Sprint common stock must make his or her own decision about whether to make an election and, if so, what election to make.

Q: If I am a Sprint stockholder, am I required to complete a form of election in order to receive my merger consideration?

A: No. If you do not make an election, you will still receive your portion of the merger consideration. However, Sprint stockholders who fail to properly complete and return the form of election prior to the election deadline will be considered non-electing stockholders for all purposes of the Merger Agreement, and accordingly

 

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will receive merger consideration (consisting of cash, shares of New Sprint common stock or a combination of the two) that cannot be predicted or determined until all elections by other Sprint stockholders have been made and taken into account, and will be determined based on the remaining mix of consideration after giving effect to all such other elections (subject to prorations). See “The Merger Agreement—Cash/Stock Proration and Allocation Rules” beginning on page [].

Q: How will Sprint’s recently announced transaction to acquire Clearwire Corporation affect the SoftBank Merger?

A: On December 17, 2012, Sprint announced that it had agreed to acquire all of the equity interests of Clearwire Corporation (together with Clearwire Communications LLC, “Clearwire”) not currently owned by Sprint (the “Clearwire Acquisition”), subject to the terms and conditions of the agreement and plan of merger, dated as of December 17, 2012, by and among Sprint, Clearwire Corporation and Collie Acquisition Corp. (the “Clearwire Acquisition Agreement”). If the Clearwire Acquisition Agreement is adopted by Clearwire’s stockholders and the other closing conditions to the Clearwire Acquisition are satisfied or waived, then upon the terms and subject to the conditions described in the Clearwire Acquisition Agreement, upon the closing of the Clearwire Acquisition, each outstanding share of Class A common stock, $0.0001 par value per share, of Clearwire Corporation (“Clearwire common stock”), except as otherwise provided for in the Clearwire Acquisition Agreement, will be converted into the right to receive cash in an amount equal to $2.97, and Clearwire Corporation will survive the acquisition as a wholly owned subsidiary of Sprint. Clearwire’s stockholders will not receive shares of Sprint common stock or shares of New Sprint common stock in connection with the Clearwire Acquisition. Before the Clearwire Acquisition can be consummated, a number of conditions must be satisfied or waived, including but not limited to obtaining requisite approval from Clearwire’s stockholders, receipt of all required regulatory approvals, and various other conditions.

In addition, in connection with the Clearwire Acquisition, Sprint entered into an agreement with each of Intel Capital Corporation, Intel Capital (Cayman) Corporation, Intel Capital Wireless, Comcast Wireless Investment, LLC and BHN Spectrum Investments, LLC (collectively, the “Voting Agreement Stockholders”) whereby (i) if the Clearwire Acquisition Agreement is terminated due to the failure of the Clearwire stockholders to approve the Clearwire Acquisition and (ii) either (a) the SoftBank Merger has been consummated or (b) the SoftBank Merger shall have been terminated in order for Sprint to enter into an alternative transaction (and such alternative transaction has been consummated), then each such Voting Agreement Stockholder will, upon the occurrence of the events described in (a) or (b), deliver a right of first offer notice to the other equityholders of Clearwire, including Sprint, to offer to sell all of the equity securities of Clearwire such entity owns at a price per share equal to $2.97, and Sprint will then be obligated to elect to purchase any such equity securities in any such notice. Each of the Voting Agreement Stockholders has agreed not to exercise their respective purchase rights with respect to any such notice it receives from the other Voting Agreement Stockholders.

In connection with the Clearwire Acquisition, SoftBank entered into a waiver and consent with Sprint which permitted Sprint to enter into the agreements related thereto and provided SoftBank with certain rights to information and review of certain actions which might be taken by Sprint in connection with the Clearwire Acquisition. Sprint agreed to, among other things, consider in good faith SoftBank’s comments and suggestions, with respect to certain matters related to the Clearwire Acquisition. In addition, Sprint agreed not to take certain actions with respect to the Clearwire Acquisition without SoftBank’s consent, including terminating the Clearwire Acquisition (subject to the fiduciary duties of the Sprint board of directors) or making any decision with respect to the satisfaction of any conditions thereto, or taking any action that would have a material adverse effect on the expected benefits to Sprint of consummating the Clearwire Acquisition.

The adoption by Sprint’s stockholders of the Merger Agreement and the completion of the SoftBank Merger is a condition to Sprint’s obligation to consummate the Clearwire Acquisition, but Sprint could elect to waive this condition and permit the closing of the Clearwire Acquisition to occur first, subject to the consent of SoftBank as

 

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discussed above. Likewise, Sprint could waive this condition if Sprint stockholders failed to adopt the Merger Agreement with SoftBank, in which case the Clearwire Acquisition could still occur, even if the SoftBank Merger does not occur.

On January 8, 2013, Clearwire announced that it had received an alternative transaction proposal from DISH Network Corporation and that the Special Committee of the Clearwire board of directors has determined that its fiduciary duties require it to engage with DISH to discuss, negotiate and/or provide information in connection with the DISH Proposal. The Special Committee has not announced any determination to change its recommendation of the Clearwire Acquisition.

Sprint’s stockholders are not being asked to vote to approve the Clearwire Acquisition, and neither the approval of the Clearwire Acquisition Agreement by Clearwire’s stockholders nor the closing of the Clearwire Acquisition are conditions to the closing of the SoftBank Merger.

Sprint and Clearwire have made filings and taken other actions, and will continue to take actions, necessary to obtain governmental approvals in connection with the Clearwire Acquisition and related transactions. While Sprint and SoftBank believe that required regulatory approvals for the SoftBank Merger and the Clearwire Acquisition will ultimately be obtained, these approvals are not assured.

Q: What are the conditions to the closing of the SoftBank Merger?

A: The closing of the SoftBank Merger is subject to certain closing conditions, including but not limited to adoption of the Merger Agreement by the Sprint stockholders, receipt of all required regulatory approvals, and other conditions.

Certain of these conditions have been satisfied. For example, each of SoftBank and Sprint has made the required notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and on December 6, 2012, the Antitrust Division (the “Antitrust Division”) of the United States Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”) granted early termination of the waiting period under the HSR Act. See the section entitled “The Merger Agreement—Regulatory Matters” beginning on page [].

In addition, on November 20, 2012, Sprint announced that it had obtained the necessary consents to amend the applicable provisions of the outstanding indentures such that the SoftBank Merger would not constitute a change of control and, as a result indebtedness outstanding under Sprint’s applicable indentures will not become payable by reason of completion of the SoftBank Merger, and on December 11, 2012, Sprint acquired all shares of Clearwire Corporation (and the associated limited liability company units of Clearwire Communications LLC) held by Eagle River Holdings, LLC (“Eagle River”) as designated in Eagle River’s notice dated October 17, 2012 (the “Eagle River Clearwire Interests”).

See the section entitled “The Merger Agreement—Conditions to the Completion of the SoftBank Merger” beginning on page [] for more information.

The SoftBank Merger is not conditioned on approval of the Clearwire Acquisition Agreement by Clearwire’s stockholders or the closing of the Clearwire Acquisition.

Q: When do you expect the SoftBank Merger to be completed?

A: We are working to complete the SoftBank Merger as quickly as possible. We currently expect to complete the SoftBank Merger in mid- 2013, but the actual completion date cannot be predicted at this time and may be delayed by regulatory approvals, matters relating to the Clearwire Acquisition and other matters or by the mutual agreement of Sprint and SoftBank.

 

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Q: What are the federal income tax consequences of the SoftBank Merger?

A: The SoftBank Merger is intended to qualify as a transaction described in Section 351 of the Internal Revenue Code, of 1986, as amended (the “Code”), for U.S. federal income tax purposes. Assuming it so qualifies, no gain or loss will be recognized by Sprint solely as a result of the SoftBank Merger. The tax consequences to a Sprint stockholder depend upon the consideration received by the stockholder:

 

   

Holders receiving solely cash for their Sprint common stock generally will recognize gain or loss equal to the difference between the amount of cash received and their tax basis in their shares of Sprint common stock.

 

   

Holders receiving solely New Sprint common stock in the SoftBank Merger generally will not recognize gain or loss. However, holders generally will recognize gain or loss in respect of any cash received in lieu of a fractional share of New Sprint common stock.

 

   

Holders receiving a combination of New Sprint common stock and cash will be prevented from recognizing a loss (except with respect to cash received in lieu of fractional shares of New Sprint common stock). These holders generally will recognize gain, if any, but not in excess of the amount of the cash they receive in the SoftBank Merger.

For a further summary of the U.S. federal income tax consequences of the SoftBank Merger, see “Material United States Federal Income Tax Consequences of the SoftBank Merger” beginning on page [].

Q: Should I send in my stock certificates now?

A: No. After the SoftBank Merger is completed, you will receive a transmittal form and written instructions on how to exchange your stock certificates for New Sprint common stock and/or cash.

PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY OR WITH YOUR FORM OF ELECTION.

Questions and Answers About the Sprint Special Stockholders’ Meeting

Q: When and where is the Sprint special stockholders’ meeting?

A: The special stockholders’ meeting will be held at [] [].m., local time on [], 2013 at [].

Q: What matters will be voted on at the special stockholders’ meeting?

A: You will be asked to consider and vote on the following proposals:

 

   

to adopt the Merger Agreement, a copy of which is attached as Annex A to this proxy statement-prospectus, which is referred to as the “Merger Proposal”;

 

   

to approve, by a non-binding advisory vote, certain compensation arrangements for Sprint’s named executive officers in connection with the SoftBank Merger, which is referred to as the “Merger-Related Compensation Proposal”; and

 

   

to approve any motion to postpone or adjourn the special stockholders’ meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the Merger Proposal, which is referred to as the “Adjournment Proposal”;

and to transact any other business as may properly come before the special stockholders’ meeting or any postponement or adjournment of such special stockholders’ meeting.

 

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Approval of the Merger Proposal is required as a condition to the consummation of the SoftBank Merger. Approval of the Merger-Related Compensation Proposal is not required to consummate the SoftBank Merger.

Sprint’s stockholders are not being asked to vote to approve the Clearwire Acquisition, and the approval of the Clearwire Acquisition Agreement by Clearwire’s stockholders and the closing of the Clearwire Acquisition are not conditions to the closing of the SoftBank Merger.

Q: How can I obtain admission to the special stockholders’ meeting?

A: You are entitled to attend the special stockholders’ meeting only if you were a Sprint stockholder as of the close of business on [], 2013, which is referred to as the “meeting record date,” or hold a valid proxy for the special stockholders’ meeting. You should be prepared to present photo identification issued by a government agency, such as a driver’s license or passport, for admittance. In addition, if you are a record holder, your name is subject to verification against the list of record holders on the meeting record date prior to being admitted to the meeting. If you are not a record holder but hold shares through a broker or nominee (in “street name”), you will need to provide proof of beneficial ownership on the meeting record date, such as your most recent account statement prior to the meeting record date, or similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the special stockholders’ meeting.

Q: What do I need to do now?

A: There are two steps you should take now:

 

  1. Carefully read and consider the information contained in this proxy statement-prospectus.

 

  2. Vote your shares of Sprint common stock. You should cast your vote on the Merger Proposal, Merger-Related Compensation Proposal and the Adjournment Proposal by voting via the Internet, by phone or by completing, signing and dating your proxy card and returning it promptly in the enclosed self-addressed envelope. You can also attend the special stockholders’ meeting and vote in person.

Q: How can I vote my shares in person at the special stockholders’ meeting?

A: Shares held directly in your name as the stockholder of record may be voted by you in person at the special stockholders’ meeting. If you choose to do so, please bring the enclosed proxy card and proof of identification. Even if you plan to attend the special stockholders’ meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the special stockholders’ meeting. If you vote your shares in person at the special stockholders’ meeting any previously submitted proxies will be revoked. Shares held in “street name” may be voted in person by you at the special stockholders’ meeting only if you obtain a signed proxy from the stockholder of record giving you the right to vote the shares. Your vote is important. Accordingly, we urge you to sign and return the accompanying proxy card whether or not you plan to attend the special stockholders’ meeting.

Subject to space availability, all Sprint stockholders as of the meeting record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at [] [].m. Cameras, recording devices and other electronic devices will not be permitted, and may not be used, at the special stockholders’ meeting.

Q: How do I vote?

A: If you are a stockholder of record of Sprint as of the meeting record date, you may submit your proxy before the special stockholders’ meeting in one of the following ways:

 

   

use the toll-free number shown on your proxy card;

 

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visit the website shown on your proxy card to vote via the Internet; or

 

   

complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

You may also cast your vote in person at the special stockholders’ meeting, as discussed above.

If your shares are held in “street name,” through a broker, bank or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. “Street name” stockholders who wish to vote at the meeting will need to obtain a proxy form from their broker, bank or other nominee. If you hold your shares in an employee plan provided by Sprint, please see the question below “How are my employee plan shares voted?”

Q: My shares are held in “street name” by my broker, bank or other nominee. Will my broker, bank or other nominee automatically vote my shares for me?

A: No. If your shares are held in the name of a broker, bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” You are not the “record holder” of such shares. If this is the case, this proxy statement-prospectus has been forwarded to you by your broker, bank or other nominee. As the beneficial holder, unless your broker, bank or other nominee has discretionary authority over your shares, you generally have the right to direct your broker, bank or other nominee as to how to vote your shares. You can contact your broker to obtain directions on how to instruct your broker with respect to the voting of your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which your broker, bank or other nominee does not have discretionary authority. This is often called a “broker non-vote.” In connection with the special stockholders’ meeting, broker non-votes will have the same effect as a vote “AGAINST” the Merger Proposal for purposes of determining whether or not such proposal has been approved, but stockholders seeking appraisal rights must take further action to perfect such rights (see “The SoftBank Merger—Appraisal Rights” beginning on page [] for more information). Assuming a quorum is present, broker non-votes will have no effect on the outcome of the vote on the Merger-Related Compensation Proposal or the Adjournment Proposal. You should therefore provide your broker, bank or other nominee with instructions as to how to vote your shares of Sprint common stock.

Please follow the voting instructions provided by your broker, bank or other nominee so that it may vote your shares on your behalf. Please note that you may not vote shares held in street name by returning a proxy card directly to Sprint or by voting in person at your special stockholders’ meeting unless you first obtain a proxy from your broker, bank or other nominee.

Q: How are my employee plan shares voted?

A: Participants in the Sprint 401(k) Plan will receive separate voting instruction cards covering their shares held in the plan. The plan trustee will vote the uninstructed shares of Sprint common stock in the same proportion as the instructed shares.

Shares of Sprint common stock purchased through the Sprint Employee Stock Purchase Plan are held in brokerage accounts and are treated the same as other beneficially owned shares. See “My shares are held in ‘street name’ by my broker, bank or other nominee. Will my broker, bank or other nominee automatically vote my shares for me?” above.

Q: How does Sprint’s board of directors recommend that I vote on the proposals?

A: Sprint’s board of directors recommends that you vote:

 

   

FOR” the Merger Proposal;

 

   

FOR” the Merger-Related Compensation Proposal; and

 

   

FOR” the Adjournment Proposal.

 

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None of SoftBank (or any of its subsidiaries), New Sprint, Sprint or the Sprint board of directors is making any recommendation as to whether any Sprint stockholder should make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two, or no election.

Q: What if I do not vote, or I abstain?

A: An abstention occurs when a stockholder attends the special stockholders’ meeting in person and does not vote or returns a proxy with an “abstain” vote.

If you fail to vote or fail to instruct your broker, bank or other nominee how to vote on the Merger Proposal, or respond with an “abstain” vote on the Merger Proposal, it will have the same effect as a vote cast “AGAINST” the Merger Proposal.

Assuming a quorum is present, if you do not attend the special stockholders’ meeting and fail to vote by proxy or fail to instruct your broker, bank or other nominee how to vote on the Merger-Related Compensation Proposal or the Adjournment Proposal, it will have no effect on the outcome of the vote on the Merger-Related Compensation Proposal or the Adjournment Proposal, as applicable.

If you attend the special stockholders’ meeting and fail to vote or respond with an “abstain” vote, it will have the same effect as a vote “AGAINST” the Merger-Related Compensation Proposal or the Adjournment Proposal, as applicable.

Therefore, we urge you to vote.

If you properly submit your proxy but do not indicate how you want to vote on the proxy card, your proxy will be counted as a vote in favor of the Merger Proposal, the Merger-Related Compensation Proposal and the Adjournment Proposal.

Q: What vote of Sprint’s stockholders is required to approve each proposal?

A: The Merger Proposal: The affirmative vote of a majority of the outstanding shares of Sprint common stock entitled to vote at the special stockholders’ meeting is required to approve the Merger Proposal. Only votes cast “FOR” the Merger Proposal constitute affirmative votes. Abstentions are counted for quorum purposes, but since they are not votes cast “FOR” the Merger Proposal, they will have the same effect as a vote “AGAINST” the Merger Proposal. Broker non-votes will also have the same effect as a vote “AGAINST” the Merger Proposal. Accordingly, a failure to vote, abstention or broker non-votes will have the same effect as a vote “AGAINST” the adoption of the Merger Agreement.

The Merger-Related Compensation Proposal: In accordance with Section 14A of the Securities Exchange Act of 1934 (as amended), which we refer to as the Exchange Act, Sprint is providing stockholders with the opportunity to approve, by a non-binding, advisory vote, certain compensation payments for Sprint’s named executive officers in connection with the SoftBank Merger, as disclosed in “The SoftBank Merger— Advisory Vote Regarding Merger-Related Compensation.” The affirmative vote of a majority of the shares of Sprint common stock represented (in person or by proxy) at the special stockholders’ meeting and entitled to vote on the proposal is required to approve the Merger-Related Compensation Proposal. Only votes cast “FOR” the Merger-Related Compensation Proposal constitute affirmative votes. Assuming a quorum is present, a non-attending record holder’s failure to vote by proxy and broker non-votes will have no effect on the outcome of the vote on the Merger-Related Compensation Proposal. If you attend the special stockholders’ meeting and fail to vote or respond with an “abstain” vote, it will have the same effect as a vote “AGAINST” the Merger-Related Compensation Proposal.

 

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The Adjournment Proposal: The affirmative vote of a majority of the shares of Sprint common stock represented (in person or by proxy) at the special stockholders’ meeting and entitled to vote on the proposal is required to approve the Adjournment Proposal. Only votes cast “FOR” the Adjournment Proposal constitute affirmative votes. Assuming a quorum is present, a non-attending record holder’s failure to vote by proxy and broker non-votes will have no effect on the outcome of the vote on the Adjournment Proposal. If you attend the special stockholders’ meeting and fail to vote or respond with an “abstain” vote, it will have the same effect as a vote “AGAINST” the Adjournment Proposal.

As of January 25, 2013, Sprint’s directors and executive officers held less than 1% of Sprint’s common stock, and the known beneficial owners of 5% or more of Sprint’s common stock, excluding SoftBank, held approximately 31.1% of Sprint’s common stock. Although SoftBank may be deemed to beneficially own 16.4% of Sprint’s common stock, as such holdings are based solely on SoftBank’s beneficial ownership of Sprint common stock underlying the Bond, such shares will not be issued and outstanding as of the meeting record date and therefore may not be voted at the special stockholders’ meeting. See “Security Ownership of Certain Beneficial Owners and Management of Sprint” beginning on page [].

Q: Who is entitled to vote at the special stockholders’ meeting?

A: All holders of Sprint common stock as of the close of business on the meeting record date are entitled to vote at the special stockholders’ meeting, or any postponements or adjournments thereof. As of the meeting record date there were [] shares of Sprint common stock outstanding and entitled to vote, held by approximately [] holders of record. Each holder of Sprint common stock is entitled to one vote for each share the stockholder held as of the meeting record date. Please also read the disclosure under “How can I vote my shares in person at the special stockholders’ meeting?”

Q: May I change my vote after I have delivered my proxy or voting instruction card?

A: Yes. You may change your vote at any time before your proxy is voted at the special stockholders’ meeting. You may do this in one of four ways:

 

   

by sending a notice of revocation to the corporate secretary of Sprint;

 

   

by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so and following the instructions on the proxy card;

 

   

by sending a completed proxy card bearing a later date than your original proxy card; or

 

   

by attending the special stockholders’ meeting and voting in person.

If you choose any of the first three methods, you must take the described action no later than the beginning of the special stockholders’ meeting.

If your shares are held in an account at a broker, bank or other nominee, you should contact your broker, bank or other nominee to change your vote.

Participants in the Sprint 401(k) Plan will receive separate voting instruction cards covering their shares held in the plan, including instructions on how to change your vote or revoke your proxy.

Shares of Sprint common stock purchased through the Sprint Employee Stock Purchase Plan are held in brokerage accounts and are treated the same as other beneficially owned shares. You must contact your broker to change your vote or revoke your proxy.

 

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Q: What does it mean if I get more than one proxy card or vote instruction card?

A: If your shares are registered differently and are in more than one account, you will receive more than one card. Please sign and return each of the proxy cards you receive using the methods described above to ensure that all of your shares are voted.

Q: What constitutes a quorum at the special stockholders’ meeting?

A: The presence, in person or by proxy, of stockholders holding a majority of the outstanding shares of Sprint common stock on the meeting record date is necessary to constitute a quorum at the special stockholders’ meeting. Abstentions and broker non-votes, if any, will be treated as present for the purposes of determining the presence or absence of a quorum for the special stockholders’ meeting.

Q: Am I entitled to appraisal rights?

A: You will be entitled to appraisal rights in connection with the SoftBank Merger provided that you comply with the applicable provisions of Kansas law, including, among other things, not voting in favor of the Merger Proposal and not surrendering your certificates representing shares of Sprint common stock for the applicable merger consideration. See “The SoftBank Merger—Appraisal Rights” beginning on page [].

Q: What happens if I sell my shares of Sprint common stock before the special stockholders’ meeting?

A: The meeting record date is earlier than both the date of the special stockholders’ meeting and the date that the SoftBank Merger is expected to be completed. If you transfer your shares of Sprint common stock after the Sprint meeting record date but before the special stockholders’ meeting, you will retain your right to vote at the special stockholders’ meeting, but you will have transferred the right to receive the SoftBank Merger consideration in the SoftBank Merger. In order to be eligible to receive the merger consideration, you must hold your shares through the effective time of the SoftBank Merger.

Q: Will Sprint still have an annual stockholders’ meeting in 2013?

A: Sprint does not expect to hold an annual stockholders’ meeting in 2013 while the SoftBank Merger is pending, and it currently plans to delay its 2013 annual stockholders’ meeting and only hold an annual meeting in 2013 if the SoftBank Merger is terminated.

Questions and Answers About New Sprint

Q: Will I receive a physical certificate for any shares of New Sprint common stock which are issued to me in the SoftBank Merger?

A: No, unless one is requested. If you receive New Sprint common stock in the SoftBank Merger, your New Sprint common stock will be issued under New Sprint’s direct registration system. This means your New Sprint common stock will be held in an account maintained by Computershare, New Sprint’s transfer agent. If you want a physical certificate, you can request one at any time. If you hold your shares through a bank, broker or other nominee, you will initially hold your New Sprint common stock through that nominee.

Q: Will I be able to trade any New Sprint common stock that I receive in connection with the SoftBank Merger?

A: The shares of New Sprint common stock issued in connection with the SoftBank Merger will be freely tradable, unless you are an affiliate of Sprint or New Sprint. Generally, persons who are deemed to be affiliates of New Sprint must comply with Rule 144 under the Securities Act of 1933 (the “Securities Act”) if they wish to sell or otherwise transfer any shares of New Sprint common stock received in connection with the SoftBank Merger. You will be notified if you are such an affiliate.

 

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Q: What will happen to my employee equity awards to acquire Sprint common stock and certain other cash-based awards granted under Sprint’s stock plans?

A: Options to purchase shares of Sprint common stock will be assumed by New Sprint and will become exercisable upon vesting for shares of New Sprint common stock after the effective time of the SoftBank Merger. The number of shares of New Sprint common stock issuable upon the exercise of these options will be equal to the number of shares of Sprint common stock that could have been purchased before the SoftBank Merger upon the exercise of these options multiplied by the “award exchange ratio” described under “The SoftBank Merger—Treatment of Stock Options, Restricted Stock Units, Performance Units, Employee Stock Purchase Plan and Deferred Compensation Plan Accounts” beginning on page [] and rounded down to the nearest whole share. The respective exercise price per share of New Sprint common stock will be equal to the exercise price per share of Sprint common stock subject to these options, divided by the award exchange ratio and rounded up to the nearest whole cent.

Restricted stock units (“RSUs”) representing the right to vest in and be issued shares of Sprint common stock will similarly be assumed by New Sprint and will similarly represent, after the effective time of the SoftBank Merger, the right to be issued, upon vesting, a number of shares of New Sprint common stock determined with reference to the award exchange ratio. Performance units will also be assumed by New Sprint and will continue to vest on the same terms and conditions applicable to the assumed performance unit as of immediately prior to the effective time of the SoftBank Merger. Performance units and RSUs that vest subject to achievement of performance objectives that relate to performance periods that have not yet been completed as of the closing date will be treated as if target performance had been achieved as of the closing date but will continue to be subject to the existing vesting provisions during the applicable performance period, subject to certain exceptions. See “The SoftBank Merger—Treatment of Stock Options, Restricted Stock Units, Performance Units, Employee Stock Purchase Plan and Deferred Compensation Plan Accounts” beginning on page [].

Notwithstanding the assumption of the Sprint options, RSUs and performance units by New Sprint, generally, each such option, RSU or performance unit, as the case may be, will remain governed by the terms of the respective Sprint equity plan and the individual option agreement or award agreement, as the case may be.

Q: Where will shares of New Sprint common stock be listed?

A: New Sprint is applying to have the New Sprint common stock listed on the NYSE under the proposed symbol “S,” the same ticker symbol currently used by Sprint.

Q: Will I receive dividends on my New Sprint common stock?

A: New Sprint does not currently intend to pay dividends on its common stock.

Q: Who can help answer my questions?

A: If you have any questions about the SoftBank Merger or how to submit your proxy, or how to submit your form of election, or if you need additional copies of this proxy statement-prospectus or the enclosed proxy card, form of election or voting instructions, you should contact:

Georgeson Inc.

199 Water Street, 26th Floor

New York, NY 10038

Toll Free: (866) 741-9588

Banks and Brokers: (212) 440-9800

 

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SUMMARY OF THE PROXY STATEMENT-PROSPECTUS

This summary highlights information contained elsewhere in this proxy statement-prospectus and may not contain all the information that is important to you with respect to the SoftBank Merger and the other matters being considered at the special stockholders’ meeting. We urge you to read the remainder of this proxy statement-prospectus carefully, including the attached Annexes, and the other documents incorporated by reference herein. See also the section entitled “Where You Can Find More Information.” We have included page references in this summary to direct you to more complete descriptions of the topics presented below.

The Companies (see pages [] and [])

Sprint

Sprint (together with its consolidated subsidiaries) is a communications company offering a comprehensive range of wireless and wireline communications products and services that are designed to meet the needs of individual consumers, businesses, government subscribers and resellers. Sprint’s operations are organized to meet the needs of its targeted subscriber groups through focused communications solutions that incorporate the capabilities of its wireless and wireline services. Sprint is the third largest wireless communications company in the United States based on wireless revenue, one of the largest providers of wireline long distance services, and one of the largest carriers of Internet traffic in the nation. Sprint’s services are provided through its ownership of extensive wireless networks, an all-digital global long distance network and a Tier 1 Internet backbone.

Sprint’s principal offices are located at 6200 Sprint Parkway, Overland Park, Kansas 66251 and its telephone number is (855) 848-3280. Sprint common stock is listed on the NYSE, trading under the symbol “S.”

For further information see “The Parties to the SoftBank Merger” beginning on page [].

Parent, Merger Sub and HoldCo

Parent and Merger Sub are wholly owned subsidiaries of SoftBank, formed by SoftBank specifically for the transactions contemplated by the Merger Agreement and the Bond Purchase Agreement. To date, neither of these entities has conducted any activities other than those incident to their formation, the matters contemplated by the Merger Agreement and the Bond Purchase Agreement (including the purchase by Parent of the $3.1 billion convertible bond issued by Sprint (the “Bond”)) and the preparation of this proxy statement-prospectus. Pursuant to the Merger Agreement, Merger Sub will merge with and into Sprint, with Sprint surviving the SoftBank Merger as a wholly owned subsidiary of Parent. Parent is a “business combination related shell company” under applicable provisions of the Securities Act that was formed by SoftBank for the sole purpose of completing the transactions contemplated by the Merger Agreement and the Bond Purchase Agreement. As of the consummation of the SoftBank Merger, New Sprint’s assets will consist of 100% of the outstanding common stock of Sprint and cash, $4.9 billion of which is to be contributed to New Sprint at or before the effective time of the SoftBank Merger by SoftBank. For further information, see “—The Structure of the SoftBank Merger” beginning on page [] and “The Merger Agreement—Structure of the SoftBank Merger” beginning on page [].

At the effective time of the SoftBank Merger, New Sprint will be renamed “Sprint Corporation,” and Sprint as the operating subsidiary after the SoftBank Merger will be renamed “Sprint Communications, Inc.”

After the SoftBank Merger is completed, New Sprint will be a “controlled company” under the rules of the NYSE and will qualify for certain exemptions relating to corporate governance under the NYSE listing standards. See “Control and Management of New Sprint after the SoftBank Merger” beginning on page [].

 

 

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HoldCo is a wholly owned subsidiary of SoftBank, formed by SoftBank specifically to hold securities of Parent in connection with the transactions contemplated by the Merger Agreement.

The principal executive offices of Parent, Merger Sub and HoldCo are located at 38 Glen Avenue, Newton, Massachusetts 02459, and their telephone number is (617) 928-9300.

For further information see “The Parties to the SoftBank Merger” beginning on page [].

SoftBank

SoftBank was established in 1981. It is currently engaged in various businesses in the information industry, including mobile communications (through its subsidiary, SOFTBANK MOBILE Corp.), broadband services (through its subsidiary, SOFTBANK BB Corp.), fixed-line telecommunications (through its subsidiary, SOFTBANK TELECOM Corp.) and portal services (through its consolidated subsidiary, Yahoo Japan Corporation). As of the end of its fiscal year ended March 31, 2012, SoftBank had 133 consolidated subsidiaries in total and had investments in 74 companies that it accounted for on an equity-method basis. By generating synergies among SoftBank’s portfolio of companies, as well as working with companies around the world that share its vision, SoftBank’s goal is to become the world leader in mobile Internet while creating new value for customers and using the Information Revolution to contribute to the wellbeing of people and society.

As of September 30, 2012, SoftBank, through its subsidiary, SOFTBANK MOBILE Corp., was Japan’s third largest mobile phone service provider, with a cumulative number of mobile subscribers in Japan of approximately 30.4 million, representing a year-on-year market share increase by 1.4% to 23.9% as of the same date. SoftBank also has interests in WILLCOM, Inc. (“WILLCOM”) and eAccess Ltd. (“eAccess”), both wireless providers in Japan. As of September 30, 2012, WILLCOM and eAccess (which provides services to subscribers in Japan under the EMOBILE brand) had approximately 4.8 million and 4.2 million subscribers, respectively. On March 12, 2010, SoftBank entered into a framework agreement to assist with the business revitalization of WILLCOM under the Japanese Corporate Rehabilitation Law. SoftBank subsequently became WILLCOM’s sponsor in connection with its rehabilitation, pursuant to a sponsor agreement entered into on August 2, 2010. Under the rehabilitation arrangement, SoftBank owns 100% of WILLCOM’s shares but does not have effective control over WILLCOM. Accordingly, SoftBank does not treat WILLCOM as a subsidiary. eAccess is Japan’s fourth largest wireless company, and SoftBank holds all of eAccess’ Class A shares and 33.29% of eAccess’ Class B shares. The rights of the holders of each class are the same, except that holders of eAccess’ Class A shares have no voting rights. Accordingly, SoftBank has 33.29% voting control of eAccess and treats eAccess as an equity method affiliate on a consolidated basis. In combination with WILLCOM and eAccess, SoftBank’s percentage of the total Japanese cellular market exceeded 28.9% as of September 30, 2012.

SoftBank’s consolidated net sales increased 6.6% year-on-year to ¥3.2 trillion, or approximately $37.1 billion, operating income increased 7.3% to ¥675.2 billion, or approximately $7.8 billion, and net income rose 65.4% to ¥313.7 billion, or approximately $3.6 billion (in each case, the U.S. dollar equivalent is referenced based on the exchange rate of 86.2 JPY per U.S. dollar as reported by the U.S. Treasury as of December 31, 2012 solely for informational purposes) during its fiscal year ended March 31, 2012.

SoftBank’s ordinary shares are traded on the Tokyo Stock Exchange under the code “9984.” SoftBank (together with its consolidated subsidiaries) had over 22,000 employees as of the end of its fiscal year ended March 31, 2012.

Sprint stockholders and other Sprint equityholders will not be receiving any interest in SoftBank or SoftBank’s ordinary shares in connection with the SoftBank Merger or the other transactions described herein.

 

 

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SoftBank’s principal executive offices are located at 1-9-1 Higashi-Shimbashi, Minato-ku, Tokyo 105-7303, Japan, and its telephone number is +81.3.6889.2000.

For further information see “The Parties to the SoftBank Merger” beginning on page [].

Financing

SoftBank has entered into a credit agreement dated December 18, 2012 (the “Credit Agreement”) with Mizuho Corporate Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Deutsche Bank AG, Tokyo Branch pursuant to which such banks have agreed to provide to SoftBank secured short-term debt financing for the purpose of consummating the SoftBank Merger and the other transactions contemplated by the Merger Agreement, subject to the satisfaction of certain conditions precedent, in the aggregate amount of up to the JPY equivalent of $17.04 billion (provided that such JPY amount shall not exceed ¥1.4 trillion, or approximately $16.2 billion). In addition, these lenders provided SoftBank with an additional ¥250 billion, or approximately $2.9 billion, loan under the Credit Agreement. In each case, the U.S. dollar equivalent is referenced based on the exchange rate of 86.2 JPY per U.S. dollar as reported by the U.S. Treasury as of December 31, 2012 solely for informational purposes. The Merger Agreement does not contain a financing condition to the closing of the SoftBank Merger, but does include a number of provisions associated with the financing, including a “reverse termination fee” payable in the event that SoftBank is ultimately unable to obtain the financing and the Merger Agreement is terminated under certain designated circumstances. See “The Merger Agreement—Termination” beginning on page [] and “The Merger Agreement—Reverse Termination Fee” beginning on page [].

For further information, please see “The SoftBank Merger—Financing” beginning on page [].

The Special Stockholders Meeting

The special stockholders’ meeting will be held on [], 2013, starting at [] [].m., local time, at [].

Sprint stockholders will be asked to vote on the following proposals:

 

   

The Merger Proposal: The affirmative vote of a majority of the outstanding shares of Sprint common stock entitled to vote (in person or represented by proxy) at the special stockholders’ meeting is required to approve the Merger Proposal.

 

   

The Merger-Related Compensation Proposal: The affirmative vote of a majority of the shares of Sprint common stock present (in person or represented by proxy) at the special stockholders’ meeting and entitled to vote on the proposal is required to approve the Merger-Related Compensation Proposal.

 

   

The Adjournment Proposal: The affirmative vote of a majority of the shares of Sprint common stock present (in person or represented by proxy) at the special stockholders’ meeting and entitled to vote on the proposal is required to approve the Adjournment Proposal.

Recommendation of the Sprint Board of Directors

After careful consideration, the Sprint board of directors has determined that the SoftBank Merger is in the best interests of Sprint and its stockholders and recommends that holders of Sprint common stock vote “FOR” the Merger Proposal, “FOR” the Merger-Related Compensation Proposal and “FOR” the Adjournment Proposal.

For a more complete description of Sprint’s reasons for the SoftBank Merger and the recommendation of the Sprint board of directors, see “The SoftBank Merger—Recommendation of the Sprint Board of Directors;

 

 

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Sprint’s Reasons for the SoftBank Merger” beginning on page []. For a description of the merger-related Sprint executive compensation arrangements, see “The SoftBank Merger—Advisory Vote Regarding Merger-Related Executive Compensation (Say-on-Golden-Parachute)” beginning on page [].

Opinions of Sprint’s Financial Advisors (see page [])

In connection with the SoftBank Merger, the Sprint board of directors received a written opinion from each of Citigroup Global Markets, Inc. (“Citigroup”), Rothschild Inc. (“Rothschild”) and UBS Securities LLC (“UBS”), each dated October 15, 2012, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters and factors considered and limitations on the review undertaken set forth in their respective written opinions, the Aggregate Merger Consideration was fair, from a financial point of view, to the holders of Sprint common stock (other than Parent, Merger Sub and any other wholly owned subsidiary of Parent). On October 13, 2012 each of Citigroup, Rothschild and UBS had delivered to the Sprint board of directors its oral opinion to the same effect, which preceded the delivery of such written opinions of each financial advisor.

The full text of the written opinions of each of Citigroup, Rothschild and UBS, which set forth the assumptions made, procedures followed, matters and factors considered and limitations and qualifications on the review undertaken in connection with each such opinion, are attached as Annexes C, D and E, respectively, and are incorporated into this proxy statement-prospectus by reference. Holders of Sprint common stock are encouraged to read these opinions carefully in their entirety. These opinions were provided for the information of Sprint’s board of directors (in its capacity as such) in connection with its evaluation of the SoftBank Merger and did not address any aspects or implications of the SoftBank Merger or the other transactions contemplated by the Merger Agreement, as it existed on October 15, 2012, other than the fairness of the Aggregate Merger Consideration from a financial point of view, to the holders of Sprint common stock (other than New Sprint, Merger Sub and any other wholly owned subsidiary of New Sprint). Citigroup, Rothschild and UBS were not requested to consider, and their opinions did not address, the underlying business decision of Sprint to effect the Transactions (as defined below), the relative merits of the Transactions as compared to any alternative business strategies that might exist for Sprint or the effect of any other transaction in which Sprint might engage. The respective opinions of Citigroup, Rothschild and UBS are not intended to be and do not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the SoftBank Merger or otherwise, including whether any stockholder should elect to receive either the Cash Consideration or the Stock Consideration or make no election. With respect to the election of the Cash Consideration or the Stock Consideration, Citigroup, Rothschild and UBS expressed no opinions as to the related proration mechanisms, procedures and limitations in the Merger Agreement. The respective opinions of each of Citigroup, Rothschild and UBS were based solely upon the information available to these financial advisors as of October 15, 2012, the date on which their respective written opinions were rendered. These opinions do not take into account or reflect, and the financial advisors were not asked to take into account or reflect, any changes or developments occurring subsequent to October 15, 2012, including the proposed Clearwire Acquisition or any effect which the proposed Clearwire Acquisition might have on any financial scenario analyses, forecasts or projections.

For a more complete description of the opinions of Citigroup, Rothschild and UBS, see “The SoftBank Merger—Opinions of Sprint’s Financial Advisors” beginning on page []. See also Annexes C, D and E to this proxy statement-prospectus.

The Structure of the SoftBank Merger

To accomplish the SoftBank Merger and the other transactions contemplated by the Merger Agreement, SoftBank formed HoldCo, Parent and Merger Sub (the “SoftBank Entities”), all of which are parties to the

 

 

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Merger Agreement. On October 22, 2012, Parent acquired the Bond from Sprint, and now beneficially owns approximately 16.4% of the outstanding shares of Sprint common stock (based on the number of shares of Sprint common stock into which the Bond may, under certain circumstances, be converted). The Bond is not convertible unless and until certain conditions are met. See “The Bond Purchase Agreement—Conversion of the Bond” beginning on page []. At the time the SoftBank Merger is completed, Merger Sub will merge with and into Sprint, and Sprint will be the surviving corporation.

At the effective time of the SoftBank Merger, Sprint will become a wholly owned subsidiary of Parent. Parent, which is currently named “Starburst II, Inc.,” will be renamed “Sprint Corporation.”

Diagrams illustrating the SoftBank Merger and procedures are as follows:

Step 1—Initial Ownership Structure

 

LOGO

Step 2—Merger

 

LOGO

 

 

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Step 3—Post-Merger Ownership Structure

 

LOGO

Summary of the Material Terms of the SoftBank Merger (see page [])

Closing and Effective Time of the SoftBank Merger. The Merger Agreement provides that the closing of the SoftBank Merger will take place three business days after the satisfaction or waiver (if permitted) of the conditions to the SoftBank Merger contained in the Merger Agreement, or, on such later date (not later than seven business days after such date) as Parent may designate in order to obtain the Debt Financing, or on such other date or at such other time as Parent and Sprint may mutually designate. The effective time of the SoftBank Merger will be the time when the certificate of merger for the SoftBank Merger is filed with the Kansas Secretary of State, or at such later time as may be specified in such certificate of merger, in accordance with the relevant provisions of Kansas law.

Merger Consideration. In the SoftBank Merger, each Sprint stockholder is entitled to elect to receive, with respect to each share of Sprint common stock owned by it, subject to the proration and allocation rules described below, either $7.30 in cash or one share of New Sprint common stock. If a Sprint stockholder owns more than one share of Sprint common stock, that stockholder may elect to receive cash as to some of its shares of Sprint common stock and New Sprint common stock as to other shares of Sprint common stock, subject to such proration and allocation rules. Under the terms of the Merger Agreement, because the aggregate cash consideration that Sprint stockholders will be entitled to receive in the SoftBank Merger is fixed at $12.14 billion, at the effective time of the SoftBank Merger, an aggregate of approximately 1,663,013,699 of the outstanding shares of Sprint common stock (representing approximately 55.43% of the outstanding Sprint common stock calculated as of the date of the Merger Agreement) will be entitled to be exchanged for $7.30 in cash per share of common stock (assuming there are no dissenting stockholders who perfect their appraisal rights). All remaining outstanding shares of Sprint common stock (representing approximately 44.57% of the outstanding Sprint common stock calculated as of the date of the Merger Agreement) will be exchanged for New Sprint common stock on a one-for-one basis. Between the date of this proxy statement-prospectus and the effective time of the SoftBank Merger, the number of shares of Sprint common stock outstanding may vary, and accordingly the number of shares of Sprint common stock that will ultimately be exchanged for shares of New Sprint common stock in the SoftBank Merger will also vary. However, pursuant to the terms of the Merger Agreement, former Sprint stockholders and other former Sprint equityholders will not own in excess of 30% of the fully diluted equity of New Sprint as of the effective time of the SoftBank Merger. Please note that Sprint stockholders and other Sprint equityholders will not be receiving any interest in SoftBank or SoftBank’s ordinary shares in connection with the SoftBank Merger or the other transactions described herein.

Making the Cash/Stock Election. Each Sprint stockholder may make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two in exchange for the stockholder’s

 

 

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shares of Sprint common stock by delivering to Computershare, the exchange agent, a completed form of election together with any other required documentation specified in the form of election. Forms of election must be returned to Computershare no later than the election deadline, which is expected to be 5:00 p.m., Eastern time, on the date that is five business days immediately preceding the effective time of the SoftBank Merger. Sprint will publicly announce the election deadline by press release at least five business days prior to the election deadline. SoftBank and Sprint anticipate that the SoftBank Merger will be completed in mid-2013.

Stockholders who hold their shares in “street name,” that is, with a broker, dealer, bank or other financial institution, and who wish to make an election will have to instruct their broker, dealer, bank or other financial institution that holds their shares to make an election on their behalf. Any share of Sprint common stock for which the record holder has not, prior to the election deadline, properly submitted a properly completed form of election to the exchange agent will be deemed to be a non-electing share. Accordingly, Sprint stockholders who fail to properly complete and return the form of election prior to the election deadline will receive merger consideration (consisting of cash, shares of New Sprint common stock or a combination of the two) that cannot be predicted or determined until all elections by other Sprint stockholders have been made and taken into account, and will be determined based on the remaining mix of consideration after giving effect to all such other elections (subject to prorations).

None of the SoftBank Entities, Sprint or the Sprint board of directors makes any recommendation about whether any Sprint stockholder should make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two, or no election. Each holder of shares of Sprint common stock must make his or her own decision about whether to make an election and, if so, what election to make.

For a more detailed description of the election procedures, see “Questions and Answers about the SoftBank Merger” beginning on page [] and “The SoftBank Merger—Making the Cash/Stock Election” beginning on page [].

Cash/Stock Proration and Allocation Rules. The proration rules applicable to the cash and stock elections to be made by Sprint stockholders have the potential to result in allocations of consideration that differ from the form of consideration elected. If the cash proration rule applies (as a result of cash elections exceeding the available cash component of the merger consideration), a Sprint stockholder that elects to receive cash for its shares of Sprint common stock will instead receive a combination of cash and shares of New Sprint common stock. If the stock proration rule applies (as a result of stock elections exceeding the available stock component of the merger consideration), a Sprint stockholder that elects to receive shares of New Sprint common stock for its shares of Sprint common stock will instead receive a combination of cash and shares of New Sprint common stock. As a result of the foregoing, you may not receive the form of consideration that you elect with respect to all of your shares of Sprint common stock.

In addition, whether or not either of the proration rules apply, Sprint stockholders who fail to elect either cash or shares of New Sprint common stock will be allocated and receive merger consideration (consisting of cash, shares of New Sprint common stock or a combination of the two) that cannot be predicted or determined until all elections by other Sprint stockholders have been made and taken into account, and will be determined based on the remaining mix of consideration after giving effect to all such other elections (subject to prorations). For a more detailed description of these proration and allocation rules, including examples of how the proration rules would work under various scenarios, see “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page [].

HoldCo Shares. In the SoftBank Merger, pursuant to the Merger Agreement and the organizational documents of New Sprint, all outstanding shares of New Sprint common stock held by HoldCo at the effective time of the SoftBank Merger will be automatically reclassified into a number of shares of New Sprint common

 

 

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stock representing 69.642% of the fully diluted equity of New Sprint (excluding shares of New Sprint common stock issuable upon exercise by HoldCo of a warrant to purchase up to 54,579,924 fully paid and nonassessable shares of New Sprint common stock (the “Warrant”), as discussed in “—Summary of the Warrant” beginning on page []) as of immediately following the effective time of the SoftBank Merger, and the former Sprint stockholders and other former equityholders of Sprint will hold, collectively, shares of New Sprint common stock and other equity securities of New Sprint collectively representing 30.358% of the fully diluted equity of New Sprint (excluding shares of New Sprint common stock issuable upon exercise by HoldCo of the Warrant) as of immediately following the effective time of the SoftBank Merger. In addition, the percentages described above assume that there will be no dissenting shares. The effect of dissenting shares, to the extent they would have otherwise received shares of New Sprint common stock in the SoftBank Merger had they not been dissenting shares, would be to increase the number of New Sprint’s outstanding shares held by both HoldCo and by other former Sprint stockholders who receive shares of New Sprint common stock in the SoftBank Merger such that the proportionate percentage of shares of New Sprint held by HoldCo and the former Sprint stockholders is the same.

Stock Options. At the effective time of the SoftBank Merger, each outstanding Sprint stock option will be converted into an option to purchase the number of shares of New Sprint common stock that is equal to (i) the number of shares of Sprint common stock that could have been purchased before the SoftBank Merger upon the exercise of such option multiplied by (ii) the “award exchange ratio” and rounded down to the nearest whole share. The award exchange ratio used to determine the number of shares of New Sprint common stock underlying stock options and RSUs is described under “The SoftBank Merger—Treatment of Stock Options, Restricted Stock Units, Performance Units, Employee Stock Purchase Plan and Deferred Compensation Plan Accounts” beginning on page []. The exercise price per share of New Sprint common stock for the converted option will be equal to the exercise price per share of Sprint common stock subject to the option before the conversion divided by the award exchange ratio, with the result rounded up to the nearest whole cent. After the conversion, stock options shall nonetheless remain governed by the terms of the plans and agreements under which the options were granted, except that New Sprint’s board of directors or any committee of the board will succeed to the authority and responsibility of Sprint’s board of directors or a committee of the board with respect to each assumed option.

Restricted Stock Units. At the effective time of the SoftBank Merger, each outstanding Sprint RSU will be converted into a right to be issued the number of shares of New Sprint common stock that is equal to (i) the number of shares of Sprint common stock underlying such Sprint RSU before the SoftBank Merger multiplied by (ii) the award exchange ratio, with the result rounded down to the nearest whole share, in the aggregate on a per award basis. After the conversion, such RSUs shall nonetheless remain governed by the terms of the plans and agreements under which the RSUs were granted, except that (1) New Sprint’s board of directors or any committee thereof will succeed to the authority and responsibility of Sprint’s board of directors or a committee thereof with respect to each assumed RSU and (2) Sprint RSUs which vest subject to achievement of performance objectives that relate to performance periods that have not yet been completed as of the closing date will be treated as if target performance had been achieved as of the closing date but will continue to be subject to the existing vesting provisions during the applicable performance period and thereafter.

Performance Units. At the effective time of the SoftBank Merger, each outstanding Sprint performance unit will be assumed by New Sprint. Each assumed performance unit will be subject to, and vested on, generally the same terms and conditions applicable to such assumed performance unit as of immediately prior to the effective time of the SoftBank Merger except that (1) New Sprint’s board of directors or any committee of the board will succeed to the authority and responsibility of Sprint’s board of directors or a committee of the board with respect to each assumed performance unit and (2) performance units which vest subject to achievement of performance objectives that relate to performance periods that have not been completed as of the closing date will be treated as if target performance had been achieved as of the closing date but will continue to be subject to the existing

 

 

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vesting provisions during the applicable performance period and thereafter. If the holder of a performance unit experiences a termination of employment during the CIC severance protection period (as such term is defined under the applicable Sprint plan) and such holder receives severance benefits under Sprint’s Separation Plan, Sprint’s Change in Control Severance Plan or an equivalent or greater severance benefit, then all outstanding performance units held by such individual will become vested and non-forfeitable, without pro-ration, and will be paid within thirty (30) days of such termination of employment, subject to applicable tax laws.

Employee Stock Purchase Plan. At the effective time of the SoftBank Merger, each outstanding option to purchase Sprint common stock under the Sprint Employee Stock Purchase Plan (“ESPP”) will be assumed by New Sprint and converted into an option to purchase the number of shares of New Sprint common stock that is equal to the number of shares of Sprint common stock that could have been purchased before the SoftBank Merger upon the exercise of such ESPP option. The exercise price per share of New Sprint common stock for the converted ESPP option will be equal to 95% of the fair market value per share of New Sprint common stock on the purchase date.

Assumption of Sprint Equity Plans. At the effective time of the SoftBank Merger, New Sprint may assume any or all of the Sprint equity plans. If New Sprint elects to do so, it will be entitled to grant stock awards using the share reserves of the applicable assumed Sprint equity plans immediately prior to the effective time of the SoftBank Merger (including any shares returned to such share reserves as a result of the termination of the converted options and converted RSUs).

Deferred Compensation Plans. At the effective time of the SoftBank Merger, all accounts under Sprint’s deferred compensation plans which provide for hypothetical investments in Sprint common stock will be converted into hypothetical investment accounts for New Sprint common stock equal to the number of shares of Sprint common stock credited to such account immediately prior to the effective time multiplied by the “award exchange ratio.” These accounts will generally continue to be governed by the terms of the applicable deferred compensation plans.

“No Solicitation” Provisions. The Merger Agreement contains provisions prohibiting Sprint from seeking an alternative acquisition transaction and requiring Sprint to notify SoftBank of any inquiries, requests, proposals or offers relating to or for any such alternative acquisition transactions. The Merger Agreement does not, however, prohibit Sprint from considering and potentially recommending to its stockholders, or terminating the Merger Agreement and entering into an agreement with respect to, an unsolicited, bona fide written superior offer from a third party under the circumstances described in, and subject to Sprint’s compliance with the terms of, the Merger Agreement. For further information see “The Merger Agreement—No Solicitation of Alternative Offers” beginning on page [].

Conditions to the Completion of the SoftBank Merger. The obligations of the SoftBank Entities and Sprint to complete the SoftBank Merger and the other transactions contemplated by the Merger Agreement are subject to the satisfaction at or prior to the closing of the SoftBank Merger of the following conditions, which may be waived by Parent and Sprint (to the extent legally permissible):

 

   

the registration statement, of which this proxy statement-prospectus forms a part, having been declared effective, no stop order suspending its effectiveness having been issued by the SEC and no proceeding for suspension of its effectiveness having been initiated by the SEC that remains pending;

 

   

the Merger Agreement having been adopted by the requisite affirmative vote of the stockholders of Sprint;

 

   

the waiting period applicable to the closing of the SoftBank Merger under the HSR Act having expired or been terminated and any waiting period under any foreign antitrust or competition law or consent or

 

 

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other foreign legal requirement having expired, been terminated or obtained, as applicable, subject to materiality (the Antitrust Division and the FTC granted early termination of the waiting period under the HSR Act on December 6, 2012);

 

   

the consent of the Federal Communications Commission (the “FCC”) and all required consents from state regulatory authorities having been obtained;

 

   

Parent having received written confirmation from the Committee on Foreign Investment in the United States (“CFIUS”) that it has completed its review or investigation and determined that there are no unresolved national security concerns with respect to the SoftBank Merger;

 

   

if required by the Defense Security Service (“DSS”), DSS having approved a plan to operate the business of New Sprint and its subsidiaries pursuant to a Foreign Ownership, Control or Influence (“FOCI”) mitigation agreement or accepted a commitment from the parties to implement such an agreement following the SoftBank Merger;

 

   

the New Sprint common stock to be issued in the SoftBank Merger having been approved for listing (subject to notice of issuance) on the NYSE;

 

   

no restraining order, injunction, statute, rule or regulation having been issued, enacted or effective that has the effect of making the SoftBank Merger illegal or otherwise prohibiting the closing of the SoftBank Merger; and

 

   

no legal proceeding instituted by a government body challenging or seeking to restrain or prohibit the SoftBank Merger, or threat by any U.S. federal government body to institute such a legal proceeding, remaining outstanding.

In addition to the conditions applicable to both the SoftBank Entities and Sprint described above, the obligations of the SoftBank Entities to complete the SoftBank Merger and the other transactions contemplated by the Merger Agreement are subject to the satisfaction at or prior to the completion of the SoftBank Merger of the following additional conditions, which may be waived by Parent (to the extent legally permissible):

 

   

Sprint’s representations and warranties having been accurate as of the date of the Merger Agreement, and being accurate as of the closing date of the SoftBank Merger, except for those representations and warranties made as of a specific earlier date, which must have been accurate as of such earlier date, subject to certain materiality requirements;

 

   

Sprint having complied with or performed in all material respects its covenants and obligations required by the Merger Agreement to be complied with or performed by Sprint at or before the closing of the SoftBank Merger;

 

   

a subsidiary of Sprint having acquired from Eagle River the Eagle River Clearwire Interests (Sprint acquired the Eagle River Clearwire Interests on December 11, 2012);

 

   

with respect to indebtedness under Sprint’s outstanding indentures that becomes payable as a result of the combination of (i) the SoftBank Merger and (ii) any ratings downgrade, the receipt of a ratings determination from either S&P or Moody’s that the New Sprint credit rating upon consummation of the SoftBank Merger will be no less than Sprint’s credit rating on the date the Merger Agreement, unless, among other things, Sprint has sufficient cash or financing to repay such indebtedness (taking into account any waivers or consents received) (on November 20, 2012, Sprint announced that it had obtained the necessary consents to amend the applicable provisions of the outstanding indentures such that the SoftBank Merger would not constitute a change of control and, as a result indebtedness outstanding under Sprint’s applicable indentures will not become payable by reason of completion of the SoftBank Merger);

 

 

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with respect to Sprint’s outstanding indebtedness for borrowed money (excluding the indebtedness referred to in the bullet above), that becomes payable as a result of the SoftBank Merger, Sprint (i) will have repaid such indebtedness, (ii) obtained the consent or waiver to such change of control from the requisite holders of such indebtedness or (iii) if the obligation to repay such indebtedness is a right of prepayment or otherwise determined solely by the relevant creditors, Sprint has cash or financing that, collectively, provides sufficient funds to pay the amount of such indebtedness;

 

   

the number of shares of Sprint common stock owned by Sprint stockholders who are entitled to and have preserved appraisal rights under Section 17-6712 of the Kansas General Corporation Code (the “KGCC”) representing less than 10% of Sprint’s common stock outstanding immediately prior to the closing of the SoftBank Merger; and

 

   

there not having occurred since the date of the Merger Agreement a “material adverse effect” with respect to Sprint (see “The Merger Agreement—Conditions to Completion of the SoftBank Merger” for a description of “material adverse effects”).

In addition to the conditions applicable to the SoftBank Entities and Sprint described above, the obligation of Sprint to complete the SoftBank Merger and the other transactions contemplated by the Merger Agreement is subject to the satisfaction at or prior to the completion of the SoftBank Merger of the following additional conditions, which may be waived by Sprint (to the extent legally permissible):

 

   

the SoftBank Entities’ representations and warranties having been accurate as of the date of the Merger Agreement, and being accurate as of the closing date of the SoftBank Merger, except for those representations and warranties made as of a specific earlier date, which must have been accurate as of such earlier date, subject to certain materiality requirements;

 

   

the SoftBank Entities having complied with or performed in all material respects their respective covenants and obligations required by the Merger Agreement to be complied with or performed by them at or before the closing of the SoftBank Merger;

 

   

HoldCo having contributed not less than $17.04 billion of cash to New Sprint; and

 

   

the tax opinion described in “Material United States Federal Income Tax Consequences of the SoftBank Merger” beginning on page [] having been delivered.

For further details, see “The Merger Agreement—Conditions to the Completion of the SoftBank Merger” beginning on page [].

The SoftBank Merger is not conditioned on approval of the Clearwire Acquisition Agreement by Clearwire’s stockholders or the closing of the Clearwire Acquisition.

Termination of the Merger Agreement. The Merger Agreement contains detailed provisions regarding the ability of Parent and Sprint to terminate the Merger Agreement at any time prior to the closing of the SoftBank Merger. Such provisions include the right of either Parent or Sprint to terminate the Merger Agreement:

 

   

by mutual written consent of Parent and Sprint;

 

   

if the SoftBank Merger has not been completed on or before October 15, 2013 (the “End Date”);

 

   

if there is a court or other governmental authority order, decree or ruling that is final and nonappealable preventing the effectiveness of the SoftBank Merger; or

 

   

if the Merger Agreement has failed to receive the requisite affirmative vote of the stockholders of Sprint for adoption at the special stockholders’ meeting.

 

 

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Furthermore, the SoftBank Entities may terminate the Merger Agreement if:

 

   

Sprint or the Sprint board of directors take or fail to take certain required actions, including if the Sprint board of directors withdraws, changes, modifies or amends (or publicly announces the withdrawal, change, modification or amendment of) its recommendation in favor of the approval of the Merger Proposal in a manner adverse to Parent or publicly proposes or states that it intends to do so; or

 

   

Sprint commits a breach of its representations, warranties or covenants in the Merger Agreement, subject to materiality and certain cure rights of Sprint.

Furthermore, Sprint may terminate the Merger Agreement if:

 

   

the Sprint board of directors authorizes Sprint to enter into a binding written agreement concerning an alternative acquisition transaction that constitutes a superior offer, and Sprint has complied with all of its related obligations under the Merger Agreement;

 

   

the SoftBank Entities commit a breach of their representations, warranties or covenants in the Merger Agreement, subject to materiality and certain cure rights of the SoftBank Entities;

 

   

all of the conditions to the SoftBank Entities’ obligations to complete the SoftBank Merger have been satisfied or waived, and Sprint provides notice that all conditions to Sprint’s obligations to complete the SoftBank Merger have been satisfied, and the SoftBank Merger is not completed (other than by Sprint’s default) within 11 business days after delivery of such notice by Sprint; or

 

   

SoftBank fails to timely take certain enumerated actions in respect of the Debt Financing in connection with the SoftBank Merger.

For further details, see “The Merger Agreement—Termination of the Merger Agreement” beginning on page [].

Termination Fee and Expenses. If the Merger Agreement is terminated under specified circumstances, Sprint may be required to pay a termination fee of $600 million or reimbursement of expenses of up to $75 million to Parent. If the Merger Agreement is terminated under other specified circumstances, Parent may be required to pay a “reverse termination fee” of $600 million to Sprint. For further details, see “The Merger Agreement—Termination Fee; Expenses” beginning on page [] and “The Merger Agreement—Reverse Termination Fee” beginning on page [].

Summary of the Bond Purchase Agreement (see page [])

On October 15, 2012, Sprint and Parent entered into the Bond Purchase Agreement, and on October 22, 2012, pursuant to the terms of the Bond Purchase Agreement, Sprint issued and Parent purchased the Bond in the principal amount of $3.1 billion. The Bond, which matures on October 15, 2019, may not be voluntarily prepaid by Sprint in whole or in part before such date. The interest rate on the Bond is 1.0% per annum, which is payable semiannually in arrears on April 15 and October 15 of each year, commencing on April 15, 2013, and accrued and unpaid interest on any portion of the Bond that is converted will be paid in cash simultaneously with the delivery of shares of Sprint common stock upon settlement of such conversion.

At any time after the Merger Agreement has been terminated without the SoftBank Merger having occurred, Parent (or any permitted transferees holding all or portions of the Bond) may convert the Bond (or portions thereof) into Sprint common stock, subject to receipt of all required regulatory approvals, as provided in the Bond Purchase Agreement. Subject to election by Parent, the Bond will automatically convert into Sprint common stock immediately prior to a change of control with respect to Sprint. In addition, the Bond Purchase Agreement provides that the Bond will automatically convert immediately prior to the effective time of the

 

 

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SoftBank Merger. Parent also has the right to convert the Bond immediately prior to any repayment of the Bond. The conversion rate of the Bond is 190.476190322581 shares of Sprint common stock for each $1,000 of principal (equivalent to 590,476,190 shares of Sprint common stock in the aggregate), subject to certain adjustments, with cash being paid in lieu of any fractional shares, except that in the case of automatic conversion immediately prior to the closing of the SoftBank Merger, the conversion rate will be equal to the number of shares obtained by dividing $1,000 by the last closing sale price of Sprint common stock immediately prior to the closing of the SoftBank Merger (but not below 190.476190322581 shares of Sprint common stock for each $1,000 of principal, subject to certain adjustments).

The Bond Purchase Agreement provides that if the Bond has been fully converted into common stock, and the Merger Agreement has terminated without the SoftBank Merger having occurred, then as long as Parent and its affiliates own (a) at least 10% of the total shares of Sprint common stock, Parent will have the right to designate two members to Sprint’s board of directors and (b) less than 10% but greater than or equal to 5% of the total number of shares of Sprint common stock, Parent will have the right to designate one member to Sprint’s board of directors. If Parent and its affiliates own less than 5% of the total number of shares of Sprint common stock, Parent will have no director designation rights. In addition, Parent’s rights to designate directors on Sprint’s board of directors will terminate if Parent sells or disposes of its economic interest in the shares of Sprint common stock issued upon conversion of the Bond. The Bond Purchase Agreement provides that Sprint will use its commercially reasonable best efforts to ensure that such designated directors are appointed to the Sprint board of directors, including ensuring that the designated directors are recommended by Sprint’s Nominating and Corporate Governance Committee and its board of directors. If the Bond is paid in full and no portion of the Bond is converted into Sprint common stock, the director designation rights of Parent under the Bond Purchase Agreement will expire.

The Bond Purchase Agreement contains various covenants, customary representations and warranties and events of default, and provides certain registration rights to Parent, its affiliates, and holders of 10% or more of Sprint common stock issued pursuant to the conversion of the Bond that has not been sold through a broker or dealer or underwritten in a public securities transaction.

The transactions contemplated by the Bond Purchase Agreement are referred to as the Bond Purchase Transaction.

Summary of the Warrant (see page [])

At the effective time of the SoftBank Merger, pursuant to the terms of the Merger Agreement, New Sprint will issue to HoldCo the Warrant to purchase up to 54,579,924 fully paid and nonassessable shares of New Sprint common stock (subject to anti-dilution adjustments), at an exercise price of $5.25 per share (subject to anti-dilution adjustments). The Warrant will be exercisable at the option of HoldCo, in whole or in part, at any time after the issuance of the Warrant until the fifth anniversary of the issuance date. The aggregate purchase price of the Warrant may be paid by either cash or, at the option of HoldCo, through a customary cashless exercise process.

The transactions contemplated by the Warrant are referred to as the Warrant Transaction, and the SoftBank Merger, the Equity Contribution, the Bond Purchase Transaction and the Warrant Transaction are collectively referred to as the “Transactions.”

Regulatory Approvals (see page [])

Hart-Scott Rodino. The transactions contemplated by the Merger Agreement require SoftBank and Sprint to submit antitrust notifications under the HSR Act, and the rules promulgated thereunder by the FTC. Each of SoftBank

 

 

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and Sprint has made the required notifications under the HSR Act, and the Antitrust Division and the FTC granted early termination of the waiting period under the HSR Act on December 6, 2012. SoftBank and Sprint believe that the SoftBank Merger can be effected in compliance with U.S. antitrust laws. However, we cannot assure you that a challenge to the consummation of the SoftBank Merger on antitrust grounds will not be made or that, if such a challenge were made, SoftBank and Sprint would prevail or would not be required to accept certain conditions, possibly including certain divestitures of substantial assets of SoftBank and/or Sprint, in order to consummate the SoftBank Merger.

Federal Communications Commission Approval. Sprint is also subject to regulation by the FCC under the Communications Act of 1934, as amended (the “Communications Act”). Sprint holds a number of licenses issued by the FCC for the operation of its wireless and wireline assets and for the provision of telecommunications services. The FCC must approve the transfer of control of the licenses held by Sprint to SoftBank as a result of the SoftBank Merger. The FCC will not issue its approval until it receives the consent of certain executive branch government agencies that undertake a national security review of FCC-notified transactions involving potential foreign ownership of U.S. telecommunications assets. These agencies include the Department of Justice, Federal Bureau of Investigation, Department of Homeland Security, and Department of Defense. The FCC also must review the impact of the additional foreign ownership of Sprint that will result from this transaction. As a result of the acquisition of control of Sprint by SoftBank, non-U.S. interests in Sprint will exceed 25%, and under the Communications Act, foreign ownership of wireless common carriers in excess of 25% is permitted unless the FCC determines that the public interest will be served by refusing to permit such holdings. While we believe that FCC approval will ultimately be obtained, this approval is not assured.

CFIUS and DSS Approvals. The SoftBank Merger is also subject to review and clearance by CFIUS under the Defense Production Act of 1950, as amended, including by the Foreign Investment and National Security Act of 2007 (collectively, the “DPA”), which provides for national security reviews of foreign acquisitions of U.S. companies that may have an impact on national security. CFIUS notification is voluntary, but provides a means to assure that the President of the United States will not exercise his authority to block the transaction or require divestiture after closing. In addition, for certain foreign acquisitions of interests in businesses engaged in classified work for U.S. federal government agencies, DSS, acting pursuant to the National Industrial Security Program Operating Manual (“NISPOM”), typically requires that the parties take certain actions to mitigate foreign ownership, control or influence. Such measures are intended to protect against unauthorized disclosures of classified or other sensitive information and technologies as well as other risks to classified work. SoftBank and Sprint will also work with DSS to develop appropriate mitigation measures.

State and International. In addition to U.S. federal regulatory and antitrust approvals, regulatory approvals are also being sought and filings have been made in a number of states in the United States and in two foreign jurisdictions.

Timing of Regulatory Approvals. We currently anticipate that required regulatory approvals will be received by mid-2013, although the receipt of these approvals and their timing cannot be assured or predicted at this time.

Impact of Clearwire Acquisition. Sprint and Clearwire have made filings and taken other actions, and will continue to take actions, necessary to obtain governmental approvals in connection with the Clearwire Acquisition and related transactions. Several governmental agencies may elect to review the Clearwire Acquisition together with the SoftBank Merger, which could have the effect of delaying approval for, and closing of, the SoftBank Merger. While Sprint and New Sprint believe that required regulatory approvals for the SoftBank Merger and the Clearwire Acquisition will ultimately be obtained, these approvals are not assured.

 

 

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Tax Consequences of the SoftBank Merger (see page [])

Sprint will not be required to complete the SoftBank Merger unless it receives a legal opinion to the effect that the exchanges that occur pursuant to the SoftBank Merger, taken together, will constitute exchanges described in Section 351 of the Code, for U.S. federal income tax purposes. Assuming the exchanges so qualify, no gain or loss will be recognized by Sprint as a result of the SoftBank Merger and the tax consequences to Sprint stockholders as a result of the SoftBank Merger generally will be as follows:

 

   

Holders of Sprint common stock who receive solely cash for their Sprint common stock generally will recognize gain or loss equal to the difference between the amount of cash received for their Sprint common stock and their tax basis in their shares of Sprint common stock. The gain or loss recognized upon the receipt of cash will be a capital gain or loss to the extent the shares of Sprint common stock were held by the stockholder as a capital asset.

 

   

Holders of Sprint common stock who receive solely shares of New Sprint common stock pursuant to the SoftBank Merger generally will not recognize gain or loss. A Sprint stockholder will, however, generally recognize gain or loss, if any, in connection with any cash the holder receives in lieu of a fractional share of New Sprint common stock.

 

   

Holders of Sprint common stock who receive a combination of New Sprint common stock and cash for their Sprint common stock generally will be prevented from recognizing any loss they may realize (other than with respect to cash received in lieu of fractional shares of New Sprint common stock). These holders generally will recognize gain equal to the lesser of (1) the amount of cash received and (2) the excess of the “amount realized” in the transaction (i.e., the fair market value of the New Sprint common stock received plus the amount of cash received) over their tax basis in their Sprint common stock.

Tax matters relating to the SoftBank Merger are very complicated and the tax consequences of the SoftBank Merger to Sprint stockholders will depend on the facts of their own situations. Sprint stockholders are urged to consult their own tax advisors for a full understanding of the tax consequences of the SoftBank Merger.

Overview of the Comparison of Rights of Holders of Sprint Common Stock and New Sprint Common Stock (see page [])

New Sprint’s authorized capital stock will consist of 9,000,000,000 shares of common stock, 1,000,000,000 shares of non-voting common stock and 20,000,000 shares of preferred stock. Sprint’s current authorized capital stock consists of 6,000,000,000 shares of Series 1 common stock, par value $2.00 per share, 500,000,000 shares of Series 2 common stock, par value $2.00 per share (together with the Series 1 common stock, the “Voting Common Stock”), 100,000,000 shares of non-voting common stock, par value $0.01 per share, and 20,000,000 shares of preferred stock, no par value. The material differences between the rights of holders of Sprint common stock and New Sprint common stock are summarized below:

 

   

Kansas law generally prohibits a corporation from engaging in any “business combination” with an interested stockholder for three years after such person becomes an interested stockholder, unless (i) before that time a corporation’s board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the corporation’s voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and shares held by employee stock ownership plans in which employee participants do not have the right to determine confidentially whether shares

 

 

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held subject to the plan will be tendered in a tender offer or exchange offer; or (iii) at or after that time the business combination is approved by the corporation’s board of directors and authorized at a stockholders’ meeting by the affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder. This provision is applicable to Sprint only until May 15, 2013. Under New Sprint’s certificate of incorporation, to approve a “business combination” with an interested stockholder, the affirmative vote of holders of at least 66 2/3% of the outstanding shares of New Sprint common stock not owned by the interested stockholder will be required.

 

   

Except as otherwise required by law, New Sprint’s certificate of incorporation will require the affirmative vote of a majority of the shares of capital stock entitled to vote for all actions that may be taken by stockholders, except that:

 

   

approval of shares representing at least 66 2/3% of the outstanding shares of New Sprint common stock entitled to vote will be required to approve amendments to the provisions of the certificate of incorporation (i) in respect of amendments to certain bylaws regarding stockholder meetings, notice of and quorum at stockholder meetings and the number of directors and (ii) governing relationships between New Sprint and SoftBank;

 

   

approval of shares representing at least 90% of the outstanding shares of New Sprint common stock entitled to vote will be required to approve amendments to bylaws (and to provisions of the New Sprint certificate of incorporation governing revisions to such bylaws) with respect to the New Sprint board of directors’ composition following such time as SoftBank no longer maintains ownership of a majority of the outstanding shares of New Sprint common stock; and

 

   

the approval of shares representing a majority of outstanding shares of capital stock entitled to vote in addition to shares representing at least a majority of outstanding shares of capital stock entitled to vote other than shares owned by SoftBank will be required to amend (i) bylaws (and provisions of New Sprint’s certificate of incorporation governing revisions to such bylaws) relating to the re-election of directors and independent director approval of certain matters during the 24 months immediately following the effective time of the SoftBank Merger and (ii) the provisions of New Sprint’s certificate of incorporation governing SoftBank’s business activities, New Sprint’s corporate opportunities and the purchase of New Sprint common stock by SoftBank.

 

   

Under New Sprint’s bylaws and the Merger Agreement, SoftBank will initially be entitled to designate six of the ten members of New Sprint’s board of directors, and at least three of such designees must be “Independent Directors” (as such term is defined in the NYSE listing rules). In addition, under New Sprint’s bylaws, so long as SoftBank’s ownership of New Sprint common stock does not fall below 50% and then remain below 50% for 90 consecutive days, vacancies and newly created directorships may only be filled by the affirmative votes of stockholders holding at least a majority of the outstanding shares of capital stock entitled to vote in the election of directors.

 

   

Sprint’s bylaws permit holders of at least 10% of issued and outstanding shares of Sprint common stock to call for special stockholders’ meetings. New Sprint’s bylaws will provide that special stockholders’ meetings of stockholders may be called only by the board of directors, and New Sprint’s bylaws will explicitly provide that New Sprint’s stockholders may not call a special stockholders’ meeting.

 

   

Sprint’s stockholders generally may only act by written consent if such consent is unanimous. New Sprint’s bylaws will provide that its stockholders will have the ability to take action by written consent upon the written consent of the holders of a minimum number of shares of New Sprint common stock required to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

 

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Limitations, Restrictions and Conditions on SoftBank’s Conduct of Business and Exercise of Rights (see page [])

Pursuant to the Merger Agreement, SoftBank has agreed to the adoption of certain provisions in New Sprint’s certificate of incorporation and bylaws, which will be in effect at the effective time of the SoftBank Merger, that will have the effect of limiting, restricting or conditioning the conduct of business by SoftBank and its subsidiaries and HoldCo’s exercise of rights as the holder of a majority of the outstanding shares of New Sprint common stock.

Required Approvals for Certain Actions. The New Sprint bylaws as in effect at the effective time of the SoftBank Merger will provide that during the 24 months immediately following the effective time of the SoftBank Merger, the following matters will require, in addition to any approval required by law, the approval of both (i) the New Sprint board of directors and (ii) a majority of “Independent Directors” (as such term is defined in the NYSE listing rules) who have no interest in the matter being voted upon:

 

   

the declaration and payment of dividends;

 

   

any transaction or agreement, including any merger, business combination or similar transaction, between New Sprint and SoftBank;

 

   

any merger, business combination or similar transaction as to New Sprint in which SoftBank or the controlled affiliate of SoftBank that holds a majority of the shares of New Sprint common stock held by SoftBank and its controlled affiliates receives consideration for its shares of New Sprint common stock that (i) is greater in value on a per share basis than that received by other stockholders of New Sprint, or (ii) represents a different form of consideration from that received by other stockholders of New Sprint;

 

   

the waiver of the provisions of Section 203 of the Delaware General Corporate Law with respect to any transaction involving a sale of New Sprint voting common stock by SoftBank or its controlled affiliates;

 

   

the settlement of any claim between SoftBank and New Sprint;

 

   

any waiver under or amendment of the provisions of the New Sprint certificate of incorporation relating to the relationship between SoftBank and New Sprint; and

 

   

any corporate action necessary to maintain compliance with U.S. laws related to national security as they relate to SoftBank or its controlled affiliates.

Conduct of Competing Businesses by SoftBank. The New Sprint certificate of incorporation as in effect at the effective time of the SoftBank Merger will provide that SoftBank will refrain from conducting or acquiring certain competing businesses unless and until the combined voting interest of SoftBank and its controlled affiliates in New Sprint remains below 10% for 90 consecutive days, subject to certain exceptions.

Allocation of Corporate Opportunities. The New Sprint certificate of incorporation as in effect at the effective time of the SoftBank Merger will not limit the right of SoftBank or its controlled affiliates to pursue or take advantage of corporate opportunities that may be available both to them or to New Sprint, except as to potential transactions or other matters that (i) relate solely to a competing business as defined in the New Sprint certificate of incorporation, and (ii) were offered to a director, officer or employee of SoftBank who is also a director or officer of New Sprint expressly in such person’s capacity as a director or officer of New Sprint.

Mandatory Offer to Purchase. The New Sprint certificate of incorporation as in effect at the effective time of the SoftBank Merger will provide that, in the event that the combined voting interest of SoftBank and its controlled affiliates in New Sprint exceeds 85% of the outstanding voting securities of New Sprint, then

 

 

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SoftBank or a controlled affiliate will make an offer to acquire all the remaining shares of New Sprint common stock at a price not less than the volume-weighted average closing price of New Sprint common stock for the 20 consecutive trading days immediately preceding such offer.

Share Ownership of Sprint Directors and Executive Officers (see page [])

As of the meeting record date, directors and executive officers of Sprint and their affiliates owned and were entitled to vote [] shares of Sprint common stock, or approximately []% of the shares of Sprint common stock issued and outstanding on that date.

Appraisal Rights (see page [])

Under the Merger Agreement, Sprint stockholders of record who do not vote in favor of the Merger Proposal and who otherwise comply with the procedures for exercising appraisal rights under the KGCC will be entitled to appraisal rights in connection with the SoftBank Merger and, if the SoftBank Merger is completed, obtain payment in cash of the fair value of their shares of Sprint common stock as determined by the Kansas district court, instead of the merger consideration. Merely not voting in favor of the Merger Proposal will not preserve the right of Sprint stockholders to appraisal of their shares of Sprint common stock under the KGCC. Sprint stockholders who desire to exercise their appraisal rights must submit a written demand for an appraisal before the vote on the Merger Proposal at the special stockholders’ meeting. Following the effective time of the SoftBank Merger, such stockholders must also comply with other procedures as required by the KGCC. Due to the complexity of these procedures, Sprint stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. These procedures are summarized under the heading, “The SoftBank Merger—Appraisal Rights” beginning on page [].

All references in Section 17-6712 of the KGCC and this summary to a “stockholder” are to a record holder of the shares of Sprint common stock as to which appraisal rights are asserted. A person having a beneficial interest in “street name” in shares of Sprint common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause such record holder to follow properly the steps summarized below and in a timely manner to perfect appraisal rights.

Any holder of Sprint common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review the discussion under the caption “Appraisal Rights” and Annex F carefully because failure to timely and properly comply with the procedures specified therein will result in the loss of appraisal rights. Annex F to this proxy statement-prospectus contains the full text of Section 17-6712 of the KGCC, which describes the rights of appraisal and related requirements. Sprint encourages you to read these provisions carefully and in their entirety. Failure to strictly comply with these provisions will result in loss of the right of appraisal.

Risks Associated with the SoftBank Merger, New Sprint and Sprint (see page [])

The SoftBank Merger (including the possibility that the SoftBank Merger may not be completed) poses a number of risks to Sprint and its stockholders. In addition, New Sprint is subject to various additional risks, including risks related to SoftBank controlling New Sprint. You are encouraged to read and consider all of these risks carefully.

Interests of Certain Sprint Directors and Executive Officers in the SoftBank Merger (see pages [] and [])

Certain of Sprint’s executive officers and directors have financial interests in the SoftBank Merger that are different from, or in addition to, the interests of Sprint’s stockholders. The members of the Sprint board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the

 

 

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Merger Agreement and the SoftBank Merger and in recommending to Sprint stockholders that the Merger Agreement be adopted. These interests are described in more detail in “The SoftBank Merger—Interests of Certain Sprint Directors and Executive Officers in the SoftBank Merger” beginning on page [].

Board of Directors and Management Following the SoftBank Merger (see page [])

During the 24 months immediately following the effective time of the SoftBank Merger, the New Sprint board of directors will consist of ten members, determined as follows:

 

   

one director who will also be the Chief Executive Officer of New Sprint;

 

   

three individuals designated by SoftBank who qualify as “Independent Directors” as such term is defined in the NYSE listing rules;

 

   

three additional individuals proposed by Sprint and reasonably acceptable to SoftBank from the members of Sprint’s board of directors immediately prior to the closing of the SoftBank Merger, who are expected to be Independent Directors; and

 

   

three additional individuals nominated by SoftBank or its controlled affiliate and elected by the stockholders of New Sprint, and who may or may not qualify as Independent Directors.

In addition, during the 12 months immediately following the period described above, the New Sprint board of directors will consist of ten members, determined as follows:

 

   

one director who will also be the Chief Executive Officer of New Sprint;

 

   

six individuals who qualify as “Independent Directors” as such term is defined in the NYSE listing rules; and

 

   

three additional individuals nominated by SoftBank or its controlled affiliate and elected by the stockholders of New Sprint, and who may or may not qualify as Independent Directors.

Each director of New Sprint will remain in office until his or her earlier resignation or successors are elected in accordance with the bylaws of New Sprint.

At all times following the period described above until such time as the combined voting interest of SoftBank and its controlled affiliates in New Sprint falls below 50% and remains below 50% for 90 consecutive days, the New Sprint board of directors will include not fewer than three (or such greater number as may be required by applicable law or listing rules) individuals who qualify as “Independent Directors” (as such term is defined in the NYSE listing rules). Thereafter, unless and until the combined voting interest of SoftBank and its controlled affiliates in New Sprint remains below 10% for 90 consecutive days, the New Sprint board of directors will include a number of individuals nominated by SoftBank or its controlled affiliate that is proportional to the combined voting interest of SoftBank and its controlled affiliates in New Sprint, rounded up to the nearest whole number.

As of the date of this proxy statement-prospectus, at the effective time of the SoftBank Merger, the following individuals are expected to serve on the New Sprint board of directors:

 

   

Ronald D. Fisher, president and director of Parent and director of SoftBank;

 

   

Daniel R. Hesse, Chief Executive Officer of Sprint; and

 

   

Masayoshi Son, founder, Chairman and CEO of SoftBank.

Other than the individuals noted above, SoftBank and Sprint have not determined who will serve on the New Sprint board of directors.

 

 

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Upon the consummation of the SoftBank Merger, the executive officers of New Sprint will be determined by the New Sprint board of directors. Other than Mr. Hesse, who is expected to be appointed as the initial Chief Executive Officer of New Sprint, as of the date of this proxy statement-prospectus, SoftBank and Sprint have not determined who will serve as the officers of New Sprint at the effective time of the SoftBank Merger. In addition, it is expected that at the effective time of the SoftBank Merger, Mr. Son would be appointed as the initial Chairman of the New Sprint board of directors and Mr. Fisher would be appointed as the initial Vice-Chairman of the New Sprint board of directors.

 

 

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SUMMARY HISTORICAL FINANCIAL DATA

The following selected historical consolidated financial data of Sprint have been derived from the audited historical consolidated financial statements and related notes of Sprint as of and for each of the five years in the period ended December 31, 2011 and from the unaudited consolidated financial statements of Sprint as of and for the nine-month periods ended September 30, 2012 and 2011. The selected historical consolidated financial data provide only a summary and should be read in conjunction with the audited consolidated financial statements and notes thereto, other financial information and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Sprint’s filings with the SEC. See “Where You Can Find More Information” on page []. Historical results are not necessarily indicative of any results to be expected in the future.

 

    As of and for the
Nine Months
Ended
September 30,
    As of and for the Year Ended December 31,  
    2012     2011     2011     2010     2009     2008     2007  
    (in millions, except per share amounts)  

Results of Operations Data:

             

Net operating revenues

  $ 26,340      $ 24,957      $ 33,679      $ 32,563      $ 32,260      $ 35,635      $ 40,146   

Goodwill impairment

    —          —          —          —          —          963        29,649   

Depreciation and amortization(1)

    5,050        3,684        4,858        6,248        7,416        8,407        8,933   

Operating income (loss)(1)

    (1,115     546        108        (595     (1,398     (2,642     (28,740

Net loss(1)(2)

    (3,004     (1,587     (2,890     (3,465     (2,436     (2,796     (29,444

Loss per Share and Dividends:

             

Basic and diluted loss per common share(1)(2)

  $ (1.00   $ (0.53   $ (0.96   $ (1.16   $ (0.84   $ (0.98   $ (10.24

Dividends per common share(3)

    —          —          —          —          —          —          0.10   

Cash Flow Data:

             

Net cash provided by operating activities

  $ 2,783      $ 2,602      $ 3,691      $ 4,815      $ 4,891      $ 6,179      $ 9,245   

Capital expenditures

    2,784        2,221        3,130        1,935        1,603        3,882        6,322   

Financial Position Data:

             

Total assets

  $ 48,972      $ 48,015      $ 49,383      $ 51,654      $ 55,424      $ 58,550      $ 64,295   

Property, plant and equipment, net

    13,108        14,168        14,009        15,214        18,280        22,373        26,636   

Intangible assets, net

    22,391        22,577        22,428        22,704        23,462        22,886        28,139   

Total debt, capital lease and financing obligations (including equity unit notes)

    21,304        18,529        20,274        20,191        21,061        21,610        22,130   

Stockholders’ equity

    8,499        13,041        11,427        14,546        18,095        19,915        22,445   

 

(1)

For the nine months ended September 30, 2012, Sprint recorded an additional $1.7 billion of depreciation expense resulting from the ongoing decommissioning of the Nextel platform as part of the Network Vision initiative, slightly offset by a net decrease in depreciation associated with assets that became fully depreciated or were retired. For the nine months ended September 30, 2012 and 2011, Sprint recorded net charges of $927 million and $1.3 billion, respectively, related to equity in losses of unconsolidated investments. In 2011, operating income improved $703 million primarily due to the increase in net operating revenues of $1.1 billion, as well as decreases in depreciation and amortization associated with a reduction in the replacement rate of assets in 2009 through 2011, and definite lived intangible assets becoming fully amortized, offset by increases in operating expenses of $413 million as a result of increases in wireless cost of services associated with 4G MVNO roaming due to higher data usage and increased wireless cost of products primarily related to higher cost of postpaid and prepaid devices. In 2010, operating loss improved $803 million primarily due to the increase in net operating revenues of $303 million in addition to decreases in operating expenses of $500

 

 

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  million as a result of Sprint’s cost cutting initiatives in prior periods. In 2009, Sprint recognized net charges of $389 million ($248 million after tax) primarily related to severance and exit costs and asset impairments other than goodwill. In 2008, Sprint recognized net charges of $936 million ($586 million after tax) primarily related to asset impairments other than goodwill, severance and exit costs, and merger and integration costs. In 2007, Sprint recognized net charges of $956 million ($590 million after tax) primarily related to merger and integration costs, asset impairments other than goodwill, and severance and exit costs.
(2) During the nine-month period ending September 30, 2012, and for the years 2011 and 2010, Sprint did not recognize significant tax benefits associated with federal and state net operating losses generated during the periods due to Sprint’s history of consecutive annual losses. As a result, Sprint recognized an increase in the valuation allowance on deferred tax assets affecting the income tax provision by $1.2 billion in the nine-month period ending September 30, 2012, and $1.2 billion, $1.4 billion, and $281 million for the years ended December 31, 2011, 2010 and 2009, respectively.
(3) Sprint did not declare any dividends on its common shares during the nine-month period ending September 30, 2012, or in 2011, 2010, 2009, and 2008. For each quarter of 2007, the dividend was $0.025 per share.

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

These unaudited pro forma condensed combined financial statements give effect to transactions related to (a) the proposed merger (the “SoftBank Merger”) whereby Sprint Nextel Corporation (“Sprint”) would become a wholly owned subsidiary of Starburst II, Inc. (“Starburst II,” “New Sprint” or “Parent”) and (b) Sprint’s proposed acquisition of all of the remaining equity interests in Clearwire Corporation (“Clearwire”) not currently held by Sprint (the “Clearwire Acquisition”). The unaudited pro forma condensed combined balance sheet includes the historical audited consolidated balance sheet of Starburst II, as of October 5, 2012, and the historical unaudited consolidated balance sheets of both Sprint and Clearwire, as of September 30, 2012, giving pro forma effect to (i) the SoftBank Merger and the Clearwire Acquisition as discussed above and (ii) the additional equity capitalization of Parent, as if these transactions had been consummated on September 30, 2012. Parent, the accounting acquirer for purposes of the SoftBank Merger was created on October 5, 2012, and did not have any operations as of and prior to September 30, 2012. Accordingly, the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 were prepared using the historical consolidated statements of operations of Sprint and Clearwire, giving pro forma effect to the acquisitions as if these transactions had been consummated on January 1, 2011. The unaudited pro forma condensed combined financial information has been adjusted to give pro forma effect to agreements and events that are (1) directly attributable to the acquisitions, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results.

SoftBank Transaction

On October 5, 2012, Parent was established by SoftBank for the purpose of acquiring a controlling interest in Sprint in the SoftBank Merger and undertaking the transactions contemplated by the Merger Agreement and the Bond Purchase Agreement (collectively, the “SoftBank Transactions”). For more details about the SoftBank Transactions, see “The Merger Agreement” beginning on page [] and “The Bond Purchase Agreement” beginning on page [].

The completion of the SoftBank Transactions is expected to occur in stages. On October 22, 2012, Sprint issued a convertible bond (“Bond”) under the Bond Purchase Agreement to Parent with a face amount of $3.1 billion, stated interest rate of 1%, and maturity date of October 15, 2019. The Bond is convertible into approximately 590 million shares of Sprint common stock, subject to adjustment. The Bond will convert into shares of Sprint common stock immediately prior to consummation of the SoftBank Merger and may not otherwise be converted prior to the termination of the Merger Agreement.

Upon consummation of the SoftBank Merger, which is subject to various conditions, including Sprint stockholder and regulatory approval, SoftBank will fund Parent with additional capital of approximately $17.0 billion, of which approximately $12.1 billion will be distributed to Sprint stockholders as merger consideration with the remaining $4.9 billion held in the cash balance of New Sprint for general corporate purposes, including but not limited to the Clearwire Acquisition. Pursuant to the terms and subject to the conditions described in the Merger Agreement, upon consummation of the SoftBank Merger, outstanding shares of Sprint common stock, except as otherwise provided for in the Merger Agreement, will be converted, at the election of Sprint stockholders, into (i) cash in an amount equal to $7.30 for each share of Sprint common stock or (ii) one share of New Sprint common stock for each share of Sprint common stock, subject in each case to proration such that a stockholder may receive a combination of cash and New Sprint common stock. See “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page [].

Upon consummation of the SoftBank Merger, HoldCo, New Sprint’s parent, will receive a five-year warrant to purchase approximately 55 million shares of New Sprint at $5.25 per share which would yield approximately $300 million in proceeds upon exercise. No pro forma adjustment for the warrant has been reflected in the unaudited pro forma condensed combined balance sheet due to its immateriality. See “The Warrant Agreement” beginning on

 

 

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page []. Upon consummation of the SoftBank Merger, (i) Sprint will become a wholly-owned subsidiary of New Sprint, (ii) New Sprint will be a publicly traded company, (iii) SoftBank will indirectly own approximately 70% of New Sprint on a fully diluted basis, and (iv) the former stockholders and other equityholders of Sprint will own approximately 30% of the fully diluted equity of New Sprint.

As more fully described in the notes to the unaudited pro forma condensed combined financial information, the estimate of total consideration paid by Parent in exchange for 100% of the outstanding shares of Sprint, excluding the 590 million common shares expected to be held by New Sprint, is determined based primarily upon the approximately $12.1 billion cash consideration plus the stock consideration equal to the estimated fair value of New Sprint shares of common stock to be distributed to Sprint stockholders existing immediately prior to the consummation of the SoftBank Merger. The total consideration paid by Parent will also include the amount of the estimated fair value of New Sprint equity awards to be issued in exchange for 100% of Sprint equity awards existing immediately prior to the consummation of the SoftBank Merger.

Clearwire Transaction

On December 17, 2012, Sprint announced the Clearwire Acquisition pursuant to an agreement and plan of merger dated as of December 17, 2012. The completion of the Clearwire Acquisition is subject to various conditions including Clearwire stockholder and regulatory approval, and the consummation of the Softbank Merger, among other things. Upon the closing of the Clearwire Acquisition, Sprint has agreed to pay to Clearwire stockholders cash in an amount equal to $2.97 per share or $2.2 billion in exchange for all shares of Clearwire common stock not currently held by Sprint.

In connection with the Clearwire Acquisition, Clearwire and Sprint have entered into agreements that provide up to $800 million of additional financing for Clearwire in the form of exchangeable notes, which will be convertible into Clearwire common stock at $1.50 per share, subject to certain conditions and subject to adjustment, pursuant to the terms of such financing agreements. Under the financing agreements, Sprint has agreed to purchase up to $80 million of exchangeable notes per month for up to ten months beginning in January 2013, subject to certain funding conditions including conditions relating to a network build out agreement and the consummation of the proposed Clearwire Acquisition. To date, Clearwire has not drawn on the financing agreements.

Unaudited Pro Forma Condensed Combined Financial Statement Considerations

The unaudited pro forma condensed combined financial information was prepared treating Parent as the acquiring entity for purposes of the SoftBank Merger and Sprint as the acquiring entity for purposes of the Clearwire Acquisition. Accordingly, consideration paid by Parent to acquire the ownership interest of Sprint will be allocated to the assets acquired and liabilities assumed from Sprint, and consideration paid by Sprint in the Clearwire Acquisition, as well as the estimated fair value of Sprint’s previously held interest in Clearwire, will be allocated to the assets acquired and liabilities assumed from Clearwire, based upon their estimated fair values as of the acquisition date of each respective transaction. The unaudited pro forma condensed combined financial information is based on various assumptions, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and the liabilities assumed from Sprint and Clearwire based on preliminary estimates of fair value.

Additionally, the allocations of the fair value of the consideration paid in excess of Sprint’s and Clearwire’s historical book value is dependent upon certain valuations and other studies that have not yet been finalized. A final estimate of the fair value of Sprint’s and Clearwire’s assets and liabilities will be based on the actual net tangible and intangible assets that exist at the acquisition date of each transaction, which will not be known prior to the consummation of each transaction. Accordingly, the pro forma consideration paid by the acquirers and the associated purchase price adjustments are preliminary, subject to future adjustments which may be material and

 

 

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have been made solely for the purpose of providing the unaudited pro forma condensed combined financial information presented below. The final purchase prices and the allocations thereof may differ materially from those reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized following completion of the transactions.

This unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial information and accompanying notes of Parent, beginning on page F-2, of Sprint, which are incorporated by reference in this proxy statement-prospectus, and of Clearwire, beginning on page F-45. The unaudited pro forma condensed combined financial information is not necessarily indicative of the operating results or financial position that would have occurred if the acquisitions had been consummated at the dates specified and is not indicative of operations going forward. The unaudited pro forma condensed combined statements of operations do not reflect any cost savings from operating efficiencies, synergies or other restructurings that could result from the proposed acquisitions.

 

 

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Starburst II

Unaudited Pro Forma Condensed Combined Balance Sheet

As of September 30, 2012

 

    Historical
Starburst  II(i)
    Sprint Nextel
Corporation
(As Reported)
    Bond
Purchase
Adjustments
          Pro Forma
Adjustments
          Eliminations           Pro Forma
Condensed
Combined—
Starburst II
& Sprint
 
    (in millions)  

ASSETS

                 

Current assets

                 

Cash and cash equivalents

  $  —        $ 5,645      $ 3,100        (3b   $ 17,040        (4a   $ —          $ 13,609   
            (12,140     (4b      
            (36     (4c      

Short-term investments

    —          684        —            —            —            684   

Accounts and notes receivable, net

    —          3,440        —            —            —            3,440   

Device and accessory inventory

    —          996        —            —            —            996   

Deferred tax assets

    —          75        —            73        (4h     —            148   

Prepaid expenses and other current assets

    —          771        —            (104     (4h     —            667   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current assets

    —          11,611        3,100          4,833          —            19,544   

Investments

    —          1,141        3,100        (3a     1,076        (4h     (3,100     (4i     2,217   

Property, plant and equipment, net

    —          13,108        —            (1,346     (4h     —            11,762   

Intangible assets

                 

Goodwill

    —          359        —            4,598        (4h     —            4,957   

FCC licenses and other

    —          20,631        —            7,462        (4h     —            28,093   

Definite-lived intangible assets, net

    —          1,401        —            5,203        (4h     —            6,604   

Other assets

    —          721        —            (468     (4h     —            253   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total assets

  $ —        $ 48,972      $ 6,200        $ 21,358        $ (3,100     $ 73,430   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities

                 

Accounts payable

  $ —        $ 3,210      $ —          $ —          $ —          $ 3,210   

Accrued expenses and other current liabilities

    —          4,427        —            (246     (4h     —            4,181   

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

    —          310        —            —            —            310   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current liabilities

    —          7,947        —            (246       —            7,701   

Long-term debt, financing and capital lease obligations

    —          20,994        2,846        (3b     2,781        (4h     —            23,775   
            (2,846     (4f      

Deferred tax liabilities

    —          7,089        —            3,301        (4h     —            10,390   

Other liabilities

    —          4,443        —            (805     (4h     —            3,638   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities

    —          40,473        2,846          2,185          —            45,504   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Commitments and contingencies

                 

Stockholders’ equity

                 

Common stock

    —          6,007        —            (6,007     (4g     —            45   
            32        (4a      
            13        (4d      

Paid-in capital

    —          46,752        3,100        (3a     (46,752     (4g     (3,100     (4i     28,017   
        254        (3b     17,008        (4a     (254     (4i  
            100        (4c      
            7,625        (4d      
            184        (4e      
            3,100        (4f      

Accumulated deficit

    —          (43,494     —            43,494        (4g     254        (4i     (136
            (254     (4f      
            (136     (4c      

Accumulated other comprehensive income (loss)

    —          (766     —            766        (4g     —            —     

Non-controlling interest

    —          —          —            —            —            —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total stockholders’ equity

    —          8,499        3,354          19,173          (3,100       27,926   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ —        $ 48,972      $ 6,200        $ 21,358        $ (3,100     $ 73,430   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

 

(i) The historical balance sheet of Starburst II is as of October 5, 2012, the date of incorporation.

See accompanying notes to the unaudited pro forma condensed combined financial information

 

 

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Starburst II

Unaudited Pro Forma Condensed Combined Balance Sheet (continued)

As of September 30, 2012

 

    Pro Forma
Condensed
Combined—
Starburst II
& Sprint
    Clearwire
Corporation
(As  Reported)

(Note 7a)
    Elimination &
Conforming
Adjustments
          Pro Forma
Adjustments
          Pro Forma
Condensed
Combined
 
    (in millions)  

ASSETS

             

Current assets

             

Cash and cash equivalents

  $ 13,609      $ 253      $ —          $ (100     (5   $ 11,556   
            (2,156     (6  
            (50     (8b  

Short-term investments

    684        936        —            —            1,620   

Accounts and notes receivable, net

    3,440        58        (50     (7b     —            3,448   

Device and accessory inventory

    996        14        —            —            1,010   

Deferred tax assets

    148        —          —            (49     (8a     99   

Prepaid expenses and other current assets

    667        82        (203     (7b     —            546   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    19,544        1,343        (253       (2,355       18,279   

Investments

    2,217        —          (2,095     (7b     100        (5     122   
            (100     (7b  

Property, plant and equipment, net

    11,762        2,352        —            (540     (8a     13,574   

Intangible assets

             

Goodwill

    4,957        —          —            —            4,957   

FCC licenses and other

    28,093        4,292        —            4,134        (8a     36,519   

Definite-lived intangible assets, net

    6,604        —          —            —            6,604   

Other assets

    253        163        —            (58     (8a     358   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 73,430      $ 8,150      $ (2,348     $ 1,181        $ 80,413   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

             

Current liabilities

             

Accounts payable

  $ 3,210      $ 71      $ (162     (7b   $ (43     (8a   $ 3,076   

Accrued expenses and other current liabilities

    4,181        401        (91     (7b     30        (6     4,521   

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

    310        27        —            —            337   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    7,701        499        (253       (13       7,934   

Long-term debt, financing and capital lease obligations

    23,775        4,244        (179     (7b     708        (8a     28,548   

Deferred tax liabilities

    10,390        183        —            1,325        (8a     11,898   

Other liabilities

    3,638        936        (75     (7b     (342     (8a     4,157   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities

    45,504        5,862        (507       1,678          52,537   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Commitments and contingencies

             

Stockholders’ equity

             

Common stock

    45        —          —            —            45   

Paid-in capital

    28,017        3,128        (3,128     (7b     —            28,017   

Accumulated deficit

    (136     (2,159     2,159        (7b     (447     (7b     (186
        447        (7b     (50     (8b  

Accumulated other comprehensive income (loss)

    —          3        (3     (7b     —            —     

Non-controlling interest

    —          1,316        (1,316     (7b     —            —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total stockholders’ equity

    27,926        2,288        (1,841       (497       27,876   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 73,430      $ 8,150      $ (2,348     $ 1,181        $ 80,413   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information

 

 

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Starburst II

Unaudited Pro Forma Condensed Combined Statement of Operations(i)

Nine Months Ended September 30, 2012

 

     Sprint Nextel
Corporation

(As Reported)
    Pro Forma
Adjustments
          Pro Forma
Condensed
Combined—
Starburst II
& Sprint
    Clearwire
Corporation
(As Reported)
(Note 7a)
    Pro Forma
Adjustments
          Pro Forma
Condensed
Combined
 
     (in millions, except per share amounts)  

Net operating revenues

   $ 26,340      $ (90     (4j   $ 26,250      $ 953      $ (358     (7c   $ 26,845   

Net operating expenses

                

Cost of services and products

     15,189        (56     (4k     15,055        943        (27     (8c     15,626   
       (78     (4j         (345     (7c  

Selling, general and administrative

     7,208        —            7,208        420        (73     (7c     7,555   

Severance, exist costs and asset impairments

     290        —            290        83        —            373   

Depreciation

     4,820        (66     (4l     4,754        559        (105     (8d     5,226   
               18        (7c  

Amortization

     230        736        (4m     966        14        (14     (8e     966   

Other, net

     (282              (282     —          —            (282
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
     27,455        536          27,991        2,019        (546       29,464   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Operating loss

     (1,115     (626       (1,741     (1,066     188          (2,619
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Other (expense) income

                

Interest expense

     (996     329        (4n     (667     (414     141        (8f     (923
               17        (7c  

Equity in losses of unconsolidated investments and other, net

     (783     —            (783     (7     887        (7c     97   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
     (1,779     329          (1,450     (421     1,045          (826
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income taxes

     (2,894     (297       (3,191     (1,487     1,233          (3,445

Income tax (expense) benefit

     (110     —          (4o     (110     175        (186     (8g     (121
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

   $ (3,004   $ (297     $ (3,301   $ (1,312   $ 1,047        $ (3,566
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Basic and diluted net loss per common share

   $ (1.00   $ —          $ (0.73   $ —        $ —          $ (0.79
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Basic and diluted weighted average common shares outstanding

     3,001        1,523        (4p     4,524        —          —            4,524   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

 

(i) Starburst II was incorporated on October 5, 2012 and therefore had no historical Statement of Operations or other activities preceding incorporation.

See accompanying notes to the unaudited pro forma condensed combined financial information

 

 

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Starburst II

Unaudited Pro Forma Condensed Combined Statement of Operations(i)

Year Ended December 31, 2011

 

     Sprint Nextel
Corporation

(As Reported)
    Pro Forma
Adjustments
          Pro Forma
Condensed
Combined—
Starburst II
& Sprint
    Clearwire
Corporation
(As Reported)
(Note 7a)
    Pro Forma
Adjustments
          Pro Forma
Condensed
Combined
 
     (in millions, except per share amounts)  

Net operating revenues

   $ 33,679      $ (133     (4j   $ 33,546      $ 1,253      $ (520     (7c   $ 34,279   

Net operating expenses

                

Cost of services and products

     19,015        (13     (4k     18,898        1,559        (38     (8c     19,905   
       (104     (4j         (514     (7c  

Selling, general and administrative

     9,592        —            9,592        698        (68     (7c     10,222   

Severance, exist costs and asset impairments

     106        —            106        700        —            806   

Depreciation

     4,455        (88     (4l     4,367        666        (142     (8d     4,902   
               11        (7c  

Amortization

     403        1,071        (4m     1,474        22        (22     (8e     1,474   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
     33,571        866          34,437        3,645        (773       37,309   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Operating income

     108        (999       (891     (2,392     253          (3,030
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Other expense

                

Interest expense

     (1,011     428        (4n     (583     (505     187        (8f     (878
               23        (7c  

Equity in losses of unconsolidated investments and other, net

     (1,733     —            (1,733     149        1,701        (7c     117   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
     (2,744     428          (2,316     (356     1,911          (761
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income taxes

     (2,636     (571       (3,207     (2,748     2,164          (3,791

Income tax expense

     (254     —          (4o     (254     (107     70        (8g     (291
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

   $ (2,890   $ (571     $ (3,461   $ (2,855   $ 2,234        $ (4,082
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Basic and diluted net loss per common share

   $ (0.96   $ —          $ (0.77   $ —        $ —          $ (0.91
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Basic and diluted weighted average common shares outstanding

     2,995        1,503        (4p     4,498        —          —            4,498   
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

 

(i) Starburst II was incorporated on October 5, 2012 and therefore had no historical Statement of Operations or other activities preceding incorporation.

See accompanying notes to the unaudited pro forma condensed combined financial information

 

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1—Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting, which is based on authoritative guidance for business combinations and uses the fair value concepts defined in authoritative guidance. The unaudited pro forma condensed combined financial information was prepared on the basis of accounting principles generally accepted in the United States of America utilizing the SEC’s guidance under Article 11 of Regulation S-X.

The unaudited pro forma condensed combined financial information and accompanying notes reflect a preliminary allocation of the estimated purchase prices as if the acquisitions and the Bond Purchase Agreement had been consummated on September 30, 2012, with respect to the balance sheet, and on January 1, 2011, with respect to each of the statements of operations presented. The estimated purchase price for each acquisition, the related allocations and all other adjustments included in this pro forma condensed combined financial information are preliminary, subject to future adjustments, which may be material, and have been prepared solely for the purpose of providing the information presented.

The authoritative guidance for business combinations requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date if fair value can reasonably be estimated. In addition, the guidance establishes that the consideration transferred be measured at the closing date of the acquisition at the then-current fair value. As the purchase price for the Parent’s acquisition of Sprint includes shares and equity awards to be issued as consideration, the estimated fair value of such shares and equity awards to be issued will most likely result in values that are different from the amounts assumed in this unaudited pro forma condensed combined financial information.

The authoritative guidance for fair value defines the term ‘fair value’, sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of inputs used to develop the fair value measures. Fair value is defined in the guidance as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. Many of these fair value measurements can be highly subjective and it is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Parent would have been had the acquisitions occurred on the dates assumed, nor is it necessarily indicative of future consolidated results of operations or financial position.

The unaudited pro forma condensed combined financial information does not reflect any cost savings from operating efficiencies, synergies or other restructurings that could result from the acquisitions. Further, upon consummation of Parent’s acquisition of Sprint, the board of directors of New Sprint will be comprised of a combination of SoftBank and Sprint appointees and the senior management of New Sprint will be determined by the board of directors of New Sprint. See “Control and Management of New Sprint After the SoftBank Merger” beginning on page [].

 

 

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SoftBank Transaction

Note 2—Preliminary Purchase Price Calculation—New Sprint

The allocations of the preliminary estimated purchase price are subject to change based on finalization of the fair values of the tangible and intangible assets acquired and liabilities assumed in connection with Parent’s acquisition of Sprint. The estimated purchase price of approximately $20.0 billion has been calculated as follows (in millions, except per share amounts):

 

Total cash to be paid to Sprint stockholders

   $  12,140   

Estimated value of shares of New Sprint to be issued to former Sprint stockholders(a)

     7,638   

Estimated value of New Sprint equity awards issued to former Sprint equity award holders(b)(c)

     184   
  

 

 

 

Total estimated purchase price

   $ 19,962   
  

 

 

 

 

(a) Represents approximately 45% or 1,340 million of Sprint’s total outstanding shares as of September 30, 2012 multiplied by the three day average of the Sprint closing share price following the announcement of the SoftBank Merger, which was $5.70 per share. As calculated in Note 4(p), 1,340 million shares is the estimated number of Sprint shares that would have been exchanged for New Sprint shares had the SoftBank Merger been consummated on September 30, 2012. Upon consummation of the SoftBank Merger, the value of this component of the consideration will be based on the actual number of New Sprint shares issued to former Sprint stockholders and the actual stock price of New Sprint. A 10% difference in Sprint’s stock price would change the purchase price by approximately $764 million with a corresponding change to goodwill. The actual purchase price and the final valuation could differ significantly at the date of consummation of the SoftBank Merger compared to the current estimate.
(b) In accordance with applicable accounting guidance, the fair value of replacement awards attributable to pre-acquisition service is recorded as part of the consideration transferred in the SoftBank Merger, while the fair value of replacement awards attributable to post-acquisition service is recorded separately from the business combination and recognized as compensation cost in the post-acquisition period over the remaining service period. The portion of Sprint equity awards attributable to pre-acquisition and post-acquisition service is estimated based on the ratio of vested to unvested equity awards.
(c) The fair value of the New Sprint equivalent equity awards was estimated as of September 30, 2012, using the Black-Scholes valuation model utilizing various assumptions for stock options and using the average of Sprint’s closing stock price for the three days following the announcement of the SoftBank Merger for restricted stock units.

Note 3—Bond Purchase Agreement

On October 22, 2012, Sprint issued the Bond, under the terms of the Bond Agreement, to Parent with a face amount of $3.1 billion, stated interest rate of 1%, and maturity date of October 15, 2019, which is convertible into approximately 590 million shares of Sprint common stock, subject to adjustment. The Bond will convert into shares of Sprint common stock immediately prior to consummation of the SoftBank Merger and may not otherwise be converted prior to the termination of the Merger Agreement. See “The Bond Purchase Agreement” beginning on page []. The following unaudited pro forma adjustments result from giving pro forma effect to the issuance of the Bond between Parent and Sprint on September 30, 2012.

 

(a) Adjustment to reflect HoldCo’s capital contribution of $3.1 billion to Parent and Parent’s subsequent purchase of the Bond issued by Sprint. The net impact of these two transactions is an increase in Parent’s investment in Sprint and an increase in Parent’s paid-in-capital of $3.1 billion.

 

(b)

Adjustment to reflect an increase in Sprint’s cash and cash equivalents, long-term debt, and additional paid-in-capital by $3.1 billion, $2.8 billion and $254 million, respectively, to give pro forma effect on September 30, 2012 for the issuance of the Bond. On the issuance date of October 22, 2012, Sprint’s closing

 

 

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  stock price of $5.68 per share was in excess of the conversion price of $5.25 per share, giving rise to a beneficial conversion value of approximately $254 million, which is reflected as additional paid-in-capital and a reduction to the carrying value of the Bond.

Note 4—Unaudited Pro Forma Adjustments

Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The estimated purchase price of approximately $20.0 billion has been allocated, based on preliminary estimates of fair value, using the historical unaudited financial statements of Sprint as of September 30, 2012. In addition to the estimated purchase price, Parent’s equity capitalization will include approximately $8 billion consisting of the $3.1 billion cash capital contribution from HoldCo in October 2012 used by Parent to purchase the Bond and the $4.9 billion cash capital contribution from HoldCo upon consummation of the SoftBank Merger. The following tables provide information regarding the pro forma equity capitalization of Parent, including a rollforward and reconciliation of the applicable components of stockholders’ equity.

 

Total equity capitalization:

 

Cash payment to former Sprint stockholders for the purchase of common stock(i)

   $ 12,140   

Issuance of Parent common stock to former Sprint stockholders(ii)

     7,638   

Estimated value of Parent equity awards issued to former Sprint equity award holders (see Note 2)

     184   
  

 

 

 

Total estimated purchase price

   $ 19,962   

Issuance of Parent shares to HoldCo in connection with October 2012 cash capital contribution

     3,100   

Issuance of Parent shares to HoldCo upon consummation of the SoftBank Merger(i)

     4,900   
  

 

 

 

Total equity capitalization(iii)

   $ 27,962   
  

 

 

 

 

i. In accordance with the Merger Agreement, SoftBank will cause HoldCo to further capitalize Parent with approximately $17.0 billion in cash. Approximately $12.1 billion will be distributed to former Sprint stockholders and approximately $4.9 billion will remain in the cash balance of Parent for general corporate purposes, including but not limited to the Clearwire Acquisition. Former Sprint stockholders will be limited to cash consideration of $12.1 billion.
ii. Represents the estimated aggregate value of the approximately 1.3 billion common shares issued by New Sprint in exchange for Sprint shares for purposes of these pro formas which is estimated to be $7.6 billion (see Note 2).

 

 

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iii. The historical stockholders’ equity of Sprint will be eliminated in consolidation with Parent upon completion of the SoftBank Merger. The combined stockholders’ equity of New Sprint will be representative of the total investment by HoldCo in New Sprint and new equity issuances. See calculation of the pro forma adjustments to the components of equity below (in millions, except per share amounts):

 

    Common stock     Paid-in-capital     Accumulated
deficit
    Accumulated
other
comprehensive
loss
    Total  

Sprint pre-acquisition equity

  $ 6,007      $ 46,752      $ (43,494   $ (766   $ 8,499   

Elimination of Sprint equity upon acquisition by Parent

    (6,007     (46,752     43,494        766        (8,499

Impact of HoldCo’s investment in Parent

    —          3,100        —          —          3,100   

Impact of shares to be issued by Parent to HoldCo (par value $0.01 per share)

    32        17,008        —          —          17,040   

Impact of shares to be issued by Parent to former Sprint stockholders (par value $0.01 per share)

    13        7,625        —          —          7,638   

Issuance of Parent equity awards

    —          184        —          —          184   

Estimated transaction fees

    —          100        (136     —          (36
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined post-acquisition equity

  $ 45      $ 28,017      $ (136   $ —        $ 27,926   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following unaudited consolidated pro forma adjustments result from the preliminary allocation of estimated purchase price to the assets acquired and liabilities assumed from the SoftBank Merger.

 

(a) Reflects the cash capital contribution of HoldCo to Parent.

 

(b) Reflects the cash payment to former Sprint stockholders for the purchase of common stock.

 

(c) Reflects estimated fees relating to the SoftBank Merger, $36 million of which is estimated to be incurred by Sprint and $100 million of which is estimated to be incurred by SoftBank on behalf of Parent.

 

(d) Reflects the issuance of New Sprint common stock to former Sprint stockholders.

 

(e) Reflects the estimated value of New Sprint equity awards issued to former Sprint equity award holders.

 

(f) Reflects the conversion of the amounts associated with the Bond. According to the provisions of the Bond Purchase Agreement, immediately prior to the consummation of the SoftBank Merger, the Bond will be converted into approximately 590 million shares of Sprint common stock. Accordingly, the amounts recorded by Sprint as debt under the $3.1 billion Bond become paid-in-capital.

 

(g) Reflects the elimination of historical Sprint equity carrying values resulting from Parent acquisition of Sprint.

 

(h) The SoftBank Merger is being treated as a business combination with Parent, the accounting acquirer, purchasing 100% of the ownership interests in Sprint. Consequently, the acquisition-date fair value of the consideration provided by Parent to the owners of Sprint immediately prior to the consummation of the SoftBank Merger will be allocated to the assets acquired and the liabilities assumed by Parent using the acquisition method, which allocates the consideration on the basis of fair value. As indicated above, the acquisition date fair value of the consideration given by Parent for the ownership interests in Sprint is estimated to be approximately $20.0 billion, which exceeded Sprint’s net book value of $8.5 billion as of September 30, 2012 by approximately $11.5 billion, which will be allocated to the assets acquired and liabilities assumed.

 

 

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The estimated purchase price has been allocated to the net tangible and intangible assets acquired and liabilities assumed as follows (in millions):

 

     September 30,
2012  historical
carrying value
    Purchase
price
adjustment
    Preliminary
fair value
 

Current assets

   $ 11,611        (31   $ 11,580   

Investments

     1,141        1,076        2,217   

Property, plant and equipment, net

     13,108        (1,346     11,762   

Indefinite life intangibles (including goodwill of $4,957)

     20,990        12,060        33,050   

Customer relationships and other

     1,401        5,203        6,604   

Other assets

     721        (468     253   

Current liabilities

     (7,947     246        (7,701

Long-term debt, financing and capital lease obligations

     (20,994     (2,781     (23,775

Deferred tax liabilities

     (7,089     (3,301     (10,390

Other liabilities

     (4,443     805        (3,638
  

 

 

   

 

 

   

 

 

 

Total

   $ 8,499      $ 11,463      $ 19,962   
  

 

 

   

 

 

   

 

 

 

 

(i) Reflects the consolidation adjustment to eliminate Parent’s $3.1 billion investment in Sprint and the $254 million beneficial conversion feature recorded by Sprint.

Unaudited Pro Forma Condensed Combined Statements of Operations Adjustments

 

(j) Reflects the elimination of deferred revenues and costs recognized in the historical statements of operations of Sprint primarily related to amounts collected at the beginning of a customer contract for activation fees and amortized over the contract life or the estimated customer life.

 

(k) Reflects the estimated adjustment to cost of services and products for the preliminary purchase price adjustment related to Sprint’s lease agreements. The estimated fair value adjustment is being amortized on a straight-line basis from lease inception over the average remaining lease term, which approximates nine years.

 

(l) Reflects the estimated adjustment to depreciation expense for the preliminary purchase price adjustment of approximately $174 million related to Sprint’s non-iDEN property, plant and equipment, net. The depreciation resulting from the adjustment is expected to be recognized on a straight-line basis over their average remaining estimated useful lives. The pro forma effect on depreciation expense resulting from the preliminary purchase price adjustment to iDEN network assets was excluded because it is nonrecurring in nature due to the planned decommissioning of the iDEN network, which is expected to be substantially complete by June 30, 2013.

 

(m) Reflects the estimated adjustment to amortization expense for the preliminary purchase price adjustment related to Sprint’s customer relationships of approximately $6.2 billion, as well as definite-lived trade names and reacquired rights. The estimated fair value of Sprint’s customer relationships is expected to be amortized over 8 years for postpaid customers and 4 years for prepaid customers using the sum of the years’ digits method. The estimated fair value of Sprint’s definite-lived trade names is expected to be amortized over the remaining term of the license agreement, which approximates 36 years. This adjustment also reflects the elimination of the historical amortization expense resulting from the amortization of reacquired rights, which were adjusted by approximately $820 million in the unaudited pro forma condensed combined balance sheet.

 

(n)

Reflects the estimated adjustment to interest expense for the preliminary purchase price adjustment to record Sprint’s outstanding debt at fair value. This adjustment also reflects the elimination of interest expense resulting from the amortization of debt issuance costs of approximately $276 million, which were adjusted

 

 

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Table of Contents
  to $0 in the unaudited pro forma condensed combined balance sheet. For purposes of the unaudited pro forma condensed combined financial information, the adjustment to Sprint’s outstanding debt is being amortized over the remaining period to maturity of the debt, which varies from approximately 1 to 20 years as of September 30, 2012.

 

(o) No tax benefit has been provided on the net pre-tax expense resulting from the pro forma adjustments. Sprint’s consolidated net operating losses and loss carryforwards will be attributed to the new Parent consolidated group. Due to Sprint’s recent history of consecutive annual losses, Sprint does not expect to record significant tax benefits on current or future net operating losses until circumstances justify the recognition of such benefits.

 

(p) Reflects the adjustments to shares outstanding as calculated below (in millions, except Merger Agreement factor):

 

     Sprint     Starburst II  

Shares outstanding as of September 30, 2012

     3,003        —     

Capitalization of Parent by HoldCo

     —          3   

Conversion of Bond, immediately prior to consummation of the SoftBank Merger

     590        —     
  

 

 

   

 

 

 

Shares outstanding immediately prior to consummation of the SoftBank Merger

     3,593        3   

Shares not subject to merger consideration

     (590  
  

 

 

   

Shares outstanding and eligible to participate in merger consideration

     3,003     

Upon consummation of the SoftBank Merger, outstanding Sprint shares are exchanged for cash and Parent shares(i)

     (3,003     1,340   

Issuance of shares to HoldCo by Parent in accordance with the Merger Agreement(ii)

       3,181   

Parent’s equity interest in Sprint

     590     
  

 

 

   

 

 

 

Total shares outstanding following consummation of the SoftBank Merger(iii)

     590        4,524   
  

 

 

   

 

 

 

 

i. As described above, Sprint stockholders and other equityholders immediately prior to consummation of the SoftBank Merger will receive total cash consideration of approximately $12.1 billion together with an approximate 30% fully diluted interest in New Sprint effectuated by an exchange of shares in accordance with the provisions of the Merger Agreement. Of the total shares of Sprint common stock outstanding immediately prior to consummation of the SoftBank Merger, approximately 45% will be exchanged for shares of New Sprint upon consummation of the SoftBank Merger.
ii. As previously described, following the consummation of the SoftBank Merger, HoldCo will own approximately 70% of New Sprint on a fully diluted basis. To achieve the targeted ownership, the Merger Agreement provides that the number of Starburst II shares held by HoldCo will be cancelled and reclassified into a number of New Sprint shares held by HoldCo which will be equal to the product of 2.294 multiplied by the sum of the following: (i) the total number of shares of New Sprint issued to non-HoldCo stockholders in the SoftBank Merger; (ii) the product of the “in-the-money multiplier” (as defined in the Merger Agreement) multiplied by the number of New Sprint shares underlying all assumed “in-the-money options” (as defined in the Merger Agreement); and (iii) the aggregate number of shares of New Sprint common stock underlying all restricted stock units outstanding as of the date of consummation of the SoftBank Merger. The pro forma consummation of the SoftBank Merger resulted in approximately 1.3 billion shares being issued to non-HoldCo stockholders. Of the 89 million Sprint equity awards as of September 30, 2012, approximately 74 million were in the money stock options or restricted stock units, of which 48 million would be considered dilutive assuming a cashless exercise of the in the money stock options.

 

 

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Consequently, except as otherwise provided in the Merger Agreement, Parent will issue 3.2 billion shares to HoldCo as shown below (in millions, except Merger Agreement factor):

 

     Starburst II
Shares
Issued to
HoldCo
 

Shares issued to non-HoldCo stockholders

     1,340   

Dilutive equity awards

     48   
  

 

 

 

Pro forma shares outstanding immediately prior to consummation of the SoftBank Merger

     1,388   

Merger Agreement factor

     x  2.294   
  

 

 

 

Shares issued to HoldCo by Parent in connection with the consummation of the SoftBank Merger

     3,184   
  

 

 

 

 

iii. Using the same formulas as those above to estimate the number of shares of Parent that result from the exchange of merger consideration, and assuming the same dilution relative to equity awards, if the SoftBank Merger had been consummated on January 1, 2011, approximately 4.5 billion shares would have been outstanding as of December 31, 2011.

Clearwire Acquisition

Note 5—Share Purchase

On December 11, 2012, Sprint purchased 30.9 million shares of Class A Common Stock of Clearwire and 2.7 million shares of Class B Common Stock of Clearwire from Eagle River Holdings, LLC for $100 million in cash. Upon the closing of the purchase, Sprint’s ownership interest in Clearwire increased to approximately 50.4%. Sprint will continue to account for its ownership interests in Clearwire under the equity method of accounting given the significant participative governance rights provided to the minority holders in Clearwire until such time of the closing of the Clearwire Acquisition.

Note 6—Preliminary Purchase Price Calculation—Clearwire

The estimated purchase price of approximately $4.1 billion for the Clearwire Acquisition has been calculated as follows (in millions, except per share amounts):

 

Total cash paid to Clearwire stockholders(a)

   $ 2,156   

Estimated fair value of Sprint’s previously held non-controlling interest in Clearwire(b)

     1,841   

Total cash paid for Eagle River Clearwire Interests(c)

     100   

Estimated payment to holders of Clearwire equity awards(d)

     30   
  

 

 

 

Total estimated purchase price

   $ 4,127   
  

 

 

 

 

(a) Represents the cash purchase price of $2.97 per share to acquire the outstanding shares of Clearwire not currently held by Sprint.
(b) Equals the estimated fair value of Sprint’s previously held equity interest in Clearwire of approximately 705 million Class B shares valued at $2.61 per share, which is the average of Clearwire’s stock price for the 3 days prior to Sprint’s announcement of the Clearwire Acquisition. The difference between $2.61 and the per share merger consideration of $2.97 represents an estimate of a control premium, which would not generally be included in the valuation of Sprint’s non-controlling interest.
(c) Represents the total cash paid to acquire the Eagle River Clearwire Interests.
(d)

In accordance with the Clearwire Acquisition Agreement, all holders of Clearwire RSUs will exchange each RSU, whether vested or unvested as of the date the transaction is consummated, for a right to receive $2.97 in cash. As of the date the Clearwire Acquisition Agreement was signed approximately 26.3 million RSUs

 

 

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Table of Contents
  were outstanding, which would result in total cash payments of approximately $78 million, of which approximately $30 million is attributable to pre-acquisition services. The amount attributable to pre-acquisition services is included as a component of the total purchase price and the remaining approximately $48 million will be expensed in New Sprint’s statement of operations post-acquisition. No amounts were included for holders of Clearwire stock options because there are no stock options outstanding with an exercise price less than $2.97 per share.

Note 7—Consolidation of Clearwire Corporation

 

(a) Includes reclassifications of certain line items in Clearwire’s historical consolidated balance sheet and statements of operations to present in a consistent manner with certain line items included in Sprint’s historical financial statements.

 

(b) The unaudited pro forma condensed combined balance sheet includes estimated adjustments to consolidate Clearwire as a wholly owned subsidiary. Sprint historically has accounted for Clearwire under the equity method of accounting, reporting the ownership percentage of Clearwire’s net assets in “Investments” on its historical consolidated balance sheet. Additionally, Sprint has historically reported the long-term portion of note receivables from Clearwire, approximately $254 million as of September 30, 2012, in “Investments” in its historical consolidated balance sheet.

These adjustments primarily relate to (i) the elimination of the adjusted carrying value of Sprint’s previously held equity interest in Clearwire, approximately $1.9 billion including the shares purchased from Eagle River, (ii) the elimination of related party balances primarily related to wholesale mobile virtual network operator (MVNO) arrangements that were reflected on the balance sheets of Sprint and Clearwire, and (iii) adjustments for the application of Sprint’s historical financial accounting and reporting policies to Clearwire.

 

(c) The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 and the year ended December 31, 2011 have been adjusted to record Clearwire’s results as reported in Clearwire’s historical statements of operations and to remove $927 million and $1.7 billion, respectively, of equity in losses recorded by Sprint in “Equity in losses of unconsolidated investments, net” in its historical consolidated statements of operations. In addition, these adjustments reflect the elimination of related party activity that was recorded in the historical statements of operations of Sprint and Clearwire which were primarily related to wholesale MVNO arrangements between Sprint and Clearwire. The unaudited pro forma condensed combined statements of operations also reflect certain adjustments for the application of Sprint’s historical financial accounting and reporting policies to Clearwire.

Note 8—Clearwire Pro Forma Adjustments

Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The estimated purchase price of approximately $4.1 billion has been allocated, based on preliminary estimates of fair value, using the historical unaudited financial statements of Clearwire as of September 30, 2012. The following unaudited pro forma adjustments result from the preliminary allocation of estimated purchase price to the assets acquired and liabilities assumed in connection with the Clearwire Acquisition.

 

(a) The Clearwire Acquisition is being treated as a business combination with Sprint as the accounting acquirer. Consequently, the estimated acquisition-date fair value of the purchase price will be allocated to the assets acquired and the liabilities assumed by Sprint. As indicated above, the purchase price is estimated to be approximately $4.1 billion, which exceed Clearwire’s net book value of $2.3 billion as of September 30, 2012 by approximately $1.8 billion, which will be allocated to the assets acquired and liabilities assumed.

 

 

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The estimated purchase price has been allocated to the net tangible and intangible assets acquired and liabilities assumed as follows (in millions):

 

     Clearwire’s September 30,
2012 historical

carrying value
    Purchase price
adjustment
    Preliminary
fair value
 

Current assets

   $ 1,343        (49   $ 1,294   

Property, plant and equipment, net

     2,352        (540     1,812   

FCC licenses and other

     4,292        4,134        8,426   

Other assets

     163        (58     105   

Current liabilities

     (499     43        (456

Long-term debt, financing and capital lease obligations

     (4,244     (708     (4,952

Deferred tax liabilities

     (183     (1,325     (1,508

Other liabilities

     (936     342        (594
  

 

 

   

 

 

   

 

 

 

Total

   $ 2,288      $ 1,839      $ 4,127   
  

 

 

   

 

 

   

 

 

 

 

(b) Reflects estimated fees relating to the Clearwire Acquisition.

Unaudited Pro Forma Condensed Combined Statements of Operations Adjustments

 

(c) Reflects a net decrease to cost of services and products associated with amortization of the fair value adjustments to Clearwire’s leased assets, including spectrum. The adjustment to cost of services and products was calculated using a weighted average remaining lease term of approximately 24 and 5 years for leased spectrum and facilities, respectively.

 

(d) Reflects the estimated adjustment to depreciation expense for the preliminary purchase price adjustment of $540 million made to Clearwire’s property, plant and equipment. The adjustment to depreciation expense was calculated using a weighted average remaining useful life of approximately 4 years.

 

(e) Reflects the adjustment to amortization expense for the preliminary purchase price adjustment of approximately $63 million made to Clearwire’s other definite lived intangible assets.

 

(f) Reflects the estimated adjustment to interest expense for the preliminary purchase price adjustment to record Clearwire’s outstanding debt at fair value. This adjustment also reflects the elimination of interest expense resulting from the amortization of debt issuance costs of $66 million, which were written off in the unaudited pro forma condensed combined balance sheet. For purposes of the unaudited pro forma condensed combined financial information, the adjustment to Clearwire’s outstanding debt is being amortized over the remaining period to maturity of the debt, which ranges from approximately 3 to 5 years as of September 30, 2012.

 

(g) Reflects the impact to income tax (expense) benefit relating to the consolidation of Clearwire as a wholly owned subsidiary.

 

 

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Other Transactions

Note 9—Liquidity

HoldCo’s $3.1 billion contribution to Parent and the assumed consummation of the SoftBank Merger, offset by the effects of the assumed consummation of the Clearwire Acquisition, will increase the balance of cash and cash equivalents by approximately $6.0 billion for the combined company. However, there has been no effect given to assume investment income or use of proceeds, except with respect to proposed all-cash acquisition of Clearwire.

Under the terms of certain of Sprint and its consolidated subsidiaries’ existing credit facilities, consummation of the SoftBank Merger would constitute a change of control that would require repayment of all outstanding balances thereunder. Amounts outstanding under the Export Development Canada and secured equipment credit facility, which were approximately $577 million in the aggregate at September 30, 2012, would become due and payable at the time of closing. In addition, Sprint’s $2.2 billion revolving bank credit facility would expire upon a change of control, of which approximately $1.0 billion was outstanding as of September 30, 2012 through letters of credit including the letter of credit required by the 2004 FCC Report and Order to reconfigure the 800 MHz band. For purposes of the unaudited pro forma condensed combined financial information, it has been assumed that amendments for such required repayments have been obtained from existing lenders under these arrangements.

As of September 30, 2012, approximately $8.8 billion of Sprint’s senior notes and guaranteed notes provided holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in Sprint’s indenture and supplemental indentures governing applicable notes) occurs, which includes both a change of control (which will occur upon consummation of the SoftBank Merger) and a ratings decline of the applicable notes by each of Moody’s Investor Services and Standard & Poor’s Rating Services. If Sprint is required to make a change of control offer, it will offer a cash payment equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid interest. On November 13, 2012, Sprint announced the commencement of a consent solicitation with respect to proposed amendments to the indenture governing the applicable senior notes and guaranteed notes to amend the definition of “Change of Control” to provide an exception to the definition for transactions involving one or more “Permitted Holders”, which were defined in the proposed amendments to include SoftBank and its affiliates. On November 20, 2012, Sprint closed the consent solicitation with the requisite consents necessary for the modifications discussed above, and executed a supplemental indenture with respect to such senior notes and guaranteed notes reflecting the proposed amendments. Accordingly, for purposes of the unaudited pro forma condensed combined financial statements, there has been no effect given to a change of control trigger event related to the senior notes and guaranteed notes.

In connection with the Clearwire Acquisition, Clearwire and Sprint have entered into agreements that provide up to $800 million of additional financing for Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions. Under the financing agreements, Sprint has agreed to purchase up to $80 million of exchangeable notes per month for up to ten months beginning in January, 2013, with some of the monthly purchases subject to certain funding conditions, including certain conditions relating to a network build out agreement and the consummation of the proposed Clearwire Acquisition. To date, Clearwire has not drawn on the financing agreements.

The Clearwire Acquisition does not accelerate any of the stated maturity dates of Clearwire’s debt; however, holders of Clearwire’s Exchangeable Notes will have the right to require Clearwire to repurchase all of the Exchangeable Notes at an amount equal to 100% of the principal amount, plus any unpaid accrued interest at the repurchase date. If all holders required Clearwire to repurchase the Exchangeable Notes, the total principal payment would approximate $629 million.

 

 

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Note 10—Subsequent Events

The effects of including pro forma adjustments for the transactions summarized below would not have a material impact on the unaudited pro forma condensed combined financial information, thus they are not required to be nor have they been reflected herein.

Spectrum Purchase

On November 6, 2012, Sprint entered into a definitive agreement with United States Cellular Corporation (U.S. Cellular) to acquire PCS spectrum and approximately 585,000 customers in parts of Illinois, Indiana, Michigan, Missouri and Ohio, including the Chicago and St. Louis markets, for $480 million in cash. Sprint has agreed, in connection with the acquisition, to reimburse U.S. Cellular for certain network shutdown costs in these markets. These costs are expected to range from $130 million to $150 million on a net present value basis, but in no event will Sprint’s reimbursement obligation exceed $200 million on an undiscounted basis. The additional spectrum will be used to supplement Sprint’s coverage in these areas. Sprint and U.S. Cellular will enter into transition services agreements as a condition to closing of the acquisition which will outline the terms of services to be provided by U.S. Cellular during the period after closing and prior to the transfer of the acquired customers to Sprint’s network. The transaction is subject to customary regulatory approvals and is expected to close in mid-2013.

Senior Notes Offering

On November 14, 2012, Sprint issued $2.3 billion aggregate principal amount of 6.0% notes due 2022. Sprint utilized the net proceeds from the offering to redeem all of the outstanding notes of Nextel Communications, Inc. due 2014 and 2015.

 

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table sets forth per share data regarding loss from continuing operations and book value for Sprint on a historical and unaudited pro forma equiavelent basis and New Sprint on a historical and unaudited pro forma combined basis. The unaudited pro forma per share amounts were computed as if the SoftBank Merger and the Clearwire Acquisition had been completed on January 1, 2011 by giving pro forma effect to the related transactions including (a) the proposed SoftBank Merger whereby Sprint would become a wholly owned subsidiary of Parent and (b) Sprint’s proposed acquisition of all of the remaining equity interests in Clearwire not currently held by Sprint. Additionally, for purposes of the unaudited pro forma book value per common share, the amount was computed as if the above transactions had been completed on September 30, 2012 as well as the additional equity capitalization of Parent. Refer to “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page [] for additional information regarding unaudited pro forma adjustments. Additionally, the amount of stock exchanged in the SoftBank Merger may vary as described under “The Merger Agreement—Consideration to be Received in the SoftBank Merger” beginning on page []. These amounts do not necessarily reflect future per share amounts of losses from continuing operations and book value per share of New Sprint.

The following comparative historical and unaudited pro forma per share data is derived from the historical consolidated financial statements of Sprint and Clearwire and adjusted to give pro forma effect to agreements and events that are directly attributable to the transactions described above. The information below should be read in conjunction with the historical financial information and accompanying notes of Parent, which are included herein beginning on page F-1, of Sprint, which are incorporated by reference into this proxy statement-prospectus, and of Clearwire, which are included herein beginning on page F-45. You should also read the “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page [].

 

     Sprint     Starburst II  
     Historical     Unaudited
pro forma
Equivalent(1)
    Historical(2)      Unaudited
Pro  Forma
Combined
 

As of and for the Nine Months Ended September 30, 2012

         

Loss from continuing operations per common share:

         

Basic and Diluted

   $ (1.00   $ (0.79   $ —         $ (0.79

Cash dividends per common share

     —          —             —     

Book value per common share

   $ 2.83      $ 6.13      $ —         $ 6.13   

As of and for the Year Ended December 31, 2011

         

Loss from continuing operations per common share:

         

Basic and Diluted

   $ (0.96   $ (0.91   $ —         $ (0.91

Cash dividends per common share

            —             —     

Book value per common share

   $ 3.81        —        $ —           —     

 

(1) The exchange ratio for the Sprint shareholders electing stock as merger consideration is 1:1.
(2) Starburst II was incorporated on October 5, 2012 and therefore had no historical Statement of Operations or other activities preceding incorporation.

 

 

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MARKET PRICES AND DIVIDEND INFORMATION

The Sprint common stock is listed on the NYSE under the symbol “S”. Parent, a direct wholly owned subsidiary of HoldCo, is not currently a publicly traded company. The following table shows the high and low sales price per share of Sprint common stock, for the periods indicated, as reported on the NYSE composite:

 

     Market Prices  
     High      Low  

2013:

     

First Quarter (through February 1, 2013)

   $ 5.97       $ 5.53   

2012:

     

First Quarter

   $ 3.03       $ 2.10   

Second Quarter

     3.33         2.30   

Third Quarter

     5.76         3.15   

Fourth Quarter

     6.04         4.79   

2011:

     

First Quarter

   $ 5.26       $ 4.12   

Second Quarter

     6.45         4.54   

Third Quarter

     5.75         2.95   

Fourth Quarter

     3.39         2.10   

2010:

     

First Quarter

   $ 4.23       $ 3.10   

Second Quarter

     5.31         3.81   

Third Quarter

     5.08         3.82   

Fourth Quarter

     4.88         3.70   

The following table shows the closing sale prices of the Sprint common stock as reported on the NYSE on October 12, 2012, the last trading day before the SoftBank Merger agreement was announced, and on February 1, 2013, the last full trading day before the date of this proxy statement-prospectus. No assurance can be given concerning the market prices of Sprint common stock before the completion of the transaction or the market price of New Sprint after the completion of the transaction. Immediately following the SoftBank Merger, SoftBank will indirectly hold approximately 70% of the fully-diluted shares of New Sprint common stock and Sprint stockholders and other Sprint equityholders will hold the remaining approximately 30% of New Sprint common stock on a fully-diluted basis. These percentages are fixed in the Merger Agreement and will not be adjusted for changes in the business, financial condition or operating results of Sprint or changes in the market price of Sprint common stock. As a result, the stock price of the New Sprint common stock that Sprint stockholders will receive in the SoftBank Merger may vary significantly from the prices shown in the table below.

 

     Closing Sale Price
of Sprint Common
Stock
 

October 12, 2012

   $ 5.73   

February 1, 2013

   $ 5.71   

The market price of the Sprint common stock will fluctuate prior to the effective time of the SoftBank Merger. You should obtain current market quotations for the shares.

As of January 25, 2013, there were 3,010,483,574 shares of Sprint common stock outstanding and approximately 44,745 holders of record of Sprint common stock.

 

 

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In each quarter of 2007, Sprint declared a $0.025 per share dividend on its common shares. In light of conditions in the business and financial markets, Sprint decided in early 2008 that it will not pay dividends for the foreseeable future. In addition, under its revolving bank credit facility, Sprint is currently restricted from paying any cash dividends as a result of its ratio of total indebtedness to trailing four quarters adjusted earnings before interest, taxes, depreciation and amortization, as defined in the amended credit facility. Under its revolving bank credit facility, Sprint may not pay cash dividends unless this ratio is less than 2.5 to 1.0.

 

 

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RISK FACTORS

In addition to the other information included and incorporated by reference in this proxy statement-prospectus, including the matters addressed in the section entitled “Statements Regarding Forward-Looking Information,” you should carefully consider the following risks before deciding whether to vote for the Merger Proposal and the Merger Agreement. In addition, you should read and consider the risks associated with the business of Sprint, and the risks associated with the business of Clearwire, because these risks will also affect New Sprint, particularly if Sprint’s acquisition of Clearwire is consummated. You should also read and consider the other information in this proxy statement-prospectus and the other documents incorporated by reference in this proxy statement-prospectus. See the section entitled “Where You Can Find More Information” beginning on page [].

Risks Relating to the SoftBank Merger

In the event you receive New Sprint common stock as merger consideration, whether by reason of electing stock or as a result of the proration and allocation rules described in this proxy statement-prospectus, the number of shares of New Sprint common stock you receive will be a fixed number and will not vary based on the market price of Sprint common stock before the effective time of the SoftBank Merger.

At the effective time of the SoftBank Merger, each share of Sprint common stock will be exchanged for either one share of New Sprint common stock or $7.30 in cash, subject to proration and allocation rules. The dollar value of New Sprint common stock that Sprint stockholders receive (whether by electing to receive stock or even if they have not elected to receive New Sprint common stock, as a result of proration or allocation rules) as merger consideration at the effective time of the SoftBank Merger will be based upon the market value of New Sprint common stock at such time, which may be different from, and lower than, the closing price of Sprint common stock prior to the public announcement of the SoftBank Merger or at any time thereafter. The market value of Sprint common stock has ranged from $[] to $[] during the period from October 10, 2012, the last trading day prior to the publication of news articles relating to a potential transaction between Sprint and SoftBank, to [], 2013, the last full trading day prior to the date of this proxy statement-prospectus. Based on these market values, and assuming that approximately 44.57% of the market value of Sprint common stock represents the value of the New Sprint common stock component of the merger consideration and approximately 55.43% of the market value of the Sprint common stock represents the value of the cash component of the merger consideration (because those percentages represent the approximate stock/cash mix of the aggregate merger consideration, in each case, based on the number of outstanding shares of Sprint common stock as of the date of the Merger Agreement), and assuming no other market or other factors that affect the value of the New Sprint common stock differently from the effect of such factors on Sprint common stock, the implied market value of the New Sprint common stock component of the merger consideration has ranged from $[] to $[] during this period. Further, the market value of Sprint common stock will continue to vary in the future due to changes in the business, operations or prospects of Sprint, market assessment of the SoftBank Merger, market and economic considerations and other factors. As a result of the foregoing and other factors, the value of the New Sprint common stock at the effective time of the SoftBank Merger and at any time thereafter cannot be predicted.

Moreover, the effective time of the SoftBank Merger will likely occur a few months after Sprint stockholder approval has been obtained. There will be no adjustment to the stock or cash components of the merger consideration, and the parties do not have a right to terminate the Merger Agreement, solely based upon changes in the market price of Sprint. Sprint stockholders are urged to obtain recent market quotations for Sprint common stock.

New Sprint is a new company with no prior operating history, and the shares of New Sprint common stock have not previously been publicly traded. The value of a share of New Sprint common stock that you may receive in the SoftBank Merger may be less than the per share cash consideration, and the trading price of New Sprint common stock immediately following the effective time of the SoftBank Merger may be different from,

 

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and lower than, the closing price of Sprint common stock at the time of the first public announcement of the SoftBank Merger or at any time thereafter. See “—Risks Related to New Sprint—Shares of New Sprint common stock may have a value that is less than the per share cash consideration and the value could fluctuate significantly.”

Sprint stockholders may receive consideration that is different from that which they elected to receive.

In the SoftBank Merger, New Sprint will issue a number of shares of New Sprint common stock based on the fixed exchange ratio of one New Sprint common share per Sprint common share and $12.14 billion in cash, such that at the effective time of the SoftBank Merger, SoftBank will hold approximately 70% of the New Sprint equity on a fully diluted basis and former Sprint stockholders and other former Sprint equityholders will hold approximately 30% of the New Sprint equity on a fully diluted basis, assuming there are no dissenting stockholders who perfect their appraisal rights. Because the aggregate cash component of the merger consideration and the aggregate stock component of the merger consideration are both fixed, we cannot assure you that a Sprint stockholder will receive the form of consideration that such stockholder elects to receive with respect to all shares of Sprint common stock held by such stockholder. If elections are made by Sprint stockholders that would result in an oversubscription of the pool of cash, those electing to receive cash will have the cash component of their per share merger consideration reduced by a pro rata amount and will receive the remainder of their merger consideration in the form of New Sprint common stock. If elections are made by Sprint stockholders that would result in an oversubscription of the pool of stock, those electing to receive stock will have the stock component of their per share merger consideration reduced by a pro rata amount and will receive the remainder of their merger consideration in the form of cash. Accordingly, even if you make a cash or stock election, there is a risk that you will receive a portion of the merger consideration in a form that you do not elect, which could result in, among other things, tax consequences that differ from those that would have resulted had you received only the form of consideration you elected (including with respect to the recognition of taxable gain to the extent cash is received). For more information about the tax consequences, see “Material United States Federal Income Tax Consequences of the SoftBank Merger” beginning on page [].

None of SoftBank (or any of its subsidiaries), New Sprint, Sprint or the Sprint board of directors has received an opinion from a financial advisor as to New Sprint common stock or makes any recommendation regarding the New Sprint common stock or with respect to whether any Sprint stockholder should make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two, or no election.

None of SoftBank (or any of its subsidiaries), New Sprint, Sprint or the Sprint board of directors makes any recommendation regarding the New Sprint common stock or as to whether any Sprint stockholder should make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two, or no election. Sprint’s board of directors has not received an opinion from any financial or other advisor as to the fairness, from a financial point of view, of the shares of New Sprint common stock, standing alone, to the Sprint stockholders. Sprint’s board of directors did not obtain an independent valuation or appraisal of the value of the shares of New Sprint common stock or the consolidated assets and liabilities of New Sprint subsequent to the effective time of the SoftBank Merger. A stockholder’s determination to make an election to receive cash, New Sprint common stock or, if electing for multiple shares, a combination of the two is a purely voluntary decision, and in certain circumstances, you may receive New Sprint common stock in exchange for some of your shares of Sprint common stock, despite that you elected only cash or did not make any election. New Sprint is a new company with no prior operating history. The per share value of the New Sprint common stock that you may receive in the SoftBank Merger may have a value less than the per share cash consideration, and the trading price of New Sprint common stock immediately following the effective time of the SoftBank Merger may be different from, and lower than, the closing price of Sprint common stock prior to the first public announcement of the SoftBank Merger or at any time thereafter. See “—Risks Related to New Sprint—Shares of New Sprint common stock may have a value that is less than the per share cash consideration and the value could fluctuate significantly.” In addition, the effective time of the SoftBank Merger will likely occur at least several weeks after the Sprint special stockholders’ meeting, and the trading price of the Sprint common stock may be different from,

 

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and lower than, the trading price of Sprint common stock immediately prior to the Sprint special stockholders’ meeting. You should carefully consider all of the information included or incorporated in this proxy statement-prospectus, including the risk factors set forth in this section.

Officers and directors of Sprint may have certain interests in the SoftBank Merger that are different from, or in addition to or in conflict with, interests of Sprint stockholders. These interests may be perceived to have affected their decision to support or approve the SoftBank Merger.

Sprint officers and directors may have certain interests in the SoftBank Merger that are different from, or in addition to or in conflict with, interests of Sprint stockholders. These interests include, but are not limited to, the treatment of Sprint stock options, restricted stock units and performance units held by directors and executive officers of Sprint in the SoftBank Merger, the continued employment after the SoftBank Merger of certain executive officers, including Daniel R. Hesse as Chief Executive Officer, the continued positions of certain directors after the SoftBank Merger, the potential payment of certain severance payments and benefits to executive officers and the indemnification of former Sprint officers and directors by New Sprint. Sprint stockholders should be aware of these interests when considering Sprint’s board of directors’ recommendation to adopt the Merger Agreement. Please see “The SoftBank Merger—Interests of Certain Sprint Directors and Executive Officers in the SoftBank Merger.”

The Merger Agreement contains provisions that could affect the decisions of a third party considering making an alternative acquisition proposal to the SoftBank Merger.

Under the terms of the Merger Agreement, in certain circumstances Sprint may be required to pay to SoftBank a termination fee of $600 million, or to pay certain fees of the SoftBank Entities up to a maximum of $75 million, in connection with termination of the Merger Agreement. In addition, the Merger Agreement limits the ability of Sprint to initiate, solicit, encourage or facilitate acquisition or merger proposals from a third party. These provisions could affect the decision by a third party to make a competing acquisition proposal, or the structure, pricing and terms proposed by a third party seeking to acquire or merge with Sprint. Please see “The Merger Agreement—Termination Fees” and “The Merger Agreement—Solicitation of Alternative Offers.”

Pending litigation against Sprint, SoftBank and Clearwire could result in an injunction preventing the completion of the SoftBank Merger or the Clearwire Acquisition and the payment of damages in the event the SoftBank Merger or the Clearwire Acquisition are completed and may adversely affect New Sprint’s business, financial condition or results of operations following the SoftBank Merger or the Clearwire Acquisition.

In connection with the SoftBank Merger and as of the date of this proxy statement-prospectus, purported stockholders of Sprint have filed several stockholder class action complaints against Sprint, its directors and the SoftBank Entities alleging, among other things, that the Sprint board of directors conducted an unfair sales process resulting in unfair consideration to the Sprint stockholders in the SoftBank Merger. The complaints assert that members of Sprint’s board of directors breached their fiduciary duties in agreeing to the SoftBank Merger and in agreeing to the issuance of the Bond, and that SoftBank aided and abetted these alleged breaches of fiduciary duties. The lawsuits seek to enjoin the SoftBank Merger and seek unspecified monetary damages.

In addition, in connection with Clearwire Acquisition and as of the date of this proxy statement prospectus, purported stockholders of Clearwire have filed several stockholder class action complaints against Clearwire, its directors and Sprint, alleging, among other things, that the Clearwire board of directors conducted an unfair sales process resulting in unfair consideration to the Clearwire stockholders in the Clearwire Acquisition. The complaints assert that members of Clearwire’s board of directors breached their fiduciary duties in agreeing to the Clearwire Acquisition and some of the complaints assert that Sprint breached fiduciary duties owed to Clearwire’s non-Sprint stockholders. The lawsuits seek to enjoin the Clearwire Acquisition and seek unspecified monetary damages, and one lawsuit seeks to enjoin the SoftBank Merger. If the Clearwire Acquisition is consummated, Sprint will assume Clearwire’s potential liability under these lawsuits, including the obligation to defend the lawsuits and indemnification obligations with respect to former Clearwire directors.

 

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These actions could prevent or delay the completion of the SoftBank Merger or the Clearwire Acquisition, divert management attention from operating Sprint’s businesses and result in substantial costs to Sprint and New Sprint, including any costs associated with indemnification of Sprint or Clearwire directors. The defense or settlement of any lawsuit or claim that remains unresolved at the time the SoftBank Merger or the Clearwire Acquisition is completed may be costly and may adversely affect New Sprint’s business, financial condition or results of performance. See “The SoftBank Merger—Stockholder Lawsuits Challenging the SoftBank Merger” beginning on page [].

The SoftBank Merger and the Clearwire Acquisition are subject to various closing conditions, and uncertainties related to the SoftBank Merger and the Clearwire Acquisition or the failure to complete the SoftBank Merger or the Clearwire Acquisition could negatively impact Sprint’s business or share price.

The SoftBank Merger and the Clearwire Acquisition are subject to the satisfaction of a number of conditions beyond New Sprint’s or Sprint’s control, and there is no assurance that the SoftBank Merger or the Clearwire Acquisition and the respective related transactions will occur on the terms and timeline currently contemplated or at all, or that the conditions to the SoftBank Merger or the Clearwire Acquisition will be satisfied or waived in a timely manner or at all. Any delay in completing the SoftBank Merger or the Clearwire Acquisition could cause New Sprint not to realize, or delay the realization of, some or all of the benefits that New Sprint expects to achieve from the SoftBank Merger or that Sprint expects to achieve from the Clearwire Acquisition. In addition, the efforts to satisfy the closing conditions of the SoftBank Merger and the Clearwire Acquisition, including the regulatory approval process, may place a significant burden on Sprint’s management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the SoftBank Merger process could adversely affect Sprint’s business, results of operations and financial condition.

The Merger Agreement with SoftBank limits Sprint’s ability to pursue alternatives to the SoftBank Merger. These restrictions may prevent Sprint from pursuing attractive business opportunities and making other changes to its business prior to the effective time of the SoftBank Merger or termination of the Merger Agreement, and if the SoftBank Merger is not consummated, Sprint may not be able to fund its capital needs from external resources on terms acceptable to it or without modifying its business plan. Sprint could also be subject to litigation related to any failure to complete the SoftBank Merger.

Uncertainty about the completion and effect of the SoftBank Merger or the Clearwire Acquisition on Sprint, Clearwire or their respective employees or customers may have an adverse effect on Sprint’s share price and business, including as a result of attempts by other communications providers to persuade Sprint’s customers to change service providers, which could increase the rate of Sprint’s subscriber churn and have a negative impact on Sprint’s subscriber growth, revenue and results of operations. These uncertainties may also impair Sprint’s ability to preserve employee morale and attract, retain and motivate key employees until the SoftBank Merger is completed. If key employees depart because of uncertainty about their future roles and the potential complexities of the SoftBank Merger or a desire not to remain with the business after the completion of the SoftBank Merger, Sprint’s business could be harmed.

If the proposed SoftBank Merger or the Clearwire Acquisition is not completed, the share price of Sprint’s common stock may decline to the extent that the current market price of Sprint common stock reflects an assumption that the SoftBank Merger, the Clearwire Acquisition and the respective related transactions will be completed. In addition, upon termination of the Merger Agreement, under specified circumstances (including in connection with a superior offer), Sprint may be required to pay a termination fee of $600 million. Also, if the Merger Agreement is terminated because Sprint stockholders do not approve the Merger Proposal, subject to the provisions of the Merger Agreement, then Sprint may be required to reimburse SoftBank for its fees and expenses incurred in connection with the Merger Agreement up to $75 million. See “—The Merger Agreement contains provisions that could affect the decisions of a third party considering making an alternative acquisition proposal to the SoftBank Merger.” Further, upon termination of the Clearwire Acquisition Agreement, under

 

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specified circumstances, Sprint may be required to pay a termination fee of $120 million (payable in cancellation of indebtedness), and under certain circumstances, Clearwire may also be entitled to receive from Sprint a supplemental prepayment for LTE services on January 15, 2014 in the amount of $100 million (conditioned upon the completion of site build-out targets pursuant to a commercial agreement currently in effect between Sprint and Clearwire and credited against certain of Sprint’s obligations under such agreement).

Further, a failed or significantly delayed SoftBank Merger or Clearwire Acquisition may result in negative publicity and a negative impression of Sprint in the investment community. Any disruptions to Sprint’s business resulting from the announcement and pendency of the SoftBank Merger or the Clearwire Acquisition and from intensifying competition from its competitors, including any adverse changes in its relationships with its customers, vendors, suppliers and employees or recruiting and retention efforts, could continue or accelerate in the event of a failed transaction. In addition, Sprint will not have the right to a termination fee from Clearwire if the Clearwire Acquisition Agreement is terminated, regardless of the actual amount of Sprint’s damages or costs incurred in connection with the Clearwire Acquisition. There can be no assurance that Sprint’s business, these relationships or its financial condition will not be negatively impacted, as compared to the condition prior to the announcement of the SoftBank Merger, if the SoftBank Merger or the Clearwire Acquisition are not consummated.

If SoftBank’s financing for the SoftBank Merger is not funded, the SoftBank Merger may not be completed. In the event of a financing failure, and the termination of the Merger Agreement under certain circumstances, Sprint’s remedies are limited to receipt of the $600 million reverse termination fee, which may not reflect the actual damages incurred by Sprint if the SoftBank Merger is not completed.

SoftBank intends to fund the cash required in connection with the SoftBank Merger and related transactions largely with debt financing. On December 18, 2012, SoftBank entered into the Credit Agreement with the Lenders for the Debt Financing for the SoftBank Merger. To the extent one or more of the Lenders is unwilling to, or unable to, fund its portion of the Debt Financing commitments under the Credit Agreement, the other Lenders are not obligated to assume the unfunded commitments and SoftBank may be required to seek alternative financing or fund such portion of the commitments itself. The Lenders’ Debt Financing commitments are subject to the satisfaction of various conditions, including conditions relating to any of Sprint’s outstanding indebtedness that may become payable as a result of the SoftBank Merger, the satisfaction or waiver of the conditions to the SoftBank Merger, the execution of satisfactory documentation and other customary closing conditions, among others. The Lenders’ commitments to provide the Debt Financing under the Credit Agreement expire on November 18, 2013. See “The SoftBank Merger—Financing” beginning on page [].

Under the Merger Agreement, SoftBank is obligated to use its reasonable best efforts (i) to obtain the Debt Financing on the terms set forth in the debt commitment letters that the Lenders executed in connection with the Debt Financing and upon which the Credit Agreement is based and (ii) in the event the Debt Financing is not available, to obtain alternative financing on financial terms no more favorable to SoftBank and subject to conditions not less favorable to SoftBank. In the event that all or any portion of the Debt Financing is not available under the Credit Agreement, financing alternatives may not be available on acceptable terms, in a timely manner or at all. If SoftBank is unable to obtain the funding from the Lenders, or any alternative financing, the completion of the SoftBank Merger may be jeopardized.

Under certain circumstances, Sprint may seek to require SoftBank to issue a borrowing certificate, borrowing notice or similar document pursuant to the SoftBank Debt Financing documents in order to permit the SoftBank Merger closing to occur. Sprint will have the right to terminate the Merger Agreement and SoftBank will be required to pay Sprint a $600 million reverse termination fee if (a) the SoftBank Merger is not consummated within 11 business days following Sprint’s notice to SoftBank that all conditions to closing have been satisfied or (b) during the 30 business day period beginning on April 15, 2013, the Credit Agreement has been terminated and SoftBank is not party to an alternative debt commitment letter or definitive financing documents which, in either case, provide for Debt Financing to be available from April 15, 2013 until

 

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October 15, 2013. SoftBank will also be required to pay a reverse termination fee if the Merger Agreement is terminated at the End Date or by Sprint due to a breach by SoftBank and, at the time of such termination, all of the closing conditions are satisfied (other than delivery of the parties’ closing certificates) and there was an uncured financing failure. See “The Merger Agreement—Termination Fees” beginning on page []. If the Merger Agreement is terminated under any circumstance that entitles Sprint to receive the reverse termination fee, the right to receive the reverse termination fee is Sprint’s only remedy and Sprint cannot otherwise seek damages from SoftBank for the failure of the SoftBank Merger to be completed or for any other matter, regardless of the actual amount of Sprint’s damages.

The pro forma financial statements and financial forecasts included in this proxy statement-prospectus are presented for illustrative purposes only and may not be an indication of New Sprint’s, Sprint’s or Clearwire’s financial condition or results of operations following the SoftBank Merger or the Clearwire Acquisition.

The pro forma financial statements and financial forecasts contained in this proxy statement-prospectus are presented for illustrative purposes only based on various adjustments, assumptions and preliminary estimates and may not be an indication of New Sprint’s, Sprint’s or Clearwire’s financial condition or results of operations following the SoftBank Merger or the Clearwire Acquisition for several reasons, including that the financial statements on which the pro forma financial statements are based were prepared on an individual company basis and the pro forma financial statements may not reflect the operations of a combined company. The financial forecasts were prepared during the period prior to the execution of the Merger Agreement on October 15, 2012 and have not been updated. See “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page [] and “The SoftBank Merger—Certain Financial Scenarios Prepared by the Management of Sprint” beginning on page []. The actual financial condition and results of operations of New Sprint, Sprint or Clearwire following the SoftBank Merger or Clearwire Acquisition may not be consistent with, or evident from, these pro forma financial statements or financial forecasts. In addition, the assumptions used in preparing the pro forma financial information and financial forecasts may not prove to be accurate, and other factors may affect New Sprint’s, Sprint’s or Clearwire’s financial condition or results of operations following the SoftBank Merger or the Clearwire Acquisition. Any potential decline in New Sprint’s, Sprint’s or Clearwire’s financial condition or results of operations may cause significant variations in the stock price of New Sprint.

The SoftBank Merger and the Clearwire Acquisition are subject to the receipt of consents and clearances from domestic and foreign regulatory authorities that may impose measures to protect national security and classified projects or other conditions that could have an adverse effect on New Sprint, or, if not obtained, could prevent completion of the SoftBank Merger or the Clearwire Acquisition.

While the Antitrust Division and the FTC granted early termination of the waiting period under the HSR Act on December 6, 2012 with respect to the SoftBank Merger, before the SoftBank Merger or the Clearwire Acquisition may be completed, various approvals or consents must be obtained from other regulatory entities. In deciding whether to grant regulatory clearances, the relevant governmental entities will consider the effect of the SoftBank Merger and the Clearwire Acquisition on competition and other relevant public interest factors within their relevant jurisdiction. Due to the substantial foreign ownership of New Sprint shares following the SoftBank Merger, each of the FCC, DSS and CFIUS may take measures and impose conditions to protect national security and classified projects, certain of which may materially and adversely affect New Sprint’s operating results, due to increasing the costs of compliance with security measures and limiting New Sprint’s control over certain U.S. facilities, contracts, personnel, and operations. In addition, the terms and conditions of any other approvals that are granted may impose requirements, limitations or costs or place restrictions on the conduct of New Sprint’s business. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions, or that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the SoftBank Merger or the Clearwire Acquisition or imposing additional material costs on, or materially limiting the revenues of, New Sprint following the SoftBank Merger or the Clearwire Acquisition. In addition, neither New Sprint nor Sprint can provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the SoftBank Merger or the Clearwire Acquisition. For further information, see “The SoftBank Merger—Regulatory Matters” beginning on page [].

 

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The SoftBank Merger will result in an ownership change for Sprint under Section 382 of the Code, potentially limiting Sprint’s use of net operating loss carryforwards, referred to as “NOLs,” tax credits and other tax attributes to offset future taxable income or tax liabilities.

Sprint has substantial NOLs, tax credits and other tax attributes for U.S. federal and state income tax purposes. The utilization of Sprint’s NOLs, tax credits and other tax attributes following the SoftBank Merger depends on the timing and amount of taxable income earned by Sprint in the future, which Sprint is not able to predict. Moreover, the SoftBank Merger will result in an ownership change for Sprint under Section 382 of the Code, potentially limiting the use of Sprint’s NOLs to offset future taxable income for both U.S. federal and state income tax purposes. Section 383 of the Code applies a similar limitation to capital loss and certain tax credit carryforwards of a corporation which experiences such an ownership change. These limitations may affect the timing of when these NOLs, tax credits and other tax attributes may be used which, in turn, may impact the timing and amount of cash taxes payable by Sprint. These tax attributes are generally subject to expiration at various times in the future to the extent that they have not previously been applied to offset the taxable income or tax liabilities of Sprint.

Risks Relating to New Sprint

So long as SoftBank controls New Sprint, other holders of New Sprint common stock will have limited ability to influence matters requiring stockholder approval, and if you are a holder of New Sprint common stock, SoftBank’s interest may conflict with yours.

Following the effective time of the SoftBank Merger, SoftBank will beneficially own approximately 69.642% of New Sprint, on a fully diluted basis, assuming SoftBank does not exercise any portion of the Warrant (and excluding shares issuable upon exercise of the Warrant) and assuming there are no dissenting stockholders who perfect their appraisal rights. If SoftBank fully exercises the Warrant, SoftBank will beneficially own 70% of New Sprint following the effective time of the SoftBank Merger, on a fully diluted basis, assuming there are no dissenting stockholders who perfect their appraisal rights. Further, to the extent there are dissenting stockholders, SoftBank’s beneficial ownership of New Sprint will increase. As a result, until such time as SoftBank and its controlled affiliates hold shares representing less than a majority of the votes entitled to be cast by the holders of outstanding New Sprint common stock at a stockholder meeting, SoftBank generally will have the ability to control the outcome of any matter submitted for the vote of New Sprint stockholders, except in certain circumstances set forth in New Sprint’s certificate of incorporation or bylaws.

In addition, pursuant to the Merger Agreement, New Sprint will be subject to certain requirements and limitations regarding the composition of the New Sprint board of directors. However, many of those requirements and limitations expire on or prior to the third anniversary of the effective time of the SoftBank Merger. Thereafter, for so long as SoftBank and its controlled affiliates hold shares of New Sprint common stock representing at least a majority of the votes entitled to be cast by the holders of New Sprint common stock at a stockholder meeting, SoftBank will be able to freely nominate and elect all the members of New Sprint’s board of directors, subject only to a requirement that a certain number of directors qualify as “Independent Directors,” as such term is defined in the NYSE listing rules, and applicable law. The directors elected by SoftBank will have the authority to make decisions affecting the capital structure of New Sprint, including the issuance of additional capital stock or options, the incurrence of additional indebtedness, the implementation of stock repurchase programs and the declaration of dividends.

The interests of SoftBank may not coincide with the interests of the other New Sprint stockholders, and the other New Sprint stockholders will not have received any interest in SoftBank or SoftBank’s ordinary shares in connection with the SoftBank Merger or the other transactions described herein. The business, financial and operating policies of Sprint in effect prior to the effective time of the SoftBank Merger may not continue following the effective time of the SoftBank Merger. SoftBank’s ability, subject to the limitations in the New Sprint certificate of incorporation and bylaws, to control all matters submitted to New Sprint’s stockholders for approval will limit the ability of other stockholders to influence corporate matters and, as a result, New Sprint

 

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may take actions that its stockholders do not view as beneficial. As a result, the market price of New Sprint common stock could be adversely affected. In addition, the existence of a controlling stockholder of New Sprint may have the effect of making it more difficult for a third party to acquire, or discouraging a third party from seeking to acquire, New Sprint. A third party would be required to negotiate any such transaction with SoftBank, and the interests of SoftBank with respect to such transaction may be different from the interests of other New Sprint stockholders.

Subject to limitations in the New Sprint certificate of incorporation, as will be in effect at the effective time of the SoftBank Merger, that limit SoftBank’s ability to engage in a certain competing businesses in the United States or take advantage of certain corporate opportunities, SoftBank is not restricted from competing with New Sprint or otherwise taking for itself or its other affiliates certain corporate opportunities that may be attractive to Sprint.

The rights of New Sprint stockholders will be different than the rights of Sprint stockholders.

Sprint stockholders who receive New Sprint common stock in the SoftBank Merger will become New Sprint stockholders, and their rights as stockholders will be governed by the amended and restated certificate of incorporation and amended and restated bylaws of New Sprint and Delaware corporate law. As a result, there will be material differences between the current rights of Sprint stockholders and the rights they can expect to have as New Sprint stockholders. You should carefully review the forms of New Sprint’s certificate of incorporation and bylaws to be in effect at the effective time of the SoftBank Merger, copies of which are attached as Exhibits B and C, respectively, to Annex A to this proxy statement-prospectus. By becoming a stockholder in New Sprint, holders of New Sprint common stock are deemed to have notice of and to have consented to the provisions of New Sprint’s certificate of incorporation and bylaws, including with respect to the provisions that are described above and elsewhere in this proxy statement-prospectus, including “Comparison of Rights of Holders of Sprint Common Stock and New Sprint Common Stock” beginning on page [] and “Control and Management of New Sprint After the SoftBank Merger—Limitations, Restrictions and Conditions on SoftBank’s Conduct of Business and Exercise of Rights” beginning on page [].

Holders of New Sprint common stock may experience economic and voting dilution as a result of future issuances of capital stock.

New Sprint’s certificate of incorporation will authorize the issuance of up to 9,000,000,000 shares of voting common stock and 1,000,000,000 shares of non-voting common stock. New Sprint has no current plans to issue any of these shares, but the issuance of shares of voting common stock would result in economic and voting dilution to all stockholders, and the issuance of shares of non-voting common stock would result in economic dilution to all stockholders. For example, New Sprint may use shares of its voting or non-voting common stock from time to time as consideration in connection with the acquisition of other companies, and New Sprint may grant or sell, or grant equity awards to acquire, shares of New Sprint voting or non-voting common stock (or instruments convertible into New Sprint non-voting common stock) to third parties, including members of New Sprint’s management or its directors.

Shares of New Sprint common stock may have a value that is less than the per share cash consideration and the value could fluctuate significantly.

The shares of New Sprint common stock for which Sprint stockholders may make an election in the SoftBank Merger may have a value that differs from the cash consideration of $7.30 per existing share of Sprint common stock or the trading price of Sprint common stock or New Sprint common stock at any time. No third-party appraisal or other determination of value was requested or obtained by Sprint’s board of directors with respect to the value of the New Sprint common stock. Accordingly, holders of Sprint common stock who receive shares of New Sprint common stock, whether by reason of electing stock or as a result of the proration and allocation rules described in this proxy statement-prospectus, instead of the cash consideration of $7.30 per

 

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share in connection with the SoftBank Merger will be subject to the risk that the per share value of New Sprint common stock may be less than the amount of the per share cash consideration, and the trading price of New Sprint common stock immediately following the effective time of the SoftBank Merger may be different from, and lower than, the closing price of Sprint common stock at the time of the first public announcement of the SoftBank Merger or at any time thereafter. In addition, the value of New Sprint common stock could fluctuate significantly for many reasons, including:

 

   

the risks described in this proxy statement-prospectus;

 

   

New Sprint’s operating and financial performance and prospects;

 

   

changes to the competitive landscape;

 

   

the arrival or departure of key personnel;

 

   

speculation in the press or the investment community; and

 

   

general market conditions.

Any inability to resolve favorably any disputes that may arise between New Sprint and SoftBank may result in a significant reduction of New Sprint revenues and earnings.

Disputes may arise between SoftBank and New Sprint in a number of areas, including:

 

   

business combinations involving New Sprint;

 

   

sales or dispositions by SoftBank of all or any portion of its ownership interest in New Sprint;

 

   

the nature, quality and pricing of services SoftBank may agree to provide New Sprint;

 

   

arrangements with third parties that are exclusionary to SoftBank or New Sprint; and

 

   

business opportunities that may be attractive to both SoftBank and New Sprint.

New Sprint may not be able to resolve any potential conflicts, and even if it does, the resolution may be less favorable than if New Sprint were dealing with an unaffiliated party.

The agreements New Sprint enters into with SoftBank may be amended upon agreement between the parties. While New Sprint is controlled by SoftBank, it may not have the leverage to negotiate amendments to these agreements if required on terms as favorable to New Sprint as those that New Sprint would negotiate with an unaffiliated third party.

SoftBank’s ability to control New Sprint’s board of directors may make it difficult for New Sprint to recruit independent directors.

For so long as SoftBank and its controlled affiliates hold shares of New Sprint common stock representing at least a majority of the votes entitled to be cast by the holders of New Sprint common stock at a stockholders’ meeting, SoftBank will be able to elect all of the members of New Sprint’s board of directors commencing three years following the effective time of the SoftBank Merger. Further, the interests of SoftBank and New Sprint’s other stockholders may diverge. Under these circumstances, persons who might otherwise accept an invitation to join New Sprint’s board of directors may decline.

 

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New Sprint will be a “controlled company” within the meaning of the NYSE rules and, as a result, will be relying on exemptions from certain corporate governance requirements that provide protection to stockholders of companies that are not “controlled companies.”

Following the SoftBank Merger, SoftBank will own more than 50% of the total voting power of New Sprint common shares and, as a result, New Sprint will be a “controlled company” under the NYSE corporate governance standards. As a controlled company, New Sprint will be exempt under the NYSE standards from the obligation to comply with certain NYSE corporate governance requirements, including the requirements:

 

   

that a majority of New Sprint’s board of directors consists of independent directors;

 

   

that New Sprint have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

   

that New Sprint have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

that an annual performance evaluation of the nominating and governance committee and compensation committee be performed.

As a result of New Sprint’s use of the “controlled company” exemptions, holders of New Sprint common stock will not have the same protection afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

New Sprint’s ability to pay dividends depends on Sprint’s performance and may be limited or otherwise restricted.

Following the SoftBank Merger, Sprint will be a wholly owned subsidiary of New Sprint, and New Sprint’s principal asset will consist of the shares of Sprint common stock. New Sprint currently does not intend to pay dividends, but should it wish to do so in the future, New Sprint’s ability to pay dividends will be limited by its status as a holding company and depends on Sprint’s financial performance and its ability to pay dividends or otherwise make distributions to New Sprint. In addition, under Delaware law, New Sprint is permitted to pay cash dividends on its capital stock only out of its surplus, which generally means the excess of its net assets over the aggregate par value of its issued stock. In the event New Sprint has no surplus, it is permitted to pay cash dividends out of its net profits for the year in which the dividend is declared or in the immediately preceding year. The payment of dividends on New Sprint common stock following the SoftBank Merger will be at the discretion of New Sprint’s board of directors and will depend on many factors, including Sprint’s results of operations, financial condition, earnings, capital requirements, limitations under its debt agreements and other legal requirements.

An investment in New Sprint common stock may be less liquid than an investment in Sprint common stock.

New Sprint common stock may be less liquid than Sprint common stock because (a) the aggregate value of the publicly held New Sprint common stock at the effective time of the SoftBank Merger will be substantially less than the aggregate value of the publicly held Sprint common stock outstanding immediately prior to the SoftBank Merger (as a result of the payment of the cash component of the merger consideration), and (b) unlike the publicly held Sprint common stock, all of the publicly held New Sprint common stock will be minority shares of a company controlled by SoftBank, which will own approximately 70% of the fully diluted equity of New Sprint following the effective time of the SoftBank Merger. See “—So long as SoftBank controls New Sprint, other holders of New Sprint common stock will have limited ability to influence matters requiring stockholder approval, and if you are a holder of New Sprint common stock, SoftBank’s interest may conflict with yours.”

If the FCC’s foreign ownership policies change, there could be significant impacts on New Sprint following the SoftBank Merger.

The Communications Act requires that no wireless licensee have more than 25% indirect foreign ownership, if the FCC determines that the public interest would be served by applying such a restriction. Under the FCC’s

 

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current rules, an indirect foreign investment is entitled to a public interest presumption if total non-World Trade Organization (“WTO”) ownership of the licensee, remains below 25%. Sprint and SoftBank have requested that the FCC apply this presumption to the case of SoftBank’s investment in Sprint. The FCC’s foreign ownership rules implement U.S. treaty obligations, but there is no guarantee that the FCC will continue to maintain its current rules, or that it will not modify aspects of the rules, including the levels and types of permissible foreign ownership. The FCC has a pending proceeding to consider whether it should modify aspects of its foreign ownership rules. In general, the FCC has proposed rule changes that would streamline its procedures and reduce regulatory burdens for granting approvals to exceed the statutory 25% limit on indirect foreign ownership. Although no rule changes have been proposed that would reduce the permissible level of foreign ownership in New Sprint, if the FCC were to take action in this way, SoftBank could be required to divest part or all of its New Sprint interest, potentially on terms that would be unfavorable and would negatively affect the value of New Sprint, and New Sprint could be required to obtain capital on less advantageous terms than might otherwise be available from SoftBank or other potential foreign investors.

Risks Relating to Sprint

The following risks are those that relate to Sprint’s business and operations. At the effective time of the SoftBank Merger, New Sprint will be a holding company and its business and operations will include those of Sprint, and therefore, those risks that relate to Sprint will also relate to New Sprint.

If Sprint is not able to retain and attract wireless subscribers, its financial performance will be impaired.

Sprint is in the business of selling communications services to subscribers, and its economic success is based on Sprint’s ability to retain current subscribers and attract new subscribers. If Sprint is unable to retain and attract wireless subscribers, Sprint’s financial performance will be impaired, and it could fail to meet its financial obligations. Beginning in 2008 through September 30, 2012, Sprint experienced decreases in its total retail postpaid subscriber base of approximately 9.5 million subscribers (excluding the impact of Sprint’s 2009 acquisitions), while Sprint’s two largest competitors increased their subscribers during that period. In addition, Sprint’s average postpaid churn rate was 1.96%, 1.86% and 1.95% for the nine months ended September 30, 2012 and the years ended December 31, 2011 and 2010, respectively, while its two largest competitors had churn rates that were substantially lower. Although Sprint has begun to see a reduction in Sprint’s net loss of postpaid subscribers, if this trend does not continue, Sprint’s financial condition, results of operations and liquidity could be materially adversely affected.

Sprint’s ability to retain existing subscribers and to compete successfully for new subscribers and reduce its rate of churn depends on, among other things:

 

   

Sprint’s successful execution of marketing and sales strategies, including the acceptance of its value proposition; service delivery and customer care activities, including new account set up and billing; and credit and collection policies;

 

   

the ability of Clearwire to successfully obtain additional financing for the continued operation and build-out of its 4G networks, particularly if the Clearwire Acquisition is not consummated;

 

   

Sprint’s ability to access Clearwire’s spectrum, particularly if the Clearwire Acquisition is not consummated;

 

   

the successful deployment and completion of Sprint’s network modernization plan, Network Vision, including a multi-mode network infrastructure, successful LTE implementation and deployment, and push-to-talk capabilities of comparable quality to Sprint’s existing Nextel platform push-to-talk capabilities;

 

   

Sprint’s ability to mitigate churn as it migrates Nextel platform push-to-talk subscribers to other offerings on the Sprint platform, which include offerings on Sprint’s multi-mode network, such as Sprint Direct Connect®;

 

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actual or perceived quality and coverage of Sprint’s networks, including Clearwire’s 4G networks;

 

   

public perception about Sprint’s brands;

 

   

Sprint’s ability to anticipate and develop new or enhanced technologies, products and services that are attractive to existing or potential subscribers;

 

   

Sprint’s ability to access additional spectrum, including through spectrum hosting arrangements;

 

   

Sprint’s ability to anticipate and respond to various competitive factors affecting the industry, including new technologies, products and services that may be introduced by Sprint’s competitors, changes in consumer preferences, demographic trends, economic conditions, and discount pricing and other strategies that may be implemented by Sprint’s competitors; and

 

   

Sprint’s ability to maintain its current mobile virtual network operator (MVNO) relationships and to enter into new arrangements with MVNOs.

Sprint’s recent success in attracting more postpaid subscribers and reducing postpaid churn on the Sprint platform may also not be sustainable. Sprint’s ability to retain subscribers may be negatively affected by industry trends related to subscriber contracts. For example, Sprint and its competitors no longer require subscribers to renew their contracts when making changes to their pricing plans. These types of changes could negatively affect Sprint’s ability to retain subscribers and could lead to an increase in churn rates if Sprint is not successful in providing an attractive product and service mix. In addition, more than 80% of the remaining 2.3 million Nextel platform postpaid subscribers represent business accounts. Accordingly, Sprint expects the level of competition for these subscribers as well as the timing of business customer decisions to cause the rate of recapture for subsequent periods to decline through the final shutdown of the Nextel platform.

Moreover, service providers frequently offer wireless equipment, such as devices, below acquisition cost as a method to retain and attract subscribers that enter into wireless service agreements for periods usually extending 12 to 24 months. Equipment cost in excess of the revenue generated from equipment sales is referred to in the industry as equipment net subsidy and is generally recognized when title of the device passes to the dealer or end-user subscriber. The cost of multi-functional devices, such as smartphones, including the iPhone, has increased significantly in recent years as a result of enhanced capabilities and functionality. At the same time, wireless service providers continue to compete on the basis of price, including the price of devices offered to subscribers, which has resulted in increased equipment net subsidy. Sprint has entered into a purchase commitment with Apple, Inc. that increases the average equipment net subsidy for postpaid devices resulting in a reduction to consolidated results from operations and reduced cash flow from operations associated with initiation of service for these devices until such time that retail service revenues associated with customers acquiring these devices exceeds such costs.

Sprint expects to incur expenses to attract new subscribers, improve subscriber retention and reduce churn, but there can be no assurance that its efforts will result in new subscribers or a lower rate of subscriber churn. Subscriber losses and a high rate of churn adversely affect Sprint’s business, financial condition and results of operations because they result in lost revenues and cash flow. Although attracting new subscribers and retention of existing subscribers are important to the financial viability of Sprint’s business, there is an added focus on retention because the cost of adding a new subscriber is higher than the cost associated with retention of an existing subscriber.

As the wireless market matures, Sprint must increasingly seek to attract subscribers from competitors and face increased credit risk from new postpaid wireless subscribers.

Sprint and its competitors increasingly must seek to attract a greater proportion of new subscribers from each other’s existing subscriber bases rather than from first-time purchasers of wireless services. Beginning in 2008 through September 30, 2012, Sprint experienced decreases in its total retail postpaid subscriber base of approximately 9.5 million subscribers (excluding the impact of Sprint’s 2009 acquisitions), while its two largest competitors increased their subscribers over the same period.

 

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In addition, the higher market penetration also means that subscribers purchasing postpaid wireless services for the first time, on average, have lower credit scores than existing wireless subscribers, and the number of these subscribers Sprint is willing to accept is dependent on Sprint’s credit policies, which may be different than our competitors’ policies. To the extent Sprint cannot compete effectively for new subscribers or if they are not creditworthy, Sprint’s revenues and results of operations will be adversely affected.

Competition and technological changes in the market for wireless services could negatively affect Sprint’s average revenue per subscriber, subscriber churn, operating costs and its ability to attract new subscribers, resulting in adverse effects on Sprint’s revenues, future cash flows, growth and profitability.

Sprint competes with a number of other wireless service providers in each of the markets in which Sprint provides wireless services, and Sprint expects competition may increase if additional spectrum is made available for commercial wireless services and as new technologies are developed and launched. As competition among wireless communications providers has increased, Sprint has created certain unlimited pricing plans that have resulted and Sprint continues to expect to result in increased usage of data on Sprint’s network. Competition in pricing and service and product offerings may also adversely impact subscriber retention and Sprint’s ability to attract new subscribers, with adverse effects on Sprint’s results of operations. A decline in the average revenue per subscriber coupled with a decline in the number of subscribers would negatively impact Sprint’s revenues, future cash flows, growth and overall profitability, which, in turn, could impact Sprint’s ability to meet Sprint’s financial obligations.

The wireless communications industry is experiencing significant technological change, including improvements in the capacity and quality of digital technology and the deployment of unlicensed spectrum devices. This change causes uncertainty about future subscriber demand for Sprint’s wireless services and the prices that Sprint will be able to charge for these services. Spending by Sprint’s competitors on new wireless services and network improvements could enable its competitors to obtain a competitive advantage with new technologies or enhancements that Sprint does not offer. Rapid change in technology may lead to the development of wireless communications technologies, products or alternative services that are superior to Sprint’s technologies, products, or services or that consumers prefer over Sprint’s. If Sprint is unable to meet future advances in competing technologies on a timely basis, or at an acceptable cost, Sprint may not be able to compete effectively and could lose subscribers to its competitors.

Some competitors and new entrants may be able to offer subscribers network features or products and services not offered by Sprint, coverage in areas not served by Sprint’s wireless networks or pricing plans that are lower than those offered by Sprint, all of which would negatively affect Sprint’s average revenue per subscriber, subscriber churn, ability to attract new subscribers, and operating costs. For example, Sprint’s prepaid services compete with several carriers, including Metro PCS and Leap Wireless, which offer competitively-priced prepaid calling plans that include unlimited long distance, texting and, in some cases, unlimited data (including 4G). In addition, Sprint may lose subscribers of its higher priced plans to Sprint’s prepaid offerings.

The success of Sprint’s network modernization plan, Network Vision, will depend on the timing, extent and cost of implementation; the performance of third-parties and related parties; upgrade requirements; and the availability and reliability of the various technologies required to provide such modernization.

Sprint must continually invest in its wireless network in order to continually improve its wireless service to meet the increasing demand for usage of Sprint’s data and other non-voice services and remain competitive.

Improvements in Sprint’s service depend on many factors, including continued access to and deployment of adequate spectrum. Sprint must maintain and expand its network capacity and coverage as well as the associated wireline network needed to transport voice and data between cell sites. If Sprint is unable to obtain access to additional spectrum to increase capacity or to deploy the services subscribers desire on a timely basis or at acceptable costs while maintaining network quality levels, Sprint’s ability to retain and attract subscribers could be materially adversely affected, which would negatively impact its operating margins.

 

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Sprint is implementing Network Vision, which is a multi-year infrastructure initiative intended to reduce operating costs and provide subscribers with an enhanced network experience by improving voice quality, coverage and data speeds, while enhancing network flexibility and improving environmental sustainability. The focus of the plan is on upgrading the existing Sprint platform and providing flexibility for new 4G technologies, including LTE. If Network Vision does not provide a competitive LTE network, an enhanced network experience, or is unable to provide Sprint platform push-to-talk capabilities, such as Sprint Direct Connect®, of comparable quality to the push-to-talk capabilities of Sprint’s existing Nextel platform or its competitors’ similar services, Sprint’s ability to provide enhanced wireless services to its subscribers, to retain and attract subscribers, and to maintain and grow its subscriber revenues could be adversely affected.

Using a new and sophisticated technology on a very large scale entails risks. For example, deployment of new technology, including LTE, may adversely affect the performance of existing services on Sprint’s networks. Should implementation of Sprint’s upgraded network be delayed or costs exceed expected amounts, its margins would be adversely affected and such effects could be material. Should the delivery of services expected to be deployed on Sprint’s upgraded network be delayed due to technological constraints, performance of third-party suppliers, zoning and leasing restrictions or permit issues, or other reasons, the cost of providing such services could become higher than expected, which could result in higher costs to customers, potentially resulting in decisions to purchase services from Sprint’s competitors which would adversely affect Sprint’s revenues, profitability and cash flow from operations.

Sprint is migrating existing Nextel platform subscribers to other offerings on Sprint’s Sprint platform, including existing or future offerings on Sprint’s multi-mode network, such as Sprint Direct Connect®. The successful deployment and market acceptance of Network Vision has resulted in and is expected to continue to result in incremental charges during the period of implementation including, but not limited to, an increase in depreciation and amortization associated with existing assets, due to changes in Sprint’s estimates of the remaining useful lives of long-lived assets, and the expected timing of asset retirement obligations. Sprint’s ability to transition subscribers from the Nextel platform to offerings on the Sprint platform is dependent, in part, upon the success of Sprint Direct Connect® and subscriber satisfaction with this technology.

Failure to complete development, testing and deployment of new technology that supports new services, including LTE, could affect Sprint’s ability to compete in the industry. The deployment of new technology and new service offerings could result in network degradation or the loss of subscribers. In addition, the technology Sprint currently uses, including WiMAX, may place it at a competitive disadvantage.

Sprint develops, tests and deploys various new technologies and support systems intended to enhance Sprint’s competitiveness by both supporting new services and features and reducing the costs associated with providing those services. Successful development and implementation of technology upgrades depend, in part, on the willingness of third parties to develop new applications or devices in a timely manner. Sprint may not successfully complete the development and rollout of new technology and related features or services in a timely manner, and they may not be widely accepted by Sprint’s subscribers or may not be profitable, in which case Sprint could not recover its investment in the technology. Deployment of technology supporting new service offerings may also adversely affect the performance or reliability of Sprint’s networks with respect to both the new and existing services and may require us to take action like curtailing new subscribers in certain markets. Any resulting subscriber dissatisfaction could affect Sprint’s ability to retain subscribers and have an adverse effect on its results of operations and growth prospects.

Sprint’s wireless networks currently provide services utilizing CDMA, iDEN and LTE technologies. Wireless subscribers served by CDMA and iDEN technologies represent a smaller portion of global wireless subscribers than the subscribers served by wireless networks that utilize Global System for Mobile Communications (GSM) technology. As a result, Sprint’s costs with respect to both CDMA and iDEN network equipment and devices may continue to be higher than the comparable costs incurred by its competitors who use GSM technology, which may place it at a competitive disadvantage. See “—The success of Sprint’s network

 

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modernization plan, Network Vision, will depend on the timing, extent and cost of implementation; the performance of third-parties and related parties; upgrade requirements; and the availability and reliability of the various technologies required to provide such modernization.”

Sprint has expended significant resources and made substantial investments to deploy a 4G mobile broadband network through its equity method investment in Clearwire using WiMAX technology. As part of Network Vision, Sprint has discontinued selling WiMAX devices; however, it expects to continue to support such devices as it fully transitions to LTE. The failure to successfully design, build and deploy Sprint’s LTE network, or a loss of or inability to access Clearwire’s spectrum could increase subscriber losses, increase Sprint’s costs of providing services or increase Sprint’s churn. Other competing technologies may have advantages over Sprint’s current or planned technology and operators of other networks based on those competing technologies may be able to deploy these alternative technologies at a lower cost and more quickly than the cost and speed with which Clearwire provides 4G MVNO services to Sprint or with which it deploys Sprint’s LTE network, which may allow those operators to compete more effectively or may require Sprint and Clearwire to deploy additional technologies. See “—Risks Relating to Clearwire” above for additional risks related to Sprint’s investment in Clearwire and the operation of its 4G network.

Current economic and market conditions, Sprint’s recent financial performance, its high debt levels, and its debt ratings could negatively impact its access to the capital markets resulting in less growth than planned or failure to satisfy financial co