
Note 3.	Investments

The components of investments were as follows:



	September 30, 2011		December 31, 2010
	(in millions)
Marketable equity securities	$	40	$	39
Equity method and other investments	2,074		3,350
	$	2,114	$	3,389

Equity Method Investment in Clearwire

Sprint's Ownership Interest

Sprint's investment in Clearwire Corporation and its consolidated subsidiary Clearwire Communications LLC (together, "Clearwire") is part of our plan to participate in the fourth generation (4G) wireless broadband market. Sprint and other investors are offering 4G products utilizing Clearwire's 4G wireless broadband network in available markets.

As of September 30, 2011, Sprint holds approximately 54% of a non-controlling economic interest in Clearwire in the form of 532 million Class B non-voting common interests (Class B Non-voting) in Clearwire Communications LLC and a 49.7% non-controlling voting interest in the form of 454 million shares of Class B voting common stock (Class B Voting) of Clearwire Corporation (together, “Class B Common Interests”) for which the carrying value totaled $1.8 billion. In June 2011, Sprint exercised its right to unilaterally surrender approximately 78 million shares of Class B Voting, which resulted in a reduction of our voting interest from approximately 54% to 49.7%. The surrender had no impact on Sprint's economic interest or governance rights in Clearwire and Sprint maintained the right to buy back the shares surrendered for a price equal to the par value of those shares. Each share of Clearwire Corporation Class B Voting, together with one Clearwire Communications LLC Class B Non-voting, is exchangeable for one share of Clearwire Corporation's Class A common stock, a publicly traded security. If Sprint does not elect to buy back shares surrendered, any Class B Non-voting shares in excess of Class B Voting shares could be sold separately, subject to certain restrictions. In addition to Class B Common Interests, Sprint holds a note receivable from Clearwire with a fixed interest rate of 12% and a maturity date of December 2015. The carrying value of the note receivable, which includes payment-in-kind interest, was $178 million and $177 million as of September 30, 2011 and December 31, 2010, respectively. The carrying value of Sprint's Class B Common Interests, together with the carrying value of the note receivable, are included in the line item "Investments" in Sprint's consolidated balance sheets. Equity in losses from Clearwire were $271 million and $1.3 billion for the three and nine-month periods ended September 30, 2011 and $298 million and $848 million for the three and nine-month periods ended September 30, 2010, respectively. Sprint's losses from its investment in Clearwire consist of Sprint's share of Clearwire's net loss, and other adjustments such as gains or losses associated with the dilution of Sprint's ownership interest resulting from Clearwire's equity issuances and other items recognized by Clearwire Corporation that do not affect Sprint's economic interest.

Sprint's Recoverability

Sprint's ability to recover the carrying value of $1.8 billion as of September 30, 2011 depends, in part, upon Clearwire's ability to obtain sufficient additional funding to support its operations and its ability to successfully maintain its existing 4G WiMAX network and the potential development, deployment and maintenance of its planned 4G Long Term Evolution (LTE) network. Uncertainty regarding Clearwire's timing and ability to obtain sufficient additional funding could result in significant changes to Clearwire's stock price and value. A sustained decline in the estimated fair value of Clearwire that would be deemed to be other-than-temporary could result in a material non-cash impairment to the carrying value of our investment. We do not intend to sell our 54% economic interest in the foreseeable future, and recoverability of our equity investment is not affected by short-term fluctuations in Clearwire's stock price.

Clearwire has reported significant net losses since its formation and we expect Clearwire to continue to generate net losses in the near term. The carrying value of Sprint's investment in Clearwire has declined approximately $2.1 billion since Clearwire's formation in November 2008, primarily resulting from Sprint's share in equity of net losses of Clearwire, resulting in a decline in Sprint's per share carrying value of Clearwire from $10.65 as of December 31, 2008 to $3.41 as of September 30, 2011. As of September 30, 2011, based on the assumed exchange of our Class B Common Interests for Class A Common Stock, the carrying value of Sprint's investment in Clearwire of $3.41 per share over Clearwire's closing stock price of $2.33 per share was equivalent to an excess of $575 million.

At each financial reporting measurement date, we evaluate the excess, if any, of Sprint's carrying value over the estimated fair value of our investment in Clearwire to determine if such excess, an implied unrealized loss, is other-than-temporary. Our evaluation considers, among other things, Clearwire's market capitalization, which assumes expectations of future performance, Clearwire's historical stock price, including historical and implied volatility associated with Clearwire's common stock and the duration of the excess of Clearwire's average trading stock price over Sprint's carrying value. Our evaluation also considers tax benefits associated with our Class B Non-Voting Interests, governance rights, our expectation of the duration of our ongoing relationship, as well as other factors. Access to Clearwire's 4G network is an important part of our strategic initiatives to attract and retain customers. Based on our evaluation, we believe that as of September 30, 2011 the carrying value of our investment, including our note receivable, is recoverable (See Note 15).

Summarized financial information for Clearwire is as follows:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(in millions)
Revenues	$	332		$	142		$	892		$	360
Operating expenses	(731		)	(662		)	(2,850		)	(1,785		)
Operating loss	$	(399	)	$	(520	)	$	(1,958	)	$	(1,425	)
Net loss from continuing operations before non-controlling interests	$	(479	)	$	(549	)	$	(2,212	)	$	(1,513	)
Net loss from discontinued operations before non-controlling interests	$	(5	)	$	(16	)	$	(79	)	$	(38	)