
Note 3.	Investments

The components of investments were as follows:



	December 31,
	2011		2010
	(in millions)
Marketable equity securities	$	43	$	39
Equity method and other investments	1,953		3,350
	$	1,996	$	3,389

Marketable equity securities

Investments in marketable equity securities are recognized at fair value and are considered available-for-sale securities. Accordingly, unrealized holding gains and losses on these securities are recognized in accumulated other comprehensive income (loss), net of related income tax. Realized gains or losses are measured and reclassified from accumulated other comprehensive income (loss) into earnings based on identifying the specific investments sold or where an other-than-temporary impairment exists.

Equity Method Investment in Clearwire

Sprint's Ownership Interest

Sprint's investment in Clearwire is part of our plan to participate in the 4G wireless broadband market. Sprint offers 4G products utilizing Clearwire's 4G wireless broadband network in available markets.

As of December 31, 2011, Sprint holds approximately 51.5% of a non-controlling economic interest in Clearwire in the form of 705 million Class B non-voting common interests (Class B Non-voting) in Clearwire Communications LLC and a 48.6% non-controlling voting interest in the form of 628 million shares of Class B voting common stock (Class B Voting) of Clearwire Corporation (together, “Class B Common Interests”) for which the carrying value, as of December 31, 2011, totaled approximately $1.7 billion. 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 any shares previously 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 issued in 2008 with a fixed interest rate of 12% and a maturity date of December 2015. The carrying value of the note receivable, which includes accretion of the premium and fees for the 2009 rollover, was $178 million and $177 million as of December 31, 2011 and 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.

On November 30, 2011, Sprint entered into new agreements with Clearwire that established long-term pricing terms for 4G services, both WiMAX and LTE. Under terms of the agreements, Sprint is required to pay Clearwire $926 million in total over the course of 2012 and 2013 in exchange for unlimited WiMAX services during those years. The agreements also establish long-term usage-based pricing for LTE services in 2012 and beyond and WiMAX services in 2014 and beyond. Under the terms Sprint may also make a series of refundable prepayments up to $350 million for LTE services, if Clearwire achieves certain build-out targets and network specifications by June 2013 or obtains purchase commitments for LTE services from other customers. These payments, beginning in 2013, will be applied towards LTE usage over the remaining term of the contract. In addition, the agreement provided improved terms and competitive pricing for re-wholesaling of WiMAX services by Sprint beginning in 2012. Lastly, as part of the agreements, on January 2, 2012, Sprint provided $150 million to Clearwire in exchange for a promissory note with a stated interest rate of 11.5% that matures in two installments of $75 million plus accrued interest in January 2013 and in January 2014. Sprint, at its sole discretion, can choose to offset any amounts payable by Clearwire under this promissory note against amounts owed by Sprint under the MVNO agreement.

On December 13, 2011, Clearwire closed a public equity offering which sold approximately 201.2 million shares of its Class A common stock at a public offering price of $2.00 per share. In conjunction with the public offering, but in a separate private transaction, Sprint exercised its preemptive rights to purchase approximately 173.6 million Class B Voting shares and 173.6 million Class B Non-voting shares at an aggregate purchase price of approximately $331 million. These equity transactions resulted in a dilution of Sprint's non-controlling economic interest and voting interest, and a pre-tax dilution loss of $27 million included in equity in losses of Clearwire.

Equity in Losses and Summarized Financial Information

Equity in losses from Clearwire were $1.7 billion, $1.3 billion and $803 million for the years ended December 31, 2011, 2010 and 2009, respectively. Sprint's losses from its investment in Clearwire consist of Sprint's share of Clearwire's net loss and other adjustments such as non-cash impairment of our investment, 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 equity in losses from Clearwire for 2011 and 2010 include charges of approximately $361 million and $97 million, respectively, which are associated with Clearwire's write-off of certain network and other assets that no longer meet their strategic plans. The year ended December 31, 2011 also includes a $135 million pre-tax impairment reflecting Sprint's reduction in the carrying value of its investment in Clearwire to an estimated fair value and a pre-tax dilution loss of $27 million. Equity in losses of Clearwire for 2009 included a pre-tax dilution loss of $154 million recognized in the first quarter, representing the finalization of ownership percentages subsequent to the November 2008 formation.

Summarized financial information for Clearwire is as follows:



	December 31,
	2011		2010
	(in millions)
Current assets	$	1,287	$	1,858
Noncurrent assets	7,556		9,182

Current liabilities	$	280	$	675
Noncurrent liabilities	4,917		4,495



	Year Ended December 31,
	2011			2010			2009
	(in millions)
Revenues	$	1,254		$	535		$	244
Operating expenses	(3,645		)	(2,698		)	(1,384		)
Operating loss	$	(2,391	)	$	(2,163	)	$	(1,140	)
Net loss from continuing operations before non-controlling interests	$	(2,856	)	$	(2,251	)	$	(1,209	)
Net loss from discontinued operations before non-controlling interests	$	(82	)	$	(52	)	$	(45	)

Sprint's Recoverability

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, both observable and unobservable inputs, including Clearwire's market capitalization, including historical volatility associated with Clearwire's common stock, the duration of a decline in Clearwire's average trading stock price below Sprint's carrying value, potential tax benefits and governance rights associated with our Class B Non-Voting interests, and our expectation of the duration of our ongoing relationship, as well as other factors. Based on our evaluation as of December 31, 2011, we recognized a non-cash impairment of $135 million in the fourth quarter 2011 to reflect a reduction to our best estimate of fair value associated with our Class B Non-Voting interests, based on the evaluation of factors described above. The determination of an estimate of fair value for a non-public security, such as our Class B Non-Voting interest, is subject to significant judgment and uncertainty.

Clearwire Related Party Transactions

Sprint's equity method investment in Clearwire includes agreements by which we resell wireless data services utilizing Clearwire's 4G network. In addition, Clearwire utilizes the Sprint network to provide dual mode service to its customers in those areas where access to a 4G network is not yet available. Accounts payable, accrued expense and other liabilities to Clearwire totaling $77 million as of December 31, 2011 and cost of services and products totaling $405 million for the year ended December 31, 2011 are included in our consolidated financial statements related to our purchase of 4G services.