
Note 3.	Investments

The components of investments were as follows:



	June 30, 2012		December 31, 2011
	(in millions)
Marketable equity securities	$	43	$	43
Equity method and other investments	1,301		1,953
	$	1,344	$	1,996

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 offers certain 4G products utilizing Clearwire's 4G wireless Worldwide Interoperability for Microwave Access (WiMAX) broadband network in available markets. As of June 30, 2012, Sprint held approximately 48.3% of a non-controlling economic interest in Clearwire Communications LLC and a 48.3% non-controlling voting interest in Clearwire Corporation (together, “Equity Interests”) for which the carrying value totaled $973 million. In June 2012, Sprint exercised its right to repurchase approximately 78 million Class B Voting shares at par value of $0.0001 per share for approximately eight thousand dollars, previously surrendered in June 2011, resulting in Sprint's non-controlling voting interest now being equivalent to its non-controlling economic interest.

In May 2012, Clearwire announced an at-the-market equity offering in which it may sell shares of its Class A common stock in one or more transactions having an aggregate offering price of up to $300 million. Sprint maintains a preemptive right to participate in Clearwire equity issuances; however, to date Sprint has elected not to exercise the right to buy shares in the equity offering, resulting in a reduction of Sprint's non-controlling economic interest.

In addition to our Equity Interests, Sprint held two notes receivable from Clearwire as of June 30, 2012. On January 2, 2012, in conjunction with new long-term pricing agreements reached between the two companies in the fourth quarter of 2011, Sprint provided $150 million to Clearwire in exchange for a promissory note. The note has 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. The difference between the fair value of the note and its face value at the date of issuance has been recorded as a prepaid expense, which will be amortized over the term of the note to cost of service. 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 mobile virtual network operator (MVNO) agreement. Additionally, 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 total carrying value of the notes receivable, which includes accretion related to premiums for both notes and fees associated with the 2009 replacement of the 2008 note, was $312 million and $178 million as of June 30, 2012 and December 31, 2011, respectively. The carrying value of Sprint's Equity Interests, together with the long-term portion of the carrying value of the notes receivable, are included in the line item "Investments" in Sprint's consolidated balance sheets. The current portion of the carrying value of the notes receivable is included in the line item "Prepaid expenses and other current assets" in Sprint's consolidated balance sheets.

Equity in Losses and Summarized Financial Information

Equity in losses from Clearwire were $429 million and $719 million for the three and six-month periods ended June 30, 2012 and $594 million and $1.0 billion for the three and six-month periods ended June 30, 2011, respectively. Sprint's losses from its investment in Clearwire consist of Sprint's share of Clearwire's net loss and other adjustments, if any, such as non-cash impairment of Sprint's 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 include charges that were associated with Clearwire's write-off of certain network and other assets that no longer meet its strategic plans that were $40 million for the six-month period ended June 30, 2012 and $202 million and $294 million for the three and six-month periods ended June 30, 2011, respectively. The three-month period ended June 30, 2012 also includes a $204 million pre-tax impairment reflecting Sprint's reduction in the carrying value of its investment in Clearwire to an estimated fair value.

Summarized financial information for Clearwire is as follows:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
	(in millions)
Revenues	$	317		$	323		$	640		$	559
Operating expenses	(628		)	(1,234		)	(1,373		)	(2,118		)
Operating loss	$	(311	)	$	(911	)	$	(733	)	$	(1,559	)
Net loss from continuing operations before non-controlling interests	$	(431	)	$	(940	)	$	(992	)	$	(1,733	)
Net loss from discontinued operations before non-controlling interests	$	(7	)	$	(33	)	$	(6	)	$	(74	)

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, 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, governance rights associated with our non-controlling voting interest, and our expectation of the duration of our ongoing relationship, as well as other factors. Based upon the evaluation of factors described above as of June 30, 2012, we recognized a non-cash impairment of $204 million in the second quarter 2012 to reflect a reduction to our best estimate of fair value associated with our non-controlling economic interests reflecting a per share carrying value of our investment in Clearwire of $1.38 as compared to Clearwire's closing stock price of $1.12 per share as of June 30, 2012. The determination of an estimate of fair value for a non-public security, such as our non-controlling economic interest, is subject to significant judgment and uncertainty. Clearwire's stock price is subject to significant volatility. Declines in Clearwire's stock price subsequent to June 30, 2012 will be evaluated in future periods for impairment of our remaining investment.

Clearwire Related-Party Transactions

Sprint's equity method investment in Clearwire includes agreements by which we resell wireless data services utilizing Clearwire's 4G WiMAX network. In addition, Clearwire utilizes the third generation (3G) Sprint network to provide dual-mode service to its customers in those areas where access to its 4G WiMAX network is not yet available. Amounts included in our consolidated balance sheets related to our agreement to purchase 4G WiMAX services from Clearwire as of June 30, 2012 and December 31, 2011 totaled $85 million and $5 million, respectively, for prepaid expenses and other current assets and $154 million and $77 million, respectively, for accounts payable, accrued expense and other liabilities. Cost of services and products included in our consolidated statements of comprehensive loss related to our agreement to purchase 4G WiMAX services from Clearwire totaled $104 million and $209 million for the three and six-month periods ended June 30, 2012, and $106 million and $152 million for the three and six-month periods ended June 30, 2011, respectively.