Related-Party Transactions

Clearwire Related-Party Transactions

Sprint's relationship with Clearwire, which is now a wholly-owned subsidiary of Sprint, includes agreements by which we resell wireless data services utilizing Clearwire's 4G network. In addition, Clearwire subscribers utilize the third generation (3G) Sprint network which provides dual-mode service to subscribers in those areas where access to Clearwire's 4G network is not available.

Immediately prior to the Clearwire Acquisition, Sprint Communications held approximately 50.1% of non-controlling voting interest and a 6.0% non-controlling economic interest in Clearwire Corporation as well as a 44.1% non-controlling economic interest in Clearwire Communications LLC for which the carrying value totaled $325 million. Prior to the close of the Clearwire Acquisition, we applied equity method accounting to the investment in Clearwire.

Equity in losses from Clearwire were $482 million, $202 million, and $1.1 billion for the Predecessor 190-day period ended July 9, 2013, Predecessor unaudited three-month period ended March 31, 2013 and the Predecessor year ended December 31, 2012, respectively. The equity in losses from our investment in Clearwire consisted of our share of Clearwire's net loss and other adjustments, if any, such as non-cash impairment of our investment, gains or losses associated with the dilution of our ownership interest resulting from Clearwire's equity issuances, derivative losses associated with the change in fair value of the embedded derivative included in exchangeable notes between Clearwire and Sprint, and other items recognized by Clearwire Corporation that did not affect our economic interest. Sprint's equity in losses for the Predecessor 190-day period ended July 9, 2013, include a $65 million derivative loss associated with the change in fair value of the embedded derivative. Equity in losses from Clearwire for the Predecessor year ended December 31, 2012 included a $204 million pre-tax impairment reflecting a reduction in the carrying value of the investment in Clearwire to an estimated fair value as well as a $41 million charge associated with Clearwire's write-off of certain network and other assets that no longer met its strategic plans.

Subsequent to the Clearwire Acquisition, Clearwire is consolidated as a wholly-owned subsidiary of Sprint. In connection with the acquisition, Sprint recorded a pre-tax gain of approximately $2.9 billion to "Gain on previously-held equity interests" in its Predecessor consolidated statements of operations immediately preceding the Clearwire Acquisition resulting from the difference between the estimated fair value of the interests owned prior to the acquisition ($5.00 per share offer price less an estimated control premium of approximately $0.60) and the carrying value of approximately $325 million for those previously-held equity interests.

Cost of services included in our consolidated statements of operations related to our agreement to purchase 4G services from Clearwire totaled $207 million, $101 million and $417 million for the Predecessor 190-day period ended July 9, 2013, Predecessor unaudited three-month period ended March 31, 2013 and the Predecessor year ended December 31, 2012, respectively.

Summarized financial information for Clearwire for the 190-day period ended July 9, 2013, which preceded the Clearwire Acquisition, is as follows:



	190 Days Ended July 9,			Year Ended December 31,
	2013			2012
	(in millions)
Revenues	$	666		$	1,265
Operating expenses	(1,285		)	(2,644		)
Operating loss	$	(619	)	$	(1,379	)
Net loss from continuing operations before non-controlling interests	$	(1,102	)	$	(1,744	)
Net loss from discontinued operations before non-controlling interests	$	—		$	(168	)

SoftBank Related-Party Transactions

In addition to agreements arising out of or relating to the SoftBank Merger, Sprint has entered into various other arrangements with SoftBank or its controlled affiliates (SoftBank Parties) or with third parties to which SoftBank Parties are also parties, including for international wireless roaming, wireless and wireline call termination, real estate, device and accessory purchasing, distribution and other services.

Specifically, we have arrangements with Brightstar US, Inc. (Brightstar), a wholly-owned subsidiary of SoftBank, whereby Brightstar provides supply chain and inventory management services to us in our indirect channels and whereby Sprint may sell new and used devices and new accessories to Brightstar for its own purposes. The supply chain and inventory management arrangement contemplates that Brightstar will purchase inventory from the OEMs to sell directly to our indirect dealers. As compensation for these services, we remit per unit fees to Brightstar for each device sold to dealers or retailers in our indirect channels. During the year ended March 31, 2015, we incurred fees under this arrangement totaling $66 million. Until Brightstar successfully negotiates contracts with, and procures credit from, our existing OEMs, Brightstar will purchase device inventory from us in order to fulfill orders within our indirect channel. During the year ended March 31, 2015, Brightstar primarily fulfilled indirect channel orders with inventory acquired from us. In October 2014, we provided a $1.0 billion credit line to Brightstar to facilitate certain of these arrangements. As a result, we shifted our concentration of credit risk away from our indirect channel partners to Brightstar. As Brightstar is a wholly-owned subsidiary of SoftBank, we expect SoftBank will provide the necessary support to ensure that Brightstar will fulfill its obligations to us under these agreements. However, we have no assurance that SoftBank will provide such support.

Amounts included in our consolidated financial statements associated with our arrangements with Brightstar were as follows:



Consolidated balance sheets:	March 31, 2015		March 31, 2014
	(in millions)
Accounts receivable	$	430	$	—
Accounts payable	$	96	$	—



Consolidated statements of operations:	March 31, 2015
	(in millions)
Net operating revenues ⁽¹⁾	$	1,818
Cost of products ⁽¹⁾	$	1,887

_________________


(1)	Amounts for all other reported periods were immaterial.

Additionally, we have arrangements with a wholly-owned subsidiary of Brightstar (Brightstar Subsidiary) to procure devices and accessories on our behalf with certain third-party vendors under existing purchase arrangements Sprint has with those vendors as well as new vendor purchase arrangements entered into by the Brightstar Subsidiary. The procurement services include placing orders, processing invoices, receiving payments from us, making payments to our suppliers on our behalf. As compensation under the device arrangement, we paid a portion of certain costs that Brightstar Subsidiary incurs plus a profit percentage. Under the accessory arrangement, we pay a percentage mark-up on the cost of accessory purchases. During the year ended March 31, 2015, three-month transition period ended March 31, 2014 and year ended December 31, 2013, we procured, through the Brightstar Subsidiary, approximately $5.3 billion, $411 million and $86 million, respectively, of device and accessory inventory, which was sold in direct and indirect channels for which we paid immaterial fees to the Brightstar Subsidiary. In mid-December 2014, we determined that the Brightstar Subsidiary will discontinue procurement of devices on our behalf and as a result, those purchasing activities are transitioning back to us.

Amounts included in our consolidated balance sheets associated with these arrangements with the Brightstar Subsidiary were as follows:



	March 31, 2015		March 31, 2014
	(in millions)
Device and accessory inventory	$	410	$	266
Accounts payable	$	16	$	205

All other transactions under agreements with SoftBank Parties, in the aggregate, were immaterial through the period ended March 31, 2015.