424B3 1 d425100d424b3.htm PROSPECTUS FILED PURSUANT TO RULE 424B3 Prospectus Filed Pursuant to Rule 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-186448

 

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 Ritz Charles, 9000 W. 137th Street, Overland Park, Kansas 66221 on June 12, 2013, at 10:00 a.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 and April 12, 2013 (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 deemed to have elected to receive cash, and they will be allocated and receive the same type (or types) of consideration that are ultimately determined to be allocable to other Sprint stockholders that have affirmatively elected to receive cash. In order for your election to receive cash or stock consideration to be valid, you must submit a properly completed form of election by 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, all as provided for in the accompanying proxy statement-prospectus (although as described above, a failure to make either election will be treated the same as an election to receive cash). 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.


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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.

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 and New Sprint’s information agent, 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 June 12, 2013.

 

Sincerely,

LOGO

James H. Hance, Jr.

Chairman of the Board of Directors

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 48 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 May 1, 2013, and is first being mailed to stockholders on or about May 3, 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

You may also ask questions about this proxy statement-prospectus and obtain copies of these documents from the proxy solicitor for Sprint and the information agent for New Sprint, Georgeson Inc., by requesting in writing or by telephone from:

Georgeson Inc.

199 Water Street, 26th Floor

New York, New York 10038

Toll Free: (866) 741-9588

Banks and Brokers: (212) 440-9800

If you would like to request any documents, please do so by June 5, 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 187.


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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 June 12, 2013 at 10:00 a.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 June 12, 2013, beginning promptly at 10:00 a.m., local time, at Ritz Charles, 9000 W. 137th Street, Overland Park, Kansas 66221, 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 and April 12, 2013 (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 April 18, 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 48 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 our proxy solicitor and New Sprint’s information agent:

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   

LOGO

James H. Hance, Jr.

May 1, 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 MAY 3, 2013.


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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

     5   

Summary of the Material Terms of the SoftBank Merger

     7   

Summary of the Bond Purchase Agreement

     13   

Summary of the Warrant

     14   

Regulatory Approvals

     14   

Tax Consequences of the SoftBank Merger

     15   

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

     16   

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

     17   

Security Ownership of Certain Beneficial Owners and Management of Sprint

     19   

Appraisal Rights

     19   

Recent Developments

     20   

Risks Associated with the SoftBank Merger, New Sprint and Sprint

     20   

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

     21   

Board of Directors and Management Following the SoftBank Merger

     21   

SUMMARY HISTORICAL FINANCIAL DATA

     23   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     25   

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     43   

MARKET PRICES AND DIVIDEND INFORMATION

     44   

RECENT DEVELOPMENTS

     46   

RISK FACTORS

     48   

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

     73   

THE PARTIES TO THE SOFTBANK MERGER

     74   

Sprint Nextel Corporation

     74   

Parent and Merger Sub

     74   

HoldCo

     74   

SoftBank

     75   

THE SPECIAL STOCKHOLDERS’ MEETING

     76   

Date, Time and Place

     76   

Purpose of the Special Stockholders’ Meeting

     76   

Recommendations of the Sprint Board of Directors

     76   

Record Date; Stock Entitled to Vote

     76   

Quorum

     77   

Required Vote

     77   

Treatment of Abstentions; Failure to Vote

     77   

Voting of Proxies; Incomplete Proxies

     78   

Shares Held in “Street Name”

     78   

Employee Plan Shares

     79   

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

     79   

Solicitation of Proxies

     79   

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

     80   

Voting by Sprint Directors and Executive Officers

     80   

Attending the Sprint Special Stockholders’ Meeting

     80   

 

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SPRINT PROPOSALS

     81   

THE SOFTBANK MERGER

     83   

Background of the SoftBank Merger

     83   

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

     93   

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

     97   

Summary of Financial Analyses of Sprint’s Financial Advisors

     105   

Certain Financial Scenarios Prepared by the Management of Sprint

     112   

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

     115   

Financing

     119   

Regulatory Matters

     121   

Making the Cash/Stock Election

     123   

Cash/Stock Proration and Allocation Rules

     126   

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

     128   

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

     130   

Appraisal Rights

     132   

Listing of New Sprint Common Stock on the NYSE

     134   

Delisting and Deregistration of Sprint Common Stock after the SoftBank Merger

     134   

Stockholder Lawsuits Challenging the SoftBank Merger

     134   

THE MERGER AGREEMENT

     136   

THE BOND PURCHASE AGREEMENT

     156   

THE WARRANT AGREEMENT

     161   

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SOFTBANK MERGER

     162   

ACCOUNTING TREATMENT OF THE SOFTBANK MERGER

     166   

DESCRIPTION OF NEW SPRINT COMMON STOCK

     167   

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

     168   

CONTROL AND MANAGEMENT OF NEW SPRINT AFTER THE SOFTBANK MERGER

     177   

SoftBank

     177   

Board of Directors of New Sprint

     177   

Directors and Executive Officers

     178   

Committees

     180   

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

     180   

Controlled Company

     181   

Certain Relationships and Related Transactions

     182   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SPRINT

     184   

LEGAL MATTERS

     186   

EXPERTS

     186   

SPRINT STOCKHOLDER PROPOSALS

     186   

WHERE YOU CAN FIND MORE INFORMATION

     187   

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 1 and “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page 126;

 

   

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 prorations as described below. Each Sprint stockholder will have the right to elect to receive Cash Consideration or Stock Consideration in respect of each share of Sprint common stock owned by that stockholder, and a Sprint stockholder that fails to make either election will be deemed to have elected to receive Cash Consideration. Because the aggregate Cash Consideration that Sprint stockholders will receive in the SoftBank Merger is fixed at $12.14 billion, the elections of Sprint stockholders to receive Cash Consideration or Stock Consideration are subject to proration and allocation rules set forth in the Merger Agreement and described herein. Based on the number of shares of Sprint common stock outstanding as of April 18, 2013 (the meeting record date), if all Sprint stockholders were to make the same election, you would receive Cash Consideration of $4.03 per share of Sprint common stock you hold (representing approximately 55.16% of $7.30), and Stock Consideration of 0.4484 (or 44.84%) of a share of New Sprint common stock per share of Sprint common stock you hold.

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 55.16% of the outstanding Sprint common stock calculated as of the meeting

 

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record date) will be entitled to be exchanged for Cash Consideration (assuming there are no dissenting stockholders who perfect their appraisal rights). All remaining outstanding shares of Sprint common stock (representing approximately 44.84% of the outstanding Sprint common stock calculated as of the meeting record date) will be exchanged for Stock Consideration.

The proration and allocation rules applicable to the cash and stock elections to be made by Sprint stockholders, which are more fully described in “Summary of the Proxy Statement-Prospectus” beginning on page 1 and “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page 126, are complex and have the potential to result in allocations of consideration that differ (for each Sprint stockholder) from the form of consideration elected (or deemed elected). Subject to the more detailed description of these rules described in such sections, these proration and allocation rules will operate in the following manner:

 

   

If Sprint stockholders, in the aggregate, elect (or are deemed to have elected) to receive Cash Consideration in an amount exceeding $12.14 billion, then (a) Sprint stockholders that elect to receive Cash Consideration (or that fail to elect either Cash Consideration or Stock Consideration and thus are deemed to have elected Cash Consideration) will receive a mixture of Cash Consideration and Stock Consideration in a proportion that results in the aggregate payment of $12.14 billion of Cash Consideration to such stockholders, pro rata in proportion to the number of shares held by such stockholders, and (b) Sprint stockholders that elect to receive Stock Consideration will receive merger consideration comprised entirely of Stock Consideration.

 

   

If Sprint stockholders, in the aggregate, elect to receive Stock Consideration in an amount exceeding the available stock component of the aggregate merger consideration, then (a) Sprint stockholders that elect to receive Stock Consideration will receive a mixture of Stock Consideration and Cash Consideration that results in the distribution of the entire stock component of the aggregate merger consideration to such stockholders, pro rata in proportion to the number of shares held by such stockholders, (b) Sprint stockholders that elect to receive Cash Consideration will receive merger consideration comprised entirely of Cash Consideration, and (c) Sprint stockholders that fail to elect either Cash Consideration or Stock Consideration will receive merger consideration comprised entirely of Cash Consideration.

The proration and allocation rules applicable to the Sprint Merger do not include any mechanism to ensure that the value of the consideration received for each share of Sprint common stock is equivalent, and the value received by a stockholder that makes (or is deemed to have made) a cash election may be significantly different than the value received by a stockholder that makes a stock election. Based on the trading prices of Sprint common stock since the close of trading on October 12, 2012, the last trading day before the SoftBank Merger was publicly announced, through the date of this proxy statement-prospectus, Sprint stockholders that consider electing to receive stock consideration in the SoftBank Merger should carefully consider the likelihood that they may receive consideration having a lower value at the effective time of the SoftBank Merger than a Sprint stockholder that elects (or is deemed to have elected) to receive cash consideration in the SoftBank Merger. Of course, the trading value of Sprint common stock after the date of this proxy statement-prospectus is subject to a large number of factors, including any developments with respect to the unsolicited proposal to acquire Sprint publicly announced by DISH Network Corporation (“DISH”) on April 15, 2013 (the “DISH Proposal”). Following the public announcement of the DISH Proposal on April 15, 2013, and prior to the date of this proxy statement-prospectus, the trading price of shares of Sprint common stock has increased, and the closing price of Sprint common stock on April 30, 2013, the last full trading day prior to the date of this proxy statement-prospectus, was $7.05. In the event the SoftBank Merger is consummated, there can be no assurance as to what the trading value of New Sprint common stock will be immediately following the completion of the SoftBank Merger or at any time thereafter. See “Risk Factors—Shares of New Sprint common stock may have a value that is less than the per share cash consideration of $7.30 or the cash consideration received after application of the proration and allocation rules and the value of such shares could fluctuate significantly.

 

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Please see “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page 126 for several specific examples of how these proration and allocation rules will work in practice.

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 (or are deemed to have elected) to receive as consideration and the proration rules, you may 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 (or are deemed to have made) 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 1 and “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page 126.

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 and New Sprint’s information agent, indicating your election, and send the form of election to Computershare Trust Company, N.A. (“Computershare”), the exchange agent, to one of the proper addresses outlined on the form of election. Sprint stockholders who fail to properly complete and return the form of election, together with any other required documentation specified in the form of election, prior to the election deadline (as described below) will be considered to have elected to receive cash for all purposes of the Merger Agreement.

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 received by Computershare, together with any other required documentation specified in the form of election, 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 but no earlier than July 1, 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 SoftBank Merger—Making the Cash/Stock Election” beginning on page 123. 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.

Once you have made a valid election, you will not be able to transfer your shares of Sprint common stock subject to such election unless and until you have validly revoked such election. Any transferee of such shares must (if the election deadline has not occurred) make a new election with respect to such shares if such transferee does not wish the shares to be considered non-electing shares. If you have made a valid election (that has not been revoked prior to the election deadline) with respect to shares of Sprint common stock, after the election

 

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deadline you will not be able to revoke such election or transfer your shares prior to the effective time of the SoftBank Merger (except in certain circumstances when the expected effective time is delayed).

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 to Computershare by the election deadline, together with any other required documentation specified in the form of election, prior to the election deadline 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 is identical to the merger consideration allocable to those stockholders that have elected to receive cash. See “The SoftBank Merger—Cash/Stock Proration and Allocation Rules” beginning on page 126.

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

 

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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 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 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 for Clearwire. The Special Committee of the Clearwire board of directors 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: How will DISH’s recently announced unsolicited proposal to acquire Sprint affect the SoftBank Merger?

A: On April 15, 2013, Sprint announced that it had received an unsolicited proposal from DISH to acquire Sprint (the “DISH Proposal”). Sprint announced that its board of directors will review the DISH Proposal carefully and consistent with its fiduciary and legal duties. The Sprint board of directors subsequently established a special committee of the board (the “Sprint Special Committee”) to assess the DISH Proposal. The Sprint Special Committee will, consistent with its fiduciary duties and in consultation with its financial and legal advisors, evaluate the DISH Proposal and make a recommendation to the full Sprint board of directors as to whether the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer as defined under the Merger Agreement (a “Superior Offer”). This determination is necessary because, under the terms of the Merger Agreement, Sprint may not engage in discussions or negotiations with DISH regarding the DISH Proposal unless, among other things, the Sprint board of directors first determines in good faith that the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer. See “Recent Developments” beginning on page 46.

The Sprint board of directors has not made any determination to change its unanimous recommendation of the SoftBank Merger.

Sprint stockholders are not being asked to vote on or take any action with respect to the DISH Proposal at the special stockholders’ meeting.

 

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Q: Will the Sprint Special Committee and Sprint’s board of directors determine whether the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer?

A: It is not possible at this time to predict when or if the Sprint Special Committee and the Sprint board of directors will make any determination with respect to the DISH Proposal. There is no obligation under the Merger Agreement for any such determination to be made within a specified time period.

The Sprint Special Committee has requested that DISH provide Sprint with additional information in writing regarding its proposal to enable Sprint’s board of directors and the Sprint Special Committee to analyze the DISH Proposal consistent with their respective fiduciary and legal duties. DISH has no obligation to provide any information or within any particular time period.

Sprint intends to amend or supplement this proxy statement-prospectus to disclose material developments, if any, with respect to the DISH Proposal in accordance with applicable law and the Merger Agreement. On April 29, 2013, Sprint announced that it did not intend to make any further comment on the work of the Sprint Special Committee until it completes an assessment with respect to whether the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer and the Sprint board of directors has considered such assessment. See “Recent Developments” beginning on page 46.

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 SoftBank Merger—Regulatory Matters” beginning on page 121.

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 150 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 and no earlier than July 1, 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 162.

Q: Should I send in my stock certificates with my proxy?

A: No. Certificates representing Sprint common stock may be properly surrendered in accordance with written instructions you will receive either (a) in connection with the cash/stock election procedures in advance of the closing of the SoftBank Merger, or (b) if no valid election is made, pursuant to a letter of transmittal to be mailed to non-electing stockholders after the SoftBank Merger is completed.

PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY.

For a more detailed description of the election and exchange procedures, see “The SoftBank Merger—Making the Cash/Stock Election” beginning on page 123 and “The Merger Agreement—Exchange Procedures” beginning on page 138.

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 10:00 a.m., local time on June 12, 2013 at Ritz Charles, 9000 W. 137th Street, Overland Park, Kansas 66221.

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 April 18, 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 9:00 a.m., local time. 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 132 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 (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.

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

 

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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 April 18, 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 26.7% 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 184.

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 3,014,764,924 shares of Sprint common stock outstanding and entitled to vote, held by approximately 45,514 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 www.proxyvote.com in the same manner you would to submit your proxy electronically or by calling 1-800-690-6903, 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.

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.

 

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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 132.

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.

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.

 

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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 128 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 128.

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 74 and 75)

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 74.

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 5 and “The Merger Agreement—Structure and Effect of the SoftBank Merger” beginning on page 136.

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 177.

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.

 

 

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The principal executive offices of Parent and Merger Sub are located at 11501 Outlook Street 4th Floor, Overland Park, Kansas 66211 and the principal executive offices of HoldCo are located at 1 Circle Star Way, San Carlos, California 94070, and their telephone number is (617) 928-9300.

For further information see “The Parties to the SoftBank Merger” beginning on page 74.

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 March 31, 2013, SoftBank was Japan’s second largest mobile communications company in terms of mobile subscribers, with over 41.9 million subscribers representing a 29.7% total market share in Japan, including 32.5 million subscribers from SoftBank Mobile Corp., 4.3 million subscribers from eAccess Ltd. (“eAccess”) and 5.1 million PHS subscribers from WILLCOM, Inc. (“Willcom”). 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 treated eAccess as an equity method affiliate under accounting principles generally accepted in Japan. However, from the fiscal quarter ending June 30, 2013, SoftBank will report its financial results under International Financial Reporting Standards (“IFRS”). Under IFRS, SoftBank will treat eAccess as a consolidated subsidiary. On March 12, 2010, SoftBank entered into a framework agreement to assist with the reorganization of Willcom under the Japanese Corporate Reorganization Act. SoftBank subsequently became Willcom’s sponsor in connection with Willcom’s reorganization, pursuant to a sponsor agreement entered into on August 2, 2010. Under the reorganization plan, SoftBank owns 100% of Willcom’s shares but does not have effective control over Willcom since Willcom remains under court administration. Accordingly, SoftBank does not treat Willcom as a subsidiary or consider it an equity method affiliate.

SoftBank’s consolidated net sales increased 6.6% year-on-year to ¥3.2 trillion, or approximately $34.0 billion, operating income increased 7.3% to ¥675.2 billion, or approximately $7.2 billion, and net income rose 65.4% to ¥313.7 billion, or approximately $3.3 billion during its fiscal year ended March 31, 2012. U.S. dollar equivalents expressed in this paragraph are based on the exchange rate of 94.2 JPY per U.S. dollar as reported by the U.S. Federal Reserve as of March 31, 2013 solely for informational purposes.

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.

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 74.

 

 

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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 under two facilities 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. On December 21, 2012, these lenders provided SoftBank with a loan of ¥250 billion (approximately $2.65 billion) under the first of SoftBank’s short-term debt facilities. Under the second of SoftBank’s short-term debt facilities, these lenders are now committed to provide SoftBank, subject to the satisfaction of certain conditions precedent, a loan of up to ¥1.0349 trillion (approximately $11.0 billion). SoftBank reduced this commitment from ¥1.4 trillion in March 2013 (approximately $14.9 billion) upon its receipt of cash proceeds from a pair of bond issuances that SoftBank intends to apply towards the consideration payable at the closing of the SoftBank Merger. In order to protect against the devaluation of the Japanese yen to the U.S. dollar, SoftBank has hedged $20.1 billion of the consideration for the SoftBank Merger at an average exchange rate of JPY 82.2 per U.S. dollar. In addition, SoftBank raised $2.485 billion and €625 million (approximately $801 million) in gross proceeds from the issuance of senior U.S. dollar and euro notes, respectively, on April 23, 2013. U.S. dollar equivalents expressed in this paragraph are based on the exchange rate of 1.2816 euros per U.S. dollar or 94.2 JPY per U.S. dollar, as reported by the U.S. Federal Reserve on March 31, 2013, solely for informational purposes.

For further information, please see “The SoftBank Merger—Financing” beginning on page 119.

The Special Stockholders’ Meeting

The special stockholders’ meeting will be held on June 12, 2013, starting at 10:00 a.m., local time, at Ritz Charles, 9000 W. 137th Street, Overland Park, Kansas 66221.

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; Sprint’s Reasons for the SoftBank Merger” beginning on page 93. 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 130.

 

 

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Opinions of Sprint’s Financial Advisors (see page 97)

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 in “Summary of the Proxy Statement-Prospectus—Summary of the Warrant” on page 14), 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.

The opinions of each of Citigroup, Rothschild and UBS, and the financial scenario analyses, forecasts or projections upon which they may have been based, 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. Since such date, certain material changes have occurred in Sprint’s current and anticipated business and financial condition, which changes include the proposed Clearwire Acquisition, various financings effected by Sprint including Sprint’s issuance of the Bond on October 15, 2012, the sale of $2.3 billion of other debt in the fourth quarter of 2012, and Sprint’s entry into a $3.0 billion five-year credit facility. Since October 15, 2012, Sprint has reported financial results for the quarter ended September 30, 2012 and the quarter and year ended December 31, 2012. Prior to the special stockholders’ meeting, Sprint will disclose certain additional results, including for the quarter ended March 31, 2013. Furthermore, in the course of its business planning, Sprint has adopted a capital budget for 2013 and developed various additional forward-looking financial models and business plans. Sprint has not, nor does it intend to, publicly disclosed such models or plans. In addition, on April 15, 2013, DISH publicly announced the DISH Proposal. All of the information described in this paragraph may have had the effect of superseding the information used by Citigroup, Rothschild and UBS in their analyses.

Additionally, Sprint has engaged each of Citigroup, Rothschild and UBS as a financial advisor in connection with Sprint’s evaluation of the DISH Proposal, any modification of the Transactions and any competing proposal from any third party.

 

 

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For a more complete description of the opinions of Citigroup, Rothschild and UBS, see “The SoftBank Merger—Opinions of Sprint’s Financial Advisors—Citigroup, Rothschild and UBS” beginning on page 97. 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 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 136. 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

 

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Step 2—Merger

 

LOGO

Step 3—Post-Merger Ownership Structure

 

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Summary of the Material Terms of the SoftBank Merger (see page 136)

Closing and Effective Time of the SoftBank Merger. The Merger Agreement provides that the closing of the SoftBank Merger will take place on the latest of (a) three business days after the satisfaction or waiver (if permitted) of the conditions to the SoftBank Merger contained in the Merger Agreement, (b) 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 (c) July 1, 2013, 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 55.16% of the outstanding Sprint common stock calculated as of the meeting record date) 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 44.84% of the outstanding Sprint common stock calculated as of the meeting record date) 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 shares of Sprint common stock by delivering to Computershare, the exchange agent, a completed form of election together with the certificates representing their shares of Sprint common stock and any other required documentation specified in the form of election. Forms of election must be received by 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, but no earlier than July 1, 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, together with any other required documentation specified in the form of election, prior to the election deadline will receive merger

 

 

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consideration (consisting of cash, shares of New Sprint common stock or a combination of the two) that is identical to the merger consideration allocable to those stockholders that have elected to receive cash.

Once a holder of Sprint common stock has made a valid election with respect to shares, the stockholder will not be able to transfer such shares unless and until the stockholder has validly revoked such election. Any transferee of such shares must (if the election deadline has not occurred) make a new election with respect to such shares if such transferee does not wish the shares to be considered non-electing shares. If a Sprint stockholder makes a valid election (that has not been revoked prior to the election deadline) with respect to shares of Sprint common stock, after the election deadline the stockholder will not be able to revoke such election or transfer such shares prior to the effective time of the SoftBank Merger (except in certain circumstances when the expected effective time is delayed).

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 Q-1 and “The SoftBank Merger—Making the Cash/Stock Election” beginning on page 123.

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 (or deemed to have been elected). Depending on what type of consideration the other Sprint stockholders elect (or are deemed to have elected) to receive as consideration and the proration rules, a Sprint stockholder may not receive the preferred type of consideration with respect to all of the stockholder’s shares of Sprint common stock. The elections that a stockholder and other Sprint stockholders make (or are deemed to have made) 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 a Sprint stockholder will receive in the SoftBank Merger.

If the cash proration rule applies (as a result of cash elections (collectively together with deemed cash elections) exceeding the available cash component of the merger consideration), a Sprint stockholder that elects (or is deemed to have elected) 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.

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 126.

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 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

 

 

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page 14) 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 128. 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 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,

 

 

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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 144.

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 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);

 

 

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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);

 

   

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

 

 

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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 162 having been delivered.

For further details, see “The Merger Agreement—Conditions to the Completion of the SoftBank Merger” beginning on page 150.

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.

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

 

 

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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 152.

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 153 and “The Merger Agreement—Reverse Termination Fee” beginning on page 154.

Summary of the Bond Purchase Agreement (see page 156)

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 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

 

 

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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 161)

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 121)

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 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

 

 

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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 have elected 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.

Tax Consequences of the SoftBank Merger (see page 162)

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

 

 

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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 168)

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 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

 

 

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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.

Limitations, Restrictions and Conditions on SoftBank’s Conduct of Business and Exercise of Rights (see page 180)

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

 

 

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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 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.

 

 

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Security Ownership of Certain Beneficial Owners and Management of Sprint (see page 184)

As of the meeting record date, directors and executive officers of Sprint and their affiliates owned and were entitled to vote 6,229,475 shares of Sprint common stock, or less than 1% of the shares of Sprint common stock issued and outstanding on that date. In addition, the known beneficial owners of 5% or more of Sprint’s common stock, excluding SoftBank, owned and were entitled to vote 804,741,415 shares of Sprint common stock, or approximately 26.7% of the shares of Sprint common stock issued and outstanding as of the record date for the special stockholders’ meeting. 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.

Appraisal Rights (see page 132)

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 132.

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 share of Sprint common stock that, as of the effective time of the SoftBank Merger, is held by a holder who is entitled to and who has properly preserved appraisal rights will not be converted into or represent the right to receive the applicable merger consideration, and the holder of such share will be entitled only to such rights as may be granted to such holder pursuant to Section 17-6712 of the KGCC with respect to such share. However, if such appraisal rights have not been perfected or the holder of such share has otherwise lost such holder’s appraisal rights with respect to such share, then, as of the later of the effective time of the SoftBank Merger or the time of the failure to perfect such rights or the loss of such rights, such share will automatically be converted into and will represent only the right to receive (upon the surrender of the certificate representing such share) the merger consideration payable to holders of shares of Sprint common stock that have elected to receive cash in the SoftBank Merger, notwithstanding any election that a holder may have made with respect to such share.

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

 

 

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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.

Recent Developments (see page 46)

On April 15, 2013, Sprint announced that it had received an unsolicited proposal from DISH to acquire Sprint. Sprint announced that its board of directors will review the DISH Proposal carefully and consistent with its fiduciary and legal duties. The Sprint board of directors subsequently established the Sprint Special Committee to assess the DISH Proposal. The Sprint board of directors has not made any determination to change its unanimous recommendation of the SoftBank Merger. It is not possible at this time to predict when or if the Sprint Special Committee and the Sprint board of directors will make any determination with respect to the DISH Proposal. There is no obligation under the Merger Agreement for any such determination to be made within a specified time period.

Risks Associated with the SoftBank Merger, New Sprint and Sprint (see page 48)

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 should carefully consider the following risks, including the risks discussed in the section entitled “Risk Factors,” before investing in our common stock:

 

   

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.

 

   

Shares of New Sprint common stock may have a value that is less than the per share cash consideration of $7.30 or the cash consideration received after application of the proration and allocation rules, and the value of such shares could fluctuate significantly.

 

   

Due to the proration and allocation rules, Sprint stockholders may receive consideration in a form that is different from that which they elected to receive.

 

   

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.

 

   

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.

 

   

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 potential failure to complete the SoftBank Merger or the Clearwire Acquisition, could negatively impact Sprint’s business or share price.

 

   

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

 

 

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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.

 

   

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 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.

 

   

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.

 

   

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

 

   

Any inability to resolve favorably any disputes that may arise between New Sprint and SoftBank may result in a reduction in value of New Sprint common stock.

 

   

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.”

Interests of Certain Sprint Directors and Executive Officers in the SoftBank Merger (see page 115)

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 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 115.

Board of Directors and Management Following the SoftBank Merger (see page 177)

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;

 

   

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; and

 

   

it is anticipated that at all times one of the directors designated by SoftBank, subject to U.S. government approval, will serve as the “Security Director” pursuant to the anticipated Network Security Agreement.

 

 

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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.

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, 2012. 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 187. Historical results are not necessarily indicative of any results to be expected in the future.

 

     As of and for the Year Ended December 31,  
     2012     2011     2010     2009     2008  
    

(in millions, except per share amounts)

 

Results of Operations Data:

          

Net operating revenues

   $ 35,345      $ 33,679      $ 32,563      $ 32,260      $ 35,635   

Goodwill impairment

     —          —          —          —          963   

Depreciation and amortization(1)

     6,543        4,858        6,248        7,416        8,407   

Operating (loss) income(1)

     (1,820     108        (595     (1,398     (2,642

Net loss(1)(2)

     (4,326     (2,890     (3,465     (2,436     (2,796

Loss per Share and Dividends:

          

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

   $ (1.44   $ (0.96   $ (1.16   $ (0.84   $ (0.98

Dividends per common share(3)

     —          —          —          —          —     

Cash Flow Data:

          

Net cash provided by operating activities

   $ 2,999      $ 3,691      $ 4,815      $ 4,891      $ 6,179   

Capital expenditures

     4,261        3,130        1,935        1,603        3,882   

Financial Position Data:

          

Total assets

   $ 51,570      $ 49,383      $ 51,654      $ 55,424      $ 58,550   

Property, plant and equipment, net

     13,607        14,009        15,214        18,280        22,373   

Intangible assets, net

     22,371        22,428        22,704        23,462        22,886   

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

     24,341        20,274        20,191        21,061        21,610   

Stockholders’ equity

     7,087        11,427        14,546        18,095        19,915   

 

(1)

In 2012, operating income decreased $1.9 billion from the prior year resulting in an operating loss primarily due to increases in operating expenses of $3.6 billion partially offset by the increase in net operating revenues of $1.7 billion. The increases in operating expenses are due to the incremental effect of accelerated depreciation due to the implementation of Network Vision, which was approximately $2.1 billion, of which the majority related to the Nextel platform. The increase related to accelerated depreciation was slightly offset by a net decrease in depreciation as a result of assets that became fully depreciated or were retired. In addition, wireless cost of products increased approximately $1.8 billion primarily due to higher cost of postpaid and prepaid devices. 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. These changes were 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 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

 

 

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  to asset impairments other than goodwill, severance and exit costs, and merger and integration costs. In 2008, Sprint recognized net charges of $936 million ($586 million after tax) primarily related to merger and integration costs, asset impairments other than goodwill, and severance and exit costs.
(2) During 2012 and 2011, 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 approximately $1.8 billion, $1.2 billion, and $1.4 billion for the years ended December 31, 2012, 2011 and 2010, respectively.
(3) Sprint did not declare any dividends on its common shares in any of the periods reported.

 

 

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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 sheets of Starburst II, Sprint and Clearwire, as of December 31, 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 December 31, 2012. The unaudited pro forma condensed combined statement of operations was prepared using the historical audited consolidated statement of operations of Starburst II for the period from October 5, 2012 (date of incorporation) through December 31, 2012, and the historical audited consolidated statements of operations of Sprint and Clearwire for the year ended December 31, 2012, giving pro forma effect to the acquisitions as if these transactions had been consummated on January 1, 2012. 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 SoftBank Merger and Clearwire Acquisition, (2) factually supportable, and (3) with respect to the statement 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 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 136 and “The Bond Purchase Agreement” beginning on page 156.

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 126.

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 page 161. 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

 

 

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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.

Clearwire Transactions

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 equaling $2.2 billion in exchange for all shares of Clearwire common stock not currently held by Sprint.

On December 17, 2012, Clearwire and Sprint 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, Clearwire has the right to sell to Sprint up to $80 million of exchangeable notes per month for up to ten months beginning in January 2013, subject to certain conditions including the consummation of the proposed Clearwire Acquisition. Refer to Note 10—Subsequent Events for additional information.

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 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.

 

 

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This unaudited pro forma condensed combined financial information should be read in conjunction with the audited 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, which are included in Sprint’s Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated by reference into this proxy statement-prospectus. 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 SoftBank Merger and Clearwire Acquisition had been consummated at the dates specified and is not indicative of operations going forward. The unaudited pro forma condensed combined statement of operations does not reflect any cost savings from operating efficiencies, synergies or other restructurings that could result from the proposed SoftBank Merger and Clearwire Acquisition.

 

 

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Starburst II

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2012

(in millions)

 

    Starburst II     Sprint Nextel
Corporation
    Bond
Conversion
Adjustments
          Eliminations           Pro Forma
Adjustments
          Pro Forma
Condensed
Combined—
Starburst II
& Sprint
 

ASSETS

                 

Current assets

                 

Cash and cash equivalents

  $ 5     $ 6,351      $ —          $ —          $ 17,040       (5c   $ 11,220   
                (12,140     (5d  
                (36     (5e  

Short-term investments

    —          1,849        —            —            —            1,849   

Accounts and notes receivable, net

    6       3,658        —            (6     (5b         3,658   

Device and accessory inventory

    —          1,200        —            —            —            1,200   

Deferred tax assets

    —          1        —            —            104        (5i     105   

Prepaid expenses and other current assets

    —          700        —            —            (113     (5i     587   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current assets

    11        13,759        —            (6       4,855          18,619   

Investments

    3,104       1,053        —            (3,100     (5b     1,255        (5i     2,312   

Property, plant and equipment, net

    —          13,607        —            —            (745     (5i     12,862   

Intangible assets

                 

Goodwill

    —          359        —            —            5,604        (5i     5,963   

FCC licenses and other

    —          20,677        —            —            7,416        (5i     28,093   

Definite-lived intangible assets, net

    —          1,335        —            —            5,266        (5i     6,601   

Other assets

    —          780        —            —            (487     (5i     293   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total assets

  $ 3,115     $ 51,570      $ —          $ (3,106     $ 23,164        $ 74,743   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities

                 

Accounts payable

  $ —        $ 3,487      $ —          $ —          $ —          $ 3,487   

Accrued expenses and other current liabilities

    3        5,008        —            (6     (5b     (264     (5i     4,741   

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

    —          379        —            —            —            379   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current liabilities

    3        8,874        —            (6       (264       8,607   

Long-term debt, financing and capital lease obligations

    —          23,962        (2,853 )     (5a     —            2,906        (5i     24,015   

Deferred tax liabilities

    1        7,047        —            —            3,364        (5i     10,412   

Other liabilities

    —          4,600        —            —            (846     (5i     3,754   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities

    4       44,483        (2,853 )       (6       5,160          46,788   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Commitments and contingencies

                 

Stockholders’ equity

                 

Common stock

    —          6,019        —            —            (6,019     (5h     45   
            —            32        (5c  
            —            13        (5f  

Paid-in capital

    3,137       47,016        3,100        (5a     (3,100     (5b     (47,016     (5h     28,040   
                17,008        (5c  
                68        (5e  
                7,671        (5f  
                156        (5g  

Accumulated deficit

    (26 )     (44,815     (247 )     (5a     —            45,062        (5h     (130
                (104     (5e  

Accumulated other comprehensive income (loss)

    —          (1,133     —            —            1,133        (5h     —     

Non-controlling interest

    —          —          —            —            —            —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total stockholders’ equity

    3,111        7,087        2,853         (3,100       18,004          27,955   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 3,115     $ 51,570      $ —          $ (3,106     $ 23,164        $ 74,743   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

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 December 31, 2012

(in millions)

 

    Pro Forma
Condensed
Combined—
Starburst II
& Sprint
    Clearwire
Corporation
(Note 7a)
    Eliminations           Pro Forma
Adjustments
          Pro Forma
Condensed
Combined
 

ASSETS

             

Current assets

             

Cash and cash equivalents

  $ 11,220      $ 199      $ —         $ (2,156     (6a   $ 9,213   
            (50     (8b  

Short-term investments

    1,849        675        —           —           2,524   

Accounts and notes receivable, net

    3,658        23        (17     (7b     —           3,664   

Device and accessory inventory

    1,200        11        —           —           1,211   

Deferred tax assets

    105        —         —           (31     (8a     74   

Prepaid expenses and other current assets

    587        84        (166     (7b     —           505   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    18,619        992        (183       (2,237       17,191   

Investments

    2,312        —         (257     (7b         126   
        (1,929     (7b      

Property, plant and equipment, net

    12,862        2,259        —            (447     (8a     14,674   

Intangible assets

             

Goodwill

    5,963        —         —           —           5,963   

FCC licenses and other

    28,093        4,274        —           4,475        (8a     36,842   

Definite-lived intangible assets, net

    6,601        —         —           —           6,601   

Other assets

    293        141        —           (53     (8a     381   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 74,743      $ 7,666      $ (2,369     $ 1,738        $ 81,778   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

             

Current liabilities

             

Accounts payable

  $ 3,487      $ 84      $ (78     (7b   $ —          $ 3,493   

Accrued expenses and other current liabilities

    4,741        286        (96     (7b     30        (6c     4,961   

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

    379        36        —           —           415   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    8,607        406        (174       30          8,869   

Long-term debt, financing and capital lease obligations

    24,015        4,271        (182     (7b     692        (8a     28,796   

Deferred tax liabilities

    10,412        144        —           1,400        (8a     11,956   

Other liabilities

    3,754        963        (84     (7b     (381     (8a     4,252   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities

    46,788        5,784        (440       1,741          53,873   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Commitments and contingencies

             

Stockholders’ equity

             

Common stock

    45        —         —           —           45   

Paid-in capital

    28,040        3,158        (3,158     (7b     —           28,040   

Accumulated deficit

    (130     (2,346     2,346        (7b     47        (7b     (180
        (47     (7b     (50     (8b  

Accumulated other comprehensive income (loss)

    —         —         —           —           —    

Non-controlling interest

    —         1,070        (1,070     (7b     —           —    
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total stockholders’ equity

    27,955        1,882        (1,929       (3       27,905   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 74,743      $ 7,666      $ (2,369     $ 1,738        $ 81,778   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

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

Year Ended December 31, 2012

(in millions, except per share amounts)

 

    Historical
Starburst  II(1)
    Sprint
Nextel
Corporation
    Pro Forma
Adjustments
          Pro Forma
Condensed
Combined—
Starburst II
& Sprint
    Clearwire
Corporation
(Note 7a)
    Pro Forma
Adjustments
          Pro Forma
Condensed
Combined
 

Net operating revenues

  $ —        $ 35,345      $ (151     (5j   $ 35,194      $ 1,265      $ (474     (7cii   $ 35,985   

Net operating expenses

                 

Cost of services and products

    —         20,841        (76     (5k     20,652        1,235        (38     (8c     21,398   
        (113     (5j         (485     (7cii  
                34        (7ciii  

Selling, general and administrative

    32       9,765        —           9,797        558        (34     (7ciii     10,321   

Severance, exist costs and asset impairments

    —         298        —           298        83        —           381   

Depreciation and amortization

    —         6,543        —         (5l     7,737        768        (107     (8d     8,380   
        1,194        (5m          
                (18     (8e  

Other, net

    —         (282     —            (282     —         —           (282
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
    32        37,165        1,005          38,202        2,644        (648       40,198   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Operating loss

    (32     (1,820     (1,156       (3,008     (1,379     174          (4,213
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Other (expense) income

                 

Interest (expense) income

    10        (1,428     446        (5n     (972     (553     196        (8f     (1,306
                23        (7ci  

Equity in losses of unconsolidated investments and other, net

    (1     (924     —           (925     (9     1,046        (7ci     112   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 
    9        (2,352     446          (1,897     (562     1,265          (1,194
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income taxes

    (23     (4,172     (710       (4,905     (1,941     1,439          (5,407

Income tax (expense) benefit

    (3     (154     —         (5o     (157     197        (210     (8g     (170
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

  $ (26   $ (4,326   $ (710     $ (5,062   $ (1,744   $ 1,229        $ (5,577
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Basic and diluted net loss per common share

  $ —       $ (1.44   $ —         $ (1.12   $ —       $ —         $ (1.23
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Basic and diluted weighted average common shares outstanding

    3       3,002        1,528        (5p     4,533        —         —           4,533   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

 

(1) The historical statement of operations of Starburst II is for the period from October 5, 2012 (date of incorporation) through December 31, 2012.

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 fair value concepts. 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 SoftBank Merger and Clearwire Acquisition had been consummated on December 31, 2012, with respect to the balance sheet, and on January 1, 2012, with respect to the statement of operations. The estimated purchase price for each of the SoftBank Merger and Clearwire 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.

 

 

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Several valuation techniques have been utilized to determine the estimated fair value of assets acquired and liabilities assumed for purposes of these unaudited pro forma condensed combined financial statements. The following table outlines the general valuation methods used to estimate fair value for the material assets acquired and liabilities assumed:

 

Asset acquired or liability assumed    Valuation Technique
Current assets and current liabilities    Current assets and liabilities are generally reflected at historical carrying amounts on the basis that these amounts approximate estimated fair value. The adjustments to current assets and current liabilities reflected in the accompanying unaudited condensed combined pro forma balance sheet are described in the associated notes included herein.
Property, plant and equipment, net    Net property, plant and equipment was calculated using a cost approach which estimates the fair value of property, plant and equipment needed to replace the functionality provided by the existing property and equipment. Accordingly, the estimated reduction in the carrying value reflected herein is primarily due to advances in telecommunications equipment technology and the decommissioning of the Nextel platform.
Tradenames    Indefinite and definite lived tradenames were determined using a relief from royalty approach, which estimates the amount a market participant would pay to utilize our tradenames.
FCC licenses    FCC licenses were determined by analysis of market comparables in addition to the use of an income approach, the Greenfield direct value method, which estimates value through estimating discounted future cash flows of a hypothetical start-up business.
Customer relationships    Customer relationships were estimated using an excess earnings approach, which estimates value through estimating discounted future cash flows of existing customers as of the measurement date.
Long-term debt    Long-term debt was determined based on quoted prices in active markets or by using other observable inputs that are derived principally from or corroborated by observable market data.
Lease contracts    Estimated based on an income approach comparing contractual rents to current market rates.

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 SoftBank Merger and Clearwire Acquisition 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 SoftBank Merger and Clearwire Acquisition. 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 177.

 

 

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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)

     7,684   

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

     156   
  

 

 

 

Total estimated purchase price

   $ 19,980   
  

 

 

 

 

(a) Represents approximately 45% or 1,347 million of Sprint’s total outstanding shares as of December 31, 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 5(p), 1,347 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 December 31, 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 $768 million with a corresponding change to goodwill. The actual purchase price and the final valuation could differ significantly on the date of consummation of the SoftBank Merger compared to the current estimate.
(b) In accordance with applicable authoritative 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 December 31, 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 156.

No pro forma adjustments are necessary with regard to the issuance of the Bond as the issuance occurred on October 22, 2012 and is included in the audited historical financial information as of and for the year ended December 31, 2012.

Note 4—New Sprint Equity Capitalization and Unaudited Pro Forma Stockholders’ Equity

The following information is provided to present additional detail regarding the elements of New Sprint’s equity capitalization and unaudited pro forma stockholders’ equity.

 

 

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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)

     7,684   

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

     156   
  

 

 

 

Total estimated purchase price

   $ 19,980   

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)

   $ 27,980   
  

 

 

 

 

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 $7.7 billion (see Note 2).
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 the new equity issuances. See the pro forma components of equity below (in millions, except per share amounts):

 

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

Parent pre-acquisition stockholders’ equity

  $ —        $ 3,137      $ (26   $ —        $ 3,111   

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        7,671        —          —          7,684   

Issuance of Parent equity awards

    —          156        —          —          156   

Estimated transaction fees

    —          68        (104     —          (36
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined post-acquisition pro forma stockholders’ equity

  $ 45      $ 28,040      $ (130   $ —        $ 27,955   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note 5—Unaudited Pro Forma Adjustments

Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The estimated purchase price of approximately $20.0 billion (see Note 2) has been allocated based on preliminary estimates of fair value, using historical financial statements of Sprint as of December 31, 2012.

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 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 and the remaining $247 million beneficial conversion feature recorded by Sprint is expensed directly to accumulated deficit.

 

 

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(b) Reflects consolidation adjustments to eliminate Parent’s $3.1 billion investment in Sprint as well as other immaterial amounts related to the Bond.

 

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

 

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

 

(e) Reflects estimated remaining fees, such as investment bankers, legal, regulatory and other, relating to the SoftBank Merger to be incurred in future periods, $36 million of which is estimated to be incurred by Sprint and $68 million of which is estimated to be incurred by SoftBank on behalf of Parent.

 

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

 

(g) Reflects the portion of the estimated fair value of New Sprint equity awards issued to former Sprint equity award holders which relate to service provided in the pre-combination period.

 

(h) Reflects the elimination of historical Sprint equity carrying values, including the effects of the Bond conversion, resulting from Parent acquisition of Sprint.

 

(i) 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 pre-combination net book value of $6.9 billion as of December 31, 2012 by approximately $13.1 billion, which will be allocated to the assets acquired and liabilities assumed.

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

 

     December 31,
2012 historical
carrying value
    Purchase
price
adjustment
    Preliminary
fair value
 

Current assets(i)

   $ 13,759        (9   $ 13,750   

Investments(ii)

     1,053        1,255        2,308   

Property, plant and equipment, net(iii)

     13,607        (745     12,862   

Indefinite life intangibles (including pro forma goodwill of $5,963)(iv)

     21,036        13,020        34,056   

Customer relationships and other(v)

     1,335        5,266        6,601   

Other assets(vi)

     780        (487     293   

Current liabilities(i)(vii)

     (8,874     264        (8,610

Long-term debt, financing and capital lease obligations(viii)

     (23,962     (2,906     (26,868

Deferred tax liabilities(ix)

     (7,047     (3,364     (10,411

Other liabilities(x)

     (4,600     846        (3,754
  

 

 

   

 

 

   

 

 

 
   $ 7,087      $ 13,140      $ 20,227   

Impact to Sprint’s pre-combination equity resulting from Parent & Sprint intercompany eliminations

     (247     —         (247
  

 

 

   

 

 

   

 

 

 

Total

   $ 6,840      $ 13,140      $ 19,980   
  

 

 

   

 

 

   

 

 

 

 

i. Adjustment includes elimination of $113 million of deferred revenue and associated deferred cost balances related to upfront activation fees for subscribers obtained in Sprint’s indirect sales channel. See Note 5(j). The adjustment to current assets is offset by an increase in Sprint’s current deferred tax assets of $104 million resulting from the net effect of purchase accounting adjustments.

 

 

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ii. Adjustment includes a $1.3 billion increase in Sprint’s equity method investment in Clearwire, reflecting an estimated fair value based on $2.61 per share. See Note 6(b).

 

iii. Adjustment includes $745 million decrease in net property, plant and equipment, reflecting the estimated replacement cost of assets. See Note 5(l).

 

iv. Adjustment includes a $5.6 billion increase in goodwill, a $4.6 billion increase in indefinite lived tradenames and a $2.8 billion increase in indefinite lived FCC licenses.

 

v. Adjustment includes a $6.2 billion increase in existing customer relationships, offset by decreases in Sprint’s definite lived tradename and reacquired rights of $147 million and $786 million, respectively, which are the result of adjusting the historical carrying values to estimated fair value. Reacquired rights, which were related to prior acquisitions, were adjusted to $0 since the tradename to which the prior reacquisitions of rights related to was included in the estimated fair value of tradenames.

 

vi. Adjustment includes the elimination of $278 million of debt issuance costs as well as the elimination of $209 million, representing the long-term portion of deferred activation costs, for which there is no future economic benefit to a market participant.

 

vii. Adjustment reflects additional reductions of deferred revenues of $151 million to an estimated fair value representing the cost of fulfilling the obligation plus a normal profit margin, in addition to the $113 million in reductions discussed in Note 5(i)(i).

 

viii. Adjustment includes a $2.9 billion increase in the carrying value of long-term debt to reflect its estimated fair value as of December 31, 2012. The premium resulting from the excess of estimated fair value over historical carrying value will be amortized as a reduction of interest expense in future periods. See Note 5(n).

 

ix. Adjustment includes the estimated deferred tax effects of the purchase price allocation, which together with the adjustment to current deferred income taxes noted in (i) above, results in an estimated increase in net deferred tax liability resulting primarily from the excess of estimated fair values over historical carrying amounts.

 

x. Adjustment includes elimination of approximately $1.4 billion of deferred rent primarily resulting from recognizing lease expense from tower leases on a straight line basis and which does not meet the definition of a liability under the authoritative literature for business combinations, elimination of long-term deferred activation revenues of $209 million for which we have no remaining performance obligation, offset by an unfavorable lease liability of approximately $750 million related to Sprint’s operating leases.

Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments

 

(j) Reflects the elimination of deferred revenues and costs recognized in the historical statement of operations of Sprint primarily related to amounts collected or incurred by Sprint at the beginning of a customer contract for upfront activation fees, and the associated costs, each of which were amortized over the longer of the contract life or the estimated customer life. The elimination of these items is factually supportable and directly related to the effect of applying purchase accounting. Deferred activation revenues and costs are not eligible for recognition in purchase accounting as they represent amounts collected and incurred in prior periods for which there is no future performance obligation or economic benefit, as applicable, by a market participant. As a result, amortization associated with these items has been eliminated.

 

(k) Reflects the estimated adjustment to cost of services and products for the preliminary purchase price adjustment related to an unfavorable operating lease liability that will be amortized on a straight-line basis over the average remaining lease term, which approximates ten years.

 

(l)

Property, plant and equipment, net was reduced by $745 million to its estimated fair value at December 31, 2012. The adjustment principally relates to a decrease in Sprint’s Nextel platform assets. No pro forma adjustment to depreciation expense was included because such adjustment would not be expected to have a

 

 

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  continuing impact as a result of the planned decommissioning of the Nextel platform, which is expected to be complete by June 30, 2013. The proforma effect of the reduction in the Nextel platform assets would have resulted in a reduction to depreciation expense of approximately $514 million for the year ended December 31, 2012. However, an adjustment has been included in the pro forma balance sheet for this non-recurring item.

 

(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 postpaid customer relationships, approximately $5.7 billion, is expected to be amortized over 8 years while the estimated fair value of Sprint’s prepaid customer relationships, approximately $500 million, is expected to be amortized over 4 years. The method of amortization for both customer relationship assets is expected to be the sum of the years’ digits method. The estimated fair value of Sprint’s definite-lived trade names of approximately $340 million 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 $786 million in the unaudited pro forma condensed combined balance sheet. See Note 5(i)(v).

 

(n) Reflects the estimated decrease in interest expense resulting from the amortization of the net premium recorded as a consequence of adjusting Sprint’s outstanding long-term debt to its estimated fair value. 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 December 31, 2012. This adjustment also reflects the elimination of interest expense resulting from the amortization of debt issuance costs of approximately $278 million, which was adjusted to $0 in the unaudited pro forma condensed combined balance sheet.

 

(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 December 31, 2012

     3,010        3   

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

     590        —     
  

 

 

   

 

 

 

Shares outstanding immediately prior to consummation of the SoftBank Merger

     3,600        3   

Shares not subject to merger consideration

     (590  
  

 

 

   

Shares outstanding and eligible to participate in merger consideration

     3,010     

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

     (3,010     1,347   

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

       3,183   

Parent’s equity interest in Sprint

     590     
  

 

 

   

 

 

 

Total shares outstanding following consummation of the SoftBank Merger

     590        4,533   
  

 

 

   

 

 

 

 

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

 

 

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  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 82 million Sprint equity awards as of December 31, 2012, approximately 67 million were in the money stock options or restricted stock units, of which 42 million would be considered dilutive assuming a cashless exercise of the in the money stock options.

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

     1,347   

Dilutive equity awards

     42   
  

 

 

 

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

     1,389   

Merger Agreement factor

     x  2.294   
  

 

 

 

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

     3,186   
  

 

 

 

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)

     1,929   

Estimated payment to holders of Clearwire equity awards(c)

     30   
  

 

 

 

Total estimated purchase price

   $ 4,115   
  

 

 

 

 

(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 31 million Class A shares and approximately 708 million Class B shares, both 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)

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

 

 

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  in cash. As of the date the Clearwire Acquisition Agreement was signed approximately 26.3 million RSUs 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 statement 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 and eliminate related party balances. The related party balances result from outstanding loans from Sprint to Clearwire as well as ending balances primarily related to wholesale mobile virtual network operator (MVNO) arrangements between Sprint and Clearwire. The following is a summary of the related party balances by line-item.

 

     Sprint     Clearwire     Elimination  

Accounts and notes receivable, net

     —          17        (17

Prepaid expenses and other current assets

     166        —          (166

Investments

     257        —          (257

Accounts payable

     (78     —          78   

Accrued expenses and other current liabilities

     —          (96     96   

Long-term debt

     —          (182     182   

Other liabilities

     —          (84     84   
  

 

 

   

 

 

   

 

 

 

Net related party balances

     345        (345     0   
  

 

 

   

 

 

   

 

 

 

In addition to the related party balances noted in the table above, the adjusted carrying value of Sprint’s previously held equity interest in Clearwire, approximately $1,929 million (see Note 6), and Clearwire’s historical equity balances have been eliminated.

 

(c) The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 has been adjusted as follows:

 

  i. To eliminate $1.1 billion of equity in losses recorded by Sprint in “Equity in losses of unconsolidated investments and other, net” in its historical consolidated statement of operations. Sprint’s historical equity in losses from Clearwire recorded during the year ended December 31, 2012, included Sprint’s proportionate interest in Clearwire’s net loss, a pre-tax impairment charge, and amortization of underlying basis differences. This adjustment is partially offset by the elimination of $54 million in interest income recognized by Sprint on its notes receivable from Clearwire. In addition, the adjustment to “Interest expense” reflects the elimination of interest expense recognized by Clearwire on its notes payable to Sprint.

 

  ii. To eliminate 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. This resulted in an adjustment to “Net operating revenues” to eliminate Clearwire’s 4G wholesale revenue from Sprint and Sprint’s 3G wholesale revenue from Clearwire which total $474 million. In addition, “Cost of services and products” was adjusted by $485 million to eliminate $474 million of related cost of service and $11 million in other costs.

 

 

 

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  iii. To reclassify amounts presented within selling, general and administrative expense in Clearwire’s statement of operations, including property taxes, fees and other costs, to provide conformity with Sprint’s presentation in costs of services and products.

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 December 31, 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 $1.9 billion as of December 31, 2012 by approximately $2.2 billion, which will be allocated to the assets acquired and liabilities assumed. The estimated purchase price has been allocated to the net tangible and intangible assets acquired and liabilities assumed as follows (in millions):

 

     Clearwire’s December 31,
2012 historical
carrying value
    Purchase price
adjustment
    Preliminary
fair value
 

Current assets(i)

   $ 992        (31   $ 961   

Property, plant and equipment, net(ii)

     2,259        (447     1,812   

FCC licenses and other(iii)

     4,274        4,475        8,749   

Other assets(iv)

     141        (53     88   

Current liabilities

     (406     —          (406

Long-term debt, financing and capital lease obligations(v)

     (4,271     (692     (4,963

Deferred tax liabilities(vi)

     (144     (1,400     (1,544

Other liabilities(vii)

     (963     381        (582
  

 

 

   

 

 

   

 

 

 

Total

   $ 1,882      $ 2,233      $ 4,115   
  

 

 

   

 

 

   

 

 

 

 

  i. Adjustment includes a decrease in the current deferred tax assets resulting from other purchase accounting adjustments related to the Clearwire Acquisition. Additionally, refer to (vi) below.
  ii. Adjustment reflects a $447 million decrease in net property, plant and equipment, reflecting the estimated replacement cost of assets.
  iii. Adjustment primarily relates to a $4.5 billion increase in FCC licenses.
  iv. Adjustment primarily consists of the elimination of $62 million of debt issue costs for which there is no future economic benefit to a market participant.
  v. Adjustment represents a $692 million increase in the carrying value of debt to reflect its estimated fair value as of December 31, 2012. The premium resulting from the excess of estimated fair value over historical carrying value will be amortized as a reduction of interest expense in future periods. See Note 8(f).
  vi. Adjustment includes the estimated deferred tax effects of the purchase price allocation, which together with the adjustment to current deferred income taxes noted in (i) above, results in an estimated increase in net deferred tax liability resulting primarily from the excess of estimated fair values over historical carrying amounts.

 

 

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  vii. Adjustment includes elimination of $717 million of deferred rents related to straight lining operating leases which does not meet the definition of a liability under the authoritative literature for business combinations, offset by estimated adjustments to unfavorable lease liabilities of $336 million related to operating leases.

 

(b) Reflects estimated fees, such as investment bankers, legal, regulatory and other, relating to the Clearwire Acquisition.

Unaudited Pro Forma Condensed Combined Statement 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 $447 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 eliminate historical amortization expense for the preliminary purchase price adjustment of approximately $57 million made to reduce Clearwire’s other definite lived intangible assets to zero.

 

(f) Reflects the estimated decrease in interest expense resulting from the amortization of the net premium recorded as a consequence of adjusting Clearwire’s outstanding debt to its estimated fair value. 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 December 31, 2012.

 

(g) The consolidated pro forma total income tax expense was calculated as if Clearwire had been a subsidiary of Sprint during the year ended December 31, 2012. The pro forma tax expense is principally attributable to New Sprint’s inability to schedule the reversal of taxable temporary differences resulting from tax amortization on FCC licenses as well as New Sprint’s inability to recognize loss benefits. The difference between the combined federal and state statutory income tax rate of 39% and the resulting effective rate is primarily the result of the expected inability of New Sprint to recognize benefits attributable to net losses due to the uncertainty of the ultimate realization of the tax benefits. See the notes relating to income tax included with the historical financial information of Sprint, which is incorporated by reference into this proxy statement-prospectus, and of Clearwire, which are included in Sprint’s Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated by reference into this proxy statement-prospectus.

Other Transactions

Note 9—Liquidity

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 $2.9 billion for the combined company. However, there has been no effect given to assume investment income or use of proceeds, except with respect to the proposed all-cash acquisition of Clearwire.

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

 

 

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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 the consummation of the proposed Clearwire Acquisition.

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.

Note 10—Subsequent Events

On February 26, 2013, Sprint and Clearwire amended the exchangeable notes agreement to remove the network build out condition to Sprint’s obligation to provide financing for the last three months (in August, September and October 2013) totaling up to $240 million. In addition, Clearwire did not sell any exchangeable notes to Sprint under the financing arrangements during January and February 2013. Clearwire has elected to sell $80 million of exchangeable notes to Sprint under the financing agreements for the months of March and April 2013 and has received total draws in the amount of $160 million for such notes.

 

 

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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 equivalent 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, 2012 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 December 31, 2012 as well as the additional equity capitalization of Parent. Refer to “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 25 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—Merger Consideration” beginning on page 137. 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 in Sprint’s Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated by reference into this proxy statement-prospectus. You should also read the “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 25.

 

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

As of and for the Year Ended December 31, 2012

        

Loss from continuing operations per common share:

        

Basic and Diluted

   $ (1.44   $ (1.23   $ (8.55   $ (1.23

Cash dividends per common share

     —          —          —          —     

Book value per common share

   $ 2.35        NA      $ 1,001.43      $ 6.16   

 

(1) The exchange ratio for the Sprint shareholders electing stock as merger consideration is 1:1.

 

 

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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

   $ 6.21       $ 5.52   

Second Quarter (through April 30, 2013)

   $ 7.35       $ 6.12   

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 10, 2012, the last trading day prior to the publication of news articles relating to a potential transaction between Sprint and SoftBank, on October 12, 2012, the last trading day before the SoftBank Merger was publicly announced, and on April 30, 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 10, 2012

   $ 5.04   

October 12, 2012

   $ 5.73   

April 30, 2013

   $ 7.05   

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.

 

 

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As of April 18, 2013, there were 3,014,764,924 shares of Sprint common stock outstanding and approximately 45,514 holders of record of Sprint common stock.

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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RECENT DEVELOPMENTS

On April 15, 2013, Sprint announced that it had received an unsolicited proposal from DISH to acquire Sprint. The DISH Proposal contemplates a transaction that would, if ultimately agreed to and consummated, involve the payment to Sprint stockholders of total consideration of $25.5 billion, consisting of $17.3 billion in cash and $8.2 billion in stock (based upon the closing price of DISH common stock on Friday, April 12, 2013). Under the DISH Proposal, Sprint stockholders would receive (i) $4.76 in cash per share of Sprint common stock and (ii) 0.05953 of a share of DISH common stock per share of Sprint common stock. The DISH Proposal further stated that DISH intends to fund the $17.3 billion cash portion of the transaction using $8.2 billion of DISH’s balance sheet cash and additional debt financing. Sprint announced that its board of directors will review the DISH Proposal carefully and consistent with its fiduciary and legal duties.

On April 22, 2013, Sprint announced that the Sprint board of directors had established the Sprint Special Committee to assess the DISH Proposal. The members of the Sprint Special Committee are Larry C. Glasscock (Chairman), James H. Hance, Jr., V. Janet Hill, William R. Nuti and Rodney O’Neal. The Sprint Special Committee will, consistent with its fiduciary duties and in consultation with its financial and legal advisors, evaluate the DISH Proposal and make a recommendation to the full Sprint board of directors as to whether the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer. This determination is necessary because, under the terms of the Merger Agreement, Sprint may not engage in discussions or negotiations with DISH regarding the DISH Proposal unless, among other things, the Sprint board of directors first determines in good faith that the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer. See “The Merger Agreement—No Solicitation of Alternative Offers” beginning on page 144.

On April 29, 2013, Sprint announced that it had received from SoftBank a limited waiver of certain provisions of the Merger Agreement. The waiver permits Sprint and its representatives, including the Sprint Special Committee, to enter into a non-disclosure agreement permitting the receipt of confidential information from DISH (but not the transmittal of Sprint confidential information to DISH) and discussions (but not negotiations) with DISH solely for the purpose of clarifying and obtaining further information from DISH regarding the DISH Proposal.

Subsequent to the formation of the Sprint Special Committee, the Sprint Special Committee requested that DISH provide it with additional information in writing regarding the DISH Proposal to enable the Sprint Special Committee and the Sprint board of directors to analyze the DISH Proposal consistent with their respective fiduciary and legal duties. DISH has communicated with the Sprint Special Committee regarding the Sprint Special Committee’s request for additional information regarding the DISH Proposal. In addition, SoftBank has communicated with Sprint management and the Sprint board of directors regarding the DISH Proposal, including SoftBank’s belief that the DISH Proposal is not a Superior Offer. The Sprint Special Committee and the Sprint board of directors expect to receive further information and communications from both DISH and SoftBank regarding the DISH Proposal and the SoftBank Merger.

The timing of any actions and determinations by the Sprint Special Committee and the Sprint board of directors with respect to the DISH Proposal, and the factors that the Sprint Special Committee and the Sprint board of directors will consider and the procedures they will follow when taking such actions or making such determinations, will be determined by the Sprint Special Committee and the Sprint board of directors in accordance with their fiduciary and legal duties and are not possible to predict. Neither the Sprint Special Committee nor the Sprint board of directors is required, pursuant to the Merger Agreement, applicable law or otherwise, to take any action with respect to the DISH Proposal within any specific time period or to consider any particular factors or follow any proscribed procedures, except as expressly set forth in the Merger Agreement, when making determinations with respect to the DISH Proposal.

 

 

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The Sprint board of directors has not made any determination to change its unanimous recommendation of the SoftBank Merger. As more fully described in “The Merger Agreement – Right to Change Board Recommendation” beginning on page 145, in response to the DISH Proposal, after following the procedures set forth in the Merger Agreement, the Sprint board of directors may change its recommendation of the SoftBank Merger or terminate the Merger Agreement to enter into a definitive agreement with DISH if (among other things) it first in good faith determines (after consultation with its outside legal counsel and financial advisors) that the DISH Proposal constitutes a Superior Offer and that the failure to make such change in its recommendation or to terminate the Merger Agreement would be reasonably likely to constitute a breach of its fiduciary duties to the stockholders of Sprint under applicable legal requirements (taking into account any amendments to the terms of the Merger Agreement proposed by SoftBank and after negotiating in good faith with SoftBank for one or more periods of time prescribed by the Merger Agreement). In the case of a change in recommendation by the Sprint board of directors, SoftBank would have the right to terminate the Merger Agreement. See “The Merger Agreement – Termination of the Merger Agreement” beginning on page 152. Upon a termination of the Merger Agreement by Sprint or SoftBank in the foregoing circumstances (among others), Sprint would be required to pay a $600 million termination fee to SoftBank. See “The Merger Agreement – Termination Fee; Expenses” beginning on page 153.

Sprint intends to amend or supplement this proxy statement-prospectus to disclose material developments, if any, with respect to the DISH Proposal in accordance with applicable law and the Merger Agreement. On April 29, 2013, Sprint announced that it did not intend to make any further comment on the work of the Sprint Special Committee until it completes an assessment with respect to whether the DISH Proposal is, or is reasonably likely to lead to, a Superior Offer and the Sprint board of directors has considered such assessment.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) has been engaged by the Sprint Special Committee as a financial advisor in connection with Sprint’s evaluation of the DISH Proposal, any modification of the Transactions and any competing proposal from any third party, as such engagement is memorialized in an engagement letter dated April 24, 2013. Merrill Lynch will receive a total fee of $7.5 million upon the consummation of the SoftBank Merger on the terms of the existing Merger Agreement (inclusive of a $2 million fee payable upon engagement and, if applicable, a $2 million opinion fee). In the event that Sprint consummates a merger or similar transaction with SoftBank (other than a transaction with SoftBank on the terms of the existing Merger Agreement), DISH or any other third party, Merrill Lynch will receive a transaction fee, which in no event shall be less than $7.5 million (inclusive of a $2 million fee payable upon engagement and, if applicable, a $2 million opinion fee) equal to (x) $4 million plus (y) 0.20% of the Additional Consideration paid in such transaction, where “Additional Consideration” means the product of (A) the excess of (1) the volume weighted average price of Sprint common stock for the ten trading days ending on (and including) the fifth trading day immediately prior to the closing of such transaction over (2) $6.38, which represents the sum of $4.03 (55.16% of the $7.30 cash consideration) and $2.35 (44.84% of $5.25, which is a hypothetical value of a share of Sprint common stock based on the initial price per share at which the Bond is convertible, the $5.25 initial exercise price of the Warrant and the illustrative price per share of Sprint common stock upon which the Equity Contribution was negotiated), and (B) the number of fully-diluted shares of Sprint common stock outstanding (using the treasury stock method) on the fifth trading day immediately prior to the closing of such transaction; provided that the amount set forth in (B) shall not be calculated including any shares of Sprint common stock (or securities convertible into shares of Sprint common stock) held by SoftBank as of April 24, 2013.

 

 

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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 187.

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 $12.14 billion of cash being paid in the merger represents, assuming no proration and at a cash price of $7.30 per share, sufficient cash for the acquisition of approximately 55.16% of the outstanding shares of Sprint common stock, calculated as of the meeting record date. Accordingly, the remaining 44.84% of the outstanding shares of Sprint common stock will be exchanged for shares of New Sprint common stock. If the holders of all shares of Sprint common stock elected to receive cash consideration in the SoftBank Merger, the proration rules in the Merger Agreement would result in each share of Sprint common stock being converted into a combination of (a) cash in the amount of $4.03 (representing 55.16% of $7.30) and (b) 0.4484 (or 44.84%) of a share of New Sprint common stock. If any Sprint stockholders elect to receive stock consideration in the SoftBank Merger, then the cash component payable to holders that elect (or are deemed to have elected) cash will be greater than $4.03, and the stock component payable to such holders will be lower than 0.4484 of a share of New Sprint common stock.

The market value of Sprint common stock has ranged from $5.37 to $7.35 during the period from the close of trading on October 12, 2012, the last trading day before the SoftBank Merger was publicly announced, to April 30, 2013, the last full trading day before the date of this proxy statement-prospectus. Assuming that the market value of a share of Sprint common stock at any point in time represents the opportunity (even if all Sprint stockholders elected to receive cash in the SoftBank Merger) to receive at least $4.03 per share in cash and the remainder of the merger consideration in shares of New Sprint common stock, and that there are 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 implicit per share market value of the New Sprint common stock component of the merger consideration may be viewed as having ranged from $2.99 to $7.40 during the period described above. For purposes of the foregoing, the implicit per share market value of the New Sprint common stock during this period was determined by subtracting $4.03 from the market value of Sprint common stock during this period, and then dividing the result by 0.4484. Because this range of implicit per share market values for New Sprint common stock has been lower than the $7.30 cash component of the merger consideration during, and lower than the per share value at which shares of Sprint common stock have traded, in each

 

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case over most of this period, Sprint stockholders that consider electing to receive stock consideration in the SoftBank Merger should carefully consider the likelihood that they may receive consideration having a lower value at the effective time of the SoftBank Merger than a Sprint stockholder that elects (or is deemed to have elected) to receive cash consideration in the SoftBank Merger. Of course, the trading value of Sprint common stock after the date of this proxy statement-prospectus is subject to a large number of factors, including any developments with respect to the DISH Proposal. Following the public announcement of the DISH Proposal on April 15, 2013, and prior to the date of this proxy statement-prospectus, the trading price of shares of Sprint common stock has increased, and the closing price of Sprint common stock on April 30, 2013, the last full trading day prior to the date of this proxy statement-prospectus, was $7.05. In the event the SoftBank Merger is consummated, there can be no assurance as to what the trading value of New Sprint common stock will be immediately following the completion of the SoftBank Merger or at any time thereafter.

Moreover, the effective time of the SoftBank Merger may 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, 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.”

Shares of New Sprint common stock may have a value that is less than the per share cash consideration of $7.30 or the cash consideration received after application of the proration and allocation rules, and the value of such shares 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 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 of $7.30, 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. Based on the trading prices of Sprint common stock since the close of trading on October 12, 2012, the last trading day before the SoftBank Merger was publicly announced, through the date of this proxy statement-prospectus, Sprint stockholders that consider electing to receive stock consideration in the SoftBank Merger should carefully consider the likelihood that they may receive consideration having a lower value at the effective time of the SoftBank Merger than a Sprint stockholder that elects (or is deemed to have elected) to receive cash consideration in the SoftBank Merger. 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;

 

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the arrival or departure of key personnel;

 

   

speculation in the press or the investment community; and

 

   

general market conditions.

Due to the proration and allocation rules, Sprint stockholders may receive consideration that is in a form different from that which they elected (or are deemed to have 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 (or is deemed to have elected) to receive with respect to all shares of Sprint common stock held by such stockholder. If elections are made (or are deemed to have been made) by Sprint stockholders that would result in an oversubscription of the pool of cash, those electing (or deemed to have elected) 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 (or are deemed to have made) 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 (or are not deemed to have elected), 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 or are deemed to have 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 162.

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 (and thus are deemed to have elected cash). 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

 

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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, 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 the 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 an 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

 

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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.

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 adversely affect New Sprint’s business, financial condition or results of operation. See “The SoftBank Merger—Stockholder Lawsuits Challenging the SoftBank Merger” beginning on page 134.

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 potential 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

 

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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 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 119.

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.

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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 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 Fee; Expenses” beginning on page 153. 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 25 and “The SoftBank Merger—Certain Financial Scenarios Prepared by the Management of Sprint” beginning on page 112. 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, principal equipment and vendor selection 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

 

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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 121.

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.

 

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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 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 the Merger Agreement included as Annex A to this proxy statement-prospectus beginning on pages Annex A-84 and Annex A-99, respectively. 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 168 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 180.

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.

Any inability to resolve favorably any disputes that may arise between New Sprint and SoftBank may result in a reduction in the value of New Sprint common stock.

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

 

   

business combinations involving New Sprint;

 

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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.

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

 

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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 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. Any changes that further limit the levels and types of permissible foreign ownership could negatively affect New Sprint and its ability to obtain capital from SoftBank or other 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 2012, Sprint experienced net decreases in its total retail postpaid subscriber base of approximately 9.7 million subscribers.

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;

 

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the ability of Clearwire to successfully obtain additional financing for the continued operation and build-out of its 4G networks;

 

   

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® and LTE;

 

   

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

 

   

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;

 

   

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, including Clearwire, and to enter into new arrangements with MVNOs.

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 Sprint’s churn rates if Sprint is not successful in providing an attractive product and service mix.

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.

 

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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. 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 smartphone penetration increases, Sprint continues to expect an 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.

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, 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 and result in increased churn. Should implementation of Sprint’s upgraded network be delayed or costs exceed expected amounts, its margins could 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 the 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 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 expects to continue to support WiMAX 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

 

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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” below for additional risks related to Clearwire.

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 covenants under Sprint’s existing debt agreements.

Sprint may incur additional debt in the future for a variety of reasons, such as refinancing, Network Vision and working capital needs, including equipment net subsidies, future investments or acquisitions. Sprint’s ability to arrange additional financing will depend on, among other factors, current economic and market conditions, its financial performance, its high debt levels, and its debt ratings. Some of these factors are beyond Sprint’s control, and Sprint may not be able to arrange additional financing on terms acceptable to it or at all. Failure to obtain suitable financing when needed could, among other things, result in Sprint’s inability to continue to expand its businesses and meet competitive challenges, including implementation of Network Vision on Sprint’s current timeline.

The continued instability in the global financial markets has resulted in periodic volatility in the credit, equity and fixed income markets. This volatility could limit Sprint’s access to the credit markets, leading to higher borrowing costs or, in some cases, the inability to obtain financing on terms that are acceptable to it, or at all.

Sprint has incurred substantial amounts of indebtedness to finance operations and other general corporate purposes. At December 31, 2012, Sprint’s total debt was approximately $24.3 billion. As a result, Sprint is highly leveraged and will continue to be highly leveraged. Accordingly, Sprint’s debt service requirements are significant in relation to its revenues and cash flow. This leverage exposes it to risk in the event of downturns in Sprint’s businesses (whether through competitive pressures or otherwise), in its industry or in the economy generally, and may impair Sprint’s operating flexibility and its ability to compete effectively, particularly with respect to competitors that are less leveraged.

The debt ratings for Sprint’s outstanding notes are currently below the “investment grade” category, which results in higher borrowing costs than investment grade debt as well as reduced marketability of Sprint’s debt. Sprint’s debt ratings could be further downgraded for various reasons, including if it incurs significant additional indebtedness including indebtedness relating to any required change of control offer, or if it does not generate sufficient cash from its operations, which would likely increase Sprint’s future borrowing costs and could adversely affect Sprint’s ability to obtain additional capital.

Sprint’s new $2.8 billion unsecured revolving credit facility, which expires in February 2018, requires that the ratio (the “Leverage Ratio”) of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non-recurring items as defined by the credit facility (adjusted EBITDA), not exceed 6.25 to 1.0 through June 30, 2014. Subsequent to June 30, 2014, the Leverage Ratio declines on a scheduled basis, as determined by the credit agreement, until the ratio becomes fixed at 4.0 to 1.0 for the fiscal quarter ended December 31, 2016 and each fiscal quarter ending thereafter. Additionally, Sprint amended its unsecured loan agreement with Export development Canada (“EDC”) to reflect the Leverage Ratio permitted under its new revolving credit facility. If Sprint does not continue to satisfy this required ratio, it will be in default under its new revolving credit facility and its EDC facility, which would trigger defaults under Sprint’s other debt obligations, which in turn could result in the maturities of certain debt obligations being accelerated. Although Sprint expects to remain in compliance with the covenants under its new revolving credit and EDC facilities through the next twelve months, its Leverage Ratio under its secured equipment credit facility is more restrictive. While Sprint is currently in discussions with the lender under its secured equipment credit facility to amend such agreement to reflect the Leverage Ratio permitted under its revolving bank credit facility, there can be no assurance that Sprint can obtain such amendment. Further, if the Clearwire Acquisition is consummated, Sprint’s consolidated debt would increase by approximately $4.3 billion (based on Clearwire’s debt as of December 31, 2012, excluding short-term debt expected to be paid by June 30, 2013). In addition to the

 

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covenants in Sprint’s new revolving credit facility, Sprint’s EDC facility and Sprint’s secured equipment credit facility, certain indentures governing Sprint’s notes limit, among other things, Sprint’s ability to incur additional debt, pay dividends, create liens and sell, transfer, lease or dispose of assets. Such restrictions could adversely affect Sprint’s ability to access the capital markets or engage in certain transactions.

Although these restrictions do not limit Sprint’s ability to engage in the SoftBank Merger, under the terms of Sprint’s secured equipment credit facility, consummation of the SoftBank Merger would constitute a change of control that would enable the lenders thereunder to require repayment of all outstanding balances thereunder. If the lenders exercised their rights as a consequence of the change of control amounts outstanding under the secured equipment credit facility, which were approximately $500 million as of March 15, 2013, would become due and payable at the time of closing. Sprint is currently in discussions with the existing lenders under the secured equipment credit facility and intends to amend this facility to, among other things, reflect the Leverage Ratio permitted under its credit facilities and exclude the SoftBank Merger from the change of control provisions.

The trading price of Sprint’s common stock has been and may continue to be volatile and may not reflect Sprint’s actual operations and performance. We expect that these factors will affect New Sprint and the New Sprint common stock following the effective time of the SoftBank Merger.

Market and industry factors may seriously harm the market price of Sprint’s common stock, regardless of Sprint’s actual operations and performance. Stock price volatility and sustained decreases in Sprint’s share price could subject its stockholders to losses or lead to action by the NYSE. The trading price of Sprint’s common stock has been, and may continue to be, subject to fluctuations in price in response to various factors, some of which are beyond Sprint’s control, including, but not limited to:

 

   

quarterly announcements and variations in Sprint’s results of operations or those of its competitors, either alone or in comparison to analysts’ expectations or prior company estimates, including announcements of subscriber counts, rates of churn, and operating margins that would result in downward pressure on Sprint’s stock price;

 

   

the cost and availability or perceived availability of additional capital and market perceptions relating to Sprint’s access to this capital;

 

   

seasonality or other variations in Sprint’s subscriber base, including its rate of churn;

 

   

announcements by Sprint or its competitors of acquisitions, new products, technologies, significant contracts, commercial relationships or capital commitments;

 

   

uncertainty related to Sprint’s proposed transactions with SoftBank and Clearwire;

 

   

the performance of SoftBank and SoftBank’s ordinary shares or speculation about the possibility of future actions SoftBank may take in connection with New Sprint;

 

   

disruption to Sprint’s operations or those of other companies critical to Sprint’s network operations;

 

   

market speculation or announcements by Sprint regarding the entering into, or termination of, material transactions, including the SoftBank Merger and the Clearwire Acquisition;

 

   

Sprint’s ability to develop and market new and enhanced technologies, products and services on a timely and cost-effective basis, including implementation of Network Vision and Sprint’s networks;

 

   

recommendations by securities analysts or changes in their estimates concerning Sprint;

 

   

the incurrence of additional debt, dilutive issuances of Sprint’s stock, short sales or hedging of, and other derivative transactions, in its common stock;

 

   

any significant change in Sprint’s board of directors or management;

 

   

litigation;

 

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changes in governmental regulations or approvals; and

 

   

perceptions of general market conditions in the technology and communications industries, the U.S. economy and global market conditions.

Consolidation and competition in the wholesale market for wireline services, as well as consolidation of Sprint’s roaming partners and access providers used for wireless services, could adversely affect Sprint’s revenues and profitability.

Sprint’s Wireline segment competes with AT&T, Verizon Communications, CenturyLink, Level 3 Communications Inc., other major local incumbent operating companies, and cable operators, as well as a host of smaller competitors. Some of these companies have high-capacity, IP-based fiber-optic networks capable of supporting large amounts of voice and data traffic. Some of these companies claim certain cost structure advantages that, among other factors, may allow them to offer services at lower prices than Sprint can. In addition, consolidation by these companies could lead to fewer companies controlling access to more cell sites, enabling them to control usage and rates, which could negatively affect Sprint’s revenues and profitability.

Sprint provides wholesale services under long-term contracts to cable television operators which enable these operators to provide consumer and business digital telephone services. These contracts may not be renewed as they expire. Increased competition and the significant increase in capacity resulting from new technologies and networks may drive already low prices down further. AT&T and Verizon Communications continue to be Sprint’s two largest competitors in the domestic long distance communications market. Sprint and other long distance carriers depend heavily on local access facilities obtained from incumbent local exchange carriers (ILECs) to serve Sprint’s long distance subscribers, and payments to ILECs for these facilities are a significant cost of service for Sprint’s Wireline segment. The long distance operations of AT&T and Verizon Communications have cost and operational advantages with respect to these access facilities because those carriers serve significant geographic areas, including many large urban areas, as the ILECs.

In addition, Sprint’s Wireless segment could be adversely affected by changes in rates and access fees that result from consolidation of Sprint’s roaming partners and access providers, which could negatively affect Sprint’s revenues and profitability.

The blurring of the traditional dividing lines among long distance, local, wireless, video and Internet services contributes to increased competition.

The traditional dividing lines among long distance, local, wireless, video and Internet services are increasingly becoming blurred. In addition, the dividing lines between voice and data are also becoming blurred. Through mergers, joint ventures and various service expansion strategies, major providers are striving to provide integrated services in many of the markets Sprint serves. This trend is also reflected in changes in the regulatory environment that have encouraged competition and the offering of integrated services. Sprint expects competition to intensify as a result of the entrance of new competitors or the expansion of services offered by existing competitors, and the rapid development of new technologies, products and services. Sprint cannot predict which of many possible future technologies, products, or services will be important to maintain Sprint’s competitive position or what expenditures Sprint will be required to make in order to develop and provide these technologies, products or services. To the extent Sprint does not keep pace with technological advances or fails to timely respond to changes in the competitive environment affecting Sprint’s industry, Sprint could lose market share or experience a decline in revenue, cash flows and net income. As a result of the financial strength and benefits of scale enjoyed by some of Sprint’s competitors, they may be able to offer services at lower prices than Sprint can, thereby adversely affecting Sprint’s revenues, growth and profitability.

 

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Subscriber dissatisfaction, including possible litigation, related to the Nextel platform shut-down could have a material adverse effect on Sprint’s results of operations.

Sprint is migrating existing Nextel platform subscribers to other offerings on the Sprint platform, including existing or future offerings on Sprint’s multi-mode network, such as Sprint Direct Connect. Sprint’s ability to maintain existing subscriber relationships depends significantly on the quality of its services, its reputation, and the continuity of service. Subscriber dissatisfaction with the shut-down of services on the Nextel platform or of alternative services or damage to Sprint’s reputation as a result of the shut-down could result in a loss of subscribers or litigation that could cause Sprint’s revenue to be reduced or its expenses to be increased resulting in a material adverse effect on Sprint’s results of operations.

If Sprint is unable to improve Sprint’s results of operations, it faces the possibility of charges for impairments of long-lived assets. Further, Sprint’s future operating results will be impacted by Sprint’s share of Clearwire’s net loss as well as the potential Clearwire Acquisition, which will likely negatively affect Sprint’s results of operations for a period of time subsequent to the Clearwire Acquisition. The carrying value of Sprint’s current investment in Clearwire may be subject to further impairment if the Clearwire Acquisition does not close.

Sprint reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount may not be recoverable. If Sprint continues to have operational challenges, including obtaining and retaining subscribers, Sprint’s future cash flows may not be sufficient to recover the carrying value of Sprint’s long-lived assets, and Sprint could record asset impairments that are material to Sprint’s consolidated results of operations and financial condition. If Sprint continues to have challenges retaining subscribers and as it assesses the deployment of Network Vision, management may conclude, in future periods, that certain equipment assets will never be either deployed or redeployed, in which case additional cash and/or non-cash charges that could be material to Sprint’s consolidated financial statements would be recognized.

Sprint accounts for Sprint’s current investment in Clearwire using the equity method of accounting and, as a result, it records its share of Clearwire’s net income or net loss, which could adversely affect Sprint’s consolidated results of operations. Clearwire reported that it will need substantial additional capital over the intermediate and long-term. Clearwire’s ability, however, to raise sufficient additional capital on acceptable terms, or at all, will remain uncertain if the proposed Clearwire Acquisition does not close. In addition, Clearwire reported that if it fails to obtain additional capital, its business prospects, financial condition and results of operations will likely be materially and adversely affected, and it will be forced to consider all available alternatives. Declines in the estimated fair value of Clearwire resulting from potential declines in its stock price as a result of failure to close the Clearwire Acquisition may require Sprint to reevaluate the decline in relation to the carrying value of its current investment in Clearwire. A conclusion by Sprint that additional declines in the value of Clearwire are other than temporary could result in an additional impairment, which could be material.

Each of Sprint and Clearwire has entered into agreements with unrelated parties for certain business operations. Any difficulties experienced by Sprint or, to the extent the Clearwire Acquisition is consummated, Clearwire in these arrangements could result in additional expense, loss of subscribers and revenue, interruption of Sprint’s services or a delay in the roll-out of new technology.

Sprint has entered into agreements with unrelated parties for the day-to-day execution of services, provisioning and maintenance for Sprint’s wireless and wireline networks, for the implementation of Network Vision, and for the development and maintenance of certain software systems necessary for the operation of Sprint’s business. Clearwire has also entered into similar arrangements relating to its wireless networks. Sprint also has agreements with unrelated parties to provide customer service and related support to its wireless subscribers and outsourced aspects of Sprint’s wireline network and back office functions to unrelated parties. In addition, Sprint has sublease agreements with unrelated parties for space on communications towers. As a result, Sprint must rely on unrelated parties to perform certain of its operations and, in certain circumstances, interface

 

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with Sprint’s subscribers. If these unrelated parties were unable to perform to Sprint’s or, to the extent the Clearwire Acquisition is consummated, Clearwire’s requirements, Sprint would have to pursue alternative strategies to provide these services and that could result in delays, interruptions, additional expenses and loss of subscribers.

The products and services utilized by Sprint and its suppliers and service providers may infringe on intellectual property rights owned by others.

Some of Sprint’s products and services use intellectual property that Sprint owns. Sprint also purchases products from suppliers, including device suppliers, and outsources services to service providers, including billing and customer care functions, that incorporate or utilize intellectual property. Sprint and some of its suppliers and service providers have received, and may receive in the future, assertions and claims from third parties that the products or software utilized by Sprint or its suppliers and service providers infringe on the patents or other intellectual property rights of these third parties. These claims could require Sprint or an infringing supplier or service provider to cease certain activities or to cease selling the relevant products and services. These claims can be time-consuming and costly to defend, and divert management resources. If these claims are successful, Sprint could be forced to pay significant damages or stop selling certain products or services or stop using certain trademarks, which could have an adverse effect on Sprint’s results of operations.

Government regulation could adversely affect Sprint’s prospects and results of operations; the FCC and state regulatory commissions may adopt new regulations or take other actions that could adversely affect Sprint’s business prospects, future growth or results of operations.

The FCC and other federal, state and local, as well as international, governmental authorities have jurisdiction over Sprint’s business and could adopt regulations or take other actions that would adversely affect Sprint’s business prospects or results of operations.

The licensing, construction, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated by the FCC and, depending on the jurisdiction, international, state and local regulatory agencies. In particular, the FCC imposes significant regulation on licensees of wireless spectrum with respect to how radio spectrum is used by licensees, the nature of the services that licensees may offer and how the services may be offered, and resolution of issues of interference between spectrum bands.

The FCC grants wireless licenses for terms of generally ten years that are subject to renewal and revocation. There is no guarantee that Sprint’s licenses will be renewed. Failure to comply with FCC requirements applicable to a given license could result in revocation of that license and, depending on the nature of the non-compliance, other Sprint licenses.

Depending on their outcome, the FCC’s proceedings regarding regulation of special access rates could affect the rates paid by Sprint’s Wireless and Wireline segments for special access services in the future. Similarly, depending on their outcome, the FCC’s proceedings on the regulatory classification of VoIP services and a pending appeal of the FCC’s 2011 order reforming universal service for high cost area and intercarrier compensation could affect the intercarrier compensation rates and the level of Universal Service Fund (USF) contributions paid by Sprint.

Various states are considering regulations over terms and conditions of service, including certain billing practices and consumer-related issues that may not be pre-empted by federal law. If imposed, these regulations could make it more difficult and expensive to implement national sales and marketing programs and could increase the costs of Sprint’s wireless operations.

Degradation in network performance caused by compliance with government regulation, such as “net neutrality,” loss of spectrum or additional rules associated with the use of spectrum in any market could result in

 

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an inability to attract new subscribers or higher subscriber churn in that market, which could adversely affect Sprint’s revenues and results of operations. Furthermore, additional costs or fees imposed by governmental regulation could adversely affect Sprint’s revenues, future growth and results of operations.

Regulatory developments regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries could affect the sourcing and availability of minerals used in the manufacture of certain products, including handsets. Although Sprint does not purchase raw materials, manufacture, or produce any electronic equipment directly, the regulation may affect some of Sprint’s suppliers. As a result, there may only be a limited pool of suppliers who provide conflict free metals, and Sprint cannot ensure that it will be able to obtain products in sufficient quantities or at competitive prices. Also, because Sprint’s supply chain is complex, it may face reputational challenges with its customers and other stakeholders if it are unable to sufficiently verify the origins for all metals used in the products that Sprint sells.

Changes to the federal Lifeline Assistance Program could negatively impact the growth of the Assurance Wireless™ and wholesale subscriber base and the profitability of the Assurance Wireless and wholesale business overall.

Virgin Mobile USA, L.P., Sprint’s wholly owned subsidiary, offers service to low-income subscribers eligible for the federal Lifeline Assistance program under the brand Assurance Wireless, which we refer to as Assurance Wireless. Assurance Wireless provides a monthly discount to eligible subscribers in the form of a free block of minutes. Moreover, some of Sprint’s wholesale customers also offer service to subscribers eligible for the federal Lifeline Assistance program. This discount is subsidized by the Low-Income Program of the federal USF and administered by the Universal Service Administrative Company. Lifeline service is offered by both wireline and wireless companies, but more recent wireless entry, particularly by prepaid carriers with a focus on lower income consumers, has caused a rapid increase in the amount of USF support directed toward the Lifeline program. The FCC recently adopted reforms to the Low Income program to increase program effectiveness and efficiencies, including a limit of one subsidized service per household. More stringent eligibility and certification requirements will make it more difficult for all Lifeline service providers to sign up and retain Lifeline subscribers. The growth in the Lifeline program has caused some regulators and legislators to question the structure of the current program and the FCC is continuing to review the growth of the program. Changes in the Lifeline program as a result of the ongoing FCC proceeding or other legislation has and would continue to negatively impact growth in the Assurance Wireless and wholesale subscriber base and/or the profitability of the Assurance Wireless and wholesale business overall.

If Sprint’s business partners and subscribers fail to meet their contractual obligations it could negatively affect Sprint’s results of operations.

The current economic environment has made it difficult for businesses and consumers to obtain credit, which could cause Sprint’s suppliers, distributors and subscribers to have problems meeting their contractual obligations with Sprint. If Sprint’s suppliers are unable to fulfill its orders or meet their contractual obligations with Sprint, Sprint may not have the services or devices available to meet the needs of its current and future subscribers, which could cause it to lose current and potential subscribers to other carriers. In addition, if Sprint’s distributors are unable to stay in business, it could lose distribution points, which could negatively affect Sprint’s business and results of operations. If Sprint’s subscribers are unable to pay their bills or potential subscribers feel they are unable to take on additional financial obligations, they may be forced to forgo Sprint’s services, which could negatively affect Sprint’s results of operations.

Sprint’s reputation and business may be harmed and it may be subject to legal claims if there is loss, disclosure or misappropriation of or access to Sprint’s subscribers’ or Sprint’s own information or other breaches of Sprint’s information security.

Sprint makes extensive use of online services and centralized data processing, including through third-party service providers. The secure maintenance and transmission of customer information is an important element of

 

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Sprint’s operations. Sprint’s information technology and other systems that maintain and transmit customer information, or those of service providers, may be compromised by a malicious third-party penetration of Sprint’s network security, or that of a third-party service provider, or impacted by advertent or inadvertent actions or inactions by Sprint’s employees, or those of a third-party service provider. As a result, Sprint’s subscribers’ information may be lost, disclosed, accessed or taken without the subscribers’ consent.

In addition, Sprint, and third-party service providers process and maintain its proprietary business information and data related to its business-to-business customers or suppliers. Sprint’s information technology and other systems that maintain and transmit this information, or those of service providers, may also be compromised by a malicious third-party penetration of Sprint’s network security or that of a third-party service provider, or impacted by intentional or inadvertent actions or inactions by Sprint’s employees or those of a third-party service provider. As a result, Sprint’s business information, or subscriber or supplier data may be lost, disclosed, accessed or taken without consent.

Any major compromise of Sprint’s data or network security, failure to prevent or mitigate the loss of its services or customer information and delays in detecting any such compromise or loss could disrupt Sprint’s operations, damage its reputation and subscribers’ willingness to purchase Sprint’s service and subject Sprint to additional costs and liabilities, including litigation, which could be material.

Any potential future acquisitions, strategic investments or mergers may subject Sprint to significant risks, any of which may harm Sprint’s business.

Sprint’s long-term strategy may include identifying and acquiring, investing in or merging with suitable candidates on acceptable terms. In particular, over time, Sprint may acquire, make investments in, or merge with companies that complement its business. Acquisitions would involve a number of risks and present financial, managerial and operational challenges, including: