Sprint Nextel Corp S
Q4 2009 Earnings Call Transcript

Operator: David Barden, BofA Merrill Lynch.

David Barden - BofA Merrill Lynch: A couple if I could. Just starting out with the pricing side of the equation, obviously last quarter, it seems like a long time ago, but there was a lot of hoopla about the T-Mobile pricing and it doesn't really seem to have had any impact on your business in the 4Q results. I guess looking at the 1Q, we've had MetroPCS take pricing down, AT&T, Verizon. And I love to kind of hear you guys’ strategic commentary about pricing, positioning and competition and your expectations for 2010? And the second question would be specifically related to Simply Everything. This was the big initiative. Two years ago, it was how you differentiated yourself competitively. Those guys are coming off of two-year contracts, starting I guess next month. And it seems like AT&T, Verizon especially will be going after those guys. What kind of retention initiatives do you think are going to be necessary to lock down that base? Thank you very much.

Dan Hesse - CEO: David, Dan here. Are you sure you don't have any more questions?

David Barden - BofA Merrill Lynch: Just two, Dan.

Dan Hesse - CEO: Okay. Let me take them one at a time. First of all on pricing, you’re right, there has been a lot of competitive activity, as you mentioned T-Mobile as well as AT&T and Verizon in recent months. So there’s no question that the industry is getting more competitive. If there’s a benefit for us, I think it's going to put more of focus on what customers are paying each month. That's been actually concern of ours that there has been so much focus on the handset pricing that customers aren't doing enough to compare what they are paying each month. And I think if you take a look at the value, for example, Any Mobile, Anytime, that's a $70 plan and if you compare that to, let’s say, the Verizon and AT&T plans at $70, you have to pay like an extra $30 for data. You know, that’s included in ours. You’ll have to pay an extra $20 for text. That’s included in ours. If you want navigation, that’s may be $10 a month. That’s included in ours. So we think –we’re well positioned from a value point of view, although we still have some education to do. I’d say the same thing with Simply Everything. If you just take a look at all the things it includes and you compare it to a $70 plan and what you need to bolt-on to those plans, we’re pretty well positioned from a pricing point of view. So, yes, it is getting more competitive. And there’s no question from a pricing perspective, but we kind of like where we are and our job will be to educate the consumer better in terms of what all is included in those offers. Your second question had to do with, was it Simply Everything. And I think it’s similar to what we have to do kind of in churn totally. First of all, we’ve seen improved churn characteristics for customers that have Simply Everything and also Any Mobile, Anytime. That’s a big piece of the economic equation because there aren’t any surprises, there aren’t overages, satisfaction tends to be high. And what we do with our customers that will be important are a number of things. So I think the number one is still focusing on the brand health and the perception of the company among our customers. And if you were to take a look at, what we call MWI, Most Want to Investigate, we’ve made a lot of progress in terms of brand health with our existing base. Unfortunately, we haven’t made as much progress with non-customers, but we believe that will come and particularly perception of price value, which I mentioned is coming up. So customers on Simply Everything kind of know they’re getting a good deal from Sprint, as well as perception of the network. Strong handsets; they’ll be looking to upgrade. We want to make sure that we have the handset lineup that they’re going to want that will be very attractive. That’s a very important element of retention. And customers that have Simply Everything are automatically on our Premier program, which means they get an upgrade every year. And that puts them in kind of a special situation relative to the industry. And, of course, handsets are becoming very important. So a strong handset lineup with Simply Everything customers being able to upgrade more frequently than they could on competitors, I think puts us in a good position. We also I think have done a much better job on our save desk of late. We've really focused time and attention on that and we’re seeing our save rates improve. So we know there’s no question. The environment is a good question to ask. The environment on post-paid is getting much more competitive. T-Mobile, Verizon and AT&T have all taken pricing actions since we launched Any Mobile, Anytime. But we think we're priced where we need to be and still provide very, very good value to customers. And on the prepaid side, I can throw it over to Dan Schulman, but there’s no question that there’s increasing competition in prepaid, when we launched Boost Unlimited at the beginning of 2009, we really had a very strong value proposition where $50 meant $50. Now, Boost has moved from really aggressive price plan to, one could argue at parity, possibly even premium to similar plans in prepaid. So Dan has I think a very robust kind of comprehensive plan on prepaid that allows us to use different brands for different segments of the market. Dan, you’re on there? You just want to make a couple of comments for prepaid?

Dan Schulman - President, Prepaid Group: Sure, Dan. Hi, Dave. Good to hear your voice again. I think as we think about the prepaid market, as Dan just mentioned, obviously Boost had a great first three quarters of the year, but it was kind of a single-play being run and competition eventually caught up to that and impacted some of its growth in the fourth quarter. We’ve been looking quite hard at the overall prepaid segment right now, and it’s a pretty robust segment somewhere between 55 and 60 million Americans now have prepaid. And so the market is no longer a one-size-fits-all. There are definitely very distinct segments of the market out there. They have very unique needs and wants. They shop in different channels. They want specific handsets or specific value propositions. And so what you’re going to see from us on the prepaid side, and we’ve just started to implement some of this, is actually create brands that have very unique value propositions that appeal to very specific segments of the market. And so some segments of the market are more price sensitive than other segments of the market and we’ll take actions where we need to there. Others have much different needs and we don’t need to take pricing action there. And so what we’re looking at is on a segment-by-segment basis and a brand-by-brand perspective. Exactly what type of value proposition do we need to have out there to clearly win in the marketplace, because by the way different competitors target different segments of the market, and you don’t really need to react from a pricing perspective just because one competitor takes action across the market. And so we’ll have not only unique value propositions but very unique CPGA and CCPU for each of the brands that we put out there, so that we think that we can drive not only very meaningful net add growth but provide a very compelling financial return as well. And so that's in a nutshell kind of our strategy in the prepaid market and we'll have that fully rolled out by the end of the second quarter.

Dan Hesse - CEO: This is Dan. I'll just make one more point. I know a lot of the analysts on the call understand this but with respect to the upgrade program on Simply Everything, when customer does upgrade, they sign a new two-year contract. So that's why it's important. It kind of keeps the customer, if you will, a long way away from being near the end of their contract.

Operator: Michael Rollins, Citi.

Michael Rollins - Citi: Two questions; just first on the churn side, can you talk about what the improvements you’re seeing in care and some of things Dan that you highlighted again this quarter, if you would expect to see that reflect itself in a better churn, especially going into the first half of 2010? And then second, can you just talk about where you want to see Sprint's role in any potential further consolidation in the industry? Thanks.

Dan Hesse - CEO: First, as I indicated in my remarks, I wish we had made more progress in churn than we have. I think we're doing all the right things, but the market is getting more competitive and we still have to do better. It is our plan to continue to improve churn and to have better churn in 2010 than we did in 2009, and our customer experience and perception of our service, our price value, our network are all important elements to that as long as – in addition to some of the other things I mentioned in terms of having good handset line up, having good loyalty programs, et cetera. So it is our plan to improve churn in 2010. And if I had to just point to actually the one weakness that in terms of our post-paid performance that I wished we had made more progress in, even though Q4 churn was an improvement both sequentially and year-over-year, it's in churn, and of course, maintaining a good high-quality prime mix is an important element of that as well, which we have maintained. So we’re not giving any specific guidance with respect to churn in 2010, but we’re working on it very, very hard. With respect to our role in further consolidation, we would look at any specific situation that came forward but all that is theoretical, so I won’t speculate on it.

Michael Rollins - Citi: And Dan, just a follow up, on the churn comments that you made, is there a difference between CDMA and iDEN churn trends that investors should be thinking about?

Dan Hesse - CEO: Yes. The iDEN churn is higher than CDMA churn. So you should think in those terms. So for example, we lost 400,000 or 504,000 post-paid net adds in the fourth quarter, yet CDMA was net add positive. So I think obviously gross adds are an element of that, no question, but also higher churn on iDEN.

Operator: John Hodulik, UBS.

John Hodulik - UBS: Just I guess following up on Mike’s question, Dan, do you think the CDMA business has turned the corner now that you’ve got back to growth and may be what’s driving the gross add share you had there? I mean maybe it’s partially Any Mobile, Anytime or I know you talked a little bit about getting a little bit looser on the credit metrics in the third quarter. I was wondering what you would say was the driver of the gross add strength? And then one more follow up on the prepaid side, it sounds very much like you guys are going to use some of these new brands or maybe the Virgin brand to effectively cut price in some sort of market segments. When MetroPCS had their Analyst Day, a month ago, I think they made it pretty clear that they intended to remain the price sort of value leader in the space given their cost structure. I mean is there a risk of that by coming out with another sort of off-brands that you risk really squeezing or whatever economics are left out of the unlimited prepaid segment? Yeah, that would be great if I could get some comments on that.

Dan Hesse - CEO: Well, it’s my hope and our plan that we’ve turned the corner, but we do see momentum going into 2010 with respect to our CDMA post-paid business, but it will continue to be a competitive environment going forward. With respect to the improvements in terms of net add performance, the MVP really is Any Mobile, Anytime. That’s been what’s moved the needle the most. From a credit point of view, we make minor tweaks basically to try to keep our credit policies similar to Verizon and AT&T. So as they move theirs, we move ours, we try to more or less mirror them. There will be slight differences market-to-market, but as our strong prime percentage results indicate, we’re not going back to some things Sprint did many years ago which was to loosen credit policies to go after adds. We are not doing that. We’re only going after profitable revenue period on post-paid. The second part of the question, may be Dan Schulman, I’ll let you answer that.

Dan Schulman - President, Prepaid Group: So actually the reason that we’re launching a multiplicity of brands is because these unique segments in the market have different needs and actually when you launch different brands, it isn’t all about pricing. There’s about different handsets, different feature functionality that customers want and so by doing this – and you’re really using I think a degree of sophisticated marketing through this and not just pulling price levers by any means and in fact through the multi-brand strategy, our anticipation and our plan is that we actually significantly grow our contribution margin. And so I think by doing this, we actually allow ourselves a lot more flexibility to be very competitive in the market to grow our net adds but also to improve our financial picture as well. And so I think by doing this it gives us a lot more flexibility, allows us to target various competitors without necessarily having to pull price levers in each and every segment of the market.

Operator: Philip Cusick, Macquarie Research Equities.

Philip Cusick - Macquarie Research Equities: Maybe we can switch over to Bob for a minute and talk about cost savings whether that’s more layoffs in 2010 or really just the ability to keep costs under control, as data demands drive up, you’ve got 18% margins here and your nearest competitor has 33%. I wonder what do you think you can do to sort of either start to rebound those margins. Is it that you’ve got too many networks running here? Is it a too competitive environment? How should we think about that? Thanks Bob.

Robert Brust - CFO: On the cost side, in 2009 we had a large reduction in force that we announced in the early part of the year. And then we had a smaller one, we announced in the fourth quarter and as far as we can see right now, that takes care of that part of our cost reduction program. This year we're into more – each of the operating managers has a very tight cost budget to achieve to make – let us get the margins we need to make our OIBDA targets and our cash flow. So this year it's more of a cost control atmosphere than a big takeout. So we don't envision any more. Right now, we don't envision any more headcount reductions. The margin issue is complex. We do have vulnerable networks and that is a problem for us (in our site) and we've been in a long-term revenue decline which we hope is nearing an end. And as that revenue decline nears an end, we can start growing the revenue in the future would take a lot of pressure off the margins. So I don't see any huge margin relief in the near future. That's going to take a more stabilization of the revenue and getting back into a growth mode.

Philip Cusick - Macquarie Research Equities: Can I follow up to the spectrum spending, you said a big drop off in 2011, should we look for it mostly flat in 2010 or do you think this recent run rate is more the number?

Robert Brust - CFO: Well, the run rate that we've been incurring holds on for this year 100 million to 200 million a quarter and then that drops off sharply next year.

Operator: Simon Flannery, Morgan Stanley.

Simon Flannery - Morgan Stanley: Dan, can you talk a little bit about the launch of the 4G products? And I don't know to what extent you can talk about the results in Q4, but how that's been tracking? How usage has been tracking customer reception, churn and so forth? And also talk about your pricing around – putting them down to the $60 level. And then if you could also just touch on the wireline business, it looked like that had a step down in revenue sequentially. You talked about some IP pricing, but perhaps also touch on the enterprise environment and are you seeing any signs of improved economic activity there, as you look into sort of 2010. Thanks.

Dan Hesse - CEO: Simon, I counted three questions there, but let me take them one at a time. With respect to 4G, there are really two things that are important to making a lot of hay with 4G. One is its kind of coverage in the number of markets. It makes it much more efficient to sell, to advertise, et cetera, and you’ll begin to see that as we hit, if you will, a critical mass in 2010 that we didn’t do in 2009. And we finished 2009 with about 30 million POPs covered and our expectation is we have roughly four times that amount of coverage at the end of 2010. The other element that’s very, very important is just having some devices available in dual-mode 4G/3G. And we launched really two devices in January, one was the U301 dual-mode AirCard and the other is the Overdrive. So we’re just beginning, if you will, to have a combination of network coverage in devices that are attractive and as I mentioned in my remarks, what will really make a difference is having some, what we call, phones, as well that you can make phone calls on, also being launched during the year. That will make a big difference. So internally, we call 2010 the year of 4G. It's going to be the year that we're the only game in town and it’s a combination of – we need to get more markets turned up and we need to get a better device line up and then we think we can really start to show some sizable progress in that regard. We also thought it was important not to provide a disincentive to customers who try out, if you will, dual-mode 4G/3G. As you know with having owning over 50% of Clearwire, we look at the pricing of 4G/3G with really two hats on. One is, if you will, the transfer price that we’re charged as an MVNO, if you will, on 4G as well as just the overall economics of that network. And if you take a look at the second half of that which is the economics of that network, it’s a lot cheaper to produce a gigabyte on the 4G network than on the 3G network. So actually one of the questions would be, why don’t you provide 4G at a lower price than 3G, because you could. But we have no intention of doing that because, as there is a, if you will, not only speed advantage, but what we are doing is offering a larger bucket because as customers get 4G devices, they’re going to want to use their devices a lot more in the mobile environment. And so raising the cap, if you will, in terms of gigabytes, we believe reflects the superior economics of 4G over 3G in terms of data production. The last question you had was with respect to wireline and I’ll let Paget talk about that.

Paget Alves - President, Business Markets Group: Simon, the sequential decline that you saw there, there are a couple of things that are impacting this. We had one as a transfer price. So, in effect, we adjusted prices for the services we provide to our wireless segment, and we did that to respond to some of the pricing pressure in the market or price reductions in the market. That along with some other non-recurring items have caused this – (both some) – had a positive impact on the third quarter and a negative impact on the fourth quarter. So, on balance, at least 50%, maybe a tad more of the change was a result of those kinds of items. So we do not expect to see that recurring in 2010. From a standpoint of the economy, the economy has affected the business marketplace. I think Dan mentioned earlier that you do see between iDEN and CDMA there’s some difference, which is to some extent a byproduct of the economic sensitivity that iDEN has to the business marketplace. But generally, we’re optimistic about what the economy will do going forward. We’re starting to see some planning certainly in the business. The larger businesses are beginning to make decisions and anticipate making purchases, so we’ve seen a very different environment as we move into 2010 as compared to say the second half of 2009.

Operator: Jason Armstrong, Goldman Sachs.

Jason Armstrong - Goldman Sachs: Couple questions that I guess tie into a couple of the others that were asked. First on margins, Bob, you talked about improving sequential margins into the first quarter next year. I’m just wondering is the message here that 4Q is sort of the trough and we move up more sustainably from here, is this more of a comment that reflects some positive seasonality in the business sort of quarter-on-quarter? And then second question just on the iDEN network, Dan, if you can speak to the commitment levels to the iDEN network. You recently made a move to put Boost back on to the CDMA platform. So I’m just wondering what the message is there as it relates to iDEN? Thanks.

Robert Brust - CFO: This is Bob and then Dan will jump on. But in my comments before, we do not (and plan to) or I didn’t mean to say we’re going to improve margin in the first quarter, I didn’t think so. We’re trying to maintain our margins while we’re in this transition from the sales declines we’ve seen from the last several years. So in the near term, I wouldn’t look for any big margin deviations until we can get the revenue turned around.

Jason Armstrong - Goldman Sachs: Okay.

Dan Hesse - CEO: Yeah, Jason, Dan here on iDEN. We continue to support the iDEN network and we plan to launch new devices. We just launched the Motorola Brute i680 in January, which I mentioned and the network is performing at its best levels ever. I don’t want people to misunderstand the launch of Boost on CDMA. We were going to be offering Boost on both iDEN and CDMA because we want to give customers, if you will, more choice based upon how they want to use the network. So it's an opportunity for us just to grow prepaid more by – in addition to continuing to offer Boost on iDEN to also offer it on our CDMA network.

Operator: Jonathan Chaplin, Credit Suisse.

Jonathan Chaplin - Credit Suisse: Two quick questions, if I may. So looking at the improvement in postpaid net adds this quarter, actually just looking at the stock improvement over the course of the last few quarters, should we expect that same kind of consistent improvement quarter-over-quarter as we head through 2010? Or there are seasonal impacts that we should be aware of there? And if we are looking at that magnitude of improvement, is it conceivable that we're looking at flat-to-positive postpaid net adds by the end of 2010? And then Bob, I'm wondering if you could give just a little bit more color on when you’re hoping to see a turn-in in the top line? It sounded like that was something that could happen in 2010 as well. Thank you.

Dan Hesse - CEO: Thanks, Jonathan. And I appreciate your effort to get more guidance out of us. Obviously, we hope to continue these trends. There will always be some seasonality. So you should, as you look in your models going forward, always reflect seasonality, and that's why we give guidance on an annual basis because there are, if you will, pluses and minuses quarter-by-quarter. But as we’ve said, we expect to lose fewer post-paid subscribers in 2010 than 2009. So expect some improvement there. We're not guiding specifically yet with respect to when we expect to be net add positive or when we expect to have revenue growth, but needless to say, we have goals internally with respect to both.

Operator: Mike McCormack, JPMorgan.

Michael McCormack - JPMorgan: Dan, can you just make a couple of comments may be first on what you’re seeing from a port ratio perspective versus other carriers and maybe more specifically, it looks like the AT&T non-iPhone sub churn rate has been quite high for the past two quarters. Is there a way that you guys are sort of seeing any change in port ratios against those guys? And just secondly on the prepaid business, Leap obviously putting it up for sale – itself up for sale, do you have any sort of commentary on what that means for the industry? Is that then sort of saying this is too competitive, we need consolidation, or is it just sort of non-endorsement of that business model? Thanks.

Dan Hesse - CEO: With respect to port ratios by competitor, we don’t provide that competitive information. With respect to Leap, I can’t comment on the specific transaction and process, but generally I think consolidation will be healthy for the industry, some consolidation. It is needless to say very competitive. It’s very much of a scale game when you’re talking about national wireless carriers, not only network, marketing channels buying phones, you go right down the list. There are a lot of scale issues that would lend themselves to, in essence, benefiting from consolidation and scale. So without any comment on Leap in particular, I see consolidation as a positive for the industry.

Michael McCormack - JPMorgan: I guess, Dan, just staying on the more general theme, do you think that that marketplace is more interesting from an organic perspective to take share or do you think M&A is a realistic method of gaining share there?

Dan Hesse - CEO: Well, I think M&A, again, it depends upon the regulatory environment and how they look at it. And, of course, like any M&A transaction, it depends upon what the numbers look like at the end of the day. What’s the price, what are the synergies and what have you? So you have to look at them. So it's hard to make a broad statement. But if the price were right, if the synergies were significant, I think M&A is absolutely a way to get to growth in the industry, if a particular transaction makes sense for anybody.

Michael McCormack - JPMorgan: It makes sense.

Operator: Vijay Jayant, Barclays Capital.

James Ratcliffe - Barclays: It’s James Ratcliffe for Vijay. Quick question on taxes (and as you) wrote down an additional portion for NOLs in the quarter, at this point when, if at all, do you expect to actually start paying material cash taxes?

Robert Brust - CFO: This is Bob. We did adjust the deferred taxes with the valuation allowance of around $300 million during the quarter. But that’s a little timeout before we’d be paying any material taxes and that’s not in the guidance we had offered. So that’s down the road a ways.

Operator: Timothy Horan, Oppenheimer.

Timothy Horan - Oppenheimer & Co.: Two questions; Bob, what’s the threshold on ownership for you to start consolidating Clearwire? And then secondly, Dan, it sounds like prepaid net adds are probably going to worsen here a little bit given the increase in competition and be hopefully materially better towards the second half of the year. And just curious if you think that’s an accurate outlook. And then could you maybe just give us a real high level ballpark of what you think would be a good year in terms of net adds? I guess you had – and this is in total, you had a million decline this year and which is a huge improvement over the last couple of years. But do you think getting to flat this year is a good number or a million decline is a good number? I know you’re saying it’s going to be better but just an order of magnitude or maybe a million growth would be a good number in your mind? Thanks.

Dan Hesse - CEO: Well, you guys don’t give up, Timothy, with respect to trying to get more guidance out of us. (Unless), I won’t say what a good target is for improvement in net adds year-over-year. Obviously, more is better. So where we want to make the improvement, we’re going to try hard to make it as large as we can. I want to make sure I understand your question on Clearwire, did you say something about a threshold? Say that…

Timothy Horan - Oppenheimer & Co.: Yes. When do you have to start consolidating Clearwire results or do you have to – it seems like your equity ownership would require you to have to start consolidating those results. If you get up to 60% ownership, you have to start consolidating. Just wondering what ownership level do you have to start consolidating? Maybe also if you can just talk about maybe how prepaid has been trending through the fourth quarter and then maybe into this first quarter given the increased competition? Thanks.

Robert Brust - CFO: This is Bob. On the Clearwire thing, there’s a lot of rules that go in the consolidation. Part is ownership, part is governance, part is control, board members and all that stuff. So we’re not near that yet. And so the accounting for Clearwire should remain as it is for the foreseeable future.

Dan Hesse - CEO: And Dan Schulman, why don’t you take the prepaid question?

Dan Schulman - President, Prepaid Group: Yeah, I’ll just kind of repeat where we were. We do expect to fully launch by the end of the second quarter with a robust revamp portfolio of brands, each of those brands aimed at particular competitors and particular customer needs. And so we expect to make very meaningful progress with net adds as we move through the year. And so we are very confident in that forecast.

Operator: Chris Larsen, Piper Jaffray.

Christopher Larsen - Piper Jaffray: Couple of questions, first on the rebanding, I wondered, could you clarify that the $2 billion in CapEx does not include the rebanding of $100 million to $200 million a quarter. And then –you’re supposed to be vacating some channels soon here, I think in the first half of 2010, but the channels to move to are not open yet. Any sense whether the FCC is going to make you do that? And then you mentioned that you spent some CapEx on 4G, was that only on WiMAX or did that include any LTE spend? Thanks.

Robert Brust - CFO: The 4G reference I made is only on the WiMAX. And your first question was?

Christopher Larsen - Piper Jaffray: Yeah, on the rebanding.

Robert Brust - CFO: On the rebanding, yeah. The rebanding is not included in the up to $2 billion of CapEx we talked about, that's an addition. And that's the way we've been reporting over the past few years.

Christopher Larsen - Piper Jaffray: No, no. I just wanted to clarify that, but also you’re supposed to vacate some channels soon. Has the FCC given you any assurance that you're not going to be forced off the channels before you have the space to move those iDEN frequencies to?

Dan Hesse - CEO: Yeah, this is Dan. We're working with the FCC and you're correct that some of the public service organizations are not ready to move. So we do expect that the process could take longer than planned. But our expectation is that we will work very closely with public safety and the FCC toward a solution that makes sense for everyone.

Operator: Ric Prentiss, Raymond James.

Ric Prentiss - Raymond James: I think I want to focus my questions on 4G. Dan, I think you said internally seeing 2010 as a year of 4G, only game in town, phones coming later this year, couple of questions in that regard. First, how important is mobility to selling the WiMAX product? How important is having even more coverage than the 120 million POPs that you talked about? And what are the options as far as if that is true, kind of getting Clearwire some more funding?

Dan Hesse - CEO: Let me take them one at a time. We think mobility is absolutely crucial, but you raise a good point or point something out that it’s also a fixed solution and the mobile solution. So there are opportunities for us and for companies like Clear to get customers to cut the cord at home by using 4G really as a stationary or premise-based high capacity connection, but our primary emphasis at Sprint is on dual-mode 4G/3G and customers that would be mobile. And that is where we see by far the largest opportunity for us, because we’re a mobility company primarily, but again there are some fixed applications, but mobility is absolutely crucial. Of course, we want to get the coverage to even greater than a 120 million POPs, and, of course, there are some realities in terms of just how quickly you can effectively bring up markets, do cell siting and what have you. It just takes a while to build out of 4G network. So we would expect that you would see more POPs being expanded in 2011 and in 2012. So this would be a continuous process like so many generations are. As a matter of fact, in Sprint’s case, we put a lot of 3G coverage in place back in 2007 and a number of competitors are really just beginning to rollout 3G. So that will be a process that continues. With respect to Clearwire funding, as you know, we just put a lot of equity and others put a lot of equity and they also raised some additional debt. So the Board of Clearwire will always – they’ll determine how much additional funding, if any, is needed going forward and we'll look at the alternatives to do that when the time comes.

Ric Prentiss - Raymond James: As you look at your positioning versus the cable and maybe other wholesalers, is it really that mobility factor that you think differentiates how you go after the customers?

Dan Hesse - CEO: Yeah, I think the great thing about, we’ll call it, the partners, is each of us has the potential to be very strong with a different value proposition that gives Clearwire even greater potential than, let’s say, a 4G network that is owned only, let’s say, by a mobile player. The cable companies can bundle it, if you will, broadband and home and on-the-go. They can bundle it with video services and other things that are really in their wheelhouse. So we see each of the partners really going to their strength. Clearwire, as I mentioned earlier, has traditionally been a fixed-line replacement company. They’re good at that. That will be their greatest strength, generally single-mode 4G as a landline replacement, not that they won’t also do other things. In Sprint’s case, very much mobility, a mobile offering, and in the case of Time Warner, Comcast, Bright House, a different bundle that they’ll be very strong, and when a customer wants to have video service or high-speed internet at home in a fixed environment. So I see the different partners that are investors in Clearwire expanding the total size of the addressable market and pie that 4G has because we each bring customer bases to the table. Our subscribers don’t have a total overlap. So all of us are bringing a customer base and unique kind of capabilities or skills to the table and that’s the plan or vision of Clearwire, is that we have all these different companies with different strengths and customer base is going after the market that I think gives the company special potential.

Operator: David Dickson, FBR Capital Markets.

David Dickson - FBR Capital Markets: Just a question (thanks) on the strategic cost structure initiatives in three key areas. First one is just on roaming costs to Verizon. I imagine those are quite high at the moment. I wanted to get a sense of how we should think about opportunities to launch post-paid CDMA on 800 over time. Secondly on the backhaul side, I'm not seeing those challenges now as we’ve been losing customers, but as we gain customers and seeing more data, we expect that that backhaul issue is going to be significant. So I’d like to get your thoughts on how we should think about the backhaul migration to Clearwire’s network, moving up special access over time? And then thirdly the multiple network challenges, moving Boost on CDMA, you alluded to it before and I appreciate that we’re going to be rolling forward (two) networks here, but how should we think about the potential for lower CPGA or better network efficiencies by migrating progressively to CDMA for both prepaid, voice and SMS-centric customers and post-paid? Thanks very much.

Dan Hesse - CEO: Let me take them kind of one at a time here. One on costs in roaming; right now, we don’t have plans to roam, let’s say, on Verizon at 800 megahertz, because you have to put that capability in the phone, the dual-mode capability which adds cost and price to the devices and our coverage is so darn good, we don't really need to. I mean coverage is a Sprint's strength, both the size of our voice footprint and data footprint, and of course the economics of roaming are not that favorable. So roaming is still fairly expensive. So we are not looking to expand to roam on 800 megahertz, because it just doesn't make economic sense to us. Secondly with respect to backhaul migration, our number-one regulatory issue and we're pleased that the FCC is taking this issue up quite seriously is special access, and just the very, very high costs that we pay roughly a third of the operating cost of a cell site are special access charges that go back to, in lion's share of the cases, directly to our competitors with extremely high margin. So we think there’s some opportunity for special access cost to come down. In addition, as we build out the network with Clearwire, we're working together to maximize the use of existing cell sites that Sprint has and to share the backhaul expense, whether that backhaul be, because there are scale economies, if you will, be provided by the local exchange carrier and we can get better economics if we're sharing, if you will, the capacity of whatever we might buy or potentially using Clearwire technology, it could be radio as a backhaul alternative to the local exchange carrier. So we're looking at every possible way to decrease cost and working very closely with Clearwire to really come up with win-win for both Clearwire company and Sprint as to look at ways we can share cell sites and backhaul any place possible. But the real key for Sprint in terms of our regulatory initiatives in 2010 will be to make a lot of progress on special access, which is the one industry structure issue that really hasn’t been addressed and needs to be addressed and the data has been out there for a long time. So I have some cautious optimism that we'll see some progress made in special access. And your last question was something about Boost on CDMA. I just want to make sure I understand that question.

David Dickson - FBR Capital Markets: I was thinking about the opportunities we may have to improve the cost structure by migrating over to the CDMA network for prepaid in terms of device costs, broader array of device manufacturers and just general network efficiencies.

Dan Hesse - CEO: Well, as mentioned earlier, not only the decisions to launch Boost on CDMA, as well as the acquisition of Virgin, gives us an opportunity to get better scale economy out of our CDMA network and our handset buying. So there will be very close coordination, if you will, between, let’s say, Dan Schulman on the prepaid side and Steve Elfman’s group that has traditional bought post-paid phones to make sure that we are getting as much, if you will, scale as we possibly can in terms of our purchases. We still do have the iDEN network and we want to make sure that we are utilizing that network and have revenue covering our fixed costs on that network. But as we look to additional investments, with those investments be in new handsets or those investments being in capital that we would put into the networks, we’re going to get a better return and a longer lived return on incremental investments on the CDMA network than on the iDEN network. So that is what’s behind it. Over time, CDMA will give us a better return on our investment.

Yijing Brentano - IR: Thanks for your participation today. If you have any additional questions, please contact Sprint’s Investor Relations team at 1-800-259-3755. This concludes our call this morning. Thanks again.

Operator: This concludes today’s conference. You may now disconnect.