UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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x☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2018~~2019



o☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File number 1-04721

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SPRINT CORPORATION

(Exact name of registrant as specified in its charter)

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Delaware			46-1170005
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

6200 Sprint Parkway,	Overland Park,	Kansas	66251
(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: ~~(855) 848-3280~~(913) 794-1091

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.01 par value	S	New York Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesx No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x ☒		Accelerated filer	o ☐
Non-accelerated filer	o ☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	o☐
			Emerging growth company	o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act.)~~Act). Yes o☐ No x

COMMON SHARES OUTSTANDING AT AUGUST 6, ~~2018:~~2019:



Sprint Corporation Common Stock	~~4,068,421,433~~4,092,896,454

Table of Contents

SPRINT CORPORATION

TABLE OF CONTENTS


		Page Reference		Page Reference
Item	PART I — FINANCIAL INFORMATION		PART I — FINANCIAL INFORMATION
1.	Financial Statements	1	Financial Statements	1
	Consolidated Balance Sheets	1	Consolidated Balance Sheets	1
	Consolidated Statements of Comprehensive Income	2	Consolidated Statements of Comprehensive (Loss) Income	2
	Consolidated Statements of Cash Flows	3	Consolidated Statements of Cash Flows	3
	Consolidated Statement of Changes in Equity	4	Consolidated Statements of Changes in Equity	4
	Notes to the Consolidated Financial Statements	5	Notes to the Consolidated Financial Statements	5
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	40	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
3.	Quantitative and Qualitative Disclosures About Market Risk	61	Quantitative and Qualitative Disclosures About Market Risk	59
4.	Controls and Procedures	61	Controls and Procedures	59


	PART II — OTHER INFORMATION		PART II — OTHER INFORMATION
1.	Legal Proceedings	62	Legal Proceedings	61
1A.	Risk Factors	62	Risk Factors	61
2.	Unregistered Sales of Equity Securities and Use of Proceeds	62	Unregistered Sales of Equity Securities and Use of Proceeds	61
3.	Defaults Upon Senior Securities	62	Defaults Upon Senior Securities	61
4.	Mine Safety Disclosures	62	Mine Safety Disclosures	61
5.	Other Information	63	Other Information	61
6.	Exhibits	64	Exhibits	63
Signature	Signature	66	Signature	65

Table of Contents

PART I — FINANCIAL INFORMATION


Item 1.	Financial Statements (Unaudited)

SPRINT CORPORATION

CONSOLIDATED BALANCE SHEETS


	June 30,			March 31,			June 30,			March 31,
	2018			2018			2019			2019
	(in millions, except share and per share data)						(in millions, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	4,378		$	6,610		$	4,869		$	6,982
Short-term investments	4,008			2,354			—			67
Accounts and notes receivable, net of allowance for doubtful accounts and deferred interest of $327 and $409, respectively	3,492			3,711
Accounts and notes receivable, net of allowance for doubtful accounts and deferred interest of $373 and $363, respectively							3,558			3,554
Device and accessory inventory	622			1,003			726			999
Prepaid expenses and other current assets	895			575			1,436			1,289
Total current assets	13,395			14,253			10,589			12,891
Property, plant and equipment, net	20,538			19,925			20,556			21,201
Costs to acquire a customer contract	1,294			—			1,631			1,559
Operating lease right-of-use assets							7,054			—
Intangible assets
Goodwill	6,586			6,586			4,598			4,598
FCC licenses and other	41,368			41,309			41,474			41,465
Definite-lived intangible assets, net	2,245			2,465			1,525			1,769
Other assets	1,023			921			1,119			1,118
Total assets	$	86,449		$	85,459		$	88,546		$	84,601
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,143		$	3,409		$	3,672		$	3,961
Accrued expenses and other current liabilities	3,658			3,962			3,048			3,597
Current portion of long-term debt, financing and capital lease obligations	4,846			3,429
Current operating lease liabilities							1,680			—
Current portion of long-term debt, financing and finance lease obligations							2,889			4,557
Total current liabilities	11,647			10,800			11,289			12,115
Long-term debt, financing and capital lease obligations	35,771			37,463
Long-term debt, financing and finance lease obligations							35,073			35,366
Long-term operating lease liabilities							5,913			—
Deferred tax liabilities	7,704			7,294			7,563			7,556
Other liabilities	3,382			3,483			2,540			3,437
Total liabilities	58,504			59,040			62,378			58,474
Commitments and contingencies
Stockholders' equity:
Common stock, voting, par value $0.01 per share, 9.0 billion authorized, 4.013 billion and 4.005 billion issued, respectively	40			40
Common stock, voting, par value $0.01 per share, 9.0 billion authorized, 4.092 billion and 4.081 billion issued, respectively							41			41
Paid-in capital	27,938			27,884			28,323			28,306
Treasury shares, at cost	(4		)	—			(2		)	—
Retained earnings (accumulated deficit)	236			(1,255		)
Accumulated deficit							(1,832		)	(1,883		)
Accumulated other comprehensive loss	(317		)	(313		)	(414		)	(392		)
Total stockholders' equity	27,893			26,356			26,116			26,072
Noncontrolling interests	52			63			52			55
Total equity	27,945			26,419			26,168			26,127
Total liabilities and equity	$	86,449		$	85,459		$	88,546		$	84,601

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME


	Three Months Ended						Three Months Ended
	June 30,						June 30,
	2018			2017			2019			2018
	(in millions, except per share amounts)						(in millions, except per share amounts)
Net operating revenues:
Service	$	5,740		$	6,071		$	5,563		$	5,740
Equipment sales	1,173			1,187			1,220			1,173
Equipment rentals	1,212			899			1,359			1,212
	8,125			8,157			8,142			8,125
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	1,677			1,709			1,710			1,677
Cost of equipment sales	1,270			1,545			1,341			1,270
Cost of equipment rentals (exclusive of depreciation below)	124			112			225			124
Selling, general and administrative	1,867			1,938			1,907			1,867
Depreciation - network and other	1,023			977			1,120			1,023
Depreciation - equipment rentals	1,136			854			1,029			1,136
Amortization	171			223			118			171
Other, net	42			(364		)	237			42
	7,310			6,994			7,687			7,310
Operating income	815			1,163			455			815
Other expense:
Other (expense) income:
Interest expense	(637		)	(613		)	(619		)	(637		)
Other income (expense), net	42			(52		)
Other income, net							28			42
	(595		)	(665		)	(591		)	(595		)
Income before income taxes	220			498
Income tax expense	(47		)	(292		)
Net income	173			206
(Loss) income before income taxes							(136		)	220
Income tax benefit (expense)							22			(47		)
Net (loss) income							(114		)	173
Less: Net loss attributable to noncontrolling interests	3			—			3			3
Net income attributable to Sprint Corporation	$	176		$	206
Net (loss) income attributable to Sprint Corporation							$	(111	)	$	176

Basic net income per common share	$	0.04		$	0.05
Diluted net income per common share	$	0.04		$	0.05
Basic net (loss) income per common share attributable to Sprint Corporation							$	(0.03	)	$	0.04
Diluted net (loss) income per common share attributable to Sprint Corporation							$	(0.03	)	$	0.04
Basic weighted average common shares outstanding	4,010			3,993			4,087			4,010
Diluted weighted average common shares outstanding	4,061			4,076			4,087			4,061

Other comprehensive income (loss), net of tax:
Net unrealized holding (losses) gains on securities and other	$	(8	)	$	5
Net unrealized holding gains (losses) on derivatives	10			(9		)
Other comprehensive (loss) income, net of tax:
Net unrealized holding losses on securities and other							$	(3	)	$	(8	)
Net unrealized holding (losses) gains on derivatives							(21		)	10
Net unrecognized net periodic pension and other postretirement benefits	2			—			2			2
Cumulative effect of accounting change	(8		)	—			—			(8		)
Other comprehensive loss	(4		)	(4		)	(22		)	(4		)
Comprehensive income	$	169		$	202
Comprehensive (loss) income							$	(136	)	$	169

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended						Three Months Ended
	June 30,						June 30,
	2018			2017			2019			2018
	(in millions)						(in millions)
Cash flows from operating activities:
Net income	$	173		$	206
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(114	)	$	173
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Impairments							210			—
Depreciation and amortization	2,330			2,054			2,267			2,330
Provision for losses on accounts receivable	57			102			117			57
Share-based and long-term incentive compensation expense	40			41			35			40
Deferred income tax expense	39			282
Gains from asset dispositions and exchanges	—			(479		)
Loss on early extinguishment of debt	—			66
Deferred income tax (benefit) expense							(33		)	39
Amortization of long-term debt premiums, net	(33		)	(51		)	(16		)	(33		)
Loss on disposal of property, plant and equipment	124			293			225			124
Deferred purchase price from sale of receivables	(170		)	(375		)	—			(170		)
Other changes in assets and liabilities:
Accounts and notes receivable	273			(53		)	(121		)	273
Inventories and other current assets	421			181			456			421
Operating lease right-of-use assets							414			—
Accounts payable and other current liabilities	(766		)	(474		)	(660		)	(766		)
Current and long-term operating lease liabilities							(460		)	—
Non-current assets and liabilities, net	(197		)	73			(136		)	(197		)
Other, net	139			58			60			139
Net cash provided by operating activities	2,430			1,924			2,244			2,430
Cash flows from investing activities:
Capital expenditures - network and other	(1,132		)	(1,151		)	(1,189		)	(1,132		)
Capital expenditures - leased devices	(1,817		)	(1,359		)	(1,516		)	(1,817		)
Expenditures relating to FCC licenses	(59		)	(13		)	(9		)	(59		)
Proceeds from sales and maturities of short-term investments	810			2,594			—			810
Purchases of short-term investments	(2,464		)	(1,499		)	67			(2,464		)
Proceeds from sales of assets and FCC licenses	133			101			182			133
Proceeds from deferred purchase price from sale of receivables	170			375			—			170
Other, net	(10		)	(1		)	(3		)	(10		)
Net cash used in investing activities	(4,369		)	(953		)	(2,468		)	(4,369		)
Cash flows from financing activities:
Proceeds from debt and financings	1,370			902			1,061			1,370
Repayments of debt, financing and capital lease obligations	(1,415		)	(2,121		)
Repayments of debt, financing and finance lease obligations							(2,919		)	(1,415		)
Debt financing costs	(248		)	—			(12		)	(248		)
Call premiums paid on debt redemptions	—			(129		)
Proceeds from issuance of common stock, net							(17		)	—
Other, net	(2		)	(15		)	—			(2		)
Net cash used in financing activities	(295		)	(1,363		)	(1,887		)	(295		)
Net decrease in cash, cash equivalents and restricted cash	(2,234		)	(392		)	(2,111		)	(2,234		)
Cash, cash equivalents and restricted cash, beginning of period	6,659			2,942			7,063			6,659
Cash, cash equivalents and restricted cash, end of period	$	4,425		$	2,550		$	4,952		$	4,425

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN EQUITY

(in millions)

Common Stock
Paid-in
Capital
Treasury Shares
(Accumulated
Deficit) Retained Earnings

Accumulated
Other
Comprehensive
Loss

Noncontrolling
Interests
Total Equity
Shares Amount Shares Amount
Balance, March 31, 2018 4,005
$ 40
$ 27,884
—
$ —
$ (1,255 ) $ (313 ) $ 63
$ 26,419
Net income (loss) 176
(3 ) 173
Other comprehensive income, net of tax 4
4
Issuance of common stock, net 8
2
1
(4 )
(2 )
Share-based compensation expense 40
40
Capital contribution by SoftBank 1
1
Cumulative effect of accounting changes 1,315
(8 ) 1,307
Other, net 3
3
Increase (decrease) attributable to noncontrolling interests 8
(8 ) —
Balance, June 30, 2018 4,013
$ 40
$ 27,938
1
$ (4 ) $ 236
$ (317 ) $ 52
$ 27,945



	Three Months Ended June 30, 2019
	Common Stock			Paid-in Capital			Treasury Shares				(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
	Shares	Amount		Paid-in Capital			Shares	Amount			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
Balance, March 31, 2019	4,081	$	41	$	28,306		—	$	—		$	(1,883	)	$	(392	)	$	55		$	26,127
Net loss											(111		)				(3		)	(114		)
Other comprehensive loss, net of tax														(22		)				(22		)
Issuance of common stock, net	11	—		(15		)	—	(2		)										(17		)
Share-based compensation expense				35																35
Other, net				(3		)														(3		)
Cumulative effect of accounting change				—							162						—			162
Balance, June 30, 2019	4,092	$	41	$	28,323		—	$	(2	)	$	(1,832	)	$	(414	)	$	52		$	26,168



	Three Months Ended June 30, 2018
	Common Stock			Paid-in Capital		Treasury Shares				(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests			Total Equity
	Shares	Amount				Shares	Amount
Balance, March 31, 2018	4,005	$	40	$	27,884	—	$	—		$	(1,255	)	$	(313	)	$	63		$	26,419
Net income (loss)										176						(3		)	173
Other comprehensive income, net of tax													4						4
Issuance of common stock, net	8			2		1	(4		)										(2		)
Share-based compensation expense				40															40
Capital contribution by SoftBank				1															1
Cumulative effect of accounting changes										1,315			(8		)				1,307
Other, net				3															3
Increase (decrease) attributable to noncontrolling interests				8												(8		)	—
Balance, June 30, 2018	4,013	$	40	$	27,938	1	$	(4	)	$	236		$	(317	)	$	52		$	27,945

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

INDEX


		Page Reference		Page Reference
1.	Basis of Presentation and Other Information	6	Basis of Presentation and Other Information	6

2.	New Accounting Pronouncements	7	New Accounting Pronouncements	7

3.	Installment Receivables	11	Installment Receivables	9

4.	Financial Instruments	12	Financial Instruments	10

5.	Property, Plant and Equipment	13	Property, Plant and Equipment	11

6.	Intangible Assets	14	Intangible Assets	12

7	Long-Term Debt, Financing and Capital Lease Obligations	15
7.			Leases	13

8.	Revenues and Contract Costs	20	Long-Term Debt, Financing and Finance Lease Obligations	17

9.	Severance and Exit Costs	24	Revenues from Contracts with Customers	22

10.	Income Taxes	25	Severance and Exit Costs	25

11.	Commitments and Contingencies	26	Income Taxes	25

12.	Per Share Data	28	Commitments and Contingencies	26

13.	Segments	28	Per Share Data	27

14.	Related-Party Transactions	30	Segments	27

15.	Guarantor Financial Information	32	Related-Party Transactions	29

16.	Additional Financial Information	39	Guarantor Financial Information	31

17.			Additional Financial Information	38

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 1.	Basis of Presentation and Other Information

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. All normal recurring adjustments considered necessary for a fair presentation have been included. Certain disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in our ~~annual report~~Annual Report on Form 10-K for the year ended March 31, ~~2018.~~2019. Unless the context otherwise requires, references to "Sprint," "we," "us," "our" and the "Company" mean Sprint Corporation and its consolidated subsidiaries for all periods presented, and references to "Sprint Communications" are to Sprint Communications, Inc. and its consolidated subsidiaries.

The preparation of the unaudited interim consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements. These estimates are inherently subject to judgment and actual results could differ.

The consolidated financial statements include our accounts, those of our 100% owned subsidiaries, and subsidiaries we control or in which we have a controlling financial interest. For controlled subsidiaries that are not wholly-owned, the noncontrolling interests are included in "Net (loss) income" and "Total ~~equity".~~equity." All intercompany transactions and balances have been eliminated in consolidation.

~~Reclassification of Prior Period Amounts~~

Certain prior period amounts have been reclassified to conform to the current period presentation. As a result of the growing significance of our leasing program, in fiscal year 2017 we disaggregated equipment revenue between device sales and device operating lease revenue in our consolidated statements of comprehensive income. Revenue derived from device sales is now being reported in a new caption called "Equipment sales," and revenue derived from device operating leases is now being reported in a new caption called "Equipment rentals." For the three-month period ended June 30, 2017, we have disaggregated revenues of $899 million from equipment revenue to "Equipment rentals."

To align with the changes made to our revenue presentation, we have added two new captions within the consolidated statements of comprehensive income to capture certain costs directly attributable to our leasing activities consisting of "Cost of equipment rentals (exclusive of depreciation)" and "Depreciation - equipment rentals." For the three-month period ended June 30, 2017, we have reclassed $112 million of loss on disposal of property, plant and equipment, net of recoveries resulting from the write-off of leased devices from "Other, net" to the new caption called "Cost of equipment rentals (exclusive of depreciation)." Additionally, we disaggregated total depreciation between network and other versus depreciation related to equipment rentals. Network and other depreciation is now being reported in a new caption called "Depreciation - network and other," and depreciation derived from equipment rentals is now being reported in a new caption called "Depreciation - equipment rentals." For the three-month period ended June 30, 2017, we have disaggregated depreciation of $854 million from depreciation to "Depreciation - equipment rentals."

~~Total net operating revenues, net operating expenses, net income, and basic and diluted earnings per share were not affected by these reclassifications.~~

~~On January 1, 2018, the Company adopted authoritative guidance regarding~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.~~ The Company adopted this standard with retrospective application to the consolidated statements of cash flows. The standard impacted the presentation of cash flows related to beneficial interests in securitization transactions, which is the deferred purchase price associated with our accounts receivable facility, resulting in reclassification of cash inflows from operating activities to investing activities of $375 million for the three-month period ended June 30, 2017 in our consolidated statements of cash flows. The standard also impacted the presentation of cash flows related to separately identifiable cash flows and application of the predominance principal primarily related to direct channel leased devices resulting in a material reclassification of cash outflows from operating activities to investing activities of $892 million for the three-month period ended June 30, 2017 in our consolidated statements of cash flows. In addition, the standard also impacted the presentation of cash flows related to debt prepayment or

~~Table of Contents~~

~~Index for Notes to the Consolidated Financial Statements~~

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

debt extinguishment costs and resulted in a reclassification of cash outflows from operating activities to financing activities of $129 million for the three-month period ended June 30, 2017 in our consolidated statements of cash flows. Proceeds from the settlement of corporate-owned life insurance policies resulted in a $2 million reclassification between operating and investing activities in our consolidated statements of cash flows for three-month period ended June 30, 2017.

~~On January 1, 2018, the Company adopted authoritative guidance regarding~~ ~~Statement of Cash Flows: Restricted Cash,~~ requiring that amounts generally described as restricted cash or restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard with retrospective application to the consolidated statements of cash flows. The adoption of this standard resulted in an increase of $72 million in the beginning balance of cash, cash equivalents and restricted cash on April 1, 2017.

Business Combination Agreement

On April 29, 2018, we announced that we entered into a Business Combination Agreement with T-Mobile US, Inc. (T-Mobile) to merge in an all-stock transaction for a fixed exchange ratio of 0.10256 of T-Mobile shares for each Sprint share, or the equivalent of 9.75 Sprint shares for each T-Mobile share (Merger Transaction). Immediately following the ~~transactions,~~Merger Transaction, Deutsche Telekom AG and SoftBank Group Corp. are expected to hold approximately 42% and 27% of fully-diluted shares of the combined company, respectively, with the remaining 31% of the fully-diluted shares of the combined company held by public stockholders. The ~~Board~~board of directors will consist of 14 directors, of which nine will be nominated by Deutsche Telekom AG, four will be nominated by SoftBank Group ~~Corp,~~Corp., and the final director will be the CEO of the combined company. The combined company will be named T-Mobile. The ~~transaction~~Merger Transaction is subject to customary closing conditions, including certain state and federal regulatory ~~approvals, and is expected to close in the first half of calendar year 2019.~~approvals. Sprint and T-Mobile completed the Hart-Scott-Rodino filing with the Department of Justice (DOJ) on May 24, 2018. On June 18, 2018, the parties filed with the ~~FCC~~Federal Communications Commission (FCC) the merger applications, including the Public Interest Statement. On July 18, 2018, the FCC accepted the applications for filing and established a public comment period for the ~~transaction.~~Merger Transaction. The formal comment period concluded on October 31, 2018. On May 20, 2019, to facilitate the FCC’s review and approval of the FCC license transfers associated with the proposed Merger Transaction, we and T-Mobile filed with the FCC a written exparte presentation (the Presentation) relating to the proposed Merger Transaction. The Presentation included proposed commitments from us and T-Mobile. Following the Presentation, we received statements of support for the Merger Transaction by the FCC Chairman Ajit Pai and Commissioners Carr and O’Rielly. Formal action on the Merger Transaction by the FCC remains pending. The Merger Transaction received clearance from the Committee on Foreign Investment in the United States on December 17, 2018.

On July 26, 2019, the DOJ and five State Attorneys General filed an action in the United States District Court for the District of Columbia that would resolve their objections to the Merger Transaction. The Merger Transaction has received approval from 18 of the 19 state public utility commissions. The parties are awaiting further regulatory approvals, and resolution of litigation filed by the Attorneys General of 14 states and the District of Columbia seeking to block the Merger Transaction. Sprint and T-Mobile also announced agreements with DISH Network Corporation (DISH) in which new T-Mobile will divest Sprint’s prepaid businesses (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications, Inc.) and Sprint’s 800 MHz spectrum assets to DISH for a total of approximately $5.0 billion. Additionally, upon the closing of the divestiture transaction, new T-Mobile will provide DISH wireless customers access to its network for up to seven years and offer standard transition

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services arrangements to DISH during a transition period of up to three years. DISH will also have an option to take on leases for certain cell sites and retail locations that are decommissioned by the new T-Mobile, subject to any assignment restrictions. The transactions with DISH are contingent on the successful closing of T-Mobile’s merger with Sprint, among other closing conditions. Additionally, the parties to the Business Combination Agreement extended the Outside Date (as defined in the Business Combination Agreement) to November 1, 2019, or, if the Marketing Period (as defined in the Business Combination Agreement) is in effect at such time, then the Outside Date will be January 2, 2020.


Note 2.	New Accounting Pronouncements

Accounting Pronouncements Adopted During the Current Year

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued new authoritative literature, ~~Revenue from Contracts with Customers~~ ~~(Topic 606)~~. This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP. The new standard supersedes much of the existing authoritative literature for revenue recognition (Topic 605). The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. Upon adoption, the Company applied the standard only to contracts that were not completed, referred to as open contracts.

The Company adopted this standard update beginning on April 1, 2018 using the modified retrospective method. This method requires that the cumulative effect of initially applying the standard be recognized at the date of application beginning April 1, 2018. We recorded a pre-tax cumulative effect of $1.7 billion ($1.3 billion, net of tax) as a reduction to the April 1, 2018 opening balance of accumulated deficit. Results for reporting periods beginning after April 1, 2018 are presented under Leases (Topic ~~606, while amounts reported for prior periods have not been adjusted and continue to be reported under accounting standards in effect for those periods. See~~ ~~Note 8. Revenues from Contracts with Customers~~ ~~for additional information related to revenues and contract costs, including qualitative and quantitative disclosures required under Topic 606.~~

~~In January 2016, the FASB issued authoritative guidance regarding~~ ~~Financial Instruments~~, which amended guidance on the classification and measurement of financial instruments. Under the new guidance, entities will be required to measure equity investments that are not consolidated or accounted for under the equity method at fair value with any changes in fair value recorded in net income, unless the entity has elected the new practicability exception. For financial liabilities measured using the fair value option, entities will be required to separately present in other comprehensive income the portion of the changes in fair value attributable to instrument-specific credit risk. Additionally, the guidance amends certain

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disclosure requirements associated with the fair value of financial instruments. The Company adopted this standard update beginning on April 1, 2018 on a retrospective basis resulting in a pre-tax cumulative effect of $12 million ($8 million, net of tax) to our opening balance of accumulated deficit.

~~In October 2016, the FASB issued authoritative guidance regarding~~ ~~Income Taxes~~, which amended guidance for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, entities will be required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, thereby eliminating the recognition exception within current guidance. The Company adopted this standard on April 1, 2018 on a modified retrospective basis with no impact to our consolidated financial statements.

~~In January 2017, the FASB issued authoritative guidance amending~~ ~~Business Combinations: Clarifying the Definition of a Business~~, to clarify the definition of a business with the objective of providing a more robust framework to assist management when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company adopted this standard on April 1, 2018 with prospective application to future business combinations.

~~In January 2017, the FASB issued authoritative guidance regarding~~ ~~Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment~~, which simplifies the goodwill impairment test by eliminating the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the test), but rather to record an impairment charge based on the excess of the carrying value over its fair value. The Company adopted this standard on April 1, 2018 with no impact to our consolidated financial statements at the date of adoption.

~~The cumulative after-tax effect of the changes made to our consolidated balance sheet for the adoption of Topic 606 and other ASUs effective for the Company on April 1, 2018 were as follows:~~

Adjustments due to
March 31, 2018 Topic 606 Other ASUs April 1, 2018
(in millions)
ASSETS
Current assets:
Accounts and notes receivable, net $ 3,711
$ 97
$ —
$ 3,808
Device and accessory inventory 1,003
(24 ) —
979
Prepaid expenses and other current assets 575
271
—
846
Costs to acquire a customer contract —
1,219
—
1,219
Other assets 921
43
—
964
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses and other current liabilities $ 3,962
$ (35 ) $ —
$ 3,927
Deferred tax liabilities 7,294
366
—
7,660
Other liabilities 3,483
(32 ) —
3,451
Stockholders' equity:
(Accumulated deficit) retained earnings (1,255 ) 1,307
8
60
Accumulated other comprehensive loss (313 ) —
(8 ) (321 )

The most significant impact upon adoption of Topic 606 on April 1, 2018 was the recognition of a deferred contract cost asset of $1.2 billion, which was recorded in "Costs to acquire a customer contract" in our consolidated balance sheets for incremental contract acquisition costs paid on open contracts at the date of adoption. We are capitalizing and subsequently amortizing commission costs, which were previously expensed, related to new service contracts over the expected customer relationship period, while costs associated with contract renewals are amortized over the anticipated length of the service contract. We expect that operating expenses will be lower in the current fiscal year compared to amounts recorded under Topic 605 due to higher deferrals of such costs compared to the amortization of prior period commission costs deferred only for open contracts at the date of adoption as permitted by Topic 606.

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~~A reconciliation of the adjustments from the adoption of Topic 606 relative to Topic 605 on our consolidated statements of comprehensive income and balance sheet were as follows:~~

Three Months Ended June 30, 2018
As reported
Balances without adoption of
Topic 606
Change
(in millions, except per share amounts)
Net operating revenues:
Service revenue $ 5,740
$ 5,883
$ (143 )
Equipment sales 1,173
892
281
Equipment rentals 1,212
1,228
(16 )
8,125
8,003
122
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below) 1,677
1,688
(11 )
Cost of equipment sales 1,270
1,248
22
Cost of equipment rentals (exclusive of depreciation below) 124
124
—
Selling, general and administrative 1,867
1,948
(81 )
Depreciation - network and other 1,023
1,023
—
Depreciation - equipment rentals 1,136
1,136
—
Amortization 171
171
—
Other, net 42
42
—
7,310
7,380
(70 )
Operating income 815
623
192
Total other expense (595 ) (595 ) —
Income before income taxes 220
28
192
Income tax expense (47 ) (7 ) (40 )
Net income 173
21
152
Less: Net loss attributable to noncontrolling interests 3
3
—
Net income attributable to Sprint Corporation $ 176
$ 24
$ 152

Basic net income per common share $ 0.04
$ 0.01
$ 0.03
Diluted net income per common share $ 0.04
$ 0.01
$ 0.03
Basic weighted average common shares outstanding 4,010
4,010
—
Diluted weighted average common shares outstanding 4,061
4,061
—

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June 30, 2018
As reported
Balances without adoption of
Topic 606
Change
(in millions)
ASSETS
Current assets:
Accounts and notes receivable $ 3,492
$ 3,404
$ 88
Device and accessory inventory 622
644
(22 )
Prepaid expenses and other current assets 895
557
338
Costs to acquire a customer contract 1,294
—
1,294
Other assets 1,023
919
104
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses and other current liabilities $ 3,658
$ 3,690
$ (32 )
Deferred tax liabilities 7,704
7,298
406
Other liabilities 3,382
3,413
(31 )
Stockholders' equity:

Retained earnings (accumulated deficit) 236
(1,223 ) 1,459

~~The most significant impacts to our financial statement results as reported under Topic 606 as compared to Topic 605 for the current reporting period are as follows:~~

Consideration paid to customers or on behalf of customers is included as a reduction of the total transaction price of customer contracts, resulting in a contract asset that is amortized to service revenue over the term of the contract. As a result, the income statement impact reflects an increase in equipment sales offset by a reduction in wireless service revenue. Under the previous standard, this consideration paid to customers or on behalf of customers was recognized as a reduction to revenue or as selling, general and administrative expense.

Costs to acquire a customer contract or for a contract renewal are now capitalized and amortized to selling, general and administrative expenses over the expected customer relationship period or length of the service contract, respectively. Under the previous standard, these commission costs were expensed as incurred.

Deferred tax liabilities were increased for temporary differences established upon adoption of Topic 606, primarily attributable to costs to acquire a customer contract. For income tax purposes, these commission costs will continue to be expensed as incurred.

~~Accounting Pronouncements Not Yet Adopted~~

~~In February 2016, the FASB issued authoritative guidance regarding~~ ~~Leases~~842), and has subsequently modified several areas of the standard in order to provide additional clarity and improvements. The new standard ~~will supersede~~supersedes much of the existing ~~authoritative literature for leases.~~lease guidance (Topic 840) to enhance the transparency and comparability of financial reporting related to leasing arrangements. This guidance requires lessees, among other things, to recognize right-of-use (ROU) assets and lease liabilities on their balance sheet for all leases. The criteria for distinguishing leases ~~with~~between finance and operating are substantially similar to criteria for distinguishing between capital leases and operating leases in previous lease ~~terms longer than twelve months.~~guidance. In July 2018, the FASB made targeted improvements to the standard, including providing an additional and optional transition method. Under this method, an entity initially applies the standard at the adoption date, including the election of certain transition reliefs, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted this standard ~~will~~beginning on April 1, 2019 using the modified retrospective transition method such that the comparative period financial statements and disclosures were not adjusted. Results for reporting periods beginning after April 1, 2019 are presented under Topic 842, while amounts reported under prior periods have not been adjusted and continue to be reported under accounting standards in effect for those periods. See Note 7. Leases for additional

information related to operating and financing leases, including qualitative and quantitative disclosures required under Topic

842.

The new standard provides for a number of optional practical expedients in transition. We elected the package of practical expedients as defined by the standard that allows an entity not to reassess:

whether expired or existing contracts contain leases under the new definition of a lease;

lease classification for expired or existing leases; and

whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

Additionally, the Company elected the permitted practical expedient to use hindsight in determining the lease term under the new standard and the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements under existing agreements.

The most significant change from adopting the new standard involved recognizing ROU assets and lease liabilities for operating leases which resulted in a material impact to our consolidated balance sheet. As of the adoption date, we recognized ROU assets in the amount of $7.4 billion and related liabilities in current liabilities of $1.8 billion and a long-term lease liability in the amount of $6.3 billion. This impact is inclusive of the following:

the recognition of the lease liability and ROU assets for operating leases that were not previously recorded. The ROU asset was adjusted for recognized balances associated with operating leases, including prepaid and deferred rent, cease-use liabilities and favorable or unfavorable intangible assets; and

the impact of our election to apply hindsight in determining the lease term, such that our lease liability generally only includes payments for the initial non-cancelable lease term.

As the Company has elected the modified retrospective transition method, any assets and liabilities that were recognized solely as a result of a transaction where the Company was the deemed owner during construction were derecognized at transition for completed construction sites. The Company funded certain construction costs which were concluded to be prepaid lease payments; consequently, such amounts were carried over at their depreciated balance of

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approximately $0.6 billion and included in the associated finance lease ROU assets, which is included within "Property, Plant and Equipment, net" in the consolidated balance sheets.

Additionally, the Company is party to several leaseback arrangements. Under the transition provision of Topic 842, we were required to reassess the previously failed sale-leasebacks of certain Sprint-owned wireless communication tower sites and determine whether the transfer of the assets to the tower operator under the arrangement met the transfer of control criteria in the revenue standard and the new leasing standard and whether a sale should be recognized. We concluded that a sale should be recognized for the approximately 1,750 remaining tower sites transferred to a third-party under an agreement that closed in 2008. Upon adoption on April 1, 2019, we derecognized our existing long-term financial obligation and the tower-related property and equipment associated with these previously failed sale-leaseback tower sites and recognized a lease liability and ROU asset for the leaseback of the tower sites. The impacts from the change in accounting conclusion are a decrease to accumulated deficit of $104 million, a decrease in liabilities of $108 million and a decrease in property, plant and equipment, net of $4 million upon transition to Topic 842.

For lease arrangements where we are the lessor, the adoption of the standard did not have a material impact. While the standard modifies the classification and accounting for sales-type and direct finance leases, substantially all of the Company's current handset leases are classified as operating leases. If terms remain consistent with the Company’s current leasing program, we do not expect material sales-type or direct financing leases in future periods.

The cumulative after-tax effect of the changes made to our consolidated balance sheet for the adoption of Topic 842 effective for the Company ~~for its fiscal year beginning~~on April 1, 2019 ~~including interim periods within that fiscal year, with early adoption permitted.~~were as follows:



	March 31, 2019			Effects of the adoption of Topic 842			April 1, 2019
	(in millions)
ASSETS
Current assets:
Prepaid expenses and other current assets	$	1,289		$	(111	)	$	1,178
Property, plant and equipment	41,740			(31		)	41,709
Accumulated depreciation	(20,539		)	27			(20,512		)
Property, plant and equipment, net	21,201			(4		)	21,197
Operating lease right-of-use assets	—			7,358			7,358
Definite-lived intangible assets, net	1,769			(119		)	1,650
Other assets	1,118			(1		)	1,117
LIABILITIES AND EQUITY
Current liabilities:
Accrued expenses and other current liabilities	$	3,597		$	(178	)	$	3,419
Current operating lease liabilities	—			1,813			1,813
Current portion of long-term debt, financing and finance lease obligations	4,557			(43		)	4,514
Long-term debt, financing and finance lease obligations	35,366			(67		)	35,299
Long-term operating lease liabilities	—			6,263			6,263
Deferred tax liabilities	7,556			46			7,602
Other liabilities	3,437			(873		)	2,564
Stockholders' equity:
(Accumulated deficit) retained earnings	(1,883		)	162			(1,721		)

In June 2018, the FASB issued authoritative guidance regarding Compensation - Stock Compensation, which expands the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The Company ~~is currently evaluating the guidance and assessing its overall impact. However, we expect the adoption of~~adopted this ~~guidance~~standard on April 1, 2019 with no impact to ~~have a material impact on~~ our consolidated ~~balance sheets.~~financial statements at the date of adoption.

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Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued authoritative guidance regarding Financial Instruments - Credit Losses~~, which~~ and has subsequently modified several areas of the standard in order to provide additional clarity and improvements. The new standard requires entities to use a Current Expected Credit Loss impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual

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~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

cash flows that the entity does not expect to collect from financial assets measured at amortized ~~cost.~~cost within the scope of the standard. The entity's estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses. The standard will be effective for the Company's fiscal year beginning April 1, 2020, including interim reporting periods within that fiscal year, although early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In ~~June~~August 2018, the FASB issued authoritative guidance regarding ~~Compensation - Stock Compensation~~Fair Value Measurement: Disclosure Framework,which ~~expands the scope of ASC Topic 718 to include share-based payment transactions~~eliminates, adds and modifies certain disclosure requirements for ~~acquiring goods and services from nonemployees.~~fair value measurements. The standard will be effective for the Company for its fiscal year beginning April 1, ~~2019,~~2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the guidance and assessing its overall impact. However, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued authoritative guidance regarding Intangibles - Goodwill and Other - Internal-Use Software, which aligns the requirements for a customer to capitalize implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard will be effective for the Company for its fiscal year beginning April 1, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the guidance and assessing its overall impact.


Note 3.	Installment Receivables

Certain subscribers have the option to pay for their devices in installments, generally up to a 24-month period. Short-term installment receivables are recorded in "Accounts and notes receivable, net" and long-term installment receivables are recorded in "Other assets" in the consolidated balance sheets.

The following table summarizes the installment receivables:



	June 30, 2019			March 31, 2019
	(in millions)
Installment receivables, gross	$	1,332		$	1,212
Deferred interest	(74		)	(71		)
Installment receivables, net of deferred interest	1,258			1,141
Allowance for credit losses	(234		)	(215		)
Installment receivables, net	$	1,024		$	926

Classified in the consolidated balance sheets as:
Accounts and notes receivable, net	$	758		$	679
Other assets	266			247
Installment receivables, net	$	1,024		$	926

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June 30,
2018 March 31,
2018
(in millions)
Installment receivables, gross $ 1,232
$ 1,472
Deferred interest (50 ) (106 )
Installment receivables, net of deferred interest 1,182
1,366
Allowance for credit losses (199 ) (217 )
Installment receivables, net $ 983
$ 1,149

Classified in the consolidated balance sheets as:
Accounts and notes receivable, net $ 841
$ 995
Other assets 142
154
Installment receivables, net $ 983
$ 1,149

The balance and aging of installment receivables on a gross basis by credit category were as follows:



	June 30, 2019						March 31, 2019
	Prime		Subprime		Total		Prime		Subprime		Total
	(in millions)						(in millions)
Unbilled	$	722	$	521	$	1,243	$	667	$	459	$	1,126
Billed - current	43		24		67		43		22		65
Billed - past due	10		12		22		10		11		21
Installment receivables, gross	$	775	$	557	$	1,332	$	720	$	492	$	1,212

June 30, 2018 March 31, 2018
Prime Subprime Total Prime Subprime Total
(in millions) (in millions)
Unbilled $ 782
$ 337
$ 1,119
$ 951
$ 391
$ 1,342
Billed - current 62
24
86
69
29
98
Billed - past due 15
12
27
17
15
32
Installment receivables, gross $ 859
$ 373
$ 1,232
$ 1,037
$ 435
$ 1,472

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~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

Activity in the deferred interest and allowance for credit losses for the installment receivables was as follows:



	Three Months Ended			Twelve Months Ended
	June 30, 2019			March 31, 2019
	(in millions)
Deferred interest and allowance for credit losses, beginning of period	$	286		$	323
Adjustment to deferred interest on short- and long-term installment receivables due to adoption of revenue recognition standard on April 1, 2018	—			(50		)
Bad debt expense	50			116
Write-offs, net of recoveries	(32		)	(118		)
Change in deferred interest on short- and long-term installment receivables	4			15
Deferred interest and allowance for credit losses, end of period	$	308		$	286

Three Months Ended Twelve Months Ended
June 30, 2018 March 31, 2018
(in millions)
Deferred interest and allowance for credit losses, beginning of period $ 323
$ 506
Adjustment to deferred interest on short- and long-term installment receivables due to Topic 606 (50 ) —
Bad debt expense 15
142
Write-offs, net of recoveries (33 ) (224 )
Change in deferred interest on short- and long-term installment receivables (6 ) (101 )
Deferred interest and allowance for credit losses, end of period $ 249
$ 323


Note 4.	Financial Instruments

The Company carries certain assets and liabilities at fair value. Fair value is defined as an exit price representing the amount 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. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows: quoted prices in active markets for identical assets or liabilities; observable inputs other than the quoted prices in active markets for identical assets and liabilities; and unobservable inputs for which there is little or no market data, which require the Company to develop assumptions of what market participants would use in pricing the asset or liability.

The carrying amount of cash equivalents, accounts and notes receivable, and accounts payable approximates fair value. Short-term investments are recorded at amortized cost and the respective carrying amounts approximate the fair value that would be determined primarily using quoted prices in active markets. AsSprint did not hold any short-term investments as of June 30, ~~2018, short-term investments totaled $4.0 billion and consisted of approximately $2.3 billion of time deposits and $1.7 billion of commercial paper.~~2019. As of March 31, ~~2018~~2019, short-term investments ~~totaled $2.4 billion and~~ consisted of ~~approximately $1.6 billion of time deposits and $765~~$67 million of commercial paper. The fair value of marketable equity securities, totaling ~~$41~~$1 million ~~and $57 million as of~~ for both periods ended June 30, ~~2018~~2019 and March 31, ~~2018~~2019, ~~respectively,~~ are measured on a recurring basis using quoted prices in active markets. Current and long-term debt inclusive of our other financings are carried at amortized cost.

Debt for which estimated fair value is determined based on unobservable inputs primarily represents borrowings under our secured equipment credit facilities, and sales of receivables under our ~~Receivables~~Accounts Receivable Facility ~~(see~~(Receivables Facility). See Note 7.8. Long-Term Debt, Financing and ~~Capital~~Finance Lease ~~Obligations)~~.Obligations for additional information. The carrying amounts associated with these borrowings approximate fair value.

The estimated fair value of the majority of our current and long-term debt, excluding our secured equipment credit facilities, and sold wireless service, installment billing and future receivables is 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.

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The following table presents carrying amounts and estimated fair values of current and long-term debt and financing obligations:

Carrying amount at June 30, 2018 Estimated Fair Value Using Input Type
Quoted prices in active markets Observable Unobservable Total estimated fair value
(in millions)
Current and long-term debt and financing obligations $ 40,784
$ 37,477
$ —
$ 3,928
$ 41,405



	Carrying amount at June 30, 2019		Estimated Fair Value Using Input Type
	Carrying amount at June 30, 2019		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	38,335	$	35,601	$	198	$	4,076	$	39,875



	Carrying amount at March 31, 2019		Estimated Fair Value Using Input Type
	Carrying amount at March 31, 2019		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	40,193	$	36,642	$	197	$	3,970	$	40,809

Carrying amount at March 31, 2018 Estimated Fair Value Using Input Type
Quoted prices in active markets Observable Unobservable Total estimated fair value
(in millions)
Current and long-term debt and financing obligations $ 40,820
$ 37,549
$ —
$ 3,737
$ 41,286

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~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~


Note 5.	Property, Plant and Equipment

Property, plant and equipment consists primarily of network equipment, leased devices and other long-lived assets used to provide service to our subscribers. Non-cash accruals included in property, plant and equipment (excluding leased devices) totaled ~~$987 million~~$1.1 billion and ~~$387~~$987 million as of June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

The following table presents the components of property, plant and equipment and the related accumulated depreciation:



	June 30, 2019			March 31, 2019
	(in millions)
Land	$	107		$	246
Network equipment, site costs and related software	25,110			24,967
Buildings and improvements	392			856
Leased devices, non-network internal use software, office equipment and other	12,448			12,627
Construction in progress	2,919			3,044
Less: accumulated depreciation	(20,420		)	(20,539		)
Property, plant and equipment, net	$	20,556		$	21,201

June 30,
2018 March 31,
2018
(in millions)
Land $ 254
$ 254
Network equipment, site costs and related software 23,144
22,930
Buildings and improvements 817
813
Non-network internal use software, office equipment, leased devices and other 11,740
11,149
Construction in progress 3,001
2,202
Less: accumulated depreciation (18,418 ) (17,423 )
Property, plant and equipment, net $ 20,538
$ 19,925
Network equipment, site costs and related software includes switching equipment, cell site towers, site development costs, radio frequency equipment, network software, digital fiber optic cable, transport facilities and transmission-related equipment. Also included within this component are finance lease ROU assets, which primarily consist of prepayments of site rental costs for leases with an immaterial remaining lease obligation. Buildings and improvements principally consist of owned general office facilities, retail stores and leasehold improvements. Non-network internal use software, office equipment, leased devices and other primarily consists of furniture, information technology systems, equipment and vehicles, and leased devices. Construction in progress, which is not depreciated until placed in service, primarily includes materials, transmission and related equipment, labor, engineering, site development costs, interest and other costs relating to the construction and development of our network.

Sprint offers a leasing program to its customers whereby qualified subscribers can lease a device for a contractual period of time. At the end of the lease term, the subscriber has the option to ~~turn in~~return the device, continue leasing the device, or purchase the device. As of June 30, ~~2018,~~2019, substantially all of our device leases were classified as operating leases. Purchases of leased devices are reported as cash outflows for "Capital expenditures - leased devices" in the consolidated statements of cash flows. The devices are then depreciated using the straight-line method to their estimated residual value generally over the term of the lease.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table presents leased devices and the related accumulated depreciation:



	June 30, 2019			March 31, 2019
	(in millions)
Leased devices	$	10,770		$	10,972
Less: accumulated depreciation	(4,346		)	(4,360		)
Leased devices, net	$	6,424		$	6,612

June 30,
2018 March 31,
2018
(in millions)
Leased devices $ 10,145
$ 9,592
Less: accumulated depreciation (3,932 ) (3,580 )
Leased devices, net $ 6,213
$ 6,012

During the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, we had non-cash transfers of returned leased devices from property, plant and equipment to device and accessory inventory at the lower of net book value or their estimated fair value of ~~$163~~$236 million and ~~$109~~$163 million, respectively. Non-cash accruals included in leased devices totaled ~~$221~~$156 million and ~~$210~~$221 million as of June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

During the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, we recorded ~~$124~~$225 million and ~~$287~~$124 million, respectively, of loss on disposal of property, plant and equipment, net of recoveries. Net losses that resulted from the write-off of leased devices ~~are~~were primarily associated with lease cancellations prior to the scheduled customer lease terms where customers did not return the devices to ~~us, were $124 million and $112 million for the three-month periods ended June 30, 2018 and 2017, respectively, and~~us. Such losses are included in "Cost of equipment rentals" in our consolidated statements of comprehensive (loss) income. ~~In addition, during~~

On June 27, 2019, the ~~three-month period ended~~Company entered into a sale and leaseback agreement for our Overland Park, Kansas campus. The sale closed and the leaseback began on July 9, 2019. As of June 30, ~~2017, we recorded $175~~2019, the Company determined that the asset should be classified as held-for-sale and measured at the lower of its carrying amount or fair value less cost to sell resulting in the recognition of a non-cash impairment of approximately $207 million ~~of losses related to $181 million of cell site construction costs that are no longer recoverable as a result of changes in our network plans, slightly offset by a $6 million gain, which are~~ included in "Other, net" ~~in our~~within the consolidated statements of comprehensive (loss) income.

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~


Note 6.	Intangible Assets

Indefinite-Lived Intangible Assets

Our indefinite-lived intangible assets consist of FCC licenses, which were acquired primarily through FCC auctions and business combinations, certain of our trademarks, and goodwill. At June 30, ~~2018,~~2019, we held 800 MHz, 1.9 GHz and 2.5 GHz FCC licenses authorizing the use of radio frequency spectrum to deploy our wireless services. As long as the Company acts within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. Accordingly, we have concluded that FCC licenses are indefinite-lived intangible assets. Our Sprint and Boost Mobile trademarks have also been identified as indefinite-lived intangible assets. Goodwill represents the excess of consideration paid over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations.

The following provides the activity of indefinite-lived intangible assets within the consolidated balance sheets:



	March 31, 2019		Net Additions		June 30, 2019
	(in millions)
FCC licenses	$	37,430	$	9	$	37,439
Trademarks	4,035		—		4,035
Goodwill⁽¹⁾	4,598		—		4,598
	$	46,063	$	9	$	46,072

March 31,
2018
Net
Additions
June 30,
2018
(in millions)
FCC licenses $ 37,274
$ 59
$ 37,333
Trademarks 4,035
—
4,035
Goodwill⁽¹⁾
6,586
—
6,586
$ 47,895
$ 59
$ 47,954

_________________


(1)	Through ~~June 30, 2018, there is no~~March 31, 2019 accumulated impairment losses for ~~goodwill.~~goodwill were $2.0 billion. There were no additional accumulated impairment losses for the quarter ended June 30, 2019.

Assessment of Impairment

Our annual impairment testing date for goodwill and indefinite-lived intangible assets is January 1 of each year; however, we test for impairment between our annual tests if an event occurs or circumstances change that indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit is below its carrying amount. Our most recent test for impairment of goodwill was completed at January 1, 2019 and we concluded that the carrying value of

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Index for Notes to the Consolidated Financial Statements

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the Wireless reporting unit exceeded its estimated fair value by $2.0 billion. As a result, a goodwill impairment charge was recorded in our consolidated statements of operations for the year ended March 31, 2019. During the three-month period ended June 30, ~~2018, our stock price and our related market capitalization decreased subsequent~~2019, we did not record any further impairment to ~~the announcement of the merger with T-Mobile. In the current quarter,~~goodwill, nor did we also updated our long-term forecasted cash flows for the Company, including those for the Wireless reporting unit. This update considered current economic conditions and trends, estimated future operating results, our views of growth rates, anticipated future economic and regulatory conditions, future cost savings initiatives and the availability of the necessary network infrastructure, handsets andrecord any impairment to other devices. Based on these events, we determined that recoverability of the carrying amount of goodwill should be evaluated for impairment at June 30, 2018. Upon completion of our valuation work, we compared the estimated fair value to the carrying amount of the Wireless reporting unit and concluded that the estimated fair value exceeded the carrying amount. As a result, no goodwill impairment was recorded.indefinite-lived intangible assets.

The determination of fair value requires considerable judgment and is highly sensitive to changes in underlying assumptions. Consequently, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill, spectrum licenses, and Sprint and Boost Mobile trade names impairment tests will prove to be an accurate prediction of the future. Sustained declines in the Company’s operating results, number of wireless subscribers, future forecasted cash flows, growth rates and other assumptions, as well as significant, ~~sustained~~persistent declines in the Company’s stock price and related market capitalization could impact the underlying key assumptions and our estimated fair values, potentially leading to a future material impairment of goodwill or other indefinite-lived intangible assets.

Intangible Assets Subject to Amortization

Customer relationships are amortized using the sum-of-the-months' digits method, while all other definite-lived intangible assets are amortized using the straight-line method over the estimated useful lives of the respective assets. We reduce the gross carrying value and associated accumulated amortization when specified intangible assets become fully amortized. Amortization expense related to favorable spectrum ~~and tower leases~~ is recognized in "Cost of services" in our consolidated statements of comprehensive (loss) income.



		June 30, 2019							March 31, 2019
	Useful Lives	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
		(in millions)
Customer relationships	5 to 8 years	$	6,563	$	(6,139	)	$	424	$	6,563	$	(6,029	)	$	534
Other intangible assets:
Favorable spectrum leases	23 years	807		(202		)	605		763		(150		)	613
Favorable tower leases⁽¹⁾	—	—		—			—		335		(215		)	120
Trademarks	2 to 34 years	520		(93		)	427		520		(89		)	431
Other	5 to 10 years	139		(70		)	69		137		(66		)	71
Total other intangible assets		1,466		(365		)	1,101		1,755		(520		)	1,235
Total definite-lived intangible assets		$	8,029	$	(6,504	)	$	1,525	$	8,318	$	(6,549	)	$	1,769

_________________


(1)	During the three-month period ended June 30, 2019, the Company adopted the new leasing standard and as a result, favorable tower leases were reclassed to ROU assets on the consolidated balance sheets. See Note 2. New Accounting Pronouncements and Note 7. Leases for further information.


Note 7.	Leases

Leases (Topic 842) Disclosures

Lessee

We have operating and finance leases as a lessee for network equipment, cell sites, co-locations, dark fiber, office buildings, retail stores and kiosks, fleet vehicles, switch sites/points of presence, and office equipment and furniture. These leases, with few exceptions, provide for automatic renewal options and escalations that are either fixed or based on the consumer price index. Our leases have remaining lease terms of 1 to 20 years, some of which may include options to extend the leases for up to 20 years, and some of which may include options to terminate the leases within one year. Network equipment typically has initial non-cancelable terms of five to ten years with similar renewal options; however, extensions longer than ten years do occur. Cell sites generally have an initial non-cancelable lease term of five years with one to four renewal options to extend the lease in five-year increments. Retail stores generally have an initial non-cancelable lease term ranging from three to ten years with renewal options in five-year increments. Fleet vehicles generally have an initial non-cancelable lease term of three years with monthly renewal options to extend the lease. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Our lease term for accounting purposes is generally

1413

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the initial non-cancelable lease term. We recognize lease expense for operating leases and amortization expense on finance leases on a straight-line basis over the lease term.

We determine if an arrangement is a lease at contract inception. A contract is or contains a lease if the contract conveys the right to control the identified asset for a period of time in exchange for consideration. The right to control an asset is defined as the right to obtain substantially all of the economic benefits from the use of the identified asset and includes the right to direct the use of the identified asset. Identified assets are either explicitly specified in the contract, or are implicitly identified. Implicit identification includes a lease provision where a space or dimension is defined in the contract. This provision becomes explicit when equipment is physically placed on the respective space.

For those identified leases, the Company records them on the balance sheet as ROU assets and corresponding lease liabilities. ROU assets represent our right to use an underlying asset for the lease term, and the lease liability represents our obligation to make lease payments arising from the lease. Finance leases have historically been recorded in "Property, plant and equipment, net" in the consolidated balance sheets. Under the new standard, finance lease assets are included in the ROU asset account within "Property, plant and equipment, net" in the consolidated balance sheets. The associated lease liabilities for our finance leases are immaterial. The ROU asset and lease liability for operating leases are initially measured and recorded at the present value of the expected future lease payments at contract commencement or modification. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method. As of June 30, 2019 and April 1, 2019, ROU assets recorded under finance leases were $612 million and $613 million, respectively, and accumulated depreciation associated with finance leases was $77 million and $58 million, respectively.

The Company's lease portfolio is broad. Some leases include real estate taxes, common area maintenance, and management fees in the annual rental payments, while in other leases these amounts are charged separately. For all asset classes where the Company is the lessee, we have elected to not separate lease and non-lease components within a contract as defined under the new standard, instead separate lease and non-lease components are accounted for as a single lease component.

We utilize the Company's estimated incremental borrowing rate to discount future payments in the calculation of the lease liability and ROU asset. The Company determines the rates using a portfolio approach based on our current secured borrowings in order to approximate the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collaterized basis for a term similar to the lease term. The Company updates the rate monthly for new leases.

Operating lease costs are recognized on the income statement on a straight-line basis over the lease term, with operating lease costs being recorded to cost of services or selling, general and administrative expense based on the primary use of the leased asset. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. Finance lease costs are recorded to depreciation expense, and interest expense is recognized using the effective interest rate method and included in interest expense in our consolidated statements of comprehensive (loss) income. Certain of our leases may require variable lease payments based on external indicators, including real estate taxes, common area charges and utility usage. These variable rent payments for both operating and finance leases are not included in the measurement of the lease liability and are expensed in the period incurred.

In 2005, Sprint entered into a lease leaseback arrangement with a third party that was subsequently acquired by Crown Castle International (CCI) whereby the third party would lease from us approximately 5,700 cell sites, which included the towers and related assets under a Master Lease (Master Lease Sites) and otherwise manage another 970 sites until which time those sites may be leased to CCI (Managed Sites). The term of the arrangement was 32 years and provides no renewal options. Sprint leases back space on certain of these towers. For those Master Lease Sites, CCI has assumed all rights and obligations that arise under the ground leases. As Sprint is only contingently liable for future ground lease payments for these sites, obligations for these ground leases are not included in Sprint’s operating lease liabilities. For those Managed Sites, while CCI is required to make all cash payments to the landlord during the term of the arrangement, Sprint was not relieved of the primary obligation under the ground leases. Obligations during the term of the arrangement for these ground leases are included in operating lease liabilities of approximately $201 million and $207 million as of June 30, 2019 and April 1, 2019, respectively. Additionally, because Sprint has no future cash payments under these leases, they have been excluded from the tabular disclosures on weighted average remaining lease term and discount rate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The components of lease expense were as follows:

June 30, 2018 March 31, 2018
Useful Lives Gross
Carrying
Value Accumulated
Amortization Net
Carrying
Value Gross
Carrying
Value Accumulated
Amortization Net
Carrying
Value
(in millions)
Customer relationships 5 to 8 years $ 6,562
$ (5,623 ) $ 939
$ 6,562
$ (5,462 ) $ 1,100
Other intangible assets:
Favorable spectrum leases 23 years 856
(216 ) 640
856
(172 ) 684
Favorable tower leases 7 years 335
(188 ) 147
335
(179 ) 156
Trademarks 2 to 34 years 520
(78 ) 442
520
(74 ) 446
Other 5 to 10 years 131
(54 ) 77
129
(50 ) 79
Total other intangible assets 1,842

(536 )
1,306

1,840

(475 )
1,365
Total definite-lived intangible assets $ 8,404

$ (6,159 )
$ 2,245

$ 8,402

$ (5,937 )
$ 2,465



	Three Months Ended
	June 30, 2019
	(in millions)
Operating lease expense	$	530
Finance lease expense:
Amortization of right-to-use assets	18
Interest on lease liabilities	1
Total finance lease expense	19
Variable lease expense	15
Total lease expense	$	564

The supplemental components of cash flows were as follows:



	Three Months Ended
	June 30, 2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	2
Operating cash flows from operating leases	576
Financing cash flows from finance leases	1
Total cash paid for amounts included in the measurement of lease liabilities	$	579
Non-cash investing and financing activities:
Operating lease right-of-use assets obtained in exchange for lease obligations	$	113

Information relating to the lease term and discount rate excluding the Managed Sites is as follows:



	Three Months Ended
	June 30, 2019
Weighted average remaining lease term (years)
Operating leases	5.4
Weighted average remaining discount rate
Operating leases	6.2	%

Maturities of operating lease liabilities as of June 30, 2019 were as follows:



	(in millions)
Remainder of fiscal year ending March 31, 2020	$	1,580
Fiscal year ending March 31, 2021	2,187
Fiscal year ending March 31, 2022	1,640
Fiscal year ending March 31, 2023	1,133
Fiscal year ending March 31, 2024	770
Thereafter	1,783
Total lease payments	9,093
Less imputed interest	(1,500		)
Total	$	7,593

Lessor

Substantially all leases where the Company is the lessor are classified as operating leases under the previous literature. Due to the Company’s election of the various practical expedients, we did not reassess the lease classification of existing leases upon adoption of Topic 842. The Company will continue to recognize the underlying asset and recognize lease

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income over the lease term. As of April 1, 2019, an immaterial amount of our handset leases met the criteria to be classified as direct financing or sales-type leases under the previous literature. We do not expect a material amount of new leases to be classified as direct financing or sales-type leases subsequent to adoption of Topic 842 if terms remain consistent with the Company’s current leasing program.

For handset leases, we separate lease and non-lease components within a contract as defined under Topic 842. The total consideration in the contract is allocated to each separate lease component and non-lease component based on each component's relative selling price, using observable standalone prices, or by maximizing other observable information. Each lease component is accounted for separately from the non-lease components of a contract.

The term of our handset leases are generally 18 months, and the customer is able to extend the lease on a month-to-month basis after the initial lease term. There is no early termination option; if the customer exits the service agreement early the remaining lease payments become immediately payable at that point. At the termination or expiration of a customer lease, the customer may purchase the leased device or return the device to the Company. As of June 30, 2019 and April 1, 2019, our estimated residual value of handsets under current operating leases was approximately $3.3 billion and $3.2 billion, respectively.

Accounting for device leases involves specific determinations under applicable lease accounting standards. These determinations affect the timing of revenue recognition and the timing and classification of the related cost of the device. If a lease is classified as an operating lease, revenue is recognized ratably over the lease term and the leased asset is included in "Property, plant and equipment, net" in the consolidated balance sheets and depreciated to its estimated residual value generally over the lease term. If the lease is classified as a sales-type lease, revenue is recognized at the commencement of the lease with a corresponding charge to cost of equipment sales. If the lease is classified as a direct-financing lease, there is no related revenue or cost of equipment sales recorded and the net investment in a leased asset is reported. The critical elements that we consider in determining the classification of our leased devices are the economic life and the fair value of the device, including the estimated residual value. For the purposes of assessing the economic life of a device, we consider both internal and external datasets including, but not limited to, the length of time subscribers use our devices, sales trends post launch, and transactions in the secondary market as there is currently a significant after-market for used wireless devices.

Adjustments to residual values of leased devices are recognized as a revision in depreciation estimates. We estimate that a 10% increase or decrease in the estimated residual values of devices under operating leases at June 30, 2019 would not have a material effect on depreciation expense over the next twelve months. For the quarter-ended June 30, 2019, the effects of changes in the estimated residual value of devices currently under operating leases have been immaterial.

Leases (Topic 840) Disclosures

As the result of adopting Topic 842 using the modified retrospective transition method, we did not restate the periods prior to the adoption date of April 1, 2019. These periods continue to be presented in accordance with Topic 840. See Note 2. New Accounting Pronouncements for further information.

Lessee

As of March 31, 2019, the minimum estimated amounts due under operating leases and capital leases were as follows:



Future Minimum Commitments	Operating Leases		Capital Leases and Financing Obligations
	(in millions)
Fiscal year ending March 31, 2020	$	2,277	$	262
Fiscal year ending March 31, 2021	2,199		150
Fiscal year ending March 31, 2022	1,793		92
Fiscal year ending March 31, 2023	1,358		44
Fiscal year ending March 31, 2024	1,039		12
Thereafter	3,101		—
Total lease payments	$	11,767	$	560

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases

Our rental commitments for operating leases, including lease renewals that are reasonably assured, consisted mainly of leases for cell and switch sites, real estate, information technology and network equipment and office space. Total rental expense was $2.8 billion, $2.7 billion, and $3.1 billion, for the years ended March 31, 2019, 2018 and 2017, respectively.

Tower Financing

During 2008, we sold and subsequently leased back approximately 3,000 cell sites, of which approximately 1,750 remained as of March 31, 2019. Terms extend through 2021, with renewal options for an additional 20 years. These cell sites were previously reported as part of "Property, plant and equipment, net" in our consolidated balance sheets due to our continued involvement with the property sold, and the transaction was accounted for as a financing. The financing obligation as of March 31, 2019 was $109 million.

Upon adoption of the new leasing standard, we were required to reassess the previously failed sale-leasebacks and determine whether the transfer of the assets to the tower operator under the arrangement met the transfer of control criteria in the revenue standard and whether a sale should be recognized. We concluded that a sale had occurred and therefore, we derecognized our existing long-term financial obligation and the tower-related property and equipment associated with these sites as part of the cumulative effect adjustment on April 1, 2019.


Note 7.8.	Long-Term Debt, Financing and ~~Capital~~Finance Lease Obligations



	Interest Rates			Maturities			June 30, 2019			March 31, 2019
							(in millions)
Notes
Senior notes
Sprint Corporation	7.13	-	7.88%	2021	-	2026	$	12,000		$	12,000
Sprint Communications, Inc.	6.00	-	11.50%	2020	-	2022	4,780			4,780
Sprint Capital Corporation	6.88	-	8.75%	2028	-	2032	4,475			6,204
Senior secured notes
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, Sprint Spectrum Co III LLC	3.36	-	5.15%	2021	-	2028	5,906			6,125
Guaranteed notes
Sprint Communications, Inc.	7.00%			2020			1,000			1,000
Credit facilities
Secured revolving bank credit facility	4.69%			2021			—			—
Secured term loans	4.94	-	5.44%	2024			5,900			5,915
PRWireless term loan	7.58%			2020			200			198
Export Development Canada (EDC)	4.65%			2019			300			300
Secured equipment credit facilities	3.53	-	4.26%	2021	-	2022	556			661
Accounts receivable facility	3.58	-	3.78%	2021			2,837			2,607
Financing obligations, finance lease and other obligations	2.35	-	12.00%	2019	-	2026	407			538
Net premiums and debt financing costs							(399		)	(405		)
							37,962			39,923
Less current portion							(2,889		)	(4,557		)
Long-term debt, financing and finance lease obligations							$	35,073		$	35,366

Interest Rates Maturities June 30,
2018 March 31,
2018
(in millions)
Notes
Senior notes
Sprint Corporation 7.13 - 7.88% 2021 - 2026 $ 12,000
$ 12,000
Sprint Communications, Inc. 6.00 - 11.50% 2020 - 2022 4,980
4,980
Sprint Capital Corporation 6.88 - 8.75% 2019 - 2032 6,204
6,204
Senior secured notes
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, Sprint Spectrum Co III LLC 3.36 - 5.15% 2021 - 2028 6,781
7,000
Guaranteed notes
Sprint Communications, Inc. 7.00 - 9.00% 2018 - 2020 2,753
2,753
Credit facilities
Secured revolving bank credit facility 4.63% 2021 —
—
Secured term loan 4.63% 2024 3,950
3,960
PRWireless term loan 7.58% 2020 182
182
Export Development Canada (EDC) 4.59% 2019 300
300
Secured equipment credit facilities 3.75 - 4.45% 2020 - 2021 462
527
Accounts receivable facility 2.83 - 3.54% 2020 2,697
2,411
Financing obligations, capital lease and other obligations 2.35 - 12.00% 2018 - 2026 646
686
Net premiums and debt financing costs (338 ) (111 )
40,617
40,892
Less current portion (4,846 ) (3,429 )
Long-term debt, financing and capital lease obligations $ 35,771
$ 37,463

As of June 30, ~~2018,~~2019, Sprint Corporation, had $12.0 billion in aggregate principal amount of senior notes outstanding. In addition, as of June 30, ~~2018,~~2019, the outstanding principal amount of the senior notes issued by Sprint Communications and Sprint Capital Corporation, the guaranteed notes issued by Sprint Communications, Sprint Communications' secured term ~~loan~~loans and secured revolving bank credit facility, the EDC agreement, the secured equipment

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

credit facilities, the Receivables Facility, and certain other obligations collectively totaled ~~$21.8~~$20.2 billion in principal amount of our long-term debt. Sprint Corporation fully and unconditionally guaranteed such indebtedness, which was issued by 100% owned subsidiaries. Although certain financing agreements restrict the ability of Sprint Communications and its subsidiaries

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

to distribute cash to Sprint Corporation, the ability of the subsidiaries to distribute cash to their respective parents, including to Sprint Communications, generally is ~~generally~~ not restricted.

Cash interest payments, ~~totaled $602~~net of amounts capitalized of $17 million and ~~$660~~$15 million, totaled $542 million and $602 million during the three-month periods ended June 30, 2019 and 2018, ~~and 2017,~~ respectively. ~~These payments were net of amounts capitalized of $15 million for both three-month periods ended June 30, 2018 and 2017.~~

Notes

As of June 30, ~~2018,~~2019, our outstanding notes consisted of senior notes and guaranteed notes, all of which are unsecured, as well as senior secured notes associated with our spectrum financing transactions. Cash interest on all of the notes is payable semi-annually in arrears with the exception of the spectrum financing senior secured notes, which is payable quarterly. As of June 30, ~~2018, $32.5~~2019, $28.2 billion aggregate principal amount of the notes was redeemable at the Company's discretion at the then-applicable redemption prices plus accrued interest.

As of June 30, ~~2018, $26.3~~2019, $23.7 billion aggregate principal amount of our senior notes, senior secured notes, and guaranteed notes provided holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in the applicable indentures and supplemental indentures) occurs. In May 2018, we successfully completed consent solicitations with respect to certain series of Sprint Corporation, Sprint Communications, and Sprint Capital Corporation senior notes. As a result of the Sprint Corporation and Sprint Communications consent solicitations, the proposed merger transaction with T-Mobile, if consummated, will not constitute a change of control as defined in the applicable indentures governing the notes.

In May 2019, Sprint Capital Corporation retired $1.7 billion aggregate principal amount upon maturity of its

outstanding 6.900% Senior Notes.

Spectrum ~~Financing~~Financings

In October 2016, certain subsidiaries of Sprint Communications, which were not "Restricted Subsidiaries" under ~~Sprint Communications' and~~ Sprint Capital Corporation's indentures, transferred certain directly held and third-party leased spectrum licenses (collectively, Spectrum Portfolio) to wholly-owned bankruptcy-remote special purpose entities (collectively, Spectrum Financing SPEs). The Spectrum Portfolio, which represented approximately 14% of Sprint's total spectrum holdings on a MHz-pops basis, was used as collateral to raise an initial $3.5 billion in senior secured notes (2016 Spectrum-Backed Notes) bearing interest at 3.36% per annum under a $7.0 billion securitization program. The 2016 Spectrum-Backed Notes are repayable over a five-year term, with interest-only payments over the first four quarters and amortizing quarterly principal payments thereafter commencing December 2017 through September 2021. During the three-month period ended June 30, ~~2018,~~2019, we made scheduled principal repayments of $219 million, resulting in a total principal amount outstanding related to the 2016 Spectrum-Backed Notes of ~~$2.9~~$2.0 billion as of June 30, ~~2018,~~2019, of which $875 million was classified as "Current portion of long-term debt, financing and ~~capital~~finance lease obligations" in the consolidated balance sheets.

In March 2018, we amended the transaction documents governing the securitization program to allow for the issuance of more than $7.0 billion of notes outstanding pursuant to the securitization program subject to certain conditions, which, among other things, may require the contribution of additional spectrum. Also in March 2018, we issued approximately $3.9 billion in aggregate principal amount of senior secured notes under the existing $7.0 billion securitization program, consisting of two series of senior secured notes. The first series of notes totaled $2.1 billion in aggregate principal amount, bears interest at 4.738% per annum, ~~and has~~have quarterly interest-only payments until June 2021, and amortizing quarterly principal amounts thereafter commencing in June 2021 through March 2025. The second series of notes totaled approximately $1.8 billion in aggregate principal amount, bears interest at 5.152% per annum, ~~and~~ have quarterly interest-only payments until June 2023, and amortizing quarterly principal amounts thereafter commencing in June 2023 through March 2028. The Spectrum Portfolio, which also serves as collateral for the 2016 Spectrum-Backed Notes, remains substantially identical to the original portfolio from October 2016.

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rate. The lease payments, which are guaranteed by Sprint Corporation and certain subsidiaries (none of which ~~were~~are "Restricted Subsidiaries" under ~~Sprint's~~Sprint Capital Corporation's indentures) of Sprint Communications (and are secured together with the obligations under another transaction document by substantially all of the assets of such entities on a pari passu basis up to an aggregate cap of $3.5 billion with the grant of security under the secured term loan and revolving bank credit facility and EDC (as defined below) agreement), are sufficient to service all outstanding series of the senior secured notes and the lease also constitutes collateral for the senior secured notes. Because the Spectrum

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Financing SPEs are wholly-owned Sprint subsidiaries, these entities are consolidated and all intercompany activity has been eliminated.

Each Spectrum Financing SPE is a separate legal entity with its own separate creditors who will be entitled, prior to and upon the liquidation of the Spectrum Financing SPEs, to be satisfied out of the Spectrum Financing SPEs' assets prior to any assets of the Spectrum Financing SPEs becoming available to Sprint. Accordingly, the assets of the Spectrum Financing SPEs are not available to satisfy the debts and other obligations owed to other creditors of Sprint until the obligations of the Spectrum Financing SPEs under the spectrum-backed senior secured notes are paid in full.

In June 2018, we obtained ~~the~~ consent ~~of the control party~~ under the spectrum-backed senior secured notes indenture to amend the indenture such that the proposed merger transaction with T-Mobile, if consummated, will not constitute a change of control as defined in the indenture.

Credit Facilities

Secured Term Loan and Revolving Bank Credit Facility

On February 3, 2017, we entered into a $6.0 billion credit agreement, ~~for $6.0 billion,~~ consisting of a $4.0 billion, seven-year secured term loan (Initial Term Loan) that matures in February 2024 and a $2.0 billion secured revolving bank credit facility that expires in February 2021. As of June 30, ~~2018, approximately $144~~2019, $120 million in letters of credit were outstanding under the secured revolving bank credit facility, including the letter of credit required by the Report and ~~Order~~ ~~(see~~Order. See Note ~~11.~~12. Commitments and ~~Contingencies)~~.Contingencies for additional information. As a result of the outstanding letters of credit, which directly reduce the availability of borrowings, the Company had approximately $1.9 billion of borrowing capacity available under the secured revolving bank credit facility as of June 30, ~~2018.~~2019. The bank credit facility requires a ratio (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 bank credit facility (adjusted EBITDA), not to exceed ~~4.75~~3.75 to 1.0 through the fiscal quarter ending December 31, ~~2018. For each fiscal quarter ending March 31, 2019 through December 31, 2019, the Leverage Ratio must not exceed 3.75 to 1.0.~~2019. The Leverage Ratio must not exceed 3.5 to 1.0 for the fiscal quarter ended March 31, 2020 and each fiscal quarter ending thereafter through expiration of the facility. The ~~term loan~~Initial Term Loan has an interest rate equal to LIBOR plus 250 basis points and the secured revolving bank credit facility has an interest rate equal to LIBOR plus a spread that varies depending on the Leverage Ratio. During the three-month period ended June 30, 2019, we made principal repayments on the Initial Term Loan totaling $10 million resulting in a total principal amount outstanding for the Initial Term Loan of $3.9 billion as of June 30, 2019.

In consideration of the ~~seven-year secured term loan,~~Initial Term Loan, we entered into a five-year fixed-for-floating interest rate swap on a $2.0 billion notional amount that has been designated as a cash flow hedge. The effective portion of changes in fair value are recorded in "Other comprehensive ~~income~~ (loss)" income" in the consolidated statements of comprehensive (loss) income and the ineffective portion, if any, is recorded as ~~interest expense~~"Interest expense" in current period earnings in the consolidated statements of comprehensive (loss) income. The fair value of the interest rate swap was ~~approximately $55~~a liability of $15 million and ~~$41~~an asset of $13 million as of June 30, ~~2018~~2019 and March 31, ~~2018,~~2019, respectively, which was recorded in "Other ~~assets"~~liabilities" and "Other assets," respectively, in the consolidated balance sheets.

On November 26, 2018, the credit agreement was amended to, among other things, authorize incremental secured term loans (Incremental Term Loans) totaling $2.0 billion, of which $1.1 billion was borrowed. On February 26, 2019, the remaining $900 million was borrowed. The Incremental Term Loans mature in February 2024, have interest rates equal to LIBOR plus 300 basis points and increased the total credit facility to $8.0 billion.

PRWireless Term Loan

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early may not be drawn again. ~~As of~~During the three-month period ended June 30, ~~2018,~~2019, the joint venture borrowed $2 million and made principal repayments of less than $1 million resulting in a total principal amount outstanding ~~was $182~~of $200 million ~~with an additional $20 million remaining available.~~as of June 30, 2019. Sprint has provided an unsecured guarantee of repayment of the secured term loan obligations. The secured portion of the facility is limited to assets of the ~~new entity~~joint venture as the borrower.

EDC Agreement

As of June 30, ~~2018,~~2019, the EDC agreement provided for security and covenant terms similar to our secured term loan and revolving bank credit facility. However, under the terms of the EDC agreement, repayments of outstanding amounts cannot be redrawn. As of June 30, ~~2018,~~2019, the total principal amount ~~of our borrowings~~outstanding under the EDC facility was $300 million.

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Secured Equipment Credit Facilities

Finnvera plc (Finnvera)

The Finnvera secured equipment credit facility provided for the ability to ~~borrow up to $800 million to~~ finance network equipment-related purchases from Nokia Solutions and Networks US LLC, USA. ~~The facility's availability for borrowing expired in October 2017. Such borrowings were contingent upon the amount and timing of network equipment-related purchases made by Sprint.~~ During the three-month period ended June 30, ~~2018,~~2019, we made principal repayments totaling $13 million on the facility resulting in a total principal amount of ~~$161~~$79 million outstanding as of June 30, ~~2018.~~2019.

K-sure

The K-sure secured equipment credit facility provides for the ability to ~~borrow up to $750 million to~~ finance network equipment-related purchases from Samsung Telecommunications America, LLC. ~~The facility can be divided into three consecutive tranches of varying size.~~ In ~~September 2017,~~October 2018, we amended the secured equipment credit facility to extend the borrowing availability through ~~December 2018.~~September 2019. Such borrowings are contingent upon the amount and timing of network equipment-related purchases made by Sprint. During the three-month period ended June 30, ~~2018,~~2019, we made principal repayments totaling ~~$32~~$72 million on the facility resulting in a total principal amount of ~~$162~~$378 million outstanding as of June 30, ~~2018.~~2019.

Delcredere | Ducroire (D/D)

The D/D secured equipment credit facility provided for the ability to ~~borrow up to $250 million to~~ finance network equipment-related purchases from Alcatel-Lucent USA Inc. ~~In September 2017, we amended the secured equipment credit facility to restore previously expired commitments of $150 million.~~ During the three-month period ended June 30, ~~2018,~~2019, we made principal repayments totaling $20 million on the facility resulting in a total principal amount of ~~$139~~$99 million outstanding as of June 30, ~~2018.~~2019.

Borrowings under the Finnvera, K-sure and D/D secured equipment credit facilities are each secured by liens on the respective network equipment ~~purchased pursuant to each facility's credit agreement.~~purchased. In addition, repayments of outstanding amounts borrowed under the secured equipment credit facilities cannot be redrawn. Each of these facilities is fully and unconditionally guaranteed by both Sprint Communications and Sprint Corporation. The secured equipment credit facilities have certain key covenants similar to those in our secured term loan and revolving bank credit facility.

Accounts Receivable Facility

Transaction Overview

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add month-to-month lease receivables as eligible receivables for leases that extend past their original lease term, and change the Purchasers' commitment allocations. The

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Purchasers' commitments ~~will be~~are allocated 22% to wireless service receivables and 78% to a combined pool of installment receivables, future lease receivables and month-to-month lease receivables. In June 2019, the Receivables Facility was further amended to extend the maturity date to February 2021. During the three-month period ended June 30, ~~2018,~~2019, we ~~borrowed $1.4~~drew $1.0 billion and repaid ~~$1.1 billion~~$800 million to the Purchasers.

Prior to the February 2017 amendment, wireless service and installment receivables sold to the Purchasers were treated as a sale of financial assets and we derecognized these receivables, as well as the related allowances, and recognized the net proceeds received in cash provided by operating activities in the consolidated statements of cash flows. The total proceeds from the sale of these receivables were comprised of a combination of cash, which was recognized as operating activities within our consolidated statements of cash flows, and a deferred purchase price (DPP). The DPP was realized by us upon either the ultimate collection of the underlying receivables sold to the Purchasers or upon Sprint's election to receive additional advances in cash from the Purchasers subject to the total availability under the Receivables Facility. All cash collections on the DPP were recognized as investing activities in the consolidated statements of cash flows. The fees associated with these sales were recognized in "Selling, general and administrative" in the consolidated statements of comprehensive (loss) income through the date of the February 2017 amendment. Subsequent to the February 2017 amendment, the sale of wireless service and installment receivables are reported as financings, which is consistent with our historical treatment for the sale of future lease receivables, and the associated fees are recognized as "Interest expense" in the consolidated statements of comprehensive (loss) income.

Transaction Structure

Sprint contributes certain wireless service, installment and future lease receivables, as well as the associated leased devices, to Sprint's wholly-owned consolidated bankruptcy-remote special purpose entities (SPEs). At Sprint's direction, the SPEs have sold, and will continue to sell, wireless service, installment and future lease receivables to the Purchasers or to a bank agent on behalf of the Purchasers. Leased devices will remain with the SPEs, once sales are initiated, and continue to be depreciated over their estimated useful life. As of June 30, ~~2018,~~2019, wireless service, installment and lease receivables contributed to the SPEs and included in "Accounts and notes receivable, net" in the consolidated balance sheets were $2.6 billion and the long-term portion of installment receivables included in "Other assets" in the consolidated balance sheets was ~~$132~~$248 million. As of June 30, ~~2018,~~2019, the net book value of devices contributed to the SPEs was ~~approximately $6.2~~$6.4 billion.

Each SPE is a separate legal entity with its own separate creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets in the SPE becoming available to Sprint. Accordingly, the assets of the SPE are not available to pay creditors of Sprint or any of its affiliates (other than any other SPE), although collections from these receivables in excess of amounts required to repay the advances, yield and fees of the Purchasers and other creditors of the SPEs may be remitted to Sprint during and after the term of the Receivables Facility.

Sales of eligible receivables by the SPEs generally occur daily and are settled on a monthly basis. Sprint pays a fee for the drawn and undrawn portions of the Receivables Facility. A subsidiary of Sprint services the receivables in exchange for a monthly servicing fee, and Sprint guarantees the performance of the servicing obligations under the Receivables Facility.

Variable Interest Entity

Sprint determined that certain of the Purchasers, which are multi-seller asset-backed commercial paper conduits (Conduits) are considered variable interest entities because they lack sufficient equity to finance their activities. Sprint's interest in the receivables purchased by the Conduits is not considered a variable interest because Sprint's interest is in assets that represent less than 50% of the total activity of the Conduits.

Financing Obligations, ~~Capital~~Finance Lease and Other Obligations

Tower Financing

During 2008, we sold and subsequently leased back approximately 3,000 cell sites, of which approximately ~~2,000 remain~~1,750 remained as of ~~June 30, 2018.~~March 31, 2019. Terms extend through 2021, with renewal options for an additional 20 years. These cell sites ~~continue to be~~were previously reported as part of ~~our~~ "Property, plant and equipment, net" in our consolidated balance sheets due to our continued involvement with the property sold, and the transaction iswas accounted for as a financing. The financing obligation as of ~~June 30, 2018 is $139~~March 31, 2019 was $109 million.

1921

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~~Capital~~Upon adoption of the new leasing standard, we were required to reassess the previously failed sale-leasebacks and determine whether the transfer of the assets to the tower operator under the arrangement met the transfer of control criteria in the revenue standard and whether a sale should be recognized. We concluded that a sale had occurred and therefore, we derecognized our existing long-term financial obligation and the tower-related property and equipment associated with these sites as part of the cumulative effect adjustment on April 1, 2019. Refer to Note 7. Leases for additional information.

Finance Lease and Other Obligations

In May 2016, Sprint closed on a transaction with Shentel to acquire one of our wholesale partners, NTELOS Holdings Corporation (nTelos). The total consideration for this transaction included $181 million, on a net present value basis, of notes payable to Shentel. Sprint will satisfy its obligations under the notes payable over an expected term of five to six years, of which the remaining obligation is ~~$132~~$141 million as of June 30, ~~2018.~~2019. The remainder of our ~~capital~~finance lease and other obligations of ~~$327~~$25 million and $241 million as of June 30, ~~2018~~2019, respectively are primarily for the use of wireless network equipment.

Covenants

Certain indentures and other agreements require compliance with various covenants, including covenants that limit the ability of the Company and its subsidiaries to sell all or substantially all of its assets, limit the ability of the Company and its subsidiaries to incur indebtedness and liens, and require that we maintain certain financial ratios, each as defined by the terms of the indentures, supplemental indentures and financing arrangements.

As of June 30, ~~2018,~~2019, the Company was in compliance with all restrictive and financial covenants associated with its borrowings. A default under any of our borrowings could trigger defaults under certain of our other debt obligations, which in turn could result in the maturities being accelerated.

Under our secured revolving bank credit facility, we are currently restricted from paying cash dividends because our ratio of total indebtedness to adjusted EBITDA (each as defined in the applicable agreements) exceeds 2.5 to 1.0.


Note 8.9.	Revenues from Contracts with Customers

The Company adopted Revenue from Contracts with Customers (Topic ~~606~~606) beginning on April 1, 2018 using the modified retrospective method. We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and the sale or rental of wireless devices and accessories. Net operating revenues primarily consist of Wireless and Wireline service revenues, revenues generated from device and accessory sales, revenues from wholesale operators and third-party affiliates. Our contracts with customers may involve multiple performance obligations, which include services, wireless devices or a combination thereof, and we allocate the transaction price between each performance obligation based on its relative standalone selling price. Upon adoption, the Company applied the standard only to contracts that were not completed, referred to as open contracts.

We operate two reportable segments: Wireless and Wireline. ~~For additional information regarding our business and segments, see "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."~~

~~Contracts with Customers~~

Service-related components of the total transaction price typically consist of fixed monthly recurring charges, variable usage charges and miscellaneous fees such as activation fees, international long distance and roaming, commissions on the device insurance program, late payment and administrative fees, and certain regulatory-related fees, net of service credits. For contracts involving multiple performance obligations, such as equipment and service, revenue is allocated based on relative standalone selling price of each performance obligation. We generally recognize revenue allocated to service performance obligations as those services are rendered. As a result of the timing of our multiple billing cycles throughout each month, we are required to estimate the amount of subscriber revenues earned but not billed from the end of each billing cycle to the end of each reporting period, and to estimate and defer amounts billed but not earned as of the end of each reporting period. These estimates are based primarily on rate plans in effect and our historical usage and billing patterns. Regulatory fees and costs are recorded gross. The largest component of regulatory fees is the Universal Service Fund, which represented no more than 2% of net operating revenues for all periods presented in the consolidated statements of comprehensive income.

We recognize equipment sales and corresponding costs of equipment sales when title and risk of loss passes to the indirect dealer or end-use subscriber, assuming all other revenue recognition criteria are met. This typically occurs at the point of sale for direct channel sales and freight-on-board dealer destination for indirect channel sales. For the three month period ended June 30, 2018, equipment sales to our indirect dealers was approximately $750 million. In subsidized postpaid and prepaid Wireless contracts, we subsidize the cost of the device as an incentive to retain and acquire subscribers.

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We recognize revenue on equipment rentals subject to leasing contracts in accordance with the classification of the lease, which is over the lease term for operating leases or upon transfer of control over the equipment for most capital leases.

The accounting estimates related to the recognition of revenue require us to make assumptions about numerous factors such as future billing adjustments, future returns, and the total contract consideration (e.g., for contracts which include customer incentives or consideration payable to the customer).

We use output methods to recognize revenue for performance obligations satisfied over time (i.e., service performance obligations). Output methods measure progress toward satisfying a performance obligation on the basis of direct measurements of the goods or services transferred to date, relative to the remaining goods or services promised under a contract. Management asserts that this method most reasonably represents the transfer of goods or services to the customer. For prepaid contracts which provide the customer with the ability to redeem fixed prepayments for future goods or services, we utilize the proportional amount of redemptions from the customer in comparison to the total expected amount of redemptions as an estimate of our progress toward satisfaction of our performance obligations. For postpaid contracts with unlimited amounts of monthly service and for Wireline contracts, we utilize the time elapsed in relation to the total contract duration as an estimate of our progress toward satisfaction of our performance obligations.

~~In determining the amounts of revenue to recognize, we use the following methods, inputs, and assumptions:~~

Determination of transaction price - we include any fixed and determinable charges per our contracts as part of the total transaction price. To the extent that variable consideration is not constrained, we include a probability-weighted estimate of the variable amount within the total transaction price and update our assumptions over the duration of the contract. We do not accept non-cash consideration from our customers as direct payment for the purchase of equipment at contract inception or for the purchase of ongoing services. Subject to certain restrictions, we may purchase used equipment from customers entering into a new subscriber contract. Our payment for the purchase of this used equipment may not equal its market value. In those circumstances, the expected difference between the purchase price and the market value of the used equipment is treated as an adjustment to the total transaction price of the customer's contract at contract inception.

Assessment of estimates of variable consideration - our Wireless contracts generally do not involve variable consideration which must be allocated amongst performance obligations at contract inception, other than expected adjustments to the total transaction price related to (a) customer equipment rebates; (b) customer retention credits; and (c) product returns and service refunds, all of which we are able to reasonably estimate at contract inception based upon historical experience with similar or identical contracts and similar or identical customers. Our Wireline contracts are generally not subject to significant amounts of variable consideration. We do not consider any of our variable consideration to be constrained for the purpose of estimating the total transaction price to be allocated to our performance obligations.

Allocation of transaction price - we allocate the total transaction price in our contracts amongst performance obligations based upon the relative standalone selling prices of those performance obligations. We use observable external pricing of performance obligations when sold on a standalone basis as evidence of standalone selling prices. Discounts and premiums built into our transaction prices are typically allocated proportionately to all performance obligations within the contracts, exclusive of performance obligations for the delivery of accessories, which are consistently sold at standalone selling price regardless of bundling, and with the exception of estimated Wireless customer retention credits, which are treated as a reduction in the portion of the total transaction price allocated to service revenue.

Measurement of returns, refunds, and other similar obligations are estimated separately for separate product and service types based upon historical experience with similar contracts and similar types of customers. The total transaction price is reduced by the amount estimated as a return, refund, or other similar obligation in relation to the sale. This amount is recorded as a current liability, unless and until our estimates have changed or the relevant obligation has been satisfied.

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Disaggregation of Revenue

We disaggregate revenue based upon differences in accounting for underlying performance obligations. Accounting differences related to our performance obligations are driven by various factors, including the type of product offering provided, the type of customer, and the expected timing of payment for goods and services.

The following table presents disaggregated reported revenue by category:



	Three Months Ended
	June 30,
	2019		2018
	(in millions)
Service revenue
Postpaid	$	4,199	$	4,188
Prepaid	843		982
Wholesale, affiliate and other	285		294
Wireline	236		276
Total service revenue	5,563		5,740
Equipment sales	1,220		1,173
Equipment rentals	1,359		1,212
Total revenue	$	8,142	$	8,125

Three Months Ended
June 30, 2018
(in millions)
Service revenue
Postpaid $ 4,188
Prepaid 982
Wireless wholesale and affiliate 294
Wireline 276
Total service revenue 5,740
Equipment sales 1,173
Equipment rentals 1,212
Total revenue $ 8,125

~~Contract Assets and Liabilities~~

Performance obligations related to our Wireless segment involve the provision of equipment and service. In most circumstances, equipment performance obligations provided to the customer as part of subsidized and installment billing contracts, or as part of standalone equipment sales, are satisfied when title and risk of loss passes to the indirect dealer or end-use subscriber, assuming all other revenue recognition criteria are met. This typically occurs at the point of sale for direct channel sales and freight-on-board dealer destination for indirect channel sales. We recognize revenue on equipment rentals subject to leasing contracts in accordance with the classification of the lease, which is over the lease term for operating leases or upon transfer of control over the equipment for most capital leases. Wireless service performance obligations are typically satisfied over 24 months for subsidized and installment billing contracts with substantive termination penalties such as Buy-One-Get-One (BOGO) contracts, over 18 to 30 months for leasing contracts, and over one month for traditional installment billing contracts. Amounts due for subsidized equipment are due at point of sale. Amounts due for equipment subject to an operating or capital lease are invoiced and collected monthly over the term of the lease. Amounts due for equipment subject to an installment billing note are invoiced and collected monthly over the term of the note, typically between 24 and 30 months for handsets and 12 to 18 months for accessories. A financing component exists in relation to subsidized and installment billing Wireless contracts. However, we do not consider the financing component to be quantitatively or qualitatively significant for installment billing contracts with durations longer than one year. For those installment billing contracts with durations of one year or less, we have elected to apply the practical expedient and not adjust the transaction price for the effects of a financing component. Amounts due for Wireless services are typically invoiced and collected monthly over the relevant service period. Wireless contracts generally do not involve variable consideration, other than expected adjustments to the total transaction price related to expected future price concessions and product returns and service refunds. Our Wireless contracts include consideration resulting from monthly customer charges intended to partially recover taxes imposed on the Company, including fees related to the Universal Service Fund. These fees are based on the customer's estimated monthly voice usage and are therefore allocated to corresponding distinct months of Wireless services. We update our estimates related to return and refund obligations for Wireless equipment and services on a quarterly basis. Returns and refunds are typically provided for up to 14 days after contract inception for individual customers and for 30 days for business customers.

Performance obligations related to our Wireline business involve the provision of services to corporate customers. Wireline service performance obligations are satisfied typically over a period between 24 and 36 months. Amounts due for services are invoiced and collected periodically over the relevant service period. Wireline contracts are not subject to significant amounts of variable consideration, other than charges intended to partially recover taxes imposed on the Company, including fees related to the Universal Service Fund. Such fees are based on the customer's estimated monthly usage and are therefore allocated to corresponding distinct months of Wireline services. Our Wireline contracts do provide

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~~the customer with monthly options to purchase goods or services at prices commensurate with the standalone selling prices for those goods or services, as determined at contract inception.~~Contract Assets and Liabilities

The relationship between the satisfaction of our performance obligations and collection of payments from the customer will vary depending upon the type of contract. In Wireless subsidized contracts, payment related to equipment performance obligations is partially collected upfront and partially collected over the related service period resulting in a contract asset position at contract inception. In traditional Wireless installment billing contracts, the full amount of consideration related to equipment performance obligations is recognized as a receivable at contract inception and collected ratably in accordance with payment terms attached to the installment note. Traditional Wireless installment billing contracts are subject to an accounting contract duration of one month and therefore, do not result in the recognition of a contract position. In Wireless installment billing contracts that include a substantive termination penalty such as when customers receive a monthly service credit to offset monthly payments against applicable installment billing notes, the amount of the total transaction price that is allocated to equipment performance obligations is less than the amount recognized as a noncontingent receivable from the customer at contract inception resulting in a contract liability position. In Wireless leasing contracts, the amount of cash received at inception is generally larger than the amount of upfront revenue allocated and recognized as rental income. This results in a contract liability at contract inception, which is often partially composed of deferred rental income. In prepaid contracts initiated in our indirect channel, customers may purchase a device at a discount.

The Company will often reimburse the dealer some portion of this discount, which is expected to be recovered through future sales of monthly service. This results in a contract asset position at contract inception. In circumstances where prepaid customers prepay account balances, which can be used to purchase future Wireless goods or services, those amounts are recognized as a contract liability until the point where prepayments are redeemed for goods or services and the related performance obligations have been satisfied. In Wireline contracts, we record a contract position, either a contract asset or a contract liability depending upon the specific facts and circumstances of the contract, including to reflect differences between the amount of revenue allocated to equipment delivered upfront and the contractually stated price for that equipment, or if we collect nonrefundable upfront payments from customers related to installation and activation.

We capitalize incremental commissions directly related to the acquisition or renewal of customer contracts, to the

extent that the costs are expected to be recovered. Capitalized costs are amortized on a straight-line basis over the shorter of

the expected customer life or the expected benefit related directly to those costs.

We assess our capitalized contract acquisition asset for impairment on a quarterly basis. We impair our capitalized costs to the extent that the carrying amount of a capitalized cost exceeds (a) the remaining amount of consideration we expect to receive in exchange for the goods and services related to the cost, less (b) the expected costs related directly to providing those goods and services that have not yet been recognized as expenses.

The following table presents the opening and closing balances of our contract assets, contract liabilities, and receivables balances, as well as capitalized costs associated with contracts with customers:


	June 30,			April 1,		June 30,			March 31,
	2018			2018		2019			2019
	(in millions)					(in millions)
Contract assets and liabilities
Contract assets⁽¹⁾	$	550		$	432	$	997		$	928
Billed trade receivables	2,470			2,559		2,659			2,690
Unbilled trade receivables	1,040			1,250		1,031			945
Contract liabilities⁽²⁾	1,045			1,104		995			1,009

Other related assets and liabilities
Other related assets:
Other related assets
Capitalized costs to acquire a customer contract:
Sales commissions - opening balance	$	1,219
Sales commissions - beginning balance						$	1,559
Sales commissions - additions	266					289
Amortization of capitalized sales commissions	(191		)			(217		)
Net costs to acquire a customer contract	$	1,294				$	1,631

_________________


(1)	The fluctuation correlates directly to the execution of new customer contracts and invoicing and collections from customers in the normal course of business.


~~(2)~~	~~Revenue recognized during the period, which was included within the beginning contract liability balance, amounts to $867 million.~~

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The following table presents revenue recognized during the three-month periods ended June 30, 2019 and 2018:



	Three Months Ended
	June 30,
	2019		2018
	(in millions)
Amounts included in the beginning of period contract liability balance	$	886	$	867

Remaining Performance Obligations

The aggregate amount of total transaction price allocated to performance obligations in contracts existing as of the balance sheet date, which are wholly ~~unsatisfied~~ or partially unsatisfied as of the end of the reporting period, and the expected time frame for satisfaction of those ~~unsatisfied~~wholly or partially unsatisfied performance obligations, are as ~~follows (in millions):~~follows:



	(in millions)
Remainder of fiscal year ending March 31, 2020	$	6,383
Fiscal year ending March 31, 2021	2,224
Thereafter	21
Total	$	8,628

Remainder of year ending March 31, 2019 $ 7,281
Year ending March 31, 2020 2,358
Thereafter 4
Total $ 9,643

The amounts disclosed above relate to the allocation of revenue amongst performance obligations in contracts existing as of the balance sheet date, and not to any differences between the timing of revenue recognition and recognition of receivables or cash collection. As a result, those amounts are not necessarily reflected as a contract liability as of the balance sheet date. Included in the above amounts are ~~$2.7~~$2.3 billion for the year ending March 31, ~~2019~~2020 and ~~$872~~$687 million for the year ending March 31, ~~2020,~~2021, respectively, related to the allocation of the total transaction price to future operating lease revenues. Additionally, amounts disclosed above include estimates of variable consideration, where applicable.

Our Wireless contracts generally do not involve variable consideration, other than expected adjustments to the total transaction price related to future price concessions and product returns and service refunds, all of which we are able to reasonably estimate at contract inception based upon historical experience with similar contracts and similar types of customers. In accordance with the practical expedients:

~~The~~the amounts disclosed above do not include revenue allocated to wholly or partially unsatisfied performance obligations for which the accounting contract duration at contract inception is less than 12 months, which includes expected revenues from traditional installment billing contracts with a one-month accounting contract ~~duration.~~duration;

~~The~~the amounts disclosed above do not include variable consideration resulting from monthly customer charges intended to partially recover taxes imposed on the Company, including fees related to the Universal Service Fund. Such fees are based on the customer's estimated monthly voice usage and are therefore, allocated to corresponding distinct months of Wireless ~~services.~~services; and

~~The~~the amounts disclosed above do not include variable consideration resulting from monthly charges to Wireless wholesale customers. Such fees are based on the customer's monthly usage of capacity and are therefore, allocated to corresponding distinct months of Wireless services.

Wireline contracts are generally not subject to significant amounts of variable consideration, other than charges intended to partially recover taxes imposed on the Company, including fees related to the Universal Service Fund. Such fees are based on the customer's estimated monthly usage and are therefore, allocated to corresponding distinct months of Wireline services and recognized as revenue when invoiced in accordance with the practical expedient. Our Wireline contracts do typically provide the customer with monthly options to purchase goods or services at prices commensurate with the standalone selling prices for those goods or services as determined at contract inception.

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Note 9.10.	Severance and Exit Costs

Severance and exit costs consist of ~~lease exit~~severance costs ~~primarily~~ associated with ~~tower~~reductions in our work force, and ~~cell sites,~~ access exit costs related to payments that will continue to be made under our backhaul access contracts for which we will no longer ~~be receiving~~receive any economic ~~benefit, and severance costs associated with reductions in our work force.~~

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benefit.

The following provides the activity in the severance and exit costs liability included in "Accounts payable," "Accrued expenses and other current liabilities" and "Other liabilities" within the consolidated balance ~~sheets:~~sheets. The net expenses are included in "Other, net" within the consolidated statements of comprehensive (loss) income:


	March 31, 2018		Net (Benefit) Expense			Cash Payments and Other			June 30, 2018		March 31, 2019		Net Expense			Cash Payments and Other			June 30, 2019
	(in millions)										(in millions)
Lease exit costs	$	165	$	—		$	(17	)	$	148
Severance costs	64		2		⁽¹⁾	(32		)	34		$	6	$	—		$	(3	)	$	3
Access exit costs	19		6		⁽²⁾	(3		)	22		36		27		⁽¹⁾	(19		)	44
	$	248	$	8		$	(52	)	$	204	$	42	$	27		$	(22	)	$	47

_________________


(1)	For the three-month period ended June 30, ~~2018,~~2019, we recognized costs of $2$27 million (Wireless only).


~~(2)~~	~~For the three-month period ended June 30, 2018, we recognized costs of~~ ~~$6 million ($1 million Wireless~~, ~~$5 million Wireline)~~ as "Severance and exit costs."

We continually refine our network strategy and evaluate other potential network initiatives to improve the overall performance of our network. As it relates to our network strategy, lease exit costs are now under the scope of Topic 842 and part of our evaluation of the remaining amortization period for the ROU asset, which is also subject to asset impairment testing. Additionally, major cost cutting initiatives are expected to continue to reduce operating expenses and improve our operating cash flows. As a result of these ongoing activities, we may incur future material charges associated with lease and access exit costs, severance, asset impairments, and accelerated depreciation, among others.


Note ~~10.~~11.	Income Taxes

The U.S. federal statutory tax rates for the three-month periods ended June 30, 2018 and 2017 were 21% and 35%, respectively. The Tax Cuts and Jobs Act (the Tax Act) enacted in December 2017 reduced the corporate income tax rate effective January 1, 2018. The differences that caused our effective income tax rates to differ from the 21% U.S. federal statutory ~~rates~~rate for ~~the three-month periods ended June 30, 2018 and 2017, respectively,~~income taxes were as follows:



	Three Months Ended June 30,
	2019			2018
	(in millions)
Income tax benefit (expense) at the federal statutory rate	$	29		$	(46	)
Effect of:
State income taxes, net of federal income tax effect	5			(15		)
State law changes, net of federal income tax effect	—			24
Increase deferred tax liability for organizational restructuring	—			(13		)
Credit for increasing research activities	4			—
Change in federal and state valuation allowance	(14		)	6
Other, net	(2		)	(3		)
Income tax benefit (expense)	$	22		$	(47	)
Effective income tax rate	16.2		%	21.4		%

Three Months Ended
June 30,
2018 2017
(in millions)
Income tax expense at the federal statutory rate $ (46 ) $ (174 )
Effect of:
State income taxes, net of federal income tax effect (15 ) (22 )
State law changes, net of federal income tax effect 24
3
Increase deferred tax liability for organizational restructuring (13 ) —
Increase deferred tax liability for business activity changes —
(65 )
Credit for increasing research activities —
4
Change in federal and state valuation allowance 6
(33 )
Other, net (3 ) (5 )
Income tax expense $ (47 ) $ (292 )
Effective income tax rate 21.4 % 58.6 %
Income tax benefit of $22 million for the three-month period ended June 30, 2019 represented a consolidated effective tax rate of 16%. During the period, we recognized a $14 million tax expense for federal and state valuation allowance. This expense partially offsets the tax benefit recognized from the pre-tax book loss at the U.S. federal statutory tax rate.

Income tax expense of $47 million for the three-month period ended June 30, 2018 represented a consolidated effective tax rate of ~~approximately~~ 21%. During the period, we recognized a $24 million tax benefit for the impact of state law changes enacted during the period, partially offset by a $13 million tax expense attributable to organizational restructuring. These adjustments were primarily driven by the change in carrying value of our deferred tax assets and liabilities on temporary differences.

Income tax expense of $292 million for the three-month period ended June 30, 2017 represented a consolidated effective tax rate of approximately 59%. Income tax expense was primarily attributable to taxable temporary differences from the tax amortization of FCC licenses and tax expense on pre-tax gains from spectrum license exchanges during the period. We also increased our deferred state income tax liability by $65 million for changes in business activities causing us to become subject to income tax in additional tax jurisdictions. This resulted in a change in the measurement of the carrying value of our deferred tax liability on temporary differences, primarily FCC licenses.

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We continue to maintain a valuation allowance on certain deferred tax assets, primarily net operating losses with definite-life carry forward periods. Factors that could change our judgment as to our ability to realize these deferred tax assets, and therefore, reduce our valuation allowance, include the existence of future taxable income generated by temporary differences reversing in the net operating loss carryforward periods and income from continuing operations.

~~On December 22, 2017 the SEC issued~~ ~~Staff Accounting Bulletin No. 118~~ (SAB 118), which addresses income tax accounting implications of the Tax Act. Estimates were used to determine the balance of deferred tax assets and liabilities subject to changes in tax laws included in the Tax Act, as well as the reversal pattern of such deferred tax assets and liabilities in assessing the ability to realize deferred tax assets. We continue to analyze the effects of the Tax Act and will record any additional impacts as they are identified during the measurement period. During the three-month period ended June 30, 2018, we did not identify or record any adjustments to the provisional amount previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2018.

As of June 30, ~~2018~~2019 and March 31, ~~2018,~~2019, we maintained unrecognized tax benefits of ~~$226~~$244 million and ~~$239~~$242 million, respectively. Cash paid for income taxes, net was ~~$39~~$27 million and ~~$32~~$39 million for the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.


Note ~~11.~~12.	Commitments and Contingencies

Litigation, Claims and Assessments

~~In March 2009,~~On April 22, 2019, a purported stockholder ~~brought suit,~~ ~~Bennett~~of the Company filed a putative class action complaint in the Southern District of New York against the Company and two of our executive officers, captioned Meneses v. Sprint ~~Nextel Corp.~~,Corporation, et al. On June 5, 2019, a second purported stockholder of the Company filed a putative class action complaint in the ~~U.S. District Court for the~~Southern District of ~~Kansas, alleging~~New York against the Company and two of our executive officers, captioned Soloman v. Sprint Corporation, et al. The complaints in the Meneses and Solomon actions allege that ~~Sprint Communications~~the Company and ~~three of its former~~the two executive officers violated ~~Section~~Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 by ~~failing adequately to disclose certain alleged operational difficulties subsequent to the Sprint-Nextel merger, and by purportedly~~ issuing ~~false and misleading~~untrue statements regarding the write-down of goodwill. The district court granted final approval of a settlement in August 2015, which did not have a material impact to our financial statements. Five stockholder derivative suits related to ~~this 2009 stockholder suit were filed against Sprint Communications~~certain postpaid net subscriber additions. The complaints seek damages and ~~certain of its present and/or former officers and directors. The first,~~ ~~Murphy v. Forsee, was filed in state court in Kansas on April 8, 2009, was removed to federal court, and was stayed by the court pending resolution of the motion to dismiss the~~ ~~Bennett~~ ~~case; the second,~~ ~~Randolph v. Forsee, was filed on July 15, 2010 in state court in Kansas, was removed to federal court, and was remanded back to state court; the third,~~ ~~Ross-Williams v. Bennett, et al., was filed in state court in Kansas on February 1, 2011; the fourth,~~ ~~Price v. Forsee, et al.,~~ ~~was filed in state court in Kansas on April 15, 2011; and the fifth,~~ ~~Hartleib v. Forsee, et al., was filed in federal court in Kansas on July 14, 2011. These cases were essentially stayed while the~~ ~~Bennett~~ case was pending, and we have reached an agreement in principle to settle the matters, by agreeing to some governance provisions and by paying plaintiffs' attorneys fees in an immaterial amount. The court approved the settlement but reduced the plaintiffs'reasonable attorneys fees. The Company believes the lawsuits are without merit. On ~~April 27, 2018,~~June 24, 2019, the ~~court of appeals for the state of Kansas affirmed the settlement ruling. On May 30, 2018, plaintiffs filed a Petition for Review with the Supreme Court of Kansas.~~Meneses action was voluntarily dismissed.

On April 19, 2012, the New York Attorney General filed a complaint alleging that Sprint Communications ~~has~~had fraudulently failed to collect and pay ~~more than $100 million in New York~~ sales taxes on ~~receipts from its~~the sale of wireless telephone services since July 2005. ~~The complaint also seeks recovery of triple damages under~~Although Sprint has settled the ~~State False Claims Act, as well as penalties and interest. Sprint Communications moved to dismiss~~dispute with the complaint on June 14, 2012. On July 1, 2013, the court entered an order denying the motion to dismiss in large part, although it did dismiss certain counts or parts of certain counts. Sprint Communications appealed that order and the intermediate appellate court affirmed the order of the trial court. On October 20, 2015, the Court of AppealsState of New York, affirmed the decision of the appellate court that the tax statute requires us to collect and remit the disputed taxes. Our petition for certiorari to the U.S. Supreme Court on grounds of federal preemption was denied. We have paid the principal amount of tax at issue, under protest, while the suit is pending. The parties are now engaged in discovery in the trial court. We will continue to defend this matter vigorously and we do not expect the resolution of this matter to have a material adverse effect on our financial position or results of operations.

~~Eight~~eight related stockholder derivative suits have been filed against Sprint Communications and certain of its current and former officers and directors. Each suit alleges generally that the individual defendants breached their fiduciary duties to Sprint Communications and its stockholders by allegedly permitting, and failing to disclose, the actions alleged in the suit filed by the New York Attorney General. One suit, filed by the Louisiana Municipal Police Employees Retirement System,

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was dismissed by a federal court. Two suits were filed in state court in Johnson County, Kansas and one of those suits was dismissed as premature; and five suits are pending in federal court in Kansas. The remaining Kansas suits have been stayed pending resolution of the Attorney General's suit. We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations.

Sprint Communications is also a defendant in a complaint filed by several stockholders of Clearwire Corporation (Clearwire) asserting claims for breach of fiduciary duty by Sprint Communications, and related claims and otherwise challenging the Clearwire acquisition. ~~ACP Master, LTD, et al. v. Sprint Nextel Corp., et al., was filed April 26, 2013, in Chancery Court in Delaware. Plaintiffs in the~~ ~~ACP Master, LTD~~ suit have also filed suit requesting an appraisal of the fair value of their Clearwire stock. Trial of those cases took place in October and November 2016. On July 21, 2017, the Delaware Chancery Court ruled in Sprint's favor in both cases. It found no breach of fiduciary duty, and determined the value of Clearwire shares under the Delaware appraisal statute to be $2.13 per share plus statutory interest. The plaintiffs filed an appeal and on April 23, 2018, the Delaware Supreme Court affirmed the ruling of the Delaware Chancery Court in its entirety. This matter is concluded as no further appeals are possible.

Sprint is currently involved in numerous court actions alleging that Sprint is infringing various patents. Most of these cases effectively seek only monetary damages. A small number of these cases are brought by companies that sell products and seek injunctive relief as well. These cases have progressed to various degrees and a small number may go to trial if they are not otherwise resolved. Adverse resolution of these cases could require us to pay significant damages, cease certain activities, or cease selling the relevant products and services. In many circumstances, we would be indemnified for monetary losses that we incur with respect to the actions of our suppliers or service providers. We do not expect the resolution of these cases to have a material adverse effect on our financial position or results of operations.

In October 2013, the FCC Enforcement Bureau began to issue notices of apparent liability (NALs) to other Lifeline providers, imposing fines for intracarrier duplicate accounts identified by the government during its audit function. Those audits also identified a small percentage of potentially duplicative intracarrier accounts related to our Assurance Wireless^® business. No NAL has yet been issued with respect to Sprint and we do not know if one will be issued. Further, we are not able to reasonably estimate the amount of any claim for penalties that might be asserted. However, based on the information currently available, if a claim is asserted by the FCC, Sprint does not believe that any amount ultimately paid would be material to the Company’s results of operations or financial position.

Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. ~~As of June 30, 2018, we have accrued $114 million associated with a state tax matter.~~ If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations.

Spectrum Reconfiguration Obligations

In 2004, the FCC adopted a Report and Order that included new rules regarding interference in the 800 MHz band and a comprehensive plan to reconfigure the 800 MHz band. The Report and Order provides for the exchange of a portion of our 800 MHz FCC spectrum licenses, and requires us to fund the cost incurred by public safety systems and other incumbent licensees to reconfigure the 800 MHz spectrum band. Also, in exchange, we received licenses for 10 MHz of nationwide spectrum in the 1.9 GHz band.

The minimum cash obligation was $2.8 billion under the Report and Order. We are, however, obligated to continue to pay the full amount of the costs relating to the reconfiguration plan, although those costs have exceeded $2.8 billion. As required under the terms of the Report and Order, a letter of credit has been secured to provide assurance that funds will be available to pay the relocation costs of the incumbent users of the 800 MHz spectrum. The letter of credit was

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initially $2.5 billion, but has been reduced during the course of the proceeding to ~~$115~~$78 million as of June 30, ~~2018.~~2019. Since the inception of the program, we have incurred payments of approximately $3.6 billion directly attributable to our performance under the Report and Order, including ~~approximately $21~~$2 million during the three-month period ended June 30, ~~2018.~~2019. When incurred, substantially all costs are accounted for as additions to FCC licenses with the remainder as property, plant and

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equipment. Based on our expenses to date and on third party administrator's audits, we have exceeded the $2.8 billion minimum cash obligation required by the FCC. On October 12, 2017, the FCC released a Declaratory Ruling that we have met the minimum cash obligation under the Report and Order and concluded that Sprint will not be required to make any payments to the U.S. Treasury.

~~Completion~~We have recently reported to the FCC that virtually all of the ~~800 MHz band reconfiguration was initially required by June 26, 2008 and~~ public safety reconfiguration is ~~nearly~~ complete across the country, including along the southern border markets, which had been delayed due to coordination efforts with ~~the exception of the States of California, Texas and New~~ Mexico. The FCC continues to grant the remaining 800 MHz public safety licensees additional time to complete their band reconfigurations which, in turn, delays our access to our 800 MHz replacement channels in these areas. In the non-border areas of these states where band reconfiguration is complete,Accordingly, Sprint has received its full allotment of replacement spectrum in the 800 MHz band and Sprint isfaces no impediments in deploying 3G CDMA and 4G LTE on this spectrum in combination with its spectrum in the 1.9 GHz and 2.5 GHz bands.


~~Note 12.~~	~~Per Share Data~~

~~Basic net income per common share is calculated by dividing net income by the weighted average~~ A small number of ~~common shares outstanding during~~non-public safety operators must still complete certain retuning work and complete administrative tasks in states along the ~~period. Diluted net income per common share adjusts basic net income per common share, computed using the treasury stock method, for the effects of potentially dilutive common shares, if the effect is~~southern border, however, these remaining activities do not antidilutive. As of the three-month period ended June 30, 2018, the computation of diluted net income per common share includes the effect of dilutive securities consisting of approximately 47 million options and restricted stock units and 4 million shares attributable to warrants, of which 2 million related to the warrant held by SoftBank. As of the three-month period ended June 30, 2018, outstanding options to purchase shares totaling 9 million were not included in the computation of diluted net income per common share because to do so would have been antidilutive. As of the three-month period ended June 30, 2017, outstanding options to purchase shares totaling 4 million were not included in the computation of diluted net income per common share because to do so would have been antidilutive. The computation of diluted net income per common share as of the three-month period ended June 30, 2017 includes the effect of dilutive securities consisting of approximately 59 million options and restricted stock units, in addition to 24 million shares attributable to warrants, of which 20 million relate to shares issuable under the warrant held by SoftBank. At the close of the merger with SoftBank, the warrant was issued at $5.25 per share. On July 10, 2018, SoftBank exercised its warrant in full to purchase 55 million shares of stock for $287 million.impact Sprint's operations.


Note 13.	Per Share Data

The computation of basic and diluted net (loss) income per common share attributable to Sprint was as follows:



	Three Months Ended
	June 30,
	2019			2018
	(in millions, except per share amounts)
Net (loss) income	$	(114	)	$	173
Less: Net loss attributable to noncontrolling interests	3			3
Net (loss) income attributable to Sprint	$	(111	)	$	176

Basic weighted average common shares outstanding	4,087			4,010
Effect of dilutive securities:
Options and restricted stock units	—			47
Warrants⁽¹⁾	—			4
Diluted weighted average common shares outstanding	4,087			4,061

Basic net (loss) income per common share attributable to Sprint	$	(0.03	)	$	0.04
Diluted net (loss) income per common share attributable to Sprint	$	(0.03	)	$	0.04

Potentially dilutive securities:
Outstanding stock options⁽²⁾	90			9

_________________


(1)	For the three-month period ended June 30, 2018, dilutive securities attributable to warrants include 2 million shares issuable under the warrant held by SoftBank. At the close of the merger with SoftBank, the warrant was issued at $5.25 per share. On July 10, 2018, SoftBank exercised its warrant in full to purchase 55 million shares of Sprint common stock for $287 million.


(2)	Potentially dilutive securities were not included in the computation of diluted net (loss) income per common share if to do so would have been antidilutive.


Note 14.	Segments

Sprint operates two reportable segments: Wireless and Wireline.

Wireless primarily includes retail, wholesale, and affiliate revenue from a wide array of wireless voice and data transmission services, revenue from the sale of wireless devices (handsets and tablets) and accessories, and equipment rentals from devices leased to customers, all of which are generated in the U.S., Puerto Rico and the U.S. Virgin Islands.

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Wireline primarily includes revenue from domestic and international wireline communication services provided to other communications companies and targeted business subscribers, in addition to our Wireless segment.

We define segment earnings as wireless or wireline operating income (loss) before other segment expenses such as depreciation, amortization, severance, exit costs, goodwill impairments, asset impairments, and other items, if any, solely and directly attributable to the segment representing items of a non-recurring or unusual nature. Expense and income items excluded from segment earnings are managed at the corporate level. Transactions between segments are generally accounted for based on market rates, which we believe approximate fair value. The Company generally re-establishes these rates at the beginning of each fiscal year. The impact of intercompany pricing rate changes to our Wireline segment earnings does not affect our consolidated results of operations as our Wireless segment has an equivalent offsetting impact in cost of services.

Segment financial information is as follows:



Statement of Operations Information	Wireless			Wireline			Corporate, Other and Eliminations			Consolidated
	(in millions)
Three Months Ended June 30, 2019
Net operating revenues	$	7,901		$	236		$	5		$	8,142
Inter-segment revenues⁽¹⁾	—			71			(71		)	—
Total segment operating expenses⁽²⁾	(4,864		)	(307		)	71			(5,100		)
Segment earnings	$	3,037		$	—		$	5		3,042
Less:
Depreciation - network and other										(1,120		)
Depreciation - equipment rentals										(1,029		)
Amortization										(118		)
Merger costs⁽²⁾										(83		)
Other, net⁽³⁾										(237		)
Operating income										455
Interest expense										(619		)
Other income, net										28
Loss before income taxes										$	(136	)



Statement of Operations Information	Wireless			Wireline			Corporate, Other and Eliminations			Consolidated
	(in millions)
Three Months Ended June 30, 2018
Net operating revenues	$	7,845		$	276		$	4		$	8,125
Inter-segment revenues⁽¹⁾	—			62			(62		)	—
Total segment operating expenses⁽²⁾	(4,527		)	(380		)	62			(4,845		)
Segment earnings (loss)	$	3,318		$	(42	)	$	4		3,280
Less:
Depreciation - network and other										(1,023		)
Depreciation - equipment rentals										(1,136		)
Amortization										(171		)
Merger costs⁽²⁾										(93		)
Other, net⁽³⁾										(42		)
Operating income										815
Interest expense										(637		)
Other income, net										42
Income before income taxes										$	220

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~~Segment financial information is as follows:~~

Statement of Operations Information Wireless Wireline Corporate,
Other and
Eliminations Consolidated
(in millions)
Three Months Ended June 30, 2018
Net operating revenues $ 7,845
$ 276
$ 4
$ 8,125
Inter-segment revenues⁽¹⁾
—
62
(62 ) —
Total segment operating expenses⁽²⁾
(4,527 ) (380 ) 62
(4,845 )
Segment earnings $ 3,318
$ (42 ) $ 4
3,280
Less:
Depreciation - network and other (1,023 )
Depreciation - equipment rentals (1,136 )
Amortization (171 )
Merger costs ⁽²⁾
(93 )
Other, net⁽³⁾
(42 )
Operating income 815
Interest expense (637 )
Other income, net 42
Income before income taxes $ 220

Statement of Operations Information Wireless Wireline Corporate,
Other and
Eliminations Consolidated
(in millions)
Three Months Ended June 30, 2017
Net operating revenues $ 7,810
$ 343
$ 4
$ 8,157
Inter-segment revenues⁽¹⁾
—
90
(90 ) —
Total segment operating expenses (4,944 ) (444 ) 84
(5,304 )
Segment earnings $ 2,866
$ (11 ) $ (2 ) 2,853
Less:
Depreciation - network and other (977 )
Depreciation - equipment rentals (854 )
Amortization (223 )
Other, net⁽³⁾
364
Operating income 1,163
Interest expense (613 )
Other expense, net (52 )
Income before income taxes $ 498


Other Information	Wireless		Wireline		Corporate and Other		Consolidated		Wireless		Wireline		Corporate and Other		Consolidated
	(in millions)								(in millions)
Capital expenditures for the three months ended June 30, 2019									$	2,543	$	28	$	134	$	2,705
Capital expenditures for the three months ended June 30, 2018	$	2,836	$	51	$	62	$	2,949	$	2,836	$	51	$	62	$	2,949
Capital expenditures for the three months ended June 30, 2017	$	2,324	$	62	$	124	$	2,510

_________________


(1)	Inter-segment revenues consist primarily of wireline services provided to the Wireless segment for resale to, or use by, wireless subscribers.


(2)	The three-month ~~period~~periods ended June 30, 2019 and 2018 ~~includes~~include $83 million and $93 million, respectively, of merger-related costs, which were recorded ~~as selling,~~in "Selling, general and ~~administrative expenses~~administrative" in the consolidated statements of comprehensive (loss) income.

(3)

Other, net for the three-month period ended June 30, 2019 includes $210 million of asset impairment charges primarily related to the sale and leaseback of our Overland Park, Kansas campus and $27 million of severance and exit costs due to access termination charges. Other, net for the three-month period ended June 30, 2018 consists of $34 million associated with the purchase of certain leased spectrum assets, which upon termination of the related spectrum leases resulted in the accelerated recognition of the unamortized favorable lease balances and $8 million of severance and exit costs primarily due to access termination charges. The three-month period ended June 30, 2017 consists of a $175 million net loss on disposal of property, plant and equipment, which consisted of a $181 million loss related to cell site construction costs that are no longer recoverable as a result of changes in our network plans, slightly offset by a $6 million gain. In addition, the three-month period ended June 30, 2017 includes a $479 million non-cash gain related to spectrum license exchanges with other carriers, a $55 million reduction of an accrual related to



Operating Revenues by Service and Products	Wireless		Wireline		Corporate, Other and Eliminations⁽¹⁾			Consolidated
	(in millions)
Three Months Ended June 30, 2019
Service revenue	$	5,042	$	289	$	(71	)	$	5,260
Wireless equipment sales	1,220		—		—			1,220
Wireless equipment rentals	1,359		—		—			1,359
Other	280		18		5			303
Total net operating revenues	$	7,901	$	307	$	(66	)	$	8,142

Operating Revenues by Service and Products	Wireless		Wireline		Corporate, Other and Eliminations⁽¹⁾			Consolidated
	(in millions)
Three Months Ended June 30, 2018
Service revenue	$	5,170	$	314	$	(62	)	$	5,422
Wireless equipment sales	1,173		—		—			1,173
Wireless equipment rentals	1,212		—		—			1,212
Other	290		24		4			318
Total net operating revenues	$	7,845	$	338	$	(58	)	$	8,125

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

favorable developments in pending legal proceedings and a $5 million reversal of previously accrued contract termination costs primarily related to the termination of our relationship with General Wireless Operations Inc. (Radio Shack).

Operating Revenues by Service and Products Wireless Wireline
Corporate,
Other and
Eliminations⁽¹⁾
Consolidated
(in millions)
Three Months Ended June 30, 2018
Service revenue $ 5,170
$ 314
$ (62 ) $ 5,422
Wireless equipment sales 1,173
—
—
1,173
Wireless equipment rentals 1,212
—
—
1,212
Other
290
24
4
318
Total net operating revenues $ 7,845
$ 338
$ (58 ) $ 8,125

Operating Revenues by Service and Products Wireless Wireline
Corporate,
Other and
Eliminations⁽¹⁾
Consolidated
(in millions)
Three Months Ended June 30, 2017
Service revenue⁽²⁾
$ 5,465
$ 413
$ (90 ) $ 5,788
Wireless equipment sales 1,187
—
—
1,187
Wireless equipment rentals 899
—
—
899
Other⁽²⁾
259
20
4
283
Total net operating revenues $ 7,810
$ 433
$ (86 ) $ 8,157

_______________


(1)	Revenues eliminated in consolidation consist primarily of wireline services provided to the Wireless segment for resale to or use by wireless subscribers.

~~(2)~~

Sprint is no longer reporting Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. We have excluded these subscribers from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline mobile virtual network operators (MVNO). The above tables reflect the reclassification of the related Assurance Wireless prepaid revenue within the Wireless segment from Wireless services to Other of $82 million for the three-month period ended June 30, 2017. Revenue associated with subscribers through our wholesale Lifeline MVNOs remains in Other following this change.


Note ~~14.~~15.	Related-Party Transactions

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

Brightstar

We have arrangements with Brightstar US, Inc. (Brightstar), whereby Brightstar provides supply chain and inventory management services to us in our indirect channels and whereby Sprint may sell new and used devices and new accessories to Brightstar for its own purposes. To facilitate certain of these arrangements, we have extended a $700 million credit line to Brightstar to assist with the purchasing and distribution of devices and accessories. As a result, we shifted our concentration of credit risk away from our indirect channel partners to Brightstar. As Brightstar is a subsidiary of SoftBank, we expect SoftBank will provide the necessary support to ensure that Brightstar will fulfill its obligations to us under these arrangements. However, we have no assurance that SoftBank will provide such support.

The supply chain and inventory management arrangement included, among other things, that Brightstar may purchase inventory from the original equipment manufacturers to sell directly to our indirect dealers. As compensation for these services, we remit per unit fees to Brightstar for each device sold to dealers or retailers in our indirect channels. During

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, we incurred fees under these arrangements totaling ~~$17~~$13 million and ~~$23~~$17 million, respectively, which are recognized in "Cost of equipment sales" and "Selling, general and administrative" expenses in the consolidated statements of comprehensive (loss) income. Additionally, we have an arrangement with Brightstar whereby they perform certain of our reverse logistics including device buyback, trade-in technology and related services.

During the three-month period ended September 30, 2017, we entered into an arrangement with Brightstar whereby accessories previously procured by us and sold to customers in our direct channels ~~will~~are now be procured and

~~Table of Contents~~

~~Index for Notes to the Consolidated Financial Statements~~

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

consigned to us from Brightstar. Amounts billed from the sale of accessory inventory are remitted to Brightstar. In exchange for our efforts to sell accessory inventory owned by Brightstar, we ~~will receive~~received a fixed fee from Brightstar for each device activated in our direct channels. In August 2018, the arrangement was amended and we received a share of the profits associated with the sale of accessory inventory owned by Brightstar. For the three-month ~~period~~periods ended June 30, 2019 and 2018, Sprint earned fees under these arrangements of $42 million and $49 million, respectively, which are recognized as other revenue within "Service revenue" in the consolidated statements of comprehensive (loss) income.

Amounts included in our consolidated financial statements associated with these supply chain and inventory management arrangements with Brightstar were as follows:


Consolidated balance sheets:	June 30, 2018		March 31, 2018		June 30, 2019		March 31, 2019
	(in millions)				(in millions)
Accounts receivable	$	125	$	188	$	175	$	187
Accounts payable	$	79	$	88
Accounts payable and accrued expenses and other current liabilities					$	93	$	109



	Three Months Ended
Consolidated statements of comprehensive (loss) income:	June 30,
	2019		2018
	(in millions)
Equipment sales	$	344	$	413
Cost of equipment sales	$	361	$	432

Three Months Ended
Consolidated statements of comprehensive income: June 30,
2018 2017
(in millions)
Equipment sales $ 413
$ 350
Cost of equipment sales $ 432
$ 356
SoftBank

Included in “Other liabilities” in the consolidated balance sheets is $108 million payable to a SoftBank affiliate for reimbursement of legal and consulting fees in connection with the proposed merger with T-Mobile paid to third parties on behalf of Sprint.

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Note ~~15.~~16.	Guarantor Financial Information

On September 11, 2013, Sprint Corporation issued $2.25 billion aggregate principal amount of 7.250% notes due 2021 and $4.25 billion aggregate principal amount of 7.875% notes due 2023 in a private placement transaction with registration rights. On December 12, 2013, Sprint Corporation issued $2.5 billion aggregate principal amount of 7.125% notes due 2024 in a private placement transaction with registration rights. Each of these issuances is fully and unconditionally guaranteed by Sprint Communications (Subsidiary Guarantor), which is a 100% owned subsidiary of Sprint Corporation (Parent/Issuer). In connection with the foregoing, in November 2014, the Company and Sprint Communications completed an offer to exchange the notes for a new issue of substantially identical exchange notes registered under the Securities Act of 1933. We did not receive any proceeds from this exchange offer. In addition, on February 24, 2015, Sprint Corporation issued $1.5 billion aggregate principal amount of 7.625% notes due 2025, and on February 20, 2018, Sprint Corporation issued $1.5 billion aggregate principal amount of 7.625% senior notes due 2026, which are fully and unconditionally guaranteed by Sprint Communications.

During the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, there were non-cash equity distributions from the non-guarantor subsidiaries to Subsidiary Guarantor of approximately $37 million and $1.5 billion, ~~and non-cash equity contributions from Subsidiary Guarantor to the non-guarantor subsidiaries of $42 million,~~ respectively, as a result of organizational restructuring for tax purposes. As of June 30, ~~2018,~~2019, there were $24.0 billion of intercompany notes issued by the Subsidiary Guarantor to the non-guarantor subsidiaries. The notes are subordinated to all unaffiliated third-party obligations of Sprint Corporation and its subsidiaries.

Under the Subsidiary Guarantor's secured revolving bank credit facility, the Subsidiary Guarantor is currently restricted from paying cash dividends to the Parent/Issuer or any non-guarantor subsidiary because the ratio of total indebtedness to adjusted EBITDA (each as defined in the applicable agreement) exceeds 2.5 to 1.0.

Sprint has a Receivables Facility providing for the sale of eligible wireless service, installment and certain future lease receivables. In April 2016, Sprint entered into the Tranche 2 transaction to sell and leaseback certain leased devices and a separate network equipment sale-leaseback transaction to sell and leaseback certain network equipment. In October 2016, Sprint transferred certain directly held and third-party leased spectrum licenses to wholly-owned bankruptcy-remote special purpose entities as part of the spectrum financing transaction. In connection with ~~each of~~both the Receivables Facility ~~Tranche 2,~~ and the spectrum financing ~~transaction,~~transactions, Sprint formed certain wholly-owned bankruptcy-remote subsidiaries that are included in the non-guarantor subsidiaries' condensed consolidated financial information. In addition, the bankruptcy-remote special purpose entities formed in connection with the network equipment sale-leaseback transaction, but which are not Sprint subsidiaries, are included in the non-guarantor subsidiaries' condensed consolidated financial information. Each of these is a separate legal entity with its own separate creditors who will be entitled, prior to and upon its liquidation, to be satisfied out of its assets prior to any assets becoming available to ~~Sprint~~ ~~(see~~Sprint. See Note 7.8. Long-Term Debt, Financing and ~~Capital~~Finance Lease ~~Obligations)~~Obligations for additional information.

We have accounted for investments in subsidiaries using the equity method. Presented below is the condensed consolidating financial information.

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CONDENSED CONSOLIDATING BALANCE SHEET


	June 30, 2018											June 30, 2019
	Parent/Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Eliminations			Consolidated		Parent/Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in millions)											(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	3,962	$	416	$	—		$	4,378	$	—	$	4,469	$	400	$	—		$	4,869
Short-term investments	—		4,008		—		—			4,008
Accounts and notes receivable, net	236		481		3,492		(717		)	3,492		233		473		3,558		(706		)	3,558
Current portion of notes receivable from consolidated affiliates	—		424		—		(424		)	—		—		424		—		(424		)	—
Device and accessory inventory	—		—		622		—			622		—		—		726		—			726
Prepaid expenses and other current assets	3		12		880		—			895		—		17		1,419		—			1,436
Total current assets	239		8,887		5,410		(1,141		)	13,395		233		5,383		6,103		(1,130		)	10,589
Investments in subsidiaries	27,885		18,777		—		(46,662		)	—		25,832		17,396		—		(43,228		)	—
Property, plant and equipment, net	—		—		20,538		—			20,538		—		—		20,556		—			20,556
Costs to acquire a customer contract	—		—		1,294		—			1,294		—		—		1,631		—			1,631
Operating lease right-of-use assets												—		—		7,054		—			7,054
Due from consolidated affiliates	6		1,711		—		(1,717		)	—		290		4,900		—		(5,190		)	—
Notes receivable from consolidated affiliates	11,864		23,567		—		(35,431		)	—		11,889		23,143		—		(35,032		)	—
Intangible assets
Goodwill	—		—		6,586		—			6,586		—		—		4,598		—			4,598
FCC licenses and other	—		—		41,368		—			41,368		—		—		41,474		—			41,474
Definite-lived intangible assets, net	—		—		2,245		—			2,245		—		—		1,525		—			1,525
Other assets	—		198		825		—			1,023		—		40		1,079		—			1,119
Total assets	$	39,994	$	53,140	$	78,266	$	(84,951	)	$	86,449	$	38,244	$	50,862	$	84,020	$	(84,580	)	$	88,546

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND EQUITY												LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	—	$	3,143	$	—		$	3,143	$	—	$	—	$	3,672	$	—		$	3,672
Accrued expenses and other current liabilities	237		414		3,724		(717		)	3,658		239		348		3,167		(706		)	3,048
Current portion of long-term debt, financing and capital lease obligations	—		1,817		3,029		—			4,846
Current operating lease liabilities												—		—		1,680		—			1,680
Current portion of long-term debt, financing and finance lease obligations												—		1,369		1,520		—			2,889
Current portion of notes payable to consolidated affiliates	—		—		424		(424		)	—		—		—		424		(424		)	—
Total current liabilities	237		2,231		10,320		(1,141		)	11,647		239		1,717		10,463		(1,130		)	11,289
Long-term debt, financing and capital lease obligations	11,864		10,348		13,559		—			35,771
Long-term debt, financing and finance lease obligations												11,889		10,636		12,548		—			35,073
Long-term operating lease liabilities												—		—		5,913		—			5,913
Notes payable to consolidated affiliates	—		11,864		23,567		(35,431		)	—		—		11,889		23,143		(35,032		)	—
Deferred tax liabilities	—		—		7,704		—			7,704		—		—		7,563		—			7,563
Other liabilities	—		812		2,570		—			3,382		—		788		1,752		—			2,540
Due to consolidated affiliates	—		—		1,717		(1,717		)	—		—		—		5,190		(5,190		)	—
Total liabilities	12,101		25,255		59,437		(38,289		)	58,504		12,128		25,030		66,572		(41,352		)	62,378
Commitments and contingencies
Total stockholders' equity	27,893		27,885		18,777		(46,662		)	27,893		26,116		25,832		17,396		(43,228		)	26,116
Noncontrolling interests	—		—		52		—			52		—		—		52		—			52
Total equity	27,893		27,885		18,829		(46,662		)	27,945		26,116		25,832		17,448		(43,228		)	26,168
Total liabilities and equity	$	39,994	$	53,140	$	78,266	$	(84,951	)	$	86,449	$	38,244	$	50,862	$	84,020	$	(84,580	)	$	88,546

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET



	March 31, 2019
	Parent/Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	6,605	$	377	$	—		$	6,982
Short-term investments	—		67		—		—			67
Accounts and notes receivable, net	96		233		3,554		(329		)	3,554
Current portion of notes receivable from consolidated affiliates	—		424		—		(424		)	—
Device and accessory inventory	—		—		999		—			999
Prepaid expenses and other current assets	—		9		1,280		—			1,289
Total current assets	96		7,338		6,210		(753		)	12,891
Investments in subsidiaries	25,785		17,363		—		(43,148		)	—
Property, plant and equipment, net	—		—		21,201		—			21,201
Costs to acquire a customer contract	—		—		1,559		—			1,559
Due from consolidated affiliates	288		2,418		—		(2,706		)	—
Notes receivable from consolidated affiliates	11,883		23,567		—		(35,450		)	—
Intangible assets
Goodwill	—		—		4,598		—			4,598
FCC licenses and other	—		—		41,465		—			41,465
Definite-lived intangible assets, net	—		—		1,769		—			1,769
Other assets	—		52		1,066		—			1,118
Total assets	$	38,052	$	50,738	$	77,868	$	(82,057	)	$	84,601

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	—	$	3,961	$	—		$	3,961
Accrued expenses and other current liabilities	97		230		3,599		(329		)	3,597
Current portion of long-term debt, financing and finance lease obligations	—		1,373		3,184		—			4,557
Current portion of notes payable to consolidated affiliates	—		—		424		(424		)	—
Total current liabilities	97		1,603		11,168		(753		)	12,115
Long-term debt, financing and finance lease obligations	11,883		10,660		12,823		—			35,366
Notes payable to consolidated affiliates	—		11,883		23,567		(35,450		)	—
Deferred tax liabilities	—		—		7,556		—			7,556
Other liabilities	—		807		2,630		—			3,437
Due to consolidated affiliates	—		—		2,706		(2,706		)	—
Total liabilities	11,980		24,953		60,450		(38,909		)	58,474
Commitments and contingencies
Total stockholders' equity	26,072		25,785		17,363		(43,148		)	26,072
Noncontrolling interests	—		—		55		—			55
Total equity	26,072		25,785		17,418		(43,148		)	26,127
Total liabilities and equity	$	38,052	$	50,738	$	77,868	$	(82,057	)	$	84,601

March 31, 2018
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
ASSETS
Current assets:
Cash and cash equivalents $ —
$ 6,222
$ 388
$ —
$ 6,610
Short-term investments —
2,354
—
—
2,354
Accounts and notes receivable, net 99
248
3,711
(347 ) 3,711
Current portion of notes receivable from consolidated affiliates —
424
—
(424 ) —
Device and accessory inventory —
—
1,003
—
1,003
Prepaid expenses and other current assets 5
9
561
—
575
Total current assets 104
9,257
5,663
(771 ) 14,253
Investments in subsidiaries 26,351
18,785
—
(45,136 ) —
Property, plant and equipment, net —
—
19,925
—
19,925
Due from consolidated affiliates 1
—
594
(595 ) —
Notes receivable from consolidated affiliates 11,887
23,991
—
(35,878 ) —
Intangible assets
Goodwill —
—
6,586
—
6,586
FCC licenses and other —
—
41,309
—
41,309
Definite-lived intangible assets, net —
—
2,465
—
2,465
Other assets —
185
736
—
921
Total assets $ 38,343
$ 52,218
$ 77,278
$ (82,380 ) $ 85,459

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ —
$ —
$ 3,409
$ —
$ 3,409
Accrued expenses and other current liabilities 100
341
3,868
(347 ) 3,962
Current portion of long-term debt, financing and capital lease obligations —
1,832
1,597
—
3,429
Current portion of notes payable to consolidated affiliates —
—
424
(424 ) —
Total current liabilities 100
2,173

9,298

(771 )
10,800
Long-term debt, financing and capital lease obligations 11,887
10,381
15,195
—
37,463
Notes payable to consolidated affiliates —
11,887
23,991
(35,878 ) —
Deferred tax liabilities —
—
7,294
—
7,294
Other liabilities —
831
2,652
—
3,483
Due to consolidated affiliates —
595
—
(595 ) —
Total liabilities 11,987
25,867
58,430
(37,244 ) 59,040
Commitments and contingencies
Total stockholders' equity 26,356
26,351
18,785
(45,136 ) 26,356
Noncontrolling interests —
—
63
—
63
Total equity 26,356
26,351
18,848
(45,136 ) 26,419
Total liabilities and equity $ 38,343
$ 52,218
$ 77,278
$ (82,380 ) $ 85,459

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME



	Three Months Ended June 30, 2019
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues:
Service	$	—		$	—		$	5,563		$	—		$	5,563
Equipment sales	—			—			1,220			—			1,220
Equipment rentals	—			—			1,359			—			1,359
	—			—			8,142			—			8,142
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,710			—			1,710
Cost of equipment sales	—			—			1,341			—			1,341
Cost of equipment rentals (exclusive of depreciation below)	—			—			225			—			225
Selling, general and administrative	—			—			1,907			—			1,907
Depreciation - network and other	—			—			1,120			—			1,120
Depreciation - equipment rentals	—			—			1,029			—			1,029
Amortization	—			—			118			—			118
Other, net	—			—			237			—			237
	—			—			7,687			—			7,687
Operating income	—			—			455			—			455
Other income (expense):
Interest income	226			526			141			(863		)	30
Interest expense	(226		)	(550		)	(706		)	863			(619		)
(Losses) earnings of subsidiaries	(111		)	(86		)	—			197			—
Other expense, net	—			(1		)	(1		)	—			(2		)
	(111		)	(111		)	(566		)	197			(591		)
(Loss) income before income taxes	(111		)	(111		)	(111		)	197			(136		)
Income tax benefit	—			—			22			—			22
Net (loss) income	(111		)	(111		)	(89		)	197			(114		)
Less: Net loss attributable to noncontrolling interests	—			—			3			—			3
Net (loss) income attributable to Sprint Corporation	(111		)	(111		)	(86		)	197			(111		)
Other comprehensive (loss) income	(22		)	(22		)	—			22			(22		)
Comprehensive (loss) income	$	(133	)	$	(133	)	$	(89	)	$	219		$	(136	)

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SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended June 30, 2018															Three Months Ended June 30, 2018
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)															(in millions)
Net operating revenues:
Service revenue	$	—		$	—		$	5,740		$	—		$	5,740
Service																$	—		$	—		$	5,740		$	—		$	5,740
Equipment sales	—			—			1,173			—			1,173			—			—			1,173			—			1,173
Equipment rentals	—			—			1,212			—			1,212			—			—			1,212			—			1,212
	—			—			8,125			—			8,125			—			—			8,125			—			8,125
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,677			—			1,677			—			—			1,677			—			1,677
Cost of equipment sales	—			—			1,270			—			1,270			—			—			1,270			—			1,270
Cost of equipment rentals (exclusive of depreciation below)	—			—			124			—			124			—			—			124			—			124
Selling, general and administrative	—			—			1,867			—			1,867			—			—			1,867			—			1,867
Depreciation - network and other	—			—			1,023			—			1,023			—			—			1,023			—			1,023
Depreciation - equipment rentals	—			—			1,136			—			1,136			—			—			1,136			—			1,136
Amortization	—			—			171			—			171			—			—			171			—			171
Other, net	—			—			42			—			42			—			—			42			—			42
	—			—			7,310			—			7,310			—			—			7,310			—			7,310
Operating income	—			—			815			—			815			—			—			815			—			815
Other income (expense):
Interest income	226			547			2			(733		)	42			226			547			2			(733		)	42
Interest expense	(226		)	(571		)	(573		)	733			(637		)	(226		)	(571		)	(573		)	733			(637		)
Earnings (losses) of subsidiaries	176			202			—			(378		)	—			176			202			—			(378		)	—
Other (expense) income, net	—			(2		)	2			—			—			—			(2		)	2			—			—
	176			176			(569		)	(378		)	(595		)	176			176			(569		)	(378		)	(595		)
Income (loss) before income taxes	176			176			246			(378		)	220			176			176			246			(378		)	220
Income tax expense	—			—			(47		)	—			(47		)	—			—			(47		)	—			(47		)
Net income (loss)	176			176			199			(378		)	173			176			176			199			(378		)	173
Less: Net loss attributable to noncontrolling interests	—			—			3			—			3			—			—			3			—			3
Net income (loss) attributable to Sprint Corporation	176			176			202			(378		)	176			176			176			202			(378		)	176
Other comprehensive (loss) income	(4		)	(4		)	(13		)	17			(4		)	(4		)	(4		)	(13		)	17			(4		)
Comprehensive income (loss)	$	172		$	172		$	186		$	(361	)	$	169		$	172		$	172		$	186		$	(361	)	$	169

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF ~~COMPREHENSIVE INCOME (LOSS)~~CASH FLOWS

Three Months Ended June 30, 2017
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
Net operating revenues:
Service revenue $ —
$ —
$ 6,071
$ —
$ 6,071
Equipment sales —
—
1,187
—
1,187
Equipment rentals —
—
899
—
899
—
—
8,157
—
8,157
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below) —
—
1,709
—
1,709
Cost of equipment sales —
—
1,545
—
1,545
Cost of equipment rentals (exclusive of depreciation below) —
—
112
—
112
Selling, general and administrative —
—
1,938
—
1,938
Depreciation - network and other —
—
977
—
977
Depreciation - equipment rentals —
—
854
—
854
Amortization —
—
223
—
223
Other, net —
(55 ) (309 ) —
(364 )
—
(55 ) 7,049
—
6,994
Operating income —
55
1,108
—
1,163
Other income (expense):
Interest income 198
45
4
(228 ) 19
Interest expense (198 ) (351 ) (292 ) 228
(613 )
Earnings (losses) of subsidiaries 206
524
—
(730 ) —
Other expense, net —
(67 ) (4 ) —
(71 )
206
151
(292 ) (730 ) (665 )
Income (loss) before income taxes 206
206
816
(730 ) 498
Income tax expense —
—
(292 ) —
(292 )
Net income (loss) 206
206
524
(730 ) 206
Other comprehensive (loss) income (4 ) (4 ) 5
(1 ) (4 )
Comprehensive income (loss) $ 202
$ 202
$ 529
$ (731 ) $ 202



	Three Months Ended June 30, 2019
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	—		$	(186	)	$	2,430		$	—		$	2,244
Cash flows from investing activities:
Capital expenditures - network and other	—			—			(1,189		)	—			(1,189		)
Capital expenditures - leased devices	—			—			(1,516		)	—			(1,516		)
Expenditures relating to FCC licenses	—			—			(9		)	—			(9		)
Purchases of short-term investments	—			67			—			—			67
Change in amounts due from/due to consolidated affiliates	17			(2,427		)	—			2,410			—
Proceeds from sales of assets and FCC licenses	—			—			182			—			182
Proceeds from intercompany note advance to consolidated affiliate	—			424			—			(424		)	—
Other, net	—			2			(5		)	—			(3		)
Net cash provided by (used in) investing activities	17			(1,934		)	(2,537		)	1,986			(2,468		)
Cash flows from financing activities:
Proceeds from debt and financings	—			—			1,061			—			1,061
Repayments of debt, financing and finance lease obligations	—			(15		)	(2,904		)	—			(2,919		)
Debt financing costs	—			(2		)	(10		)	—			(12		)
Proceeds from issuance of common stock, net	(17		)	—			—			—			(17		)
Change in amounts due from/due to consolidated affiliates	—			—			2,410			(2,410		)	—
Repayments of intercompany note advance from parent	—			—			(424		)	424			—
Net cash (used in) provided by financing activities	(17		)	(17		)	133			(1,986		)	(1,887		)
Net (decrease) increase in cash, cash equivalents and restricted cash	—			(2,137		)	26			—			(2,111		)
Cash, cash equivalents and restricted cash, beginning of period	—			6,606			457			—			7,063
Cash, cash equivalents and restricted cash, end of period	$	—		$	4,469		$	483		$	—		$	4,952

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS



	Three Months Ended June 30, 2018
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	—		$	(231	)	$	2,661		$	—		$	2,430
Cash flows from investing activities:
Capital expenditures - network and other	—			—			(1,132		)	—			(1,132		)
Capital expenditures - leased devices	—			—			(1,817		)	—			(1,817		)
Expenditures relating to FCC licenses	—			—			(59		)	—			(59		)
Proceeds from sales and maturities of short-term investments	—			810			—			—			810
Purchases of short-term investments	—			(2,464		)	—			—			(2,464		)
Change in amounts due from/due to consolidated affiliates	28			(778		)	—			750			—
Proceeds from sales of assets and FCC licenses	—			—			133			—			133
Proceeds from deferred purchase price from sale of receivables	—			—			170			—			170
Proceeds from intercompany note advance to consolidated affiliate	—			424			—			(424		)	—
Other, net	—			—			(10		)	—			(10		)
Net cash provided by (used in) investing activities	28			(2,008		)	(2,715		)	326			(4,369		)
Cash flows from financing activities:
Proceeds from debt and financings	—			—			1,370			—			1,370
Repayments of debt, financing and finance lease obligations	—			(10		)	(1,405		)	—			(1,415		)
Debt financing costs	(28		)	(9		)	(211		)	—			(248		)
Change in amounts due from/due to consolidated affiliates	—			—			750			(750		)	—
Repayments of intercompany note advance from parent	—			—			(424		)	424			—
Other, net	—			(2		)	—			—			(2		)
Net cash (used in) provided by financing activities	(28		)	(21		)	80			(326		)	(295		)
Net (decrease) increase in cash, cash equivalents and restricted cash	—			(2,260		)	26			—			(2,234		)
Cash, cash equivalents and restricted cash, beginning of period	—			6,222			437			—			6,659
Cash, cash equivalents and restricted cash, end of period	$	—		$	3,962		$	463		$	—		$	4,425

Three Months Ended June 30, 2018
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities $ —
$ (231 ) $ 2,661
$ —
$ 2,430
Cash flows from investing activities:
Capital expenditures - network and other —
—
(1,132 ) —
(1,132 )
Capital expenditures - leased devices —
—
(1,817 ) —
(1,817 )
Expenditures relating to FCC licenses —
—
(59 ) —
(59 )
Proceeds from sales and maturities of short-term investments —
810
—
—
810
Purchases of short-term investments —
(2,464 ) —
—
(2,464 )
Change in amounts due from/due to consolidated affiliates 28
(778 ) —
750
—
Proceeds from sales of assets and FCC licenses —
—
133
—
133
Proceeds from deferred purchase price from sale of receivables —
—
170
—
170
Proceeds from intercompany note advance to consolidated affiliate —
424
—
(424 ) —
Other, net —
—
(10 ) —
(10 )
Net cash provided by (used in) investing activities 28
(2,008 ) (2,715 ) 326
(4,369 )
Cash flows from financing activities:
Proceeds from debt and financings —
—
1,370
—
1,370
Repayments of debt, financing and capital lease obligations —
(10 ) (1,405 ) —
(1,415 )
Debt financing costs (28 ) (9 ) (211 ) —
(248 )
Change in amounts due from/due to consolidated affiliates —
—
750
(750 ) —
Repayments of intercompany note advance from parent —
—
(424 ) 424
—
Other, net —
(2 ) —
—
(2 )
Net cash (used in) provided by financing activities (28 ) (21 ) 80
(326 ) (295 )
Net (decrease) increase in cash, cash equivalents and restricted cash —
(2,260 ) 26
—
(2,234 )
Cash, cash equivalents and restricted cash, beginning of period —
6,222
437
—
6,659
Cash, cash equivalents and restricted cash, end of period $ —
$ 3,962
$ 463
$ —
$ 4,425

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

Three Months Ended June 30, 2017
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities $ —
$ (394 ) $ 2,318
$ —
$ 1,924
Cash flows from investing activities:
Capital expenditures - network and other —
—
(1,151 ) —
(1,151 )
Capital expenditures - leased devices —
—
(1,359 ) —
(1,359 )
Expenditures relating to FCC licenses —
—
(13 ) —
(13 )
Proceeds from sales and maturities of short-term investments —
2,594
—
—
2,594
Purchases of short-term investments —
(1,499 ) —
—
(1,499 )
Change in amounts due from/due to consolidated affiliates —
588
—
(588 ) —
Proceeds from sales of assets and FCC licenses —
—
101
—
101
Proceeds from deferred purchase price from sale of receivables —
—
375
—
375
Other, net —
2
(3 ) —
(1 )
Net cash provided by (used in) investing activities —
1,685
(2,050 ) (588 ) (953 )
Cash flows from financing activities:
Proceeds from debt and financings —
—
902
—
902
Repayments of debt, financing and capital lease obligations —
(1,598 ) (523 ) —
(2,121 )
Call premiums paid on debt redemptions —
(129 ) —
—
(129 )
Change in amounts due from/due to consolidated affiliates —
—
(588 ) 588
—
Other, net —
9
(24 ) —
(15 )
Net cash (used in) provided by financing activities —
(1,718 ) (233 ) 588
(1,363 )
Net (decrease) increase in cash, cash equivalents and restricted cash —
(427 ) 35
—
(392 )
Cash, cash equivalents and restricted cash, beginning of period —
2,461
481
—
2,942
Cash, cash equivalents and restricted cash, end of period $ —
$ 2,034
$ 516
$ —
$ 2,550

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~~Index for Notes to the Consolidated Financial Statements~~

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~


Note ~~16.~~17.	Additional Financial Information

Cash, Cash Equivalents and Restricted Cash

The following provides the classifications of cash, cash equivalents and restricted cash in the consolidated balance sheets:


	June 30, 2018		March 31, 2018		June 30, 2019		March 31, 2019
	(in millions)				(in millions)
Cash and cash equivalents	$	4,378	$	6,610	$	4,869	$	6,982
Restricted cash in Other assets ⁽¹⁾	47		49		83		81
Cash, cash equivalents and restricted cash	$	4,425	$	6,659	$	4,952	$	7,063

_________________


(1)	Restricted cash in Other assets is required as part of our spectrum financing transactions.

Accounts Payable

Accounts payable at June 30, ~~2018~~2019 and March 31, ~~2018~~2019 include liabilities in the amounts of ~~$80~~$64 million and ~~$66~~$75 million, respectively, for payments issued in excess of associated bank balances but not yet presented for collection.

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Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Sprint Corporation, including 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. Unless the context otherwise requires, references to "Sprint," "we," "us," "our" and the "Company" mean Sprint Corporation and its consolidated subsidiaries for all periods presented, and references to "Sprint Communications" are to Sprint Communications, Inc. and its consolidated subsidiaries.

Description of the Company

We are a large wireless communications company in the U.S., as well as a provider of wireline services. Our services are provided through our ownership of extensive wireless networks, an all-digital global wireline network and a Tier 1 Internet backbone.

We offer wireless and wireline services to subscribers in all 50 states, Puerto Rico, and the U.S. Virgin Islands under the Sprint corporate brand, which includes our retail brands of Sprint^®, Boost Mobile^®, Virgin Mobile^®, and Assurance Wireless^® on our wireless networks utilizing various technologies including third generation (3G) code division multiple access (CDMA) and fourth generation (4G) services utilizing Long Term Evolution (LTE). We utilize these networks to offer our wireless subscribers differentiated products and services through the use of a single network or a combination of these networks.

Business Combination Agreement

~~Revenue Recognition~~On July 26, 2019, the DOJ and five State Attorneys General filed an action in the United States District Court for the District of Columbia that would resolve their objections to the Merger Transaction. The Merger Transaction has received approval from 18 of the 19 state public utility commissions. The parties are awaiting further regulatory approvals, and resolution of litigation filed by the Attorneys General of 14 states and the District of Columbia seeking to block the Merger Transaction. Sprint and T-Mobile also announced agreements with DISH Network Corporation (DISH) in which new T-Mobile will divest Sprint’s prepaid businesses (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications, Inc.) and Sprint’s 800 MHz spectrum assets to DISH for a total of approximately $5.0 billion. Additionally, upon the closing of the divestiture transaction, new T-Mobile will provide DISH wireless customers access to its network for up to seven years and offer standard transition services arrangements to DISH during a transition period of up to three years. DISH will also have an option to take on leases for certain cell sites and retail locations that are decommissioned by the new T-Mobile, subject to any assignment restrictions. The transactions with DISH are contingent on the successful closing of T-Mobile’s merger with Sprint among other closing conditions. Additionally, the parties to the Business Combination Agreement extended the Outside Date (as defined in the

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Business Combination Agreement) to November 1, 2019, or, if the Marketing Period (as defined in the Business Combination Agreement) is in effect at such time, then the Outside Date will be January 2, 2020.

Leases

The Company adopted ~~Revenue from Contracts with Customers~~Leases (Topic ~~606)~~842) beginning on April 1, ~~2018~~2019 using the modified retrospective transition method. See Note ~~8. Revenues from Contracts with Customers~~ 7. Leases in Notes to the Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for additional information related to ~~revenues~~operating and ~~contract costs,~~financing leases, including qualitative and quantitative disclosures required under Topic ~~606.~~842. The impact to our consolidated financial statements of adopting Topic ~~606~~842 is presented in Note 2. New Accounting Pronouncements in Notes to the Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

Wireless

We offer wireless services on a postpaid and prepaid payment basis to retail subscribers and also on a wholesale basis, which includes the sale of wireless services that utilize the Sprint network but are sold under the wholesaler's brand.

Postpaid

In our postpaid portfolio, we offer several price plans for both consumer and business subscribers. Many of our price plans include unlimited talk, text and data or allow subscribers to purchase monthly data allowances. We also offer family plans that include multiple lines of service under one account.

Under the Sprint brand, we currently offer our devices through leasing and installment billing programs, and within limited plan offerings devices may be subsidized in exchange for a service contract. Our Sprint branded leasing and installment billing programs do not require a long-term service contract but offer devices tied to service plans at lower monthly rates when compared to subsidy plans. The installment billing program requires the subscriber to pay full or a discounted retail price based on promotional activities for the device over the installment period. The leasing program requires the subscriber

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to pay a rental fee over the lease term. In July 2017, we introduced the Sprint Flex program, which gives customers the opportunity to enjoy their phone before deciding what option (upgrade, continue leasing, return or buy) works best for their lifestyle. Depending on device type, certain leases carry an option to upgrade to a new device annually prior to expiration of the lease. The terms of our lease and installment billing contracts require that customers maintain service otherwise the balance of the remaining contractual obligation on the device is due upon termination of their service. The subsidy program, which has been de-emphasized, requires a long-term service contract and allows ~~for~~ a subscriber to purchase a device generally at a discount. ~~Additionally, in~~In our non-Sprint branded postpaid plan, we offer devices through an installment billing program while requiring service to be purchased on a prepaid basis. The majority of Sprint's current handset activations occur on our Sprint Flex leasing program.

Prepaid

Our prepaid portfolio currently includes multiple brands, each designed to appeal to specific subscriber uses and demographics. Additionally, a subsidy program is available within ~~limited~~certain prepaid plan offerings. In our indirect channel, customers who activate service under certain prepaid plan offerings are able to purchase devices at a discount. Sprint Forward (formerly Sprint Prepaid) primarily serves as a complementary offer to our Sprint Postpaid offer for those subscribers who want plans that are affordable, simple and flexible without a long-term commitment. Boost Mobile primarily serves subscribers that are looking for value without data limits. Virgin Mobile primarily serves subscribers that are looking to optimize spend but need solutions that offer control, flexibility and connectivity through various plans with high speed data options. Virgin Mobile is also designated as a Lifeline-only Eligible Telecommunications Carrier. Under the Assurance Wireless brand, Virgin Mobile provides service to Lifeline eligible subscribers (for whom it seeks reimbursement from the federal Universal Service Fund) and subscribers who have lost their Lifeline eligibility and retain Assurance Wireless retail service. The Lifeline program requires applicants to meet certain eligibility requirements and existing subscribers must recertify as to those requirements annually.While Sprint will continue to support our Lifeline subscribers through our Assurance Wireless prepaid brand, we have excluded these subscribers from our reported prepaid customer base for all periods presented due to regulatory changes resulting in tighter program restrictions. (See ~~"Subscriber Results"~~ ~~for more information.)~~

Wholesale

We have focused our wholesale business on ~~enabling~~allowing our diverse network of customers to successfully grow their business by providing them with an array of network, product, and device solutions. This allows our customers to customize this full suite of value-added solutions to meet the growing demands of their businesses. As part of these growing demands, some of our wholesale mobile virtual network operators (MVNO) are also selling prepaid services under the Lifeline program. While Sprint will continue to support our Lifeline subscribers through our wholesale MVNOs, we have excluded these subscribers from our reported wholesale customer base for all periods presented due to regulatory changes resulting in tighter program restrictions. (See ~~"Subscriber Results"~~ ~~for more information.)~~

We continue to support the open development of applications, content, and devices on the Sprint network. In addition, we enable a variety of business and consumer third-party relationships through our portfolio of machine-to-machine solutions, which we offer on a retail postpaid and wholesale basis. Our machine-to-machine solutions portfolio provides a secure, real-time and reliable wireless two-way data connection across a broad range of connected devices.

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Wireline

We provide a suite of wireline communication services to other communications companies and targeted business ~~subscribers.~~customers. In addition, our Wireline segment provides data and IP communication services to our Wireless segment. We provide long distance services and operate all-digital global long distance and Tier 1 IP networks.

Business Strategies and Key Priorities

Our business strategy is to be responsive to changing customer mobility demands of existing and potential customers, and to expand our business into new areas of customer value and economic opportunity through innovation and differentiation. To help lay the foundation for these future growth opportunities, our strategy revolves around targeted investment in the following key priority areas:

~~Sprint's~~our Next-Gen network plan will deliver competitive coverage, faster speeds and more capacity;

~~Create~~create a compelling unlimited value proposition;

~~Provide~~provide the best digital customer experience; and

~~Engage~~engage our ~~partners~~employees by making Sprint a great place to work.

~~Table~~While the Company launched 5G in select cities in the first half of ~~Contents~~

We2019 and we plan to continue to invest in our network during the next few years, ~~targeting to launch 5G in~~many of the ~~first half of 2019.~~underlying service quality, scale, and financial challenges remain. We aim to use our ~~wealth of~~ spectrum to build our 5G network ~~with focus~~ on ~~designing an incredibly dense~~2.5 GHz spectrum. See Network below for more information regarding our network ~~with thousands~~plans and potential challenges to our rollout of small cells. 5G includes faster speeds and, more importantly, low latency. We expect to also expand coverage using a hybrid plan that combines traditional macros, mini macros, air strands and Sprint Magic Boxes.5G.

We ~~plan~~aim to create a compelling unlimited value proposition by leveraging our spectrum holdings while remaining the price leader on Unlimited plan offerings and taking our brand to the next level.

We plan to continue to invest in digital capabilities and artificial intelligence to improve the customer experience. We are focused on finding the right balance between physical and digital retail to serve customers wherever and whenever they want.

We have recruited leaders in our industry from around the globe and employ an organizational focus to ensure Sprint has a work environment employees recommend.

Network

We continue to increase coverage and capacity by densifying and evolving our existing network toward 5G. Densification, which includes increasing the number of small cells and antennas, is intended to enhance coverage and capacity across the network. We are also deploying new technologies, such as Massive MIMO and carrier aggregation, which allows us to move more data at faster speeds over the same spectrum and eventually migrate customers to an all ~~data service.~~IP network, supporting both Voice over LTE and data. Additionally, our introduction of tri-band devices, including those with 5G capabilities, allows us to manage and operate our network more efficiently and at a lower cost. We have continued to see positive results from these infrastructure upgrades in key U.S. markets. While Sprint will build 5G in a number of cities throughout the country, its current 5G build plans will result in coverage that is limited to major cities and the surrounding areas rather than coverage that blankets the entire geography of the United States. Sprint’s ability to expand this 5G network build plan may be limited by its financial resources, lack of scale and access to low-band spectrum. Moreover, Sprint plans to focus on creating a 5G ecosystem for smartphones and other mobile devices rather than stationary devices.

The 2.5 GHz spectrum band carries the highest percentage of Sprint's LTE data traffic. We have significant additional capacity to grow the use of our 2.5 GHz spectrum holdings into the future. Sprint believes it is well-positioned with spectrum holdings of more than 160 MHz of 2.5 GHz spectrum in the top 100 markets in the U.S. Sprint's ~~broad~~ spectrum holdings allow us to introduce 5G in parallel with 4G service over the same 2.5 GHz spectrum band, supporting the early introduction of 5G devices without disrupting the capacity needed to support our 4G users.

Overall, our densification and introduction of 5G technologies are expected to continue to enhance the customer experience by adding data capacity, increasing the wireless data speeds available to our customers, and improving network performance for both voice and data ~~services. While circumstances may change~~services, especially in the ~~future, we believe that~~geographic areas where 5G will be provided. In the event the

Merger Transaction is not completed, our ~~substantial spectrum holdings are sufficient to allow us to continue~~ability to provide ~~consistent~~a nationwide network ~~reliability, capacity,~~capable of competing effectively with

other competitors in the wireless industry will depend on our access to, and ~~speed, as well as to provide current and future customers a highly competitive wireless experience.~~deployment of, adequate low-band spectrum. As part of the evolution of our existing network toward 5G, we plan to modify our existing backhaul architecture to enable increased capacity to our network at a lower cost by either negotiating lower vendor pricing for existing Ethernet technology or replacing Ethernet with fiber. We expect to incur termination costs associated with Ethernet contractual commitments with ~~third party~~

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third-party vendors ranging between approximately ~~$225~~$100 million to ~~$275~~$120 million, of which the majority are expected to be incurred by December 31, 2020.

In 2019, Sprint launched 5G service in five major cities with four more major cities expected to launch shortly. Once 5G-compatible equipment is in place and activated, customers in those cities will have access to Sprint's 5G network if they are in range of a cell site that has been equipped with a 5G radio supported by available 2.5 GHz spectrum and have a 5G-capable device. As more and more sites are 5G-enabled, customers in those areas will be able to have an increasing percentage of their mobile experiences on 5G rather than on LTE or 3G.

If the Merger Transaction with T-Mobile is not completed, it is expected that Sprint will not be able to deploy a nationwide 5G network on the same scale and on the same timeline as the combined company. For example, Sprint’s standalone 5G network would be geographically limited due to both Sprint’s limited current network footprint on which to build 5G sites and the cost of utilizing 2.5 GHz spectrum for 5G.

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RESULTS OF OPERATIONS

Consolidated Results of Operations

The following table provides an overview of the consolidated results of operations.


	Three Months Ended						Three Months Ended
	June 30,						June 30,
	2018			2017			2019			2018
	(in millions)						(in millions)
Wireless segment earnings	$	3,318		$	2,866		$	3,037		$	3,318
Wireline segment earnings	(42		)	(11		)
Wireline segment loss							—			(42		)
Corporate, other and eliminations	4			(2		)	5			4
Consolidated segment earnings	3,280			2,853			3,042			3,280
Depreciation - network and other	(1,023		)	(977		)	(1,120		)	(1,023		)
Depreciation - equipment rentals	(1,136		)	(854		)	(1,029		)	(1,136		)
Amortization	(171		)	(223		)	(118		)	(171		)
Other, net	(135		)	364			(320		)	(135		)
Operating income	815			1,163			455			815
Interest expense	(637		)	(613		)	(619		)	(637		)
Other income (expense), net	42			(52		)
Income tax expense	(47		)	(292		)
Net income	$	173		$	206
Other income, net							28			42
Income tax benefit (expense)							22			(47		)
Net (loss) income							$	(114	)	$	173

Depreciation Expense - Network and Other

Depreciation expense - network and other increased ~~$46~~$97 million, or 5%9%, for the three-month period ended June 30, ~~2018~~2019 compared to the same period in ~~2017,~~2018, primarily due to increased depreciation on new asset additions, partially offset by decreases associated with fully depreciated or retired assets.

Depreciation Expense - Equipment Rentals

Depreciation expense - equipment rentals ~~increased $282~~decreased $107 million, or ~~33%~~9%, for the three-month period ended June 30, ~~2018~~2019 compared to the same period in ~~2017,~~2018, primarily due to ~~increased~~decreased depreciation onfor fully depreciated or retired leased devices ~~as a result of the continued growth of the~~combined with favorable changes to leased device ~~leasing program.~~residual values.

Amortization Expense

Amortization expense decreased ~~$52~~$53 million, or ~~23%~~31%, for the three-month period ended June 30, ~~2018~~2019 compared to the same period in ~~2017,~~2018, primarily due to customer relationship intangible assets that are amortized using the sum-of-the-months'-digits method, which results in higher amortization rates in early periods that decline over time.

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Other, net

The following table provides additional information regarding items included in "Other, net" for the three-month periods endedJune 30, ~~2018~~2019and ~~2017.~~2018.

Three Months Ended
June 30,
2018 2017
(in millions)
Severance and exit costs $ (8 ) $ —
Litigation and other contingencies —
55
Loss on disposal of property, plant and equipment, net —
(175 )
Contract terminations (34 ) 5
Gains from asset dispositions and exchanges —
479
Merger costs (93 ) —
Total $ (135 ) $ 364



	Three Months Ended
	June 30,
	2019			2018
	(in millions)
Severance and exit costs	$	(27	)	$	(8	)
Contract termination costs	—			(34		)
Merger costs	(83		)	(93		)
Asset impairment	(210		)	—
Total	$	(320	)	$	(135	)

Other, net represented an expense of $320 million for the three-month period ended June 30, 2019. During the three-month period ended June 30, 2019, we recognized $210 million of asset impairment expense primarily related to the sale and leaseback of our Overland Park, Kansas campus and severance and exit costs of $27 million due to access termination charges. In addition, during the three-month period ended June 30, 2019, we incurred merger-related costs of $83 million, which were recorded in "Selling, general and administrative" in the consolidated statements of comprehensive (loss) income.

Other, net represented an expense of $135 million for the three-month period ended June 30, 2018. During the three-month period ended June 30, 2018, we recognized severance and exit costs of $8 million primarily due to access termination charges and $34 million associated with the purchase of certain leased spectrum assets, which upon termination of the related spectrum leases resulted in the accelerated recognition of the unamortized favorable lease balances. We also

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incurred merger-related costs of $93 million, which were recorded ~~as selling,~~in "Selling, general and ~~administrative expenses~~administrative" in the consolidated statements of comprehensive (loss) income.

Other, net represented a benefit of $364 million for the three-month period ended June 30, 2017. During the three-month period ended June 30, 2017, we recorded a $479 million non-cash gain as a result of spectrum license exchanges with other carriers, a $55 million reduction of an accrual related to favorable developments in pending legal proceeding, and a $5 million benefit in contract terminations. In addition, we recorded a $175 million net loss on disposal of property, plant and equipment, which consisted of a $181 million loss related to cell site construction costs that are no longer recoverable as a result of changes in our network plans, slightly offset by a $6 million gain.

Interest Expense

Interest expense ~~increased $24~~decreased $18 million, or 4%3%, for the three-month period ended June 30, ~~2018~~2019 compared to the same period in ~~2017.~~2018. The effective interest rate, which includes capitalized interest, on the weighted average long-term debt balance of $38.6 billion and $40.5 billion was 6.6% and ~~$40.1 billion was~~ 6.4% ~~and 6.3%~~ for the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. See “Liquidity and Capital Resources” for more information on the Company's financing activities.

Other income, ~~(expense),~~ net

Other income, ~~(expense),~~ net was ~~income of $42~~$28 million and ~~expense of $52~~$42 million for the three-month periods ended June 30, 2019 and 2018, respectively, and ~~2017, respectively.~~ represents interest income.

Income ~~during~~Taxes

Income tax benefit of $22 million for the three-month period ended June 30, ~~2018 was primarily due to $43 million~~2019, respectively, represented a consolidated effective tax rate of ~~interest income. The~~16%. During the three-month period ended June 30, ~~2017 included $66~~2019, we recognized a $14 million oftax expense for federal and state valuation allowance. This expense partially offsets the tax benefit recognized from the pre-tax book loss ~~on early extinguishment of debt related to~~at the ~~retirement of portions of the Sprint Communications 8.375% Notes due 2017 and 9.000% Guaranteed Notes due 2018.~~

~~Income Taxes~~

~~The~~ U.S. federal statutory tax rates for the periods ended June 30, 2018 and 2017 were 21% and 35%, respectively. The Tax Cuts and Jobs Act (the Tax Act) enacted in December 2017, reduced the corporate income tax rate effective January 1, 2018.rate.

~~Income~~As of June 30, 2019, we maintained valuation allowance on deferred tax ~~expense~~assets primarily related to net operating loss carryforwards. As of ~~$292 million~~each reporting date, we consider new evidence, both positive and negative, that could affect our view of the future realization of deferred tax assets. Provisions included in federal and state tax laws, in particular alternative cost recovery methods for fixed assets applicable in future periods, can significantly impact the timing of deductions for tax purposes that may result in projected taxable income during the net operating loss carryforward periods. This projected taxable income would be a positive source of evidence. We believe that there is a reasonable possibility that within the next 12 months sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance on deferred tax assets related to certain net operating losses will no longer be needed. Release of the valuation

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allowance would result in the recognition of the deferred tax assets and a non-cash tax benefit for the ~~three-month~~ period ~~ended June 30, 2017 represented a consolidated effective tax rate~~the release is recorded. The exact timing and amount of ~~approximately 59%. Income tax expense was primarily attributable to taxable temporary differences from~~ the tax amortization of FCC licenses and tax expense on pre-tax gains from spectrum license exchanges during the period. We also increased our deferred state income tax liability by $65 million for changes in business activities causing us to becomevaluation allowance release are subject to ~~income tax in additional tax jurisdictions. This resulted in a~~ change independing on the ~~measurement~~results of operations and the ~~carrying value~~timing of ~~our deferred tax liability on temporary differences, primarily FCC licenses.~~future taxable income.

Segment Earnings - Wireless

Wireless segment earnings are a function of wireless net operating revenues inclusive of wireless service revenue, the sale of wireless devices (handsets, tablets and ~~tablets)~~wearables), broadband devices, connected devices, leasing wireless devices, and commissions on the device insurance and accessory programs. Combined with wireless net operating revenues, Wireless segment earnings are also a function of costs of equipment sales and rentals, costs to acquire subscribers, and network and interconnection costs to serve those subscribers, as well as other Wireless segment operating expenses. The cost of equipment sales and equipment rentals primarily ~~include~~includes equipment costs associated with our installment billing and subsidy programs, and loss on disposal of property, plant and equipment, net of recoveries, resulting from the write-off of leased devices where customers did not return the devices to us. The costs to acquire our subscribers also includes marketing and sales costs incurred to attract those subscribers. Network costs primarily represent switch and cell site costs, backhaul costs, and interconnection costs, which generally consist of per-minute usage fees and roaming fees paid to other carriers. The remaining costs associated with operating the Wireless segment include the costs to operate our customer care organization and administrative support. Wireless service revenue, costs to acquire subscribers, and variable network and interconnection costs fluctuate with the changes in our subscriber base and their related usage, but some cost elements do not fluctuate in the short-term with these changes.

As shown by the table above under "Consolidated Results of Operations," Wireless segment earnings represented almost all of our total consolidated segment earnings for the three-month periods ended June 30, ~~2018~~2019 and ~~2017.~~2018. Within the

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Wireless segment, postpaid wireless services represent the most significant contributor to earnings and is driven by the number of postpaid subscribers utilizing our services, as well as average revenue per user (ARPU). The wireless industry is subject to competition to retain and acquire subscribers of wireless services. All markets in which we operate have high rates of penetration for wireless ~~services.~~services, and we expect this competition and market penetration to continue to pressure our share of gross additions and rates of churn.

Device Financing Programs

We offer a leasing program whereby qualified subscribers can lease a device for a contractual period of time, and an installment billing program that allows subscribers to purchase a device by paying monthly installments, generally over 24 months. In July 2017, we introduced the Sprint Flex program, which gives customers the opportunity to enjoy their phone before deciding what option (upgrade, continue leasing, return or buy) works best for their lifestyle. Depending on device type, certain leases carry an option to upgrade to a new device annually prior to expiration of the lease. At the end of the lease term, the subscriber has the option to ~~turn in their~~return the device, continue leasing ~~their~~the device, or purchase the device.

As of June 30, ~~2018,~~2019, substantially all of our device leases were classified as operating leases and predominantly all of our subscribers choose ~~the leasing option~~to lease devices from us under the Sprint Flex program. As a result, the leased devices are classified as property, plant and equipment when ~~made available~~leased to subscribers through Sprint's direct channels. For leases in the indirect channel, we purchase the devices at lease inception from the dealer, which are then capitalized to property, plant and equipment. Lease revenue is recorded monthly over the term of the lease and the cost of the device is depreciated to its estimated residual value, generally over the lease term. As these devices are classified as property, plant and equipment, the cost of the device is not recorded as cost of equipment sales compared to when sold under the installment billing or ~~the~~ traditional subsidy program but rather is recorded as depreciation expense, which results in a significant positive impact to Wireless segment earnings. Depreciation expense incurred on leased devices for the three-month periods ended June 30, 2019 and 2018, was $1.0 billion and ~~2017, was~~ $1.1 billion, ~~and $854 million,~~ respectively. If the mix of leased devices within our subscriber base continues to increase, we expect this positive impact on the financial results of Wireless segment earnings to continue and depreciation expense to increase.

Under the installment billing program, we recognize a majority of the revenue associated with future expected installment payments at the time of sale of the device to Sprint branded customers. As compared to our traditional subsidy program, this results in better alignment of the revenue with the cost of the device. The impact to Wireless earnings from the sale of devices under our installment billing program is ~~generally~~ neutral except for the impact from promotional offers.

Our device leasing and installment billing programs require a greater use of cash flow in the early part of the device contracts as our subscribers will generally pay less upfront than athrough our traditional subsidy program. The accounts ~~receivables~~receivable facility discussed in "Liquidity and Capital Resources" ~~was designed to mitigate~~partially mitigates the significant use of cash from purchasing devices from original equipment manufacturers (OEMs) to fulfill our leasing and installment billing programs.

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Wireless Segment Earnings Trends

Sprint offers lower monthly service fees without a traditional contract as an incentive to attract subscribers to certain of our service plans. These lower rates for service are available whether the subscriber brings their own device, pays the full or discounted retail price offor the device, leases their device through our Sprint Flex leasing program, or purchases the device under our installment billing program. We expect our postpaid ARPU to ~~stabilize~~decline in fiscal year ~~2018~~2019 due to ~~less dilution~~the mix of devices resulting from higher data device sales, which generally have a lower ARPU than handsets, and continued promotional activities as subscribers exit existing promotional offers and increase their monthly spending with us, combined with an increase in acquisition ARPU due to less promotional discounts on multi-lines. We continue to expect higher equipment rentals and equipment sales associated with the leasing and installment billing programs.activities. Since inception, the combination of lower-priced plans and our leasing and installment billing programs have been accretive to Wireless segment earnings. We expect that trend to continue ~~with~~so long as we are able to attract subscribers, particularly postpaid handset subscribers. Additionally, we expect prepaid service revenue to decline in fiscal year 2019 due to the ~~magnitude~~continued amortization of contract balances as a result of the ~~impact being dependent upon subscriber~~ adoption ~~rates.~~of Revenue from Contracts with Customers (Topic 606).

We began to experience net losses of postpaid handset subscribers in mid-2013. Since the release of our price plans associated with device financing options, results have shown improvement in trends of postpaid handset subscribers starting with the quarter ended September 30, ~~2015; however, there can be no assurance that this trend will continue.~~2015. However, we began to experience net losses of postpaid handset subscribers starting with the quarter ended September 30, 2018 through the current quarter. We ~~have taken~~continue to take initiatives to provide the best value in wireless service while continuing to enhance our network performance, coverage and capacity in order to attract and retain valuable handset subscribers. In addition, we ~~are evaluating~~continue to evaluate our cost model to operationalize ~~a more~~the most effective cost ~~structure.~~structure but expect any improvements in 2019 to be fully offset by incremental costs associated with the network and customer experience initiatives.

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The following table provides an overview of the results of operations of our Wireless segment.


	Three Months Ended						Three Months Ended
	June 30,						June 30,
Wireless Segment Earnings	2018			2017			2019			2018
	(in millions)						(in millions)
Postpaid	$	4,188		$	4,466		$	4,199		$	4,188
Prepaid⁽¹⁾	982			999			843			982
Retail service revenues	5,170			5,465
Retail service revenue							5,042			5,170
Wholesale, affiliate and other⁽¹⁾	290			259			280			290
Total service revenue	5,460			5,724			5,322			5,460
Equipment sales	1,173			1,187			1,220			1,173
Equipment rentals	1,212			899			1,359			1,212
Total net operating revenues	7,845			7,810			7,901			7,845
Cost of services (exclusive of depreciation and amortization)	(1,429		)	(1,412		)	(1,519		)	(1,429		)
Cost of equipment sales	(1,270		)	(1,545		)	(1,341		)	(1,270		)
Cost of equipment rentals (exclusive of depreciation)	(124		)	(112		)	(225		)	(124		)
Selling, general and administrative expense	(1,704		)	(1,875		)	(1,779		)	(1,704		)
Total net operating expenses	(4,527		)	(4,944		)	(4,864		)	(4,527		)
Wireless segment earnings	$	3,318		$	2,866		$	3,037		$	3,318

~~_______________~~

~~(1)~~

Sprint is no longer reporting Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. We have excluded these subscribers from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline mobile virtual network operators (MVNO). The above table reflects the reclassification of the related Assurance Wireless prepaid revenue from Prepaid service revenue to Wholesale, affiliate and other revenue of $82 million for the three-month period ended June 30, 2017. Revenue associated with subscribers through our wholesale Lifeline MVNOs remains in Wholesale, affiliate and other revenue following this change.

Service Revenue

Our Wireless segment generates service revenue from the sale of wireless services and the sale of wholesale and other services. Service revenue consists of fixed monthly recurring charges, variable usage charges and miscellaneous fees such as activation fees, international long distance and roaming, commissions on the device insurance program, late payment and administrative fees, and certain regulatory-related fees, net of service credits.

The ability of our Wireless segment to generate service revenue is primarily a function of:

revenue generated from each subscriber, which ~~in turn~~ is a function of the types and amount of services utilized by each subscriber and the rates charged for those services; and

the number of subscribers that we serve, which ~~in turn~~ is a function of our ability to retain existing subscribers and acquire new subscribers.

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Retail comprises those subscribers to whom Sprint directly provides wireless services, whether those services are provided on a postpaid or a prepaid basis. We also categorize our retail subscribers as prime and subprime based ~~upon~~on subscriber credit profiles. We use proprietary scoring systems that measure the credit quality of our subscribers using several factors, such as credit bureau information, subscriber credit risk scores and service plan characteristics. Payment history is subsequently monitored to further evaluate subscriber credit profiles. Wholesale and affiliates are those subscribers who are served through MVNO and affiliate relationships and other arrangements. Under the MVNO relationships, wireless services are sold by Sprint to other companies that resell those services to subscribers.

Retail service revenue decreased ~~$295~~$128 million, or 5%2%, for the three-month period ended June 30, ~~2018,~~2019, compared to the same period in ~~2017.~~2018. The decrease was primarily due to lower prepaid service revenue due to the continued amortization of contract balances as a result of the adoption of Topic 606, combined with lower average revenue per postpaid ~~subscriber~~and prepaid subscribers driven by an increase in subscribers on lower price plans ~~combined with a~~and promotional activities and lower ~~amount of revenue allocated to service revenue following the adoption of Topic 606.~~prepaid subscribers. The decrease was partially offset by an increase in average postpaid ~~and prepaid~~ subscribers.

Wholesale, affiliate and other revenues ~~increased $31~~decreased $10 million, or ~~12%~~3%, for the three-month period ended June 30, ~~2018,~~2019, compared to the same period in ~~2017,~~2018. The decrease was primarily due to lower Lifeline revenue resulting from the continued amortization of contract balances as a result of the adoption of Topic 606, combined with lower fees earned under an accessories arrangement with ~~Brightstar, which commenced during the quarter ending September 30, 2017. This increase~~Brightstar. The decrease was partially offset by ~~a decrease~~an increase in ~~imputed interest recognized~~revenues associated with ~~installment billing on devices and reduced revenue associated~~a reciprocal long-term lease agreement with ~~postpaid and prepaid resellers due~~T-Mobile. In September 2018, we signed a reciprocal long-term lease agreement with T-Mobile in which both parties have the right to ~~competitive pressures.~~use a portion of spectrum owned by the other party. Approximately ~~82%~~79% of our total wholesale and affiliate subscribers represent connected devices. These devices generate revenue which varies based on usage.

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Average Monthly Service Revenue per Subscriber and Subscriber Trends

The table below summarizes average number of retail subscribers. Additional information about the number of subscribers, net additions (losses) to subscribers, and average rates of monthly postpaid and prepaid subscriber churn for each quarter since the quarter ended June 30, ~~2017~~2018 may be found in the tables ~~on the following pages.~~below.


	Three Months Ended		Three Months Ended
	June 30,		June 30,
	2018	2017	2019	2018
	(subscribers in thousands)		(subscribers in thousands)
Average postpaid subscribers	32,050	31,472	32,883	32,050
Average prepaid subscribers	9,027	8,710	8,736	9,027
Average retail subscribers	41,077	40,182	41,619	41,077

The table below summarizes ARPU. Additional information about ARPU for each quarter since the quarter ended June 30, ~~2017~~2018 may be found in the tables on the following pages.



	Three Months Ended
	June 30,
	2019		2018
ARPU⁽¹⁾:
Postpaid	$	42.57	$	43.55
Prepaid	$	32.15	$	36.27
Average retail	$	40.38	$	41.95

Three Months Ended
June 30,
2018 2017
ARPU⁽¹⁾:

Postpaid $ 43.55
$ 47.30
Prepaid $ 36.27
$ 38.24
Average retail $ 41.95
$ 45.34

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(1)

ARPU is calculated by dividing service revenue by the sum of the monthly average number of subscribers in the applicable service category. Changes in average monthly service revenue reflect subscribers for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage, the amount of service credits which are offered to subscribers, plus the net effect of average monthly revenue generated by new subscribers and deactivating subscribers.

Postpaid ARPU for the three-month period ended June 30, ~~2018~~2019 decreased compared to the same period in ~~2017~~2018 primarily due to lower service revenue resulting from increased promotional activities ~~subscriber migrations to service plans associated with~~and higher data device ~~financing options, and~~sales which generally have a lower ~~revenue allocated to service revenue following the adoption of Topic 606.~~ARPU than handsets. Prepaid ARPU decreased for the three-month period ended June 30, ~~2018~~2019 compared to the same period in ~~2017~~2018 primarily due to ~~the~~ lower service revenue ~~resulting from promotional activities and lower revenue allocated~~due to ~~service revenue following~~the continued amortization of contract balances as a result of the adoption of Topic ~~606.~~606 and from promotional activities. (See "Subscriber Results" below for more information.)

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The following table shows (a) net additions (losses) of wireless subscribers, (b) our total subscribers, and (c) end of period connected device subscribers as of the end of each quarterly period beginning with the quarter ended June 30, ~~2017.~~2018.


	June 30, 2017		Sept 30, 2017	Dec 31, 2017	March 31, 2018		June 30, 2018		June 30, 2018		Sept 30, 2018		Dec 31, 2018		March 31, 2019		June 30, 2019
Net additions (losses) (in thousands)⁽¹⁾
Postpaid⁽²⁾	(39	)	168	256	39		123		123		109		309		169		134
Prepaid⁽³⁾	35		95	63	170		3		3		(14	)	(173	)	(30	)	(169	)
Wholesale and affiliates⁽³⁾	65		115	66	(165	)	(69	)
Wholesale and affiliates									(69	)	(115	)	(88	)	(147	)	(140	)
Total Wireless	61		378	385	44		57		57		(20	)	48		(8	)	(175	)

End of period subscribers (in thousands)⁽¹⁾
Postpaid⁽⁶⁾⁽⁵⁾	31,518		31,686	31,942	32,119		32,187		32,187		32,296		32,605		32,774		33,075
Prepaid⁽⁸⁾⁽⁴⁾	8,719		8,765	8,997	8,989		9,033		9,033		9,019		8,846		8,816		8,647
Wholesale and affiliates^{(3)(4)(5)(9)(10)}	13,461		13,576	13,642	13,517		13,347
Wholesale and affiliates^{(2)(4)(5)(6)(7)}									13,347		13,232		13,044		12,897		12,590
Total Wireless	53,698		54,027	54,581	54,625		54,567		54,567		54,547		54,495		54,487		54,312

Supplemental data - connected devices
End of period subscribers (in thousands)⁽⁵⁾⁽²⁾
Retail postpaid	2,091		2,158	2,259	2,335		2,429		2,429		2,585		2,821		3,121		3,453
Wholesale and affiliates	11,100		11,221	11,272	11,162		10,963		10,963		10,838		10,563		10,384		9,968
Total	13,191		13,379	13,531	13,497		13,392		13,392		13,423		13,384		13,505		13,421

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(1)

A subscriber is defined as an individual line of service associated with each device activated by a customer. Subscribers that transfer from their original service category classification to another ~~platform, or another~~ service ~~line within the same platform,~~category are generally reflected as a net loss to the original service category and a net addition to their new service category. There is no net effect for such subscriber changes to the total wireless net additions (losses) or end of period subscribers.

(2)

~~During the three-month~~End of period ~~ended March 31, 2018, a non-Sprint branded~~connected devices are included in retail postpaid ~~offering was introduced allowing prepaid customers to purchase a device under our installment billing program. As a result~~or wholesale and affiliates end of ~~the extension of credit, approximately 167,000 prepaid subscribers were migrated from the prepaid~~period subscriber ~~base into the postpaid subscriber base.~~ totals for all periods presented.


(3)	During the three-month period ended June 30, 2018, we ceased selling devices in our installment billing program under one of our brands and as a result, 45,000 subscribers were migrated back to ~~prepaid.~~


~~(3)~~	~~Sprint is no longer reporting Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. We have excluded these subscribers~~prepaid from ~~our subscriber base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline MVNOs.~~postpaid.

(4)

As a result of our affiliate agreement with Shentel, certain subscribers have been transferred from postpaid and prepaid to affiliates. During the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates. During the three-month period ended March 31, 2018, 29,000 and 11,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates. During the three-month period ended June 30, 2018, 10,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates.


(5)	~~End of period connected devices are included in retail postpaid or wholesale and affiliates end of period subscriber totals for all periods presented.~~


~~(6)~~	During the three-month period ended June 30, ~~2017, 2,000 Wi-Fi connections~~2019, one of our postpaid customers purchased a wholesale MVNO and as a result, 167,000 subscribers were ~~adjusted~~transferred from the wholesale to the postpaid subscriber base.


~~(7)~~	During the three-month period ended September 30, 2017, the Prepaid Data Share platform It's On was decommissioned as the Company continues to focus on higher value contribution offerings resulting in a 49,000 reduction to prepaid end of period subscribers.


~~(8)~~	~~During the three-month period ended December 31, 2017, prepaid end of period subscribers increased by 169,000 in conjunction with the PRWireless transaction.~~

~~(9)~~(6)

Subscribers through some of our MVNO relationships have inactivity either in voice usage or primarily as a result of the nature of the device where activity only occurs when data retrieval is initiated by the end-user and may occur infrequently. Although we continue to provide these subscribers access to our network through our MVNO relationships, approximately ~~2,260,000~~2,988,000 subscribers at June 30, ~~2018~~2019 through these MVNO relationships have been inactive for at least six months, with no associated revenue during the six-month period ended June 30, ~~2018.~~2019.


~~(10)~~(7)	On April 1, 2018, 115,000 wholesale subscribers were removed from the subscriber base with no impact to revenue. During the three-month period ended December 31, 2018, an additional 100,000 wholesale subscribers were removed from the subscriber base with no impact to revenue.

The following table shows our average rates of monthly postpaid and prepaid subscriber churn as of the end of each quarterly period beginning with the quarter ended June 30, ~~2017.~~2018.


	June 30, 2017⁽²⁾		Sept 30, 2017		Dec 31, 2017		March 31, 2018		June 30, 2018		June 30, 2018		Sept 30, 2018		Dec 31, 2018		March 31, 2019		June 30, 2019
Monthly subscriber churn rate⁽¹⁾
Postpaid	1.65	%	1.72	%	1.80	%	1.78	%	1.63	%	1.63	%	1.78	%	1.85	%	1.81	%	1.74	%
Prepaid	4.57	%	4.83	%	4.63	%	4.30	%	4.17	%	4.17	%	4.74	%	4.83	%	4.37	%	4.23	%

_______________________

(1)

Churn is calculated by dividing net subscriber deactivations for the quarter by the sum of the average number of subscribers for each month in the quarter. For postpaid accounts comprising multiple subscribers, such as family plans and enterprise accounts, net deactivations are defined as deactivations in excess of subscriber activations in a particular account within 30 days. Postpaid and Prepaid churn consist of both voluntary churn, where the subscriber makes his or her own determination to cease being a subscriber, and involuntary churn, where the subscriber's service is terminated due to a lack of payment or other reasons.

~~(2)~~

In the quarter ended June 30, 2017, the Company enhanced subscriber reporting to better align certain early-life gross activations and deactivations associated with customers who have not paid us after the initial subscriber transaction. This enhancement had no impact to net additions, but did result in reporting lower gross additions and lower deactivations in the quarter. Without this enhancement, total postpaid churn in the quarter would have been 1.73% versus 1.65%.

The following table shows our postpaid and prepaid ARPU as of the end of each quarterly period beginning with the quarter ended June 30, ~~2017.~~2018.


	June 30, 2017		Sept 30, 2017		Dec 31, 2017		March 31, 2018		June 30, 2018		June 30, 2018		Sept 30, 2018		Dec 31, 2018		March 31, 2019		June 30, 2019
ARPU
Postpaid	$	47.30	$	46.00	$	45.13	$	44.40	$	43.55	$	43.55	$	43.99	$	43.64	$	43.25	$	42.57
Prepaid	$	38.24	$	37.83	$	37.46	$	37.15	$	36.27	$	36.27	$	35.40	$	34.53	$	33.67	$	32.15

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Subscriber Results

Retail Postpaid — During the three-month period ended June 30, ~~2018,~~2019, net postpaid subscriber additions were 134,000 compared to 123,000 in the same period in 2018. Net subscriber results include tablet net additions of 31,000 during the three-month period ended June 30, 2019 compared to net losses of ~~39,000~~64,000 in the same period in ~~2017.~~2018 and additions in other data devices of 231,000 and 100,000 during the three-month periods ended June 30, 2019 and June 30, 2018, respectively, both of which generally have a significantly lower ARPU as compared to handset subscribers. The increase in net postpaid subscriber additions in the current quarter were primarily driven by net subscriber additions of other data devices and non-Sprint branded retail postpaid phones, ~~combined with subscriber additions under the~~partially offset by an increase in postpaid phone churn driven by subscribers exiting multi-line introductory promotional offers, competitive pressures and network-related churn. Marketing efforts by other wireless carriers, including price reduction, to incent subscribers to switch carriers also negatively impact churn, which has a negative effect on earnings.

The Company's non-Sprint branded postpaid ~~plan~~ offering ~~partially offset by tablet~~allows prepaid customers to purchase a device under our installment billing program. This program provides prepaid customers with access to this offer under their respective brands. Qualified customers on this non-Sprint branded postpaid offering receive an extension of credit to purchase their device. The subscriber ~~losses. During~~will remain classified as postpaid at the conclusion of their installment billing payments. For the quarter ended June 30, ~~2018,~~2019, net subscriber additions and end of period subscribers under the non-Sprint branded postpaid plan offering were ~~71,000, which represents the associated net retail postpaid additions for the quarter~~116,000 and 670,000, respectively, and are included in total retail postpaid subscribers above.

Retail Prepaid — During the three-month period ended June 30, ~~2018,~~2019, we ~~added 3,000~~lost 169,000 net prepaid subscribers compared to ~~35,000~~adding 3,000 in the same period in ~~2017.~~2018. The increase in net ~~additions in the quarter were primarily due to subscriber growth in~~

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~~the Boost Mobile~~ prepaid ~~brand, partially offset by~~ subscriber losses in the ~~Virgin Mobile prepaid brand~~quarter was primarily due to lower gross additions as a result of exiting certain channels, combined with subscriber losses due to continued competitive pressures in the market.

Wholesale and Affiliate Subscribers — Wholesale and affiliate subscribers represent customers that are served on our networks through companies that resell our wireless services to their subscribers, customers residing in affiliate territories and connected devices that utilize our network. Of the ~~13.3~~12.6 million subscribers included in wholesale and affiliates, approximately ~~82%~~79% represent connected devices. Wholesale and affiliate net subscriber ~~net~~ losses were ~~69,000~~140,000 during the three-month period ended June 30, ~~2018~~2019 compared to net ~~additions~~losses of ~~65,000~~69,000 during the same period in ~~2017,~~2018, inclusive of net losses of connected devices totaling ~~86,000~~249,000 and ~~net additions totaling 220,000,~~86,000, respectively. The net losses in the three-month period ended June 30, ~~2018~~2019 were primarily attributable to a decline in connected devices, partially offset by an increase in subscribers through our postpaid and prepaid resellers.

Cost of Services

Cost of services consists primarily of:

costs to operate and maintain our networks, including direct switch and cell site costs, such as rent, utilities, maintenance, labor costs associated with network employees, and spectrum frequency leasing costs;

fixed and variable interconnection costs, the fixed component of which consists of monthly flat-rate fees for facilities leased from local exchange carriers and other providers based on the number of cell sites and switches in service in a particular period and the related equipment installed at each site, and the variable component ~~which~~ generally consists of per-minute use fees charged by wireline providers for calls terminating on their networks ~~which fluctuate~~and fluctuates in relation to the level and duration of those terminating calls;

long distance costs paid to ~~the Wireline segment;~~

~~costs to service and repair devices;~~other carriers;

regulatory fees;

roaming fees paid to other carriers; and

fixed and variable costs relating to payments to third parties for the subscriber use of their proprietary data applications, such as messaging, music and cloud services and connected vehicle fees.

Cost of services increased ~~$17~~$90 million, or 1%6%, for the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017,~~2018, primarily due to higher network costs including ~~rent~~cell site maintenance, software and ~~backhaul. This~~costs associated with a reciprocal long-term lease agreement with T-Mobile, combined with an increase ~~was~~in roaming costs due to higher data volume. These increases were partially offset by ~~a decrease~~lower roaming rates and declines in ~~long distance due to the migration off of the Wireline~~ network labor and ~~lower service and repair~~backhaul costs.

Equipment Sales and Cost of Equipment Sales

Our devices are sold to customers through installment billing and subsidy programs. We recognize equipment sales and corresponding costs of equipment sales when title and risk of loss passes to the indirect dealer or end-use subscriber, assuming all other revenue recognition criteria are met. Under the installment billing program, the device is

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generally sold at full or a discounted retail price and we recognize most of the future expected installment payments at the time of sale of the device. Under the subsidy program, which has been de-emphasized, we offer certain incentives, such as new devices at heavily discounted prices, to retain and acquire subscribers. The cost of these incentives is recorded as a reduction ofto the total transaction price and allocated to performance obligations.

Cost of equipment sales includes equipment costs (primarily devices and accessories), order fulfillment related expenses, and write-downs of ~~device and accessory~~ inventory related to shrinkage and obsolescence. Additionally, cost of equipment sales is reduced by any rebates that are earned from the equipment manufacturers. Cost of equipment sales in excess of the net revenue generated from equipment sales is referred to in the industry as equipment net subsidy. As postpaid subscribers migrate from acquiring devices through our subsidy program to our leasing or installment billing programs, equipment net subsidy continues to decline. We also make incentive payments to certain indirect dealers who purchase devices directly from OEMs or other device distributors. Under Topic 606, these incentive payments are included as a reduction of the total transaction price of customer contracts, resulting in a contract asset that is amortized to service revenue over the term of the contract.

The net impact to equipment sales revenue and cost of equipment sales from the sale of devices under our installment billing program is relatively neutral except for the impact from promotional offers.

Equipment sales ~~decreased $14~~increased $47 million, or 1%4%, for the three-month period ended June 30, ~~2018,~~2019, compared to the same period in ~~2017.~~2018. The ~~decrease~~increase in equipment sales for the three-month period ended June 30, ~~2018~~2019 was primarily due to ~~a decline~~an increase in the number of postpaid devices sold ~~as result of~~and a higher average sales price per prepaid devices sold. These increases for the ~~higher mix of subscribers choosing to lease~~three-month period were partially offset by a lower average sales price per postpaid device as

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~~opposed to purchasing~~sold and a ~~device,~~ decrease in the volume of used postpaid devices sold to third parties and lower accessory revenue due to an accessories arrangement with Brightstar. The fees earned under the arrangement with Brightstar are recorded as other revenue and included in wholesale, affiliate and other revenues. These decreases were partially offset by a higher amount of revenue allocated to equipment sales following the adoption of Topic 606 and a higher average sales price per postpaid and prepaid devices sold.parties. Cost of equipment sales ~~decreased $275~~increased $71 million, or ~~18%~~6%, for the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017,~~2018. The increase in the three-month period was primarily due to ~~a decrease~~an increase in postpaid devices sold asand a ~~result of the~~ higher ~~mix of~~average cost per prepaid devices sold, partially offset by a lower average cost per postpaid ~~subscribers choosing to lease their~~ devices ~~combined with~~sold and a ~~decline~~decrease in the volume of used postpaid devices sold to third ~~parties and lower accessory costs due to an accessories arrangement with Brightstar. These decreases were partially offset by higher average cost per postpaid and prepaid devices sold.~~ parties.

Equipment Rentals and Cost of Equipment Rentals

Under our leasing program, we recognize revenue from equipment rentals over the term of the operating lease. Cost of equipment rentals includes losses on disposal of property, plant and equipment, net of recoveries, resulting from the write-off of leased devices. The losses on disposal of property, plant and equipment, net of recoveries, result from the write-off of leased devices associated with lease cancellations prior to the scheduled customer lease terms where customers did not return the devices to us. We expect to incur losses in future periods as a result of customers who do not return devices under our leasing program.

We expect that the revenues derived from leasing our devices to customers will be less than the costs of the devices as the life of the device exceeds the contractual lease period. We offer the Sprint Flex program to customers as an ~~incentive~~additional option to ~~attract and retain subscribers who~~ purchase ~~wireless~~ services ~~that utilize~~utilizing our wireless network. While revenue derived from providing devices to customers contributes to our consolidated earnings, wireless service is the major contributor. Therefore, we believe the evaluation of the Company's central operations, which is to provide wireless service to customers, are best viewed at the consolidated level. Accordingly, we believe consolidated level metrics such as operating income and cash flows from operations are the best indicators of our overall ability to generate cash.

Equipment rentals increased ~~$313~~$147 million, or ~~35%~~12%, for the ~~three month~~three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017,~~2018, primarily due to higher revenue from the leasing program as more subscribers are choosing to lease their ~~device.~~device and the mix of devices leased. Cost of equipment rentals increased ~~$12~~$101 million, or ~~11%~~81%, for the ~~three months~~three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017,~~2018, primarily due to an increase in loss on disposal of property, plant and equipment, net of recoveries associated with non-returned leased devices.

Selling, General and Administrative Expense

Sales and marketing ~~costs~~expenses primarily consist of subscriber acquisition costs, including commissions paid to our indirect dealers, third-party distributors and retail sales force for new device activations and upgrades, residual payments to our indirect dealers, commission payments made to OEMs or other device distributors for direct source handsets, payroll and facilities costs associated with our retail sales force, marketing employees, advertising, media programs and sponsorships, including costs related to branding. ~~Upon the adoption of Topic 606, commission~~Commission costs determined to be incremental, recoverable and directly associated with subscriber contracts are deferred and amortized to sales and marketing expense. General and administrative expenses primarily consist of costs for billing, customer care and information technology operations, bad debt expense and administrative support activities, including collections, legal, finance, human resources, corporate communications, and strategic planning.

Sales and marketing ~~expense decreased $140~~expenses increased $37 million, or ~~12%~~3%, for the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017,~~2018, primarily due to ~~lower commission costs as a result~~higher marketing spend.

Table of ~~the adoption of Topic 606 combined with lower postpaid marketing costs.~~Contents

General and administrative ~~costs decreased $31~~expenses increased $38 million, or 5%6%, for the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017,~~2018. The increase in the three-month period was primarily due to ~~lower~~higher bad debt ~~expense,~~and customer care expenses, partially offset by ~~an increase~~a decline in ~~customer care costs.~~

other general and administrative expenses. Bad debt expense ~~decreased $44~~increased $59 million, or ~~43%~~102%, for the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017.~~2018. The ~~decrease~~increase in the three-month period was primarily related to ~~lower~~higher installment billing reserves due to ~~fewer~~an increase in subscribers entering into installment ~~notes.~~billing contracts as a result of a recent market trial and an increase in service revenue bad debt. We reassess our allowance for doubtful accounts quarterly.

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Segment Earnings - Wireline

We provide a suite of wireline communications services to other communications companies and targeted business ~~subscribers.~~customers. In addition, we provide data and IP communication services to our Wireless segment. We provide long distance services and operate all-digital global long distance and Tier 1 IP networks. Our services and products include domestic and international data communications using various protocols such as multiprotocol label switching technologies (MPLS), IP, managed network services, Voice over Internet Protocol (VoIP), and Session Initiated Protocol (SIP). Our IP services can also be combined with wireless services. Such services include our Sprint Mobile Integration service, which enables a wireless handset to operate as part of a subscriber's wireline voice network, and our DataLink^SM service, which uses our wireless networks to connect a subscriber location into their primarily wireline wide-area IP/MPLS data network, making it easy for businesses to adapt their network to changing business requirements.

We continue to assess the portfolio of services provided by our Wireline business and are focusing our efforts on IP-based data services. Standalone voice services have been discontinued and we continue to de-emphasize and shutdown non-IP-based data services. Our Wireline segment markets and sells its services primarily through direct sales representatives.

Wireline segment earnings are primarily a function of wireline service revenue, network and interconnection costs, and other Wireline segment operating expenses. Network costs primarily represent special access costs and interconnection costs, which generally consist of domestic and international per-minute usage fees paid to other carriers. The remaining costs associated with operating the Wireline segment include the costs to operate our customer care and billing organizations in addition to administrative support. Wireline service revenue and variable network and interconnection costs fluctuate with the changes in our customer base and their related usage, but some cost elements do not fluctuate in the short-term with the changes in our customer usage. Our wireline services provided to our Wireless segment are generally accounted for based on market rates, which we believe approximate fair value. The Company generally re-establishes these rates at the beginning of each fiscal year. The impact of intercompany pricing rate changes to our Wireline segment earnings does not affect our consolidated results of operations as our Wireless segment has an equivalent offsetting impact in cost of services.

The following table provides an overview of the results of operations of our Wireline segment.


	Three Months Ended						Three Months Ended
	June 30,						June 30,
Wireline Segment Earnings	2018			2017
Wireline Segment Earnings (Loss)							2019			2018
	(in millions)						(in millions)
Total net service revenues	$	338		$	433		$	307		$	338
Cost of services (exclusive of depreciation)	(311		)	(387		)
Cost of services							(262		)	(311		)
Selling, general and administrative expense	(69		)	(57		)	(45		)	(69		)
Total net operating expenses	(380		)	(444		)	(307		)	(380		)
Wireline segment earnings	$	(42	)	$	(11	)
Wireline segment earnings (loss)							$	—		$	(42	)

Service ~~Revenue~~Revenues

Service revenues for the three-month period ended June 30, ~~2018~~2019 decreased ~~$95~~$31 million, or ~~22%~~9%, compared to the same period in ~~2017.~~2018. The decrease was driven by ~~lower voice volumes as the Company has discontinued standalone voice services combined with~~ fewer customers using IP-based data services.

Costs of Services

Costs of services include access costs paid to local phone companies, other domestic service providers and foreign phone companies to complete calls made by our domestic subscribers, costs to operate and maintain our networks, and costs of customer premise equipment. Costs of services decreased ~~$76~~$49 million, or ~~20%~~16%, in the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017.~~2018. The decrease was primarily due to lower access expense as the result of savings ~~initiatives and lower expense as a result~~initiatives.

Table of ~~discontinuing standalone voice services.~~Contents

Selling, General and Administrative Expense

Selling, general and administrative expense ~~increased $12~~decreased $24 million, or ~~21%~~35%, in the three-month period ended June 30, ~~2018~~2019, compared to the same period in ~~2017.~~2018. The ~~increase~~decrease was primarily due to ~~higher sales and marketing expense, partially offset by~~ lower shared administrative and employee-related costs required to support the Wireline segment as a result of the decline in revenue. Total selling, general and administrative expense as a percentage of net ~~services revenue~~service revenues was 15% for the three-month period ended June 30, 2019, as compared to 20% for the three-month period ended June 30, ~~2018 compared to 13%~~2018.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow



	Three Months Ended
	June 30,
	2019			2018
	(in millions)
Net cash provided by operating activities	$	2,244		$	2,430
Net cash used in investing activities	$	(2,468	)	$	(4,369	)
Net cash used in financing activities	$	(1,887	)	$	(295	)

Operating Activities

Net cash provided by operating activities of $2.2 billion for the three-month period ended June 30, ~~2017.~~2019 decreased $186 million from the same period in 2018. The change was primarily due to decreased cash received from customers of $239 million, partially offset by lower cash paid for interest of $60 million due to lower outstanding debt.

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~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Cash Flow~~

Three Months Ended
June 30,
2018 2017
(in millions)
Net cash provided by operating activities $ 2,430
$ 1,924
Net cash used in investing activities $ (4,369 ) $ (953 )
Net cash used in financing activities $ (295 ) $ (1,363 )

~~On January 1, 2018, the Company adopted authoritative guidance regarding~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments~~. The Company adopted this standard with retrospective application to the consolidated statements of cash flows. The standard impacted the presentation of cash flows related to beneficial interests in securitization transactions, which is the deferred purchase price associated with our Accounts Receivable Facility (Receivables Facility), resulting in reclassifications of cash inflows from operating activities to investing activities of $375 million for the three-month period ended June 30, 2017 in our consolidated statements of cash flows. We continue to record collections of installment billing receivables associated with the historical deferred purchase price for installment notes entered into prior to the amendment to our Receivables Facility in February 2017 as cash inflows in investing activities. The standard also impacted the presentation of cash flows related to separately identifiable cash flows and application of the predominance principal primarily related to direct channel leased devices and resulted in material reclassifications of cash outflows from operating activities to investing activities of $892 million for the three-month period ended June 30, 2017 in our consolidated statements of cash flows.

~~Operating Activities~~

Net cash provided by operating activities of $2.4 billion for the three-month period ended June 30, 2018 increased $506 million from the same period in 2017. The increase was primarily due to $434 million of increased cash received from customers, of which $205 million is related to an increase in installment billing receivables collected due to an amendment to our Receivables Facility in February 2017, as all cash collected on the underlying receivables generated after the amendment is reflected in operating activities, as described below in Accounts Receivable Facility.

Investing Activities

Net cash used in investing activities for the three-month period ended June 30, 2019 decreased by $1.9 billion compared to the same period in 2018 primarily due to the sale of short-term investments of $1.7 billion and decreased leased device purchases of $301 million.

Net cash used in investing activities for the three-month period ended June 30, 2018 increased by $3.4 billion compared to the same period in 2017 primarily due to increased net purchases of short-term investments of $2.7 billion and increased purchases of $458 million of leased devices. In addition, we had a decrease of $205 million due to an amendment to our Receivables Facility in February 2017, as all cash collected on the underlying receivables generated after the amendment is reflected in operating activities, as described below in Accounts Receivable Facility.

Financing Activities

Net cash used in financing activities of $1.9 billion for the three-month period ended June 30, 2019 increased $1.6 billion compared to the same period in 2018 primarily due to an increase in repayments of debt, financing and finance lease obligations. Total principal repayments include $1.7 billion, $800 million, $219 million and $105 million for the Sprint Capital Corporation 6.900% Senior Notes due 2019, Receivables Facility, the 2016 spectrum financing transaction and the secured equipment credit facilities, respectively. These payments were partially offset by Receivables Facility borrowings of $1.0 billion.

Net cash used in financing activities was $295 million for the three-month period ended June 30, 2018. We made principal repayments of $1.1 billion, $219 million and $65 million for the Receivables Facility, the 2016 Spectrum Transaction and the secured equipment credit facilities, respectively. We also had Receivables Facility borrowings of $1.4 billion. Additionally, we paid $248 million in debt financing costs primarily due to fees related to the consent solicitations as a result of the Business Combination Agreement with T-Mobile.

~~Net cash used in financing activities was $1.4 billion for the three-month period ended June 30, 2017,~~ ~~which was primarily due to~~ the retirement of $388 million principal amount of outstanding Sprint Communications 8.375% Notes due 2017 and $1.2 billion principal amount of outstanding Sprint Communications 9.000% Guaranteed Notes due 2018. We also paid $129 million of call redemption premiums and tender expenses associated with the early retirement of the Sprint Communications debt. In addition, we repaid $148 million, $93 million, $125 million and $117 million for the Handset Sale-Leaseback Tranche 2, secured equipment credit facilities, Receivables Facility, network equipment sale-leaseback transactions, respectively. These repayments were partially offset by Receivables Facility borrowings of $765 million and secured equipment credit facilities draws of $92 million.

Working Capital

We had negative working capital of ~~$1.7 billion~~$700 million and ~~$3.5 billion~~working capital of $776 million as of June 30, ~~2018~~2019 and March 31, ~~2018,~~2019, respectively. The change in working capital was primarily due to ~~increases~~a decline in cash and cash equivalents and short-term investments driven by the ~~current portion~~increase in repayments of ~~long-term~~ debt, financing and ~~capital~~finance lease

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obligations ~~of $1.7 billion related to the Sprint Capital Corporation 6.900% Notes due 2019.~~as described above. The remaining balance was due to changes to other working capital items.

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Long-Term Debt and Other Funding Sources

Our device leasing and installment billing programs require a greater use of operating cash flow in the early part of the device contracts as our subscribers will generally pay less upfront than through our traditional subsidy program. The Receivables Facility described below was designed ~~in large part~~ to help mitigate the significant use of cash from purchasing devices from OEMs to fulfill our installment billing and leasing programs.

Accounts Receivable Facility

Our Receivables Facility provides us the opportunity to sell certain wireless service receivables, installment receivables, and future amounts due from customers who lease certain devices from us to unaffiliated third parties (the Purchasers). The maximum funding limit under the Receivables Facility is $4.5 billion. In February 2017, the Receivables Facility was amended and Sprint regained effective control over the receivables transferred to the Purchasers by obtaining the right, under certain circumstances, to repurchase them. Subsequent to the February 2017 amendment, all proceeds received from the Purchasers in exchange for the transfer of our wireless service and installment receivables are recorded as borrowings. Repayments and borrowings under the Receivables Facility are reported as financing activities in the consolidated statements of cash flows. All cash collected on repurchased receivables ~~continues~~subsequent to bethe February 2017 amendment was recognized in investing activities in the consolidated statements of cash flows. In ~~October 2017, the Receivables Facility was amended to, among other things, extend the maturity date to November 2019. In~~ June 2018, the Receivables Facility was ~~further~~ amended to, among other things, extend the maturity date to June 2020, increase the maximum funding limit by $200 million, reduce financing costs and add month-to-month lease receivables as eligible receivables for leases that extend past their original lease term. In June 2019, the Receivables Facility was further amended to extend the maturity date to February 2021. While we have the right to decide how much cash to receive from each sale, the maximum amount of cash available to us varies based on a number of factors and, as of June 30, ~~2018,~~2019, represents approximately ~~50%~~49% of the total amount of the eligible receivables sold to the Purchasers. As of June 30, ~~2018,~~2019, the total amount ~~of borrowings~~outstanding under our Receivables Facility was ~~$2.7~~$2.8 billion and the total amount available to be drawn was ~~$942~~$649 million. However, subsequent to June 30, ~~2018,~~2019, Sprint repaid ~~approximately $1.2~~$2.3 billion under the Receivables Facility reducing amounts outstanding to ~~approximately $1.5 billion.~~$537 million. During the three-month period ended June 30, ~~2018,~~2019, we ~~borrowed $1.4~~drew $1.0 billion and repaid ~~$1.1 billion~~$800 million to the Purchasers, which were reflected as financing activities in the consolidated statements of cash flows. Sprint contributes certain wireless service, installment and future lease receivables, as well as the associated leased devices, to Sprint's wholly-owned consolidated bankruptcy-remote special purpose entities (SPEs). At Sprint's direction, the SPEs have sold, and will continue to sell, wireless service, installment and future lease receivables to the Purchasers or to a bank agent on behalf of the Purchasers. Leased devices will remain with the SPEs, once sales are initiated, and continue to be depreciated over their estimated useful life. As of June 30, ~~2018,~~2019, wireless service, installment and lease receivables contributed to the SPEs and included in "Accounts and notes receivable, net" in the consolidated balance sheets were $2.6 billion and the long-term portion of installment receivables included in "Other assets" in the consolidated balance sheets was ~~$132~~$248 million. As of June 30, ~~2018,~~2019, the net book value of devices contributed to the SPEs was ~~approximately $6.2~~$6.4 billion.

Spectrum ~~Financing~~Financings

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2025. The second series of notes totaled

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approximately $1.8 billion in aggregate principal amount, bears interest at 5.152% per annum, ~~and~~ have quarterly interest-only payments until June 2023, and amortizing quarterly principal amounts thereafter commencing in June 2023 through March 2028. The Spectrum Portfolio, which also serves as collateral for the 2016 Spectrum-Backed Notes, remains substantially identical to the original portfolio from October 2016.

Simultaneously with the October 2016 offering, Sprint Communications entered into a long-term lease with the Spectrum Financing SPEs for the ongoing use of the Spectrum Portfolio. The spectrum lease is accounted for as an executory ~~contract, which for accounting purposes is treated in a similar manner to an operating lease.~~contract. Sprint Communications is required to make monthly lease payments to the Spectrum Financing SPEs at a market rate. The lease payments, which are guaranteed by Sprint Corporation and certain subsidiaries (none of which ~~were~~are "Restricted Subsidiaries" under ~~Sprint's~~Sprint Capital Corporation's indentures) of Sprint Communications (and are secured together with the obligations under another transaction document by substantially all of the assets of such entities on a pari passu basis up to an aggregate cap of $3.5 billion with the grant of security under the secured term loan and revolving bank credit facility and EDC (as defined below) agreement), are sufficient to service all outstanding series of the senior secured notes and the lease also constitutes collateral for the senior secured notes. Because the Spectrum Financing SPEs are wholly-owned Sprint subsidiaries, these entities are consolidated and all intercompany activity has been eliminated.

Credit Facilities

Secured Term Loan and Revolving Bank Credit Facility

On February 3, 2017, we entered into a $6.0 billion credit agreement, ~~for $6.0 billion,~~ consisting of a $4.0 billion, seven-year secured term loan (Initial Term Loan) that matures in February 2024 and a $2.0 billion secured revolving bank credit facility that expires in February 2021. The bank credit facility requires a ratio (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 bank credit facility (adjusted EBITDA), not to exceed ~~4.75~~3.75 to 1.0 through the fiscal quarter ending December 31, ~~2018. For each fiscal quarter ending March 31, 2019 through December 31, 2019, the Leverage Ratio must not exceed 3.75 to 1.0.~~2019. The Leverage Ratio must not exceed 3.5 to 1.0 for the fiscal quarter ended March 31, 2020 and each fiscal quarter ending thereafter through expiration of the facility. The ~~term loan~~Initial Term Loan has an interest rate equal to LIBOR plus 250 basis points and the secured revolving bank credit facility has an interest rate equal to LIBOR plus a spread that varies depending on the Leverage Ratio. During the three-month period ended June 30, 2019, we made principal repayments on the Initial Term Loan totaling $10 million resulting in a total principal amount outstanding for the Initial Term Loan of $3.9 billion as of June 30, 2019.

On November 26, 2018, the credit agreement was amended to, among other things, authorize Incremental Term Loans totaling $2.0 billion, of which $1.1 billion was borrowed. On February 26, 2019, the remaining $900 million was borrowed. The Incremental Term Loans mature in February 2024, have interest rates equal to LIBOR plus 300 basis points and increased the total credit facility to $8.0 billion.

PRWireless Term Loan

During the three-month period ended December 31, 2017, Sprint and PRWireless PR, Inc. completed a transaction to combine their operations in Puerto Rico and the U.S. Virgin Islands into a new entity. Prior to the formation of the new entity, PRWireless PR, Inc. had incurred debt under a secured term loan, which became debt of the new entity upon the transaction close. The secured term loan bears interest at 5.25% plus LIBOR and expires in June 2020. Any amounts repaid early may not be drawn again. ~~As of~~During the three-month period ended June 30, ~~2018,~~2019, the joint venture borrowed $2 million and made principal repayments of less than $1 million resulting in a total principal amount outstanding ~~was $182~~of $200 million ~~with an additional $20 million remaining available.~~as of June 30, 2019. Sprint has provided an unsecured guarantee of repayment of the secured term loan obligations. The secured portion of the facility is limited to assets of the ~~new entity~~joint venture as the borrower.

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Export Development Canada (EDC) Agreement

Secured ~~Equipment Credit Facilities~~equipment credit facilities

Finnvera plc (Finnvera)

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~~borrowing expired in October 2017. Such borrowings were contingent upon the amount and timing of network equipment-related purchases made by Sprint.~~ During the three-month period ended June 30, ~~2018,~~2019, we made principal repayments totaling $13 million on the facility resulting in a total principal amount of ~~$161~~$79 million outstanding as of June 30, ~~2018.~~2019.

K-sure

Delcredere | Ducroire (D/D)

The D/D secured equipment credit facility provided for the ability ~~to borrow up to $250 million~~ to finance network equipment-related purchases from Alcatel-Lucent USA Inc. In September 2017, we amended the secured equipment credit facility to restore previously expired commitments of $150 million. During the three-month period ended June 30, ~~2018,~~2019, we made principal repayments totaling $20 million on the facility resulting in a total principal amount of ~~$139~~$99 million outstanding as of June 30, ~~2018.~~2019.

Borrowings under the Finnvera, K-sure and D/D secured equipment credit facilities are each secured by liens on the respective network equipment purchased pursuant to each facility's credit agreement. In addition, repayments of outstanding amounts borrowed under the secured equipment credit facilities cannot be redrawn. Each of these facilities is fully and unconditionally guaranteed by both Sprint Communications and Sprint Corporation. As of June 30, 2019, the K-sure facility had $96 million of available borrowing capacity, and the Finnvera and D/D facilities had no available borrowing capacity.

As of June 30, ~~2018,~~2019, our Leverage Ratio, as defined by our secured revolving bank credit facility was ~~3.4~~2.9 to 1.0. Because our Leverage Ratio exceeded 2.5 to 1.0 at period end, we were restricted from paying cash dividends.

Liquidity and Capital Resources

As of June 30, ~~2018,~~2019, our liquidity, including cash and cash equivalents, short-term investments, available borrowing capacity under our secured revolving bank credit facility and availability under our Receivables Facility was ~~$11.2~~$7.4 billion. Our cash, ~~and~~ cash equivalents and short-term investments totaled ~~$8.4~~$4.9 billion as of June 30, ~~2018~~2019 compared to ~~$9.0~~$7.0 billion as of March 31, ~~2018.~~2019. As of June 30, ~~2018,~~2019, we had availability of $1.9 billion under the secured revolving bank credit facility. Amounts available under our Receivables Facility as of June 30, ~~2018~~2019 totaled ~~$942~~$649 million.

~~In addition,~~Additionally, as of June 30, ~~2018,~~2019, we had available borrowing capacity of ~~$427~~$96 million under our K-sure secured equipment credit facility. However, utilization of this facility is dependent upon the amount and timing of network equipment-related purchases from the applicable supplier ~~as well as~~and the ~~period of time remaining to complete any further borrowings available~~associated availability under ~~each~~the facility. ~~On July 10, 2018, SoftBank exercised its warrant in full to purchase 55 million shares of stock for $287 million.~~

As of June 30, ~~2018,~~2019, we offered two device financing programs that allow subscribers to forgo traditional service contracts and pay less upfront for devices in exchange for lower monthly service fees, early upgrade options, or both. While a majority of the revenue associated with the installment ~~sales~~billing program is recognized at the time of sale along with the related cost of equipment sales, lease revenue associated with our leasing program is recorded monthly over the term of the lease and the cost of the device is depreciated to its estimated residual value generally over the lease term, which creates a positive impact to Wireless segment earnings. If the mix of leased devices continues to increase, we expect this positive impact on the financial results of Wireless segment earnings to continue and depreciation expense to increase. The leasing and installment billing programs will continue to require a greater use of cash flows in the earlier part of the contracts as the subscriber will generally pay less upfront than through our traditional subsidy program because they are financing the device. The Receivables Facility was established ~~as a mechanism~~ to help mitigate the use of cash from purchasing devices from OEMs to fulfill our leasing and installment billing programs.

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To meet our liquidity requirements, we look to a variety of sources. In addition to our existing cash and cash equivalents, short-term investments, and cash generated from operating activities, we raise funds as necessary from external sources. We rely on our ability to issue debt and equity securities, the ability to access other forms of financing, including debt financing, some of which is secured by our assets, proceeds from the sale of certain accounts receivable and future lease receivables, proceeds from future financing transactions, such as spectrum, and the borrowing capacity available under our credit facilities to support our short- and long-term liquidity requirements. We believe our existing available liquidity and

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cash flows from operations will be sufficient to meet our funding requirements over the next twelve months, including debt service requirements and other significant future contractual obligations.

To maintain an adequate amount of available liquidity and execute our current business plan, which includes, among other things, network deployment and maintenance, subscriber growth, data usage capacity needs and the expected achievement of a cost structure intended to improve profitability and to meet our long-term debt service requirements and other significant future contractual obligations, we will need to continue to raise additional funds from external sources. ~~In addition, we are pursuing extended payment terms.~~ If we are unable to obtain external funding, ~~execute on our~~fail to operationalize the most effective cost ~~reduction initiatives,~~structure, or are ~~not successful~~unsuccessful in attracting valuable subscribers such as postpaid handset subscribers, our operations ~~would~~could be adversely affected, which may lead to defaults under certain of our borrowings.

Depending on the amount of any difference in actual results versus what we currently expect, it may make it difficult for us to generate sufficient earnings before interest, taxes, depreciation and amortization and other non-recurring items (adjusted EBITDA) to remain in compliance with our financial covenants or be able to meet our debt service obligations, which could result in acceleration of our indebtedness, or adversely impact our ability to raise additional funding through the sources described above, or both. If such events occur, we may engage with our lenders to obtain appropriate waivers or amendments of our credit facilities or refinance borrowings, or seek funding from other external sources, although there is no assurance we would be successful in any of these actions.

A default under certain of our borrowings could trigger defaults under certain of our other financing obligations, which in turn could result in the maturities being accelerated. Certain indentures and other agreements governing our financing obligations require compliance with various covenants, including covenants that limit the Company's ability to sell certain of its assets, limit the Company and its subsidiaries' ability to incur indebtedness and liens, and require that we maintain certain financial ratios, each as defined by the terms of the indentures, related supplemental indentures and other agreements. Our ability to obtain additional financing, including monetizing certain of our assets or to modify the terms of our existing financing, on terms acceptable to us, or at all, may require T-Mobile’s consent under the contractual restrictions contained in the Business Combination Agreement.

In determining our expectation of future funding needs in the next twelve months and beyond, we have made several assumptions regarding:

projected revenues and expenses relating to our operations, including those related to our installment billing and leasing programs, along with the success of initiatives such as our expectations of achieving a more competitive cost structure through cost reduction initiatives and increasing our postpaid handset subscriber base;

~~cash needs related to our installment billing and device leasing~~ programs;

~~availability under the Receivables Facility, which terminates in June 2020;~~

~~availability of our $2.0 billion secured revolving bank credit facility, which expires in February 2021, less outstanding letters of credit;~~

~~remaining availability of approximately $427 million of our secured equipment credit facility for eligible capital expenditures, and any corresponding principal, interest, and fee payments;~~

~~scheduled principal payments on debt, credit facilities and financing obligations, including approximately $19.8 billion coming due over the next five years;~~

~~raising additional funds from external sources;~~

~~the expected use of cash and cash equivalents in the near-term;~~

anticipated levels and timing of capital expenditures, including assumptions regarding lower unit costs, network capacity additions and upgrades, and the deployment of new technologies in our networks, FCC license acquisitions, and purchases of leased devices;

scheduled principal payments on debt, credit facilities and financing obligations, including $28.7 billion coming due over the next five fiscal years;

cash needs related to our device financing programs;

availability under the Receivables Facility, which terminates in February 2021;

availability of our $2.0 billion secured revolving bank credit facility, which expires in February 2021;

remaining availability of $96 million of our secured equipment credit facility for eligible capital expenditures, and any corresponding principal, interest, and fee payments;

raising additional funds from external sources;

the expected use of cash and cash equivalents in the near-term;

any additional contributions we may make to our pension plan;

estimated residual values of devices related to our device ~~lease~~leasing program; and

other future contractual obligations and general corporate expenditures.

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Our ability to fund our needs from external sources is ultimately affected by the overall capacity ~~of,~~ and ~~financing terms available~~availability in the banking and securities markets, and the availability of other financing alternatives, as well as our performance and our credit ratings. Given our recent financial performance as well as the volatility in these markets, we continue to monitor them closely ~~and to take steps~~but may be limited in our ability to maintain financial flexibility at a reasonable cost of ~~capital.~~

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capital or at all.

The outlooks and credit ratings from Moody's Investor Service, Standard & Poor's Ratings Services, and Fitch Ratings for certain of Sprint Corporation's outstanding obligations were:

Rating

Rating Agency

Issuer Rating

Unsecured Notes

Guaranteed Notes

Secured Bank Credit Facility

Spectrum Notes

Outlook

Moody's

Ba2

Baa2

Watch Positive

Standard and Poor's

B+

BB-

N/A

Watch ~~Positive~~Developing

Fitch

B+

BB+

BBB

Watch Positive

FUTURE CONTRACTUAL OBLIGATIONS

With the adoption of Topic 842 on April 1, 2019, Sprint elected the hindsight practical expedient in determining the lease term. Upon adoption of the standard, our expected lease term for our cell sites was shortened to the initial non-cancelable term only. Historically, we included renewal assumptions in our lease term if the non-cancelable term was less than ten years and the corresponding payments were reflected in our future contractual obligations. This change resulted in a decrease to future contractual obligations of approximately $1.6 billion. There have been no significant changes to our future contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended March 31, ~~2018.~~2019. Below is a graph depicting our future principal maturities of debt as of June 30, ~~2018.~~2019.

* This table excludes (i) our $2.0 billion secured revolving bank credit facility, which will expire in 2021 and has no outstanding balance, (ii) ~~$144~~$120 million in letters of credit outstanding under the secured revolving bank credit facility, (iii) ~~$507~~$406 million of ~~capital~~finance leases and other obligations, and (iv) net premiums and debt financing costs.

OFF-BALANCE SHEET FINANCING

As of June 30, ~~2018,~~2019, we did not participate in, or secure, financings for any unconsolidated special purpose entities.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Sprint applies those accounting policies that management believes best reflect the underlying business and economic events, consistent with U.S. GAAP. Inherent in such policies are certain key assumptions and estimates made by management. Management regularly updates its estimates used in the preparation of the consolidated financial statements based on its latest assessment of the current and projected business and general economic environment. See Note 8. ~~Revenues from Contracts with Customers~~ 7. Leases in Notes to the Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report

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on Form 10-Q for a full discussion of critical accounting policies related to the adoption of Topic ~~606.~~842. Additional information regarding the Company's Critical Accounting Policies and Estimates is included in Item 7. of the Company's Annual Report on Form 10-K for the year ended March 31, ~~2018.~~2019.

~~Evaluation of Goodwill and Indefinite-lived Intangible Assets for Impairment~~

As a result of the SoftBank Merger in July 2013, we recognized indefinite-lived assets at their acquisition-date estimates of fair value, including FCC licenses, goodwill, and trade names. All of the indefinite-lived assets, including goodwill, were allocated to our Wireless segment. As of March 31, 2018, the carrying values of these assets were $37.3 billion, $6.6 billion and $4.0 billion, respectively.

Sprint evaluates the carrying value of our indefinite-lived assets, including goodwill, at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit is below its carrying amount.

During the three-month period ended June 30, 2018, our stock price and our related market capitalization decreased subsequent to the announcement of the merger with T-Mobile. In the current quarter, we also updated our long-term forecasted cash flows for the Company, including those for the Wireless reporting unit. This update considered current economic conditions and trends, estimated future operating results, our views of growth rates, anticipated future economic and regulatory conditions, future cost savings initiatives and the availability of the necessary network infrastructure, handsets and other devices. Based on these events, we determined that recoverability of the carrying amount of goodwill should be evaluated for impairment at June 30, 2018. The key inputs to the valuation model included, but were not limited to, discount rates, terminal growth rates, control premiums, market multiple data from selected guideline public companies, management’s internal forecasts which include numerous assumptions such as share of industry gross additions, churn, mix of plans, rate changes, operating and capital expenditures and EBITDA margins, among others. Changes in certain assumptions, management’s failure to execute on the current plan, or negative developments associated with the proposed merger with T-Mobile could have a significant impact to the estimated fair value of the Wireless reporting unit. We note that our fair value cushion was in excess of 10% of the carrying value of equity as of June 30, 2018.

The determination of fair value requires considerable judgment and is highly sensitive to changes in underlying assumptions and execution of management’s plan. Consequently, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill, spectrum and trade name impairment tests will prove to be an accurate prediction of the future. Sustained declines in the Company’s operating results, number of wireless subscribers, future forecasted cash flows, growth rates and other assumptions, as well as significant, sustained declines in the Company’s stock price and related market capitalization could impact the underlying key assumptions and our estimated fair values, potentially leading to a future material impairment of goodwill or other indefinite-lived intangible assets.

FINANCIAL STRATEGIES

General Risk Management Policies

Our board of directors has adopted a financial risk management policy that authorizes us to enter into derivative transactions, and all transactions comply with the policy. We do not purchase or hold any derivative financial instruments for speculative purposes with the exception of equity rights obtained in connection with commercial agreements or strategic investments, usually in the form of warrants to purchase common shares.

Derivative instruments are primarily used for hedging and risk management purposes. Hedging activities may be done for various purposes, including, but not limited to, mitigating the risks associated with an asset, liability, committed transaction or probable forecasted transaction. We seek to minimize counterparty credit risk through credit approval and review processes, credit support agreements, continual review and monitoring of all counterparties, and thorough legal review of contracts. Exposure to market risk is controlled by regularly monitoring changes in hedge positions under normal and stress conditions to ensure they do not exceed established limits.

OTHER INFORMATION

We routinely post important information on our website at www.sprint.com/investors. Information contained on or accessible through our website is not part of this report.

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FORWARD-LOOKING STATEMENTS

We include certain estimates, projections and other forward-looking statements in our annual, quarterly and current reports, and in other publicly available material. Statements regarding expectations, including performance assumptions and estimates relating to capital requirements, as well as other statements that are not historical facts, are forward-looking statements.

These statements reflect management's judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, subscriber and network usage, subscriber growth and retention, technologies, products and services, pricing, operating costs, the timing of various events, and the economic and regulatory environment.

Future performance cannot be assured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include:

Merger Transaction:

the failure to obtain, or delays in obtaining, required regulatory approvals for the ~~merger,~~Merger Transaction, and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the ~~merger,~~Merger Transaction, or the failure to satisfy any of the other conditions to the ~~merger~~Merger Transaction on a timely basis or at all;

the occurrence of events that may give rise to a right of one or both of the parties to terminate the Business Combination Agreement;

the diversion of management and financial resources toward the completion of the ~~merger;~~Merger Transaction;

adverse effects on the market price of our common stock or on our or T-Mobile’s operating results because of a failure to complete the ~~merger~~Merger Transaction in the anticipated timeframe or at all;

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inability to obtain the financing contemplated to be obtained in connection with the ~~merger~~Merger Transaction on the expected terms or ~~timing or at all;~~timing;

the ability of us, T-Mobile and the combined company to make payments on debt, repay existing or future indebtedness when due, comply with the covenants contained therein or retain sufficient business flexibility;

adverse changes in the ratings of our or T-Mobile’s debt securities or adverse conditions in the credit markets;

negative effects of the announcement, pendency or consummation of the ~~merger~~Merger Transaction on the market price of our common stock and on our or T-Mobile’s operating results, including as a result of changes in key customer, supplier, employee or other business relationships;

potential conflicts of interests between our directors and executive officers and our stockholders;

significant costs related to the ~~merger,~~Merger Transaction, including financing costs, and unknown liabilities;

failure to realize the expected benefits and synergies of the ~~merger~~Merger Transaction in the expected timeframes or at all;

costs or difficulties related to the integration of our and T-Mobile’s networks and operations;

the risk of litigation or regulatory actions related to the ~~merger;~~Merger Transaction, including the antitrust litigation brought by the Attorneys General of 14 states and the District of Columbia;

the inability of us, T-Mobile or the combined company to retain and hire key personnel;

the risk that certain contractual restrictions contained in the Business Combination Agreement during the pendency of the ~~merger~~Merger Transaction could adversely affect our or T-Mobile’s ability to pursue business opportunities or strategic transactions;

Business:

our ability to obtain additional financing, including monetizing certain of our assets, including those under our existing or future programs to monetize a portion of our network or spectrum holdings, or to modify the terms of our existing financing on terms acceptable to us, or at all, or to obtain T-Mobile’s consent under the contractual restrictions contained in the Business Combination Agreement;

our ability to continue to receive the expected benefits of our existing ~~financings such as receivable~~ financings;

failure to improve our ability to retain and attract subscribers and to manage credit risks associated with our subscribers;

the effective implementation of our ~~plans to improve the quality of our~~5G network, including timing, scale, execution, technologies, costs, spectrum availability, and performance of our network;

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ability to continue to access spectrum and acquire additional spectrum, including certain low-band frequencies;

failure to improve subscriber churn, bad debt expense, accelerated cash use, costs and write-offs, including with respect to changes in expected residual values related to any of our ~~service plans, including installment billing and leasing programs;~~devices;

the ability to generate sufficient cash flow to fully implement our ~~plans to improve and enhance the quality of our~~5G network and service plans, improve our operating margins, implement our business strategies, and provide competitive new technologies;

our ability to deploy a nationwide 5G network on the scale and on the timeline necessary for us to compete effectively with our competitors, if the Merger Transaction is not consummated;

our ability to have the scale necessary to successfully compete;

our ability to maintain a sufficiently large subscriber base necessary to support the needs of a competitive nationwide wireless network and the associated high costs;

the effects of vigorous competition on a highly penetrated market, including the impact of competition on the prices we are able to charge subscribers for services and devices we provide and on the geographic areas served by our network;

the impact of installment sales and leasing of handsets;

the ~~impact of increased purchase commitments;~~

~~the~~ overall demand for our service plans, including the impact of decisions of new or existing subscribers between our service offerings; and the impact of new, emerging, and competing technologies on our business;

our ability to provide the desired mix of integrated services to our subscribers;

~~our ability to continue to access our spectrum and acquire additional spectrum capacity;~~

changes in available technology and the effects of such changes, including product substitutions and deployment costs and performance;

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volatility in the trading price of our common stock, including as a result of the ~~merger,~~Merger Transaction, current economic conditions, and our ability to access ~~capital, including debt or equity;~~capital;

the impact of various parties not meeting our business requirements, including a significant adverse change in the ability or willingness of such parties to provide service and products, including distribution, or infrastructure equipment for our network;

the costs and business risks associated with providing new services and entering new geographic markets;

the effects of the ~~merger~~Merger Transaction or any other future merger or acquisition involving us, as well as the effect of mergers, acquisitions, and consolidations, and new entrants in the communications industry, and unexpected announcements or developments from others in our industry;

our ability to comply with restrictions imposed by the U.S. Government as a condition to our merger with SoftBank;

the effects of any material impairment of our goodwill or other indefinite-lived intangible assets;

the impacts of new accounting standards or changes to existing standards that the Financial Accounting Standards Board or other regulatory agencies issue, including the ~~Securities and Exchange Commission (SEC);~~SEC;

unexpected results of litigation filed against us or our suppliers or vendors;

the costs or potential customer impact of compliance with regulatory mandates including ~~but not limited to, compliance with the FCC's Report and Order to reconfigure the 800 MHz band and~~ any government regulation regarding "net neutrality"; or data privacy;

equipment failure, natural disasters, terrorist acts or breaches of network or information technology security;

one or more of the markets in which we compete being impacted by changes in political, economic, or other factors such as monetary policy, legal and regulatory changes, or other external factors over which we have no control;

the impact of being a "controlled company" exempt from many corporate governance requirements of the NYSE; and

other risks referenced from time to time in this report and other filings of ours with the SEC, including Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended March 31, ~~2018.~~2019.

The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are found throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report. Readers are cautioned that other factors, although not listed above, could also materially affect our future performance and operating results. The reader should not place undue reliance on forward-looking statements, which

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speak only as of the date of this report. We are not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this report, including unforeseen events.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies, and equity prices. The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk sensitive instruments and positions as described in our Annual Report on Form 10-K for the year ended March 31, ~~2018.~~2019.


Item 4.	Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (Exchange Act), such as this Quarterly Report on Form 10-Q, is reported in accordance with the SEC's rules. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q as of June 30, ~~2018,~~2019, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the disclosure controls and procedures were effective as of June 30, ~~2018~~2019 in providing reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is accumulated and communicated to

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management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and in providing reasonable assurance that the information is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

Internal controls over our financial reporting continue to be updated as necessary to accommodate modifications to our business processes and accounting procedures. During the three-month period ended June 30, ~~2018,~~2019, we completed the implementation of internal controls designed to address the impact of the new ~~revenue recognition~~leasing standard, which we adopted on a modified retrospective ~~basis~~transition method effective April 1, ~~2018.~~2019. Other than those changes associated with the new ~~revenue recognition~~leasing standard, there have been no changes in our internal control over financial reporting that occurred during the three-month period ended June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION


Item 1.	Legal Proceedings

Sprint Communications is also a defendant in a complaint filed by several stockholders of Clearwire Corporation (Clearwire) asserting claims for breach of fiduciary duty by Sprint Communications, and related claims and otherwise challenging the Clearwire acquisition. ~~ACP Master, LTD, et al. v. Sprint Nextel Corp., et al.~~,Meneses action was ~~filed April 26, 2013, in Chancery Court in Delaware. Plaintiffs in the~~ ~~ACP Master, LTD~~ suit have also filed suit requesting an appraisal of the fair value of their Clearwire stock. Trial of those cases took place in October and November 2016. On July 21, 2017, the Delaware Chancery Court ruled in Sprint's favor in both cases. It found no breach of fiduciary duty, and determined the value of Clearwire shares under the Delaware appraisal statute to be $2.13 per share plus statutory interest. The plaintiffs filed an appeal and on April 23, 2018, the Delaware Supreme Court affirmed the ruling of the Delaware Chancery Court in its

~~entirety. This matter is concluded as no further appeals are possible.~~voluntarily dismissed.

Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations. ~~During~~Except as otherwise noted, during the three-month period ended June 30, ~~2018,~~2019, there were no material developments in the status of these legal proceedings.


Item 1A.	Risk Factors

There have been no material changes to our risk factors as described in our Annual Report on Form 10-K for the year ended March 31, ~~2018.~~2019.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None


Item 3.	Defaults Upon Senior Securities

None


Item 4.	Mine Safety Disclosures

None

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Item 5.	Other Information

Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Securities Exchange Act of 1934. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, including, among other matters, transactions or dealings relating to the government of Iran. Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

After the merger with SoftBank, SoftBank acquired control of Sprint. During the three-month period ended June 30, ~~2018,~~2019, SoftBank, through one of its non-U.S. subsidiaries, provided roaming services in Iran through Telecommunications Services Company (MTN Irancell), which is or may be a government-controlled entity. During such period, SoftBank had no gross revenues from such services and no net profit was generated. This subsidiary also provided telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan. During the three-month period ended June 30, ~~2018,~~2019, SoftBank estimates that gross revenues and net profit generated by such services were both under ~~$5,000.~~$4,000. Sprint was not involved in, and did not receive any revenue from, any of these activities. These activities have been conducted in accordance with applicable laws and regulations, and they are not sanctionable under U.S. or Japanese law. Accordingly, with respect to Telecommunications Services Company (MTN Irancell), the relevant SoftBank subsidiary intends to continue such activities. With respect to services provided to accounts affiliated with the Embassy of Iran in Japan, the relevant SoftBank subsidiary is obligated under contract to continue such services.

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In addition, during the three-month period ended June 30, ~~2018,~~2019, SoftBank, through one of its non-U.S. indirect subsidiaries, provided office supplies to the Embassy of Iran in Japan. SoftBank estimates that gross revenue and net profit generated by such services were under ~~$1,500~~$2,100 and ~~$300,~~$500, respectively. Sprint was not involved in and did not receive any revenue from any of these activities. Accordingly, the relevant SoftBank subsidiary intends to continue such activities.

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Item 6.	Exhibits

Exhibit No. Exhibit Description Form Incorporated by Reference
Filed/Furnished
Herewith

SEC
File No.
Exhibit Filing Date

(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession

2.1**
Business Combination Agreement, dated as of April 29, 2018, by and among T-Mobile US, Inc., Huron Merger Sub LLC, Superior Merger Sub Corp., Sprint Corporation, Starburst I, Inc., Galaxy Investment Holdings, Inc., and for the limited purposes set forth therein, Deutsche Telekom AG, Deutsche Telekom Holding B.V. and SoftBank Group. Corp. 8-K 001-04721 2.1
4/30/2018

(3) Articles of Incorporation and Bylaws

3.1
Amended and Restated Certificate of Incorporation 8-K 001-04721 3.1
7/11/2013

3.2
Amended and Restated Bylaws 8-K 001-04721 3.2
8/7/2013

(4) Instruments Defining the Rights of Security Holders, including Indentures

4.1
Sixth Supplemental Indenture, dated as of May 14, 2018, to the Indenture, dated as of September 11, 2013, by and between Sprint Corporation and The Bank of New York Mellon Trust Company, N.A. 8-K 001-04721 4.1
5/14/2018

4.2
Thirteenth Supplemental Indenture, dated as of May 14, 2018, to the Indenture, dated as of November 20, 2006, by and between Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A. 8-K 001-04721 4.2
5/14/2018

4.3
Fourth Supplemental Indenture, dated as of May 18, 2018, to the Indenture, dated as of October 1, 1998, by and among Sprint Capital Corporation, Sprint Communications, Inc., and The Bank of New York Mellon Trust Company, N.A. 8-K 001-04721 4.1
5/18/2018

4.4
Second Supplemental Indenture, dated as of June 6, 2018, to the Indenture, dated as of October 27, 2016, by and among Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, Sprint Spectrum Co III LLC and Deutsche Bank Trust Company Americas 8-K 001-04721 4.1
6/6/2018

(10) Material Contracts
10.1
Support Agreement, dated as of April 29, 2018, by and among Deutsche Telekom AG, Deutsche Telekom Holding B.V., Sprint Corporation and SoftBank Group. Corp. 8-K 001-04721 10.1
4/30/2018

10.2
Second Amendment to Intra-Company Spectrum Lease Agreement, dated as of June 6, 2018, by and among Sprint Spectrum License Holder LLC, Sprint Spectrum License Holder II LLC, Sprint Spectrum License Holder III LLC, Sprint Communications, Inc., Sprint Intermediate HoldCo LLC, Sprint Intermediate HoldCo II LLC, Sprint Intermediate HoldCo III LLC, Sprint Corporation and the subsidiary guarantors named on the signature pages thereto. 8-K 001-04721 10.1
6/6/2018

10.3
Third Amended and Restated Receivables Sale and Contribution Agreement, dated as of June 29, 2018, by and among Sprint Spectrum L.P., as servicer, and certain Sprint Corporation subsidiaries, as originators and sellers, and certain special purpose entities, as purchasers *

Exhibit No.

Exhibit Description

Form

Incorporated by Reference

Filed/Furnished

Herewith

SEC

File No.

Exhibit

Filing Date

(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession

2.1**

Business Combination Agreement, dated as of April 29, 2018, by and among T-Mobile US, Inc., Huron Merger Sub LLC, Superior Merger Sub Corp., Sprint Corporation, Starburst I, Inc., Galaxy Investment Holdings, Inc., and for the limited purposes set forth therein, Deutsche Telekom AG, Deutsche Telekom Holding B.V. and SoftBank Group. Corp.

8-K

001-04721

2.1

4/30/2018

2.2***

Amendment No. 1, dated as of July 26, 2019, to the Business Combination Agreement, dated as of April 29, 2018, by and among T-Mobile US, Inc., Huron Merger Sub LLC, Superior Merger Sub Corporation, Sprint Corporation, Starburst I, Inc., Galaxy Investment Holdings, Inc., and for the limited purposes set forth therein, Deutsche Telekom AG, Deutsche Telekom Holding B.V., and SoftBank Group Corp.

8-K

001-04721

2.2

7/26/2019

2.3***

Asset Purchase Agreement, dated as of July 26, 2019, by and among T-Mobile US, Inc., Sprint Corporation, and DISH Network Corporation.

8-K

001-04721

2.1

7/26/2019

(3) Articles of Incorporation and Bylaws

3.1

Amended and Restated Certificate of Incorporation

8-K

001-04721

3.1

7/11/2013

3.2

Amended and Restated Bylaws

8-K

001-04721

3.2

8/7/2013

(4) Instruments Defining the Rights of Security Holders, including Indentures

4.1

Fourteenth Supplemental Indenture, dated as June 7, 2019, to the Indenture, dated as of November 20, 2006, between Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A.

8-K

001-04721

4.1

6/10/2019

4.2

Form of 7.000% Guaranteed Note due 2020, as amended on June 7, 2019 (included in Exhibit 4.1)

8-K

001-04721

4.2

6/10/2019

(10) Material Contracts

10.1

Second Amendment to Third Amended and Restated Receivables Sale and Contribution Agreement, dated as of June 24, 2019, by and among Sprint Spectrum L.P., as servicer, certain Sprint Corporation subsidiaries, as originators and sellers, and certain special purpose entities, as purchasers, certain commercial paper conduits and financial institutions from time to time party thereto, and Mizuho Bank, Ltd.

10.2

Second Amendment to Third Amended and Restated Receivables Purchase Agreement, dated as of June 24, 2019, by and among Sprint Spectrum L.P., as servicer, certain Sprint Corporation special purpose entities, as sellers, certain commercial paper conduits and financial institutions from time to time party thereto, as purchaser agents, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as joint lead arranger, SMBC Nikko Securities America, Inc., as joint lead arranger, and Mizuho Bank, Ltd., as administrative agent and collateral agent

10.3

Summary of Cash Bonus Award Granted to Andrew M. Davies

(31) and (32) Officer Certifications

31.1

Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)

6463

Table of Contents

Exhibit No. Exhibit Description Form Incorporated by Reference
Filed/Furnished
Herewith

SEC
File No.
Exhibit Filing Date

10.4
Third Amended and Restated Receivables Purchase Agreement, dated as of June 29, 2018, by and among Sprint Spectrum L.P., as servicer, certain Sprint Corporation special purpose entities, as sellers, certain commercial paper conduits and financial institutions from time to time party thereto, as purchaser agents, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrative agent, SMBC Nikko Securities America, Inc., as administrative agent, and Mizuho Bank, Ltd., as administrative agent and collateral agent *

10.5
Employment Offer Letter, dated July 2, 2018, by and between Andrew M. Davies and Sprint Corporation 8-K 001-04721 10.1
7/2/2018

10.6
Amended and Restated Employment Agreement, dated July 2, 2018, by and between Marcelo Claure and Sprint Corporation 8-K 001-04721 10.2
7/2/2018

10.7
Amended and Restated Employment Agreement, dated July 2, 2018, by and between Michel Combes and Sprint Corporation 8-K 001-04721 10.3
7/2/2018

(12) Statement re Computation of Ratios

12
Computation of Ratio of Earnings to Fixed Charges *

(31) and (32) Officer Certifications

31.1
Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) *

31.2
Certification of Chief Financial Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) *

32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *

32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *

(101) Formatted in XBRL (Extensible Business Reporting Language)

101.INS XBRL Instance Document *

101.SCH XBRL Taxonomy Extension Schema Document *

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB XBRL Taxonomy Extension Label Linkbase Document *

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

Exhibit No.

Exhibit Description

Form

Incorporated by Reference

Filed/Furnished

Herewith

SEC

File No.

Exhibit

Filing Date

31.2

Certification of Chief Financial Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002

(101) Formatted in XBRL (Extensible Business Reporting Language)

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File

_________________


*	Filed or furnished, as required.


**	Filing excludes certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K, which the registrant agrees to furnish supplementally to the SEC upon request by the SEC; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, , for any schedules or exhibits so furnished.


***	Filing excludes certain schedules pursuant to Item 601(a)(5) of Regulation S-K, which the registrant agrees to furnish supplementally to the SEC upon request by the SEC.

6564

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



SPRINT CORPORATION (Registrant)

By:		/s/ PAUL W. SCHIEBER, JR.
		Paul W. Schieber, Jr. Vice President and Controller (Principal Accounting Officer)

Date: August 7, ~~2018~~2019

6665



				Adjustments due to
	March 31, 2018			Topic 606			Other ASUs			April 1, 2018
	(in millions)
ASSETS
Current assets:
Accounts and notes receivable, net	$	3,711		$	97		$	—		$	3,808
Device and accessory inventory	1,003			(24		)	—			979
Prepaid expenses and other current assets	575			271			—			846
Costs to acquire a customer contract	—			1,219			—			1,219
Other assets	921			43			—			964
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses and other current liabilities	$	3,962		$	(35	)	$	—		$	3,927
Deferred tax liabilities	7,294			366			—			7,660
Other liabilities	3,483			(32		)	—			3,451
Stockholders' equity:
(Accumulated deficit) retained earnings	(1,255		)	1,307			8			60
Accumulated other comprehensive loss	(313		)	—			(8		)	(321		)



	Three Months Ended June 30, 2018
	As reported			Balances without adoption of Topic 606			Change
	(in millions, except per share amounts)
Net operating revenues:
Service revenue	$	5,740		$	5,883		$	(143	)
Equipment sales	1,173			892			281
Equipment rentals	1,212			1,228			(16		)
	8,125			8,003			122
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	1,677			1,688			(11		)
Cost of equipment sales	1,270			1,248			22
Cost of equipment rentals (exclusive of depreciation below)	124			124			—
Selling, general and administrative	1,867			1,948			(81		)
Depreciation - network and other	1,023			1,023			—
Depreciation - equipment rentals	1,136			1,136			—
Amortization	171			171			—
Other, net	42			42			—
	7,310			7,380			(70		)
Operating income	815			623			192
Total other expense	(595		)	(595		)	—
Income before income taxes	220			28			192
Income tax expense	(47		)	(7		)	(40		)
Net income	173			21			152
Less: Net loss attributable to noncontrolling interests	3			3			—
Net income attributable to Sprint Corporation	$	176		$	24		$	152

Basic net income per common share	$	0.04		$	0.01		$	0.03
Diluted net income per common share	$	0.04		$	0.01		$	0.03
Basic weighted average common shares outstanding	4,010			4,010			—
Diluted weighted average common shares outstanding	4,061			4,061			—



	Carrying amount at June 30, 2018		Estimated Fair Value Using Input Type
	Carrying amount at June 30, 2018		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	40,784	$	37,477	$	—	$	3,928	$	41,405



	Carrying amount at March 31, 2018		Estimated Fair Value Using Input Type
	Carrying amount at March 31, 2018		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	40,820	$	37,549	$	—	$	3,737	$	41,286




Remainder of year ending March 31, 2019	$	7,281
Year ending March 31, 2020	2,358
Thereafter	4
Total	$	9,643



	Three Months Ended June 30, 2017
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues:
Service revenue	$	—		$	—		$	6,071		$	—		$	6,071
Equipment sales	—			—			1,187			—			1,187
Equipment rentals	—			—			899			—			899
	—			—			8,157			—			8,157
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,709			—			1,709
Cost of equipment sales	—			—			1,545			—			1,545
Cost of equipment rentals (exclusive of depreciation below)	—			—			112			—			112
Selling, general and administrative	—			—			1,938			—			1,938
Depreciation - network and other	—			—			977			—			977
Depreciation - equipment rentals	—			—			854			—			854
Amortization	—			—			223			—			223
Other, net	—			(55		)	(309		)	—			(364		)
	—			(55		)	7,049			—			6,994
Operating income	—			55			1,108			—			1,163
Other income (expense):
Interest income	198			45			4			(228		)	19
Interest expense	(198		)	(351		)	(292		)	228			(613		)
Earnings (losses) of subsidiaries	206			524			—			(730		)	—
Other expense, net	—			(67		)	(4		)	—			(71		)
	206			151			(292		)	(730		)	(665		)
Income (loss) before income taxes	206			206			816			(730		)	498
Income tax expense	—			—			(292		)	—			(292		)
Net income (loss)	206			206			524			(730		)	206
Other comprehensive (loss) income	(4		)	(4		)	5			(1		)	(4		)
Comprehensive income (loss)	$	202		$	202		$	529		$	(731	)	$	202