Filed Pursuant to Rule 424(b)(3)
Registration No. 333-75578
Sprint Capital Corporation
Sprint Corporation
Offer to Exchange
6.0% Notes due 2007
that have been registered under the Securities Act of 1933
for
all outstanding unregistered 6.0% Notes due 2007
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The Registered Notes
. The terms of the new notes are substantially identical to the
outstanding notes, except that the new notes will be freely tradable.
. Interest is payable on January 15 and July 15 of each year.
. The new notes will mature on January 15, 2007.
. Sprint Capital may redeem the new notes at any time. The redemption
price is described under the heading "Description of the New
Notes--Optional Redemption and Ability to Purchase" on page 27.
. The new notes will rank equally with all of Sprint Capital's other
unsecured and unsubordinated indebtedness.
. Sprint will fully and unconditionally guarantee the new notes. The
guarantees will rank equally with all of Sprint's other unsecured and
unsubordinated obligations.
. The new notes will not be listed on any securities exchange.
The Exchange Offer
. The exchange offer will expire at 5:00 p.m. New York City time, on
February 15, 2002, unless extended.
. The exchange offer is not subject to any conditions other than that the
exchange offer not violate applicable law or any applicable
interpretation of the staff of the SEC.
. All old notes that are validly tendered and not validly withdrawn will
be exchanged.
. Tenders of old notes may be withdrawn at any time before the expiration
of the exchange offer.
. We will not receive any proceeds from the exchange offer.
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See "Risk Factors" beginning on page 7 for a discussion of the factors that
you should consider in connection with the exchange offer and an exchange of
old notes for new notes.
We are not asking you for a proxy and you are requested not to send us a
proxy.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is accurate or complete or passed upon the adequacy or accuracy
of this prospectus. Any representation to the contrary is a criminal offense.
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The date of this prospectus is January 4, 2002.
Unless the context otherwise requires, references in this prospectus to
"Sprint," "we," "us," and "our" mean Sprint Corporation and its subsidiaries,
including Sprint Capital Corporation, references to "Sprint Capital" mean
Sprint Capital Corporation, our wholly owned finance subsidiary, references to
"FON common stock" mean the FON common stock, series 1, of Sprint, and
references to "PCS common stock" mean the PCS common stock, series 1, of Sprint.
References to "U.S. $," "U.S. Dollars" and "$" are to the currency of the
United States of America.
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended, which we refer to as the Securities Act.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of new notes received in
exchange for old notes where the old notes were acquired by the broker-dealer
as a result of market-making activities or other trading activities. We have
agreed that, for a period of 180 days after the SEC declares the registration
statement effective, we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
450 Fifth Street, N. W., Washington, D. C. 20549, 233 Broadway, New York, New
York 10279 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. You can also obtain copies of the documents at prescribed
rates by writing to the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D. C. 20549. Please call the SEC at l-800-SEC-0330
for further information on the operation of the public reference facilities.
Our SEC filings are also available at the office of the New York Stock
Exchange. For further information on obtaining copies of our public filings at
the New York Stock Exchange, you should call (212) 656-5060.
We "incorporate by reference" the information that we file with the SEC,
which means that we are disclosing important information to you in those
documents. The information incorporated by reference is an important part of
this prospectus, and information that we subsequently file with the SEC will
automatically update and supercede information in this prospectus and in our
other filings with the SEC. We incorporate by reference the documents listed
below, which we have already filed with the SEC, and any future filings we make
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934, as amended, which we refer to as the Exchange Act (other
than information furnished pursuant to Item 9 of any Current Report on Form
8-K, and the Report of the Compensation Committee, the Performance Graph and
the Report on the Repricing of Options included in our definitive proxy
statement), until the later of the date on which we have completed the exchange
offer or the end of the period during which this prospectus is available for
use by participating broker-dealers and others with similar prospectus delivery
requirements for use in connection with any resale of new notes.
. Annual Report on Form 10-K/A for the year ended December 31, 2000;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 200l;
. Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;
. Quarterly Report on Form 10-Q for the quarter ended September 30, 2001;
. Current Report on Form 8-K filed on February 20, 2001;
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. Current Report on Form 8-K filed on April 23, 2001;
. Current Report on Form 8-K filed on May 16, 2001;
. Current Report on Form 8-K filed on July 24, 2001;
. Current Report on Form 8-K filed on August 7, 2001;
. Current Report on Form 8-K filed on August 8, 2001; and
. Current Report on Form 8-K/A filed on October 30, 2001.
You may request a copy of these filings, other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing,
at no cost, by writing or calling us at the following address:
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
(800) 259-3755
Attention: Investor Relations
To obtain timely delivery of this information, you must request it no later
than five (5) business days before February 15, 2002, the expiration date of
the exchange offer.
We and Sprint Capital have also filed a registration statement with the SEC
relating to the new notes described in this prospectus. This prospectus is part
of the registration statement. You may obtain from the SEC a copy of the
registration statement and exhibits that we and Sprint Capital filed with the
SEC when we and Sprint Capital registered the new notes. The registration
statement may contain additional information that may be important to you.
You should rely on the information contained or incorporated by reference in
this prospectus. Neither we nor Sprint Capital have authorized anyone else to
provide you with additional or different information. We and Sprint Capital are
only offering to exchange these securities in states where the offer is
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.
3
SPRINT CORPORATION
We are a global communications company and a leader in integrating
long-distance, local service, and wireless communications. We are also one of
the largest carriers of Internet traffic using our tier one Internet protocol
network, which provides connectivity to any point on the Internet either
through our own network or via direct connections with another backbone
provider. We are the nation's third-largest provider of long distance services
and operate nationwide, all-digital long distance and tier one Internet
protocol networks using fiber-optic and electronic technology. In addition, our
local telecommunications division currently serves approximately 8.3 million
access lines in 18 states. We also operate the only 100% digital personal
communications service, or PCS, wireless network in the United States with
licenses to provide service nationwide using a single frequency band and a
single technology. We own PCS licenses to provide service to the entire United
States population, including Puerto Rico and the U.S. Virgin Islands. As part
of our overall business strategy, we regularly evaluate opportunities to expand
and complement our operations by pursuing strategic transactions. For the year
ended December 31, 2000, we had revenues of $23.6 billion and net income of $93
million and served more than 23 million business and residential customers. For
the nine months ended September 30, 2001, we had revenues of $19.4 billion and
a net loss of $167 million.
In November 1998, we allocated all of our assets and liabilities into two
groups: the FON group and the PCS group. At the same time, we reclassified each
share of our publicly traded common stock into tracking stocks. Each share of
common stock was reclassified into one share of FON common stock and 1/2 share
of PCS common stock. Our business is divided into four lines of business: the
global markets division, the local telecommunications division, the product
distribution and directory publishing businesses, and the PCS wireless
telephony products and services business. The FON group includes the global
markets division, the local telecommunications division, and the product
distribution and directory publishing businesses. The PCS group includes the
PCS wireless telephony products and services business. The PCS common stock is
intended to reflect the financial results and economic value of the PCS
wireless telephony products and services business. The FON common stock is
intended to reflect the financial results and economic value of the global
markets division, the local telecommunications division, and the product
distribution and directory publishing businesses.
We were incorporated in 1938 under the laws of the State of Kansas. Our
principal executive offices are located at 2330 Shawnee Mission Parkway,
Westwood, Kansas 66205, and our telephone number is (913) 624-3000.
Sprint's PCS Group
The PCS group includes our wireless PCS operations. The PCS group markets
its wireless telephony products and services under the Sprint and Sprint PCS
brand names. The PCS group currently provides nationwide service through a
combination of:
. operating its own digital network in major metropolitan areas,
. affiliating with other companies, primarily in and around small
metropolitan areas,
. roaming on analog cellular networks of other providers using
dual-band/dual-mode handsets, and
. roaming on other providers' digital PCS networks that use code division
multiple access technology.
The PCS group also provides wholesale PCS services to companies that resell
the services to their customers on a retail basis. These companies pay the PCS
group a discounted price for their customers' usage, but bear the costs of
acquisition and customer service. The PCS group also includes our investment in
Pegas Telecomunicaciones, S. A. de C.V., a wireless PCS operation in Mexico.
This investment is accounted for using the equity method. Pegaso is currently
experiencing financial difficulties and is evaluating various restructuring
alternatives.
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The PCS group's business goals include continually expanding network
capacity and coverage using superior technology and increasing market
penetration by aggressively marketing competitively priced PCS products and
services under the Sprint and Sprint PCS brand names, offering enhanced voice
and data services and seeking to provide superior customer service. The
principal elements of the PCS group's strategy for achieving these goals are:
. operating a nationwide digital wireless network;
. leveraging the operating scale of the PCS group's national network to
achieve significant cost advantages in purchasing power, operations, and
marketing;
. leveraging our national brand to gain consumer confidence in, and
acceptance of, the PCS group's products and services;
. using state-of-the-art technology, including code division multiple
access technology, which is a digital spread-spectrum wireless
technology that allows a large number of users to access a single
frequency band that assigns a code to all speech bits, sends a scrambled
transmission of the enclosed speech over the air and reassembles the
speech into its original format;
. incorporating third generation technology into its network;
. delivering superior service to its customers;
. growing its customer base using multiple distribution channels;
. continuing to expand capacity and coverage; and
. offering PCS group services in combination with FON group services.
Since launching its first commercial PCS service in the United States in
November 1995, the PCS group has experienced rapid customer growth, providing
service to approximately 12.7 million direct and resale customers as of
September 30, 2001, representing an increase of more than 47% in the number of
customers served as of September 30, 2000. The PCS group affiliates also had
approximately 1.7 million subscribers as of September 30, 200l. The service
offered by the PCS group and its affiliates now covers nearly 244 million
people. For the year ended December 31, 2000, the PCS group had net operating
revenues of $6.3 billion, and for the nine months ended September 30, 2001, the
PCS group had net operating revenues of $7.0 billion.
Sprint's FON Group
The FON group includes our global markets division, local telecommunications
division, and product distribution and directory publishing businesses.
Through our global markets division we provide a broad suite of
communications services targeted to domestic business and residential
customers, multinational corporations and other communications companies. These
services include domestic and international voice services, data communications
services using various protocols such as Internet protocol and frame relay (a
public data service that transfers packets of data over our network), and
managed network services. In addition, our global markets division is expanding
its ability to provide web and applications hosting, consulting services, and
co-location services. Through this division we also provide broadband services
and digital subscriber line services, which enable high-speed transmission of
data over existing copper telephone lines between the customer and the service
provider.
Our local telecommunications division consists primarily of regulated local
exchange carriers serving approximately 8.3 million access lines in 18 states.
Through this division we provide local voice and data services, long distance
services for customers within our local territories, and access for other
carriers to our local exchange facilities. This division also sells
telecommunications equipment. Our local telecommunications division has
embarked on a strategy to market our entire long distance and PCS product
portfolios as well as its core product lines of local voice, advanced network
features, and data products to our local customers.
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Our product distribution and directory publishing businesses consist of
wholesale distribution of telecommunications equipment and the publishing and
marketing of white and yellow page telephone directories. We are one of the
nation's largest distributors of telecommunications equipment to wireline and
wireless service companies, cable television operators, and systems resellers.
In October 2001, we decided to terminate our efforts to develop and deploy
our integrated communications service, referred to as Sprint ION. We also
decided to freeze the number of multi-point, multi-channel distribution
services ("MMDS") markets we serve until substantial progress is made on
second-generation MMDS technology. We expect that these actions, together with
the other restructuring actions we are taking to control costs, will result in
a one-time pre-tax charge to earnings of approximately $2 billion during the
fourth quarter of 2001.
For the year ended December 31, 2000, the FON group had net operating
revenues of $17.7 billion, and for the nine months ended September 30, 2001,
the FON group had net operating revenues of $12.9 billion.
SPRINT CAPITAL CORPORATION
Sprint Capital is a wholly owned subsidiary of our company. We formed Sprint
Capital to engage in financing activities to provide funds for use by us and
our other subsidiaries other than the local exchange companies in our local
telecommunications division. Sprint Capital raises funds through the sale of
debt securities and then uses the net proceeds to make loans to, or investments
in, us or our other subsidiaries, other than the local exchange companies in
our local telecommunications division. Sprint Capital does not and will not
engage in any other business operations. Sprint Capital was incorporated in
1993 under the laws of the State of Delaware. Its principal offices are located
at 2330 Shawnee Mission Parkway, Westwood, Kansas 66205, and its telephone
number is (913) 624-3000.
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RISK FACTORS
You should carefully consider the following risk factors and the other
information included or incorporated by reference in this prospectus before
deciding to tender your old notes in exchange for new notes pursuant to the
exchange offer. The risks under the heading "Risk Factors Relating to Our
Company" apply to both the old notes and the new notes.
Risk Factors Relating to Our Company
Failure to satisfy our substantial capital requirements could cause us to
delay or abandon our expansion plans.
The PCS group and the FON group will continue to require substantial
additional capital to continue to expand their businesses. We may not be able
to arrange additional financing to fund our capital requirements on terms
acceptable to us. Our ability to arrange additional financing will depend on,
among other factors, our financial performance, general economic conditions,
and prevailing market conditions. Many of these factors are beyond our control.
Either of the PCS group's or the FON group's financing efforts may adversely
affect the other group's ability to raise additional capital. Failure to obtain
suitable financing could, among other things, result in the delay or
abandonment of the PCS group's expansion plans or the inability of the FON
group to continue to expand its business and meet competitive challenges.
Our substantial leverage will reduce cash flow from operations available to
fund our business, may cause a decline in our credit rating, and may limit our
ability to raise additional capital.
We have substantial indebtedness. As of September 30, 2001, we had total
outstanding debt of $21.7 billion. We intend to incur additional indebtedness
in the future as we implement the business plans of the PCS group and the FON
group. In connection with the execution of our business strategies, we are
continually evaluating acquisition opportunities with respect to both the PCS
group and the FON group, and we may elect to finance acquisitions by incurring
additional indebtedness. We must use a portion of our future cash flow from
operations to pay the principal and interest on our indebtedness, which will
reduce the funds available for our operations, including capital investments
and business expenses. This could hinder our ability to adjust to changing
market and economic conditions. If we incur significant additional
indebtedness, our credit rating could be adversely affected. As a result, our
borrowing costs would likely increase and our access to capital may be
adversely affected.
We face intense competition that may reduce our market share and harm our
financial performance.
There is substantial competition in the telecommunications industry. The
traditional dividing lines between long distance, local, wireless, and Internet
services are increasingly becoming blurred. Through mergers and various service
integration strategies, major providers, including us, are striving to provide
integrated solutions both within and across all geographical markets.
We expect competition to intensify as a result of the entrance of new
competitors and the rapid development of new technologies, products, and
services. We cannot predict which of many possible future technologies,
products, or services will be important to maintain our competitive position or
what expenditures will be required to develop and provide these technologies,
products or services. Our ability to compete successfully will depend on
marketing and on our ability to anticipate and respond to various competitive
factors affecting the industry, including new services that may be introduced,
changes in consumer preferences, demographic trends, economic conditions, and
discount pricing strategies by competitors. To the extent we do not keep pace
with technological advances or fail to timely respond to changes in competitive
factors in our industry, we could lose market share or experience a decline in
our revenue and net income.
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PCS group. Each of the markets in which the PCS group competes is served by
other two-way wireless service providers, including cellular, enhanced
specialized mobile radio, and PCS operators and resellers. A majority of
markets have five or more commercial mobile radio service providers. Each of
the top 50 metropolitan markets has at least two other PCS competitors in
addition to two cellular incumbents. Many of these competitors have been
operating for a number of years and currently serve a substantial subscriber
base. The Federal Communications Commission recently decided to allow
commercial mobile radio service providers to own more spectrum in urban markets
and to remove all spectrum limits in January 2003. Competition may continue to
increase to the extent that licenses are transferred from smaller stand-alone
operators to larger, better capitalized, and more experienced wireless
communications operators. These larger wireless communications operators may be
able to offer customers network features not offered by the PCS group. The
actions of these larger wireless communications operators could negatively
impact the PCS group's customer churn, ability to attract new customers,
average revenue per user, cost to acquire customers, and operating costs per
customer.
The PCS group relies on agreements with competitors to provide automatic
roaming capability to PCS group customers in many of the areas of the United
States not covered by the PCS group's network, which primarily serves
metropolitan areas. Certain competitors may be able to offer coverage in areas
not served by the PCS group's network or may be able to offer roaming rates
that are lower than those offered by the PCS group. Certain of our competitors
are seeking to reduce access to their networks through actions pending with the
Federal Communications Commission. Moreover, the standard for the dominant air
interface on which PCS customers roam is currently being considered for
elimination by the Federal Communications Commission as part of a streamlining
proceeding. If the Federal Communications Commission eliminates this standard,
PCS customers may have difficulty roaming in certain markets.
Many cellular providers, some of which have an infrastructure in place and
have been operating for a number of years, have been upgrading their systems
and provide expanded and digital services to compete with the PCS group's
services. Many of these wireless providers require their customers to enter
into long term contracts, which may make it more difficult for the PCS group to
attract customers away from these wireless providers.
We anticipate that market prices for two-way wireless voice services and
products generally will decline in the future as a result of increased
competition. We also expect to face increased competition for access to
distribution channels. Consequently, we may be forced to increase spending for
advertising and promotions. All of this may lead to greater choices for
customers, possible consumer confusion, and increased industry churn.
FON group. As the nation's third largest provider of long distance services,
the FON group competes with AT&T Corp., or AT&T, and WorldCom, Inc., as well as
a host of smaller competitors. Companies such as Qwest Communications
International Inc. and Level 3 Communications, Inc. have built high-capacity
fiber-optic networks capable of supporting tremendous amounts of bandwidth.
Although these companies have not captured a large market share, they and
others with a strategy of using Internet-based networks claim certain cost
structure advantages which, among other factors, may position them well for the
future. In addition, increased competition has forced lower prices for long
distance services. The significant increase in capacity resulting from new
networks may drive prices down further.
The Telecommunications Act of 1996 allows the Regional Bell Operating
Companies to provide long distance services in their respective regions if
certain conditions are met. Verizon Communications Inc. has entered the long
distance market in New York, Massachusetts, Connecticut, and Pennsylvania, and
SBC Communications Inc. has entered the long distance market in Texas, Kansas,
Oklahoma, Arkansas and Missouri. Both have been successful in obtaining a
significant market share in a short period of time. A significant number of the
Regional Bell Operating Companies may secure regulatory clearance to offer long
distance services in their respective markets in the next 12 months. As the
Regional Bell Operating Companies have entered the market, they have proven to
be formidable long distance competitors.
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Because our local telecommunications division operates largely in rural
markets, competition in the local division's markets is occurring more
gradually. In urban areas, however, there is already substantial competition
for business customers, with varying levels of competition in third tier and
rural markets. Cable modems provide competition for second line and data
services for residential customers, and wireless services will continue to grow
as an alternative to wireline services. Certain mergers or other combinations
involving our competitors may increase competition.
Demand for some of our communications products and services has been
adversely affected by a downturn in the United States economy as well as
changes in the global economy.
Demand for some of our communications products and services has been
adversely affected by a downturn in the United States economy as well as
changes in the global economy. A number of the FON group's wholesale customers
have struggled financially and some have filed for bankruptcy. As a result, we
have experienced lower than expected revenues for our wholesale business in
recent quarters.
Likewise, a number of our suppliers have recently experienced financial
challenges. If they cannot meet their commitments, we would have to use
different vendors and this could result in delays, interruptions, or additional
expenses associated with the upgrade and expansion of our networks and the
offering of our products and services.
If current general economic conditions continue or worsen, the revenues,
cash flow, and operating results of the PCS group, the FON group, and our
company as a whole could be adversely affected.
The FON group has experienced declining revenues and net income.
The FON group has experienced declining operating revenues and net income
for the past several quarters. We recently announced plans to improve the FON
group's competitive position and reduce its costs, but we have not yet fully
implemented these plans. If we fail to successfully implement these plans, or
if the FON group cannot increase its revenues, the FON group may be unable to
make the capital expenditures necessary to implement its business plan or
otherwise conduct its business in an effective and competitive manner. This
could further damage our ability to maintain or increase revenues and net
income of the FON group and of our company as a whole.
Any failure by the PCS group to continue the buildout of its network and
meet capacity requirements of its customer growth will likely impair its
financial performance and adversely affect our results of operations.
The PCS group has additional network buildout and substantial capacity
additions to complete. As the PCS group continues the buildout and expansion of
its PCS network, it must:
. obtain rights to a large number of cell sites,
. obtain zoning variances or other approvals or permits for network
construction and expansion, and
. build and maintain additional network capacity to satisfy customer growth.
Network buildout and expansion may not occur as scheduled or at the cost
that the PCS group has estimated. The Federal Communications Commission
requires certain levels of construction or "buildout" for licensees to retain
their PCS licenses. Moreover, delays or failure to add network capacity, or
increased costs of adding capacity, could limit our ability to increase the
revenues of, or cause a deterioration in the operating margin of, the PCS group
or our company as a whole.
The PCS group expects to continue to supplement its own network buildout
through affiliation arrangements with other companies. Under these
arrangements, these companies offer PCS services under the Sprint PCS
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brand name, allow us to retain a portion of collected revenues, and complete
network buildout at the affiliates' expense. The related PCS networks are in
various stages of network buildout and launch. These companies may not be able
to complete and operate their networks.
The PCS group has a history of operating losses.
If the PCS group does not achieve and maintain profitability on a timely
basis, the PCS group may be unable to make the capital expenditures necessary
to implement its business plan, meet its debt service requirements, or
otherwise conduct its business in an effective and competitive manner. This
would require us to divert cash from other uses, which may not be possible or
may detract from the growth of our other businesses. These events could limit
our ability to increase revenues and net income of the PCS group, the FON
group, and our company as a whole or cause these amounts to decline.
Significant changes in the wireless industry could cause a decline in demand
for the PCS group's services.
The wireless telecommunications industry is experiencing significant
technological change, including improvements in the capacity and quality of
digital technology such as the move to third generation wireless technology.
This causes uncertainty about future customer demand for the PCS group's
services and the prices that we will be able to charge for these services. For
example, the demands for wireless data services provided by the PCS group may
be impacted by the proliferation of wireless local area networks using new
technologies or the enactment of new laws or regulations restricting use of
wireless handsets. The rapid change in technology may lead to the development
of wireless telecommunications services or alternative services that consumers
prefer over PCS. There is also uncertainty as to the extent to which airtime
charges and monthly recurring charges may continue to decline. As a result, the
future prospects of the wireless industry and the PCS group and the success of
PCS and other competitive services remain uncertain.
A high rate of customer churn would likely impair the PCS group's financial
performance.
Historically, the PCS group has experienced a significant rate of customer
churn. Customer churn in the third quarter of 2001 was higher than it was in
the second quarter of 2001, and we believe that customer churn may be higher in
the fourth quarter of 2001. Current strategies to reduce customer churn may not
be successful. A high rate of customer churn would impair our ability to
increase the revenues of, or cause a deterioration in the operating margin of,
the PCS group or our company as a whole.
Government regulation could adversely affect the PCS group's prospects and
results of operations.
The licensing, construction, operation, sale, and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the Federal Communications Commission and, depending on the
jurisdiction, state and local regulatory agencies. In addition, the Federal
Communications Commission, together with the Federal Aviation Administration,
regulates tower marking and lighting. Tower construction is also affected by
federal statutes addressing environmental protection and historic preservation.
The Federal Communications Commission, the Federal Aviation Administration, or
other governmental authorities having jurisdiction over the PCS group's
business could adopt regulations or take other actions that would adversely
affect the business prospects or results of operations of the PCS group.
Federal Communications Commission licenses to provide PCS services are
subject to renewal and revocation. The PCS group's metropolitan trading area
licenses will expire in 2005, and its basic trading area licenses will expire
in 2007. Metropolitan trading areas are areas defined by the Federal
Communications Commission for the purpose of issuing licenses for PCS. Several
basic trading areas make up each metropolitan trading area. The licenses may be
renewed by the Federal Communications Commission for additional ten year terms,
but there is no guarantee that the PCS group's licenses will be renewed.
Federal Communications Commission rules require all PCS licensees to meet
certain buildout requirements. The PCS group may not continue to obtain the
requisite coverage in each metropolitan trading area market or obtain the
requisite coverage in each basic trading area market. Failure to comply with
Federal Communications
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Commission requirements in a given license area could result in revocation of
the PCS group's PCS license for that license area or the imposition of fines on
the PCS group by the Federal Communications Commission.
Failure by various regulatory bodies to make telephone numbers available in
a timely fashion could result in the PCS group's not having enough local
numbers to assign to new subscribers in certain markets. The Federal
Communications Commission has adopted rules to promote the efficient use of
numbering resources, including restrictions on the assignment of telephone
numbers to carriers, including wireless carriers. The Federal Communications
Commission is considering additional rules in this area. The Federal
Communications Commission has delegated to states the authority to assign,
administer, and conserve telephone numbers. Depending on the rules adopted by
the states, the supply of available numbers could be adversely restricted. As a
result, the PCS group:
. may be required to assign subscribers non-local telephone numbers, which
may be a disincentive for potential customers to subscribe to PCS
service,
. may incur significant costs to either acquire new numbers or reassign
subscribers to new numbers, and
. may be unable to enroll new subscribers at projected rates.
Failure to complete development and rollout of new technology could impact
our ability to compete in the industry.
We recently terminated our efforts to develop and market Sprint ION.
Accounting charges which primarily relate to the wind-down of ION, including
associated asset write-offs, are expected to result in an estimated $2 billion
one-time pre-tax charge to our fourth quarter 2001 earnings. We are, however,
currently in the process of developing and rolling out various new technologies
intended to help us compete in the industry. We have entered into several major
contracts with vendors and undertaken other initiatives for the provision of
third generation technology to be included in our PCS network. Successful
implementation of this upgrade depends on the vendors meeting their obligations
in a timely manner. We may not successfully complete the development and
rollout of third generation technology or any other new technology in a timely
manner, and third generation technology or any other new technology may not be
widely accepted by customers. In either case, we may not be able to compete
effectively in the industry.
Risk Factors Relating to the New Notes
We are a holding company and, accordingly, are dependent on the cash flow of
our subsidiaries to satisfy our obligations under our indebtedness.
The new notes are obligations guaranteed by us. We are primarily a holding
company and have no material operations, sources of income, or assets other
than our equity interest in our subsidiaries. Because substantially all of our
operations are conducted by our subsidiaries, the guarantees of the new notes
effectively will rank junior to all existing and future debt, trade payables,
and other liabilities of our subsidiaries other than Sprint Capital. Our rights
and the rights of our creditors (including holders of the notes) to participate
in any distribution of assets of any subsidiary on its liquidation or
reorganization or otherwise would be subject to the prior claims of the
subsidiary's creditors, except to the extent that our claims as a creditor of
the subsidiary may be recognized. After the payment of the subsidiary's
liabilities, the subsidiary may not have enough assets remaining to pay us to
permit our creditors, including the holders of the new notes, to be paid.
If you do not exchange your old notes for new notes, you will continue to
have restrictions on your ability to resell them.
The old notes were not registered under the Securities Act or under the
securities laws of any state and may not be resold, offered for resale or
otherwise transferred unless they are subsequently registered or resold
pursuant to an exemption from the registration requirements of the Securities
Act and applicable state securities
11
laws. If you do not exchange your old notes for new notes pursuant to the
exchange offer, you will not be able to resell, offer to resell or otherwise
transfer the old notes unless they are registered under the Securities Act or
unless you resell them, offer to resell them or otherwise transfer them under
an exemption from the registration requirements of, or in a transaction not
subject to, the Securities Act. In addition, we will no longer be under an
obligation to register the old notes under the Securities Act except in the
limited circumstances provided in the registration rights agreement. In
addition, to the extent that old notes are tendered for exchange and accepted
in the exchange offer, the trading market for the untendered and tendered but
unaccepted old notes could be adversely affected.
There is no public market for the new notes.
The new notes are new securities for which there is currently no trading
market. We do not intend to list the new notes on any securities exchange. We
cannot assure you that an active trading market for the new notes will develop.
If a market for the new notes does develop, that market may cease to exist
at any time. In addition, in any such market, the new notes could trade at
prices that may be higher or lower than their principal amount.
The liquidity of any market for the new notes will depend upon various
factors, including:
. the number of holders of the new notes;
. the interest of securities dealers in making a market for the new notes;
. the overall market for similar debt securities;
. our financial performance and prospects; and
. the prospects for companies in our industry generally.
In addition, the liquidity of the trading market in the new notes and the
market price of the new notes may be adversely affected by changes in the
overall market for fixed income securities. As a result, an active trading
market may not develop for the new notes. If no active trading market develops,
you may not be able to resell your new notes at their fair market value or at
all.
To the extent that old notes are surrendered and accepted in the exchange
offer, the trading market for unsurrendered old notes and for
surrendered-but-unaccepted old notes could be adversely affected due to the
limited amount of old notes that are expected to remain outstanding following
the exchange offer. Generally, when there are fewer outstanding securities of
an issue, there is less demand to purchase that security, which results in a
lower price for the security. Conversely, if many old notes are not
surrendered, or are surrendered-but-unaccepted, the trading market for the new
notes could be adversely affected. See "Plan of Distribution" and "The Exchange
Offer" for further information regarding the distribution of the new notes and
the consequences of failure to participate in the exchange offer.
RECENT DEVELOPMENTS
On November 2, 2001, Sprint Capital closed its unregistered offering of
$1,750,000,000 aggregate principal amount of 6.0% notes due 2007, which we
refer to in this prospectus as the old notes, pursuant to a purchase agreement
dated as of October 30, 2001, among us, Sprint Capital, and Banc of America
Securities LLC and Lehman Brothers Inc., as representatives of the initial
purchasers named on Schedule I to the purchase agreement, which we refer to in
this prospectus as the Purchase Agreement. The net proceeds to Sprint Capital
(before expenses) from the offering was approximately $1,735,370,000. We used
$750 million of the proceeds to repay medium-term notes when they matured on
November 15, 2001. Those notes consisted of $500 million principal amount of
fixed rate notes that bore interest at an annual rate of 6.5% and $250 million
principal amount of floating rate notes that bore annual interest at 3-month
LIBOR plus 29 basis points, adjusted quarterly. The remainder of the net
proceeds was used to repay commercial paper. As of November 1, 2001, Sprint had
12
outstanding more than $3.45 billion in commercial paper, bearing interest at
annual rates from 2.9% to 4.1%, with an average maturity of 90 days. Sprint
used the proceeds from the issuances of the medium-term notes and commercial
paper to repay indebtedness and for working capital, capital expenditures and
other purposes.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference "forward-looking
statements" within the meaning of the securities laws. All statements that are
not historical facts are "forward-looking statements." The words "estimate,"
"project," "intend," "expect," "believe," "anticipate," and similar expressions
identify forward-looking statements. These forward-looking statements include
statements regarding the expected financial position, business, financing
plans, business prospects, revenues, working capital, liquidity, capital needs,
interest costs, and income, in each case relating to the PCS group and the FON
group as well as our company as a whole.
Forward-looking statements are estimates and projections reflecting our best
judgment and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking
statements. Although we and Sprint Capital believe that the estimates and
projections reflected in the forward-looking statements are reasonable, our
expectations may prove to be incorrect. Important factors that could cause
actual results to differ materially from estimates or projections contained in
the forward-looking statements include:
. the effects of vigorous competition in the markets in which we operate;
. the costs and business risks associated with providing new services and
entering new markets necessary to provide nationwide or global services;
. the ability of the PCS group to continue to grow a significant market
presence;
. the effects of mergers and consolidations within the telecommunications
industry;
. the uncertainties related to our strategic investments;
. the impact of any unusual items resulting from ongoing evaluations of
our business strategies;
. the impact of new technologies on our business;
. unexpected results of litigation filed against us;
. the possibility of 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, or regulatory changes, including the impact of
the Telecommunications Act of 1996 or other external factors over which
we have no control; and
. those factors listed in this prospectus under "Risk Factors."
We believe these forward-looking statements are reasonable; however you
should not place undue reliance on any forward-looking statements, which are
based on our current expectations. Furthermore, forward-looking statements
speak only as of the date they are made.
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any proceeds from the
exchange offer. You will receive, in exchange for old notes tendered by you and
accepted by us in the exchange offer, new notes in the same principal amount.
The old notes surrendered in exchange for the new notes will be retired and
cancelled and cannot be reissued. Accordingly, the issuance of the new notes
will not result in any increase of our outstanding debt. However, we will incur
the expenses of the exchange offer, which are estimated to be approximately
$700,000. Any surrendered-but-unaccepted old notes will be returned to you and
will remain outstanding.
13
CAPITALIZATION OF SPRINT
The following table sets forth as of September 30, 2001 the historical
consolidated capitalization of Sprint.
As of
September 30, 2001
------------------
(in millions)
Cash and equivalents....................................................................... $ 205
=======
Short-term debt (includes current maturities of long-term debt)............................ $ 4,548
Long-term debt and capital lease obligations............................................... 15,434
Equity unit notes.......................................................................... 1,725
Redeemable preferred stock................................................................. 256
Class A FT common stock, $.50 par value, 100.0 million shares authorized, 43.1 million
shares issued and outstanding (each share represents the right to 50% of a share of PCS
stock)................................................................................... 22
Class A DT common stock, $.01 par value, 100.0 million shares authorized, 43.1 million
shares issued and outstanding (each share represents the right to approximately 0.9% of a
share of PCS stock)...................................................................... --
FON stock, $2.00 par value, 4.2 billion shares authorized, 887.5 million shares issued and
outstanding.............................................................................. 1,775
PCS stock, $1.00 par value, 4.6 billion shares authorized, 983.6 million shares issued and
outstanding.............................................................................. 984
Capital in excess of par or stated value................................................... 10,006
Retained earnings.......................................................................... 1,087
Other...................................................................................... 7
-------
Total capitalization.................................................................... $35,844
=======
Except for the issuance of the old notes and as described in this prospectus
or in the documents incorporated by reference herein, there has been no
material change in Sprint's consolidated capitalization since September 30,
2001.
CAPITALIZATION OF SPRINT CAPITAL
Sprint Capital's authorized stock consists of 100 shares of $2.50 par value
common stock, all of which is outstanding and issued to Sprint. As of September
30, 2001, Sprint Capital had $16.9 billion principal amount of debt
outstanding. Except for the issuance of the old notes and as described in this
prospectus or in the documents incorporated by reference herein, there has been
no material change in Sprint Capital's capitalization since September 30, 2001.
14
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratio of earnings to fixed charges for our
company, which includes our subsidiaries, on a consolidated basis. The
following table does not show the ratio of earnings to fixed charges for Sprint
Capital on a stand-alone basis because it would not be meaningful.
For purposes of calculating the ratio,
(1) earnings means:
. income (loss) from continuing operations before taxes, plus
. equity in the net losses of less-than-50% owned entities, less
. capitalized interest; and
(2) fixed charges means:
. interest on all debt of continuing operations, including capitalized
interest, plus
. amortization of debt issuance costs, plus
. the interest component of operating rents.
The ratio of earnings to fixed charges is calculated as follows:
(earnings) + (fixed charges)
---------------------
(fixed charges)
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------- --------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges 5.96(1) 6.67(2) 1.79(3) -- (4) -- (5) -- (6) -- (7)
- --------
(1) Earnings, as defined above, include a nonrecurring charge related to
litigation of $60 million. Excluding this charge, the ratio of earnings to
fixed charges would have been 6.10 for 1996.
(2) Earnings, as defined above, include a nonrecurring litigation charge of $20
million and nonrecurring net gains of $71 million mainly from sales of
local exchanges and certain investments. Excluding these items, the ratio
of earnings to fixed charges would have been 6.54 for 1997.
(3) Earnings, as defined above, include a nonrecurring charge to write off $179
million of acquired in-process research and development costs related to
the PCS restructuring and nonrecurring net gains of $104 million mainly
relating to sales of local exchanges. Excluding these items, the ratio of
earnings to fixed charges would have been 1.85 for 1998.
(4) Earnings, as defined above, were inadequate to cover fixed charges by $1.1
billion in 1999. Earnings, as defined above, include a net nonrecurring
gain of $54 million from investment activities. Excluding this gain,
earnings, as defined above, would have been inadequate to cover fixed
charges by $1.2 billion.
(5) Earnings, as defined above, were inadequate to cover fixed charges by $621
million in 2000. Earnings, as defined above, include:
. nonrecurring charges of $238 million principally representing a
write-down of goodwill, $187 million for costs associated with the
terminated WorldCom merger and $122 million for the write-downs of
certain equity investments;
. net nonrecurring gains of $71 million from the sale of an independent
directory publishing operation and from investment activities; and
. a nonrecurring gain of $28 million from the sale of network
infrastructure and the right to manage customers to a PCS affiliate.
15
Excluding these items, earnings, as defined above, would have been
inadequate to cover fixed charges by $173 million.
(6) Earnings, as defined above, were inadequate to cover fixed charges by $63
million in the nine months ended September 30, 2000. Earnings, as defined
above, include nonrecurring items in the first quarter of 2000 of a net
gain from investment activities of $26 million and a nonrecurring gain of
$28 million on the sale of network infrastructure and the right to manage
customers to a PCS affiliate. Earnings, as defined above, include
nonrecurring items in the second quarter of 2000 of $187 million for costs
associated with the proposed WorldCom merger, which was terminated, and a
gain on the sale of an independent directory publishing operation of $45
million. Excluding these items, the ratio of earnings to fixed charges
would have been 1.02.
(7) Earnings, as defined above, were inadequate to cover fixed charges by $49
million in the nine months ended September 30, 2001. Earnings, as defined
above, include nonrecurring gains in the first quarter of 2001 of $14
million from investment activities. Earnings, as defined above, include
nonrecurring items in the third quarter of 2001 of a write-down of an
investment of $157 million, a loss on the sale of an investment of $25
million and a gain from the amendment of certain retirement plan benefits
of $120 million. Excluding these items, earnings, as defined above, would
have been inadequate to cover fixed charges by $1 million.
16
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We sold the old notes on November 2, 2001 to the initial purchasers pursuant
to the Purchase Agreement. These initial purchasers subsequently sold the old
notes to:
. "qualified institutional buyers", as defined in Rule 144A under the
Securities Act, in reliance on Rule 144A, and
. persons in offshore transactions in reliance on Regulation S under the
Securities Act.
As a condition to the initial sale of the old notes, we and the
representatives of the initial purchasers entered into a registration rights
agreement dated as of November 2, 2001. Pursuant to the registration rights
agreement, we agreed to conduct an exchange offer. We agreed to issue and
exchange the new notes for all old notes validly tendered and not validly
withdrawn before the expiration of the exchange offer. A copy of the
registration rights agreement has been filed as an exhibit to the registration
statement which includes this prospectus. The registration statement is
intended to satisfy some of our obligations under the registration rights
agreement and the Purchase Agreement.
The term "holder" with respect to the exchange offer means any person in
whose name old notes are registered on the trustee's books or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose old notes are held of record by The Depository Trust Company,
which we refer to as the Depositary or DTC, who desires to deliver the old note
by book-entry transfer at DTC.
Resale of the New Notes
We believe that you will be allowed to resell the new notes to the public
without registration under the Securities Act, and without delivering a
prospectus that satisfies the requirements of Section 10 of the Securities Act,
if you can make the representations set forth below under "The Exchange
Offer--Procedures for Tendering Old Notes." However, if you intend to
participate in a distribution of the new notes, or you are an "affiliate" of us
as defined in Rule 405 of the Securities Act, you must comply with the
registration requirements of the Securities Act and deliver a prospectus,
unless an exemption from registration is otherwise available to you. You have
to represent to us in the letter of transmittal accompanying this prospectus
that you meet the conditions exempting you from the registration requirements.
We base our view on interpretations by the staff of the SEC in no-action
letters issued to other issuers in exchange offers like ours. However, we have
not asked the SEC to consider this particular exchange offer in the context of
a no-action letter. Therefore, you cannot be sure that the SEC will treat it in
the same way it has treated other exchange offers in the past.
A broker-dealer that has bought old notes for market-making or other trading
activities has to deliver a prospectus in order to resell any new notes it
receives for its own account in the exchange. This prospectus may be used by a
broker-dealer to resell any of its new notes. We have agreed in the
registration rights agreement to send this prospectus to any broker-dealer that
requests copies for a period of up to 180 days after the SEC declares the
registration statement relating to this exchange offer effective. See "Plan of
Distribution" for more information regarding broker-dealers.
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance of the exchange offer would not be in compliance with
the securities or blue sky laws.
Terms of the Exchange Offer
General. Based on the terms and conditions set forth in this prospectus and
in the letter of transmittal, we will accept any and all old notes validly
tendered and not validly withdrawn before the expiration date.
17
Subject to the minimum denomination requirements of the new notes, we will
issue $1,000 principal amount of new notes in exchange for each $1,000
principal amount of outstanding old notes validly tendered pursuant to the
exchange offer and not validly withdrawn before the expiration date. Holders
may tender some or all of their old notes pursuant to the exchange offer.
However, old notes may be tendered only in amounts that are integral multiples
of $1,000 principal amount.
The form and terms of the new notes are the same as the form and terms of
the old notes except that the new notes will be registered under the Securities
Act and, therefore, the new notes will not bear legends restricting the
transfer of the new notes.
The new notes will evidence the same indebtedness as the old notes, which
they replace, and will be issued under, and be entitled to the benefits of, the
same indenture that governs the old notes. As a result, both the new notes and
the old notes will be treated as a single class of debt securities under the
indenture. The exchange offer does not depend on any minimum aggregate
principal amount of old notes being surrendered for exchange.
As of the date of this prospectus, $1,750,000,000 in aggregate principal
amount of the old notes is outstanding, all of which is registered in the name
of Cede & Co., as nominee for DTC. Solely for reasons of administration, we
have fixed the close of business on January 2, 2002 as the record date for the
exchange offer for purposes of determining the persons to whom this prospectus
and the letter of transmittal will be initially mailed. There will be no fixed
record date for determining holders of the old notes entitled to participate in
this exchange offer.
As a holder of old notes, you do not have any appraisal or dissenters'
rights or any other right to seek monetary damages in court under the Delaware
General Corporation Law, the Kansas General Corporation Code or the indenture
governing the notes. We intend to conduct the exchange offer in accordance with
the provisions of the registration rights agreement and the applicable
requirements of the Exchange Act and the related rules and regulations of the
SEC. Old notes that are not surrendered for exchange in the exchange offer will
remain outstanding and interest on these notes will continue to accrue.
We will be deemed to have accepted validly surrendered old notes if and when
we give oral or written notice of our acceptance to Bank One Trust Company,
N.A., which is acting as the exchange agent. The exchange agent will act as
agent for the tendering holders of old notes for the purpose of receiving the
new notes from us.
If you surrender old notes in the exchange offer, you will not be required
to pay brokerage commissions or fees. In addition, subject to the instructions
in the letter of transmittal, you will not have to pay transfer taxes for the
exchange of old notes. We will pay all charges and expenses in connection with
the exchange offer, other than certain applicable taxes described under "--Fees
and Expenses."
Expiration Date; Extensions; Amendments
The "expiration date" is 5:00 p.m., New York City time, on February 15,
2002, unless we extend the exchange offer, in which case the expiration date is
the latest date and time to which we extend the exchange offer.
In order to extend the exchange offer, we will:
. notify the exchange agent of any extension by oral or written
communication;
. issue a press release or other public announcement, which will report
the approximate number of old notes deposited; the press release or
announcement would be issued before 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
During any extension of the exchange offer, all old notes previously
surrendered and not withdrawn will remain subject to the exchange offer.
18
We reserve the right:
. to delay accepting any old notes,
. to amend the terms of the exchange offer in any manner,
. to extend the exchange offer, or
. if, in the opinion of our counsel, the consummation of the exchange
offer would violate any law or interpretation of the staff of the SEC,
to terminate or amend the exchange offer by giving oral or written
notice to the exchange agent.
Any delay in acceptance, extension, termination or amendment will be
followed as soon as practicable by a press release or other public
announcement. If we amend the exchange offer in a manner that we determine
constitutes a material change, we will promptly disclose that amendment by
means of a prospectus supplement that will be distributed to the registered
holders of the old notes, and we will extend the exchange offer for a period of
time that we will determine, depending upon the significance of the amendment
and the manner of disclosure to the registered holders, if the exchange offer
would have otherwise expired.
We will have no obligation to publish, advertise, or otherwise communicate
any public announcement that we may choose to make, other than by making a
timely release to an appropriate news agency.
In all cases, issuance of the new notes for old notes that are accepted for
exchange will be made only after timely receipt by the exchange agent of a
properly completed and duly executed letter of transmittal or a book-entry
confirmation with an agent's message, in each case, with all other required
documents. However, we reserve the absolute right to waive any conditions of
the exchange offer or any defects or irregularities in the surrender of old
notes. If we do not accept any surrendered old notes for any reason set forth
in the terms and conditions of the exchange offer or if you submit old notes
for a greater principal amount than you want to exchange, we will return
certificates for the unaccepted or non-exchanged old notes to you, or
substitute old notes evidencing the unaccepted or non-exchanged portion, as
appropriate. See "--Return of Old Notes."
Interest on the New Notes
The new notes will accrue cash interest on the same terms as the old notes,
i.e., at the rate of 6.0% per year (using a 360-day year consisting of twelve
30-day months), payable semi-annually in arrears on January 15 and July 15 of
each year. The amount of interest payable for any period shorter than a full
semi-annual period for which interest is computed will be computed on the basis
of the actual number of days elapsed in the 180-day period. Old notes accepted
for exchange will not receive accrued interest at the time of exchange.
However, each new note will bear interest:
. from the later of (1) the last interest payment date on which interest
was paid on the old note surrendered in exchange for the new note or (2)
if the old note is exchanged for the new note on a date after the record
date for an interest payment date to occur on or after the date of the
exchange and as to which that interest will be paid, the date of that
interest payment date, or
. if no interest has been paid on the old notes, from November 2, 2001.
Procedures for Tendering Old Notes
If you wish to surrender old notes you must:
. complete and sign the letter of transmittal, or send a timely
confirmation of a book-entry transfer of old notes to the exchange agent,
. have the signatures on the letter of transmittal guaranteed if required
by the letter of transmittal, and
. mail or deliver the required documents to the exchange agent at its
address set forth in the letter of transmittal for receipt before the
expiration date.
19
In addition, either:
. certificates for old notes must be received by the exchange agent along
with the letter of transmittal;
. a timely confirmation of a book-entry transfer of old notes into the
exchange agent's account at DTC, pursuant to the procedure for
book-entry transfer described below, must be received by the exchange
agent before the expiration date; or
. you must comply with the procedures described below under "--Guaranteed
Delivery Procedures."
If you do not withdraw your surrender of old notes before the expiration
date, it will indicate an agreement between you and Sprint Capital that you
have agreed to surrender the old notes, in accordance with the terms and
conditions in the letter of transmittal.
The method of delivery of old notes, the letter of transmittal and all other
required documents to the exchange agent is at your election and risk. Instead
of delivery by mail, we recommend that you use an overnight or hand delivery
service, properly insured, with return receipt requested. In all cases, you
should allow sufficient time to assure delivery to the exchange agent before
the expiration date. Do not send any letter of transmittal or old notes to us.
You may request that your broker, dealer, commercial bank, trust company or
nominee effect the above transactions for you.
If you are a beneficial owner of the old notes and you hold those notes
through a broker, dealer, commercial bank, trust company or other nominee and
you want to surrender your old notes, you should contact that intermediary
promptly and instruct it to surrender the old notes on your behalf.
Generally, an eligible institution must guarantee signatures on a letter of
transmittal unless
. you tender your old notes as the registered holder, which term includes
any participant in DTC whose name appears on a security listing as the
owner of old notes, and the new notes issued in exchange for your old
notes are to be issued in your name and delivered to you at your
registered address appearing on the security register for the old notes,
or
. you surrender your old notes for the account of an eligible institution.
An "eligible institution" is:
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
. a commercial bank or trust company having an office or correspondent in
the United States, or
. an "eligible guarantor institution" as defined by Rule 17Ad-15 under the
Exchange Act.
In each instance, the entity must be a member of one of the signature guarantee
programs identified in the letter of transmittal.
If the new notes or unexchanged old notes are to be delivered to an address
other than that of the registered holder appearing on the security register for
the old notes, an eligible institution must guarantee the signature in the
letter of transmittal.
Your surrender will be deemed to have been received as of the date when:
. the exchange agent receives a properly completed and signed letter of
transmittal accompanied by the old notes, or a confirmation of
book-entry transfer of the old notes into the exchange agent's account
at DTC with an agent's message, or
. the exchange agent receives a notice of guaranteed delivery from an
eligible institution. Issuances of new notes in exchange for old notes
surrendered pursuant to a notice of guaranteed delivery or letter to
similar effect by an eligible institution will be made only against
submission of a duly signed letter of
20
transmittal, and any other required documents, and deposit of the
surrendered old notes, or confirmation of a book-entry transfer of the
old notes into the exchange agent's account at DTC pursuant to the
book-entry procedures described below.
We will make the determination regarding all questions relating to the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of surrendered old notes, and our determination will be final and
binding on all parties.
We reserve the absolute right to reject any and all old notes improperly
surrendered. We will not accept any old notes if our acceptance of them would,
in the opinion of our counsel, be unlawful. We also reserve the absolute right
to waive any defects, irregularities, or conditions of surrender as to any
particular old note. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of transmittal, will
be final and binding on all parties. Unless waived, you must cure any defects
or irregularities in connection with surrenders of old notes within the time we
determine. Although we intend to notify holders of defects or irregularities in
connection with surrenders of old notes, neither we, the exchange agent nor
anyone else will incur any liability for failure to give that notice.
Surrenders of old notes will not be deemed to have been made until any defects
or irregularities have been cured or waived.
We have no current plan to acquire any old notes that are not surrendered in
the exchange offer or to file a registration statement to permit resales of any
old notes that are not surrendered pursuant to the exchange offer. We reserve
the right in our sole discretion to purchase or make offers for any old notes
that remain outstanding after the expiration date. To the extent permitted by
law, we also reserve the right to purchase old notes in the open market, in
privately negotiated transactions or otherwise. The terms of any future
purchases or offers could differ from the terms of the exchange offer.
Pursuant to the letter of transmittal, if you elect to surrender old notes
in exchange for new notes, you must exchange, assign and transfer the old notes
to us and irrevocably constitute and appoint the exchange agent as your true
and lawful agent and attorney-in-fact with respect to the surrendered old
notes, with full power of substitution, among other things, to cause the old
notes to be assigned, transferred and exchanged. By executing the letter of
transmittal, you make the representations and warranties set forth below to us.
By executing the letter of transmittal you also promise to, on request, execute
and deliver any additional documents that we consider necessary to complete the
transactions described in the letter of transmittal.
By executing the letter of transmittal and surrendering old notes in the
exchange offer, you will be representing to us that, among other things,
. you have full power and authority to tender, exchange, assign and
transfer the old notes surrendered,
. we will acquire good title to the old notes being surrendered, free and
clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating
to their sale or transfer, and not subject to any adverse claim when we
accept the old notes,
. you are acquiring the new notes in the ordinary course of your business,
. you are not engaging and do not intend to engage in a distribution of
the new notes,
. you have no arrangement or understanding with any person to participate
in the distribution of the new notes,
. you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in the exchange offer
for the purpose of distributing the new notes, you must comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the new notes, and that you
cannot rely on the position of the SEC's staff set forth in their
no-action letters,
. you understand that a secondary resale transaction described above and
any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an
21
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K of the SEC, and
. you are not an "affiliate", as defined in Rule 405 under the Securities
Act, of us or Sprint Capital, or, if you are an "affiliate," that you
will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
If you are a broker-dealer and you will receive new notes for your own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, you will be required to
acknowledge in the letter of transmittal that you will deliver a prospectus in
connection with any resale of the new notes. See "Plan of Distribution."
Participation in the exchange offer is voluntary. You are urged to consult
your financial and tax advisors in making your decision on whether to
participate in the exchange offer.
Return of Old Notes
If any old notes are not accepted for any reason described in this
prospectus, or if old notes are withdrawn or are submitted for a greater
principal amount than you want to exchange, the exchange agent will return the
unaccepted, withdrawn or non-exchanged old notes to you or, in the case of old
notes surrendered by book-entry transfer, into an account for your benefit at
DTC, unless otherwise provided in the letter of transmittal. The old notes will
be credited to an account maintained with DTC as promptly as practicable.
Book Entry Transfer
The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in DTC's system may make book-entry delivery of old notes by
causing DTC to transfer the old notes into the exchange agent's account at DTC
in accordance with DTC's procedures for transfer. To effectively tender notes
through DTC, the financial institution that is a participant in DTC will
electronically transmit its acceptance through the Automatic Transfer Offer
Program. DTC will then edit and verify the acceptance and send an agent's
message to the exchange agent for its acceptance. An agent's message is a
message transmitted by DTC to the exchange agent stating that DTC has received
an express acknowledgment from the participant in DTC tendering the old notes
that the participant has received and agrees to be bound by the terms of the
letter of transmittal, and that we may enforce this agreement against the
participant.
A delivery of old notes through a book-entry transfer into the exchange
agent's account at DTC will only be effective if an agent's message or the
letter of transmittal with any required signature guarantees and any other
required documents is transmitted to and received by the exchange agent at its
address set forth in the letter of transmittal for receipt before the
expiration date unless the guaranteed delivery procedures described below are
complied with. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
Guaranteed Delivery Procedures
If you wish to surrender your old notes and (1) your old notes are not
immediately available so that you can meet the expiration date deadline, (2)
you cannot deliver your old notes or other required documents to the exchange
agent before the expiration date, or (3) the procedure for book-entry transfer
cannot be completed on a timely basis, you may nonetheless participate in the
exchange offer if:
. you surrender your notes through an eligible institution;
. before the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form provided by us, by mail or
hand delivery, showing the name and address of the holder, the name(s)
in which the old notes are registered, the certificate number(s) of the
old notes, if applicable, and the principal amount of old notes
surrendered; the notice of guaranteed delivery must state that the
surrender is being made by the
22
notice of guaranteed delivery and guaranteeing that, within five New
York Stock Exchange trading days after the expiration date, the letter
of transmittal, together with the certificate(s) representing the old
notes, in proper form for transfer, or a book-entry confirmation with an
agent's message, as the case may be, and any other required documents,
will be delivered by the eligible institution to the exchange agent, and
. the properly executed letter of transmittal, as well as the
certificate(s) representing all surrendered old notes, in proper form
for transfer, or a book-entry confirmation, as the case may be, and all
other documents required by the letter of transmittal are received by
the exchange agent within five New York Stock Exchange trading days
after the expiration date.
Unless old notes are surrendered by the above-described method and deposited
with the exchange agent within the time period set forth above, we may, at our
option, reject the surrender. The exchange agent will send you a notice of
guaranteed delivery upon your request if you want to surrender your old notes
according to the guaranteed delivery procedures described above.
Withdrawal of Tenders of Old Notes
You may withdraw your surrender of old notes at any time before the
expiration date.
To withdraw old notes surrendered in the exchange offer, the exchange agent
must receive a written notice of withdrawal at its address set forth below
before the expiration date. Any notice of withdrawal must:
. specify the name of the person having deposited the old notes to be
withdrawn,
. identify the old notes to be withdrawn, including the certificate number
or numbers, if applicable, and principal amount of the old notes,
. contain a statement that you are withdrawing your election to have the
old notes exchanged,
. be signed by the holder in the same manner as the original signature on
the letter of transmittal used to surrender the old notes, and
. specify the name in which any old notes are to be registered, if
different from that of the registered holder of the old notes and,
unless the old notes were tendered for the account of an eligible
institution, the signatures on the notice of withdrawal must be
guaranteed by an eligible institution. If old notes have been
surrendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at
DTC.
We, in our sole discretion, will make the final determination on all
questions regarding the validity, form, eligibility and time of receipt of
notices of withdrawal, and our determination will bind all parties. Any old
notes withdrawn will be deemed not to have been validly surrendered for
purposes of the exchange offer and no new notes will be issued unless the old
notes so withdrawn are validly surrendered again. Properly withdrawn old notes
may be surrendered again by following one of the procedures described above
under "--Procedures for Tendering Old Notes" at any time before the expiration
date. Any old notes that are not accepted for exchange will be returned at no
cost to the holder or, in the case of old notes surrendered by book-entry
transfer, into an account for your benefit at DTC pursuant to the book-entry
transfer procedures described above, as soon as practicable after withdrawal,
rejection of surrender or termination of the exchange offer.
Additional Obligations
We may be required, under certain circumstances, to file a shelf
registration statement. See "Registration Rights." In any event, we are under a
continuing obligation, for a period of up to 180 days after the SEC declares
the registration statement of which this prospectus is a part effective, to
keep the registration statement effective and to provide copies of the latest
version of the prospectus to any broker-dealer that requests copies for use in
a resale, subject to our ability to suspend the effectiveness of any
registration statement as described under "Registration Rights" below.
23
Conditions of the Exchange Offer
Notwithstanding any other term of the exchange offer, or any extension of
the exchange offer, we do not have to accept for exchange, or exchange new
notes for, any old notes, and we may terminate the exchange offer before
acceptance of the old notes, if:
(a) any statute, rule or regulation has been enacted or any action has been
taken by any court or governmental authority that, in our reasonable
judgment, seeks to or would prohibit, restrict or otherwise render
consummation of the exchange offer illegal; or
(b) any change, or any development that would cause a change, in our
business or financial affairs has occurred that, in our sole judgment,
might materially impair our ability to proceed with the exchange offer
or a change that would materially impair the contemplated benefits to us
of the exchange offer; or
(c) a change occurs in the current interpretations by the staff of the SEC
that, in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer.
If we, in our sole discretion, determine that any of the above conditions is
not satisfied, we may:
. refuse to accept any old notes and return all surrendered old notes to
the surrendering holders,
. extend the exchange offer and retain all old notes surrendered before
the expiration date, subject to the holders' right to withdraw the
surrender of the old notes, or
. waive any unsatisfied conditions regarding the exchange offer and accept
all properly surrendered old notes that have not been withdrawn. If this
waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that
will be distributed to the registered holders of the old notes, and we
will extend the exchange offer for a period of time that we will
determine, depending upon the significance of the waiver and the manner
of disclosure to the registered holders, if the exchange offer would
have otherwise expired.
Exchange Agent
We have appointed Bank One Trust Company, N.A. as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for
notices of guaranteed delivery should be directed to the exchange agent at the
following address:
By Mail, Hand or Overnight Courier:
Bank One Trust Company, N.A.
One North State Street, 9th Floor
Suite IL1-0134
Chicago, Illinois 60602
Attention: Exchanges
For New York Hand Deliveries:
Bank One, N.A.
55 Water Street, 1st Floor
Jeanette Park Entrance
New York, New York 10041
To Confirm by Telephone:
(800) 524-9472 or (800) 346-5153
For information with respect to the Exchange Offer, call
Investor Relations Department of the Exchange Agent:
(800) 524-9472 or (800) 346-5153
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Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
facsimile, telephone or in person by our officers and regular employees or by
officers and employees of our affiliates. No additional compensation will be
paid to any officers and employees who engage in soliciting tenders.
We have not retained any dealer-manager or other soliciting agent for the
exchange offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and will reimburse it for
related, reasonable out-of-pocket expenses. We may also reimburse brokerage
houses and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses they incur in forwarding copies of this prospectus, the
letter of transmittal and related documents.
We will pay all expenses incurred in connection with the performance of our
obligations in the exchange offer, including registration fees, fees and
expenses of the exchange agent, the transfer agent and registrar and printing
costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
old notes. If, however, new notes, or old notes for principal amounts not
surrendered or accepted for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the old
notes surrendered, or if a transfer tax is imposed for any reason other than
the exchange, then the amount of any transfer taxes will be payable by the
person surrendering the notes. If you do not submit satisfactory evidence of
payment of those taxes or exemption from payment of those taxes with the letter
of transmittal, the amount of those transfer taxes will be billed directly to
you.
Consequences of Failure to Exchange
Old notes that are not exchanged will remain "restricted securities" within
the meaning of Rule 144(a)(3) of the Securities Act. Accordingly, they may not
be offered, sold, pledged or otherwise transferred except:
. to us or to any of our subsidiaries,
. inside the United States to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act,
. inside the United States to an institutional accredited investor that,
before the transfer, furnishes to the trustee a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of the old notes, the form of which you can obtain from the
trustee and, if such transfer is in respect of an aggregate principal
amount of old notes at the time of transfer of less than $100,000, an
opinion of counsel acceptable to us that the transfer complies with the
Securities Act,
. outside the United States in compliance with Rule 904 under the
Securities Act,
. pursuant to the exemption from registration provided by Rule 144 under
the Securities Act, if available, or
. pursuant to an effective registration statement under the Securities Act.
The liquidity of the old notes could be adversely affected by the exchange
offer. See "Risk Factors--Risk Factors Relating to the New Notes--There is no
public market for the new notes."
Accounting Treatment
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. We will amortize the expenses of the exchange offer and the
unamortized expenses related to the issuance of the old notes over the
remaining term of the notes.
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DESCRIPTION OF THE NEW NOTES
The form and terms of the new notes and the old notes are identical in all
material respects, except that transfer restrictions and registration rights
applicable to the old notes do not apply to the new notes. References in this
section to the "Notes" are references to both the old notes and the new notes.
The old notes were, and the new notes will be, issued under the indenture
dated as of October 1, 1998, among us, Sprint Capital, and Bank One, N.A., as
trustee, as supplemented by a first supplemental indenture dated as of January
15, 1999, and a second supplemental indenture dated as of October 15, 2001.
Sprint Capital will issue the new notes, and we will fully and unconditionally
guarantee the new notes. The old notes carry and the new notes will carry a
6.0% fixed rate of interest and the Notes will mature on January 15, 2007. The
Notes will not be subject to any sinking fund provisions. The Notes will be
initially limited to an aggregate principal amount of $1,750,000,000.
You should read the indenture for provisions that may be important to you.
In the summary below, we have included references to section numbers of the
indenture so that you can easily locate these provisions. Capitalized terms
used in the summary have the meaning specified in the indenture. You can obtain
copies of the indenture by following the directions described under the caption
"Where You Can Find More Information." In this section, references to "our,"
"we," and similar terms mean Sprint Corporation, excluding its subsidiaries.
The indenture does not limit the aggregate principal amount of debt
securities that Sprint Capital may issue and provides that Sprint Capital may
issue debt securities from time to time in one or more series, in each case
with the same or various maturities, at par or at a discount. Sprint Capital
may issue additional debt securities of a particular series, including the
Notes, without the consent of the holders of the debt securities of that series
outstanding at the time of the issuance. Any additional debt securities,
together with all other outstanding debt securities of that series, will
constitute a single series of debt securities under the indenture. The
indenture also does not limit our ability or the ability of Sprint Capital to
incur other debt and does not contain financial or similar restrictive
covenants, except as described below. Notes issued by Sprint Capital will be
its senior unsecured obligations and will be fully and unconditionally
guaranteed by us.
The Notes, if issued in certificated form, will be in denominations of
$1,000 or integral multiples of $1,000, without coupons, and may be transferred
or exchanged, without service charge but upon payment of any taxes or other
governmental charges payable in connection with the transfer or exchange, at
the offices described below. The new notes may be presented for registration or
transfer and exchange at the offices of the registrar. Any old notes that
remain outstanding after the completion of the exchange offer, together with
the new notes issued in the exchange offer, will be treated as a single class
of securities under the indenture.
Payments on the Notes
Payments on Notes issued as a global security will be made to the
depositary, a successor depositary or, if no depositary is used, to the paying
agent for the Notes. Principal and interest with respect to certificated Notes
will be payable, the transfer of the Notes will be registrable, and Notes will
be exchangeable for Notes of other denominations of a like aggregate principal
amount at the office or agency maintained by Sprint Capital for this purpose in
the Borough of Manhattan, New York City. However, at Sprint Capital's option,
payment of interest may be made by check mailed to the address of the holder
entitled to payment or by wire transfer to an account designated by the holder
entitled to payment. Bank One, N.A. is serving as the initial paying agent,
transfer agent, and registrar for the Notes. Sprint Capital may at any time
designate additional transfer agents and paying agents with respect to the
Notes and may remove any transfer agent, paying agent, or registrar for the
Notes. Sprint Capital will at all times maintain a paying agent and transfer
agent for the Notes in the Borough of Manhattan, New York City.
Any monies deposited with the trustee or paying agent or held by Sprint
Capital in trust for the payment of principal of or interest on any Note and
remaining unclaimed for two years after the principal or interest has
26
become due and payable will, at Sprint Capital's request, be repaid to Sprint
Capital or released from trust, as applicable, and the holder of the Note must
thereafter look, as a general unsecured creditor, only to us for payment.
Interest
Each Note will bear interest at the rate of 6.0% per year, payable
semiannually in arrears on January 15 and July 15 of each year, each an
"interest payment date", to the person in whose name the Note is registered at
the regular record date. The regular record date will be the fifteenth calendar
day, whether or not a business day, immediately preceding the related interest
payment date.
Interest on each new note will accrue:
. from the later of (1) the last interest payment date on which interest
was paid on the old note surrendered in exchange for the new note or (2)
if the old note is exchanged for the new note on a date after the record
date for an interest payment date to occur on or after the date of the
exchange and as to which that interest will be paid, the date of that
interest payment date, or
. if no interest has been paid on the old note, from November 2, 2001.
The amount of interest payable will be computed on the basis of a 360-day
year consisting of twelve 30-day months. The amount of interest payable for any
period shorter than a full semi-annual period for which interest is computed
will be computed on the basis of the actual number of days elapsed in the
180-day period. If any date on which interest is payable on the Notes is not a
business day, it will be paid on the next succeeding day that is a business
day, without any interest or other payment in respect of the delay, with the
same force and effect as if made on the scheduled payment date.
Guarantees
We will unconditionally guarantee the due and punctual payment of the
principal, any premium, and interest on the Notes when and as it becomes due
and payable, whether at maturity or otherwise (Section 311). The guarantees
will rank equally with all our other unsecured and unsubordinated indebtedness
from time to time outstanding. The guarantees provide that upon a default in
payment of principal or any premium or interest on a Note, the holder of the
Note may institute legal proceedings directly against us to enforce the
guarantees without first proceeding against Sprint Capital. The indenture
provides that we may under certain circumstances assume all rights and
obligations of Sprint Capital under the indenture with respect to a series of
notes issued by Sprint Capital.
Optional Redemption and Ability to Purchase
The Notes will be redeemable, as a whole or in part, at the option of Sprint
Capital, at any time or from time to time, on at least 30 days, but not more
than 60 days, prior notice mailed to the registered address of each holder of
the Notes. The redemption price will be equal to the greater of (1) 100% of the
principal amount of the Notes to be redeemed or (2) the sum of the present
values of the Remaining Scheduled Payments (as defined below) discounted, on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months),
at a rate equal to the sum of the Treasury Rate (as defined below) and 20 basis
points. In the case of each of clause (1) and (2), accrued interest will be
payable to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
year equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding the redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for the redemption date.
27
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be used, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the remaining
term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the Reference Treasury Dealer Quotations for the redemption date
after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the trustee obtains fewer than five Reference Treasury
Dealer Quotations, the average of all quotations obtained. "Reference Treasury
Dealer Quotations" means, with respect to each Reference Treasury Dealer and
any redemption date, the average, as determined by the trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the trustee by that
Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
business day preceding the redemption date.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by Sprint Capital.
"Reference Treasury Dealer" means each of Banc of America Securities LLC,
Lehman Brothers Inc., and three other primary U.S. Government securities
dealers (each a "Primary Treasury Dealer") selected by Sprint Capital and their
respective successors. If any of the foregoing ceases to be a Primary Treasury
Dealer, Sprint Capital will substitute another nationally recognized investment
banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of principal of and interest on the
Note that would be due after the redemption date but for the redemption. If the
redemption date is not an interest payment date with respect to the Note, the
amount of the next succeeding scheduled interest payment on the Note will be
reduced by the amount of interest accrued on the Note to such redemption date.
On and after the redemption date, interest will cease to accrue on the Notes
or any portion of the Notes called for redemption unless Sprint Capital
defaults in the payment of the redemption price and accrued interest. On or
before the redemption date, Sprint Capital will deposit with a paying agent (or
the trustee) money sufficient to pay the redemption price of and accrued
interest on the Notes to be redeemed on that date. If less than all of the
Notes are to be redeemed, the Notes to be redeemed will be selected by the
trustee by whatever method the trustee considers fair and appropriate.
The redemption price of any Note redeemed at maturity will equal the
principal amount of the Note.
The terms of the Notes do not prohibit us from purchasing Notes on the open
market.
Restrictive Covenants
Sprint. Under the indenture, we may not, and may not permit our Restricted
Subsidiaries to, create, incur, or allow to exist any Lien on any property or
assets now owned or acquired at a later time unless:
. the Lien is a Permitted Lien, or
. the outstanding guarantees are equally and ratably secured by the Lien,
or
. the aggregate principal amount of indebtedness secured by the Lien and
any other Lien, other than Permitted Liens, plus the Attributable Debt
in respect of any Sale and Leaseback Transaction does not exceed 15% of
our Consolidated Net Tangible Assets (Section 1012).
28
Sprint Capital. Sprint Capital may not create, issue, assume, or guarantee
any unsecured funded debt ranking prior to the debt securities issued by Sprint
Capital under the indenture (Section 1009).
Sprint Capital may not create, assume, or suffer to exist any Lien upon any
of its property or assets, now owned or acquired at a later time, without
equally and ratably securing any outstanding debt securities issued by Sprint
Capital under the indenture with any and all other obligations and indebtedness
secured by the Lien, subject to certain exceptions (Section 1008).
Definitions. Under the indenture:
"Attributable Debt" of a Sale and Leaseback Transaction means, at any date,
the total net amount of rent required to be paid under the lease during the
remaining term of the lease, excluding any subsequent renewal or other
extension options held by the lessee, discounted from the respective due dates
of the amounts to the date of determination at the rate of interest per year
implicit in the terms of the lease, as determined in good faith by us,
compounded annually. The net amount of rent required to be paid under any lease
during the remaining term will be the remaining amount of rent payable, after
excluding amounts required to be paid on account of maintenance and repairs,
insurance, taxes, assessments, water rates, and similar charges and contingent
rents.
"Capital Lease Obligations" means indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles. The
amount of indebtedness is the capitalized amount of the obligations determined
in accordance with generally accepted accounting principles consistently
applied.
"Consolidated Net Tangible Assets" means our and our subsidiaries'
consolidated total assets as reflected in our most recent balance sheet
preceding the date of determination, prepared in accordance with generally
accepted accounting principles consistently applied, less
. current liabilities, excluding current maturities of long-term debt and
Capital Lease Obligations, and
. goodwill, tradenames, trademarks, patents, minority interests of others,
unamortized debt discount and expense and other similar intangible
assets, excluding any investments in permits or licenses issued, granted
or approved by the Federal Communications Commission.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, lien, charge, easement or
zoning restriction, encumbrance, preference, priority, or other security
agreement or preferential arrangement of any kind or nature whatsoever on or
with respect to property including any Capital Lease Obligation, conditional
sale, or other title retention agreement having substantially the same economic
effect as any of the foregoing or any Sale and Leaseback Transaction.
"Permitted Liens" means:
(1) Liens existing on October 1, 1998;
(2) Liens on property existing at the time of acquisition of the property or
to secure the payment of all or any part of the purchase price of the property
or to secure any indebtedness incurred before, at the time of or within 270
days after the acquisition of the property for the purpose of financing all or
any part of the purchase price of the property;
(3) Liens securing indebtedness owed by a Restricted Subsidiary to us or any
of our wholly owned subsidiaries;
(4) Liens on property of any entity, or on the stock, indebtedness or other
obligations of any entity, existing at the time
. the entity becomes a Restricted Subsidiary,
. the entity is merged into or consolidated with us or a Restricted
Subsidiary, or
. we or a Restricted Subsidiary acquire all or substantially all of
the assets of the entity,
29
but only if the Liens do not extend to any other property of ours or property
of any other Restricted Subsidiary;
(5) Liens on property to secure any indebtedness incurred to provide funds
for all or any part of the cost of development of or improvements to the
property;
(6) Liens on our property or the property of any of our Restricted
Subsidiaries securing
. nondelinquent performance of bids or contracts, other than for
borrowed money, obtaining of advances or credit or the securing of
debt,
. contingent obligations on surety and appeal bonds, and
. other nondelinquent obligations of a similar nature,
in each case, incurred in the ordinary course of business;
(7) Liens securing Capital Lease Obligations, but only if
. the Liens attach to the property within 270 days after its
acquisition, and
. the Liens attach solely to the property so acquired;
(8) Liens arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of set-off or similar rights and remedies as
to deposit accounts or other funds, but only if the deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by us or a Restricted Subsidiary, as applicable, in excess of those set
forth by regulations promulgated by the Federal Reserve Board and the deposit
account is not intended by us or the Restricted Subsidiary to provide
collateral to the depository institution;
(9) pledges or deposits under worker's compensation laws, unemployment
insurance laws or similar legislation;
(10) statutory and tax Liens for sums not yet due or delinquent or which are
being contested or appealed in good faith by appropriate proceedings;
(11) Liens arising solely by operation of law, such as mechanics',
materialmen's, warehouseman's and carriers' Liens, and Liens of landlords or of
mortgages of landlords, on fixtures and movable property located on premises
leased in the ordinary course of business;
(12) Liens on personal property, other than shares of stock or indebtedness
of any Restricted Subsidiary, to secure loans maturing not more than one year
from the date of the creation of the loan and on accounts receivable associated
with a receivables financing program of ours or any of our Restricted
Subsidiaries;
(13) any Lien created by or resulting from litigation or other proceeding
against us or any Restricted Subsidiary, or upon property of ours or of a
Restricted Subsidiary, or any lien for workmen's compensation awards or similar
awards, so long as the finality of the judgment or award is being contested and
execution on the judgment or award is stayed or the Lien relates to a final
unappealable judgment which is satisfied within 30 days of the judgment or any
Lien incurred by us or any Restricted Subsidiary for the purpose of obtaining a
stay or discharge in the course of any litigation or other proceeding, as long
as the judgment or award does not constitute an Event of Default under clause
(5) of "Events of Default" below;
(14) Liens on our real property or the real property of a Restricted
Subsidiary which constitute minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of the real property, as long as all
of the liens referred to in this clause (14) in the aggregate do not at any
time materially detract from the value of the real property or materially
impair its use in the operation of our business or the business of our
subsidiaries;
(15) Liens on our property or the property of a Restricted Subsidiary
securing indebtedness or other obligations issued by the United States of
America or any state or any department, agency or instrumentality or
30
political subdivision of the United States of America or any state, or by any
other country or any political subdivision of any other country, to finance all
or any part of the purchase price of, or, in the case of real property, the
cost of construction on or improvement of, any property or assets subject to
the Liens, including Liens incurred in connection with pollution control,
industrial revenue or similar financings; and
(16) any renewal, extension or replacement of any Lien permitted pursuant to
(1), (2), (4), (5), (7) and (15) above or of any indebtedness secured by any
such Lien, as long as the extension, renewal or replacement Lien is limited to
all or any part of the same property that secured the Lien extended, renewed or
replaced, plus improvements on the property, and the principal amount of
indebtedness secured by the Lien and not otherwise authorized by clauses (1),
(2), (4), (5), (7) and (15) does not exceed the principal amount of
indebtedness plus any premium or fee payable in connection with the renewal,
extension or replacement so secured at the time of the renewal, extension or
replacement.
"Receivables Subsidiary" means a special purpose wholly owned subsidiary
created in connection with any transactions that may be entered into by us or
any of our subsidiaries pursuant to which we or any of our subsidiaries may
sell, convey, grant a security interest in or otherwise transfer undivided
percentage interests in its receivables.
"Restricted Subsidiary" means any subsidiary of ours, other than a
Receivables Subsidiary or Sprint Capital, if:
. the subsidiary has substantially all of its property in the United
States, other than its territories and possessions; and
. at the end of our most recent fiscal quarter preceding the date of
determination, the aggregate amount, determined in accordance with
generally accepted accounting principles consistently applied, of
securities of, loans and advances to, and other investments in, the
subsidiary held by us and our other subsidiaries, less any securities
of, loans and advances to, and other investments in us and our other
subsidiaries held by the subsidiary or any of its subsidiaries, exceeded
15% of our Consolidated Net Tangible Assets.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
pursuant to which property is sold or transferred by us or a Restricted
Subsidiary and is thereafter leased back from the purchaser or transferee by us
or the Restricted Subsidiary.
Events of Default
Definition. The indenture defines an Event of Default with respect to debt
securities of any series as any one of the following events:
(1) failure to pay principal of or any premium on any debt security of
that series at maturity;
(2) failure to pay any interest on any debt security of that series when
due, continued for 30 days;
(3) failure to deposit any sinking fund payment, when due, in respect of
any debt security of that series;
(4) failure to perform any other covenant or warranty in the indenture,
continued for 60 days after written notice as provided in the indenture;
(5) default resulting in acceleration of more than $50 million in
aggregate principal amount of any indebtedness for money borrowed by us or
Sprint Capital or any other subsidiary of ours under the terms of the
instrument under which that indebtedness is issued or secured, if that
indebtedness is not discharged or acceleration is not rescinded or annulled
within 10 days after written notice as provided in the indenture; and
(6) certain events of bankruptcy, insolvency or reorganization.
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Remedies. If an Event of Default with respect to the Notes occurs and is
continuing, either the trustee or the holders of at least 25% in principal
amount of the outstanding Notes may declare the principal amount of all the
Notes to be due and payable immediately by written notice as provided in the
indenture. Notwithstanding the foregoing, if an Event of Default described in
clause (6) with respect to any Notes occurs and is continuing, then all of the
Notes will become immediately due and payable without any further act by us,
Sprint Capital, any holder or the trustee. At any time after a declaration of
acceleration with respect to the Notes has been made and before a judgment or
decree for payment of the money due based on acceleration has been obtained,
the holders of a majority in principal amount of the outstanding Notes may, in
accordance with the indenture, rescind and annul the acceleration (Section 502).
Obligations of Trustee. The indenture provides that the trustee will be
under no obligation, subject to the duty of the trustee during the continuance
of default to act with the required standard of care, to exercise any of its
rights or powers under the indenture at the request or direction of any of the
holders of the Notes, unless the holders offer reasonable indemnity to the
trustee (Sections 601 and 603). Subject to the provisions for indemnification
of the trustee, the holders of a majority in principal amount of the
outstanding Notes will have the right, in accordance with applicable law, to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or exercising any trust or power conferred on the
trustee, with respect to the Notes (Section 512).
Under the indenture we and Sprint Capital must furnish to the trustee
annually a statement regarding the performance of our respective obligations
under the indenture and as to any default in performance (Section 1004).
Modification and Waiver
Modifications and Amendments. We, Sprint Capital, and the trustee may modify
and amend the indenture, in most cases only with the consent of the holders of
a majority in principal amount of the notes of each series affected by the
modification or amendment.
However, neither we nor Sprint Capital may, without the consent of the
holder of each outstanding Note affected:
. change the date specified in the Note for the payment of the principal
of, or any installment of principal of or interest on, the Note,
. reduce the principal amount of, or any premium or interest on, any Note,
. change the place or currency of payment of principal of, or any premium
or interest on, any Note,
. impair the right to institute suit for the enforcement of any payment on
or with respect to any Note, or
. reduce the percentage in principal amount of outstanding Notes, the
consent of whose holders is required to modify or amend the indenture or
to waive compliance with certain provisions of the indenture or for
waiver of certain defaults (Section 902).
In addition, we, Sprint Capital and the trustee may not, without the consent
of the holder of each outstanding Note affected, modify or amend the terms and
conditions of, or our obligations under, the guarantees in any manner adverse
to the holders of any Note.
Waivers. The holders of a majority in principal amount of the outstanding
Notes may on behalf of the holders of all Notes waive compliance by us or
Sprint Capital, as the case may be, with certain restrictive provisions of the
indenture (Sections 1010 and 1013). The holders of a majority in principal
amount of the outstanding Notes may on behalf of the holders of all Notes waive
any past default under the indenture with respect to the Notes, except a
default in the payment of the principal of or any premium or interest on any
Note or in respect of a covenant or provision which under the indenture cannot
be modified or amended without the consent of the holder of each outstanding
Note (Section 513).
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Consolidation, Merger and Conveyances
Neither we nor Sprint Capital may consolidate with or merge into any other
person or convey, transfer or lease all or substantially all of our properties
and assets in any one transaction or series of transactions, and neither we nor
Sprint Capital may permit any person to consolidate with or merge into us or
Sprint Capital or convey, transfer or lease all or substantially all of its
properties and assets in any one transaction or series of transactions to us or
Sprint Capital, unless:
. we or Sprint Capital, as applicable, are the continuing corporation or
the successor entity is a corporation, partnership, or trust and assumes
our obligations or the obligations of Sprint Capital, as applicable,
under the Notes, the guarantees and the indenture,
. with respect to Sprint Capital, the successor person is organized under
the laws of any United States jurisdiction,
. after giving effect to the transaction no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, has happened and is continuing, and
. certain other conditions specified in the indenture are met.
Thereafter, if we or Sprint Capital are not the successor person, all of our
obligations and the obligations of Sprint Capital terminate (Sections 801 and
802).
Defeasance
The indenture provides that we and Sprint Capital may elect either:
. to defease and be discharged from any and all obligations with respect
to the Notes and the guarantees of those Notes, with certain limited
exceptions described below, which we refer to as full defeasance, or
. to be released from our respective obligations with respect to the Notes
under the restrictive covenants in the indenture and the related Events
of Default as well as the Event of Default consisting of the
cross-default to other indebtedness, which we refer to as covenant
defeasance.
In order to accomplish full defeasance or covenant defeasance, we or Sprint
Capital must deposit with the trustee, or other qualifying trustee, in trust,
money, or U.S. government obligations which through the payment of principal
and interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes on
the scheduled due dates for the payments. Such a trust may be established only
if, among other things, we or Sprint Capital deliver to the applicable trustee
an opinion of counsel to the effect that the holders of the Notes will not
recognize gain or loss for federal income tax purposes as a result of full
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if full defeasance or covenant defeasance had not occurred. The
opinion, in the case of full defeasance, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable federal income
tax law occurring after October 1, 1998. Obligations not discharged in a full
defeasance include those relating to the rights of holders of outstanding Notes
to receive, solely from the trust fund described above, payments in respect of
the principal of and any premium and interest on Notes when due as set forth in
Section 1304 of the indenture, and obligations to register the transfer or
exchange of the Notes, to replace temporary or mutilated, destroyed, lost or
stolen Notes, to maintain an office or agency in respect of the Notes, to hold
moneys for payment in trust and to compensate, reimburse and indemnify the
trustee (Article Thirteen).
Regarding the Trustee
We have a normal business banking relationship with the trustee, including
the maintenance of accounts and the borrowing of funds. The trustee may own
Notes.
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Governing Law
New York law, without regard to principles of conflicts of law, will govern
the indenture, the Notes and the guarantees.
Book-Entry System
The new notes will be initially issued in the form of one or more global
securities registered in the name of The Depository Trust Company ("DTC") or
its nominee.
Upon the issuance of a global security, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the individual beneficial interests represented by the global security
exchanged by those persons in the exchange offer. Ownership of beneficial
interests in a global security exchanged will be limited to persons that have
accounts with DTC ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership interest will be effected only
through, records maintained by DTC (with respect to participants' interests) or
by the participants (with respect to the owners of beneficial interests in the
global security other than participants). The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of the
securities in definitive form. Those limits and laws may impair the ability to
transfer beneficial interests in a global security.
Payment of principal and interest on Notes represented by a global security
will be made in immediately available funds to DTC or its nominee, as the case
may be, as the sole registered owner and the sole holder of the Notes
represented by the global security for all purposes under the indenture. We
have been advised by DTC that upon receipt of any payment of principal of or
interest on any global security, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
or face amount of the global security as shown on the records of DTC. Payments
by participants to owners of beneficial interests in a global security held
through such participants will be governed by standing instructions and
customary practices as is now the case with securities held for customer
accounts registered in "street name" and will be the sole responsibility of
such participants.
A global security may not be transferred except as a whole by DTC or a
nominee of DTC to a nominee of DTC or to DTC. A global security is exchangeable
for certificated Notes only if:
(a) DTC notifies us that it is unwilling or unable to continue as a
depositary for the global security or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act,
(b) we in our discretion at any time determine to cause the issuance of
certificated notes, or
(c) there shall have occurred and be continuing a default or an Event of
Default with respect to the Notes represented by the global security.
Any global security that is exchangeable for certificated Notes pursuant to the
preceding sentence will be exchanged for certificated Notes in authorized
denominations and registered in such names as DTC or any successor depositary
holding the global security may direct. Subject to the foregoing, a global
security is not exchangeable, except for a global security of like denomination
to be registered in the name of DTC or any successor depositary or its nominee.
If a global security becomes exchangeable for certificated Notes,
(a) certificated Notes will be issued only in fully registered form in
denominations of $1,000 or integral multiples of $1,000,
(b) payment of principal, and premium, if any, and interest on, the
certificated Notes will be payable, and the transfer of the certificated
Notes will be registrable, at the office or agency that we maintain for
such purposes, and
34
(c) no service charge will be made for any registration of transfer or
exchange of the certificated Notes, although we may require payment of a
sum sufficient to cover any tax or governmental charge imposed in
connection with the transfer or exchange.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell Notes to persons in
states that require physical delivery of the Notes, or to pledge these
securities, the holder must transfer its interest in a global security, in
accordance with the normal procedures of DTC and with the procedures set forth
in the indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of Notes, including the presentation of old notes for exchange as
described above, only at the direction of one or more participants to whose
account the DTC interests in the global security are credited and only in
respect of that portion of the aggregate principal amount of Notes as to which
such participant or participants has or have given such direction. However, if
there is an Event of Default under the indenture, DTC will exchange the global
security for certificated securities, which it will distribute to its
participants.
So long as DTC or any successor depositary for a global security, or any
nominee, is the registered owner of the global security, DTC or the successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the global security for all purposes under
the indenture and the Notes. Except as set forth above, owners of beneficial
interests in a global security will not be entitled to have the Notes
represented by the global security registered in their names, will not receive
or be entitled to receive physical delivery of certificated Notes in definitive
form, and will not be considered to be the owners or holders of any Notes under
the global security. Accordingly, each person owning a beneficial interest in a
global security must rely on the procedures of DTC or any successor depositary,
and, if that person is not a participant, on the procedures of the participant
through which they own their interest, to exercise any rights of a holder under
the indenture. We understand that under existing industry practices, if we
request any action of holders or if an owner of a beneficial interest in a
global security desires to give or take any action that a holder is entitled to
give or take under the indenture, DTC or any successor depositary would
authorize the participants holding the relevant beneficial interest to give or
take the action, and the participants would authorize beneficial owners owning
through them to give or take the action or would otherwise act upon the
instructions of beneficial owners owning through them.
DTC has advised us that DTC is a limited-purpose trust company organized
under the Banking Law of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered under the Exchange Act. DTC
was created to hold the securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants in
those securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations some of
whom (or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies,
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in global securities among participants of DTC, it is
under no obligation to perform or continue to perform those procedures, and the
procedures may be discontinued at any time. Neither we nor the trustee have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
35
REGISTRATION RIGHTS
As part of the sale of the old notes to the initial purchasers pursuant to
the Purchase Agreement, the holder of the old notes became entitled to the
benefits of the registration rights agreement, dated as of November 2, 2001 by
and among us, Sprint Capital, and Banc of America Securities LLC and Lehman
Brothers Inc., as representatives of the initial purchasers.
Under the registration rights agreement, we agreed:
. to offer the new notes and the related guarantees in exchange for
surrender of the old notes and the related guarantees; and
. to use our reasonable best efforts to keep the exchange offer open for
at least 30 days but not more than 45 business days (or longer if
required by applicable law) after the date that the notice of the
exchange offer is mailed to the holders of the old notes.
The exchange offer being made by this prospectus, if consummated within the
required time periods, will satisfy these obligations under the registration
rights agreement. We understand that there are approximately 100 beneficial
owners of old notes. We are sending this prospectus, together with the letter
of transmittal, to all the beneficial holders known to us. For each old note
validly surrendered to us pursuant to the exchange offer and not validly
withdrawn, the holder will receive a new note having a principal amount equal
to that of the surrendered old note.
Under existing interpretations of the SEC contained in several no-action
letters to third parties, we believe that the new notes and the related
guarantees will be freely transferable by the holders, other than our
affiliates, after the exchange offer without further registration under the
Securities Act. However, if you want to exchange your old notes for new notes,
you will be required to represent:
. you have full power and authority to tender, exchange, assign and
transfer the old notes surrendered;
. we will acquire good title to the old notes being surrendered, free and
clear of all security interests, liens, restrictions, charges,
encumbrances, conditional sale agreements or other obligations relating
to their sale or transfer, and not subject to any adverse claim when we
accept the old notes;
. you are acquiring the new notes in the ordinary course of your business;
. you are not engaging and do not intend to engage in a distribution of
the new notes;
. you have no arrangement or understanding with any person to participate
in the distribution of the new notes;
. you acknowledge and agree that if you are a broker-dealer registered
under the Exchange Act or you are participating in the exchange offer
for the purpose of distributing the new notes, you must comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the new notes, and that you
cannot rely on the position of the SEC's staff set forth in their
no-action letters;
. you understand that a secondary resale transaction described above and
any resales of new notes obtained by you in exchange for old notes
acquired by you directly from us should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K of the SEC; and
. you are not an "affiliate", as defined in Rule 405 under the Securities
Act, of us or Sprint Capital, or, if you are an "affiliate," that you
will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
We agree to make available, for a period of up to 180 days after the
effective date of the registration statement of which this prospectus is a
part, a prospectus meeting the requirements of the Securities Act for use
36
by participating broker-dealers and other persons, if any, with similar
prospectus delivery requirements for use in connection with any resale of new
notes.
If
(i) applicable interpretations of the staff of the SEC do not permit us to
effect a registered exchange offer,
(ii) for any other reason the registered exchange offer is not completed by
July 30, 2002,
(iii) the initial purchasers so request with respect to old notes not
eligible to be exchanged for new notes in the registered exchange
offer and that are held by them following the consummation of the
registered exchange offer, or
(iv) any holder of old notes, other than an initial purchaser, is not
eligible to participate in the registered exchange offer or does not
receive freely tradeable new notes in the registered exchange offer
other than by reason of being our affiliate (it being understood that
the requirement that a participating broker-dealer deliver the
prospectus contained in the exchange offer registration statement in
connection with sales of new notes will not result in those new notes
being not "freely tradeable"),
then we will, at our cost,
(a) as promptly as practicable, file a shelf registration statement
covering resales of the old notes or the new notes, as the case may be,
(b) cause the shelf registration statement to be declared effective under
the Securities Act, and
(c) use our reasonable best efforts to keep the shelf registration
statement effective until two years after its effective date.
In the event that we file a shelf registration statement, we will provide
each holder of the old notes and the new notes with copies of the prospectus
that is a part of the shelf registration statement, notify each holder when the
shelf registration statement has become effective, and take other actions that
are required to permit unrestricted resales of the notes. A holder that sells
notes pursuant to the shelf registration statement will be required to be named
as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with the sales and will be
bound by the provisions of the registration rights agreement that are
applicable to a holder selling notes pursuant to the shelf registration
statement, including certain indemnification rights and obligations.
Notwithstanding the foregoing, during any 365-day period, we may delay
filing or suspend the effectiveness of any registration statement or require
holders not to sell any new notes or old notes pursuant to an effective
registration statement for up to three periods of up to 60 consecutive days
(except for the consecutive 45-day period immediately before maturity of the
notes) but not more than an aggregate of 90 days during any 365-day period, if
there is a possible acquisition or business combination or other transaction,
business development or other event involving us that may require disclosure in
the registration statement and we determine that such disclosure is not in our
or our stockholders' best interests or if obtaining any financial statements
relating to an acquisition or business combination required to be included in
the registration statement would be impracticable. In such a case, we will
promptly notify any holder of the suspension of the registration statement's
effectiveness or the requirement that they not sell any new notes or old notes
pursuant to an effective registration statement. Upon the abandonment,
consummation or termination of the possible acquisition or business combination
or other transaction, business development or event or the availability of the
required financial statements with respect to an acquisition or business
combination, the suspension of the use of the registration statement will
cease, and we will promptly notify holders that the use of the prospectus
contained in the registration statement, as amended or supplemented, as
applicable, may resume.
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If
(a) on or before July 30, 2002, the registered exchange offer has not been
consummated, or
(b) after either the registration statement of which this prospectus is a
part or the shelf registration statement has been declared effective,
it ceases to be effective or usable (subject to certain exceptions) in
connection with resales of old notes or new notes in accordance with
and during the periods specified in the registration rights agreement,
(we refer to each of these events as a "Registration Default"), interest will
accrue on the principal amount of the old notes and the new notes (in addition
to the stated interest on the old notes and the new notes) from and including
the date on which any Registration Default occurs but excluding the date on
which all Registration Defaults have been cured. This additional interest will
accrue at a rate of 0.25% per year.
38
PLAN OF DISTRIBUTION
We are not using any underwriters for this exchange offer. We are also
bearing the expenses of the exchange.
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of any new notes received in exchange for old notes
acquired by the broker-dealer as a result of market-making or other trading
activities.
We will not receive any proceeds from any sale of new notes by
broker-dealers or any other persons. New notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes, or a combination
of these methods of resale, at market prices prevailing at the time of resale,
at prices related to the prevailing market prices or negotiated prices. Any
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
broker-dealer and/or the purchasers of any new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker-dealer that participates in a distribution of new
notes may be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit resulting from these resales of new notes and any
commissions or concessions received by any of these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of up to 180 days after the registration statement of which
this prospectus is a part is declared effective, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests these documents. We have agreed
to pay all expenses incident to the exchange offer other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the old
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the purchase, ownership and disposition of Notes by persons
that acquire new notes pursuant to the exchange offer and that acquired old
notes pursuant to the initial unregistered offering at the offering prices set
forth on the cover page of the offering memorandum used in that offering.
Unless otherwise stated, this summary deals only with Notes held as capital
assets by U.S. Holders (as defined below). It does not deal with special
classes of holders such as banks, thrifts, real estate investment trusts,
regulated investment companies, insurance companies, dealers in securities or
currency or tax-exempt investors. This summary also does not address the tax
consequences to U.S. Holders that have a functional currency other than the
U.S. Dollar, partnerships that hold Notes, persons that hold Notes as part of a
straddle, hedging, constructive sale or conversion transaction, or
shareholders, partners or beneficiaries of a holder of Notes. It also does not
include any description of any tax consequences under the tax laws of any state
or local government or of any foreign government that may be applicable to the
Notes. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations under the Code (the "Treasury Regulations")
and administrative and judicial interpretations of the Code, as of the date of
this prospectus, all of which are subject to change, possibly on a retroactive
basis. References in this section to the "Notes" are references to both the old
notes and the new notes.
39
As used in this section, the term "U.S. Holder" means any beneficial owner
of Notes that is, for United States federal income tax purposes,
. a citizen or resident of the United States,
. a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States, any state thereof
or the District of Columbia,
. an estate the income of which is subject to United States federal income
taxation regardless of its source, or
. a trust if (1) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust or (2) the trust has in effect a valid election
to be treated as a domestic trust for United States federal income tax
purposes.
As used in this discussion, the term "Non-U.S. Holder" means a beneficial owner
of Notes that is not a U.S. Holder.
Tax Consequences of the Registered Exchange Offer
Pursuant to the registration rights agreement, we have agreed to offer to
exchange the old notes for publicly registered notes having substantially
identical terms. See "Registration Rights." Under current law, the exchange of
old notes for new notes pursuant to the registered exchange offer will not be
treated as an "exchange" for federal income tax purposes because the new notes
do not differ materially in kind or extent from the old notes. Accordingly, (i)
holders will not recognize taxable gain or loss upon the receipt of new notes
in exchange for old notes in the registered exchange offer, (ii) the holding
period for a new note received in the registered exchange offer will include
the holding period of the old note surrendered in exchange for the new note,
and (iii) the adjusted tax basis of a new note immediately after the exchange
will be the same as the adjusted tax basis of the old note surrendered in
exchange for the new note.
We are obligated to pay additional interest on the Notes under certain
circumstances described under "Registration Rights." Although the matter is not
free from doubt, this additional interest should be taxable as interest under
the rules described below. It is possible, however, that the Internal Revenue
Service ("IRS") may take a different position with respect to the treatment of
this additional interest. Holders should consult their own tax advisors about
payments of additional interest.
U.S. Holders
Interest Income. Interest on a Note will be includible in a U.S. Holder's
gross income as ordinary U.S. source interest income at the time it is accrued
or received in accordance with the U.S. Holder's method of accounting for
United States federal income tax purposes.
Sale, Exchange, or Retirement of Notes. Upon sale, exchange, or retirement
of a Note, a U.S. Holder generally will recognize gain or loss equal to the
difference between the U.S. Holder's adjusted tax basis in the Note and the
amount realized on the sale, exchange, or retirement (less any accrued but
previously unpaid interest, which would be taxable as such). A U.S. Holder's
adjusted tax basis in a Note generally will equal the U.S. Holder's purchase
price for the Note less any principal payments received by the U.S. Holder.
Gain or loss so recognized will be capital gain or loss and will be long-term
capital gain or loss if, at the time of the sale, exchange, or retirement, the
Note was held for more than one year. Under current law, net capital gains of
non-corporate taxpayers, under certain circumstances, are taxed at lower rates
than items of ordinary income. The deduction of capital losses is subject to
certain limitations.
40
Information Reporting and Backup Withholding Tax. In general, information
reporting requirements will apply to payments of principal, premium, if any,
and interest on a Note and the proceeds of the sale of a Note, and a backup
withholding tax may apply to such payments to a non-corporate U.S. Holder if
that U.S. Holder
. fails to furnish or certify its correct taxpayer identification number
to the payor in the manner required,
. is notified by the IRS that it has failed to report payments of interest
or dividends properly, or
. under certain circumstances, fails to certify that it has not been
notified by the IRS that it is subject to backup withholding for failure
to report interest or dividend payments.
Any amounts withheld under the backup withholding rules from a payment to a
U.S. Holder will be allowed as a credit against that U.S. Holder's United
States federal income tax and may entitle the holder to a refund, provided that
the required information is furnished to the IRS. The rate for backup
withholding tax, if applicable, will be equal to the fourth lowest tax rate
imposed on single-filing individuals (30% for 2002-2003, 29% for 2004-2005, and
28% for 2006 and later years).
Non-U.S. Holders
The rules governing United States federal income taxation of a beneficial
owner of Notes that, for United States federal income tax purposes, is a
Non-U.S. Holder are complex and no attempt will be made in this prospectus to
provide more than a summary of those rules. Non-U.S. Holders should consult
with their own tax advisors to determine the effect of federal, state, local
and foreign income tax laws, as well as treaties, with regard to an investment
in the Notes, including any reporting requirements.
Interest Income. Generally, interest income of a Non-U.S. Holder that is not
effectively connected with a United States trade or business will be subject to
a withholding tax at a 30% rate or, if applicable, a lower tax rate specified
by a treaty. However, interest income earned on the Notes by a Non-U.S. Holder
will qualify for the "portfolio interest" exemption and therefore will not be
subject to United States federal income tax or withholding tax, if it is not
effectively connected with a United States trade or business of the Non-U.S.
Holder and if
. the Non-U.S. Holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of Sprint
Capital or Sprint entitled to vote,
. the Non-U.S. Holder is not a controlled foreign corporation that is
related to Sprint Capital or Sprint through stock ownership, and
. the Non-U.S. Holder certifies to Sprint Capital or its agent, under
penalties of perjury, that it is not a U.S. Holder and provides its name
and address or otherwise satisfies applicable identification
requirements.
Unless an applicable treaty otherwise provides, a Non-U.S. Holder generally
will be taxed in the same manner as a U.S. Holder with respect to interest if
the interest income is effectively connected with a United States trade or
business of the Non-U.S. Holder. Effectively connected interest received or
accrued by a corporate Non-U.S. Holder may also, under certain circumstances,
be subject to an additional "branch profits" tax at a 30% rate or, if
applicable, a lower tax rate specified by a treaty. Even though such
effectively connected interest is subject to income tax and may be subject to
the branch profits tax, it is not subject to withholding tax if the holder
delivers a properly executed IRS Form W-8ECI (or a suitable substitute form) to
the payor.
Sale, Exchange, or Retirement of Notes. A Non-U.S. Holder generally will not
be subject to United States federal income tax or withholding tax on any gain
realized on the sale, exchange, or retirement of Notes unless
. the gain is effectively connected with a United States trade or business
of the Non-U.S. Holder,
. in the case of a Non-U.S. Holder who is an individual, the holder is
present in the United States for a period or periods aggregating 183
days or more during the taxable year of the disposition, and either
41
the holder has a "tax home" in the United States or the disposition is
attributable to an office or other fixed place of business maintained by
the holder in the United States, or
. the Non-U.S. Holder is subject to tax pursuant to the provisions of the
Code applicable to certain United States expatriates.
Information Reporting and Backup Withholding Tax. Sprint Capital must report
annually to the IRS and to each Non-U.S. Holder the amount of any interest paid
on the Notes in that year and the amount of tax withheld, if any, with respect
to these payments. Copies of those information returns also may be made
available, under the provisions of a specific treaty or agreement, to the
taxing authorities of the country in which the Non-U.S. Holder resides or is
incorporated. United States information reporting requirements and backup
withholding tax will not
apply to payments of interest on Notes to a Non-U.S. Holder if the
certification or identification requirements described in "Interest Income" are
satisfied by the holder, unless the payor knows or has reason to know that the
holder is not entitled to an exemption from information reporting or backup
withholding tax.
Information reporting requirements and backup withholding tax will not apply
to any payment of the proceeds of the sale of Notes effected outside the United
States by a foreign office of a "broker" (as defined in applicable Treasury
Regulations), unless the broker is a United States person or has certain
connections to the United States. Payment of the proceeds of any such sale
effected outside the United States by a foreign office of a broker described in
the preceding sentence will not be subject to backup withholding tax, but will
be subject to information reporting requirements, unless the broker has
documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or
through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of
the Notes provides the statement described in "Interest Income" or otherwise
establishes an exemption.
We recommend that you consult your own tax advisor as to the particular
consequences of exchanging your old notes for new notes, including the
applicability and effect of any state, local or foreign tax laws.
42
LEGAL MATTERS
The validity of the new notes will be passed upon for us by King & Spalding,
New York, New York.
EXPERTS
Ernst & Young LLP, our independent auditors, have audited Sprint
Corporation's consolidated financial statements and schedule, as amended, and
the combined financial statements, as amended, of the FON group and the PCS
group included in Sprint Corporation's Annual Report on Form 10-K/A for the
year ended December 31, 2000, as set forth in their reports, which are
incorporated by reference in this prospectus which, as to the year 1998 for our
consolidated financial statements and for the combined financial statements of
the PCS group, are based in part on the report of Deloitte & Touche LLP,
independent auditors. These financial statements and schedule are incorporated
by reference in reliance on the reports given on the authority of such firms as
experts in accounting and auditing.
The consolidated financial statements and the related financial statement
schedule of Sprint Spectrum Holding Company, L.P. and subsidiaries for the year
ended December 31, 1998, incorporated in this prospectus by reference from
Sprint Corporation's Annual Report on Form 10-K/A for the year ended December
31, 2000, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
43
No dealer, salesperson or other individual has been authorized to give any
information or to make any representation not contained in this prospectus and,
if given or made, such information or representations must not be relied upon
as having been authorized by us. This prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make an
offer in those jurisdictions. Neither the delivery of this prospectus nor any
sale made hereunder will, under any circumstances, create any implication that
the information in this prospectus is correct as of any time subsequent to the
date of this prospectus or that there has been no change in the affairs of
Sprint or Sprint Capital since that date.
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TABLE OF CONTENTS
Page
----
Where You Can Find More Information... 2
Sprint Corporation.................... 4
Sprint Capital Corporation............ 6
Risk Factors.......................... 7
Recent Developments................... 12
Special Note Regarding Forward-Looking
Statements.......................... 13
Use of Proceeds....................... 13
Capitalization of Sprint.............. 14
Capitalization of Sprint Capital...... 14
Ratio of Earnings to Fixed Charges.... 15
The Exchange Offer.................... 17
Description of the New Notes.......... 26
Registration Rights................... 36
Plan of Distribution.................. 39
United States Federal Income Tax
Consequences........................ 39
Legal Matters......................... 43
Experts............................... 43
SPRINT CAPITAL CORPORATION
SPRINT CORPORATION
Offer to Exchange
6.0% Notes due 2007
that have been registered under the
Securities Act of 1933
for all outstanding unregistered
6.0% Notes due 2007
January 4, 2002