UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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

For the quarterly period ended December 31, ~~2017~~2019



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

Commission File number 1-04721

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SPRINT CORPORATION

(Exact name of registrant as specified in its charter)

—————————————————————



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

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

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

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



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

—————————————————————

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

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

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



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

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

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

COMMON SHARES OUTSTANDING AT JANUARY ~~31, 2018:~~24, 2020:



Sprint Corporation Common Stock	~~4,003,046,276~~4,111,432,945

Table of Contents

SPRINT CORPORATION

TABLE OF CONTENTS


		Page Reference		Page Reference
Item	PART I — FINANCIAL INFORMATION		PART I — FINANCIAL INFORMATION
1.	Financial Statements	1	Financial Statements	1
	Consolidated Balance Sheets	1	Consolidated Balance Sheets	1
	Consolidated Statements of Comprehensive Income (Loss)	2	Consolidated Statements of Comprehensive (Loss) Income	2
	Consolidated Statements of Cash Flows	3	Consolidated Statements of Cash Flows	3
	Consolidated Statement of Changes in Equity	4	Consolidated Statements of Changes in Equity	4
	Notes to the Consolidated Financial Statements	5	Notes to the Consolidated Financial Statements	6
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	40	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
3.	Quantitative and Qualitative Disclosures About Market Risk	62	Quantitative and Qualitative Disclosures About Market Risk	66
4.	Controls and Procedures	63	Controls and Procedures	66


	PART II — OTHER INFORMATION		PART II — OTHER INFORMATION
1.	Legal Proceedings	64	Legal Proceedings	68
1A.	Risk Factors	64	Risk Factors	68
2.	Unregistered Sales of Equity Securities and Use of Proceeds	64	Unregistered Sales of Equity Securities and Use of Proceeds	69
3.	Defaults Upon Senior Securities	64	Defaults Upon Senior Securities	69
4.	Mine Safety Disclosures	64	Mine Safety Disclosures	69
5.	Other Information	65	Other Information	69
6.	Exhibits	66	Exhibits	71
Signature	Signature	68	Signature	73

Table of Contents

PART I — FINANCIAL INFORMATION


Item 1.	Financial Statements (Unaudited)

SPRINT CORPORATION

CONSOLIDATED BALANCE SHEETS


	December 31,			March 31,			December 31,			March 31,
	2017			2017			2019			2019
	(in millions, except share and per share data)						(in millions, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	4,440		$	2,870		$	3,179		$	6,982
Short-term investments	173			5,444			62			67
Accounts and notes receivable, net of allowance for doubtful accounts and deferred interest of $344 and $354, respectively	3,917			4,138
Accounts and notes receivable, net of allowance for doubtful accounts and deferred interest of $410 and $363, respectively							3,873			3,554
Device and accessory inventory	1,009			1,064			1,117			999
Prepaid expenses and other current assets	626			601			1,224			1,289
Total current assets	10,165			14,117			9,455			12,891
Property, plant and equipment, net	19,712			19,209			20,827			21,201
Costs to acquire a customer contract							1,808			1,559
Operating lease right-of-use assets							6,713			—
Intangible assets
Goodwill	6,586			6,579			4,598			4,598
FCC licenses and other	41,222			40,585			41,492			41,465
Definite-lived intangible assets, net	2,667			3,320			918			1,769
Other assets	1,067			1,313			1,091			1,118
Total assets	$	81,419		$	85,123		$	86,902		$	84,601
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,176		$	3,281		$	3,396		$	3,961
Accrued expenses and other current liabilities	3,859			4,141			3,335			3,597
Current portion of long-term debt, financing and capital lease obligations	4,036			5,036
Current operating lease liabilities							1,860			—
Current portion of long-term debt, financing and finance lease obligations							3,880			4,557
Total current liabilities	11,071			12,458			12,471			12,115
Long-term debt, financing and capital lease obligations	32,825			35,878
Long-term debt, financing and finance lease obligations							33,507			35,366
Long-term operating lease liabilities							5,423			—
Deferred tax liabilities	7,709			14,416			7,038			7,556
Other liabilities	3,509			3,563			2,708			3,437
Total liabilities	55,114			66,315			61,147			58,474
Commitments and contingencies
Stockholders' equity:
Common stock, voting, par value $0.01 per share, 9.0 billion authorized, 4.002 billion and 3.989 billion issued, respectively	40			40
Common stock, voting, par value $0.01 per share, 9.0 billion authorized, 4.112 billion and 4.081 billion issued, respectively							41			41
Paid-in capital	27,825			27,756			28,402			28,306
Treasury shares, at cost							(9		)	—
Accumulated deficit	(1,264		)	(8,584		)	(2,226		)	(1,883		)
Accumulated other comprehensive loss	(366		)	(404		)	(453		)	(392		)
Total stockholders' equity	26,235			18,808			25,755			26,072
Noncontrolling interests	70			—			—			55
Total equity	26,305			18,808			25,755			26,127
Total liabilities and equity	$	81,419		$	85,123		$	86,902		$	84,601

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
(in millions, except per share amounts)
Net operating revenues:
Service $ 5,930
$ 6,323
$ 17,968
$ 19,252
Equipment 2,309
2,226
6,355
5,556
8,239
8,549
24,323

24,808
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below) 1,733
1,925
5,140
6,125
Cost of products (exclusive of depreciation and amortization included below) 1,673
1,985
4,622
5,097
Selling, general and administrative 2,108
2,080
6,059
5,992
Severance and exit costs 13
19
13
30
Depreciation 1,977
1,837
5,693
5,227
Amortization 196
255
628
813
Other, net (188 ) 137
(323 ) 230
7,512
8,238
21,832

23,514
Operating income 727
311
2,491

1,294
Other expense:
Interest expense (581 ) (619 ) (1,789 ) (1,864 )
Other expense, net (42 ) (60 ) (50 ) (67 )
(623 ) (679 ) (1,839 )
(1,931 )
Income (loss) before income taxes 104
(368 ) 652

(637 )
Income tax benefit (expense) 7,052
(111 ) 6,662
(286 )
Net income (loss) 7,156
(479 ) 7,314

(923 )
Less: Net loss attributable to noncontrolling interests 6
—
6
—
Net income (loss) attributable to Sprint Corporation $ 7,162
$ (479 ) $ 7,320
$ (923 )

Basic net income (loss) per common share $ 1.79
$ (0.12 ) $ 1.83
$ (0.23 )
Diluted net income (loss) per common share $ 1.76
$ (0.12 ) $ 1.79
$ (0.23 )
Basic weighted average common shares outstanding 4,001
3,983
3,998
3,979
Diluted weighted average common shares outstanding 4,061
3,983
4,080
3,979

Other comprehensive income (loss), net of tax:
Net unrealized holding gains (losses) on securities and other $ 7
$ (5 ) $ 25
$ —
Net unrealized holding gains on derivatives 19
—
12
—
Net unrecognized net periodic pension and other postretirement benefits —
—
1
2
Other comprehensive income (loss) 26
(5 ) 38
2
Comprehensive income (loss) $ 7,182
$ (484 ) $ 7,352
$ (921 )



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
	(in millions, except per share amounts)
Net operating revenues:
Service	$	5,416		$	5,699		$	16,252		$	17,201
Equipment sales	1,372			1,589			3,784			4,180
Equipment rentals	1,292			1,313			3,981			3,778
	8,080			8,601			24,017			25,159
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	1,718			1,648			5,203			5,019
Cost of equipment sales	1,646			1,734			4,346			4,521
Cost of equipment rentals (exclusive of depreciation below)	201			182			666			457
Selling, general and administrative	2,045			2,003			5,888			5,731
Depreciation - network and other	1,071			1,088			3,256			3,132
Depreciation - equipment rentals	1,011			1,137			3,096			3,454
Amortization	474			145			698			475
Other, net	(152		)	185			106			298
	8,014			8,122			23,259			23,087
Operating income	66			479			758			2,072
Other (expense) income:
Interest expense	(589		)	(664		)	(1,802		)	(1,934		)
Other (expense) income, net	(6		)	32			36			153
	(595		)	(632		)	(1,766		)	(1,781		)
(Loss) income before income taxes	(529		)	(153		)	(1,008		)	291
Income tax benefit (expense)	408			8			494			(56		)
Net (loss) income	(121		)	(145		)	(514		)	235
Less: Net loss (income) attributable to noncontrolling interests	1			4			9			(4		)
Net (loss) income attributable to Sprint Corporation	$	(120	)	$	(141	)	$	(505	)	$	231

Basic net (loss) income per common share attributable to Sprint Corporation	$	(0.03	)	$	(0.03	)	$	(0.12	)	$	0.06
Diluted net (loss) income per common share attributable to Sprint Corporation	$	(0.03	)	$	(0.03	)	$	(0.12	)	$	0.06
Basic weighted average common shares outstanding	4,109			4,078			4,098			4,050
Diluted weighted average common shares outstanding	4,109			4,078			4,098			4,110

Other comprehensive (loss) income, net of tax:
Net unrealized holding losses on securities and other	$	—		$	(2	)	$	(2	)	$	(9	)
Net unrealized holding gains (losses) on derivatives	4			(25		)	(23		)	(8		)
Net unrecognized net periodic pension and other postretirement benefits	(39		)	2			(36		)	5
Cumulative effect of accounting change	—			—			—			(8		)
Other comprehensive loss	(35		)	(25		)	(61		)	(20		)
Comprehensive (loss) income	$	(156	)	$	(170	)	$	(575	)	$	215

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended						Nine Months Ended
	December 31,						December 31,
	2017			2016			2019			2018
	(in millions)						(in millions)
Cash flows from operating activities:
Net income (loss)	$	7,314		$	(923	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (loss) income							$	(514	)	$	235
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Asset impairments							231			—
Depreciation and amortization	6,321			6,040			7,050			7,061
Provision for losses on accounts receivable	312			406			435			278
Share-based and long-term incentive compensation expense	137			57			90			101
Deferred income tax (benefit) expense	(6,707		)	276			(532		)	25
Gains from asset dispositions and exchanges	(479		)	(354		)
Call premiums paid on debt redemptions	(129		)	—
Loss on early extinguishment of debt	65			—
Amortization of long-term debt premiums, net	(125		)	(234		)	(47		)	(94		)
Loss on disposal of property, plant and equipment	533			368			692			642
Contract terminations	(5		)	96
Deferred purchase price from sale of receivables							—			(223		)
Other changes in assets and liabilities:
Accounts and notes receivable	(74		)	(542		)	(754		)	65
Deferred purchase price from sale of receivables	—			(220		)
Inventories and other current assets	(3,216		)	(2,254		)	650			248
Operating lease right-of-use assets							1,280			—
Accounts payable and other current liabilities	(104		)	(97		)	(436		)	(530		)
Current and long-term operating lease liabilities							(1,433		)	—
Non-current assets and liabilities, net	260			(313		)	(172		)	(601		)
Other, net	302			594			225			375
Net cash provided by operating activities	4,405			2,900			6,765			7,582
Cash flows from investing activities:
Capital expenditures - network and other	(2,499		)	(1,421		)	(3,360		)	(3,814		)
Capital expenditures - leased devices	(1,787		)	(1,530		)	(5,449		)	(5,739		)
Expenditures relating to FCC licenses	(92		)	(46		)	(24		)	(145		)
Proceeds from sales and maturities of short-term investments	7,113			2,649			79			6,619
Purchases of short-term investments	(1,842		)	(4,998		)	(74		)	(5,152		)
Proceeds from sales of assets and FCC licenses	367			126			819			416
Proceeds from deferred purchase price from sale of receivables							—			223
Proceeds from corporate owned life insurance policies							5			110
Other, net	16			26			(27		)	52
Net cash provided by (used in) investing activities	1,276			(5,194		)
Net cash used in investing activities							(8,031		)	(7,430		)
Cash flows from financing activities:
Proceeds from debt and financings	3,073			6,830			4,731			6,416
Repayments of debt, financing and capital lease obligations	(7,159		)	(3,266		)
Repayments of debt, financing and finance lease obligations							(7,188		)	(6,937		)
Debt financing costs	(19		)	(272		)	(12		)	(286		)
Proceeds from issuance of common stock, net							(29		)	281
Acquisition of noncontrolling interest							(33		)	—
Other, net	(6		)	68			1			—
Net cash (used in) provided by financing activities	(4,111		)	3,360
Net increase in cash and cash equivalents	1,570			1,066
Cash and cash equivalents, beginning of period	2,870			2,641
Cash and cash equivalents, end of period	$	4,440		$	3,707
Net cash used in financing activities							(2,530		)	(526		)
Net decrease in cash, cash equivalents and restricted cash							(3,796		)	(374		)
Cash, cash equivalents and restricted cash, beginning of period							7,063			6,659
Cash, cash equivalents and restricted cash, end of period							$	3,267		$	6,285

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN EQUITY

(in millions)

Common Stock
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Noncontrolling
Interests
Total Equity
Shares Amount
Balance, March 31, 2017 3,989
$ 40
$ 27,756
$ (8,584 ) $ (404 ) $ —
$ 18,808
Net income (loss) 7,320
(6 ) 7,314
Other comprehensive income, net of tax 38
38
Issuance of common stock, net 13
12

12
Share-based compensation expense 137
137
Capital contribution by SoftBank 5
5
Other, net (57 ) (57 )
(Decrease) increase attributable to noncontrolling interests (28 ) 76
48
Balance, December 31, 2017 4,002
$ 40
$ 27,825
$ (1,264 ) $ (366 ) $ 70
$ 26,305



	Nine Months Ended December 31, 2019
	Common Stock			Paid-in Capital			Treasury Shares					(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
	Shares	Amount					Shares		Amount
Balance, March 31, 2019	4,081	$	41	$	28,306		—		$	—		$	(1,883	)	$	(392	)	$	55		$	26,127
Net loss												(111		)				(3		)	(114		)
Other comprehensive loss, net of tax															(22		)				(22		)
Issuance of common stock, net	11			(15		)			(2		)										(17		)
Share-based compensation expense				35																	35
Other, net				(3		)															(3		)
Cumulative effect of accounting change												162									162
Balance, June 30, 2019	4,092	41		28,323			—		(2		)	(1,832		)	(414		)	52			26,168
Net loss												(274		)				(5		)	(279		)
Other comprehensive loss, net of tax															(4		)				(4		)
Issuance of common stock, net	16			(2		)	2		(14		)										(16		)
Share-based compensation expense				28																	28
Balance, September 30, 2019	4,108	41		28,349			2		(16		)	(2,106		)	(418		)	47			25,897
Net loss												(120		)				(1		)	(121		)
Other comprehensive loss, net of tax															(35		)				(35		)
Issuance of common stock, net	4			(3		)	(1	)	7												4
Share-based compensation expense				27																	27
Capital contribution by SoftBank				1																	1
Acquisition of noncontrolling interest⁽¹⁾				28														(46		)	(18		)
Balance, December 31, 2019	4,112	$	41	$	28,402		1		$	(9	)	$	(2,226	)	$	(453	)	$	—		$	25,755

_________________


(1)	On November 1, 2019, we acquired PRWireless PR, Inc’s. member shares in PRWireless Holdco, LLC for cash consideration of $33 million making Sprint the sole shareholder of PRWireless Holdco, LLC and removing the noncontrolling interest.

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions)



	Nine Months Ended December 31, 2018
	Common Stock			Paid-in Capital			Treasury Shares					(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interests			Total Equity
	Shares	Amount					Shares		Amount
Balance, March 31, 2018	4,005	$	40	$	27,884		—		$	—		$	(1,255	)	$	(313	)	$	63		$	26,419
Net income (loss)												176						(3		)	173
Other comprehensive income, net of tax															4						4
Issuance of common stock, net	8			2			1		(4		)										(2		)
Share-based compensation expense				40																	40
Capital contribution by SoftBank				1																	1
Cumulative effect of accounting changes												1,315			(8		)				1,307
Other, net				3																	3
Increase (decrease) attributable to noncontrolling interests				8														(8		)	—
Balance, June 30, 2018	4,013	40		27,938			1		(4		)	236			(317		)	52			27,945
Net income												196						11			207
Other comprehensive income, net of tax															9						9
Issuance of common stock, net	66	1		288			1		(11		)										278
Share-based compensation expense				27																	27
Capital contribution by SoftBank				1																	1
Other, net				(3		)															(3		)
Balance, September 30, 2018	4,079	41		28,251			2		(15		)	432			(308		)	63			28,464
Net loss												(141		)				(4		)	(145		)
Other comprehensive loss, net of tax															(25		)				(25		)
Issuance of common stock, net				(3		)	(1	)	8												5
Share-based compensation expense				34																	34
Other, net				(4		)															(4		)
Balance, December 31, 2018	4,079	$	41	$	28,278		1		$	(7	)	$	291		$	(333	)	$	59		$	28,329

See Notes to the Consolidated Financial Statements

Table of Contents

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

INDEX


		Page Reference		Page Reference
1.	Basis of Presentation	6	Basis of Presentation and Other Information	7

2.	New Accounting Pronouncements	6	New Accounting Pronouncements	8

3.	Installment Receivables	8	Installment Receivables	10

4.	Financial Instruments	9	Financial Instruments	11

5.	Property, Plant and Equipment	11	Property, Plant and Equipment	12

6.	Intangible Assets	12	Intangible Assets	13

7.	Accounts Payable	13	Leases	15

8.	Long-Term Debt, Financing and Capital Lease Obligations	14	Long-Term Debt, Financing and Finance Lease Obligations	19

9.	Severance and Exit Costs	20	Revenues from Contracts with Customers	24

10.	Income Taxes	20	Severance and Exit Costs	26

11.	Commitments and Contingencies	23	Income Taxes	27

12.	Per Share Data	25	Commitments and Contingencies	27

13.	Segments	25	Per Share Data	29

14.	Related-Party Transactions	29	Segments	29

15.	Guarantor Financial Information	31	Related-Party Transactions	33

16.			Guarantor Financial Information	34

17.			Additional Financial Information	43

18.			Subsequent Events	43

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 1.	Basis of Presentation and Other Information

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. All normal recurring adjustments considered necessary for a fair presentation have been included. Certain disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in our ~~annual report~~Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2019. Unless the context otherwise requires, references to "Sprint," "we," "us," "our" and the "Company" mean Sprint Corporation and its consolidated subsidiaries for all periods presented, and references to "Sprint Communications" are to Sprint Communications, Inc. and its consolidated subsidiaries.

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

The consolidated financial statements include our accounts, those of our 100% owned subsidiaries, and

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

~~Certain prior~~Business Combination Agreement

On April 29, 2018, we announced that we entered into a Business Combination Agreement with T-Mobile US, Inc. (T-Mobile) to merge in an all-stock transaction for a fixed exchange ratio of 0.10256 of T-Mobile shares for each Sprint share, or the equivalent of 9.75 Sprint shares for each T-Mobile share (Merger Transaction). Immediately following the Merger Transaction, Deutsche Telekom AG and SoftBank Group Corp. are expected to hold approximately 42% and 27% of fully-diluted shares of the combined company, respectively, with the remaining 31% of the fully-diluted shares of the combined company held by public stockholders. The board of directors will consist of 14 directors, of which 9 will be nominated by Deutsche Telekom AG, 4 will be nominated by SoftBank Group Corp., and the final director will be the CEO of the combined company. The combined company will be named T-Mobile. The Merger Transaction is subject to customary closing conditions, including certain state and federal regulatory approvals. Sprint and T-Mobile completed the Hart-Scott-Rodino filing with the Department of Justice (DOJ) on May 24, 2018. On June 18, 2018, the parties filed with the Federal Communications Commission (FCC) the merger applications, including the Public Interest Statement. On July 18, 2018, the FCC accepted the applications for filing and established a public comment period ~~amounts have been reclassified~~for the Merger Transaction. The formal comment period concluded on October 31, 2018. On May 20, 2019, to ~~conform~~facilitate the FCC’s review and approval of the FCC license transfers associated with the proposed Merger Transaction, we and T-Mobile filed with the FCC a written exparte presentation (the Presentation) relating to the ~~current~~proposed Merger Transaction. The Presentation included proposed commitments from us and T-Mobile. On October 16, 2019, the FCC voted to approve the Merger Transaction. The Merger Transaction received clearance from the Committee on Foreign Investment in the United States on December 17, 2018.

On July 26, 2019, the DOJ and 5 State Attorneys General filed an action in the United States District Court for the District of Columbia that would resolve their objections to the Merger Transaction. Since then, 5 additional states have joined the DOJ action. The Merger Transaction has received approval from 18 of the 19 state public utility commissions. The parties are awaiting further regulatory approvals and resolution of litigation filed by the Attorneys General of 13 states and the District of Columbia seeking to block the Merger Transaction. The parties to the Business Combination Agreement extended the Outside Date (as defined in the Business Combination Agreement) to November 1, 2019, or, if the Marketing Period (as defined in the Business Combination Agreement) is in effect at such time, then the Outside Date will be January 2, 2020. After November 1, 2019, Sprint and T-Mobile each have a right under the Business Combination Agreement to terminate that agreement at any time because the Merger Transaction was not completed as of that date.

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Also, on July 26, 2019, Sprint and T-Mobile announced agreements with DISH Network Corporation (DISH) in which new T-Mobile will divest Sprint’s prepaid assets (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications, Inc.) and Sprint’s 800 MHz spectrum assets to DISH for a total of approximately $5.0 billion. Additionally, upon the closing of the divestiture transaction, new T-Mobile will provide DISH wireless customers access to its network for up to seven years and offer standard transition services arrangements to DISH during a transition period ~~presentation.~~of up to three years. DISH will also have an option to take on leases for certain cell sites and retail locations that are decommissioned by the new T-Mobile, subject to any assignment restrictions. Under the terms of the arrangement, Sprint appointed individuals, subject to approval by the DOJ, to oversee the prepaid assets and maintain complete managerial responsibility, including the ability to make all business decisions relating to the operations of the prepaid assets independent of Sprint and T-Mobile. In connection with the execution of the firm agreements by and between DISH and the Company, as well as the agreements with the DOJ as outlined in the Proposed Final Judgment and Stipulation and Order, Sprint has not lost a controlling financial interest in its prepaid assets. The transactions with DISH are contingent on the successful closing of T-Mobile’s merger with Sprint, among other closing conditions.


Note 2.	New Accounting Pronouncements

Accounting Pronouncements Adopted During the Current Year

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued new authoritative literature, ~~Revenue from Contracts with Customers,~~ Leases (Topic 842), and has subsequently modified several areas of the standard in order to provide additional clarity and improvements. The new standard ~~will supersede~~supersedes much of the existing ~~authoritative literature~~lease guidance (Topic 840) to enhance the transparency and comparability of financial reporting related to leasing arrangements. This guidance requires lessees, among other things, to recognize right-of-use (ROU) assets and lease liabilities on their balance sheet for ~~revenue recognition.~~all leases. The ~~standard~~criteria for distinguishing leases between finance and ~~related amendments will be effective~~operating are substantially similar to criteria for distinguishing between capital leases and operating leases in previous lease guidance. In July 2018, the ~~Company for its fiscal year beginning April 1, 2018, including interim periods within that fiscal year.~~

~~Two adoption methods are available for implementation of~~FASB made targeted improvements to the standard, ~~update related to~~including providing an additional and optional transition method. Under this method, an entity initially applies the ~~recognition~~standard at the adoption date, including the election of revenue from contracts with customers. Under the full retrospective method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the modified retrospective method, the guidance is applied only to the most current period presented, recognizing thecertain transition reliefs, and recognizes a cumulative effect ~~of the change as an~~ adjustment to the ~~beginning~~opening balance of retained earnings ~~and also requires additional disclosures comparing~~in the ~~results to the previous guidance. We will adopt the~~period of adoption.

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

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

842.

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

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

lease classification for expired or existing leases; and

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

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

The most significant change from adopting the new standard involved recognizing ROU assets and lease liabilities for operating leases which resulted in a material impact to our consolidated ~~financial statements upon adoption. The ultimate impact on revenue resulting from the application~~balance sheet. As of the ~~new standard will be subject to assessments that are dependent on many variables, including, but not limited to,~~adoption date, we recognized ROU assets in the ~~terms~~amount of $7.4 billion and ~~mix~~related liabilities in current liabilities of $1.8 billion and a long-term lease liability in the amount of $6.3 billion. This impact is inclusive of the ~~contractual arrangements we have with customers.~~following:

~~We expect~~ the ~~timing~~recognition of ~~recognition~~the lease liability and ROU assets for our sales commission expenses will be materially impacted, as a substantial portion of these costs (which are currently expensed) will be capitalized and expensed over time. We expect to amortize costs related to new service contracts over the expected customer relationship period while costsoperating leases that were not previously recorded. The ROU asset was adjusted for recognized balances associated with ~~contract renewals are expected to be amortized over the anticipated length of the service contract. In addition, the~~operating leases, including prepaid and deferred ~~contract cost asset will be assessed for impairment on a periodic basis.~~rent, cease-use liabilities and favorable or unfavorable intangible assets; and

For bundled arrangements that include both lease and service elements, we expect the allocation of the customer consideration and the pattern of revenue recognition to be relatively consistent with our current practice.

We are still in the process of evaluating these impacts, and our initial assessments may change due to changes in the terms and mix of the contractual arrangements we have with customers. New products or offerings, or changes to current offerings, may yield significantly different impacts than currently expected.

~~We are in the process of implementing significant new revenue accounting systems, processes and internal controls over revenue recognition as a result of adopting the new standard.~~

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

As the Company has elected the modified retrospective transition method, any assets and liabilities that were recognized solely as a result of a transaction where the Company was the deemed owner during construction were derecognized at transition for completed construction sites. The Company funded construction costs for a certain population of owner during construction cell sites (ODC sites). These costs were concluded to be prepaid lease payments; consequently, such amounts were carried over at their depreciated balance of approximately $0.6 billion and included in the associated finance lease ROU assets, which is included within "Property, Plant and Equipment, net" in the consolidated balance sheets. The remaining lease obligations for these ODC sites were immaterial.

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

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

The cumulative after-tax effect of the changes made to our consolidated balance sheet for the adoption of Topic 842 effective for the Company on April 1, 2019 were as follows:



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

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In ~~July 2015,~~June 2018, the FASB issued authoritative guidance regarding ~~Inventory~~Compensation - Stock Compensation, which ~~simplifies~~expands the ~~subsequent measurement~~scope of ~~certain inventories by replacing today’s lower of cost or market test with a lower of cost~~ASC Topic 718 to include share-based payment transactions for acquiring goods and ~~net realizable value test. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.~~services from non-employees. The Company adopted this standard ~~is effective for the Company’s fiscal year beginning~~on April 1, ~~2017, including interim periods within this fiscal year, and the adoption of this guidance did not have a material~~2019 with no impact onto our consolidated financial ~~statements.~~statements at the date of adoption.

~~In January 2016, the FASB issued authoritative guidance regarding~~ ~~Financial Instruments~~, which amended guidance on the classification and measurement of financial instruments. Under the new guidance, entities will be required to measure equity investments that are not consolidated or accounted for under the equity method at fair value with any changes in fair value recorded in net income, unless the entity has elected the new practicability exception. For financial liabilities measured using the fair value option, entities will be required to separately present in other comprehensive income the portion of the changes in fair value attributable to instrument-specific credit risk. Additionally, the guidance amends certain disclosure requirements associated with the fair value of financial instruments. The standard will be effective for the Company’s fiscal year beginning April 1, 2018, including interim reporting periods within that fiscal year. The Company does not expect the adoption of this guidance to have a material impact on our consolidated financial statements.Accounting Pronouncements Not Yet Adopted

~~In February 2016, the FASB issued authoritative guidance regarding~~ ~~Leases.~~ The new standard will supersede much of the existing authoritative literature for leases. This guidance requires lessees, among other things, to recognize right-of-use assets and liabilities on their balance sheet for all leases with lease terms longer than twelve months. The standard will be effective for the Company for its fiscal year beginning April 1, 2019, including interim periods within that fiscal year, with early application permitted. Entities are required to use modified retrospective application for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements with the option to elect certain transition reliefs. The Company is currently evaluating the guidance and assessing its overall impact. However, we expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In June 2016, the FASB issued authoritative guidance regarding Financial Instruments - Credit Losses~~, which~~ and has subsequently modified several areas of the standard in order to provide additional clarity and improvements. The new standard requires entities to use a Current Expected Credit Loss impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized ~~cost.~~cost within the scope of the standard. The entity's estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses. The standard will be effective for the Company's fiscal year beginning April 1, 2020, including interim reporting periods therein, and will require a cumulative effect adjustment to the opening balance of retained earnings in the period in which the guidance is effective. We are currently in the process of developing an expected credit loss model and have not yet determined the impact of the new credit loss standard on our consolidated financial statements.

In August 2018, the FASB issued authoritative guidance regarding Fair Value Measurement: Disclosure Framework,which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The standard will be effective for the Company for its fiscal year beginning April 1, 2020, including interim periods within that fiscal year, ~~although~~with early adoption is permitted. The Company ~~does~~is currently evaluating the guidance and assessing its overall impact. However, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August ~~2016,~~2018, the FASB issued authoritative guidance regarding ~~Statement of Cash Flows: Classification of Certain Cash Receipts~~Intangibles - Goodwill and ~~Cash Payments,~~ Other - Internal-Use Software, which aligns the requirements for a customer to ~~address diversity~~capitalize implementation costs incurred in ~~how certain cash receipts and cash payments are presented and classified in~~a hosting arrangement that is a service contract with the ~~statement of cash flows. It provides guidance on eight specific cash flow issues.~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard will be effective for the Company for its fiscal year beginning April 1, ~~2018,~~2020, including interim periods within that fiscal year, with early adoption ~~permitted and retrospective application required.~~permitted. The ~~standard will impact the presentation of cash flows related to beneficial interests in securitization transactions, which~~Company is the deferred purchase price, resulting in a material reclassification of cash inflows from operating activities to investing activities for prior periods in our consolidated statements of cash flows. The standard will also impact the presentation of cash flows related to separately identifiable cash flows and application of the predominance principal related to direct channel leased devices and will result in a material reclassification of cash outflows from operating activities to investing activities for all periods presented in our consolidated statements of cash flows. In addition, the standard will impact the presentation of cash flows related to debt prepayment or debt extinguishment costs and will result in a reclassification of cash outflows from operating activities to financing activities in the nine-month period ended December 31, 2017 in our consolidated statements of cash flows. There were no debt prepayment or debt extinguishment costs in the nine-month period ended December 31, 2016. While the Company does expect the impact of this guidance to be material to our cash flow presentation, we continue to evaluatecurrently evaluating the guidance and ~~quantify the specific impacts.~~

~~Table of Contents~~

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

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~In October 2016, the FASB issued authoritative guidance regarding~~ ~~Income Taxes~~, which amended guidance for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, entities will be required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, thereby eliminating the recognition exception within current guidance. The standard will be effective for the Company’s fiscal year beginning April 1, 2018, including interim reporting periods within that fiscal year. The Company doesassessing its overall impact. However, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In ~~November 2016,~~December 2019, the FASB issued authoritative guidance regarding ~~Statement of Cash Flows: Restricted Cash,~~ ~~requiring that amounts generally described as restricted cash or restricted cash equivalents be included with cash~~Income Taxes, which removes certain exceptions and ~~cash equivalents when reconciling~~simplifies the ~~beginning-of-period~~accounting for income taxes by clarifying and ~~end-of-period total amounts shown on the statement of cash flows. The~~amending existing guidance. This standard ~~will be~~is effective for ~~the Company’s~~ fiscal ~~year~~years beginning ~~April 1, 2018,~~after December 15, 2020, including interim ~~reporting~~ periods within ~~that~~those fiscal ~~year,~~years, with early adoption ~~permitted and retrospective application required.~~permitted. The Company ~~does~~is currently evaluating the guidance and assessing its overall impact. However, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

~~In January 2017, the FASB issued authoritative guidance amending~~ ~~Business Combinations: Clarifying the Definition of a Business~~, to clarify the definition of a business with the objective of providing a more robust framework to assist management when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company for its fiscal year beginning April 1, 2018, including interim periods within that fiscal year, with early application permitted. The amendments are to be applied prospectively to business combinations that occur after the effective date.

~~In January 2017, the FASB issued authoritative guidance regarding~~ ~~Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment~~, which simplifies the goodwill impairment test by eliminating the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the test), but rather to record an impairment charge based on the excess of the carrying value over its fair value. The standard will be effective for the Company’s annual goodwill impairment test in the fiscal year beginning April 1, 2020, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

~~In August 2017, the FASB issued authoritative guidance regarding~~ ~~Derivatives and Hedging~~, which provided targeted improvements and simplifications to accounting for hedging activities and applies to entities that elect to apply hedge accounting in accordance with current U.S. GAAP. The amendments will be effective for the Company’s fiscal year beginning April 1, 2019, and for interim periods within that fiscal year, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our consolidated financial statements.


Note 3.	Installment Receivables

Certain subscribers have the option to pay for their devices in installments, generally up to a 24-month period. Short-term installment receivables are recorded in "Accounts and notes receivable, net" and long-term installment receivables are recorded in "Other assets" in the consolidated balance sheets. ~~From October 2015 to February 2017, installment receivables sold to~~ ~~unaffiliated third parties~~ (the Purchasers) were treated as a sale of financial assets and we derecognized these receivables, as well as the related allowances. As a result of our Accounts Receivable Facility (Receivables Facility) being amended in February 2017, all proceeds received from the Purchasers in exchange for our installment receivables are now recorded as borrowings ~~(see Note 8. Long-Term Debt, Financing and Capital Lease Obligations)~~.

810

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the installment receivables:



	December 31, 2019			March 31, 2019
	(in millions)
Installment receivables, gross	$	1,578		$	1,212
Deferred interest	(84		)	(71		)
Installment receivables, net of deferred interest	1,494			1,141
Allowance for credit losses	(244		)	(215		)
Installment receivables, net	$	1,250		$	926

Classified in the consolidated balance sheets as:
Accounts and notes receivable, net	$	951		$	679
Other assets	299			247
Installment receivables, net	$	1,250		$	926

December 31,
2017 March 31,
2017
(in millions)
Installment receivables, gross $ 1,773
$ 2,270
Deferred interest (133 ) (207 )
Installment receivables, net of deferred interest 1,640
2,063
Allowance for credit losses (257 ) (299 )
Installment receivables, net $ 1,383
$ 1,764

Classified on the consolidated balance sheets as:
Accounts and notes receivable, net $ 1,168
$ 1,195
Other assets 215
569
Installment receivables, net $ 1,383
$ 1,764

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



	December 31, 2019						March 31, 2019
	Prime		Subprime		Total		Prime		Subprime		Total
	(in millions)						(in millions)
Unbilled	$	856	$	612	$	1,468	$	667	$	459	$	1,126
Billed - current	53		31		84		43		22		65
Billed - past due	11		15		26		10		11		21
Installment receivables, gross	$	920	$	658	$	1,578	$	720	$	492	$	1,212

December 31, 2017 March 31, 2017
Prime Subprime Total Prime Subprime Total
(in millions) (in millions)
Unbilled $ 1,170
$ 455
$ 1,625
$ 1,501
$ 619
$ 2,120
Billed - current 75
32
107
74
36
110
Billed - past due 21
20
41
20
20
40
Installment receivables, gross $ 1,266
$ 507
$ 1,773
$ 1,595
$ 675
$ 2,270

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



	Nine Months Ended			Twelve Months Ended
	December 31, 2019			March 31, 2019
	(in millions)
Deferred interest and allowance for credit losses, beginning of period	$	286		$	323
Adjustment to deferred interest on short- and long-term installment receivables due to adoption of revenue recognition standard on April 1, 2018	—			(50		)
Bad debt expense	142			116
Write-offs, net of recoveries	(114		)	(118		)
Change in deferred interest on short- and long-term installment receivables	14			15
Deferred interest and allowance for credit losses, end of period	$	328		$	286

Nine Months Ended Twelve Months Ended
December 31, 2017 March 31, 2017
(in millions)
Deferred interest and allowance for credit losses, beginning of period $ 506
$ —
Bad debt expense 135
61
Write-offs, net of recoveries (177 ) (28 )
Change in deferred interest on short-term and long-term installment receivables (74 ) 8
Recognition of deferred interest and allowance for credit losses —
465
Deferred interest and allowance for credit losses, end of period $ 390
$ 506


Note 4.	Financial Instruments

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

The carrying amount of cash equivalents, accounts and notes receivable, and accounts payable approximates fair value. Short-term investments are recorded at amortized cost and the respective carrying amounts approximate the fair value that would be determined primarily using quoted prices in active markets. As of December 31, ~~2017,~~2019 and March 31, 2019, short-term investments consisted of ~~$173~~$62 million and $67 million of commercial ~~paper. As of~~ ~~March 31, 2017, short-term investments totaled $5.4 billion and consisted of approximately $3.0 billion of time deposits and $2.4 billion of commercial paper.~~paper, respectively. The fair value of marketable equity securities as of December 31, 2019 was immaterial. The fair value of marketable equity securities, totaling ~~$60~~

911

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~million and $46~~$1 million as of ~~December 31, 2017~~ ~~and~~ March 31, ~~2017~~2019, ~~respectively, are~~is measured on a recurring basis using quoted prices in active markets.

~~Except for our financing transaction for the Handset Sale-Leaseback (Tranche 2) with Mobile Leasing Solutions, LLC (MLS), which was terminated in October 2017~~ ~~(see Note 8. Long-Term Debt, Financing and Capital Lease Obligations), current~~ Current and long-term debt ~~and~~inclusive of our other financings are carried at amortized cost. The Company elected to measure the financing obligation with MLS at fair value as a means to better reflect the economic substance of the arrangement and it was the only eligible financial instrument for which we had elected the fair value option.

The fair value of the financing obligation, which was determined at the outset of the arrangement using a discounted cash flow model, was derived by unobservable inputs such as customer churn rates, customer upgrade probabilities, and the likelihood that Sprint will elect the exchange option versus the termination option upon a customer upgrade. Any gains or losses resulting from changes in the fair value of the financing obligation were included in “Other income (expense), net” in the consolidated statements of comprehensive income (loss). During the three and nine-month periods ended December 31, 2017, there was no material change in the fair value of the financing obligation. During the nine-month period ended December 31, 2017, we made principal repayments and non-cash adjustments totaling $385 million to MLS, resulting in our principal balance being fully paid. In addition to the financing obligation with MLS, the remaining debtDebt for which estimated fair value is determined based on unobservable inputs primarily represents borrowings under our secured equipment credit facilities, ~~network equipment sale-leaseback,~~ and sales of receivables under our ~~Receivables~~Accounts Receivable Facility ~~(see~~(Receivables Facility). See Note 8. Long-Term Debt, Financing and ~~Capital~~Finance Lease ~~Obligations)~~.Obligations for additional information. The carrying amounts associated with these borrowings approximate fair value.

The estimated fair value of the majority of our current and long-term debt, excluding our secured equipment credit facilities, and sold wireless service, installment billing and future receivables ~~and borrowings under our network equipment sale-leaseback and Tranche 2 transactions,~~ is determined based on quoted prices in active markets or by using other observable inputs that are derived principally from, or corroborated by, observable market data.

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

Carrying amount at December 31, 2017 Estimated Fair Value Using Input Type
Quoted prices in active markets Observable Unobservable Total estimated fair value
(in millions)
Current and long-term debt and financing obligations $ 36,690
$ 30,281
$ 2,970
$ 4,954
$ 38,205



	Carrying amount at December 31, 2019		Estimated Fair Value Using Input Type
	Carrying amount at December 31, 2019		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	37,736	$	35,951	$	—	$	4,150	$	40,101



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

Carrying amount at March 31, 2017 Estimated Fair Value Using Input Type
Quoted prices in active markets Observable Unobservable Total estimated fair value
(in millions)
Current and long-term debt and financing obligations $ 40,581
$ 33,196
$ 4,352
$ 5,468
$ 43,016

~~Table of Contents~~

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

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~


Note 5.	Property, Plant and Equipment

Property, plant and equipment consists primarily of network equipment, leased devices and other long-lived assets used to provide service to our subscribers. Non-cash accruals included in property, plant and equipment (excluding leased devices) totaled ~~$428 million and $325 million~~$1.0 billion as of December 31, ~~2017~~2019 and ~~2016, respectively.~~2018.

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



	December 31, 2019			March 31, 2019
	(in millions)
Land	$	105		$	246
Network equipment, site costs and related software	25,373			24,967
Buildings and improvements	444			856
Leased devices, non-network internal use software, office equipment and other	12,269			12,627
Construction in progress	2,628			3,044
Less: accumulated depreciation	(19,992		)	(20,539		)
Property, plant and equipment, net	$	20,827		$	21,201

Network equipment, site costs and related software includes switching equipment, cell site towers, site development costs, radio frequency equipment, network software, digital fiber optic cable, transport facilities and transmission-related equipment. Also included within this component are finance lease ROU assets, which primarily consist of prepayments of site rental costs for ODC site leases with an immaterial remaining lease obligation. Buildings and improvements principally consist of owned general office facilities, retail stores and leasehold improvements. Leased devices, non-network internal use software, office equipment and other primarily consists of leased devices, furniture, information technology systems, and equipment and vehicles. Construction in progress, which is not depreciated until placed in service, primarily includes materials, transmission and related equipment, labor, engineering, site development costs, interest and other costs relating to the construction and development of our network.

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31,
2017 March 31,
2017
(in millions)
Land $ 254
$ 260
Network equipment, site costs and related software 22,649
21,693
Buildings and improvements 809
818
Non-network internal use software, office equipment, leased devices and other 10,626
8,625
Construction in progress 2,101
2,316
Less: accumulated depreciation (16,727 ) (14,503 )
Property, plant and equipment, net $ 19,712
$ 19,209

Sprint offers a leasing program to its customers whereby qualified subscribers can lease a device for a contractual period of time. At the end of the lease term, the subscriber has the option to ~~turn in~~return the device, continue leasing the device, or purchase the device. As of December 31, ~~2017,~~2019, substantially all of our device leases were classified as operating leases. ~~Lease revenue associated with~~Purchases of leased devices subject to operating leases, which is included in equipment revenue, was $1.0 billion, $2.9 billion, $887 million and $2.5 billion for the three and nine-month periods ended December 31, 2017 and 2016, respectively.

~~At lease inception, the devices leased through Sprint's direct channels~~ are reclassified from inventory to property, plant and equipment. For those devices leased through indirect channels, Sprint purchases the device to be leased from the retailer at lease inception and reports these purchasesreported as cash outflows for "Capital expenditures - leased devices" in the consolidated statements of cash flows. The devices are then depreciated using the straight-line method to their estimated residual value generally over the term of the lease.

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



	December 31, 2019			March 31, 2019
	(in millions)
Leased devices	$	10,591		$	10,972
Less: accumulated depreciation	(3,843		)	(4,360		)
Leased devices, net	$	6,748		$	6,612

December 31,
2017 March 31,
2017
(in millions)
Leased devices $ 9,098
$ 7,276
Less: accumulated depreciation (3,415 ) (3,114 )
Leased devices, net $ 5,683
$ 4,162

During the nine-month periods ended December 31, ~~2017~~2019 and ~~2016, there were~~2018, we had non-cash transfers toof returned leased devices ~~of approximately $3.7 billion~~from property, plant and ~~$2.3 billion, respectively, along with a corresponding decrease in "Device~~equipment to device and accessory ~~inventory" for devices leased through our direct channel.~~inventory at the lower of net book value or their estimated fair value of $888 million and $645 million, respectively. Non-cash accruals included in leased devices totaled ~~$306~~$175 million and ~~$166~~$264 million as of December 31, ~~2017~~2019 and ~~2016, respectively, for devices purchased from indirect dealers that were leased to our subscribers. Depreciation expense incurred on all leased devices was $990 million and $2.7 billion for~~2018, respectively.

During the ~~three~~three- and nine-month periods ended December 31, ~~2017, respectively,~~2019 and ~~$837~~2018, we recorded $227 million, $692 million, $299 million and ~~$2.2 billion for the same periods in 2016, respectively.~~

~~During the three and nine-month periods ended December 31, 2017 and 2016, we recorded $123 million, $527 million, $137 million and $368~~$642 million, respectively, of loss on disposal of property, plant and equipment, net of ~~recoveries, which is included in "Other, net" within Operating income in our consolidated statements of comprehensive income (loss).~~recoveries. Net losses that resulted from the write-off of leased devices ~~are~~were primarily associated ~~with~~with lease cancellations prior to the scheduled customer lease terms where customers did not return the devices to usus. Such losses were ~~$123~~the primary driver of the loss on disposal of property, plant and equipment, net of recoveries, and were $201 million, ~~$347~~$666 million, ~~$109~~$182 million and ~~$340~~$457 million for the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 and ~~2016, respectively. In addition,~~2018, respectively, and are included in "Cost of equipment rentals" in our consolidated statements of comprehensive (loss) income. Additionally, during the nine-month period ended December 31, ~~2017,~~2019, we recorded $26 million of losses ~~totaling $180 million were~~primarily related to ~~$181~~network assets that are no longer recoverable as a result of changes in our network plans, which are included in "Other, net" in our consolidated statements of comprehensive (loss) income. During the three- and nine-month periods ended December 31, 2018, we recorded $117 million and $185 million, respectively, of losses primarily related to cell site construction costs and other network costs that are no longer recoverable as a result of changes in our network plans, ~~during~~which are included in "Other, net" in our consolidated statements of comprehensive (loss) income.

On June 27, 2019, the ~~three-month period~~

~~Table~~Company entered into a sale and leaseback agreement for our Overland Park, Kansas campus. The Company determined that the asset should be classified as held-for-sale as of ~~Contents~~

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

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~ended~~ June 30, ~~2017~~2019 and $5measured at the lower of its carrying amount or fair value less cost to sell resulting in the recognition of a non-cash impairment of approximately $207 million included in "Other, net" within the consolidated statements of ~~hurricane-related charges during~~comprehensive (loss) income. On July 9, 2019, the ~~three-month period ended September 30, 2017, offset by a $6 million gain.~~sale closed resulting in the derecognition of the campus assets and the leaseback began.


Note 6.	Intangible Assets

Indefinite-Lived Intangible Assets

Our indefinite-lived intangible assets consist of FCC licenses, which were acquired primarily through FCC auctions and business combinations, certain of our trademarks, and goodwill. At December 31, ~~2017,~~2019, we held 800 MHz, 1.9 GHz and 2.5 GHz FCC licenses authorizing the use of radio frequency spectrum to deploy our wireless services. As long as the Company acts within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. Accordingly, we have concluded that FCC licenses are indefinite-lived intangible assets. Our Sprint and Boost Mobile trademarks have also been identified as indefinite-lived intangible assets. Goodwill represents the excess of consideration paid over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations.

During the quarter ended December 31, 2017, Sprint and PRWireless PR, Inc. completed a transaction to combine their operations in Puerto Rico and the U.S. Virgin Islands into a new entity named PRWireless HoldCo, LLC. The companies contributed employees, subscribers, network assets and spectrum

Table of Contents

Index for Notes to the transaction. Sprint and PRWireless PR, Inc. have an approximate 68% and a 32% preferred economic interest, as well as a 55% and 45% common voting interest in the new entity, respectively. Sprint's ownership represents a controlling financial interest and as a result fully consolidates the entity and presents a noncontrolling interest in its consolidated financial statements. The consideration transferred by Sprint has been preliminarily allocated to assets acquired and liabilities assumed from PRWireless PR, Inc. based on their estimated fair values at the time of the transaction. The preliminary purchase accounting adjustments represent management's current best estimate of fair value but could change as additional information is obtained and evaluated. Beginning total assets and liabilities of the new entity were approximately $390 million and $240 million, respectively. Of these amounts, approximately $270 million and $220 million represent the fair value of the PRWireless PR, Inc. asset and liability contribution, respectively, which have increased the corresponding financial statement line items in the Sprint consolidated balance sheet at December 31, 2017. The acquired assets primarily consist of approximately $150 million of FCC licenses, $35 million of other intangible assets and $85 million of current and fixed assets. The acquired liabilities consist of approximately $170 million of long-term debt and $50 million of other current liabilities.Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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



	March 31, 2019		Net Additions		December 31, 2019
	(in millions)
FCC licenses	$	37,430	$	27	$	37,457
Trademarks	4,035		—		4,035
Goodwill⁽¹⁾	4,598		—		4,598
	$	46,063	$	27	$	46,090

March 31,
2017
Net
Additions
December 31,
2017
(in millions)
FCC licenses $ 36,550
$ 637
⁽¹⁾
$ 37,187
Trademarks 4,035
—
4,035
Goodwill 6,579
7
⁽²⁾
6,586
$ 47,164
$ 644
$ 47,808

_________________

(1)

~~During~~Through March 31, 2019 accumulated impairment losses for goodwill were $2.0 billion. There were 0 additional accumulated impairment losses for the nine-month period ended December 31, 2017, net additions within FCC licenses include a $479 million increase from spectrum license exchanges described below, and approximately $150 million of spectrum licenses as a result of the transaction with PRWireless PR, Inc. described above.2019.


~~(2)~~	During the nine-month period ended December 31, 2017, approximately $7 million was added to goodwill as a result of the transaction with PRWireless PR, Inc. and the purchase accounting adjustments on its contributions described above.

~~Spectrum License Exchanges~~

~~In the~~first quarter of fiscal year 2017, we exchanged certain spectrum licenses with other carriers in non-cash transactions. As a result, we recorded a non-cash gain of $479 million, which represented the difference between the fair value and the net book value of the spectrum transferred to the other carriers. The gain was recorded in "Other, net" within Operating income in the consolidated statements of comprehensive income (loss) for the nine-month period ended December 31, 2017.

~~Table of Contents~~

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

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

Assessment of Impairment

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

Our ~~stock price~~most recent test for impairment of goodwill was completed at January 1, 2019 and we concluded that the carrying value of the Wireless reporting unit exceeded its estimated fair value by $2.0 billion. As a result, a goodwill impairment charge was recorded in our consolidated statements of operations for the year ended March 31, 2019. During the nine-month period ended December 31, ~~2017 of $5.89 was below the net book value per share price of $6.56. Subsequent~~2019, we did not record any further impairment to ~~the balance sheet date, the stock price has decreased further~~goodwill, nor did we record any impairment to $5.36 at February 2, 2018. The quoted market price of our stock is not the sole consideration of fair value. Other considerations include, but are not limited to, expectations of future results and an estimated control premium.other indefinite-lived intangible assets.

The determination of fair value requires considerable judgment and is highly sensitive to changes in underlying assumptions. Consequently, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill, spectrum licenses, and Sprint and Boost Mobile trade names impairment tests will prove to be an accurate prediction of the future. It is possible that business conditions could further deteriorate. Sustained declines in the Company’s operating results, number of wireless subscribers, future forecasted cash flows, growth rates and other assumptions, as well as significant, ~~sustained~~persistent declines in the Company’s stock price and related market capitalization could impact the underlying key assumptions and our estimated fair values, potentially leading to aan additional future material impairment of goodwill or other indefinite-lived intangible assets. In the event the merger contemplated by the Business Combination Agreement discussed previously is not consummated, there may be additional impairments that could be material to our financial statements depending on, among other things, the manner in which we conduct business in the future.

Intangible Assets Subject to Amortization

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

December 31, 2017 March 31, 2017
Useful Lives Gross
Carrying
Value Accumulated
Amortization Net
Carrying
Value Gross
Carrying
Value Accumulated
Amortization Net
Carrying
Value
(in millions)
Customer relationships 8 years $ 6,561
$ (5,289 ) $ 1,272
$ 6,923
$ (5,053 ) $ 1,870
Other intangible assets:
Favorable spectrum leases 23 years 861
(163 ) 698
869
(138 ) 731
Favorable tower leases 7 years 487
(322 ) 165
589
(386 ) 203
Trademarks 34 years 520
(70 ) 450
520
(58 ) 462
Other 10 years 127
(45 ) 82
91
(37 ) 54
Total other intangible assets 1,995

(600 )
1,395

2,069

(619 )
1,450
Total definite-lived intangible assets $ 8,556

$ (5,889 )
$ 2,667

$ 8,992

$ (5,672 )
$ 3,320


~~Note 7.~~	~~Accounts Payable~~

~~Accounts payable at~~During the three-month period ended December 31, ~~2017~~2019, Sprint revised the remaining amortization period for the intangible assets associated with the Company’s right to use the Virgin trademark as a result of the Company’s decisions to discontinue its Virgin Mobile services and ~~March~~to notify Virgin Enterprises Limited that the agreement providing for such use would not be renewed. As a result of the prospective revision in estimated life, the Company recognized $381 million in additional amortization expense during the three- and nine-month periods ended December 31, ~~2017 include liabilities in~~2019 compared to amounts that would have been recorded had the ~~amounts~~asset life not been revised. The effect of ~~$103 million~~this change on basic and ~~$69 million, respectively,~~diluted earnings per share, net of tax for ~~payments issued in excess of associated bank balances but not yet presented for collection.~~the three- and nine-month periods ended December 31, 2019 was $0.07 per share.

1314

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



		December 31, 2019							March 31, 2019
	Useful Lives	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
		(in millions)
Customer relationships	5 to 8 years	$	6,563	$	(6,321	)	$	242	$	6,563	$	(6,029	)	$	534
Other intangible assets:
Favorable spectrum leases	23 years	802		(215		)	587		763		(150		)	613
Favorable tower leases⁽¹⁾	—	—		—			—		335		(215		)	120
Trademarks	< 1 year	520		(482		)	38		520		(89		)	431
Other⁽²⁾	10 years	117		(66		)	51		137		(66		)	71
Total other intangible assets		1,439		(763		)	676		1,755		(520		)	1,235
Total definite-lived intangible assets		$	8,002	$	(7,084	)	$	918	$	8,318	$	(6,549	)	$	1,769

_________________


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


(2)	During the three-month period ended December 31, 2019, we recognized $19 million of asset impairment charges primarily related to an inbound roaming arrangement with a third party in Puerto Rico.


Note 7.	Leases

Leases (Topic 842) Disclosures

Lessee

We have operating and finance leases as a lessee for network equipment, cell sites, co-locations, dark fiber, office buildings, retail stores and kiosks, fleet vehicles, switch sites/points of presence, and office equipment and furniture. These leases, with few exceptions, provide for automatic renewal options and escalations that are either fixed or based on the consumer price index. Our leases have remaining lease terms of 1 to 20 years, some of which may include options to extend the leases for up to 20 years, and some of which may include options to terminate the leases within one year. Network equipment typically has initial non-cancelable terms of five to ten years with similar renewal options; however, extensions longer than ten years do occur. Cell sites generally have an initial non-cancelable lease term of five years with 1 to 4 renewal options to extend the lease in five-year increments. Retail stores generally have an initial non-cancelable lease term ranging from three to ten years with renewal options in five-year increments. Fleet vehicles generally have an initial non-cancelable lease term of three years with monthly renewal options to extend the lease. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Our lease term for accounting purposes is generally the initial non-cancelable lease term. We recognize lease expense for operating leases and amortization expense on finance leases on a straight-line basis over the lease term.

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

For those identified leases, the Company records them on the balance sheet as ROU assets and corresponding lease liabilities. ROU assets represent our right to use an underlying asset for the lease term, and the lease liability represents our obligation to make lease payments arising from the lease. Finance leases have historically been recorded in "Property, plant and equipment, net" in the consolidated balance sheets. Under the new standard, finance lease assets for ODC sites are included in the ROU asset account within "Property, plant and equipment, net" in the consolidated balance sheets. The lease liabilities for these ODC sites are immaterial. The ROU asset and lease liability for operating leases are initially measured and recorded at the present value of the expected future lease payments at contract commencement or modification. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method. As of December 31, 2019 and April 1, 2019, ROU assets for the ODC sites recorded under finance leases were $612 million and $613 million, respectively, and accumulated depreciation associated with these ODC sites were $113 million and $58 million, respectively.

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company's lease portfolio is broad. Some leases include real estate taxes, common area maintenance, and management fees in the annual rental payments, while in other leases these amounts are charged separately. For all asset classes where the Company is the lessee, other than the ODC sites portfolio, we have elected to not separate lease and non-lease components within a contract as defined under the new standard. Therefore, separate lease and non-lease components are accounted for as a single lease component. The ODC site leases represent a separate underlying asset group for which all the identified leases were classified as finance leases. For this asset class, Sprint did not elect to combine the components of the contracts and, instead, accounts for lease and non-lease components separately.

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

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

In 2005, Sprint entered into a lease leaseback arrangement with a third party that was subsequently acquired by Crown Castle International (CCI) whereby the third party would lease from us approximately 5,700 cell sites, which included the towers and related assets under a Master Lease (Master Lease Sites) and otherwise manage another 970 sites until which time those sites may be leased to CCI (Managed Sites). The term of the arrangement was 32 years and provides 0 renewal options. Sprint leases back space on certain of these towers. For those Master Lease Sites, CCI has assumed all rights and obligations that arise under the ground leases. As Sprint is only contingently liable for future ground lease payments for these sites, obligations for these ground leases are not included in Sprint’s operating lease liabilities. For those Managed Sites, while CCI is required to make all cash payments to the landlord during the term of the arrangement, Sprint was not relieved of the primary obligation under the ground leases. Obligations during the term of the arrangement for these ground leases are included in operating lease liabilities of approximately $207 million as of both December 31, 2019 and April 1, 2019. Additionally, because Sprint has no future cash payments under these leases, they have been excluded from the tabular disclosures on weighted average remaining lease term and discount rate.

The components of lease expense were as follows:



	Three Months Ended		Nine Months Ended
	December 31, 2019		December 31, 2019
	(in millions)
Operating lease expense	$	545	$	1,622
Finance lease expense:
Amortization of right-to-use assets	18		55
Interest on lease liabilities	1		2
Total finance lease expense	19		57
Variable lease expense	23		65
Total lease expense	$	587	$	1,744

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The supplemental components of cash flows were as follows:



	Three Months Ended		Nine Months Ended
	December 31, 2019		December 31, 2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	2	$	5
Operating cash flows from operating leases	579		1,756
Financing cash flows from finance leases	1		2
Total cash paid for amounts included in the measurement of lease liabilities	$	582	$	1,763
Non-cash investing and financing activities:
Operating lease right-of-use assets obtained in exchange for lease obligations	$	262	$	643

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



	Nine Months Ended
	December 31, 2019
Weighted average remaining lease term (years)
Operating leases	4.9
Weighted average remaining discount rate
Operating leases	6.0	%

Maturities of operating lease liabilities as of December 31, 2019 were as follows:



	(in millions)
Remainder of fiscal year ending March 31, 2020	$	540
Fiscal year ending March 31, 2021	2,234
Fiscal year ending March 31, 2022	1,721
Fiscal year ending March 31, 2023	1,212
Fiscal year ending March 31, 2024	848
Thereafter	2,065
Total lease payments	8,620
Less imputed interest	(1,340		)
Total	$	7,280

Lessor

Substantially all leases where the Company is the lessor are classified as operating leases under the previous literature. Due to the Company’s election of the various practical expedients, we did not reassess the lease classification of existing leases upon adoption of Topic 842. The Company will continue to recognize the underlying asset and recognize lease income over the lease term. As of April 1, 2019, an immaterial amount of our handset leases met the criteria to be classified as direct financing or sales-type leases under the previous literature. We do not expect a material amount of new leases to be classified as direct financing or sales-type leases subsequent to adoption of Topic 842 if terms remain consistent with the Company’s current leasing program.

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

The term of our handset leases are generally 18 months, and the customer is able to extend the lease on a month-to-month basis after the initial lease term. There is 0 early termination option; if the customer exits the service agreement early the remaining lease payments become immediately payable at that point. At the termination or expiration of a customer lease, the customer may purchase the leased device or return the device to the Company. As of December 31, 2019 and April 1, 2019, our estimated residual value of handsets under current operating leases was approximately $3.7 billion and $3.2 billion, respectively.

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Adjustments to residual values of leased devices are recognized as a revision in depreciation estimates. We estimate that a 10% increase or decrease in the estimated residual values of devices under operating leases at December 31, 2019 would not have a material effect on depreciation expense over the next twelve months. For the quarter-ended December 31, 2019, the effects of changes in the estimated residual value of devices currently under operating leases have been immaterial.

Leases (Topic 840) Disclosures

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

Lessee

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



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

Operating Leases

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

Tower Financing

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

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

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 8.	Long-Term Debt, Financing and ~~Capital~~Finance Lease Obligations


	Interest Rates			Maturities			December 31, 2017			March 31, 2017			Interest Rates			Maturities			December 31, 2019			March 31, 2019
							(in millions)												(in millions)
Notes
Senior notes
Sprint Corporation	7.13	-	7.88%	2021	-	2025	$	10,500		$	10,500		7.13	-	7.88%	2021	-	2026	$	12,000		$	12,000
Sprint Communications, Inc.	6.00	-	11.50%	2020	-	2022	4,780			6,080			6.00	-	11.50%	2020	-	2022	4,780			4,780
Sprint Capital Corporation	6.88	-	8.75%	2019	-	2032	6,204			6,204			6.88	-	8.75%	2028	-	2032	4,475			6,204
Senior secured notes
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, Sprint Spectrum Co III LLC	3.36%			2021			3,281			3,500			3.36	-	5.15%	2021	-	2028	5,469			6,125
Sprint Communications, Inc.	9.25%			2022			200			200
Guaranteed notes
Sprint Communications, Inc.	7.00	-	9.00%	2018	-	2020	2,800			4,000			7.00%			2020			1,000			1,000
Exchangeable notes
Clearwire Communications LLC	8.25%			2017			—			629
Credit facilities
Secured revolving bank credit facility	3.88%			2021			—			—			4.06%			2021			—			—
Secured term loan	4.13%			2024			3,970			4,000
Secured term loans													4.31	-	4.81%	2024			5,870			5,915
PRWireless term loan	6.94%			2020			183			—			7.35%			2020			—			198
Export Development Canada (EDC)	4.07%			2019			300			300			4.31%			2019			—			300
Secured equipment credit facilities	3.02	-	3.72%	2020	-	2021	555			431			3.14	-	3.86%	2021	-	2022	505			661
Accounts receivable facility	2.44	-	2.97%	2019			2,966			1,964			2.89	-	3.09%	2021			3,310			2,607
Financing obligations, capital lease and other obligations	2.35	-	12.00%	2018	-	2026	1,146			3,016
Financing obligations, finance lease and other obligations													2.62	-	12.00%	2020	-	2026	349			538
Net premiums and debt financing costs							(24		)	90									(371		)	(405		)
							36,861			40,914									37,387			39,923
Less current portion							(4,036		)	(5,036		)							(3,880		)	(4,557		)
Long-term debt, financing and capital lease obligations							$	32,825		$	35,878
Long-term debt, financing and finance lease obligations																			$	33,507		$	35,366

As of December 31, ~~2017,~~2019, Sprint Corporation, ~~the parent corporation,~~ had ~~$10.5~~$12.0 billion in aggregate principal amount of senior notes outstanding. In addition, as of December 31, ~~2017,~~2019, the outstanding principal amount of the senior notes issued by Sprint Communications and Sprint Capital Corporation, the ~~senior secured notes issued by Sprint Communications, the~~ guaranteed notes issued by Sprint Communications, Sprint Communications' secured term ~~loan~~loans and secured revolving bank credit facility, ~~the EDC agreement,~~ the secured equipment credit facilities, the Receivables Facility, and certain other obligations collectively totaled ~~$22.0~~$20.1 billion in principal amount of our long-term debt. Sprint Corporation fully and unconditionally guaranteed such indebtedness, which was issued by 100% owned subsidiaries. Although certain financing agreements restrict the ability of Sprint Communications and its subsidiaries to distribute cash to Sprint Corporation, the ability of the subsidiaries to distribute cash to their respective parents, including to Sprint Communications, generally is ~~generally~~ not restricted.

Cash interest payments, net of amounts capitalized of ~~$42~~$52 million and ~~$32~~$54 million, totaled $1.7 billion and $1.9 billion during the nine-month periods ended December 31, ~~2017~~2019 and ~~2016, respectively, totaled $1.9 billion during each of the nine-month periods ended December 31, 2017 and 2016.~~2018, respectively.

Notes

As of December 31, ~~2017,~~2019, our outstanding notes consisted of senior notes and guaranteed notes, all of which are unsecured, as well as senior secured notes associated with our spectrum financing ~~transaction and senior secured notes issued by Sprint Communications.~~transactions. Cash interest on all of the notes is payable semi-annually in arrears with the exception of the

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spectrum financing senior secured notes, which is payable quarterly. As of December 31, ~~2017, $27.6~~2019, $27.7 billion aggregate principal amount of the notes was redeemable at the Company's discretion at the then-applicable redemption prices plus accrued interest.

As of December 31, ~~2017, $21.4~~2019, $23.2 billion aggregate principal amount of our senior notes, senior secured notes, and guaranteed notes provided holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in the applicable indentures and supplemental indentures) occurs. In May 2018, we successfully completed consent solicitations with respect to certain series of Sprint Corporation, Sprint Communications, and Sprint Capital Corporation senior notes. As a result of the Sprint Corporation and Sprint Communications consent solicitations, the

~~On December 1, 2017 the Clearwire Communications LLC exchangeable notes were retired pursuant~~

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proposed merger transaction with T-Mobile, if consummated, will not constitute a change of control as defined in the ~~indenture, which provided that~~applicable indentures governing the ~~notes could be tendered at the holder's option or called at our option on or after that date, in each case for 100% of the par value plus accrued interest.~~notes.

~~During the three-month period ended June 30, 2017, pursuant to a cash tender offer,~~In May 2019, Sprint ~~Communications~~Capital Corporation retired ~~$388 million~~$1.7 billion aggregate principal amount upon maturity of its

outstanding 8.375% Notes due 2017 and $1.2 billion principal amount of its outstanding 9.000% Guaranteed Notes due 2018. We incurred costs of $129 million, which consisted of call redemption premiums and tender expenses, and removed unamortized premiums of $64 million associated with these retirements resulting in a loss on early extinguishment of debt of $65 million, which is included in "Other income (expense), net" in our consolidated statements of comprehensive income (loss). In addition, during the three-month period ended September 30, 2017, Sprint Communications retired the remaining $912 million principal amount of its outstanding 8.375% Notes due August 2017.6.900% Senior Notes.

Spectrum ~~Financing~~Financings

In October 2016, certain subsidiaries of Sprint Communications, which were not "Restricted Subsidiaries" under Sprint Capital Corporation's indentures, transferred certain directly held and third-party leased spectrum licenses (collectively, Spectrum Portfolio) to wholly-owned bankruptcy-remote special purpose entities (collectively, Spectrum Financing SPEs). The Spectrum Portfolio, which represented approximately 14% of Sprint's total spectrum holdings on a MHz-pops basis, was used as collateral to raise an initial $3.5 billion in senior secured notes (2016 Spectrum-Backed Notes) bearing interest at 3.36% per annum under a $7.0 billion ~~program that permits Sprint to raise up to an additional $3.5 billion in senior secured notes, subject to certain conditions.~~securitization program. The ~~senior secured notes~~2016 Spectrum-Backed Notes are repayable over a five-year term, with interest-only payments over the first four quarters and amortizing quarterly principal payments thereafter commencing December 2017 through September 2021. During the nine-month period ended December 31, ~~2017,~~2019, we made scheduled principal repayments of ~~$219~~$656 million, resulting in a total principal amount outstanding related to the 2016 Spectrum-Backed Notes of ~~$3.3~~$1.5 billion ~~outstanding~~ as of December 31, ~~2017,~~2019, of which $875 million was classified as "Current portion of long-term debt, financing and ~~capital~~finance lease obligations" in the consolidated balance sheets.

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

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

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

~~Credit Facilities~~

~~Unsecured Credit Facility Commitment~~

~~During~~In June 2018, we obtained consent under the ~~three-month period ended September 30, 2017, Sprint Communications entered into~~spectrum-backed senior secured notes indenture to amend the indenture such that the proposed merger transaction with T-Mobile, if consummated, will not constitute a ~~commitment letter with a group~~change of banks to provide an unsecured credit facility in an aggregate principal amount up to $3.2 billion. Draws on the unsecured credit facility would bear interest at a rate equal to either the London Interbank Offered Rate (LIBOR) plus a percentage that varies depending on the days elapsed since the effective date of the facility (1.25% to 4.25% per annum), or base rate,control as defined in the commitment letter, plus a percentage that varies depending on the days elapsed since the effective date of the facility (0.25% to 3.25% per annum). Commitments will be reduced by an amount equal to the proceeds from the sales of certain assets and will terminate upon certain debt issuances or sales of equity securities. Amounts borrowed andindenture.

1520

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repaid cannot be redrawn and the unsecured credit facility, if executed, will terminate in March 2019. As of December 31, 2017, the unsecured credit facility had not been executed and thus no amounts have been drawn.Credit Facilities

Secured Term Loan and Revolving Bank Credit Facility

On February 3, 2017, we entered into a $6.0 billion credit agreement, ~~for $6.0 billion,~~ consisting of a $4.0 billion, seven-year secured term loan (Initial Term Loan) that matures in February 2024 and a $2.0 billion secured revolving bank credit facility that expires in February 2021. As of December 31, ~~2017, approximately $151~~2019, $116 million in letters of credit were outstanding under the secured revolving bank credit facility, including the letter of credit required by the Report and ~~Order~~ ~~(see~~Order. See Note ~~11.~~12. Commitments and ~~Contingencies)~~.Contingencies for additional information. As a result of the outstanding letters of credit, which directly reduce the availability of borrowings, the Company had approximately ~~$1.8~~$1.9 billion of borrowing capacity available under the secured revolving bank credit facility as of December 31, ~~2017.~~2019. The bank credit facility requires a ratio (Leverage Ratio) of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non-recurring items, as defined by the bank credit facility (adjusted EBITDA), not to exceed ~~6.0~~3.75 to 1.0 through the fiscal quarter ending December 31, ~~2017. After December 31, 2017, the~~2019. The Leverage Ratio ~~declines on a scheduled basis until the ratio becomes fixed at~~must not exceed 3.5 to 1.0 for the fiscal quarter ended March 31, 2020 and each fiscal quarter ending thereafter through expiration of the facility. The ~~term loan~~Initial Term Loan has an interest rate equal to LIBOR plus 250 basis points and the secured revolving bank credit facility has an interest rate equal to LIBOR plus a spread that varies depending on the Leverage Ratio. During the nine-month period ended December 31, 2019, we made principal repayments on the Initial Term Loan totaling $30 million resulting in a total principal amount outstanding for the Initial Term Loan of $3.9 billion as of December 31, 2019.

In consideration of the ~~seven-year secured term loan,~~Initial Term Loan, we entered into a five-year fixed-for-floating interest rate swap on a $2.0 billion notional amount that has been designated as a cash flow hedge. The effective portion of changes in fair value are recorded in "Other comprehensive ~~income~~ (loss)" income" in the consolidated statements of comprehensive (loss) income ~~(loss)~~ and the ineffective portion, if any, is recorded as "Interest expense" in current period earnings in the consolidated statements of comprehensive ~~income~~ (loss) ~~as interest expense.~~income. The fair value of the interest rate swap was ~~approximately $10~~a liability of $17 million and an asset of $13 million as of December 31, ~~2017,~~2019 and March 31, 2019, respectively, which was recorded ~~as an asset~~in "Other liabilities" and "Other assets," respectively, in the consolidated balance sheets.

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

PRWireless Term Loan

During the ~~quarter~~three-month period ended December 31, 2017, Sprint and PRWireless PR, Inc. completed a transaction to combine their operations in Puerto Rico and the U.S. Virgin Islands into a new ~~entity.~~joint venture. Prior to the formation of the new entity, PRWireless PR, Inc. had incurred ~~$178 million principal amount of~~ debt under a secured term loan, which became debt of the new entity upon the transaction close. ~~The secured term loan bears interest at 5.25% plus LIBOR and expires in June 2020. Any amounts repaid early may not be drawn again. From~~On November 1, 2019, the ~~effective date of~~Company prepaid the ~~transaction through December 31, 2017, PRWireless PR, LLC borrowed an additional $5 million under the secured term loan resulting in $183 million~~ total principal amount outstanding ~~with an additional $20~~of $199 million ~~remaining available as of December 31, 2017. Sprint has provided an unsecured guarantee of repayment of~~under the ~~secured~~PRWireless term loan ~~obligations. The secured portion of the facility is limited to assets of the new entity as the borrower.~~previously due in June 2020.

EDC Agreement

~~As of December 31, 2017,~~Through September 15, 2019, the Company had amounts outstanding under the EDC agreement, which provided for security and covenant terms similar to our secured term loan and revolving bank credit facility. ~~However, under~~On September 16, 2019, the ~~terms of the EDC agreement, repayments of outstanding amounts cannot be redrawn. As of December 31, 2017,~~Company prepaid the total principal amount ~~of our borrowings~~outstanding under the EDC facility ~~was~~of $300 ~~million.~~million previously due in December 2019.

Secured Equipment Credit Facilities

Finnvera plc (Finnvera)

The Finnvera secured equipment credit facility provided for the ability to ~~borrow up to $800 million to~~ finance network equipment-related purchases from Nokia Solutions and Networks US LLC, USA. ~~The facility's availability for borrowing expired in October 2017. Such borrowings were contingent upon the amount and timing of network-related purchases made by Sprint.~~ During the nine-month period ended December 31, ~~2017,~~2019, we ~~drew $160 million and~~ made principal repayments totaling ~~$98~~$54 million on the facility resulting in a total principal amount of ~~$202~~$38 million outstanding as of December 31, ~~2017.~~2019.

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K-sure

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three consecutive tranches of varying size. In September 2017, we amended the secured equipment credit facility to extend the borrowing availability through December 2018. Such borrowings are contingent upon the amount and timing of network-related purchases made by Sprint. During the nine-month period ended December 31, ~~2017,~~2019, we drew $96 million and made principal repayments totaling ~~$65~~$159 million on the facility, resulting in a total principal amount of ~~$194~~$387 million outstanding as of December 31, ~~2017.~~2019.

Delcredere | Ducroire (D/D)

The D/D secured equipment credit facility provided for the ability to ~~borrow up to $250 million to~~ finance network equipment-related purchases from Alcatel-Lucent USA Inc. ~~In September 2017, we amended the secured equipment credit facility to restore previously expired commitments of $150 million.~~ During the nine-month period ended December 31, ~~2017,~~2019, we ~~drew $150 million and~~ made principal repayments totaling ~~$23~~$39 million on the facility resulting in a total principal amount of ~~$159~~$80 million outstanding as of December 31, ~~2017.~~2019.

Borrowings under the Finnvera, K-sure and D/D secured equipment credit facilities are each secured by liens on the respective network equipment ~~purchased pursuant to each facility's credit agreement.~~purchased. In addition, repayments of outstanding amounts borrowed under the secured equipment credit facilities cannot be redrawn. Each of these facilities is fully and unconditionally guaranteed by both Sprint Communications and Sprint Corporation. As of December 31, 2019, the K-sure facility, the Finnvera and D/D facilities had no available borrowing capacity. The secured equipment credit facilities have certain key covenants similar to those in our secured term loan and revolving bank credit facility.

Accounts Receivable Facility

Transaction Overview

Our Receivables Facility provides us the opportunity to sell certain wireless service receivables, installment receivables, and future amounts due from customers who lease certain devices from us to ~~the Purchasers.~~unaffiliated third parties (the Purchasers). The maximum funding limit under the Receivables Facility is ~~$4.3~~$4.5 billion. While we have the right to decide how much cash to receive from each sale, the maximum amount of cash available to us varies based on a number of factors and, as of December 31, ~~2017,~~2019, represents approximately ~~50%~~51% of the total amount of the eligible receivables sold to the Purchasers. As of December 31, ~~2017,~~2019, the total amount ~~of borrowings~~outstanding under our Receivables Facility was ~~$3.0~~$3.3 billion and the total amount available to be drawn was ~~$781~~$95 million. In February 2017, the Receivables Facility was amended and Sprint ~~gained~~regained effective control over the receivables transferred to the Purchasers by obtaining the right, under certain circumstances, to repurchase them. Subsequent to the February 2017 amendment, all proceeds received from the Purchasers in exchange for the transfer of our wireless service and installment receivables are recorded as ~~borrowings~~borrowings. Repayments and ~~all cash inflows and outflows~~borrowings under the Receivables Facility are reported as financing activities in the consolidated statements of cash flows. All cash collected on repurchased receivables subsequent to the February 2017 amendment was recognized in investing activities in the consolidated statements of cash flows. In ~~October 2017,~~June 2018, the Receivables Facility was amended to, among other things, extend the maturity date to ~~November 2019~~June 2020, increase the maximum funding limit by $200 million, reduce financing costs, add month-to-month lease receivables as eligible receivables for leases that extend past their original lease term, and ~~to reallocate~~change the Purchasers' commitment allocations. The Purchasers' commitments ~~between~~are allocated 22% to wireless service receivables and 78% to a combined pool of installment ~~and~~receivables, future lease receivables ~~through May 2018~~and month-to-month lease receivables. In June 2019, the Receivables Facility was further amended to ~~26%, 28% and 46%, respectively. After May 2018,~~extend the ~~allocation of the Purchasers' commitments between wireless service, installment and future lease receivables will be 26%, 18% and 56%, respectively.~~maturity date to February 2021. During the nine-month period ended December 31, ~~2017,~~2019, we drew ~~$2.7~~$4.6 billion and repaid ~~$1.7~~$3.8 billion to the Purchasers.

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

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historical treatment for the sale of future lease receivables, and the associated fees are recognized as "Interest expense" in the consolidated statements of comprehensive ~~income~~ (loss).

During the nine-month period ended December 31, 2016, we remitted $185 million of funds to the Purchasers because the amount of cash proceeds received by us under the facility exceeded the maximum funding limit, which increased the total amount of the DPP due to Sprint. We also elected to receive $625 million of cash, which decreased the total amount of the DPP due to Sprint. In addition, during the nine-month period ended December 31, 2016, sales of new receivables exceeded cash collections on previously sold receivables such that the DPP increased by $660 million.

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income.

Transaction Structure

Sprint contributes certain wireless service, installment and future lease receivables, as well as the associated leased devices, to Sprint's wholly-owned consolidated bankruptcy-remote special purpose entities (SPEs). At Sprint's direction, the SPEs have sold, and will continue to sell, wireless service, installment and future lease receivables to the Purchasers or to a bank agent on behalf of the Purchasers. Leased devices will remain with the SPEs, once sales are initiated, and continue to be depreciated over their estimated useful life. As of December 31, ~~2017,~~2019, wireless service, installment and ~~installment~~lease receivables contributed to the SPEs and included in "Accounts and notes receivable, net" in the consolidated balance sheets were ~~$3.0~~$2.7 billion and the long-term portion of installment receivables included in "Other assets" in the consolidated balance sheets was ~~$208~~$280 million. As of December 31, ~~2017,~~2019, the net book value of devices contributed to the SPEs was ~~approximately $5.6~~$6.7 billion.

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

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

Variable Interest Entity

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

Financing Obligations,

~~Network Equipment Sale-Leaseback~~

~~In April 2016, Sprint sold~~ Finance Lease and leased back certain network equipment to unrelated bankruptcy-remote special purpose entities (collectively, Network LeaseCo). The network equipment acquired by Network LeaseCo, which we consolidate, was used as collateral to raise approximately $2.2 billion in borrowings from external investors, including SoftBank Group Corp. (SoftBank). Principal and interest payments on the borrowings from the external investors were repaid in staggered, unequal payments through January 2018. During the nine-month period ended December 31, 2017, we made principal repayments totaling $1.4 billion, resulting in a total principal amount of $454 million outstanding as of December 31, 2017, which was fully repaid in January 2018.

Network LeaseCo is a variable interest entity for which Sprint is the primary beneficiary. As a result, Sprint is required to consolidate Network LeaseCo and our consolidated financial statements include Network LeaseCo's debt and the related financing cash inflows. The network assets included in the transaction, which had a net book value of approximately $3.0 billion and consisted primarily of equipment located at cell towers, remain on Sprint's consolidated financial statements and continue to be depreciated over their respective estimated useful lives. As of December 31, 2017, these network assets had a net book value of approximately $1.8 billion.

The proceeds received were reflected as cash provided by financing activities in the consolidated statements of cash flows and payments made to Network LeaseCo are reflected as principal repayments and interest expense over the respective terms. Sprint has the option to purchase the equipment at the end of the leaseback term for a nominal amount. All intercompany transactions between Network LeaseCo and Sprint are eliminated in our consolidated financial statements.

~~Handset Sale-Leasebacks~~

~~Transaction Structure~~

~~Sprint sold certain iPhone~~^® ~~devices being leased by our customers to MLS, a company formed by a group of equity investors, including SoftBank, and then subsequently leased the devices back. Under the agreements, Sprint generally~~

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~~maintains the customer leases, continues to collect and record lease revenue from the customer and remits monthly rental payments to MLS during the leaseback periods.~~

Under the agreements, Sprint contributed the devices and the associated customer leases to wholly-owned consolidated bankruptcy-remote special purpose entities of Sprint (SPE Lessees). The SPE Lessees then sold the devices and transferred certain specified customer lease-end rights and obligations, such as the right to receive the proceeds from customers who elect to purchase the device at the end of the customer lease term, to MLS in exchange for a combination of cash and DPP. Settlement for the DPP occurs after repayment of MLS's senior loan obligations, senior subordinated loan obligations, and a return to MLS's equity holders and can be reduced to the extent that MLS experiences a loss on the device (either not returned or sold at an amount less than the expected residual value of the device), but only to the extent of the device's DPP balance. In the event that MLS sells the devices returned from our customers at a price greater than the expected device residual value, Sprint has the potential to share some of the excess proceeds.

The SPE Lessees retain all rights to the underlying customer leases, such as the right to receive the rental payments during the device leaseback period, other than the aforementioned certain specified customer lease-end rights. Each SPE Lessee is a separate legal entity with its own separate creditors who will be entitled, prior to and upon the liquidation of the SPE Lessee, to be satisfied out of the SPE Lessee’s assets prior to any assets in the SPE Lessee becoming available to Sprint. Accordingly, the assets of the SPE Lessee are not available to pay creditors of Sprint or any of its affiliates. The SPE Lessees are obligated to pay the full monthly rental payments under each device lease to MLS regardless of whether our customers make lease payments on the devices leased to them or whether the customer lease is canceled. Sprint has guaranteed to MLS (subject to a cap of 20% of the aggregate cash purchase price) the performance of the agreements and undertakings of the SPE Lessees under the transaction documents.

~~Handset Sale-Leasebacks Tranche 2 (Tranche 2)~~

In May 2016, Sprint entered into Tranche 2. We transferred devices with a net book value of approximately $1.3 billion to MLS in exchange for cash proceeds totaling $1.1 billion and a DPP of $186 million. The proceeds were accounted for as a financing. Accordingly, the devices remained in "Property, plant and equipment, net" in the consolidated balance sheets and we continued to depreciate the assets to their estimated residual values over the respective customer lease terms. During the nine-month period ended December 31, 2017, we made principal repayments and non-cash adjustments totaling $385 million to MLS. In October 2017, Sprint terminated Tranche 2 pursuant to its terms and repaid all outstanding amounts.

The proceeds received were reflected as cash provided by financing activities in the consolidated statements of cash flows and payments made to MLS were reflected as principal repayments and interest expense. We had elected to account for the financing obligation at fair value. Accordingly, changes in the fair value of the financing obligation were recognized in "Other income (expense), net" in the consolidated statements of comprehensive income (loss) over the course of the arrangement.

~~Handset Sale-Leasebacks Tranche 1 (Tranche 1)~~

In December 2015, Sprint entered into Tranche 1. We recorded the sale, removed the devices from our balance sheet, and classified the leasebacks as operating leases. The cash proceeds received in the transaction were reflected as cash provided by investing activities in the consolidated statements of cash flows and payments made to MLS under the leaseback were reflected as "Cost of products" in the consolidated statements of comprehensive income (loss). Rent expense related to MLS totaled $117 million and $494 million during the three and nine-month periods ended December 31, 2016 and is reflected in cash flows from operations. In December 2016, Sprint terminated Tranche 1 by repurchasing the devices and related customer lease-end rights and obligations from MLS. Additionally, the leaseback was canceled and there are no further rental payments owed to MLS related to Tranche 1.Other Obligations

Tower Financing

During 2008, we sold and subsequently leased back approximately 3,000 cell sites, of which approximately ~~2,000 remain~~1,750 remained as of ~~December~~March 31, ~~2017.~~2019. Terms extend through 2021, with renewal options for an additional 20 years. These cell sites ~~continue to be~~were previously reported as part of ~~our~~ "Property, plant and equipment, net" in our consolidated balance sheets due to our continued involvement with the property sold, and the transaction iswas accounted for as a financing. The financing obligation as of ~~December~~March 31, ~~2017 is $160~~2019 was $109 million.

~~Table~~Upon adoption of ~~Contents~~

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

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~Capital~~Finance Lease and Other Obligations

In May 2016, Sprint closed on a transaction with Shentel to acquire one of our wholesale partners, NTELOS Holdings Corporation (nTelos). The total consideration for this transaction included $181 million, on a net present value basis, of notes payable to Shentel. Sprint will satisfy its obligations under the notes payable over an expected term of five to six years, of which the remaining obligation is ~~$145~~$121 million as of December 31, ~~2017.~~2019. The remainder of our ~~capital~~finance lease and other obligations of ~~$334~~$22 million and $206 million as of December 31, ~~2017~~2019, respectively are primarily for the use of wireless network equipment.

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Covenants

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

As of December 31, ~~2017,~~2019, the Company was in compliance with all restrictive and financial covenants associated with its borrowings. A default under any of our borrowings could trigger defaults under certain of our other debt obligations, which in turn could result in the maturities being accelerated.

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


Note 9.	Revenues from Contracts with Customers

The Company adopted Revenue from Contracts with Customers (Topic 606) beginning on April 1, 2018 using the modified retrospective method. Upon adoption, the Company applied the standard only to contracts that were not completed, referred to as open contracts. We operate 2 reportable segments: Wireless and Wireline.

Disaggregation of Revenue

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

The following table presents disaggregated reported revenue by category:



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
	(in millions)
Service revenue
Postpaid	$	4,229	$	4,236	$	12,646	$	12,679
Prepaid	740		924		2,375		2,860
Wholesale, affiliate and other	225		294		546		881
Wireline	222		245		685		781
Total service revenue	5,416		5,699		16,252		17,201
Equipment sales	1,372		1,589		3,784		4,180
Equipment rentals	1,292		1,313		3,981		3,778
Total revenue	$	8,080	$	8,601	$	24,017	$	25,159

Contract Assets and Liabilities

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

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recognized as rental income. This results in a contract liability at contract inception, which is often partially composed of deferred rental income. In prepaid contracts initiated in our indirect channel, customers may purchase a device at a discount.

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

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

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

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

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



	December 31,			March 31,
	2019			2019
	(in millions)
Contract assets and liabilities
Contract assets⁽¹⁾	$	1,081		$	928
Billed trade receivables	2,654			2,690
Unbilled trade receivables	1,230			945
Contract liabilities	1,051			1,009

Other related assets
Capitalized costs to acquire a customer contract:
Sales commissions - beginning balance	$	1,559
Sales commissions - additions	958
Amortization of capitalized sales commissions	(709		)
Net costs to acquire a customer contract	$	1,808

_________________


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

The following table presents revenue recognized during the nine-month periods ended December 31, 2019 and 2018:



	Nine Months Ended
	December 31,
	2019		2018
	(in millions)
Amounts included in the beginning of period contract liability balance	$	927	$	986

Remaining Performance Obligations

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



	(in millions)
Remainder of fiscal year ending March 31, 2020	$	2,608
Fiscal year ending March 31, 2021	6,241
Thereafter	397
Total	$	9,246

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The amounts disclosed above relate to the allocation of revenue amongst performance obligations in contracts existing as of the balance sheet date, and not to any differences between the timing of revenue recognition and recognition of receivables or cash collection. As a result, those amounts are not necessarily reflected as a contract liability as of the balance sheet date. Included in the above amounts are $893 million for the year ending March 31, 2020, $2.0 billion for the year ending March 31, 2021 and $74 million thereafter related to the allocation of the total transaction price to future operating lease revenues. Additionally, amounts disclosed above include estimates of variable consideration, where applicable.

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

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

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

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

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


Note 10.	Severance and Exit Costs

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

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

March 31,
2017
Net
(Benefit) Expense

Cash Payments
and Other
December 31,
2017
(in millions)
Lease exit costs $ 249
$ (12 )
⁽¹⁾
$ (68 ) $ 169
Severance costs 12
22
⁽²⁾
(17 ) 17
Access exit costs 40
3
⁽³⁾
(21 ) 22
$ 301
$ 13
$ (106 ) $ 208



	March 31, 2019		Net Expense			Cash Payments and Other			December 31, 2019
	(in millions)
Severance costs	$	6	$	6	⁽¹⁾	$	(6	)	$	6
Exit costs	61		60		⁽²⁾	(89		)	32
	$	67	$	66		$	(95	)	$	38

_________________


(1)	For the~~three and~~ nine-month ~~periods~~period ended December 31, ~~2017,~~2019, we recognized ~~benefits~~costs of $3$6 million~~and $12~~ ($5 million ~~(Wireless only), respectively, resulting from the reversal of certain lease exit cost reserves associated with the Clearwire WiMAX network which was shutdown on March 31, 2016.~~ Wireless, $1 million Corporate).


(2)	For the ~~three and~~ nine-month ~~periods~~period ended December 31, ~~2017,~~2019, we recognized costs of ~~$17~~$60 million ($1663 million costs Wireless, $2 million benefit Wireline, $1 million ~~Wireline) and$22 million ($19 million Wireless, $3 million Wireline), respectively.~~

~~(3)~~

~~For~~benefit Corporate) as "Other, net" within the ~~three and nine-month periods ended December 31, 2017, we recognized a benefit~~consolidated statements of ~~$1 million ($9 million benefit Wireless, $8 million costs Wireline) and costs of $3 million~~ (~~$8 million benefit Wireless~~, ~~$11 million costs Wireline), respectively. The Wireless benefits resulted from the reduction of certain access exit cost reserves that are no longer required related to previous network initiatives.~~

comprehensive (loss) income.

We continually refine our network strategy and evaluate other potential network initiatives to improve the overall performance of our network. As it relates to our network strategy, lease exit costs are now under the scope of Topic 842 and part of our evaluation of the remaining amortization period for the ROU asset, which is also subject to asset impairment testing. Additionally, major cost cutting initiatives are expected to continue to reduce operating expenses and improve our

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operating cash flows. As a result of these ongoing activities, we may incur future material charges associated with lease and access exit costs, severance, asset impairments, and accelerated depreciation, among others.


Note ~~10.~~11.	Income Taxes

Sprint Corporation is the parent of an affiliated group of corporations which join in the filing of a U.S. federal consolidated income tax return. Additionally, we file income tax returns in each state jurisdiction which imposes an income tax. In certain state jurisdictions, Sprint and its subsidiaries file combined tax returns with certain other SoftBank affiliated entities. State tax expense or benefit has been determined utilizing the separate return approach as if Sprint and its subsidiaries file on a stand-alone basis. We also file income tax returns in a number of foreign jurisdictions; however, our foreign income tax activity is immaterial.

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to: (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; (3) bonus depreciation that will allow for full expensing of qualified property; (4) creating a new limitation on deductible interest expense; (5) eliminating the corporate alternative minimum tax; and (6) new tax rules related to foreign operations.

Section 15 of the Internal Revenue Code stipulates that our fiscal year ending March 31, 2018 will have a blended federal statutory tax rate of 31.5%, which is based on the applicable tax rates before and after the effectiveness of the Tax Act and the number of days in the year. The differences that caused our effective income tax rates to differ from the ~~31.5% and 35%~~21% U.S. federal statutory rate for income taxes ~~for the nine-month periods ended December 31, 2017 and 2016, respectively,~~ were as follows:



	Nine Months Ended December 31,
	2019			2018
	(in millions)
Income tax benefit (expense) at the federal statutory rate	$	212		$	(61	)
Effect of:
State income taxes, net of federal income tax effect	39			(40		)
State law changes, net of federal income tax effect	6			62
Increase deferred tax liability for organizational restructuring	(4		)	(12		)
Credit for increasing research activities	9			13
Change in federal and state valuation allowance	236			12
Increase in liability for unrecognized tax benefits	(4		)	(6		)
Non-deductible penalties	—			(29		)
Other, net	—			5
Income tax benefit (expense)	$	494		$	(56	)
Effective income tax rate	49.0		%	19.2		%

Nine Months Ended
December 31,
2017 2016
(in millions)
Income tax (expense) benefit at the federal statutory rate $ (205 ) $ 223
Effect of:
State income taxes, net of federal income tax effect (57 ) 8
State law changes, net of federal income tax effect (28 ) 3
Increase deferred tax liability on FCC licenses —
(46 )
Increase deferred tax liability for business activity changes (69 ) —
Credit for increasing research activities 11
—
Tax benefit from organizational restructuring —
42
Change in federal and state valuation allowance (64 ) (522 )
Increase in liability for unrecognized tax benefits (20 ) —
Tax benefit from the Tax Act 7,090
—
Other, net 4
6
Income tax benefit (expense) $ 6,662
$ (286 )
Effective income tax rate (1,021.8 )% (44.9 )%

We recognized, as a provisional estimate, a $7.1 billion non-cash tax benefit through income from continuing operations for the re-measurement of deferred tax assets and liabilities due to changes in tax laws included in the Tax Act. This re-measurement of deferred taxes had no impact on cash flows.

The re-measurement was driven by two provisions in the Tax Act. First, as a result of the corporate tax rate reduction from 35% to 21%, we recognized a $5.0 billion non-cash tax benefit through income from continuing operations for the re-measurement of our deferred tax assets and liabilities. Secondly, the Tax Act included a provision whereby net operating losses generated in tax years beginning after December 31, 2017 may be carried forward indefinitely. The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards and credits. The provision in the Tax Act, modifying the carryforward period of net operating losses, changed our assessment as to the ability to recognize deferred tax assets on certain deductible temporary differences projected to be realized in tax years with an indefinite-lived carryforward period. In assessing the ability to realize these deferred tax assets, we considered taxable temporary differences from indefinite-lived assets, such as FCC licenses, to be an available source of future taxable income. This source of income was not previously considered because it could not be scheduled to reverse in the same period as the definite-lived deductible temporary differences. As a result of this change in assessment, we recognized a $2.1 billion non-cash tax benefit through income from continuing operations to reduce our valuation allowance.

We believe it is more likely than not that our remaining deferred tax assets, net of the valuation allowance, will be realized based on current income tax laws, including those modified by the Tax Act, and expectations of future taxable income stemming from the reversal of existing deferred tax liabilities.

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~The sources of the differences that gave rise to the deferred tax assets and liabilities as of December 31, 2017 and March 31, 2017, along with the income tax effect of each, were as follows:~~

December 31, 2017 March 31, 2017
(in millions)
Deferred tax assets
Net operating loss carryforwards $ 4,169
$ 6,812
Tax credit carryforwards 365
340
Capital loss carryforwards —
1
Property, plant and equipment 1,997
2,192
Debt obligations 83
205
Deferred rent 237
402
Pension and other postretirement benefits 211
332
Accruals and other liabilities 907
1,454
7,969
11,738
Valuation allowance (5,212 ) (10,477 )
2,757
1,261
Deferred tax liabilities
FCC licenses 8,793
12,876
Trademarks 1,122
1,712
Intangibles 340
771
Other 211
318
10,466
15,677

Long-term deferred tax liability $ 7,709
$ 14,416

~~On December 22, 2017, the SEC issued~~ ~~Staff Accounting Bulletin No. 118~~ ~~(SAB 118) which addresses income tax accounting implications of the Tax Act. The purpose of SAB 118 was to address any uncertainty or diversity of view in applying~~ ~~ASC Topic 740, Income Taxes~~ in the reporting period in which the Tax Act was enacted. SAB 118 addresses situations where the accounting is incomplete for certain income tax effects of the Tax Act upon issuance of a company’s financial statements for the reporting period which include the enactment date. SAB 118 allows for a provisional amount to be recorded if it is a reasonable estimate of the impact of the Tax Act. Additionally, SAB 118 allows for a measurement period to finalize the impacts of the Tax Act, not to extend beyond one year from the date of enactment.

Estimates were used in determining the balance of deferred tax assets and liabilities subject to changes in tax laws included in the Tax Act. In addition, estimates were used in determining the timing of reversals of deferred tax assets and liabilities in assessing the ability to realize certain deferred tax assets, which impacted the valuationallowance adjustment we recorded as part of the effects of the Tax Act. Additional information and analysis is required to accurately determine the deferred tax assets and liabilities effected by the Tax Act as well as determine the reversal pattern of such deferred tax assets and liabilities in assessing the ability to realize deferred tax assets.

In accordance with SAB 118, we recorded, as a provisional estimate, a $7.1 billion non-cash tax benefit through income from continuing operations in the period ended December 31, 2017. This amount is a reasonable estimate of the tax effects of the Tax Act on our financial statements. We will continue to analyze the effects of the Tax Act on the financial statements and operations and record any additional impacts as they are identified during the measurement period provided for in SAB 118.

Income tax benefit of $6.7 billion for the nine-month period ended December 31, 2017 was primarily attributable to the impact of the Tax Act as previously discussed, partially offset by taxable temporary differences from the tax amortization of FCC licenses and tax expense on pre-tax gains from spectrum license exchanges during the period. We also increased our deferred state income tax liability by $69 million for changes in business activities causing us to become subject to income tax in additional tax jurisdictions. This resulted in a change in the measurement of the carrying value of our deferred tax liability on temporary differences, primarily FCC licenses. Income tax expense of $286$494 million for the nine-month period ended December 31, ~~2016 was primarily attributable to~~2019 represented a consolidated effective tax rate of 49%. During the period, we recognized a $236 million tax benefit for federal and state valuation allowance. Federal net operating losses generated after the enactment of the Tax Cuts and Jobs may be carried forward indefinitely until utilized. We recognized a deferred tax asset on the estimated net operating loss generated in the current period because we have sufficient sources of future taxable income from taxable temporary differences ~~from~~on indefinite-lived assets, such as FCC licenses, against which the loss carryforwards may be realized. In the current period, we transitioned into a net deferred tax ~~amortization~~

~~Table~~liability position on our definite-lived temporary differences driven primarily by the full expensing of ~~Contents~~

~~Index~~qualifying property for ~~Notes~~tax purposes. The net taxable temporary differences that gave rise to the ~~Consolidated Financial Statements~~net deferred tax liability are scheduled to reverse in the carryforward periods of our definite-lived net operating losses and serve as a source of future taxable income, against which our definite-lived loss carryforwards may be realized. We recorded a tax benefit of $304 million during the nine-month period ended December 31, 2019 to reduce our valuation allowance to the extent of the net taxable temporary differences generated and scheduled to reverse in the loss carryforward periods.

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~of FCC licenses and~~Income tax expense ~~on pre-tax gains from spectrum license exchanges~~of $56 million for the nine-month period ended December 31, 2018 represented a consolidated effective tax rate of 19%. During the period, we recognized a $62 million tax benefit for the impact of state law changes enacted during the period, partially offset by a $12 million tax ~~benefits from~~expense attributable to organizational restructuring. These adjustments were primarily driven by the ~~reversal~~change in carrying value of ~~certain state income tax valuation allowance on~~our deferred tax assets. As a result of organizational restructuring, which drove a sustained increase in the profitability of specific legal entities, we revised our estimate regarding the realizability of the involved entities’ deferred state tax assets and ~~recorded a state tax benefit of $42 million. Additionally, in conjunction~~liabilities on temporary differences. In addition, the rate was impacted by non-deductible penalties related to litigation with the ~~Spectrum Financing and resulting change in state taxability footprint, we recognized tax expense~~State of $46 million to increase the deferred tax liability for the temporary differences between the carrying amounts of our FCC licenses for financial statement purposes and their tax bases. FCC licenses are amortized over 15 years for income tax purposes but, because these licenses have an indefinite life, they are not amortized for financial statement reporting purposes. Prior to the Tax Act, these temporary differences could not be scheduled to reverseNew York that was settled during the loss carryforward period against our deferred tax assets. As a result, a valuation allowance is recorded against our loss carryforward and other excess deferred tax assets resulting in a net deferred tax expense.period.

As of December 31, ~~2017~~2019 and March 31, ~~2017,~~2019, we maintained unrecognized tax benefits of ~~$191~~$249 million and ~~$190~~$242 million, respectively. Cash paid for income taxes, net was ~~$55~~$47 million and ~~$34~~$62 million for the nine-month periods ended December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.


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

Litigation, Claims and Assessments

In ~~March 2009,~~September 2019, Sprint notified the FCC that the Company had claimed monthly subsidies for serving subscribers even though these subscribers may not have met usage requirements under Sprint's usage policy for the Lifeline program. The Company provides service to eligible Lifeline subscribers under the Assurance Wireless brand for whom it

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seeks reimbursement from the Universal Service Fund. In 2016, the FCC enacted changes to the Lifeline program, which required Sprint to update how it determined qualifying subscriber usage. An inadvertent coding issue in the system used to identify qualifying subscriber usage occurred in July 2017 while the system was being updated to address the required changes. Sprint claimed monthly subsidies for serving Lifeline subscribers that may not have met Sprint's usage requirements under the Lifeline program. We investigated and proactively raised the identified issue with the FCC and the appropriate state regulators. We corrected the functionality and assessed the impact of identified changes. Resolution of this matter could require us to pay fines and penalties, which could be material to our consolidated financial statements. We are committed to reimbursing federal and state governments for any subsidy payments that were collected incorrectly as a result of the system issue.

On April 22, 2019, a purported stockholder ~~brought suit,~~ ~~Bennett~~of the Company filed a putative class action complaint in the Southern District of New York against the Company and 2 of our executive officers, captioned Meneses v. Sprint ~~Nextel Corp.~~,Corporation, et al. On June 5, 2019, a second purported stockholder of the Company filed a putative class action complaint in the ~~U.S. District Court for the~~Southern District of ~~Kansas, alleging~~New York against the Company and 2 of our executive officers, captioned Soloman v. Sprint Corporation, et al. The complaints in the Meneses and Solomon actions allege that ~~Sprint Communications~~the Company and ~~three of its former~~the 2 executive officers violated ~~Section~~Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 by ~~failing adequately to disclose certain alleged operational difficulties subsequent to the Sprint-Nextel merger, and by purportedly~~ issuing ~~false and misleading~~untrue statements regarding the write-down of goodwill. The district court granted final approval of a settlement in August 2015, which did not have a material impact to our financial statements. Five stockholder derivative suits related to ~~this 2009 stockholder suit were filed against Sprint Communications~~certain postpaid net subscriber additions. The complaints seek damages and ~~certain of its present and/or former officers and directors.~~reasonable attorneys fees. The ~~first,~~ ~~Murphy v. Forsee~~,Company believes the lawsuits are without merit. On June 24, 2019, the Meneses action was ~~filed in state court in Kansas on April 8, 2009, was removed to federal court, and was stayed by the court pending resolution of the motion to dismiss the~~ ~~Bennett~~ ~~case; the second,~~ ~~Randolph v. Forsee, was filed on July 15, 2010 in state court in Kansas, was removed to federal court, and was remanded back to state court; the third,~~ ~~Ross-Williams v. Bennett, et al., was filed in state court in Kansas on February 1, 2011; the fourth,~~ ~~Price v. Forsee, et al.,~~ ~~was filed in state court in Kansas on April 15, 2011; and the fifth,~~ ~~Hartleib v. Forsee, et al., was filed in federal court in Kansas on July 14, 2011. These cases were essentially stayed while the~~ ~~Bennett~~ case was pending, and we have reached an agreement in principle to settle the matters, by agreeing to some governance provisions and by paying plaintiffs' attorneys fees in an immaterial amount. The court approved the settlement but reduced the plaintiffs' attorneys fees; the attorneys fees issue is on appeal.voluntarily dismissed.

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

~~Eight~~8 related stockholder derivative suits have been filed against Sprint Communications and certain of its current and former officers and directors. Each suit alleges generally that the individual defendants breached their fiduciary duties to Sprint Communications and its stockholders by allegedly permitting, and failing to disclose, the actions alleged in the suit filed by the New York Attorney General. ~~One~~NaN suit, filed by the Louisiana Municipal Police Employees Retirement System, was dismissed by a federal court. ~~Two~~NaN suits were filed in state court in Johnson County, Kansas and ~~one~~1 of those suits was dismissed as premature; and ~~five~~5 suits are pending in federal court in Kansas. The remaining Kansas suits have been stayed

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

pending resolution of the Attorney General's suit. We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations.

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

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

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

Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. ~~As of December 31, 2017, we have accrued $114 million associated with a state tax matter.~~ If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations.

~~During the quarter ended December 31, 2017, Sprint settled several related patent infringement lawsuits and received payments of approximately $350 million, excluding legal fees incurred.~~

Spectrum Reconfiguration Obligations

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

The minimum cash obligation iswas $2.8 billion under the Report and Order. We are, however, obligated to continue to pay the full amount of the costs relating to the reconfiguration plan, ~~even if~~although those costs ~~exceed~~have exceeded $2.8

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billion. As required under the terms of the Report and Order, a letter of credit has been secured to provide assurance that funds will be available to pay the relocation costs of the incumbent users of the 800 MHz spectrum. The letter of credit was initially $2.5 billion but has been reduced during the course of the proceeding to ~~$115~~$74 million as of December 31, ~~2017.~~2019. Since the inception of the program, we have incurred payments of approximately ~~$3.5~~$3.6 billion directly attributable to our performance under the Report and Order, including ~~approximately $8~~$13 million during the nine-month period ended December 31, ~~2017.~~2019. When incurred, substantially all costs are accounted for as additions to FCC licenses with the remainder as property, plant and equipment. Based on our expenses to date and on third party administrator's audits, we have exceeded the $2.8 billion minimum cash obligation

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~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

required by the FCC. On October 12, 2017, the FCC released a Declaratory Ruling that we have met the minimum cash obligation under the Report and Order and concluded that Sprint will not be required to make any payments to the U.S. Treasury.

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


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

~~Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average~~ A small number of ~~common shares outstanding during~~non-public safety operators must still complete certain retuning work and complete administrative tasks in states along the period. Diluted net income (loss) per common share adjusts basic net income (loss) per common share, computed using the treasury stock method, for the effects of potentially dilutive common shares, if the effect issouthern border, however, these remaining activities do not antidilutive. As of the three-month period ended December 31, 2017, the computation of diluted net income (loss) per common share includes the effect of dilutive securities consisting of approximately 47 million options and restricted stock units, in addition to 13 million shares attributable to warrants, of which 9 million relate to the warrant held by SoftBank. As of the nine-month period ended December 31, 2017, the computation of diluted net income (loss) per common share includes the effect of dilutive securities consisting of approximately 61 million options and restricted stock units, in addition to 21 million shares attributable to warrants, of which 17 million relate to the warrant held by SoftBank. As of both the three and nine-month periods ended December 31, 2017, outstanding options to purchase shares totaling 6 million were not included in the computation of diluted net income (loss) per common share because to do so would have been antidilutive. Outstanding options and restricted stock units (exclusive of participating securities) that had no effect on our computation of dilutive weighted average number of shares outstanding as their effect would have been antidilutive were approximately 118 million shares as of the three and nine-month periods ended December 31, 2016, in addition to 62 million total shares issuable under warrants, of which 55 million relate to shares issuable under the warrant held by SoftBank. The warrant was issued to SoftBank at the close of the merger with SoftBank and is exercisable at $5.25 per share at the option of SoftBank, in whole or in part, at any time on or prior to July 10, 2018.impact Sprint's operations.


Note 13.	Per Share Data

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



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
	(in millions, except per share amounts)
Net (loss) income	$	(121	)	$	(145	)	$	(514	)	$	235
Less: Net loss (income) attributable to noncontrolling interests	1			4			9			(4		)
Net (loss) income attributable to Sprint	$	(120	)	$	(141	)	$	(505	)	$	231

Basic weighted average common shares outstanding	4,109			4,078			4,098			4,050
Effect of dilutive securities:
Options and restricted stock units	—			—			—			56
Warrants⁽¹⁾	—			—			—			4
Diluted weighted average common shares outstanding	4,109			4,078			4,098			4,110

Basic net (loss) income per common share attributable to Sprint	$	(0.03	)	$	(0.03	)	$	(0.12	)	$	0.06
Diluted net (loss) income per common share attributable to Sprint	$	(0.03	)	$	(0.03	)	$	(0.12	)	$	0.06

Potentially dilutive securities:
Outstanding stock options⁽²⁾	72			96			72			6

_________________


(1)	For the nine-month period ended December 31, 2018, dilutive securities attributable to warrants include 1 million shares issuable under the warrant held by SoftBank. At the close of the merger with SoftBank, the warrant was issued at $5.25 per share. On July 10, 2018, SoftBank exercised its warrant in full to purchase 55 million shares of Sprint common stock for $287 million.


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


Note 14.	Segments

Sprint operates ~~two~~2 reportable segments: Wireless and Wireline.

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

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

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

Segment financial information is as ~~well as cable and Internet service providers.~~

follows:



Statement of Operations Information	Wireless			Wireline			Corporate, Other and Eliminations			Consolidated
	(in millions)
Three Months Ended December 31, 2019
Net operating revenues	$	7,859		$	222		$	(1	)	$	8,080
Inter-segment revenues⁽¹⁾	—			74			(74		)	—
Total segment operating expenses⁽²⁾	(5,324		)	(284		)	76			(5,532		)
Segment earnings	$	2,535		$	12		$	1		2,548
Less:
Depreciation - network and other										(1,071		)
Depreciation - equipment rentals										(1,011		)
Amortization										(474		)
Merger costs⁽²⁾										(78		)
Other, net⁽³⁾										152
Operating income										66
Interest expense										(589		)
Other expense, net										(6		)
Loss before income taxes										$	(529	)



Statement of Operations Information	Wireless			Wireline			Corporate, Other and Eliminations			Consolidated
	(in millions)
Three Months Ended December 31, 2018
Net operating revenues	$	8,351		$	245		$	5		$	8,601
Inter-segment revenues⁽¹⁾	—			71			(71		)	—
Total segment operating expenses⁽²⁾	(5,240		)	(332		)	72			(5,500		)
Segment earnings (loss)	$	3,111		$	(16	)	$	6		3,101
Less:
Depreciation - network and other										(1,088		)
Depreciation - equipment rentals										(1,137		)
Amortization										(145		)
Merger costs⁽²⁾										(67		)
Other, net⁽³⁾										(185		)
Operating income										479
Interest expense										(664		)
Other income, net										32
Loss before income taxes										$	(153	)

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~~Segment financial information is as follows:~~


Statement of Operations Information	Wireless including hurricane and other			Wireless hurricane and other		Wireless excluding hurricane and other			Wireline			Corporate, Other and Eliminations			Consolidated			Wireless			Wireline			Corporate, Other and Eliminations			Consolidated
	(in millions)																	(in millions)
Three Months Ended December 31, 2017
Nine Months Ended December 31, 2019
Net operating revenues⁽²⁾	$	7,928		$	21	$	7,949		$	307		$	4		$	8,260		$	23,327		$	685		$	5		$	24,017
Inter-segment revenues⁽¹⁾	—			—		—			86			(86		)	—			—			218			(218		)	—
Total segment operating expenses⁽²⁾	(5,286		)	96		(5,190		)	(423		)	72			(5,541		)	(15,193		)	(896		)	216			(15,873		)
Segment earnings	$	2,642		$	117	$	2,759		$	(30	)	$	(10	)	2,719			$	8,134		$	7		$	3		8,144
Less:
Depreciation															(1,977		)
Depreciation - network and other																											(3,256		)
Depreciation - equipment rentals																											(3,096		)
Amortization															(196		)										(698		)
Hurricane-related charges⁽²⁾															(66		)
Merger costs⁽²⁾																											(230		)
Other, net⁽³⁾															247												(106		)
Operating income															727												758
Interest expense															(581		)										(1,802		)
Other expense, net															(42		)
Income before income taxes															$	104
Other income, net																											36
Loss before income taxes																											$	(1,008	)

Statement of Operations Information Wireless Wireline Corporate,
Other and
Eliminations Consolidated
(in millions)
Three Months Ended December 31, 2016
Net operating revenues $ 8,172
$ 372
$ 5
$ 8,549
Inter-segment revenues⁽¹⁾
—
125
(125 ) —
Total segment operating expenses (5,775 ) (449 ) 125
(6,099 )
Segment earnings $ 2,397
$ 48
$ 5
2,450
Less:
Depreciation (1,837 )
Amortization (255 )
Other, net⁽³⁾
(47 )
Operating income 311
Interest expense (619 )
Other expense, net (60 )
Loss before income taxes $ (368 )

Statement of Operations Information Wireless including hurricane and other Wireless hurricane and other Wireless excluding hurricane and other Wireline Corporate,
Other and
Eliminations Consolidated
(in millions)
Nine Months Ended December 31, 2017
Net operating revenues⁽²⁾
$ 23,347
$ 33
$ 23,380
$ 963
$ 13
$ 24,356
Inter-segment revenues⁽¹⁾
—
—
—
272
(272 ) —
Total segment operating expenses⁽²⁾
(15,109 ) 118
(14,991 ) (1,305 ) 241
(16,055 )
Segment earnings $ 8,238
$ 151
$ 8,389
$ (70 ) $ (18 ) 8,301
Less:
Depreciation (5,693 )
Amortization (628 )
Hurricane-related charges⁽²⁾
(100 )
Other, net⁽³⁾
611
Operating income 2,491
Interest expense (1,789 )
Other expense, net (50 )
Income before income taxes $ 652

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Statement of Operations Information Wireless Wireline Corporate,
Other and
Eliminations Consolidated
(in millions)
Nine Months Ended December 31, 2016
Net operating revenues $ 23,620
$ 1,177
$ 11
$ 24,808
Inter-segment revenues⁽¹⁾
—
386
(386 ) —
Total segment operating expenses (16,460 ) (1,473 ) 379
(17,554 )
Segment earnings $ 7,160
$ 90
$ 4
7,254
Less:
Depreciation (5,227 )
Amortization (813 )
Other, net⁽³⁾
80
Operating income 1,294
Interest expense (1,864 )
Other expense, net (67 )
Loss before income taxes $ (637 )
Other Information Wireless Wireline Corporate and
Other Consolidated
(in millions)
Capital expenditures for the nine months ended December 31, 2017 $ 3,828
$ 133
$ 325
$ 4,286
Capital expenditures for the nine months ended December 31, 2016 $ 2,654
$ 74
$ 223
$ 2,951




Statement of Operations Information	Wireless including hurricane			Wireless hurricane			Wireless excluding hurricane			Wireline			Corporate, Other and Eliminations			Consolidated
	(in millions)
Nine Months Ended December 31, 2018
Net operating revenues⁽⁴⁾	$	24,365		$	(3	)	$	24,362		$	781		$	13		$	25,156
Inter-segment revenues⁽¹⁾	—			—			—			201			(201		)	—
Total segment operating expenses⁽²⁾⁽⁴⁾	(14,650		)	(7		)	(14,657		)	(1,060		)	198			(15,519		)
Segment earnings (loss)	$	9,715		$	(10	)	$	9,705		$	(78	)	$	10		9,637
Less:
Depreciation - network and other																(3,132		)
Depreciation - equipment rentals																(3,454		)
Amortization																(475		)
Hurricane-related reimbursements⁽⁴⁾																32
Merger costs⁽²⁾																(216		)
Other, net⁽³⁾																(320		)
Operating income																2,072
Interest expense																(1,934		)
Other income, net																153
Income before income taxes																$	291

Other Information							Wireless			Wireline			Corporate and Other			Consolidated
							(in millions)
Capital expenditures for the nine months ended December 31, 2019							$	8,360		$	92		$	357		$	8,809
Capital expenditures for the nine months ended December 31, 2018							$	9,101		$	170		$	282		$	9,553

_________________


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

(2)

The ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019 and 2018 includes ~~$66~~$78 million, $230 million, $67 million, and ~~$100~~$216 million, respectively, of ~~hurricane-related charges~~merger-related costs, which ~~are classified~~were recorded in ~~our~~"Selling, general and administrative" in the consolidated statements of comprehensive ~~income~~ (loss) as follows: $21 million and $33 million, respectively, as contra-revenue in net operating revenues, $30 million and $45 million, respectively, as cost of services, $15 million and $17 million, respectively, as selling, general and administrative expenses and $5 million in the nine-month period only as other, net, all within the Wireless segment. In addition, the three and nine-month periods ended December 31, 2017, includes a $51 million charge related to a regulatory fee matter, which is classified as cost of services in our consolidated statements of comprehensive income (loss).income.

(3)

Other, net for both the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 consists of ~~$13~~$20 million and $66 million, respectively, of severance and exit costs due to access termination charges and reductions in ~~both periods~~work force, favorable developments in litigation and ~~net reductions~~other contingencies of ~~$260~~$270 million ~~and $315 million, respectively,~~ primarily associated with legal ~~settlements or favorable developments in pending legal proceedings. The nine-month period ended December 31, 2017 consists of a $175 million net~~recoveries for patent infringement lawsuits, loss on disposal of property, plant and equipment ~~which consisted~~ of ~~a $181~~$26 million ~~loss~~primarily related to ~~cell site construction~~network costs that are no longer recoverable as a result of changes in our network plans, ~~offset by~~ a ~~$6 million gain. In addition, the nine-month period ended December 31, 2017 includes a $479~~$4 million non-cash gain ~~related to~~as a result of spectrum license exchanges with other carriers and a $5partial pension settlement of $57 million. During the three-month period ended December 31, 2019, we recognized $19 million ~~reversal~~ of ~~previously accrued contract termination costs~~asset impairment charges primarily related to ~~the termination of our relationship~~an inbound roaming arrangement with General Wireless Operations Inc. (Radio Shack). Losses totaling $123 million and $347 million relating to the write-off of leased devices associated with lease cancellations were excluded from Other, net and included within Wireless segment earnings for the three and nine-month periods ended December 31, 2017, respectively. Other, net for the three and nine-month periods ended December 31, 2016 consists of $19 million and $30 million expense, respectively, of severance and exit costs as well as $28 million loss on disposal of property, plant and equipment related to cell site construction costs that are no longer recoverable as a ~~result of changes~~third party in ~~our network plans. In addition,~~Puerto Rico. During the nine-month period ended December 31, ~~2016 includes a $354 million non-cash gain related to spectrum license exchanges with other carriers, a $103 million charge related to a state tax matter and $113~~2019, we recognized $231 million of ~~contract termination costs,~~asset impairment charges primarily related to the ~~termination of our pre-existing wholesale arrangement with nTelos as a result of the Shentel transaction. Losses totaling approximately $109 million~~sale and $340 million relating to the write-off of leased devices associated with lease cancellations were excluded from Other, net and included within Wireless segment earnings for the three and nine-month periods ended December 31, 2016, respectively.leaseback

2731

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of our Overland Park, Kansas campus. Other, net for the three- and nine-month periods ended December 31, 2018 consists of $30 million and $63 million, respectively, of severance and exit costs primarily due to lease exit costs, reductions in work force and access termination charges, litigation expense of $50 million related to tax matters settled with the State of New York, loss on disposal of property, plant and equipment of $117 million and $185 million, respectively, primarily related to cell site construction costs and other network costs that are no longer recoverable as a result of changes in our network plans, offset by a $12 million gain from the sale of certain assets. The nine-month period ended December 31, 2018 includes $34 million associated with the purchase of certain leased spectrum assets, which upon termination of the related spectrum leases resulted in the accelerated recognition of the unamortized favorable lease balances.

(4)

The nine-month period ended December 31, 2018 includes $32 million of hurricane-related reimbursements, which are classified in our consolidated statements of comprehensive (loss) income as follows: $3 million as service revenue in net operating revenues, $6 million as cost of services, $1 million as selling, general and administrative expenses and $22 million as other, net, all within the Wireless segment.



Operating Revenues by Service and Products	Wireless		Wireline		Corporate, Other and Eliminations⁽¹⁾			Consolidated
	(in millions)
Three Months Ended December 31, 2019
Service revenue	$	4,969	$	279	$	(74	)	$	5,174
Wireless equipment sales	1,372		—		—			1,372
Wireless equipment rentals	1,292		—		—			1,292
Other	226		17		(1		)	242
Total net operating revenues	$	7,859	$	296	$	(75	)	$	8,080

Operating Revenues by Service and Products	Wireless		Wireline		Corporate, Other and Eliminations⁽¹⁾			Consolidated
	(in millions)
Three Months Ended December 31, 2018
Service revenue⁽²⁾	$	5,160	$	297	$	(71	)	$	5,386
Wireless equipment sales	1,589		—		—			1,589
Wireless equipment rentals	1,313		—		—			1,313
Other	289		19		5			313
Total net operating revenues	$	8,351	$	316	$	(66	)	$	8,601

Operating Revenues by Service and Products	Wireless		Wireline		Corporate, Other and Eliminations⁽¹⁾			Consolidated
	(in millions)
Nine Months Ended December 31, 2019
Service revenue	$	15,021	$	850	$	(218	)	$	15,653
Wireless equipment sales	3,784		—		—			3,784
Wireless equipment rentals	3,981		—		—			3,981
Other	541		53		5			599
Total net operating revenues	$	23,327	$	903	$	(213	)	$	24,017

Operating Revenues by Service and Products	Wireless		Wireline		Corporate, Other and Eliminations⁽¹⁾			Consolidated
	(in millions)
Nine Months Ended December 31, 2018
Service revenue⁽²⁾	$	15,536	$	914	$	(201	)	$	16,249
Wireless equipment sales	4,180		—		—			4,180
Wireless equipment rentals	3,778		—		—			3,778
Other	868		68		13			949
Total net operating revenues	$	24,362	$	982	$	(188	)	$	25,156

Operating Revenues by Service and Products Wireless Wireline
Corporate,
Other and
Eliminations⁽¹⁾
Consolidated
(in millions)
Three Months Ended December 31, 2017
Wireless services⁽²⁾
$ 5,311
$ —
$ —
$ 5,311
Wireless equipment 2,309
—
—
2,309
Voice —
94
(32 ) 62
Data —
29
(20 ) 9
Internet —
254
(36 ) 218
Other
329
16
6
351
Total net operating revenues $ 7,949
$ 393
$ (82 ) $ 8,260

Operating Revenues by Service and Products Wireless Wireline
Corporate,
Other and
Eliminations⁽¹⁾
Consolidated
(in millions)
Three Months Ended December 31, 2016
Wireless services⁽³⁾
$ 5,671
$ —
$ —
$ 5,671
Wireless equipment 2,226
—
—
2,226
Voice —
153
(61 ) 92
Data —
41
(23 ) 18
Internet —
281
(38 ) 243
Other⁽³⁾
275
22
2
299
Total net operating revenues $ 8,172
$ 497
$ (120 ) $ 8,549

Operating Revenues by Service and Products Wireless Wireline
Corporate,
Other and
Eliminations⁽¹⁾
Consolidated
(in millions)
Nine Months Ended December 31, 2017
Wireless services⁽²⁾
$ 16,141
$ —
$ —
$ 16,141
Wireless equipment 6,355
—
—
6,355
Voice —
327
(114 ) 213
Data —
96
(59 ) 37
Internet —
765
(100 ) 665
Other 884
47
14
945
Total net operating revenues $ 23,380
$ 1,235
$ (259 ) $ 24,356

Operating Revenues by Service and Products Wireless Wireline
Corporate,
Other and
Eliminations⁽¹⁾
Consolidated
(in millions)
Nine Months Ended December 31, 2016
Wireless services⁽³⁾
$ 17,280
$ —
$ —
$ 17,280
Wireless equipment 5,556
—
—
5,556
Voice —
506
(196 ) 310
Data —
127
(67 ) 60
Internet —
871
(119 ) 752
Other⁽³⁾
784
59
7
850
Total net operating revenues $ 23,620
$ 1,563
$ (375 ) $ 24,808

_______________


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


(2)	~~Wireless services~~Service revenue related to the Wireless segment in the ~~three and~~ nine-month ~~periods~~period ended December 31, ~~2017~~2018 excludes ~~$21~~$3 million ~~and $33 million, respectively,~~ of hurricane-related ~~contra-revenue charges~~revenue reimbursements reflected in net operating revenues in our consolidated statements of comprehensive ~~income~~ (loss).

~~(3)~~

Sprint is no longer reporting Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. We have excluded them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline mobile virtual network operators (MVNO). The above tables reflect the reclassification of the related Assurance Wireless prepaid revenue within the Wireless segment from Wireless services to Other of $92 million and $275 million for the three and nine months ended December 31, 2016, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNOs continues to remain in Other following this change. income.

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SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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

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

Brightstar

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

The supply chain and inventory management arrangement ~~provides,~~included, among other things, that Brightstar may purchase inventory from the original equipment manufacturers ~~(OEMs)~~ to sell directly to our indirect dealers. As compensation for these services, we remit per unit fees to Brightstar for each device sold to dealers or retailers in our indirect channels. During the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 and ~~2016,~~2018, we incurred fees under these arrangements totaling ~~$25~~$14 million, $41 million, $18 million and ~~$71~~$51 million, respectively, which are recognized in "Cost of equipment sales" and ~~$15 million~~"Selling, general and ~~$43 million, respectively.~~administrative" expenses in the consolidated statements of comprehensive (loss) income. Additionally, we have an arrangement with Brightstar whereby they perform certain of our reverse logistics including device buyback, trade-in technology and related services.

During the ~~quarter~~three-month period ended September 30, 2017, we entered into an arrangement with Brightstar whereby accessories previously procured by us and sold to customers in our direct channels ~~will~~are now be procured and consigned to us from Brightstar. Amounts billed from the sale of accessory inventory are remitted to Brightstar. In exchange for our efforts to sell accessory inventory owned by Brightstar, we ~~will receive~~received a fixed fee from Brightstar for each device activated in our direct channels. In August 2018, the arrangement was amended and we received a share of the profits associated with the sale of accessory inventory owned by Brightstar. For the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019 and 2018, Sprint earned fees under these arrangements of ~~approximately $71~~$50 million, $134 million, $52 million and ~~$100~~$149 million, respectively, which are recognized as other revenue within "Service ~~revenues"~~revenue" in the consolidated statements of comprehensive ~~income~~ (loss). income.

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


Consolidated balance sheets:	December 31, 2017		March 31, 2017		December 31, 2019		March 31, 2019
	(in millions)				(in millions)
Accounts receivable	$	253	$	367	$	183	$	187
Accounts payable	$	119	$	160
Accounts payable and accrued expenses and other current liabilities					$	74	$	109



	Three Months Ended				Nine Months Ended
Consolidated statements of comprehensive (loss) income:	December 31,				December 31,
	2019		2018		2019		2018
	(in millions)
Equipment sales	$	394	$	619	$	1,090	$	1,448
Cost of equipment sales	$	421	$	644	$	1,164	$	1,510

Consolidated statements of comprehensive income (loss):
Three Months Ended
December 31,
Nine Months Ended
December 31,
2017 2016 2017 2016
(in millions)
Service revenues $ 71
$ —
$ 100
$ —
Equipment revenues $ 639
$ 480
$ 1,432
$ 1,107
Cost of products $ 657
$ 403
$ 1,465
$ 1,021
Selling, general and administrative $ 13
$ 9
$ 39
$ 26
SoftBank

In addition to the amounts associated with the supply chain and inventory management arrangements discussed above, Sprint earned fees from a Brightstar subsidiary for billing and collecting payments from subscribers under certain insurance programs of approximately $10 million and $27 million, and $23 million and $77 millionIncluded in ~~the three and nine-month periods ended December 31, 2017 and 2016, respectively, which are recognized as "Service revenues"~~“Other liabilities” in the consolidated ~~statements~~balance sheets is $154 million payable to a SoftBank affiliate for reimbursement of ~~comprehensive income (loss).~~legal and consulting fees in connection with the proposed merger with T-Mobile paid to third parties on behalf of Sprint.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~SoftBank~~

In November 2015 and April 2016, Sprint entered into Handset Sale-Leaseback Tranche 1 and Tranche 2, respectively, with MLS, a company formed by a group of equity investors, including SoftBank, to sell and leaseback certain devices, which are currently being leased by our customers, for total cash proceeds of approximately $2.2 billion. SoftBank's initial equity investment in MLS totaled $79 million. Brightstar provided reverse logistics and remarketing services to MLS with respect to the devices.

In December 2016, Tranche 1 was terminated and the associated devices were repurchased by Sprint from MLS. With the cash proceeds, MLS repurchased the equity units from its investors including SoftBank. In October 2017, Sprint terminated Tranche 2 pursuant to its terms and repaid all outstanding amounts.

In April 2016, Sprint sold and leased back certain network equipment to Network LeaseCo. The network equipment acquired by Network LeaseCo, which is consolidated by us, was used as collateral to raise approximately $2.2 billion in borrowings from external investors, including $250 million from SoftBank. Principal and interest payments on the borrowings from the external investors were repaid in staggered, unequal payments through January 2018. During the nine-month period ended December 31, 2017, we made principal repayments totaling $1.4 billion, resulting in a total principal amount of $454 million outstanding as of December 31, 2017, which was fully repaid in January 2018.

~~All other transactions under agreements with SoftBank or its controlled affiliates, in the aggregate, were immaterial through the period ended December 31, 2017.~~

~~Table of Contents~~

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

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~


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

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

During the nine-month periods ended December 31, ~~2017~~2019 and ~~2016,~~2018, there were non-cash equity ~~contributions~~distributions from the non-guarantor subsidiaries to Subsidiary Guarantor ~~to the Non-Guarantor Subsidiaries~~of approximately $31 million and $1.1 billion, respectively, as a result of organizational restructuring for tax ~~purposes~~purposes. As of ~~$4.7~~December 31, 2019, there were $23.6 billion ~~and $563 million, respectively. We also replaced $22.9 billion~~ of ~~short-term payables with~~ intercompany notes issued by the Subsidiary Guarantor to the ~~Non-Guarantor Subsidiaries during the nine-month period ended December 31, 2017.~~non-guarantor subsidiaries. The notes are subordinated to all unaffiliated ~~third party~~third-party obligations of Sprint Corporation and its subsidiaries.

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

Sprint has a Receivables Facility providing for the sale of eligible wireless service, installment and certain future lease receivables. In April 2016, Sprint entered into the Tranche 2 transaction to sell and leaseback certain leased devices and a separate network equipment sale-leaseback transaction to sell and leaseback certain network equipment. In October 2016, Sprint transferred certain directly held and third-party leased spectrum licenses to wholly-owned bankruptcy-remote special purpose entities as part of the spectrum financing transaction. In connection with ~~each of~~both the Receivables Facility ~~Tranche 2,~~ and the spectrum financing ~~transaction,~~transactions, Sprint formed certain wholly-owned bankruptcy-remote subsidiaries that are included in the non-guarantor subsidiaries' condensed consolidated financial information. In addition, the bankruptcy-remote special purpose entities formed in connection with the network equipment sale-leaseback transaction, but which are not Sprint subsidiaries, are included in the non-guarantor subsidiaries' condensed consolidated financial information. Each of these is a separate legal entity with its own separate creditors who will be entitled, prior to and upon its liquidation, to be satisfied out of its assets prior to any assets becoming available to ~~Sprint~~ ~~(see~~Sprint. See Note 8. Long-Term Debt, Financing and ~~Capital~~Finance Lease ~~Obligations)~~Obligations for additional information.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET


	December 31, 2017											December 31, 2019
	Parent/Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Eliminations			Consolidated		Parent/Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in millions)											(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	3,948	$	492	$	—		$	4,440	$	—	$	2,932	$	247	$	—		$	3,179
Short-term investments	—		173		—		—			173		—		62		—		—			62
Accounts and notes receivable, net	196		445		3,917		(641		)	3,917		233		473		3,873		(706		)	3,873
Current portion of notes receivable from consolidated affiliate	—		424		—		(424		)	—
Current portion of notes receivable from consolidated affiliates												—		424		—		(424		)	—
Device and accessory inventory	—		—		1,009		—			1,009		—		—		1,117		—			1,117
Prepaid expenses and other current assets	1		8		617		—			626		—		15		1,209		—			1,224
Total current assets	197		4,998		6,035		(1,065		)	10,165		233		3,906		6,446		(1,130		)	9,455
Investments in subsidiaries	26,233		36,237		—		(62,470		)	—		25,471		17,021		—		(42,492		)	—
Property, plant and equipment, net	—		—		19,712		—			19,712		—		—		20,827		—			20,827
Costs to acquire a customer contract												—		—		1,808		—			1,808
Operating lease right-of-use assets												—		—		6,713		—			6,713
Due from consolidated affiliates	1		—		13,776		(13,777		)	—		290		6,109		—		(6,399		)	—
Notes receivable from consolidated affiliate	10,407		22,491		—		(32,898		)	—
Notes receivable from consolidated affiliates												11,902		23,143		—		(35,045		)	—
Intangible assets
Goodwill	—		—		6,586		—			6,586		—		—		4,598		—			4,598
FCC licenses and other	—		—		41,222		—			41,222		—		—		41,492		—			41,492
Definite-lived intangible assets, net	—		—		2,667		—			2,667		—		—		918		—			918
Other assets	—		196		871		—			1,067		—		40		1,051		—			1,091
Total assets	$	36,838	$	63,922	$	90,869	$	(110,210	)	$	81,419	$	37,896	$	50,219	$	83,853	$	(85,066	)	$	86,902

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND EQUITY												LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	—	$	3,176	$	—		$	3,176	$	—	$	—	$	3,396	$	—		$	3,396
Accrued expenses and other current liabilities	196		383		3,921		(641		)	3,859		239		346		3,456		(706		)	3,335
Current portion of long-term debt, financing and capital lease obligations	—		1,895		2,141		—			4,036
Current portion of notes payable to consolidated affiliate	—		—		424		(424		)	—
Current operating lease liabilities												—		—		1,860		—			1,860
Current portion of long-term debt, financing and finance lease obligations												—		2,569		1,311		—			3,880
Current portion of notes payable to consolidated affiliates												—		—		424		(424		)	—
Total current liabilities	196		2,278		9,662		(1,065		)	11,071		239		2,915		10,447		(1,130		)	12,471
Long-term debt, financing and capital lease obligations	10,407		10,407		12,011		—			32,825
Notes payable to consolidated affiliate	—		10,407		22,491		(32,898		)	—
Long-term debt, financing and finance lease obligations												11,902		9,085		12,520		—			33,507
Long-term operating lease liabilities												—		—		5,423		—			5,423
Notes payable to consolidated affiliates												—		11,902		23,143		(35,045		)	—
Deferred tax liabilities	—		—		7,709		—			7,709		—		—		7,038		—			7,038
Other liabilities	—		820		2,689		—			3,509		—		846		1,862		—			2,708
Due to consolidated affiliates	—		13,777		—		(13,777		)	—		—		—		6,399		(6,399		)	—
Total liabilities	10,603		37,689		54,562		(47,740		)	55,114		12,141		24,748		66,832		(42,574		)	61,147
Commitments and contingencies
Total stockholders' equity	26,235		26,233		36,237		(62,470		)	26,235		25,755		25,471		17,021		(42,492		)	25,755
Noncontrolling interests	—		—		70		—			70		—		—		—		—			—
Total equity	26,235		26,233		36,307		(62,470		)	26,305		25,755		25,471		17,021		(42,492		)	25,755
Total liabilities and equity	$	36,838	$	63,922	$	90,869	$	(110,210	)	$	81,419	$	37,896	$	50,219	$	83,853	$	(85,066	)	$	86,902

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SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET



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

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

March 31, 2017
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
ASSETS
Current assets:
Cash and cash equivalents $ —
$ 2,461
$ 409
$ —
$ 2,870
Short-term investments —
5,444
—
—
5,444
Accounts and notes receivable, net 86
1
4,137
(86 ) 4,138
Device and accessory inventory —
—
1,064
—
1,064
Prepaid expenses and other current assets —
11
590
—
601
Total current assets 86
7,917
6,200
(86 ) 14,117
Investments in subsidiaries 18,800
23,854
—
(42,654 ) —
Property, plant and equipment, net —
—
19,209
—
19,209
Due from consolidated affiliates 25
13,032
—
(13,057 ) —
Notes receivable from consolidated affiliate 10,394
575
—
(10,969 ) —
Intangible assets
Goodwill —
—
6,579
—
6,579
FCC licenses and other —
—
40,585
—
40,585
Definite-lived intangible assets, net —
—
3,320
—
3,320
Other assets —
134
1,179
—
1,313
Total assets $ 29,305
$ 45,512
$ 77,072
$ (66,766 ) $ 85,123

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ —
$ —
$ 3,281
$ —
$ 3,281
Accrued expenses and other current liabilities 103
478
3,646
(86 ) 4,141
Current portion of long-term debt, financing and capital lease obligations —
1,356
3,680
—
5,036
Total current liabilities 103
1,834
10,607
(86 ) 12,458
Long-term debt, financing and capital lease obligations 10,394
13,647
11,837
—
35,878
Notes payable to consolidated affiliate —
10,394
575
(10,969 ) —
Deferred tax liabilities —
—
14,416
—
14,416
Other liabilities —
837
2,726
—
3,563
Due to consolidated affiliates —
—
13,057
(13,057 ) —
Total liabilities 10,497
26,712
53,218
(24,112 ) 66,315
Commitments and contingencies
Total stockholders' equity 18,808
18,800
23,854
(42,654 ) 18,808
Total liabilities and stockholders' equity $ 29,305
$ 45,512
$ 77,072
$ (66,766 ) $ 85,123

3336

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Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME



	Three Months Ended December 31, 2019
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues:
Service	$	—		$	—		$	5,416		$	—		$	5,416
Equipment sales	—			—			1,372			—			1,372
Equipment rentals	—			—			1,292			—			1,292
	—			—			8,080			—			8,080
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,718			—			1,718
Cost of equipment sales	—			—			1,646			—			1,646
Cost of equipment rentals (exclusive of depreciation below)	—			—			201			—			201
Selling, general and administrative	—			—			2,045			—			2,045
Depreciation - network and other	—			—			1,071			—			1,071
Depreciation - equipment rentals	—			—			1,011			—			1,011
Amortization	—			—			474			—			474
Other, net	—			—			(152		)	—			(152		)
	—			—			8,014			—			8,014
Operating income	—			—			66			—			66
Other income (expense):
Interest income	227			511			113			(834		)	17
Interest expense	(227		)	(513		)	(683		)	834			(589		)
(Losses) earnings of subsidiaries	(120		)	(118		)	—			238			—
Other expense, net	—			—			(23		)	—			(23		)
	(120		)	(120		)	(593		)	238			(595		)
(Loss) income before income taxes	(120		)	(120		)	(527		)	238			(529		)
Income tax benefit	—			—			408			—			408
Net (loss) income	(120		)	(120		)	(119		)	238			(121		)
Less: Net loss attributable to noncontrolling interests	—			—			1			—			1
Net (loss) income attributable to Sprint Corporation	(120		)	(120		)	(118		)	238			(120		)
Other comprehensive (loss) income	(35		)	(35		)	(37		)	72			(35		)
Comprehensive (loss) income	$	(155	)	$	(155	)	$	(156	)	$	310		$	(156	)

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME



	Three Months Ended December 31, 2018
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues:
Service	$	—		$	—		$	5,699		$	—		$	5,699
Equipment sales	—			—			1,589			—			1,589
Equipment rentals	—			—			1,313			—			1,313
	—			—			8,601			—			8,601
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,648			—			1,648
Cost of equipment sales	—			—			1,734			—			1,734
Cost of equipment rentals (exclusive of depreciation below)	—			—			182			—			182
Selling, general and administrative	—			—			2,003			—			2,003
Depreciation - network and other	—			—			1,088			—			1,088
Depreciation - equipment rentals	—			—			1,137			—			1,137
Amortization	—			—			145			—			145
Other, net	—			—			185			—			185
	—			—			8,122			—			8,122
Operating income	—			—			479			—			479
Other income (expense):
Interest income	227			540			175			(904		)	38
Interest expense	(227		)	(609		)	(732		)	904			(664		)
(Losses) earnings of subsidiaries	(141		)	(69		)	—			210			—
Other expense, net	—			(3		)	(3		)	—			(6		)
	(141		)	(141		)	(560		)	210			(632		)
(Loss) income before income taxes	(141		)	(141		)	(81		)	210			(153		)
Income tax benefit	—			—			8			—			8
Net (loss) income	(141		)	(141		)	(73		)	210			(145		)
Less: Net loss attributable to noncontrolling interests	—			—			4			—			4
Net (loss) income attributable to Sprint Corporation	(141		)	(141		)	(69		)	210			(141		)
Other comprehensive (loss) income	(25		)	(25		)	—			25			(25		)
Comprehensive (loss) income	$	(166	)	$	(166	)	$	(73	)	$	235		$	(170	)

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME



	Nine Months Ended December 31, 2019
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues:
Service	$	—		$	—		$	16,252		$	—		$	16,252
Equipment sales	—			—			3,784			—			3,784
Equipment rentals	—			—			3,981			—			3,981
	—			—			24,017			—			24,017
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			5,203			—			5,203
Cost of equipment sales	—			—			4,346			—			4,346
Cost of equipment rentals (exclusive of depreciation below)	—			—			666			—			666
Selling, general and administrative	—			—			5,888			—			5,888
Depreciation - network and other	—			—			3,256			—			3,256
Depreciation - equipment rentals	—			—			3,096			—			3,096
Amortization	—			—			698			—			698
Other, net	—			—			106			—			106
	—			—			23,259			—			23,259
Operating income	—			—			758			—			758
Other income (expense):
Interest income	679			1,546			372			(2,534		)	63
Interest expense	(679		)	(1,585		)	(2,072		)	2,534			(1,802		)
(Losses) earnings of subsidiaries	(505		)	(464		)	—			969			—
Other expense, net	—			(2		)	(25		)	—			(27		)
	(505		)	(505		)	(1,725		)	969			(1,766		)
(Loss) income before income taxes	(505		)	(505		)	(967		)	969			(1,008		)
Income tax benefit	—			—			494			—			494
Net (loss) income	(505		)	(505		)	(473		)	969			(514		)
Less: Net loss attributable to noncontrolling interests	—			—			9			—			9
Net (loss) income attributable to Sprint Corporation	(505		)	(505		)	(464		)	969			(505		)
Other comprehensive (loss) income	(61		)	(61		)	(36		)	97			(61		)
Comprehensive (loss) income	$	(566	)	$	(566	)	$	(509	)	$	1,066		$	(575	)

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended December 31, 2017															Nine Months Ended December 31, 2018
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)															(in millions)
Net operating revenues	$	—		$	—		$	8,239		$	—		$	8,239
Net operating revenues:
Service																$	—		$	—		$	17,201		$	—		$	17,201
Equipment sales																—			—			4,180			—			4,180
Equipment rentals																—			—			3,778			—			3,778
																—			—			25,159			—			25,159
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,733			—			1,733			—			—			5,019			—			5,019
Cost of products (exclusive of depreciation and amortization included below)	—			—			1,673			—			1,673
Cost of equipment sales																—			—			4,521			—			4,521
Cost of equipment rentals (exclusive of depreciation below)																—			—			457			—			457
Selling, general and administrative	—			—			2,108			—			2,108			—			—			5,731			—			5,731
Severance and exit costs	—			—			13			—			13
Depreciation	—			—			1,977			—			1,977
Depreciation - network and other																—			—			3,132			—			3,132
Depreciation - equipment rentals																—			—			3,454			—			3,454
Amortization	—			—			196			—			196			—			—			475			—			475
Other, net	—			—			(188		)	—			(188		)	—			—			298			—			298
	—			—			7,512			—			7,512			—			—			23,087			—			23,087
Operating income	—			—			727			—			727			—			—			2,072			—			2,072
Other income (expense):
Interest income	198			458			1			(643		)	14			679			1,632			517			(2,699		)	129
Interest expense	(198		)	(382		)	(644		)	643			(581		)	(679		)	(1,755		)	(2,199		)	2,699			(1,934		)
Earnings (losses) of subsidiaries	7,162			7,088			—			(14,250		)	—			231			337			—			(568		)	—
Other expense, net	—			(2		)	(54		)	—			(56		)
Other income, net																—			17			7			—			24
	7,162			7,162			(697		)	(14,250		)	(623		)	231			231			(1,675		)	(568		)	(1,781		)
Income (loss) before income taxes	7,162			7,162			30			(14,250		)	104			231			231			397			(568		)	291
Income tax benefit	—			—			7,052			—			7,052
Income tax expense																—			—			(56		)	—			(56		)
Net income (loss)	7,162			7,162			7,082			(14,250		)	7,156			231			231			341			(568		)	235
Less: Net loss attributable to noncontrolling interests	—			—			6			—			6
Less: Net income attributable to noncontrolling interests																—			—			(4		)	—			(4		)
Net income (loss) attributable to Sprint Corporation	7,162			7,162			7,088			(14,250		)	7,162			$	231		$	231		$	337		$	(568	)	$	231
Other comprehensive income (loss)	26			26			6			(32		)	26
Other comprehensive (loss) income																(20		)	(20		)	(10		)	30			(20		)
Comprehensive income (loss)	$	7,188		$	7,188		$	7,088		$	(14,282	)	$	7,182		$	211		$	211		$	331		$	(538	)	$	215

3440

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended December 31, 2016
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
Net operating revenues $ —
$ —
$ 8,549
$ —
$ 8,549
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below) —
—
1,925
—
1,925
Cost of products (exclusive of depreciation and amortization included below) —
—
1,985
—
1,985
Selling, general and administrative —
—
2,080
—
2,080
Severance and exit costs —
—
19
—
19
Depreciation —
—
1,837
—
1,837
Amortization —
—
255
—
255
Other, net —
—
137
—
137
—
—
8,238
—
8,238
Operating income —
—
311
—
311
Other (expense) income:
Interest income 198
43
4
(233 ) 12
Interest expense (198 ) (409 ) (245 ) 233
(619 )
(Losses) earnings of subsidiaries (479 ) (38 ) —
517
—
Other (expense) income, net —
(75 ) 3
—
(72 )
(479 ) (479 ) (238 ) 517
(679 )
(Loss) income before income taxes (479 ) (479 ) 73
517
(368 )
Income tax expense —
—
(111 ) —
(111 )
Net (loss) income (479 ) (479 ) (38 ) 517
(479 )
Other comprehensive (loss) income (5 ) (5 ) (4 ) 9
(5 )
Comprehensive (loss) income $ (484 ) $ (484 ) $ (42 ) $ 526
$ (484 )



	Nine Months Ended December 31, 2019
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	—		$	(197	)	$	6,962		$	—		$	6,765
Cash flows from investing activities:
Capital expenditures - network and other	—			—			(3,360		)	—			(3,360		)
Capital expenditures - leased devices	—			—			(5,449		)	—			(5,449		)
Expenditures relating to FCC licenses	—			—			(24		)	—			(24		)
Proceeds from sales and maturities of short-term investments	—			79			—			—			79
Purchases of short-term investments	—			(74		)	—			—			(74		)
Change in amounts due from/due to consolidated affiliates	29			(3,560		)	—			3,531			—
Proceeds from sales of assets and FCC licenses	—			—			819			—			819
Proceeds from corporate owned life insurance policies	—			5			—			—			5
Proceeds from intercompany note advance to consolidated affiliate	—			424			—			(424		)	—
Other, net	—			—			(27		)	—			(27		)
Net cash provided by (used in) investing activities	29			(3,126		)	(8,041		)	3,107			(8,031		)
Cash flows from financing activities:
Proceeds from debt and financings	—			—			4,731			—			4,731
Repayments of debt, financing and finance lease obligations	—			(345		)	(6,843		)	—			(7,188		)
Debt financing costs	—			(3		)	(9		)	—			(12		)
Proceeds from issuance of common stock, net	(29		)	—			—			—			(29		)
Acquisition of noncontrolling interest	—			(3		)	(30		)	—			(33		)
Change in amounts due from/due to consolidated affiliates	—			—			3,531			(3,531		)	—
Repayments of intercompany note advance from parent	—			—			(424		)	424			—
Other, net	—			—			1			—			1
Net cash (used in) provided by financing activities	(29		)	(351		)	957			(3,107		)	(2,530		)
Net decrease in cash, cash equivalents and restricted cash	—			(3,674		)	(122		)	—			(3,796		)
Cash, cash equivalents and restricted cash, beginning of period	—			6,606			457			—			7,063
Cash, cash equivalents and restricted cash, end of period	$	—		$	2,932		$	335		$	—		$	3,267

3541

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Nine Months Ended December 31, 2017
Parent/Issuer Subsidiary Guarantor Non-Guarantor Subsidiaries Eliminations Consolidated
(in millions)
Net operating revenues $ —
$ —
$ 24,323
$ —
$ 24,323
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below) —
—
5,140
—
5,140
Cost of products (exclusive of depreciation and amortization included below) —
—
4,622
—
4,622
Selling, general and administrative —
—
6,059
—
6,059
Severance and exit costs —
—
13
—
13
Depreciation —
—
5,693
—
5,693
Amortization —
—
628
—
628
Other, net —
(55 ) (268 ) —
(323 )
—
(55 ) 21,887
—
21,832
Operating income —
55
2,436
—
2,491
Other income (expense):
Interest income 593
783
10
(1,320 ) 66
Interest expense (593 ) (1,171 ) (1,345 ) 1,320
(1,789 )
Earnings (losses) of subsidiaries 7,320
7,722
—
(15,042 ) —
Other expense, net —
(69 ) (47 ) —
(116 )
7,320
7,265
(1,382 ) (15,042 ) (1,839 )
Income (loss) before income taxes 7,320
7,320
1,054
(15,042 ) 652
Income tax benefit —
—
6,662
—
6,662
Net income (loss) 7,320
7,320
7,716
(15,042 ) 7,314
Less: Net loss attributable to noncontrolling interests —
—
6
—
6
Net income (loss) attributable to Sprint Corporation 7,320
7,320
7,722
(15,042 ) 7,320
Other comprehensive income (loss) 38
38
18
(56 ) 38
Comprehensive income (loss) $ 7,358
$ 7,358
$ 7,734
$ (15,098 ) $ 7,352

CASH FLOWS



	Nine Months Ended December 31, 2018
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	—		$	(408	)	$	7,990		$	—		$	7,582
Cash flows from investing activities:
Capital expenditures - network and other	—			—			(3,814		)	—			(3,814		)
Capital expenditures - leased devices	—			—			(5,739		)	—			(5,739		)
Expenditures relating to FCC licenses	—			—			(145		)	—			(145		)
Proceeds from sales and maturities of short-term investments	—			6,619			—			—			6,619
Purchases of short-term investments	—			(5,152		)	—			—			(5,152		)
Change in amounts due from/due to consolidated affiliates	(253		)	(1,285		)	—			1,538			—
Proceeds from sales of assets and FCC licenses	—			—			416			—			416
Proceeds from deferred purchase price from sale of receivables	—			—			223			—			223
Proceeds from corporate owned life insurance policies	—			110			—			—			110
Proceeds from intercompany note advance to consolidated affiliate	—			424			—			(424		)	—
Other, net	—			—			52			—			52
Net cash (used in) provided by investing activities	(253		)	716			(9,007		)	1,114			(7,430		)
Cash flows from financing activities:
Proceeds from debt and financings	—			1,100			5,316			—			6,416
Repayments of debt, financing and finance lease obligations	—			(1,783		)	(5,154		)	—			(6,937		)
Debt financing costs	(28		)	(47		)	(211		)	—			(286		)
Proceeds from issuance of common stock, net	281			—			—			—			281
Change in amounts due from/due to consolidated affiliates	—			—			1,538			(1,538		)	—
Repayments of intercompany note advance from parent	—			—			(424		)	424			—
Net cash provided by (used in) financing activities	253			(730		)	1,065			(1,114		)	(526		)
Net (decrease) increase in cash, cash equivalents and restricted cash	—			(422		)	48			—			(374		)
Cash, cash equivalents and restricted cash, beginning of period	—			6,222			437			—			6,659
Cash, cash equivalents and restricted cash, end of period	$	—		$	5,800		$	485		$	—		$	6,285

Table of Contents

Index for Notes to the Consolidated Financial Statements

SPRINT CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 17.	Additional Financial Information

Cash, Cash Equivalents and Restricted Cash

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

Nine Months Ended December 31, 2016
Parent/Issuer Subsidiary Guarantor Non-Guarantor Subsidiaries Eliminations Consolidated
(in millions)
Net operating revenues $ —
$ —
$ 24,808
$ —
$ 24,808
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below) —
—
6,125
—
6,125
Cost of products (exclusive of depreciation and amortization included below) —
—
5,097
—
5,097
Selling, general and administrative —
—
5,992
—
5,992
Severance and exit costs —
—
30
—
30
Depreciation —
—
5,227
—
5,227
Amortization —
—
813
—
813
Other, net —
—
230
—
230
—
—
23,514
—
23,514
Operating income —
—
1,294
—
1,294
Other (expense) income:
Interest income 593
105
13
(674 ) 37
Interest expense (593 ) (1,271 ) (674 ) 674
(1,864 )
(Losses) earnings of subsidiaries (923 ) 320
—
603
—
Other expense, net —
(77 ) (27 ) —
(104 )
(923 ) (923 ) (688 ) 603
(1,931 )
(Loss) income before income taxes (923 ) (923 ) 606
603
(637 )
Income tax expense —
—
(286 ) —
(286 )
Net (loss) income (923 ) (923 ) 320
603
(923 )
Other comprehensive income (loss) 2
2
3
(5 ) 2
Comprehensive (loss) income $ (921 ) $ (921 ) $ 323
$ 598
$ (921 )

~~Table~~The following provides the classifications of ~~Contents~~

~~Index for Notes to~~cash, cash equivalents and restricted cash in the ~~Consolidated Financial Statements~~

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~consolidated balance sheets:

Nine Months Ended December 31, 2017
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities $ —
$ (1,143 ) $ 5,548
$ —
$ 4,405
Cash flows from investing activities:
Capital expenditures - network and other —
—
(2,499 ) —
(2,499 )
Capital expenditures - leased devices —
—
(1,787 ) —
(1,787 )
Expenditures relating to FCC licenses —
—
(92 ) —
(92 )
Proceeds from sales and maturities of short-term investments —
7,113
—
—
7,113
Purchases of short-term investments —
(1,842 ) —
—
(1,842 )
Change in amounts due from/due to consolidated affiliates —
—
689
(689 ) —
Proceeds from sales of assets and FCC licenses —
—
367
—
367
Proceeds from intercompany note advance to consolidated affiliate —
575
—
(575 ) —
Other, net —
—
16
—
16
Net cash provided by (used in) investing activities —
5,846
(3,306 ) (1,264 ) 1,276
Cash flows from financing activities:
Proceeds from debt and financings —
—
3,073
—
3,073
Repayments of debt, financing and capital lease obligations —
(2,530 ) (4,629 ) —
(7,159 )
Debt financing costs —
(9 ) (10 ) —
(19 )
Change in amounts due from/due to consolidated affiliates —
(689 ) —
689
—
Repayments of intercompany note advance from parent —
—
(575 ) 575
—
Other, net —
12
(18 ) —
(6 )
Net cash used in financing activities —
(3,216 ) (2,159 ) 1,264
(4,111 )
Net increase in cash and cash equivalents —
1,487
83
—
1,570
Cash and cash equivalents, beginning of period —
2,461
409
—
2,870
Cash and cash equivalents, end of period $ —
$ 3,948
$ 492
$ —
$ 4,440



	December 31, 2019		March 31, 2019
	(in millions)
Cash and cash equivalents	$	3,179	$	6,982
Restricted cash in Other assets⁽¹⁾	88		81
Cash, cash equivalents and restricted cash	$	3,267	$	7,063

_________________


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

Accounts Payable

~~Table~~Accounts payable at December 31, 2019 and March 31, 2019 include liabilities in the amounts of ~~Contents~~$74 million and $75 million, respectively, for payments issued in excess of associated bank balances but not yet presented for collection.

~~Index for Notes~~


Note 18.	Subsequent Events

On January 24, 2020, we amended our secured revolving bank credit facility. Pursuant to the ~~Consolidated Financial Statements~~amendment, the availability of commitments under the bank credit facility will remain at $2.0 billion until the original maturity date of February 3, 2021, while the availability of approximately $1.8 billion of commitments was extended to February 3, 2022. The amendment also modifies the required ratio (Leverage Ratio) of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non-recurring items, as defined by the bank credit facility (adjusted EBITDA), so as not to exceed 3.75 to 1.0 for the fiscal quarter ended December 31, 2019 and 6.0 to 1.0 for the fiscal quarter ended March 31, 2020 and each fiscal quarter ending thereafter through expiration of the facility. In addition to amending the secured revolving bank credit facility, the Company also amended the Receivables Facility to, among other things, extend the maturity date from February 2021 to January 2022.

~~SPRINT CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

Nine Months Ended December 31, 2016
Parent/Issuer Subsidiary Guarantor
Non-Guarantor
Subsidiaries
Eliminations Consolidated
(in millions)
Cash flows from operating activities:
Net cash (used in) provided by operating activities $ —
$ (1,168 ) $ 4,186
$ (118 ) $ 2,900
Cash flows from investing activities:
Capital expenditures - network and other —
—
(1,421 ) —
(1,421 )
Capital expenditures - leased devices —
—
(1,530 ) —
(1,530 )
Expenditures relating to FCC licenses —
—
(46 ) —
(46 )
Proceeds from sales and maturities of short-term investments —
2,614
35
—
2,649
Purchases of short-term investments —
(4,943 ) (55 ) —
(4,998 )
Change in amounts due from/due to consolidated affiliates —
6,865
—
(6,865 ) —
Proceeds from sales of assets and FCC licenses —
—
126
—
126
Intercompany note advance to consolidated affiliate —
(392 ) —
392
—
Proceeds from intercompany note advance to consolidated affiliate —
62
—
(62 ) —
Other, net —
—
26
—
26
Net cash provided by (used in) investing activities —
4,206
(2,865 ) (6,535 ) (5,194 )
Cash flows from financing activities:
Proceeds from debt and financings —
—
6,830
—
6,830
Repayments of debt, financing and capital lease obligations —
(2,000 ) (1,266 ) —
(3,266 )
Debt financing costs —
(110 ) (162 ) —
(272 )
Intercompany dividends paid to consolidated affiliate —
—
(118 ) 118
—
Change in amounts due from/due to consolidated affiliates —
—
(6,865 ) 6,865
—
Intercompany note advance from consolidated affiliate —
—
392
(392 ) —
Repayments of intercompany note advance from consolidated affiliate —
—
(62 ) 62
—
Other, net —
35
33
—
68
Net cash (used in) provided by financing activities —
(2,075 ) (1,218 ) 6,653
3,360
Net increase in cash and cash equivalents —
963
103
—
1,066
Cash and cash equivalents, beginning of period —
2,154
487
—
2,641
Cash and cash equivalents, end of period $ —
$ 3,117
$ 590
$ —
$ 3,707

3943

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

OVERVIEW

Sprint Corporation, including its consolidated subsidiaries, is a communications company offering a comprehensive range of wireless and wireline communications products and services that are designed to meet the needs of individual consumers, businesses, government subscribers, and resellers. Unless the context otherwise requires, references to "Sprint," "we," "us," "our" and the "Company" mean Sprint Corporation and its consolidated subsidiaries for all periods presented, and references to "Sprint Communications" are to Sprint Communications, Inc. and its consolidated subsidiaries.

Description of the Company

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

We offer wireless and wireline services to subscribers in all 50 states, Puerto Rico, and the U.S. Virgin Islands under the Sprint corporate brand, which includes our retail brands of Sprint^®, Boost Mobile^®, Virgin Mobile^®, and Assurance Wireless^® on our wireless networks utilizing various technologies including third generation (3G) code division multiple access (CDMA) and fourth generation (4G) services utilizing Long Term Evolution (LTE). In 2019, Sprint launched fifth generation (5G) service in nine major cities, which is supported by our available 2.5 GHz spectrum. We utilize these networks to offer our wireless subscribers differentiated products and services through the use of a single network or a combination of these networks.

Business Combination Agreement

On April 29, 2018, we announced that we entered into a Business Combination Agreement with T-Mobile US, Inc. (T-Mobile) to merge in an all-stock transaction for a fixed exchange ratio of 0.10256 of T-Mobile shares for each Sprint share, or the equivalent of 9.75 Sprint shares for each T-Mobile share (Merger Transaction). Immediately following the Merger Transaction, Deutsche Telekom AG and SoftBank Group Corp. are expected to hold approximately 42% and 27% of fully-diluted shares of the combined company, respectively, with the remaining 31% of the fully-diluted shares of the combined company held by public stockholders. The board of directors will consist of 14 directors, of which nine will be nominated by Deutsche Telekom AG, four will be nominated by SoftBank Group Corp., and the final director will be the CEO of the combined company. The combined company will be named T-Mobile. The Merger Transaction is subject to customary closing conditions, including certain state and federal regulatory approvals. Sprint and T-Mobile completed the Hart-Scott-Rodino filing with the Department of Justice (DOJ) on May 24, 2018. On June 18, 2018, the parties filed with the Federal Communications Commission (FCC) the merger applications, including the Public Interest Statement. On July 18, 2018, the FCC accepted the applications for filing and established a public comment period for the Merger Transaction. The formal comment period concluded on October 31, 2018. On May 20, 2019, to facilitate the FCC’s review and approval of the FCC license transfers associated with the proposed Merger Transaction, we and T-Mobile filed with the FCC a written exparte presentation (the Presentation) relating to the proposed Merger Transaction. The Presentation included proposed commitments from us and T-Mobile. On October 16, 2019, the FCC voted to approve the Merger Transaction. The Merger Transaction received clearance from the Committee on Foreign Investment in the United States on December 17, 2018.

On July 26, 2019, the DOJ and five State Attorneys General filed an action in the United States District Court for the District of Columbia that would resolve their objections to the Merger Transaction. Since then, five additional states have joined the DOJ action. The Merger Transaction has received approval from 18 of the 19 state public utility commissions. The parties are awaiting further regulatory approvals and resolution of litigation filed by the Attorneys General of 13 states and the District of Columbia seeking to block the Merger Transaction. The parties to the Business Combination Agreement extended the Outside Date (as defined in the Business Combination Agreement) to November 1, 2019, or, if the Marketing Period (as defined in the Business Combination Agreement) is in effect at such time, then the Outside Date will be January 2, 2020. After November 1, 2019, Sprint and T-Mobile each have a right under the Business Combination Agreement to terminate that agreement at any time because the Merger Transaction was not completed as of that date.

Also, on July 26, 2019, Sprint and T-Mobile announced agreements with DISH Network Corporation (DISH) in which new T-Mobile will divest Sprint’s prepaid businesses (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Telecommunications Company and Swiftel Communications, Inc.) and Sprint’s 800 MHz spectrum assets to DISH for a total of approximately $5.0 billion. Additionally, upon the closing of the divestiture transaction, new T-Mobile will provide DISH wireless customers access to its network for up to seven years and offer standard transition services arrangements to DISH during a transition period of up to three years. DISH will also have an

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option to take on leases for certain cell sites and retail locations that are decommissioned by the new T-Mobile, subject to any assignment restrictions. Under the terms of the arrangement, Sprint appointed individuals, subject to approval by the DOJ, to oversee the prepaid assets and maintain complete managerial responsibility, including the ability to make all business decisions relating to the operations of the prepaid assets independent of Sprint and T-Mobile. In connection with the execution of the firm agreements by and between DISH and the Company, as well as the agreements with the DOJ as outlined in the Proposed Final Judgment and Stipulation and Order, Sprint has not lost a controlling financial interest in its prepaid assets. The transactions with DISH are contingent on the successful closing of T-Mobile’s merger with Sprint among other closing conditions.

Leases

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

Wireless

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

Postpaid

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

WeUnder the Sprint brand, we currently offer our devices through leasing and installment billing programs, and within limited plan offerings devices may be subsidized in exchange for a service contract. Our Sprint branded leasing and installment billing programs do not require a long-term service ~~contract. These programs~~contract but offer devices tied to service plans at lower monthly rates when compared to subsidy ~~plans, but require~~plans. The installment billing program requires the subscriber to pay full or ~~near full~~a discounted retail price based on promotional activities for the device over the ~~lease term or~~ installment period. ~~Our~~The leasing program ~~allows~~requires the subscriber to ~~either turn in~~pay a rental fee over the ~~device,~~lease term. In July 2017, we introduced the Sprint Flex program, which gives customers the opportunity to enjoy their phone before deciding what option (upgrade, continue leasing, ~~the~~return or buy) works best for their lifestyle. Depending on device ~~or purchase the~~type, certain leases carry an option to upgrade to a new device ~~at the end~~annually prior to expiration of the ~~lease term.~~lease. The terms of our lease and installment billing contracts require that customers maintain service otherwise the balance of the remaining contractual obligation on the device is due upon termination of their service. The subsidy program, which has been de-emphasized, requires a long-term service contract and allows ~~for~~ a subscriber to purchase a device generally at a ~~discount for~~discount. In our non-Sprint branded postpaid plan, we offer devices through an installment billing program while requiring service to be purchased on a ~~new line of service.~~prepaid basis. The majority of Sprint's current handset activations occur on our Sprint Flex leasing program.

Prepaid

Our prepaid portfolio currently includes multiple brands, each designed to appeal to specific subscriber uses and demographics. ~~Sprint Forward (formerly Sprint Prepaid) primarily serves as~~Additionally, a ~~complementary offer~~subsidy program is available within certain prepaid plan offerings. In our indirect channel, customers who activate service under certain prepaid plan offerings are able to ~~our Sprint Postpaid offer for those subscribers who want plans that are affordable, simple and flexible without~~purchase devices at a ~~long-term commitment.~~discount. Boost Mobile primarily serves subscribers that are looking for value without data limits. Virgin Mobile primarily serves subscribers that are looking to optimize spend but need solutions that offer control, flexibility and connectivity through various plans with high speed data options. In January 2020, we discontinued Virgin Mobile ~~is also designated as a Lifeline-only Eligible Telecommunications Carrier.~~service and have started transferring existing customers to the Boost Mobile brand. Under the Assurance Wireless brand, ~~Virgin Mobile provides~~we provide service to Lifeline eligible subscribers (for whom it seeks reimbursement from the federal Universal Service Fund) and subscribers who have lost their Lifeline eligibility and retain Assurance Wireless retail service. The Lifeline program requires applicants to meet certain eligibility requirements and existing subscribers must recertify as to those requirements annually.While Sprint will continue to support our Lifeline subscribers through our Assurance Wireless prepaid brand, we have excluded these subscribers from our reported prepaid customer base for all periods presented due to regulatory changes resulting in tighter program restrictions. (See ~~"Subscriber Results"~~ ~~for more information.)~~

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Wholesale

We have focused our wholesale business on ~~enabling~~allowing our diverse network of customers to successfully grow their business by providing them with an array of network, product, and device solutions. This allows our customers to customize this full suite of value-added solutions to meet the growing demands of their businesses. As part of these growing demands,

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some of our wholesale mobile virtual network operators (MVNO) are also selling prepaid services under the Lifeline program. While Sprint will continue to support our Lifeline subscribers through our wholesale MVNOs, we have excluded these subscribers from our reported wholesale customer base for all periods presented due to regulatory changes resulting in tighter program restrictions. (See ~~"Subscriber Results"~~ ~~for more information.)~~

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

Wireline

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

Business Strategies and Key Priorities

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

~~Unlock the~~our Next-Gen network plan will deliver competitive coverage, faster speeds and more capacity;

create a compelling unlimited value ~~of our substantial spectrum holdings by densifying and optimizing our network to~~ proposition;

provide ~~customers with~~ the best digital customer experience;

~~Achieve our cost reduction goals by significantly transforming our business;~~

~~Deliver an attractive value proposition and substantially enhance our distribution through use of innovative models;~~

~~Create an alternative financial structure that leverages our assets to fuel our growth and maximize stockholder value;~~

~~Attract and retain world-class talent and establish strategic partnerships to create an optimal, engaged, and winning team;~~ and

~~Deliver an exceptional wireless experience so customers stay longer, buy more,~~engage our employees by making Sprint a great place to work.

While the Company launched 5G in select cities in the first half of 2019 and ~~tell their friends.~~

~~To provide a network that delivers the consistent reliability, capacity and speed that customers demand,~~ we ~~expect~~plan to continue to ~~optimize our 3G data network and~~ invest in ~~LTE deployment across all~~our network during the next few years, many of the underlying service quality, scale, and financial challenges remain. We aim to use our spectrum ~~bands.~~ to build our 5G network on 2.5 GHz spectrum. See Network below for more information regarding our network plans and potential challenges to our rollout of 5G.

We ~~also expect~~aim to ~~deploy new technologies that will help strengthen~~create a compelling unlimited value proposition by leveraging our ~~competitive position, including~~spectrum holdings while remaining the ~~expected use of High Performance User Equipment,~~price leader on Unlimited plan offerings and taking our brand to the ~~Sprint Magic Box that is an LTE booster, Voice over LTE, more extensive use of Wi-Fi~~next level.

We plan to continue to invest in digital capabilities and artificial intelligence to improve the ~~use of small cells to further densify our network.~~

To achieve a more competitive cost position, we have established an Office of Cost Management with responsibility for identifying, operationalizing, and monitoring sustained improvements in operating costs and efficiencies. Also, we have deployed cost management and planning tools across the entire organization to more effectively monitor expenditures.

customer experience. We are focused on ~~attracting~~finding the right balance between physical and ~~retaining subscribers by improving our sales~~digital retail to serve customers wherever and marketing initiatives. We have demonstrated our value proposition through our evolving price plans, promotions, and payment programs and have deployed local marketing and civic engagement initiatives in key markets.

Our current strategy also includes transactions that continue to leverage our assets such as the Accounts Receivable Facility (Receivables Facility) and the spectrum financing transaction. Each of these transactions is described in more detail in "Liquidity and Capital Resources."whenever they want.

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

To deliver a simplified and improved customer experience, we are focusing on key subscriber touch points, pursuing process improvements and deploying platforms to simplify and enhance the interactions between us and our

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~~customers. In addition, we have established a customer experience team to support our focus on net promoter score as an important key measure of customer satisfaction.~~

Network

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

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

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

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

other competitors in the wireless industry will depend on our access to, and deployment of, adequate low-band spectrum, which we may not be able to obtain. As part of the evolution of our existing network toward 5G, we plan to modify our existing backhaul architecture to enable increased capacity ~~and speed, as well as to provide current and future customers a highly competitive wireless experience. As a result of changes~~ to our network ~~plans during our fourth quarter of fiscal year 2017, we~~at a lower cost by either negotiating lower vendor pricing for existing Ethernet technology or replacing Ethernet with fiber. We expect to incur ~~charges of approximately $200 million primarily~~termination costs associated with Ethernet contractual commitments with third-party vendors ranging between approximately $25 million to $50 million, of which the majority are expected to be incurred by December 31, 2020.

As previously announced, in 2019 Sprint launched 5G service in nine major cities. Once 5G-compatible equipment is in place and activated, customers in those cities will have access to Sprint's 5G network if they are in range of a cell site ~~construction costs~~ that has been equipped with a 5G radio supported by available 2.5 GHz spectrum and have a 5G-capable device. As more and more sites are ~~no longer recoverable. As we continue~~5G-enabled, customers in those areas will be able to ~~refine our~~have an increasing percentage of their mobile experiences on 5G rather than on LTE or 3G.

If the Merger Transaction with T-Mobile is not completed, it is expected that Sprint will not be able to deploy a nationwide 5G network ~~strategy~~on the same scale and ~~evaluate other potential~~on the same timeline as the combined company. For example, Sprint’s standalone 5G network ~~initiatives, we may incur future material charges associated with lease~~would be geographically limited to major cities and ~~access exit costs, loss from asset dispositions or accelerated depreciation, among others.~~

~~PRWireless HoldCo, LLC Transaction~~

~~During the quarter ended December 31, 2017, Sprint and PRWireless PR, Inc. completed a transaction~~surrounding areas due to ~~combine their operations in Puerto Rico~~both Sprint’s limited current network footprint on which to build 5G sites and the ~~U.S. Virgin Islands into a new entity. The companies contributed employees, subscribers, network assets and~~cost of utilizing 2.5 GHz spectrum for 5G. Significant changes to the ~~transaction. We expect the new entity to create a stronger competitor in Puerto Rico and the U.S. Virgin Islands offering postpaid, prepaid, Lifeline~~Company's network deployment and business services with increased scale, expanded distribution, improved network capacity, faster speed, and a deeper spectrum position. Sprint and PRWireless PR, Inc. have an approximate 68% and a 32% preferred economic interest, as well as a 55% and 45% common voting interestplans could negatively impact the Company's forecast of future operating results, which could result in ~~the new entity, respectively.~~asset impairments in future periods.

RESULTS OF OPERATIONS

Consolidated Results of Operations

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

Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
(in millions)
Wireless segment earnings $ 2,759
�� $ 2,397
$ 8,389
$ 7,160
Wireline segment earnings (30 ) 48
(70 ) 90
Corporate, other and eliminations (10 ) 5
(18 ) 4
Consolidated segment earnings 2,719
2,450
8,301
7,254
Depreciation (1,977 ) (1,837 ) (5,693 ) (5,227 )
Amortization (196 ) (255 ) (628 ) (813 )
Other, net 181
(47 ) 511
80
Operating income 727
311
2,491
1,294
Interest expense (581 ) (619 ) (1,789 ) (1,864 )
Other expense, net (42 ) (60 ) (50 ) (67 )
Income tax benefit (expense) 7,052
(111 ) 6,662
(286 )
Net income (loss) $ 7,156
$ (479 ) $ 7,314
$ (923 )

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	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
	(in millions)
Wireless segment earnings	$	2,535		$	3,111		$	8,134		$	9,705
Wireline segment earnings (loss)	12			(16		)	7			(78		)
Corporate, other and eliminations	1			6			3			10
Consolidated segment earnings	2,548			3,101			8,144			9,637
Depreciation - network and other	(1,071		)	(1,088		)	(3,256		)	(3,132		)
Depreciation - equipment rentals	(1,011		)	(1,137		)	(3,096		)	(3,454		)
Amortization	(474		)	(145		)	(698		)	(475		)
Other, net	74			(252		)	(336		)	(504		)
Operating income	66			479			758			2,072
Interest expense	(589		)	(664		)	(1,802		)	(1,934		)
Other (expense) income, net	(6		)	32			36			153
Income tax benefit (expense)	408			8			494			(56		)
Net (loss) income	$	(121	)	$	(145	)	$	(514	)	$	235

Depreciation Expense - Network and Other

Depreciation expense ~~increased $140~~- network and other decreased $17 million, or 8%2%, for the three-month period ended December 31, 2019, compared to the same period in 2018. The primary driver was decreases associated with fully depreciated or retired assets. Depreciation expense - network and other increased $124 million, or 4%, for the nine-month period ended December 31, 2019, compared to the same period in 2018, primarily due to increased depreciation on new asset additions, partially offset by decreases associated with fully depreciated or retired assets.

Depreciation Expense - Equipment Rentals

Depreciation expense - equipment rentals decreased $126 million, or 11%, and ~~$466~~$358 million, or 9%10%, infor the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016,~~2018, primarily due to favorable changes to leased device residual values. These decreases were partially offset by increased depreciation on new asset additions net of fully depreciated or retired leased ~~devices as a result~~devices.

Table of ~~the continued growth of the device leasing program. Depreciation~~Contents

Amortization Expense

Amortization expense ~~incurred on all leased devices was $990~~increased $329 million, or 227%, and ~~$2.7 billion~~$223 million, or 47%, for the ~~three~~three- and nine-month periods ended December 31, ~~2017, respectively, and $837 million and $2.2 billion for the same periods in 2016, respectively.~~

~~Amortization Expense~~

~~Amortization expense decreased $59 million, or 23%, and $185 million, or 23%, in the three and nine-month periods ended December 31, 2017,~~2019, respectively, compared to the same periods in ~~2016,~~2018, primarily due to the acceleration of amortization expense related to the Company’s decision to discontinue its Virgin Mobile brand. This was partially offset by customer relationship intangible assets that are amortized using the sum-of-the-months'-digits method, which results in higher amortization rates in early periods that decline over time.

Other, net

The following table provides additional information regarding items included in "Other, net" for the ~~three~~three- and nine-month periods endedDecember 31, ~~2017~~2019and ~~2016.~~2018.


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	December 31,						December 31,						December 31,						December 31,
	2017			2016			2017			2016			2019			2018			2019			2018
	(in millions)												(in millions)
Severance and exit costs	$	(13	)	$	(19	)	$	(13	)	$	(30	)	$	(20	)	$	(30	)	$	(66	)	$	(63	)
Litigation and other contingencies	260			—			315			(103		)
Litigation benefit (costs) and other contingencies													270			(50		)	270			(50		)
Loss on disposal of property, plant and equipment, net	—			(28		)	(175		)	(28		)	(26		)	(117		)	(26		)	(185		)
Contract terminations	—			—			5			(113		)
Gains from asset dispositions and exchanges	—			—			479			354			4			12			4			12
Hurricane-related charges	(66		)	—			(100		)	—
Partial pension settlement													(57		)	—			(57		)	—
Merger costs													(78		)	(67		)	(230		)	(216		)
Asset impairments													(19		)	—			(231		)	—
Contract termination costs													—			—			—			(34		)
Hurricane-related reimbursements													—			—			—			32
Total	$	181		$	(47	)	$	511		$	80		$	74		$	(252	)	$	(336	)	$	(504	)

Other, net represented a benefit of ~~$181~~$74 million and ~~$511~~an expense of $336 million infor the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively. During the ~~three~~three- and nine-month periods ended December 31, ~~2017, we recognized~~ 2019, the following items comprised Other, net:

severance and exit costs of ~~$13~~$20 million and $66 million, respectively, due to access termination charges and reductions in work force;

favorable developments in litigation and other contingencies of $270 million primarily associated with reductions in work force. We incurred hurricane-related charges of $66 million and $100 million during the three and nine-month periods ended December 31, 2017, respectively, which were recorded as contra-revenue, cost of services, selling, general and administrative expenses, and legal recoveries for patent infringement lawsuits;

loss on disposal of property, plant and equipment ~~in the consolidated statements~~ of ~~comprehensive income (loss). We had a net benefit in litigation and other contingencies of $260~~$26 million and $315 million during the three and nine-month periods ended December 31, 2017, respectively, associated with legal settlements for patent infringement lawsuits as well as other contingencies associated with a regulatory fee matter. During the nine-month period ended December 31, 2017, we recorded a $479 million non-cash gain as a result of spectrum license exchanges with other carriers and a $5 million benefit in contract terminations. Additionally, we recognized a $175 million net loss on disposal of property, plant and equipment, which consisted of a $181 million lossprimarily related to ~~cell site construction~~network costs that are no longer recoverable as a result of changes in our network ~~plans, offset by~~plans;

non-cash gain of $4 million as a $6result of spectrum license exchanges with another carrier;

partial pension settlement of $57 million, ~~gain.~~which is the result of a plan amendment to the Sprint Retirement Pension Plan (Plan) to offer certain terminated participants who had not begun receiving Plan benefits the opportunity to voluntarily elect to receive their benefits as an immediate lump sum distribution; and

merger-related costs of $78 million and $230 million, respectively, which were recorded in "Selling, general and administrative" in the consolidated statements of comprehensive (loss) income.

Additionally, during the three-month period ended December 31, 2019, we recognized $19 million of asset impairment charges primarily related to an inbound roaming arrangement with a third party in Puerto Rico. During the nine-month period ended December 31, 2019, we recognized $231 million of asset impairment charges primarily related to the sale and leaseback of our Overland Park, Kansas campus.

Other, net represented an expense of ~~$47~~$252 million and ~~a benefit of $80~~$504 million infor the ~~three~~three- and nine-month periods ended December 31, ~~2016,~~2018, respectively. During the ~~three~~three- and nine-month periods ended December 31, ~~2016, we recognized~~ 2018, the following items comprised Other, net:

severance and exit costs of ~~$19~~$30 million and ~~$30~~$63 million, respectively, primarily due to lease exit costs, reductions in work force and ~~we recorded a $28~~access termination charges;

litigation expense of $50 million related to tax matters settled with the State of New York;

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loss on disposal of property, plant and equipment of $117 million and $185 million, respectively, primarily related to cell site construction costs and other network costs that are no longer recoverable as a result of changes in our network ~~plans. During~~plans;

gain of $12 million from the sale of certain assets; and

merger-related costs of $67 million and $216 million, respectively, which were recorded in "Selling, general and administrative" in the consolidated statements of comprehensive (loss) income.

Additionally, during the three-month period ended June 30, 2018, we recognized $34 million associated with the purchase of certain leased spectrum assets, which upon termination of the related spectrum leases resulted in the accelerated recognition of the unamortized favorable lease balances. We also recorded $32 million of reimbursements during the nine-month period ended December 31, 2016, we recognized a $103 million charge associated with a state tax matter and a $354 million non-cash gain as a result of spectrum license exchanges with other carriers. Additionally, we recorded a $113 million of contract terminations that was primarily2018 related to the ~~termination~~hurricanes occurring in the prior fiscal year, which were recorded as "Service revenue" in net operating revenues, "Cost of ~~our pre-existing wholesale arrangement with NTELOS Holdings Corporation (nTelos) as a result~~services," "Selling, general and administrative," and "Other, net" in the consolidated statements of ~~the transaction with Shentel.~~comprehensive (loss) income.

Interest Expense

Interest expense decreased ~~$38 million, or 6%, and~~ $75 million, or 4%11%, inand $132 million, or 7%, for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The effective interest rate, which includes capitalized interest, on the weighted average long-term debt balance of ~~$37.2~~$36.9 billion and ~~$38.6~~$37.4 billion was ~~6.4%~~6.5% and ~~6.3%~~6.6% for

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the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively. The effective interest rate, which includes capitalized interest, on the weighted average long-term debt balance of ~~$38.4~~$39.7 billion and ~~$37.1~~$40.0 billion was ~~6.6% and 6.8%~~6.5% for both the ~~three~~three- and nine-month periods ended December 31, ~~2016,~~2018, respectively. See “Liquidity and Capital Resources” for more information on the Company's financing activities.

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

Other ~~expense,~~(expense) income, net was ~~$42~~expense of $6 million and ~~$50~~income of $36 million infor the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively. ~~The~~Other expense, ~~was~~net for the three-month period ended December 31, 2019 primarily ~~due to $64 million and $70 million of~~represents equity in losses of unconsolidated investments, net ~~during~~of which $21 million relates to other-than-temporary impairment of an equity method investment, partially offset by interest income. Other income, net for the ~~three~~nine-month period ended December 31, 2019 primarily represents interest income, partially offset by equity in losses of unconsolidated investments, net of which $21 million relates to an impairment of an equity method investment. Other income, net was $32 million and $153 million for the three- and nine-month periods ended December 31, ~~2017, respectively, which includes a $50~~2018, respectively. Interest income during the three- and nine-month periods ended December 31, 2018 was $39 million ~~impairment to an equity method investment.~~and $129 million, respectively. In addition, during the nine-month period ended December 31, ~~2017, $65~~2018 we recognized other income of $24 million as a result of ~~loss on early extinguishment~~a tax-related legal settlement.

Income Taxes

Income tax benefit of ~~debt related to the retirement of portions of the Sprint Communications 8.375% Notes due 2017 and 9.000% Guaranteed Notes due 2018 was offset by $66 million of interest income.~~

~~Other expense, net was $60~~$408 million and ~~$67~~$494 million infor the ~~three~~three- and nine-month periods ended December 31, ~~2016,~~2019, respectively, represented a consolidated effective tax rate of 77% and 49%, respectively. ~~The expense was primarily due to recognizing~~During the ~~remaining debt finance costs of $74 million associated with the terminated unsecured financing facility in the three-month~~nine-month period ended December 31, ~~2016.~~2019, we recognized a $236 million tax benefit for federal and state valuation allowance. See Note 11. Income Taxes in Notes to the Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for additional information related to the reduction of our valuation allowance recorded during the period.

Income ~~Taxes~~

Ontax benefit of $8 million and expense of $56 million for the three- and nine-month periods ended December ~~22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act included changes in tax laws that had~~31, 2018, respectively, represented a ~~material impact on our financial statements. The impact was driven by the re-measurement of deferred tax assets and liabilities. The re-measurement included the impact of the corporate~~consolidated effective tax rate ~~reduction from 35% to 21%~~of 5% and 19%, respectively. During the ~~evaluation of our ability to realize deferred tax assets. Due to complexities involved in accounting for the enactment of the Tax Act, the SEC issued~~ ~~Staff Accounting Bulletin No. 118~~ ~~(SAB 118), which addresses the accounting implications. SAB 118 allows us to record a provisional estimate of the impacts of the Tax Act in our earnings in the~~nine-month period ended December 31, ~~2017. Based on currently available information,~~2018, we ~~recorded, as~~recognized a ~~provisional estimate, a $7.1 billion non-cash~~$62 million tax benefit ~~through income~~ for ~~continuing operations~~the impact of state law changes enacted during the period, partially offset by a $12 million tax expense attributable to ~~re-measure~~organizational restructuring. These adjustments were primarily driven by the change in carrying ~~values~~value of our deferred tax assets and ~~liabilities. The re-measurement~~liabilities on temporary differences.

As of ~~deferred taxes had no impact on cash flows~~ ~~(See Note 10. Income Taxes).~~

We expect adjustments to income tax expense in the quarter ending March 31, 2018, which may potentially be material. Income tax expense will be impacted primarily by the change in estimates of temporary differences during the quarter and the related future reversal patterns used in determining the measurement of our deferred tax assets. We do not expect these adjustments to impact cash flows.

~~Income tax benefit of $7.1 billion for the three-month period ended~~ December 31, 2017 was primarily attributable to the impact of the Tax Act as discussed above. Income tax benefit of $6.7 billion for the nine-month period ended December 31, 2017 was primarily attributable to the impact of the Tax Act, partially offset by taxable temporary differences from the tax amortization of FCC licenses and tax expense on pre-tax gains from spectrum license exchanges during the period. We also increased our deferred state income tax liability by $69 million for changes in business activities causing us to become subject to income tax in additional tax jurisdictions. This resulted in a change in the measurement of the carrying value of our deferred tax liability on temporary differences, primarily FCC licenses.

Income tax expense of $111 million and $286 million for the three and nine-month periods ended December 31, 2016, respectively, represented consolidated effective tax rates of approximately (30)% and (45)%, respectively. Income tax expense for both periods was primarily attributable to taxable temporary differences from the tax amortization of FCC licenses and tax expense to increase our deferred tax liability on FCC licenses temporary differences. Income tax expense for the nine-month period ended December 31, 2016 included tax expense on pre-tax gains from spectrum license exchanges during the period, partially offset by tax benefits from the reversal of certain state income tax2019, we maintained valuation allowance on deferred tax assets primarily related to net operating loss carryforwards net of taxable temporary differences projected to reverse in the carryforward periods. As of each reporting date, we consider new evidence, both positive and negative, that could affect our view of the future realization of deferred tax assets. Provisions included in federal and state tax laws, in particular alternative cost recovery methods for fixed assets applicable in future periods, can significantly impact the timing of deductions for tax purposes that may result in projected taxable income during the net operating loss carryforward periods. This projected taxable income would be a positive source of evidence. We believe that there is a reasonable possibility that our net deferred tax liability on net taxable temporary differences will increase in future periods and may result in additional reductions of our valuation allowance. A reduction of the valuation allowance would result in the recognition of the deferred tax assets and a non-cash tax benefit for

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the period the reduction is recorded. The exact timing and amount of the valuation allowance reduction are subject to change depending on the results of operations and the timing of future taxable income.

Segment Earnings - Wireless

Wireless segment earnings are a function of wireless net operating revenues inclusive of wireless service revenue, the sale of wireless devices (handsets, tablets and ~~tablets)~~wearables), broadband devices, connected devices, ~~and accessories,~~ leasing wireless devices, and commissions on the device insurance ~~program, commissions on our device~~and accessory ~~program, in addition to~~programs. Combined with wireless net operating revenues, Wireless segment earnings are also a function of costs of equipment sales and rentals, costs to acquire subscribers, and network and interconnection costs to serve those subscribers, as well as other Wireless segment operating expenses. The cost of equipment sales and equipment rentals primarily includes equipment costs associated with our installment billing and subsidy programs, and loss on disposal of property, plant and equipment, net of recoveries, resulting from the write-off of leased devices where customers did not return the devices to us. The costs to acquire our subscribers ~~include the cost at which we sell our devices, as well as the~~also includes marketing and sales costs incurred to attract those subscribers. Network costs primarily represent switch and cell site costs, backhaul costs, and interconnection costs, which generally consist of per-minute usage fees and roaming fees paid to other carriers. The remaining costs

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associated with operating the Wireless segment include the costs to operate our customer care organization and administrative support. Wireless service revenue, costs to acquire subscribers, and variable network and interconnection costs fluctuate with the changes in our subscriber base and their related usage, but some cost elements do not fluctuate in the short-term with these changes.

As shown by the table above under "Consolidated Results of Operations," Wireless segment earnings represented almost all of our total consolidated segment earnings for the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 and ~~2016.~~2018. Within the Wireless segment, postpaid wireless services represent the most significant contributor to earnings and is driven by the number of postpaid subscribers utilizing our services, as well as average revenue per user (ARPU). The wireless industry is subject to competition to retain and acquire subscribers of wireless services. ~~Almost all~~All markets in which we operate have high rates of penetration for wireless ~~services.~~services, and we expect this competition and market penetration to continue to pressure our share of gross additions and rates of churn.

Device Financing Programs

We offer a leasing program whereby qualified subscribers can lease a device for a contractual period of time, and an installment billing program that allows subscribers to purchase a device by paying monthly installments, generally over 24 months. In July 2017, we introduced the Sprint Flex program, which gives customers the opportunity to ~~get annual upgrades for all smartphones. With Sprint Flex, customers can lease any phone and have the option to upgrade or purchase later. This program allows customers to~~ enjoy their phone before deciding what option (upgrade, continue leasing, return or buy) works best for their lifestyle.

~~Under~~ Depending on device type, certain leases carry an option to upgrade to a new device annually prior to expiration of the ~~leasing program, qualified subscribers can lease a device for a contractual period of time.~~lease. At the end of the lease term, the subscriber has the option to ~~turn in their~~return the device, continue leasing ~~their~~the device, or purchase the device.

As of December 31, ~~2017,~~2019, substantially all of our device leases were classified as operating ~~leases.~~leases and predominantly all of our subscribers choose to lease devices from us under the Sprint Flex program. As a result, ~~at lease inception,~~ the leased devices are ~~reclassified from inventory to~~classified as property, plant and equipment when leased to subscribers through Sprint's direct channels. For leases in the indirect channel, we purchase the devices at lease inception from the dealer, which isare then capitalized to property, plant and equipment. ~~While a majority of the revenue associated with installment sales is recognized at the time of sale along with the related cost of products, lease~~Lease revenue is recorded monthly over the term of the lease and the cost of the device is depreciated to its estimated residual value, generally over the lease term. ~~During the three and nine-month periods ended December 31, 2017 and 2016, we leased~~As these devices ~~through our Sprint direct channels with costs totaling approximately $1.8 billion, $3.7 billion, $1.1 billion and $2.3 billion, respectively. These devices were reclassified from inventory to~~are classified as property, plant and equipment, ~~and, as such,~~ the cost of the device ~~was~~is not recorded as cost of ~~products~~equipment sales compared to when ~~purchased~~sold under the installment billing or ~~the~~ traditional subsidy program but rather is recorded as depreciation expense, which ~~resulted~~results in a significant positive impact to Wireless segment earnings. Depreciation expense incurred on ~~all~~ leased devices for the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 and ~~2016,~~2018, was ~~$990 million, $2.7~~$1.0 billion, ~~$837 million~~$3.1 billion, $1.1 billion and ~~$2.2~~$3.5 billion, respectively. If the mix of leased devices continues to increase, we expect this positive impact on the financial results of Wireless segment earnings to continue and depreciation expense to increase. However, prior to its termination, the benefit to Wireless segment earnings was partially offset by the Handset Sale-Leaseback Tranche 1 (Tranche 1) transaction that was consummated in November 2015 whereby we sold and subsequently leased back certain devices leased to our customers. As a result, the cost to us of the devices sold to Mobile Leasing Solutions, LLC (MLS) under Tranche 1 was no longer recorded as depreciation expense, but rather was recognized as rent expense within “Cost of products” in the consolidated statements of comprehensive income (loss) during the leaseback periods until Tranche 1 was terminated in conjunction with the repurchase of devices in December 2016.

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

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

Wireless Segment Earnings Trends

Sprint offers lower monthly service fees without a traditional contract as an incentive to attract subscribers to certain of our service plans. These lower rates for service are available whether the subscriber brings their own device, pays

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the full or ~~near full~~discounted retail price offor the device, leases their device through our Sprint Flex leasing program, or purchases the device under our installment billing ~~program, or leases their~~

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~~device through our leasing~~ program. We expect our postpaid ARPU to ~~continue~~decline in fiscal year 2019 due to ~~decline primarily as~~the mix of devices resulting from higher data device sales, which generally have a ~~result of dilution from~~lower ARPU than handsets, and continued promotional activities and lower service fees associated with our price plans offered in conjunction with device financing options. However, we expect higher equipment revenue associated with the leasing and installment billing programs to partially offset these declines.activities. Since inception, the combination of lower-priced plans and our leasing and installment billing programs have been accretive to Wireless segment earnings. We expect that trend to continue ~~with~~so long as we are able to attract subscribers, particularly postpaid handset subscribers. Additionally, we expect prepaid service revenue to decline in fiscal year 2019 due to the ~~magnitude~~continued amortization of contract balances as a result of the ~~impact being dependent upon subscriber~~ adoption ~~rates.~~of Revenue from Contracts with Customers (Topic 606).

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

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


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	December 31,						December 31,						December 31,						December 31,
Wireless Segment Earnings	2017			2016			2017			2016			2019			2018			2019			2018
	(in millions)												(in millions)
Postpaid(1)	$	4,314		$	4,686		$	13,151		$	14,184		$	4,229		$	4,236		$	12,646		$	12,676
Prepaid⁽¹⁾	997			985			2,990			3,096			740			924			2,375			2,860
Retail service revenues	5,311			5,671			16,141			17,280
Retail service revenue													4,969			5,160			15,021			15,536
Wholesale, affiliate and other⁽¹⁾	329			275			884			784			226			289			541			868
Total service revenues	5,640			5,946			17,025			18,064
Equipment revenues	2,309			2,226			6,355			5,556
Total service revenue													5,195			5,449			15,562			16,404
Equipment sales													1,372			1,589			3,784			4,180
Equipment rentals													1,292			1,313			3,981			3,778
Total net operating revenues	7,949			8,172			23,380			23,620			7,859			8,351			23,327			24,362
Cost of services (exclusive of depreciation and amortization)	(1,385		)	(1,649		)	(4,204		)	(5,226		)	(1,554		)	(1,439		)	(4,664		)	(4,340		)
Cost of products (exclusive of depreciation and amortization)	(1,673		)	(1,985		)	(4,622		)	(5,097		)
Cost of equipment sales													(1,646		)	(1,734		)	(4,346		)	(4,521		)
Cost of equipment rentals (exclusive of depreciation)													(201		)	(182		)	(666		)	(457		)
Selling, general and administrative expense	(2,009		)	(2,032		)	(5,818		)	(5,797		)	(1,923		)	(1,885		)	(5,517		)	(5,339		)
Loss on disposal of property, plant and equipment	(123		)	(109		)	(347		)	(340		)
Total net operating expenses	(5,190		)	(5,775		)	(14,991		)	(16,460		)	(5,324		)	(5,240		)	(15,193		)	(14,657		)
Wireless segment earnings	$	2,759		$	2,397		$	8,389		$	7,160		$	2,535		$	3,111		$	8,134		$	9,705

_______________

(1)

Sprint is no longer reporting Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. We have excluded them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline mobile virtual network operators (MVNO). The above table reflects the reclassification of the related Assurance Wireless prepaid revenue from PrepaidPostpaid service revenue ~~to Wholesale, affiliate and other revenue of $92 million and $275 million for~~in the ~~three and~~ nine-month ~~periods~~period ended December 31, ~~2016, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNOs continues to remain in Wholesale, affiliate and other~~2018 excludes $3 million of hurricane-related revenue ~~following this change.~~reimbursements.

Service Revenue

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

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

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

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

Retail comprises those subscribers to whom Sprint directly provides wireless services, whether those services are provided on a postpaid or a prepaid basis. We also categorize our retail subscribers as prime and subprime based on subscriber credit profiles. We use proprietary scoring systems that measure the credit quality of our subscribers using several factors, such as credit bureau information, subscriber credit risk scores and service plan characteristics. Payment history is

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subsequently monitored to further evaluate subscriber credit profiles. Wholesale and affiliates are those subscribers who are

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served through MVNO and affiliate relationships and other arrangements. Under the MVNO relationships, wireless services are sold by Sprint to other companies that resell those services to subscribers.

Effective January 1, 2017, we entered into a new Master Services Agreement with a vendor to provide post-sale device support services (including device insurance) to subscribers. Under the new agreement, the vendor bears the risk of loss with regards to claims and related costs, which Sprint no longer incurs. Sprint remits premiums to the vendor who pays Sprint a monthly recurring commission per subscriber for the duration of the agreement. Additionally, under the terms of the new agreement, the vendor is the primary obligor in the agreement with the subscriber and, as such, revenue is accounted for and presented on a net basis, whereas historically the amounts were presented on a gross basis. The change is expected to result in reductions in service revenue by approximately $500 million in fiscal year 2017. Because the vendor, not Sprint, is fulfilling the services, we expect the reductions in service revenue to be more than offset by greater reductions in cost of services expense.

Retail service revenue decreased ~~$360~~$191 million, or 6%4%, and ~~$1.1 billion,~~$515 million, or ~~7%,~~3% for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The ~~decrease was~~decreases were primarily due to lower prepaid service revenue driven by the continued amortization of contract balances as a ~~lower insurance revenues due to changes in our device insurance program and~~result of the adoption of Topic 606, combined with lower average revenue per postpaid subscriber driven by higher data device sales which generally have a lower ARPU than handsets, an increase in ~~subscribers on~~service offers and other promotional activities and lower ~~price plans, combined with a decrease in average~~ prepaid ~~subscribers and competitive pressures.~~subscribers. The ~~decrease was~~decreases were partially offset by an increase in average postpaid subscribers.

Wholesale, affiliate and other revenues ~~increased $54~~decreased $63 million, or ~~20%~~22%, and ~~$100~~$327 million, or ~~13%,~~38% for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016,~~2018. The decreases were primarily due to lower Lifeline revenue as a result of reimbursements to federal and state governments for subsidies claimed contrary to Sprint's usage policy as well as lower claims during the periods. Additionally, the decrease in revenues was also due to the continued amortization of contract balances as a result of the adoption of Topic 606 combined with lower fees earned under ~~the~~an accessories arrangement with ~~Brightstar, which commenced during the quarter ending September 30, 2017, combined with an increase in imputed interest recognized associated with installment billing on devices. These increases~~Brightstar. The decreases were partially offset by ~~reduced revenue~~an increase in revenues associated with ~~postpaid and prepaid resellers due~~a reciprocal long-term lease agreement with T-Mobile. In September 2018, we signed a reciprocal long-term lease agreement with T-Mobile in which both parties have the right to ~~competitive pressures.~~use a portion of spectrum owned by the other party. Approximately ~~83%~~78% of our total wholesale and affiliate subscribers represent connected devices. These devices generate revenue which varies based on usage.

Average Monthly Service Revenue per Subscriber and Subscriber Trends

The table below summarizes average number of retail subscribers. Additional information about the number of subscribers, net additions (losses) to subscribers, and average rates of monthly postpaid and prepaid subscriber churn for each quarter since the quarter ended June 30, ~~2016~~2018 may be found in the tables ~~on the following pages.~~below.


	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
	December 31,		December 31,		December 31,		December 31,
	2017	2016	2017	2016	2019	2018	2019	2018
	(subscribers in thousands)				(subscribers in thousands)
Average postpaid subscribers	31,728	31,431	31,606	31,153	33,544	32,361	33,222	32,218
Average prepaid subscribers	8,840	9,662	8,756	10,311	8,327	8,918	8,532	8,976
Average retail subscribers	40,568	41,093	40,362	41,464	41,871	41,279	41,754	41,194

The table below summarizes ARPU. Additional information about ARPU for each quarter since the quarter ended June 30, ~~2016~~2018 may be found in the tables on the following pages.



	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2019		2018		2019		2018
ARPU⁽¹⁾:
Postpaid	$	42.02	$	43.64	$	42.29	$	43.73
Prepaid	$	29.63	$	34.53	$	30.93	$	35.40
Average retail	$	39.56	$	41.67	$	39.97	$	41.90

Three Months Ended Nine Months Ended
December 31, December 31,
2017 2016 2017 2016
ARPU⁽¹⁾:

Postpaid $ 45.13
$ 49.70
$ 46.14
$ 50.59
Prepaid $ 37.46
$ 33.97
$ 37.84
$ 33.35
Average retail $ 43.46
$ 46.00
$ 44.34
$ 46.30

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(1)

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

Postpaid ARPU for the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 decreased compared to the same periods in ~~2016~~2018 primarily due to lower service ~~fees~~revenue resulting from higher data device sales, which generally have a lower ARPU than handsets, and increased promotional activities, subscriber migrations to service plans associated with device financing options, and lower device insurance program revenues as a result of entering into a Master Services Agreement with a vendor to provide post-sale device support services to subscribers. We expect postpaid

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ARPU to continue to decline during fiscal year 2017 primarily as a result of dilution from promotional activities and lower service fees associated with our price plans offered in conjunction with device financing options. However, as a result of our leasing and installment billing programs, we expect increasing equipment revenues to partially offset these declines.activities. Prepaid ARPU ~~increased~~decreased for the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 compared to the same periods in ~~2016~~2018 primarily due to lower service revenue driven by the ~~removal~~continued amortization of ~~approximately 1.2 million low-engagement prepaid customers from our base~~contract balances as a result of ~~aligning our churn~~the adoption of Topic 606 and ~~retention rules across all our prepaid brands, excluding Assurance Wireless, in the three-month period ending December 31, 2016.~~from promotional activities. (See "Subscriber Results" below for more information.)

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The following table shows (a) net additions (losses) of wireless subscribers, (b) our total subscribers, and (c) end of period connected device subscribers as of the end of each quarterly period beginning with the quarter ended June 30, ~~2016.~~2018.


	June 30, 2016		Sept 30, 2016		Dec 31, 2016		March 31, 2017		June 30, 2017		Sept 30, 2017	Dec 31, 2017	June 30, 2018		Sept 30, 2018		Dec 31, 2018		March 31, 2019		June 30, 2019		Sept 30, 2019		Dec 31, 2019
Net additions (losses) (in thousands)⁽¹⁾
Postpaid	180		344		405		(118	)	(39	)	168	256	123		109		309		169		134		273		494
Prepaid⁽²⁾	(306	)	(449	)	(460	)	195		35		95	63	3		(14	)	(173	)	(30	)	(169	)	(207	)	(174	)
Wholesale and affiliates⁽²⁾	728		704		619		291		65		115	66
Wholesale and affiliates													(69	)	(115	)	(88	)	(147	)	(140	)	(462	)	(71	)
Total Wireless	602		599		564		368		61		378	385	57		(20	)	48		(8	)	(175	)	(396	)	249

End of period subscribers (in thousands)⁽¹⁾
Postpaid^(3)(4)(5)	30,945		31,289		31,694		31,576		31,518		31,686	31,942
Postpaid^(2)(3)(4)(5)													32,187		32,296		32,605		32,774		33,075		33,348		33,842
Prepaid⁽⁸⁾⁽⁴⁾	10,636		10,187		8,493		8,688		8,719		8,765	8,997	9,033		9,019		8,846		8,816		8,647		8,440		8,266
Wholesale and affiliates⁽⁹⁾⁽⁷⁾	11,782		12,486		13,084		13,375		13,461		13,576	13,642	13,347		13,232		13,044		12,897		12,590		12,128		12,057
Total Wireless	53,363		53,962		53,271		53,639		53,698		54,027	54,581	54,567		54,547		54,495		54,487		54,312		53,916		54,165

Supplemental data - connected devices
End of period subscribers (in thousands)⁽⁴⁾⁽²⁾
Retail postpaid	1,822		1,874		1,960		2,001		2,091		2,158	2,259	2,429		2,585		2,821		3,121		3,453		3,718		4,050
Wholesale and affiliates	9,244		9,951		10,594		10,880		11,100		11,221	11,272	10,963		10,838		10,563		10,384		9,968		9,585		9,419
Total	11,066		11,825		12,554		12,881		13,191		13,379	13,531	13,392		13,423		13,384		13,505		13,421		13,303		13,469

_______________________

(1)

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


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

~~(3)~~

As part of the Shentel transaction, 186,000 and 92,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates, of which 18,000 prepaid subscribers were subsequently excluded from our subscriber base as the result of the regulatory changes in the Lifeline program as noted in (2) above. An additional 270,000 of nTelos' subscribers are now part of our affiliate relationship with Shentel and were reported in wholesale and affiliate subscribers beginning with the quarter ended June 30, 2016. In addition, during the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates as a result of the transfer of additional subscribers to Shentel.


~~(4)~~	End of period connected devices are included in ~~total~~ retail postpaid or wholesale and affiliates end of period subscriber totals for all periods presented.


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


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


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

(6)

During the three-month period ended December 31, 2016, the Company aligned all prepaid brands, excluding Assurance Wireless but including prepaid affiliate subscribers, under one churn and retention program. As a result of this change, end of period prepaid and affiliate subscribers as of December 31, 2016 were reduced by 1,234,000 and 21,000, respectively. See "Subscriber Results" below for more information.


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


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

~~(9)~~

Subscribers through some of our MVNO relationships have inactivity either in voice usage or primarily as a result of the nature of the device where activity only occurs when data retrieval is initiated by the end-user and may occur infrequently. Although we continue to provide these subscribers access to our network through our MVNO relationships, approximately ~~2,100,000~~2,545,000 subscribers at December 31, ~~2017~~2019 through these MVNO relationships have been inactive for at least six months, with no associated revenue during the six-month period ended December 31, ~~2017.~~2019.

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

The following table shows our average rates of monthly postpaid and prepaid subscriber churn as of the end of each quarterly period beginning with the quarter ended June 30, ~~2016.~~2018.


	June 30, 2016		Sept 30, 2016		Dec 31, 2016		March 31, 2017		June 30, 2017⁽²⁾		Sept 30, 2017		Dec 31, 2017		June 30, 2018		Sept 30, 2018		Dec 31, 2018		March 31, 2019		June 30, 2019		Sept 30, 2019		Dec 31, 2019
Monthly subscriber churn rate⁽¹⁾
Postpaid	1.56	%	1.52	%	1.67	%	1.75	%	1.65	%	1.72	%	1.80	%	1.63	%	1.78	%	1.85	%	1.81	%	1.74	%	1.87	%	1.98	%
Prepaid	5.39	%	5.59	%	5.74	%	4.69	%	4.57	%	4.83	%	4.63	%	4.17	%	4.74	%	4.83	%	4.37	%	4.23	%	4.94	%	4.92	%

_______________________

(1)

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

~~(2)~~

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

The following table shows our postpaid and prepaid ARPU as of the end of each quarterly period beginning with the quarter ended June 30, ~~2016.~~2018.


	June 30, 2016		Sept 30, 2016		Dec 31, 2016		March 31, 2017		June 30, 2017		Sept 30, 2017		Dec 31, 2017		June 30, 2018		Sept 30, 2018		Dec 31, 2018		March 31, 2019		June 30, 2019		Sept 30, 2019		Dec 31, 2019
ARPU
Postpaid	$	51.54	$	50.54	$	49.70	$	47.34	$	47.30	$	46.00	$	45.13	$	43.55	$	43.99	$	43.64	$	43.25	$	42.57	$	42.30	$	42.02
Prepaid	$	33.00	$	33.15	$	33.97	$	38.48	$	38.24	$	37.83	$	37.46	$	36.27	$	35.40	$	34.53	$	33.67	$	32.15	$	30.97	$	29.63

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Subscriber Results

Retail Postpaid — During the three-month period ended December 31, ~~2017,~~2019, net postpaid subscriber additions were ~~256,000~~494,000 compared to ~~405,000~~309,000 in the same period in ~~2016.~~2018. Net subscriber results include tablet net additions of 107,000 during the three-month period ended December 31, 2019 compared to 32,000 in the same period in 2018 and additions in other data devices of 502,000 and 303,000 during the three-month period ended December 31, 2019 and 2018, respectively, both of which generally have a significantly lower ARPU as compared to handset subscribers. The increase in net postpaid subscriber additions in the current quarter ~~were~~was primarily driven by net subscriber additions of ~~phones and~~ other data devices, partially offset by ~~tablet~~an increase in postpaid phone churn driven by subscribers exiting multi-line introductory promotional offers, competitive pressures and network-related churn. Marketing efforts by other wireless carriers, including device promotions, to incent subscribers to switch carriers also negatively impact churn, which has a negative effect on earnings.

The Company's non-Sprint branded postpaid offering allows prepaid customers to purchase a device under our installment billing program. This program provides prepaid customers with access to this offer under their respective brands. Qualified customers on this non-Sprint branded postpaid offering receive an extension of credit to purchase their device. The subscriber ~~losses.~~will remain classified as postpaid at the conclusion of their installment billing payments. For the quarter ended December 31, 2019, net subscriber additions and end of period subscribers under the non-Sprint branded postpaid plan offering were 108,000 and 885,000, respectively, and are included in total retail postpaid subscribers above.

Retail Prepaid — During the three-month period ended December 31, ~~2017,~~2019, we ~~added 63,000~~lost 174,000 net prepaid subscribers compared to ~~losses of 460,000~~173,000 in the same period in ~~2016.~~2018. The net ~~additions in the quarter were primarily due to growth in subscribers in the Boost Mobile~~ prepaid ~~brand, partially offset by~~ subscriber losses in the ~~Virgin Mobile prepaid brand~~quarter was primarily due to lower gross additions as a result of exiting certain channels, combined with subscriber losses due to continued ~~competition~~competitive pressures in the market.

We are no longer reporting prepaid Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. While we will continue to support our Lifeline subscribers through our Assurance Wireless prepaid brand, we have excluded these subscribers from our reported prepaid customer base. The above subscriber table reflects the exclusion of the Assurance Wireless prepaid subscribers on a comparable and trended basis resulting in the removal of 3.3 million subscribers from our reported prepaid subscriber base as of March 31, 2017.

As part of our ongoing efforts to simplify and drive consistency across our prepaid business, as well as tighten the customer engagement criteria, we aligned all prepaid brands, excluding Assurance Wireless, under one churn and retention program as of December 31, 2016. As a result of this alignment, prepaid and prepaid affiliate subscribers under our Boost Mobile, Virgin Mobile and Sprint brands are now deactivated 60 days from the later of the date of initial activation or the most recent replenishment date.

Wholesale and Affiliate Subscribers — Wholesale and affiliate subscribers represent customers that are served on our networks through companies that resell our wireless services to their subscribers, customers residing in affiliate territories and connected devices that utilize our network. Of the ~~13.6~~12.1 million subscribers included in wholesale and affiliates, approximately ~~83%~~78% represent connected devices. Wholesale and affiliate net subscriber ~~net additions~~losses were ~~66,000~~71,000 during the three-month period ended December 31, ~~2017~~2019 compared to ~~619,000~~net losses of 88,000 during the same period in ~~2016,~~2018, inclusive of net ~~additions~~losses of connected devices totaling ~~51,000~~166,000 and ~~643,000,~~175,000, respectively. The net ~~additions~~losses in the three-month period ended December 31, ~~2017~~2019 were primarily attributable to ~~growth~~a decline in connected devices, partially offset by ~~a decline~~an increase in subscribers through our postpaid and prepaid resellers.

We are no longer reporting wholesale Lifeline MVNO subscribers due to regulatory changes resulting in tighter program restrictions. While we will continue to support our Lifeline subscribers through our wholesale MVNOs, we have excluded these subscribers from our reported wholesale customer base. The above subscriber table reflects the exclusion of wholesale Lifeline MVNO subscribers on a comparable and trended basis resulting in the removal of 2.8 million subscribers from our reported wholesale subscriber base as of March 31, 2017.

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Cost of Services

Cost of services consists primarily of:

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

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

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

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

regulatory fees;

roaming fees paid to other carriers; and

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

Cost of services ~~decreased $264~~increased $115 million, or ~~16%~~8%, and ~~$1.0 billion,~~$324 million, or ~~20%~~7%, for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016,~~2018, primarily due to ~~the impact of changes to our device insurance program, now administered~~an increase in roaming costs driven by ~~a vendor who provides post-sale device support to subscribers~~higher data volume and ~~bears the risk of loss on claims and related costs in exchange for a monthly recurring commission per subscriber, which the Company records as service revenue. In addition,~~higher network costs ~~such as~~including cell site maintenance, software and costs associated with a reciprocal long-term lease agreement with T-Mobile. These increases were partially offset by lower roaming rates and declines in network labor and backhaul ~~were lower as a result of our network improvements and transformation initiatives, combined with a decrease in long distance primarily due to lower volume and rates.~~

Although we expect further reductions in cost of services from our ongoing and recently implemented transformation initiatives, our expectations are that the benefits for fiscal year 2017 will be less than those achieved in fiscal year 2016. The modifications to our device insurance program resulted in a shift from gross presentation of the associated revenue and costs of the program to a net presentation, which is accretive to earnings, is the primary driver for the expected reduction in cost of services in fiscal year 2017 compared to fiscal year 2016. The remaining improvements are expected to come from reductions in network costs associated with labor, backhaul and roaming. As noted in our discussion of "Service revenue" above, we expect revenue to decline by approximately $500 million in fiscal year 2017 as a result of the changes to the device insurance program.costs.

Equipment ~~Revenue~~Sales and Cost of ~~Products~~Equipment Sales

Our devices are sold to customers through installment billing and subsidy programs. We recognize equipment ~~revenue~~sales and corresponding costs of ~~devices~~equipment sales when title and risk of loss passes to the indirect dealer or end-use subscriber, assuming all other revenue recognition criteria are met. ~~Our devices are either sold to customers under installment billing and subsidy programs, or leased under the leasing program.~~ Under the installment billing program, the device is generally sold at full or ~~near full~~a discounted retail price and we recognize most of the future expected installment payments at the

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time of sale of the device. Under the subsidy program, which ~~is being~~has been de-emphasized, we offer certain incentives, such as new devices at heavily discounted prices, to retain and acquire subscribers. The cost of these incentives is recorded as a reduction to ~~equipment revenue upon activation of~~ the ~~device with a service contract.~~total transaction price and allocated to performance obligations.

Cost of ~~products~~equipment sales includes equipment costs (primarily devices and accessories), order fulfillment related expenses, and write-downs of ~~device and accessory~~ inventory related to shrinkage and obsolescence. Additionally, cost of ~~products~~equipment sales is reduced by any rebates that are earned from the equipment manufacturers. Cost of ~~products~~equipment sales in excess of the net revenue generated from equipment sales is referred to in the industry as equipment net subsidy. As postpaid subscribers migrate from acquiring devices through our subsidy program to our leasing or installment billing programs, equipment net subsidy continues to decline. We also make incentive payments to certain indirect dealers who purchase devices directly from OEMs or other device distributors. Those payments are recognized as selling, general and administrative expenses when the device is activated with a Sprint service plan because Sprint does not recognize any equipment revenue or cost of products for those transactions. (See ~~Selling, General and Administrative Expense~~ ~~below.)~~

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

Equipment sales decreased $217 million, or 14%, and $396 million, or 9%, for the time value of money element related to the imputed interest on the installment receivables. Under the leasing program, lease revenue is recorded over the term of the lease. The cost of the leased device is depreciated to its estimated residual value generally over the lease term. During the

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~~three~~three- and nine-month periods ended December 31, 2017 and 2016, we leased devices through our Sprint direct channels totaling approximately $1.8 billion, $3.7 billion, $1.1 billion and $2.3 billion, respectively, which were reclassified from inventory to property, plant and equipment and, as such, the cost of the device was not recorded as cost of products compared to when purchased under the installment billing or the traditional subsidy programs.

~~Equipment revenue increased $83 million, or 4%, and $799 million, or 14%, for the three and nine-month periods ended December 31, 2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The decrease in equipment sales for the three-month period ended December 31, 2019 was primarily due to a lower average sales price per postpaid device sold combined with a decline in the number of postpaid devices sold, partially offset by an increase in the number of prepaid devices sold and a higher average sales price per prepaid device sold. The decrease in equipment ~~revenue~~sales for the ~~three~~nine-month period ended December 31, 2019 was primarily due to a lower average sales price per postpaid device sold and a decrease in the volume of used postpaid devices sold to third parties. These decreases for the nine-month period ended were partially offset by an increase in the number of postpaid devices sold and a higher average sales price per prepaid device sold. Higher postpaid data device sales, which generally have a lower average sales price than postpaid handsets, contributed to the lower average sales price per postpaid device sold for both the three- and nine-month periods ended December 31, 2017 was primarily due to an increase in the volume of used devices sold to third parties, higher lease revenue, and higher average sales price per postpaid and prepaid devices sold, partially offset by a decrease in postpaid devices sold.2019. Cost of ~~products~~equipment sales decreased ~~$312~~$88 million, or ~~16%~~5%, and ~~$475~~$175 million, or 9%4%, for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016,~~2018. The decrease in the three-month period was primarily due to a ~~decrease~~lower average cost per postpaid device sold and a decline in ~~devices sold as a result of~~ the ~~higher mix~~number of postpaid ~~subscribers choosing to lease their~~ devices ~~combined with the elimination of lease payments to MLS associated with the termination of Tranche 1,~~sold, partially offset by an increase in the number of prepaid devices sold and a higher average cost per prepaid device sold. The decrease in the nine-month period was primarily due to a lower average cost per postpaid device sold and a decrease in the volume of used postpaid devices sold to third parties, ~~and~~partially offset by a higher average cost per prepaid device sold and an increase in the number of postpaid ~~and prepaid~~ devices ~~sold.~~

~~Total equipment revenues included $1.0 billion and $2.9 billion of lease revenues~~sold . Higher postpaid data device sales, which generally have a lower average cost than postpaid handsets, contributed to the lower average cost per postpaid device sold for both the ~~three~~three- and nine-month periods ended December 31, ~~2017, respectively, compared to $887 million~~2019.

Equipment Rentals and ~~$2.5 billion for~~Cost of Equipment Rentals

Under our leasing program, we recognize revenue from equipment rentals over the ~~three~~term of the operating lease. Cost of equipment rentals includes losses on disposal of property, plant and ~~nine-month periods ended December 31, 2016, respectively.~~equipment, net of recoveries, resulting from the write-off of leased devices. The ~~increase in lease revenue is primarily related to~~losses on disposal of property, plant and equipment, net of recoveries, result from the ~~increase in subscribers choosing to lease as opposed to purchasing a device. The two primary costs~~write-off of leased devices associated with lease ~~revenues are depreciation of~~cancellations prior to the ~~leased device and~~scheduled customer lease terms where customers did not return the devices to us. We expect to incur losses ~~incurred for devices that are not returned to us by customers. The depreciation expense attributable to lease revenues, which is presented~~in future periods as a ~~component~~result of consolidated depreciation expense, was $990 million and $2.7 billion for the three and nine-month periods ended December 31, 2017, respectively, compared to $837 million and $2.2 billion for the three and nine-month periods ended 2016. Additionally, the loss on leasedcustomers who do not return devices which is presented in "Other, net" within Operating income in the consolidated statements of comprehensive income (loss), was $123 million and $347 million for the three and nine-month periods ended December 31, 2017, respectively, compared to $109 million and $340 million for the three and nine-month periods ended 2016, respectively. under our leasing program.

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

Equipment rentals decreased $21 million, or 2%, and increased $203 million, or 5%, for the three- and nine-month periods ended December 31, 2019, respectively, compared to the same periods in 2018. The decrease in the three-month period was primarily due to a decline in the number of devices leased. The increase in the nine-month period was primarily due to higher revenue from the leasing program and the mix of devices leased. Cost of equipment rentals increased $19 million, or 10%, and $209 million, or 46% for the three- and nine-month periods ended December 31, 2019, respectively, compared to the same periods in 2018, primarily due to an increase in loss on disposal of property, plant and equipment, net of recoveries associated with non-returned leased devices.

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Selling, General and Administrative Expense

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

Sales and marketing ~~expense remained~~expenses increased $3 million, and $11 million, or relatively flat, ~~increasing $4 million, and increased $93 million, or 3%,~~ for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The ~~increase in the nine-month period ended December 31, 2017 was~~increases were primarily due to higher ~~prepaid~~commission expenses and marketing ~~costs~~spend, partially offset by lower retail labor expenses combined with a decrease in payments to OEMs for direct source handsets as a result of ~~media spend related to the Boost Mobile and Virgin Mobile brands.~~lower volume of device sales.

General and administrative ~~costs decreased $27~~expenses increased $35 million, or 4%5%, and ~~$72~~$167 million, or ~~3%,~~8% for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016,~~2018. The increases were primarily due to ~~lower~~higher bad debt ~~expense,~~and customer care expenses, partially offset by ~~an increase~~a decline in other general and administrative ~~costs.~~expenses.

Bad debt expense ~~decreased $73~~increased $56 million, or ~~42%~~50%, and ~~$105~~$156 million, or ~~26%,~~56% for the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The ~~decreases~~increases were primarily ~~related~~due to ~~lower~~higher installment billing reserves ~~due to fewer~~as a result of an increase in subscribers entering into installment ~~notes, partially offset by~~billing contracts and an increase in service revenue bad ~~debt resulting from higher reserve rates and an increase in accounts written off due to higher churn.~~debt. We reassess our allowance for doubtful accounts quarterly.

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~~Loss on Disposal of Property, Plant and Equipment~~

For the three and nine-month periods ended December 31, 2017 and 2016, loss on the disposal of property, plant and equipment, net of recoveries, of $123 million, $347 million, $109 million, and $340 million, respectively, primarily resulted from the write-off of leased devices associated with lease cancellations prior to the scheduled customer lease terms where customers did not return the devices to us. We expect to continue to incur losses in future periods as a result of customers who do not return devices under our leasing program. Similar charges have been incurred for devices sold under our subsidy and installment billing programs as equipment net subsidy and bad debt expense, respectively. While we expect the mix of lease subscribers to increase in the future as a result of our Sprint Flex program, which launched during the quarter ended September 30, 2017, we expect the amount of losses in fiscal year 2017 to remain relatively consistent with the amounts recorded in fiscal year 2016.

Segment Earnings - Wireline

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

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

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

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

Three Months Ended Nine Months Ended
December 31, December 31,
Wireline Segment Earnings 2017 2016 2017 2016
(in millions)
Voice $ 94
$ 153
$ 327
$ 506
Data 29
41
96
127
Internet 254
281
765
871
Other 16
22
47
59
Total net service revenues 393
497
1,235
1,563
Cost of services (exclusive of depreciation) (352 ) (400 ) (1,111 ) (1,284 )
Selling, general and administrative expense (71 ) (49 ) (194 ) (189 )
Total net operating expenses (423 ) (449 ) (1,305 ) (1,473 )
Wireline segment earnings $ (30 ) $ 48
$ (70 ) $ 90



	Three Months Ended						Nine Months Ended
	December 31,						December 31,
Wireline Segment Earnings (Loss)	2019			2018			2019			2018
	(in millions)
Total net service revenues	$	296		$	316		$	903		$	982
Cost of services	(238		)	(280		)	(756		)	(886		)
Selling, general and administrative expense	(46		)	(52		)	(140		)	(174		)
Total net operating expenses	(284		)	(332		)	(896		)	(1,060		)
Wireline segment earnings (loss)	$	12		$	(16	)	$	7		$	(78	)

~~Wireline Revenue~~

~~Voice~~Service Revenues

~~Voice~~Service revenues for the ~~three~~three- and nine-month periods ended December 31, ~~2017~~2019 decreased ~~$59~~$20 million, or ~~39%~~6%, and ~~$179~~$79 million, or ~~35%~~8%, respectively, compared to the same periods in ~~2016.~~2018. The decrease was driven by lower volume and overall rate declines primarily due to lower international hubbing volumes as the company continues to de-emphasize certain voice services, combined with the decline in prices for the sale of services to our Wireless segment. Voice revenues generated from the sale of services to our Wireless segment represented 34% and 35% of total voice revenues for the three and nine-month periods ended December 31, 2017, respectively, compared to 40% and 39% for the same periods in 2016.

~~Data Revenues~~

Data revenues reflect sales of data services, primarily Private Line and managed network services bundled with non-IP-based data access. Data revenues decreased $12 million, or 29%, and $31 million, or 24%, for the three and nine-month periods ended December 31, 2017, respectively, compared to the same periods in 2016, as a result of customer churn, primarily related to Private Line. Data revenues generated from the provision of services to the Wireless segment represented 69% and 61% of total data revenue for the three and nine-month periods ended December 31, 2017, respectively, compared to 56% and 53% for the same periods in 2016.

~~Internet Revenues~~

fewer customers using IP-based data services ~~revenue reflects sales of Internet services, including MPLS, VoIP, SIP, and managed services bundled with IP-based~~as we continue to migrate customers from TDM to Ethernet-based data access. IP-based data services revenue decreased $27 million, or 10%, and $106 million, or 12%, for the three and nine-month periods ended December 31, 2017, respectively, compared to the same periods in 2016, primarily due to fewer IP customers. In addition, revenue was also impacted by a decline in prices for the sale of services to our Wireless segment. Sale of services to our Wireless segment represented 14% and 13% of total Internet revenues for the three and nine-month periods ended December 31, 2017, compared to 14% for both periods in 2016.

~~Other Revenues~~

Other revenues, which primarily consist of sales of customer premises equipment, decreased $6 million, or 27%, and $12 million, or 20%, in the three and nine-month periods ended December 31, 2017, respectively, compared to the same periods in 2016.services.

Costs of Services

Costs of services include access costs paid to local phone companies, other domestic service providers and foreign phone companies to complete calls made by our domestic subscribers, costs to operate and maintain our networks, and costs of customer premise equipment. Costs of services decreased ~~$48~~$42 million, or ~~12%~~15%, and ~~$173~~$130 million, or ~~13%~~15%, in the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The decrease was primarily due to lower access expense as the result of ~~savings initiatives and lower network labor costs combined with lower international voice rates and volume.~~our TDM migration efforts.

Selling, General and Administrative Expense

Selling, general and administrative expense ~~increased $22~~decreased $6 million, or ~~45%~~12%, and $5$34 million, or 3%20%, in the ~~three~~three- and nine-month periods ended December 31, ~~2017,~~2019, respectively, compared to the same periods in ~~2016.~~2018. The ~~increases were~~

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decrease was primarily due to ~~higher sales and marketing expense, partially offset by~~ lower shared administrative and employee-related costs required to support the Wireline segment as a result of the decline in revenue. Total selling, general and administrative expense as a percentage of net ~~services revenue~~service revenues was ~~18%~~16% and 16% for the ~~three~~three- and nine-month periods ended December 31, ~~2017, respectively,~~2019, as compared to ~~10%~~16% and ~~12%~~18% for the ~~three~~three- and nine-month periods ended December 31, ~~2016, respectively.~~2018.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Nine Months Ended
December 31,
2017 2016
(in millions)
Net cash provided by operating activities $ 4,405
$ 2,900
Net cash provided by (used in) investing activities $ 1,276
$ (5,194 )
Net cash (used in) provided by financing activities $ (4,111 ) $ 3,360



	Nine Months Ended
	December 31,
	2019			2018
	(in millions)
Net cash provided by operating activities	$	6,765		$	7,582
Net cash used in investing activities	$	(8,031	)	$	(7,430	)
Net cash used in financing activities	$	(2,530	)	$	(526	)

Operating Activities

Net cash provided by operating activities of ~~$4.4~~$6.8 billion infor the nine-month period ended December 31, ~~2017 increased $1.5 billion~~2019 decreased $817 million from the same period in ~~2016.~~2018. The ~~increase~~change was primarily due to ~~lower vendor~~decreased cash received from customers of $1.7 billion, partially offset by a reduction in vendor- and labor-related payments of ~~$1.0~~$768 million.

Net cash provided by operating activities of $7.6 billion ~~which were primarily due to reduced operating costs resulting from the Company's ongoing cost reduction initiatives, and $564 million of increased cash received from customers. Also, during~~for the nine-month period ended December 31, ~~2017, we paid $129~~2018 increased $173 million ~~which consisted of call redemption premiums and tender expenses,~~from the same period in 2017. The change was primarily due to increased cash received from

customers of $1.2 billion, of which $686 million is related to an increase in installment billing receivables collected due to an amendment to our Receivables Facility in February 2017. All cash collected on the ~~early retirement~~underlying receivables generated after the amendment is reflected in operating activities, as described below in Accounts Receivable Facility. The increased cash received from customers was partially offset by higher vendor- and labor-related payments of ~~Sprint Communications 8.575% Notes~~$1.1 billion primarily due ~~2017 and 9.000% Guaranteed Notes due 2018.~~to

unfavorable changes in working capital.

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Investing Activities

Net cash ~~provided by~~used in investing activities infor the nine-month period ended December 31, ~~2017 improved~~2019 increased $601 million compared to the same period in 2018 primarily due to decreased proceeds from the sale of short-term investments of $6.5 billion, partially offset by ~~$6.5~~decreased purchases of short-term investments of $5.1 billion. This net change in short-term investments was partially offset by increased proceeds from the sale of assets of $403 million and a decrease in network and other capital expenditures of $454 million.

Net cash used in investing activities for the nine-month period ended December 31, 2018 increased $5.8 billion compared to the same period in ~~2016,~~2017, primarily due to ~~increased~~decreased net proceeds offrom short-term investments of ~~$7.6 billion. This increase was partially offset by~~$3.8 billion, increased network and other capital expenditures of ~~$1.1~~$1.3 billion due to 5G network expenditures and increased leased device purchases of ~~$257~~$206 million. In addition, we had a decrease of $686 million due to an amendment to our Receivables Facility in February 2017. All cash collected on the underlying receivables generated after the amendment is reflected in operating activities, as described below in Accounts Receivable Facility. These activities were partially offset by $110 million borrowed against the cash surrender value of ~~leased devices from indirect dealers.~~corporate owned life insurance policies.

Financing Activities

Net cash used in financing activities ~~was $4.1~~of $2.5 billion ~~during~~for the nine-month period ended December 31, ~~2017, which was~~2019 increased $2.0 billion compared to the same period in 2018 primarily due to an increase in repayments of debt, financing and finance lease obligations. Total principal repayments include $1.7 billion, $3.8 billion, $300 million, $199 million, $656 million and $252 million for the ~~retirement of $1.3 billion principal amount of outstanding~~ Sprint ~~Communications 8.375%~~Capital Corporation 6.900% Senior Notes due ~~2017~~2019, Receivables Facility, Export Development Canada (EDC) facility, PRWireless term loan, the 2016 spectrum financing transaction and ~~$1.2~~the secured equipment credit facilities, respectively. These payments were partially offset by Receivables Facility borrowings of $4.6 billion.

Net cash used in financing activities was $526 million for the nine-month period ended December 31, 2018. Total principal repayments include $4.2 billion, ~~principal amount of outstanding~~$1.8 billion, $656 million and $169 million for the Receivables Facility, Sprint Communications 9.000% Guaranteed Notes due ~~2018. In addition, we had Receivables Facility~~2018, the 2016 spectrum financing transaction and the secured equipment credit facilities, ~~draws~~respectively. Additionally, we paid $286 million in debt financing costs primarily due to fees related to the consent solicitations as a result of ~~$2.7 billion and $310 million, respectively.~~the Business Combination Agreement with T-Mobile. These ~~draws~~payments were partially offset by ~~principal repayments of $342 million, $186 million, $1.7 billion. $1.4 billion, $629 million and $219 million for the Handset Sale-Leaseback Tranche 2, secured equipment credit facilities,~~ Receivables Facility ~~network equipment sale-leaseback transaction, Clearwire Communications LLC 8.25% exchangeable notes and the spectrum financing transaction, respectively.~~

~~Net cash provided by financing activities was $3.4~~borrowings of $5.1 billion, ~~during the nine-month period ended December 31, 2016,~~ ~~which was primarily due to cash receipts~~proceeds from an incremental secured term loan (Incremental Term Loan) of ~~$2.2 billion,$1.1~~$1.1 billion and ~~$3.5 billion~~proceeds from ~~the network equipment sale-leaseback,~~ ~~Handset Sale-Leaseback Tranche 2 and spectrum financing transactions, respectively. These receipts were partially offset by repayments~~issuance of ~~$502~~common stock, net of $281 million ~~$220~~primarily related to SoftBank exercising its warrant in full to purchase 55 million ~~and $153 million for the Handset Sale-Leaseback Tranche 2, secured equipment credit facilities and financing of future lease receivables, respectively. We also retired $2.0 billion in principal amount~~shares of Sprint ~~Communications, Inc. 6% senior notes due 2016 and $300 million principal amount of Clearwire Communications LLC 14.75% secured notes due 2016. In addition, we paid a total of $272 million~~common stock in ~~debt finance costs for the unsecured financing facility, the network equipment sale-leaseback and spectrum financing transactions.~~July 2018.

Working Capital

We had negative working capital of ~~$906 million~~$3.0 billion and working capital of ~~$1.7 billion~~$776 million as of December 31, ~~2017~~2019 and March 31, ~~2017,~~2019, respectively. The change in working capital was primarily due to ~~increases~~a decline in cash and cash equivalents driven by the ~~current portion~~increase in repayments of ~~long-term~~ debt, financing and ~~capital~~finance lease obligations of $1.8 billion related to the remaining portion of the Sprint Communications 9.000% Guaranteed Notes due 2018 and $438 million related to the spectrum leasing transaction. In addition, we retired $1.2 billion Sprint Communications 9.000% Guaranteed Notes due 2018 as described above. ~~These were~~

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~~partially offset by net Receivables Facility draws of approximately $1.0 billion.~~ The remaining balance was due to changes to other working capital items.

Long-Term Debt and Other Funding Sources

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

Accounts Receivable Facility

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February 2021. While we have the right to decide how much cash to receive from each sale, the maximum amount of cash available to us varies based on a number of factors and, as of December 31, ~~2017,~~2019, represents approximately ~~50%~~51% of the total amount of the eligible receivables sold to the Purchasers. As of December 31, ~~2017,~~2019, the total amount ~~of borrowings~~outstanding under our Receivables Facility was ~~$3.0~~$3.3 billion and the total amount available to be drawn was ~~$781~~$95 million. During the nine-month period ended December 31, ~~2017,~~2019, we drew ~~$2.7~~$4.6 billion and repaid ~~$1.7~~$3.8 billion to the Purchasers, which were reflected as financing activities in the consolidated statements of cash flows. Sprint contributes certain wireless service, installment and future lease receivables, as well as the associated leased devices, to Sprint's wholly-owned consolidated bankruptcy-remote special purpose entities (SPEs). At Sprint's direction, the SPEs have sold, and will continue to sell, wireless service, installment and future lease receivables to the Purchasers or to a bank agent on behalf of the Purchasers. Leased devices will remain with the SPEs, once sales are initiated, and continue to be depreciated over their estimated useful life. As of December 31, ~~2017,~~2019, wireless service, installment and ~~installment~~lease receivables contributed to the SPEs and included in "Accounts and notes receivable, net" in the consolidated balance sheets were ~~$3.0~~$2.7 billion and the long-term portion of installment receivables included in "Other assets" in the consolidated balance sheets was ~~$208~~$280 million. As of December 31, ~~2017,~~2019, the net book value of devices contributed to the SPEs was ~~approximately $5.6~~$6.7 billion.

~~Network Equipment Sale-Leaseback~~

~~In April 2016, Sprint sold and leased back certain network equipment~~On January 24, 2020, the Company amended the Receivables Facility to, ~~unrelated bankruptcy-remote special purpose entities (collectively, Network LeaseCo). The network equipment acquired by Network LeaseCo, which we consolidate, was used as collateral~~among other things, extend the maturity date from February 2021 to raise approximately $2.2 billion in borrowings from external investors, including SoftBank Group Corp. (SoftBank). Principal and interest payments on the borrowings from the external investors were repaid in staggered, unequal payments through January 2018. During the nine-month period ended December 31, 2017, we made principal repayments totaling $1.4 billion, resulting in a total principal amount of $454 million outstanding as of December 31, 2017, which was fully repaid in January 2018.

~~Handset Sale-Leaseback Tranche 2 (Tranche 2)~~

~~Sprint sold certain iPhone~~^® devices being leased by our customers to MLS, a company formed by a group of equity investors, including SoftBank, and then subsequently leased the devices back. Under the agreements, Sprint generally maintains the customer leases, continues to collect and record lease revenue from the customer and remits monthly rental payments to MLS during the leaseback periods.

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proceeds were accounted for as a financing. Accordingly, the devices remain in "Property, plant and equipment, net" in the consolidated balance sheets and we continue to depreciate the assets to their estimated residual values over the respective customer lease terms. During the nine-month period ended December 31, 2017, we made principal repayments and non-cash adjustments totaling $385 million to MLS. In October 2017, Sprint terminated Tranche 2 pursuant to its terms and repaid all outstanding amounts.

Spectrum ~~Financing~~Financings

In October 2016, certain subsidiaries of Sprint Communications, which were not "Restricted Subsidiaries" under ~~its~~Sprint Capital Corporation's indentures, transferred certain directly held and third-party leased spectrum licenses (collectively, Spectrum Portfolio) to wholly-owned bankruptcy-remote special purpose entities (collectively, Spectrum Financing SPEs). The Spectrum Portfolio, which represented approximately 14% of Sprint's total spectrum holdings on a MHz-pops basis, was used as collateral to raise an initial $3.5 billion in senior secured notes (2016 Spectrum-Backed Notes) bearing interest at 3.36% per annum under a $7.0 billion ~~program that permits Sprint to raise up to an additional $3.5 billion in senior secured notes, subject to certain conditions.~~securitization program. The ~~senior secured notes~~2016 Spectrum-Backed Notes are repayable over a five-year term, with interest-only payments over the first four quarters and amortizing quarterly principal payments thereafter commencing December 2017 through September 2021. During the nine-month period ended December 31, ~~2017,~~2019, we made scheduled principal repayments of ~~$219~~$656 million, resulting in a total principal amount outstanding related to the 2016 Spectrum-Backed Notes of ~~$3.3~~$1.5 billion ~~outstanding~~ as of December 31, ~~2017,~~2019, of which $875 million was classified as "Current portion of long-term debt, financing and ~~capital~~finance lease obligations" in the consolidated balance sheets.

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

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Financing ~~SPE~~SPEs are not available to satisfy the debts and other obligations owed to other creditors of Sprint until the obligations of the Spectrum Financing SPEs under the spectrum-backed senior secured notes are paid in full.

~~Long-Term Debt~~

~~During~~In June 2018, we obtained consent under the ~~three-month period ended June 30, 2017, pursuant~~spectrum-backed senior secured notes indenture to amend the indenture such that the proposed merger transaction with T-Mobile, if consummated, will not constitute a ~~cash tender offer, Sprint Communications retired $388 million principal amount~~change of ~~its outstanding 8.375% Notes due 2017 and $1.2 billion principal amount of its outstanding 9.000% Guaranteed Notes due 2018. During~~control as defined in the three-month period ended September 30, 2017, Sprint Communications retired the remaining $912 million principal amount of its outstanding 8.375% Notes due August 2017. During the three-month period ended December 31, 2017, we retired $629 million principal amount outstanding of 8.25% Clearwire Communications LLC exchangeable notes.indenture.

Credit Facilities

Secured Term Loan and Revolving Bank Credit Facility

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equal to LIBOR plus 250 basis points and the secured revolving bank credit facility has an interest rate equal to LIBOR plus a spread that varies depending on the Leverage Ratio. During the nine-month period ended December 31, 2019, we made principal repayments on the Initial Term Loan totaling $30 million resulting in a total principal amount outstanding for the Initial Term Loan of $3.9 billion as of December 31, 2019.

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

On January 24, 2020, we amended our secured revolving bank credit facility. Pursuant to the amendment, the availability of commitments under the bank credit facility will remain at $2.0 billion until the original maturity date of February 3, 2021, while the availability of approximately $1.8 billion of commitments was extended to February 3, 2022. The amendment also modifies the required ratio (Leverage Ratio) of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non-recurring items, as defined by the bank credit facility (adjusted EBITDA), so as not to exceed 3.75 to 1.0 for the fiscal quarter ended December 31, 2019 and 6.0 to 1.0 for the fiscal quarter ended March 31, 2020 and each fiscal quarter ending thereafter through expiration of the facility.

PRWireless Term Loan

During the ~~quarter~~three-month period ended December 31, 2017, Sprint and PRWireless PR, Inc. completed a transaction to combine their operations in Puerto Rico and the U.S. Virgin Islands into a new ~~entity.~~joint venture. Prior to the formation of the new entity, PRWireless PR, Inc. had incurred ~~$178 million principal amount of~~ debt under a secured term loan, which became debt of the new entity upon the transaction close. ~~The term loan bears interest at 5.25% plus LIBOR and expires in June 2020. Any amounts repaid early may not be drawn again. From~~On November 1, 2019, the ~~effective date through December 31, 2017,~~Company prepaid the ~~new entity borrowed $5 million, resulting in a~~ total principal amount outstanding of ~~$183~~$199 million ~~outstanding as of December 31, 2017 with an additional $20 million remaining available as of December 31, 2017. Sprint has provided an unsecured guarantee of repayment of~~under the ~~secured~~PRWireless term loan ~~obligations. The secured portion of the facility is limited to assets of the new entity as the borrower.~~previously due in June 2020.

Export Development Canada ~~(EDC)~~ Agreement

~~As of December 31, 2017,~~On September 16, 2019, the EDC agreement provided for security and covenant terms similar to our secured term loan and revolving bank credit facility. However, under the terms of the EDC agreement, repayments of outstanding amounts cannot be redrawn. As of December 31, 2017,Company prepaid the total principal amount ~~of our borrowings~~outstanding under the EDC facility ~~was~~of $300 ~~million.~~

~~Unsecured Credit Facility Commitment~~

~~During the three-month period ended September 30, 2017, Sprint Communications entered into a commitment letter with a group of banks to provide an unsecured credit facility~~million previously due in an aggregate principal amount up to $3.2 billion. Draws on the unsecured credit facility would bear interest at a rate equal to either the London Interbank Offered Rate (LIBOR) plus a percentage that varies depending on the days elapsed since the effective date of the facility (1.25% to 4.25% per annum), or base rate, as defined in the commitment letter, plus a percentage that varies depending on the days elapsed since the effective date of the facility (0.25% to 3.25% per annum). Commitments will be reduced by an amount equal to the proceeds from the sales of certain assets and will terminate upon certain debt issuances or sales of equity securities. Amounts borrowed and repaid cannot be redrawn and the unsecured credit facility, if executed, will terminate in MarchDecember 2019. ~~As of December 31, 2017, the unsecured credit facility had not been executed and thus no amounts have been drawn.~~

Secured ~~Equipment Credit Facilities~~equipment credit facilities

Finnvera plc (Finnvera)

K-sure

The K-sure secured equipment credit facility provides for the ability to ~~borrow up to $750 million to~~ finance network equipment-related purchases from Samsung Telecommunications America, LLC. The facility can be divided in up to three consecutive tranches of varying size. In September 2017, we amended the secured equipment credit facility to extend the borrowing availability through December 2018. Such borrowings are contingent upon the amount and timing of network-related purchases made by Sprint. During the nine-month period ended December 31, ~~2017,~~2019, we drew $96 million and made principal repayments totaling ~~$65~~$159 million on the facility resulting in a total principal amount of ~~$194~~$387 million outstanding as of December 31, ~~2017.~~2019.

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Delcredere | Ducroire (D/D)

Borrowings under the Finnvera, K-sure and D/D secured equipment credit facilities are each secured by liens on the respective network equipment purchased pursuant to each facility's credit agreement. In addition, repayments of

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outstanding amounts borrowed under the secured equipment credit facilities cannot be redrawn. Each of these facilities is fully and unconditionally guaranteed by both Sprint Communications and Sprint Corporation. As of December 31, 2019, the K-sure facility, the Finnvera and D/D facilities had no available borrowing capacity.

As of December 31, ~~2017,~~2019, our Leverage Ratio, as defined by our secured revolving bank credit facility was 3.2 to 1.0. Because our Leverage Ratio exceeded 2.5 to 1.0 at period end, we were restricted from paying cash dividends.

Liquidity and Capital Resources

As of December 31, ~~2017,~~2019, our liquidity, including cash and cash equivalents, short-term investments, available borrowing capacity under our secured revolving bank credit facility ~~available capacity under our unsecured credit facility commitment~~ and availability under our Receivables Facility was ~~$10.4~~$5.2 billion. Our cash, ~~and~~ cash equivalents and short-term investments totaled ~~$4.6~~$3.2 billion as of December 31, ~~2017~~2019 compared to ~~$8.3~~$7.0 billion as of March 31, ~~2017.~~2019. As of December 31, ~~2017,~~2019, we had availability of ~~$1.8~~$1.9 billion under the secured revolving bank credit ~~facility and $3.2 billion under our unsecured credit facility commitment.~~facility. Amounts available under our Receivables Facility as of December 31, ~~2017~~2019 totaled ~~$781~~$95 million.

In addition, as of December 31, 2017, we had available borrowing capacity of $427 million under our K-sure secured equipment credit facility. However, utilization of this facility is dependent upon the amount and timing of network-related purchases from the applicable supplier as well as the period of time remaining to complete any further borrowings available under each facility.

As of December 31, ~~2017,~~2019, we offered two device financing programs that allow subscribers to forgo traditional service contracts and pay less upfront for devices in exchange for lower monthly service fees, early upgrade options, or both. While a majority of the revenue associated with the installment ~~sales~~billing program is recognized at the time of sale along with the related cost of ~~products,~~equipment sales, lease revenue associated with our leasing program is recorded monthly over the term of the lease and the cost of the device is depreciated to its estimated residual value generally over the lease term, which creates a positive impact to Wireless segment earnings. If the mix of leased devices continues to increase, we expect this positive impact on the financial results of Wireless segment earnings to continue and depreciation expense to increase. The leasing and installment billing ~~and leasing~~ programs will continue to require a greater use of ~~operating~~ cash flows in the earlier part of the contracts as the subscriber will generally pay less upfront than ~~the~~through our traditional subsidy program because they are financing the device. The Receivables Facility ~~and our relationship with MLS were~~was established ~~as mechanisms~~ to help mitigate the use of cash from purchasing devices from OEMs to fulfill our leasing and installment billing ~~and leasing~~ programs.

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

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

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

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

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

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

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

~~availability under the Receivables Facility, which terminates in November 2019;~~

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

~~availability under our $3.2 billion unsecured credit facility commitment;~~

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

~~scheduled principal payments on debt, credit facilities and financing obligations, including approximately $19.9 billion coming due over the next five years;~~

~~raising additional funds from external sources;~~

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

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

scheduled principal payments on debt, credit facilities and financing obligations, including $28.6 billion coming due over the next five fiscal years;

cash needs related to our device financing programs;

availability under the Receivables Facility, which terminates in January 2022;

availability of our secured revolving bank credit facility, which expires in February 2022;

raising additional funds from ~~our indirect dealers;~~external sources;

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

any additional contributions we may make to our pension plan;

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

other future contractual obligations and general corporate expenditures.

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

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

Rating

Rating Agency

Issuer Rating

Unsecured Notes

Guaranteed Notes

Secured Bank Credit Facility

Spectrum Notes

Outlook

Moody's

Ba2

Baa2

~~Stable~~Watch Positive

Standard and Poor's

B+

BB-

N/A

~~Stable~~Watch Developing

Fitch

B+

BB+

BBB

~~Stable~~Watch Positive

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FUTURE CONTRACTUAL OBLIGATIONS

~~During~~With the ~~quarter ended December 31, 2017,~~adoption of Topic 842 on April 1, 2019, Sprint elected the hindsight practical expedient in determining the lease term. Upon adoption of the standard, our expected lease term for our cell sites was shortened to the initial non-cancelable term only. Historically, we ~~amended various tower master~~included renewal assumptions in our lease ~~agreements that extended minimum lease terms~~term if the non-cancelable term was less than ten years and ~~increased certain~~the corresponding payments were reflected in our future ~~commitments resulting~~contractual obligations. This change resulted in ~~an increase~~a decrease to future contractual obligations of approximately ~~$2.6~~$1.6 billion. ~~During the quarter ended June 30, 2017, we retired certain notes of Sprint Communications pursuant to the cash tender offer described in~~ ~~Note 8. Long-Term Debt, Financing and Capital Lease Obligations.~~ There have been no other significant changes to our future contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2019. Below is a graph depicting our future principal maturities of debt as of December 31, ~~2017.~~2019.

* This table excludes (i) our ~~$2.0 billion~~ secured revolving bank credit facility, which was amended in January 2020, will expire in ~~2021~~February 2022 and has no outstanding balance, (ii) ~~$151~~$116 million in letters of credit outstanding under the secured revolving bank credit facility, (iii) ~~$532~~$349 million of ~~capital~~finance leases and other obligations, and (iv) net premiums and debt financing costs.

OFF-BALANCE SHEET FINANCING

As of December 31, ~~2017,~~2019, we did not participate in, or secure, financings for any unconsolidated special purpose entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Sprint applies those accounting policies that management believes best reflect the underlying business and economic events, consistent with U.S. GAAP. Inherent in such policies are certain key assumptions and estimates made by management. Management regularly updates its estimates used in the preparation of the consolidated financial statements based on its latest assessment of the current and projected business and general economic environment. See Note 7. Leases in Notes to the Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for a full discussion of critical accounting policies related to the adoption of Topic 842. Additional information regarding the Company's Critical Accounting Policies and Estimates is included in Item 7. of the Company's Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2019.

As discussed in Item 7. of the Company's Annual Report on Form 10-K for the period ended March 31, 2017, one of our critical accounting policies is the evaluation of goodwill and indefinite-lived intangible assets for impairment. Our stock price at December 31, 2017 of $5.89 was below the net book value per share price of $6.56. Subsequent to the balance sheet date, the stock price has decreased further to $5.36 at February 2, 2018. The quoted market price of our stock is not the sole consideration of fair value. Other considerations include, but are not limited to, expectations of future results and an estimated control premium.

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Sustained declines in the Company’s operating results, number of wireless subscribers, future forecasted cash flows, growth rates and other assumptions, as well as significant, sustained declines in the Company’s stock price and related market capitalization could impact the underlying key assumptions and our estimated fair values, potentially leading to a future material impairment of goodwill or other indefinite-lived intangible assets.

FINANCIAL STRATEGIES

General Risk Management Policies

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

Derivative instruments are primarily used for hedging and risk management purposes. Hedging activities may be done for various purposes, including, but not limited to, mitigating the risks associated with an asset, liability, committed transaction or probable forecasted transaction. We seek to minimize counterparty credit risk through credit approval and

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review processes, credit support agreements, continual review and monitoring of all counterparties, and thorough legal review of contracts. Exposure to market risk is controlled by regularly monitoring changes in hedge positions under normal and stress conditions to ensure they do not exceed established limits.

OTHER INFORMATION

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

FORWARD-LOOKING STATEMENTS

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

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

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

Merger Transaction:

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

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

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

adverse effects on the market price of our common stock or on our or T-Mobile’s operating results because of a failure to complete the Merger Transaction in the anticipated timeframe or at all as well as adverse effects on the market price of our common stock in the event of a modification of the Exchange Ratio;

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

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

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

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

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

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

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

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

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

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

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

Business:

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

our ability to continue to receive the expected benefits of our existing financings;

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

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

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

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

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

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

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

our ability to have the scale necessary to successfully compete;

~~Table~~our ability to maintain a sufficiently large subscriber base necessary to support the needs of ~~Contents~~

a competitive nationwide wireless network and the associated high costs;

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

the impact of ~~device financing programs, including~~installment sales and leasing of handsets; ~~the impact of purchase commitments;~~

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

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

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

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

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

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

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

the ~~ability~~effects of the Merger Transaction or any other future merger or acquisition involving us, as well as the effect of mergers, acquisitions, and consolidations, and new entrants in the communications industry, and unexpected announcements or developments from others in our ~~competitors to offer products and services at lower prices due to lower cost structures or otherwise;~~industry;

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

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

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

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

unexpected results of investigations conducted by us or third parties, including any governmental agencies;

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

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

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

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

other risks referenced from time to time in this report and other filings of ours with the SEC, including Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2019.

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


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies, and equity prices. The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk sensitive instruments and positions as described in our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2019.

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Item 4.	Controls and Procedures

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

In connection with the preparation of this Quarterly Report on Form 10-Q as of December 31, ~~2017,~~2019, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that due to the material weakness described below, the Company's design and operation of the disclosure controls and procedures were ~~effective~~ineffective as of December 31, ~~2017~~2019 in providing reasonable assurance that information required to be disclosed in reports we file or submit under the ~~Securities~~ Exchange Act ~~of 1934~~ is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and in providing reasonable assurance that the information is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

A material weakness in internal control over financial reporting was discovered related to an issue with the functionality that determined qualifying subscriber usage under the Lifeline program. The material weakness is the result of deficiencies in the operating effectiveness of the controls over testing changes to this functionality that determines qualifying subscriber usage and the validation of the ongoing qualifying subscriber usage under the Lifeline program. The Company provides service to eligible Lifeline subscribers under the Assurance Wireless brand for whom it seeks reimbursement from the Universal Service Fund. In 2016, the FCC enacted changes to the Lifeline program, which required Sprint to update how it determined qualifying subscriber usage. An inadvertent coding issue in the system used to identify qualifying subscriber usage occurred in July 2017 while the system was being updated to address the required changes. Sprint claimed monthly subsidies for serving Lifeline subscribers that may not have met Sprint’s usage requirements under the Lifeline program. The estimated reimbursements to federal and state governments for subsidies claimed contrary to Sprint’s usage policy reduced "Service revenue," increased "Selling, general and administrative expense" and increased our "Net loss attributable to Sprint Corporation" in the consolidated statements of comprehensive (loss) income for the nine-month period ended December 31, 2019. While Sprint supports our Lifeline subscribers through our Assurance Wireless prepaid brand, beginning in April 2017

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we excluded the Lifeline subscribers from our reported prepaid subscriber base due to regulatory changes resulting in tighter program restrictions.

We investigated and proactively raised the identified issue with the FCC and the appropriate state regulators. We corrected the functionality and assessed the impact of identified changes. Management, with oversight of the Audit Committee, has been actively engaged in developing remediation plans to address the material weakness noted above. As part of the remediation plans, the Company is assessing the change management policies and controls and designing and implementing additional processes and controls for validating ongoing subscriber qualifications under the Lifeline program. Subsequent testing of the operational effectiveness of the modified systems and validation controls will be necessary to conclude that the material weakness has been fully remediated. We are committed to reimbursing federal and state governments for any subsidy payments that were collected incorrectly as a result of the system issue as well as successfully implementing the remediation plans.

Internal controls over our financial reporting continue to be updated as necessary to accommodate modifications to our business processes and accounting procedures. ~~There~~Other than the material weakness noted above, there have been no changes in our internal control over financial reporting that occurred during the ~~quarter~~three-month period ended December 31, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Notwithstanding the material weakness described above, management has concluded that our consolidated financial statements included in this Quarterly Report on Form 10-Q for the three- and nine-month periods ended December 31, 2019 are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States of America for each of the periods presented and that these financial statements may be relied upon.

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PART II — OTHER INFORMATION


Item 1.	Legal Proceedings

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

Various other suits, inquiries, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges were found to be mistaken, it could result in payments by us. While it is not possible to determine the ultimate disposition of each of these proceedings and whether they will be resolved consistent with our beliefs, we expect that the outcome of such proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations. ~~During~~Except as otherwise noted, during the ~~quarter~~nine-month period ended December 31, ~~2017,~~2019, there were no material developments in the status of these legal proceedings.


Item 1A.	Risk Factors

~~There have been no material changes to our risk factors as described in~~"Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2019 includes a

discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk

factors and information disclosed in our Annual Report on Form 10-K. Except as presented below, there have been no

material changes from the risk factors described in our Annual Report on Form 10-K.

Failure to complete the Merger Transaction, or a delay in completing the Merger Transaction, could negatively impact our stock price and the future business, assets, liabilities, prospects, outlook, financial condition and results of operations of us or the combined company.

After November 1, 2019, Sprint and T-Mobile each have a right under the Business Combination Agreement to terminate that agreement at any time because the Merger Transaction was not completed as of that date. If the Merger Transaction is not completed or is substantially delayed, our common stock price and future business and financial results likely will be negatively affected, or our employees, suppliers, vendors, distributors, retailers, dealers or customers could lose focus on our business, cease doing business with us, or curtail their activities with us. If the Business Combination Agreement is terminated, it could have an adverse effect on our business, financial condition, operating results and stock price.

The success of our network improvements and 5G deployment will depend on the timing, extent and cost of implementation; availability of financial resources; access to additional spectrum, including low-band frequencies; the performance of third-parties; upgrade requirements; and the availability and reliability of the various technologies required to provide such modernization.

We must continually invest in our wireless network, including expanding our network capacity and coverage through macro sites and small cells, in order to improve our wireless services and remain competitive by providing 5G capabilities. The development and deployment of new technologies and services requires us to anticipate the changing demands of our customers and to respond accordingly, which we may not be able to do in a timely or efficient manner.

Improvements in our service depend on many factors, including our ability to predict and adapt to future changes in technologies, changes in consumer demands, changes in pricing and service offerings by our competitors and continued access to and deployment of adequate spectrum, including any leased spectrum. If we are unable to access or acquire additional spectrum to increase capacity or to deploy the services subscribers desire on a timely basis or at acceptable costs while maintaining network quality levels, our ability to attract and retain subscribers could be adversely affected, which would negatively impact our operating results. If the Merger Transaction is not completed, our ability to provide a nationwide 5G network capable of competing effectively with other competitors in the wireless industry will depend on our access to, and deployment of, adequate low-band spectrum that we do not currently have and that we may not be able to obtain in the future on a timely basis or at all given the lack of low-band spectrum available for purchase, or at acceptable costs.

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Accordingly, we likely will be unable to access sufficient low-band spectrum as a standalone company, which would limit the scope of our 5G services to certain geographic areas only and which likely would cause our 5G services to suffer from inconsistent network performance. Without access to additional low band spectrum or additional financial resources, Sprint will have limited ability to provide a 5G network outside of metro areas.

If we fail to provide a competitive network, which includes delivering a positive and consistent network experience nationwide, our ability to provide wireless services to our subscribers, to attract and retain subscribers, and to maintain and grow our subscriber revenues could be adversely affected. For instance, we will need to acquire additional spectrum to remain competitive and grow our subscriber base, meet increasing customer demands, and deploy a nationwide 5G network.

Using new and sophisticated technologies on a very large scale entails risks. For example, deployment of new technologies, such as 5G, from time to time has adversely affected, and in the future may adversely affect, the performance of existing services on our network and result in increased churn or failure to attract wireless subscribers. Should implementation of our network upgrades, including 5G, fail, be delayed or result in incurring costs in excess of expected amounts, our margins could be adversely affected and such effects could be material. Should the delivery of services expected to be deployed on our network be delayed due to technological constraints or changes, performance of third-party suppliers, regulatory restrictions, including zoning and leasing restrictions, or permit issues, subscriber dissatisfaction, or other reasons, the cost of providing such services could become higher than expected, ultimately increasing our cost to subscribers and resulting in decreases in net subscribers or our margins, or both, which would adversely affect our revenues, profitability, and cash flow from operations.

In addition, as a standalone company, we may lack the financial resources necessary to provide a robust,

nationwide 5G network capable of competing effectively with other competitors in the wireless industry and other companies that have more recently begun providing wireless services, many of which have greater financial resources than we do. Accordingly, if the Merger Transaction is not completed, it is expected that we will not be able to deploy a nationwide 5G network on the same scale and on the same timeline as the combined company or on a scale and timeline that will allow us to compete effectively with our competitors, and therefore will continue to be limited in our ability to compete effectively in the 5G era. Further, it is expected that if the Merger Transaction is not completed, we will continue to lack the network, scale and financial resources of other competitors in, and other companies that have more recently begun providing, wireless services.


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

None


Item 3.	Defaults Upon Senior Securities

None


Item 4.	Mine Safety Disclosures

None

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Item 5.	Other Information

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

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

After the merger with SoftBank, SoftBank acquired control of Sprint. During the three-month period ended December 31, ~~2017,~~2019, SoftBank, through one of its non-U.S. subsidiaries, provided roaming services in Iran through Telecommunications Services Company (MTN Irancell), which is or may be a government-controlled entity. During such period, SoftBank had no gross revenues from such services and no net profit was generated. This subsidiary also provided telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan. During the ~~three-month~~nine-month period ended December 31, ~~2017,~~2019, SoftBank estimates that gross revenues and net profit generated by such services were both under ~~$2,000.~~$12,000. Sprint was not involved in, and did not receive any revenue from, any of these

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activities. These activities have been conducted in accordance with applicable laws and regulations, and they are not sanctionable under U.S. or Japanese law. Accordingly, with respect to Telecommunications Services Company (MTN Irancell), the relevant SoftBank subsidiary intends to continue such activities. With respect to services provided to accounts affiliated with the Embassy of Iran in Japan, the relevant SoftBank subsidiary is obligated under contract to continue such services.

In addition, during the ~~three-month~~nine-month period ended December 31, ~~2017,~~2019, SoftBank, through one of its non-U.S. indirect subsidiaries, provided office supplies to the Embassy of Iran in Japan. SoftBank estimates that gross revenue and net profit generated by such services were under $5,500 and ~~$1,000,~~$1,100, respectively. Sprint was not involved in and did not receive any revenue from any of these activities. Accordingly, the relevant SoftBank subsidiary intends to continue such activities.

Annual Meeting of Stockholders

We will hold the annual meeting of stockholders on March 31, 2020 in accordance with NYSE listing standards that require a meeting in each fiscal year, provided the meeting may be delayed or canceled based on the status of closing the Merger Transaction.

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Item 6.	Exhibits

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

SEC
File No.
Exhibit Filing Date

(3) Articles of Incorporation and Bylaws

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

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

(10) Material Contracts

10.1

Employment Agreement, effective January 3, 2018, by and between Michel Combes and Sprint Corporation

8-K 001-04721 10.1
1/4/2018

10.2

First Amendment to Amended and Restated Employment Agreement, effective January 4, 2018, by and between Marcelo Claure and Sprint Corporation

8-K 001-04721 10.2
1/4/2018

10.3

Amendment to Amended Employment Agreement, effective January 3, 2018, by and between Kevin Crull and Sprint Corporation

8-K 001-04721 10.3
1/4/2018

10.4
Second Amendment to Second Amended and Restated Receivables Sale and Contribution Agreement, dated October 24, 2017, by and among Sprint Spectrum L.P., as servicer, and certain Sprint Corporation subsidiaries, as originators and sellers, and certain special purpose entities, as purchasers 10-Q 001-04721 10.2
11/2/2017

10.5
Third Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated as of October 24, 2017, by and among Sprint Spectrum L.P., as servicer, certain Sprint Corporation special purpose entities, as sellers, certain commercial paper conduits and financial institutions from time to time party thereto, as purchaser agents, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrative agent, SMBC Nikko Securities America, Inc., as administrative agent, and Mizuho Bank, Ltd., as administrative agent and collateral agent 10-Q 001-04721 10.3
11/2/2017

10.6
Third Amendment to Amended Employment Agreement, effective December 15, 2017, by and between John Saw and Sprint Corporation *

10.7
Retention Award Letter for Paul Schieber effective October 17, 2017 *

(12) Statement re Computation of Ratios

12
Computation of Ratio of Earnings to Fixed Charges *

(31) and (32) Officer Certifications

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

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

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

Exhibit No.

Exhibit Description

Form

Incorporated by Reference

Filed/Furnished

Herewith

SEC

File No.

Exhibit

Filing Date

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

2.1**

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

8-K

001-04721

2.1

4/30/2018

2.2***

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

8-K

001-04721

2.2

7/26/2019

2.3***

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

8-K

001-04721

2.1

7/26/2019

(3) Articles of Incorporation and Bylaws

3.1

Amended and Restated Certificate of Incorporation

8-K

001-04721

3.1

7/11/2013

3.2

Amended and Restated Bylaws

8-K

001-04721

3.2

8/7/2013

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

4.1

Fifteenth Supplemental Indenture, dated as of December 6, 2019, by and among Sprint Communications, Inc, PRWireless PR, LLC, PRWireless Holdco, LLC, Sprint PR LLC, Sprint PR Spectrum LLC, and The Bank of New York Mellon Trust Company.

(31) and (32) Officer Certifications

31.1

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

31.2

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

32.1

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

32.2

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

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

101.INS

XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

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Exhibit No.

Exhibit Description

Form

Incorporated by Reference

Filed/Furnished

Herewith

SEC

File No.

Exhibit

Filing Date

~~32.2~~

104

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

~~(101) Formatted~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in ~~XBRL (Extensible Business Reporting Language)~~

~~101.INS~~

~~XBRL Instance Document~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase Document~~

Exhibits 101)

_________________


*	Filed or furnished, as required.


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


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

6772

Table of Contents

SIGNATURE

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



SPRINT CORPORATION (Registrant)

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

Date: ~~February 5, 2018~~January 27, 2020

6873



	Common Stock			Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
	Shares	Amount		Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
Balance, March 31, 2017	3,989	$	40	$	27,756		$	(8,584	)	$	(404	)	$	—		$	18,808
Net income (loss)							7,320						(6		)	7,314
Other comprehensive income, net of tax										38						38
Issuance of common stock, net	13			12												12
Share-based compensation expense				137												137
Capital contribution by SoftBank				5												5
Other, net				(57		)										(57		)
(Decrease) increase attributable to noncontrolling interests				(28		)							76			48
Balance, December 31, 2017	4,002	$	40	$	27,825		$	(1,264	)	$	(366	)	$	70		$	26,305



	Carrying amount at December 31, 2017		Estimated Fair Value Using Input Type
	Carrying amount at December 31, 2017		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	36,690	$	30,281	$	2,970	$	4,954	$	38,205



	Carrying amount at March 31, 2017		Estimated Fair Value Using Input Type
	Carrying amount at March 31, 2017		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt and financing obligations	$	40,581	$	33,196	$	4,352	$	5,468	$	43,016



	March 31, 2017		Net (Benefit) Expense				Cash Payments and Other			December 31, 2017
	(in millions)
Lease exit costs	$	249	$	(12	)	⁽¹⁾	$	(68	)	$	169
Severance costs	12		22			⁽²⁾	(17		)	17
Access exit costs	40		3			⁽³⁾	(21		)	22
	$	301	$	13			$	(106	)	$	208



Consolidated statements of comprehensive income (loss):	Three Months Ended December 31,				Nine Months Ended December 31,
	2017		2016		2017		2016
	(in millions)
Service revenues	$	71	$	—	$	100	$	—
Equipment revenues	$	639	$	480	$	1,432	$	1,107
Cost of products	$	657	$	403	$	1,465	$	1,021
Selling, general and administrative	$	13	$	9	$	39	$	26



	Three Months Ended December 31, 2016
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues	$	—		$	—		$	8,549		$	—		$	8,549
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			1,925			—			1,925
Cost of products (exclusive of depreciation and amortization included below)	—			—			1,985			—			1,985
Selling, general and administrative	—			—			2,080			—			2,080
Severance and exit costs	—			—			19			—			19
Depreciation	—			—			1,837			—			1,837
Amortization	—			—			255			—			255
Other, net	—			—			137			—			137
	—			—			8,238			—			8,238
Operating income	—			—			311			—			311
Other (expense) income:
Interest income	198			43			4			(233		)	12
Interest expense	(198		)	(409		)	(245		)	233			(619		)
(Losses) earnings of subsidiaries	(479		)	(38		)	—			517			—
Other (expense) income, net	—			(75		)	3			—			(72		)
	(479		)	(479		)	(238		)	517			(679		)
(Loss) income before income taxes	(479		)	(479		)	73			517			(368		)
Income tax expense	—			—			(111		)	—			(111		)
Net (loss) income	(479		)	(479		)	(38		)	517			(479		)
Other comprehensive (loss) income	(5		)	(5		)	(4		)	9			(5		)
Comprehensive (loss) income	$	(484	)	$	(484	)	$	(42	)	$	526		$	(484	)



	Nine Months Ended December 31, 2017
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues	$	—		$	—		$	24,323		$	—		$	24,323
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			5,140			—			5,140
Cost of products (exclusive of depreciation and amortization included below)	—			—			4,622			—			4,622
Selling, general and administrative	—			—			6,059			—			6,059
Severance and exit costs	—			—			13			—			13
Depreciation	—			—			5,693			—			5,693
Amortization	—			—			628			—			628
Other, net	—			(55		)	(268		)	—			(323		)
	—			(55		)	21,887			—			21,832
Operating income	—			55			2,436			—			2,491
Other income (expense):
Interest income	593			783			10			(1,320		)	66
Interest expense	(593		)	(1,171		)	(1,345		)	1,320			(1,789		)
Earnings (losses) of subsidiaries	7,320			7,722			—			(15,042		)	—
Other expense, net	—			(69		)	(47		)	—			(116		)
	7,320			7,265			(1,382		)	(15,042		)	(1,839		)
Income (loss) before income taxes	7,320			7,320			1,054			(15,042		)	652
Income tax benefit	—			—			6,662			—			6,662
Net income (loss)	7,320			7,320			7,716			(15,042		)	7,314
Less: Net loss attributable to noncontrolling interests	—			—			6			—			6
Net income (loss) attributable to Sprint Corporation	7,320			7,320			7,722			(15,042		)	7,320
Other comprehensive income (loss)	38			38			18			(56		)	38
Comprehensive income (loss)	$	7,358		$	7,358		$	7,734		$	(15,098	)	$	7,352



	Nine Months Ended December 31, 2016
	Parent/Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net operating revenues	$	—		$	—		$	24,808		$	—		$	24,808
Net operating expenses:
Cost of services (exclusive of depreciation and amortization included below)	—			—			6,125			—			6,125
Cost of products (exclusive of depreciation and amortization included below)	—			—			5,097			—			5,097
Selling, general and administrative	—			—			5,992			—			5,992
Severance and exit costs	—			—			30			—			30
Depreciation	—			—			5,227			—			5,227
Amortization	—			—			813			—			813
Other, net	—			—			230			—			230
	—			—			23,514			—			23,514
Operating income	—			—			1,294			—			1,294
Other (expense) income:
Interest income	593			105			13			(674		)	37
Interest expense	(593		)	(1,271		)	(674		)	674			(1,864		)
(Losses) earnings of subsidiaries	(923		)	320			—			603			—
Other expense, net	—			(77		)	(27		)	—			(104		)
	(923		)	(923		)	(688		)	603			(1,931		)
(Loss) income before income taxes	(923		)	(923		)	606			603			(637		)
Income tax expense	—			—			(286		)	—			(286		)
Net (loss) income	(923		)	(923		)	320			603			(923		)
Other comprehensive income (loss)	2			2			3			(5		)	2
Comprehensive (loss) income	$	(921	)	$	(921	)	$	323		$	598		$	(921	)