2. Cautionary Statement Regarding Forward-Looking Information
The information highlighted in this presentation includes selected financial information and should be read in
conjunction with our consolidated financial statements and notes and the Cautionary Statements Regarding
Forward-Looking Information included in our press release dated April 20, 2005, which is posted on Sprint’s
website at <<http://www.sprint.com/sprint/ir/fn/>>, as well as our financial statements and notes, the trends and
risk factors affecting us and other information provided in our annual, quarterly and current reports, proxy
statement, and other filings made with the Securities and Exchange Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934.
This presentation includes quot;forward-looking statementsquot; within the meaning of securities laws. The statements in
this presentation regarding the business outlook and expected performance as well as other statements that are
not historical facts are forward-looking statements. The words quot;estimate,quot; quot;project,quot; quot;forecast,quot; quot;intend,quot; quot;expect,quot;
quot;believe,quot; quot;target,quot; quot;providing guidancequot; and similar expressions identify forward-looking statements, which are
estimates and projections reflecting management' judgments based on currently available information and
s
involve a number of risks and uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statements. Forward-looking statements speak only as of the date indicated.
Sprint is not obligated to publicly release any revisions to forward-looking statements to reflect events after the
date of any news release or unforeseen events. With respect to these forward-looking statements, Sprint has
made assumptions regarding, among other things, customer and network usage, customer growth and retention,
pricing, costs to acquire customers and to provide services, the timing of various events and the economic
environment.
This presentation contains certain non-GAAP financial measures as well as reconciliations to the most directly
comparable GAAP financial measures. Because Sprint does not predict special items that might occur in the
future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based
financial measures, Sprint does not provide reconciliations to its forward-looking measures. Definitions of these
non-GAAP financial measures are available in the April 20, 2005, First Quarter 2005 Investor Update located at
<http://www.sprint.com/sprint/ir/>.
First Quarter 2005 Investor Update 2
3. quot;Safe Harborquot; Statement under the Private Securities Litigation Reform Act of 1995
A number of the matters discussed in this document are not historical or current facts deal with potential future circumstances
and developments, in particular, information regarding the new company, including expected synergies resulting from the
merger of Sprint and Nextel, combined operating and financial data, future technology plans, and whether and when the
transactions contemplated by the merger agreement will be consummated. The discussion of such matters is qualified by the
inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from actual future
experience involving any one or more of such matters. Such risks and uncertainties include: the failure to realize capital and
operating expense synergies; the result of the review of the proposed merger by various regulatory agencies, and any
conditions imposed on the new company in connection with consummation of the merger; approval of the merger by the
stockholders of Sprint and Nextel and satisfaction of various other conditions to the closing of the merger contemplated by the
merger agreement; and the risks that are described from time to time in Sprint’s and Nextel’s respective reports filed with the
SEC, including each company’s annual report on Form 10-K for the year ended December 31, 2004. This document speaks
only as of its date, and Sprint and Nextel each disclaims any duty to update the information herein.
Additional Information and Where to Find It
Sprint Corporation has filed a Registration Statement on Form S-4 with the SEC (Reg. No. 333-123333) containing a
preliminary joint proxy statement/prospectus regarding the proposed transaction. SHAREHOLDERS OF SPRINT AND
SHAREHOLDERS OF NEXTEL ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/ PROSPECTUS THAT IS
PART OF THE REGISTRATION STATEMENT, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE
COMBINATION. The final joint proxy statement/prospectus will be mailed to shareholders of Sprint and shareholders of Nextel.
Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, www.sec.gov, from
Sprint Investor Relations at Sprint Corporation, 6200 Sprint Parkway, Overland Park, Kansas 66251, 800-259-3755, Option 1 or
from Nextel Investor Relations at 2001 Edmund Halley Drive, Reston, Virginia 20191, 703-433-4300.
Participants in Solicitation
Sprint, Nextel and their respective directors and executive officers, other members of management and employees and the
proposed directors and executive officers of Sprint Nextel, may be deemed to be participants in the solicitation of proxies in
respect of the combination. Information concerning the proposed directors and executive officers of Sprint Nextel, Sprint’s and
Nextel’s respective directors and executive officers and other participants in the proxy solicitation, including a description of
their interests, is included in the joint proxy statement/prospectus contained in the above-referenced Registration Statement on
Form S-4.
First Quarter 2005 Investor Update 3
4. Reconciliation of non-GAAP Liquidity Measures
Quarter ended March 31, 2005 Quarter ended March 31, 2004
Long Other & Long Other &
Consolidated Wireless Local Distance Eliminations
Consolidated Wireless Local Distance Eliminations
Operating income (loss) $ 1,036 $ 455 $ 445 $ 146 $ (10) Operating income (loss) $ 724 $ 277 $ 446 $ 11 $ (10)
(1)
Special items - 2 1 (3) - (1)
Special items 30 4 14 12 -
Adjusted operating income (loss)* 1,036 457 446 143 (10)
Adjusted operating income (loss)* 754 281 460 23 (10)
Depreciation and amortization 1,036 644 277 117 (2)
Depreciation and amortization 1,233 644 268 320 1
Adjusted EBITDA* 2,072 $ 1,101 $ 723 $ 260 $ (12)
Adjusted EBITDA* 1,987 $ 925 $ 728 $ 343 $ (9)
Adjust for special items -
Adjust for special items (30)
(2)
Other operating activities, net (688) (2)
Other operating activities, net (919)
Cash provided by operating activities-GAAP 1,384
Cash provided by operating activities-GAAP 1,038
Capital expenditures (659)
Capital expenditures (683)
Dividends paid (187)
Dividends paid (115)
Investments in and loans to affiliates, net (14)
Other investing activities, net 3
Other investing activities, net 8
Free Cash Flow* 243
Free Cash Flow* 532
Decrease in debt, net (22)
Decrease in debt, net (1,012)
Proceeds from common stock issued 33
Investments in debt securities, net 19
Proceeds from common stock issued 58 Investments in debt securities, net 34
Other financing activities, net 13 Other financing activities, net 16
Change in cash and equivalents - GAAP $ (390) Change in cash and equivalents - GAAP $ 304
(1)
In the 2005 first quarter, Sprint's restructuring activities were related to its ongoing organizational realignment initiatives as well as the Web
Hosting wind-down. This activity had no impact on consolidated results.
In the 2004 first quarter, Sprint recorded a $30 million pre-tax restructuring charge related to its ongoing organizational realignment initiatives
as well as the Web Hosting wind-down. These charges reduced net income by $19 million.
(2)
Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating activities and
non-operating items in income (loss) from continuing operations.
First Quarter 2005 Investor Update 4
5. Adjusted Earnings Per Share Reconciliation
Quarters Ended March 31, 2005 2004
$ 470 $ 223
Earnings Applicable to Common Stock
Preferred stock dividends paid 2 2
472 225
GAAP Net income
(1)
Special items (net of taxes)
Restructuring and asset impairments - 19
$ 472 $ 244
Adjusted Net Income
$ 0.31 $ 0.16
GAAP diluted earnings per share
Special items - 0.01
(2)
Adjusted Earnings Per Share $ 0.31 $ 0.17
(1)
In the 2004 first quarter, Sprint recorded a $30 million pre-tax restructuring charge related to its ongoing
organizational realignment initiatives as well as the Web Hosting wind-down. These charges reduced
net income by $19 million.
(2)
Earnings per share data may not add due to rounding.
First Quarter 2005 Investor Update 5
11. Wireless Financial Results
1Q05 4Q04 1Q04
$3.87B $3.84B 1% $3.44B 13%
Net Operating Revenues
$457M $417M 10% $281M 63%
Adjusted Operating Income
$1.10B $1.07B 3% $925M 19%
Adjusted EBITDA
Adjusted EBITDA as a percent
31.1% 31.0% +10bps 30.2% +90bps
of Service Revenue
$683M $177M NA $519M 32%
Adjusted EBITDA less CAPEX
First Quarter 2005 Investor Update 11
12. Wireless Operating Performance
1Q05 4Q04 1Q04
518K 526K -2% 414K 25%
Direct Net Additions
621K 923K -33% 420K 48%
Wholesale Net Additions
166K 133K 24% 138K 20%
Affiliate Net Additions
1.31M 1.58M -18% 972K 34%
Total Net Subscriber Additions
2.5% 2.7% -20bps 2.9% -40bps
Churn
$61 $62 -1% $61 NA
ARPU
$1.83B $1.85B -1% $1.74B 5%
Costs of Services and Products
$935M $919M 2% $768M 22%
Selling, General & Admin
Improving customer retention driving higher adds
First Quarter 2005 Investor Update 12
13. Strong Momentum in Data
Wireless Data ARPU
Wireless Data Revenue Wireless Data Subscribers
$8.00
$400 9.0
% 8.0
3 $6.00
$300
+8 %
3% 29
+6 +
7.0
$200 $4.00
6.0
$100 $2.00
5.0
$0 $0.00 4.0
1Q04 1Q05 1Q04 1Q05 1Q04 1Q05
Highest ARPU contribution from data in industry
•
EV-DO being aggressively deployed into the network
•
First Quarter 2005 Investor Update 13
14. Long Distance Highlights
Revenue
$2,000
-1%
Good performance driven by
• $1,750
solid execution $1,500
(millions)
Progress on strategy to
$1,250
•
focus on solutions, network $1,000
convergence and targeting $750
4Q04 1Q05
growth opportunities
Adjusted EBITDA
$300
Encouraging signs in LD
•
voice pricing thresholds $275
%
1
+1
(millions)
CNO revenues and
• $250
subscribers ramping $225
$200
4Q04 1Q05
First Quarter 2005 Investor Update 14
15. Long Distance Financial Results
1Q05 4Q04 1Q04
$1.72B $1.73B -1% $1.91B -10%
Net Operating Revenues
$882M $889M -1% $957M -8%
Business Voice
$183M $190M -4% $229M -20%
Consumer Voice
$412M $405M 2% $452M -9%
Data
$178M $176M 1% $223M -20%
Internet
$143M $124M 15% $23M NA
Adjusted Operating Income
$260M $235M 11% $343M -24%
Adjusted EBITDA
$195M $144M 35% $287M -32%
Adjusted EBITDA less Capex
First Quarter 2005 Investor Update 15
16. Aggressive Cost Management
Full year 2005 expected to benefit from
•
aggressive cost actions taken in 2004
Access initiatives paying dividends
•
CSP + SGA down 3% sequentially and 7% y-o-y
•
Adjusted EBITDA well in excess of capex on
•
prudent investment allocations
First Quarter 2005 Investor Update 16
17. Local 1Q05 Highlights
Strong 1st quarter
•
Revenue
Data growth largely
• $1,600
offset effect of access $1,400
line declines
($Millions
$1,200
Solid Adjusted
• $1,000
EBITDA margin $800
1Q04 4Q04 1Q05
Executed while
•
planning local spin-off
First Quarter 2005 Investor Update 17
18. Local Financial Results
1Q05 4Q04 1Q04
$1.50B $1.51B -1% $1.51B -1%
Net Operating Revenue
$446M $484M -8% $460M -3%
Adjusted Operating Income
$723M $757M -4% $728M -1%
Adjusted EBITDA
$567M $428M 32% $519M 9%
Adjusted EBITDA less CAPEX
7.64M 7.67M -0.4% 7.88M -3.0%
Access Lines
7.55B 7.72B -2% 8.46B -11%
Access M OU
1.33B 1.29B 3% 990M 34%
LD M OU
First Quarter 2005 Investor Update 18
19. DSL – Building Long Term Value
Lines in Service (000's)
600
Strong service line growth
•
%
500
58
DSL penetration increased +
• 400
to 10% of capable lines 300
Average revenue per user
• 200
1Q04 1Q05
of $43 Net Additions (000's)
100
$300M annualized revenue
• 75
stream and growing %
+31
50
25
0
1Q04 1Q05
First Quarter 2005 Investor Update 19
20. Increasing Household Penetration of
Strategic Products
Penetration of at least one
• 100%
8% 12%
or more strategic product
26%
27%
75%
rose to 71%
Consumer LD penetration
• 33%
50%
32%
increased over 400 basis
25%
points year-over-year 33% 29%
0%
DSL penetration increased
• 1Q04 1Q05
Basic Service 1 Strategic Product
by almost 400 basis points 2 Strategic Products 3+ Strategic Products
First Quarter 2005 Investor Update 20
21. Q&A
Gary Forsee, Chairman and CEO
•
Len Lauer, President and COO
•
Bob Dellinger, Executive Vice President and CFO
•
Mike Fuller, President Local
•
Howard Janzen, President Sprint Business Solutions
•
Tim Kelly, President Sprint Consumer Solutions
•
Kurt Fawkes, Vice President Investor Relations
•
First Quarter 2005 Investor Update 21
