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, customer and network usage, customer growth and retention, pricing, operating costs, the timing of various events and the economic 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:

• the effects of vigorous competition, including the impact of competition on the price we are able to charge customers for services and equipment we provide and our ability to attract new customers and retain existing customers; the overall demand for our service offerings, including the impact of decisions of new subscribers between our post-paid and prepaid services offerings and between our two network platforms; and the impact of new, emerging and competing technologies on our business;

• the impact of overall wireless market penetration on our ability to attract and retain customers with good credit standing and the intensified competition among wireless carriers for those customers;

• the impact of difficulties we may encounter in connection with the integration of the pre-merger Sprint and Nextel Communications, Inc. businesses, and the integration of the businesses and assets of Nextel Partners, Inc. and the third party affiliates, or PCS Affiliates, that provide wireless personal communications services, or PCS, under the Sprint® brand name, that we have acquired, including the risk that these difficulties could prevent or delay our realization of the cost savings and other benefits we expect to achieve as a result of these integration efforts and the risk that we will be unable to continue to retain key employees;

• the uncertainties related to the implementation of our business strategies, investments in our networks, our systems, and other businesses, including investments required in connection with our planned deployment of a next generation broadband wireless network;

• the costs and business risks associated with providing new services and entering new geographic markets, including with respect to our development of new services expected to be provided using the next generation broadband wireless network that we plan to deploy;

• the impact of potential adverse changes in the ratings afforded our debt securities by ratings agencies;

• the effects of mergers and consolidations and new entrants in the communications industry and unexpected announcements or developments from others in the communications industry;

• unexpected results of litigation filed against us;

• the inability of third parties to perform to our requirements under agreements related to our business operations, including a significant adverse change in Motorola, Inc.'s ability or willingness to provide handsets and related equipment and software applications, or to develop new technologies or features for our integrated Digital Enhanced Network, or iDEN®, network;

• the impact of adverse network performance;

• the costs and/or potential customer impacts of compliance with regulatory mandates, particularly requirements related to the reconfiguration of the 800 megahertz, or MHz, band used to operate our iDEN network, as contemplated by the Federal Communications Commission's, or FCC's, Report and Order released in August 2004 as supplemented by subsequent memoranda;

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

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

• other risks referenced from time to time in this report, including in Part II, Item 1A "Risk Factors" and other filings of ours with the Securities and Exchange Commission, or SEC, including in our annual report on Form 10-K for the year ended December 31, 2006 in Part I, Item 1A "Risk Factors."

The words "may," "could," "estimate," "project," "forecast," "intend," "expect," "believe," "target," "providing guidance" 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. 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.

Overview

We are a global 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 and government customers. We have organized our operations to meet the needs of our targeted customer groups through focused communications solutions that incorporate the capabilities of our wireless and wireline services to meet their specific needs. We are one of the three largest wireless companies in the United States based on the number of wireless subscribers. We own extensive wireless networks and a global long distance, Tier 1 Internet backbone.

Business

We, together with the PCS Affiliates, offer digital wireless services in all 50 states, Puerto Rico and the U.S. Virgin Islands under the Sprint brand name utilizing wireless code division multiple access, or CDMA, technology. The PCS Affiliates, through commercial arrangements with us, provide wireless services mainly in and around smaller U.S. metropolitan areas on CDMA-based wireless networks built and operated at their expense, in most instances using spectrum licensed to and controlled by us. We also offer digital wireless services under our Nextel® and Boost Mobile® brand names using iDEN technology. We are one of the largest providers of long distance services and one of the largest carriers of Internet traffic in the nation.

On May 17, 2006, we spun-off to our shareholders our local communications business, which is now known as Embarq Corporation and is comprised primarily of what was our Local segment prior to the spin-off. As a result of the spin-off, we no longer own any interest in Embarq. The results of Embarq for periods prior to the spin-off are presented as discontinued operations.

We believe the communications industry has been and will continue to be highly competitive on the basis of price, the types of services and devices offered and quality of service. Although we believe that many of our targeted customers base their purchase decisions on quality of service and the availability of differentiated features and services, competitive pricing, both in terms of the monthly recurring charges and the number of minutes or other features available under a particular rate plan, and handset offerings and pricing are often important factors in potential customers' purchase decisions.

Our industry has been and continues to be subject to consolidation and dynamic change as well as intense competition. In an effort to maintain our operating margins in a price-competitive environment, we continually seek ways to create or improve capital and operating efficiencies in our business. Consequently, we routinely reassess our business plans and their implications on our operations, and these assessments may continue to impact the future valuation of our long-lived assets. As part of our overall business strategy, we regularly evaluate opportunities to expand and complement our business and may at any time be discussing or negotiating a transaction that, if consummated, could have a material effect on our business, financial condition, liquidity or results of operations.

The FCC regulates the licensing, operation, acquisition and sale of the licensed radio spectrum that is essential to our business. The FCC and state Public Utilities Commissions, or PUCs, also regulate the provision of communications services. Future changes in regulations or legislation related to spectrum licensing or other matters related to our business could impose significant additional costs on us either in the form of direct out-of-pocket costs or additional compliance obligations.

Management Overview

We have two reportable segments that we operate and manage as strategic business units: Wireless and Wireline. See note 11 of the Notes to Consolidated Financial Statements for additional information on our segments.

Wireless

Products and Services

We offer a wide array of wireless mobile telephone and wireless data transmission services on networks that utilize CDMA and iDEN technologies to meet the needs of individual consumers, businesses and government customers. Through our Wireless segment, we, together with the PCS Affiliates, offer digital wireless service in all 50 states, Puerto Rico and the U.S. Virgin Islands, and provide wireless coverage in over 360 metropolitan markets, including 315 of the 318 largest U.S. metropolitan areas, where more than 280 million people live or work. We offer wireless international voice roaming for subscribers of both CDMA and iDEN-based services in numerous countries. We, together with the PCS Affiliates and resellers of our wholesale wireless services, served about 54 million wireless subscribers as of September 30, 2007.

We offer wireless mobile telephone and data transmission services and features in a variety of pricing plans, typically on a contract basis, for one or two year periods. Services are billed on a monthly basis according to the applicable pricing plan, which typically includes a fixed charge for certain services and variable charges for other services. We also offer wireless services that focus on the youth market, including our Boost Mobile prepaid wireless service on our iDEN network and our Boost Unlimitedsm local calling wireless service on our CDMA network. We also offer wholesale CDMA-based wireless services to resellers, commonly known as mobile virtual network operators, or MVNOs, such as Virgin Mobile USA, Qwest Communications International, Inc., Movida Communications, Inc., Helio Inc. and Embarq, which purchase wireless services from us at wholesale rates and resell the services to their customers under their own brand names. Under these MVNO arrangements, the operators bear the costs of subscriber acquisition, billing and customer service.

We also provide CDMA-based wireless services that are marketed and sold by several cable multiple systems operators, or MSOs, currently in 33 markets. As part of this agreement, we have jointly developed converged services designed to combine certain of the core products and interactive features offered by the MSOs with CDMA-based wireless technology to deliver a broad range of services, including video, wireless voice and data services, high speed Internet and cable phone service, to the participating cable MSOs' customers.

Our strategy is to utilize state-of-the-art technology to provide differentiated wireless services and applications in order to acquire and retain high-quality wireless subscribers. We offer a broad portfolio of data services across our CDMA network that utilize high-speed evolution data optimized, or EV-DO, technology. These services include data messaging, photo and video offerings, entertainment and location-based applications, marketed as Power Visionsm, and mobile broadband applications for laptops and other devices. Currently,

EV-DO technology covers about 228 million people and serves customers in 233 communities with populations of at least 100,000. EV-DO data roaming is available in selected markets in Canada and Mexico. We have incorporated EV-DO Rev. A, the most recent version of EV-DO technology, into over 80% of our CDMA network. We anticipate incorporating EV-DO Rev. A into almost 85% of our CDMA network by the end of 2007. EV-DO Rev. A is designed to support a variety of Internet Protocol, or IP, video and high performance walkie-talkie applications on our CDMA network.

On our iDEN network, we continue to support features and services designed to meet the needs of our customers. Both the Nextel and prepaid Boost Mobile brands feature our industry-leading walkie-talkie services, which give subscribers the ability to communicate instantly across the continental United States and to and from Hawaii and, through agreements with other iDEN providers, to and from select markets in Canada, Latin America and Mexico, as well as a variety of digital wireless mobile telephone and wireless data transmission services. We offer some data services on the iDEN network, but that network does not support a full complement of data services and many of those services are available only with limited capabilities. We plan to introduce several new iDEN handsets in the fourth quarter 2007 in an effort to retain existing subscribers of, and attract new subscribers to, our iDEN-based services.

We offer devices that operate seamlessly between our CDMA and iDEN networks - marketed as PowerSourcetm - that enable us to offer wireless service that combines our CDMA-based voice and data applications and our iDEN-based walkie-talkie applications. We are focusing our sales efforts of PowerSource devices on existing subscribers of certain iDEN services to offer them the benefit of higher data speeds on CDMA.

We plan to utilize QUALCOMM Incorporated's QChat® technology, which is designed to provide high performance walkie-talkie services on our CDMA network, and we are designing interfaces to provide for interoperability of walkie-talkie services on our CDMA and iDEN networks. Upon successful launch of QChat devices, we expect that they will succeed PowerSource devices. Currently, we are testing the QChat application on our CDMA network and plan to launch customer user group trials in early 2008 with a goal of launching the related service offerings in 2008. See Part II, Item 1A, "Risk Factors," for information regarding a dispute involving the intellectual property rights of Qualcomm that relate to QChat.

We also plan to deploy a next generation broadband wireless network that will be designed to provide significantly higher data transport speeds using our spectrum holdings in the 2.5 gigahertz, or GHz, band and technology based on the Worldwide Inter-Operability for Microwave Access, or WiMAX, standard. We are designing this network to support a wide range of high-speed IP-based wireless services in a mobile environment. Our initial plans contemplate deploying the new network in larger metropolitan areas with a goal of introducing commercial service offerings in some of those markets beginning in 2008. We recently agreed with Clearwire Corporation to terminate the non-binding letter of intent signed by us and Clearwire in July 2007 that provided, among other things, for the joint construction of a nationwide broadband network based on WiMAX technology.

Service Revenue

Our Wireless segment generates revenues from the provision of wireless services, the sale of wireless equipment and the provision of wholesale and other services. The ability of our Wireless segment to generate service revenues is primarily a function of:

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

• the revenue generated by each subscriber, which in turn is a function of the types and amount of services utilized by each subscriber and the rates that we charge for those services.

Post-Paid and Prepaid Subscribers

The wireless industry is subject to intense competition, which impacts our ability to attract and retain subscribers for wireless services. Most markets in which we operate have very high rates of penetration for

wireless services, which has resulted in the slowing of the rate of growth of subscribers of wireless services. Consequently, we believe that wireless carriers must attract a greater proportion of new subscribers from the existing customer bases of competitors rather than from first time purchasers of wireless services. Because of high penetration rates, first time purchasers of wireless services tend to have lower credit ratings or no credit history. As a result, wireless carriers have focused considerable efforts on the care and service of existing subscribers and retention of valued customers. Some of our competitors have reported significant improvements in their post-paid customer retention rates (i.e., rates of customer churn). The combination of decreased rates of churn of some of our competitors, together with a slowing in the rate of subscriber growth, has reduced the pool of potential subscribers making wireless service provider decisions.

Below is a table showing (a) net additions for the past seven quarters of direct subscribers for our iDEN and CDMA networks, excluding subscribers obtained through the acquisition of Nextel Partners and various PCS Affiliates, existing subscribers who have migrated between networks and indirect subscribers of MVNOs or PCS Affiliates, (b) our total iDEN and CDMA direct subscribers as of the end of each quarterly period, and (c) our rates of monthly post-paid and prepaid customer churn for the past seven quarters.

                                                                                               Quarter Ended
                                             March 31,      June 30,       September 30,       December 31,         March 31,      June 30,       September 30,
                                               2006           2006             2006                2006               2007           2007             2007

Net additions (in thousands)
Post-paid
iDEN                                                 72           (68 )              (379 )             (643 )            (744 )        (662 )              (700 )
CDMA                                                491           278                 191                337               524           678                 363

Total                                               563           210                (188 )             (306 )            (220 )          16                (337 )

Boost Mobile-branded service:
iDEN-based prepaid                                  502           497                 216                171               272            70                 (57 )
CDMA-based unlimited local calling plan               -             -                   -                  -                 3            99                 124

Total                                               502           497                 216                171               275           169                  67

End of period subscribers (in thousands)
iDEN post-paid                                   16,616        18,624              18,204             17,601 (1)        16,535        15,472              14,355
CDMA post-paid(2)                                22,487        22,781              23,471             24,204 (1)        25,049        26,128              27,079
Boost Mobile prepaid                              3,128         3,625               3,841              4,012             4,284         4,354               4,297
Boost Mobile unlimited local calling plan             -             -                   -                  -                 3           102                 226
Monthly customer churn rate
Direct post-paid(3)                                 2.1 %         2.1 %               2.4 %              2.3 %             2.3 %         2.0 %               2.3 %
Direct prepaid                                      5.4 %         6.0 %               6.8 %              6.5 %             7.0 %         6.8 %               6.2 %

(1) In the quarter ended December 31, 2006, we changed our subscriber deactivation policy for post-paid subscribers to provide us additional time to retain subscribers who were subject to deactivation due to late payment. To effect this change, the subscriber base as of October 1, 2006 was increased by 436,000 subscribers. We adjusted our subscriber beginning balance so as to not increase our direct net subscriber additions or decrease the customer churn rates for the fourth quarter 2006 due to this policy change.

(2) Includes subscribers with PowerSource devices.

(3) During the third quarter 2007, we implemented an additional churn rule to remove the impact of activations and deactivations occurring within 30 days in the same account. The new rule, which we believe presents a more precise churn calculation, reduced churn by approximately 10 basis points to 2.3% in the third quarter 2007. The additional churn rule did not impact reported net additions, or results of operations. Prior period churn figures have not been adjusted for this additional churn rule.

During the third quarter 2007, both involuntary and voluntary post-paid customer churn increased. Voluntary customer churn has been negatively impacted by competitive market conditions, including new handset introductions by our competitors, as well as longer wait and handle times on calls to customer service centers. Higher call volumes were in part a result of inquiries related to the conversion of certain of our CDMA customers to a unified billing platform and the change to an improved and simplified bill format. We expect that the conversion to the new platform and the introduction of the new bills, which is being carried out in phases, will be completed by mid 2008. Although the longer wait and handle times during this conversion process have negatively impacted customer satisfaction in the short-term, and led to increased voluntary churn, we expect that the enhanced capabilities of the unified billing platform will increase functionality for our customer care representatives and enhance the customer experience over time. The longer wait times were also due to insufficient staffing in our call centers to handle customer calls. We have since added customer service representatives, and have seen improvements in wait and handle times.

The rate of involuntary churn is to a large extent a function of the credit quality of our subscribers, general economic conditions and, to a lesser extent, seasonal factors. For example, in the second calendar quarter of the year, we have historically experienced a decrease in involuntary churn. Our ratio of subscribers with a prime credit rating to those with a subprime rating has improved in recent periods. While we continually monitor and adjust our credit policies in an effort to attract desirable and profitable lower credit quality subscribers, we have recently tightened our credit policies, which may adversely impact our ability to add lower credit quality subscribers.

In an attempt to maintain and increase our share of post-paid subscriber additions, in recent quarters we have improved the performance of our networks by adding cell sites to expand the coverage and capacity of our networks, improved our brand awareness by increasing media spending in connection with our new marketing campaign, improved our handset portfolio through the introduction of new CDMA and PowerSource handsets, and enhanced incentives to improve third-party sales distribution. Although these efforts have contributed to an increase in our base of CDMA post-paid subscribers in recent quarters, our base of post-paid subscribers of iDEN-based services has continued to decline in recent quarters.

We are experiencing increased competition in our prepaid and youth markets from new entrants that are targeting these subscribers with competitively-priced calling plans that include unlimited local calling, which has contributed to the loss of subscribers of our Boost Mobile prepaid services in the third quarter 2007 and we expect this trend to continue in the fourth quarter 2007. In order to compete with new entrants that offer prepaid unlimited local calling plans, we began to offer a CDMA-based unlimited local calling service plan on a trial basis in four markets, which we are marketing as Boost Unlimited. Due to the success of the trial, we have expanded our Boost Unlimited offering to twelve states.

Average Revenue per Subscriber

Below is a table showing our average revenue per post-paid and prepaid
subscriber for the past seven quarterly periods.


                                                                                    Quarter Ended
                            March 31,         June 30,         September 30,        December 31,        March 31,         June 30,         September 30,
                               2006             2006               2006                 2006               2007             2007               2007

Average monthly
service revenue per
user
Direct post-paid            $       62       $       62       $            61       $          60       $       59       $       60       $            59
Direct prepaid              $       36       $       34       $            33       $          32       $       32       $       31       $            30

The average monthly service revenue per post-paid subscriber generally decreased over the past seven quarters due primarily to declines in voice revenue per subscriber. This decline is due in part to increased sales to the business and government markets, which receive favorable volume-based pricing, and increased sales of family add-on plans, each of which contributes to improved credit quality of our subscriber base and ultimately reduces churn for such customers. The increased percentage of our customers that have roaming included in

their pricing plans also has contributed to the decline in average monthly revenue per subscriber. In recent periods, we also have experienced two trends that negatively impact average monthly revenue per subscriber, each of which is expected to continue. First, we have experienced a high rate of involuntary churn of customers with subprime credit ratings, which typically generate monthly revenues in excess of customers with prime credit ratings. Second, new subscribers of our wireless services have pricing plans with monthly fixed rates that are lower on average than the pricing plans of our existing subscribers.

The decline in voice revenue per subscriber has been partially offset by data services revenue, primarily from our Vision, PowerVision and mobile broadband applications for laptops and other devices available on our CDMA network. There is no assurance that data service revenue per subscriber will continue to grow at current rates or keep pace with declines in voice revenue. In addition, average monthly service revenue per subscriber of our Boost Mobile prepaid services also declined over the last seven quarters due in part to a decrease in usage of wireless services by our existing customers. . . .