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 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:

• 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 continue to encounter in connection with the integration of the pre-merger Sprint and Nextel businesses, and the integration of the businesses and assets of Nextel Partners and the PCS Affiliates that provide wireless PCS under the Sprint® brand name, that we have acquired, including the risk that these difficulties may limit our ability to fully integrate the operations of these businesses and the risk that we will be unable to continue to retain key employees;

• 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 the ability of any of our handset suppliers to provide devices, or Motorola's ability or willingness to provide related equipment and software applications, or to develop new technologies or features for our 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 MHz band used to operate our iDEN network, as contemplated by the 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, economic 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 I, Item 1A "Risk Factors" and other filings of ours with the SEC.

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 also are one of the largest providers of wireline long distance services and one of the largest carriers of Internet traffic in the nation. We own extensive wireless networks and a global long distance, Tier 1 Internet backbone.

On December 17, 2007, Daniel R. Hesse joined our company as President and Chief Executive Officer. Senior management is currently reviewing our operations and assessing our strategies and future business plans.

This process is still ongoing and, depending on the outcome, our operations, future capital requirements and future valuation of our long-lived assets could be affected. As part of our overall business strategy, we regularly evaluate opportunities to strengthen 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. As a result, the forward-looking information provided in this document is based only on information currently available to senior management.

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.

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

Business Segments

We have two reportable segments: Wireless and Wireline. See note 12 of the Notes to Consolidated Financial Statements for additional information on our segments.

Wireless

Products and Services

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 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 and resellers of our wholesale wireless services, offer digital wireless service in all 50 states, Puerto Rico and the U.S. Virgin Islands, and provide wireless coverage in 360 metropolitan markets, including 341 of the 349 largest U.S. metropolitan areas, serving about 54 million wireless subscribers as of December 31, 2007. We offer wireless international voice roaming for subscribers of both CDMA and iDEN-based services in numerous countries. Our CDMA network utilizes high-speed evolution data optimized, or EV-DO, technology to provide high-speed data applications. We have incorporated EV-DO Rev. A, the most recent version of EV-DO technology that is designed to support a variety of IP, video and high performance walkie-talkie applications, into over 82% of our CDMA network.

We offer a wide array of 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 MVNOs, such as Qwest Communications International, Inc., Virgin Mobile USA, Helio Inc., Movida Communications, 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 offer a broad portfolio of data services across our CDMA network, including data messaging, photo and video offerings, entertainment and location-based applications, marketed as Power VisionSM, and mobile broadband applications for laptops and other devices.

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 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. In addition, we are also improving our product and service offerings on our iDEN network, which will include the introduction of several new handsets in 2008.

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 the PowerSource devices. Currently, we are testing the QChat application on our CDMA network and our goal is to launch commercial service offerings in 2008. For information regarding a dispute involving the intellectual property rights of QUALCOMM that relate to QChat, see Item 1A. "Risk Factors-The intellectual property rights utilized by us and our suppliers and service providers may infringe on intellectual property rights owned by others."

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 from 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.

The declines in our subscriber base and revenue generated from each subscriber group discussed below have resulted in a decline in service revenue.

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 will limit the 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 (losses) for the past twelve quarters of direct subscribers for our iDEN and CDMA networks, excluding subscribers obtained through business combinations, existing subscribers who have migrated between networks and indirect subscribers of MVNOs and PCS Affiliates, (b) our total iDEN and CDMA post-paid subscribers as of each of the quarters in 2005, 2006 and 2007, and (c) our average rates of monthly post-paid and prepaid customer churn for the past twelve quarters.

                                                                                                                                           Quarter Ended
                                                 March 31,      June 30,      September 30,      December 31,      March 31,      June 30,      September 30,      December 31,        March 31,      June 30,      September 30,      December 31,
                                                   2005           2005            2005               2005            2006           2006            2006               2006              2007           2007            2007               2007
Net additions (losses)
(in thousands)
Post-paid:
iDEN                                                    -             -                 136               188             72           (68 )             (379 )            (643 )           (744 )        (662 )             (700 )            (686 )
CDMA(2)                                                518           400                394               558            491           278                191               337              524           678                363                 3

Total                                                  518           400                530               746            563           210               (188 )            (306 )           (220 )          16               (337 )            (683 )

Boost Mobile-branded service:
iDEN-based prepaid                                      -             -                 230               638            502           498                216               171              272            70                (57 )            (202 )
CDMA-based unlimited local calling plan                 -             -                  -                 -              -             -                  -                 -                 3            99                124               257

Total                                                   -             -                 230               638            502           498                216               171              275           169                 67                55

End of period subscribers
(in thousands)
iDEN post-paid                                          -             -              16,367            16,555         16,616        18,624             18,204            17,601 (1)       16,535        15,472             14,355            13,246
CDMA post-paid(2)                                   18,283        18,683             19,600            20,422         22,487        22,781             23,471            24,204 (1)       25,050        26,129             27,079            27,505

Total post-paid                                     18,283        18,683             35,967            36,977         39,103        41,405             41,675            41,805           41,585        41,601             41,434            40,751

Boost Mobile prepaid                                    -             -               1,987             2,625          3,127         3,625              3,841             4,012            4,284         4,354              4,297             4,095
Boost Mobile unlimited local calling plan               -             -                  -                 -              -             -                  -                 -                 3           102                226               483

Total prepaid                                           -             -               1,987             2,625          3,127         3,625              3,841             4,012            4,287         4,456              4,523             4,578

Monthly customer churn rate
Direct post-paid(3)                                    2.5 %         2.2 %              2.2 %             2.1 %          2.1 %         2.1 %              2.4 %             2.3 %            2.3 %         2.0 %              2.3 %             2.3 %
Direct prepaid                                          -             -                 3.5 %             4.6 %          5.4 %         6.0 %              6.8 %             6.5 %            7.0 %         6.8 %              6.2 %             7.5 %

(1) In the fourth quarter 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, introduced in the fourth quarter 2006.

(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 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 2007, we endeavored to retain subscribers and attract new subscribers by improving our customer care and sales and distribution functions. In addition, we took other actions in an effort to improve our customers' experience including improving our network performance by adding cell sites to expand the coverage and capacity of our networks, enhancing our brand awareness by increased media spending, and broadening our handset portfolio primarily through the introduction of new CDMA and PowerSource handsets.

We added about 1.6 million net post-paid subscribers on the CDMA network in 2007; however, we have experienced a continued decline in the number of new post-paid CDMA subscribers in the fourth quarter 2007. Competitive marketing conditions including increased advertising and promotions by our competitors have contributed to the decline in the number of new customers. Earlier in the year, we adjusted our credit policy in certain markets in an effort to attract new subscribers. In late 2007, we adjusted our credit policies and returned to policy standards similar to those in mid 2006, which also contributed to the decline in subscriber additions on our CDMA platform in the fourth quarter 2007. We continually monitor and adjust our credit policies in an effort to attract desirable and profitable customers, including our lower credit quality customers. Our ratio of subscribers with a subprime credit rating to those with a prime credit rating has decreased slightly from the fourth quarter 2006. Refer to "-Results of Operations-Segment Results of Operations-Wireless-Wireless Segment Earnings" below for a discussion of subscriber trends.

We have experienced declines in the number of new iDEN post-paid subscribers in recent quarters and we lost about 2.8 million net post-paid subscribers on this network during 2007. Consumer sentiment regarding the iDEN network, reduced marketing programs and limited new handset offerings at higher than market prices have all contributed to the decline in new iDEN customers.

We calculate churn by dividing net subscriber deactivations for the quarter by the sum of the average number of subscribers for each month in the quarter. Net subscriber deactivations are used in the numerator of the churn calculation. For accounts comprised of multiple subscribers, such as family plans and enterprise accounts, net deactivations are defined as deactivations in excess of customer activations in a particular account within 30 days. Post-paid churn consists of both voluntary churn, where the subscriber makes his or her own determination to cease being a customer, and involuntary churn, where we terminate the customer's service due to a lack of payment or other reasons. Involuntary deactivations represent slightly over half of all deactivations on our CDMA network in 2007. Although overall post-paid churn was relatively flat in 2007 as compared to 2006, post-paid churn on our iDEN platform increased, which was offset by reduced post-paid churn on our CDMA platform. Voluntary churn on the iDEN network has been adversely impacted by customer sentiment related to: the network, limited handset offerings at higher than market prices, and customer care experience. Our overall 2007 post-paid churn remains high relative to that of our competitors for the same reasons. Prepaid subscriber churn increased as compared to 2006, primarily due to competition in our prepaid and youth markets from new entrants. Refer to "-Results of Operations-Segment Results of Operations-Wireless-Wireless Segment Earnings" below for a discussion of churn trends.

Average Revenue per Subscriber

Below is a table showing our average revenue per post-paid and prepaid
subscriber for the past twelve quarters.



                                                                                                                                          Quarter Ended
                                             March 31,       June 30,       September 30,      December 31,      March 31,       June 30,       September 30,      December 31,      March 31,       June 30,       September 30,      December 31,
                                                2005           2005             2005               2005             2006           2006             2006               2006             2007           2007             2007               2007
Average monthly service revenue per user
Direct post-paid                             $       61     $       62     $            63     $          63     $       62     $       62     $            61     $          60     $       59     $       60     $            59     $          58
Direct prepaid                                       -              -      $            37     $          37     $       36     $       34     $            33     $          32     $       32     $       31     $            30     $          28

Average monthly service revenue per subscriber for the quarter is calculated by dividing our quarterly service revenue by the sum of our average number of subscribers for each month in the quarter. Changes in average monthly post-paid service revenue are due to changes in the rate plans we offer and usage of our service and applications by subscribers. The decline in our average monthly voice revenue is primarily due to the loss of subscribers with higher priced service plans, while new subscribers and the subscribers acquired from the PCS Affiliates have lower priced service plans. In addition, the decline is partly attributable to the migration of our existing customers to family add-on plans or plans that include roaming in their service plan, as well as increased sales to businesses and the government, which receive favorable

volume-based pricing. In addition to our standard voice plans, we offer data plans or add on plans that provide our customers offerings such as short message service, or SMS, connection cards and our Sprint Vision and Power Vision service plan. As these products and services are becoming increasingly popular with our customers, the decline in the average voice revenue per subscriber is being partially offset by an increase in the average data revenue per post-paid subscriber. There is no assurance that data service revenue per subscriber will continue to grow at current rates or eventually offset the declines in voice revenue.

Segment Earnings

Wireless segment earnings is primarily a function of wireless service revenue, costs to acquire subscribers, network and interconnection costs to serve those subscribers and other Wireless segment operating expenses. The costs to acquire our customers includes the net cost at which we sell our handsets, referred to as handset subsidies, as well as the marketing and sales costs incurred to attract those customers. Network costs primarily represent switch and cell site costs and interconnection costs generally consist of per-minute use fees and roaming fees paid to other carriers. The remaining costs associated with . . .