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 July 27, 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' 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 suggested by the forward-looking statements.
In addition, forward-looking statements include statements related to information about the combined
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. 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 July 27, 2005,
Second Quarter 2005 Investor Update located at <http://www.sprint.com/sprint/ir/>.
Second Quarter 2005 Investor Update 2
3. Reconciliation of Non-GAAP Liquidity Measures
Quarter-to-date June 30, 2005
Long Other &
Consolidated Wireless Local Distance Elim inations
$ 1,196 $ 625 $ 469 $ 136 $ (34)
Operating income (loss)
Special items (1) 60 19 1 13 27
1,256 644 470 149 (7)
Adjusted operating income (loss)*
Depreciation and amortization 1,036 645 278 114 (1)
2,292 $ 1,289 $ 748 $ 263 $ (8)
Adjusted EBITDA*
Adjust for special items (60)
Other operating activities, net (2) 1,280
3,512
Cash provided by operating activities-GAAP
Capital expenditures (997)
Dividends paid (186)
Proceeds from sales of assets 208
Other investing activities, net (3)
2,534
Free Cash Flow*
Decrease in debt, net (40)
Investments in debt securities, net (5)
Proceeds from common stock issued 48
Other financing activities, net 11
$ 2,548
Change in cash and equivalents - GAAP
Quarter-to-date June 30, 2004
Long Other &
Consolidated Wireless Local Distance Elim inations
$ 718 $ 418 $ 445 $ (139) $ (6)
Operating income (loss)
Special items (1) 82 7 2 73 -
800 425 447 (66) (6)
Adjusted operating income (loss)*
Depreciation and amortization 1,232 640 271 321 -
2,032 $ 1,065 $ 718 $ 255 $ (6)
Adjusted EBITDA*
Adjust for special items (82)
Other operating activities, net (2) (54)
1,896
Cash provided by operating activities-GAAP
Capital expenditures (993)
Dividends paid (180)
Other investing activities, net (32)
691
Free Cash Flow*
Decrease in debt, net (1,090)
Proceeds from common stock issued 12
Investments in debt securities, net 25
Other financing activities, net (8)
$ (370)
Change in cash and equivalents - GAAP
See accompanying Notes to Consolidated Financial Statements.
(1)
Other operating activities, net includes the change in w orking capital, change in deferred income taxes, miscellaneous operating activities and non-operating
(2)
items in net income.
Second Quarter 2005 Investor Update 3
4. Adjusted Earnings Per Share Reconciliation
Quarter-to-Date Year-to-Date
Periods Ended June 30, 2005 2004 2005 2004
$ 599 $ 229 $ 1,069 $ 452
Earnings Applicable to Common Stock
Earnings allocated to participating securities - 6 - 6
Preferred stock dividends paid 1 1 3 3
600 236 1,072 461
GAAP Net income
Special items (net of taxes) (1)
Restructuring and asset impairments 20 58 20 77
Merger and integration expense 17 - 17 -
MCI settlement - (9) - (9)
Premium on early retirement of debt - 18 - 18
$ 637 $ 303 $ 1,109 $ 547
Adjusted Net Income
$ 0.40 $ 0.16 $ 0.71 $ 0.31
GAAP diluted earnings per share
Special items 0.02 0.05 0.02 0.06
(2)
Adjusted Earnings Per Share $ 0.42 $ 0.21 $ 0.74 $ 0.37
See accompanying Notes to Consolidated Financial Statements.
(1)
(2) Earnings per share data may not add due to rounding.
Second Quarter 2005 Investor Update 4
6. Substantial Improvements in Financial Strength
Year-to-date Free Cash
Sprint Corp
Flow of $3.1 billion $20
Net Debt reduced by $15
38% since 2Q04
(Billions)
$10
Interest expense down
11% y-o-y $5
Net Debt below 1.2x $0
2Q04 4Q04 2Q05
trailing 12-mos Debt Cash on Hand Net Debt
Adjusted EBITDA
Second Quarter 2005 Investor Update 6
7. Improving Business Mix
Revenue Contribution Adjusted EBITDA Contribution
100% 100%
20%
21%
22%
33%
35% 35%
75% 75%
24%
24%
27%
11%
12%
13%
50% 50%
56%
55% 56%
52%
25% 53%
52%
25%
0% 0%
2Q04 1Q05 2Q05 2Q04 1Q05 2Q05
Wireless LD Local Wireless LD Local
Results exclude North Supply & before eliminations
Expanding wireless contribution
Strong growth in wireline data products
Second Quarter 2005 Investor Update 7
8. Progress on Financial Priorities
Focus on day-to-day operations
Execute 2005 Plan Deliver the numbers
Seamless merger / spin
Key partnerships
Profitable Growth
Strategic products and investments
Drive productivity
Improve Margins Leverage expense initiatives
Detailed synergy plans
Second Quarter 2005 Investor Update 8
9. Updated 2005 Guidance
Previous Guidance New Guidance
Revenue
Consolidated Up Low Single Digits Up 3% to 4%
Wireless Up Low Double Digit Up Low Double Digit
Local Down Very Low Single Digit Down Very Low Single Digit
Long Distance Down Low Double Digit Down High Single Digit
Adjusted EBITDA
Consolidated $8.5B to $8.7B $8.7B to $8.9B
Wireless $4.8B to $5.0B $4.8B to $5.0B
Local $2.85B Approximately $2.9B
Long Distance Upper Half of $800M to $950M Approximately $1B
Sprint Capex $4.0 - $4.2B $4.0 - $4.2B
Guidance excludes merger costs, US Unwired
Merger costs expected to be significant in 2H05
Second Quarter 2005 Investor Update 9
10. Wireless 2Q05 Highlights
Strong financial and operational results
Margin expansion driven by increased
revenues and solid cost management
Improved customer retention
Industry leading wireless data results and
launch of EV-DO HSD network
Second Quarter 2005 Investor Update 10
11. Wireless Financial Results
2Q05 1Q05 2Q04
$4.04B $3.87B 4% $3.61B 12%
Net Operating Revenues
$644M $457M 41% $425M 52%
Adjusted Operating Income
$1.29B $1.10B 17% $1.07B 21%
Adjusted EBITDA
Adjusted EBITDA as a percent
35.2% 31.1% +410 bps 33.0% +220 bps
of Service Revenue*
$611M $683M -11% $404M 51%
Adjusted EBITDA less CAPEX
* Service revenue includes direct, wholesale, affiliate and other
Second Quarter 2005 Investor Update 11
12. Wireless Operating Performance
2Q05 1Q05 2Q04
26.6M 26.0M 2% 22.2M 20%
Total Subscribers on Network
588K 1.31M -55% 897K -34%
Total Net Subscriber Additions
2.2% 2.5% -30 bps 2.3% -10 bps
Churn
$62 $61 2% $62 -
ARPU
$1.84B $1.83B 1% $1.73B 6%
Costs of Services and Products
$910M $935M -3% $811M 12%
Selling, General & Admin
Second Quarter 2005 Investor Update 12
13. Wireless Data Leadership
Wireless Data ARPU Data % of
Reported ARPU
nearly $6.50
10%
Highest data
contribution in industry 8%
EV-DO being
aggressively deployed 6%
2Q04 4Q04 2Q05
Second Quarter 2005 Investor Update 13
14. Long Distance 2Q05 Highlights
Good performance driven by solid execution
Progress on solution selling
Revenue stability due to volume increases and
more stable pricing
Adjusted EBITDA
Revenue
$2,000 $300
Flat
$1,750
+1 %
$275
(Millions)
$1,500
(Millions)
$250
$1,250
$225
$1,000
$200
$750
1Q05 2Q05
1Q05 2Q05
Second Quarter 2005 Investor Update 14
15. Long Distance Financial Results
2Q05 1Q05 2Q04
$1.72B $1.72B - $1.87B -8%
Net Operating Revenues
$892M $882M 1% $947M -6%
Business Voice
$162M $183M -12% $217M -25%
Consumer Voice
$420M $412M 2% $438M -4%
Data
$178M $178M - $214M -17%
Internet
$149M $143M 4% ($66M) NA
Adjusted Operating Income (Loss)
$263M $260M 1% $255M 3%
Adjusted EBITDA
$193M $195M -1% $191M 1%
Adjusted EBITDA less Capex
Second Quarter 2005 Investor Update 15
16. Cost Management Yielding Results
1H05 benefited from aggressive cost actions
CSP impacted by volume increases
Access initiatives paying dividends
SGA down 9% sequentially and 35% y-o-y
Sales rep employee productivity increases
Second Quarter 2005 Investor Update 16
17. Local 2Q05 Highlights Revenue
$1,600
Strong 2nd quarter
$1,400
($Millions
$1,200
Solid revenue, profit $1,000
and cash results $800
2Q04 1Q05 2Q05
Adjusted EBITDA Adjusted EBITDA
$760 60%
margin of 51% $735 55%
Executed while
(Millions)
$710 50%
planning local spin-off $685 45%
$660 40%
2Q04 1Q05 2Q05
Adjusted EBITDA Adjusted EBITDA Margin
Second Quarter 2005 Investor Update 17
18. Local Financial Results
2Q05 1Q05 2Q04
$1.48B $1.50B -1% $1.51B -2%
Net Operating Revenue
$470M $446M 5% $447M 5%
Adjusted Operating Income
$748M $723M 3% $718M 4%
Adjusted EBITDA
$547M $567M -4% $471M 16%
Adj EBITDA less CAPEX
7.53M 7.64M -1.4% 7.78M -3.2%
Access Lines
7.00B 7.55B -7% 7.85B -11%
Access M OU
1.28B 1.33B -3% 1.10B 16%
LD M OU
Second Quarter 2005 Investor Update 18
19. Strong Data Revenue Growth
DSL Special Access
590K lines in service Increased sales to
wireless carriers
DSL penetration
increased to 11% of 2% sequential increase
capable lines 10% y-o-y increase
ARPU of $43 $450M annualized
$300M annualized revenue stream
revenue stream
16% of total revenues, up 260 bps y-o-y
Second Quarter 2005 Investor Update 19
20. Bundle Strategy Gaining Traction
62%
Penetration of one or more
60%
strategic products increased 58%
to 71% 56%
54%
Strong increases in LD and 52%
2Q04 2Q05
DSL penetration
12%
Strength in wireline /
8%
wireless bundles, video
4%
0%
2Q04 2Q05
Second Quarter 2005 Investor Update 20
21. Local Spin-Off Update
Transition teams making significant progress
Finalized business model
Commercial arrangements for LD & wireless near final
Significant work on the new brand
Preparing state regulatory applications
Management announcements underway
Second Quarter 2005 Investor Update 21
22. Sprint Nextel Merger Process In Final Stages
Pending
Accomplishments
Regulatory approval
Brand announced
Shareholder approvals Set expectations
Management team Execute the plan
Significant work on Communicate our
expected synergies progress
Planning for launch Deliver the results
IRS ruling on spin
Second Quarter 2005 Investor Update 22
23. Q&A
Gary Forsee, Chairman and CEO
Len Lauer, President and COO
Bob Dellinger, Executive Vice President and CFO
Mike Fuller, President Local
Kurt Fawkes, Vice President Investor Relations
Second Quarter 2005 Investor Update 23