
Note 12.	Compensation Plans

As of March 31, 2012, Sprint sponsored three incentive plans: the 2007 Omnibus Incentive Plan (2007 Plan), the 1997 Long-Term Incentive Program (1997 Program) and the Nextel Incentive Equity Plan (Nextel Plan), (together, "Compensation Plans"). In the first quarter 2012, the Management Incentive Stock Option Plan (MISOP) became inactive when all outstanding options expired. Sprint also sponsors an Employee Stock Purchase Plan (ESPP). Under the 2007 Plan, we may grant share and non-share based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other equity-based and cash awards to employees, outside directors, and other eligible individuals as defined by the plan. In general, options are granted with an exercise price equal to the market value of the underlying shares on the grant date, vest on an annual basis over three or four years, and have a contractual term of ten years. Restricted stock units generally have performance and service requirements or service requirements only with vesting periods ranging from one to three years. Performance-based restricted stock units awarded in 2012 have a three-year performance period and vest subject to the Company's performance as compared to objectives established when the award was granted. Performance-based restricted stock units awarded in 2011 and 2010 have three distinct one-year performance periods and are granted in each period once the performance objectives are established, usually during the first quarter of each calendar year. Employees and directors who are granted restricted stock units are not required to pay for the shares but generally must remain employed with us, or continue to serve as a member of our board of directors, until the restrictions lapse, which is typically three years for employees and one year for directors. The Compensation Committee of our board of directors, or one or more executive officers should the Compensation Committee so authorize, as provided in the 2007 Plan, will determine the terms of each share and non-share based award. No new grants can be made under the 1997 Program or the Nextel Plan.

For the three-month period ended March 31, 2012, the number of shares available and reserved for future grants under the 2007 Plan totaled approximately 135 million common shares. The number of shares available under the 2007 Plan includes shares originally granted under the 1997 Program, the Nextel Plan or the MISOP that are forfeited, expired, or otherwise terminated, which totaled approximately 6 million shares in the three-month period ended March 31, 2012. As of March 31, 2012, restricted stock units and options to acquire about 82 million shares were outstanding under the 2007 Plan, restricted stock units and options to acquire about 8 million shares were outstanding under the 1997 Program, and options to acquire about 2 million shares were outstanding under the Nextel Plan. As of March 31, 2012, the ESPP has approximately 76 million common shares authorized and reserved for future purchases. We use new shares to satisfy share-based awards or treasury shares, if available.

Compensation Costs

The cost of employee services received in exchange for share-based awards classified as equity is measured using the estimated fair value of the award on the date of the grant, and that cost is recognized over the period that the award recipient is required to provide service in exchange for the award. Awards of instruments classified as liabilities are measured at the estimated fair value at each reporting date through settlement. Share-based compensation cost related to awards with graded vesting is recognized using the straight-line method.

Pre-tax share and non-share based compensation charges from our incentive plans included in net loss were $17 million and $18 million for the three-month periods ended March 31, 2012 and 2011. The net income tax benefit recognized in the consolidated financial statements for share-based compensation awards for the same two periods was $4 million and $5 million, respectively.

As of March 31, 2012, there was $72 million of total unrecognized compensation cost related to non-vested incentive awards that are expected to be recognized over a weighted average period of 2.00 years. Cash received from exercise under all share-based payment arrangements, net of shares surrendered for employee tax obligations, was insignificant for each of the three-month periods ended March 31, 2012 and 2011.

Options

The fair value of each option award is estimated on the grant date using the Black-Scholes option valuation model, based on several assumptions including the risk-free interest rate, volatility, expected dividend yield and expected term. Options outstanding as of March 31, 2012 include options granted under the 2007 Plan, the 1997 Program and the Nextel Plan, as discussed above. The risk-free interest rate used is based on the U.S. Treasury yield curve in effect on the measurement date, with a term equal to the expected term of the options. The volatility used is the implied volatility from traded options on our common shares. The expected dividend yield used is estimated based on our historical dividend yield and other factors. The expected term of options granted is estimated using the simplified method, defined as the average of the vesting term and the contractual term as our historical data is not expected to represent the future expected term of equity awards due to our severance activities over the last several years.

The following table provides the estimated fair value and assumptions used in determining the fair value of option awards granted during the three months ended March 31, 2012:



Weighted average grant date fair value	$1.22
Risk free interest rate	1.15%
Volatility	59.4%
Weighted average expected volatility	59.4%
Expected dividend yield	NA
Weighted average expected dividend yield	NA
Expected term (years)	6
Options granted (millions)	12

A summary of the status of the options under our option plans as of March 31, 2012, and changes during the quarter then ended, is presented below:



	Shares Under Option		Weighted Average per Share Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in millions)				(in years)	(in millions)
Outstanding January 1, 2012	65		$	8.16
Granted	12		$	2.23
Exercised	—		$	—
Forfeited/expired	(6	)	$	15.54
Outstanding at March 31, 2012	71		$	6.54	7.07	$	9
Vested or expected to vest at March 31, 2012	68		$	6.74	6.94	$	7
Exercisable at March 31, 2012	42		$	8.81	5.91	$	—

Restricted Stock Units

The fair value of each restricted stock unit award is calculated using the share price at the date of grant. Restricted stock units outstanding consist of those units granted under the 2007 Plan and the 1997 Program, as discussed above. A summary of the status of the restricted stock units as of March 31, 2012, and changes during the quarter then ended, is presented below:



	Restricted Stock Units		Weighted Average Grant Date Fair Value of Restricted Stock Units
	Future Performance and Service Required	Future Service Required	Future Performance and Service Required		Future Service Required
	(in millions)
Outstanding January 1, 2012	6	2	$	3.95	$	8.52
Granted	13	—	$	2.23	$	—
Vested	—	—	$	—	$	—
Forfeited	—	—	$	—	$	—
Outstanding March 31, 2012	19	2	$	2.75	$	8.84

The total fair value of restricted stock units vested was insignificant for the three-month period ended March 31, 2012 and was $12 million for the three-month period ended March 31, 2011. The weighted-average grant date fair value of restricted stock units granted during the three-month period ended March 31, 2012 was $2.23 per unit, compared with $4.20 per unit for the same prior year period.

Certain restricted stock units outstanding as of March 31, 2012 are entitled to dividend equivalents paid in cash, if dividends are declared and paid on common shares, but performance-based restricted stock units are not entitled to dividend equivalent payments until the applicable performance and service criteria have been met.