
Note 3.	Investments

The components of investments were as follows:



	September 30, 2012		December 31, 2011
	(in millions)
Marketable equity securities	$	46	$	43
Equity method and other investments	1,095		1,953
	$	1,141	$	1,996

Equity Method Investment in Clearwire

Sprint's Ownership Interest

Sprint's investment in Clearwire Corporation and its consolidated subsidiary Clearwire Communications LLC (together, "Clearwire") is one of the ways we participate in the fourth generation (4G) wireless broadband market. Sprint offers certain 4G products utilizing Clearwire's 4G wireless Worldwide Interoperability for Microwave Access (WiMAX) broadband network in available markets. As of September 30, 2012, Sprint held approximately 48.2% of a non-controlling economic interest in Clearwire Communications LLC and a 48.2% non-controlling voting interest in Clearwire Corporation (together, “Equity Interests”) for which the carrying value totaled $764 million, which is equivalent to a $1.08 per share carrying value. In June 2012, Sprint exercised its right to repurchase approximately 78 million Class B Voting shares at par value of $0.0001 per share for approximately eight thousand dollars, previously surrendered in June 2011, resulting in Sprint's non-controlling voting interest now being equivalent to its non-controlling economic interest.

In addition to our Equity Interests, Sprint held two notes receivable from Clearwire as of September 30, 2012. On January 2, 2012, in conjunction with new long-term pricing agreements reached between the two companies in the fourth quarter of 2011, Sprint provided $150 million to Clearwire in exchange for a promissory note. The note has a stated interest rate of 11.5% that matures in two installments of $75 million plus accrued interest in January 2013 and in January 2014. The difference between the fair value of the note and its face value at the date of issuance has been recorded as a prepaid expense, which will be amortized over the service period to cost of service. Sprint, at its sole discretion, can choose to offset any amounts payable by Clearwire under this promissory note against amounts owed by Sprint under the mobile virtual network operator (MVNO) agreement. Additionally, Sprint holds a note receivable from Clearwire issued in 2008 with a fixed interest rate of 12% and a maturity date of December 2015. The total carrying value of the notes receivable, which includes accretion related to premiums for both notes and fees associated with the 2009 replacement of the 2008 note, was $316 million and $178 million as of September 30, 2012 and December 31, 2011, respectively. The carrying value of Sprint's Equity Interests, together with the long-term portion of the carrying value of the notes receivable, are included in the line item "Investments" in Sprint's consolidated balance sheets. The current portion of the carrying value of the notes receivable is included in the line item "Prepaid expenses and other current assets" in Sprint's consolidated balance sheets.

Equity in Losses and Summarized Financial Information

Equity in losses from Clearwire were $208 million and $927 million for the three and nine-month periods ended September 30, 2012 and $271 million and $1.3 billion for the three and nine-month periods ended September 30, 2011, respectively. Sprint's losses from its investment in Clearwire consist of Sprint's share of Clearwire's net loss and other adjustments, if any, such as non-cash impairment of Sprint's investment, gains or losses associated with the dilution of Sprint's ownership interest resulting from Clearwire's equity issuances, and other items recognized by Clearwire Corporation that do not affect Sprint's economic interest. Sprint's equity in losses from Clearwire include charges that were associated with Clearwire's write-off of certain network and other assets that no longer meet its strategic plans that were $41 million for the nine-month period ended September 30, 2012 and $15 million and $309 million for the three and nine-month periods ended September 30, 2011, respectively. The nine-month period ended September 30, 2012 also includes a $204 million pre-tax impairment recognized in the second quarter 2012 reflecting Sprint's reduction in the carrying value of its investment in Clearwire to an estimated fair value.

Summarized financial information for Clearwire is as follows:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(in millions)
Revenues	$	314		$	332		$	954		$	892
Operating expenses	(647		)	(731		)	(2,020		)	(2,850		)
Operating loss	$	(333	)	$	(399	)	$	(1,066	)	$	(1,958	)
Net loss from continuing operations before non-controlling interests	$	(320	)	$	(479	)	$	(1,312	)	$	(2,212	)
Net loss from discontinued operations before non-controlling interests	$	(173	)	$	(5	)	$	(179	)	$	(79	)

Sprint's Recoverability

At each financial reporting measurement date, we evaluate the excess, if any, of Sprint's carrying value over the estimated fair value of our investment in Clearwire to determine if such excess, an implied unrealized loss, is other-than-temporary. Our evaluation considers, among other things, both observable and unobservable inputs, including Clearwire's market capitalization, historical volatility associated with Clearwire's common stock, the duration of a decline in Clearwire's average trading stock price below Sprint's per share carrying value, potential tax benefits, governance rights associated with our non-controlling voting interest, and our expectation of the duration of our ongoing relationship, as well as other factors. Based upon the evaluation of factors described above, we recognized a non-cash impairment of $204 million in the second quarter 2012 to reflect a reduction to our best estimate of fair value associated with our non-controlling economic interests. The determination of an estimate of fair value for a non-public security, such as our non-controlling economic interest, is subject to significant judgment and uncertainty. Clearwire's stock price is subject to significant volatility. Based on our analysis, we expect to recover the carrying value of our investment in Clearwire as of September 30, 2012. Declines in Clearwire's stock price subsequent to September 30, 2012, if any, will be evaluated in future periods for impairment of our remaining investment. Our proportionate share of the underlying net assets of Clearwire exceeds the carrying value of our equity investment by approximately $338 million, which is primarily related to our non-cash impairments recognized in prior periods.

Clearwire Related-Party Transactions

Sprint's equity method investment in Clearwire includes agreements by which we resell wireless data services utilizing Clearwire's 4G WiMAX network. In addition, Clearwire utilizes the third generation (3G) Sprint network to provide dual-mode service to its customers in those areas where access to its 4G WiMAX network is not yet available. Amounts included in our consolidated balance sheets related to our agreement to purchase 4G WiMAX services from Clearwire as of September 30, 2012 and December 31, 2011 totaled $119 million and $5 million, respectively, for prepaid expenses and other current assets and $155 million and $77 million, respectively, for accounts payable, accrued expense and other liabilities. Cost of services and products included in our consolidated statements of comprehensive loss related to our agreement to purchase 4G WiMAX services from Clearwire totaled $103 million and $312 million for the three and nine-month periods ended September 30, 2012, and $111 million and $263 million for the three and nine-month periods ended September 30, 2011, respectively.