
Note 4.	Investments

The components of investments were as follows:



	December 31,
	2012		2011
	(in millions)
Marketable equity securities	$	45	$	43
Equity method and other investments	1,008		1,953
	$	1,053	$	1,996

Marketable equity securities

Investments in marketable equity securities are recognized at fair value and are considered available-for-sale securities. Accordingly, unrealized holding gains and losses on these securities are recognized in accumulated other comprehensive loss, net of related income tax. Realized gains or losses are measured and reclassified from accumulated other comprehensive loss into "Other income (expense), net" in Sprint's consolidated statement of comprehensive loss based on identifying the specific investments sold or where an other-than-temporary impairment exists.

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.

On December 11, 2012, Sprint purchased the equity holdings of one of Clearwire's equityholders, Eagle River Holdings, LLC (Eagle River) for $100 million in cash. These holdings represented 30.9 million shares of Clearwire Corporation Class A Common Stock and 2.7 million shares of Clearwire Communications LLC Class B Interests (together, “Interests”). After the purchase, Sprint held a 50.4% non-controlling voting interest and a 2.1% non-controlling economic interest in Clearwire Corporation, as well as a 48.3% non-controlling economic interest in Clearwire Communications LLC (together, “Equity Interests”).

Under the Clearwire Equityholders' Agreement, Sprint can nominate seven of the thirteen directors to the Clearwire Board. Upon closing of the Eagle River purchase, Sprint is no longer subject to the requirement that one of its seven designees be independent of Sprint. In addition, upon closing, the composition of the remaining board seats was modified so that the number of independent directors the Nominating and Governance Committee of the Clearwire Board can nominate to the Clearwire Board increased from two to three, while the number of directors the remaining investors have the right to nominate to the Clearwire Board under the Clearwire Equityholders' Agreement was reduced from four to three directors. Sprint will continue to account for its ownership interests in Clearwire under the equity method of accounting given the substantive participative governance rights provided to the minority holders in Clearwire, which restrict Sprint from exerting control over Clearwire's operations.

The carrying value of our Equity Interests totaled $674 million as of December 31, 2012. In addition to our Equity Interests, Sprint held two notes receivable from Clearwire as of December 31, 2012. On January 2, 2012, in conjunction with new long-term pricing agreements within the mobile virtual network operator (MVNO) agreement 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 MVNO agreement, and this action was taken for the installment due in January 2013. 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 $320 million and $178 million as of December 31, 2012 and 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 $1.1 billion, $1.7 billion and $1.3 billion for the years ended December 31, 2012, 2011 and 2010, 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 for 2012, 2011 and 2010 include charges of approximately $41 million, $361 million and $97 million, respectively, which are associated with Clearwire's write-off of certain network and other assets that no longer meet its strategic plans. The years ended December 31, 2012 and 2011 also include a pre-tax impairment of $204 million and $135 million, respectively, reflecting Sprint's reduction in the carrying value of its investment in Clearwire to an estimate of fair value and a pre-tax dilution loss of $27 million for the year ended December 31, 2011.

As of December 31, 2012, our proportionate share of the underlying net assets of Clearwire exceeds the carrying value of our equity investment by approximately $275 million, which is primarily related to our non-cash impairments recognized in current and prior periods.

Summarized financial information for Clearwire is as follows:



	December 31,
	2012		2011
	(in millions)
Current assets	$	988	$	1,287
Noncurrent assets	6,678		7,556

Current liabilities	$	405	$	280
Noncurrent liabilities	5,379		4,917



	Year Ended December 31,
	2012			2011			2010
	(in millions)
Revenues	$	1,265		$	1,254		$	535
Operating expenses	(2,644		)	(3,645		)	(2,698		)
Operating loss	$	(1,379	)	$	(2,391	)	$	(2,163	)
Net loss from continuing operations before non-controlling interests	$	(1,744	)	$	(2,856	)	$	(2,251	)
Net loss from discontinued operations before non-controlling interests	$	(168	)	$	(82	)	$	(52	)

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 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. 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 Related-Party Transactions

Sprint's equity method investment in Clearwire includes agreements by which we resell wireless data services utilizing Clearwire's 4G 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 a 4G WiMAX network is not available. Amounts included in our consolidated balance sheets related to our agreement to purchase 4G WiMAX services from Clearwire as of December 31, 2012 and 2011 totaled $78 million and $5 million, respectively, for prepaid expenses and other current assets and $79 million and $77 million, respectively, for accounts payable, accrued expense and other current 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 $417 million and $405 million for the year ended December 31, 2012 and 2011, respectively, and was immaterial for the year ended December 31, 2010.