Intangible Assets

Indefinite-Lived Intangible Assets

Our indefinite-lived intangible assets consists of FCC licenses, which were acquired primarily through FCC auctions and business combinations, certain of our trademarks, and goodwill. At March 31, 2015, we held 1.9 GHz, 800 MHz and 2.5 GHz FCC licenses authorizing the use of radio frequency spectrum to deploy our wireless services. As long as the Company acts within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. Accordingly, we have concluded that FCC licenses are indefinite-lived intangible assets. Goodwill represents the excess of consideration paid over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations (see Note 3. Significant Transactions).

During the quarter ended June 30, 2014, the Company entered into definitive agreements with various counterparties to sell certain FCC licenses held by its Wireless segment. During the quarters ended September 30, 2014 and March 31, 2015, agreements totaling $100 million and $200 million, respectively, received regulatory approval and were settled. These transactions did not have a material impact on the Company's consolidated results of operations.

The following provides the activity of Indefinite-lived intangible assets within the consolidated balance sheets:



	March 31, 2014		Net Additions					March 31, 2015
	(in millions)
FCC licenses	$	36,043	$	(91	)			$	35,952
Trademarks	5,935		(1,900		)	⁽¹	⁾	4,035
Goodwill	6,383		192			⁽²	⁾	6,575
	$	48,361	$	(1,799	)			$	46,562



	December 31, 2013		Net Additions					March 31, 2014
	(in millions)
FCC licenses	$	35,889	$	154				$	36,043
Trademarks	5,935		—					5,935
Goodwill	6,434		(51		)	⁽³	⁾	6,383
	$	48,258	$	103				$	48,361

_________________


(1)	Net reduction to trademarks for the year ended March 31, 2015 of approximately $1.9 billion was related to the impairment of the Sprint trade name. See discussion below.

(2)

Net additions to goodwill for the Successor year ended March 31, 2015 of approximately $192 million were the result of purchase price allocation adjustments, which consisted of a $232 million increase recorded during the three-month period ended March 31, 2015 to correct the amount of net deferred tax liabilities recognized in connection with the SoftBank Merger and Clearwire Acquisition and a net $40 million decrease recorded during the three-months ended June 30, 2014, which is also associated with the SoftBank Merger and Clearwire Acquisition.


(3)	Net reduction to goodwill for the Successor three-month transition period ended March 31, 2014 of $51 million was the result of purchase price allocation adjustments associated with the SoftBank Merger.

Assessment of Impairment

Our annual impairment testing date for goodwill and indefinite-lived intangible assets is January 1 of each year; however, we test for impairment between our annual tests if an event occurs or circumstances change that indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit is below its carrying amount. Since the SoftBank Merger Date, actual results and expectations of net postpaid handset subscriber additions have been lower than the forecasts used to allocate the purchase price to the assets acquired and liabilities assumed. During the quarter ended December 31, 2014, the stock price and our related market capitalization decreased significantly and our credit rating was downgraded by one of the ratings service providers. We also updated our long-term forecasted cash flows for the Company, including for the Wireless reporting unit, during the fourth quarter. This update considered current economic conditions and trends, estimated future operating results, our views of growth rates, anticipated future economic and regulatory conditions, future cost savings initiatives and the availability of the necessary network infrastructure, handsets and other devices. Based on these events and changes in circumstances, we determined that recoverability of the carrying amount of goodwill and the Sprint trade name should be evaluated for impairment.

The impairment test for an indefinite-lived intangible asset consists of a comparison of the fair value of the asset to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized equal to that excess. We estimated the fair value of the Sprint trade name assigned to the Wireless segment using the relief-from-royalty method, which uses several significant assumptions, including management projections of future revenue, a royalty rate, a long-term growth rate, and a discount rate. As these assumptions are largely unobservable, the estimate of fair value is considered to be unobservable within the fair value hierarchy. The significant unobservable inputs included projected revenues, a royalty rate, a growth rate of 1.5% in the terminal year and a discount rate of 16%. The carrying value of the Sprint trade name exceeded its estimated fair value of $3.3 billion. Accordingly, during the quarter ended December 31, 2014 we recorded an impairment loss of $1.9 billion, which is included in “Impairments” in our consolidated statements of operations.

The analysis of potential impairment of goodwill requires a two-step approach. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. We estimated the fair value of the Wireless reporting unit using both discounted cash flow and market-based valuation models. The determination of the fair value of the reporting unit requires significant estimates and assumptions, including significant unobservable inputs. The key inputs include, but are not limited to, a discount rate of 8%, a terminal growth rate of 1.5%, a control premium, market multiple data from selected guideline public companies, management’s internal forecasts which include numerous assumptions such as share of industry gross additions, churn, mix of plans, rate changes, expenses, EBITDA margins, and capital expenditures, among others. We compared the estimated fair value to the carrying amount of the Wireless reporting unit and concluded that the second step of a goodwill impairment test was not required because the estimated fair value exceeded the carrying amount.

The determination of fair value requires considerable judgment and is highly sensitive to changes in underlying assumptions. Consequently, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill and Sprint trade name impairment tests will prove to be an accurate prediction of the future. Continued, sustained declines in the Company’s operating results, future forecasted cash flows, growth rates and other assumptions, as well as significant, sustained declines in the Company’s stock price and related market capitalization could impact the underlying key assumptions and our estimated fair values, potentially leading to a future material impairment of goodwill or other indefinite-lived intangible assets.

Intangible Assets Subject to Amortization

Customer relationships are amortized using the sum-of-the-months' digits method, while all other definite-lived intangible assets are amortized using the straight line method over the estimated useful lives of the respective assets. We reduce the gross carrying value and associated accumulated amortization when specified intangible assets become fully amortized. Amortization expense related to favorable spectrum and tower leases is recognized in cost of services.



		March 31, 2015							March 31, 2014
	Useful Lives	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
		(in millions)
Customer relationships	4 to 8 years	$	6,923	$	(2,791	)	$	4,132	$	6,923	$	(1,289	)	$	5,634
Other intangible assets:
Favorable spectrum leases	23 years	884		(71		)	813		884		(30		)	854
Favorable tower leases	3 to 7 years	589		(189		)	400		589		(80		)	509
Trademarks	34 years	520		(27		)	493		520		(12		)	508
Other	4 to 10 years	72		(17		)	55		60		(7		)	53
Total other intangible assets		2,065		(304		)	1,761		2,053		(129		)	1,924
Total definite-lived intangible assets		$	8,988	$	(3,095	)	$	5,893	$	8,976	$	(1,418	)	$	7,558



	Fiscal Year 2015		Fiscal Year 2016		Fiscal Year 2017		Fiscal Year 2018		Fiscal Year 2019
	(in millions)
Estimated amortization expense	$	1,427	$	1,162	$	882	$	665	$	461