Higher postpaid and prepaid ARPU leading to sequential and year-over-year growth in wireless service revenue and net operating revenue

Thirteenth consecutive quarter of improvement in Customer Care Satisfaction and First Call Resolution

Net operating revenues

Adjusted OIBDA*

Adjusted OIBDA margin*

Operating income (loss)

Net loss ⁽¹⁾

Diluted loss per common share ⁽¹⁾

Capital Expenditures ⁽²⁾

Free Cash Flow*

Consolidated net operating revenues of $8.3 billion for the quarter were 3 percent higher than in the first quarter of 2010 and remained relatively flat as compared to the fourth quarter of 2010. The quarterly year-over-year improvement was primarily due to higher ARPU for postpaid and prepaid, growth in the number of prepaid subscribers and higher wireless equipment revenues, partially offset by net losses of postpaid subscribers and lower wireline revenues.

Adjusted OIBDA* was $1.5 billion for the quarter, compared to almost $1.5 billion for the first quarter of 2010 and $1.3 billion for the fourth quarter of 2010. Year-over-year, Adjusted OIBDA* improved 2 percent as a result of an increase in wireless service revenues, primarily due to higher postpaid and prepaid ARPU, partially offset by higher subsidy costs from a greater mix of smartphone sales, which on average carry a higher subsidy rate per handset. Sequentially, Adjusted OIBDA* improved 15 percent primarily as a result of higher postpaid and prepaid ARPU and reduced subsidy costs resulting from a decline in postpaid handset sales.

Capital expenditures⁽²⁾, excluding capitalized interest of $99 million, were $555 million in the quarter, compared to $419 million in the first quarter of 2010 and $608 million in the fourth quarter of 2010. Wireless capital expenditures were $449 million in the first quarter of 2011, compared to $311 million in the first quarter of 2010 and $473 million in the fourth quarter of 2010. During the quarter, the company invested primarily in data capacity to maintain a competitive position in data service and overall network quality. Wireline capital expenditures were $53 million in the first quarter of 2011, compared to $56 million in the first quarter of 2010 and $67 million in the fourth quarter of 2010.

Free Cash Flow* was $178 million for the quarter, compared to $506 million for the first quarter of 2010 and $913 million for the fourth quarter of 2010. The quarterly year-over-year decline was due to a $100 million pension contribution and changes in working capital. Sequentially, quarterly Free Cash Flow* decreased as a result of a one-time federal tax stimulus refund of approximately $153 million received in the fourth quarter of 2010, approximately $150 million in higher cash interest payments, which is typical for the first quarter of each year, the pension contribution and working capital changes.

Net operating revenues

Adjusted OIBDA*

Adjusted OIBDA margin*

Capital Expenditures ⁽²⁾

The company served over 51 million customers at the end of the first quarter of 2011. This includes 33.0 million postpaid subscribers (27.4 million via the Sprint brand on CDMA, 5.3 million on iDEN, and 317,000 Nextel PowerSource users who utilize both networks), 13.1 million prepaid subscribers (9.9 million on CDMA and 3.2 million on iDEN) and approximately 4.9 million wholesale and affiliate subscribers, all of whom utilize our CDMA network.

For the quarter, Sprint added more than 1.1 million net wireless customers including net additions of 732,000 retail subscribers and net additions of 389,000 wholesale and affiliate subscribers.

Sprint lost approximately 114,000 net postpaid subscribers during the quarter, a net improvement of 464,000, or 80 percent, compared to the first quarter of 2010.

The CDMA network added approximately 253,000 net postpaid customers during the quarter, which includes net losses of 57,000 Nextel PowerSource customers. Excluding Nextel PowerSource customer losses, the Sprint brand added 310,000 postpaid wireless subscribers. The iDEN network lost 367,000 net postpaid customers in the quarter.

The company added 846,000 net prepaid subscribers during the quarter, which includes net additions of 1.4 million prepaid CDMA customers, offset by net losses of 560,000 prepaid iDEN customers.

The credit quality of Sprint’s end-of-period postpaid customers remained strong with more than 83 percent prime.

For the quarter, Sprint reported its best ever postpaid churn of 1.81 percent, compared to 2.15 percent for the year-ago period and 1.86 percent for the fourth quarter of 2010. The company achieved its best quarterly year-over-year improvement in postpaid churn in five years primarily as a result of progress in brand health, handset offerings and overall customer perception. Sequentially, postpaid churn improved five basis points overcoming the historical first quarter seasonal increase.

Approximately 9 percent of postpaid customers upgraded their handsets during the first quarter, reflecting strong demand for Sprint’s handset portfolio and continued strength in contract renewals.

Prepaid churn for the first quarter of 2011 was 4.36 percent, compared to 5.74 percent for the year-ago period and 4.93 percent for the fourth quarter of 2010. The year-over-year and sequential improvements in prepaid churn were primarily a result of the predominance of Boost Monthly Unlimited subscribers on CDMA and Assurance Wireless^SM customers, who on average have lower churn than that of Virgin Mobile customers. Prepaid churn also benefited from improvement in churn for Virgin Mobile customers both year-over-year and sequentially.

Wireless service revenues of $6.6 billion for the quarter represent an increase of approximately 3 percent compared to the first quarter of 2010 and the fourth quarter of 2010. The year-over-year improvement is primarily due to higher postpaid and prepaid ARPU, an increased number of prepaid subscribers as a result of the Boost Monthly Unlimited offering, additional market launches of Assurance Wireless^SM and the re-launch of the Virgin Mobile brand, partially offset by net losses of postpaid subscribers since the first quarter 2010. Sequentially, wireless service revenues increased primarily as a result of higher postpaid and prepaid ARPU and growth in prepaid net subscribers.

Wireless postpaid ARPU increased year-over-year and sequentially from $55 to $56. Year-over-year, ARPU benefited from higher monthly recurring revenues as a result of premium data add-on charges for smartphones and the greater popularity of fixed-rate bundle plans, partially offset by lower overage, casual data and text revenues. Sequentially, ARPU increased primarily as a result of growth in premium data add-on revenues.

Prepaid ARPU for the quarter was approximately $28, compared to $27 in the year-ago period and $28 in the fourth quarter of 2010. The year-over-year improvement primarily resulted from higher ARPU among Boost Mobile customers.

Wholesale, affiliate and other revenues were up $20 million, compared to the year-ago period, and increased $7 million sequentially. Service revenues from wholesale, affiliate and other revenues improved year-over-year and sequentially primarily as a result of growth in wholesale revenues from our 3G MVNO relationships.

Total wireless operating expenses were $7.3 billion in the first quarter, compared to $7.4 billion in the year-ago period and $7.6 billion in the fourth quarter of 2010.

Wireless equipment subsidy in the first quarter was approximately $1.1 billion (equipment revenue of $695 million, less cost of products of $1.8 billion), compared to approximately $1.0 billion in the year-ago period and almost $1.2 billion in the fourth quarter of 2010. The year-over-year increase in subsidy is associated with both postpaid and prepaid handset sales. Within postpaid, the increase in subsidy is due to a greater mix of smartphones, which on average carry a higher subsidy rate per handset. Within prepaid, the increase is primarily due to higher handset sales volume as a result of the company’s multi-brand strategy. Sequentially, subsidy decreased primarily as a result of lower postpaid subscriber gross additions and upgrades, partially offset by higher prepaid subsidy driven by the popularity of Android devices on the Virgin Mobile and Boost Mobile brands, which on average carry a higher subsidy rate per handset.

Wireless SG&A expenses increased over 1 percent year-over-year but remained relatively flat sequentially. Year-over-year, SG&A expenses increased primarily due to higher costs related to subscriber gross additions and upgrades, partially offset by improvement in customer care and bad debt expenses.

Wireless depreciation and amortization expense decreased $397 million year-over-year primarily due to the absence of amortization for customer relationship intangible assets related to the 2005 acquisition of Nextel, which became fully amortized in 2010 as well as the company’s annual depreciable life study reflecting a reduction in the replacement rate of capital additions.

Wireless Adjusted OIBDA* of almost $1.3 billion in the first quarter of 2011 compares to $1.2 billion in the first quarter of 2010 and $1.0 billion in the fourth quarter of 2010. The year-over-year improvement in Adjusted OIBDA* was primarily due to higher prepaid service revenues, partially offset by higher subsidy. Sequentially, Adjusted OIBDA* improved primarily as a result of higher postpaid and prepaid service revenues and lower subsidy.

Net operating revenues

Adjusted OIBDA*

Adjusted OIBDA margin*

Capital Expenditures ⁽²⁾

Wireline revenues of $1.1 billion for the quarter declined 14 percent year-over-year and almost 9 percent sequentially primarily as a result of an annual intercompany rate reduction based on market prices for voice and IP as well as the scheduled migration of wholesale cable VoIP customers off of Sprint’s IP platform. Year-over-year, first quarter wireline revenues were also impacted by lower voice volume.

Total wireline operating expenses were $1.0 billion in the first quarter of 2011. Total operating expenses declined almost 13 percent year-over-year and almost 9 percent sequentially due to improvement in SG&A expenses and lower depreciation expenses. Year-over-year, first quarter total operating expenses also decreased as a result of lower cost of service from continued decline of voice volume.

Wireline Adjusted OIBDA* was $228 million for the quarter, compared to $279 million in the first quarter of 2010 and $267 million reported for the fourth quarter of 2010. Wireline Adjusted OIBDA* declined year-over-year and sequentially as a result of lower revenues, partially offset by cost reductions.

our ability to attract and retain subscribers;

the ability of our competitors to offer products and services at lower prices due to lower cost structures;

the effects of vigorous competition on a highly penetrated market, including the impact of competition on the price we are able to charge subscribers for services and equipment we provide and our ability to attract new subscribers and retain existing subscribers; the overall demand for our service offerings, including the impact of decisions of new or existing subscribers between our postpaid and prepaid services offerings and between our two network platforms; and the impact of new, emerging and competing technologies on our business;

the ability to generate sufficient cash flow to fully implement our network modernization plan, Network Vision, to improve and enhance our networks and service offerings, implement our business strategies and provide competitive new technologies;

the effective implementation of Network Vision, including timing, technologies, and costs;

changes in available technology and the effects of such changes, including product substitutions and deployment costs;

our ability to obtain additional financing on terms acceptable to us, or at all;

volatility in the trading price of our common stock, current economic conditions and our ability to access capital;

the impact of unrelated parties not meeting our business requirements, including a significant adverse change in the ability or willingness of such parties to provide devices or infrastructure equipment for our CDMA network, or Motorola Mobility, Inc.’s or Motorola Solutions Inc.’s ability or willingness to provide related devices, infrastructure equipment and software applications for our iDEN network;

the costs and business risks associated with providing new services and entering new geographic markets;

the financial performance of Clearwire and its continued deployment of a 4G network;

the effects of mergers and consolidations and new entrants in the communications industry and unexpected announcements or developments from others in the communications industry;

unexpected results of litigation filed against us or our suppliers or vendors;

the impact of adverse network performance;

the costs or potential customer impacts of compliance with regulatory mandates including, but not limited to, compliance with the FCC’s Report and Order to reconfigure the 800 MHz band;

equipment failure, natural disasters, terrorist acts or other breaches of network or information technology security;

one or more of the markets in which we compete being impacted by changes in political, economic or other factors such as monetary policy, legal and regulatory changes or other external factors over which we have no control; and

other risks referenced from time to time in our filings with the Securities and Exchange Commission, including in Part I, Item IA “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2010 and, when filed, Part II, Item 1A “Risk Factors” of our quarterly report on Form 10-Q for the quarter ended March 31, 2011.

Net Operating Revenues

Net Operating Expenses

Cost of services

Cost of products

Selling, general and administrative

Depreciation

Amortization

Other, net

Total net operating expenses

Operating Income (Loss)

Interest expense

Equity in losses of unconsolidated investments and other, net

Loss before Income Taxes

Income tax (expense) benefit ⁽¹⁾

Net Loss ⁽¹⁾

Basic and Diluted Loss Per Common Share ⁽¹⁾

Weighted Average Common Shares outstanding

Effective Tax Rate ⁽¹⁾

NON-GAAP RECONCILIATION – NET LOSS TO ADJUSTED OIBDA* (Unaudited)

(Millions)

TABLE NO. 5

Net Loss ⁽¹⁾

Income tax (expense) benefit ⁽¹⁾

Loss before Income Taxes

Depreciation

Amortization

Interest expense

Equity in losses of unconsolidated investments and other, net

OIBDA*

Severance and exit costs ⁽³⁾

Gains from asset dispositions and exchanges ⁽⁴⁾

Asset impairments and abandonments

Adjusted OIBDA*

Capital expenditures ⁽²⁾

Adjusted OIBDA* less Capex

Adjusted OIBDA Margin*

Selected item:

Deferred tax asset valuation allowance ⁽¹⁾

Net Operating Revenues

Retail service revenue

Wholesale, affiliate and other service revenue

Equipment revenue

Total net operating revenues

Net Operating Expenses

Cost of services

Cost of products

Selling, general and administrative

Depreciation

Amortization

Other, net

Total net operating expenses

Operating Income (Loss)

NON-GAAP RECONCILIATION

Operating Income (Loss)

Severance and exit costs ⁽³⁾

Gains from asset dispositions and exchanges ⁽⁴⁾

Asset impairments and abandonments

Depreciation

Amortization

Adjusted OIBDA*

Capital expenditures ⁽²⁾

Adjusted OIBDA* less Capex

Adjusted OIBDA Margin*

OPERATING STATISTICS

Retail Postpaid Subscribers

Service revenue (in millions)

ARPU

Churn

Net (losses) additions (in thousands)

End of period subscribers (in thousands)

Hours per subscriber

Retail Prepaid Subscribers

Service revenue (in millions)

ARPU

Churn

Net additions (in thousands)

End of period subscribers (in thousands)

Hours per subscriber

Wholesale and Affiliate Subscribers

Net additions (in thousands)

End of period subscribers (in thousands)

Total Subscribers

Net additions (losses) (in thousands)

End of period subscribers (in thousands)

Net Operating Revenues

Voice

Data

Internet

Other

Total net operating revenues

Net Operating Expenses

Costs of services and products

Selling, general and administrative                                           

Depreciation

Other, net

Total net operating expenses

Operating Income

Operating Income

Severance and exit costs ⁽³⁾

Asset impairments and abandonments

Depreciation

Adjusted OIBDA*

Capital expenditures ⁽²⁾

Adjusted OIBDA* less Capex

Adjusted OIBDA Margin*

Operating Activities

Net loss ⁽¹⁾

Asset impairments

Depreciation and amortization

Provision for losses on accounts receivable

Share-based compensation expense

Deferred income taxes

Equity in losses of unconsolidated investments and other, net

Gains from asset dispositions and exchanges

Contribution to pension plan

Other, net

Net cash provided by operating activities

Investing Activities

Capital expenditures

Expenditures relating to FCC licenses

Change in short-term investments, net

Investment in Clearwire

Proceeds from sales and exchanges of assets

Other, net

Net cash used in investing activities

Financing Activities

Repayments of debt and capital lease obligations

Other, net

Net cash used in financing activities

Net (Decrease) Increase in Cash and Cash Equivalents

Cash and Cash Equivalents, beginning of period

Cash and Cash Equivalents, end of period

RECONCILIATION TO FREE CASH FLOW* (NON-GAAP) (Unaudited)

(Millions)

TABLE NO. 9

Net Cash Provided by Operating Activities

Capital expenditures

Expenditures relating to FCC licenses

Proceeds from sales and exchanges of assets

Other investing activities, net

Free Cash Flow*

Decrease in debt and other, net

Investment in Clearwire

Other financing activities, net

Net (Decrease) Increase in Cash, Cash Equivalents and Short-Term Investments

Assets

Current assets

Cash and cash equivalents

Short-term investments

Accounts and notes receivable, net

Device and accessory inventory

Deferred tax assets

Prepaid expenses and other current assets

Total current assets

Investments and other assets

Property, plant and equipment, net

Goodwill

FCC licenses and other

Definite-lived intangible assets, net

Total

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable

Accrued expenses and other current liabilities

Current portion of long-term debt, financing and capital lease obligations

Total current liabilities

Long-term debt, financing and capital lease obligations

Deferred tax liabilities

Other liabilities

Total liabilities

Shareholders' equity

Common shares

Paid-in capital

Treasury shares, at cost

Accumulated deficit

Accumulated other comprehensive loss

Total shareholders' equity

Total

NET DEBT* (NON-GAAP) (Unaudited)

(Millions)

TABLE NO. 11

Total Debt

Less: Cash and cash equivalents

Less: Short-term investments

Net Debt*

ISSUER

Sprint Nextel Corporation

Export Development Canada Facility (tranche 1)

Export Development Canada Facility (tranche 2)

6% Notes due 2016

8.375% Notes due 2017

9.25% Debentures due 2022

Sprint Nextel Corporation

Sprint Capital Corporation

8.375% Notes due 2012

6.9% Notes due 2019

6.875% Notes due 2028

8.75% Notes due 2032

Sprint Capital Corporation

Nextel Communications Inc.