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Sprint 2Q15 Earnings Report

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Fiscal 2Q15 Results Conference Call Nov. 3, 2015 #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization.


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Cautionary Statement SAFE HARBOR This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan,” “providing guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our network, connections growth, and liquidity; and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forwardlooking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties. #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 2


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*Non-GAAP Financial Measures *FINANCIAL MEASURES Sprint provides financial measures determined in accordance with GAAP and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies. Sprint provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to GAAP of its forward-looking financial measures. The measures used in this release include the following: EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance, exit costs, and other special items. Adjusted EBITDA Margin represents Adjusted EBITDA divided by non-equipment net operating revenues for Wireless and Adjusted EBITDA divided by net operating revenues for Wireline. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry. Sprint Platform Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid accounts during the period. We believe that ABPA provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid customer billings per account as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid account each month. Sprint Platform Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid phone connections during the period. We believe that ABPU provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid phone customer billings as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid phone user each month. Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments, including changes in restricted cash, if any. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments. Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and, if any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at www.sprint.com/investors. #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 3


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Net Loss per Share 2QFY14 Reported net loss per share 2QFY15 ($0.19) ($0.15) Select Items included in net loss per share: Severance and exit costs ($0.07) Asset impairment charge ($0.02) Other non-recurring ($0.04) #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 4


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Highlights Building momentum in postpaid Positive postpaid phone net additions for the first time in over two years Best ever postpaid churn and the first national carrier on record to improve postpaid churn from the April-June quarter to the July-September quarter Continued network improvement Network continues to receive third party accolades and is stronger, faster, and more reliable than ever before #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 5


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Making Progress vs Competition Postpaid Net Adds^ In Thousands Only carrier with y/y growth in postpaid net adds and postpaid phone net adds 2Q14 2Q15 2Q14 2Q15 2Q14 2Q15 2Q14 2Q15 Verizon AT&T T-Mobile Postpaid Phone Net Adds^ First national carrier on record to improve postpaid churn from the April-June quarter to the July-September quarter Sprint Sprint 4th consecutive quarter surpassing AT&T in postpaid phone net adds and widening the gap AT&T In Thousands 237 Postpaid Churn^ FY1Q15 to FY2Q15 bps change IMPROVED Q/Q 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 Verizon #MoveForward AT&T T-Mobile Sprint ^ indicates results specific to Sprint Platform ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 6


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Growing Connections 553 Postpaid Net Adds^ In Thousands UPOVER 800K Year-over-year 1.1 million total net adds in the quarter, nearly 80% improvement compared to the prior year quarter First quarter of postpaid phone net adds in over two years 2QFY14 3QFY14 4QFY14 1QFY15 Postpaid Phone Net Adds^ 2QFY15 237 In Thousands Best-ever postpaid churn Postpaid Churn^ IMPROVED 64 bps Year-over-year UPOVER 700K 1.54% Year-over-year 2QFY14 3QFY14 #MoveForward 4QFY14 1QFY15 2QFY15 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 ^ indicates results specific to Sprint Platform ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 7


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Network Improvement Average download speeds up 66% y/y Median Downlink Throughput Speed 2H-2014 66% Now have twelve 2x20 carrier aggregation enabled devices, including the iPhone 6s, providing a noticeably faster data experience to users Sprint has received almost 55% more RootScore awards y/y in 2H15 to-date 2H-2015 Early progress being made on the densifications plans to further differentiate our network in the future #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 8


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Transforming the Cost Structure Operating Expenses $2B+ Plan to reduce run rate operating expenses by $2 billion or more in 2016+ Reductions to come from all areas of the business FY 2015 FY 2016 + Expect some upfront transformation program operating and capital costs to realize these run rate savings Thoughtful approach to grow and optimize the business at the same time #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 9


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Enhancing Our Value Proposition ® Innovating with unique customer focused offers like iPhone Forever ® Improving the customer experience by eliminating overages on shared data plans Introduced the industry’s best entry point plan for low data users Raised the price of unlimited high-speed data plan to $70 to maintain profitability Continue to enhance the value proposition for our prepaid brands #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 10


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Revenue Net operating revenue of $8 billion was down $513 million y/y Lower wireless and wireline service revenues 5% improvement in equipment revenues Postpaid ABPA* increased 3% y/y Postpaid Phone ABPU* increased 2% y/y, maintaining pricing discipline #MoveForward ^ indicates results specific to Sprint Platform ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 11


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Adjusted EBITDA* / Operating Income Adjusted EBITDA* of $2.0 billion for the quarter increased 45% y/y Expense reductions more than offset the decline in net operating revenues Operating loss of $2 million in the quarter improved by $190 million y/y #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 12


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CapEx and Liquidity Cash capital expenditures of $1.7 billion in the quarter increased y/y due to the $573 million related to indirect channel device leases Capital spending on the network was flat y/y $5.9 billion of general purpose liquidity Also have network vendor financing of $1.2 billion Significant progress towards finalizing handset leasing facility #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 13


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Fiscal 2015 Guidance Adjusted EBITDA* • Expect to be at low end of prior guidance of $7.2 to $7.6 billion, after adjusting for estimated transformation program costs • Excludes any impacts from the potential sale of certain devices being leased by our customers Operating Income • Now expect to be between breakeven and ($150) million, after adjusting for estimated transformation program costs • Excludes any impacts from the potential sale of certain devices being leased by our customers Cash Capex • Continue to expect approximately $5 billion, excluding the capex associated with purchasing leased devices in indirect channels #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization. 14


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Questions & Answers #MoveForward ©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited without authorization.


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