Investor Quarterly Update: Sprint Nextel Reports First Quarter 2006 Results

-- Strong demand for data, IP and DSL services

-- Adds 1.3 million net wireless subscribers

-- Local spin-off nearing conclusion

-- Solid progress on merger integration

-- Maintains financial outlook

First Quarter Highlights

Wireless (pro forma)

-- Revenues of $8.5 billion increased 13% from first quarter of 2005

-- Adjusted Operating Income* of $469 million increased 7% compared to $440 million in the year-ago period. This measure was partially impacted by amortization expense arising from affiliate acquisitions

-- Adjusted OIBDA* of $2.7 billion increased 15% from the year-ago period

Long Distance

-- Revenues were $1.7 billion, a 3% decrease year-over-year

-- Adjusted Operating Income* of $115 million compares to $143 million in 2005

-- Adjusted OIBDA* was $236 million, a 9% decrease year-over-year

Local

-- Revenues of $1.6 billion increased 1% year-over-year

-- Adjusted Operating Income* of $452 million increased 4% year-over-year

-- Adjusted OIBDA* was $715 million, slightly ahead of the year ago period

Sprint Nextel Corp. (NYSE:S) today reported first quarter 2006financial results. In the quarter, the company experienced strongdemand for its communications services while continuing to make solidprogress on key strategic initiatives.

For the quarter, diluted earnings per share were 14 cents,compared to 31 cents per share for the first quarter of 2005. Theyear-ago results do not include the Nextel operations. In the currentquarter, reported earnings include a 19-cent charge for merger-relatedamortization cost and a 2-cent charge for special items. In thequarter, the company reported consolidated revenue of $11.5 billion,an increase of 66 percent compared to the year-ago period. Operatingincome was $863 million versus $1.04 billion in the first quarter of2005.

For the quarter, Adjusted EPS before Amortization*, which removesthe effects of special items and merger related amortization costs,was 35 cents per share versus pro forma Adjusted EPS beforeAmortization* of 31 cents in the year-ago period. The 13 percentgrowth was driven by a strong gain in Wireless, modest growth in Localand lower net interest costs, which were partially offset by a lowercontribution from Long Distance.

Consolidated revenue for the quarter increased 9 percent comparedto pro forma consolidated revenue for the first quarter of 2005.Quarterly consolidated Adjusted OIBDA* of $3.6 billion increased 10percent compared to the first quarter of 2005 pro forma results. Firstquarter Free Cash Flow* was $1.2 billion.

"In the first quarter, we continued to advance on our operatingand strategic goals and integrate the affiliates we have acquired,"said Gary Forsee, Sprint Nextel president and chief executive officer."Our performance in the quarter was marked by balanced growth inWireless and we achieved good velocity on Long Distance IP and LocalDSL services. With an expected ramp-up in merger synergies during thebalance of 2006, we continue to maintain our financial outlook forfull year performance," he said.

"In the quarter, we added 1.3 million wireless subscribersincluding more than 1 million though retail channels," Forsee added."Combined with 2.1 million subscribers of Nextel Partners, which weexpect to acquire in the second quarter, we ended the period with 51million wireless subscribers. In the quarter, Wireless top-line andAdjusted OIBDA* grew at double-digit annual rates, and wireless datarevenues grew at a sequential rate of 21 percent. We continued toenhance the industry's most powerful wireless network for mobilebroadband services as we extended our high-speed footprint to morewireless users than any other carrier. In the period, Long Distance IPrevenues were up 26 percent year-over-year, and Local DSL netsubscriber additions were at an all-time high of 84,000. With thereceipt of all state commission approvals, we are now nearingcompletion of our planned spin-off of our local communicationsbusiness, which will go to market under the EMBARQ(TM) brand. Thistransaction will create the largest independent local-telephoneoperation in the United States and enhance the growth profile ofSprint Nextel," Forsee said.

Editor's Note:

In accordance with purchase accounting rules, Sprint Nextel's 2005reported results are comprised of Sprint's stand-alone results priorto the Aug. 12, 2005, merger with Nextel Communications Inc., pluscombined Sprint and Nextel results for the remainder of the year.Results from Sprint PCS affiliates acquired in the fourth quarter of2005 and first quarter of 2006 are included for all periods subsequentto the date that the applicable acquisition was completed.

To provide comparability with previously reported periods, SprintNextel also is providing pro forma Consolidated and Wireless resultsand certain other financial measures* for the first quarter of 2005.The pro forma results assume the merger of Sprint and Nextel occurredat the beginning of 2005 and includes the impact of conforming theaccounting policies and both financial and non-financial measures ofthe two companies. The pro forma Consolidated and Wireless informationexcludes results of acquired affiliates prior to their respectiveacquisition close dates.
Consolidated
TABLE No. 1 Selected Unaudited Financial Data (dollars in millions,
except per share amounts)
----------------------------------------------------------------------
Quarter Quarter
Ended Ended
March 31, March 31, %
As Reported Financial Data 2006 2005 Change
----------------------------
Net operating revenues $11,548 $6,936 66%
Adjusted operating income* 1,035 1,036 ---
Adjusted OIBDA* 3,641 2,072 76%

Net income 419 472 (11)%

Diluted earnings per share $0.14 $0.31 (55)%

Capex $1,422 $659 116%

Free cash flow* $1,201 $532 126%

Pro Forma Financial Data
Net operating revenues $11,548 $10,586 9%
Adjusted operating income* 1,035 1,019 2%
Adjusted OIBDA* 3,641 3,311 10%

Diluted earnings per share $0.14 $0.13 8%
Adjusted earnings per share before
amortization* $0.35 $0.31 13%

Pro Forma Capex $1,422 $1,433 (1)%
----------------------------------------------------------------------

The following is a discussion of Consolidated pro forma results.

-- The growth in revenue in the first quarter of 2006 was driven by Wireless.

-- Adjusted Operating Income* benefited from growth in Wireless revenues, which was offset by higher depreciation expense, increased acquisition-related amortization expense and a lower contribution from Long Distance.

-- The growth in Adjusted OIBDA* was mainly due to a higher contribution from Wireless, partially offset by a lower contribution from Long Distance.

-- In the first quarter of 2006, interest expense, net of interest income, was $324 million compared to $391 million in the year ago-period. The effective income tax rate in the quarter was consistent with the year ago period. In the first quarter of 2006, non-cash stock compensation was $129 million versus $135 million in the first quarter of 2005.

-- Wireless represented nearly 80 percent of total capital spending in the quarter.

-- At the end of the quarter, Net Debt* was $18.4 billion.
Wireless
TABLE No. 2 Selected Unaudited Financial Data (dollars in millions)
----------------------------------------------------------------------
Quarter Quarter
Ended Ended
March 31, March 31, %
2006 2005 Change
----------------------------
As Reported Financial Data
Net operating revenues $8,515 $3,867 120%
Adjusted operating income* 469 457 3%
Adjusted OIBDA* 2,691 1,101 144%


Capex(1) $1,071 $418 156%


Pro Forma Financial Data
Net operating revenues $8,515 $7,520 13%
Adjusted operating income* 469 440 7%
Adjusted OIBDA* 2,691 2,340 15%
Adjusted OIBDA margin* 35.0% 34.2%

Pro Forma Capex(1) $1,071 $1,192 (10)%

(1)Capex includes re-banding capital
----------------------------------------------------------------------

Discussion of the following Wireless results is on a pro formabasis.

-- In the first quarter, Wireless added 1.3 million net subscribers including 563,000 under the Sprint and Nextel post-paid brands, 502,000 under the Boost Mobile brand and 273,000 through wholesale channels and from Sprint PCS affiliates. Approximately 1.6 million subscribers were transferred from affiliates to the direct category as a result of acquisitions completed in the quarter.

-- For the quarter, total retail gross additions were 4.1 million, compared to 3.6 million in the first quarter of 2005 and 4.0 million in the fourth quarter.

-- Post-paid churn of 2.1 percent in the quarter was consistent with the year-ago period and the fourth quarter. Normalized Boost Mobile churn in the quarter was 5.4 percent.

-- Service revenues increased 13 percent, due to a larger customer base, which was partially offset by lower average revenue per user (ARPU).

-- Direct post-paid ARPU of a little over $62 in the quarter declined 3 percent, compared to the year-ago period. The decline was 1 percent sequentially. Affiliate acquisitions were a significant contributor to both the annual and sequential declines in post-paid ARPU. Post-paid ARPU benefited from industry-leading data contributions of approximately $7, a 54 percent annual increase. Pre-paid ARPU was $36 in the quarter versus $37 reported in the fourth quarter 2005.

-- Equipment revenues increased 22 percent compared to the year-ago period, mainly due to higher average revenue per handset.

-- Wholesale and affiliate revenues in the quarter declined 12 percent compared to the year-ago period due to Sprint PCS affiliate acquisitions and lower wholesale rates, which were partially offset by higher wholesale customer counts.

-- In the quarter, the Adjusted OIBDA Margin* improved by 80 basis points compared to the first quarter of 2005 reflecting growing scale benefits and merger synergies, that were partially offset by higher sales and marketing costs and investments in new capabilities.

-- Costs of services and products increased 15 percent compared to the year-ago period. The increase is mainly due to higher network costs associated with the build-out of new cell sites and high speed data services and costs to support a larger customer base.

-- Selling, general and administrative (SG&A) expenses increased 10 percent compared to the first quarter of 2005 due to higher customer volume and increased marketing spending for branding and retention.

-- Depreciation expense was up 19 percent compared to the first quarter of 2005. The increase was mainly due to higher in-service balances, affiliate acquisitions and select decreases in estimated useful lives.

-- For the quarter, capital expenditures were $1.1 billion. Spending was mainly focused on improving network quality, expanding capacity and expanding the mobile broadband footprint. Capital spending is expected to ramp up over the course of the year.

-- In the quarter, Adjusted OIBDA* exceeded capital expenditures by $1.62 billion compared to the pro forma figure of $1.15 billion in the first quarter of 2005.
Long Distance
TABLE No. 3 Selected Unaudited Financial Data (dollars in millions)
----------------------------------------------------------------------
Quarter Quarter
Ended Ended
March 31, March 31, %
2006 2005 Change
----------------------------
Net operating revenues $1,669 $1,715 (3)%
Adjusted operating income* 115 143 (20)%
Adjusted OIBDA* 236 260 (9)%
Adjusted OIBDA margin* 14.1% 15.2%

Capex $92 $65 42%

-- In the quarter, net operating revenues declined at a slower rate than anticipated.

-- Voice revenues declined 5 percent compared to the year-ago period but were flat sequentially. Compared to the year-ago period, contract renewals pressured business retail voice revenues, which were partially offset by higher wholesale services and a growing contribution from cable partners.

-- At the quarter's end, Sprint Nextel was providing cable telephony wireline services to seven cable companies with a total of more than 1.02 million cable telephony subscribers, a 24 percent gain from the end of 2005. Cable related revenues were at a $200 million annual run rate in the quarter and more than tripled from a year ago.

-- Internet revenues were up 17 percent sequentially, due to strong demand for Dedicated IP and MPLS. This was partially offset by reduced ATM and Frame Relay revenues.

-- The Adjusted OIBDA Margin* declined by 110 basis points compared to the first quarter of 2005, mainly due to lower unit pricing.

-- Total operating expenses were flat year-over-year. SG&A costs were down 13 percent compared to the first quarter of 2005, due to lower marketing costs and reduced bad debt expense. This decrease was partially offset by higher costs of services and products, mainly driven by growth in cable-related services.

-- For the quarter, capital expenditures of $92 million were focused on adding capacity to support our cable telephony business and to meet the strong demand for IP services. Long Distance capital expenditures are expected to be relatively level throughout the year. Adjusted OIBDA* in the quarter exceeded capital expenditures by $144 million compared to $195 million in the first quarter of 2005.
Local
TABLE No. 4 Selected Unaudited Financial Data (dollars in millions)
----------------------------------------------------------------------
Quarter Quarter
Ended Ended
March 31, March 31, %
2006 2005 Change
----------------------------
Net operating revenues $1,620 $1,597 1%
Adjusted operating income* 452 436 4%
Adjusted OIBDA* 715 712 ---
Adjusted OIBDA margin* 44.1% 44.6%

Capex $179 $152 18%

-- In the first quarter, Local added a quarterly record 84,000 net new DSL subscribers, which lifted total DSL subscribers at the quarter's end to 777,000, a 41 percent increase from the end of the first quarter of 2005. The growth in DSL users this quarter was stimulated by several new market offers.

-- Switched access lines declined 4.9 percent compared to the year ago period. Wireless replacement and cable competition continue to be the primary drivers of line losses.

-- The year-over-year revenue growth in the quarter was driven by a 15 percent increase in data services and gains at North Supply partially offset by a 5 percent decline in voice revenues.

-- The Adjusted OIBDA Margin* in the quarter declined by 50 basis points compared to the year-ago period mainly due to lower voice revenue.

-- Total operating expenses were up 3 percent compared to the first quarter of 2005 due to higher costs of services and products associated with increased sales at North Supply.

-- For the quarter, Adjusted OIBDA* exceeded capital expenditures by $536 million compared to $560 million in the same period for 2005.

-- Sprint Nextel continues to expect the spin-off of the local operations to be completed in the second quarter of 2006 through a dividend of the shares of Embarq Corp., the new company formed to operate the local operations. Following the spin-off, Local financial results will likely vary from currently reported results. In particular, Local is expected to incur higher overhead support costs.

-- Additional detailed information regarding the spin-off and Embarq's business and plans can be found in Embarq's Form 10 filing with the Securities and Exchange Commission containing a preliminary information statement regarding the proposed spin-off.

Forward-Looking Guidance

Sprint Nextel's financial targets for fiscal year 2006 includesWireless, Long Distance, and 11 months of results from Alamosa andEnterprise Communications, but do not include Local, Nextel Partners,or UbiquiTel. The company is reiterating its prior guidance, whichincludes:

-- 2006 consolidated revenues are expected to be $41 billion, or more. This target assumes high single-digit to low double-digit growth in Wireless and a mid-to-high single-digit revenue decline for Long Distance.

-- 2006 target for Adjusted OIBDA* is approximately $13 billion. Wireless service margins are expected to increase by approximately 200 bps and Long Distance margins are expected to be in the low teens.

-- Capital spending in 2006 is expected to be approximately $6.3 billion inclusive of $600 million of re-banding capital expenditures.

-- Total re-banding costs for 2006 are expected to be $1.4 billion, which includes $600 million of re-banding capital expenditures and $800 million of other costs that primarily will be recorded as spectrum assets.

Additionally, Sprint Nextel continues to expect to deliver $14.5billion of Net Present Value synergies resulting from its merger andthe company continues to target a 40% or better Adjusted OIBDA ServiceMargin* by 2008.

*Financial Measures

Sprint Nextel provides financial measures generated usinggenerally accepted accounting principles (GAAP) and using adjustmentsto GAAP (non-GAAP). The non-GAAP financial measures reflect industryconventions, or standard measures of liquidity, profitability orperformance commonly used by the investment community forcomparability purposes. These non-GAAP measures are not measurementsunder accounting principles generally accepted in the United States.These measurements should be considered in addition to, but not as asubstitute for, the information contained in our financial statementsprepared in accordance with GAAP. We have defined below each of thenon-GAAP measures we use, but these measures may not be synonymous tosimilar measurement terms used by other companies.

Sprint Nextel provides reconciliations of these non-GAAP measuresin its financial reporting. Because Sprint Nextel does not predictspecial items that might occur in the future, and our forecasts aredeveloped at a level of detail different than that used to prepareGAAP-based financial measures, Sprint Nextel does not providereconciliations to GAAP of its forward-looking financial measures.

The measures used in this release include the following:

Adjusted Earnings per Share (EPS) is defined as income fromcontinuing operations, before special items, net of tax and thediluted EPS calculated thereon. Adjusted EPS before Amortization isdefined as income from continuing operations, before special items andamortization, net of tax, and the diluted EPS calculated thereon.These non-GAAP measures should be used in addition to, but not as asubstitute for, the analysis provided in the statement of operations.We believe that these measures are useful because they allow investorsto evaluate our performance for different periods on a more comparablebasis by excluding items that do not relate to the ongoing operationsof our businesses.

Adjusted Net Income is defined as income (loss) from continuingoperations before special items. Adjusted Net Income beforeAmortization is defined as income (loss) from continuing operationsbefore special items and amortization, net of tax. These non-GAAPmeasures should be used in addition to, but not as a substitute for,the analysis provided in the statement of operations. We believe thatthese measures are useful because they allow investors to evaluate ourperformance for different periods on a more comparable basis byexcluding items that do not relate to the ongoing operations of ourbusinesses.

Adjusted Operating Income is defined as operating income beforespecial items. This non-GAAP measure should be used in addition to,but not as a substitute for, the analysis provided in the statement ofoperations. We believe this measure is useful because it allowsinvestors to evaluate our operating results for different periods on amore comparable basis by excluding special items.

Adjusted OIBDA is defined as operating income before depreciation,amortization, restructuring and asset impairments, and special items.Adjusted OIBDA Margin represents Adjusted OIBDA divided bynon-equipment net operating revenues for wireless and Adjusted OIBDAdivided by net operating revenues for Local and Long Distance.Adjusted OIBDA Service Margin is the ratio of Adjusted OIBDA to netoperating revenues less equipment revenues. Although we have usedsubstantially similar measures in the past, which we called "AdjustedEBITDA," we now use the term Adjusted OIBDA and Adjusted OIBDA Marginto describe the measure we use as it more clearly reflects theelements of the measure. These non-GAAP measures should be used inaddition to, but not as a substitute for, the analysis provided in thestatement of operations. We believe that Adjusted OIBDA and AdjustedOIBDA Margin provide useful information to investors because they arean indicator of the strength and performance of our ongoing businessoperations, including our ability to fund discretionary spending suchas capital expenditures, spectrum acquisitions and other investmentsand our ability to incur and service debt. While depreciation andamortization are considered operating costs under generally acceptedaccounting principles, these expenses primarily represent non-cashcurrent period allocation of costs associated with long-lived assetsacquired or constructed in prior periods. Adjusted OIBDA and AdjustedOIBDA Margin are calculations commonly used as a basis for investors,analysts and credit rating agencies to evaluate and compare theperiodic and future operating performance and value of companieswithin the telecommunications industry.

Free Cash Flow is defined as the change in cash and equivalentsless the change in debt, investment in certain securities, proceedsfrom common stock and other financing activities, net. This non-GAAPmeasure should be used in addition to, but not as a substitute for,the analysis provided in the statement of cash flows. We believe thatFree Cash Flow provides useful information to investors, analysts andour management about the cash generated by our core operations afterinterest and dividends and our ability to fund scheduled debtmaturities and other financing activities, including discretionaryrefinancing and retirement of debt and purchase or sale ofinvestments.

Net Debt is consolidated debt, including current maturities, lesscash and equivalents and current marketable securities. This non-GAAPmeasure should be used in addition to, but not as a substitute for,the analysis provided in the statements of financial position and cashflows. We believe that Net Debt provides useful information toinvestors, analysts and credit rating agencies about the capacity ofthe company to reduce the debt load and improve its capital structure.

Safe Harbor

This news release includes "forward-looking statements" within themeaning of the securities laws. The statements in this news releaseregarding the business outlook, expected performance, as well as otherstatements that are not historical facts, are forward-lookingstatements. The words "estimate," "project," "forecast," "intend,""expect," "believe," "target," "providing guidance" and similarexpressions are intended to identify forward-looking statements.Forward-looking statements are estimates and projections reflectingmanagement's judgment based on currently available information andinvolve a number of risks and uncertainties that could cause actualresults to differ materially from those suggested by theforward-looking statements. With respect to these forward-lookingstatements, management has made assumptions regarding, among otherthings, customer and network usage, customer growth and retention,pricing, operating costs, the timing of various events and theeconomic environment.

Future performance cannot be ensured. Actual results may differmaterially from those in the forward-looking statements. Some factorsthat could cause actual results to differ include:

-- the uncertainties related to the benefits of the Sprint-Nextel merger, including anticipated synergies and cost savings and the timing thereof;

-- the uncertainties related to and the impact of the contemplated spin-off of Sprint Nextel's local communications operations;

-- the effects of vigorous competition and the overall demand for Sprint Nextel's service offerings in the markets in which Sprint Nextel operates and the impact of new, emerging and competing technologies on Sprint Nextel's business;

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

-- the impact of any adverse change in the ratings afforded Sprint Nextel's debt securities by ratings agencies;

-- the ability of Wireless to continue to grow and improve profitability;

-- the ability of Long Distance to achieve expected revenues;

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

-- the uncertainties related to Sprint Nextel's investments in networks, systems, and other businesses;

-- the uncertainties related to the implementation of Sprint Nextel's business strategies,

-- unexpected results of litigation filed against Sprint Nextel;

-- no significant adverse change in Motorola, Inc.'s ability or willingness to provide handsets and related equipment and software applications or to develop new technologies or features for the iDEN network;

-- the impact of adverse network performance, including any performance issues resulting from the reconfiguration of the 800 Megahertz band of the iDEN network that is contemplated by the Federal Communications Commission's Report and Order, released in August 2004 and supplemented thereafter;

-- the costs of compliance with regulatory mandates, particularly requirements related to the Federal Communications Commission's Report and Order and deployment of enhanced 911 services on the iDEN network;

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

-- the inability of third parties to perform to Sprint Nextel's requirements under agreements related to Sprint Nextel's business operations;

-- one or more of the markets in which Sprint Nextel competes being impacted by changes in political or other factors such as monetary policy, legal and regulatory changes or other external factors over which Sprint Nextel has no control; and

-- other risks referenced from time to time in Sprint Nextel's filings with the Securities and Exchange Commission, including its Form 10-K/A for the year ended December 31, 2005.

Sprint Nextel believes these forward-looking statements arereasonable; however, you should not place undue reliance onforward-looking statements, which are based on current expectationsand speak only as of the date of this release. Sprint Nextel is notobligated to publicly release any revisions to forward-lookingstatements to reflect events after the date of this release.

Additional Information and Where to Find It

Embarq Corporation has filed a Registration Statement on Form 10with the SEC (Reg. No. 001-72032) containing a preliminary informationstatement regarding the proposed spin-off. SHAREHOLDERS OF SPRINTNEXTEL ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHERRELEVANT DOCUMENTS FILED WITH THE SEC BY EMBARQ BECAUSE THEY CONTAINIMPORTANT INFORMATION ABOUT EMBARQ AND THE SPIN-OFF. The definitiveinformation statement will be mailed to shareholders of Sprint Nextel.Investors and security holders will be able to obtain the documentsfree of charge at the SEC's web site, www.sec.gov, from Sprint NextelInvestor Relations at Sprint Nextel Corporation, 2001 Edmund HalleyDrive, Reston, Virginia 20191, 703-433-4300 or from Embarq, 5454 West110th Street, Overland Park, Kansas 66211, 866-591-1964, CorporateSecretary.

About Sprint Nextel

Sprint Nextel offers a comprehensive range of communicationsservices bringing mobility to consumer, business and governmentcustomers. Sprint Nextel is widely recognized for developing,engineering and deploying innovative technologies, including tworobust wireless networks offering industry leading mobile dataservices; instant national and international walkie-talkiecapabilities; and an award-winning and global Tier 1 Internetbackbone. For more information, visit www.sprint.com.
Sprint Nextel Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (a)
(millions, except per share data)


TABLE No. 5 Quarter Ended
-------------------
March 31, March 31,
2006 2005
-------------------

Net Operating Revenues $ 11,548 $ 6,936
----------------------------------------------------------------------
Operating Expenses
Costs of services and products 4,541 2,948
Selling, general and administrative
(includes $105 & $0 of merger and
integration)(1) 3,471 1,916
Restructuring and asset impairments(2) 67 -
Depreciation 1,668 1,033
Amortization 938 3
----------------------------------------------------------------------
Total operating expenses 10,685 5,900
----------------------------------------------------------------------
Operating Income 863 1,036
Interest expense (408) (304)
Interest income 84 29
Equity in earnings (losses) of unconsolidated
subsidiaries 20 (9)
Other, net(3) 108 11
----------------------------------------------------------------------
Income before income taxes 667 763
Income tax expense (248) (291)
----------------------------------------------------------------------
Net Income 419 472
Preferred stock dividends paid (2) (2)
----------------------------------------------------------------------
Earnings Available to Common Shareholders $ 417 $ 470
-------------------

Diluted Earnings Per Common Share $ 0.14 $ 0.31
-------------------
Diluted weighted average common shares 2,992.8 1,494.7
-------------------
Basic Earnings Per Common Share $ 0.14 $ 0.32
-------------------

(a) Results for each of the periods reflected include the results of
Nextel from the date of merger and the acquired Affiliates from
their respective dates of acquisition.

(1), (2), (3) See accompanying Notes to Financial Data on page 21.


Sprint Nextel Corporation
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(millions, except per share data)


TABLE No. 6 Quarter Ended
-------------------
March 31, March 31,
2006 2005
-------------------

Net Operating Revenues $ 11,548 $ 10,586
-------------------------------------------------- --------- ---------
Operating Expenses
Costs of services and products 4,541 4,094
Selling, general and administrative
(includes $105 & $10 of merger and integration) 3,471 3,191
Restructuring and asset impairments 67 -
Depreciation 1,668 1,470
Amortization 938 822
-------------------------------------------------- --------- ---------
Total operating expenses 10,685 9,577
-------------------------------------------------- --------- ---------
Operating Income 863 1,009
Interest expense (408) (427)
Interest income 84 36
Equity in earnings of unconsolidated subsidiaries 20 8
Other, net 108 (25)
-------------------------------------------------- --------- ---------
Income before income taxes 667 601
Income tax expense (248) (221)
-------------------------------------------------- --------- ---------
Net Income 419 380
Preferred stock dividends paid (2) (2)
-------------------------------------------------- --------- ---------
Earnings Available to Common Shareholders $ 417 $ 378
--------- ---------


Diluted Earnings Per Common Share (a)
Diluted earnings per share $ 0.14 $ 0.13
Special items 0.02 0.01
--------- ---------
Adjusted EPS * (a) $ 0.16 $ 0.14
--------- ---------

Diluted weighted average common shares 2,992.8 2,944.8
--------- ---------

(a) Earnings per share data may not add due to rounding.

Pro forma consolidated statements of operations have been presented as
if the Sprint Nextel merger occurred at the beginning of 2005. Because
the merger occurred in the third quarter of 2005, the first quarter of
2006 reflects actual results. The pro forma results do not include any
Affiliate results prior to the dates of their respective acquisitions
because they do not significantly affect reported results.


Sprint Nextel Corporation
RECONCILIATIONS OF EARNINGS PER SHARE (Unaudited)
(millions, except per share data)


TABLE No. 7 As Reported Pro Forma(c)
------------------- -------------
Quarter Ended Quarter Ended
------------------- -------------
March 31, March 31, March 31,
2006 2005 2005
------------------- -------------

Earnings Available to Common
Shareholders $ 417 $ 470 $ 378
Preferred stock dividends paid 2 2 2
------------------------------------ ------------------- -------------
Net Income 419 472 380
Special items (net of taxes) (a)
Restructuring and asset
impairments 41 - -
Merger integration expense 64 - 6
Net gains on investment activities (55) - -
Premium on early retirement of
debt - - 22
------------------------------------ ------------------- -------------
Adjusted Net Income* $ 469 $ 472 $ 408
------------------------------------ ------------------- -------------

Amortization (net of taxes) 564 2 494

------------------------------------ ------------------- -------------
Adjusted Net Income* before
Amortization $ 1,033 $ 474 $ 902
------------------------------------ ------------------- -------------

Diluted Earnings Per Share $ 0.14 $ 0.31 $ 0.13

------------------------------------ ------------------- -------------
Earnings Per Share from Continuing
Operations $ 0.14 $ 0.31 0.13
Special items 0.02 - 0.01

------------------------------------ ------------------- -------------
Adjusted Earnings Per Share* (b) $ 0.16 $ 0.31 $ 0.14
------------------------------------ ------------------- -------------

Amortization (net of taxes) 0.19 - 0.17

------------------------------------ ------------------- -------------
Adjusted Earnings Per Share* before
Amortization (b) $ 0.35 $ 0.31 $ 0.31
------------------------------------ ------------------- -------------

(a) See accompanying Notes to Financial Data for more information on
special items.

(b) Earnings per share data may not add due to rounding.

(c) Pro forma consolidated information has been presented as if the
Sprint Nextel merger occurred at the beginning of 2005. The 2006
first quarter reflects actual results.


Sprint Nextel Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(millions)


TABLE No. 8
------------------------
March 31, December 31,
2006 2005
------------------------
Assets
Current assets
Cash and cash equivalents $ 6,604 $ 8,902
Marketable securities 909 1,763
Accounts receivable, net 4,538 4,827
Inventories 1,025 950
Deferred tax asset 1,301 1,811
Prepaid expenses and other current
assets 836 839
--------------------------------------------------------------------
Total current assets 15,213 19,092

Investments 2,365 2,369
Property, plant and equipment, net 31,449 31,133
Intangible assets, net 53,020 49,334
Other assets 721 652
--------------------------------------------------------------------

Total $ 102,768 $ 102,580
------------------------

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 3,275 $ 3,827
Accrued expenses and other current
liabilities 5,146 5,176
Current portion of long-term debt and
capital lease obligations 5,772 5,047
--------------------------------------------------------------------
Total current liabilities 14,193 14,050

Long-term debt and capital lease
obligations 20,178 20,632
Deferred income taxes 11,731 11,687
Postretirement and other benefit
obligations 1,389 1,385
Other liabilities 2,662 2,642
--------------------------------------------------------------------
Total liabilities 50,153 50,396


Redeemable preferred stock - 247

Shareholders' equity
Common stock 5,874 5,846
Other shareholders' equity 46,741 46,091
--------------------------------------------------------------------
Total shareholders' equity 52,615 51,937
--------------------------------------------------------------------

Total $ 102,768 $ 102,580
------------------------


Sprint Nextel Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited) (a)
(millions)

TABLE No. 9

---------------------------------------------------------------------
March 31, March 31,
For the Period Ended 2006 2005
---------------------------------------------------------------------

Operating Activities
Net income $ 419 $ 472
Depreciation and amortization 2,606 1,036
Deferred income taxes 151 260
Other, net (209) (384)
---------------------------------------------------------------------
Net cash provided by operating activities 2,967 1,384
---------------------------------------------------------------------

Investing Activities
Cash paid for capital expenditures (1,728) (659)
Business acquisitions, net of cash acquired (3,399) -
Proceeds from maturities and sales of
marketable securities, net 830 (80)
Proceeds from sales of assets and investments 123 8
Other, net (85) (14)
---------------------------------------------------------------------
Net cash used by investing activities (4,259) (745)
---------------------------------------------------------------------

Financing Activities
Payments on debt (868) (1,012)
Retirement of redeemable preferred stock (247) -
Dividends paid (76) (187)
Proceeds from issuance of common stock 185 58
Other, net - 13
---------------------------------------------------------------------
Net cash used by financing activities (1,006) (1,128)
---------------------------------------------------------------------

Change in cash and cash equivalents (2,298) (489)

Cash and cash equivalents at beginning of period 8,902 4,176
---------------------------------------------------------------------

Cash and cash equivalents at end of period $ 6,604 $ 3,687
-------------------


(a) This statement is comprised of Sprint's stand-alone results in
2005, prior to the merger with Nextel Communications, Inc. Results
from Affiliates acquired in 2006 are included beginning at each
Affiliate's acquisition close date.


Sprint Nextel Corporation
PRO FORMA WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(millions, except statistics data)

TABLE No. 10 Quarter Ended
-------------------
March 31, March 31,
2006 2005
-------------------

Net Operating Revenues
Service $ 7,487 $ 6,616
Equipment 830 679
Wholesale, affiliate and other 198 225
-------------------------------------------------- -------------------
Total 8,515 7,520
-------------------------------------------------- -------------------

Operating Expenses
Cost of services 1,759 1,510
Cost of equipment 1,340 1,196
Selling, general and administrative 2,725 2,474
Restructuring and asset impairments 28 2
Depreciation 1,284 1,078
Amortization 938 822
-------------------------------------------------- -------------------
Total operating expenses 8,074 7,082
-------------------------------------------------- -------------------

Operating Income $ 441 $ 438
-------------------

Special Item Reconciliations

Operating Income $ 441 $ 438
Special items:
Restructuring and asset impairments 28 2
-------------------
Adjusted Operating Income * 469 440
Depreciation and amortization 2,222 1,900
-------------------
Adjusted OIBDA * $ 2,691 $ 2,340
-------------------

Operating Income Margin 5.7% 6.4%
Adjusted OIBDA Margin * 35.0% 34.2%



Pro forma consolidated statements of operations have been presented as
if the Sprint Nextel merger occurred at the beginning of 2005. Because
the merger occurred in the third quarter of 2005, the first quarter of
2006 reflects actual results. The pro forma results do not include any
Affiliate results prior to the dates of their respective acquisitions
because they do not significantly affect reported results.


Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS (Unaudited)
(millions)


TABLE No. 11
---------------------------------------------------
For the Quarter
Ended March 31, Long Other &
2006 Consolidated Wireless Distance Local Eliminations
----------------------------------------------------------------------

Operating Income $ 863 $ 441 $ 105 $423 $ (106)
Special
items (a)
Restructuring
and asset
impairments 67 28 10 29 -
Merger and
integration
expense 105 - - - 105
---------------------------------------------------
Adjusted Operating
Income* 1,035 469 115 452 (1)
Depreciation and
amortization 2,606 2,222 121 263 -
---------------------------------------------------
Adjusted OIBDA* 3,641 2,691 236 715 (1)
Capital
expenditures 1,422 1,071 92 179 80
---------------------------------------------------
Adjusted OIBDA*
less Capex $ 2,219 $ 1,620 $ 144 $536 $ (81)
---------------------------------------------------



---------------------------------------------------

For the Quarter
Ended March 31, Long Other &
2005 Consolidated Wireless Distance Local Eliminations
----------------------------------------------------------------------

Operating Income $ 1,036 $ 455 $ 146 $435 $ -
Special
items (a)
Restructuring
and asset
impairments - 2 (3) 1 -
Merger and
integration
expense - - - - -
---------------------------------------------------
Adjusted Operating
Income* 1,036 457 143 436 -
Depreciation and
amortization 1,036 644 117 276 (1)
---------------------------------------------------
Adjusted OIBDA* 2,072 1,101 260 712 (1)
Capital
expenditures 659 418 65 152 24
---------------------------------------------------
Adjusted OIBDA*
less Capex $ 1,413 $ 683 $ 195 $560 $ (25)
---------------------------------------------------



---------------------------------------------------
For the Quarter
Ended March 31, Pro forma Pro forma Long Other &
2005 Consolidated Wireless Distance Local Eliminations
----------------------------------------------------------------------

Operating Income $ 1,009 $ 438 $ 146 $435 $ (10)
Special
items (a)
Restructuring
and asset
impairments - 2 (3) 1 -
Merger and
integration
expense 10 - - - 10
---------------------------------------------------
Adjusted Operating
Income* 1,019 440 143 436 -
Depreciation and
amortization 2,292 1,900 117 276 (1)
---------------------------------------------------
Adjusted OIBDA* 3,311 2,340 260 712 (1)
Capital
expenditures 1,433 1,192 65 152 24
---------------------------------------------------
Adjusted OIBDA*
less Capex $ 1,878 $ 1,148 $ 195 $560 $ (25)
---------------------------------------------------


(a) See accompanying Notes to Financial Data for more information on
special items.


Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS (Unaudited)
(millions)

TABLE No.12
-------------------
Quarter Ended
-------------------
March 31, March 31,
2006 2005
-------------------
Wireless Pro Forma
Adjusted OIBDA* $ 2,691 $ 2,340
Service, wholesale, affiliate and other net
operating revenues 7,685 6,841
Adjusted OIBDA margin* 35.0% 34.2%

Operating income $ 441 $ 438
Operating income margin 5.7% 6.4%

Long Distance
Adjusted OIBDA* $ 236 $ 260
Total net operating revenues 1,669 1,715
Adjusted OIBDA margin* 14.1% 15.2%

Operating income $ 105 $ 146
Operating income margin 6.3% 8.5%

Local
Adjusted OIBDA* $ 715 $ 712
Total net operating revenues 1,620 1,597
Adjusted OIBDA margin* 44.1% 44.6%

Operating income $ 423 $ 435
Operating income margin 26.1% 27.2%


Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS
(millions)


TABLE No. 13 Consolidated Free
Cash Flow
-------------------
Quarter Ended
------------------
March 31, March 31,
2006 2005
--------- ---------

Adjusted OIBDA* $ 3,641 $ 2,072
Adjust for special items (172) -
Other operating activities, net (a) (502) (688)
Capital expenditures (1,728) (659)
Dividends paid (76) (187)
Proceeds from sales of assets 123 8
Other investing activities, net (85) (14)
-------------------
Free Cash Flow* 1,201 532
Business acquisitions, net of cash acquired (3,399) -
Payments on debt (868) (1,012)
Retirement of redeemable preferred stock (247) -
Proceeds from maturities and sales of marketable
securities 830 (80)
Proceeds from common stock issued 185 58
Other financing activities, net - 13
-------------------
Change in cash and cash equivalents - GAAP $ (2,298) $ (489)
===================



TABLE No. 14

---------
March 31,
2006
---------
Total Debt $ 25,950
Less: Cash and cash equivalents (6,604)
Marketable securities (909)
---------
Net Debt* $ 18,437
=========


(a) Other operating activities, net includes the change in working
capital, change in deferred income taxes, miscellaneous operating
activities and non-operating items in net income.


Sprint Nextel Corporation
OPERATING STATISTICS

TABLE No. 15
---------------------------------------------------------------------
1Q06
----------------------------------------------------------------------

Wireless Pro Forma

Financial and Other Statistics (dollars in millions)
----------------------------------------------------

Direct Post-Paid Subscribers
Service revenue (in millions) $ 7,175
ARPU $ 62
Churn 2.1%
Additions (in thousands) (1) 563
End of period subscribers (in thousands) (2) 39,103
Hours per subscriber 17

Direct Pre-Paid Subscribers
Service revenue (in millions) $ 312
ARPU $ 36
Churn (4) 5.4%
Additions (in thousands) 502
End of period subscribers (in thousands) (3) 3,127

Wholesale Subscribers
Additions (in thousands) 228
End of period subscribers (in thousands) 5,382

Affiliate Subscribers
Additions (in thousands) (1) 45
End of period subscribers (in thousands) 1,256

Number of cell sites on air 55,000

Adjusted OIBDA* $ 2,691
Adjusted OIBDA Margin* 35.0%

(1) Direct post-paid and affiliate net subscriber additions have been
reflected before transfers from the affiliate subscriber base
totaling 1,605k in the Q1 2006.

(2) Direct post-paid end of period subscribers reflect a decrease due
to a reclassification of 42k employee phone rate plans changing
from revenue-generating to non-revenue-generating.

(3) Direct prepaid end of period subscribers reflect a beginning
balance adjustment of 59k subscribers to exclude prepaid
subscribers acquired from affiliates in Q3 and Q4 2005.

(4) Represents prepaid churn normalized for a change in the treatment
of low-balance customers.

Long Distance

Financial and Other Statistics (dollars in millions)
----------------------------------------------------

Total Long Distance Net Operating Revenues $ 1,669
Voice net operating revenue $ 1,009
Data net operating revenue $ 375
Internet net operating revenue $ 225
Other net operating revenue $ 60

Total Operating Expenses $ 1,564
Costs of services and products $ 1,098
Selling, general and administrative $ 335
Depreciation $ 121
Amortization $ -
Restructuring and asset impairments $ 10

Operating income $ 105
Operating income margin 6.3%

Adjusted OIBDA* $ 236
Adjusted OIBDA Margin* 14.1%

YOY voice volume growth 10%

Local

Financial and Other Statistics (dollars in millions)
----------------------------------------------------

Total Local Operating Revenues $ 1,620
Voice net operating revenue $ 1,050
Data net operating revenue $ 267
Other net operating revenue $ 303

Total Operating Expenses $ 1,197
Costs of services and products $ 599
Selling, general and administrative $ 306
Depreciation $ 263
Amortization $ -
Restructuring and asset impairments $ 29

Operating income $ 423
Operating income margin 26.1%

Adjusted OIBDA* $ 715
Adjusted OIBDA Margin* 44.1%

Total Access Lines (thousands) 7,259
Residential access lines 4,970
Business access lines 2,070
Wholesale access lines 219
YOY Access line decline (5) -4.9%

Access minutes of use (millions) 6,728
Long distance minutes of use (millions) 1,287

Strategic product penetration - residential 73%

DSL service revenues $ 98
DSL lines in service (thousands) 777

DSL capable lines (thousands) 5,416


(5) Reported decline excludes the sale of approximately 5,100 access
lines; including this transaction the YOY Access line decline is
5.0%.


Sprint Nextel Corporation
NOTES TO FINANCIAL DATA (Unaudited)

(1) In the first quarter 2006, we recorded merger, integration and
spin-related costs of $105 million, which reduced net income by
$64 million. All merger costs were related to the Sprint-Nextel
merger, the acquisition of the Affiliates or the planned spin-off
of the Local segment. Certain merger, integration and spin-related
costs are generally considered to be non-recurring in nature, and
have been reflected as unallocated corporate costs and therefore
excluded from segment results.

(2) In the first quarter 2006, we recorded restructuring and asset
impairment charges of $67 million, which reduced net income by $41
million. The restructuring charges totaled approximately $49
million (pre-tax) and related to the severance associated with the
ongoing merger and integration activities, as well as a voluntary
restructuring program completed by the Local segment, and are
allocated to the appropriate segment results.

(3) In the first quarter 2006, we recorded aggregate gains on sales of
equity investments of $78 million, $16 million net gains on
derivative fair value adjustments and a $7 million gain on the
sale of certain local exchanges. These gains increased net income
by approximately $64 million.


Sprint Nextel Corporation
LOCAL DIVISION - STATEMENTS OF OPERATIONS
RECONCILIATION OF NEW SEGMENT REPORTING (Unaudited)
(millions)

TABLE No. 16
----------------------------- ----------------------------------------
Local
Telephone North Intercompany* Local
Quarter Ended 3/31/2006 Operations Supply Eliminations Division
----------------------------- ----------------------------------------

Net Operating Revenues $ 1,467 $ 243 $ (90) $ 1,620
----------------------------- ----------------------------------------
Operating Expenses
Costs of services and
products 460 229 (90) 599
Selling, general and
administrative 287 19 - 306
Depreciation and
amortization 265 5 (7) 263
Restructuring and asset
impairments 26 3 - 29
----------------------------- ----------------------------------------
Total operating expenses 1,038 256 (97) 1,197
----------------------------- ----------------------------------------
Operating Income (Loss) $ 429 $ (13) $ 7 $ 423
----------------------------------------

Adjusted OIBDA* $ 720 $ (5) $ - $ 715
----------------------------------------

Capex $ 179 $ - $ - $ 179
----------------------------------------


Operating Income (Loss) $ 429 $ (13)
Special Items 26 3
-----------------
Adjusted Operating Income
(Loss)* $ 455 $ (10)
-----------------
Depreciation and
amortization 265 5
-----------------
Adjusted OIBDA* $ 720 $ (5)
-----------------

Adjusted OIBDA Margin* 49% -2%
Operating Income Margin 29% -5%



----------------------------- ----------------------------------------
Local
Telephone North Intercompany* Local
Quarter Ended 3/31/2005 Operations Supply Eliminations Division
----------------------------- ---------- ------ ------------- --------

Net Operating Revenues $ 1,498 $ 186 $ (87) $ 1,597
----------------------------- ----------------------------------------
Operating Expenses
Costs of services and
products 482 165 (83) 564
Selling, general and
administrative 293 27 1 321
Depreciation and
amortization 277 5 (6) 276
Restructuring and asset
impairments 1 - - 1
----------------------------- ----------------------------------------
Total operating expenses 1,053 197 (88) 1,162
----------------------------- ----------------------------------------
Operating Income (Loss) $ 445 $ (11) $ 1 $ 435
----------------------------------------

Adjusted OIBDA* $ 723 $ (6) $ (5) $ 712
----------------------------------------

Capex $ 156 $ 1 $ (5) $ 152
----------------------------------------


Operating Income (Loss) $ 445 $ (11)
Special Items 1 -
-----------------
Adjusted Operating Income
(Loss)* $ 446 $ (11)
Depreciation and
amortization 277 5
-----------------
Adjusted OIBDA* $ 723 $ (6)
-----------------

Adjusted OIBDA Margin* 48% -3%
Operating Income Margin 30% -6%


* Intercompany eliminations also include certain immaterial rounding
differences