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Sprint iPhone costs excluded in pay estimates

Tue, 02/14/2012 - 3:19pm
Maisie Ramsay, Wireless

Sprint's hefty gamble on the iPhone may have contributed to a $684 million reduction in its operating income before depreciation and amortization last quarter, but that won't be a factor in determining executive pay.

The operator said yesterday that it would exclude the iPhone's sizable financial impact from bonus calculations for its executive officers.

The exclusions increased the payouts under its short-term incentive plan from about 63 percent to 73 percent of target, and long-term incentives from about 91 percent to 106 percent of target.

"The company believes that the investment it is making in the iPhone will be beneficial to our shareholders in the long-term," Sprint said in an 8-K document filed Monday with the SEC.

Sprint also decided to exclude payments from LightSquared from its compensation arithmetic, since it set targets and budget before it reached final terms with the company. LightSquared paid Sprint $290 million in the second and third quarters as part of a spectrum hosting deal that has been put on hold as it works to solve problems with GPS interference.

Sprint's losses swelled to $1.3 billion last quarter after the high cost of subsidizing the iPhone and upgrading its network outpaced a 5 percent increase in sales. It sold about 1.8 million iPhones between October and December of last year, far less than the 7.6 million iPhones activated by AT&T during the same period.

Subsidies on the iPhone cost $200 more than for other smartphones, CFO Joe Euteneuer said in October. The company has agreed to pay Apple $15.5 billion over the next four years for the hugely popular device.

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