This excerpt taken from the S 10-K filed Mar 1, 2007.
Note 14. Segments
We operate, and are managed, as two strategic segments: Wireless and Long Distance. These segments are organized by products and services. Until May 2006, we operated a third segment, our local communications business, that provided local and long distance voice and data services and is classified as discontinued operations. See note 2 for more information.
Our executives use segment earnings as the primary measure to evaluate segment performance and make resource allocation decisions. Segment earnings is defined as operating income before depreciation, amortization, severance, lease exit costs, asset impairments and other expenses. We have adjusted the segment information for 2005 and 2004 to include information related to segment earnings, rather than operating income (loss), which was the primary measure used to manage our segments in those years. These expenses, along with all items below operating income (loss) on our consolidated statements of operations, including interest expense and income tax (expense) benefit, are managed on a total company basis and are reflected only in our consolidated results.
Our Wireless segment includes revenue from a wide array of wireless mobile telephone and wireless data transmission services and the sale of wireless equipment. Through our Wireless segment, we, together with the remaining PCS Affiliates, offer digital wireless service in all 50 states, Puerto Rico and the U.S. Virgin Islands.
Our Long Distance segment includes revenue from domestic and international wireline voice and data communication services and services to the cable multiple systems operators, or MSOs, that resell our long distance service and/or use our back office systems and network assets in support of their telephone services provided over cable facilities.
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We generally account for transactions between segments based on fully distributed costs, which we believe approximate fair value. In certain transactions, pricing is set using market rates. Segment financial information is as follows: