AT&T Wireless 2014 Annual Report Download - page 30

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
28 | AT&T INC.
net debt at closing, which was approximately $700.
GSF Telecom offers service under both the Iusacell
and Unefon brand names in Mexico with a network
that covers about 70 percent of Mexico’s population
of approximately 120 million.
Spectrum Acquisitions In September 2014, we
completed our acquisition of 49 AWS spectrum licenses,
covering nearly 50 million people in 14 states, from
Aloha Partners II, L.P., for approximately $847 in cash.
In January 2015, we submitted winning bids for 251 AWS
spectrum licenses, comprised of 42 G Block licenses,
37 H Block licenses, 58 I Block licenses, and 114 J Block
licenses, in the AWS-3 Auction (FCC Auction 97) for
$18,189 (see “Liquidity and Capital Resources”).
We will cover approximately 96 percent of the U.S.
population with high-value contiguous AWS-3 spectrum.
We also intend to bid at least $9,000 in connection with
the 600 MHz auction, provided there is sufficient spectrum
available in the auction to give us a viable path to at least
a 2x10 MHz nationwide spectrum footprint.
Connecticut Wireline Disposition In October 2014,
we sold our incumbent local exchange operations in
Connecticut to Frontier Communications Corporation for
$2,018 and recorded a pre-tax gain of $147.
Federal Trade Commission Litigation In October 2014,
the Federal Trade Commission (FTC) filed a civil suit in the
U.S. District Court for the Northern District of California
against AT&T Mobility, LLC seeking injunctive relief and
unspecified money damages under Section 5 of the Federal
Trade Commission Act. The FTC’s allegations concern
AT&T’s Maximum Bit Rate (MBR) program, which temporarily
reduces the download speeds of a small portion of our
legacy Unlimited Data Plan customers each month.
MBR is an industry-standard practice that is authorized
by the FCC and designed to affect only the most data-
intensive applications (such as video streaming). Texts,
emails, tweets, social media posts, Internet browsing,
and many other applications are typically unaffected.
Contrary to the FTC’s allegations, which we vigorously
dispute, our MBR program is permitted by our customer
contracts, was fully disclosed in advance to our Unlimited
Data Plan customers, and was implemented to protect the
network for the benefit of all customers. In addition, we
believe that the FTC has no jurisdiction to bring this action
and have moved to dismiss the litigation on that basis.
Labor Contracts As of January 31, 2015, we employed
approximately 253,000 persons. Approximately 53 percent
of our employees are represented by the Communications
Workers of America, the International Brotherhood of
Electrical Workers or other unions. Contracts covering
approximately 41,000 non-Mobility employees will expire
during 2015, including approximately 12,000 traditional
wireline employees in our five-state Midwest region and
The merger agreement was adopted by DIRECTV’s
stockholders on September 25, 2014 and the transaction
remains subject to review by the FCC and the Department of
Justice and to other closing conditions. It is also a condition
that all necessary consents by certain foreign governmental
entities have been obtained and are in full force and effect.
The transaction is expected to close in the first half of 2015.
The merger agreement provides certain mutual termination
rights for us and DIRECTV, including the right of either
party to terminate the agreement if the merger is not
consummated by May 18, 2015, subject to extension in
certain cases to a date no later than November 13, 2015.
Either party may also terminate the agreement if an order
permanently restraining, enjoining, or otherwise prohibiting
consummation of the merger becomes final and
nonappealable. In October 2014, DIRECTV and the National
Football League renewed their agreement for the “NFL
Sunday Ticket” service substantially on the terms discussed
between AT&T and DIRECTV, satisfying one of the conditions
to closing the merger. Under certain circumstances relating
to a competing transaction, DIRECTV may be required to pay
a termination fee to us in connection with or following a
termination of the agreement.
Based on synergies we expect to realize with the
acquisition, we have also committed to the following upon
closing of the transaction: (1) expanding or enhancing our
deployment of both wireline and fixed wireless broadband
to at least 15 million customer locations across 48 states,
with most of the locations in underserved rural areas,
(2) adhering to the FCC’s Open Internet protections
established in 2010 for three years after closing, regardless
of whether the FCC re-establishes such protections for
other industry participants following the D.C. Circuit’s
vacating of those rules, (3) for three years after closing,
offering standalone retail broadband Internet access
service at reasonable market-based prices, including
a service of at least 6 Mbps down (where feasible)
at guaranteed prices, in areas where we offer wireline
broadband service today, and (4) offering, for three years
after closing, standalone DIRECTV satellite video service
at nationwide package prices that do not differ between
customers in AT&T’s wireline footprint and customers
outside our current 21-state wireline footprint.
NII Holdings Inc. Acquisition On January 26, 2015, we
entered into an agreement with NII to acquire its wireless
business in Mexico for $1,875, less any outstanding net
debt held by the business at closing, in a transaction
pursuant to Section 363 of the U.S. Bankruptcy Code.
Upon closing, we will acquire companies, which operate
under the name Nextel Mexico, and approximately
3.0 million subscribers.
GSF Telecom Acquisition On January 16, 2015, we
completed our acquisition of 100 percent of the stock of
Mexican wireless company GSF Telecom for $2,500, less