Verizon Wireless 2006 Annual Report Download - page 32

Cash of $5,401 million was used to reduce our total debt during
2004. We repaid $2,315 million and $2,769 million of Wireline and
Verizon corporate long-term debt, respectively. The Wireline debt
repayment includes the early retirement of $1,275 million of long-
term debt and $950 million of other long-term debt at maturity. The
corporate debt repayment includes $1,984 million of zero-coupon
convertible notes redeemed by Verizon corporate and $723 million
of other corporate long-term debt at maturity. Also, during 2004, we
decreased our short-term borrowings by $747 million and Verizon
corporate issued $500 million of long-term debt.
Our ratio of debt to debt combined with shareowners’ equity
was 42.8% at December 31, 2006 compared to 49.1% at December
31, 2005.
As of December 31, 2006, we had no bank borrowings outstanding.
We also had approximately $6.2 billion of unused bank lines of credit
(including a $6.0 billion three-year committed facility that expires in
September 2009 and various other facilities totaling approximately
$400 million) and we had shelf registrations for the issuance of up to
$4.5 billion of unsecured debt securities. The debt securities of Verizon
and our telephone subsidiaries continue to be accorded high ratings
by primary rating agencies. In order to simplify and streamline our
financing entities, Verizon Global Funding merged into Verizon
Communications on February 1, 2006. Verizon Communications is now
the primary issuer of all long-term and short-term debt for Verizon. The
short-term ratings of Verizon Communications are: Moody’s P-2; S&P
A-1; and Fitch F1. The long-term ratings of Verizon Communications
are: Moody’s A3 with stable outlook; S&P A with negative outlook; and
Fitch A+ with stable outlook. In June 2006, the long-term debt rating of
Verizon Wireless was upgraded by Moody’s to A2 from A3 and
assigned a stable outlook and the long-term debt rating of Verizon
Communications was affirmed at A3 with a stable outlook. In
December 2006, Fitch affirmed the long-term debt rating of Verizon
Communications at A+ with a stable outlook. Following the maturity of
its remaining external debt in December 2006, Moody’s and Fitch with-
drew the rating on Verizon Wireless.
We and our consolidated subsidiaries are in compliance with all of
our debt covenants.
As in prior years, dividend payments were a significant use of capital
resources. We determine the appropriateness of the level of our div-
idend payments on a periodic basis by considering such factors as
long-term growth opportunities, internal cash requirements and the
expectations of our shareowners. In 2006 and 2005, Verizon
declared quarterly cash dividends of $.405 per share. In 2004, we
declared quarterly cash dividends of $.385 per share.
Common stock has been used from time to time to satisfy some of
the funding requirements of employee and shareowner plans. On
January 19, 2006, the Board of Directors determined that no addi-
tional common shares could be purchased under previously
authorized share repurchase programs and gave authorization to
repurchase of up to 100 million common shares terminating no later
than the close of business on February 28, 2008. We repurchased
$1,700 million of our common stock as part of this program.
connection with sales of our interests in various other investments,
including a partnership venture with Crown Castle International
Corp., EuroTel Bratislava, a.s. and Iowa Telecom preferred stock.
In 2006, investing activities of discontinued operations include net
pretax cash proceeds of $2,042 million in connection with the sale of
Verizon Dominicana. In 2005, investing activities of discontinued
operations are primarily related to capital expenditures related to
discontinued operations. In 2004, investing activities of discontinued
operations include cash proceeds of $1,603 million from the sale of
Verizon Information Services Canada, partially offset by capital
expenditures related to discontinued operations.
Under the terms of an investment agreement, Vodafone had the right
to require Verizon Wireless to purchase up to an aggregate of $20
billion worth of Vodafone’s interest in Verizon Wireless at designated
times (put windows) at its then fair market value, not to exceed $10
billion in any one put window. Vodafone had the right to require the
purchase of up to $10 billion during a 61-day period which opened
on June 10 and closed on August 9 in 2006, and did not exercise
that right. As of December 31, 2006, Vodafone only has the right to
require the purchase of up to $10 billion worth of its interest, during
a 61-day period opening on June 10 and closing on August 9 in
2007, under its one remaining put window. Vodafone also may
require that Verizon Wireless pay for up to $7.5 billion of the required
repurchase through the assumption or incurrence of debt. In the
event Vodafone exercises its one remaining put right, we (instead of
Verizon Wireless) have the right, exercisable at our sole discretion, to
purchase up to $2.5 billion of Vodafone’s interest for cash or Verizon
stock at our option.
Cash Flows Used In Financing Activities
Our total debt was reduced by $1,896 million during 2006. We repaid
$6,838 million of Wireline debt, including premiums associated with the
retirement of $5,665 million of aggregate principal amount of long-term
debt assumed in connection with the MCI merger. The Wireline repay-
ments also included the early retirement/prepayment of $697 million of
long-term debt and $155 million of other long-term debt at maturity.
We repaid $2.5 billion of Domestic Wireless 5.375% fixed rate notes
that matured on December 15, 2006. At December 31, 2006, Verizon
Wireless had no third-party debt. Also, we redeemed the $1,375 million
accreted principal of our remaining zero-coupon convertible notes and
retired $482 million of other corporate long-term debt at maturity.
These repayments were partially offset by our issuance of long-term
debt with a total aggregate principal amount of $4,000 million, resulting
in cash proceeds of $3,958 million, net of discounts, issuance costs
and the receipt of cash proceeds related to hedges on the interest rate
of an anticipated financing. In connection with the spin-off of Idearc,
we received net cash proceeds of approximately $2 billion and retired
debt in the aggregate principal amount of approximately $7 billion (see
Other Consolidated Results – Discontinued Operations – Verizon
Information Services).
Cash of $240 million was used to reduce our total debt during 2005.
We repaid $1,533 million of Domestic Wireless, $1,183 million of
Wireline and $1,109 million of Verizon corporate long-term debt. The
Wireline debt repayment included the early retirement of $350 million
of long-term debt and $806 million of other long-term debt at matu-
rity. This decrease was largely offset by the issuance by Verizon
corporate of long-term debt with a total principal amount of $1,500
million, resulting in total cash proceeds of $1,478 million, net of dis-
counts and costs, and an increase in our short-term borrowings of
$2,098 million.
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Management’s Discussion and Analysis
of Results of Operations and Financial Condition continued