Verizon Wireless 2006 Annual Report Download - page 37

redeem both series of Senior Notes prior to maturity under the
optional redemption procedures provided in the indentures. The
6.688% Notes were redeemed on March 1, 2006, and the 7.735%
Notes were redeemed on February 16, 2006.
In addition, on January 20, 2006, Verizon announced an offer to
repurchase MCI $1,983 million aggregate principal amount of
5.908% Senior Notes Due 2007 at 101% of their par value. On
February 21, 2006, $1,804 million of these notes were redeemed by
Verizon. Verizon satisfied and discharged the indenture governing
this series of notes shortly after the close of the offer for those note-
holders who did not accept this offer.
Zero-Coupon Convertible Notes
Previously, Verizon Global Funding issued approximately $5,442 mil-
lion in principal amount at maturity of zero-coupon convertible notes
due 2021 which were callable by Verizon on or after May 15, 2006.
On May 15, 2006, we redeemed the remaining $1,375 million
accreted principal of the outstanding zero-coupon convertible notes
at a redemption price of $639.76 per $1,000 principal plus interest of
approximately $0.5767 per $1,000 principal. The total payment on
the date of redemption was approximately $1,377 million.
Other Debt Redemptions/Prepayments
Other debt redemptions/prepayments included approximately $697
million of outstanding debt issuances at various rates associated
with our operating telephone companies. Original maturity dates
ranged from 2010 through 2026. On December 15, 2006, Verizon
Wireless’ six year 5.375% fixed rate note of $2.5 billion matured. At
December 31, 2006, Verizon Wireless had no third-party debt out-
standing. On January 8, 2007, we redeemed the remaining $1,580
million of the outstanding notes of the Verizon Communications Inc.
floating rate notes due 2007. The gain/(loss) on these redemptions
and prepayments were immaterial.
Issuance of Debt
In February 2006, Verizon issued $4,000 million of floating rate and
fixed rate notes maturing from 2007 through 2035.
Spectrum Purchases
On November 29, 2006, we were granted thirteen 20 MHz licenses
we won in an FCC auction of Advanced Wireless Services spectrum
that concluded on September 18, 2006, for which we had bid a total
of $2,809 million. These licenses, which we anticipate using for the
provision of advanced wireless broadband services, cover a popula-
tion of nearly 200 million. We have made all required payments to the
FCC for these licenses.
Environmental Matters
During 2003, under a government-approved plan, remediation com-
menced at the site of a former Sylvania facility in Hicksville, New
York that processed nuclear fuel rods in the 1950s and 1960s.
Remediation beyond original expectations proved to be necessary
and a reassessment of the anticipated remediation costs was con-
ducted. A reassessment of costs related to remediation efforts at
several other former facilities was also undertaken. In September
2005, the Army Corps of Engineers (ACE) accepted the Hicksville
site into the Formerly Utilized Sites Remedial Action Program. This
may result in the ACE performing some or all of the remediation
effort for the Hicksville site with a corresponding decrease in costs
to Verizon. To the extent that the ACE assumes responsibility for
remedial work at the Hicksville site, an adjustment to a reserve pre-
viously established for the remediation may be made. Adjustments
may also be made based upon actual conditions discovered during
the remediation at any of the sites requiring remediation.
35
forty-five days assuming the satisfactory completion of its due dili-
gence investigation of CANTV. The tender offers are subject to certain
conditions including that a majority of the outstanding shares are ten-
dered to the Government and receipt of regulatory approvals. Based
upon the terms of the MOU and our current investment balance in
CANTV, we expect that we will record a loss on our investment in the
first quarter of 2007. The ultimate amount of the loss depends on a
variety of factors, including the successful completion of the tender
offer and the satisfaction of other terms in the MOU.
Spin-off of Idearc
On November 17, 2006 we completed the spin-off of Idearc to
shareowners of Verizon. Verizon distributed a dividend of one share
of Idearc common stock for every 20 shares of Verizon common
stock. Cash was paid for fractional shares. The distribution of Idearc
common stock is considered a tax free transaction for us and for our
shareowners, except for the cash payments for fractional shares
which are generally taxable. Idearc now owns what was the Verizon
domestic print and Internet yellow pages directories publishing
operations, which had been the principal component of our
Information Services segment. This transaction resulted in an
increase of nearly $9 billion in shareowners’ equity, as well as a
reduction of total debt by more than $7 billion and we received
approximately $2 billion in cash.
Telephone Access Lines Spin-off
On January 16, 2007, we announced a definitive agreement with
FairPoint Communications, Inc. (FairPoint) that will result in Verizon
establishing a separate entity for its local exchange and related busi-
ness assets in Maine, New Hampshire and Vermont, spinning off that
new entity to Verizon shareowners, and immediately merging it with
and into FairPoint.
Upon the closing of the transaction, Verizon shareowners will own
approximately 60 percent of the new company and FairPoint stock-
holders will own approximately 40 percent. Verizon Communications
will not own any shares in FairPoint after the merger. In connection
with the merger, Verizon shareowners will receive one share of
FairPoint stock for approximately every 55 shares of Verizon stock
held as of the record date. Both the spin-off and merger are expected
to qualify as tax-free transactions, except to the extent that cash is
paid to Verizon shareowners in lieu of fractional shares.
The total value to be received by Verizon and its shareowners in
exchange for these operations will be approximately $2,715 million.
Verizon shareowners will receive approximately $1,015 million of
FairPoint common stock in the merger, based upon FairPoint’s recent
stock price and the terms of the merger agreement. Verizon will
receive $1,700 million in value through a combination of cash distribu-
tions to Verizon and debt securities issued to Verizon prior to the
spin-off. Verizon may exchange these newly issued debt securities for
certain debt that was previously issued by Verizon, which would have
the effect of reducing Verizon’s then-outstanding debt.
Redemption of Debt
Debt assumed from MCI merger
On January 17, 2006, Verizon announced offers to purchase two
series of MCI senior notes, MCI $1,983 million aggregate principal
amount of 6.688% Senior Notes Due 2009 and MCI $1,699 million
aggregate principal amount of 7.735% Senior Notes Due 2014, at
101% of their par value. Due to the change in control of MCI that
occurred in connection with the merger with Verizon on January 6,
2006, Verizon was required to make this offer to noteholders within
30 days of the closing of the merger of MCI and Verizon. Separately,
Verizon notified noteholders that MCI was exercising its right to
Management’s Discussion and Analysis
of Results of Operations and Financial Condition continued