Verizon Wireless 2006 Annual Report Download - page 54

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In connection with the spin-off, we named Idearc the exclusive offi-
cial publisher of Verizon print directories of wireline listings in
markets where Verizon is the current incumbent local exchange car-
rier. We also entered into other agreements that defined
responsibility for obligations arising before or that may arise after
the spin-off, including, among others, obligations relating to Idearc
employees, certain transition services and taxes. In general, the
agreements governing the exchange of services between us and
Idearc are for specified periods at cost-based or commercial rates.
Verizon Dominicana C. por A., Telecomunicaciones de Puerto Rico,
Inc. and Compañía Anónima Nacional Teléfonos de Venezuela
During the second quarter of 2006, we reached definitive agree-
ments to sell our interests in our Caribbean and Latin American
telecommunications operations in three separate transactions to
América Móvil, S.A. de C.V. (América Móvil), a wireless service
provider throughout Latin America, and a company owned jointly by
Teléfonos de México, S.A. de C.V. (Telmex) and América Móvil. We
agreed to sell our 100 percent indirect interest in Verizon
Dominicana C. por A. (Verizon Dominicana) and our 52 percent
interest in Telecomunicaciones de Puerto Rico, Inc. (TELPRI) to
América Móvil. An entity jointly owned by América Móvil and Telmex
agreed to purchase our indirect 28.5 percent interest in Compañía
Anónima Nacional Teléfonos de Venezuela (CANTV).
In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, (SFAS No. 144) we have classified
the results of operations of Verizon Dominicana and TELPRI as dis-
continued operations. CANTV continues to be accounted for as an
equity method investment.
On December 1, 2006, we closed the sale of Verizon Dominicana.
The transaction resulted in net pretax cash proceeds of $2,042 mil-
lion, net of a purchase price adjustment of $373 million. The U.S.
taxes that became payable and were recognized at the time the
transaction closed exceeded the $30 million pretax gain resulting in
an after-tax loss of $541 million.
We expect to close the sale of our interest in TELPRI in 2007 sub-
ject to the receipt of regulatory approvals and in accordance with
the terms of the definitive agreement. We expect that the sale will
result in approximately $900 million in net pretax cash proceeds.
During the second quarter of 2006, we entered into a definitive agree-
ment to sell our indirect 28.5% interest in CANTV to an entity jointly
owned by América Móvil and Telmex for estimated pretax proceeds of
$677 million. Regulatory authorities in Venezuela never commenced
the formal review of that transaction and the related tender offers for
the remaining equity securities of CANTV. On February 8, 2007, after
two prior extensions, the parties terminated the stock purchase
agreement because the parties mutually concluded that the regulatory
approvals would not be granted by the Government.
In January 2007, the Bolivarian Republic of Venezuela (the
Republic) declared its intent to nationalize certain companies,
including CANTV. On February 12, 2007, we entered into a
Memorandum of Understanding (MOU) with the Republic. The MOU
provides that the Republic will offer to purchase all of the equity
securities of CANTV through public tender offers in Venezuela and
the United States at a price equivalent to $17.85 per ADS. If the
tender offers are completed, the aggregate purchase price for
Verizon’s shares would be $572 million. If the 2007 dividend that
has been recommended by the CANTV Board is approved by
shareholders and paid prior to the closing of the tender offers, this
amount will be reduced by the amount of the dividend. Verizon has
agreed to tender its shares if the offers are commenced. The
Republic has agreed to commence the offers within forty-five days
assuming the satisfactory completion of its due diligence investiga-
tion of CANTV. The tender offers are subject to certain conditions
including that a majority of the outstanding shares are tendered 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.
Verizon Information Services Canada
During 2004, we announced our decision to sell Verizon Information
Services Canada Inc. to an affiliate of Bain Capital, a global private
investment firm, for $1,540 million (Cdn. $1,985 million). The sale
closed during the fourth quarter of 2004 and resulted in a gain of
$1,017 million ($516 million after-tax).
In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144), we have classified
the results of operation of the U.S. print and Internet yellow pages
directories business, Verizon Dominicana and Verizon Information
Services Canada as discontinued operations in the consolidated
statements of income for all years presented through the date of the
spin-off or sale. We have also classified the results of operations of
TELPRI, which we continued to own at December 31, 2006, as dis-
continued operations in the consolidated statements of income.
Our investment in CANTV continues to be accounted for as an
equity method investment in continuing operations.
The assets and liabilities of the U.S print and Internet yellow pages
directories business, Verizon Information Services Canada, Verizon
Dominicana and TELPRI are disclosed as current assets and current
liabilities held for sale in the consolidated balance sheets for all
years presented through the date of their spin-off or divestiture.
Additional detail related to those assets and liabilities are as follows:
(dollars in millions)
At December 31, 2006 2005
Current assets $303 $995
Plant, property and
equipment, net 1,436 2,318
Other non-current assets 853 920
Total assets $2,592 $4,233
Current liabilities $181 $1,369
Long-term debt 575 300
Other non-current liabilities 1,398 1,201
Total liabilities $2,154 $2,870
Related to the assets and liabilities above is $241 million and $898
million included as Accumulated Other Comprehensive Loss in the
condensed consolidated balance sheets as of December 31, 2006
and December 31, 2005, respectively.
Notes to Consolidated Financial Statements continued