Verizon Wireless 2006 Annual Report Download - page 58

Cellular Partnerships and Other
In August 2002, Verizon Wireless and Price Communications Corp.
(Price) combined Price’s wireless business with a portion of Verizon
Wireless. The resulting limited partnership, Verizon Wireless of the
East LP (VZ East), is controlled and managed by Verizon Wireless.
In exchange for its contributed assets, Price received a limited part-
nership interest in the new partnership which was exchangeable
into the common stock of Verizon Wireless if an initial public
offering of that stock occurred, or into the common stock of Verizon
on the fourth anniversary of the asset contribution date. On August
15, 2006, Verizon delivered 29.5 million shares of newly-issued
Verizon common stock to Price valued at $1,007 million in
exchange for Price’s limited partnership interest in VZ East.
Preferred Securities Issued By Subsidiaries
On January 15, 2006, Verizon redeemed $100 million Verizon
International Holdings Ltd. Series A variable term voting cumulative
preferred stock at the redemption price per share of $100,000, plus
accrued and unpaid dividends.
NOTE 10
LEASING ARRANGEMENTS
As Lessor
We are the lessor in leveraged and direct financing lease agree-
ments under which commercial aircraft and power generating
facilities, which comprise the majority of the portfolio, along with
industrial equipment, real estate property, telecommunications and
other equipment are leased for remaining terms up to 49 years as of
December 31, 2006. Minimum lease payments receivable represent
unpaid rentals, less principal and interest on third-party nonre-
course debt relating to leveraged lease transactions. Since we have
no general liability for this debt, which holds a senior security
interest in the leased equipment and rentals, the related principal
and interest have been offset against the minimum lease payments
receivable in accordance with GAAP. All recourse debt is reflected
in our consolidated balance sheets. See Note 4 for information on
lease impairment charges.
Verizon had equity investments in these partnerships of $659 million
and $652 million, respectively. Verizon currently adjusts the carrying
value of these investments for any losses incurred by the limited
partnerships through earnings.
The remaining investments include wireless partnerships in the
U.S., and other smaller domestic and international investments.
Cost Investees
Some of our cost investments are carried at their current market
value. Other cost investments are carried at their original cost,
except in cases where we have determined that a decline in the
estimated market value of an investment is other than temporary as
described in Note 5. Our cost investments include a variety of
domestic and international investments primarily involved in pro-
viding communication services.
Our cost investments in unconsolidated businesses included 43.4
million of shares of MCI common stock that were converted upon
the closing of the MCI merger (see Note 2).
NOTE 9
MINORITY INTEREST
Minority interests in equity of subsidiaries were as follows:
(dollars in millions)
At December 31, 2006 2005
Minority interests in consolidated subsidiaries*:
Wireless joint venture (55%) $27,854 $24,683
Cellular partnerships and other (various) 483 1,650
Preferred securities issued by subsidiaries —100
$28,337 $26,433
*Indicated ownership percentages are Verizon’s consolidated interests.
Wireless Joint Venture
The wireless joint venture was formed in April 2000 in connection
with the combination of the U.S. wireless operations and interests
of Verizon and Vodafone. The wireless joint venture operates as
Verizon Wireless. Verizon owns a controlling 55% interest in Verizon
Wireless and Vodafone owns the remaining 45%.
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 desig-
nated 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.
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Notes to Consolidated Financial Statements continued