Verizon Wireless 2006 Annual Report Download - page 81

Notes to Consolidated Financial Statements continued
79
Disposition of Businesses and Investments
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
business 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 stockholders 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 frac-
tional 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 distri-
butions 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.
CANTV
During the second quarter of 2006, we entered into a definitive
agreement 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 con-
cluded 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.
Redemption of Debt
On January 8, 2007, we redeemed the remaining $1,580 million of the
outstanding Verizon Communications Inc. floating rate notes due
2007. The gain/(loss) on this redemption was immaterial.
NOTE 23
SUBSEQUENT EVENTS