Verizon Wireless 2008 Annual Report Download - page 49

Notes to Consolidated Financial Statements continued
47
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No. 51, (SFAS
No. 160). SFAS No. 160 establishes accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the retained interest
and gain or loss when a subsidiary is deconsolidated. This statement is
effective for financial statements issued for fiscal years beginning on or
after December 15, 2008 which will be applied prospectively, except
for the presentation and disclosure requirements which will be applied
retrospectively for all periods presented. Upon the initial adoption of
this statement, we will change the classification and presentation of
Noncontrolling Interest in our financial statements, which we currently
refer to as minority interest. Additionally, we conduct certain business
operations in certain markets through non-wholly owned entities. Any
changes in these ownership interests may be required to be measured
at fair value and recognized as a gain or loss, if any, in earnings. SFAS No.
160 will also result in a lower effective income tax rate for the Company
due to the inclusion of income attributable to noncontrolling interest in
income before the provision for income taxes. However, the income tax
provision will not be adjusted as a result of SFAS No. 160.
NOTE 2
ACQUISITIONS
Alltel Corporation
On June 5, 2008, Verizon Wireless entered into an agreement and plan
of merger with Alltel and its controlling stockholder, Atlantis Holdings
LLC, an affiliate of private investment firms TPG Capital and GS Capital
Partners, to acquire 100% of the equity of Alltel in an all-cash merger.
After satisfying all closing conditions, including receiving the required
regulatory approvals, Verizon Wireless closed the acquisition on January
9, 2009 and paid approximately $5.9 billion for the equity of Alltel.
Immediately prior to the closing, the Alltel debt associated with the
transaction, net of cash, was approximately $22.2 billion. Alltel provides
wireless voice and advanced data services to residential and business
customers in 34 states.
We expect to experience substantial operational benefits from the
Alltel acquisition, including additional combined overall cost savings
from reduced roaming costs by moving more traffic to our own net-
work, reduced network-related costs from the elimination of duplicate
facilities, consolidation of platforms, efficient traffic consolidation, and
reduced overall expenses relating to advertising, overhead and head-
count. We expect reduced overall combined capital expenditures as a
result of greater economies of scale and the rationalization of network
assets. We also anticipate that the use of the same technology platform
will enable us to rapidly integrate Alltel’s operations with ours while
enabling a seamless transition for customers.
The Alltel acquisition will be accounted for as a business combination
under SFAS No. 141(R). While Verizon Wireless has commenced the
appraisals necessary to assess the fair values of the tangible and intan-
gible assets acquired and liabilities assumed, the amounts of assets and
liabilities arising from contingencies, the fair value of noncontrolling
interests, and the amount of goodwill to be recognized as of the acqui-
sition date, the initial purchase price allocation is not yet available.
On June 10, 2008, in connection with the agreement to acquire Alltel,
Verizon Wireless purchased from third parties $5.0 billion aggregate
principal amount of debt obligations of certain subsidiaries of Alltel for
approximately $4.8 billion, plus accrued and unpaid interest. The matu-
rity dates of these obligations range from 2015 to 2017. Verizon Wireless’s
investment in Alltel debt obligations is classified as available-for-sale and
is included in Other investments in the consolidated balance sheet at
December 31, 2008.
Alltel Divestiture Markets
As a condition of the regulatory approvals by the United States
Department of Justice (DOJ) and the FCC that were required to com-
plete the Alltel acquisition, Verizon Wireless will divest overlapping
properties in 105 operating markets in 24 states (the Alltel Divestiture
Markets). These markets consist primarily of Alltel operations, but also
include the pre-merger operations of Verizon Wireless in four markets as
well as operations in Southern Minnesota and Western Kansas that were
acquired from Rural Cellular Corporation (Rural Cellular). As a result of
these divestiture requirements, Verizon Wireless has placed the licenses
and assets in the Alltel Divestiture Markets in a management trust that
will continue to operate the markets under their current brands until
they are sold.