Verizon Wireless 2008 Annual Report Download - page 52

Notes to Consolidated Financial Statements continued
50
In accordance with SFAS No. 144 we have classified TELPRI, Verizon
Dominicana and our former domestic print and Internet yellow page
directories publishing operations as discontinued operations in the con-
solidated financial statements for all periods presented through the date
of the divestiture or spin-off.
Income from discontinued operations, net of tax, presented in the con-
solidated statements of income included the following:
(dollars in millions)
Years Ended December 31, 2008 2007 2006
Operating revenues $ – $ 306 $ 5,077
Income before provision for income taxes $ – $ 185 $ 2,041
Provision for income taxes –(43) (1,282)
Income from discontinued operations,
net of tax $ – $ 142 $ 759
Extraordinary Item
Compañía Anónima Nacional Teléfonos de Venezuela (CANTV)
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, which provided that the Republic offer to pur-
chase all of the equity securities of CANTV, including our 28.5% interest,
through public tender offers in Venezuela and the United States. Under
the terms of the MOU, the prices in the tender offers would be adjusted
downward to reflect any dividends declared and paid subsequent to
February 12, 2007. During 2007, the tender offers were completed and
Verizon received an aggregate amount of approximately $572 million,
which included $476 million from the tender offers as well as $96 million
of dividends declared and paid subsequent to the MOU. During 2007,
based upon our investment balance in CANTV, we recorded an extraor-
dinary loss of $131 million, including taxes of $38 million.
Other Dispositions
Telephone Access Lines Spin-off
On January 16, 2007, we announced a definitive agreement with
FairPoint Communications, Inc. (FairPoint) providing for Verizon to estab-
lish a separate entity for its local exchange and related business assets
in Maine, New Hampshire and Vermont, spin-off that new entity into a
newly formed company, known as Northern New England Spinco Inc.
(Spinco), to Verizon’s shareowners, and immediately merge it with and
into FairPoint.
On March 31, 2008, we completed the spin-off of the shares of Spinco to
Verizon shareowners and the merger of Spinco with FairPoint, resulting
in Verizon shareowners collectively owning approximately 60 percent
of FairPoint common stock. FairPoint issued approximately 53.8 million
shares of FairPoint common stock to Verizon shareowners in the merger,
and Verizon shareowners received one share of FairPoint common stock
for every 53.0245 shares of Verizon common stock they owned as of
March 7, 2008. FairPoint paid cash in lieu of any fraction of a share of
FairPoint common stock.
On April 1, 2008, the number of shares of restricted stock units (RSUs)
and performance stock units (PSUs) previously issued by Verizon were
adjusted pursuant to the terms of the applicable Verizon equity incentive
plans, taking into account the change in the value of Verizon common
stock as a result of the spin-off.
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 Verizon employees whose primary
duties relate to Spinco’s business, certain transition services and taxes.
In general, the agreements governed the exchange of services between
us and FairPoint through January 2009 at specified cost-based or com-
mercial rates.
As a result of the spin-off, our net debt was reduced by approximately $1.4
billion. The consolidated income statements for the periods presented
include the results of operations of the local exchange and related busi-
ness assets in Maine, New Hampshire and Vermont through March 31,
2008, the date of completion of the spin-off. The consolidated balance
sheet as of December 31, 2008 reflects the spin-off as of March 31, 2008,
which increased shareowners’ investment by approximately $16 million,
and included approximately $79 million ($44 million after-tax) related
to defined benefit pension and postretirement benefit plans, which is
reflected as a reduction to the beginning balance of Accumulated other
comprehensive loss.
During 2008, we recorded pretax charges of $103 million ($81 million
after-tax) for costs incurred related to the separation of the wireline
facilities and operations in Maine, New Hampshire and Vermont from
Verizon at the closing of the transaction, as well as for professional advi-
sory and legal fees in connection with this transaction. During 2007, we
recorded pretax charges of $84 million ($80 million after-tax) for costs
incurred related to the separation of the wireline facilities and opera-
tions in Maine, New Hampshire and Vermont.
NOTE 4
WIRELESS LICENSES, GOODWILL AND OTHER INTANGIBLE
ASSETS
Wireless Licenses
Changes in the carrying amount of wireless licenses are as follows:
(dollars in millions)
Balance as of December 31, 2006 $ 50,959
Wireless licenses acquired 170
Capitalized interest on wireless licenses 203
Other, net (536)
Balance as of December 31, 2007 $ 50,796
Wireless licenses acquired 10,626
Capitalized interest on wireless licenses 557
Other, net (5)
Balance as of December 31, 2008 $ 61,974
As of December 31, 2008 and 2007, $12.4 billion and $3.0 billion, respec-
tively, of wireless licenses were not in service.
During 2007, Other, net primarily included the impact of adopting FIN
48 (see Note 1) of $535 million.
On March 20, 2008, the FCC announced the results of Auction 73 of
wireless spectrum licenses in the 700 MHz band. We were the suc-
cessful bidder for twenty-five 12 MHz licenses in the A-Block frequency,
seventy-seven 12 MHz licenses in the B-Block frequency and seven 22
MHz licenses (nationwide with the exception of Alaska) in the C-Block
frequency, with an aggregate bid price of $9,363 million. We have made
all required payments to the FCC for these licenses. The FCC granted us
these licenses on November 26, 2008.