Verizon Wireless 2010 Annual Report Download - page 22

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20
Other Consolidated Results
Equity in Earnings of Unconsolidated Businesses
Equity in earnings of unconsolidated businesses decreased 8.1% in 2010 compared to 2009 primarily due to lower earnings at Vodafone Omnitel N.V.
(Vodafone Omnitel), which were primarily driven by the devaluation of the Euro versus the U.S. dollar.
Equity in earnings of unconsolidated businesses decreased 2.5% in 2009 compared to 2008 primarily due to higher income tax benefits recorded
at Vodafone Omnitel during 2008 and the devaluation of the Euro versus the U.S. dollar. Partially offsetting the decrease were higher earnings at
Vodafone Omnitel.
Other Income and (Expense), Net
Additional information relating to Other income and (expense), net is as follows:
(dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2010 2009 2008 2010 vs. 2009 2009 vs. 2008
Interest income $ 92 $ 75 $ 362 $ 17 22.7 % $ (287) (79.3)%
Foreign exchange gains (losses), net 5 – (46) 5 nm 46 nm
Other, net (43) 16 (33) (59) nm 49 nm
Total $ 54 $ 91 $ 283 $ (37) (40.7) $ (192) (67.8)
nm – not meaningful
Management’sDiscussionandAnalysis
ofFinancialConditionandResultsofOperations – As Adjusted continued
Other income and (expense), net decreased during 2010 compared
to 2009 primarily due to fees incurred during the third quarter of 2010
relatedtotheearlyextinguishmentofdebt(see“ConsolidatedFinancial
Condition”). Partially offsettingthedecreasewashigherdistributions
from investments and foreign exchange gains at our international wire-
line operations.
Interest Expense
(dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2010 2009 2008 2010 vs. 2009 2009 vs. 2008
Total interest costs on debt balances $ 3,487 $ 4,029 $ 2,566 $ (542) (13.5)% $ 1,463 57.0 %
Less capitalized interest costs 964 927 747 37 4.0 180 24.1
Total $ 2,523 $ 3,102 $ 1,819 $ (579) (18.7) $ 1,283 70.5
Average debt outstanding $ 57,278 $ 64,039 $ 41,064
Effective interest rate 6.1 % 6.3 % 6.2 %
Other income and (expense), net decreased during 2009 compared to
2008 primarily driven by lower interest income, in part due to lower
invested balances. The investment in $4.8 billion of Alltel debt obligations
acquired in 2008 was eliminated in consolidation beginning in January
2009, subsequent to the close of the Alltel transaction.
Total interest costs on debt balances decreased during 2010 compared
to 2009 primarily due to a $6.8 billion decline in average debt (see
“ConsolidatedFinancialCondition”).Interestcostsduring2009included
fees related to the bridge facility that was entered into and utilized to
complete the acquisition of Alltel, which contributed to the higher effec-
tive interest rate.
Total interest costs on debt balances increased during 2009 compared to
2008 primarily due to a $23 billion increase in the average debt levels. The
increase in average debt outstanding compared to 2008 was primarily
driven by borrowings to finance the acquisition of Alltel. The increase in
capitalized interest costs during 2009 primarily related to capitalization of
interest on wireless licenses under development for commercial service
(see“ConsolidatedFinancialCondition”).