Verizon Wireless 2012 Annual Report Download - page 39

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Cash Flows Used In Financing Activities
We seek to maintain a mix of fixed and variable rate debt to lower bor-
rowing costs within reasonable risk parameters and to protect against
earnings and cash flow volatility resulting from changes in market condi-
tions. During 2012, 2011 and 2010, net cash used in financing activities
was $21.3 billion, $5.8 billion and $13.7 billion, respectively.
2012
During January 2012, $1.0 billion of 5.875%Verizon New Jersey Inc.
Debenturesmaturedandwererepaid.DuringFebruary2012,$0.8bil-
lion of 5.25% Verizon Wireless Notes matured and were repaid. During
July2012,$0.8billionof7.0%VerizonWirelessNotesmaturedandwere
repaid. In addition, during 2012 we utilized $0.2 billion under fixed rate
vendor financing facilities.
On November 2, 2012, we announced the commencement of a tender
offer (the Tender Offer) to purchase for cash any and all of the out-
standing $1.25 billion aggregate principal amount of 8.95% Verizon
Communications Notes due 2039. In the Tender Offer that was com-
pleted November 9, 2012, $0.9 billion aggregate principal amount of the
notes was purchased and $0.35 billion principal amount of the notes
remains outstanding. Any accrued and unpaid interest on the principal
purchased was paid to the date of purchase.
During November 2012, we issued $4.5 billion aggregate principal
amount of fixed rate notes at varying maturities resulting in cash pro-
ceeds of approximately $4.47 billion, net of discounts and issuance costs.
The net proceeds were used for general corporate purposes, for the
Tender Offer, and to redeem $0.7 billion of $2.0 billion of 8.75% Verizon
Communications Notes due 2018, $1.0 billion of 4.625% Verizon Virginia
LLC Debentures, Series A due 2013 and $0.75 billion of 4.35% Verizon
Communications Notes due 2013.
In addition, during 2012, various fixed rate notes totaling approximately
$0.2 billion were repaid and any accrued and unpaid interest was paid to
the date of payment.
See“OtherItems”regardingtheearlydebtredemptioncostsincurredin
connection with the aforementioned repurchases and redemptions.
2011
During 2011, proceeds from long-term borrowings totaled $11.1 billion,
which was primarily used to repay outstanding debt, redeem higher
interest bearing debt maturing in the near term and for other general
corporate purposes.
During 2011, $0.5 billion of 5.35% Verizon Communications Notes
matured and were repaid, and we utilized $0.3 billion under fixed rate
vendor financing facilities.
DuringMarch2011,weissued$6.25billionaggregateprincipalamount
of fixed and floating rate notes at varying maturities resulting in cash pro-
ceeds of approximately $6.19 billion, net of discounts and issuance costs.
The net proceeds were used for the repayment of commercial paper and
other general corporate purposes, as well as to redeem $2.0 billion aggre-
gate principal amount of telephone subsidiary debt during April 2011.
The debt obligations of Terremark that were outstanding at the time of
its acquisition by Verizon were repaid during the second quarter of 2011.
During November 2011, we issued $4.6 billion aggregate principal
amount of fixed rate notes at varying maturities resulting in cash pro-
ceeds of approximately $4.55 billion, net of discounts and issuance costs.
During November 2011, the net proceeds were used to redeem $1.6 bil-
lion aggregate principal amount of Verizon Communications notes and
$1.9 billion aggregate principal amount of telephone subsidiary debt.
The remaining net proceeds were used for the repayment of commercial
Cash Flows Used In Investing Activities
Capital Expenditures
Capital expenditures continue to be our primary use of capital resources
as they facilitate the introduction of new products and services, enhance
responsiveness to competitive challenges and increase the operating
efficiency and productivity of our networks.
Capital expenditures, including capitalized software, were as follows:
(dollars in millions)
Years Ended December 31, 2012 2011 2010
Verizon Wireless $ 8,857 $ 8,973 $ 8,438
Wireline 6,342 6,399 7,269
Other 976 872 751
$ 16,175 $ 16,244 $ 16,458
Total as a percentage of revenue 14.0% 14.7% 15.4%
Capital expenditures declined slightly at Verizon Wireless in 2012 com-
pared to 2011 due to the decreased investment in the capacity of our
wireless EV-DO network, partially offset by the increased build-out of our
4G LTE network. Capital expenditures declined slightly at Wireline due to
lower legacy spending requirements.
The increase in capital expenditures at Verizon Wireless during 2011 was
primarily due to the increased investment in the capacity of our wire-
less EV-DO network, as well as the build-out of our 4G LTE network. The
decrease in capital expenditures at Wireline during 2011 was primarily
due to capital expenditures in 2010 related to the local exchange busi-
nessandrelatedactivitiesthatwerespunofftoFrontier,aswellaslower
capitalexpendituresrelatedtothebuild-outofFiOS.
Acquisitions
During 2012, 2011 and 2010, we invested $3.9 billion, $0.2 billion and
$0.8 billion, respectively, in acquisitions of wireless licenses, net. During
2012, 2011 and 2010, we also invested $0.9 billion, $1.8 billion and $0.7
billion, respectively, in acquisitions of investments and businesses, net of
cash acquired.
• During 2012, we paid approximately $3.9 billion net to acquire wireless
licenses primarily to meet future LTE capacity needs and enable LTE
expansion.Additionally,during2012,weacquiredHUGHESTelematics,
aprovideroftelematicsservices,for$0.6billion.See“Acquisitionsand
Divestitures”foradditionaldetails.
• During April 2011, we paid approximately $1.4 billion for the equity of
Terremark, which was partially offset by $0.1 billion of cash acquired
(see“AcquisitionsandDivestitures”).See“Cash FlowsFromFinancing
Activities”belowregardingthedebtobligationsofTerremarkthatwere
repaidduringMay2011.Inaddition,during2011,weacquiredvarious
wireless licenses and markets as well as a provider of cloud software
technology for cash consideration that was not significant.
• On August 23, 2010, Verizon Wireless acquired the net assets and
relatedcustomersofsixoperatingmarketsinLouisianaandMississippi
in a transaction with AT&T Inc. for cash consideration of $0.2 billion.
Dispositions
During 2012, we received cash consideration that was not significant
relatedtothesaleofsomeofour700MHzlowerAandBblockspectrum
licenses.WeacquiredtheselicensesaspartofFCCAuction73in2008.
During 2010, we received cash proceeds of $2.6 billion in connection
with the sale of the Alltel Divestiture Markets (see“Acquisitions and
Divestitures”).
Other, net
During 2011, Other, net primarily included proceeds related to the sales
of long-term investments, which were not significant to our consolidated
statements of income.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued