Verizon Wireless 2012 Annual Report Download - page 46

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44
Spectrum Licenses
During the third quarter of 2012, after receiving the required regula-
tory approvals, Verizon Wireless completed the following previously
announced transactions in which we acquired wireless spectrum that
will be used to deploy additional fourth-generation (4G) Long Term
Evolution (LTE) capacity:
• Verizon Wireless acquired AWS spectrum in separate transactions with
SpectrumCoandCoxTMIWireless,LLCforwhichitpaidanaggregate
of $3.9 billion at the time of the closings. Verizon Wireless has also
recorded a liability of $0.4 billion related to a three-year service obliga-
tion to SpectrumCo’s members pursuant to commercial agreements
executed concurrently with the SpectrumCo transaction.
• Verizon Wireless completed license purchase and exchange transac-
tions with Leap Wireless, Savary Island Wireless, which is majority
owned by LeapWireless, and a subsidiary of T-Mobile. As a result of
these transactions, Verizon Wireless received an aggregate $2.6 billion
of AWS and PCS licenses at fair value and net cash proceeds of $0.2 bil-
lion,transferredcertainAWSlicensestoT-Mobileanda700megahertz
(MHz)lowerAblocklicensetoLeapWireless,andrecordedanimmate-
rial gain.
HUGHES Telematics, Inc.
OnJune1,2012,weagreedtoacquireHUGHESTelematicsforapproxi-
mately $12 per share in cash for a total acquisition price of $0.6 billion
andwecompletedtheacquisitiononJuly26,2012.Asaresultofthe
transaction, HUGHESTelematics became a wholly-owned subsidiary
of Verizon. The consolidated financial statements include the results of
HUGHESTelematics’operations fromthedatetheacquisition closed.
Uponclosing,werecordedapproximately$0.6billionofgoodwill,$0.1
billionofotherintangibles,andassumedthedebtobligationsofHUGHES
Telematics, which were approximately $0.1 billion as of the date of acqui-
sition, and which were repaid by Verizon. Had this acquisition been
completedonJanuary1,2012or2011,theresultsoftheacquiredopera-
tionsofHUGHESTelematicswouldnothavehadasignificantimpacton
the consolidated net income attributable to Verizon. The acquisition has
accelerated our ability to bring more telematics offerings to market for
existingandnewHUGHESTelematicsandVerizoncustomers.
TheacquisitionofHUGHESTelematicswasaccountedforasabusiness
combination under the acquisition method. The cost of the acquisition
was allocated to the assets and liabilities acquired based on their fair
values as of the close of the acquisition, with the excess amount being
recorded as goodwill.
Terremark Worldwide, Inc.
During April 2011, we acquired Terremark for $19 per share in cash.
Closing and other direct acquisition-related costs totaled approximately
$13millionafter-tax.Theacquisitionwascompletedviaa“short-form”
merger under Delaware law through which Terremark became a wholly
ownedsubsidiaryofVerizon.TheacquisitionenhancedVerizon’sofferings
to business and government customers globally.
Telephone Access Line Spin-off
OnJuly1,2010,afterreceivingregulatoryapproval,wecompletedthe
spin-off of the shares of a newly formed subsidiary of Verizon (Spinco) to
VerizonstockholdersandthemergerofSpincowithFrontier.Spincoheld
definedassetsandliabilitiesthatwereusedinVerizon’slocalexchange
businesses and related activities in 14 states. The total value of the trans-
action to Verizon and its stockholders was approximately $8.6 billion.
Alltel Divestiture Markets
As a condition of the regulatory approvals to complete the acquisition
ofAlltelCorporationinJanuary2009,VerizonWirelesswasrequiredto
divest overlapping properties in 105 operating markets in 24 states (Alltel
DivestitureMarkets).Duringthesecondquarterof2010,AT&TMobility
acquired 79 of the 105 Alltel Divestiture Markets, including licenses
and network assets, for approximately $2.4 billion in cash, and Atlantic
Tele-Network,Inc.acquiredtheremaining26AlltelDivestitureMarkets,
including licenses and network assets, for $0.2 billion in cash.
See Note 2 to the consolidated financial statements for additional infor-
mation relating to the above acquisitions and divestitures.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
aCquisitiOns and divestitures