Verizon Wireless 2013 Annual Report Download - page 35

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transferbyAT&TtoVerizonWirelessofAWS(10MHz)licensesincertain
markets in the western United States. Verizon Wireless also sold certain
lower 700 MHz B block spectrum licenses to an investment rm for
a payment of $0.2 billion. As a result, we received $0.5 billion of AWS
licenses at fair value and we recorded a pre-tax gain of approximately
$0.3 billion in Selling, general and administrative expense on our con-
solidated statement of income for the year ended December 31, 2013.
• During the fourth quarter of 2013, we entered into license exchange
agreements with T-Mobile USA to exchange certain AWS and PCS
licenses. These non-cash exchanges, which are subject to approval by
theFCCandothercustomaryclosingconditions,areexpectedtoclose
in the rst half of 2014. The exchange includes a number of swaps that
we expect will result in more ecient use of the AWS and PCS bands.
As a result of these agreements, $0.9 billion of Wireless licenses are clas-
sied as held for sale and included in Prepaid expenses and other on
our consolidated balance sheet at December 31, 2013. Upon comple-
tion of the transaction, we expect to record an immaterial gain.
• SubsequenttothetransactionwithT-MobileUSAinthefourthquarter
of 2013, on January 6, 2014, we announced two agreements with
T-MobileUSAwithrespecttoourremaining700MHzAblockspectrum
licenses. Under one agreement, we will sell certain of these licenses to
T-Mobile USA in exchange for cash consideration of approximately
$2.4 billion, and under the second agreement we will exchange the
remainder of these licenses for AWS and PCS spectrum licenses. These
transactions are subject to the approval of the FCC as well as other
customary closing conditions. These transactions are expected to close
in the middle of 2014.
Other
During 2013, we acquired various other wireless licenses and markets
for cash consideration that was not signicant. Additionally, we obtained
control of previously unconsolidated wireless partnerships, which were
previously accounted for under the equity method and are now consoli-
dated, which resulted in an immaterial gain. We recorded $0.2 billion of
goodwill as a result of these transactions.
Wireline
HUGHES Telematics, Inc.
During July 2012, we acquired HUGHES Telematics for approximately $12
per share in cash for a total acquisition price of $0.6 billion. As a result
of the transaction, HUGHES Telematics became a wholly-owned subsid-
iary of Verizon. The consolidated nancial 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 signicant impact on
the consolidated net income attributable to Verizon. The acquisition has
accelerated our ability to bring more telematics oerings to market for
existing and new 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 mil-
lion after-tax. The acquisition was completed via a tender oer followed
bya“short-form”mergerunderDelawarelawthroughwhichTerremark
became a wholly-owned subsidiary of Verizon. The acquisition enhanced
Verizon’soeringstobusinessandgovernmentcustomersglobally.
Other
During the fourth quarter of 2013, Verizon acquired an industry leader in
content delivery networks for $0.4 billion. We expect the acquisition will
increase our ability to meet the growing demand for online digital media
content. Upon closing, we recorded $0.3 billion of goodwill. Additionally,
we acquired a technology and television cloud company for cash con-
sideration that was not signicant. The consolidated nancial statements
include the results of the operations of each of these acquisitions from
the date each acquisition closed.
On January 21, 2014, Verizon announced an agreement to acquire a busi-
ness dedicated to the development of cloud television products and
services for cash consideration that was not signicant. The transaction,
whichwascompletedinFebruary2014,isexpectedtoacceleratethe
availability of next-generation video services.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued