Verizon Wireless 2014 Annual Report Download - page 18

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Other income and (expense), net changed unfavorably during 2014 com-
pared to the similar period in 2013 primarily due to early debt redemption
costsof$1.4billionincurredin2014(see“OtherItems”).
Other income and (expense), net changed favorably during 2013 com-
pared to 2012 primarily due to fees of $1.1 billion incurred in 2012 related
to the early redemption of debt, partially oset by $0.2 billion of fees
incurred during the fourth quarter of 2013 as a result of the termination
of a bridge credit agreement upon the eectiveness of a term loan agree-
ment(see“OtherItems”).
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Interest Expense (dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Total interest costs on debt balances $ 5,291 $ 3,421 $ 2,977 $ 1,870 54.7 % $ 444 14.9 %
Less Capitalized interest costs 376 754 406 (378) (50.1) 348 85.7
Total $ 4,915 $ 2,667 $ 2,571 $ 2,248 84.3 $ 96 3.7
Average debt outstanding $ 108,461 $ 65,959 $ 52,949
Eective interest rate 4.9% 5.2% 5.6%
Provision (Benet) for Income Taxes (dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Provision (Benet) for income taxes $ 3,314 $ 5,730 $ (660) $ (2,416) (42.2)% $ 6,390 nm
Eective income tax rate 21.7 % 19.6 % (6.7)%
nm - not meaningful
Total interest costs on debt balances increased during 2014 compared
to 2013 primarily due to the issuance of xed and oating rate notes
tonancetheWirelessTransaction(see“AcquisitionsandDivestitures”)
resulting in an increase in average debt and a corresponding increase
in interest expense, partially oset by a lower eective interest rate (see
“ConsolidatedFinancialCondition”).Capitalizedinterestcostswerelower
in 2014 primarily due to a decrease in wireless licenses that are currently
under development, which was due to the deployment of AWS licenses
for commercial service during 2014.
The eective income tax rate is calculated by dividing the provision for
income taxes by income before the provision for income taxes. The eec-
tive income tax rate for 2014 was 21.7% compared to 19.6% for 2013. The
increase in the eective income tax rate was primarily due to additional
income taxes on the incremental income from the Wireless Transaction
completedonFebruary21,2014andwaspartiallyosetbytheutiliza-
Other Consolidated Results
Equity in Earnings of Unconsolidated Businesses
Equity in earnings of unconsolidated businesses increased $1.6 billion during 2014 compared to the similar period in 2013 primarily due to the gain
of $1.9 billion recorded on the sale of our interest in Vodafone Omnitel N.V. (Vodafone Omnitel) during the rst quarter of 2014, which was part of the
consideration for the Wireless Transaction.
Equity in earnings of unconsolidated businesses decreased $0.2 billion, or 56.2%, in 2013 compared to 2012 primarily due to lower earnings from
operations at Vodafone Omnitel. The decrease during 2013 was partially oset by an immaterial gain recorded by Verizon Wireless upon obtaining
control of previously unconsolidated wireless partnerships, which were previously accounted for under the equity method and are now consolidated.
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, 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Interest income $ 108 $ 64 $ 57 $ 44 68.8 % $ 7 12.3 %
Other, net (1,302) (230) (1,073) (1,072) nm 843 (78.6)
Total $ (1,194) $ (166) $ (1,016) $ (1,028) nm $ 850 (83.7)
nm - not meaningful
Total interest costs on debt balances increased during 2013 compared to
2012 primarily due to the issuance of $49.0 billion of xed and oating
ratenotestofinance theWirelessTransaction (see“Acquisitionsand
Divestitures”)resultinginanincreaseinaveragedebtaswellasanincre-
mental increase in interest expense of $0.7 billion, partially oset by a
lowereffectiveinterestrate(see“Consolidated FinancialCondition”).
Capitalized interest costs were higher in 2013 primarily due to increases
in wireless licenses that are currently under development.
tion of certain tax credits in connection with the Omnitel Transaction in
2014 and the eective income tax rate impact of lower income before
income taxes due to severance, pension and benet charges recorded
in 2014 compared to severance, pension and benet credits recorded
in 2013. The decrease in the provision for income taxes was primarily
due to lower income before income taxes due to severance, pension and
benet charges recorded in 2014 compared to severance, pension and
benet credits recorded in 2013.