Verizon Wireless 2014 Annual Report Download - page 28

26
Capital expenditures increased at Wireless in 2013 compared to 2012
in order to substantially complete the build-out of our 4G LTE network.
Capital expenditures declined at Wireline as a result of decreased legacy
spendingrequirementsandadeclineinspendingonourFiOSnetwork.
Acquisitions
During 2014, 2013 and 2012, we invested $0.4 billion, $0.6 billion and
$4.3 billion, respectively, in acquisitions of wireless licenses. During
2014, 2013 and 2012, we also invested $0.2 billion, $0.5 billion and
$0.9 billion, respectively, in acquisitions of investments and businesses,
net of cash acquired.
OnJanuary29,2015,theFCCcompletedanauctionof65MHzofspec-
trum, which it identied as the AWS-3 band. Verizon participated in that
auction, and was the high bidder on 181 spectrum licenses, for which we
will pay approximately $10.4 billion. During the fourth quarter of 2014,
we made a deposit of $0.9 billion related to our participation in this auc-
tion.OnFebruary13,2015,wemadeadownpaymentof$1.2billionfor
these spectrum licenses. Verizon has submitted an application for these
licenses and must complete payment for them in the rst quarter of
2015. During January 2015, we entered into a term loan agreement with
a major nancial institution, pursuant to which we expect to borrow $6.5
billion to pay for the spectrum licenses. The proceeds from the Tower
MonetizationTransaction,whichweexpecttoreceiveinthersthalfof
2015, will be used to repay the majority of the term loan outstanding.
See Note 2 to the consolidated nancial statements for additional infor-
mationregardingtheTowerMonetizationTransactionandNote8tothe
consolidated nancial statements for additional information regarding
the term loan agreement.
InFebruary2014,Verizonacquiredabusinessdedicatedtothedevelop-
ment of IP television for cash consideration that was not signicant.
During the fourth quarter of 2013, Verizon acquired an industry leader
in content delivery networks for $0.4 billion. Additionally, we acquired
a technology company for cash consideration that was not signicant.
During 2012, we paid approximately $4.3 billion 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 Note 2 to the consoli-
dated nancial statements for additional information.
Dispositions
During 2014, we received proceeds of $2.4 billion related to spectrum
license transactions and $0.1 billion related to the disposition of a non-
strategic Wireline business. See Note 2 to the consolidated nancial
statements for additional information.
During2013,wecompletedthesaleof700MHzlowerBblockspectrum
licenses and as a result, we received proceeds of $2.1 billion.
During 2012, we received $0.4 billion 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.
Other, net
FortheyearendedDecember31,2014,Other,netincludedthedeposit
of$0.9billionrelatedtoourparticipationintheFCCauctionofspectrum
in the AWS-3 band.
Cash Flows Provided By Operating Activities
Our primary source of funds continues to be cash generated from
operations, primarily from our Wireless segment. Net cash provided by
operating activities during 2014 decreased by $8.2 billion compared to
2013 primarily due to a $3.7 billion increase in income tax payments
due to the incremental pre-tax income attributable to Verizon included
inVerizon’sincomesincetheclosingoftheWirelessTransaction.Also
contributing to the decrease was a $2.3 billion increase in interest
payments primarily due to the incremental debt needed to fund
the Wireless Transaction as well as a $1.5 billion increase in pension
contributions. The decrease in Cash ows provided by operating activities
was partially oset by an increase in earnings at our Wireless segment.
OnFebruary 21, 2014,wecompletedtheWirelessTransactionwhich
providesfullaccesstothe cash owsofVerizonWireless.Havingfull
access to all the cash ows from our wireless business gives us the ability
to continue to invest in our networks and spectrum, meet evolving
customer requirements for products and services and take advantage of
new growth opportunities across our lines of business.
Net cash provided by operating activities during 2013 increased by $7.3
billion compared to 2012 primarily due to higher consolidated earnings,
lower pension contributions and improved working capital levels. The
increase in net cash provided by operating activities in 2013 was partially
oset by net distributions of $0.3 billion received from Vodafone Omnitel
in 2012.
Cash Flows Used In Investing Activities
Capital Expenditures
Capital expenditures continue to be a primary use of capital resources as
they facilitate the introduction of new products and services, enhance
responsiveness to competitive challenges and increase the operating
eciency and productivity of our networks.
Capital expenditures, including capitalized software, were as follows:
(dollars in millions)
Years Ended December 31, 2014 2013 2012
Wireless $ 10,515 $ 9,425 $ 8,857
Wireline 5,750 6,229 6,342
Other 926 950 976
$ 17,191 $ 16,604 $ 16,175
Total as a percentage of revenue 13.5% 13.8% 14.0%
Capital expenditures increased at Wireless in 2014 compared to
2013 in order to increase the capacity of our 4G LTE network. Capital
expenditures declined at Wireline as a result of decreased legacy
spending requirements.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued