Verizon Wireless 2014 Annual Report Download - page 51

49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Tower Monetization Transaction
On February 5, 2015, we announced an agreement with American Tower
Corporation (American Tower) pursuant to which American Tower will
have the exclusive rights to lease and operate over 11,300 of our wireless
towers for an upfront payment of $5.0 billion. Under the terms of the
leases, American Tower will have exclusive rights to lease and operate
the towers over an average term of approximately 28 years. As part of
this transaction, we will also sell 165 towers for $0.1 billion. We will sub-
lease capacity on the towers from American Tower for a minimum of 10
years at current market rates, with options to renew. As the leases expire,
American Tower will have xed-price purchase options to acquire these
towers based on their anticipated fair market values at the end of the
lease terms. We plan to account for the upfront payment primarily as pre-
paid rent and a portion as a nancing obligation. This transaction, which
is subject to customary closing conditions, is expected to close during
the rst half of 2015.
Other
During 2014 and 2013, we acquired various other wireless licenses and
markets for cash consideration that was not signicant. Additionally,
during 2013, we obtained control of previously unconsolidated wire-
less partnerships, which were previously accounted for under the
equity method and are now consolidated, which resulted in an imma-
terial gain. In 2013, we recorded $0.2 billion of goodwill as a result of
these transactions.
During 2012, we acquired various other wireless licenses and markets for
cash consideration that was not signicant and recorded $0.2 billion of
goodwill as a result of these transactions.
Wireline
Access Line Sale
On February 5, 2015, we announced that we have entered into a deni-
tive agreement with Frontier Communications Corporation (Frontier)
pursuant to which Verizon will sell its local exchange business and related
landline activities in California, Florida, and Texas, including FiOS Internet
and Video customers, switched and special access lines and high-speed
Internet service and long distance voice accounts in these three states
for approximately $10.5 billion. The transaction, which includes the
acquisition by Frontier of the equity interests of Verizon’s incumbent local
exchange carriers (ILECs) in California, Florida and Texas, does not involve
any assets or liabilities of Verizon Wireless. The assets and liabilities that
will be sold are currently included in Verizon’s continuing operations. As
part of the transaction, Frontier will assume $0.6 billion of indebtedness
from Verizon. The transaction is subject to the satisfaction of certain
closing conditions including, among others, receipt of state and federal
telecommunications regulatory approvals, and we expect this transac-
tion to close during the rst half of 2016.
The transaction will result in Frontier acquiring approximately 1.5 mil-
lion FiOS Internet subscribers, 1.2 million FiOS Video subscribers and the
related ILEC businesses from Verizon. This business generated revenues
of approximately $5.4 billion, excluding revenue with aliates, for Verizon
in 2013, which is the most recent year for which audited stand-alone
nancial statements are currently available.
HUGHES Telematics, Inc.
During July 2012, we acquired HUGHES Telematics, Inc. (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 subsidiary 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 acquisition, and which were repaid by Verizon.
Had this acquisition been completed on January 1, 2012, the results of
the acquired operations of HUGHES Telematics would not have had a sig-
nicant impact on the consolidated net income attributable to Verizon.
The acquisition has accelerated our ability to bring more telematics oer-
ings 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.
Other
On July 1, 2014, we sold a non-strategic Wireline business, which provides
communications solutions to a variety of government agencies for net
cash proceeds of $0.1 billion and recorded an immaterial gain.
Other
On October 7, 2014, Redbox Instant by Verizon, a venture between
Verizon and Redbox Automated Retail, LLC (Redbox), a wholly-owned
subsidiary of Outerwall Inc., ceased providing service to its customers. In
accordance with an agreement between the parties, Redbox withdrew
from the venture on October 20, 2014 and Verizon wound down and dis-
solved the venture during the fourth quarter of 2014. As a result of the
termination of the venture, we recorded a pre-tax loss of $0.1 billion in
the fourth quarter of 2014.
During February 2014, Verizon acquired a business dedicated to the
development of Internet Protocol (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. Upon closing, we recorded
$0.3 billion of goodwill. Additionally, we acquired a technology company
for cash consideration that was not signicant. The consolidated nancial
statements include the results of the operations of each of these acquisi-
tions from the date each acquisition closed.