AT&T Wireless 2006 Annual Report Download - page 63

2006 AT&T Annual Report : : 61
Consolidation Wireless Consolidated
For the year ended December 31, 2004 Wireline Wireless Directory Other and Elimination Elimination Results
Revenues from external customers $36,418 $19,565 $3,665 $650 $ — $(19,565) $40,733
Intersegment revenues 31 — 94 56 (181) — —
Total segment operating revenues 36,449 19,565 3,759 706 (181) (19,565) 40,733
Operations and support expenses 25,233 14,960 1,644 567 (176) (14,960) 27,268
Depreciation and amortization expenses 7,322 3,077 9 236 (3) (3,077) 7,564
Total segment operating expenses 32,555 18,037 1,653 803 (179) (18,037) 34,832
Segment operating income 3,894 1,528 2,106 (97) (2) (1,528) 5,901
Interest expense — 900 — — 1,023 (900) 1,023
Interest income — 12 — — 492 (12) 492
Equity in net income of affiliates — (415) — 873 — 415 873
Other income (expense) – net — (82) — — 922 82 922
Segment income before income taxes 3,894 143 2,106 776 389 (143) 7,165
American Tower Corp. Agreement
In August 2000, we reached an agreement with American
Tower Corp. (American Tower) under which we granted
American Tower the exclusive rights to lease space on a
number of our communications towers. In exchange, we
received a combination of cash and equity instruments as
complete prepayment of rent with the closing of each leasing
agreement. The value of the prepayments were recorded as
deferred revenue and recognized in income as revenue over
the life of the leases. The balance of deferred revenue was
$568 in 2006, $598 in 2005 and $628 in 2004.
NOTE 6. EQUITY METHOD INVESTMENTS
Investments in partnerships, joint ventures, including
AT&T Mobility, and less-than majority-owned subsidiaries
where we have significant influence are accounted for under
the equity method. Until the December 29, 2006 BellSouth
acquisition (see Note 2), we accounted for our 60% economic
interest in AT&T Mobility under the equity method since we
shared control equally with BellSouth, our 40% economic
partner. We had equal voting rights and representation on the
board of directors that controlled AT&T Mobility. As a result of
the BellSouth acquisition, AT&T Mobility became a wholly-
owned subsidiary of AT&T and is reported in our wireless
segment and our Consolidated Statements of Income.
AT&T Mobility The following table is a reconciliation
of our investments in and advances to AT&T Mobility as
presented on our Consolidated Balance Sheets:
2006 2005
Beginning of year $ 31,404 $33,687
Equity in net income 1,508 200
Other adjustments (32,912) (2,483)
End of year $ — $31,404
Undistributed earnings from AT&T Mobility were $4,219 prior
to the BellSouth acquisition at December 29, 2006, and
$2,711 at December 31, 2005. “Other adjustments” in 2006
primarily represents the consolidation of AT&T Mobility as a
wholly-owned subsidiary of AT&T as a result of the BellSouth
acquisition. “Other adjustments” in 2005 included the net
activity of $2,442 under our revolving credit agreement with
AT&T Mobility, reflecting a repayment of their shareholder loan
of $1,747 and a net repayment of their revolving credit
balance of $695 (see Note 14).
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at
December 31:
Lives
(years) 2006 2005
Land — $ 1,925 $ 1,169
Buildings 35-45 23,481 15,557
Central office equipment 3-10 63,997 57,254
Cable, wiring and conduit 10-50 64,483 55,858
Other equipment 5-15 33,448 12,111
Software 3-5 11,678 5,539
Under construction — 3,137 1,750
202,149 149,238
Accumulated depreciation
and amortization 107,553 90,511
Property, plant and
equipment – net $ 94,596 $ 58,727
Our depreciation expense was $8,874 in 2006, $7,372 in 2005
and $7,447 in 2004.
Certain facilities and equipment used in operations are
leased under operating or capital leases. Rental expenses
under operating leases were $869 for 2006, $473 for 2005
and $479 for 2004. At December 31, 2006, the future mini-
mum rental payments under noncancelable operating leases
for the years 2007 through 2011 were $1,961, $1,718, $1,488,
$1,295 and $1,087, with $6,747 due thereafter. Capital leases
were not significant.
During 2005, we had impairments in our wireline segment
of $349 on assets for which we do not believe we will recover
their value due to the acquisition of ATTC. The impairments
primarily consisted of $237 due to the write-down of out-of-
region assets to current market value and write-offs of $45
of collocation assets and $43 of software. The impairments
are reflected as an operating expense in the “Selling, general
and administrative” line on our Consolidated Statements
of Income.