AT&T Wireless 2006 Annual Report Download - page 64

62 : : 2006 AT&T Annual Report
Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
The following table presents summarized financial information
for AT&T Mobility at December 31 or for the year then ended:
2006 2005 2004
Income Statements
Operating revenues $37,506 $34,433 $19,565
Operating income 4,567 1,824 1,528
Net income 2,523 333 201
Balance Sheets
Current assets $ 7,196 $ 6,049
Noncurrent assets 90,438 73,270
Current liabilities 10,317 10,008
Noncurrent liabilities 26,318 24,333
Other Equity Method Investments Our investments in
equity affiliates include primarily international investments.
As of December 31, 2006, our investments in equity affiliates
included an 8.9% interest in Teléfonos de México, S.A. de C.V.
(Telmex), Mexico’s national telecommunications company, and
an 8.0% interest in América Móvil S.A. de C.V. (América Móvil),
primarily a wireless provider in Mexico, with telecommunica-
tions investments in the United States and Latin America. We
are a member of a consortium that holds all of the class AA
shares of Telmex stock, representing voting control of the
company. Another member of the consortium, Carso Global
Telecom, S.A. de C.V., has the right to appoint a majority of the
directors of Telmex. We also are a member of a consortium
that holds all of the class AA shares of América Móvil stock,
representing voting control of the company. Another member
of the consortium, Americas Telecom S.A. de C. V., has the
right to appoint a majority of the directors of América Móvil.
The following table is a reconciliation of our investments in
equity affiliates as presented on our Consolidated Balance Sheets:
2006 2005
Beginning of year $2,031 $1,798
Additional investments 5 6
Equity in net income of affiliates 535 409
Dividends received (97) (158)
Currency translation adjustments (22) 66
Dispositions — (228)
Other adjustments (457) 138
End of year $1,995 $2,031
Undistributed earnings from equity affiliates were $2,038 and
$1,615 at December 31, 2006 and 2005. The currency
translation adjustment for 2006 and 2005 primarily reflects
the effect of exchange rate fluctuations on our investments in
Telmex and América Móvil. “Other adjustments” for 2006
consisted primarily of $375 representing the consolidation of
the Cellular Communications of Puerto Rico, YPC and other
domestic wireless investments as wholly-owned subsidiaries
of AT&T as a result of the BellSouth acquisition and $75
representing purchase accounting revaluation of equity
investments in ATTC.
Dispositions for 2005 primarily reflect the dissolution of a
wireless partnership. “Other adjustments” for 2005 include
equity investment balances at December 31, 2005, acquired
as part of our acquisition of ATTC totaling $135, which
includes our 49% economic interest in Alestra S. de R.L. de
C.V., a telecommunications company in Mexico.
The fair value of our investment in Telmex, based on the
equivalent value of Telmex L shares at December 31, 2006,
was $2,543. The fair value of our investment in América Móvil,
based on the equivalent value of América Móvil L shares at
December 31, 2006, was $6,488.
NOTE 7. DEBT
Long-term debt of AT&T and its subsidiaries, including interest
rates and maturities, is summarized as follows at December 31:
2006 2005
Notes and debentures
Interest Rates Maturities
4.13% – 5.98% 2006 – 2054 $18,571 $12,284
6.00% – 7.88% 2006 – 2097 24,685 12,700
8.13% – 9.75% 2006 – 2031 8,626 4,417
Other 141 3
Fair value of interest rate swaps (80) (16)
51,943 29,388
Unamortized premium, net of discount 2,323 639
Total notes and debentures 54,266 30,027
Capitalized leases 211 115
Total long-term debt, including
current maturities 54,477 30,142
Current maturities of long-term debt (4,414) (4,027)
Total long-term debt $50,063 $26,115
On December 29, 2006, we assumed $28,321 in long-term
debt and capital leases related to our acquisition of BellSouth
(see Note 2). The debt of AT&T Mobility was included in the
amount assumed now that it is a subsidiary of AT&T. BellSouth’s
and AT&T Mobility’s long-term debt included both fixed and
floating interest rates with a weighted-average rate of 6.7%
(ranging from 4.2% to 8.8%) and had maturities ranging from
2007 to 2097. Included in our “Total notes and debentures”
balance in the table above was the face value of acquired debt
from BellSouth and AT&T Mobility of $25,234, which had a
carrying amount of $26,968 at December 31, 2006.
Included in the table above at December 31, 2006, was
$1,734 representing the remaining excess of the fair value over
the recorded value of debt in connection with the acquisition
of BellSouth and AT&T Mobility. The excess is amortized over
the remaining lives of the underlying debt obligations.
We have debt instruments that may require us to repur-
chase the debt or which may alter the interest rate associated
with that debt. We have two issues of $1,000 Puttable Reset
Securities (PURS) at 4.2% maturing in 2021 with an annual put
option by the holder. If the holders of our PURS do not require
us to repurchase the securities, the interest rate will be reset
based on current market conditions. Since these securities can
be put to us annually, the balance is included in current
maturities of long-term debt in our balance sheet.
On November 18, 2005, we consolidated $8,293 in long-
term debt, including capital leases, related to our acquisition
of ATTC. ATTC’s debt included both fixed and floating interest
rates with a weighted-average rate of 8.6% (ranging from
3.87% to 9.75%) and had maturities ranging from 2006 to
2054. Included in our “Total notes and debentures” balance
in the table above was the face value of acquired debt from
ATTC of $6,910, which had a carrying amount of $7,694 at
December 31, 2005.