AT&T Wireless 2007 Annual Report Download - page 47

2007 AT&T Annual Report
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• $316 related to the acquisition of Ingenio, a provider
of Pay Per Call search and directory solutions,
and Interwise, a provider of voice, Web and video
conferencing services.
• $190 to satisfy an obligation to Alaska Native Wireless,
LLC to acquire wireless spectrum and the acquisition
of an additional ownership interest in Cellular
Communications of Puerto Rico.
• $136 related to the acquisition of wireless and media
rights, intellectual property and other strategic assets.
In October 2007, we agreed to purchase spectrum licenses
in the 700 MHz frequency band from Aloha Partners, L.P.
for approximately $2,500. We closed this transaction in
February 2008. Additionally, we are an eligible bidder in
the FCC wireless spectrum auctions which began in
January 2008.
Net cash provided by investing activities for 2007 was
$2,663 and consisted of net proceeds of $1,594 from
dispositions of non-strategic assets, $1,033 from the sale of
marketable and equity securities and $36 related to other
activities. Proceeds from dispositions included the following:
• $1,137 from the sale of properties and other non-
strategic assets.
• $301 from the sale of spectrum to Clearwire Corporation,
which includes interest.
• $156 related to T-Mobile’s exercise of its option to
purchase an additional 10 MHz of spectrum in the
San Diego market, the sale of cost investments and
the sale of wireless towers.
To provide high-quality communications services to our
customers, we must make significant investments in property,
plant and equipment. The amount of capital investment is
influenced by demand for services and products, continued
growth and regulatory considerations. Capital expenditures in
the wireline segment, which represented approximately 77%
of our capital expenditures, increased 68% in 2007, reflecting
the acquisition of BellSouth. Our capital expenditures are
primarily for our wireline subsidiaries’ networks, our U-verse
services, merger-integration projects and support systems for
our long-distance service. Because of opportunities made
available by the continued changing regulatory environment
and our acquisitions of ATTC and BellSouth, we expect that
our capital expenditures for 2008, which include wireless
network expansion and U-verse services, will be in the
midteens as a percentage of consolidated revenue. We expect
to fund 2008 capital expenditures for our wireline and
wireless segments, including international operations, using
cash from operations and incremental borrowings depending
on interest rate levels and overall market conditions.
During 2007, we spent $3,745 in the wireless segment
primarily for Universal Mobile Telecommunications System/
High-Speed Packet Access (UMTS/HSPA) network expansion,
GSM/EDGE (Enhanced Data Rates for Global Evolution)
network capacity expansion and upgrades, as well as for IT
and other support systems for our wireless service. The
network capacity requirements and expansion of our UMTS/
HSPA wireless networks will continue to require substantial
amounts of capital through 2008. In 2008, our wireless capital
expenditures should be in the lower double-digit range as a
percent of our wireless revenues for the integration and
expansion of our networks and the installation of UMTS/HSPA
technology in a number of markets.
We spent approximately $2,500 on our U-verse services in
2007 and expect spending to be approximately $2,500 in 2008
for capital expenditures on our U-verse services for initial
network-related deployment costs. We expect to pass approxi-
mately 30 million living units by the end of 2010. Additional
customer activation capital expenditures are not included in
this capital spending forecast. We expect that the business
opportunities made available, specifically in the data/broad-
band area, will allow us to expand our products and services
(see “U-verse Services” discussed in “Expected Growth Areas”).
The other segment capital expenditures were less than
1.5% of total capital expenditures for 2007. Included in the
other segment are equity investments, which should be
self-funding as they are not direct AT&T operations; as well
as corporate, diversified business and Sterling operations,
which we expect to fund using cash from operations.
We expect to fund any advertising & publishing segment
capital expenditures using cash from operations.
Cash Used in or Provided by Financing Activities
We plan to fund our 2008 financing activities through a
combination of debt issuances and cash from operations.
Our financing activities include funding share repurchases
and the repayment of debt. We will continue to examine
opportunities to fund our activities by issuing debt at
favorable rates and with cash from the disposition of
certain other non-strategic investments.
On March 4, 2006, our Board of Directors authorized the
repurchase of up to 400 million shares of AT&T common
stock. During 2007, we repurchased 267 million shares at a
cost of $10,390. Share repurchases under this plan totaled
approximately 351 million shares at a cost of $13,068.
On December 10, 2007, our Board of Directors authorized
a new share repurchase plan of 400 million shares, which
replaces our previous share repurchase authorization.
This new authorization represents approximately 6.6 percent
of AT&T’s shares outstanding at December 31, 2007 and
expires at the end of 2009. We have repurchased, and intend
to continue to repurchase, a portion of the shares pursuant
to plans that comply with the requirements of Rule 10b5-1(c)
under the Securities Exchange Act of 1934. We will fund
our additional share repurchases through a combination
of cash from operations, borrowings dependent upon
market conditions, and cash from the disposition of certain
non-strategic investments.
We paid dividends of $8,743 in 2007, $5,153 in 2006 and
$4,256 in 2005, reflecting the issuance of additional shares
for the BellSouth and ATTC acquisitions and dividend increases.
In December 2007, our Board of Directors approved a
12.7% increase in the quarterly dividend from $0.355 to
$0.40 per share. This increase recognizes our strong growth
and positive outlook and follows a 6.8% dividend increase
approved by AT&T’s Board in December 2006. Dividends
declared by our Board of Directors totaled $1.465 per share
in 2007, $1.35 per share in 2006 and $1.30 per share in 2005.
Our dividend policy considers both the expectations and
requirements of stockholders, internal requirements of AT&T
and long-term growth opportunities. It is our intent to provide
the financial flexibility to allow our Board of Directors to
consider dividend growth and to recommend an increase in
dividends to be paid in future periods. All dividends remain
subject to approval by our Board of Directors.