AT&T Wireless 2009 Annual Report Download - page 36

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
34 AT&T 09 AR
Dobson Acquisition
In November 2007, we acquired Dobson Communications
Corporation (Dobson). Dobson marketed wireless services
under the Cellular One brand and had provided roaming
services to AT&T subsidiaries since 1990. Dobson had
1.7 million subscribers across 17 states, mostly in rural
and suburban areas. Dobson was incorporated into our
wireless operations subsequent to its acquisition.
Wireless Customer and Operating Trends
As of December 31, 2009, we served 85.1 million wireless
customers, compared to 77.0 million at December 31, 2008,
and 70.1 million at December 31, 2007. Approximately 59%
of our wireless customer net additions in 2009 were postpaid
customer additions which were lower than the impact in the
prior year, as we saw a significant increase in gross and net
additions in our reseller customer business in 2009. Sales of
emerging devices, such as netbooks and eReaders, are largely
included in our reseller customer base. We expect continued
growth in sales of emerging devices. Improvement in our
postpaid churn levels since 2007 contributed to our net
additions and retail customer growth in 2009 and 2008.
This improvement was attributable to network enhancements,
attractive products and services offerings, including Apple
iPhone, customer service improvements, and continued high
levels of advertising.
Gross customer additions were 21.4 million in 2009 and
2008. Postpaid customer gross additions have continued
to increase due to attractive plan offerings and exclusive
product offerings such as Apple iPhone, and unique quick
messaging devices.
Centennial Acquisition
In November 2009, we acquired Centennial Communications,
Corp. (Centennial), a regional provider of wireless and
wired communications services with approximately 865,000
customers as of December 31, 2009, and its operations
have been included in our consolidated results since the
acquisition date.
Wireless Properties Transactions
In May 2009, we announced a definitive agreement to
acquire certain wireless assets from Verizon Wireless (VZ)
for approximately $2,350 in cash. The assets primarily
represent former Alltel Wireless assets. We will acquire
wireless properties, including licenses and network assets,
serving approximately 1.5 million subscribers in 79 service
areas across 18 states. In October 2009, the Department
of Justice (DOJ) cleared our acquisition of Centennial,
subject to the DOJ’s condition that we divest Centennial’s
operations in eight service areas in Louisiana and Mississippi.
We are in the process of finalizing definitive agreements and
seeking regulatory approvals to sell all eight Centennial
service areas ultimately identified in that ruling. We anticipate
we will close the sales during the first half of 2010. As of
December 31, 2009, the fair value of the assets subject
to the sale, net of related liabilities, was $282. Since the
properties we will acquire use a different network technology
than our Global System for Mobile Communication (GSM)
technology, we expect to incur additional costs to convert
that network and subscriber handsets to our GSM technology.
Wireless
Segment Results
Percent Change
2009 vs. 2008 vs.
2009 2008 2007 2008 2007
Segment operating revenues
Service $48,657 $44,410 $38,678 9.6% 14.8%
Equipment 4,940 4,925 4,006 0.3 22.9
Total Segment Operating Revenues 53,597 49,335 42,684 8.6 15.6
Segment operating expenses
Operations and support 34,561 32,481 28,585 6.4 13.6
Depreciation and amortization 5,765 5,770 7,079 (0.1) (18.5)
Total Segment Operating Expenses 40,326 38,251 35,664 5.4 7.3
Segment Operating Income 13,271 11,084 7,020 19.7 57.9
Equity in Net Income of Affiliates 9 6 16 50.0 (62.5)
Segment Income $13,280 $11,090 $ 7,036 19.7% 57.6%