AT&T Wireless 2011 Annual Report Download - page 66

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
64 AT&T Inc.
including 12 MHz of Lower 700 MHz D and E block spectrum
covering more than 70 million people in five of the top 15
metropolitan areas and 6 MHz of Lower 700 MHz D block
spectrum covering more than 230 million people across the
rest of the United States. We plan to deploy this spectrum as
supplemental downlink capacity, using carrier aggregation
technology once compatible handsets and network equipment
are developed.
Purchase of Wireless Partnership Minority Interest In
July 2011, we completed the acquisition of Convergys
Corporation’s minority interests in the Cincinnati SMSA
Limited Partnership and an associated cell tower holding
company for approximately $320 in cash.
Wireless Properties Transactions In June 2010, we
acquired certain wireless properties, including FCC licenses
and network assets, from Verizon Wireless for $2,376 in cash.
The assets primarily represent former Alltel Wireless assets
and served approximately 1.6 million subscribers in 79 service
areas across 18 states. The fair value of the acquired net
assets of $1,439 included $368 of property, plant and
equipment, $937 of goodwill, $765 of FCC licenses, and
$224 of customer lists and other intangible assets.
Centennial In December 2010, we completed our
acquisition accounting of Centennial Communications
Corporation (Centennial), which included net assets of
$1,518 in goodwill, $655 in FCC licenses, and $449 in
customer lists and other intangible assets.
Other Acquisitions We acquired $33 of wireless spectrum
in 2011 and $265 in 2010 from various companies, primarily
in support of our ongoing network enhancement efforts.
In 2010, we also acquired a home monitoring platform
developer and other entities for $86 in cash.
Dispositions
Tender of Telmex Shares In August 2011, the Board of
Directors of América Móvil, S.A. de C.V. (América Móvil)
approved a tender offer for the remaining outstanding shares
of Télefonos de México, S.A. de C.V. (Telmex) that were not
already owned by América Móvil. We tendered all of our
shares of Telmex for $1,197 of cash. Telmex was accounted
for as an equity method investment (see Note 7).
Sale of Sterling Operations In May 2010, we entered into
an agreement to sell our Sterling Commerce Inc. (Sterling)
subsidiary and changed our reporting for Sterling to
discontinued operations. In August 2010, we completed the
sale and received net proceeds of approximately $1,400.
During the second quarter of 2010, we accounted for Sterling
as a discontinued operation. We determined that the cash
inflows under the transition services agreement and our cash
outflows under the enterprise license agreement will not
constitute significant continuing involvement with Sterling’s
operations after the sale. We have reclassified Sterling’s
operating results, for all historic periods, to income from
discontinued operations in the accompanying consolidated
statements of income.
reporting units calculated under a market multiple approach
as well as a discounted cash flow approach. FCC licenses
are tested for impairment on an aggregate basis, consistent
with the management of the business on a national scope.
We perform our test of the fair values of FCC licenses using
a discounted cash flow model. Brand names are tested by
comparing the book value to a fair value calculated using a
discounted cash flow approach on a presumed royalty rate
derived from the revenues related to the brand name. The fair
value measurements used are considered Level 3 under the
Fair Value and Disclosure framework (see Note 9).
Intangible assets that have finite useful lives are amortized
over their useful lives, a weighted average of 8.3 years
(7.9 years for customer lists and relationships and 11.2 years
for other). Customer lists and relationships are amortized using
primarily the sum-of-the-months-digits method of amortization
over the expected period in which those relationships are
expected to contribute to our future cash flows. The remaining
finite-lived intangible assets are generally amortized using the
straight-line method of amortization.
Advertising Costs We expense advertising costs for
advertising products and services or for promoting our
corporate image as we incur them (see Note 14).
Foreign Currency Translation We are exposed to foreign
currency exchange risk through our foreign affiliates and equity
investments in foreign companies. Our foreign subsidiaries and
foreign investments generally report their earnings in their
local currencies. We translate our share of their foreign assets
and liabilities at exchange rates in effect at the balance sheet
dates. We translate our share of their revenues and expenses
using average rates during the year. The resulting foreign
currency translation adjustments are recorded as a separate
component of accumulated other comprehensive income
(accumulated OCI) in the accompanying consolidated balance
sheets. We do not hedge foreign currency translation risk in
the net assets and income we report from these sources.
However, we do hedge a large portion of the foreign currency
exchange risk involved in anticipation of highly probable
foreign currency-denominated transactions, which we explain
further in our discussion of our methods of managing our
foreign currency risk (see Note 9).
Pension and Other Postretirement Benefits See Note 11
for a comprehensive discussion of our pension and
postretirement benefit expense, including a discussion of
the actuarial assumptions and our policy for recognizing
the associated gains and losses.
NOTE 2. ACQUISITIONS, DISPOSITIONS AND
OTHER ADJUSTMENTS
Acquisitions
Qualcomm Spectrum Purchase In December 2011, we
completed our purchase of spectrum licenses in the Lower
700 MHz frequency band from Qualcomm Incorporated
(Qualcomm) for approximately $1,925 in cash. The spectrum
covers more than 300 million people total nationwide,