AT&T Wireless 2012 Annual Report Download - page 35

AT&T Inc. | 33
managed networking to business customers. Additionally, we
receive commissions on sales of satellite television services
offered through our agency arrangements. The Wireline
segment results have been reclassified to exclude the
operating results of the home monitoring business moved to
our Other segment and to include the operating results of
customer information services, which were previously
reported in our Other segment’s results.
The Advertising Solutions segment included our directory
operations, which published Yellow and White Pages
directories and sold directory advertising, Internet-based
advertising and local search through May 8, 2012 (see Note 4).
The Other segment accounted for less than 1% of our
2012 and 2011 total segment operating revenues.
Since segment operating expenses exceeded revenue in
both years, a segment loss was incurred in both 2012
and 2011. This segment includes our portion of the results
from our international equity investments, our 47 percent
equity interest in YP Holdings, and costs to support
corporate-driven activities and operations. Also included
in the Other segment are impacts of corporate-wide
decisions for which the individual operating segments are
not being evaluated. The Other segment results have been
reclassified to exclude the operating results of customer
information services, which are now reported in our
Wireline segment’s results.
The following sections discuss our operating results by
segment. Operations and support expenses include bad debt
expense; advertising costs; sales and marketing functions,
including customer service centers; real estate costs,
including maintenance and utilities on all buildings; credit
and collection functions; and corporate support costs, such
as finance, legal, human resources and external affairs.
Pension and postretirement service costs, net of amounts
capitalized as part of construction labor, are also included to
the extent that they are associated with these employees.
Our Wireless and Wireline segments also include certain
network planning and engineering expenses, information
technology, our repair technicians and repair services, and
property taxes as operations and support expenses.
We discuss capital expenditures for each segment in
“Liquidity and Capital Resources.”
Income from discontinued operations, net of tax In the
third quarter of 2010, we sold our subsidiary Sterling
Commerce Inc. (Sterling). Income from discontinued
operations in 2010 was $779, including a gain of $769.
Segment Results
Our segments are strategic business units that offer different
products and services over various technology platforms and
are managed accordingly. Our operating segment results
presented in Note 3 and discussed below for each segment
follow our internal management reporting. We analyze our
operating segments based on segment income before income
taxes. We make our capital allocation decisions based on
our strategic direction of the business, needs of the network
(wireless or wireline) providing services and other assets
needed to provide emerging services to our customers.
Actuarial gains and losses from pension and other
postemployment benefits, interest expense and other income
(expense) – net, are managed only on a total company basis
and are, accordingly, reflected only in consolidated results.
Therefore, these items are not included in each segment’s
percentage of our total segment income. Each segment’s
percentage of total segment operating revenue and income
calculations is derived from our segment results table in
Note 3, and may total more than 100 percent due to losses
in one or more segments. At December 31, 2012, we had
three reportable segments: (1) Wireless, (2) Wireline and
(3) Other. Our operating results prior to May 9, 2012, also
included Advertising Solutions, which was a reportable
segment. On May 8, 2012, we completed the sale of our
Advertising Solutions segment and received a 47 percent
equity interest in the new entity YP Holdings (see Note 4).
The Wireless segment accounted for approximately 52% of
our 2012 total segment operating revenues as compared to
50% in 2011 and 70% of our 2012 total segment income as
compared to 96% in 2011. This segment uses our nationwide
network to provide consumer and business customers with
wireless voice and advanced data communications services.
This segment includes our portion of the results from our
mobile payment joint venture ISIS, which is accounted for
as an equity investment.
The Wireline segment accounted for approximately 47% of
our total segment operating revenues in both 2012 and 2011
and 30% of our 2012 total segment income as compared to
44% in 2011. This segment uses our regional, national and
global network to provide consumer and business customers
with landline voice and data communications services,
U-verse high-speed broadband, video, voice services, and