AT&T Wireless 2012 Annual Report Download - page 50

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
48 | AT&T Inc.
working terms for these mobility employees are structured
on a regional basis and one regional contract for 20,000
employees expired during February 2013. Contracts
covering approximately 30,000 non-mobility employees
will expire during 2013, including approximately 20,000
wireline employees in our five-state Southwest region.
On February 6, 2013, we announced a tentative agreement
with the CWA covering the wireline employees in our
Southwest region; this agreement is subject to ratification
by these employees. After expiration of the current
agreements, work stoppages or labor disruptions may
occur in the absence of new contracts or other agreements
being reached.
Environmental We are subject from time to time to judicial
and administrative proceedings brought by various
governmental authorities under federal, state or local
environmental laws. We reference in our Forms 10-Q and
10-K certain environmental proceedings that could result in
monetary sanctions (exclusive of interest and costs) of one
hundred thousand dollars or more. However, we do not
believe that any of those currently pending will have a
material adverse effect on our results of operations.
LIQUIDITY AND CAPITAL RESOURCES
We had $4,868 in cash and cash equivalents available at
December 31, 2012. Cash and cash equivalents included cash
of $482 and money market funds and other cash equivalents
of $4,386. Cash and cash equivalents increased $1,823 since
December 31, 2011. During 2012, cash inflows were primarily
provided by cash receipts from operations, a net increase in
our long-term debt and cash received from the sale of our
Advertising Solutions segment. These inflows were largely
offset by cash used to meet the needs of the business,
including but not limited to, payment of operating expenses,
funding capital expenditures, dividends to stockholders, stock
repurchases and the acquisition of wireless spectrum.
We discuss many of these factors in detail below.
Cash Provided by or Used in Operating Activities
During 2012, cash provided by operating activities was
$39,176, compared to $34,743 in 2011. Higher operating
cash flows in 2012 are due to non-recurring payments made
in the prior year, including a $3,000 merger breakup fee to
Deutsche Telekom AG (Deutsche Telekom) and a contribution
to our pension plan of $1,000, as well as improvements in
inventory and working capital management during 2012.
During 2011, cash provided by operating activities was
$34,743 compared to $35,222 in 2010. Our lower operating
cash flows reflected the payment of $3,000 cash to Deutsche
Telekom and a contribution to our pension plan of $1,000
partially offset by decreased tax payments of $3,506.
Operating cash in 2011 was also positively affected by our
decision to pay approximately $2,500 of retiree postretirement
expenses from plan assets, as opposed to our prior-year
election to pay these out of corporate funds.
expand our wireline IP broadband network to additional
residential and small-business customer locations to cover
approximately 75 percent of all such customer locations
in our 22-state wireline service area by year-end 2015.
This project is intended to support new revenue opportunities
in four key areas: wireless, strategic network services,
network managed (“cloud”) services and security as well
as continued growth in existing wireless, U-verse and
IP-related business services. We expect capital expenditures
in the $21,000 range for 2013, and 2014 and 2015 to
each be approximately $22,000, and then decrease to
pre-Project VIP levels.
Atlantic Tele-Network, Inc. Transaction On January 22, 2013,
we announced an agreement to acquire Atlantic Tele-
Network, Inc.’s (ATNI) U.S. retail wireless operations, operated
under the Alltel brand, for $780 in cash. Under the terms of
the agreement, we will acquire wireless properties, including
licenses, network assets, retail stores and approximately
585,000 subscribers. The transaction is subject to review
by the FCC and the Department of Justice (DOJ) and to
other customary closing conditions and is expected to close
in the second half of 2013.
Spectrum Acquisitions On January 24, 2013, we acquired
NextWave Wireless Inc. (NextWave), which holds wireless
licenses in the Wireless Communication Services (WCS)
and Advanced Wireless Service (AWS) bands. We acquired
all the equity and purchased a portion of the debt of
NextWave for $600. Certain of NextWave’s assets were
distributed to the holders of its debt in redemption of the
remainder of that debt. During January 2013, we have also
closed approximately $400 of other wireless spectrum
acquisitions from various companies.
On January 25, 2013, we announced an agreement to
acquire spectrum in the 700 MHz B band from Verizon
Wireless for $1,900 in cash and an assignment of AWS
spectrum licenses in five markets. The 700 MHz licenses to
be acquired by AT&T cover 42 million people in 18 states.
The transaction is subject to review by the FCC and DOJ.
We expect to close the transaction in the second half of 2013.
Labor Contracts As of January 31, 2013, we employed
approximately 242,000 persons. Approximately 55 percent
of our employees are represented by the Communications
Workers of America (CWA), the International Brotherhood
of Electrical Workers or other unions. Contracts covering
approximately 77,000 (as of December 31, 2012) employees
expired during 2012 and we have reached new contracts
covering approximately 57,000 of those employees.
Contracts covering wireline employees in California,
Connecticut and Nevada expired in April 2012 and remain
subject to negotiation. In addition, during 2012, we entered
into a new national four-year contract covering only benefits
with the approximately 40,000 employees in our mobility
business; contracts covering wages and other non-benefit