AT&T Wireless 2014 Annual Report Download - page 76

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
74 | AT&T INC.
No customer accounted for more than 10% of consolidated
revenues in 2014, 2013 or 2012.
Labor Contracts As of January 31, 2015, we employed
approximately 253,000 persons. Approximately 53 percent
of our employees are represented by the Communications
Workers of America, the International Brotherhood of
Electrical Workers or other unions. Contracts covering
approximately 41,000 non-Mobility employees will expire
during 2015, including approximately 12,000 traditional
wireline employees in our five-state Midwest region and
24,000 in our nine-state Southeast region. After expiration
of the current agreements, work stoppages or labor
disruptions may occur in the absence of new contracts
or other agreements being reached.
NOTE 16. SALES OF EQUIPMENT INSTALLMENT RECEIVABLES
We offer our customers the option to purchase certain
wireless devices in installments over a period of up to
30 months, with the right to trade in the original equipment
for a new device within a set period and have the remaining
unpaid balance satisfied. As of December 31, 2014 and
2013, gross equipment installment receivables of $4,265
and $921 were included on our consolidated balance
sheets, of which $2,514 and $606 are notes receivable
that are included in “Accounts receivable, net.”
On June 27, 2014, we entered into uncommitted agreements
pertaining to the sale of equipment installment receivables
and related security with Citibank, N.A. and various other
relationship banks as purchasers (collectively, the Purchasers)
with a funding amount not expected to exceed $2,000 at
any given time. Under the agreement, we may transfer
the receivables to the Purchasers for cash and additional
consideration upon settlement of the receivables. Under the
terms of the arrangement, we continue to bill and collect
on behalf of our customers for the receivables sold.
The following table sets forth a summary of equipment
installment receivables sold during 2014:
2014
Net receivables sold1 $4,126
Cash proceeds received 2,528
Deferred purchase price recorded 1,629
1 Gross receivables sold were $4,707, before deducting the allowance, imputed
interest and trade-in right guarantees.
The deferred purchase price was initially recorded at
estimated fair value, which was based on remaining
installment payments expected to be collected, adjusted by
the expected timing and value of device trade-ins, and is
subsequently carried at the lower of cost or net realizable
value. The estimated value of the device trade-ins considers
prices offered to us by independent third parties that
contemplate changes in value after the launch of a device
model. The fair value measurements used are considered
Level 3 under the Fair Value Measurement and Disclosure
framework (see Note 10).
At December 31, 2014, our deferred purchase price
receivable was $1,606, which is included in “Other Assets”
on our consolidated balance sheets. Our maximum
exposure to loss as a result of selling these equipment
installment receivables is limited to the amount of our
deferred purchase price at any point in time.
The sales of equipment installment receivables did not
have a material impact in our consolidated statements of
income or to “Total Assets” reported on our consolidated
balance sheets. We reflect the cash flows related to the
arrangement as operating activities in our consolidated
statements of cash flows because the cash received from
the Purchasers upon both the sale of the receivables and
the collection of the deferred purchase price is not subject
to significant interest rate risk.
NOTE 17. TOWER TRANSACTION
On December 16, 2013, we closed our transaction with
Crown Castle International Corp. (Crown Castle) in which
Crown Castle gained the exclusive rights to lease and
operate 9,048 wireless towers and purchased 627 of our
wireless towers for $4,827 in cash. The leases have various
terms with an average length of approximately 28 years.
As the leases expire, Crown Castle will have fixed price
purchase options for these towers totaling approximately
$4,200, based on their estimated fair market values at the
end of the lease terms. We sublease space on the towers
from Crown Castle for an initial term of 10 years at current
market rates, subject to optional renewals in the future.
We determined our continuing involvement with the tower
assets prevented us from achieving sale-leaseback
accounting for the transaction, and we accounted for the
cash proceeds from Crown Castle as a financing obligation
on our consolidated balance sheets. We record interest
on the financing obligation using the effective interest
method at a rate of approximately 3.90%. The financing
obligation is increased by interest expense and estimated
future net cash flows generated and retained by Crown
Castle from operation of the tower sites, and reduced
by our contractual payments. We continue to include
the tower assets in Property, plant and equipment in
our consolidated balance sheets and depreciate them
accordingly. At December 31, 2014 and 2013, the tower
assets had a balance of $999 and $1,039, respectively.
Our depreciation expense for these assets was $39 for
2014. The impact of the transaction on our operating
results for the year ended December 31, 2013, was
not material.