AT&T Wireless 2015 Annual Report Download - page 30

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
28 | AT&T INC.
We review customer relationships and other long-lived
assets for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable
over the remaining life of the asset or asset group.
To determine that the asset is recoverable, we verify
that the expected undiscounted future cash flows
directly related to that asset exceed its book value.
We evaluate our investments to determine whether
market declines are temporary and accordingly reflected
in accumulated other comprehensive income, or other-
than-temporary and recorded as an expense in “Other
income (expense) – net” in the consolidated statements
of income. This evaluation is based on the length of time
and the severity of decline in the investment’s value.
In 2014, we identified an immaterial other-than-
temporary decline in the value of equity method
investments and various cost investments.
Income Taxes Our estimates of income taxes and
the significant items giving rise to the deferred assets
and liabilities are shown in Note 11 and reflect our
assessment of actual future taxes to be paid on items
reflected in the financial statements, giving consideration
to both timing and probability of these estimates. Actual
income taxes could vary from these estimates due to
future changes in income tax law or the final review of
our tax returns by federal, state or foreign tax authorities.
We use our judgment to determine whether it is more
likely than not that we will sustain positions that we have
taken on tax returns and, if so, the amount of benefit
to initially recognize within our financial statements.
We regularly review our uncertain tax positions and
adjust our unrecognized tax benefits (UTBs) in light
of changes in facts and circumstances, such as
changes in tax law, interactions with taxing authorities
and developments in case law. These adjustments to
our UTBs may affect our income tax expense. Settlement
of uncertain tax positions may require use of our cash.
New Accounting Standards
See Note 1 for a discussion of recently issued or adopted
accounting standards.
OTHER BUSINESS MATTERS
DIRECTV In July 2015, we completed our acquisition
of DIRECTV, a leading provider of digital television
entertainment services in both the United States and
Latin America. The acquisition gives us a unique and
complementary set of assets and the opportunity to
achieve substantial cost synergies over time, as well as
increasing revenue from bundling and integrating services.
Our distribution scale enables us to offer consumers attractive
combinations of video, high-speed broadband and mobile
services, using all the sales channels of both companies. We
believe the combined company will be a content distribution
leader across mobile, video and broadband platforms.
Under the merger agreement, each share of DIRECTV
stock was exchanged for $28.50 cash plus 1.892 shares
of our common stock. After adjustment for shares issued
to trusts consolidated by AT&T, stock based payment
arrangements and fractional shares, which were settled
in cash, AT&T issued 954,407,524 shares to DIRECTV
shareholders, giving them an approximate 16% stake
in the combined company, based on common shares
outstanding. Based on our $34.29per share closing stock
price on July 24, 2015, the aggregate value of consideration
paid to DIRECTV shareholders was $47,409, including
$32,727 of AT&T stock and $14,378 in cash, $299 for
share-based payment arrangements and $5 for DIRECTV
shares previously purchased on the open market by
trusts consolidated by AT&T.
The FCC approved the transaction subject to the following
conditions:
• Fiber to the Premises Deployment – Within four
years, we will offer our all-fiber Internet access service
to at least 12.5 million customer locations such as
residences, home offices and very small businesses.
Combined with our existing high-speed broadband
network, at least 25.7 million customer locations will
have access to broadband speeds of 45Mbps or higher
by the end of the four-year build. While the addition
of medium and large businesses do not count towards
the commitments, we will have the opportunity to
provide services to those customers as part of this
expansion. In addition, we will offer 1 Gbps fiber
Internet access service pursuant to applicable E-rate
rules to any eligible school or library requesting that
service within or contiguous to our all-fiber footprint.
• Discounted Broadband Services Program – Within our
21-state area, we will offer a discounted fixed broadband
service to low-income households that qualify for the
government’s Supplemental Nutrition Assistance Program.
In locations where it is available, service with speeds
of at least 10Mbps will be offered for ten dollars per
month. Elsewhere, 5Mbps service will be offered for
ten dollars per month or, in some locations, 3Mbps
service will be offered for five dollars per month.
• Non-Discriminatory Usage-Based Practices – We are
required to refrain from using usage-based allowances
or other retail terms and conditions on our fixed
broadband Internet access service, as defined in the
order, to discriminate in favor of our own online video
services. We can and will continue to offer discounts
on integrated bundles of our video and fixed
broadband services.