Comcast 2008 Annual Report Download - page 56

Note 6: Investments
The components of our investments are presented in the
table below.
December 31 (in millions) 2008 2007
Fair Value Method
Equity securities $ 940 $2,080
Debt securities 3621
943 2,701
Equity Method
Insight Midwest —1,877
SpectrumCo, LLC 1,354 1,352
Clearwire 421 —
Other 402 453
2,177 3,682
Cost Method
AirTouch 1,479 1,465
Other 243 213
1,722 1,678
Total investments 4,842 8,061
Less: Current investments 59 98
Noncurrent investments $4,783 $7,963
Fair Value Method
We hold equity investments in publicly traded companies that we
account for as AFS or trading securities. As of December 31,
2008, we held $932 million of fair value method equity securities
related to our obligations under prepaid forward contracts, which
mature between 2011 and 2015. At maturity of these prepaid
forward contracts, the counterparties are entitled to receive some
or all of the equity securities, or an equivalent amount of cash at
our option, based upon the market value of the equity securities at
that time.
The net unrealized gains on investments accounted for as AFS
securities as of December 31, 2008 and 2007 were $29 million
and $42 million, respectively. The amounts were reported primarily
as a component of accumulated other comprehensive income
(loss), net of related deferred income taxes of $10 million and $15
million in 2008 and 2007, respectively.
The cost, fair value, and unrealized gains and losses related to our
AFS securities are presented in the table below. The decreases in
2008 from 2007 are primarily due to the sale of debt securities.
Year ended December 31 (in millions) 2008 2007
Cost $60 $685
Unrealized gains 34 44
Unrealized losses (5) (2)
Fair value $89 $727
Proceeds from the sale of AFS securities in 2008, 2007 and 2006
were $638 million, $1.033 billion and $209 million, respectively.
Gross realized gains on these sales in 2008, 2007 and 2006 were
$1 million, $145 million and $59 million, respectively. Sales of AFS
securities for the year ended December 31, 2008 consisted
primarily of the sale of debt securities. Sales of AFS securities in
2007 and 2006 consisted primarily of sales of Time Warner Inc.
common stock.
Equity Method
Insight Midwest Partnership
We accounted for our interest in Insight Midwest as an equity
method investment until January 1, 2008, the date the Comcast
asset pool was distributed to us (see Note 5). As of December 31,
2007, our recorded investment in Insight exceeded our propor-
tionate interest in the book value of its net assets by $144 million.
The basis difference was attributed to indefinite-lived intangible
assets.
SpectrumCo, LLC
SpectrumCo, LLC (“SpectrumCo”), a consortium of investors
including us, Time Warner Cable, Bright House Networks and Cox
Communications (“Cox”), was the successful bidder for 137 wire-
less spectrum licenses for approximately $2.4 billion in the Federal
Communications Commission’s advanced wireless spectrum auc-
tion that concluded in September 2006. Our portion of the total
cost to purchase the licenses was approximately $1.3 billion. In
October 2008, SpectrumCo and its members entered into an
agreement under which Cox would withdraw as a member of
SpectrumCo and have its interest in SpectrumCo redeemed in
accordance with its pre-existing exit rights. Under the agreement,
Cox was entitled to receive from SpectrumCo at the closing
approximately $70 million and certain spectrum licenses covering
areas in or near Cox’s service area. The agreement required the
$70 million to be funded by contributions to SpectrumCo from the
remaining members. This transaction closed in January 2009 and
we contributed $45 million to SpectrumCo to satisfy our funding
obligations under the agreement. Based on SpectrumCo’s cur-
rently planned activities, we have determined that it is not a VIE.
We have and continue to account for this joint venture as an equity
method investment based on its governance structure, notwith-
standing our majority interest.
Clearwire
In November 2008, Sprint Nextel (“Sprint”) and the legal prede-
cessor of Clearwire Corporation (“old Clearwire”) closed on a
series of transactions (collectively the “Clearwire transaction”) with
an investor group made up of us, Intel, Google, Time Warner
Cable and Bright House Networks. As a result of the Clearwire
transaction, Sprint and old Clearwire combined their next-
generation wireless broadband businesses and formed a new
independent holding company, Clearwire Corporation, and its
operating subsidiary, Clearwire Communications LLC (“Clearwire
Comcast 2008 Annual Report on Form 10-K 54