Dish Network 2013 Annual Report Download - page 72

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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Discontinued Operations - Blockbuster
On April 26, 2011, we completed the Blockbuster Acquisition. Blockbuster primarily offered movies and video
games for sale and rental through multiple distribution channels such as retail stores, by-mail, digital devices, the
blockbuster.com website and the BLOCKBUSTER On Demand® service. Since the Blockbuster Acquisition, we
continually evaluated the impact of certain factors, among others, competitive pressures, the ability of significantly
fewer company-owned domestic retail stores to continue to support corporate administrative costs, and other issues
impacting the store-level financial performance of our company-owned domestic retail stores. Certain factors,
among others, previously led us to close a significant number of company-owned domestic retail stores during 2012
and 2013. On November 6, 2013, we announced that Blockbuster would close all of its remaining company-owned
domestic retail stores and discontinue the Blockbuster by-mail DVD service. As of December 31, 2013,
Blockbuster had ceased all material operations. Accordingly, our Consolidated Balance Sheets, Statements of
Operations and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows have been recast to
present Blockbuster as discontinued operations for all periods presented and the amounts presented in our Notes to
the Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K relate only to our continuing
operations, unless otherwise noted.
During the third quarter 2013, we determined that our Blockbuster operations in Mexico (“Blockbuster Mexico”)
were “held for sale.” As a result, we recorded pre-tax impairment charges of $19 million related to exiting the
business, which was recorded in “Income (loss) from discontinued operations, net of tax” on our Consolidated
Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2013. On January
14, 2014, we completed the sale of Blockbuster Mexico.
On January 16, 2013, Blockbuster Entertainment Limited and Blockbuster GB Limited, our Blockbuster operating
subsidiaries in the United Kingdom, entered into administration proceedings in the United Kingdom (the
“Administration”). As a result of the Administration, we wrote down the assets of all our Blockbuster UK
subsidiaries to their estimated net realizable value on our Consolidated Balance Sheets as of December 31, 2012. In
total, we recorded charges of approximately $46 million on a pre-tax basis related to the Administration, which was
recorded in “Income (loss) from discontinued operations, net of tax” on our Consolidated Statements of Operations
and Comprehensive Income (Loss) for the year ended December 31, 2012.
Wireless Spectrum
In 2008, we paid $712 million to acquire certain 700 MHz wireless spectrum licenses, which were granted to us by
the FCC in February 2009 subject to certain interim and final build-out requirements. On March 2, 2012, the FCC
approved the transfer of 40 MHz of AWS-4 wireless spectrum licenses held by DBSD North America and TerreStar
to us. On March 9, 2012, we completed the DBSD Transaction and the TerreStar Transaction, pursuant to which we
acquired, among other things, certain satellite assets and wireless spectrum licenses held by DBSD North America
and TerreStar. The total consideration to acquire the DBSD North America and TerreStar assets was approximately
$2.860 billion. The financial results of DBSD North America and TerreStar are included in our results beginning
March 9, 2012.
We generated $2 million and $1 million of revenue for the years ended December 31, 2013 and 2012, respectively,
from our wireless segment. In addition, we incurred operating losses of $591 million and $64 million for the years
ended December 31, 2013 and 2012, respectively. Operating losses for the year ended December 31, 2013 included
a $438 million impairment charge for the T2 and D1 satellites, $53 million of additional depreciation expense
related to the accelerated depreciable lives of certain assets designed to support the TerreStar MSS business, which
ceased operations during the second quarter 2013, $48 million of deprecation expense and $34 million of legal and
financial advisory fees related to our proposed mergers and acquisitions. See Note 8 in the Notes to the
Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K for further information.
We incur general and administrative expenses associated with certain satellite operations and regulatory compliance
matters from our wireless spectrum assets. We also incur depreciation and amortization expenses associated with
certain assets of DBSD North America and TerreStar. As we review our options for the commercialization of this
wireless spectrum, we may incur significant additional expenses and may have to make significant investments
related to, among other things, research and development, wireless testing and wireless network infrastructure.