Time Warner Cable 2009 Annual Report Download - page 94

Clearwire Investment
TWC holds an indirect equity interest in Clearwire Corporation (“Clearwire”), which was formed by the combination of the respective
wireless broadband businesses of Sprint Nextel Corporation (“Sprint”) and Clearwire Communications LLC, an operating subsidiary of
Clearwire (the “Clearwire Investment”). The Clearwire Investment is focused on deploying the first nationwide fourth-generation (“4G”)
wireless network to provide mobile broadband services to wholesale and retail customers. In November 2008, TWC, Intel Corporation
(“Intel”), Google Inc., Comcast and Bright House Networks, LLC (“Bright House”) invested $3.2 billion in Clearwire Communications
LLC, of which $550 million was contributed by TWC. In connection with the initial investment, TWC entered into wholesale agreements
with Clearwire and Sprint that allow TWC to offer wireless services utilizing Clearwire’s 4G WiMax network and Sprint’s third-generation
code-division multiple access network. The Company allocated $20 million of its initial $550 million investment in Clearwire
Communications LLC to its rights under these agreements, which the Company believes represents the fair value of favorable pricing
provisions contained in the agreements. Such assets are included in other assets in the consolidated balance sheet as of December 31, 2008
and are being amortized over the estimated lives of the agreements. In November 2009, TWC, Sprint, Intel, Comcast, Bright House and
Eagle River Holdings, LLC collectively agreed to invest up to an additional $1.564 billion in Clearwire Communications LLC, of which
TWC agreed to fund approximately $103 million. During the fourth quarter of 2009, TWC contributed $97 million to Clearwire
Communications LLC and expects to make its remaining contribution during the first quarter of 2010.
As of December 31, 2009, the Company’s equity interest in the underlying net assets of the Clearwire Investment exceeds the
carrying value of the Company’s investment in Clearwire by approximately $200 million. Such difference relates to intangible assets not
subject to amortization and, therefore, is not being amortized. During 2008, the Company recorded a noncash pretax impairment charge
of $367 million on its Clearwire investment as a result of a significant decline in the estimated fair value of the investment, which is
included in other income (expense), net in the consolidated statement of operations. The primary input in estimating the fair value of
TWC’s investment in Clearwire was the quoted market value of Clearwire Corporation publicly traded Class A shares at December 31,
2008, which declined significantly from May 2008, the date TWC agreed to make its investment.
TKCCP Joint Venture
Texas and Kansas City Cable Partners, L.P. (“TKCCP”) was a 50-50 joint venture between a consolidated subsidiary of TWC
(TWE-A/N) and Comcast. On January 1, 2007, TKCCP distributed its assets to its partners. TWC received certain cable assets located in
Kansas City, south and west Texas and New Mexico (the “Kansas City Pool”) and Comcast received the pool of assets consisting of the
Houston cable systems (the “Houston Pool”). TWC began consolidating the results of the Kansas City Pool on January 1, 2007. TKCCP
was formally dissolved on May 15, 2007. For accounting purposes, TWC treated the distribution of TKCCP’s assets as a sale of TWC’s
50% equity interest in the Houston Pool and as an acquisition of Comcast’s 50% equity interest in the Kansas City Pool. As a result of the
sale of TWC’s 50% equity interest in the Houston Pool, TWC recorded a pretax gain of $146 million in the first quarter of 2007, which is
included as a component of other income (expense), net, in the consolidated statement of operations for the year ended December 31,
2007. In 2009, Comcast and TWC finalized the post-closing adjustment associated with the sale of the Houston Pool, and the Company
recorded a $12 million gain, which is included in other income (expense), net, in the consolidated statement of operations for the year
ended December 31, 2009.
12. INCOME TAXES
Prior to the Separation, TWC was not a separate taxable entity for U.S. federal and various state income tax purposes and its results
were included in the consolidated U.S. federal and certain consolidated or combined state income tax returns of Time Warner. For taxable
periods after the Separation, TWC will file separate U.S. federal and consolidated or combined state income tax returns. The following
income tax information has been prepared assuming TWC was a stand-alone taxpayer for all periods presented.
Current and deferred income tax (benefit) provision provided on income from continuing operations are as follows (in millions):
2009 2008 2007
Year Ended December 31,
Federal:
Current . . ....................................................... $ 83 $ (188) $ 356
Deferred . ....................................................... 543 (3,967) 321
State:
Current . . ....................................................... 61 39 67
Deferred . ....................................................... 133 (993) 62
Total ........................................................... $ 820 $ (5,109) $ 806
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)