US Cellular 2008 Annual Report Download - page 178

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 ACQUISITIONS, DIVESTITURES AND EXCHANGES
U.S. Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the
competitiveness of its operations and maximizing its long-term return on investment. As part of this
strategy, U.S. Cellular reviews attractive opportunities to acquire additional operating markets and
wireless spectrum. In addition, U.S. Cellular may seek to divest outright or include in exchanges for other
wireless interests those markets and wireless interests that are not strategic to its long-term success.
2008 Activity
Significant Transactions Pending as of December 31, 2008:
In October 2008, U.S. Cellular entered into an agreement to acquire six 12 megahertz Block C licenses
in the lower 700 megahertz band of the wireless spectrum covering portions of three states (Kansas,
Missouri and Oklahoma) for $9.0 million in cash. This transaction closed in January 2009.
A FCC auction of spectrum in the PCS and AWS-1 bands, designated by the FCC as Auction 78, began
on August 13, 2008 and closed August 20, 2008. U.S. Cellular participated in Auction 78 indirectly
through its interest in Aquinas Wireless. Aquinas Wireless paid $2.1 million to the FCC for five licenses
for which it was the provisional winning bidder in the auction.
U.S. Cellular also participated in the 2008 FCC auction of spectrum in the 700 megahertz band, known
as Auction 73, which closed on March 20, 2008. U.S. Cellular participated in Auction 73 indirectly
through its interest in King Street Wireless. King Street Wireless paid $300.5 million to the FCC for the
152 licenses for which it was the provisional winning bidder in the auction.
There is no prescribed timeframe for the FCC to review the qualifications of the various winning bidders
and grant licenses related to Auctions 78 and 73. As of December 31, 2008, the FCC had not granted
the licenses to Aquinas Wireless or King Street Wireless. See Note 4—Variable Interest Entities, for
further details on Aquinas Wireless and King Street Wireless and the licenses acquired in Auctions 78
and 73.
Significant Transactions Completed as of December 31, 2008:
In December 2008, as a result of two acquisitions, U.S. Cellular purchased seven 12 megahertz Block C
licenses in the Lower 700 megahertz band of the wireless spectrum in the state of Missouri for
$19.6 million in cash.
In May 2008, U.S. Cellular acquired the remaining 50%-ownership interest of North Carolina RSA 1
Partnership, a wireless market operator in which U.S. Cellular had previously owned a 50%
non-operating, unconsolidated interest, for $6.9 million in cash.
In March 2008, U.S. Cellular acquired six 12 megahertz Block C licenses in the Lower 700 megahertz
band of the wireless spectrum in Maine for $5.0 million in cash.
In October 2006, U.S. Cellular’s interest in Midwest Wireless Communications, LLC was sold to Alltel
Corporation. In connection with the sale, U.S. Cellular became entitled to receive approximately
$106.0 million in cash. Of this amount, $95.1 million was distributed upon closing and $10.9 million was
held in escrow to secure certain true-up, indemnification and other possible adjustments; the funds held
in escrow were to be distributed in installments over a period of four to fifteen months following the
closing. U.S. Cellular received $6.6 million and $4.3 million of funds from the escrow, plus interest of
$0.2 million and $0.3 million, in 2008 and 2007, respectively.
In November 2007, U.S. Cellular entered into an exchange agreement with Sprint Nextel Corporation
which provided for U.S. Cellular to receive personal communication service (‘‘PCS’’) spectrum in eight
licenses covering portions of Oklahoma, West Virginia, Maryland and Iowa, in exchange for U.S. Cellular
delivering PCS spectrum in eight licenses covering portions of Illinois. In connection with the exchange,
U.S. Cellular recognized a pre-tax loss of $20.8 million during the fourth quarter of 2007. This transaction
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