US Cellular 2009 Annual Report Download - page 18

contributions (most of the USF contribution expenses are offset by revenues for amounts passed
through to customers).
• Advertising expenses decreased $18.3 million, or 7%. Advertising expenses in 2008 included
expenditures related to the launch in June 2008 of a new branding campaign, Believe in Something
Betterᓼ.
• Other selling and marketing expenses increased $8.6 million, or 2%, reflecting higher commissions due
to a greater number of retail sales and renewals.
2008—
• General and administrative expenses increased $63.3 million, or 8%, due to increases in employee
related expenses; increases related to bad debts expense (reflecting both higher revenues and higher
bad debts as a percent of revenues); and increases in USF contributions and other regulatory fees
and taxes. Partially offsetting these expenses were decreases in consulting and outsourcing expenses
and billing expenses.
• Advertising expenses increased $47.3 million, or 21%, due primarily to an increase in media
purchases, including expenditures related to the launch in June 2008 of a new branding campaign,
Believe in Something Betterᓼ.
• Other selling and marketing expenses increased $31.9 million, or 6%, reflecting more retail sales
associates, higher retail facilities expenses and higher commissions due to a greater number of retail
sales and renewals.
U.S. Cellular expects Selling, general and administrative expenses to increase in the foreseeable future
driven primarily by increases in expenses associated with acquiring, serving and retaining customers, as
well as costs related to its multi-year initiatives discussed previously.
Depreciation, amortization and accretion
Depreciation, amortization and accretion decreased $6.3 million, or 1%, due primarily to fully depreciating
Time Division Multiple Access (‘‘TDMA’’) and analog network equipment in 2008, partially offset by
accelerating depreciation of certain cell site and switch equipment in 2009. U.S. Cellular discontinued its
TDMA-based service in 2009; in connection with such discontinuance, property, plant and equipment in
service and accumulated depreciation of $452.0 million were eliminated from the Consolidated Balance
Sheet.
See ‘‘Financial Resources’’ and ‘‘Liquidity and Capital Resources’’ for a discussion of U.S. Cellular’s
capital expenditures.
Loss on impairment of intangible assets
U.S. Cellular recognized impairment losses on licenses as indicated in the table below. The impairment
loss in 2009 was incurred in connection with the annual impairment assessment of licenses and goodwill
performed during the fourth quarter of 2009. The 2008 impairment loss was attributable to the
deterioration in the credit and financial markets and the accelerated decline in the overall economy in the
fourth quarter of 2008. These factors impacted U.S. Cellular’s calculation of the estimated fair value of
licenses in the fourth quarter of 2008 through the use of a higher discount rate when projecting future
cash flows and lower than previously projected earnings in the wireless industry.
In 2007, $20.8 million of the impairment loss was recognized in conjunction with an exchange of
personal communication licenses with Sprint Nextel. Of the remaining 2007 impairment loss, $2.1 million
related to other licenses and $1.9 million related to impairments of customer lists.
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