Cincinnati Bell 2006 Annual Report Download - page 179

the use of the asset. Therefore, an impairment charge of $18.6 million was recorded in the fourth quarter of 2005
to record the TDMA assets at fair value. The Company calculated the fair value of the assets based on the
appraised amount at which the assets could be sold in a current transaction between willing parties. The
impairment charge was recorded in the Consolidated Statements of Operations under the caption “Asset
impairments and other charges.” After the impairment charges, the carrying value of the TDMA assets was less
than $1 million at December 31, 2005.
To satisfy increasing demand for existing voice minutes of use by customers as well as to provide enhanced
data services such as streaming video, the Company intends to construct a third generation (“3G”) network and
deploy it on the newly purchased Advanced Wireless Services (“AWS’’) spectrum. Due to this implementation,
lives of certain GSM assets were shortened and depreciation has been accelerated based on the new useful life.
The increase in depreciation due to this acceleration was approximately $1.3 million in the fourth quarter of
2006.
During 2004, the Company retired certain assets with a net book value of $3.5 million and recorded the
charge in the Consolidated Statements of Operations under the caption “Asset impairments and other charges.”
5. Acquisitions of Businesses and Wireless Licenses
Acquisition of Remaining Interest in Cincinnati Bell Wireless LLC
On February 14, 2006, the Company purchased Cingular’s 19.9% membership interest in Cincinnati Bell
Wireless LLC (“CBW”). As a result, the Company paid purchase consideration of $83.0 million in cash to
Cingular and incurred transaction expenses of $0.2 million. CBW is now a wholly-owned subsidiary of the
Company. The Company funded the purchase with its Corporate credit facility and available cash.
The transaction was accounted for as a step acquisition using the purchase method of accounting in
accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” The Company
applied the purchase price against the minority interest and then allocated the remainder to identifiable tangible
and intangible assets and liabilities acquired as follows:
(dollars in millions)
Minority interest ...................... $27.8
Intangible assets ...................... 42.1
Goodwill ............................ 10.2
Other ............................... 3.1
Total purchase price ................... $83.2
The purchase price allocation was based upon the estimated fair values as of February 14, 2006 of the
tangible and intangible assets and liabilities. Estimated fair value was compared to the book value already
recorded, and 19.9% of the excess of estimated fair value over book value was allocated to the respective
tangible and intangible assets and liabilities. The excess purchase price over the minority interest and fair value
ascribed to the tangible and intangible assets and liabilities was recorded as goodwill. The Company anticipates
both the goodwill and intangible assets to be fully deductible for tax purposes.
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