Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2020


Note 3. Acquisitions and Divestitures

Spectrum License Transactions

In March 2020, the Federal Communication Commission's (FCC) incentive auction for spectrum licenses in the upper 37 Gigahertz (GHz), 39 GHz, and 47 GHz bands concluded. Verizon participated in this incentive auction and was the high bidder on 4,940 licenses, which primarily consisted of 37 GHz and, to a lesser extent, 39 GHz spectrum. As an incumbent licensee, our 39 GHz licenses provided us with incentive payments that were applied towards the purchase price of spectrum in the auction. The value of the licenses won by Verizon amounted to $3.4 billion, of which $1.8 billion was settled with the relinquished 39 GHz licenses. The remaining balance was settled in cash of $1.6 billion, of which $101 million was paid in December 2019. In connection with the incentive auction, a pre-tax net loss of $1.2 billion ($914 million after-tax) was recorded in Selling, general and administrative expense in the condensed consolidated statement of income for the six months ended June 30, 2020 because the exchange of the previously held licenses for new licenses had commercial substance. Refer to Note 4 for additional information. The new reconfigured licenses were received in the second quarter 2020 and are included in Wireless licenses in our condensed consolidated balance sheet. The average remaining renewal period for these acquired licenses was 9.9 years.

The fair value of the licenses represents a Level 2 measurement as defined in Accounting Standards Codification 820, Fair Value Measurements and Disclosures, and was determined based on the final auction price for each defined geographical area.

During the three and six months ended June 30, 2020, we entered into and completed various other wireless license acquisitions for cash consideration of an insignificant amount and approximately $177 million, respectively.

BlueJeans Network, Inc.

In April 2020, we entered into a definitive purchase agreement to acquire BlueJeans Network, Inc. (BlueJeans), an enterprise-grade video conferencing and event platform, whose services are sold to Business customers globally. The transaction closed in May 2020. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $396 million, net of cash acquired.

The financial results of BlueJeans are included in the consolidated results of Verizon from the date of acquisition. These amounts are insignificant for the three and six months ended June 30, 2020.

The acquisition of BlueJeans was accounted for as a business combination. We are currently assessing the identification and measurement of the assets acquired and liabilities assumed based on their fair values as of the close of the acquisition, subject to customary closing adjustments. Preliminarily, we recorded approximately $282 million of goodwill and $192 million of other intangible assets, which primarily consisted of enterprise customer list and internally developed technology. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired. The goodwill represents future economic benefits that we expect to achieve as a result of the acquisition.

Other

During the three months ended June 30, 2020, we completed no other acquisitions. For the six months ended June 30, 2020, we completed other acquisitions for insignificant amounts of cash consideration.