Wireless Licenses, Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2013

Wireless Licenses, Goodwill and Other Intangible Assets

2.	Wireless Licenses, Goodwill and Other Intangible Assets

Wireless Licenses

Changes in the carrying amount of Wireless licenses are as follows:


(dollars in millions)
Balance at January 1, 2013	$	77,744
Acquisitions		43
Capitalized interest on wireless licenses		275
Reclassifications, adjustments and other		(2,237	)

Balance at June 30, 2013	$	75,825

Reclassifications, adjustments and other includes $2.3 billion of Wireless licenses that are classified as held for sale and included in Prepaid expenses and other on our condensed consolidated balance sheet at June 30, 2013 as well as the exchange of wireless licenses completed during the first quarter of 2013. See below for additional details.

During the first quarter of 2013, we completed license exchange transactions with T-Mobile USA Inc. (T-Mobile) and Cricket License Company, LLC, a subsidiary of Leap Wireless, to exchange certain Advanced Wireless Services (AWS) licenses. These non-cash exchanges include a number of intra-market swaps that will enable Verizon Wireless to make more efficient use of the AWS band. As a result of these exchanges, we received an aggregate $0.5 billion of AWS licenses at fair value and recorded an immaterial gain.

On April 18, 2012, we announced plans to initiate an open sale process for all of our 700 MHz lower A and B block spectrum licenses, subject to the receipt of acceptable bids. We acquired these licenses as part of Federal Communications Commission (FCC) Auction 73 in 2008. On January 25, 2013, Verizon Wireless agreed to sell 39 lower 700 MHz B block spectrum licenses to AT&T Inc. (AT&T) in exchange for a payment of $1.9 billion and the transfer by AT&T to Verizon Wireless of AWS (10 MHz) licenses in certain markets in the western United States. Verizon Wireless also agreed to sell certain lower 700 MHz B block spectrum licenses to an investment firm for a payment of $0.2 billion. These transactions are subject to approval by the FCC. As a result of these agreements, $2.3 billion of Wireless licenses are classified as held for sale and included in Prepaid expenses and other on our condensed consolidated balance sheet at June 30, 2013. When finalized, the sales will complete the open sale process. We expect to deploy the remaining licenses as necessary to meet our own spectrum needs.

At June 30, 2013, approximately $7.7 billion of Wireless licenses were under development for commercial service for which we were capitalizing interest costs.

Goodwill

Changes in the carrying amount of Goodwill are as follows:


(dollars in millions)	Wireless		Wireline			Total
Balance at January 1, 2013	$	18,172	$	5,967		$	24,139
Acquisitions		203		–			203
Reclassifications, adjustments and other		–		(6	)		(6	)

Balance at June 30, 2013	$	18,375	$	5,961		$	24,336

The increase in Goodwill at June 30, 2013 was recorded by Verizon Wireless upon obtaining control of previously unconsolidated wireless partnerships, which were previously accounted for under the equity method and are now consolidated. This resulted in an immaterial gain recorded during the three and six months ended June 30, 2013.

Other Intangible Assets

The following table displays the composition of Other intangible assets, net:


	At June 30, 2013							At December 31, 2012

(dollars in millions)	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount

Customer lists (6 to 13 years)	$	3,595	$	(2,504	)	$	1,091	$	3,556	$	(2,338	)	$	1,218
Non-network internal-use software (3 to 7 years)		11,015		(6,734	)		4,281		10,415		(6,210	)		4,205
Other (2 to 25 years)		742		(338	)		404		802		(292	)		510

Total	$	15,352	$	(9,576)		$	5,776	$	14,773	$	(8,840	)	$	5,933

The amortization expense for Other intangible assets was as follows:


(dollars in millions)	Three Months Ended June 30,		Six Months Ended June 30,
2013		$ 399		$ 785
2012		367		728

Estimated annual amortization expense for Other intangible assets is as follows:


Years	(dollars in millions)
2013		$ 1,557
2014		1,333
2015		1,122
2016		872
2017		664

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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