7. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company tests goodwill for impairment on an annual basis, which has been determined to be as of December 31 of each fiscal year. The Company also tests goodwill between annual tests if an event occurs or circumstances change that indicate that the fair value of a reporting unit may be below its carrying value.

The Company employs both qualitative and quantitative tests of its goodwill. The company tests goodwill at the reporting unit which is one level below its operating segments. During 2016, the Company performed a qualitative assessment for some of the Company’s reporting units and determined there were no indicators of impairment. For the other reporting units in 2016, goodwill was evaluated using a quantitative model. During 2015, the Company performed a qualitative assessment on goodwill to determine whether a quantitative assessment was necessary and determined there were no indicators of potential impairment. In 2014, the Company performed a qualitative assessment for some of the Company’s reporting units and determined there were no indicators of impairment. For the other reporting units in 2014, goodwill was evaluated using a quantitative model. The quantitative test for goodwill impairment is determined using a two‑step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of a reporting unit using a discounted cash flow (“DCF”) analysis. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, perpetual growth rates, and the amount and timing of expected future cash flows. Discount rates are based on a weighted‑average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity. The cash flows employed in the DCF analysis were derived from internal earnings and forecasts and external market forecasts. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed.

The second step of our quantitative test for goodwill impairment compares the implied fair value of the reporting unit’s goodwill with its carrying amount of goodwill to measure the amount of impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, whereby the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

During June 2016, as a result of recent industry consolidation activities and a review of strategic alternatives for the Company’s U.S. Wireline business in the Northeast, the Company identified factors indicating the carrying amount of certain assets may not be recoverable. More specifically, the factors included the competitive environment, recent industry consolidation, and the Company’s view of future opportunities in the market which began to evolve in the second quarter of 2016. On August 4, 2016, the Company entered into a stock purchase agreement to sell the majority of its U.S. Wireline business. The transaction is subject to customary closing conditions.

As a result of this transaction and the recent developments in the market, the Company determined it was appropriate to assess the reporting unit’s assets for impairment. The reporting unit holds three types of assets for purposes of impairment testing: i) other assets such as accounts receivable and inventory, ii) long lived assets such as property plant and equipment, and iii) goodwill. Management first assessed the other assets for impairment and determined no impairment was appropriate. Second, the property, plant and equipment was assessed for impairment. The impairment test compared the undiscounted cash flows from the use and eventual disposition of the asset group to its carrying amount and determined the carrying amount was not recoverable. The impairment loss of $3.6 million was equal to the amount by which the carrying amount exceeded the fair value. Third management assessed goodwill for impairment following the two step impairment test. The carrying amount of the reporting unit exceeded its fair value, after considering the $3.6 million asset impairment. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill to measure the amount of impairment loss. The impairment loss equaled $7.5 million. The Company utilized the income approach, with Level 3 valuation inputs, which considered both the purchase agreement and cash flows discounted at a rate of 14% in its fair value calculations. In total, the Company recorded an impairment charge of $11.1 million. The impairment charge is included in income from operations for the year ended December 31, 2016.

The Company performed its annual impairment assessments of its goodwill as of December 31, 2016 and determined that no impairment charges were required, as the fair value of each reporting unit exceeded its book value. Accordingly, there were additional changes in the carrying amounts of goodwill during that year.

The table below disclosed goodwill recorded in each of the Company’s segments and accumulated impairment changes through during 2016. There were no changes to the Company’s goodwill balances from January 1, 2014 through December 31, 2015 (in thousands):


	U.S.		International			Renewable
	Telecom		Telecom		Energy		Consolidated
Balance at December 31, 2015	$	39,639	$	5,438	$	—	$	45,077
Acquisitions		3,121		20,586		3,279		26,986
Deconsolidation of Subsidiary		—		(1,698)		—		(1,698)
Impairment		(7,491)		—		—		(7,491)
Balance at December 31, 2016
Gross		42,759		24,326		3,279		70,364
Accumulated Impairment		(7,491)		—		—		(7,491)
Net	$	35,268	$	24,326	$	3,279	$	62,873

Telecommunications Licenses

The Company tests those telecommunications licenses that are indefinite lived for impairment on an annual basis, which has been determined to be as of December 31 of each fiscal year. The Company also tests telecommunication licenses that are indefinite lived between annual tests if an event occurs or circumstances change that indicate that the fair value of a reporting unit may be below its carrying value.

The Company performed quantitative and qualitative assessments for its annual impairment assessment of substantially all of its indefinite lived telecommunications licenses as of December 31, 2016 and 2015 and determined that there were no indications of potential impairments.

The changes in the carrying amount of the Company’s telecommunications licenses, by operating segment, for the three years ended December 31, 2016 were as follows (in thousands):


	U.S.		Int'l
	Telecom		Telecom		Consolidated
Balance at December 31, 2014	$	24,944	$	19,146	$	44,090
Amortization		—		(622)		(622)
Balance at December 31, 2015	$	24,944	$	18,524	$	43,468
Deconsolidation of subsidiary		—		(2,178)		(2,178)
Acquired licenses		—		7,623		7,623
Amortization		—		(622)		(622)
Balance at December 31, 2016	$	24,944	$	23,347	$	48,291

The licenses acquired during 2016 were acquired in the Innovative Transaction and are expected to be available for use into perpetuity. A subsidiary in the Company’s International Telecom segment was amortizing one of its telecommunications licenses until the date of its deconsolidation in December 2016.

Customer Relationships

The customer relationships, all of which are included in the International Telecom segment, are being amortized on an accelerated basis, over the expected period during which their economic benefits are to be realized. The Company recorded $2.0 million, $0.4 million, and $0.3 million of amortization related to customer relationships during year ended December 31, 2016, 2015, and 2014, respectfully.

Future amortization of customer relationships, in our International Telecom segment, is as follows (in thousands):


	Future Amortization
2017	$	3,281
2018		2,411
2019		1,897
2020		1,528
2021		1,300
Thereafter		4,612
Total	$	15,029

Other Intangible Assets

The Company held other intangibles of $4.9 million consisting of $3.0 million of franchise rights and $1.9 million of tradenames in its International Telecom segment. These assets are recorded in other assets on the Company’s balance sheet. In 2016, we assessed the value of a tradename and concluded that its book value exceeded its fair value. As a result, we recorded a non-cash impairment charge of $0.3 million during the year ended December 31, 2016