Notes to Consolidated Financial Statements

NOTE 4

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 December 31, 2007

$

50,796

 

Wireless licenses acquired

 

10,626

 

Capitalized interest on wireless licenses

 

557

 

Reclassifications, adjustments and other

 

(5

)

Balance at December 31, 2008

$

61,974

 

Wireless licenses acquired (Note 2)

 

9,444

 

Capitalized interest on wireless licenses

 

730

 

Reclassifications, adjustments and other

 

(81

)

Balance at December 31, 2009

$

72,067

 

Reclassifications, adjustments and other during 2009 primarily include wireless licenses that are included in the Alltel Divestiture Markets (see Note 2) as held for sale and included in Prepaid expenses and other in the accompanying consolidated balance sheets. As of December 31, 2009 and 2008, $12.2 billion and $12.4 billion, respectively, of wireless licenses were under development for commercial service for which we are capitalizing interest costs.

The average remaining renewal period of our wireless license portfolio was 8.0 years as of December 31, 2009 (see Note 1, Goodwill and Other Intangible Assets – Intangible Assets Not Subject to Amortization).

On March 20, 2008, the FCC announced the results of Auction 73 of wireless spectrum licenses in the 700 MHz band. We were the successful bidder for twenty-five 12 MHz licenses in the A-Block frequency, seventy-seven 12 MHz licenses in the B-Block frequency and seven 22 MHz licenses (nationwide with the exception of Alaska) in the C-Block frequency, with an aggregate bid price of $9,363 million. We have made all required payments to the FCC for these licenses by April 2008. The FCC granted us these licenses on November 26, 2008.

Goodwill

Changes in the carrying amount of goodwill are as follows:

(dollars in millions)

 

Domestic
Wireless

 

Wireline

 

Total

 

Balance at December 31, 2007

$

345

 

$

4,900

 

$

5,245

 

Acquisitions (Note 2)

 

954

 

 

 

 

954

 

Reclassifications, adjustments and other

 

(2

)

 

(162

)

 

(164

)

Balance at December 31, 2008

$

1,297

 

$

4,738

 

$

6,035

 

Acquisitions (Note 2)

 

16,353

 

 

 

 

16,353

 

Reclassifications, adjustments and other

 

88

 

 

(4

)

 

84

 

Balance at December 31, 2009

$

17,738

 

$

4,734

 

$

22,472

 

Reclassifications, adjustments and other in Domestic Wireless during 2009 relate to the finalization of the Rural Cellular purchase accounting, partially offset by goodwill that is included in the Alltel Divestiture Markets (see Note 2) as held for sale and included in Prepaid expenses and other in the accompanying consolidated financial statements. Reclassifications, adjustments and other during 2008 reflect the revised estimated tax losses of acquired assets and liabilities.

Other Intangible Assets

The following table displays the composition of Other intangible assets:

(dollars in millions)

 

At December 31, 2009

 

At December 31, 2008

 

 

Gross
Amount

 

Accumulated
Amortization

 

Net
Amount

 

Gross
Amount

 

Accumulated
Amortization

 

Net
Amount

 

Other intangible assets:

Customer lists (6 to 8 years)

$

3,134

 

$

(1,012

)

$

2,122

 

$

1,415

 

$

(595

)

$

820

 

Non-network internal-use software

(2 to 7 years)

 

8,455

 

 

(4,346

)

 

4,109

 

 

8,099

 

 

(4,102

)

 

3,997

 

Other (1 to 25 years)

 

865

 

 

(332

)

 

533

 

 

465

 

 

(83

)

 

382

 

Total

$

12,454

 

$

(5,690

)

$

6,764

 

$

9,979

 

$

(4,780

)

$

5,199

 

At December 31, 2009, the gross amount of Customer lists, Non-network software and Other includes $2,391 million related to the Alltel acquisition.

The annual amortization expense for Other intangible assets were as follows:

Years

(dollars in millions)

2009

 

$

1,970

 

2008

 

 

1,383

 

2007

 

 

1,341

 

Estimated future annual amortization expense for Other intangible assets at December 31, 2009 is as follows:

Years

(dollars in millions)

2010

 

$

1,848

 

2011

 

 

1,496

 

2012

 

 

1,224

 

2013

 

 

987

 

2014

 

 

582

 

During 2008, we entered into an agreement to acquire a non-exclusive license (the IP License) to a portfolio of intellectual property owned by an entity formed for the purpose of acquiring and licensing intellectual property. We paid an initial fee of $100 million for the IP License, which is included in Other intangible assets, net and is being amortized over the estimated average remaining lives of the licensed intellectual property. In addition, we executed a subscription agreement (with a capital commitment up to $250 million, of which approximately $176 million remains to be funded at December 31, 2009, as required, through 2012) to become a member in a limited liability company (the LLC) formed by the same entity for the purpose of acquiring and licensing additional intellectual property. In connection with this investment, we will receive non-exclusive license rights to certain intellectual property acquired by the LLC for an annual license fee.