Capital
expenditures continue to be our primary use of capital
resources and facilitate the introduction of new products
and services, enhance responsiveness to competitive
challenges and increase the operating efficiency and
productivity of our networks. Including capitalized
software, we invested $7,118 million in our Domestic
Telecom business in 2004, compared to $6,820 million
and $8,004 million in 2003 and 2002, respectively. We
also invested $5,633 million in our Domestic Wireless
business in 2004, compared to $4,590 million and $4,414
million in 2003 and 2002, respectively. The increase
in capital spending of both Domestic Telecom and Domestic
Wireless in 2004 represents our continuing effort to
invest in high growth areas including wireless, long
distance, DSL and other wireline data initiatives. The
decrease in capital spending in 2003, particularly by
Domestic Telecom, was primarily due to a decrease in
demand for local network expansion, partially offset
by investments in high growth areas.
Capital spending, including capitalized software, is
expected to increase by approximately 10% in 2005.
We invested $1,196 million in acquisitions and investments
in businesses during 2004, including $1,052 million
for wireless licenses and businesses, including the
NextWave Telecom Inc. (NextWave) licenses covering the
New York metropolitan area, and $144 million related
to Verizon’s limited partnership investments in
entities that invest in affordable housing projects.
In 2003, we invested $1,162 million in acquisitions
and investments in businesses, including $762 million
to acquire 50 wireless licenses and related network
assets from Northcoast Communications LLC, $242 million
related to Verizon’s limited partnership investments
in entities that invest in affordable housing projects
and $157 million for other wireless properties. In 2002,
we invested $1,088 million in acquisitions and investments
in businesses, including $556 million to acquire some
of the cellular properties of Dobson Communications
Corporation, $181 million related to Verizon’s
limited partnership investments in entities that invest
in affordable housing projects and $242 million for
other wireless properties. We also received a $1,740
million refund from the FCC in connection with a wireless
auction payment.
In 2004, we received cash proceeds of $1,720 million,
including $1,603 million from the sale of Verizon Information
Services Canada and $117 million from the sale of a
small business unit. In 2003, we received cash proceeds
of $229 million, from the sale of our European directory
publication operations in Austria, the Czech Republic,
Gibraltar, Hungary, Poland and Slovakia. In 2002, we
received cash proceeds of $4,638 million, including
$3,868 million from the sale of non-strategic access
lines and $770 million in connection with the sale of
TSI.
Our short-term investments include principally cash
equivalents held in trust accounts for payment of employee
benefits. In 2004, 2003 and 2002, we invested $1,827
million, $1,887 million and $2,073 million, respectively,
in short-term investments, primarily to pre-fund active
employees’ health and welfare benefits. Proceeds
from the sales of all short-term investments, principally
for the payment of these benefits, were $1,727 million,
$1,767 million and $1,857 million in the years 2004,
2003 and 2002, respectively.
Other, net investing activities for 2004 include net
cash proceeds of $1,632 million received in connection
with the sale of our 20.5% interest in TELUS and $650
million in connection with sales of our interests in
various other investments, including a partnership venture
with Crown Castle International Corp., EuroTel Bratislava,
a.s. and Iowa Telecom preferred stock. Other, net investing
activities for 2003 include net cash proceeds of $415
million in connection with sales of our interests in
various investments, primarily TCC and Crown Castle
International Corp. and $195 million in connection with
the sale of our interest in Eurotel Praha, representing
a portion of the total proceeds of $525 million. Other,
net investing activities for 2002 include total cash
proceeds of $1,453 million in connection with share
sales of various investments, including net cash proceeds
of $769 million in connection with a sale of nearly
all of our investment in TCNZ and $281 million related
to the sale of our investment in C&W, and purchases
of investments of $425 million.
Under the terms of an investment agreement, Vodafone
may require Verizon Wireless to purchase up to an aggregate
of $20 billion worth of Vodafone’s interest in
Verizon Wireless at designated times at its then fair
market value. In the event Vodafone exercises its put
rights, we have the right, exercisable at our sole discretion,
to purchase up to $12.5 billion of Vodafone’s
interest instead of Verizon Wireless for cash or Verizon
stock at our option. Vodafone had the right to require
the purchase of up to $10 billion during a 61-day period
opening on June 10 and closing on August 9 in 2004,
and did not exercise that right. As a result, Vodafone
still has the right to require the purchase of up to
$20 billion worth of its interest, not to exceed $10
billion in any one year, during a 61-day period opening
on June 10 and closing on August 9 in 2005 through 2007.
Vodafone also may require that Verizon Wireless pay
for up to $7.5 billion of the required repurchase through
the assumption or incurrence of debt.
For continuation of Consolidated
Financial Condition, see next page. |
