Intangible Assets

12 Months Ended

Dec. 31, 2014

NOTE 7 INTANGIBLE ASSETS

Changes in TDS' Licenses, Franchise rights and Goodwill are presented below. See Note 6 — Acquisitions, Divestitures and Exchanges for information regarding transactions which affected Licenses, Franchise rights and Goodwill during the periods. Previously under GAAP, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS' Licenses and Goodwill. Consequently, U.S. Cellular's Licenses and Goodwill on a stand-alone basis do not equal the TDS consolidated Licenses and Goodwill related to U.S. Cellular.

Licenses

(Dollars in thousands)			U.S. Cellular		Wireline		Cable		Other (1)		Total

Balance December 31, 2012			$	1,462,019	$	2,800	$	-	$	15,220	$	1,480,039
	Acquisitions			16,540		-		-		-		16,540
	Transferred to Assets held for sale			(16,027)		-		-		-		(16,027)
	Divestitures			(59,419)		-		-		-		(59,419)
	Other			2,646		-		-		-		2,646
Balance December 31, 2013				1,405,759		2,800		-		15,220		1,423,779
	Acquisitions			41,707		-		2,703		-		44,410
	Transferred to Assets held for sale			(56,809)		-		-		-		(56,809)
	Exchanges, net			55,780		-		-		-		55,780
	Divestitures			-		-		-		(15,220)		(15,220)
	Other			1,634		-		-		-		1,634
Balance December 31, 2014			$	1,448,071	$	2,800	$	2,703	$	-	$	1,453,574

(1)		Represents the transfer of licenses from Airadigm to U.S. Cellular in 2014. See Note 6 — Acquisitions, Divestitures and Exchanges for additional information.

Franchise rights

(Dollars in thousands)		Cable

Balance December 31, 2012		$	-
	Acquisitions		123,668
Balance December 31, 2013			123,668
	Acquisitions		120,979
	Divestitures		(347)
Balance December 31, 2014		$	244,300

Goodwill

(Dollars in thousands)			U.S. Cellular		Wireline (1)		Cable		HMS		Other (2)		Total

Balance December 31, 2012 (3)			$	269,307	$	420,458	$	-	$	103,627	$	3,802	$	797,194
	Acquisitions			-		-		61,712		15,203		-		76,915
	Divestitures			(135)		-		-		-		-		(135)
	NY1 & NY2 Deconsolidation			(37,131)		-		-		-		-		(37,131)
Balance December 31, 2013				232,041		420,458		61,712		118,830		3,802		836,843
	Acquisitions			-		-		33,610		-		-		33,610
	Loss on impairment			-		-		-		(84,000)		(3,802)		(87,802)
	Divestitures			(291)		(2,564)		-		-		-		(2,855)
	Transferred to Assets held for sale			(4,344)		(4,100)		-		-		-		(8,444)
Balance December 31, 2014			$	227,406	$	413,794	$	95,322	$	34,830	$	-	$	771,352

(1)		In July 2014, TDS Telecom sold certain Wireline markets.
(2)		TDS performed its annual impairment review of Goodwill in the fourth quarter of 2014. Based on the results of this review, TDS concluded that the entire amount of Goodwill related to Suttle-Straus was impaired, which resulted in a $3.8 million loss on impairment.
(3)		Includes accumulated impairment losses in prior periods as follows: $333.9 million for U.S. Cellular, $29.4 million for Wireline and $0.5 million for Other.

Interim Goodwill Impairment Assessment

During the third quarter of 2014, due to a decline in projected revenue and earnings of TDS Telecom's HMS reporting unit compared with previously projected results, TDS determined that an interim impairment test of HMS Goodwill was required. TDS performed the Step 1 Goodwill impairment test, as defined by GAAP, as of August 1, 2014.

The discounted cash flow approach and guideline public company method were used to value the HMS reporting unit. The discounted cash flow approach uses value drivers and risks specific to the industry and current economic factors. The cash flow estimates incorporated assumptions that market participants would use in their estimates of fair value and may not be indicative of TDS Telecom specific assumptions. The most significant assumptions made in this process were the revenue growth rate (shown as a ten year compound annual growth rate in the table below), the terminal revenue growth rate, the discount rate and capital expenditures as a percentage of revenue (shown as a ten year simple average in the table below).

The guideline public company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-traded companies. The developed multiples were applied to applicable financial measures of the HMS reporting unit to determine fair value. The discounted cash flow approach and guideline public company method were weighted to arrive at the total fair value used for impairment testing.

The following table represents key assumptions used in estimating the fair value of the HMS reporting unit as of August 1, 2014 using the discounted cash flow approach.

Key assumptions	HMS
Revenue growth rate	6.1	%
Terminal revenue growth rate	2.5	%
Discount rate	11.5	%
Capital expenditures as a percentage of revenue	8.6	%

As of August 1, 2014, the carrying value of the HMS reporting unit exceeded its fair value; therefore, a Step 2 Goodwill impairment test was performed. The second step compared the implied fair value of the reporting unit Goodwill to the carrying amount of that Goodwill. To calculate the implied fair value of Goodwill in this second step, TDS allocated the fair value of the reporting unit to all of the assets and liabilities of that reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value was the price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to the assets and liabilities of the reporting unit was the implied fair value of Goodwill. Since the carrying amount of Goodwill exceeded the implied fair value of Goodwill, an impairment loss was recognized for that difference. As a result of the Step 2 Goodwill impairment test, TDS recognized a loss on impairment of $84.0 million during the third quarter of 2014.

- 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.

+ References+ Details