Management’s Discussion and Analysis of Financial Condition and Results of Operations continued In February 2017, Verizon acquired XO, which owns and operates one of the largest fiber-based IP and Ethernet networks, for total cash consideration of approximately $1.5 billion, of which $0.1 billion was paid in 2015. In June 2017, Verizon acquired Yahoo’s operating business for cash consideration of approximately $4.5 billion, net of cash acquired. In December 2017, Verizon purchased certain fiber-optic network assets in the Chicago market from WideOpenWest, Inc. (WOW!) for cash consideration of approximately $0.2 billion. In July 2016, we acquired Telogis, a global cloud-based mobile enterprise management business, for $0.9 billion of cash consideration. In November 2016, we acquired Fleetmatics, a leading global provider of fleet and mobile workforce management solutions, for $60.00 per ordinary share in cash. The aggregate merger consideration was approximately $2.5 billion, including cash acquired of $0.1 billion. In January 2015, the FCC completed an auction of 65 MHz of spectrum, which it identified as the AWS-3 band. Verizon participated in that auction, and was the high bidder on 181 spectrum licenses, for which we paid cash of approximately $10.4 billion. During the first quarter of 2015, we submitted an application to the FCC and paid $9.5 billion to the FCC to complete payment for these licenses. The cash payment of $9.5 billion is classified within Acquisitions of wireless licenses on our consolidated statement of cash flows for the year ended December 31, 2015. In April 2015, the FCC granted us these spectrum licenses. In June 2015, Verizon acquired AOL for cash consideration of approximately $3.8 billion, net of cash acquired. During 2017, 2016 and 2015, we acquired various other businesses and investments for cash consideration that was not significant. See “Acquisitions and Divestitures” for additional information on our acquisitions. Dispositions During 2017, we received net cash proceeds of $3.5 billion in connection with the Data Center Sale on May 1, 2017. We also completed other insignificant transactions during 2017. During 2016, we received cash proceeds of $9.9 billion in connection with the completion of the Access Line Sale on April 1, 2016. See “Acquisitions and Divestitures” for additional information on our dispositions. Other, net In May 2015, we consummated a sale-leaseback transaction with a financial services firm for the buildings and real estate at our Basking Ridge, New Jersey location. We received total gross proceeds of $0.7 billion resulting in a deferred gain of $0.4 billion, which will be amortized over the initial leaseback term of twenty years. The leaseback of the buildings and real estate is accounted for as an operating lease. The proceeds received as a result of this transaction have been classified within Other, net investing activities for the year ended December 31, 2015. Also in 2015, we received proceeds of $0.2 billion related to a sale of real estate. Cash Flows Used In Financing Activities We seek to maintain a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters. During 2017, 2016 and 2015, net cash used in financing activities was $6.7 billion, $13.4 billion and $15.1 billion, respectively. 2017 During 2017, our net cash used in financing activities of $6.7 billion was primarily driven by: $24.2 billion used for repayments of long-term borrowings and capital lease obligations, which included $0.4 billion used for repayments of asset-backed long-term borrowings and $9.5 billion used for dividend payments. These uses of cash were partially offset by proceeds from long-term borrowings of $32.0 billion, which included $4.3 billion of proceeds from our asset-backed debt transactions. Proceeds from and Repayments of Long-Term Borrowings At December 31, 2017, our total debt increased to $117.1 billion as compared to $108.1 billion at December 31, 2016. Our effective interest rate was 4.7% and 4.8% during the years ended December 31, 2017 and 2016, respectively. The substantial majority of our total debt portfolio consists of fixed rate indebtedness, therefore, changes in interest rates do not have a material effect on our interest payments. See also “Market Risk” and Note 6 to the consolidated financial statements for additional details. At December 31, 2017, approximately $18.0 billion or 15.3% of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily the Euro and British Pound Sterling. We have entered into cross currency swaps on a majority of our foreign denominated debt in order to fix our future interest and principal payments in U.S. dollars and mitigate the impact of foreign currency transaction gains or losses. See “Market Risk” for additional information. 2017 Annual Report | Verizon Communications Inc. and Subsidiaries 31
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