Property, Plant and Equipment

12 Months Ended

Dec. 31, 2011

Property, Plant and Equipment

Property, Plant and Equipment

(6) Property, Plant and Equipment

        CenturyLink accounted for its acquisition of us under the acquisition method of accounting, which requires the assignment of the purchase price to the assets acquired based on the preliminary estimates of their fair values at the acquisition date.

        Net property, plant and equipment is composed of the following:

		Successor			Predecessor
	Depreciable Lives	December 31, 2011			December 31, 2010
		(Dollars in millions)
Property, plant and equipment:
Land	N/A	$	384			105
Fiber, conduit and other outside plant(1)	8-45 years		3,679			20,962
Central office and other network electronics(2)	3-10 years		3,507			20,981
Support assets(3)	5-30 years		2,869			5,166
Construction in progress(4)	N/A		265			193
Gross property, plant and equipment			10,704			47,407
Accumulated depreciation			(1,218	)		(35,550	)
Net property, plant and equipment		$	9,486			11,857

(1)

Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.

(2)

Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers.

(3)

Support assets consist of buildings, computers and other administrative and support equipment.

(4)

Construction in progress includes property of the foregoing categories that has not been placed in service as it is still under construction.

        We recorded depreciation expense of $1.209 billion, $475 million, $1.979 billion and $2.100 billion for the successor nine months ended December 31, 2011, the predecessor three months ended March 31, 2011, and the predecessor years ended December 31, 2010 and 2009, respectively.

        Effective January 1, 2010, we changed our estimates of the economic lives of certain telecommunications equipment assets. These changes resulted in additional depreciation expense of approximately $50 million for the year ended December 31, 2010 when compared to the year ended December 31, 2009.

Asset Retirement Obligations

        As of the successor date of December 31, 2011, our asset retirement obligations balance was primarily related to estimated future costs of removing equipment from leased properties and estimated future costs of properly disposing of asbestos and other hazardous materials upon remodeling or demolishing buildings. Asset retirement obligations are included in other long-term liabilities on our consolidated balance sheets. The following table provides asset retirement obligation activity:

	Asset Retirement Obligations
	(Dollars in millions)
Balance at January 1, 2009 (Predecessor)	$	65
Accretion expense		7
Liabilities incurred		3
Liabilities settled and other		(1	)
Change in estimate		(11	)
Balance at December 31, 2009 (Predecessor)		63
Accretion expense		7
Liabilities incurred		—
Liabilities settled and other		(1	)
Change in estimate		(6	)
Balance at December 31, 2010 (Predecessor)		63
Accretion expense		2
Liabilities incurred		—
Liabilities settled and other		(1	)
Change in estimate		—
Balance at March 31, 2011 (Predecessor)	$	64
Fair value adjustment		34
Balance at April 1, 2011 (Successor)	$	98
Accretion expense		5
Liabilities incurred		—
Liabilities settled and other		(3	)
Change in estimate		(38	)
Balance at December 31, 2011 (Successor)	$	62

        During 2011, we revised our estimates for the cost of removal of network equipment, asbestos remediation, and other obligations by $38 million. These revisions resulted in a reduction of the asset retirement obligation and offsetting reduction to gross property, plant and equipment.