# Interest Cost

Interest on borrowings of the company and its consolidated subsidiaries amounted to $512 million in 1985, $456 million in 1984 and $429 million in 1983. Of these amounts, $89 million in 1985, $48 million in 1984 and $39 million in 1983 were capitalized, resulting in interest expense of $443 million, $408 million and $390 million for the same three years.

# Satellite Business Systems

MCI Communications Corporation and IBM have signed an agreement under which MCI will acquire substantially all of the assets and operations of Satellite Business Systems in exchange for approximately 47 million shares of MCI common stock, which IBM agrees to retain for a minimum of three years. At December 31, 1985, the value of the SBS assets to be exchanged was $418 million. Completion of the transaction is subject to approval by the Federal Communications Commission and review under provisions of the Hart/Scott/Rodino Act. In addition, IBM has agreed that it will, under certain conditions, invest an additional $400 million in MCI between September 1, 1986 and December 31, 1988.

IBM and Aetna Life & Casualty had previously reached agreement for IBM to acquire Aetna's interest in SBS, effective June 30, 1985. In addition to certain cash payments and other considerations, Aetna may receive a future payment from IBM which is dependent on the market value of MCI common stock at the time the MCI transaction is concluded, up to a maximum of $98.6 million. Had this transaction taken place on December 31, 1985, the contingent payment would have been approximately $30 million.

IBM's investment in SBS is accounted for by the equity method, and is included in investments and other assets in the consolidated statement of financial position.