VZ 10-K diff: FY 2023-12-31 → FY 2024-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+39 paragraphs −30 paragraphs ~30 changed
FY 2023-12-31 (earlier)
Item 1A. Risk Factors
The following discussion of "Risk Factors" identifies factors that may adversely affect our business, operations, financial condition or future performance. This information should be read in conjunction with "Management’s Discussion and Analysis of Financial Condition and Result of Operations" and the consolidated financial statements and related notes. The following discussion of risks is not all-inclusive but is designed to highlight what we believe are the material factors to consider when evaluating our business and expectations. These factors could cause our future results to differ materially from our historical results and from expectations reflected in forward-looking statements.
Economic and Strategic RisksWe face significant competition that may reduce our profits.
We face significant competition in our industries. The rapid development of new technologies, services and products has eliminated many of the traditional distinctions among wireless, cable, internet and local and long distance communication services and brought new competitors to our markets, including other telecommunications companies, cable companies, wireless service providers, satellite providers, technology companies and application and device providers. While these changes have enabled us to offer new types of products and services, they have also allowed other providers to broaden the scope of their own competitive offerings. If we are unable to compete effectively, we could experience lower than expected revenues and earnings.
Wireless service providers are significantly altering the financial relationships with their customers through commercial offers that vary service and device pricing, promotions, incentives and levels of service provided – in some cases specifically targeting our customers and putting pressure on pricing and margins. In addition, we expect the wireless industry’s customer growth rate to moderate over time in comparison to historical growth rates, leading to increased competition for customers. Our ability to compete effectively will depend on, among other things, our network reliability, speed, capacity and coverage, the pricing of our products and services, the quality of our customer service, our development of new and enhanced products and services, the reach and quality of our sales and distribution channels, our ability to market our products and services effectively and our capital resources. It will also depend on how successfully we anticipate and respond to various factors affecting our industries, including regulatory changes, new technologies and business models, such as the increasing use of artificial intelligence and machine learning technologies, changes in consumer preferences and demand for existing services, demographic trends and evolving economic conditions, including inflation. If we are not able to respond successfully to these competitive challenges, our results of operations and financial condition could be adversely impacted. In addition, a sustained decline in a reporting unit's revenues and earnings has resulted in the past, and may again result in the future, in a significant negative impact on its fair value requiring us to record an impairment charge, which could have an adverse impact on our results of operations.13
Table of ContentsIf we are not able to take advantage of developments in technology and address changing consumer demand on a timely basis, or if the deployment of our 5G network is delayed or hindered for any reason, we may experience a decline in the demand for our services, be unable to implement our business strategy and experience reduced profits.
Our industries are rapidly changing as new technologies are developed that offer consumers an array of choices for their communications needs and allow new entrants into the markets we serve. In order to grow and remain competitive, we will need to adapt to future changes in technology, enhance our existing offerings and introduce new offerings to address our customers’ changing demands. If we are unable to meet future challenges from competing technologies on a timely basis or at an acceptable cost, we could lose customers to our competitors. We may not be able to accurately predict technological trends or the success of new services in the market. If our new services fail to gain acceptance in the marketplace, or if costs associated with the implementation and introduction of these services materially increase, our ability to retain and attract customers could be adversely affected.
The deployment of our 5G network is subject to a variety of risks, including those related to equipment availability, unexpected costs, and regulatory matters that could cause deployment delays or network performance issues. In addition, certain use cases for 5G technologies and related ecosystems are still in early development stages and their ultimate adoption or success is uncertain. These issues could result in significant costs, put us at a competitive disadvantage, or reduce the anticipated benefits of the enhancements to our networks.As we introduce new offerings and technologies, we expect to phase out outdated and unprofitable technologies and services. If we are unable to do so on a cost-effective basis, we could experience reduced profits. In addition, there could be legal or regulatory restraints on our ability to phase out current services.Adverse conditions in the U.S. and international economies could impact our results of operations and financial condition.Unfavorable economic conditions, such as a recession or economic slowdown in the U.S. or elsewhere, or inflation in the markets in which we operate, could negatively affect the affordability of and demand for some of our products and services and our cost of doing business. In difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products, electing to use fewer higher margin services, dropping down in price plans or obtaining lower-cost products and services offered by other companies. Similarly, under these conditions, the business customers that we serve may delay purchasing decisions, delay full implementation of service offerings or reduce their use of services. In addition, adverse economic conditions may lead to an increased number of our consumer and business customers that are unable to pay for services. Unfavorable economic conditions could also amplify other risk factors discussed in this section, including, but not limited to, our competitive position and margins. Over the last two years, as a result of the inflationary environment in the U.S., we experienced increases in our direct costs, including electricity and other energy-related costs for our network operations, and transportation and labor costs, as well as increased interest expenses related to rising interest rates. In 2022, these factors, along with impacts of the intense competition in our industries, resulted in lower earnings per share and caused us to lower our growth expectations and related financial guidance for that year. We expect the inflationary environment and related pressures to continue into 2024. In that case and if other unfavorable economic conditions continue or worsen, they could have a material adverse effect on our results of operations and financial condition.Operational RisksCyber attacks impacting our networks or systems could have an adverse effect on our business.
Cyber attacks, including through the use of ransomware and other forms of malware, distributed denial of services attacks, credential harvesting, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could have an adverse effect on our business. Cyber attacks may cause equipment failures, loss of information, including sensitive personal information of customers or employees or valuable technical and marketing information, as well as disruptions to our or our customers’ operations. Cyber attacks against companies, including Verizon, have increased in frequency, scope and potential harm in recent years. They may occur alone or in conjunction with physical attacks, especially where disruption of service is an objective of the attacker. The development and maintenance of systems to prevent such attacks is costly and requires ongoing monitoring and updating to address their increasing prevalence and sophistication. While, to date, we have not been subject to cyber attacks that, individually or in the aggregate, have been material to Verizon's operations or financial condition, the preventive actions we take to reduce the risks associated with cyber attacks, including protection of our systems and networks, may be insufficient to repel or mitigate the effects of a cyber attack in the future.
The inability to operate or use our networks and systems or those of our suppliers, vendors and other service providers as a result of cyber attacks, even for a limited period of time, may result in significant expenses to Verizon and/or a loss of market share to our competitors. The costs associated with a cyber attack on Verizon could include expensive incentives offered to existing customers and business partners to retain their business, increased expenditures on cybersecurity measures and the use of alternate resources, lost revenues from business interruption and litigation. Further, certain of Verizon’s businesses, such as those offering security solutions and infrastructure and cloud services to business customers, could be negatively affected if14
Table of Contentsour ability to protect our own networks and systems is called into question as a result of a cyber attack. Our presence in the IoT industry, which includes offerings of telematics products and services, could also increase our exposure to potential costs and expenses and reputational harm in the event of cyber attacks impacting these products or services. In addition, a compromise of security or a theft or other compromise of valuable information, such as financial data and sensitive or private personal information, could result in lawsuits and government claims, investigations or proceedings. Any of these occurrences could damage our reputation, adversely impact customer and investor confidence and result in a material adverse effect on Verizon’s results of operation or financial condition.Natural disasters, extreme weather conditions, acts of war, terrorist or other hostile acts could cause damage to our infrastructure and result in significant disruptions to our operations.
Our business operations are subject to interruption by power outages, acts of war, terrorist or other hostile acts, natural disasters or the potential impacts of climate change, including the increasing prevalence and intensity of hurricanes, wildfires, flooding, hail and storms. Such events could cause significant damage to our infrastructure upon which our business operations rely, resulting in degradation or disruption of service to our customers, as well as significant recovery time and expenditures to resume operations. Our system redundancy may be ineffective or inadequate to sustain our operations through all such events. We are implementing, and will continue to implement, measures to protect our infrastructure and operations from the impacts of these events in the future, but these measures and our overall disaster recovery planning may not be sufficient for all eventualities. These events could also damage the infrastructure of the suppliers that provide us with the equipment and services that we need to operate our business and provide products to our customers. These occurrences could result in lost revenues from business interruption, damage to our reputation and reduced profits.
We depend on key suppliers and vendors to provide services and equipment that we need to operate our business.
We depend on various key suppliers and vendors to provide us, directly or through other suppliers, with equipment and services, such as fiber, switch and network equipment, smartphones and other wireless devices, customer service support and other services that we need in order to operate our business. For example, our smartphone and other device suppliers often rely on one vendor for the manufacture and supply of critical components, such as chipsets, used in their devices, and there are a limited number of companies capable of supplying the network infrastructure equipment on which we depend.
Our suppliers or vendors could fail to provide equipment or service on a timely basis, or fail to meet our performance expectations, for a number of reasons, including, for example, disruption to the global supply chain as a result of geopolitical factors, public health crises, natural disasters or the potential impacts of global climate change. If such failures occur, we may be unable to provide products and services as and when requested by our customers, or we may be unable to continue to maintain or upgrade our networks. Due to the cost and time lag that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were required to, or chose to, replace the products or services of one or more major suppliers with products or services from another source, especially if the replacement became necessary on short notice. Any such disruption could increase our costs, decrease our operating efficiencies and have a material adverse effect on our business, results of operations and financial condition.
A significant number of our suppliers and vendors are located or rely on operations outside of the U.S., which carries additional risks and regulatory obligations, including those related to cybersecurity, data privacy and compliance. Certain business practices in foreign countries may not align with U.S. laws and regulations. In addition, international operations increase our exposure to other risks, such as economic and geopolitical instability, fluctuations in exchange rates, and labor-related risks.
The suppliers and vendors on which we rely are and may in the future be subject to litigation with respect to technology on which we depend, including litigation involving claims of patent infringement. Such claims are frequently made in the communications industry. We are unable to predict whether our business will be affected by any such litigation. We expect our dependence on key suppliers to continue as we develop and introduce more advanced generations of technology.A significant portion of our workforce is represented by labor unions, and we could incur additional costs or experience work stoppages as a result of the renegotiation of our labor contracts.As of December 31, 2023, approximately 24.0% of our workforce is represented by the Communications Workers of America or the International Brotherhood of Electrical Workers. While we have labor contracts in place with these unions, with subsequent negotiations we could incur additional costs and/or experience work stoppages, which could adversely affect our business operations. In addition, while a small percentage of the workforce outside of our traditional wireline operations is represented by unions for bargaining, we cannot predict what impact increased union density in this workforce could have on our operations.Damage to our reputation or brands could adversely affect our business.
We believe that our reputation and brands significantly contribute to the success of our business and our relationships with our customers, employees and other stakeholders.Our reputation and brands could be negatively affected by a number of factors, including actual or alleged quality or reliability issues related to our services and products; cybersecurity incidents and data breaches; allegations of legal noncompliance;
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litigation or regulatory activity; incidents involving unethical behavior or misconduct; material weaknesses in our internal controls over financial reporting; safety, human rights, workplace or labor issues; environmental incidents or impacts; governance issues; our sustainability goals and practices; our actual or perceived position or lack of position on social and other sensitive matters; the conduct of our employees, representatives or partners; activists’ campaigns; negative sentiment about us shared over social media or the press; and other issues, incidents, or statements that, whether based on actual or perceived circumstances, result in adverse publicity.Damage to our reputation and brands could undermine our customers’ confidence in us and reduce demand for our products and services, which could result in decreased revenue and adversely affect our business and financial results. If our reputation or brands are damaged, it could also attract regulatory scrutiny, increase litigation risks, affect our ability to attract and retain top talent, and reduce investor confidence in us.
Public health crises could materially adversely affect our business, financial condition and results of operations.We are subject to risks related to public health crises, such as the COVID-19 pandemic, which had an adverse effect on our operating results in 2020. Our business is based on our ability to provide products and services to customers throughout the United States and around the world and the ability of those customers to use and pay for those products and services for their businesses and in their daily lives. As a result, our business, financial condition and results of operations could be materially adversely affected by a public health crisis that significantly impacts the way customers use and are able to pay for our products and services, the way our employees are able to provide services to our customers, and the ways that our partners and suppliers are able to provide products and services to us. For example, public and private sector policies and initiatives to reduce the transmission of COVID-19 and initiatives Verizon took in response to the health crisis to promote the health and safety of our employees and provide critical infrastructure and connectivity to our customers, along with the related global slowdown in economic activity, resulted in decreased revenues, increased costs and lower earnings per share during 2020. In addition, such a crisis could significantly increase the probability or consequences of the risks our business faces in ordinary circumstances, such as risks associated with our supplier and vendor relationships, risks of an economic slowdown, regulatory risks, and the costs and availability of financing.Regulatory and Legal Risks
Changes in the regulatory framework under which we operate could adversely affect our business prospects or results of operations.
Our domestic operations are subject to regulation by the FCC and other federal, state, and local agencies, and our international operations are regulated by various foreign governments and international bodies. These regulatory regimes frequently restrict or impose conditions on our ability to operate in designated areas and provide specified products or services. We are frequently required to maintain licenses for our operations and conduct our operations in accordance with prescribed standards. We are often involved in regulatory and other governmental proceedings or inquiries related to the application of these requirements. It is impossible to predict with any certainty the outcome of pending federal and state regulatory proceedings relating to our operations, or the reviews by federal or state courts of regulatory rulings. Without relief, existing laws and regulations may inhibit our ability to expand our business and introduce new products and services. Similarly, we cannot guarantee that we will be successful in obtaining the licenses needed to carry out our business plan or in maintaining our existing licenses. For example, the FCC grants wireless licenses for terms generally lasting 10 years, subject to renewal. The loss of, or a material limitation on, certain of our licenses could have a material adverse effect on our business, results of operations and financial condition.
New laws or regulations or changes to the existing regulatory framework at the federal, state, and local, or international level, such as those described below, those that incentivize business models or technologies different from ours or requirements limiting our ability to continue or discontinue service to customers could restrict the ways in which we manage our wireline and wireless networks and operate our businesses, impose additional costs, diminish revenue opportunities, and potentially impede our ability to provide services in a manner that would be attractive to us and our customers.• Privacy and data protection – We are subject to local, state, federal and international laws and regulations related to privacy and data protection. In particular, the California Consumer Privacy Act, Europe's General Data Protection Regulation and a number of other privacy laws more recently adopted by other states and countries include significant penalties for non-compliance. Generally, attention to privacy and data security requirements is increasing at all levels of government globally, and privacy-related legislation has been introduced or is under consideration in many locations. These regulations could have a significant impact on our businesses.
• Regulation of broadband internet access services – In 2023, the FCC proposed to return to regulation of broadband services under Title II of the Communications Act. The proposal would revive and expand the FCC's 2015 approach (that was reversed in 2017) to regulating broadband internet access services as telecommunications services subject to utilities-style common carriage regulation. Several states have also adopted or are considering adopting laws or executive orders that would impose net neutrality and other requirements on some of our broadband services. The FCC also adopted broad rules related to "digital discrimination" that could further increase regulatory oversight of broadband services.16
Table of Contents• "Open Access" – We hold certain wireless licenses that require us to comply with so-called "open access" FCC regulations, which generally require licensees of particular spectrum to allow customers to use devices and applications of their choice. Moreover, certain services could be subject to conflicting regulation by the FCC and/or various state and local authorities, which could significantly increase the cost of implementing and introducing new services.
• Climate-Related Regulation and Policy – Due to the nature of our operations, we have been, and expect to continue to be impacted by regulatory developments related to climate change, including, for example, the direct regulation of greenhouse gas emissions or carbon policies that could result in a tax on such emissions. In addition, policy-driven changes in the prices of fuel or energy in geographies in which we operate could make it more expensive for us to purchase energy to power our networks and data centers, and any increase in taxes on fuel could increase our costs associated with operating those vehicles in our fleet that are dependent on traditional fuels.These developments and the further regulation of broadband, wireless, and our other activities and any related court decisions could result in significant increases in costs for us or restrict our ability to compete in the marketplace and limit the return we can expect to achieve on past and future investments in our networks.
Our business may be impacted by changes in tax laws and regulations, or their interpretations, and challenges to our tax positions.Tax laws and regulations are complex, dynamic, and subject to change and varying interpretations, especially when evaluated against new technologies and telecommunications services. In addition, tax legislation has been introduced or is being considered in various jurisdictions that could significantly impact our tax rate, tax liabilities, and carrying value of deferred tax assets or deferred tax liabilities. Any of these changes could materially impact our financial performance and our tax provision, net income and cash flows.We are also subject to ongoing audits, examinations and other tax controversies in various jurisdictions. Although we regularly assess the likelihood of an adverse outcome resulting from these controversies to determine the adequacy of provisions for taxes, the final outcome of any such controversy may be materially different from our expectations. In the event that we have not accurately or fully described, disclosed or determined, calculated or remitted amounts that were due to taxing authorities or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, we could be subject to additional taxes, penalties and interest, which could materially impact our business, financial condition and operating results.
We are subject to a substantial amount of litigation, which could require us to pay significant damages or settlements.We are subject to a substantial amount of litigation and claims in arbitration, including, but not limited to, shareholder lawsuits, patent and copyright infringement lawsuits, wage and hour class actions, contract and commercial claims, personal injury claims, property claims, environmental claims, and lawsuits relating to our advertising, sales, billing and collection practices. In addition, our wireless business also faces personal injury and wrongful death lawsuits relating to alleged health effects of wireless phones or radio frequency transmitters. We may incur significant expenses in defending these lawsuits. In addition, we may be required to pay significant awards or settlements.Allegations related to lead sheathed copper cables in our copper network infrastructure could expose us to regulatory scrutiny, litigation, penalties, removal and compliance costs, operational impact or reputational damage.There have been media reports alleging that certain lead sheathed copper cables that are part of our copper-based network infrastructure may present health or environmental risks in areas where those facilities are deployed. These allegations could result in government investigations, legislative or regulatory actions, litigation, penalties and other liability, remediation and compliance costs or negative operational impacts. In addition, we are currently subject to regulatory inquiries and lawsuits related to these allegations, and additional legal proceedings and other contingencies may arise in the future. Our insurance policies may not cover or may not be sufficient to fully cover the costs of these claims. Accordingly, we may incur substantial expenses as a result of these allegations, which cannot be reasonably estimated at this time but could be material.In addition, negative assertions about the health or environmental impact of our lead sheathed cables may harm our reputation, which could adversely affect our business and our relationship with various stakeholders, even if such allegations ultimately prove to be inaccurate.
Financial RisksVerizon has significant debt, which could increase further if Verizon incurs additional debt in the future and does not retire existing debt.
As of December 31, 2023, Verizon had approximately $128.5 billion of outstanding unsecured indebtedness, $9.5 billion of unused borrowing capacity under our existing revolving credit facility and $22.2 billion of outstanding secured indebtedness. Verizon’s debt level and related debt service obligations could have negative consequences, including:
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• requiring Verizon to dedicate significant cash flow from operations to the payment of principal, interest and other amounts payable on our debt, which would reduce the funds we have available for other purposes, such as working capital, capital expenditures, dividend payments and acquisitions;
• making it more difficult or expensive for Verizon to obtain any necessary future financing for working capital, capital expenditures, debt service requirements, debt refinancing, acquisitions or other purposes and limiting its ability to repurchase common stock;
• reducing Verizon’s flexibility in planning for or reacting to changes in our industries and market conditions;
• making Verizon more vulnerable in the event of a downturn in our business; and
• exposing Verizon to increased interest rate risk to the extent that (i) our debt obligations are subject to variable interest rates or (ii) we need to refinance existing debt that bears interest at a rate lower than current market rates.
Adverse changes in the financial markets and other factors could increase our borrowing costs and the availability of financing.We require a significant amount of capital to operate and grow our business. We fund our capital needs in part through borrowings in the public and private credit markets. Adverse changes in the financial markets, including increases in interest rates or changes in exchange rates, could increase our cost of borrowing, require us to post a significant amount of collateral, and/or make it more difficult for us to obtain financing for our operations or refinance existing indebtedness. In addition, our ability to obtain funding under asset-backed debt transactions is subject to our ability to continue to originate a sufficient amount of assets eligible to be securitized. Our borrowing costs also can be affected by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by customary credit metrics. A decrease in these ratings would likely increase our cost of borrowing and/or make it more difficult for us to obtain financing. A severe disruption in the global financial markets could impact some of the financial institutions with which we do business, and such instability could also affect our access to financing.
Increases in costs for pension benefits and active and retiree healthcare benefits may reduce our profitability and increase our funding commitments.With approximately 105,400 employees and approximately 182,700 retirees as of December 31, 2023 eligible to participate in Verizon’s benefit plans, the costs of pension benefits and active and retiree healthcare benefits have a significant impact on our profitability. Our costs of maintaining these plans, and the future funding requirements for these plans, are affected by several factors, including increases in healthcare costs, decreases in investment returns on funds held by our pension and other benefit plan trusts and changes in the discount rate and mortality assumptions used to calculate pension and other postretirement expenses. If we are unable to limit future increases in the costs of our benefit plans, those costs could reduce our profitability and increase our funding commitments.
FY 2024-12-31 (later)
Item 1A. Risk Factors
The following discussion of "Risk Factors" identifies factors that may adversely affect our business, operations, financial condition or future performance. This information should be read in conjunction with "Management’s Discussion and Analysis of Financial Condition and Result of Operations" and the consolidated financial statements and related notes. The following discussion of risks is not all-inclusive but is designed to highlight what we believe are the material factors to consider when evaluating our business and expectations. These factors could cause our future results to differ materially from our historical results and from expectations reflected in forward-looking statements.
Economic and Strategic RisksWe face significant competition that may negatively affect our operating results.
We face significant competition in our industries. The rapid development of new technologies, services and products has eliminated many of the traditional distinctions among wireless, cable, internet and other communication services and brought new competitors to our markets, including other telecommunications companies, cable companies, wireless service providers, satellite providers, technology companies and application and device providers. While these changes have enabled us to offer new types of products and services, they have also allowed other providers to broaden the scope of their own competitive offerings. If we are unable to successfully differentiate our services and products from our competitors, it could adversely affect our competitive position and market share.
Our competitors commonly offer aggressive pricing, promotions, premium content options and other incentives – in some cases specifically targeting our customers and putting pressure on our pricing and margins. In addition, we expect the wireless industry’s customer growth rate to moderate over time in comparison to historical growth rates, leading to increased competition for customers. Our ability to compete effectively will depend on, among other things, our network reliability, speed, capacity and coverage, the pricing of our products and services, our and our competitors' promotional strategies, the quality of our customer service, our development of new and enhanced products and services, the reach and quality of our sales and distribution channels, our ability to market our products and services effectively and our capital resources. It will also depend on how successfully we anticipate and respond to various factors affecting our industries, including regulatory changes, new technologies and business models, such as the increasing use of AI and machine learning technologies, changes in consumer preferences and demand for existing services, demographic trends and evolving geopolitical and economic conditions, including inflation. If we are not able to respond successfully to these competitive challenges, our results of operations and financial condition could be adversely impacted. In addition, a sustained decline in a reporting unit's revenues and earnings has resulted in the past, and may again result in the future, in a significant negative impact on its fair value requiring us to record an impairment charge, which could have an adverse impact on our results of operations.
If we are not able to take advantage of developments in technology and address changing consumer demand on a timely basis, or if the ongoing deployment of our 5G network is delayed or hindered for any reason, we may experience a decline in the demand for our services, be unable to implement our business strategy and experience reduced profits.
Our industries are rapidly changing as new technologies are developed that offer consumers an array of choices for their communications needs and allow new entrants into the markets we serve. In order to grow and remain competitive, we will need to adapt to future changes in technology, enhance our existing offerings and introduce new offerings to address our customers’ changing demands. If we are unable to meet future challenges from competing technologies on a timely basis or at an acceptable cost, we could lose customers to our competitors. We may not be able to accurately predict technological trends or the success of new services in the market. If our new services fail to gain acceptance in the marketplace, or if costs associated13
Table of Contentswith the implementation and introduction of these services materially increase, our ability to retain and attract customers could be adversely affected.
The deployment of our 5G network is subject to a variety of risks, including those related to equipment availability, unexpected costs, and regulatory matters that could cause deployment delays or network performance issues. In addition, certain advanced use cases for 5G technologies and related ecosystems are still in the early phases of adoption and their ultimate adoption or success is uncertain. These issues could result in significant costs, put us at a competitive disadvantage, or reduce the anticipated benefits of the enhancements to our networks.As we introduce new offerings and technologies, we expect to phase out outdated and unprofitable technologies and services. If we are unable to do so on a cost-effective basis, we could experience reduced profits. In addition, there could be legal or regulatory restraints on our ability to phase out current services.Finally, we are using AI in our network deployment and maintenance as well as our customer and employee support services. There are technological, regulatory, ethical and other risks involved in deploying and using AI, particularly generative AI models. There can be no assurance that the usage of AI will meaningfully enhance our products or services or be beneficial to our business, including our efficiency or profitability. Our investments in AI and related technologies may not result in the benefits we anticipate or enable us to obtain or maintain a competitive advantage.Adverse conditions in the U.S. and international economies could impact our results of operations and financial condition.Unfavorable economic conditions, such as a recession or economic slowdown in the U.S. or elsewhere, or inflation in the markets in which we operate, could negatively affect the affordability of and demand for some of our products and services and our cost of doing business. In difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products, electing to use fewer higher margin services, dropping down in price plans or obtaining lower-cost products and services offered by other companies. Similarly, under these conditions, business customers may delay purchasing decisions, or full implementation of our service offerings, reduce their use of our services or choose lower-cost offerings from our competitors. In addition, adverse economic conditions may lead to an increased number of our consumer and business customers that are unable to pay for services. Unfavorable economic conditions could also amplify other risks discussed in this report, including, but not limited to, those related to our competitive position and margins. Furthermore, our initiatives designed to reduce costs and improve operating efficiencies may be ineffective or insufficient.
Over the last several years, as a result of the inflationary environment in the U.S., we experienced increases in our direct costs, including electricity and other energy-related costs for our network operations, and transportation and labor costs, as well as increased interest expense related to changing interest rates. In 2022, these factors, along with impacts of the intense competition in our industries, resulted in lower earnings per share and caused us to lower our growth expectations and related financial guidance for that year. Similarly, unfavorable economic conditions in the future could have a material adverse effect on our results of operations and financial condition.Operational RisksCyberattacks impacting our networks or systems could have an adverse effect on our business.
Cyberattacks, including through the use of ransomware and other forms of malware, distributed denial of services attacks, credential harvesting, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could have an adverse effect on our business. Cyberattacks against companies, including Verizon, have increased in frequency, scope and potential harm in recent years. Cyberattacks may be perpetrated by a variety of groups or persons, including nation-state and state-sponsored actors, malicious actors, employees, contractors, or other unrelated third parties. Nation-state and state-sponsored actors can sustain malicious activities for extended periods and deploy significant resources to plan and carry out attacks. For example, in September 2024, we became aware that we were one of several telecommunications companies that were the subject of a cyberattack by a highly sophisticated nation-state actor known as Salt Typhoon. In that case, the threat actor was able to access portions of our network as part of what we determined to be a narrowly focused effort to obtain information about a limited number of individuals primarily involved in government or political activity. While we were able to contain the Salt Typhoon attack, we may be unable to contain or mitigate the impacts of a significant cyberattack in the future.
Cyberattacks may cause equipment failures, loss of information, including sensitive personal information of customers or employees or valuable technical, financial and marketing information. Such attacks may also result in disruptions to our customers’ operations or our own business operations, including our ability to operate our networks and systems, activate customers or take payments. Cyberattacks may occur alone or in conjunction with physical attacks, especially where disruption of service is an objective of the attacker. Further, the use of AI and machine learning by threat actors may increase the frequency and severity of cyberattacks against us or other companies. The inability to operate or use our networks and systems or those of our suppliers, vendors and other service providers as a result of cyberattacks, even for a limited period of time, may result in significant expenses to Verizon, a loss of current or future customers and/or a loss of market share to our competitors. The costs associated with a cyberattack on Verizon could include expensive incentives offered to existing customers and business partners14
Table of Contentsto retain their business, increased expenditures on cybersecurity measures and the use of alternate resources, lost revenues from business interruption and the costs of investigations and litigation, including potential damages. Further, certain of Verizon’s businesses, such as those offering security solutions and infrastructure and cloud services to business customers, could be negatively affected if our ability to protect our own networks and systems is called into question as a result of a cyberattack. Our presence in the IoT industry, which includes offerings of telematics products and services, could also increase our exposure to potential costs and expenses and reputational harm in the event of cyberattacks impacting these products or services. Any of these occurrences could damage our reputation, adversely impact customer and investor confidence and result in a material adverse effect on Verizon’s results of operation or financial condition.
The development and maintenance of systems to prevent and detect cyberattacks is costly and requires ongoing monitoring and updating to address the increasing prevalence and sophistication of cyberattacks. In addition, due to the sophistication of threat actors, an attack may persist for an extended period of time before it is detected, and it may be difficult and time consuming to ascertain the extent of an attack once detected.
While none of the cyberattacks to which we have been subject to date have been material to Verizon's operations or financial condition, there can be no guarantee that we will not experience a material cyberattack in the future. The actions we take to reduce the risks associated with cyberattacks, including protecting our systems and networks, may be insufficient to repel or mitigate the effects of a cyberattack in the future.Natural disasters, extreme weather conditions, acts of war, terrorist or other hostile acts could cause damage to our infrastructure and result in significant disruptions to our operations.
Our business operations are subject to interruption by power outages, acts of war, terrorist or other hostile acts, natural disasters or the potential impacts of climate change, including the increasing prevalence and intensity of hurricanes, wildfires, flooding, hail and storms. Such events could cause significant damage to our infrastructure upon which our business operations rely, resulting in degradation or disruption of service to our customers, as well as significant recovery time and expenditures to resume operations. Our system redundancy may be ineffective or inadequate to sustain our operations through all such events. We are implementing, and will continue to implement, measures to protect our infrastructure and operations from the impacts of these events in the future, but these measures and our overall disaster recovery planning may not be sufficient for all eventualities. These events could also damage the infrastructure of the suppliers that provide us with the equipment and services that we need to operate our business and provide products to our customers. These occurrences could result in lost revenues from business interruption, damage to our reputation and reduced profits.
We depend on key suppliers and vendors to provide services and equipment that we need to operate our business.
We depend on various key suppliers and vendors to provide us, directly or through other suppliers, with equipment and services, such as fiber, switch and network equipment, smartphones and other wireless devices, customer service support and other services that we need in order to operate our business. For example, our smartphone and other device suppliers often rely on one vendor for the manufacture and supply of critical components, such as chipsets, used in their devices, and there are a limited number of companies capable of supplying the network infrastructure equipment on which we depend.
Our suppliers or vendors could fail to provide equipment or service on a timely basis, or fail to meet our performance expectations, for a number of reasons, including, for example, disruption to the global supply chain as a result of geopolitical factors, public health crises, natural disasters or the potential impacts of global climate change. If such failures occur, we may be unable to provide products and services as and when requested by our customers, or we may be unable to continue to maintain or upgrade our networks. Due to the cost and time lag that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were required to, or chose to, replace the products or services of one or more major suppliers with products or services from another source, especially if the replacement became necessary on short notice. Any such disruption could increase our costs, decrease our operating efficiencies and have a material adverse effect on our business, results of operations and financial condition.
A significant number of our suppliers and vendors are located or rely on operations outside of the U.S., which carries additional risks and regulatory obligations, including those related to cybersecurity, data privacy and compliance. Certain business practices in foreign countries may not align with U.S. laws and regulations. In addition, international operations increase our exposure to other risks, such as economic and geopolitical instability, fluctuations in exchange rates, and labor-related risks.
The suppliers and vendors on which we rely are and may in the future be subject to litigation with respect to technology on which we depend, including litigation involving claims of patent infringement. Such claims are frequently made in the communications industry. We are unable to predict whether our business will be affected by any such litigation. We expect our dependence on key suppliers to continue as we develop and introduce more advanced generations of technology.15
Table of ContentsA significant portion of our workforce is represented by labor unions, and we could incur additional costs or experience work stoppages as a result of the renegotiation of our labor contracts.As of December 31, 2024, approximately 25% of our workforce is represented by the Communications Workers of America or the International Brotherhood of Electrical Workers. While we have labor contracts in place with these unions, with subsequent negotiations we could incur additional costs and/or experience work stoppages, which could adversely affect our business operations. In addition, while a small percentage of the workforce outside of our traditional wireline operations is represented by unions for bargaining, we cannot predict what impact increased union density in this workforce could have on our operations.Damage to our reputation or brands could adversely affect our business.
We believe that our reputation and brands significantly contribute to the success of our business and our relationships with our customers, employees and other stakeholders.Our reputation and brands could be negatively affected by a number of factors, including actual or alleged quality or reliability issues related to our services and products; cybersecurity incidents and data breaches; allegations of legal noncompliance; litigation or regulatory activity; incidents involving unethical behavior or misconduct; material weaknesses in our internal controls over financial reporting; safety, human rights, workplace or labor issues; environmental incidents or impacts; allegations related to the safety of our products, services and equipment; governance issues; our sustainability goals and practices; our actual or perceived position or lack of position on social and other sensitive matters; the conduct of our employees, representatives or partners; activists’ campaigns; negative sentiment about us shared over social media or the press; and other issues, incidents, or statements that, whether based on actual or perceived circumstances, result in adverse publicity. In addition, changes to the content standards of social media platforms could impact our marketing and advertising initiatives on such platforms and increase risks related to our brand.Damage to our reputation and brands could undermine our customers’ confidence in us and reduce demand for our products and services, which could result in decreased revenue and adversely affect our business and financial results. If our reputation or brands are damaged, it could also attract regulatory scrutiny, increase litigation risks, affect our ability to attract and retain top talent, and reduce investor confidence in us.
Public health crises could materially adversely affect our business, financial condition and results of operations.We are subject to risks related to public health crises, which have in the past, and may in the future, have an adverse effect on our business, financial condition and operating results. For example, in 2020, the COVID-19 pandemic and resulting policies, initiatives and impacts, along with the related global slowdown in economic activity, resulted in our decreased revenues, increased costs and lower earnings per share. Negative effects of a public health crisis may include, but are not limited to, closure of our retail stores, impacts on customers' use of our networks, products and services and their ability to pay for them, employees' health and safety concerns, limitation of customer-focused field operations, and vendor and supply chain disruptions. In addition, such a crisis could significantly increase the probability or consequences of the risks our business faces in ordinary circumstances, such as risks associated with our supplier and vendor relationships, risks of an economic slowdown, regulatory risks, and the costs and availability of financing.Regulatory and Legal Risks
Changes in the regulatory framework under which we operate could adversely affect our business prospects or results of operations.
Our domestic operations are subject to regulation by the FCC and other federal, state, and local agencies, and our international operations are regulated by various foreign governments and international bodies. These regulatory regimes frequently restrict or impose conditions on our ability to operate in designated areas and provide specified products or services. We are frequently required to maintain licenses for our operations and conduct our operations in accordance with prescribed standards. We are often involved in regulatory and other governmental proceedings or inquiries related to the application of these requirements. It is impossible to predict with any certainty the outcome of pending federal and state regulatory proceedings relating to our operations, or the reviews by federal or state courts of regulatory rulings. Without relief, existing laws and regulations may inhibit our ability to expand our business and introduce new products and services. Similarly, we cannot guarantee that we will be successful in obtaining the licenses needed to carry out our business plan or in maintaining our existing licenses. For example, the FCC grants wireless licenses for terms generally lasting 10 years, subject to renewal. The loss of, or a material limitation on, certain of our licenses could have a material adverse effect on our business, results of operations and financial condition.
New laws or regulations or changes to the existing regulatory framework at the federal, state, and local, or international level, such as those described below, those that incentivize business models or technologies different from ours or requirements limiting our ability to continue or discontinue service to customers could restrict the ways in which we manage our wireline and wireless networks and operate our businesses, impose additional costs, diminish revenue opportunities, and potentially impede our ability to provide services in a manner that would be attractive to us and our customers.16
Table of Contents• Privacy and data protection – We are subject to local, state, federal and international laws and regulations related to privacy and data protection. In particular, the California Consumer Privacy Act, Europe's General Data Protection Regulation and a number of other privacy laws more recently adopted by other states and countries include significant penalties for non-compliance. Generally, attention to privacy and data security requirements is increasing at all levels of government globally, and privacy-related legislation has been introduced or is under consideration in many locations. These regulations could have a significant impact on our businesses.
• Regulation of broadband internet access services – Verizon offers many different broadband services. In early January 2025, based on litigation filed by the broadband industry, a federal appeals court overturned the FCC's April 2024 final decision to regulate broadband services via utility-style common carriage regulation under Title II of the Communications Act. Absent further action in the courts, this decision will remain in effect and limit the risk of burdensome FCC broadband regulation. In addition to federal activity, several states have adopted or are considering adopting laws or executive orders that would impose net neutrality and other requirements on some of our broadband services, including a law in New York that requires discounted broadband pricing for low income customers. Some states may also impose pricing or other rules related to broadband built with the assistance of federal or state funding. The FCC also adopted broad rules related to "digital discrimination" that could further increase regulatory oversight of broadband services; industry groups have appealed those rules in court.
• "Open access" – We hold certain wireless licenses that require us to comply with so-called "open access" FCC regulations, which generally require licensees of particular spectrum to allow customers to use devices and applications of their choice. Moreover, certain services could be subject to conflicting regulation by the FCC and/or various state and local authorities, which could significantly increase the cost of implementing and introducing new services.
• Climate-related regulation and policy – Due to the nature of our operations, we have been, and expect to continue to be impacted by regulatory developments related to climate change, including, for example, the direct regulation of greenhouse gas emissions or carbon policies that could result in a tax on such emissions. In addition, policy-driven changes in the prices of fuel or energy in geographies in which we operate could make it more expensive for us to purchase energy to power our networks and data centers, and any increase in taxes on fuel could increase our costs associated with operating those vehicles in our fleet that are dependent on traditional fuels.These developments and the further regulation of broadband, wireless, and our other activities and any related court decisions could result in significant increases in costs for us or restrict our ability to compete in the marketplace and limit the return we can expect to achieve on past and future investments in our networks.
Our business may be impacted by changes in tax laws and regulations, or their interpretations, and challenges to our tax positions.Tax laws and regulations are complex, dynamic, and subject to change and varying interpretations, especially when evaluated against new technologies and telecommunications services. In addition, tax legislation has been introduced or is being considered in various jurisdictions that could significantly impact our tax rate, tax liabilities, and the carrying value of deferred tax assets or deferred tax liabilities. Any of these changes could materially impact our financial performance and our tax provision, net income and cash flows.We are also subject to ongoing audits, examinations and other tax controversies in various jurisdictions. Although we regularly assess the likelihood of an adverse outcome resulting from these controversies to determine the adequacy of provisions for taxes, the final outcome of any such controversy may be materially different from our expectations. In the event that we have not accurately or fully described, disclosed or determined, calculated or remitted amounts that were due to taxing authorities or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, we could be subject to additional taxes, penalties and interest, which could materially impact our business, financial condition and operating results.
We are subject to a substantial amount of litigation, which could require us to pay significant damages or settlements.We are subject to a substantial amount of litigation and claims in arbitration, including, but not limited to, shareholder lawsuits, patent and copyright infringement lawsuits, wage and hour class actions, contract and commercial claims, personal injury claims, property claims, environmental claims, and lawsuits relating to our advertising, sales, billing and collection practices. We may incur significant expenses in defending these lawsuits. In addition, we may be required to pay significant awards of damages or settlements. We also could be subject to court-ordered injunctions and other remedies that could negatively impact our business operations. Our wireless business is also subject to lawsuits relating to alleged adverse health effects of wireless phones and radio frequency transmitters. Any of these allegations or changes in government agencies’ assessment of the risks associated with using wireless devices could result in significant legal and regulatory liability and other remedies, and could have a material adverse effect on our business, financial condition and operating results.
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Table of ContentsAllegations related to lead sheathed copper cables in our copper network infrastructure could expose us to regulatory scrutiny, litigation, penalties, removal and compliance costs, operational impact or reputational damage.There have been media reports alleging that certain lead sheathed copper cables that are part of our copper-based network infrastructure may present health or environmental risks in areas where those facilities are deployed. These allegations have resulted in government investigations, regulatory inquiries and litigation, and could further result in legislative or regulatory actions, penalties and other liability, remediation and compliance costs or negative operational impacts. Additional legal proceedings and other contingencies may arise in the future. Our insurance policies may not cover or may not be sufficient to fully cover the costs of these claims. Accordingly, we may incur substantial expenses as a result of these allegations, which cannot be reasonably estimated at this time but could be material.In addition, negative assertions about the health or environmental impact of our lead sheathed cables may harm our reputation, which could adversely affect our business and our relationship with various stakeholders, even if such allegations ultimately prove to be inaccurate.
Financial RisksVerizon has significant debt, which could increase further if we incur additional debt in the future and do not retire existing debt.
As of December 31, 2024, Verizon had approximately $117.9 billion of outstanding unsecured indebtedness, $12.0 billion of unused borrowing capacity under our existing revolving credit facility and $26.1 billion of outstanding secured indebtedness. Our debt level and related debt service obligations could have negative consequences, including:
• requiring us to dedicate significant cash flow from operations to the payment of principal, interest and other amounts payable on our debt, which would reduce the funds we have available for other purposes, such as working capital, capital expenditures, dividend payments and acquisitions;
• making it more difficult or expensive for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements, debt refinancing, acquisitions or other purposes and limiting our ability to repurchase common stock;
• reducing our flexibility in planning for or reacting to changes in our industries and market conditions;
• making us more vulnerable in the event of a downturn in our business; and
• exposing us to increased interest rate risk to the extent that (i) our debt obligations are subject to variable interest rates or (ii) we need to refinance existing debt that bears interest at a rate lower than current market rates.
Our initiatives aimed at reducing our indebtedness and achieving any target leverage ratio may be unsuccessful due to macroeconomic, business and other factors.
Adverse changes in the financial markets and other factors could increase our borrowing costs and reduce the availability of financing.We require a significant amount of capital to operate and grow our business. We fund our capital needs in part through borrowings in the public and private credit markets. Adverse changes in the financial markets, including increases in interest rates or changes in exchange rates, could increase our cost of borrowing, require us to post a significant amount of collateral, and/or make it more difficult for us to obtain financing for our operations or refinance existing indebtedness. In addition, our ability to obtain funding under asset-backed debt transactions is subject to our ability to continue to originate a sufficient amount of assets eligible to be securitized. Our borrowing costs also can be affected by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by customary credit metrics. A decrease in these ratings would likely increase our cost of borrowing and/or make it more difficult for us to obtain financing. A severe disruption in the global financial markets could impact some of the financial institutions with which we do business, and such instability could also affect our access to financing.
Increases in costs for pension benefits and active and retiree healthcare benefits may reduce our profitability and increase our funding commitments.With approximately 99,600 employees and approximately 179,700 retirees as of December 31, 2024 eligible to participate in Verizon’s benefit plans, the costs of pension benefits and active and retiree healthcare benefits have a significant impact on our profitability. Our costs of maintaining these plans, and the future funding requirements for these plans, are affected by several factors, including increases in healthcare costs, decreases in investment returns on funds held by our pension and other benefit plan trusts and changes in the discount rate and mortality assumptions used to calculate pension and other postretirement
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expenses. If we are unable to limit future increases in the costs of our benefit plans, those costs could reduce our profitability and increase our funding commitments.
We are subject to risks associated with mergers, acquisitions, divestitures and other strategic transactions.
From time to time, we pursue mergers, acquisitions, joint ventures, assets transfers and other strategic transactions that we believe may expand our business or are consistent with our strategy. We may also occasionally divest assets and businesses. Any such transaction entails certain risks and could present financial, managerial and operational challenges. If we are unable to consummate planned strategic transactions and successfully integrate acquired businesses into our existing operations, or if we are not able to achieve cost savings, synergies and other anticipated benefits of any such transaction, our business could be negatively affected. Divestitures may result in asset impairment and disposition charges, and loss of income from divested assets and businesses, or require continued financial involvement in the divested business for a period following the transaction, including through indemnification arrangements. In addition, strategic transactions may involve significant expenses, require additional financing or expose us to liabilities not discovered in the due diligence process or as a result of transaction-related litigation. These and other risks related to our mergers, acquisitions, divestitures and other strategic transactions, including our pending acquisition of Frontier, may have an adverse effect on our business, financial condition, and operating results.
Item 7 · Management's Discussion & Analysis
+353 paragraphs −349 paragraphs ~349 changed
FY 2023-12-31 (earlier)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OverviewVerizon Communications Inc. is a holding company that, acting through its subsidiaries, is one of the world’s leading providers of communications, technology, information and entertainment products and services to consumers, businesses and government entities. With a presence around the world, we offer data, video and voice services and solutions on our networks and platforms that are designed to meet customers’ demand for mobility, reliable network connectivity and security.
To compete effectively in today’s dynamic marketplace, we are focused on the capabilities of our high-performing networks to drive growth based on delivering what customers want and need in the digital world. We are consistently deploying new network architecture and technologies to secure our leadership in both 4G and 5G wireless networks. Our network quality is the hallmark of our brand and the foundation for the connectivity, platforms and solutions upon which we build our competitive advantage. In 2023, we continued deploying our C-Band spectrum, enhancing and driving the monetization of our networks, platforms and solutions, while focusing on improving our financial and operating performance.Our strategy requires significant capital investments primarily to acquire wireless spectrum, put the spectrum into service, provide additional capacity for growth in our networks, invest in the fiber that supports our businesses, evolve and maintain our networks and develop and maintain significant advanced information technology systems and data system capabilities. We believe that our C-Band spectrum, together with our industry leading millimeter wave spectrum holdings and our 4G LTE network and fiber infrastructure, will drive innovative products and services and fuel our growth.Highlights of Our 2023 Financial Results(dollars in millions)
Business OverviewWe have two reportable segments that we operate and manage as strategic business units - Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
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Revenue by Segment
———
Note: Excludes eliminations.
Verizon Consumer GroupOur Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. Our wireline services are provided in nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100% fiber-optic network through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios. Our Consumer segment's wireless and wireline products and services are available to our retail customers, as well as resellers that purchase wireless network access from us on a wholesale basis.Customers can obtain our wireless services on a postpaid or prepaid basis. Our postpaid service is generally billed one month in advance for a monthly access charge in return for access to and usage of network services. Our prepaid service is offered only to Consumer customers and enables individuals to obtain wireless services without credit verification by paying for all services in advance. The Consumer segment also offers several categories of wireless equipment to customers, including a variety of smartphones and other handsets, wireless-enabled internet devices, such as tablets, and other wireless-enabled connected devices, such as smart watches.In addition to the wireless services and equipment discussed above, the Consumer segment sells residential fixed connectivity solutions, including internet, video and voice services, and wireless network access to resellers on a wholesale basis. The Consumer segment's operating revenues for the year ended December 31, 2023 totaled $101.6 billion, a decrease of $1.9 billion, or 1.8%, compared to the year ended December 31, 2022. See "Segment Results of Operations" for additional information regarding our Consumer segment’s operating performance and selected operating statistics.Verizon Business GroupOur Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products, including solutions that support mobile resource management. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world. The Business segment's operating revenues for the year ended December 31, 2023 totaled $30.1 billion, a decrease of $950 million, or 3.1%, compared to the year ended December 31, 2022. See "Segment Results of Operations" for additional information regarding our Business segment’s operating performance and selected operating statistics.Corporate and OtherCorporate and other primarily includes device insurance programs, investments in unconsolidated businesses and development stage businesses that support our strategic initiatives, as well as unallocated corporate expenses, certain pension and other employee benefit related costs and interest and financing expenses. Corporate and other also includes the historical results of divested businesses and other adjustments and gains and losses that are not allocated or used in assessing segment performance due to their nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses from these transactions that are not individually significant are included in segment results and therefore included in the chief operating decision maker’s assessment of segment performance. See "Consolidated Results of Operations" for additional information regarding Corporate and other results.
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Capital Expenditures and InvestmentsWe continue to invest in our wireless networks, high-speed fiber and other advanced technologies to position ourselves at the center of growth trends for the future. During the year ended December 31, 2023, these investments included $18.8 billion for capital expenditures . See "Cash Flows Used in Investing Activities" and "Liquidity and Capital Resources" for additional information. In the second quarter of 2023, we completed our accelerated $10 billion capital program related to C-Band spectrum deployment. Our ongoing C-Band spectrum deployment is funded through our general capital expenditure program.
Global Network and Technology
Over the past several years, we have been leading the development of 5G wireless technology industry standards and the ecosystems for fixed and mobile 5G wireless services. 5G technology enables higher throughput and lower latency than 4G LTE technology and allows our networks to handle more traffic as the number of internet-connected devices grows.
We are focusing our capital investment on building our next generation 5G network, while also adding capacity and density to our 4G LTE network. We are densifying our networks by utilizing macro and small cell technology, in-building solutions and distributed antenna systems. Network densification enables us to add capacity to address increasing mobile video consumption and the growing demand for IoT products and services on our 5G and 4G LTE networks. In January 2022, we began rapidly deploying our C-Band spectrum, which, as of December 31, 2023, covers approximately 242 million people in the U.S. We obtained full access to our C-Band spectrum in August 2023 and will continue deploying this spectrum across the continental U.S.
To compensate for the shrinking market for traditional copper-based products, we continue to build fiber-based networks supporting data, video and advanced business services - areas where demand for reliable high-speed connections is growing. In addition, we leverage our 5G and 4G LTE networks for our FWA broadband service.Consolidated Results of OperationsIn this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. In "Segment Results of Operations," we review the performance of our two reportable segments in more detail.
During the first quarter of 2023, Verizon reorganized the customer groups within its Business segment. Previously, this segment was comprised of four customer groups: Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale. Following the reorganization, there are now three customer groups: Enterprise and Public Sector, Business Markets and Other, and Wholesale. Enterprise and Public Sector combines the customers previously included in Global Enterprise and Public Sector and Other (excluding BlueJeans and Connect customers) as well as the commercial wireline customers previously included in Small and Medium Business. Business Markets and Other combines the customers previously included in Small and Medium Business (excluding commercial wireline customers), the BlueJeans customers previously included in Global Enterprise and Public Sector and Other, and the Connect customers previously included in Public Sector and Other. The Wholesale customer group remained unchanged. Prior period operating revenue results within the Business segment have been recast for these reorganized customer groups. There was no change to the composition of our reportable segments and total segment results, nor the determination of segment profit.
A discussion of the Business segment's 2021 operating revenue results reflecting the current customer groups and year-over-year comparisons between 2022 and 2021 have been included in "Segment Results of Operations" below. A discussion of the 2021 items and year-over-year comparisons between 2022 and 2021 for all other items that are not included in this Form 10-K can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.Consolidated Operating Revenues
(dollars in millions)Decrease
Years Ended December 31, 2023 2022 2023 vs. 2022
Consumer $ 101,626 $ 103,506 $ (1,880) (1.8) %
Business 30,122 31,072 (950) (3.1)
Corporate and other 2,479 2,510 (31) (1.2)
Eliminations (253) (253) — —
Consolidated Operating Revenues $ 133,974 $ 136,835 $ (2,861) (2.1)
Consolidated operating revenues decreased during 2023 compared to 2022 primarily due to decreases in Wireless equipment revenues.Revenues for our segments are discussed separately below under the heading "Segment Results of Operations."24
Table of ContentsConsolidated Operating Expenses
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Cost of services $ 28,100 $ 28,637 $ (537) (1.9) %
Cost of wireless equipment 26,787 30,496 (3,709) (12.2)
Selling, general and administrative expense 32,745 30,136 2,609 8.7
Depreciation and amortization expense 17,624 17,099 525 3.1
Verizon Business Group goodwill impairment 5,841 — 5,841 nm
Consolidated Operating Expenses $ 111,097 $ 106,368 $ 4,729 4.4nm - not meaningful
Operating expenses for our segments are discussed separately below under the heading "Segment Results of Operations."Cost of Services
Cost of services includes the following costs directly attributable to a service: salaries and wages, benefits, materials and supplies, content costs, contracted services, network access and transport costs, customer provisioning costs, computer systems support and costs to support our outsourcing contracts and technical facilities. Aggregate customer service costs, which include billing and service provisioning, are allocated between Cost of services and Selling, general and administrative expense.Cost of services decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $658 million in access costs primarily as a result of pricing changes and usage declines largely related to the shutdown of our competitors' third-generation (3G) networks in 2022 and ongoing efforts to migrate off network prepaid subscribers to the Verizon network;
• a decrease of $156 million in direct costs primarily related to certain professional services that did not reoccur in 2023;
• an increase of $204 million in regulatory costs primarily related to a higher net Federal Universal Service Fund (FUSF) rate; and
• an increase of $149 million in rent and lease expense primarily driven by new leases and lease modifications related to the deployment of the C-Band spectrum.Cost of Wireless EquipmentCost of wireless equipment decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $4.7 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 24% in upgrades; and
• an increase of $953 million due to a shift to higher priced equipment in the mix of wireless devices sold.Selling, General and Administrative Expense
Selling, general and administrative expense includes salaries and wages and benefits not directly attributable to a service or product, the provision for credit losses, taxes other than income taxes, advertising and sales commission costs, call center and information technology costs, regulatory fees, professional service fees and rent and utilities for administrative space. Also included is a portion of the aggregate customer care costs as discussed above in "Cost of Services."Selling, general and administrative expense increased during 2023 compared to 2022 primarily due to:
• an increase of $603 million in the provision for credit losses resulting from additional bad debt reserves as collections return to pre-pandemic levels, coupled with an increase in wireless retail postpaid gross additions;
• an increase of $533 million in personnel costs from severance charges;
• an increase of $458 million primarily related to asset rationalization charges;
• an increase of $393 million primarily related to higher costs for device insurance programs due to an increase in claims;
• an increase of $299 million in advertising costs driven by costs associated with the myPlan launch in the second quarter of 2023 and the scaling of our Total by Verizon prepaid brand;
• an increase of $161 million related to business transformation costs;
• an increase of $113 million in connection with the non-strategic business shutdown of our BlueJeans business offering; and
• an increase of $100 million related to a legal settlement.
See "Special Items" for additional information on the severance charges, asset rationalization charges, business transformation costs, the non-strategic business shutdown and the legal settlement.Depreciation and Amortization ExpenseDepreciation and amortization expense increased during 2023 compared to 2022, primarily due to the change in the mix of net depreciable and amortizable assets, including acquisition-related intangible assets, and the continued deployment of C-Band network assets.
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Table of ContentsVerizon Business Group Goodwill Impairment
During 2023, we recorded a pre-tax charge of $5.8 billion as a result of the annual goodwill impairment test performed in the fourth quarter. See "Critical Accounting Estimates" for additional information.Other Consolidated Results
Other Income (Expense), Net
Additional information relating to Other income (expense), net is as follows:
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Interest income $ 354 $ 146 $ 208 nm
Other components of net periodic benefit income (cost) (938) 2,386 (3,324) nm
Net debt extinguishment gains (losses) 308 (1,077) 1,385 nm
Other, net (37) (82) 45 54.9 %
Other Income (Expense), Net $ (313) $ 1,373 $ (1,686) nmnm - not meaningfulOther income (expense), net reflects certain items not directly related to our core operations, including interest income, debt extinguishment costs, components of net periodic pension and postretirement benefit cost and income and certain foreign exchange gains and losses.
Other income (expense), net decreased during 2023 compared to 2022 primarily due to:
• a net pension and postretirement benefits remeasurement loss of $992 million recorded during 2023, compared with a gain of $1.7 billion recorded during 2022, as well as an increase in interest costs in 2023 of $421 million primarily due to an increase in discount rates;
• net debt extinguishment gains of $308 million related to open market repurchases of various Company notes and tender offers in 2023, compared with losses of $1.1 billion primarily related to tender offers in 2022; and
• an increase in interest income due to higher interest rates.Interest Expense
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Total interest costs on debt balances $ 7,342 $ 5,643 $ 1,699 30.1 %
Less capitalized interest costs 1,818 2,030 (212) (10.4)
Interest Expense $ 5,524 $ 3,613 $ 1,911 52.9Average debt outstanding (1)(3)$ 151,062 $ 151,226Effective interest rate (2)(3)4.9 % 3.7 %(1) The average debt outstanding is a financial measure and is calculated by applying a simple average of prior thirteen-month end balances of total short-term and long-term debt, net of discounts, premiums and unamortized debt issuance costs.
(2) The effective interest rate is the rate of actual interest incurred on debt. It is calculated by dividing the total interest costs on debt balances by the average debt outstanding.
(3) We believe that this measure is useful to management, investors and other users of our financial information in evaluating our debt financing cost and trends in our debt leverage management.Total interest expense increased during 2023 compared to 2022 primarily as a result of an increase in interest costs due to a higher average interest rate and a decrease in capitalized interest costs due to the early clearance and deployment of C-Band spectrum in the current period, which were partially offset by lower average debt balances.Provision for Income Taxes
(dollars in millions)Decrease
Years Ended December 31, 2023 2022 2023 vs. 2022
Provision for income taxes $ 4,892 $ 6,523 $ (1,631) (25.0) %
Effective income tax rate 28.8 % 23.1 %
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The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The increase in the effective income tax rate was primarily due to the Verizon Business Group goodwill impairment charge of $5.8 billion that substantially decreased income before income taxes and is not deductible. The decrease in the provision for income taxes was primarily due to the decrease in income before income taxes in the current period.A reconciliation of the statutory federal income tax rate to the effective income tax rate for each period is included in Note 12 to the consolidated financial statements.Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA
Consolidated earnings before interest, taxes, depreciation and amortization expense (Consolidated EBITDA) and Consolidated Adjusted EBITDA, which are presented below, are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to Verizon’s competitors. Consolidated EBITDA is calculated by adding back interest, taxes, depreciation and amortization expense to net income.Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of certain special items. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. We believe that Consolidated Adjusted EBITDA is widely used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes, and depreciation and amortization policies. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis. See "Special Items" for additional information.It is management’s intent to provide non-GAAP financial information to enhance the understanding of Verizon’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
(dollars in millions)Years Ended December 31, 2023 2022
Consolidated Net Income $ 12,095 $ 21,748Add:Provision for income taxes 4,892 6,523
Interest expense 5,524 3,613Depreciation and amortization expense (1)17,624 17,099
Consolidated EBITDA $ 40,135 $ 48,983Add (Less):Other (income) expense, net (2)(3)
$ 313 $ (1,373)
Equity in (earnings) losses of unconsolidated businesses 53 (44)
Severance charges 533 304
Verizon Business Group goodwill impairment 5,841 —
Asset rationalization 480 —
Legal settlement 100 —
Business transformation costs 176 —
Non-strategic business shutdown 158 —
Consolidated Adjusted EBITDA $ 47,789 $ 47,870
(1) Includes Amortization of acquisition-related intangible assets, which were $865 million and $826 million during the years ended December 31, 2023 and 2022, respectively. The result for the year ended December 31, 2023 also includes a portion of the Non-strategic business shutdown. See "Special Items" for additional information.
(2) Includes Pension and benefits remeasurement charges of $992 million during the year ended December 31, 2023 and credits of $1.7 billion during the year ended December 31, 2022. See "Special Items" and "Other Income (Expense), Net" for additional information.
(3) Includes Early debt redemption costs, which were $1.2 billion during the year ended December 31, 2022. See "Special Items" and "Other Income (Expense), Net" for additional information.
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The changes in Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA in the table above during 2023 compared to 2022 were primarily a result of the factors described above in connection with operating revenues and operating expenses.Segment Results of Operations
We have two reportable segments that we operate and manage as strategic business units - Consumer and Business. We measure and evaluate our segments based on segment operating income. The use of segment operating income is consistent with the chief operating decision maker’s assessment of segment performance.To aid in the understanding of segment performance as it relates to segment operating income, management uses the following operating statistics to evaluate the overall effectiveness of our segments. We believe these operating statistics are useful to investors and other users of our financial information because they provide additional insight into drivers of our segments’ operating results, key trends and performance relative to our peers. These operating statistics may be determined or calculated differently by other companies and may not be directly comparable to those statistics of other companies.
Wireless retail connections are retail customer device postpaid and prepaid connections as of the end of the period. Retail connections under an account may include those from smartphones and basic phones (collectively, phones), postpaid and prepaid FWA, as well as tablets and other internet devices, wearables and retail IoT devices. Wireless retail connections are calculated by adding total retail postpaid and prepaid new connections in the period to prior period retail connections, and subtracting total retail postpaid and prepaid disconnects in the period.
Wireless retail postpaid connections are retail postpaid customer device connections as of the end of the period. Retail postpaid connections under an account may include those from phones, postpaid FWA, as well as tablets and other internet devices, wearables and retail IoT devices. Wireless retail postpaid connections are calculated by adding retail postpaid new connections in the period to prior period retail postpaid connections, and subtracting retail postpaid disconnects in the period.
Wireless retail prepaid connections are retail prepaid customer device connections as of the end of the period. Retail prepaid connections may include those from phones, prepaid FWA, as well as tablets and other internet devices, and wearables. Wireless retail prepaid connections are calculated by adding retail prepaid new connections in the period to prior period retail prepaid connections, and subtracting retail prepaid disconnects in the period.
Fios internet connections are the total number of connections to the internet using Fios internet services as of the end of the period. Fios internet connections are calculated by adding Fios internet new connections in the period to prior period Fios internet connections, and subtracting Fios internet disconnects in the period.
Fios video connections are the total number of connections to traditional linear video programming using Fios video services as of the end of the period. Fios video connections are calculated by adding Fios video net additions in the period to prior period Fios video connections. Fios video net additions are calculated by subtracting the Fios video disconnects from the Fios video new connections.
Total broadband connections are the total number of connections to the internet using Fios internet services, Digital Subscriber Line (DSL), and postpaid, prepaid and IoT FWA as of the end of the period. Total broadband connections are calculated by adding total broadband connections, net additions in the period to prior period total broadband connections.Wireless retail connections, net addition s are the total number of additional retail customer device postpaid and prepaid connections, less the number of device disconnects in the period. Wireless retail connections, net additions in each period presented are calculated by subtracting the total retail postpaid and prepaid disconnects, net of certain adjustments, from the total retail postpaid and prepaid new connections in the period.
Wireless retail postpaid connections, net additions are the total number of additional retail customer device postpaid connections, less the number of device disconnects in the period. Wireless retail postpaid connections, net additions in each period presented are calculated by subtracting the retail postpaid disconnects, net of certain adjustments, from the retail postpaid new connections in the period.
Wireless retail prepaid connections, net additions are the total number of additional retail customer device prepaid connections, less the number of device disconnects in the period. Wireless retail prepaid connections, net additions in each period presented are calculated by subtracting the retail prepaid disconnects, net of certain adjustments, from the retail prepaid new connections in the period.
Wireless retail postpaid phone connections, net additions are the total number of additional retail customer postpaid phone connections, less the number of phone disconnects in the period. Wireless retail postpaid phone connections, net additions in each period presented are calculated by subtracting the retail postpaid phone disconnects, net of certain adjustments, from the retail postpaid phone new connections in the period.28
Table of ContentsTotal broadband connections, net additions are the total number of additional total broadband connections, less the number of total broadband disconnects in the period. Total broadband connections, net additions in each period presented are calculated by subtracting the total broadband disconnects, net of certain adjustments, from the total broadband new connections in the period.Wireless churn is the rate at which service to retail, retail postpaid, or retail postpaid phone connections is terminated on average in the period. The churn rate in each period presented is calculated by dividing retail disconnects, retail postpaid disconnects, or retail postpaid phone disconnects by the average retail connections, average retail postpaid connections, or average retail postpaid phone connections, respectively, in the period.
Wireless retail postpaid ARPA is the calculated average retail postpaid service revenue per account (ARPA) from retail postpaid accounts in the period. Wireless retail postpaid service revenue does not include recurring device payment plan billings related to the Verizon device payment program, plan billings related to device warranty and insurance or regulatory fees. Wireless retail postpaid ARPA in each period presented is calculated by dividing retail postpaid service revenue by the average retail postpaid accounts in the period.
Wireless retail postpaid accounts are wireless retail customers that are directly served and managed under the Verizon brand and use its services as of the end of the period. Accounts include unlimited plans, shared data plans and corporate accounts, as well as legacy single connection plans and multi-connection family plans. A single account may include monthly wireless services for a variety of connected devices. Wireless retail postpaid accounts are calculated by adding retail postpaid new accounts to the prior period retail postpaid accounts.
Wireless retail postpaid connections per account is the calculated average number of retail postpaid connections per retail postpaid account as of the end of the period. Wireless retail postpaid connections per account is calculated by dividing the total number of retail postpaid connections by the number of retail postpaid accounts as of the end of the period.
Segment operating income margin reflects the profitability of the segment as a percentage of revenue. Segment operating income margin is calculated by dividing total segment operating income by total segment operating revenues.
Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA) , which is presented below, is a non-GAAP measure and does not purport to be an alternative to operating income (loss) as a measure of operating performance. We believe this measure is useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as it excludes the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to segment operating income (loss). Segment EBITDA margin is calculated by dividing Segment EBITDA by total segment operating revenues. See Note 13 to the consolidated financial statements for additional information.
Verizon Consumer Group
Our Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. Our wireline services are provided in nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100% fiber-optic network through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios.29Table of Contents
Operating Revenues and Selected Operating Statistics
(dollars in millions, except ARPA)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Service (1)
$ 74,874 $ 73,139 $ 1,735 2.4 %
Wireless equipment 20,645 23,168 (2,523) (10.9)
Other 6,107 7,199 (1,092) (15.2)
Total Operating Revenues $ 101,626 $ 103,506 $ (1,880) (1.8)
Connections (‘000): (2)
Wireless retail postpaid 93,850 91,856 1,994 2.2
Wireless retail prepaid 21,122 22,664 (1,542) (6.8)
Total wireless retail 114,972 114,520 452 0.4
Fios internet 6,976 6,740 236 3.5
Fios video 2,951 3,234 (283) (8.8)
Total broadband 9,056 7,900 1,156 14.6Net Additions in Period (‘000):Wireless retail postpaid 2,044 965 1,079 nm
Wireless retail prepaid (1,151) (445) (706) nm
Total wireless retail 893 520 373 71.7
Wireless retail postpaid phones (132) (655) 523 79.8
Total broadband 1,163 904 259 28.7Churn Rate:Wireless retail 1.67 % 1.63 %
Wireless retail postpaid 1.03 % 1.01 %
Wireless retail postpaid phones 0.83 % 0.81 %Account Statistics:Wireless retail postpaid ARPA $ 132.36 $ 125.97 $ 6.39 5.1
Wireless retail postpaid accounts (‘000) (2)
32,990 33,183 (193) (0.6)
Wireless retail postpaid connections per account (2)
2.84 2.77 0.07 2.5
(1) Wireless service revenues included in our Consumer segment were approximately $63.4 billion and $61.5 billion for the years ended December 31, 2023 and 2022, respectively.
(2) As of end of periodWhere applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.
nm - not meaningfulConsumer's total operating revenues decreased during 2023 compared to 2022 as a result of decreases in Wireless equipment revenue and Other revenue, partially offset by an increase in Service revenue.Service RevenueService revenue increased during 2023 compared to 2022 primarily driven by an increase in Wireless service revenue.
Wireless service revenue increased $1.8 billion during 2023 compared to 2022 primarily as a result of:
• an increase of $1.7 billion in access revenues related to our postpaid plans primarily driven by pricing actions implemented in recent periods; a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue; an increase in our FWA subscriber base; and an increase in device protection revenue primarily due to an increase in the price of the bundled offering. These increases were partially offset by the amortization of wireless equipment sales promotions;
• an increase of $405 million related to growth in non-retail service revenue;
• an increase of $287 million in TravelPass revenue related to increased customer international travel; and
• a decrease of $500 million in prepaid revenue primarily due to a decrease in the prepaid subscriber base.
30Table of ContentsFor the year ended December 31, 2023, Fios service revenue totaled $10.9 billion and remained relatively flat compared to the similar period in 2022.Wireless Equipment RevenueWireless equipment revenue decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $3.9 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 26% in upgrades; and
• an increase of $1.4 billion related to a shift to higher priced equipment in the mix of wireless devices sold.Other Revenue
Other revenue includes fees that partially recover the direct and indirect costs of complying with regulatory and industry obligations and programs, revenues associated with certain products included in our device protection offerings, leasing and interest recognized when equipment is sold to the customer by an authorized agent under a device payment plan agreement.Other revenue decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $1.2 billion in revenue primarily related to a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue; and
• an increase of $109 million in revenue from regulatory surcharges, primarily related to FUSF surcharges driven by a higher net rate, partially offset by a decrease related to other regulatory surcharges.Operating Expenses
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Cost of services $ 17,580 $ 17,746 $ (166) (0.9) %
Cost of wireless equipment 21,827 25,134 (3,307) (13.2)
Selling, general and administrative expense 20,131 19,064 1,067 5.6
Depreciation and amortization expense 13,077 12,716 361 2.8
Total Operating Expenses $ 72,615 $ 74,660 $ (2,045) (2.7)Cost of ServicesCost of services decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $566 million in access costs primarily as a result of pricing changes, the shutdown of our competitors' 3G networks in 2022 and ongoing efforts to migrate off network prepaid subscribers to the Verizon network;
• an increase of $177 million in personnel costs mainly driven by a decrease in capitalized labor in connection with the completion of our incremental C-Band capital spending program, and valuation assumption changes in connection with certain post-employment benefits;
• an increase of $154 million in regulatory costs primarily related to a higher net FUSF rate; and
• an increase of $92 million in rent and lease expense primarily driven by new leases and lease modifications related to the deployment of the C-Band spectrum.Cost of Wireless EquipmentCost of wireless equipment decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $4.1 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 26% in upgrades; and
• an increase of $858 million related to a shift to higher priced equipment in the mix of wireless devices sold.Selling, General and Administrative ExpenseSelling, general and administrative expense increased during 2023 compared to 2022 primarily due to:
• an increase of $458 million in the provision for credit losses resulting from additional bad debt reserves as collections return to pre-pandemic levels, coupled with an increase in wireless retail postpaid gross additions;
• an increase of $352 million in advertising costs driven by costs associated with the myPlan launch in the second quarter of 2023 and the scaling of our Total by Verizon prepaid brand; and
• an increase of $237 million in personnel costs mainly driven by an increase in commission expense due to the amortization of deferred contract costs, along with an increase in costs associated with third-party contracted resources.
Depreciation and Amortization Expense
Depreciation and amortization expense increased during 2023 compared to 2022 driven by the change in the mix of total Verizon depreciable and amortizable assets and Consumer's usage of those assets.
31Table of ContentsSegment Operating Income and EBITDA
(dollars in millions)Increase
Years Ended December 31, 2023 2022 2023 vs. 2022
Segment Operating Income $ 29,011 $ 28,846 $ 165 0.6 %
Add Depreciation and amortization expense 13,077 12,716 361 2.8
Segment EBITDA $ 42,088 $ 41,562 $ 526 1.3
Segment operating income margin 28.5 % 27.9 %
Segment EBITDA margin 41.4 % 40.2 %The changes in the table above during the periods presented were primarily a result of the factors described above in connection with Consumer operating revenues and operating expenses.
Verizon Business GroupOur Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world. The Business segment is organized in three customer groups: Enterprise and Public Sector, Business Markets and Other, and Wholesale.Operating Revenues and Selected Operating Statistics
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2021 2023 vs. 2022 2022 vs. 2021
Enterprise and Public Sector $ 15,076 $ 15,693 $ 16,393 $ (617) (3.9) % $ (700) (4.3) %
Business Markets and Other 12,715 12,772 11,929 (57) (0.4) 843 7.1
Wholesale 2,331 2,607 2,720 (276) (10.6) (113) (4.2)
Total Operating Revenues (1)(2)
$ 30,122 $ 31,072 $ 31,042 $ (950) (3.1) $ 30 0.1
Connections (‘000): (3)
Wireless retail postpaid 29,779 28,733 27,411 1,046 3.6 1,322 4.8
Fios internet 385 373 356 12 3.2 17 4.8
Fios video 61 67 71 (6) (9.0) (4) (5.6)
Total broadband 1,661 1,036 599 625 60.3 437 73.0Net Additions in Period ('000):Wireless retail postpaid 1,242 1,640 1,001 (398) (24.3) 639 63.8
Wireless retail postpaid phones 562 856 509 (294) (34.3) 347 68.2
Total broadband 539 386 81 153 39.6 305 nmChurn Rate:Wireless retail postpaid 1.48 % 1.38 % 1.27 %
Wireless retail postpaid phones 1.13 % 1.07 % 1.03 %
(1) Service and other revenues included in our Business segment were approximately $26.4 billion, $27.0 billion and $27.7 billion for the years ended December 31, 2023, 2022 and 2021, respectively. Wireless equipment revenues included in our Business segment were approximately $3.7 billion, $4.0 billion and $3.4 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) Wireless service revenues of our Business segment, which are included in Service and other revenues in our consolidated statements of income, were approximately $13.4 billion, $12.8 billion and $12.4 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
(3) As of end of periodWhere applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.nm - not meaningful
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Business's total operating revenues decreased during 2023 compared to 2022 as a result of decreases in revenue from each of the three Business customer groups.
Business's total operating revenues increased during 2022 compared to 2021 as a result of an increase in Business Markets and Other revenue, partially offset by decreases in Enterprise and Public Sector and Wholesale revenues.Enterprise and Public SectorEnterprise and Public Sector offers wireless products and services as well as wireline connectivity and managed solutions to our large business and government customers. Large businesses are identified based on their size and volume of business with Verizon. Public sector offers these services with features and pricing designed to address the needs of U.S. federal, state and local governments and educational institutions.
Enterprise and Public Sector revenues decreased during 2023 compared to 2022 primarily due to:
• a decrease of $530 million in wireline networking revenue and traditional data and voice communication services along with related professional services, driven by secular pressures in the marketplace; and
• a decrease of $98 million in Wireless equipment revenue driven by a lower volume of devices sold primarily related to fewer phone activations , partially offset by a shift to higher priced equipment in the mix of devices sold.
Enterprise and Public Sector revenues decreased during 2022 compared to 2021 primarily as a result of:
• a decrease of $763 million in wireline networking revenue and traditional data and voice communication services along with related professional services, driven by secular pressures in the marketplace;
• a decrease of $181 million due to lower FUSF volume and rate along with resulting surcharges;
• an increase of $152 million in Wireless equipment revenue driven by a shift to higher priced equipment in the mix of devices sold and a higher volume of devices sold, partially offset by the impact of related promotions;
• an increase of $84 million in Wireless service revenue primarily driven by an increase in wireless retail postpaid connections as well as the economic adjustment charge that took effect late in the second quarter of 2022; and
• an increase of $37 million in customer premise equipment primarily due to higher volumes.Business Markets and OtherBusiness Markets and Other offers wireless services and equipment, conferencing services, tailored voice and networking products, Fios services, advanced voice solutions and security services to businesses that ordinarily do not meet the requirements to be categorized as Enterprise and Public Sector, as described above. Business Markets and Other also includes solutions that support mobile resource management.
Business Markets and Other revenue decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $267 million in Wireless equipment revenue primarily driven by a lower volume of devices sold primarily related to fewer phone upgrades ;
• a decrease of $155 million in Other revenue primarily related to a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue;
• a decrease of $77 million related to a decrease in wireline voice and DSL service connections; and
• an increase of $496 million in Wireless service revenue primarily driven by the economic adjustment charge that took effect late in the second quarter of 2022; an increase in our wireless retail postpaid connections, including our FWA subscriber base; and a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue.
Business Markets and Other revenue increased during 2022 compared to 2021 primarily as a result of:
• an increase of $507 million in Wireless equipment revenue driven by a higher volume of devices sold and a shift to higher priced equipment in the mix of devices sold, partially offset by an increase in promotions;
• an increase of $395 million in Wireless service revenue primarily driven by an increase in our wireless retail postpaid connections as well as the economic adjustment charge that took effect late in the second quarter of 2022; and
• a decrease of $72 million related to a decrease in wireline voice and DSL service connections.
For the years ended December 31, 2023, 2022 and 2021, Fios revenues totaled $923 million, $927 million and $905 million, respectively.Wholesale
Wholesale offers wireline communications services including data, voice, local dial tone and broadband services primarily to local, long distance, and wireless carriers that use our facilities to provide services to their customers.Wholesale revenues decreased during 2023 compared to 2022 primarily due to a decrease of $276 million related to declines in traditional voice communication and network connectivity as a result of technology substitution, certain fiber transactions completed in 2022 that did not reoccur, as well as a decrease in core data.
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Wholesale revenues decreased during 2022 compared to 2021 primarily due to a decrease of $113 million related to declines in traditional voice communication and network connectivity as a result of technology substitution and rationalization of international traffic, as well as a decrease in core data.Operating Expenses
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Cost of services $ 10,180 $ 10,483 $ (303) (2.9) %
Cost of wireless equipment 4,959 5,362 (403) (7.5)
Selling, general and administrative expense 8,429 8,284 145 1.8
Depreciation and amortization expense 4,488 4,312 176 4.1
Total Operating Expenses $ 28,056 $ 28,441 $ (385) (1.4)Cost of ServicesCost of services decreased during 2023 compared to 2022 primarily due to:
• a decrease of $142 million in direct costs primarily related to certain professional services that did not reoccur in 2023;
• a decrease of $114 million in personnel costs related to the impact of workforce changes; and
• a decrease of $95 million in access costs related to changes in usage and circuit access prices.Cost of Wireless EquipmentCost of wireless equipment decreased during 2023 compared to 2022 primarily as a result of:
• a decrease of $577 million driven by a lower volume of wireless devices sold primarily related to a decrease of 11% in upgrades ; and
• an increase of $174 million related to a shift to higher priced equipment in the mix of wireless devices sold.Selling, General and Administrative ExpenseSelling, general and administrative expense increased during 2023 compared to 2022 primarily due to an increase of $148 million in the provision for credit losses resulting from additional bad debt reserves as collections return to pre-pandemic levels, coupled with an increase in wireless retail postpaid gross additions.Depreciation and Amortization ExpenseDepreciation and amortization expense increased during 2023 compared to 2022 driven by the change in the mix of total Verizon depreciable and amortizable assets and Business's usage of those assets.Segment Operating Income and EBITDA
(dollars in millions)Increase/(Decrease)
Years Ended December 31, 2023 2022 2023 vs. 2022
Segment Operating Income $ 2,066 $ 2,631 $ (565) (21.5) %
Add Depreciation and amortization expense 4,488 4,312 176 4.1
Segment EBITDA $ 6,554 $ 6,943 $ (389) (5.6)
Segment operating income margin 6.9 % 8.5 %
Segment EBITDA margin 21.8 % 22.3 %The changes in the table above during the periods presented were primarily a result of the factors described above in connection with Business operating revenues and operating expenses.34
Table of ContentsSpecial Items
Special items included in Income Before Provision For Income Taxes were as follows:
(dollars in millions)Years Ended December 31, 2023 2022Amortization of acquisition-related intangible assets (1)Depreciation and amortization expense $ 865 $ 826Severance, pension and benefits charges (credits)Selling, general and administrative expense 533 304
Other (income) expense, net 992 (1,675)Verizon Business Group goodwill impairment
Verizon Business Group goodwill impairment5,841 —
Asset rationalization
Cost of services 22 —
Selling, general and administrative expense 458 —Legal settlementSelling, general and administrative expense 100 —Business transformation costsCost of services 15 —
Selling, general and administrative expense 161 —Non-strategic business shutdownDepreciation and amortization expense 21 —
Cost of services 45 —
Selling, general and administrative expense 113 —
Early debt redemption costs
Other (income) expense, net — 1,241
Total $ 9,166 $ 696(1) Amounts are included in segment results of operations.
Consolidated Adjusted EBITDA, a non-GAAP measure discussed in the section titled "Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA" as part of Consolidated Results of Operations, excludes all of the amounts included above.
The income and expenses related to special items included in our consolidated results of operations were as follows:
(dollars in millions)Years Ended December 31, 2023 2022
Within Total Operating Expenses $ 8,174 $ 1,130
Within Other (income) expense, net 992 (434)
Total $ 9,166 $ 696Amortization of Acquisition-Related Intangible AssetsDuring 2023 and 2022, we recorded pre-tax amortization expense of $865 million and $826 million, respectively, related to acquired intangible assets.Severance, Pension and Benefits Charges (Credits)During 2023, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded net pre-tax pension and benefits charges of $992 million in our pension and postretirement benefit plans. The charges were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by:
• a charge of $534 million due to an increase in our healthcare cost trend rate assumption used to determine the current year liabilities of our postretirement benefit plans from a weighted-average of 6.6% at December 31, 2022 to a weighted-average of 7.3% at December 31, 2023;• a charge of $503 million ($288 million for pension plans and $215 million for postretirement benefit plans) due to a decrease in our discount rate assumption used to determine the current year liabilities of our plans from a weighted-average of 5.2% at December 31, 2022 to a weighted-average of 5.0% at December 31, 2023;• a net credit of $45 million primarily due to other actuarial assumption adjustments, which includes the difference between our estimated and our actual return on plan assets.During 2023, we also recorded net pre-tax severance charges of $533 million, primarily related to involuntary separations under our existing plans, in Selling, general and administrative expense in our consolidated statement of income.
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During 2022, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded net pre-tax pension and benefits credits of $1.7 billion in our pension and postretirement benefit plans. The credits were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by:
• a credit of $7.0 billion ($4.1 billion for pension plans and $2.9 billion for postretirement benefit plans) due to an increase in our discount rate assumption used to determine the current year liabilities of our plans from a weighted-average of 2.9% at December 31, 2021 to a weighted-average of 5.2% at December 31, 2022;
• a charge of $5.5 billion due to the difference between our estimated and actual return on assets; and
• a credit of $206 million due to other actuarial assumption adjustments.
During 2022, we also recorded net pre-tax severance charges of $304 million, related to involuntary separations under our existing plans, in Selling, general and administrative expense in our consolidated statement of income.Due to the presentation of the other components of net periodic benefit cost, we recognize a portion of the pension and benefits charges (credits) in Other income (expense), net in our consolidated statements of income.
See Note 11 to the consolidated financial statements for additional information related to severance, pension and benefits charges (credits).Verizon Business Group Goodwill Impairment
During 2023, we recorded a pre-tax charge of $5.8 billion as a result of the annual goodwill impairment test performed in the fourth quarter. See "Critical Accounting Estimates" for additional information.Asset Rationalization
During 2023, we recorded pre-tax asset rationalization charges of $480 million. Asset rationalization charges of $155 million recorded during the second quarter of 2023 related to certain real estate and non-strategic assets that we made a decision to cease use of as part of our transformation initiatives. Asset rationalization charges of $325 million recorded during the fourth quarter of 2023 primarily related to Business network assets that we made a decision to cease use of as part of our continued transformation initiatives.Legal Settlement
During 2023, we recorded a pre-tax charge of $100 million related to the settlement of a litigation matter regarding certain administrative fees.
Business Transformation Costs
During 2023, we recorded pre-tax charges of $176 million primarily related to costs incurred in connection with strategic partnership initiatives in our managed network support services for certain Business customers.Non-Strategic Business Shutdown
During 2023, we recorded pre-tax charges of $179 million related to the shutdown of our BlueJeans business offering.Early Debt Redemption Costs
During 2022, we recorded pre-tax early debt redemption costs of $1.2 billion primarily in connection with tender offers. See Note 7 to the consolidated financial statements for additional information related to our early debt redemptions.Operating Environment and TrendsThe telecommunications industry is highly competitive. The rapid development of new technologies, services and products has eliminated many of the distinctions among wireless, cable, internet and traditional telephone services and brought new competitors to our markets. We expect competition to remain intense as traditional and non-traditional participants seek increased market share.
We believe that our high-quality networks and customer base differentiate us from our competitors and give us the ability to plan and manage through changing economic and competitive conditions. We remain focused on executing on the fundamentals of the business: enhancing our networks, maintaining a high-quality customer base, and delivering strong financial and operating results. We also continue to focus on cost efficiencies in order to have flexibility to adjust to changes in the competitive and economic environments and increase shareholder value.
The U.S. wireless market has achieved a high penetration of smartphones, which reduces the opportunity for new phone connection growth for the industry. We expect the wireless industry's customer growth rate to moderate over time in comparison to historical growth rates, furthering competition for customers. Future revenue growth in the industry is expected to be driven by expanding existing customer relationships, increasing the number of ways customers can connect with wireless networks and
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services and increasing the penetration of FWA and connected devices including wearables, tablets and IoT devices. Although certain use cases for 5G technologies and related ecosystems are in early development stages, we expect that this technology will provide a significant opportunity for growth in the coming years.
We expect future service revenue growth opportunities to arise from increased access revenue as customer demand for mobile and FWA 5G connectivity continues to expand and customers shift to higher access plans, driven in part by access to our high quality network. Additionally, we expect service revenue to benefit from targeted pricing actions and increased connections per account. Future service revenue growth opportunities will be dependent on expanding the penetration of our services, increasing the number of ways that our customers can connect with our networks and services and the development of new ecosystems.
With respect to wireless services and equipment, pricing plays an increasingly important role in the wireless competitive landscape. As the demand for wireless services continues to grow, wireless service providers are offering a range of service plans at competitive prices. In addition, aggressive device promotions have become more common in recent years in an effort to encourage customers to switch carriers, as well as retain existing customers. We compete in this area by offering our customers services and devices that we believe provide significant value for the price. We and other wireless service providers, as well as equipment manufacturers, offer device payment options, which provide customers with the ability to pay for their device over a period of time, and some providers offer device leasing arrangements.
For further details on competitive environment and trends, refer to "Business — Competition and Related Trends" in Part I, Item 1 and "Risk Factors — Economic and Strategic Risks — We face significant competition that may reduce our profits" in Part I, Item 1A of this Annual Report on Form 10-K.Connection TrendsIn our Consumer segment, we are focused on attracting new customers and maintaining our high-quality retail postpaid customer base by capitalizing on demand for reliable high-speed connectivity. We believe the combination of our wireless network quality and service and product offerings represents an attractive value proposition and provides a compelling customer experience, supporting increased penetration of data services. While our Consumer segment experienced diminished connection growth in recent years, we expect that future connection growth opportunities will be driven by the comparative value we provide to our customers, as well as our FWA broadband service. In our prepaid business, we expect to continue to operate in a highly competitive environment while making improvements to achieve long-term growth.
We expect to continue to grow our Fios internet connections as we seek to increase our penetration rates within our Fios service areas, further supported by the demand for higher speed internet connections. At the same time, we expect continued growth of FWA connections to complement strong Fios results as demand for broadband services continues to grow. In Fios video, the business continues to face ongoing pressure as observed throughout the linear television market. We have experienced continuing access line and DSL losses as customers have switched to alternative technologies such as wireless, VoIP, and cable for voice and data services, and we expect this trend to continue.
In our Business segment, we offer wireless products and services to business and government customers across the U.S. We continue to grow our connections while operating in a highly competitive environment. We expect that this connection growth, combined with our industry-leading network assets, will provide additional opportunities to sell solutions, such as those around security, private networking and other network connectivity services, advanced communications and professional services.
In addition, in both our Consumer and our Business segments, we expect to support connection growth in part by adding capacity and further expanding our wireless coverage, and by continuing the build-out of our 5G network.
Service Revenue Trends
In our Consumer segment, we expect continued growth in our wireless service revenue, driven by targeted pricing actions, migrations to higher priced plans, and increases in FWA connections. We expect Fios revenue to benefit in 2024 as growth in our broadband customer base and an increased demand for higher speed internet connections offset the impact of the shift from bundled wireline services to standalone internet service.
In our Business segment, we expect wireless service revenue to expand, driven by growth from an increase in wireless volumes and FWA contributions. We expect that Fios, through increased penetration, will also contribute to revenue growth and that legacy traditional wireline services will continue to face secular pressures.
Cash Flow Trends
We are focused on achieving profitable growth as we continue to deliver strong revenues and undertake initiatives to reduce our overall cost structure. We expect that our ability to generate cash flows will benefit from our expected service revenue growth and our anticipated reduction in capital expenditures. See "Liquidity and Capital Resources" for additional information on our capital program.
37Table of ContentsLiquidity and Capital ResourcesWe use the net cash generated from our operations to fund expansion and modernization of our networks, service and repay external financing, pay dividends, invest in new businesses and spectrum and, when appropriate, buy back shares of our outstanding common stock. Our sources of funds, primarily from operations and, to the extent necessary, from external financing arrangements, are sufficient to meet ongoing operating and investing requirements over the next 12 months and beyond.
Our cash and cash equivalents balance is $2.1 billion as of December 31, 2023. Our cash and cash equivalents are held both domestically and internationally, and are invested to maintain principal and provide liquidity. See "Market Risk" for additional information regarding our foreign currency risk management strategies.
We expect that our capital spending requirements will continue to be financed primarily through internally generated funds. Debt or equity financing may be needed to fund additional investments or development activities, or to maintain an appropriate capital structure to ensure our financial flexibility. Our external financing arrangements include credit facilities and other bank lines of credit, an active commercial paper program, vendor financing arrangements, issuances of registered debt or equity securities, U.S. retail medium-term notes and other securities that are privately-placed or offered overseas. In addition, we monetize certain receivables through asset-backed debt transactions.Capital ExpendituresOur 2024 capital program includes capital to fund advanced networks and services, including expanding and adding capacity and density to our core networks, deploying C-Band spectrum, and advancing our network architecture. We anticipate cash requirements for our 2024 capital program to be between $17.0 billion and $17.5 billion.Contractual Obligations and CommitmentsWe have various contractual obligations and commitments. The following represent our anticipated material cash requirements from known contractual and other obligations as of December 31, 2023:
• Long-term debt, including current maturities, commitments of $149.2 billion, of which $12.3 billion (including $3.6 billion of unsecured debt) are expected to be due within the next twelve months. Related interest payments are $68.6 billion, of which $5.9 billion, are expected to be due within the next twelve months. Items included in long-term debt with variable coupon rates exclude unamortized debt issuance costs, and are described in Note 7 to the consolidated financial statements.
• Operating lease obligations of $28.4 billion and Finance lease obligations of $2.3 billion, of which $4.8 billion and $793 million, respectively, are expected to be due within the next twelve months. In addition, Verizon has an obligation of $378 million representing future minimum payments under the sublease arrangement for our cell towers, of which $302 million is expected to be due within the next twelve months. See Note 6 to the consolidated financial statements for additional information.
• Unconditional purchase obligations, with terms in excess of one year, amount to $21.7 billion, of which $8.9 billion is expected to be due within the next twelve months. Items included in unconditional purchase obligations are primarily commitments to purchase network equipment, software and services, content, marketing services and other items which will be used or sold in the ordinary course of business. These amounts do not represent our entire anticipated purchases in the future, but represent only those items that are the subject of contractual obligations. We also purchase products and services as needed with no firm commitment. See Note 16 to the consolidated financial statements for additional information.
• Estimated commitments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with C-Band wireless spectrum acquired under Auction 107. The remaining commitment is estimated to be approximately $400 million, all of which is expected to be due within the next twelve months.
• Other long-term liabilities, including current maturities, of $4.0 billion, of which approximately $770 million is expected to be due within the next twelve months. Other long-term liabilities represent estimated postretirement benefit and qualified pension plan contributions. Qualified pension plan contributions include estimated minimum funding contributions. We expect that there will be no required pension funding through the end of 2024, subject to changes in market conditions. Postretirement benefit payments include future postretirement benefit payments. These estimated amounts: (1) are subject to change based on changes to assumptions and future plan performance, which could impact the timing and/or amounts of these payments; and (2) exclude expectations beyond 5 years due to uncertainty of the timing and amounts.
• We are not able to make a reasonable estimate of when the unrecognized tax benefits balance of $2.7 billion and related interest and penalties will be settled with the respective taxing authorities until the related tax audits are further developed or resolved. See Note 12 to the consolidated financial statements for additional information.
38Table of ContentsConsolidated Financial Condition
(dollars in millions)Years Ended December 31, 2023 2022Cash Flows Provided By (Used In)
Operating activities$ 37,475 $ 37,141Investing activities(23,432) (28,662)Financing activities(14,657) (8,529)
Decrease in cash, cash equivalents and restricted cash $ (614) $ (50)Cash Flows Provided By Operating ActivitiesOur primary source of funds continues to be cash generated from operations. Net cash provided by operating activities increased $334 million during 2023 compared to 2022 primarily due to an improvement in working capital. The improvement in working capital was primarily driven by changes in accounts payable as a result of timing, changes in inventory levels and fewer phone upgrades compared to the prior year. This increase in net cash provided by operating activities was partially offset by higher cash interest payments and a decrease in earnings. During 2023, we made a discretionary contribution of $200 million to one of our qualified pension plans. Additionally, we expect that there will be no required pension funding through the end of 2024, subject to changes in market conditions.Cash Flows Used In Investing Activities
Capital Expenditures
Capital expenditures continue to relate primarily to the use of capital resources to enhance the operating efficiency and productivity of our networks, maintain our existing infrastructure, facilitate the introduction of new products and services and enhance responsiveness to competitive challenges.Capital expenditures, including capitalized software, were $18.8 billion and $23.1 billion for 2023 and 2022, respectively. Capital expenditures decreased approximately $4.3 billion during 2023, compared to 2022, primarily due to the completion of our accelerated $10 billion C-Band deployment program in the first half of 2023. See "Global Network and Technology" for more details.Acquisitions of Wireless LicensesDuring 2023 and 2022, we made payments of $4.3 billion and $1.6 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives associated with Auction 107 .
During 2023 and 2022, we recorded capitalized interest related to wireless licenses of $1.4 billion and $1.7 billion, respectively.
In March 2022, Verizon signed agreements with satellite operators in which operators agreed to clear C-Band spectrum in certain markets and frequencies ahead of the previously expected timeframe. During 2022, Verizon made payments of approximately $310 million associated with these agreements.Collateral Receipts (Payments) Related to Derivative Contracts, NetDuring 2023, we received return of collateral posted of $880 million related to derivative contracts, net of payments. During 2022, we made collateral payments of $2.3 billion related to derivative contracts, net of receipts. See Note 9 to the consolidated financial statements for additional information.
Cash Received Related to Acquisitions of Businesses, Net
On November 23, 2021 (the Acquisition Date), we completed the acquisition of TracFone Wireless, Inc. (TracFone). During 2022, Verizon received net cash proceeds of $248 million for the final settlement of working capital, which was included in our consideration as of the Acquisition Date. See Note 3 to the consolidated financial statements for additional information.Cash Flows Used In Financing ActivitiesWe seek to maintain a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. During 2023 and 2022, net cash used in financing activities was $14.7 billion and $8.5 billion, respectively.2023
During 2023, our net cash used in financing activities of $14.7 billion was primarily driven by $11.0 billion used for dividend payments, $10.6 billion used for repayments and repurchases of long-term borrowings (secured and unsecured) as well as finance lease obligations and $1.5 billion used for other financing activities. These cash flows used in financing activities were39Table of Contents
partially offset by $8.6 billion provided by proceeds from long-term borrowings, which included $6.6 billion of proceeds from our asset-backed debt transactions.
Proceeds from and Repayments and Repurchases of Long-Term BorrowingsAt December 31, 2023, our total debt increased to $150.7 billion compared to $150.6 billion at December 31, 2022. Our effective interest rate was 4.9% and 3.7% during the years ended December 31, 2023 and 2022, respectively. We have entered into interest rate swaps to achieve a targeted mix of fixed and variable rate debt, managing our exposure to changes in interest rates. See also "Market Risk" and Note 7 to the consolidated financial statements for additional information.
At December 31, 2023, approximately $33.7 billion, or 21.7%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily Euro and British Pound Sterling. We have entered into cross currency swaps on 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.
Verizon may acquire debt securities issued by Verizon and its affiliates through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers, or otherwise, upon such terms and at such prices as Verizon may from time to time determine, for cash or other consideration.Other, NetOther, net financing activities during 2023 includes $302 million in payments made under the sublease arrangement for our cell towers, $257 million in payments for TracFone contingent consideration and $252 million in payments related to vendor financing arrangements. See Note 3 to the consolidated financial statements for additional information on the TracFone contingent considerations.DividendsThe Board of Directors of the Company assesses the level of our dividend payments on a periodic basis taking into account such factors as long-term growth opportunities, internal cash requirements and the expectations of our shareholders. During the third quarter of 2023, our Board of Directors increased our quarterly dividend payment by 1.9% to $0.6650 from $0.6525 per share in the preceding quarter. This is the seventeenth consecutive year that Company’s Board of Directors has approved a quarterly dividend increase.
As in prior periods, dividend payments were a significant use of capital resources. During 2023, we paid $11.0 billion in dividends.
2022
During 2022, our net cash used in financing activities of $8.5 billion was primarily driven by $13.6 billion used for repayments, redemptions and repurchases of long-term borrowings (secured and unsecured) as well as finance lease obligations, $10.8 billion used for dividend payments and $2.1 billion used for other financing activities. These cash flows used in financing activities were partially offset by $17.8 billion provided by proceeds from long-term borrowings, which included $10.7 billion of proceeds from our asset-backed debt transactions.
Proceeds from and Repayments, Redemptions, and Repurchases of Long-Term Borrowings
At December 31, 2022, our total debt was $150.6 billion. During the year ended December 31, 2022, our effective interest rate was 3.7%. We have entered into interest rate swaps to achieve a targeted mix of fixed and variable rate debt, managing our exposure to changes in interest rates. See "Market Risk" and Note 7 to the consolidated financial statements for additional information.
At December 31, 2022, approximately $34.0 billion, or 22.5%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily Euro and British Pound Sterling. We have entered into cross currency swaps on 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.
Other, Net
Other, net financing activities during 2022 includes the cash consideration payments to acquire additional interests in certain controlled wireless partnerships and early debt redemption costs. See Note 15 to the consolidated financial statements for additional information on the early debt redemption costs.
Dividends
During the third quarter of 2022, our Board of Directors increased our quarterly dividend payment by 2.0% to $0.6525 per share.
During 2022, we paid $10.8 billion in dividends.
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Table of ContentsAsset-Backed DebtAs of December 31, 2023, the carrying value of our asset-backed debt was $22.2 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity, or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco), a wholly-owned subsidiary of the Company, and certain other Company affiliates (collectively, the Originators) transfer device payment plan agreement receivables and certain other receivables (collectively referred to as certain receivables) or a participation interest in certain other receivables to one of the ABS Entities, which in turn transfers such receivables and participation interest to another ABS Entity that issues the debt. Verizon entities retain the equity interests and residual interests, as applicable, in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.
Our asset-backed debt is secured by the transferred receivables and participation interest, and future collections on such receivables and underlying receivables related to such participation interest. These receivables and participation interest transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of certain receivables and participation interest, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, the Company has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.Cash collections on the receivables and on the underlying receivables related to the participation interest collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our consolidated balance sheets.
Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our consolidated statements of cash flows. The asset-backed debt issued is included in Debt maturing within one year and Long-term debt in our consolidated balance sheets.
See Note 7 to the consolidated financial statements for additional information.
Long-Term Credit FacilitiesAt December 31, 2023(dollars in millions) Maturities Facility Capacity Unused Capacity Principal Amount Outstanding
Verizon revolving credit facility (1)2026 $ 9,500 $ 9,457 $ —Various export credit facilities (2)2024 - 2031 11,000 —
6,618
Total $ 20,500 $ 9,457 $ 6,618
(1) The revolving credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. The revolving credit facility provides for the issuance of letters of credit. As of December 31, 2023, there have been no drawings against the $9.5 billion revolving credit facility since its inception.
(2) During 2023 and 2022, we drew down $1.0 billion and $3.0 billion, respectively, from these facilities. Borrowings under certain of these facilities are amortized semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.
Common Stock
Common stock has been used from time to time to satisfy some of the funding requirements of employee and shareholder plans. During the years ended December 31, 2023 and 2022, we issued 4.4 million and 2.1 million shares of common stock from treasury stock, which had aggregate values of $192 million and $91 million, respectively.
In February 2020, the Board of Directors of the Company authorized a share buyback program to repurchase up to 100 million shares of our common stock. The program will terminate when the aggregate number of shares purchased reaches 100 million, or a new share repurchase plan superseding the current plan is authorized, whichever is sooner. The program permits Verizon to
41Table of Contentsrepurchase shares over time, with the amount and timing of repurchases depending on market conditions and corporate needs. There were no repurchases of common stock during 2023 and 2022 under our authorized share buyback program.Credit RatingsVerizon’s credit ratings did not change in 2023 or 2022.Securities ratings assigned by rating organizations are expressions of opinion and are not recommendations to buy, sell or hold securities. A securities rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.
Covenants
Our credit agreements contain covenants that are typical for large, investment grade companies. These covenants include requirements to pay interest and principal in a timely fashion, pay taxes, maintain insurance with responsible and reputable insurance companies, preserve our corporate existence, keep appropriate books and records of financial transactions, maintain our properties, provide financial and other reports to our lenders, limit pledging and disposition of assets and mergers and consolidations, and other similar covenants.
We and our consolidated subsidiaries are in compliance with all of our restrictive covenants in our debt agreements.
Change In Cash, Cash Equivalents and Restricted CashOur Cash and cash equivalents at December 31, 2023 totaled $2.1 billion, a $540 million decrease compared to December 31, 2022, primarily as a result of the factors discussed above.
Restricted cash at December 31, 2023 totaled $1.4 billion, a $74 million decrease compared to restricted cash at December 31, 2022, primarily related to cash collections on certain receivables and on the underlying receivables related to the participation interest that are required at certain specified times to be placed into segregated accounts.Free Cash Flow
Free cash flow is a non-GAAP financial measure that reflects an additional way of viewing our liquidity that, we believe, when viewed with our GAAP results, provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. Free cash flow is calculated by subtracting capital expenditures (including capitalized software) from net cash provided by operating activities. We believe it is a more conservative measure of cash flow since capital expenditures are necessary for ongoing operations. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on finance lease obligations or cash payments for business acquisitions or wireless licenses. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.
The following table reconciles net cash provided by operating activities to free cash flow:
(dollars in millions)Years Ended December 31, 2023 2022
Net cash provided by operating activities $ 37,475 $ 37,141
Less Capital expenditures (including capitalized software) 18,767 23,087
Free cash flow $ 18,708 $ 14,054
The increase in free cash flow during 2023 is a reflection of the increase in operating cash flows, as well as the decrease in capital expenditures, both of which are discussed above.Employee Benefit Plans Funded Status and Contributions
Employer ContributionsWe operate numerous qualified and nonqualified pension plans and other postretirement benefit plans. These plans primarily relate to our domestic business units. During 2023, we made a discretionary contribution of $200 million to one of our qualified pension plans. We made no discretionary contributions to our qualified pension plans in 2022. During 2023 and 2022, we made contributions of $52 million and $53 million to our nonqualified pension plans, respectively.
Our overall investment strategy is to achieve a mix of assets that allows us to meet projected benefit payments while taking into consideration risk and return. In an effort to reduce the risk of our portfolio strategy and better align assets with liabilities, we have adopted a liability driven pension strategy that seeks to better match the interest rate sensitivity of the liability hedging assets with the interest rate sensitivity of the liability. We expect that the strategy will reduce the likelihood that assets will decline at a time when liabilities increase (referred to as liability hedging), with the goal to reduce the risk of underfunding to the plan and its participants and beneficiaries. Over time, as the asset allocation shifts to more liability hedging assets, this strategy will
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generally result in lower expected asset returns. For 2024, we expect no required qualified pension plan contributions and insignificant nonqualified pension plan contributions.
Contributions to our other postretirement benefit plans generally relate to payments for benefits on an as-incurred basis since these other postretirement benefit plans do not have funding requirements similar to the pension plans. We contributed $936 million and $692 million to our other postretirement benefit plans in 2023 and 2022, respectively. Contributions to our other postretirement benefit plans are estimated to be approximately $770 million in 2024.Leasing Arrangements
See Note 6 to the consolidated financial statements for additional information related to leasing arrangements.
Guarantees
We guarantee the debentures of our operating telephone company subsidiaries. See Note 7 to the consolidated financial statements for additional information.
In connection with the execution of agreements for the sale of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as financial losses. See Note 16 to the consolidated financial statements for additional information.As of December 31, 2023, letters of credit totaling approximately $803 million, which were executed in the normal course of business and support several financing arrangements and payment obligations to third parties, were outstanding. See Note 16 to the consolidated financial statements for additional information.Other Future ObligationsAs of December 31, 2023, Verizon had 26 renewable energy purchase agreements (REPAs) with third parties. See Note 16 to the consolidated financial statements for additional information. Under the REPAs, we plan to purchase up to an aggregate of approximately 3.5 gigawatts of capacity across multiple states.Critical Accounting Estimates
Critical Accounting Estimates
A summary of the critical accounting estimates used in preparing our financial statements are as follows:
Wireless Licenses and Goodwill
Wireless licenses and goodwill are a significant component of our consolidated assets. Both our wireless licenses and goodwill are treated as indefinite-lived intangible assets and, therefore are not amortized, but rather are tested for impairment annually in the fourth fiscal quarter, unless there are events requiring an earlier assessment or changes in circumstances during an interim period suggesting impairment indicators are present. We believe our estimates and assumptions are reasonable and represent appropriate marketplace considerations as of the valuation date. Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates and assumptions are uncertain by nature, may change over time and can vary from actual results. It is possible that in the future there may be changes in our estimates and assumptions, including the timing and amount of future cash flows, margins, growth rates, market participant assumptions, comparable benchmark companies and related multiples and discount rates, which could result in different fair value estimates. Significant and adverse changes to any one or more of the above-noted estimates and assumptions could result in an impairment to our wireless licenses and goodwill impairment for one or more of our reporting units.Wireless LicensesThe carrying value of our wireless licenses was approximately $155.7 billion as of December 31, 2023. We aggregate our wireless licenses into one single unit of accounting, as we utilize our wireless licenses on an integrated basis as part of our nationwide wireless network. Our wireless licenses provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communication services. There are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of our wireless licenses.We test our wireless licenses for potential impairment annually or more frequently if impairment indicators are present. We have the option to first perform a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. However, we may elect to bypass the qualitative assessment in any period and proceed directly to performing the quantitative impairment test. It is our policy to perform quantitative impairment assessment at least every three years.During the fourth quarter of 2023 and 2022, we performed a qualitative impairment assessment as our annual impairment test to determine whether it is more likely than not that the fair value of our wireless licenses was less than the carrying amount. As part of our qualitative assessment we considered several factors including the business enterprise value of our combined wireless
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business, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA margin results, projections and recent merger and acquisition activity), the recent and projected financial performance of our combined wireless business as a whole, as well as other factors including the result of our last quantitative assessment. Our annual impairment tests in 2023 and 2022 indicated that it is more likely than not that the fair value of our wireless licenses remained above their carrying value and, therefore, did not result in an impairment.GoodwillAt December 31, 2023, the balance of our goodwill was approximately $22.8 billion, of which $21.2 billion was in our Consumer reporting unit and $1.7 billion was in our Business reporting unit.To determine if goodwill is potentially impaired, we have the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we elect not to conduct the qualitative assessment or if indications of a potential impairment exist, the determination of whether an impairment has occurred requires the fair value of each reporting unit to be assessed. It is our policy to perform quantitative impairment assessments at least every three years.Under the qualitative assessment, we consider several factors, including the business enterprise value of the reporting unit from the last quantitative test and the excess of fair value over carrying value from this test, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA margin results, projections and recent merger and acquisition activity), the recent and projected financial performance of the reporting unit, as well as other factors.
Under the quantitative assessment, the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of two components-projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represents our estimate of the weighted-average cost of capital, or expected return, that a marketplace participant would have required as of the valuation date. The application of our goodwill impairment test requires key assumptions underlying our valuation model. The discounted cash flow analysis factors in assumptions on discount rates and terminal growth rates to reflect risk profiles of key strategic revenue and cost initiatives, as well as revenue and EBITDA growth relative to history and market trends and expectations. The market multiples approach reflects significant judgment involved in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples is influenced by differences in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could result in a goodwill impairment loss.
During the fourth quarter of 2023, we performed a qualitative impairment assessment for our Consumer reporting unit. Our qualitative assessment indicated that it was more likely than not that the fair value of our Consumer reporting unit exceeded its carrying value and, therefore, did not result in an impairment.
During the fourth quarter of 2023, we performed a quantitative impairment assessment for our Business reporting unit given the low excess of fair value over carrying value identified in our prior annual impairment assessment and increased competitive and market pressures experienced throughout 2023. These pressures have resulted in lower projected cash flows primarily driven by secular declines in wireline services and products across our Business customer groups. In connection with Verizon’s annual budget process in the fourth quarter of 2023, leadership completed a comprehensive five-year strategic planning review of our Business reporting unit resulting in declines in financial projections driven by market dynamics as compared to the prior year five-year strategic planning cycle. The revised projections were used as a key input into the Business reporting unit’s annual goodwill impairment test performed in the fourth quarter. In addition, changes in the macroeconomic environment, including interest rate and inflationary pressures have also impacted the fair value of the reporting unit.
We applied a combination of a market approach and a discounted cash flow method reflecting current assumptions and inputs, including our revised projections, discount rate and expected growth rates, which resulted in the determination that the fair value of our Business reporting unit was less than its carrying amount. As a result, in the fourth quarter of 2023 we recorded a non-cash goodwill impairment charge of approximately $5.8 billion ($5.8 billion after-tax) in our consolidated statement of income. The goodwill balance of the Business reporting unit was approximately $7.5 billion prior to the occurrence of this impairment charge. In our Business reporting unit, if all other assumptions were to remain unchanged, we expect the impairment charge would increase by approximately $1.0 billion if the terminal value growth rate declined by 50 basis points, or $1.3 billion if the discount rate increased by 50 basis points, or $1.1 billion if the EBITDA margin decreased by 100 basis points. See Note 4 to the consolidated financial statements for additional information.
At December 31, 2023, the balance of goodwill in our Business reporting unit, after the goodwill impairment charge, was $1.7 billion. Though we have determined that no further impairment exists for our Business reporting unit as of December 31, 2023, a future projected sustained decline in the reporting unit's revenues and earnings could have a significant negative impact on its fair value and could result in future impairment charges. Such a decline could be driven by, among other things: (1)
44Table of Contentsdecreases in sales volumes or long-term growth rate as a result of competitive pressures or other factors; or (2) the inability to achieve or delays in achieving the goals in our strategic initiatives. Adverse changes to macroeconomic factors, such as increases in long-term interest rates, would also negatively impact the fair value of the reporting unit.
At December 31, 2022, the balance of our goodwill was approximately $28.7 billion, of which $21.1 billion was in our Consumer reporting unit and $7.5 billion was in our Business reporting unit. During the fourth quarter of 2022, we performed a qualitative impairment assessment for our Consumer reporting unit. Our qualitative assessment indicated that it was more likely than not that the fair value of our Consumer reporting unit exceeded its carrying value and, therefore, did not result in an impairment. During the fourth quarter of 2022, we performed a quantitative impairment assessment for our Business reporting unit. At the goodwill impairment measurement date of October 31, 2022, our quantitative assessment indicated that the fair value for our Business reporting unit exceeded its carrying amount by approximately 8% and, therefore, did not result in an impairment.Pension and Other Postretirement Benefit PlansWe maintain benefit plans for most of our employees, including, for certain employees, pension and other postretirement benefit plans. Benefit plan assumptions, including the discount rate used, the long-term rate of return on plan assets, the determination of the substantive plan and health care trend rates are periodically updated and impact the amount of benefit plan income, expense, assets and obligations. Changes to one or more of these assumptions could significantly impact our accounting for pension and other postretirement benefits.
In determining pension and other postretirement obligations, the weighted-average discount rate was selected to approximate the composite interest rates available on a selection of high-quality bonds available in the market at December 31, 2023. The bonds selected had maturities that coincided with the time periods during which benefit payments are expected to occur, were non-callable (or callable with certain selection criteria met) and available in sufficient quantities to ensure marketability (at least $300 million par outstanding). Bond yields are subject to uncertainty for a number of reasons including corporate performance, credit rating downgrades and upgrades, government fiscal policy decisions, and general market volatility. The expected long-term rates of return on plan assets used in determining Verizon’s pension and other postretirement obligations are based on expectations for future investment returns for the plans’ asset allocation. The rates are subject to uncertainty for a number of reasons including corporate performance, credit ratings, monetary policy, inflation, exchange rates, investor behavior and general market volatility.
A sensitivity analysis of the impact of changes in the discount rate and the long-term rate of return on plan assets on the benefit obligations and expense (income) recorded, as well as an increase or a decrease in the actual versus expected return on plan assets as of December 31, 2023 and for the year then ended pertaining to Verizon’s pension and postretirement benefit plans, is provided in the table below. The amounts in the table below related to discount rate changes are gross impacts on benefit obligations and expense, and do not reflect changes in asset values as a result of interest rate changes, for which our pension plan is highly hedged.
(dollars in millions) Percentage point change Increase/(decrease) at December 31, 2023
Pension plans discount rate +0.50 $ (691)
-0.50 757
Rate of return on pension plan assets +1.00 (131)
-1.00 131
Postretirement plans discount rate +0.50 (520)
-0.50 564Rate of return on postretirement plan assets +1.00 (4)
-1.00 4In addition to our liability hedging assets, we also employ an interest rate hedging strategy to further minimize the impact of discount rate changes on the funded ratio of the pension plan. While the target hedge ratio varies depending on the funded status of the plan and the level of interest rates, the target hedge ratio was 80% at December 31, 2023, significantly limiting volatility.The annual measurement date for both our pension and other postretirement benefits is December 31. We use the full yield curve approach to estimate the interest cost component of net periodic benefit cost for pension and other postretirement benefits. The full yield curve approach refines our estimate of interest cost by applying the individual spot rates from a yield curve composed of the rates of return on several hundred high-quality fixed income corporate bonds available at the measurement date. These individual spot rates align with the timing of each future cash outflow for benefit payments and therefore provide a more precise estimate of interest cost.
See Note 11 to the consolidated financial statements for additional information.45
Table of ContentsIncome Taxes
Our current and deferred income taxes and associated valuation allowances are impacted by events and transactions arising in the normal course of business as well as in connection with the adoption of new accounting standards, changes in tax laws and rates, acquisitions and dispositions of businesses and non-recurring items. As a global commercial enterprise, our income tax rate and the classification of income taxes can be affected by many factors, including estimates of the timing and realization of deferred income tax assets and the timing and amount of income tax payments. We account for tax benefits taken or expected to be taken in our tax returns in accordance with the accounting standard relating to the uncertainty in income taxes, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. We review and adjust our liability for unrecognized tax benefits based on our best judgment given the facts, circumstances and information available at each reporting date. To the extent that the final outcome of these tax positions is different than the amounts recorded, such differences may impact income tax expense and actual tax payments. We recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. Actual tax payments may materially differ from estimated liabilities as a result of changes in tax laws as well as unanticipated transactions impacting related income tax balances. See Note 12 to the consolidated financial statements for additional information.
Property, Plant and EquipmentOur Property, plant and equipment balance represents a significant component of our consolidated assets. We record property, plant and equipment at cost. We depreciate property, plant and equipment on a straight-line basis over the estimated useful life of the assets. The estimated useful life is subject to change due to a variety of factors such as change in asset capacity or performance, technical obsolescence, market expectations and competition impacts. In connection with our ongoing review of the estimated useful lives of property, plant and equipment during 2023, we determined that the estimated useful life of our property, plant and equipment would remain unchanged. We expect that a one year increase in estimated useful lives of our property, plant and equipment would result in a decrease to our 2023 depreciation expense of $2.3 billion and that a one year decrease would result in an increase of approximately $3.6 billion in our 2023 depreciation expense.Accounts Receivable
Accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The gross amount of accounts receivable and corresponding allowance for credit losses are presented separately in the consolidated balance sheets. We maintain allowances for credit losses resulting from the expected failure or inability of our customers to make required payments. We recognize the allowance for credit losses at inception and reassess quarterly based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, as well as management’s expectations of conditions in the future, as applicable. The impact of these factors on the allowance involves significant level of estimation and is subject to uncertainty. Our allowance for credit losses is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.We record an allowance to reduce the receivables to the amount that is expected to be collectible. For device payment plan agreement receivables, we record bad debt expense based on a default and loss calculation using our proprietary loss model. The expected loss rate is determined based on customer credit scores and other qualitative factors as noted above. The loss rate is assigned individually on a customer by customer basis and the custom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted-average loss rate used for determining the allowance balance. The weighted-average expected loss rate increased 1.36% at December 31, 2023 as compared to at December 31, 2022. We expect that an increase or decrease of 0.25% in the weighted-average loss rate would result in a change of $111 million in bad debt expense.
We monitor the collectability of our wireless service receivables as one overall pool. Wireline service receivables are disaggregated and pooled by the following customer groups: consumer, small and medium business, enterprise, public sector and wholesale. For wireless service receivables and wireline consumer and small and medium business receivables, the allowance is calculated based on a 12 month rolling average write-off balance multiplied by the average life-cycle of an account from billing to write-off. The risk of loss is assessed over the contractual life of the receivables and is adjusted based on the historical loss amounts for current and future conditions based on management’s qualitative considerations. For enterprise, public sector and wholesale wireline receivables, the allowance for credit losses is based on historical write-off experience and individual customer credit risk, as applicable. We consider multiple factors in determining the allowance as discussed above.If there is a deterioration of our customers’ financial condition or if future actual default rates on receivables in general differ from those currently anticipated, we may have to adjust our allowance for credit losses, which would affect earnings in the period the adjustments are made. See Note 8 to the consolidated financial statements for additional information.46
Table of ContentsAcquisitions and Divestitures
Spectrum License Transactions
From time to time we enter into agreements to buy, sell or exchange spectrum licenses. We believe these spectrum license transactions have allowed us to continue to enhance the reliability of our wireless network while also resulting in a more efficient use of spectrum.In February 2021, the Federal Communications Commission (FCC) concluded Auction 107 for C-Band wireless spectrum. Verizon paid $45.5 billion for the licenses it won, of which $44.6 billion was paid in the first quarter of 2021. In accordance with the rules applicable to the auction, Verizon is required to make payments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction, which are estimated to be $7.6 billion. During 2023 and 2022, we made payments of $4.3 billion and $1.6 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives. During 2021, we made payments of $1.3 billion primarily related to certain obligations for projected clearing costs. We expect to continue to make payments of approximately $400 million for the remaining obligations through 2024. The final timing and amounts of these payments could differ based on the actual amount of incumbent holders’ reimbursement claims and the speed with which those claims are approved and processed. The carrying value of the wireless spectrum won in Auction 107 consists of all payments required to participate and purchase licenses in the auction, including Verizon’s allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction that we are obligated to pay in order to acquire the licenses, as well as capitalized interest to the extent qualifying activities have occurred.In March 2022, Verizon signed agreements with satellite operators in which operators agreed to clear C-Band spectrum in certain markets and frequencies ahead of the previously expected timeframe. During 2022, Verizon incurred costs associated with these agreements of approximately $340 million, of which $310 million was paid as of December 31, 2022 and the remainder was paid in 2023. This early clearance accelerated Verizon's access to more spectrum in a number of key markets to support its 5G network initiatives.See Note 3 to the consolidated financial statements for additional information regarding our spectrum license transactions.
TracFone Wireless, Inc.In November 2021, we completed the acquisition of TracFone. Verizon acquired all of TracFone's outstanding stock in exchange for approximately $3.5 billion in cash, net of cash acquired and working capital and other adjustments, 57,596,544 shares of common stock of the Company valued at approximately $3.0 billion, and up to an additional $650 million in future cash contingent consideration related to the achievement of certain performance measures and other commercial arrangements. The fair value of the common stock was determined on the basis of its closing market price on the Acquisition Date. The estimated fair value of the contingent consideration as of the Acquisition Date was approximately $560 million and represents a Level 3 measurement. The contingent consideration payable is based on the achievement of certain revenue and operational targets, measured over a two year earn out period. During 2023 and 2022, Verizon made payments of $257 million and $188 million, respectively, related to the contingent consideration, which is reflected in Cash flows from financing activities in our consolidated statements of cash flows. See Note 3 and Note 9 to the consolidated financial statements for additional information.
Verizon Media Divestiture
On September 1, 2021, we completed the sale of Verizon Media Group. As of the close of the transaction, cash proceeds, the fair value of the non-convertible preferred limited partnership units of an affiliate of Apollo Global Management Inc. (the Apollo Affiliate) and the fair value of 10% of the fully-diluted common limited partnership units of the Apollo Affiliate were $4.3 billion, $496 million, and $124 million, respectively. We recorded a pre-tax gain on sale of approximately $1.0 billion (after-tax $1.0 billion) in Selling general and administrative expense in our consolidated statement of income for the year ended December 31, 2021. In addition, we incurred $346 million of various costs associated with this disposition which are primarily recorded in Selling general and administrative expense in our consolidated statement of income for the year ended December 31, 2021. See Note 3 to the consolidated financial statements for additional information.
FY 2024-12-31 (later)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OverviewVerizon Communications Inc. is a holding company that, acting through its subsidiaries, is one of the world’s leading providers of communications, technology, information and streaming products and services to consumers, businesses and government entities. With a presence around the world, we offer data, video and voice services and solutions on our networks and platforms that are designed to meet customers’ demand for mobility, reliable network connectivity and security.
To compete effectively in today’s dynamic marketplace, we are focused on the capabilities of our high-performing networks to drive growth based on delivering what customers want and need in the digital world. We are consistently deploying new network architecture and technologies to secure our leadership in both 5G and 4G wireless networks. Our network quality is the hallmark of our brand and the foundation for the connectivity, platforms and solutions upon which we build our competitive advantage. In 2024, we focused on enhancing and driving the monetization of our networks, platforms and solutions, retaining and growing our high-quality customer base and further improving our financial and operating performance.Our strategy requires significant capital investments primarily to acquire wireless spectrum, put the spectrum into service, provide additional capacity for growth in our networks, invest in the fiber that supports our businesses, evolve and maintain our networks and develop and maintain significant advanced information technology systems and data system capabilities. We believe that our C-Band spectrum, together with our industry leading millimeter wave spectrum holdings and our 4G LTE network and fiber infrastructure, will drive innovative products and services and fuel our growth.Highlights of Our 2024 Financial Results(dollars in millions)
Business OverviewWe have two reportable segments that we operate and manage as strategic business units - Consumer and Business.
23Table of Contents
Revenue by Segment
———
Note: Excludes eliminations.
Verizon Consumer GroupOur Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. Our wireline services are provided in nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100% fiber-optic network through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios.Customers can obtain our wireless services on a postpaid or prepaid basis. Our postpaid service is generally billed one month in advance for a monthly access charge in return for access to and usage of network services. Our prepaid service is offered only to Consumer customers and enables individuals to obtain wireless services without credit verification by paying for all services in advance. The Consumer segment also offers several categories of wireless equipment to customers, including a variety of smartphones and other handsets, wireless-enabled internet devices, such as tablets, and other wireless-enabled connected devices, such as smart watches.In addition to wireless services and equipment for retail customers, the Consumer segment sells residential fixed connectivity solutions, including internet, video and voice services, and wireless network access to resellers on a wholesale basis.
The Consumer segment's operating revenues for the year ended December 31, 2024 totaled $102.9 billion, an increase of $1.3 billion, or 1.3%, compared to the year ended December 31, 2023. See "Segment Results of Operations" for additional information regarding our Consumer segment’s operating performance and selected operating statistics.Verizon Business GroupOur Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and advanced communication services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products. We provide these products and services to businesses, public sector customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world.
The Business segment's operating revenues for the year ended December 31, 2024 totaled $29.5 billion, a decrease of $591 million, or 2.0%, compared to the year ended December 31, 2023. See "Segment Results of Operations" for additional information regarding our Business segment's operating performance and selected operating statistics.Corporate and OtherCorporate and other primarily includes device insurance programs, investments in unconsolidated businesses and development stage businesses that support our strategic initiatives, as well as unallocated corporate expenses, certain pension and other employee benefit related costs and interest and financing expenses. Corporate and other also includes the historical results of divested businesses and other adjustments and gains and losses that are not allocated or used in assessing segment performance due to their nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses from these transactions that are not individually significant are included in segment results and therefore are included in the chief operating decision maker's assessment of segment performance. See "Consolidated Results of Operations" for additional information regarding Corporate and other results.
24Table of Contents
Capital Expenditures and InvestmentsWe continue to invest in our wireless networks, high-speed fiber and other advanced technologies to position ourselves at the center of growth trends for the future. During the year ended December 31, 2024, these investments included $17.1 billion for capital expenditures . See "Cash Flows Used in Investing Activities" and "Liquidity and Capital Resources" for additional information.
Global Networks and Technology
We consider the reliability, speed, capacity, coverage and security of our wireless network to be key factors in our continued success. We are evolving and transforming our networks to ensure our customers receive access to the best network possible. Over the past several years, we have been leading the development of 5G wireless technology industry standards and the ecosystems for fixed and mobile 5G wireless services. Our evolution to 5G with its new architecture allows us to simplify operations by eliminating legacy network elements.
While we continue to improve our 5G wireless service coverage, we are also adding capacity and density to our networks. Network densification enables us to increase coverage, improve quality of service and add capacity to accommodate an increasing number of users.
In addition to enhancing our wireless service, our wireless mobility investments provide the foundation for our growing FWA broadband business. We are also continuing to expand our fiber-based networks, as customers increasingly value the ability to obtain wireless and wireline broadband services from the same provider. In September 2024, we entered into an agreement to acquire Frontier as part of our fiber expansion strategy, and we expect to increase the capital expenditures we devote to our fiber networks in 2025.Consolidated Results of OperationsIn this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. In "Segment Results of Operations," we review the performance of our two reportable segments in more detail. A detailed discussion of our 2022 results and year-over-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.Consolidated Operating Revenues
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Consumer $ 102,904 $ 101,626 $ 1,278 1.3 %
Business 29,531 30,122 (591) (2.0)
Corporate and other 2,609 2,479 130 5.2
Eliminations (256) (253) (3) 1.2
Consolidated Operating Revenues $ 134,788 $ 133,974 $ 814 0.6
Consolidated operating revenues increased during 2024 compared to 2023 primarily due to revenue increases in our Consumer segment, partially offset by revenue decreases in our Business segment.Revenues for our segments are discussed separately below under the heading "Segment Results of Operations."Consolidated Operating Expenses
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Cost of services $ 27,997 $ 28,100 $ (103) (0.4) %
Cost of wireless equipment 26,100 26,787 (687) (2.6)
Selling, general and administrative expense 34,113 32,745 1,368 4.2
Depreciation and amortization expense 17,892 17,624 268 1.5
Verizon Business Group goodwill impairment — 5,841 (5,841) nm
Consolidated Operating Expenses $ 106,102 $ 111,097 $ (4,995) (4.5)nm - not meaningful
Operating expenses for our segments are discussed separately below under the heading "Segment Results of Operations."25
Table of ContentsCost of Services
Cost of services includes the following costs directly attributable to a service: salaries and wages, benefits, materials and supplies, content costs, contracted services, network access and transport costs, customer provisioning costs, computer systems support and costs to support our outsourcing contracts and technical facilities. Aggregate customer service costs, which include billing and service provisioning, are allocated between Cost of services and Selling, general and administrative expense.Cost of services decreased during 2024 compared to 2023 primarily as a result of:
• a decrease of $259 million in access costs primarily as a result of decreases in prepaid subscribers, changes in usage and net circuit access prices;
• a decrease of $147 million in personnel costs primarily related to the impact of workforce changes;
• an increase of $167 million related to an asset and business rationalization charge taken in 2024 compared to an asset rationalization charge taken in 2023; and
• an increase of $152 million in digital content costs primarily associated with an increase in subscriptions through MyPlan offerings, partially offset by a decrease in traditional linear content costs due to a decline in Fios video subscribers.Cost of Wireless EquipmentCost of wireless equipment decreased during 2024 compared to 2023 primarily as a result of:
• a decrease of $2.1 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 10% in upgrades; and
• an increase of $1.4 billion due to a shift to higher priced equipment in the mix of wireless devices sold.Selling, General and Administrative Expense
Selling, general and administrative expense includes salaries and wages and benefits not directly attributable to a service or product, the provision for credit losses, taxes other than income taxes, advertising and sales commission costs, call center and information technology costs, regulatory fees, professional service fees and rent and utilities for administrative space. Also included is a portion of the aggregate customer care costs as discussed above in "Cost of Services."Selling, general and administrative expense increased during 2024 compared to 2023 primarily as a result of:
• an increase of $1.2 billion due to severance charges in 2024 primarily related to our voluntary separation program compared to 2023;
• an increase of $240 million in personnel costs related to an increase in costs associated with the transition to third-party contracted resources along with the impacts of a prior year compensation plan assumption change that did not reoccur and increased sales commission expense;
• an increase of $124 million in the provision for credit losses resulting from an increase in postpaid phone gross additions and additional bad debt reserves;
• an increase of $124 million in advertising costs related to Value Brand marketing campaigns and the refresh of the Verizon brand in 2024 compared to 2023;
• a decrease of $273 million related to an asset and business rationalization charge taken in 2024 compared to an asset rationalization charge taken in 2023; and
• a decrease of $161 million related to business transformation costs in 2023 that did not reoccur.
See "Special Items" for additional information on the severance charges, the asset and business rationalization charges and the business transformation costs.Depreciation and Amortization ExpenseDepreciation and amortization expense increased during 2024 compared to 2023, primarily due to the change in the mix of net depreciable and amortizable assets, including the amortization period of certain acquisition-related intangible assets, and the continued deployment of C-Band network assets.Verizon Business Group Goodwill Impairment
During 2023, we recorded a pre-tax charge of $5.8 billion as a result of the annual goodwill impairment test performed in the fourth quarter. See "Critical Accounting Estimates" for additional information.26
Table of ContentsOther Consolidated Results
Other Income (Expense), Net
Additional information relating to Other income (expense), net is as follows:
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Interest income $ 336 $ 354 $ (18) (5.1) %
Other components of net periodic benefit income (cost) 300 (938) 1,238 nm
Net debt extinguishment gains
385 308 77 25.0
Other, net (26) (37) 11 (29.7)
Other Income (Expense), Net $ 995 $ (313) $ 1,308 nmnm - not meaningfulOther income (expense), net reflects certain items not directly related to our core operations, including interest income, debt extinguishment gains and losses, components of net periodic pension and postretirement benefit income and cost and certain foreign exchange gains and losses.
Other income (expense), net increased during 2024 compared to 2023 primarily due to a net pension and postretirement benefits remeasurement gain of $657 million recorded during 2024, compared with a loss of $992 million recorded during 2023. The increase was partially offset by a decrease of $396 million due to lower plan assets on which to earn expected returns in our pension and postretirement plans compared to 2023.
See Note 11 to the consolidated financial statements for more information on the other components of net periodic benefit income (cost).Interest Expense
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Total interest costs on debt balances $ 7,612 $ 7,342 $ 270 3.7 %
Less capitalized interest costs 963 1,818 (855) (47.0)
Interest Expense $ 6,649 $ 5,524 $ 1,125 20.4Average debt outstanding (1)(3)$ 150,361 $ 151,062Effective interest rate (2)(3)5.1 % 4.9 %(1) The average debt outstanding is a financial measure and is calculated by applying a simple average of prior thirteen-month end balances of total short-term and long-term debt, net of discounts, premiums and unamortized debt issuance costs.
(2) The effective interest rate is the rate of actual interest incurred on debt. It is calculated by dividing the total interest costs on debt balances by the average debt outstanding.
(3) We believe that this measure is useful to management, investors and other users of our financial information in evaluating our debt financing cost and trends in our debt leverage management.Total interest expense increased during 2024 compared to 2023 primarily as a result of a decrease in capitalized interest due to additional C-Band spectrum licenses being placed into service and an increase in interest costs due to a higher average interest rate partially offset by lower average debt balances.Provision for Income Taxes
(dollars in millions)Years Ended December 31, 2024 2023 Increase
Provision for income taxes $ 5,030 $ 4,892 $ 138 2.8 %
Effective income tax rate 21.9 % 28.8 %
The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The decrease in the effective income tax rate was primarily due to the Verizon Business Group goodwill impairment charge of $5.8 billion in 2023 that substantially decreased income before income taxes and was not deductible. The increase in the provision for income taxes was primarily due to the increase in 2024 in income before income taxes.A reconciliation of the statutory federal income tax rate to the effective income tax rate for each period is included in Note 12 to the consolidated financial statements.27
Table of ContentsConsolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA
Consolidated earnings before interest, taxes, depreciation and amortization expense (Consolidated EBITDA) and Consolidated Adjusted EBITDA, which are presented below, are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to Verizon’s competitors. Consolidated EBITDA is calculated by adding back interest, taxes, depreciation and amortization expense to net income.Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of certain special items. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends. We believe that Consolidated Adjusted EBITDA is widely used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes, and depreciation and amortization policies. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis. See "Special Items" for additional information.It is management’s intent to provide non-GAAP financial information to enhance the understanding of Verizon’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
(dollars in millions)Years Ended December 31, 2024 2023
Consolidated Net Income $ 17,949 $ 12,095Add:Provision for income taxes 5,030 4,892
Interest expense 6,649 5,524Depreciation and amortization expense (1)17,892 17,624
Consolidated EBITDA $ 47,520 $ 40,135Add (Less):Other (income) expense, net (2)
$ (995) $ 313
Equity in losses of unconsolidated businesses
53 53
Severance charges
1,733 533
Asset and business rationalization
374 480
Legacy legal matter
106 —
Verizon Business Group goodwill impairment — 5,841
Legal settlement — 100
Business transformation costs — 176
Non-strategic business shutdown — 158
Consolidated Adjusted EBITDA $ 48,791 $ 47,789
(1) Includes Amortization of acquisition-related intangible assets, which were $817 million and $865 million during the years ended December 31, 2024 and 2023, respectively. The results for the year ended December 31, 2023 also include a portion of the charges associated with the Non-strategic business shutdown. See "Special Items" for additional information.
(2) Includes Pension and benefits mark-to-market credits of $532 million during the year ended December 31, 2024 and charges of $992 million during the year ended December 31, 2023. See "Special Items" for additional information.
The changes in Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA in the table above during 2024 compared to 2023 were primarily a result of the factors described above in connection with consolidated operating revenues and consolidated operating expenses.Segment Results of Operations
We have two reportable segments that we operate and manage as strategic business units - Consumer and Business. We measure and evaluate our segments based on segment operating income. The use of segment operating income is consistent with the chief operating decision maker’s assessment of segment performance.28
Table of ContentsTo aid in the understanding of segment performance as it relates to segment operating income, management uses the following operating statistics to evaluate the overall effectiveness of our segments. We believe these operating statistics are useful to investors and other users of our financial information because they provide additional insight into drivers of our segments’ operating results, key trends and performance relative to our peers. These operating statistics may be determined or calculated differently by other companies and may not be directly comparable to those statistics of other companies.
Wireless retail connections are retail customer device postpaid and prepaid connections as of the end of the period. Retail connections under an account may include those from smartphones and basic phones (collectively, phones), postpaid and prepaid FWA, as well as tablets and other internet devices, wearables and retail IoT devices. Wireless retail connections are calculated by adding total retail postpaid and prepaid new connections in the period to prior period retail connections, and subtracting total retail postpaid and prepaid disconnects in the period.
Wireless retail postpaid connections are retail postpaid customer device connections as of the end of the period. Retail postpaid connections under an account may include those from phones, postpaid FWA, as well as tablets and other internet devices, wearables and retail IoT devices. Wireless retail postpaid connections are calculated by adding retail postpaid new connections in the period to prior period retail postpaid connections, and subtracting retail postpaid disconnects in the period.
Wireless retail prepaid connections are retail prepaid customer device connections as of the end of the period. Retail prepaid connections may include those from phones, prepaid FWA, as well as tablets and other internet devices, and wearables. Wireless retail prepaid connections are calculated by adding retail prepaid new connections in the period to prior period retail prepaid connections, and subtracting retail prepaid disconnects in the period.
Fios internet connections are the total number of connections to the internet using Fios internet services as of the end of the period. Fios internet connections are calculated by adding Fios internet new connections in the period to prior period Fios internet connections, and subtracting Fios internet disconnects in the period.
Fios video connections are the total number of connections to traditional linear video programming using Fios video services as of the end of the period. Fios video connections are calculated by adding Fios video net additions in the period to prior period Fios video connections. Fios video net additions are calculated by subtracting the Fios video disconnects from the Fios video new connections.
Total broadband connections are the total number of connections to the internet using Fios internet services, Digital Subscriber Line (DSL), and postpaid, prepaid and IoT FWA as of the end of the period. Total broadband connections are calculated by adding total broadband connections, net additions in the period to prior period total broadband connections.FWA broadband connections are the total number of postpaid and prepaid connections to the internet through our 5G or 4G LTE wireless networks as of the end of the period. FWA broadband connections are calculated by adding FWA broadband connections, net additions in the period to prior period FWA broadband connections.
Wireline broadband connections are the total number of connections to the internet using DSL and Fios internet services as of the end of the period. Wireline broadband connections are calculated by adding wireline broadband connections, net additions in the period to prior period wireline broadband connections.Wireless retail connections, net addition s are the total number of additional retail customer device postpaid and prepaid connections, less the number of device disconnects in the period. Wireless retail connections, net additions in each period presented are calculated by subtracting the total retail postpaid and prepaid disconnects, net of certain adjustments, from the total retail postpaid and prepaid new connections in the period.
Wireless retail postpaid connections, net additions are the total number of additional retail customer device postpaid connections, less the number of device disconnects in the period. Wireless retail postpaid connections, net additions in each period presented are calculated by subtracting the retail postpaid disconnects, net of certain adjustments, from the retail postpaid new connections in the period.
Wireless retail prepaid connections, net additions are the total number of additional retail customer device prepaid connections, less the number of device disconnects in the period. Wireless retail prepaid connections, net additions in each period presented are calculated by subtracting the retail prepaid disconnects, net of certain adjustments, from the retail prepaid new connections in the period.
Wireless retail postpaid phone connections, net additions are the total number of additional retail customer postpaid phone connections, less the number of phone disconnects in the period. Wireless retail postpaid phone connections, net additions in each period presented are calculated by subtracting the retail postpaid phone disconnects, net of certain adjustments, from the retail postpaid phone new connections in the period.Total broadband connections, net additions are the total number of additional total broadband connections, less the number of total broadband disconnects in the period. Total broadband connections, net additions in each period presented are calculated by subtracting the total broadband disconnects, net of certain adjustments, from the total broadband new connections in the period.29
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FWA broadband connections, net additions are the total number of additional FWA broadband connections, less the number of FWA broadband disconnects in the period. FWA broadband connections, net additions in each period presented are calculated by subtracting the FWA broadband disconnects, net of certain adjustments, from the FWA broadband new connections in the period.
Wireline broadband connections, net additions are the total number of additional wireline broadband connections, less the number of wireline broadband disconnects in the period. Wireline broadband connections, net additions in each period presented are calculated by subtracting the wireline broadband disconnects, net of certain adjustments, from the wireline broadband new connections in the period.Wireless churn is the rate at which service to retail, retail postpaid, or retail postpaid phone connections is terminated on average in the period. The churn rate in each period presented is calculated by dividing retail disconnects, retail postpaid disconnects, or retail postpaid phone disconnects by the average retail connections, average retail postpaid connections, or average retail postpaid phone connections, respectively, in the period.
Wireless retail postpaid ARPA is the calculated average retail postpaid service revenue per account (ARPA) from retail postpaid accounts in the period. Wireless retail postpaid service revenue does not include recurring device payment plan billings related to the Verizon device payment program, plan billings related to device warranty and insurance or regulatory fees. Wireless retail postpaid ARPA in each period presented is calculated by dividing retail postpaid service revenue by the average retail postpaid accounts in the period.
Wireless retail postpaid accounts are wireless retail customers that are directly served and managed under the Verizon brand and use its services as of the end of the period. Accounts include unlimited plans, shared data plans and corporate accounts, as well as legacy single connection plans and multi-connection family plans. A single account may include monthly wireless services for a variety of connected devices. Wireless retail postpaid accounts are calculated by adding retail postpaid new accounts to the prior period retail postpaid accounts.
Wireless retail postpaid connections per account is the calculated average number of retail postpaid connections per retail postpaid account as of the end of the period. Wireless retail postpaid connections per account is calculated by dividing the total number of retail postpaid connections by the number of retail postpaid accounts as of the end of the period.
Segment operating income margin reflects the profitability of the segment as a percentage of revenue. Segment operating income margin is calculated by dividing total segment operating income by total segment operating revenues.
Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA) , which is presented below, is a non-GAAP measure and does not purport to be an alternative to operating income (loss) as a measure of operating performance. We believe this measure is useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as it excludes the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to segment operating income (loss). Segment EBITDA margin is calculated by dividing Segment EBITDA by total segment operating revenues. See Note 13 to the consolidated financial statements for additional information.
Verizon Consumer Group
Our Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. Our wireline services are provided in nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100% fiber-optic network through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios.30Table of Contents
Operating Revenues and Selected Operating Statistics
(dollars in millions, except ARPA)Years Ended December 31, 2024 2023 Increase/(Decrease)
Service
$ 76,880 $ 74,874 $ 2,006 2.7 %
Wireless equipment 19,598 20,645 (1,047) (5.1)
Other 6,426 6,107 319 5.2
Total Operating Revenues $ 102,904 $ 101,626 $ 1,278 1.3
Revenue Statistics:
Wireless service revenue
$ 65,374 $ 63,358 $ 2,016 3.2
Fios revenue
$ 11,647 $ 11,614 $ 33 0.3
Connections (‘000): (1)
Wireless retail postpaid 95,118 93,850 1,268 1.4
Wireless retail prepaid 20,138 21,122 (984) (4.7)
Total wireless retail 115,256 114,972 284 0.2
Fios internet 7,135 6,976 159 2.3
Fios video 2,684 2,951 (267) (9.0)
FWA broadband
2,714 1,866 848 45.4
Wireline broadband
7,300 7,190 110 1.5
Total broadband 10,014 9,056 958 10.6Net Additions in Period (‘000):Wireless retail postpaid 1,345 2,044 (699) (34.2)
Wireless retail prepaid (975) (1,151) 176 15.3
Total wireless retail 370 893 (523) (58.6)
Wireless retail postpaid phones 341 (132) 473 nm
FWA broadband
846 989 (143) (14.5)
Wireline broadband
110 174 (64) (36.8)
Total broadband 956 1,163 (207) (17.8)Churn Rate:Wireless retail 1.62 % 1.67 %
Wireless retail postpaid 1.06 % 1.03 %
Wireless retail postpaid phones 0.84 % 0.83 %Account Statistics:Wireless retail postpaid ARPA $ 138.25 $ 132.36 $ 5.89 4.4
Wireless retail postpaid accounts (‘000) (1)
32,794 32,990 (196) (0.6)
Wireless retail postpaid connections per account (1)
2.90 2.84 0.06 2.1
(1) As of end of periodWhere applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.
nm - not meaningfulConsumer's total operating revenues increased during 2024 compared to 2023 as a result of increases in Service and Other revenues, partially offset by a decrease in Wireless equipment revenue.Service RevenueService revenue increased during 2024 compared to 2023 primarily driven by an increase in Wireless service revenue.
31Table of ContentsWireless service revenue increased during 2024 compared to 2023 primarily as a result of:
• an increase of $1.5 billion in access revenues related to our postpaid plans primarily due to pricing actions, an increase in subscriptions through MyPlan offerings and a 45% increase in our FWA subscriber base. These increases were partially offset by the amortization of wireless equipment sales promotions;
• an increase of $638 million related to growth in non-retail service revenue;
• an increase of $318 million in TravelPass revenue due to increased customer international travel; and
• a decrease of $625 million in prepaid revenue primarily due to a decrease in the prepaid subscriber base partially driven by the termination of the Affordable Connectivity Program in the second quarter of 2024.Wireless Equipment RevenueWireless equipment revenue decreased during 2024 compared to 2023 primarily as a result of:
• a decrease of $1.5 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 10% in upgrades; and
• an increase of $474 million due to a shift to higher priced equipment in the mix of wireless devices sold, partially offset by the impact of related promotions.Other Revenue
Other revenue includes fees that partially recover the direct and indirect costs of complying with regulatory and industry obligations and programs, revenues associated with certain products included in our device protection offerings, leasing and interest recognized when equipment is sold to the customer by an authorized agent under a device payment plan agreement.Other revenue increased during 2024 compared to 2023 primarily due to:
• an increase of $193 million driven by regulatory surcharges primarily related to a higher net Federal Universal Service Fund rate, along with an increase in other regulatory surcharges; and
• an increase of $116 million related to device protection offerings primarily due to changes in the products offered and pricing actions.Operating Expenses
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Cost of services $ 18,072 $ 17,580 $ 492 2.8 %
Cost of wireless equipment 21,259 21,827 (568) (2.6)
Selling, general and administrative expense 20,537 20,131 406 2.0
Depreciation and amortization expense 13,552 13,077 475 3.6
Total Operating Expenses $ 73,420 $ 72,615 $ 805 1.1Cost of ServicesCost of services increased during 2024 compared to 2023 primarily as a result of:
• an increase of $270 million in rent and lease expense primarily driven by new leases and lease modifications related to the continued deployment of the C-Band spectrum and Consumer's proportionate usage of shared leased assets;
• an increase of $195 million in personnel costs mainly driven by certain other post-employment benefit credits in 2023 that did not reoccur in 2024;
• an increase of $154 million in digital content costs primarily associated with an increase in subscriptions through MyPlan offerings, partially offset by a decrease in traditional linear content costs due to a decline in Fios video subscribers; and
• a decrease of $169 million in access costs primarily as a result of decreases in prepaid subscribers, changes in usage and net circuit access prices.Cost of Wireless EquipmentCost of wireless equipment decreased during 2024 compared to 2023 primarily as a result of:
• a decrease of $1.7 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 10% in upgrades; and
• an increase of $1.2 billion due to a shift to higher priced equipment in the mix of wireless devices sold.Selling, General and Administrative ExpenseSelling, general and administrative expense increased during 2024 compared to 2023 primarily due to:
• an increase of $176 million in the provision for credit losses resulting from an increase in postpaid phone gross additions and additional bad debt reserves; and
• an increase of $105 million in advertising costs related to Value Brand marketing campaigns in 2024 compared to 2023.
32Table of ContentsDepreciation and Amortization Expense
Depreciation and amortization expense increased during 2024 compared to 2023 driven by the change in the mix of total Verizon depreciable and amortizable assets and Consumer's usage of those assets.Segment Operating Income and EBITDA
(dollars in millions)Years Ended December 31, 2024 2023 Increase
Segment Operating Income $ 29,484 $ 29,011 $ 473 1.6 %
Add Depreciation and amortization expense 13,552 13,077 475 3.6
Segment EBITDA $ 43,036 $ 42,088 $ 948 2.3
Segment operating income margin 28.7 % 28.5 %
Segment EBITDA margin 41.8 % 41.4 %The changes in the table above during the periods presented were primarily a result of the factors described above in connection with Consumer operating revenues and operating expenses.
Verizon Business GroupOur Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and advanced communication services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products. We provide these products and services to businesses, public sector customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world. The Business segment is organized in three customer groups: Enterprise and Public Sector, Business Markets and Other, and Wholesale.
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Table of ContentsOperating Revenues and Selected Operating Statistics
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Enterprise and Public Sector $ 14,218 $ 15,076 $ (858) (5.7) %
Business Markets and Other 13,099 12,715 384 3.0
Wholesale 2,214 2,331 (117) (5.0)
Total Operating Revenues (1)
$ 29,531 $ 30,122 $ (591) (2.0)
Revenue Statistics:
Wireless service revenue
$ 13,753 $ 13,372 $ 381 2.8
Fios revenue
$ 1,252 $ 1,235 $ 17 1.4
Connections (‘000): (2)
Wireless retail postpaid 30,819 29,779 1,040 3.5
Fios internet 401 385 16 4.2
Fios video 54 61 (7) (11.5)
FWA broadband
1,854 1,201 653 54.4
Wireline broadband
459 460 (1) (0.2)
Total broadband 2,313 1,661 652 39.3Net Additions in Period ('000):Wireless retail postpaid 1,010 1,242 (232) (18.7)
Wireless retail postpaid phones 546 562 (16) (2.8)
FWA broadband
622 547 75 13.7
Wireline broadband
(1) (8) 7 87.5
Total broadband 621 539 82 15.2Churn Rate:Wireless retail postpaid 1.47 % 1.48 %
Wireless retail postpaid phones 1.11 % 1.13 %
(1) Service and other revenues included in our Business segment were approximately $25.9 billion and $26.4 billion for the years ended December 31, 2024 and 2023, respectively. Wireless equipment revenues included in our Business segment were approximately $3.6 billion and $3.7 billion for the years ended December 31, 2024 and 2023, respectively.
(2) As of end of periodWhere applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.Business's total operating revenues decreased during 2024 compared to 2023 as a result of decreases in Enterprise and Public Sector and Wholesale revenues, partially offset by an increase in Business Markets and Other revenue.Enterprise and Public SectorEnterprise and Public Sector offers wireless products and services as well as wireline connectivity such as broadband and managed services to our large business and public sector customers. Large businesses are identified based on their size and volume of business with Verizon. Public sector customers include U.S. federal, state and local governments and educational institutions. Our offerings to this customer group include plans with features and pricing designed to address their specific needs.
Enterprise and Public Sector revenues decreased during 2024 compared to 2023 primarily due to a decrease of $702 million in wireline revenue primarily driven by declines in networking, traditional data and voice communication services along with related professional services. These declines were due to secular market pressure and technology shifts, coupled with lower customer premise equipment sales volumes.Business Markets and OtherBusiness Markets and Other offers wireless services (including FWA broadband), wireless equipment, advanced communication services, tailored voice and networking products, Fios services, advanced voice solutions and security services to businesses
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that ordinarily do not meet the requirements to be categorized as Enterprise and Public Sector, as described above. Business Markets and Other also includes solutions that support mobile resource management.
Business Markets and Other revenue increased during 2024 compared to 2023 primarily as a result of:
• an increase of $486 million in Wireless service revenue primarily due to pricing actions and an increase in our FWA subscriber base; and
• a decrease of $89 million in connection with the shutdown of our BlueJeans business offering in 2023 and a decline in traditional voice communication revenues.Wholesale
Wholesale offers wireline communications services including data, voice, local dial tone and broadband services primarily to local, long distance, and wireless carriers that use our facilities to provide services to their customers.Wholesale revenues decreased during 2024 compared to 2023 primarily due to a decrease of $117 million related to declines in traditional voice communication and network connectivity as a result of technology substitution, as well as a decrease in core data.Operating Expenses
(dollars in millions)Years Ended December 31, 2024 2023 Increase/(Decrease)
Cost of services $ 9,742 $ 10,180 $ (438) (4.3) %
Cost of wireless equipment 4,841 4,959 (118) (2.4)
Selling, general and administrative expense 8,583 8,429 154 1.8
Depreciation and amortization expense 4,307 4,488 (181) (4.0)
Total Operating Expenses $ 27,473 $ 28,056 $ (583) (2.1)Cost of ServicesCost of services decreased during 2024 compared to 2023 primarily due to:
• a decrease of $99 million in rent and lease expense primarily driven by a change in Business's proportionate usage of shared leased assets;
• a decrease of $87 million in access costs primarily related to changes in usage and net circuit access prices;
• a decrease of $82 million in customer premise equipment costs due to lower volumes sold; and
• a decrease of $63 million in personnel costs related to the impact of workforce changes, partially offset by certain other post-employment benefit credits in 2023 that did not reoccur in 2024.Cost of Wireless EquipmentCost of wireless equipment decreased during 2024 compared to 2023 primarily as a result of:
• a decrease of $385 million driven by a lower volume of wireless devices sold; and
• an increase of $267 million due to a shift to higher priced equipment in the mix of wireless devices sold.Selling, General and Administrative ExpenseSelling, general and administrative expense increased during 2024 compared to 2023 primarily as a result of:
• an increase of $221 million in personnel costs primarily related to an increase in costs associated with the transition to third-party contracted resources along with the impacts of a prior year compensation plan assumption change that did not reoccur; and
• a decrease of $63 million in the provision for credit losses resulting from a reduction in bad debt reserves.Depreciation and Amortization ExpenseDepreciation and amortization expense decreased during 2024 compared to 2023 driven by the change in the mix of total Verizon depreciable and amortizable assets and Business's usage of those assets.
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Table of ContentsSegment Operating Income and EBITDA
(dollars in millions)Years Ended December 31, 2024 2023 Decrease
Segment Operating Income $ 2,058 $ 2,066 $ (8) (0.4) %
Add Depreciation and amortization expense 4,307 4,488 (181) (4.0)
Segment EBITDA $ 6,365 $ 6,554 $ (189) (2.9)
Segment operating income margin 7.0 % 6.9 %
Segment EBITDA margin 21.6 % 21.8 %The changes in the table above during the periods presented were primarily a result of the factors described above in connection with Business operating revenues and operating expenses.Special Items
Special items included in Income Before Provision For Income Taxes were as follows:
(dollars in millions)Years Ended December 31, 2024 2023Amortization of acquisition-related intangible assets (1)Depreciation and amortization expense $ 817 $ 865Severance, pension and benefits charges (credits)Selling, general and administrative expense 1,733 533
Other (income) expense, net (532) 992
Asset and business rationalization
Cost of services 189 22
Selling, general and administrative expense 185 458
Legacy legal matter
Selling, general and administrative expense 106 —Verizon Business Group goodwill impairment
Verizon Business Group goodwill impairment— 5,841Legal settlementSelling, general and administrative expense — 100Business transformation costsCost of services — 15
Selling, general and administrative expense — 161Non-strategic business shutdownDepreciation and amortization expense — 21
Cost of services — 45
Selling, general and administrative expense — 113
Total $ 2,498 $ 9,166(1) Amounts are included in segment results of operations.
Consolidated Adjusted EBITDA, a non-GAAP measure discussed in the section titled "Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA" as part of Consolidated Results of Operations, excludes all of the amounts included above.
The income and expenses related to special items included in our consolidated results of operations were as follows:
(dollars in millions)Years Ended December 31, 2024 2023
Within Total Operating Expenses $ 3,030 $ 8,174
Within Other (income) expense, net (532) 992
Total $ 2,498 $ 9,166Amortization of Acquisition-Related Intangible AssetsDuring 2024 and 2023, we recorded pre-tax amortization expense of $817 million and $865 million, respectively, related to acquired intangible assets.
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Table of ContentsSeverance, Pension and Benefits Charges (Credits)During 2024, we recorded pre-tax severance charges of $1.7 billion, related to separations under our voluntary separation program for select U.S.-based management employees as well as other headcount reduction initiatives. The severance charges were recorded in Selling, general and administrative expense in our consolidated statement of income.
During 2024, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded a net pre-tax pension and benefits credit of $532 million in our pension and postretirement benefit plans. The net gain was recorded in Other income (expense), net in our consolidated statement of income and was primarily driven by:
• a credit of $1.3 billion ($635 million for pension plans and $656 million for postretirement benefit plans) due to an increase in our discount rate assumption used to determine the current year liabilities of our plans from a weighted-average of 5.0% for both our pension and post retirement plans at December 31, 2023 to a weighted-average of 5.8% for our pension plans and 5.6% for our postretirement benefit plans at December 31, 2024;
• a charge of $711 million due to the difference between our estimated and actual return on assets; and
• a net charge of $48 million primarily due to other actuarial assumption adjustments.
During 2023, we recorded net pre-tax severance charges of $533 million, primarily related to involuntary separations under our existing plans, in Selling, general and administrative expense in our consolidated statement of income.During 2023, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded net pre-tax pension and benefits charges of $992 million in our pension and postretirement benefit plans. The charges were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by:
• a charge of $534 million due to an increase in our healthcare cost trend rate assumption used to determine the current year liabilities of our postretirement benefit plans from a weighted-average of 6.6% at December 31, 2022 to a weighted-average of 7.3% at December 31, 2023;• a charge of $503 million ($288 million for pension plans and $215 million for postretirement benefit plans) due to a decrease in our discount rate assumption used to determine the current year liabilities of our plans from a weighted-average of 5.2% at December 31, 2022 to a weighted-average of 5.0% at December 31, 2023; and• a net credit of $45 million primarily due to other actuarial assumption adjustments, which includes the difference between our estimated and our actual return on plan assets.Due to the presentation of the other components of net periodic benefit cost, we recognize a portion of the pension and benefits charges (credits) in Other income (expense), net in our consolidated statements of income.
See Note 11 to the consolidated financial statements for additional information related to severance, pension and benefits charges (credits).Asset and Business Rationalization
During 2024, we recorded a pre-tax asset and business rationalization charge of $374 million predominately related to the decision to cease use of certain real estate assets and exit non-strategic portions of certain businesses as part of our continued transformation initiatives.
During 2023, we recorded pre-tax asset rationalization charges of $480 million. Asset rationalization charges of $155 million recorded during the second quarter of 2023 related to certain real estate and non-strategic assets that we made a decision to cease use of as part of our transformation initiatives. Asset rationalization charges of $325 million recorded during the fourth quarter of 2023 primarily related to Business network assets that we made a decision to cease use of as part of our continued transformation initiatives.
Legacy Legal Matter
During 2024, we recorded a pre-tax charge of $106 million associated with a litigation matter related to a legacy contract for the production of telephone directories in Costa Rica by a subsidiary of the Company.Verizon Business Group Goodwill Impairment
During 2023, we recorded a pre-tax charge of $5.8 billion as a result of the annual goodwill impairment test performed in the fourth quarter. See "Critical Accounting Estimates" for additional information.Legal Settlement
During 2023, we recorded a pre-tax charge of $100 million related to the settlement of a litigation matter regarding certain administrative fees.
Business Transformation Costs
During 2023, we recorded pre-tax charges of $176 million primarily related to costs incurred in connection with strategic partnership initiatives in our managed network support services for certain Business customers.37
Table of ContentsNon-Strategic Business Shutdown
During 2023, we recorded pre-tax charges of $179 million related to the shutdown of our BlueJeans business offering.Operating Environment and TrendsThe telecommunications industry is highly competitive, and we expect competition to remain intense as traditional and non-traditional participants seek increased market share. We believe that our high-quality networks and customer base in addition to our attractive offerings and value proposition differentiate us from our competitors and give us the ability to plan and manage through changing market conditions. We remain focused on executing on the fundamentals of the business: enhancing our networks, offering innovative services and products, growing and maintaining a high-quality customer base, and delivering strong financial and operating results. We also continue to focus on cost efficiencies in order to have flexibility to adjust to changes in the competitive and economic environments and increase shareholder value.
The U.S. wireless market has achieved a high penetration of smartphones, which reduces the opportunity for new phone connection growth for the industry. We expect the wireless industry's customer growth rate to moderate over time in comparison to historical growth rates, furthering competition for customers. Future revenue growth in the industry is expected to be driven by expanding existing customer relationships, increasing the number of ways customers can connect with wireless networks and services and increasing the penetration of FWA and connected devices including wearables, tablets and IoT devices. Although certain advanced use cases for 5G technologies and related ecosystems are in the early phases of adoption, we believe that they will provide an opportunity for growth in the coming years.
We expect future service revenue growth opportunities to arise from increased access revenue as customer demand for mobile and FWA 5G connectivity continues to expand and customers shift to higher access plans. Additionally, we expect service revenue to benefit from targeted pricing actions and increased connections per account. Future service revenue growth opportunities will be dependent on expanding the penetration of our services, increasing the number of ways that our customers can connect with our networks and services and the development of new 5G use cases and ecosystems.
Pricing plays an increasingly important role in the wireless competitive landscape. As the demand for wireless services continues to grow, wireless service providers are offering a range of service plans and bundled services at competitive prices. In addition, aggressive device promotions have become more common in recent years in an effort to encourage customers to switch carriers, as well as retain existing customers. We compete in this area by offering our customers services and devices, with a variety of content options and other perks, that we believe provide significant value for the price. We and other wireless service providers, as well as equipment manufacturers, offer device payment options, which provide customers with the ability to pay for their device over a period of time, and some providers offer device leasing arrangements.
For further details on competitive environment and trends, refer to "Business — Competition and Related Trends" in Part I, Item 1 and "Risk Factors — Economic and Strategic Risks — We face significant competition that may negatively affect our operating results" in Part I, Item 1A of this Annual Report on Form 10-K.Connection TrendsIn our Consumer segment, we are focused on attracting new customers and maintaining our high-quality retail postpaid customer base by capitalizing on demand for reliable high-speed connectivity and customizable, personalized offerings and solutions. We believe the combination of our wireless network quality and service and product offerings represents an attractive value proposition and provides a compelling customer experience, supporting increased penetration of data services. While our Consumer segment experienced diminished wireless connection growth in recent years, we expect that future connection growth opportunities will be driven by the comparative value we provide to our customers, as well as our FWA broadband service. In our prepaid business, while we expect to continue to operate in a highly competitive environment, we are making improvements to achieve long-term growth.
We expect to continue to grow our Fios internet connections as we seek to expand availability of Fios, increase our penetration rates within our Fios service areas, and experience continued strong demand for higher speed internet connections. Our pending acquisition of Frontier is expected to enhance our fiber broadband footprint and provide opportunities for future growth. At the same time, we expect continued growth of FWA connections to complement strong Fios results as demand for broadband services continues to grow.
In Fios video, the business continues to face ongoing pressure as observed throughout the linear television market. We have experienced continuing access line and DSL losses as customers have switched to alternative technologies such as wireless, VoIP, and cable for voice and data services, and we expect this trend to continue.
In our Business segment, we offer wireless products and services to business and public sector customers across the U.S. We continue to grow our connections while operating in a highly competitive environment. We expect that this connection growth, combined with our industry-leading network assets, will provide additional opportunities to sell solutions, such as those around security, private networking and other network connectivity services, advanced communications and professional services.
38Table of ContentsIn addition, in both our Consumer and our Business segments, we expect to support connection growth in part by adding capacity and further expanding our wireless coverage, and by continuing the build-out and densification of our 5G network.
Service Revenue Trends
In our Consumer segment, we expect continued growth in our wireless service revenue, driven by targeted pricing actions, migrations to higher priced plans, increased offering of perks, and increases in FWA connections and revenue, offset in part by higher promotion amortization impacts in 2025. Our efforts to maintain and grow our customer base and make improvements to our prepaid business, if successful, are also expected to benefit our wireless service revenue. We expect Fios revenue to benefit from growth in our Fios customer base and an ongoing demand for higher speed internet connections, which offsets the impact of the shift from bundled wireline services to standalone internet service.
In our Business segment, we expect wireless service revenue to expand, driven by growth from an increase in wireless volumes and strong FWA revenue. We expect that Fios, through increased penetration, will also contribute to revenue growth and that legacy traditional wireline services will continue to face secular pressures.
Other Trends
We are focused on achieving profitable growth as we continue to deliver strong revenues and undertake initiatives to reduce costs and improve efficiencies, including through AI-driven technologies.
We expect that our ability to generate cash flows will benefit from our expected service revenue growth, despite the moderate expected increase in our 2025 capital program compared to 2024. See "Liquidity and Capital Resources" for additional information on our capital program.
In the course of business, we make promotional equipment offers to attract and retain customers. In 2024, the growth of our wireless service revenue was unfavorably impacted by the amortization of wireless equipment sales and promotions. We expect these pressures to continue and increase in 2025. In addition, in 2023 and 2024, we had fewer phone upgrades compared to prior years. To the extent upgrade volumes increase in 2025, the expenses associated with those device sales are expected to contribute to higher costs.Liquidity and Capital ResourcesWe use the net cash generated from our operations to invest in new businesses and spectrum, fund expansion and modernization of our networks, pay dividends, service and repay external financing and, when appropriate, buy back shares of our outstanding common stock. Our sources of funds, primarily from operations and, to the extent necessary, from external financing arrangements, are sufficient to meet ongoing operating and investing requirements over the next 12 months and beyond.
Our cash and cash equivalents balance is $4.2 billion as of December 31, 2024. Our cash and cash equivalents are held both domestically and internationally, and are invested to maintain principal and provide liquidity. See "Quantitative and Qualitative Disclosures About Market Risk" for additional information regarding our foreign currency risk management strategies.
We expect that our capital spending requirements will continue to be financed primarily through internally generated funds. Debt or equity financing may be needed to fund additional investments or development activities, including, for example, to complete our acquisition of Frontier, or to maintain an appropriate capital structure to ensure our financial flexibility. Our external financing arrangements include credit facilities and other bank lines of credit, an active commercial paper program, vendor financing arrangements, issuances of registered debt or equity securities, U.S. retail medium-term notes and other securities that are privately-placed or offered overseas. In addition, we monetize certain receivables through asset-backed debt transactions.Capital ExpendituresOur 2025 capital program includes capital to fund advanced networks and services, including expanding and adding capacity and density to our core networks, the ongoing deployment of C-Band spectrum, and advancing our network architecture. It will also support our broadband expansion plans including the launch of our fixed wireless access solution for multi-dwelling units. We anticipate cash requirements for our 2025 capital program to be between $17.5 billion and $18.5 billion.Contractual Obligations and CommitmentsWe have various contractual obligations and commitments. The following represent our anticipated material cash requirements from known contractual and other obligations as of December 31, 2024:
• Long-term debt, including current maturities, commitments of $142.2 billion, of which $21.7 billion (including $3.3 billion of unsecured debt) are expected to be due within the next twelve months. Related interest payments are $66.3 billion, of which $5.8 billion, are expected to be due within the next twelve months. Items included in long-term debt with variable coupon rates exclude unamortized debt issuance costs, and are described in Note 7 to the consolidated financial statements.
39Table of Contents• Operating lease obligations of $29.1 billion and Finance lease obligations of $2.5 billion, of which $5.0 billion and $954 million, respectively, are expected to be due within the next twelve months. In addition, Verizon has an obligation of $3.7 billion representing future minimum payments under the leaseback and sublease arrangements for our cell towers, of which $447 million is expected to be due within the next twelve months. See Note 6 to the consolidated financial statements for additional information.
• Unconditional purchase obligations, with terms in excess of one year, amount to $16.7 billion, of which $6.2 billion is expected to be due within the next twelve months. Items included in unconditional purchase obligations are primarily commitments to purchase content, network equipment, software and services, marketing services and other items which will be used or sold in the ordinary course of business. These amounts do not represent our entire anticipated purchases in the future, but represent only those items that are the subject of contractual obligations. We also purchase products and services as needed with no firm commitment. See Note 16 to the consolidated financial statements for additional information.
• Other long-term liabilities, including current maturities, of $3.9 billion, of which approximately $726 million is expected to be due within the next twelve months. Other long-term liabilities represent estimated postretirement benefit and qualified pension plan contributions. Qualified pension plan contributions include estimated minimum funding contributions. We expect that there will be no required pension funding through the end of 2025, subject to changes in market conditions. Postretirement benefit payments include future postretirement benefit payments. These estimated amounts: (1) are subject to change based on changes to assumptions and future plan performance, which could impact the timing and/or amounts of these payments; and (2) exclude expectations beyond 5 years due to uncertainty of the timing and amounts.
• We are not able to make a reasonable estimate of when the unrecognized tax benefits balance of $2.6 billion and related interest and penalties will be settled with the respective taxing authorities until the related tax audits are further developed or resolved.Consolidated Financial Condition
(dollars in millions)Years Ended December 31, 2024 2023Cash Flows Provided By (Used In)
Operating activities$ 36,912 $ 37,475Investing activities(18,674) (23,432)Financing activities(17,100) (14,657)
Increase (decrease) in cash, cash equivalents and restricted cash $ 1,138 $ (614)Cash Flows Provided By Operating ActivitiesOur primary source of funds continues to be cash generated from operations. Net cash provided by operating activities decreased $563 million during 2024 compared to 2023 primarily due to changes in working capital, partially offset by an increase in earnings and an increase in Other, net cash flow from operating activities.
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses
The change in working capital was primarily driven by higher cash income taxes paid in the current period as well as higher interest expense and severance payments primarily related to separations under our voluntary separation program.
Other, Net
Other, net cash flow from operating activities during 2024 includes $2.0 billion of proceeds related to the transaction with Vertical Bridge REIT, LLC (Vertical Bridge). These proceeds were partially offset by discretionary contributions made in March 2024 in the aggregate amount of $365 million to our qualified pension plans. We expect that there will be no required pension funding through the end of 2025, subject to changes in market conditions.Cash Flows Used In Investing Activities
Capital Expenditures
Capital expenditures continue to relate primarily to the use of capital resources to enhance the operating efficiency and productivity of our networks, maintain our existing infrastructure, facilitate the introduction of new products and services and enhance responsiveness to competitive challenges.Capital expenditures, including capitalized software, were $17.1 billion and $18.8 billion for 2024 and 2023, respectively. Capital expenditures decreased approximately $1.7 billion during 2024, compared to 2023, primarily due to the completion of our accelerated $10 billion C-Band deployment program in 2023.Acquisitions of Wireless LicensesDuring 2024 and 2023, we made payments of $269 million and $4.3 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives associated with Auction 107 .
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During 2024 and 2023, we recorded capitalized interest related to wireless licenses of $616 million and $1.4 billion, respectively.Collateral Receipts (Payments) Related to Derivative Contracts, NetDuring 2024, we made collateral payments of $712 million related to derivative contracts, net of receipts. During 2023, we received return of collateral posted of $880 million related to derivative contracts, net of payments. See Note 9 to the consolidated financial statements for additional information.Cash Flows Used In Financing ActivitiesWe seek to maintain a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. During 2024 and 2023, net cash used in financing activities was $17.1 billion and $14.7 billion, respectively.
2024
During 2024, our net cash used in financing activities of $17.1 billion was primarily driven by $20.3 billion used for repayments and repurchases of long-term borrowings (secured and unsecured) as well as finance lease obligations, $11.2 billion used for dividend payments, and $1.1 billion used for other financing activities. These cash flows used in financing activities were partially offset by $15.6 billion provided by proceeds from long-term borrowings, which included $12.4 billion of proceeds from our asset-backed debt transactions.
Proceeds from and Repayments and Repurchases of Long-Term Borrowings
At December 31, 2024, our total debt decreased to $144.0 billion compared to $150.7 billion at December 31, 2023. Our effective interest rate was 5.1% and 4.9% during the years ended December 31, 2024 and 2023, respectively. We have entered into interest rate swaps to achieve a targeted mix of fixed and variable rate debt, managing our exposure to changes in interest rates. See "Quantitative and Qualitative Disclosures About Market Risk" and Note 7 to the consolidated financial statements for additional information.
At December 31, 2024, approximately $30.5 billion, or 20.6%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily Euro and British Pound Sterling. We have entered into cross currency swaps on 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 "Quantitative and Qualitative Disclosures About Market Risk" for additional information.
Verizon may acquire debt securities issued by Verizon and its affiliates through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers, or otherwise, upon such terms and at such prices as Verizon may from time to time determine, for cash or other consideration.
Other, Net
Other, net cash flow from financing activities during 2024 includes $830 million in proceeds related to financing obligations for the cell towers transaction with Vertical Bridge. These proceeds were partially offset by $431 million in payments related to vendor financing arrangements, $425 million in equity distribution payments made for controlled entities, $313 million in payments made under the sublease arrangement for our cell towers, $280 million in cash consideration payments to acquire additional interest in certain controlled entities and $243 million in payments for settlement of cross currency swaps. See Note 6 to the consolidated financial statements for additional information on the Vertical Bridge transaction. See Note 14 to the consolidated financial statements for additional information on noncontrolling interests.
Dividends
The Board of Directors of the Company assesses the level of our dividend payments on a periodic basis taking into account such factors as long-term growth opportunities, internal cash requirements and the expectations of our shareholders. During the third quarter of 2024, our Board of Directors increased our quarterly dividend payment by 1.9% to $0.6775 from $0.6650 per share in the preceding quarter. This is the eighteenth consecutive year that Company’s Board of Directors has approved a quarterly dividend increase.
As in prior periods, dividend payments were a significant use of capital resources. During 2024, we paid $11.2 billion in dividends.2023
During 2023, our net cash used in financing activities of $14.7 billion was primarily driven by $11.0 billion used for dividend payments, $10.6 billion used for repayments and repurchases of long-term borrowings (secured and unsecured) as well as finance lease obligations and $1.5 billion used for other financing activities. These cash flows used in financing activities were41Table of Contents
partially offset by $8.6 billion provided by proceeds from long-term borrowings, which included $6.6 billion of proceeds from our asset-backed debt transactions.
Proceeds from and Repayments and Repurchases of Long-Term BorrowingsAt December 31, 2023, our total debt was $150.7 billion. During the year ended December 31, 2023, our effective interest rate was 4.9%. We have entered into interest rate swaps to achieve a targeted mix of fixed and variable rate debt, managing our exposure to changes in interest rates. See "Quantitative and Qualitative Disclosures About Market Risk" and Note 7 to the consolidated financial statements for additional information.
At December 31, 2023, approximately $33.7 billion, or 21.7%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily Euro and British Pound Sterling. We have entered into cross currency swaps on 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 "Quantitative and Qualitative Disclosures About Market Risk" for additional information.Other, NetOther, net cash flow from financing activities during 2023 includes $302 million in payments made under the sublease arrangement for our cell towers, $257 million in payments for contingent consideration related to the acquisition of TracFone Wireless, Inc. (TracFone) and $252 million in payments related to vendor financing arrangements. See Note 3 to the consolidated financial statements for additional information on the TracFone contingent considerations.DividendsDuring the third quarter of 2023, our Board of Directors increased our quarterly dividend payment by 1.9% to $0.6650 per share.
During 2023, we paid $11.0 billion in dividends.Asset-Backed DebtCash collections on the receivables and on the underlying receivables related to the participation interest collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our consolidated balance sheets.
Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our consolidated statements of cash flows. The asset-backed debt issued is included in Debt maturing within one year and Long-term debt in our consolidated balance sheets.
See Note 7 to the consolidated financial statements for additional information.
Long-Term Credit FacilitiesAt December 31, 2024(dollars in millions) Maturities Facility Capacity Unused Capacity Principal Amount Outstanding
Verizon revolving credit facility (1)2028 $ 12,000 $ 11,963 $ —Various export credit facilities (2)2025 - 2031 10,000 —
5,441
Total $ 22,000 $ 11,963 $ 5,441
(1) The revolving credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. The revolving credit facility provides for the issuance of letters of credit. As of December 31, 2024, there have been no drawings against the revolving credit facility since its inception.
(2) During 2024, there were no drawings from these facilities. During 2023, we drew down $1.0 billion from these facilities. Borrowings under certain of these facilities are amortized semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.
In March 2024, we amended our $9.5 billion revolving credit facility to increase the capacity to $12.0 billion and extended its maturity to 2028.
42Table of ContentsCommon Stock
Common stock has been used from time to time to satisfy some of the funding requirements of employee and shareholder plans. During the years ended December 31, 2024 and 2023, we issued 5.4 million and 4.4 million shares of common stock from treasury stock, which had aggregate values of $238 million and $192 million, respectively.
In February 2020, the Board of Directors of the Company authorized a share buyback program to repurchase up to 100 million shares of our common stock. The program will terminate when the aggregate number of shares purchased reaches 100 million, or a new share repurchase plan superseding the current plan is authorized, whichever is sooner. The program permits Verizon to repurchase shares over time, with the amount and timing of repurchases depending on market conditions and corporate needs. There were no repurchases of common stock during 2024 and 2023 under our authorized share buyback program.Credit RatingsVerizon’s credit ratings did not change in 2024 or 2023.Securities ratings assigned by rating organizations are expressions of opinion and are not recommendations to buy, sell or hold securities. A securities rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.
Covenants
Our credit agreements contain covenants that are typical for large, investment grade companies. These covenants include requirements to pay interest and principal in a timely fashion, pay taxes, maintain insurance with responsible and reputable insurance companies, preserve our corporate existence, keep appropriate books and records of financial transactions, maintain our properties, provide financial and other reports to our lenders, limit pledging and disposition of assets and mergers and consolidations, and other similar covenants.
We and our consolidated subsidiaries are in compliance with all of our restrictive covenants in our debt agreements.
Change In Cash, Cash Equivalents and Restricted CashOur Cash and cash equivalents at December 31, 2024 totaled $4.2 billion, a $2.1 billion increase compared to December 31, 2023, primarily as a result of the factors discussed above.
Restricted cash at December 31, 2024 totaled $441 million, a $991 million decrease compared to restricted cash at December 31, 2023, primarily related to cash collections on certain receivables and on the underlying receivables related to the participation interest that are required at certain specified times to be placed into segregated accounts. The decrease of $991 million in restricted cash was primarily due to a change in the timing on when cash collections on certain receivables collateralizing our asset-backed debt securities are required to be placed into segregated accounts.Free Cash Flow
Free cash flow is a non-GAAP financial measure that reflects an additional way of viewing our liquidity that, we believe, when viewed with our GAAP results, provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. Free cash flow is calculated by subtracting capital expenditures (including capitalized software) from net cash provided by operating activities. We believe it is a more conservative measure of cash flow since capital expenditures are necessary for ongoing operations. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on finance lease obligations or cash payments for business acquisitions or wireless licenses. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.
The following table reconciles net cash provided by operating activities to free cash flow:
(dollars in millions)Years Ended December 31, 2024 2023
Net cash provided by operating activities $ 36,912 $ 37,475
Less Capital expenditures (including capitalized software) 17,090 18,767
Free cash flow $ 19,822 $ 18,708
The increase in free cash flow during 2024 is a reflection of the decrease in capital expenditures, partially offset by the decrease in operating cash flows, both of which are discussed above.
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Table of ContentsEmployee Benefit Plans Funded Status and Contributions
Employer ContributionsWe operate numerous qualified and nonqualified pension plans and other postretirement benefit plans. These plans primarily relate to our domestic business units. During 2024, we made discretionary contributions in the aggregate amount of $365 million to our qualified pension plans. During 2023, we made a discretionary contribution of $200 million to one of our qualified pension plans. During 2024 and 2023, we made contributions of $56 million and $52 million to our nonqualified pension plans, respectively.
Our overall investment strategy is to achieve a mix of assets that allows us to meet projected benefit payments while taking into consideration risk and return. In an effort to reduce the risk of our portfolio strategy and better align assets with liabilities, we have adopted a liability driven pension strategy that seeks to better match the interest rate sensitivity of the liability hedging assets with the interest rate sensitivity of the liability. We expect that the strategy will reduce the likelihood that assets will decline at a time when liabilities increase (referred to as liability hedging), with the goal to reduce the risk of underfunding to the plan and its participants and beneficiaries. Over time, as the asset allocation shifts to more liability hedging assets, this strategy will generally result in lower expected asset returns. For 2025, we expect no required qualified pension plan contributions and insignificant nonqualified pension plan contributions.
Contributions to our other postretirement benefit plans generally relate to payments for benefits on an as-incurred basis since these other postretirement benefit plans do not have funding requirements similar to the pension plans. We contributed $935 million and $936 million to our other postretirement benefit plans in 2024 and 2023, respectively. Contributions to our other postretirement benefit plans are estimated to be approximately $726 million in 2025.Leasing Arrangements
See Note 6 to the consolidated financial statements for additional information related to leasing arrangements.
Guarantees
We guarantee the debentures of our operating telephone company subsidiaries. See Note 7 to the consolidated financial statements for additional information.
In connection with the execution of agreements for the sale of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as financial losses. See Note 16 to the consolidated financial statements for additional information.As of December 31, 2024, letters of credit totaling approximately $816 million, which were executed in the normal course of business and support several financing arrangements and payment obligations to third parties, were outstanding. See Note 16 to the consolidated financial statements for additional information.Other Future ObligationsAs of December 31, 2024, Verizon had 28 renewable energy purchase agreements with third parties for a total of approximately 3.7 gigawatts of anticipated renewable energy capacity across multiple states. See Note 16 to the consolidated financial statements for additional information.Critical Accounting Estimates
Critical Accounting Estimates
A summary of the critical accounting estimates used in preparing our financial statements are as follows:
Wireless Licenses and Goodwill
Wireless licenses and goodwill are a significant component of our consolidated assets. Both our wireless licenses and goodwill are treated as indefinite-lived intangible assets and, therefore are not amortized, but rather are tested for impairment annually in the fourth fiscal quarter, unless there are events requiring an earlier assessment or changes in circumstances during an interim period suggesting impairment indicators are present. We believe our estimates and assumptions are reasonable and represent appropriate marketplace considerations as of the valuation date. Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates and assumptions are uncertain by nature, may change over time and can vary from actual results. It is possible that in the future there may be changes in our estimates and assumptions, including the timing and amount of future cash flows, margins, growth rates, market participant assumptions, comparable benchmark companies and related multiples and discount rates, which could result in different fair value estimates. Significant and adverse changes to any one or more of the above-noted estimates and assumptions could result in an impairment to our wireless licenses and goodwill impairment for one or more of our reporting units.44
Table of ContentsWireless LicensesThe carrying value of our wireless licenses was approximately $156.6 billion as of December 31, 2024. We aggregate our wireless licenses into one single unit of accounting, as we utilize our wireless licenses on an integrated basis as part of our nationwide wireless network. Our wireless licenses provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communication services. There are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of our wireless licenses.We test our wireless licenses for potential impairment annually or more frequently if impairment indicators are present. We have the option to first perform a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. However, we may elect to bypass the qualitative assessment in any period and proceed directly to performing the quantitative impairment test. It is our policy to perform quantitative impairment assessment at least every three years.Our quantitative impairment assessment consisted of comparing the estimated fair value of our aggregate wireless licenses to the aggregated carrying amount as of the test date. Under our quantitative assessment, we estimated the fair value of our wireless licenses using the Greenfield approach. The Greenfield approach is an income based valuation approach that values the wireless licenses by calculating the cash flow generating potential of a hypothetical start-up company that goes into business with no assets except the wireless licenses to be valued. A discounted cash flow analysis is used to estimate what a marketplace participant would be willing to pay to purchase the aggregated wireless licenses as of the valuation date. As a result, we were required to make significant estimates about future cash flows and profitability specifically associated with our wireless licenses, an appropriate discount rate based on the risk associated with those estimated cash flows and assumed terminal value and growth rates. We considered current and expected future economic conditions, current and expected availability of wireless network technology and infrastructure and related equipment and the costs thereof as well as other relevant factors in estimating future cash flows and profitability. The discount rate represented our estimate of the weighted-average cost of capital (WACC), or expected return, that a marketplace participant would have required as of the valuation date and includes a risk premium associated with the current and expected economic conditions as of the valuation date. We developed the discount rate based on our consideration of the cost of debt and equity of a group of guideline companies as of the valuation date. The terminal value growth rate represented our estimate of the marketplace's long-term growth rate.
During the fourth quarter of 2023, we performed a qualitative impairment assessment as our annual impairment test to determine whether it is more likely than not that the fair value of our wireless licenses was less than the carrying amount. As part of our qualitative assessment we considered several factors including the enterprise value of our combined wireless business, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA margin results, projections and recent merger and acquisition activity), the recent and projected financial performance of our combined wireless business as a whole, as well as other factors including the result of our last quantitative assessment performed in 2021. Our annual impairment test in 2023 indicated that it is more likely than not that the fair value of our wireless licenses remained above their carrying value and, therefore, did not result in an impairment.
During the fourth quarter of 2024, we performed a quantitative impairment assessment in accordance with our policy. The quantitative impairment assessment we performed during the fourth quarter of 2024 indicated that the fair value of our wireless licenses is substantially in excess of their carrying value and, therefore, did not result in an impairment. In the event of a 10% decline in the fair value of our wireless licenses, the fair value would have still exceeded their carrying value. We do not believe reasonable changes in significant estimates would change the outcome to this quantitative assessment. For instance, if either the terminal value growth rate declined by 50 basis points (bps) or if the WACC increased by 50 bps, the fair value of wireless licenses would still exceed their carrying value.GoodwillAt both December 31, 2024 and 2023, the balance of our goodwill was approximately $22.8 billion, of which $21.2 billion was in our Consumer reporting unit and $1.7 billion was in our Business reporting unit.To determine if goodwill is potentially impaired, we have the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we elect not to conduct the qualitative assessment or if indications of a potential impairment exist, the determination of whether an impairment has occurred requires the fair value of each reporting unit to be assessed. It is our policy to perform quantitative impairment assessments at least every three years.Under the qualitative assessment, we consider several factors, including the enterprise value of the reporting unit from the last quantitative test and the excess of fair value over carrying value from this test, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA margin results, projections and recent merger and acquisition activity), the recent and projected financial performance of the reporting unit, as well as other factors.
Under the quantitative assessment, the fair value of the reporting unit is calculated using an average of the market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of two
45Table of Contentscomponents-projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond the cash flows from the discrete projection period. The fair value of the reporting unit using the income approach is calculated based on the sum of the present value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represents our estimate of the WACC, or expected return, that a marketplace participant would have required as of the valuation date. The application of our goodwill impairment test requires key assumptions underlying our valuation model. The discounted cash flow analysis factors in assumptions on discount rates and terminal growth rates to reflect risk profiles of key strategic revenue and cost initiatives, as well as revenue and EBITDA growth relative to history and market trends and expectations. The market multiples approach reflects significant judgment involved in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples is influenced by differences in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could result in a goodwill impairment.
During the fourth quarter of 2023, we performed a qualitative impairment assessment for our Consumer reporting unit. Our qualitative assessment indicated that it was more likely than not that the fair value of our Consumer reporting unit exceeded its carrying value and, therefore, did not result in an impairment.
During the fourth quarter of 2024, we performed a quantitative impairment assessment for our Consumer reporting unit in accordance with our policy. We applied a combination of a market approach and a discounted cash flow method reflecting current assumptions and inputs, including our revised projections, discount rate and expected growth rates. Our assessment indicated that the fair value of our Consumer reporting unit substantially exceeded its carrying value and, therefore, did not result in an impairment. In the event of a 10% decline in the fair value of our Consumer reporting unit, the fair value of the Consumer reporting unit would have still exceeded its book value. We do not believe reasonable changes in significant assumptions would change the outcome to this quantitative assessment. For instance, if either the terminal value growth rate declined by 50 bps or if the discount rate increased by 50 bps, the fair value of our Consumer reporting unit would still exceed its carrying value.
During the fourth quarter of 2023, we performed a quantitative impairment assessment for our Business reporting unit given the low excess of fair value over carrying value identified in our 2022 annual impairment assessment and increased competitive and market pressures experienced throughout 2023. These pressures resulted in lower projected cash flows primarily driven by secular declines in wireline services and products across our Business customer groups. In connection with Verizon’s annual budget process in the fourth quarter of 2023, leadership completed a comprehensive five-year strategic planning review of our Business reporting unit resulting in declines in financial projections driven by market dynamics as compared to the prior year five-year strategic planning cycle. The revised projections were used as a key input into the Business reporting unit’s annual goodwill impairment test performed in the fourth quarter of 2023. In addition, changes in the macroeconomic environment, including interest rate and inflationary pressures also impacted the fair value of the reporting unit. We applied a combination of a market approach and a discounted cash flow method reflecting current assumptions and inputs, including our revised projections, discount rate and expected growth rates, which resulted in the determination that the fair value of our Business reporting unit was less than its carrying amount. As a result, in the fourth quarter of 2023, we recorded a noncash goodwill impairment charge of approximately $5.8 billion ($5.8 billion after-tax) in our consolidated statement of income. The goodwill balance of the Business reporting unit was approximately $7.5 billion prior to the occurrence of this impairment charge.
During the fourth quarter of 2024, we performed a quantitative impairment assessment for our Business reporting unit given the impairment of the Business reporting unit's goodwill in the prior year. In addition, the Business reporting unit has continued to experience competitive and market pressures throughout 2024, that may persist over the near term. We applied a combination of a market approach and a discounted cash flow method reflecting current assumptions and inputs, including our revised projections, discount rate and expected growth rates, which indicated that the fair value of our Business reporting unit exceeded its carrying value and, therefore, did not result in an impairment. At the goodwill impairment measurement date of October 31, 2024, our Business reporting unit had a fair value that exceeded its carrying amount by approximately 8% and remains susceptible to future impairment risk. We do not anticipate reasonable changes in significant assumptions to change the outcome of the quantitative impairment assessment. For instance, if either the terminal value growth rate declined by 50 bps, or if the discount rate increased by 50 bps, or if the EBITDA margin decreased by 100 basis points, the fair value of our Business reporting unit would still exceed its carrying value. However, management believes there is a continued risk that our Business reporting unit may be required to recognize an impairment charge in the future. As of December 31, 2024, $1.7 billion of goodwill was allocated to our Business reporting unit. See Note 4 to the consolidated financial statements for additional information.
A projected sustained decline in the reporting unit's revenues and earnings could have a significant negative impact on its fair value and could result in future impairment charges. Such a decline could be driven by, among other things: (1) decreases in sales volumes or long-term growth rate as a result of competitive pressures or other factors; or (2) the reporting unit's inability to achieve or delays in achieving its goals or strategic initiatives. Adverse changes to macroeconomic factors, such as increases in long-term interest rates, would also negatively impact the fair value of the reporting unit.Pension and Other Postretirement Benefit PlansWe maintain benefit plans for most of our employees, including, for certain employees, pension and other postretirement benefit plans. Benefit plan assumptions, including the discount rate used, the long-term rate of return on plan assets, the determination of the substantive plan and health care trend rates are periodically updated and impact the amount of benefit plan income,
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expense, assets and obligations. Changes to one or more of these assumptions could significantly impact our accounting for pension and other postretirement benefits.
In determining pension and other postretirement obligations, the weighted-average discount rate was selected to approximate the composite interest rates available on a selection of high-quality bonds available in the market at December 31, 2024. The bonds selected had maturities that coincided with the time periods during which benefit payments are expected to occur, were non-callable (or callable with certain selection criteria met) and available in sufficient quantities to ensure marketability (at least $300 million par outstanding). Bond yields are subject to uncertainty for a number of reasons including corporate performance, credit rating downgrades and upgrades, government fiscal policy decisions, and general market volatility. The expected long-term rates of return on plan assets used in determining Verizon’s pension and other postretirement obligations are based on expectations for future investment returns for the plans’ asset allocation. The rates are subject to uncertainty for a number of reasons including corporate performance, credit ratings, monetary policy, inflation, exchange rates, investor behavior and general market volatility.
A sensitivity analysis of the impact of changes in the discount rate and the long-term rate of return on plan assets on the benefit obligations and expense (income) recorded, as well as an increase or a decrease in the actual versus expected return on plan assets as of December 31, 2024 and for the year then ended pertaining to Verizon’s pension and postretirement benefit plans, is provided in the table below. The amounts in the table below related to discount rate changes are gross impacts on benefit obligations and expense, and do not reflect changes in asset values as a result of interest rate changes, for which our pension plan is highly hedged.
(dollars in millions) Percentage point change Increase/(Decrease) at December 31, 2024
Pension plans discount rate +0.50 $ (410)
-0.50 451
Rate of return on pension plan assets +1.00 (78)
-1.00 78
Postretirement plans discount rate +0.50 (450)
-0.50 486Rate of return on postretirement plan assets +1.00 (4)
-1.00 4In addition to our liability hedging assets, we also employ an interest rate hedging strategy to further minimize the impact of discount rate changes on the funded ratio of the pension plan. While the target hedge ratio varies depending on the funded status of the plan and the level of interest rates, the target hedge ratio was 60% at December 31, 2024, limiting volatility.The annual measurement date for both our pension and other postretirement benefits is December 31. We use the full yield curve approach to estimate the interest cost component of net periodic benefit cost for pension and other postretirement benefits. The full yield curve approach refines our estimate of interest cost by applying the individual spot rates from a yield curve composed of the rates of return on several hundred high-quality fixed income corporate bonds available at the measurement date. These individual spot rates align with the timing of each future cash outflow for benefit payments and therefore provide a more precise estimate of interest cost.
See Note 11 to the consolidated financial statements for additional information.Income Taxes
Our current and deferred income taxes and associated valuation allowances are impacted by events and transactions arising in the normal course of business as well as in connection with the adoption of new accounting standards, changes in tax laws and rates, acquisitions and dispositions of businesses and non-recurring items. As a global commercial enterprise, our income tax rate and the classification of income taxes can be affected by many factors, including estimates of the timing and realization of deferred income tax assets and the timing and amount of income tax payments. We account for tax benefits taken or expected to be taken in our tax returns in accordance with the accounting standard relating to the uncertainty in income taxes, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. We review and adjust our liability for unrecognized tax benefits based on our best judgment given the facts, circumstances and information available at each reporting date. To the extent that the final outcome of these tax positions is different than the amounts recorded, such differences may impact income tax expense and actual tax payments. We recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. Actual tax payments may materially differ from estimated liabilities as a result of changes in tax laws as well as unanticipated transactions impacting related income tax balances. See Note 12 to the consolidated financial statements for additional information.
Property, Plant and EquipmentOur Property, plant and equipment balance represents a significant component of our consolidated assets. We record property, plant and equipment at cost. We depreciate property, plant and equipment on a straight-line basis over the estimated useful life of the assets. The estimated useful life is subject to change due to a variety of factors such as change in asset capacity or
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performance, technical obsolescence, market expectations and competitive impacts. In connection with our ongoing review of the estimated useful lives of property, plant and equipment during 2024, we determined that the estimated useful life of our property, plant and equipment would remain unchanged. We expect that a one year increase in estimated useful lives of our property, plant and equipment would result in a decrease to our 2024 depreciation expense of $2.4 billion and that a one year decrease would result in an increase of approximately $3.6 billion in our 2024 depreciation expense.Accounts Receivable
Accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The gross amount of accounts receivable and corresponding allowance for credit losses are presented separately in the consolidated balance sheets. We maintain allowances for credit losses resulting from the expected failure or inability of our customers to make required payments. We recognize the allowance for credit losses at inception and reassess quarterly based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, as well as management’s expectations of conditions in the future, as applicable. The impact of these factors on the allowance involves significant level of estimation and is subject to uncertainty. Our allowance for credit losses is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.We record an allowance to reduce the receivables to the amount that is expected to be collectible. For device payment plan agreement receivables, we record bad debt expense based on a default and loss calculation using our proprietary loss model. The expected loss rate is determined based on customer credit scores and other qualitative factors as noted above. The loss rate is assigned individually on a customer by customer basis and the custom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted-average loss rate used for determining the allowance balance. The weighted-average expected loss r ate increased 0.75% at December 31, 2024 as compared to the rate at December 31, 2023. We expect that an increase or decrease of 0.25% in the weighted-average loss rate would result in a chan ge of $160 million in bad debt expense.
We monitor the collectability of our wireless service receivables as one overall pool. Wireline service receivables are disaggregated and pooled by the following types of customers and related contracts: consumer, small and medium business, enterprise, public sector and wholesale. For wireless service receivables and wireline consumer and small and medium business receivables, the allowance is calculated based on a 12 month rolling average write-off balance multiplied by the average life-cycle of an account from billing to write-off. The risk of loss is assessed over the contractual life of the receivables and is adjusted based on the historical loss amounts for current and future conditions based on management’s qualitative considerations. For enterprise, public sector and wholesale wireline receivables, the allowance for credit losses is based on historical write-off experience and individual customer credit risk, if applicable. We consider multiple factors in determining the allowance as discussed above.If there is a deterioration of our customers’ financial condition or if future actual default rates on receivables in general differ from those currently anticipated, we may have to adjust our allowance for credit losses, which would affect earnings in the period the adjustments are made. See Note 8 to the consolidated financial statements for additional information.Acquisitions and Divestitures
Spectrum License Transactions
From time to time we enter into agreements to buy, sell or exchange spectrum licenses. We believe these spectrum license transactions have allowed us to continue to enhance the reliability of our wireless network while also resulting in a more efficient use of spectrum.In February 2021, the Federal Communications Commission (FCC) concluded Auction 107 for C-Band wireless spectrum. In accordance with the rules applicable to the auction, Verizon is required to make payments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction, which are estimated to be $7.5 billion. During 2024, 2023 and 2022, we made payments of $269 million, $4.3 billion and $1.6 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives. The carrying value of the wireless spectrum won in Auction 107 consists of all payments required to participate and purchase licenses in the auction, including Verizon’s allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction that we are obligated to pay in order to acquire the licenses, as well as capitalized interest to the extent qualifying activities have occurred.In March 2022, Verizon signed agreements with satellite operators in which operators agreed to clear C-Band spectrum in certain markets and frequencies ahead of the previously expected timeframe. During 2022, Verizon incurred costs associated with these agreements of approximately $340 million, of which $310 million was paid as of December 31, 2022 and the remainder was paid in 2023. This early clearance accelerated Verizon's access to more spectrum in a number of key markets to support its 5G network initiatives.48
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On October 17, 2024, Verizon entered into a license purchase agreement to acquire select spectrum licenses of United States Cellular Corporation and certain of its subsidiaries (UScellular) for total consideration of $1.0 billion, subject to certain potential adjustments. The closing of this transaction is subject to the receipt of regulatory approvals and other closing conditions, including the consummation of UScellular's proposed sale of its wireless operations and select spectrum assets to T-Mobile US, Inc., and the termination of certain post-closing arrangements with respect to that sale.See Note 3 to the consolidated financial statements for additional information regarding our spectrum license transactions.
TracFone Wireless, Inc.On November 23, 2021 (the Acquisition Date), we completed the acquisition of TracFone. Verizon acquired all of TracFone's outstanding stock in exchange for approximately $3.5 billion in cash, net of cash acquired and working capital and other adjustments, 57,596,544 shares of common stock of the Company valued at approximately $3.0 billion, and up to an additional $650 million in future cash contingent consideration related to the achievement of certain performance measures and other commercial arrangements. The fair value of the common stock was determined on the basis of its closing market price on the Acquisition Date. The estimated fair value of the contingent consideration as of the Acquisition Date was approximately $560 million and represented a Level 3 measurement. The contingent consideration payable was based on the achievement of certain revenue and operational targets, measured over a two year earn out period. Contingent consideration payments were completed in January of 2024.
During 2024 and 2023, Verizon made payments of $52 million and $257 million, respectively, related to the contingent consideration, which are reflected in Cash flows from financing activities in our consolidated statements of cash flows. See Note 3 and Note 9 to the consolidated financial statements for additional information.
Frontier Communications Parent, Inc.
On September 4, 2024, Verizon entered into an Agreement and Plan of Merger (the Merger Agreement) to acquire Frontier, a U.S. provider of broadband internet and other communication services. The transaction is structured as a merger of the Company's subsidiary with and into Frontier, as a result of which Frontier will become a wholly owned subsidiary of the Company and shares of Frontier common stock outstanding immediately prior to the effective time of merger (subject to certain limited exceptions) will be cancelled and converted into the right to receive a per share merger consideration of $38.50, in cash. In November 2024, Frontier shareholders approved the transaction. Consummation of the transaction is subject to the receipt of certain regulatory approvals and other customary closing conditions. Under certain circumstances, if the Merger Agreement is terminated, Frontier may be required to pay Verizon a termination fee of $320 million. Under certain other specified circumstances, Verizon may be required to pay Frontier a termination fee of $590 million.