Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20192020


OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

Commission file number: 1-8606
Verizon Communications Inc.
(Exact name of registrant as specified in its charter)
Delaware23-2259884
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
Delaware23-2259884
(State or other jurisdiction
of incorporation or organization)		(I.R.S. Employer Identification No.)
1095 Avenue of the Americas10036
New York,New York
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (212) (212) 395-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.10VZNew York Stock Exchange
Common Stock, par value $0.10VZThe NASDAQ Global Select Market
2.375%1.625% Notes due 20222024VZ22AVZ24BNew York Stock Exchange
0.500%4.073% Notes due 20222024VZ22BVZ24CNew York Stock Exchange
1.625%0.875% Notes due 20242025VZ24BVZ25New York Stock Exchange
4.073%3.250% Notes due 20242026VZ24CVZ26New York Stock Exchange
0.875%1.375% Notes due 20252026VZ25VZ26BNew York Stock Exchange
3.25%0.875% Notes due 20262027VZ26VZ27ENew York Stock Exchange
1.375% Notes due 20262028VZ26BVZ28New York Stock Exchange
0.875%1.875% Notes due 20272029VZ27EVZ29BNew York Stock Exchange
1.375%1.250% Notes due 20282030VZ28VZ30New York Stock Exchange
1.875% Notes due 20292030VZ29BVZ30ANew York Stock Exchange
1.250%2.625% Notes due 20302031VZ30VZ31New York Stock Exchange
2.625%2.500% Notes due 2031VZ31VZ31ANew York Stock Exchange
2.500%0.875% Notes due 20312032VZ31AVZ32New York Stock Exchange
4.75%1.300% Notes due 20342033VZ34VZ33BNew York Stock Exchange
4.750% Notes due 2034VZ34New York Stock Exchange
3.125% Notes due 2035VZ35New York Stock Exchange
3.375% Notes due 2036VZ36ANew York Stock Exchange
2.875% Notes due 2038VZ38BNew York Stock Exchange
1.500% Notes due 2039VZ39CNew York Stock Exchange
3.500% Fixed Rate Notes due 2039VZ39DNew York Stock Exchange
1.850% Notes due 2040VZ40New York Stock Exchange



Table of Contents
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes   ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes   ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐  Yes   ☒  No

At June 30, 2019, 4,135,764,8092020, 4,138,053,870 shares of the registrant’s common stock were outstanding, after deducting 155,668,837153,379,776 shares held in treasury.


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TABLE OF CONTENTS

Item No.Page
Item No.Page
PART I - FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Statements of Income
4
Three and six months ended June 30, 20192020 and 20182019
Condensed Consolidated Statements of Comprehensive Income
5
Three and six months ended June 30, 20192020 and 20182019
Condensed Consolidated Balance Sheets
6
At June 30, 20192020 and December 31, 20182019
Condensed Consolidated Statements of Cash Flows
7
Six months ended June 30, 20192020 and 20182019
Notes to Condensed Consolidated Financial Statements
8
Item 2.
3332
Item 3.
5254
Item 4.
5255
Item 1.
5255
Item 1A.
5255
Item 2.
5355
Item 6.
5456
5557

















Table of Contents
Part I - Financial Information

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
Verizon Communications Inc. and Subsidiaries

Three Months Ended  Six Months Ended Three Months EndedSix Months Ended
June 30,  June 30,  June 30,June 30,
(dollars in millions, except per share amounts) (unaudited)2019
 2018
 2019
 2018
(dollars in millions, except per share amounts) (unaudited)2020201920202019
       
Operating Revenues       Operating Revenues
Service revenues and other$27,351
 $27,159
 $54,548
 $53,891
Service revenues and other$26,692  $27,351  $54,173  $54,548  
Wireless equipment revenues4,720
 5,044
 9,651
 10,084
Wireless equipment revenues3,755  4,720  7,884  9,651  
Total Operating Revenues32,071
 32,203
 64,199
 63,975
Total Operating Revenues30,447  32,071  62,057  64,199  
       
Operating Expenses       Operating Expenses
Cost of services (exclusive of items shown below)7,702
 8,234
 15,494
 16,180
Cost of services (exclusive of items shown below)7,639  7,702  15,393  15,494  
Cost of wireless equipment5,019
 5,397
 10,217
 10,706
Cost of wireless equipment4,110  5,019  8,652  10,217  
Selling, general and administrative expense7,268
 7,605
 14,466
 14,449
Selling, general and administrative expense7,156  7,268  15,741  14,466  
Depreciation and amortization expense4,232
 4,350
 8,463
 8,674
Depreciation and amortization expense4,181  4,232  8,331  8,463  
Total Operating Expenses24,221
 25,586
 48,640
 50,009
Total Operating Expenses23,086  24,221  48,117  48,640  
       
Operating Income7,850
 6,617
 15,559
 13,966
Operating Income7,361  7,850  13,940  15,559  
Equity in losses of unconsolidated businesses(13) (228) (19) (247)Equity in losses of unconsolidated businesses(13) (13) (25) (19) 
Other income (expense), net(1,312) 360
 (1,017) 285
Other income (expense), net(72) (1,312) 71  (1,017) 
Interest expense(1,215) (1,222) (2,425) (2,423)Interest expense(1,089) (1,215) (2,123) (2,425) 
Income Before Provision For Income Taxes5,310
 5,527
 12,098
 11,581
Income Before Provision For Income Taxes6,187  5,310  11,863  12,098  
Provision for income taxes(1,236) (1,281) (2,864) (2,669)Provision for income taxes(1,348) (1,236) (2,737) (2,864) 
Net Income$4,074
 $4,246
 $9,234
 $8,912
Net Income$4,839  $4,074  $9,126  $9,234  
       
Net income attributable to noncontrolling interests$130
 $126
 $258
 $247
Net income attributable to noncontrolling interests$139  $130  $270  $258  
Net income attributable to Verizon3,944
 4,120
 8,976
 8,665
Net income attributable to Verizon4,700  3,944  8,856  8,976  
Net Income$4,074
 $4,246
 $9,234
 $8,912
Net Income$4,839  $4,074  $9,126  $9,234  
       
Basic Earnings Per Common Share       Basic Earnings Per Common Share
Net income attributable to Verizon$0.95
 $1.00
 $2.17
 $2.10
Net income attributable to Verizon$1.14  $0.95  $2.14  $2.17  
Weighted-average shares outstanding (in millions)4,138
 4,135
 4,138
 4,120
Weighted-average shares outstanding (in millions)4,139  4,138  4,139  4,138  
       
Diluted Earnings Per Common Share       Diluted Earnings Per Common Share
Net income attributable to Verizon$0.95
 $1.00
 $2.17
 $2.10
Net income attributable to Verizon$1.13  $0.95  $2.14  $2.17  
Weighted-average shares outstanding (in millions)4,139
 4,139
 4,140
 4,123
Weighted-average shares outstanding (in millions)4,141  4,139  4,141  4,140  
See Notes to Condensed Consolidated Financial Statements


4
Table of Contents
Condensed Consolidated Statements of Comprehensive Income
Verizon Communications Inc. and Subsidiaries
Three Months Ended  Six Months Ended  Three Months EndedSix Months Ended
June 30,  June 30, June 30,June 30,
(dollars in millions) (unaudited)2019
 2018
 2019
 2018
(dollars in millions) (unaudited)2020201920202019
       
Net Income$4,074
 $4,246
 $9,234
 $8,912
Net Income$4,839  $4,074  $9,126  $9,234  
Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit       Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit
Foreign currency translation adjustments, net of tax of $3, $13, $(2) and $6(67) (176) (43) (83)
Unrealized gain (loss) on cash flow hedges, net of tax of $193, $55, $198 and $(125)(537) (152) (550) 349
Unrealized gain (loss) on marketable securities, net of tax of $0, $0, $(2) and $14
 1
 8
 (4)
Defined benefit pension and postretirement plans, net of tax of $56, $58, $112 and $118(169) (173) (338) (346)
Other comprehensive loss attributable to Verizon(769) (500) (923) (84)
Foreign currency translation adjustments, net of tax of $4, $3, $0 and $(2)Foreign currency translation adjustments, net of tax of $4, $3, $0 and $(2)77  (67) (43) (43) 
Unrealized gain (loss) on cash flow hedges, net of tax of $(133), $193, $659 and $198Unrealized gain (loss) on cash flow hedges, net of tax of $(133), $193, $659 and $198314  (537) (1,896) (550) 
Unrealized gain on marketable securities, net of tax of $(2), $0, $(1) and $(2)Unrealized gain on marketable securities, net of tax of $(2), $0, $(1) and $(2)6  4  5  8  
Defined benefit pension and postretirement plans, net of tax of $55, $56, $111 and $112Defined benefit pension and postretirement plans, net of tax of $55, $56, $111 and $112(169) (169) (338) (338) 
Other comprehensive income (loss) attributable to VerizonOther comprehensive income (loss) attributable to Verizon228  (769) (2,272) (923) 
Total Comprehensive Income$3,305
 $3,746
 $8,311
 $8,828
Total Comprehensive Income$5,067  $3,305  $6,854  $8,311  
       
Comprehensive income attributable to noncontrolling interests$130
 $126
 $258
 $247
Comprehensive income attributable to noncontrolling interests$139  $130  $270  $258  
Comprehensive income attributable to Verizon3,175
 3,620
 8,053
 8,581
Comprehensive income attributable to Verizon4,928  3,175  6,584  8,053  
Total Comprehensive Income$3,305
 $3,746
 $8,311
 $8,828
Total Comprehensive Income$5,067  $3,305  $6,854  $8,311  
See Notes to Condensed Consolidated Financial Statements

5
Table of Contents
Condensed Consolidated Balance Sheets
Verizon Communications Inc. and Subsidiaries

At June 30,
 At December 31,
At June 30,At December 31,
(dollars in millions, except per share amounts) (unaudited)2019
 2018
(dollars in millions, except per share amounts) (unaudited)20202019
   
Assets   Assets
Current assets   Current assets
Cash and cash equivalents$1,949
 $2,745
Cash and cash equivalents$7,882  $2,594  
Accounts receivable, net of allowances of $745 and $76524,926
 25,102
Accounts receivableAccounts receivable23,742  26,162  
Less Allowance for credit lossesLess Allowance for credit losses1,070  —  
Less Allowance for doubtful accountsLess Allowance for doubtful accounts—  733  
Accounts receivable, net (Note 1)Accounts receivable, net (Note 1)22,672  25,429  
Inventories1,167
 1,336
Inventories1,289  1,422  
Prepaid expenses and other5,266
 5,453
Prepaid expenses and other5,490  8,028  
Total current assets33,308
 34,636
Total current assets37,333  37,473  
   
Property, plant and equipment257,395
 252,835
Property, plant and equipment272,714  265,734  
Less accumulated depreciation169,577
 163,549
Less Accumulated depreciationLess Accumulated depreciation179,960  173,819  
Property, plant and equipment, net87,818
 89,286
Property, plant and equipment, net92,754  91,915  
   
Investments in unconsolidated businesses650
 671
Investments in unconsolidated businesses529  558  
Wireless licenses94,333
 94,130
Wireless licenses95,767  95,059  
Goodwill24,632
 24,614
Goodwill24,667  24,389  
Other intangible assets, net9,474
 9,775
Other intangible assets, net9,600  9,498  
Operating lease right-of-use assets22,467
 —
Operating lease right-of-use assets22,431  22,694  
Other assets10,426
 11,717
Other assets10,178  10,141  
Total assets$283,108
 $264,829
Total assets$293,259  $291,727  
   
Liabilities and Equity   Liabilities and Equity
Current liabilities   Current liabilities
Debt maturing within one year$8,773
 $7,190
Debt maturing within one year$6,651  $10,777  
Accounts payable and accrued liabilities17,633
 22,501
Accounts payable and accrued liabilities19,297  21,806  
Current operating lease liabilities3,154
 —
Current operating lease liabilities3,270  3,261  
Other current liabilities8,654
 8,239
Other current liabilities9,668  9,024  
Total current liabilities38,214
 37,930
Total current liabilities38,886  44,868  
   
Long-term debt104,598
 105,873
Long-term debt106,190  100,712  
Employee benefit obligations18,040
 18,599
Employee benefit obligations17,821  17,952  
Deferred income taxes34,225
 33,795
Deferred income taxes33,798  34,703  
Non-current operating lease liabilities18,254
 —
Non-current operating lease liabilities18,158  18,393  
Other liabilities11,830
 13,922
Other liabilities14,293  12,264  
Total long-term liabilities186,947
 172,189
Total long-term liabilities190,260  184,024  
   
Commitments and Contingencies (Note 12)

 

Commitments and Contingencies (Note 11)Commitments and Contingencies (Note 11)
   
Equity   Equity
Series preferred stock ($0.10 par value; 250,000,000 shares authorized; none issued)—
 —
Common stock ($0.10 par value; 6,250,000,000 shares authorized in each period; 4,291,433,646 issued in each period)429
 429
Series preferred stock ($0.10 par value; 250,000,000 shares authorized; NaN issued)Series preferred stock ($0.10 par value; 250,000,000 shares authorized; NaN issued)—  —  
Common stock ($0.10 par value; 6,250,000,000 shares authorized in each period; 4,291,433,646 shares issued in each period)Common stock ($0.10 par value; 6,250,000,000 shares authorized in each period; 4,291,433,646 shares issued in each period)429  429  
Additional paid in capital13,419
 13,437
Additional paid in capital13,281  13,419  
Retained earnings47,945
 43,542
Retained earnings56,746  53,147  
Accumulated other comprehensive income1,447
 2,370
Common stock in treasury, at cost (155,668,837 and 159,400,267 shares outstanding)(6,823) (6,986)
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(1,274) 998  
Common stock in treasury, at cost (153,379,776 and 155,605,527 shares outstanding)Common stock in treasury, at cost (153,379,776 and 155,605,527 shares outstanding)(6,722) (6,820) 
Deferred compensation – employee stock ownership plans and other165
 353
Deferred compensation – employee stock ownership plans and other237  222  
Noncontrolling interests1,365
 1,565
Noncontrolling interests1,416  1,440  
Total equity57,947
 54,710
Total equity64,113  62,835  
Total liabilities and equity$283,108
 $264,829
Total liabilities and equity$293,259  $291,727  
See Notes to Condensed Consolidated Financial Statements

6
Table of Contents
Condensed Consolidated Statements of Cash Flows
Verizon Communications Inc. and Subsidiaries
Six Months Ended Six Months Ended
June 30,  June 30,
(dollars in millions) (unaudited)2019
 2018
(dollars in millions) (unaudited)20202019
   
Cash Flows from Operating Activities   Cash Flows from Operating Activities
Net Income$9,234
 $8,912
Net Income$9,126  $9,234  
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense8,463
 8,674
Depreciation and amortization expense8,331  8,463  
Employee retirement benefits(294) (300)Employee retirement benefits(32) (294) 
Deferred income taxes588
 1,354
Deferred income taxes(120) 588  
Provision for uncollectible accounts738
 462
Provision for expected credit lossesProvision for expected credit losses831  738  
Equity in losses of unconsolidated businesses, net of dividends received50
 268
Equity in losses of unconsolidated businesses, net of dividends received46  50  
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses(4,593) (1,538)Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses3,297  (4,593) 
Discretionary employee benefits contributions(300) (1,679)Discretionary employee benefits contributions—  (300) 
Other, net1,950
 280
Other, net2,073  1,950  
Net cash provided by operating activities15,836
 16,433
Net cash provided by operating activities23,552  15,836  
   
Cash Flows from Investing Activities   Cash Flows from Investing Activities
Capital expenditures (including capitalized software)(7,967) (7,838)Capital expenditures (including capitalized software)(9,850) (7,967) 
Acquisitions of businesses, net of cash acquired(28) (38)Acquisitions of businesses, net of cash acquired(399) (28) 
Acquisitions of wireless licenses(199) (1,155)Acquisitions of wireless licenses(1,801) (199) 
Other, net(395) 303
Other, net(74) (395) 
Net cash used in investing activities(8,589) (8,728)Net cash used in investing activities(12,124) (8,589) 
   
Cash Flows from Financing Activities   Cash Flows from Financing Activities
Proceeds from long-term borrowings6,237
 4,584
Proceeds from long-term borrowings9,305  6,237  
Proceeds from asset-backed long-term borrowings3,982
 1,716
Proceeds from asset-backed long-term borrowings2,844  3,982  
Repayments of long-term borrowings and finance lease obligations(9,630) (6,568)Repayments of long-term borrowings and finance lease obligations(8,533) (9,630) 
Repayments of asset-backed long-term borrowings(2,817) (2,000)Repayments of asset-backed long-term borrowings(4,612) (2,817) 
Dividends paid(4,981) (4,845)Dividends paid(5,090) (4,981) 
Other, net(834) (752)Other, net(146) (834) 
Net cash used in financing activities(8,043) (7,865)Net cash used in financing activities(6,232) (8,043) 
   
Decrease in cash, cash equivalents and restricted cash(796) (160)
Increase (decrease) in cash, cash equivalents and restricted cashIncrease (decrease) in cash, cash equivalents and restricted cash5,196  (796) 
Cash, cash equivalents and restricted cash, beginning of period3,916
 2,888
Cash, cash equivalents and restricted cash, beginning of period3,917  3,916  
Cash, cash equivalents and restricted cash, end of period (Note 1)$3,120
 $2,728
Cash, cash equivalents and restricted cash, end of period (Note 1)$9,113  $3,120  
See Notes to Condensed Consolidated Financial Statements


7
Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
Verizon Communications Inc. and Subsidiaries

Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States (U.S.) and based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements ofincluded in Verizon Communications Inc.'s (Verizon or the Company) included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.

In November 2018, we announced a strategic reorganization of our business. Under the new structure, effective April 1, 2019, there are two reportable segments that we operate and manage as strategic business units - Verizon Consumer Group (Consumer) and Verizon Business Group (Business). In conjunction with the new reporting structure, we recast our segment disclosures for all periods presented.

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 Wireless brand and through wholesale and other arrangements. 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 under the Fios brand 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.

Our Business segment provides wireless and wireline communications services and products, video and data services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various Internet of Things (IoT) services and products. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and select products and services to customers around the world.

Basis of Presentation
WeCertain amounts have been reclassified certain prior year amounts to conform to the current year presentation,period’s presentation.

Use of Estimates
U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions take into account historical and forward-looking factors that the Company believes are reasonable, including but not limited to the potential impacts arising from the recent novel coronavirus (COVID-19) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts from COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.

Examples of significant estimates include the allowance for changescredit losses, the recoverability of intangible assets, property, plant and equipment, and other long-lived assets, the incremental borrowing rate for the lease liability, fair value measurements, including those related to financial instruments, goodwill, spectrum licenses and intangible assets, unrecognized tax benefits, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in our reportable segments.connection with business combinations.

Earnings Per Common Share
There were a total of approximately 2 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for both the three and six months ended June 30, 2019. There were a total of approximately 4 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for both the three2020 and six months ended June 30, 2018.2019.

Cash, Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximates quoted market value and includes amounts held in money market funds.

Cash collections on the device payment plan agreement receivables collateralizing 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 condensed consolidated balance sheets.

Cash, cash equivalents and restricted cash are included in the following line items onin the condensed consolidated balance sheets:
At June 30,At December 31,Increase / (Decrease)
(dollars in millions)20202019
Cash and cash equivalents$7,882  $2,594  $5,288  
Restricted cash:
Prepaid expenses and other1,101  1,221  (120) 
Other assets130  102  28  
Cash, cash equivalents and restricted cash$9,113  $3,917  $5,196  
 At June 30,
 At December 31,
 Increase / (Decrease)
(dollars in millions)2019
 2018
 
Cash and cash equivalents$1,949
 $2,745
 $(796)
Restricted cash:     
Prepaid expenses and other1,055
 1,047
 8
Other assets116
 124
 (8)
Cash, cash equivalents and restricted cash$3,120
 $3,916
 $(796)


Allowance for Credit Losses
Goodwill
Goodwill isPrior to January 1, 2020, accounts receivable were recorded at cost less an allowance for doubtful accounts. The gross amount of accounts receivable and corresponding allowance for doubtful accounts were presented separately in the excesscondensed consolidated balance sheets. We maintained allowances for uncollectible accounts receivable, including our direct-channel device payment plan agreement receivables, for estimated losses resulting from the failure or inability of our customers to make required payments. Indirect-channel device payment receivables are considered financial instruments and were initially recorded at fair value net of imputed interest, and credit losses were recorded as incurred. However, receivable balances were assessed quarterly for impairment and an allowance was recorded if the receivable was considered impaired. Subsequent to January 1, 2020, 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 condensed 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 acquisition costasset’s collectability. The allowance is based on multiple factors including historical
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experience with bad debts, the fair valuecredit quality of the identifiable net assets acquired. Impairment testing for goodwill is performed annuallycustomer base, the aging of such receivables and current macroeconomic conditions, such as COVID-19, as well as management’s expectations of conditions in the fourth quarter or more frequentlyfuture, if impairment indicators are present. We transitioned into our new segment reporting structure effective April 1, 2019, which resulted in certain changes to our operating segments and reporting units. Upon the

date of reorganization, the goodwill of our historical Wireless reporting unit, historical Wireline reporting unit and historical Verizon Connect reporting unit were reallocated to our new Consumer and Business reporting units using a relative fair value approach.

We performed an impairmentapplicable. Our allowance for credit losses is based on management’s assessment of the impacted reporting units, specificallycollectability of assets pooled together with similar risk characteristics.

We pool our historical Wireless, historical Wirelinedevice payment plan agreement receivables based on the credit quality indicators and historical Connect reporting unitsshared risk characteristics of "new customers" and "existing customers." New customers are defined as customers who have been with Verizon for less than 210 days if they are classified as a Consumer segment customer, or less than 12 months if they are classified as a Business segment customer. Existing customers are defined as customers who have been with Verizon for more than 210 days if they are in Consumer, or more than 12 months if they are in Business. 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 March 31, 2019, immediately beforea default and loss calculation using our strategic reorganization became effective. Our impairment assessments indicated thatproprietary 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 fair valuecustom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted-average loss rate used for eachdetermining the allowance balance.

We monitor the collectability of our historical Wireless, historicalwireless service receivables as one overall pool. Wireline service receivables are disaggregated and historical Connect reporting units exceeded their respective carrying value, and therefore did not result in a goodwill impairment. We then performed an impairment assessment for our Consumer and Business reporting units on April 1, 2019, immediately following our strategic reorganization. Our impairment assessments indicated that the fair value for each of our Consumer and Business reporting units exceeded their respective carrying values and therefore, did not result in a goodwill impairment. Our Media reporting unit was not impactedpooled by the strategic reorganizationfollowing customer groups: consumer, small and there was no indicatormedium business, global enterprise 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 impairment.an account from billing to write-off. The risk of loss is assessed over the contractual life of the receivables and we adjust the historical loss amounts for current and future conditions based on management’s qualitative considerations. For global enterprise 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.

Recently Adopted Accounting Standard
The following Accounting Standard Updates (ASUs) were issued by the Financial Accounting Standards Board (FASB), and have been recently adopted by Verizon.

DescriptionDescriptionDate of AdoptionEffect on Financial Statements
ASU 2016-02, ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01, Leases (Topic 842)
The FASB issued Topic 842 requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, Topic 842 will enable users of financial statements to further understand the amount, timing and uncertainty of cash flows arising from leases. Topic 842 allows for a modified retrospective application and is effective as of the first quarter of 2019. Entities are allowed to apply the modified retrospective approach: (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented; or (2) retrospectively at the beginning of the period of adoption (January 1, 2019) through a cumulative-effect adjustment. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply.1/1/2019We adopted Topic 842 beginning on January 1, 2019, using the modified retrospective approach with a cumulative-effect adjustment to opening retained earnings recorded at the beginning of the period of adoption. Therefore, upon adoption, we have recognized and measured leases without revising comparative period information or disclosure. We recorded an increase of $410 million (net of tax) to retained earnings on January 1, 2019 which related to deferred sale leaseback gains recognized from prior transactions. Additionally, the adoption of the standard had a significant impact in our condensed consolidated balance sheet due to the recognition of $22.1 billion of operating lease liabilities, along with $23.2 billion of operating lease right-of-use-assets.

The cumulative after-tax effect of the changes made to our condensed consolidated balance sheet for the adoption of Topic 842 were as follows:
(dollars in millions)At December 31, 2018
 
Adjustments due to
Topic 842

 At January 1, 2019
Prepaid expenses and other$5,453
 $(329) $5,124
Operating lease right-of-use assets—
 23,241
 23,241
Other assets11,717
 (2,048) 9,669
Accounts payable and accrued liabilities22,501
 (3) 22,498
Other current liabilities8,239
 (2) 8,237
Current operating lease liabilities—
 2,931
 2,931
Deferred income taxes33,795
 139
 33,934
Non-current operating lease liabilities—
 19,203
 19,203
Other liabilities13,922
 (1,815) 12,107
Retained earnings43,542
 410
 43,952
Noncontrolling interests1,565
 1
 1,566


In addition to the increase to the operating lease liabilities and right-of-use assets and the derecognition of deferred sale leaseback gains through opening retained earnings, Topic 842 also resulted in reclassifying the presentation of prepaid and deferred rent to operating lease right-of-use assets. The operating lease right-of-use assets amount also includes the balance of any prepaid lease payments, unamortized initial direct costs, and lease incentives.

We elected the package of practical expedients permitted under the transition guidance within the new standard. Accordingly, we have adopted these practical expedients and did not reassess: (1) whether an expired or existing contract is a lease or contains an embedded lease; (2) lease classification of an expired or existing lease; or (3) capitalization of initial direct costs for an expired or existing lease. In addition, we have elected the land easement transition practical expedient, and did not reassess whether an existing or expired land easement is a lease or contains a lease if it has not historically been accounted for as a lease.

We lease network equipment including towers, distributed antenna systems, small cells, real estate, connectivity mediums which include dark fiber, equipment leases, and other various types of assets for use in our operations under both operating and finance leases. We assess whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for

separately, we determine the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use.

For both operating and finance leases, we recognize a right-of-use asset, which represents our right to use the underlying asset for the lease term, and a lease liability, which represents the present value of our obligation to make payments arising over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Management uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate, which will be updated on a quarterly basis for measurement of new lease liabilities.

In those circumstances where the Company is the lessee, we have elected to account for non-lease components associated with our leases (e.g., common area maintenance costs) and lease components as a single lease component for substantially all of our asset classes. Additionally, in arrangements where we are the lessor, we have customer premise equipment for which we apply the lease and non-lease component practical expedient and account for non-lease components (e.g., service revenue) and lease components as combined components under the revenue recognition guidance in ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606) as the service revenues are the predominant components in the arrangements.

Rent expense for operating leases is recognized on a straight-line basis over the term of the lease and is included in either Cost of services or Selling, general and administrative expense in our condensed consolidated statements of income, based on the use of the facility on which rent is being paid. Variable rent payments related to both operating and finance leases are expensed in the period incurred. Our variable lease payments consist of payments dependent on various external indicators, including real estate taxes, common area maintenance charges and utility usage.

Operating leases with a term of 12 months or less are not recorded on the balance sheet; we recognize a rent expense for these leases on a straight-line basis over the lease term.

We recognize the amortization of the right-of-use asset for our finance leases on a straight-line basis over the shorter of the term of the lease or the useful life of the right-of-use asset in Depreciation and amortization expense in our condensed consolidated statements of income. The interest expense related to finance leases is recognized using the effective interest method based on the discount rate determined at lease commencement and is included within Interest expense in our condensed consolidated statements of income.

See Note 5 for additional information related to leases, including disclosure required under Topic 842.

Recently Issued Accounting Standards
The following ASUs have been recently issued by the FASB.
DescriptionDate of AdoptionEffect on Financial Statements
ASU 2016-13, ASU 2018-19, ASU 2019-04, and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326)
In June 2016, the FASB issued this standard updateTopic 326 which requires certain financial assets to be measured at amortized cost net of an allowance for estimated credit losses, such that the net receivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions, and reasonable and supportable forecasts that affect the collectability of the amounts. An entity will applyapplies the update through a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (January 1, 2020). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. Early adoption of this standard is permitted.1/1/2020
We are currently evaluatingadopted Topic 326 beginning on January 1, 2020 using the impacts that this standard update will have on our various financial assets,modified retrospective approach with a cumulative effect adjustment to opening retained earnings recorded at the beginning of the period of adoption. Therefore upon adoption, we recognized and measured estimated credit losses without revising comparative period information or disclosures. We recorded the pre-tax cumulative effect of $265 million ($200 million net of tax) as a reduction to the January 1, 2020 opening balance of retained earnings, which we expectwas related to include, but are not limited to, ourthe timing of expected credit loss recognition for certain device payment plan agreement receivables service receivablesbased upon reasonable and contract assets.

We have established a cross-functional coordinated team to implementsupportable forecasts of the future economic condition as of January 1, 2020. Additionally, the adoption of the standard update. We are inimpacted the process of determiningcondensed consolidated balance sheet by presenting financial assets measured at amortized cost separate from the allowance for estimated credit losses. There is no significant impact to our operating results for the current period due to this standard update.
ASU 2020-04, Reference Rate Reform (Topic 848)
Topic 848 provides temporary optional guidance to ease the potential impactsburden in accounting for reference rate reform. Topic 848 provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met.
3/12/2020Topic 848 was effective for the Company beginning on March 12, 2020, and we will apply the amendments prospectively through December 31, 2022. There was no impact to our processes, including allowance estimation models, and internal controls in order to meetcondensed consolidated financial statements for the current period as a result of adopting this standard update's accounting and reporting requirements.





update.
The cumulative after-tax effect of the changes made to our condensed consolidated balance sheet for the adoption of Topic 326 were as follows:
(dollars in millions)At December 31, 2019Adjustments due to
Topic 326		At January 1, 2020
Allowance for credit losses$—  $919  $919  
Allowance for doubtful accounts733  (733) —  
Other assets10,141  (79) 10,062  
Deferred income taxes34,703  (65) 34,638  
Retained earnings53,147  (200) 52,947  
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See Note 6 for additional information related to credit losses, including disclosures required under Topic 326.

Note 2. Revenues and Contract Costs
We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and through the sale of wireless equipment.


Revenue by Category
We have two2 reportable segments that we operate and manage as strategic business units - Consumer and Business. Revenue is disaggregated by products and services within Consumer and customer groups (Global Enterprise, Small(Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale) within Business. See Note 1110 for additional information on revenue by segment.

Corporate and other includes the results of our media business, Verizon Media Group (Verizon Media), which operated under the "Oath" brand until January 2019,, and other businesses. Verizon Media generated revenues from contracts with customers under ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606) of approximately $1.4 billion and $3.1 billion during the three and six months ended June 30, 2020, respectively. Verizon Media generated revenues from contracts with customers under Topic 606 of approximately $1.8 billion and $3.6 billion during the three and six months ended June 30, 2019, respectively. Verizon Media generated revenues from contracts with customers under Topic 606 of approximately $1.9 billion and $3.8 billion during the three and six months ended June 30, 2018, respectively.

We also earn revenues that are not accounted for under Topic 606 from leasing arrangements (such as towers), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the customer by an authorized agent. As allowed by the practical expedient within Topic 842,ASU 2016-02, "Leases" (Topic 842), we have elected to combine the lease and non-lease components for those arrangements of customer premise equipment where we are the lessor as components accounted for under Topic 606. During the three and six months ended June 30, 2020, revenues from arrangements that were not accounted for under Topic 606 were approximately $785 million and $1.6 billion, respectively. During the three and six months ended June 30, 2019, revenues from arrangements that were not accounted for under Topic 606 were approximately $797 million and $1.6 billion, respectively. During the three and six months ended June 30, 2018, revenues from arrangements that were not accounted for under Topic 606 were approximately $1.1 billion and $2.3 billion, respectively.

Remaining Performance Obligations
When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price may relate to service performance obligations which were not satisfied or are partially satisfied as of the end of the reporting period. Below we disclose information relating to these unsatisfied performance obligations. Upon adoption, we elected to apply the practical expedient available under Topic 606 that provides the option to exclude the expected revenues arising from unsatisfied performance obligations related to contracts that have an original expected duration of one year or less. This situation primarily arises with respect to certain month-to-month service contracts. At June 30, 2019,2020, month-to-month service contracts represented approximately 87%89% of our wireless postpaid contracts and approximately 57%67% of our wireline Consumer and Small and Medium Business contracts, compared to June 30, 2018,2019, for which month-to-month service contracts represented approximately 83%87% of our wireless postpaid contracts and 56%57% of our wireline Consumer and Small and Medium Business contracts.

Additionally, certain contracts provide customers the option to purchase additional services. The fees related to these additional services are recognized when the customer exercises the option (typically on a month-to-month basis).

Contracts for wireless services are generally either month-to-month and cancellable at any time (typically under a device payment plan) or contain terms ranging from greater than one month to up to two years (typically under a fixed-term plan). Additionally, customers may incur charges based on usage or additional optional services purchased in conjunction with entering into a contract that can be cancelled at any time and therefore are not included in the transaction price. The transaction price allocated to service performance obligations, which are not satisfied or are partially satisfied as of the end of the reporting period, are generally related to our fixed-term plans.contracts that are not accounted for as month-to-month contracts.

Our Consumer group customers also include other telecommunications companies who utilize Verizon's networks totraditional wholesale resellers that purchase and resell wireless service under their own brands to their respective end customers. Reseller arrangements generally include a stated contract term, which typically extends longer than two years. These arrangements generallyyears and, in some cases, include an annuala periodic minimum revenue commitment over the contract term of the contract for which revenues will be recognized in future periods.

Consumer customer contracts for wireline services are generally month-to-month; however, they may have a service term of two years; however, this term may beyears or shorter than twelve months or may be month-to-month.months. Certain contracts with Business customers for wireline services extend into future periods, contain fixed monthly fees and usage-based fees, and can include annual commitments in each year of the contract or commitments over the entire specified contract term; however, a significant number of contracts for wireline services with our Business customers have a contract term that is twelve months or less.

Additionally, there are certain contracts with Business customers for wireline and telematics services and certain Verizon Media contracts with customers that have a contractual minimum fee over the total contract term. We cannot predict the time period when revenue will be recognized related to those contracts; thus, they are excluded from the time bands below. These contracts have varying terms spanning over approximately five years ending in June 20242025 and have aggregate contract minimum payments totaling $3.9$2.7 billion.
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At June 30, 2019,2020, the transaction price related to unsatisfied performance obligations for total Verizon that is expected to be recognized for 2019,the remainder of 2020, 2021 and thereafter was $10.8$10.3 billion, $14.7$13.1 billion and $5.9$4.0 billion, respectively. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations and changes in the timing and scope of contracts, arising from contract modifications.

Accounts Receivable and Contract Balances
The timing of revenue recognition may differ from the time of billing to our customers. Receivables presented in our condensed consolidated balance sheetsheets represent an unconditional right to consideration. Contract balances represent amounts from an arrangement when either Verizon has performed, by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer,

or the customer has made payment to Verizon in advance of obtaining control of the goods and/or services promised to the customer in the contract.

Contract assets primarily relate to our rights to consideration for goods or services provided to customers but for which we do not have an unconditional right at the reporting date. Under a fixed-term plan, total contract revenue is allocated between wireless service and equipment revenues. In conjunction with these arrangements, a contract asset is created, which represents the difference between the amount of equipment revenue recognized upon sale and the amount of consideration received from the customer when the performance obligation related to the transfer of control of the equipment is satisfied. The contract asset is reclassified to accounts receivable as wireless services are provided and billed. We have the right to bill the customer as service is provided over time, which results in our right to the payment being unconditional. The contract asset balances are presented in our condensed consolidated balance sheetsheets as Prepaid expenses and other and Other assets. We assess our contract assetsrecognize the allowance for impairmentcredit losses at inception and reassess quarterly based on a quarterly basis and will recognize an impairment charge tomanagement’s expectation of the extent their carrying amount is not recoverable.asset’s collectability.

Contract liabilities arise when we bill our customers and receive consideration in advance of providing the goods or services promised in the contract. We typically bill service one month in advance, which is the primary component of the contract liability balance. Contract liabilities are recognized as revenue when services are provided to the customer. The contract liability balances are presented in our condensed consolidated balance sheetsheets as Other current liabilities and Other liabilities.

The following table presents information about receivables from contracts with customers:
At June 30,At January 1,At June 30,At January 1,
(dollars in millions)2020202020192019
Receivables(1)
$10,967  $12,078  $12,173  $12,104  
Device payment plan agreement receivables(2)
10,047  11,741  10,053  8,940  
 At June 30,
 At January 1,
 At June 30,
 At January 1,
(dollars in millions)2019
 2019
 2018
 2018
Receivables(1)
$12,173
 $12,104
 $11,412
 $12,073
Device payment plan agreement receivables(2)
10,053
 8,940
 5,258
 1,461
(1)Balances do not include receivables related to the following contracts: leasing arrangements (such as towers), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the customer by an authorized agent.
(1)
(2)Included in device payment plan agreement receivables presented in Note 6. Balances do not include receivables related to contracts completed prior to January 1, 2018 and receivables derived from the sale of equipment on a device payment plan through an authorized agent.

Balances do not include receivables related to the following contracts: leasing arrangements (such as towers), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the customer by an authorized agent.
(2)
Included in device payment plan agreement receivables presented in Note 7. Balances do not include receivables related to contracts completed prior to January 1, 2018 and receivables derived from the sale of equipment on a device payment plan through an authorized agent.

The following table presents information about contract balances:
 At June 30,
 At January 1,
 At June 30,
 At January 1,
 2019
 2019
 2018
 2018
Contract asset$1,059
 $1,003
 $1,059
 $1,170
Contract liability (1)
4,946
 4,943
 4,652
 4,452

At June 30,At January 1,At June 30,At January 1,
(dollars in millions)2020202020192019
Contract asset$993  $1,150  $1,059  $1,003  
Contract liability (1)
5,275  5,307  4,946  4,943  
(1) Revenue recognized related to contract liabilities existing at January 1, 20192020 were $204 million and $4.0 billion, for the three and six months ended June 30, 2020, respectively. Revenue recognized related to contract liabilities existing at January 1, 20182019 were $194 million and $3.9 billion, for the three and six months ended June 30, 2019, respectively, and $327 million and $3.8 billion, for the three and six months ended June 30, 2018.respectively.

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The balance of contract assets and contract liabilities recorded in our condensed consolidated balance sheetsheets were as follows:
At June 30,At December 31,
(dollars in millions)20202019
Assets
Prepaid expenses and other$762  $848  
Other assets231  302  
Total$993  $1,150  
Liabilities
Other current liabilities$4,636  $4,651  
Other liabilities639  656  
Total$5,275  $5,307  


At June 30,
 At December 31,
(dollars in millions)2019
 2018
Assets   
Prepaid expenses and other$812
 $757
Other assets247
 246
Total$1,059
 $1,003
    
Liabilities   
Other current liabilities$4,323
 $4,207
Other liabilities623
 736
Total$4,946
 $4,943


Contract Costs
Topic 606 requires the recognition of an asset for incremental costs to obtain a customer contract, which are then amortized to expense over the respective periods of expected benefit. We recognize an asset for incremental commission expenses paid to internal and external sales personnel and agents in conjunction with obtaining customer contracts. We only defer these costs when we have determined the commissions are incremental costs that would not have been incurred absent the customer contract and are expected to be recoverable. Costs to obtain a contract are amortized and recorded ratably as commission expense over the period representing the transfer of goods or services to which the assets relate. Costs to obtain wireless contracts are amortized over both of our Consumer and Business customers' estimated device upgrade cycles, as such costs are typically incurred each time a customer upgrades. Costs to obtain wireline contracts are amortized as expense over the estimated customer relationship period for our Consumer customers. Incremental costs to obtain wireline contracts for our Business customers are insignificant. Costs to obtain contracts are recorded in Selling, general and administrative expense.


We also defer costs incurred to fulfill contracts that: (1) relate directly to the contract; (2) are expected to generate resources that will be used to satisfy our performance obligation under the contract; and (3) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed as we satisfy our performance obligations and recorded in Cost of services. These costs principally relate to direct costs that enhance our wireline business resources, such as costs incurred to install circuits. Costs to obtain contracts are recorded in Selling, general and administrative expense.

We determine the amortization periods for our costs incurred to obtain or fulfill a customer contract at a portfolio level due to the similarities within these customer contract portfolios.

Other costs, such as general costs or costs related to past performance obligations, are expensed as incurred.

Collectively, costs to obtain a contract and costs to fulfill a contract are referred to as Deferreddeferred contract costs, and amortized over a two- to five-yeartwo-to five-year period. Deferred contract costs are classified as current or non-current within Prepaid expenses and other and Other assets, respectively.

The balances of Deferreddeferred contract costs included in our condensed consolidated balance sheetsheets were as follows:
At June 30,At December 31,
(dollars in millions)20202019
Assets
Prepaid expenses and other$2,455  $2,578  
Other assets1,791  1,911  
Total$4,246  $4,489  


At June 30,
 At December 31,
(dollars in millions)2019
 2018
Assets   
Prepaid expenses and other$2,352
 $2,083
Other assets1,774
 1,812
Total$4,126
 $3,895


For the three and six months ended June 30, 2020, we recognized expense of $767 million and $1.5 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income. For the three and six months ended June 30, 2019, we recognized expense of $639 million and $1.3 billion, respectively, associated with the amortization of Deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income. For the three and six months ended June 30, 2018, we recognized expense of $471 million and $877 million, respectively, associated with the amortization of Deferreddeferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

We assess our Deferreddeferred contract costs for impairment on a quarterly basis. We recognize an impairment charge to the extent the carrying amount of a deferred cost exceeds the remaining amount of consideration we expect to receive in exchange for the goods and services related to the cost, less the expected costs related directly to providing those goods and services that have not yet been recognized as expenses. There have been no0 impairment charges recognized for the three and six months ended June 30, 20192020 or June 30, 2018.2019.

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Note 3. Acquisitions and Divestitures
Spectrum License Transactions
In 2019,March 2020, the Federal Communications CommissionCommunication Commission's (FCC) completed two millimeter waveincentive auction for spectrum license auctions.licenses in the upper 37 Gigahertz (GHz), 39 GHz, and 47 GHz bands concluded. Verizon participated in these auctionsthis incentive auction and was the high bidder on 94,940 licenses, which primarily consisted of 37 GHz and, 1,066to a lesser extent, 39 GHz spectrum. As an incumbent licensee, our 39 GHz licenses respectively,provided us with incentive payments that were applied towards the purchase price of spectrum in the 24 Gigahertz (GHz) and 28auction. The value of the licenses won by Verizon amounted to $3.4 billion, of which $1.8 billion was settled with the relinquished 39 GHz bands. We submitted an application to the FCC and paidlicenses. The remaining balance was settled in cash of approximately $521$1.6 billion, of which $101 million was paid in December 2019. In connection with the incentive auction, a pre-tax net loss of $1.2 billion ($914 million after-tax) was recorded in Selling, general and administrative expense in the condensed consolidated statement of income for the six months ended June 30, 2020 because the exchange of the previously held licenses that will be issued.for new licenses had commercial substance. Refer to Note 4 for additional information. The deposits related to these spectrumnew reconfigured licenses were received in the second quarter 2020 and are classified within Other assetsincluded in Wireless licenses in our condensed consolidated balance sheetssheet. The average remaining renewal period for these acquired licenses was 9.9 years.
The fair value of the licenses represents a Level 2 measurement as of June 30, 2019.

defined in Accounting Standards Codification 820, Fair Value Measurements and Disclosures, and was determined based on the final auction price for each defined geographical area.
During both the three and six months ended June 30, 2019,2020, we entered into and completed various other wireless license transactionsacquisitions for cash consideration of an insignificant amount and approximately $177 million, respectively.

BlueJeans Network, Inc.
In April 2020, we entered into a definitive purchase agreement to acquire BlueJeans Network, Inc. (BlueJeans), an enterprise-grade video conferencing and event platform, whose services are sold to Business customers globally. The transaction closed in May 2020. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $396 million, net of cash consideration.acquired.

Other
During bothThe financial results of BlueJeans are included in the consolidated results of Verizon from the date of acquisition. These amounts are insignificant for the three and six months ended June 30, 2019,2020.

The acquisition of BlueJeans was accounted for as a business combination. We are currently assessing the identification and measurement of the assets acquired and liabilities assumed based on their fair values as of the close of the acquisition, subject to customary closing adjustments. Preliminarily, we recorded approximately $282 million of goodwill and $192 million of other intangible assets, which primarily consisted of enterprise customer list and internally developed technology. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired. The goodwill represents future economic benefits that we expect to achieve as a result of the acquisition.

Other
During the three months ended June 30, 2020, we completed variousno other acquisitions. For the six months ended June 30, 2020, we completed other acquisitions for an insignificant amountamounts of cash consideration.

Note 4. Wireless Licenses, Goodwill, and Other Intangible Assets
Wireless Licenses
The carrying amounts of Wireless licenses are as follows:
At June 30,At December 31,
(dollars in millions)20202019
Wireless licenses$95,767  $95,059  
 At June 30,
At December 31,
(dollars in millions)2019
2018
Wireless licenses$94,333
$94,130



At June 30, 2020 and 2019, and 2018, approximately $6.6$3.5 billion and $11.5$6.6 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. We recorded approximately $168$101 million and $269$168 million of capitalized interest on wireless licenses for the six months ended June 30, 20192020 and 2018,2019, respectively.

In March 2020, we reclassified substantially all of our 39 GHz wireless licenses, including capitalized interest, with a carrying value of $2.8 billion to assets held for sale in connection with the FCC's incentive auction. As a result, these wireless licenses were adjusted down to their fair value of $1.6 billion resulting in a pre-tax loss of $1.2 billion ($914 million after-tax) for the six months ended June 30, 2020. The new reconfigured licenses were received in the second quarter 2020 and had a value of $3.4 billion. See Note 3 for additional information regarding spectrum license transactions.

During 2020, we renewed various wireless licenses in accordance with FCC regulations. The average remaining renewal period for these licenses was 10 years.

13
Table of our wireless licenses portfolio was 4.3 years as of June 30, 2019.Contents
Goodwill
The Company transitioned into our new reporting structure as of April 1, 2019. The table below shows the reallocation of goodwill from our historical reporting structure to our current reporting structure.

Changes in the carrying amount of Goodwill are as follows:
(dollars in millions)Consumer
 Business
 Wireless
 Wireline
 Other
 Total
Balance at January 1, 2019 (1)
$—
 $—
 $18,397
 $3,871
 $2,346
 $24,614
Acquisitions—
 —
 —
 20
 —
 20
Reclassifications, adjustments and other—
 —
 —
 1
 —
 1
Balance at March 31, 2019—
 —
 18,397
 3,892
 2,346
 24,635
Reporting Unit reallocation (2)
17,104
 7,269
 (18,397) (3,892) (2,084) —
Balance at April 1, 201917,104
 7,269
 —
 —
 262
 24,635
Acquisitions—

1
 —
 —
 —
 1
Reclassifications, adjustments and other—
 (4) —
 —
 —
 (4)
Balance at June 30, 2019$17,104
 $7,266
 $—
 $—
 $262
 $24,632

(dollars in millions)ConsumerBusinessOtherTotal
Balance at January 1, 2020 (1)
$17,104  $7,269  $16  $24,389  
Acquisitions (Note 3)—  282  —  282  
Reclassifications, adjustments and other—  (4) —  (4) 
Balance at June 30, 2020 (1)
$17,104  $7,547  $16  $24,667  

(1) Other Goodwill is net of accumulated impairment chargecharges of $4.6$4.8 billion, related to our Media reporting unit (included within Other in the table above), which was recorded in the fourth quarter of 2018.unit.
(2)
Represents the reallocation of goodwill as a result of the Company reorganizing its segments as described in Note 1.

Other Intangible Assets
The following table displays the composition of Other intangible assets, net:net as well as the respective amortization period:
 At June 30, 2020At December 31, 2019
(dollars in millions)Gross
Amount		Accumulated
Amortization		Net
Amount		Gross
Amount		Accumulated
Amortization		Net
Amount
Customer lists (8 to 13 years)$4,009  $(1,740) $2,269  $3,896  $(1,511) $2,385  
Non-network internal-use software (5 to 7 years)21,670  (15,292) 6,378  20,530  (14,418) 6,112  
Other (2 to 25 years)1,981  (1,028) 953  1,967  (966) 1,001  
Total$27,660  $(18,060) $9,600  $26,393  $(16,895) $9,498  
 At June 30, 2019  At December 31, 2018 
(dollars in millions)
Gross
Amount

 
Accumulated
Amortization

 
Net
Amount

 
Gross
Amount

 
Accumulated
Amortization

 
Net
Amount

Customer lists (8 to 13 years)$3,948
 $(1,299) $2,649
 $3,951
 $(1,121) $2,830
Non-network internal-use software (3 to 7 years)19,354
 (13,589) 5,765
 18,603
 (12,785) 5,818
Other (2 to 25 years)1,985
 (925) 1,060
 1,988
 (861) 1,127
Total$25,287
 $(15,813) $9,474
 $24,542
 $(14,767) $9,775


The amortization expense for Other intangible assets was as follows: 
Three Months EndedSix Months Ended
(dollars in millions)June 30,June 30,
2020$605  $1,197  
2019569  1,124  
 Three Months Ended
 Six Months Ended
(dollars in millions)June 30,
 June 30,
2019$569
 $1,124
2018557
 1,091


The estimated future amortization expense for Other intangible assets for the remainder of the current year and next 5 years is as follows:
Years(dollars in millions)
Remainder of 2020$1,194  
20212,136  
20221,838  
20231,476  
20241,105  
2025746  
Years(dollars in millions)
Remainder of 2019$1,086
20201,903
20211,610
20221,335
20231,049
2024795


14

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Note 5. Leasing Arrangements
We enter into various lease arrangements for network equipment including towers, distributed antenna systems, small cells, real estate and connectivity mediums including dark fiber, equipment leases, and other various types of assets for use in our operations. Our leases have remaining lease terms ranging from 1 year to 24 years, some of which include options that we can elect to extend the leases term for up to 25 years, and some of which include options to terminate the leases. For the majority of leases entered into during the current period, we have concluded it is not reasonably certain that we would exercise the options to extend the lease or terminate the lease. Therefore, as of the lease commencement date, our lease terms generally do not include these options. We include options to extend the lease when it is reasonably certain that we will exercise that option.

During March 2015, we completed a transaction with American Tower Corporation (American Tower) pursuant to which American Tower acquired the exclusive rights to lease and operate approximately 11,300 of our wireless towers for an upfront payment of $5.0 billion. We have subleased capacity on the towers from American Tower for a minimum of 10 years at current market rates in 2015, with options to renew. We continue to include the towers in Property, plant and equipment, net in our condensed consolidated balance sheets and depreciate them accordingly. In addition to the rights to lease and operate the towers, American Tower assumed the interest in the underlying ground leases related to these towers. While American Tower can renegotiate the terms of and is responsible for paying the ground leases, we are still the primary obligor for these leases and accordingly, the present value of these ground leases are included in our operating lease right-of-use assets and operating lease liabilities. We do not expect to be required to make ground lease payments unless American Tower defaults, which we determined to be remote.
The components of net lease cost were as follows:
  Three Months Ended
 Six Months Ended
  June 30,
 June 30,
(dollars in millions)Classification2019
 2019
Operating lease cost (1)
Cost of services
Selling, general and administrative expense
$1,178
 $2,348
Finance lease cost:    
Amortization of right-of-use assetsDepreciation and amortization expense82
 168
Interest on lease liabilitiesInterest expense10
 19
Short-term lease cost (1)
Cost of services
Selling, general and administrative expense
8
 24
Variable lease cost (1)
Cost of services
Selling, general and administrative expense		51
 108
Sublease incomeService revenues and other(67) (134)
Total net lease cost $1,262
 $2,533
(1) All operating lease costs, including short-term and variable lease costs, are split between Cost of services and Selling, general and administrative expense in the condensed consolidated statements of income based on the use of the facility that the rent is being paid on. See Note 1 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.
Supplemental disclosure for the statement of cash flows related to operating and finance leases were as follows:
 Six Months Ended
 June 30,
(dollars in millions)2019
Cash Flows from Operating Activities 
Cash paid for amounts included in the measurement of lease liabilities 
Operating cash flows for operating leases$(2,089)
Operating cash flows for finance leases(19)
Cash Flows from Financing Activities 
Financing cash flows for finance leases(178)
Supplemental lease cash flow disclosures 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities1,300
Right-of-use assets obtained in exchange for new finance lease liabilities221



Supplemental disclosures for the balance sheet related to finance leases were as follows:
 At June 30,
(dollars in millions)2019
Assets 
Property, plant and equipment, net$823
  
Liabilities 
Debt maturing within one year$321
Long-term debt627
Total Finance lease liabilities$948


The weighted-average remaining lease term and the weighted-average discount rate of our leases were as follows:
At June 30,
2019
Weighted-average remaining lease term (years)
Operating Leases9
Finance Leases4
Weighted-average discount rate
Operating Leases4.1%
Finance Leases4.0%Note 5. Debt


The Company's maturity analysis of operating and finance lease liabilities as of June 30, 2019 were as follows:
(dollars in millions)Operating Leases
 Finance Leases
Remainder of 2019$1,996
 $178
20203,840
 291
20213,460
 198
20223,067
 137
20232,713
 88
Thereafter11,094
 144
Total lease payments26,170
 1,036
Less interest(4,762) (88)
Present value of lease liabilities21,408
 948
Less current obligation(3,154) (321)
Long-term obligation at June 30, 2019$18,254
 $627


As of June 30, 2019, we have contractually obligated lease payments amounting to $477 million for an office facility operating lease that has not yet commenced. We have legally obligated lease payments for various other operating leases that have not yet commenced for which the total obligation was not significant. We have certain rights and obligations for these leases, but have not recognized an operating lease right-of-use asset or an operating lease liability since they have not yet commenced.

Real Estate Transaction
On July 23, 2019, Verizon completed a sale-leaseback transaction for buildings and real estate. We received total gross proceeds of $1.0 billion. We lease backed a portion of the buildings and real estate sold and accounted for it as an operating lease. The term of the leaseback is for two years with four options to renew for an additional three months each.


Note 6. Debt

Significant Debt Transactions
The following table shows the transactions that occurred during the six months ended June 30, 2019.

2020.
February Exchange Offers
(dollars in millions)Principal Amount Exchanged
 Principal Amount Issued
Verizon 1.750% - 5.150% notes and floating rate notes, due 2021 - 2025$3,892
 $—
GTE LLC 8.750% debentures, due 202121
 —
Verizon 4.016% notes due 2029 (1)
—
 4,000
Total$3,913
 $4,000
(1) Total exchange amount issued in consideration does not include an insignificant amount of cash used to settle.

May Tender Offers
(dollars in millions)Principal Amount Purchased
 
Cash Consideration (1)

Verizon 5.012% notes due 2054$3,192
 $3,626
Verizon 4.672% notes due 20551,308
 1,404
Total$4,500
 $5,030
(1) In addition to the purchase price, any accrued and unpaid interest on the purchased notes was paid to the date of purchase.

Debt Redemptions, Repurchases and Repayments
(dollars in millions)Principal Redeemed / Repaid
 
Amount Paid as % of Principal (1)

March 2019   
Verizon 5.900% notes due 2054$500
 100.000%
Verizon 1.375% notes due 2019206
 100.000%
Verizon 1.750% notes due 2021621
 100.000%
Verizon 3.000% notes due 2021930
 101.061%
Verizon 3.500% notes due 2021315
 102.180%
Open market repurchases of various Verizon notes163
 Various
March 2019 total2,735
  
    
June 2019   
Verizon 2.625% notes due 2020831
 100.037%
Verizon 3.500% notes due 2021736
 102.238%
Verizon floating rate (LIBOR + 0.770%) notes due 2019229
 100.000%
June 2019 total1,796
  
Total$4,531
  
(dollars in millions)Principal Redeemed/ Repurchased/ Repaid
Amount Paid (1)
Three Months Ended March 31, 2020
Verizon 4.950% notes due 2047$1,475  $1,475  
Three Months Ended March 31, 2020 total$1,475  $1,475  
Three Months Ended June 30, 2020
Verizon 5.143% preferred stock due 2020$1,650  $1,650  
Verizon floating rate (LIBOR +0.550%) notes due 2020 (2)
1,018  1,018  
Verizon 4.600% notes due 2021920  949  
Verizon 3.125% notes due 20221,256  1,314  
Open market repurchases of various Verizon notes121  143  
Verizon 2.375% notes due 2022 (3)
€935  $1,199  
Verizon 0.500% notes due 2022 (4)
€454  $517  
Three Months Ended June 30, 2020 total6,790  
Six Months Ended June 30, 2020 total$8,265  
(1) Percentages represent priceRepresents amount paid to redeem, repurchase and repay.or repay, excluding interest or dividend.

(2) The three-month London Interbank Offered Rate (LIBOR).

(3) Principal and premium amount repaid was €980 million. US dollar amount paid includes cash settlement from derivatives entered in connection with the transaction. See Note 7 for information on cross currency swaps.
(4) Principal and premium amount repaid was €463 million. US dollar amount paid includes cash settlement from derivatives entered in connection with the transaction. See Note 7 for information on cross currency swaps.
Debt Issuances
(amounts in millions)Principal Amount Issued
 
Net Proceeds (1)

March 2019   
Verizon 3.875% notes due 2029 (2)
$1,000
 $994
Verizon 5.000% notes due 2051510
 506
March 2019 total$1,510
 $1,500
    
June 2019   
Verizon 0.875% notes due 2027€1,250
 1,391
Verizon 1.250% notes due 2030€1,250
 1,385
Verizon 2.500% notes due 2031£500
 647
June 2019 total

 3,423
Total  $4,923
Issuances
(amounts in millions)Principal Amount Issued
Net Proceeds (1)
Three Months Ended March 31, 2020
Verizon 3.600% notes due 2060$2,385  $2,369  
Verizon 3.000% notes due 2027750  747  
Verizon 3.150% notes due 20301,500  1,489  
Verizon 4.000% notes due 20501,250  1,241  
Three Months Ended March 31, 2020 total$5,885  $5,846  
Three Months Ended June 30, 2020
Verizon 2.500% due 2030 (2)
C$1,000  $705  
Verizon 3.625% due 2050 (2)
C$300  $209  
Verizon 1.300% notes due 2033 (2)
€1,350  $1,464  
Verizon 1.850% notes due 2040 (2)
€800  $869  
Three Months Ended June 30, 2020 total3,247  
Six Months Ended June 30, 2020 total$9,093  
(1) Net proceeds were net of discount and issuance costs.
(2) An amount equal to the net proceeds from this green bond will be used to fund, in whole or in part, "Eligible Green Investments." "Eligible Green Investments" include new and existing investments made by us during the period from two years prior to the issuance of the green bond through the maturity date of the green bond, in the following categories: (1) renewable energy; (2) energy efficiency; (3) green buildings; (4) sustainable water management; and (5) biodiversity and conservation.See Note 7 for information on cross currency swaps.

Short-Term Borrowing and Commercial Paper Program
During the three months ended June 30, 2019,2020, we repaid $600$700 million in aggregate from the short termrelated to our bilateral short-term uncommitted bank credit facility and there was no outstanding balance as of June 30, 2019.

As ofJune 30, 2019, we had $200 million of commercial paper outstanding.

Asset-Backed Debt
facility. As of June 30, 2019,2020, we had 0 amount outstanding related to this facility.

In April 2020, we issued $3.5 billion in commercial paper. During the three months ended June 30, 2020, we repaid $2.5 billion of commercial paper. As of June 30, 2020, we had $1.0 billion of commercial paper outstanding. In July 2020, we repaid $460 million of commercial paper.

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Asset-Backed Debt
As of June 30, 2020, the carrying value of our asset-backed debt was $11.3$10.6 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) and certain other affiliates of Verizon (collectively, the Originators) transfer device payment plan agreement receivables to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests 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 device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables 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 device payment plan agreement receivables, 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, Verizon has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.


Cash collections on the device payment plan agreement receivables collateralizing 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 condensed consolidated balance sheets.


Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included in our condensed consolidated balance sheets.


As mentioned above, the holders of our asset-backed debt do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. However, if an early amortization of our asset-backed debt occurs, including as a result of increased customer delinquencies or losses relating to COVID-19, all collections on the securitized device payment plan agreement receivables would be used to pay principal and interest on the asset-backed debt, and our financing cash flow requirements would increase for the twelve months immediately following an early amortization event.

ABS Notes
During the six months ended June 30, 2019,2020, we completed the following ABS Notes transactions:
(dollars in millions)Interest Rates %Expected Weighted-average Life to Maturity (in years)Principal Amount Issued
March 2020
A-1a Senior class notes1.850  2.46$1,326  
A-1b Senior floating rate class notes LIBOR + 0.270
(1)
2.46100  
B Junior class notes1.980  3.1898  
C Junior class notes2.060  3.3676  
Total$1,600  
(dollars in millions)Interest Rates % Expected Weighted-average Life to Maturity (in years)Principal Amount Issued
March 2019    
A-1a Senior class notes2.930 2.50$900
A-1b Senior floating rate class notes LIBOR + 0.330
(1) 
2.50100
B Junior class notes3.020 3.2269
C Junior class notes3.220 3.4053
March 2019 total   1,122
     
June 2019    
A-1a Senior class notes2.330 2.52855
A-1b Senior floating rate class notes LIBOR + 0.450
(1) 
2.52145
B Junior class notes2.400 3.2869
C Junior class notes2.600 3.4753
June 2019 total   1,122
Total   $2,244
(1) The one-month London Interbank Offered Rate (LIBOR) rateLIBOR at June 30, 20192020 was 2.398%0.162%.

Under the terms of each series of ABS Notes, there is a two year-year revolving period during which we may transfer additional receivables to the ABS Entity. In April 2019, the two year revolving period of the ABS Notes issued in March 2017 ended and we began to repay principal on the 2017-1 Class A senior ABS Notes. During the three and six months ended June 30, 2019,2020, we made aggregate principal repayments of $794$883 million and $1.4$1.9 billion, respectively, on ABS Notes that have entered the amortization period.

In July 2020, in connection with an optional acquisition of receivables and redemption of ABS Notes, we made a principal payment, in whole, for all ABS Notes.$137 million.

ABS Financing Facilities
In May 2018,2020, we amended and restated our outstanding ABS financing facility originally entered into an ABS financing facilityin 2016, and previously amended and restated in 2019, with a number of financial institutions (2018 ABS Financing Facility). One loan agreement was entered into in connection with the 2018 ABS financing facility. During the three months ended June 30, 2019, the remaining $540 million outstanding under the loan agreement was prepaid, and the loan agreement was terminated.

In September 2016, we entered into an ABS Financing Facility with a number of financial institutions, which was amended and restated in May 2019 (2019 ABS(ABS Financing Facility). Under the terms of the 2019 ABS Financing Facility, the financial institutions mademake advances under asset-backed loans backed by device payment plan agreement receivables of both consumer and business customers. TwoOne loan agreements were entered intoagreement is outstanding in connection with the 2019 ABS Financing Facility, in September 2016 and May 2017such loan agreement was amended and a third was entered intorestated in May 2019.2020. The 2016 and 2017 loan agreements had a final maturity date in March 2021 and bore interest at a floating rate. The two year revolving period of the two loan agreements ended in September 2018. The 2019 loan agreement has a final maturity date in May 20232024 and bears interest at floating rates. There is a one year revolving period until May 2020,2021, which may be extended with the approval of the financial institutions. Under all of the loan agreements,agreement, we have the right to prepay all or a portion of the advances at any time without penalty, but in certain cases, with breakage costs. Subject to
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certain conditions, we may also remove receivables from the ABS Entity. DuringIn January 2020, we prepaid $1.3 billion of the three months ended June 30, 2019, we paid off bothloan under the 2016 and 2017 loans for an aggregate of $671 million primarily with proceeds from the 2019 loan agreement. As of June 30, 2019, there wasIn March 2020, we borrowed an outstanding balanceadditional $1.3 billion under the 2019 ABS Financing Facility of $1.8 billion.loan agreement. In August 2019,June 2020, we prepaid $1.5 billion of the loan made in May 2019 under the 2019loan agreement. The aggregate outstanding balance under the ABS Financing Facility.Facility was $1.8 billion as of June 30, 2020.

Variable Interest Entities (VIEs)
The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.


The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:
At June 30,At December 31,
(dollars in millions)20202019
Assets
Account receivable, net$9,981  $10,525  
Prepaid expenses and other1,053  1,180  
Other assets3,584  3,856  
Liabilities
Accounts payable and accrued liabilities10  11  
Short-term portion of long-term debt3,894  5,578  
Long-term debt6,713  6,791  
 At June 30,
 At December 31,
(dollars in millions)2019
 2018
Assets   
Account receivable, net$10,095
 $8,861
Prepaid expenses and other1,020
 989
Other assets3,353
 2,725
    
Liabilities   
Accounts payable and accrued liabilities11
 7
Short-term portion of long-term debt4,477
 5,352
Long-term debt6,775
 4,724


See Note 76 for additional information on device payment plan agreement receivables used to secure asset-backed debt.

Long-Term Credit Facilities
As of June 30, 2019, the unused borrowing capacity under our $9.5 billion credit facility was approximately $9.4 billion.
At June 30, 2020
(dollars in millions)MaturitiesFacility CapacityUnused CapacityPrincipal Amount Outstanding
Verizon revolving credit facility (1)
2022$9,500  $9,392  n/a
Various export credit facilities (2)
2022-20277,000  1,500  $4,206  
Total$16,500  $10,892  $4,206  
n/a - not applicable

(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. We use theThe revolving credit facility provides for the issuance of letters of credit.
(2) These credit and for general corporate purposes.

facilities are used to finance equipment-related purchases. Borrowings under certain of these facilities amortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding.

In March 2016,July 2020, we drew $500 million from a $1.5 billion export credit facility entered into a $1.0 billion credit facility insured by Eksportkreditnamnden,in June 2020 and fully drew down $500 million from an export credit agency with a maturity date of December 2024. As of June 30, 2019, the outstanding balance was $647 million. We used this credit facility to finance network equipment-related purchases. In July 2017, we entered into credit facilities insured by various export credit agencies providing us with the ability to borrow up to $4.0 billion to finance equipment-related purchases with maturity dates ranging fromin July 2022 to May 2027. The facilities have multiple borrowings available, portions of which extend through October 2019, contingent upon the amount of eligible equipment-related purchases that we make. During the three and six months ended June 30, 2019, we drew down $450 million and $874 million, respectively, from these facilities. During the six months ended June 30, 2018, we drew down $1.7 billion from these facilities. As of June 30, 2019, we had an outstanding balance of $3.5 billion.2020.

Non-Cash TransactionTransactions
During the six months ended June 30, 20192020 and 2018,2019, we financed, primarily through vendor financing arrangements, the purchase of approximately $221$673 million and $862$221 million, respectively, of long-lived assets consisting primarily of network equipment. At both June 30, 2020 and December 31, 2019, and 2018, $1.0$1.3 billion and $1.4$1.1 billion, respectively, relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore are not reflected within Capital expenditures in our condensed consolidated statements of cash flows.

Early Debt Redemptions
During both the three and six months ended June 30, 2019, we recorded losses on early debt redemptions of $1.5 billion related to the May tender offers and other insignificant transactions, which were recorded in Other income (expense), net in our condensed consolidated statements of income.

During the six months ended June 30, 2018, we recorded losses on early debt redemptions of $249 million related to the 2018 March tender offers for 13 series of notes issued by Verizon with coupon rates ranging from 1.750% to 5.012% and maturity dates ranging from 2021 to 2055, which were recorded in Other income (expense), net in our condensed consolidated statements of income.

Guarantees
We guarantee the debentures of our operating telephone company subsidiaries. As of June 30, 2019, $7962020, $765 million aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

We also guarantee the debt obligations of GTE LLC as successor in interest to GTE Corporation that were issued and outstanding prior to July 1, 2003. As of June 30, 2019, $4232020, $391 million aggregate principal amount of these obligations remained outstanding.

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Covenants
We and our consolidated subsidiaries are in compliance with all of our restrictive covenants.

Note 7. Wireless6. Device Payment PlansPlan Agreement and Wireless Service Receivables
The following table presents information about accounts receivable, net of allowances, recorded in our condensed consolidated balance sheet:
At June 30, 2020
(dollars in millions)Device payment plan agreementWireless
service
Other receivables(1)
Total
Accounts receivable(2)
$12,017  $5,089  $6,636  $23,742  
Less Allowance for credit losses584  234  252  1,070  
Accounts receivable, net of allowance$11,433  $4,855  $6,384  $22,672  
(1) Other receivables primarily include wireline receivables, Verizon Media receivables and other receivables, the allowances for which are individually insignificant.
(2) Following the adoption of Topic 326 on January 1, 2020, accounts receivable are measured at amortized cost.

Under the Verizon device payment program, our eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fees as compared to those under our fixed-term service plans, and their device payment plan charge is included on their wireless monthly bill. As of January 2017, we no longer offer Consumer customers new fixed-term, subsidized service plans for phones; however, we continue to offer subsidized plans to our Business

customers. We also continue to service existing plans for customers who have not yet purchased and activated devices under the Verizon device payment program.

Wireless Device Payment Plan Agreement Receivables
The following table displays device payment plan agreement receivables, net, recognized in our condensed consolidated balance sheets:
At June 30,At December 31,
(dollars in millions)2020
2019(1)
Device payment plan agreement receivables, gross$17,079  $19,493  
Unamortized imputed interest(429) (454) 
Device payment plan agreement receivables, at amortized cost16,650  19,039  
Allowance (2)
(795) (472) 
Device payment plan agreement receivables, net$15,855  $18,567  
Classified in our condensed consolidated balance sheets:
Accounts receivable, net$11,433  $13,045  
Other assets4,422  5,522  
Device payment plan agreement receivables, net$15,855  $18,567  
 At June 30,
 At December 31,
(dollars in millions)2019
 2018
Device payment plan agreement receivables, gross$18,327
 $19,313
Unamortized imputed interest(455) (546)
Device payment plan agreement receivables, net of unamortized imputed interest17,872
 18,767
Allowance for credit losses(487) (597)
Device payment plan agreement receivables, net$17,385
 $18,170
    
Classified in our condensed consolidated balance sheets:   
Accounts receivable, net$12,486
 $12,624
Other assets4,899
 5,546
Device payment plan agreement receivables, net$17,385
 $18,170
(1) Balances reflected are prior to the adoption of Topic 326 on January 1, 2020.
(2) Includes allowance for both short-term and long-term device payment plan agreement receivables. The allowance as of June 30, 2020 and December 31, 2019 relate to our provision for credit losses and doubtful accounts, respectively.


Included in our device payment plan agreement receivables net at June 30, 20192020 and December 31, 2018,2019, are net device payment plan agreement receivables of $13.4$13.5 billion and $11.5$14.3 billion, respectively, thatwhich have been transferred to ABS Entities and continue to be reported in our condensed consolidated balance sheets. See Note 65 for additional information. We believe the carrying value of our installment loansthese receivables approximate their fair value using a Level 3 expected cash flow model.

For indirect channel wireless contracts with customers, we impute risk adjusted interest on the device payment plan agreement receivables. We record the imputed interest as a reduction to the related accounts receivable. Interest income, which is included within Service revenues and other in our condensed consolidated statements of income, is recognized over the financed device payment term.

Promotions
We may offer certain promotions that allow a customer to trade in their owned device in connection with the purchase of a new device. Under these types of promotions, the customer receives a credit for the value of the trade-in device. In addition, we may provide the customer with additional future credits that will be applied against the customer’s monthly bill as long as service is maintained. We recognize a liability for the trade-in device measured at fair value, for the customer’s right to trade-in the device which is determined by considering several factors, including the weighted-average selling prices obtained in recent resales of similar devices eligible for trade-in. Future credits are recognized when earned by the customer. Device payment plan agreement receivables, net, does not reflect the trade-in device liability. At June 30, 20192020 and December 31, 20182019, the amount of trade-in liability was $60$55 million and $64$103 million, respectively.

From time to time, we offer certain marketing promotions that allow our customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a
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customer enters into a device payment plan agreement with the right to upgrade to a new device, we account for this trade-in right as a guarantee obligation.

For indirect channel wireless contracts with customers, we impute risk adjusted interest on the device payment plan agreement receivables. We record the imputed interest as a reduction to the related accounts receivable. Interest income, which is included within Service revenues and other in our condensed consolidated statementsOrigination of income, is recognized over the financed device payment term.

Device Payment Plan Agreements
When originating device payment plan agreements, we use internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program. If a customer is either new to Verizon Wireless or has less than 210 days of customer tenure with Verizon Wireless (a new customer), the credit decision process relies more heavily on external data sources. If the customer has 210 days or more of customer tenure with Verizon Wireless (an existing customer), the credit decision process relies on internal data sources. Verizon Wireless’Verizon’s experience has been that the payment attributes of longer tenured customers are highly predictive for estimating their reliability to make future payments. ExternalCustomers with longer tenures tend to exhibit similar risk characteristics to other customers with longer tenures, and receivables due from customers with longer tenures tend to perform better than receivables from customers that have not previously been Verizon customers. As a result of this experience, we make initial lending decisions based upon whether the customers are "established customers" or "short-tenured customers." If a Consumer customer has been a customer for 45 days or more, or if a Business customer has been a customer for 12 months or more, the customer is considered an "established customer." For established customers, the credit decision and ongoing credit monitoring processes rely on a combination of internal and external data sources include obtainingsources. If a Consumer customer has been a customer less than 45 days, or a Business customer has been a customer for less than 12 months, the customer is considered a "short-tenured customer." For short-tenured customers, the credit report from a national consumerdecision and credit reporting agency, if available. Verizon Wireless uses its internalmonitoring processes rely more heavily on external data sources.

Internal data and/or external credit data are obtained from the credit reporting agencies, if available, to create a custom credit risk score.score for Consumer customers. The custom credit risk score is generated automatically (except with respect to a small number of applications where the information needs manual intervention) from the applicant’s credit data using Verizon Wireless’ proprietary custom credit models, which are empirically derived, demonstrably and statistically sound.models. The credit risk score measures the likelihood that the potential customer will become severely delinquent and be disconnected for non-payment. For a small portion of newshort-tenured customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternatealternative credit data is used for the risk assessment. For Business customers, we also verify the existence of the business with external data sources.

Based on the custom credit risk score, we assign each customer to a credit class, each of which has specified offers of credit including an account level spending limit and either a maximum amount of credit allowed per device or a required down payment percentage. During the fourth quarter of 2018, Verizon Wirelesswe moved all Consumer customers, newshort-tenured and existing,established, from a required down payment percentage, between zero0 and 100%, to a maximum amount of credit per device.

Credit Quality Information
Subsequent to origination, Verizon Wireless monitorswe assess indicators for the quality of our wireless device payment plan agreement portfolio using two models, one for new customers and one for existing customers. The model for new customers pools all Consumer and Business wireless customers based on 210 days and 12 months or less, respectively, as "new customers." The model for existing customers pools all Consumer and Business wireless customers based on 210 days and 12 months or more, respectively, as "existing customers."

The following table presents device payment plan agreement receivables, at amortized cost, as of June 30, 2020, by credit quality indicator and year of origination:
Year of Origination
(dollars in millions)202020192018Prior to 2018Total
New customers$1,042  $1,360  $169  $43  $2,614  
Existing customers4,964  7,857  1,186  29  14,036  
Total$6,006  $9,217  $1,355  $72  $16,650  
The data presented in the table above was last updated on June 30, 2020.

We assess indicators for the quality of our wireless service receivables portfolio as one overall pool. As of June 30, 2020, wireless service receivables, at amortized cost, originating in 2020 and 2019 were $5.0 billion and an insignificant amount, respectively.

Allowance for Credit Losses
The credit quality indicators are used in determining the estimated amount and the timing of expected credit losses for the device payment plan agreement and wireless service receivables portfolios.

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Activity in the allowance for credit losses by portfolio segment of receivables were as follows:
(dollars in millions)
Device Payment
Plan Agreement Receivables(1)
Wireless Service Plan Receivables
Balance at January 1, 2020$472  $156  
Opening balance sheet adjustment related to Topic 326 adoption265  —  
Adjusted opening balance, January 1, 2020737  156  
Current period provision for expected credit losses449  252  
Write-offs charged against the allowance(415) (208) 
Recoveries collected24  34  
Balance at June 30, 2020$795  $234  
(1) Includes allowance for both short-term and long-term device payment plan agreement receivables.

We monitor delinquency and write-off experience as key creditbased on the quality indicators for its portfolio of our device payment plan agreementsagreement and fixed-termwireless service plans.receivables portfolios. The extent of our collection efforts with respect to a particular customer are based on the results of our proprietary custom empirically derived internal behavioral scoring models that analyze the customer’s past performance to

predict the likelihood of the customer falling further delinquent. These customercustom scoring models assess a number of variables, including origination characteristics, customer account history and payment patterns. Since our customers’ behaviors may be impacted by general economic conditions, we analyzed whether changes in macroeconomic conditions impact our credit loss experience and have concluded that our credit loss estimates are generally not materially impacted by reasonable and supportable forecasts of future economic conditions. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. We continuously monitor collection performance results and the credit quality of ourFor device payment plan agreement receivables, based on a variety of metrics, including aging. Verizon Wireless considerswe consider an account to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date. For wireless service receivables, an account is considered delinquent 34 days after the bill cycle date. The risk class determines the speed and severity of the collections effort including initiatives taken to facilitate customer payment.

As of June 30, 2020, our allowance for credit losses considered the current and potential future impacts caused by COVID-19 based on available information to date. The impacts also include the Company's commitment to the FCC's "Keep Americans Connected" pledge, through which we pledged to waive late fees for, and not terminate service to, any of our consumer or small business customers who informed us that they had been impacted financially by the COVID-19 crisis through May 13, which we extended to June 30, 2020.

The balance and aging of the device payment plan agreement receivables, on a gross basisat amortized cost, were as follows:
At June 30,
(dollars in millions)2020
Unbilled$15,720 
Billed:
Current832 
Past due98 
Device payment plan agreement receivables, at amortized cost$16,650 
 At June 30,
 At December 31,
(dollars in millions)2019
 2018
Unbilled$17,042
 $18,043
Billed:   
Current1,028
 986
Past due257
 284
Device payment plan agreement receivables, gross$18,327
 $19,313


Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:
(dollars in millions)2019
 2018
Balance at January 1,$597
 $848
Bad debt expense401
 237
Write-offs(511) (331)
Balance at June 30,$487
 $754
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Note 8.7. Fair Value Measurements
Recurring Fair Value Measurements
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2019:2020:

(dollars in millions)
Level 1(1)

 
Level 2(2)

 
Level 3(3)

 Total
(dollars in millions)
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:       Assets:
Prepaid expenses and other:Prepaid expenses and other:
Foreign exchange forwardsForeign exchange forwards$—  $5  $—  $5  
Other assets:       Other assets:
Fixed income securities$—
 $434
 $—
 $434
Fixed income securities—  458  —  458  
Interest rate swaps—
 529
 —
 529
Interest rate swaps—  1,935  —  1,935  
Cross currency swaps—
 170
 —
 170
Cross currency swaps—  89  —  89  
Interest rate caps—
 2
 —
 2
Interest rate caps—  1  —  1  
Foreign exchange forwards—
 5
 —
 5
Total$—
 $1,140
 $—
 $1,140
Total$—  $2,488  $—  $2,488  
       
Liabilities:       Liabilities:
Other current liabilities:Other current liabilities:
Forward starting interest rate swapsForward starting interest rate swaps$—  $568  $—  $568  
Other liabilities:       Other liabilities:
Interest rate swaps$—
 $189
 $—
 $189
Interest rate swaps—  340  —  340  
Cross currency swaps—
 814
 —
 814
Cross currency swaps—  2,590  —  2,590  
Forward starting interest rate swaps—
 536
 —
 536
Forward starting interest rate swaps—  552  —  552  
Interest rate caps—
 1
 —
 1
Interest rate caps—  1  —  1  
Total$—
 $1,540
 $—
 $1,540
Total$—  $4,051  $—  $4,051  


The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:2019:

(dollars in millions)
Level 1(1)

 
Level 2(2)

 
Level 3(3)

 Total
(dollars in millions)
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:       Assets:
Other assets:       Other assets:
Fixed income securities$—
 $405
 $—
 $405
Fixed income securities$—  $442  $—  $442  
Interest rate swaps—
 3
 —
 3
Interest rate swaps—  568  —  568  
Cross currency swaps—
 220
 —
 220
Cross currency swaps—  211  —  211  
Interest rate caps—
 14
 —
 14
Foreign exchange forwardsForeign exchange forwards—  5  —  5  
Total$—
 $642
 $—
 $642
Total$—  $1,226  $—  $1,226  
       
Liabilities:       Liabilities:
Other liabilities:       Other liabilities:
Interest rate swaps$—
 $813
 $—
 $813
Interest rate swaps$—  $173  $—  $173  
Cross currency swaps—
 536
 —
 536
Cross currency swaps—  912  —  912  
Forward starting interest rate swaps—
 60
 —
 60
Forward starting interest rate swaps—  604  —  604  
Interest rate caps—
 4
 —
 4
Total$—
 $1,413
 $—
 $1,413
Total$—  $1,689  $—  $1,689  
(1)Quoted prices in active markets for identical assets or liabilities.
(1)
(2)Observable inputs other than quoted prices in active markets for identical assets and liabilities.
(3)Unobservable pricing inputs in the market.

Quoted prices in active markets for identical assets or liabilities
(2)
Observable inputs other than quoted prices in active markets for identical assets and liabilities
(3)
Unobservable pricing inputs in the market

Certain of our equity investments do not have readily determinable fair values and are excluded from the tables above. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer and are included in Investments in unconsolidated businesses in our condensed consolidated balance sheets. As of June 30, 20192020 and December 31, 2018,2019, the carrying amount of our investments without readily determinable fair values were $289$301 million and $248$284 million, respectively. During both the three and six months ended June 30, 2019,2020, there were insignificant adjustments due to observable price changes and there were noinsignificant impairment charges. Cumulative adjustments due to observable price changes and impairment charges were $58 million and insignificant, respectively.insignificant.

Fixed income securities consist primarily of investments in municipal bonds. For fixed income securities that do not have quoted prices in active markets, we use alternative matrix pricing resulting in these debt securities being classified as Level 2.

Derivative contracts are valued using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are classified within Level 2. We use mid-market pricing for fair value measurements of our derivative instruments. Our
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derivative instruments are recorded on a gross basis. Cash flows from derivatives designated in a qualifying hedging relationship are classified in the same category as the cash flows from the hedged items.

We recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between Level 1 and Level 2 during the six months ended June 30, 2019 and 2018.

Fair Value of Short-term and Long-term Debt
The fair value of our debt is determined using various methods, including quoted prices for identical terms and maturities,debt instruments, which is a Level 1 measurement, as well as quoted prices for similar debt instruments with comparable terms and maturities, in inactive markets and future cash flows discounted at current rates, which areis a Level 2 measurements. measurement.

The fair value of our short-term and long-term debt, excluding finance leases, was as follows:
 Fair Value
(dollars in millions)Carrying
Amount		Level 1Level 2Level 3Total
At December 31, 2019$110,373  $86,712  $42,488  $—  $129,200  
At June 30, 2020111,631  89,504  47,916  —  137,420  
 At June 30,  At December 31, 
 2019  2018 
(dollars in millions)
Carrying
Amount

 Fair Value
 
Carrying
Amount

 
Fair
Value 

Short- and long-term debt, excluding finance leases$112,424
 $129,342
 $112,159
 $118,535



Derivative Instruments
We enter into derivative transactions primarily to manage our exposure to fluctuations in foreign currency exchange rates and interest rates. We employ risk management strategies, which may include the use of a variety of derivatives including interest rate swaps, cross currency swaps, forward starting interest rate swaps, treasury rate locks, interest rate caps and foreign exchange forwards. We do not hold derivatives for trading purposes.

The following table sets forth the notional amounts of our outstanding derivative instruments:
At June 30,At December 31,
(dollars in millions)20202019
Interest rate swaps$16,996  $17,004  
Cross currency swaps24,740  23,070  
Forward starting interest rate swaps2,000  3,000  
Interest rate caps158  679  
Foreign exchange forwards960  1,130  
 At June 30,
 At December 31,
(dollars in millions)2019
 2018
Interest rate swaps$19,084
 $19,813
Cross currency swaps20,091
 16,638
Forward starting interest rate swaps3,000
 4,000
Interest rate caps1,292
 2,218
Foreign exchange forwards1,035
 600


Interest Rate Swaps
We enter into interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates that are currently based on LIBOR, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against interest rate risk exposure of designated debt issuances. We record the interest rate swaps at fair value in our condensed consolidated balance sheets as assets and liabilities. Changes in the fair value of the interest rate swaps are recorded to Interest expense, which are offset by changes in the fair value of the hedged debt due to changes in interest rates.

During the three months ended June 30, 2020, we did 0t enter into any interest rate swaps and we settled interest rate swaps with a total notional value of $929 million. During the six months ended June 30, 2020 we entered into and settled interest rate swaps with a total notional value of $2.4 billion. During the three months ended June 30, 2019, we did 0t enter into or settle any interest rate swaps. During the six months ended June 30, 2019, we entered into and settled interest rate swaps with a total notional value of $510 million and settled interest rate swaps with a total notional value of $1.2 billion.billion, respectively.

The ineffective portionsportion of these interest rate swaps were losses of an insignificant amount and gains of $56 million for the three and six months ended June 30, 2020, respectively. The ineffective portion of these interest rate swaps were gains of an insignificant amount and $60 million for the three and six months ended June 30, 2019, were insignificant and $60 million, respectively, and insignificant for the similar periods in 2018.respectively.

The following amounts were recorded in Long-term debt in our condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges:
At June 30,At December 31,
(dollars in millions)20202019
Carrying amount of hedged liabilities$18,438  $17,337  
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities1,544  433  
 At June 30,
 At December 31,
(dollars in millions)2019
 2018
Carrying amount of hedged liabilities$19,341
 $18,903
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities373
 (785)


Cross Currency Swaps
We have entered into cross currency swaps designated as cash flow hedges to exchange our British Pound Sterling, Euro, Swiss Franc, Canadian Dollar and Australian Dollar-denominated cash flows into U.S. dollars and to fix our cash payments in U.S. dollars, as well as to mitigate the impact of foreign currency transaction gains or losses.
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During both the three and six months ended June 30, 2020, we entered into cross currency swaps with a total notional value of $3.3 billion and we settled cross currency swaps with a total notional value of $1.6 billion. During the three and six months ended June 30, 2020, a pre-tax gain of $1.0 billion and a pre-tax loss of $1.9 billion, respectively, were recognized in Other comprehensive income (loss). During the three and six months ended June 30, 2019, we entered into cross currency swaps with a total notional value of $3.5 billion.billion and we did 0t settle any cross currency swaps. During the three and six months ended June 30, 2019, pre-tax losses of $340 million and $328 million, respectively, were recognized in Other comprehensive income (loss). During the three and six months ended June 30, 2018, a pre-tax loss of $1.1 billion and an insignificant pretax gain, respectively, were recognized in Other comprehensive income (loss). A portion of the gains recognized in Other comprehensive income (loss) was reclassified to Other income (expense), net to offset the related pre-tax foreign currency transaction gain or loss on the underlying hedged item.

Forward Starting Interest Rate Swaps
We have entered into forward starting interest rate swaps designated as cash flow hedges in order to manage our exposure to interest rate changes on future forecasted transactions. We hedge our exposure to the variability in future cash flows based on the expected maturities of the related forecasted debt issuance.

During the three and six months ended June 30, 2020, we did 0t enter into any new forward starting interest rate swaps. During the three months ended June 30, 2020, we did 0t settle any forward starting interest rate swaps. During the six months ended June 30, 2020, we settled forward starting interest rate swaps with a total notional value of $1.0 billion. During the three and six months ended June 30, 2019, we did not0t enter into any new forward starting interest rate swaps. During the three months ended June 30, 2019, we did not0t settle any forward starting interest rate swaps and, for the six months ended June 30, 2019, we settled forward starting interest rate swaps with a total notional value of $1.0 billion. During the three and six months ended June 30, 2020, an insignificant pre-tax gain and a pre-tax loss of $809 million, respectively, were recognized in Other comprehensive income (loss), resulting from interest rate movements. During the three and six months ended June 30, 2019, pre-tax losses of $293 million and $497 million, respectively, were recognized in Other comprehensive income (loss)., resulting from interest rate movements.

Treasury Rate Locks
We hedgeenter into treasury rate locks to mitigate our exposure tointerest rate risk. During the variabilitythree months ended June 30, 2020, we did 0t enter into or settle any treasury rate locks designated as cash flow hedges, and we did 0t recognize any amount in futureour condensed consolidated financial statement. During the six months ended June 30, 2020, we entered into and settled treasury rate locks designated as cash flows based onflow hedges with a total notional value of $500 million, and we recognized an insignificant pre-tax loss in Other comprehensive income (loss). During the expected maturities of the related forecasted debt issuance.three and six months ended June 30, 2019, we did 0t enter into or settle any treasury rate locks designated as cash flow hedges, and we did 0t recognize any amount in our condensed consolidated financial statements.

Net Investment Hedges
We have designated certain foreign currency debt instruments as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. The notional amount of the Euro-denominated debt designated as a net investment hedge was €750 million as of both June 30, 20192020 and December 31, 2018.2019.


Undesignated Derivatives
We also have the following derivative contracts which we use as economic hedges but for which we have elected not to apply hedge accounting.

Interest Rate Caps
We enter into interest rate caps to mitigate our interest exposure to interest rate increases on our ABS Financing Facilities and ABS Notes. DuringWe recognized insignificant pre-tax losses in Interest expense during the three and six months ended June 30, 20192020 and 2018, we recognized an insignificant amount in Interest expense.2019.

Foreign Exchange Forwards
We enter into British Pound Sterling and Euro foreign exchange forwards to mitigate our foreign exchange rate risk related to non-functional currency denominated monetary assets and liabilities of international subsidiaries.subsidiaries, as well as foreign exchange risk related to debt settlements. During the three months ended June 30, 2020, we entered into and settled foreign exchange forwards with a total notional value of $4.3 billion and $4.2 billion, respectively. During the six months ended June 30, 2020, we entered into and settled foreign exchange forwards with a total notional value of $6.9 billion and $7.1 billion, respectively. During the three months ended June 30, 2019, we entered into and settled foreign exchange forwards with a total notional value of $3.1 billion and $6.1$3.0 billion, respectively,respectively. During the six months ended June 30, 2019, we entered into and settled foreign exchange forwards with a total notional value of $3.0$6.1 billion and $5.6 billion, respectively. During the three and six months ended June 30, 2019, we recognized2020, pre-tax gains of $81 million and an insignificant amount, respectively, were recognized in Other income (expense), net. During the three and six months ended June 30, 2019, insignificant pre-tax losses were recognized in Other income (expense), net.

Treasury Rate Locks
We enter into treasury rate locks to mitigate our interest rate risk. During the three months ended June 30, 2020, we did 0t enter into or settle any treasury rate locks, and we did 0t recognize any amount in our condensed consolidated financial statement. During the six months ended June 30, 2020, we entered into and settled treasury rate locks with a total notional value of $1.6 billion, and we recognized an insignificant
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pre-tax gain in Interest expense. During the three and six months ended June 30, 2019, we did 0t enter into or settle any treasury rate locks, and we did 0t recognize any amount in our condensed consolidated financial statements.

Concentrations of Credit Risk
Financial instruments that subject us to concentrations of credit risk consist primarily of temporary cash investments, short-term and long-term investments, trade receivables, including device payment plan agreement receivables, certain notes receivable, including lease receivables, and derivative contracts.

Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements which provide rules for collateral exchange. Negotiations and executions of new ISDA master agreements and CSA agreements with our counterparties continued throughout 2018 and 2019. The newly executed CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in outstanding positions as compared to established thresholds and changes in credit ratings. At June 30, 20192020, we held approximately $0.1$0.3 billion and at December 31, 2018 we posted approximately $0.1 billionan insignificant amount of collateral related to derivative contracts under collateral exchange arrangements,agreements, which were recorded as Other current liabilities and Prepaid expenses and other, respectively, in our condensed consolidated balance sheets.sheet. At December 31, 2019, we held an insignificant amount of collateral related to derivative contracts under collateral exchange arrangements, which were recorded as Other current liabilities in our condensed consolidated balance sheet. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote and do not expect that any such nonperformance would result in a significant effect on our results of operations or financial condition due to our diversified pool of counterparties.

Note 9.8. Employee Benefits
We maintain non-contributory defined benefit pension plans for certain employees. In addition, we maintain postretirement health care and life insurance plans for certain retirees and their dependents, which are both contributory and non-contributory, and include a limit on our share of the cost for certain current and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include service costs associated with pension and other postretirement benefits while other credits and/or charges based on actuarial assumptions, including projected discount rates, an estimated return on plan assets, and impact from health care trend rates are reported in Other income (expense), net. These estimates are updated in the fourth quarter to reflect actual return on plan assets and updated actuarial assumptions or upon a remeasurement event. The adjustment is recognized in the income statement during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses.

Net Periodic Benefit Cost (Income)
The following table summarizes the components of net periodic benefit cost (income) related to our pension and postretirement health care and life insurance plans:
(dollars in millions)
PensionHealth Care and Life
Three Months Ended June 30,2020201920202019
Service cost - Cost of services$59  $50  $23  $19  
Service cost - Selling, general and administrative expense14  12  5  5  
Service cost$73  $62  $28  $24  
Amortization of prior service cost (credit)$15  $16  $(242) $(243) 
Expected return on plan assets(296) (282) (6) (10) 
Interest cost137  176  107  158  
Remeasurement loss, net153  —  —  —  
Other components$9  $(90) $(141) $(95) 
Total$82  $(28) $(113) $(71) 
 (dollars in millions) 
 Pension Health Care and Life 
Three Months Ended June 30,2019
 2018
 2019
 2018
Service cost - Cost of services$50
 $59
 $19
 $26
Service cost - Selling, general and administrative expense12
 14
 5
 6
Service cost$62
 $73
 $24
 $32
        
Amortization of prior service cost (credit)$16
 $10
 $(243) $(244)
Expected return on plan assets(282) (329) (10) (11)
Interest cost176
 166
 158
 154
Other components$(90) $(153) $(95) $(101)
        
Total$(28) $(80) $(71) $(69)


 (dollars in millions) 
 Pension Health Care and Life 
Six Months Ended June 30,2019
 2018
 2019
 2018
Service cost - Cost of services$100
 $117
 $39
 $52
Service cost - Selling, general and administrative expense23
 28
 9
 12
Service cost$123
 $145
 $48
 $64
        
Amortization of prior service cost (credit)$31
 $20
 $(486) $(488)
Expected return on plan assets(564) (658) (19) (22)
Interest cost354
 332
 315
 307
Remeasurement gain, net(96) —
 —
 —
Other components$(275) $(306) $(190) $(203)
        
Total$(152) $(161) $(142) $(139)

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(dollars in millions)
PensionHealth Care and Life
Six Months Ended June 30,2020201920202019
Service cost - Cost of services$118  $100  $45  $39  
Service cost - Selling, general and administrative expense28  23  10  9  
Service cost$146  $123  $55  $48  
Amortization of prior service cost (credit)$30  $31  $(483) $(486) 
Expected return on plan assets(593) (564) (13) (19) 
Interest cost277  354  214  315  
Remeasurement loss (gain), net335  (96) —  —  
Other components$49  $(275) $(282) $(190) 
Total$195  $(152) $(227) $(142) 

The service cost component of net periodic benefit cost (income) is recorded in Cost of services and Selling, general and administrative expense in the condensed consolidated statements of income while the other components, including mark-to-marketremeasurement adjustments, if any, are recorded in Other income (expense), net.

2018 Voluntary Separation Program
In SeptemberDecember 2018, we announced a Voluntary Separation Program for select U.S.-based management employees. Approximately 10,400 eligible employees separatedbegan separating from the Company under thisa Voluntary Separation Program. The program as offinished at the end of June 2019. The severance benefits payments to these employees are expected to bewere substantially completed by the end of September 2019.

Severance Payments
During the three and six months ended June 30, 2019,2020, we paid severance benefits of $643$52 million and $1.5 billion,$175 million, respectively. During both the three and six monthmonths ended June 30, 2019,2020, we recorded net pre-tax severance charges of an insignificant amount. At June 30, 2019,2020, we had a remaining severance liability of $765$443 million, a portion of which includes future contractual payments to employees separated as a result of the Voluntary Separation Program.employees.

Employer Contributions
During the six months ended June 30, 2020, we made 0 contributions to our qualified pension plans. During both the three and six months ended June 30, 2020, we made insignificant contributions to our nonqualified pension plans. During the six months ended June 30, 2019, we made a discretionary pension contribution of $300 million to our qualified pension plans. As a result of the $300 million and $1.0 billion discretionary pension contributions during the six months ended June 30, 2019 and 2018, respectively, weWe do not expect mandatory pension funding through December 31, 2019. There was no contribution made to our nonqualified pension plans during the three and six months ended June 30, 2019.2020. There have been no significant changes with respect to the nonqualified pension and other postretirement benefit plans contributions in 2019.2020.

Remeasurement gain,loss (gain), net
During the three and six months ended June 30, 2020, we recorded net pre-tax remeasurement losses of $153 million and $335 million in our pension plans, respectively, triggered by settlements.

During the three months ended June 30, 2020, we recorded a net pre-tax remeasurement loss of $153 million primarily driven by a $163 million charge mainly due to the difference between our estimated return on assets and our actual return on assets and changes in our lump sum interest rate assumptions used to determine the current year liabilities of our pension plans, offset by a credit due to changes in our discount rate.

During the three months ended March 31, 2020, we recorded a net pre-tax remeasurement loss of $182 million primarily driven by a $196 million charge mainly due to changes in our discount rate and lump sum interest rate assumptions used to determine the current year liabilities of our pension plans, offset by a credit due to the difference between our estimated return on assets and our actual return on assets.

During the six months ended June 30, 2019, we recorded a net pre-tax remeasurement gain of $96 million in our pension plans triggered by the Voluntary Separation Program for select U.S.-based management employees and other headcount reduction initiatives, primarily driven by a $150 million credit due to the difference between our estimated return on assets and our actual return on assets, offset by a $54 million charge due to a change in our discount rate assumption used to determine the current year liabilities of our pension plans.



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Note 10.9. Equity and Accumulated Other Comprehensive Income
Equity
Changes in the components of Total equity were as follows:
(dollars in millions, except per share amounts, and shares in thousands)
Three months ended June 30,20202019
SharesAmountSharesAmount
Common Stock
Balance at beginning of period4,291,434  $429  4,291,434  $429  
Balance at end of period4,291,434  429  4,291,434  429  
Additional Paid In Capital
Balance at beginning of period13,302  13,418  
Other(21) 1  
Balance at end of period13,281  13,419  
Retained Earnings
Balance at beginning of period54,557  46,493  
Net income attributable to Verizon4,700  3,944  
Dividends declared ($0.6150, $0.6025 per share)(2,544) (2,492) 
Other33  —  
Balance at end of period56,746  47,945  
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period attributable to Verizon(1,502) 2,216  
Foreign currency translation adjustments77  (67) 
Unrealized gain (loss) on cash flow hedges314  (537) 
Unrealized gain on marketable securities6  4  
Defined benefit pension and postretirement plans(169) (169) 
Other comprehensive income (loss)228  (769) 
Balance at end of period attributable to Verizon(1,274) 1,447  
Treasury Stock
Balance at beginning of period(153,438) (6,725) (155,727) (6,825) 
Employee plans58  3  58  2  
Balance at end of period(153,380) (6,722) (155,669) (6,823) 
Deferred Compensation-ESOPs and Other
Balance at beginning of period149  125  
Restricted stock equity grant157  44  
Amortization(69) (4) 
Balance at end of period237  165  
Noncontrolling Interests
Balance at beginning of period1,443  1,604  
Total comprehensive income139  130  
Distributions and other(166) (369) 
Balance at end of period1,416  1,365  
Total Equity$64,113  $57,947  

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(dollars in millions, except per share amounts, and shares in thousands)(dollars in millions, except per share amounts, and shares in thousands)(dollars in millions, except per share amounts, and shares in thousands)
Three months ended June 30,2019
   2018
   
Six months ended June 30,Six months ended June 30,20202019
Shares
 Amount
 Shares
 Amount
 SharesAmountSharesAmount
Common Stock        Common Stock
Balance at beginning of period4,291,434
 $429
 4,291,422
 $429
 
Common shares issued—
 —
 12
 —
 
Balance at beginning of yearBalance at beginning of year4,291,434  $429  4,291,434  $429  
Balance at end of period4,291,434
 429
 4,291,434
 429
 Balance at end of period4,291,434  429  4,291,434  429  
        
Additional Paid In Capital        Additional Paid In Capital
Balance at beginning of period  13,418
   13,437
 
Balance at beginning of yearBalance at beginning of year13,419  13,437  
Other  1
   1
 Other(138) (18) 
Balance at end of period  13,419
   13,438
 Balance at end of period13,281  13,419  
        
Retained Earnings        Retained Earnings
Balance at beginning of period  46,493
   39,974
 
Balance at beginning of yearBalance at beginning of year53,147  43,542  
Opening balance sheet adjustmentOpening balance sheet adjustment(200) 
(1)
410  
(2)
Adjusted opening balanceAdjusted opening balance52,947  43,952  
Net income attributable to Verizon  3,944
   4,120
 Net income attributable to Verizon8,856  8,976  
Dividends declared ($0.6025, $0.5900 per share)  (2,492)   (2,437) 
Dividends declared ($1.2300, $1.2050 per share)Dividends declared ($1.2300, $1.2050 per share)(5,090) (4,983) 
OtherOther33  —  
Balance at end of period  47,945
   41,657
 Balance at end of period56,746  47,945  
        
Accumulated Other Comprehensive Income        
Balance at beginning of period attributable to Verizon  2,216
   3,705
 
Accumulated Other Comprehensive Income (Loss)Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year attributable to VerizonBalance at beginning of year attributable to Verizon998  2,370  
Foreign currency translation adjustments  (67)   (176) Foreign currency translation adjustments(43) (43) 
Unrealized loss on cash flow hedges  (537)   (152) Unrealized loss on cash flow hedges(1,896) (550) 
Unrealized gain on marketable securities  4
   1
 Unrealized gain on marketable securities5  8  
Defined benefit pension and postretirement plans  (169)   (173) Defined benefit pension and postretirement plans(338) (338) 
Other comprehensive loss  (769)   (500) Other comprehensive loss(2,272) (923) 
Balance at end of period attributable to Verizon  1,447
   3,205
 Balance at end of period attributable to Verizon(1,274) 1,447  
        
Treasury Stock        Treasury Stock
Balance at beginning of period(155,727) (6,825) (159,526) (6,992) 
Balance at beginning of yearBalance at beginning of year(155,606) (6,820) (159,400) (6,986) 
Employee plans58
 2
 28
 2
 Employee plans2,222  98  3,726  163  
Shareholder plans—
 —
 —
 —
 Shareholder plans4  —  5  —  
Balance at end of period(155,669) (6,823) (159,498) (6,990) Balance at end of period(153,380) (6,722) (155,669) (6,823) 
        
Deferred Compensation-ESOPs and Other        Deferred Compensation-ESOPs and Other
Balance at beginning of period  125
   228
 
Balance at beginning of yearBalance at beginning of year222  353  
Restricted stock equity grant  44
   38
 Restricted stock equity grant172  79  
Amortization  (4)   19
 Amortization(157) (267) 
Balance at end of period  165
   285
 Balance at end of period237  165  
        
Noncontrolling Interests        Noncontrolling Interests
Balance at beginning of period  1,604
   1,564
 
Balance at beginning of yearBalance at beginning of year1,440  1,565  
Opening balance sheet adjustmentOpening balance sheet adjustment—  1  
(2)
Adjusted opening balanceAdjusted opening balance1,440  1,566  
Total comprehensive income  130
   126
 Total comprehensive income270  258  
Distributions and other  (369)   (139) Distributions and other(294) (459) 
Balance at end of period  1,365
   1,551
 Balance at end of period1,416  1,365  
Total Equity  $57,947
   $53,575
 Total Equity$64,113  $57,947  

         
(dollars in millions, except per share amounts, and shares in thousands)
Six months ended June 30,2019
   2018
   
 Shares
 Amount
 Shares
 Amount
 
Common Stock        
Balance at beginning of year4,291,434
 $429
 4,242,374
 $424
 
Common shares issued—
 —
 49,060
 5
 
Balance at end of period4,291,434
 429
 4,291,434
 429
 
         
Additional Paid In Capital        
Balance at beginning of year  13,437
   11,101
 
Other  (18)   2,337
 
Balance at end of period  13,419
   13,438
 
         
Retained Earnings        
Balance at beginning of year  43,542
   35,635
 
Opening balance sheet adjustment  410
(1) 
  2,232
(2) 
Adjusted opening balance  43,952
   37,867
 
Net income attributable to Verizon  8,976
   8,665
 
Dividends declared ($1.205, $1.1800 per share)  (4,983)   (4,875) 
Balance at end of period  47,945
   41,657
 
         
Accumulated Other Comprehensive Income        
Balance at beginning of year attributable to Verizon  2,370
   2,659
 
Opening balance sheet adjustment  —
   630
(2) 
Adjusted opening balance  2,370
   3,289
 
Foreign currency translation adjustments  (43)   (83) 
Unrealized gain (loss) on cash flow hedges  (550)   349
 
Unrealized gain (loss) on marketable securities  8
   (4) 
Defined benefit pension and postretirement plans  (338)   (346) 
Other comprehensive loss  (923)   (84) 
Balance at end of period attributable to Verizon  1,447
   3,205
 
         
Treasury Stock        
Balance at beginning of year(159,400) (6,986) (162,898) (7,139) 
Employee plans3,726
 163
 3,396
 149
 
Shareholder plans5
 —
 4
 —
 
Balance at end of period(155,669) (6,823) (159,498) (6,990) 
         
Deferred Compensation-ESOPs and Other        
Balance at beginning of year  353
   416
 
Restricted stock equity grant  79
   91
 
Amortization  (267)   (222) 
Balance at end of period  165
   285
 
         
Noncontrolling Interests        
Balance at beginning of year  1,565
   1,591
 
Opening balance sheet adjustment  1
(1) 
  44
(2) 
Adjusted opening balance  1,566
   1,635
 
Total comprehensive income  258
   247
 
Distributions and other  (459)   (331) 
Balance at end of period  1,365
   1,551
 
Total Equity  $57,947
   $53,575
 
(1) The opening balance sheet adjustment for the six months ended June 30, 2020 is due to the adoption of Topic 326 on January 1, 2020. See Note 1 for additional information.
(2) Opening balance sheet adjustments for the six months ended June 30, 2019 are due to the adoption of Topic 842 on January 1, 2019. See Note 1 for additional information.
(2) Opening balance sheet adjustments for the six months ended June 30, 2018 are due to the adoption of multiple ASUs on January 1, 2018. Refer to the consolidated financial statements and notes thereto included in the Company’sVerizon's Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 for additional information.


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Common Stock
In February 2020, the Verizon Board of Directors authorized a share buyback program to repurchase up to 100 million shares of the Company's 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. Verizon did not repurchase any shares of Verizon common stock through its previouslyunder our authorized share buyback programprograms during the six months ended June 30, 2019.2020. At June 30, 2019,2020, the maximum number of shares that could be purchased by or on behalf of Verizon under our share buyback program was 100 million.

Common stock has been used from time to time to satisfy some of the funding requirements of employee and shareowner plans, including 3.72.2 million common shares issued from Treasury stock during the six months ended June 30, 2019.2020.

In connection with our acquisition of Straight Path Communications, Inc. in February 2018, we issued approximately 49 million shares of Verizon common stock, valued at approximately $2.4 billion.

Accumulated Other Comprehensive Income (Loss)
The changes in the balances of Accumulated other comprehensive income (loss) by component were as follows:
(dollars in millions)Foreign 
currency
translation
adjustments		Unrealized loss on cash flow hedgesUnrealized gain on marketable securitiesDefined
benefit
pension and
postretirement
plans		Total
Balance at January 1, 2020$(584) $(816) $27  $2,371  $998  
Other comprehensive income (loss)(43) (2,065) 5  —  (2,103) 
Amounts reclassified to net income—  169  —  (338) (169) 
Net other comprehensive income (loss)(43) (1,896) 5  (338) (2,272) 
Balance at June 30, 2020$(627) $(2,712) $32  $2,033  $(1,274) 
(dollars in millions)
Foreign 
currency
translation
adjustments

 
Unrealized
gain (loss) on cash
flow hedges

 
Unrealized
gain on
marketable
securities

 
Defined
benefit
pension and
postretirement
plans

 Total
Balance at January 1, 2019$(600) $(80) $20
 $3,030
 $2,370
Other comprehensive income (loss)(43) (607) 8
 —
 (642)
Amounts reclassified to net income—
 57
 —
 (338) (281)
Net other comprehensive income (loss)(43) (550) 8
 (338) (923)
Balance at June 30, 2019$(643) $(630) $28
 $2,692
 $1,447


The amounts presented above in net other comprehensive income (loss) are net of taxes. The amounts reclassified to net income related to unrealized gainloss on cash flow hedges in the table above are included in Other income (expense), net and Interest expense in our condensed consolidated statements of income. See Note 87 for additional information. The amounts reclassified to net income related to defined benefit pension and postretirement plans in the table above are included in Cost of services and Selling, general and administrative expense in our condensed consolidated statements of income. See Note 98 for additional information.

Note 11.10. Segment Information
Reportable Segments
As discussed in Note 1, in November 2018, we announced a strategic reorganization of our business.Under the new structure, effective April 1, 2019, there are twoWe have 2 reportable segments that we operate and manage as strategic business units - Consumer and Business. In conjunction with the new reporting structure, we recast our segment disclosures for all periods presented. We measure and evaluate our reportable segments based on segment operating income, consistent with the chief operating decision maker’s assessment of segment performance.

Our segments and their principal activities consist of the following:
SegmentDescription
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 Wireless brand and through wholesale and other arrangements. 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 under theby our Verizon Fios brandproduct portfolio and over a traditional copper-based network to customers who are not served by Fios.
Verizon
Business Group		Our Business segment provides wireless and wireline communications services and products, including data, video and dataconferencing 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 select products and services to customers around the world.


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. Our Business segment’s wireless and wireline products and services are organized by the primary customer groups targeted by these offerings: Global Enterprise, Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale.

Corporate and other includes the results of our media business, Verizon Media, and other businesses, investments in unconsolidated businesses, 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 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 as these items are included in the chief operating decision maker’s assessment of segment performance.


The reconciliation of segment operating revenues and expenses to consolidated operating revenues and expenses below includes the effects of special items that the chief operating decision maker does not consider in assessing segment performance, primarily because of their nature.
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The following table provides operating financial information for our two2 reportable segments:
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
External Operating Revenues       
Consumer       
Service$16,350
 $16,050
 $32,611
 $31,864
Wireless equipment3,904
 4,251
 8,070
 8,521
Other1,680
 1,650
 3,350
 3,130
Total Consumer21,934
 21,951
 44,031
 43,515
        
Business       
Global Enterprise2,673
 2,808
 5,363
 5,632
Small and Medium Business2,781
 2,638
 5,485
 5,166
Public Sector and Other1,492
 1,437
 2,963
 2,866
Wholesale810
 956
 1,650
 1,941
Total Business7,756
 7,839
 15,461
 15,605
Total reportable segments$29,690
 $29,790
 $59,492
 $59,120
        
Intersegment Revenues       
Consumer$61
 $52
 $112
 $115
Business12
 12
 26
 29
Total reportable segments$73
 $64
 $138
 $144
        
Total Operating Revenues       
Consumer$21,995
 $22,003
 $44,143
 $43,630
Business(1)
7,768
 7,851
 15,487
 15,634
Total reportable segments$29,763
 $29,854
 $59,630
 $59,264
        
Operating Income       
Consumer$7,336
 $7,060
 $14,586
 $13,995
Business1,071
 1,101
 2,119
 2,215
Total reportable segments$8,407
 $8,161
 $16,705
 $16,210

 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2020201920202019
External Operating Revenues
Consumer
Service$15,898  $16,350  $32,241  $32,611  
Wireless equipment3,209  3,904  6,586  8,070  
Other1,946  1,680  3,932  3,350  
Total Consumer21,053  21,934  42,759  44,031  
Business
Small and Medium Business2,597  2,781  5,395  5,485  
Global Enterprise2,587  2,673  5,217  5,363  
Public Sector and Other1,523  1,492  2,997  2,963  
Wholesale756  810  1,516  1,650  
Total Business7,463  7,756  15,125  15,461  
Total reportable segments$28,516  $29,690  $57,884  $59,492  
Intersegment Revenues
Consumer$60  $61  $119  $112  
Business19  12  38  26  
Total reportable segments$79  $73  $157  $138  
Total Operating Revenues
Consumer$21,113  $21,995  $42,878  $44,143  
Business(1)
7,482  7,768  15,163  15,487  
Total reportable segments$28,595  $29,763  $58,041  $59,630  
Operating Income
Consumer$7,064  $7,336  $14,346  $14,586  
Business946  1,071  1,900  2,119  
Total reportable segments$8,010  $8,407  $16,246  $16,705  
(1) Service and other revenues included in our Business segment amounted to approximately $7.0 billion for both the three months ended June 30, 2020 and 2019. Service and other revenues included in our Business segment amounted to approximately $13.9 billion for both the six months ended June 30, 2020 and 2019. Wireless equipment revenues included in our Business segment amounted to approximately $546 million and $1.3 billion for the three and six months ended June 30, 2019,2020, respectively, and approximately $7.1 billion and $14.0 billion for the three and six months ended June 30, 2018, respectively. Wireless equipment revenues included in our Business segment amounted to approximately $814 million and $1.6 billion for the three and six months ended June 30, 2019, respectively, and approximately $793 million and $1.6 billion for the three and six months ended June 30, 2018, respectively.

The following table provides Fios revenue for our two2 reportable segments:
Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2020201920202019
Consumer$2,754  $2,772  $5,553  $5,536  
Business260  239  522  482  
Total Fios revenue$3,014  $3,011  $6,075  $6,018  
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
Consumer$2,772
 $2,738
 $5,536
 $5,472
Business239
 218
 482
 435
Total Fios revenue$3,011
 $2,956
 $6,018
 $5,907

The following table provides Wireless service revenue underfor our current reportable structuresegments and includes intersegment activity:
Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2020201920202019
Consumer$13,087  $13,456  $26,563  $26,813  
Business2,861  2,775  5,742  5,469  
Total Wireless service revenue$15,948  $16,231  $32,305  $32,282  
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
Consumer$13,456
 $13,122
 $26,813
 $26,003
Business2,775
 2,615
 5,469
 5,116
Total Wireless service revenue$16,231
 $15,737
 $32,282
 $31,119
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Reconciliation to Consolidated Financial Information
A reconciliation of the reportable segment operating revenues to consolidated operating revenues is as follows:
Three Months EndedSix Months Ended
 June 30,June 30,
(dollars in millions)2020201920202019
Total reportable segment operating revenues$28,595  $29,763  $58,041  $59,630  
Corporate and other1,967  2,412  4,239  4,747  
Eliminations(115) (104) (223) (178) 
Total consolidated operating revenues$30,447  $32,071  $62,057  $64,199  
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
Total reportable segment operating revenues$29,763
 $29,854
 $59,630
 $59,264
Corporate and other2,412
 2,429
 4,747
 4,891
Eliminations(104) (80) (178) (180)
Total consolidated operating revenues$32,071
 $32,203
 $64,199
 $63,975


A reconciliation of the total reportable segmentsegment's operating income to consolidated income before provision for income taxes is as follows:
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2020201920202019
Total reportable segment operating income$8,010  $8,407  $16,246  $16,705  
 Corporate and other(445) (354) (704) (740) 
Other components of net periodic benefit charges (Note 8)(204) (203) (407) (406) 
Loss on spectrum license transaction (Note 3)—  —  (1,195) —  
Total consolidated operating income7,361  7,850  13,940  15,559  
Equity in losses of unconsolidated businesses(13) (13) (25) (19) 
Other income (expense), net(72) (1,312) 71  (1,017) 
Interest expense(1,089) (1,215) (2,123) (2,425) 
Income Before Provision For Income Taxes$6,187  $5,310  $11,863  $12,098  
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
Total reportable segment operating income$8,407
 $8,161
 $16,705
 $16,210
Corporate and other(354) (426) (740) (811)
Severance charges (Note 9)—
 (339) —
 (339)
Other components of net periodic benefit charges (Note 9)(203)
(208) (406) (416)
Acquisition and integration related charges—
 (120) —
 (227)
Product realignment charges—
 (451) —
 (451)
Total consolidated operating income7,850
 6,617
 15,559
 13,966
        
Equity in losses of unconsolidated businesses(13) (228) (19) (247)
Other income (expense), net(1,312) 360
 (1,017) 285
Interest expense(1,215) (1,222) (2,425) (2,423)
Income Before Provision For Income Taxes$5,310
 $5,527
 $12,098
 $11,581

No single customer accounted for more than 10% of our total operating revenues during the three and six months ended June 30, 20192020 and 2018.2019.

The chief operating decision maker does not review disaggregated assets on a segment basis; therefore, such information is not presented. Depreciation included in the measure of segment profitability is primarily allocated primarily based on proportional usage.

Note 12.11. Commitments and Contingencies
In the ordinary course of business, Verizon is involved in various commercial litigation and regulatory proceedings at the state and federal level. Where it is determined, in consultation with counsel based on litigation and settlement risks, that a loss is probable and estimable in a given matter, the Company establishes an accrual. In none of the currently pending matters is the amount of accrual material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including: (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. We continuously monitor these proceedings as they develop and adjust any accrual or disclosure as needed. We do not expect that the ultimate resolution of any pending regulatory or legal matter in future periods including the Hicksville matter described below, will have a material effect on our financial condition, but it could have a material effect on our results of operations for a given reporting period.

Reserves have been established to cover environmental matters relating to discontinued businesses and past telecommunications activities. These reserves include funds to address contamination at the site of a former Sylvania facility in Hicksville, NY, which had processed nuclear fuel rods in the 1950s and 1960s. In September 2005, the Army Corps of Engineers (ACE) accepted the site into its Formerly Utilized Sites Remedial Action Program. As a result, the ACE has taken primary responsibility for addressing the contamination at the site. An adjustment to the reserves may be made after a cost allocation is conducted with respect to the past and future expenses of all of the parties. Adjustments to the environmental reserve may also be made based upon the actual conditions found at other sites requiring remediation.

Verizon is currently involved in approximately 3025 federal district court actions alleging that Verizon is infringing various patents. Most of these cases are brought by non-practicing entities and effectively seek only monetary damages; a small number are brought by companies that have sold products and could seek injunctive relief as well. These cases have progressed to various stages and a small number may go to trial in the coming 12 months if they are not otherwise resolved.

In connection with the execution of agreements for the sales 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 indemnity

from certain financial losses. From time to time, counterparties may make claims under these provisions, and Verizon will seek to defend against those claims and resolve them in the ordinary course of business.

Subsequent to the sale of Verizon Information Services Canada in 2004, we continue to provide a guarantee to publish directories, which was issued when the directory business was purchased in 2001 and had a 30-year term (before extensions). The preexisting guarantee continues, without modification, despite the subsequent sale of Verizon Information Services Canada and the spin-off of our domestic print and Internetinternet yellow pages directories business. The possible financial impact of the guarantee, which is not expected to be adverse, cannot be reasonably estimated as a variety of the potential outcomes available under the guarantee result in costs and revenues or benefits that may offset each other. We do not believe performance under the guarantee is likely.


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During 2020, Verizon entered into 4 renewable energy purchase agreements (REPAs) with third parties. Each of the REPAs is based on the expected operation of a renewable energy-generating facility and has a fixed price term from 12 to 18 years from commencement of the facility's entry into commercial operation, which is expected to occur in 2021 or 2023, as applicable. The REPAs generally are expected to be financially settled based on the prevailing market price as energy is generated by the facilities.  

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Verizon Communications Inc. (Verizon, or the Company) is a holding company that, acting through its subsidiaries, is one of the world’s leading providers of communications, information and entertainment products and services to consumers, businesses and government entities. With a presence around the world, we offer voice, data, video and videovoice services and solutions on our networks that are designed to meet customers’ demand for mobility, reliable network connectivity, security and control. We have a highly diverse workforce of approximately 135,900135,300 employees as of June 30, 2019.2020.

To compete effectively in today’s dynamic marketplace, we are focused on transforming around the capabilities of our high-performing networks to drive growth based on delivering what customers want and need in the new digital world. During 2019,2020, we are focused on leveraging our network leadership; retaining and growing our high-quality customer base while balancing profitability; enhancing ecosystems in growth businesses; and driving monetization of our networks and solutions. We are creating business value by earning customers’customers', employees’employees' and shareholders’shareholders' trust, minimizinglimiting our environmental impact and maximizingcontinuing our customer base growth while creating social benefit through our products and services. 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 steady and consistent investments in our networks and platforms will drive innovative products and services and fuel our growth.

We are consistently deploying new network architecture and technologies to extendsecure our leadership in both fourth-generation (4G) and fifth-generation (5G) wireless networks. We expect that our next-generation multi-use platform, which we call the Intelligent Edge Network, design will allow us to realize significant efficienciessimplify operations by utilizing multi-purpose infrastructure utilizing common architecture withineliminating legacy network elements, speed the coredeployment of 5G wireless technology and providing flexibility to meet customer demands. In addition, protectingcreate new opportunities in the privacy of our customers’ information and the security of our systems and networks continues to bebusiness market in a priority at Verizon.cost efficient manner. Our network leadership is the hallmark of our brand and the foundation for the connectivity, platformplatforms and solutions upon which we build our competitive advantage.

Highlights of Our Financial Results for the Three Months Ended June 30, 20192020 and 20182019
(dollars in millions)
chart-q22019qtdoprevenue.jpgchart-q22019qtdopincome.jpgchart-q22019qtdnetincome.jpg

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Highlights of Our Financial Results for the Six Months Ended June 30, 20192020 and 20182019
(dollars in millions)

chart-q22019ytdoprevenue.jpgchart-q22019ytdopincome.jpgchart-q22019ytdnetincome.jpgvz-20200630_g4.jpgvz-20200630_g5.jpgvz-20200630_g6.jpg
chart-q22019cashflowsfromops.jpgchart-q22019capex.jpgvz-20200630_g7.jpgvz-20200630_g8.jpg

Impacts of the Recent Novel Coronavirus (COVID-19)
This disclosure discusses the actions Verizon has taken in response to the COVID-19 crisis and the impacts that the situation has had on our business, as well as related known or expected trends. The disclosure in the remainder of this Management's Discussion & Analysis of Financial Condition and Results of Operations is qualified by the disclosure in this section on the impacts of COVID-19 and, to the extent that the disclosure in the remainder of Management's Discussion & Analysis refers to a financial or performance metric that has been affected by a trend or activity, that reference is in addition to any impact discussed in this section on the impacts of COVID-19.

COVID-19 was identified in China in late 2019 and has since spread throughout the world, including throughout the United States (U.S.). Public and private sector policies and initiatives to reduce the transmission of COVID-19 have varied significantly across the U.S., but during the period ended June 30, 2020 a significant percentage of the U.S. population was subject to meaningful restrictions on activities, which included limitations on the operation of non-essential businesses including retail operations, requirements that individuals remain in or close to their homes, school closures, limitations on large gatherings, travel restrictions and other policies to promote or enforce physical distancing. Similar restrictions have been implemented in many other countries in which we operate. As described below, these restrictions and our responses to them are significantly impacting how our customers use our products and services, how they interact with us, and how our employees work and provide services to our customers. In addition, governments have imposed a wide variety of consumer protection measures that limit how certain businesses, including telecommunications companies, can operate their businesses and interact with their customers. The crisis and governmental responses to the crisis have also resulted in a slowdown of global economic activity, which has significantly impacted our customers. As a result, prior trends in our business may not be applicable to our operations during the pendency of the crisis.

Most of the policies and initiatives referenced above were implemented during the latter part of the first quarter and during the second quarter 2020, as were Verizon’s activities described below. The impact of COVID-19 for the remainder of the year and beyond will depend significantly on the duration and potential cyclicality of the health crisis and the related public policy actions, additional initiatives we undertake in response to employee, market or regulatory needs or demands, the length and severity of the global economic slowdown, and whether and how our customers change their behaviors over the longer term.

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Operations
In response to the crisis beginning in the first quarter 2020, we began executing our business continuity plans and evolving our operations to protect the safety of our employees and to continue to provide critical infrastructure and connectivity to our customers, as they have changed their ways of working and living. Some of the initiatives we took include:
•Moving over 115,000 of our 135,300 employees to remote work arrangements.
•Closing nearly 70% of our company-owned retail store locations and moving to appointment-only access to our remaining store locations.
•Limiting our customer-focused field operations based on the criticality of the services being provided or repaired.
•Enhancing our safety protocols for employees who cannot work from home.
•Providing temporary additional compensation to employees in front line roles that cannot be done from home.
•Adjusting other compensation and benefits programs to address circumstances created by the crisis.
•Taking the Federal Communication Commission's (FCC's) "Keep Americans Connected" pledge, through which we pledged to waive late fees for, and not terminate service to, any of our consumer or small business customers who informed us that they had been impacted financially by the COVID-19 crisis through May 13, which we extended to June 30, 2020. Customers who enrolled in the pledge were also automatically enrolled in a repayment program following June 30, 2020.
•Providing additional data allocations to permit wireless consumer and small business customers to remain connected during the first several months of the pandemic.
•Waiving activation and upgrade fees through digital distribution channels.
•Working with business customers to address payment needs during the crisis.
•Maintaining effective governance and internal controls in a remote work environment.

As some of the restrictions on physical movement and limitations on business and other activities described above eased to varying degrees during the second quarter 2020, we began the process of resuming certain of our operations, with the health and safety of our employees and customers as our utmost priority, and modifying some of our temporary policies. These initiatives include:
•Beginning to transition to facility access where feasible for those with remote work arrangements.
•Reopening certain temporarily closed company-owned retail store locations, with more than 60% of all company-owned retail store locations open as of June 30, 2020, introducing touch-less retail and providing curbside pickup options.
•Resuming certain customer-focused field operations.
•Discontinuing certain of our temporary compensation and benefits arrangements.

We expect that we will continue to revise our approach to these initiatives as the crisis evolves in the third quarter 2020 and beyond in order to meet the needs of our employees, customers and the Company and to continue to provide our products and services.

Operating Metrics
The following comparison of key performance metrics for the month of June 2020 with the same metrics for the entire second quarter 2020 shows the trends at the end of the second quarter compared to the quarter as a whole as the conditions in the various markets in which we operate evolved during the quarter.
Verizon Business Group
Verizon Consumer GroupSmall and Medium BusinessGlobal EnterprisePublic Sector and Other
2Q 2020June 20202Q 2020June 20202Q 2020June 20202Q 2020June 2020
Wireless retail postpaid gross additions(29)%(21)%(34)%(23)%(26)%(8)%125 %48 %
Wireless retail postpaid phone churn(21 bps)(18 bps)(5 bps)4 bps1 bps17 bps(22 bps)(4 bps)
Wireless retail postpaid upgrades(9)%— %(26)%(4)%(35)%(23)%(32)%(27)%
Wireless retail postpaid device activations(17)%(9)%(31)%(15)%(30)%(14)%39 %8 %
Fios internet gross additions(35)%(13)%(49)%(4)%n/an/an/an/a
n/a - not applicable

The following displays Verizon Media Group key performance metrics for the month of June 2020:
Verizon Media Group
Monthly active users4 %
Yahoo Finance45 %
Yahoo News25 %

The above metrics reflect that during the second quarter 2020, our various customer groups experienced a wide range of trends in customer demand, as well as different trajectories in those trends towards the end of the quarter. As a result of resuming our business activities during the quarter as described above, consumer activity showed significant improvement in the month of June as compared to the second quarter as a whole. The level of decline in Consumer wireless retail postpaid gross additions improved in June from the decline level experienced in the beginning of the quarter, while churn remained historically low. Wireless upgrade volumes were flat in June, reflecting pent-up demand, the availability of 5G-enabled devices and the introduction of other new devices. Consumer Fios performance saw significant improvement in June 2020, reflecting the transition we made from halting in-home Fios installations in the beginning of the quarter to resuming in-home
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installations in June, as well as the institution of innovative solutions for Fios self-installations.

In Business, we continued to experience significant pressure in Small and Medium Business throughout the quarter, with marginally higher churn and more robust upgrade activity in June. Among our Public Sector and Other and certain Global Enterprise customers, we experienced a surge in demand for connectivity in the beginning of the quarter to support front line crisis responders, work-from home and home schooling arrangements and other demands for critical connectivity services. Public Sector customers continued to demonstrate a robust demand for phones and connected devices throughout the quarter. In Global Enterprise, while we experienced a reduction in wireless volumes beginning in mid-April, we saw an improvement in gross add activity in June.

In Verizon Media, we continued to experience a decline in advertising and search revenue as advertisers paused or canceled campaigns during the second quarter 2020, and users searched for fewer commercial terms, providing less opportunity for monetization.

The progression of these trends in the third quarter and thereafter will depend on a number of factors, including how government policies with respect to physical distancing and reopening evolve and what the related macroeconomic impacts will be.

See "Segment Results of Operations" for additional information regarding our selected operating statistics.

Liquidity and Capital Resources
Verizon finished the second quarter 2020 in a strong financial position. As of June 30, 2020, our balance sheet included:
Cash and cash equivalents$7.9  billion
Unsecured debt$102.2  billion

As of June 30, 2020, our Cash and cash equivalents balance was $7.9 billion compared to $2.6 billion as of December 31, 2019 and $1.9 billion as of June 30, 2019. We made the decision to maintain a higher cash balance in order to further protect the Company against the uncertainties of the COVID-19 crisis. During the three months ended June 30, 2020, we decreased the amount of unsecured notes maturing through 2022 by $3.8 billion. As of June 30, 2020, we have no unsecured notes maturing during the remainder of 2020 and we have less than $1.0 billion of unsecured notes maturing in 2021. As of June 30, 2020, we had not drawn down on our $9.5 billion revolving credit facility and the unused borrowing capacity was approximately $9.4 billion. 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. During the three months ended June 30, 2020, we entered into a $1.5 billion export credit facility, as well as issued $0.9 billion aggregate principal amount of Canadian dollar-denominated notes and $2.3 billion aggregate principal amount of Euro-denominated notes, and we were active in the commercial paper market. In July 2020, we drew $500 million from the export credit facility entered into in June 2020 and fully drew down $500 million from an export credit facility entered into in July 2020. In addition, we repaid $460 million of commercial paper.

The COVID-19 crisis, together with other dynamics in the marketplace, has caused borrowing costs to fluctuate significantly and, in certain cases, restricted the ability of borrowers to access the capital markets and other sources of financing. In order to provide financial flexibility and finance certain investments and projects, we may continue to utilize external financing arrangements that have been or may be affected by these market conditions. However, we believe that our cash on hand, the cash we expect to generate from our operations, and cash from other sources of financing available to us are, and will continue to be, sufficient to meet our ongoing operating, capital expenditure and investing requirements.

We expect to continue to have sufficient cash to fund our operations, although we could experience significant fluctuations in our cash flows from period to period during the crisis. The net cash generated from our operations provides our primary source of cash flows. While we have historically experienced consistently low levels of payment delinquencies among our consumer and business accounts, beginning late in the first quarter 2020, we started to see increases in delinquencies across our retail customer base and our small and medium business accounts. This change in delinquency rate moderated during the second quarter; however, if these levels of delinquencies begin to grow, they could have a material adverse impact on our cash flows. We could also experience fluctuations in our cash flows in the periods that follow the end of the COVID-19 crisis resulting from the ongoing impacts of the crisis on macroeconomic conditions in the U.S. and our customers working to become current on their bills beginning in the third quarter 2020.

In addition, we issue asset-backed debt secured by our device payment plan agreement receivables and the collections on such receivables. These transactions require us to comply with various tests, including delinquency and loss-related tests, which, if not met, would cause the asset-backed debt to amortize earlier and faster than otherwise expected. The holders of our asset-backed debt do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. However, if an early amortization of our asset-backed debt occurs, including as a result of increased customer delinquencies or losses relating to COVID-19, all collections on the securitized device payment plan agreement receivables would be used to pay principal and interest on the asset-backed debt, and our financing cash flow requirements would increase for the twelve months immediately following an early amortization event.

Impacts on Financial Results
Our revenues and expenses in the first half of 2020 were impacted by COVID-19 as a result of the actions we took to care for our employees and to keep our customers connected and as a result of our customers’ changing activities as well as the restrictions on activities and the global economic slowdown, as described below. We estimate that the net impact of COVID-19 on our second quarter results was a reduction of approximately $0.14 in earnings per share, primarily as a result of decreases in wireless service revenue, decreases in advertising and
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search revenue at Verizon Media, and the operational actions we took, as described above.

Revenues
As a result of our decision to keep our customers connected during the crisis, we experienced fewer step ups in data plans, lower overage revenues and lower fees from activations and upgrades and fewer fees in the first half of 2020. We also experienced lower roaming revenues, as our customers meaningfully reduced travel during the year. In Verizon Media we have seen a reduction in advertising and search revenue, as customers have scaled back their advertising campaigns.
We have also seen considerably less churn in the consumer wireless base and lower equipment volumes and upgrade rates since the beginning of the crisis. As a result of limited in-store engagement and these changing customer behaviors, we experienced significantly lower equipment revenue in the first half of 2020.

Expenses
While certain expenses, such as equipment cost, were lower as a result of the revenue impacts discussed above, these decreases were partially offset by increases in the allowance for credit losses, commission expense and compensation related costs. The increase in sales related compensation costs was a result of an expansion of our compensation programs for both employees and agents. This COVID-19 relief program did not qualify for deferral treatment as defined by Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers;" however the costs were not materially different on a cash basis.

As a result of waiving late fees and keeping customers connected during the crisis pursuant to our pledge, and pursuant to various state orders and laws, we saw increases in delinquencies across our retail customer base and certain of our business accounts. This change in the delinquency rate has since has since moderated; however, if the levels of delinquencies for our consumer and small and medium business customers begin to grow again, additional provisions to our allowance for credit losses may be required, which could be significant. We continue to monitor customer behavior and our expected loss assumptions and estimates.

Other
In addition, equity and debt markets experienced significant volatility during the first half 2020 partially as a result of the crisis, and federal governmental actions to stimulate the economy have significantly impacted interest rates. These circumstances could affect the funding level of our pension plans and our calculated liabilities under our pension and other postemployment benefit plans. Other impacts from the crisis on our financial results in the third quarter and beyond could result from a further slowdown in the global economy, additional regulatory or legislative initiatives that impact our relationships with our customers, and other initiatives we undertake to respond to the needs of our employees and our customers.

We expect these impacts on our revenues and expenses to continue during the third quarter 2020 and beyond, though the extent of these impacts will depend on the factors described above.

Business Overview
In November 2018, we announced a strategic reorganization of our business. Under the new structure, effective April 1, 2019, there areWe have two reportable segments that we operate and manage as strategic business units - Verizon Consumer Group (Consumer) and Verizon Business Group (Business). In conjunction with the new reporting structure, we recast our segment disclosures for all periods presented.


Revenue by Segment for the Three Months Ended June 30, 20192020 and 20182019
chart-q22019qtd2019revbyseg.jpgchart-q22019qtd2018revbyseg.jpgvz-20200630_g9.jpgvz-20200630_g10.jpg
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———
Note: Excludes eliminations.

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Revenue by Segment for the Six Months Ended June 30, 20192020 and 20182019
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———
Note: Excludes eliminations.

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 United States (U.S.)U.S. under the Verizon Wireless brand and through wholesale and other arrangements. 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 under theby our Verizon Fios brandproduct 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. A retailOur postpaid connection represents an individual line of service for a wireless device for which a customer 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 smartphonesmartphones and other handsets, wireless-enabled Internetinternet devices, such as tablets, laptop computers and netbooks,jetpacks, and other wireless-enabled connected devices, such as smart watches and other wearables.

In addition to the wireless services and equipment discussed above, Consumer sells residential fixed connectivity solutions, including Internet,internet, video and voice services, and wireless network access to resellers on a wholesale basis. The Consumer segment's operating revenues for the three and six months ended June 30, 20192020 totaled $22.0$21.1 billion and $44.1$42.9 billion, respectively, representing a relatively flat changedecrease of 4.0% and an increase of 1.2%2.9%, respectively, compared to the similar periods in 2018. As2019. See "Segment Results of June 30, 2019,Operations" for additional information regarding our Consumer had approximately 94 million wireless retail connections, 6 million broadband connectionssegment’s operating performance and 4 million Fios video connections.selected operating statistics.

Verizon Business Group
Our Business segment provides wireless and wireline communications services and products, including data, video and dataconferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various Internet of Things (IoT) services and products, including Verizon Connect’s solutions whichthat support fleet tracking management, compliance management, field service management, asset tracking and other types of mobile resource management. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and select products and services to customers around the world. The Business segment's operating revenues for the three and six months ended June 30, 20192020 totaled $7.8$7.5 billion and $15.5$15.2 billion, respectively, representing a decrease of 1.1%3.7% and 0.9%2.1%, respectively, compared to the similar periods in 2018. As2019. See "Segment Results of June 30, 2019,Operations" for additional information regarding our Business had approximately 24 million wireless retail postpaid connectionssegment’s operating performance and approximately 500 thousand broadband connections.selected operating statistics.

Corporate and Other
Corporate and other includes the results of our media business, Verizon Media, Group (Verizon Media), which operated under the "Oath" brand until January 2019, and other businesses, investments in unconsolidated businesses, insurance captives, 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 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 as these items are included in the chief operating decision maker’s assessment of segment performance.

Verizon Media includes diverse media and technology brands that serve both consumers and businesses. Verizon Media provides consumers with owned and operated and third-party search properties andas well as mail, news, finance, news, sports and entertainment offerings, and provides other businesses and partners access to consumers through digital advertising, content delivery and video streaming platforms. Verizon Media's total operating revenues were $1.8$1.4 billion and $3.6$3.1 billion, respectively, for the three and six months ended June 30, 2019,2020, which represents a decrease of 2.9%24.5% and 5.1%14.5%, respectively, compared to the similar periods in 2018.2019.


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Capital Expenditures and Investments
We 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 six months ended June 30, 2019,2020, these investments included $8.0$9.9 billion for capital expenditures. See "Cash Flows Used in Investing Activities" for additional information. Capital expenditures for 2020 are currently expected to be in the range of $17.5 billion to $18.5 billion, including the continued investment in our 5G network. We believe that our investments aimed at expanding our portfolio of products and services will provide our customers with an efficient, reliable infrastructure for competing in the information economy.

Global Network and Technology
We are focusing our capital spending on adding capacity and density to our 4G Long-Term Evolution (LTE) network, while positioning for 5G.also building our next generation 5G network. We are densifying our 4G LTE network by utilizing small cell technology, in-building solutions and distributed antenna systems. Network densification not only enables us to add capacity to address increasing mobile video consumption and the growing demand for IoT products and services but it also positions us for the deployment ofon our 4G LTE and 5G technology.networks. 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. We believe 5G technology can provide users with eight capabilities, or currencies. The eight currencies are peak data rates, mobile data volumes, mobility, number of connected devices, energy efficiency, service deployment, reduced latency and improved reliability. We expect that 5G technology will provide higher throughput and lower latency than the current 4G LTE technology and enable our networks to handle more traffic as the number of Internet-connectedinternet-connected devices grows. During 2018,As of June 30, 2020, we have commercially launched 5G Home initiallyin six U.S. markets - two on global standards, one on proprietary standards in four U.S. markets: Sacramento, Los Angeles, Houston and Indianapolis.three on both standards. We will shift to the global standards as soon as the compatible devices and equipment become available. In February 2019, we announced that we expect to expand 5G Home coverage to more markets in the second half of 2019. In 2019, wehave also launched our 5G Ultra Wideband Network in Chicago, Minneapolis, Denver, Providence, St. Paul, Washington DC, Atlanta, Detroit35 U.S. markets, as well as several 5G-compatible smartphones and Indianapolis, with a target of the network becoming commercially available in 30 plus markets by year-end. In addition, we launched the first 5G-compatible smartphone in April 2019.other devices.

To compensate for the shrinking market for traditional copper-based products, we continue to build our wireline business around fiber-based networks supporting data, video and advanced business services - areas where demand for reliable high-speed connections is growing. We are evolving the architecture of our networks to a next-generation multi-use platform, providing improved efficiency and virtualization, increased automation and opportunities for edge computing services that will support both our fiber-based and radio access network technologies. We call this the Intelligent Edge Network. We expect that this new architecture will simplify operations by eliminating legacy network elements, improve our 4G LTE wireless coverage, speed the deployment of 5G wireless technology and create new opportunities in the business market.market in a cost efficient manner.

Operating Environment and Trends
There have been no significant changes to theThe information related to trends affecting our business that was previously disclosed in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2018, except either as a result2019 is updated by the disclosure included above under "Impacts of our segment realignment or as discussed below.the Recent Novel Coronavirus (COVID-19)" and the following information.

We adopted Accounting Standard Update (ASU) 2016-02, ASU 2018-01,2016-13, ASU 2018-10,2018-19, ASU 2018-11,2019-04, ASU 2018-20 and ASU 2019-01, Leases2019-05, Financial Instruments - Credit Losses (Topic 842)326) on January 1, 2019,2020, using the modified retrospective application. This method does not impact the prior periods, which continue to reflect the accounting treatment prior to the adoption of Topic 842.326. As a result, for items that were affected by our adoption of Topic 842,326, financial results of periods prior to January 1, 20192020 are not comparable to the current period financial results. See Notes 1 and 56 to the condensed consolidated financial statements for additional information.

Recent Developments
In September 2018, we announced a Voluntary Separation Program for select U.S.-based management employees. Approximately 10,400 eligible employees separated from the Company under this program as of the end of June 2019. The severance benefits payments to these employees are expected to be substantially completed by the end of September 2019.

In 2019, the Federal Communications Commission (FCC) completed 2 millimeter wave spectrum license auctions. Verizon participated in these auctions and was the high bidder on 9 and 1,066 licenses, respectively, in the 24 Gigahertz (GHz) and 28 GHz bands. We submitted an application to the FCC and paid cash of approximately $521 million for the licenses that will be issued.

On July 23, 2019, Verizon completed a sale-leaseback transaction for buildings and real estate. We received total gross proceeds of $1.0 billion. We lease backed a portion of the buildings and real estate sold and accounted for it as an operating lease. The term of the leaseback is for two years with 4 options to renew for an additional three months each.

Critical Accounting Estimates
Upon the date of reorganization on April 1, 2019, the goodwill of our historical Wireless reporting unit, historical Wireline reporting unit and historical Verizon Connect reporting unit were reallocated to our new Consumer and Business reporting units. At June 30, 2019, the balance of our goodwill was approximately $24.6 billion, of which $17.1 billion was in our Consumer reporting unit, $7.3 billion was in our Business reporting unit, and $262 million was in Other, which includes our Media reporting unit and other corporate entities. 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 indicators of a potential impairment exist, the determination of whether an impairment has occurred requires the determination of the fair value of the reporting unit being assessed.

We performed a quantitative assessment of our current reporting units, Consumer and Business, subsequent to the strategic reorganization. Our impairment assessments indicated that the fair value for each of our Consumer and Business reporting units significantly exceeded their respective carrying values and therefore, did not result in a goodwill impairment. Our Media reporting unit was not impacted by the strategic reorganization and there were no indicators of impairment during the second quarter of 2019.

Under our quantitative assessment, the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method. The market approach includes the use of comparative multiples to corroborate 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 represented 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 required key assumptions underlying our valuation model. The discounted cash flow analysis factored 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 earnings before interest, taxes, depreciation and amortization expenses (EBITDA) growth relative to history and market trends and expectations. The market multiples approach incorporated significant judgment involved in the selection comparable public company multiples and benchmarks. The selection of companies was influenced by differences in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently uncertain, and a significant adverse change in one or a combination of these inputs could trigger a goodwill impairment loss in the future.

Consolidated Results of Operations
In this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. Our revenues and expenses in the first half of 2020 were impacted by COVID-19 as a result of the actions we took to care for our employees and keep our customers connected and as a result of our customers’ changing activities, restrictions on activities and the global economic slowdown. See "Overview" for more information. In "Segment Results of Operations," we review the performance of our two reportable segments in more detail.

Consolidated Revenues
 Three Months Ended  Six Months Ended  
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Consumer$21,113  $21,995  $(882) (4.0)%$42,878  $44,143  $(1,265) (2.9)%
Business7,482  7,768  (286) (3.7) 15,163  15,487  (324) (2.1) 
Corporate and other1,967  2,412  (445) (18.4) 4,239  4,747  (508) (10.7) 
Eliminations(115) (104) (11) 10.6  (223) (178) (45) 25.3  
Consolidated Revenues$30,447  $32,071  $(1,624) (5.1) $62,057  $64,199  $(2,142) (3.3) 
 Three Months Ended      Six Months Ended     
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Consumer$21,995
 $22,003
 $(8) — % $44,143
 $43,630
 $513
 1.2 %
Business7,768
 7,851
 (83) (1.1) 15,487
 15,634
 (147) (0.9)
Corporate and other2,412
 2,429
 (17) (0.7) 4,747
 4,891
 (144) (2.9)
Eliminations(104) (80) (24) 30.0
 (178) (180) 2
 (1.1)
Consolidated Revenues$32,071
 $32,203
 $(132) (0.4) $64,199
 $63,975
 $224
 0.4

Consolidated revenues decreased $132 million,$1.6 billion, or 0.4%5.1%, and increased $224 million,$2.1 billion, or 0.4%3.3%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018.2019. The decreasedecreases in revenues during the three months ended June 30, 2019 waswere due to decreases in revenues at our Business segment and Corporate and other. The increase in revenues during the six months ended June 30, 2019 was due to an increase in revenues at our Consumer segment, partially offset by decreases in revenues at our Business segment and Corporate and other.

Revenues for our segments are discussed separately below under the heading "Segment Results of Operations."

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Corporate and other revenues decreased 0.7%$445 million, or 18.4%, and $144$508 million, or 2.9%10.7%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018. The decrease in revenues during the three and six months ended June 30, 2019, was primarily due to a decrease of $55$449 million and $193$519 million, respectively, in revenues within Verizon Media.

Consolidated Operating Expenses
 Three Months Ended  Six Months Ended  
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Cost of services$7,639  $7,702  $(63) (0.8)%$15,393  $15,494  $(101) (0.7)%
Cost of wireless equipment4,110  5,019  (909) (18.1) 8,652  10,217  (1,565) (15.3) 
Selling, general and administrative expense7,156  7,268  (112) (1.5) 15,741  14,466  1,275  8.8  
Depreciation and amortization expense4,181  4,232  (51) (1.2) 8,331  8,463  (132) (1.6) 
Consolidated Operating Expenses$23,086  $24,221  $(1,135) (4.7) $48,117  $48,640  $(523) (1.1) 
 Three Months Ended      Six Months Ended     
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Cost of services$7,702
 $8,234
 $(532) (6.5)% $15,494
 $16,180
 $(686) (4.2)%
Cost of wireless equipment5,019
 5,397
 (378) (7.0) 10,217
 10,706
 (489) (4.6)
Selling, general and administrative expense7,268
 7,605
 (337) (4.4) 14,466
 14,449
 17
 0.1
Depreciation and amortization expense4,232
 4,350
 (118) (2.7) 8,463
 8,674
 (211) (2.4)
Consolidated Operating Expenses$24,221
 $25,586
 $(1,365) (5.3) $48,640
 $50,009
 $(1,369) (2.7)


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.facilities and traffic acquisition costs. Aggregate customer careservice costs, which include billing and service provisioning, are allocated between Cost of services and Selling, general and administrative expense.

Cost of services decreased $532$63 million, or 6.5%0.8%, and $686$101 million, or 4.2%0.7%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily due to decreases in traffic acquisition costs due to COVID-19, as well as decreases in costs related to the device protection offerings to our wireless retail postpaid customers and access costs and roaming primarily driven by a decrease in employee related coststravel due to lower headcount, a decrease in network access costs due to reduction in voice connections and a product realignment charge in 2018 (see "Special Items"). TheCOVID-19. These decreases were partially offset by an increaseincreases in digital content costs, rent expense as a result of adding capacity to the networks to support increased demand.demand, wireline equipment costs and personnel costs.

Cost of Wireless Equipment
Cost of wireless equipment decreased $378$909 million, or 7.0%18.1%, and $489 million,$1.6 billion, or 4.6%15.3%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018, primarily2019, as a result of declines in the number of wireless devices sold as a result ofdue to an elongation of the handset upgrade cycle, partially offset by shiftsand declines in activation and upgrade volumes primarily due to higher priced devices in the mix of devices sold.COVID-19.

Selling, General and Administrative Expense
Selling, general and administrative expense includes:includes salaries and wages and benefits not directly attributable to a service or product, bad debt charges,the allowance 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".Services."

Selling, general and administrative expense decreased $337$112 million, or 4.4%1.5%, and increased 0.1%$1.3 billion, or 8.8%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018.2019. The decrease during the three months ended June 30, 2020, compared to the similar period in 2019, was primarily due to decreases in the allowance for credit losses, regulatory fees, personnel costs and advertising expenses. These decreases were partially offset by increases in sales commission expense. The increase during the six months ended June 30, 2020, compared to the similar period in 2019, was primarily due to a decrease in employee related costs and$1.2 billion loss resulting from the acquisition and integration related charges in 2018 primarily related to the acquisition of Yahoo! Inc.'s (Yahoo) operating businessspectrum license auction (see "Special items"Items") and increases in the allowance for credit losses and sales commission expense. These increases were partially offset by andecreases in regulatory fees, personnel costs and advertising expenses. The increase in advertising expenses, sales commission expense and bad debt expense.the allowance for credit losses was primarily due to COVID-19. The increaseincreases in sales commission expense isduring the three and six months ended June 30, 2020 were due to a lower net deferral of commission costs in the current year as compared to the prior year, as a resultwell as incremental sales compensation while certain of the adoption of ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606) on January 1, 2018 using a modified retrospective approach. The increase during the six months ended June 30, 2019 was primarilyour stores and agent locations are closed due to increases in advertising expenses, sales commission and bad debt expense. These increases were partially offset by decreases in employee related costs primarily due to the Voluntary Separation Program and the acquisition and integration related charges in 2018 primarily related to the acquisition of Yahoo operating business (see "Special Items").COVID-19.

Depreciation and Amortization Expense
Depreciation and amortization expense decreased $118$51 million, or 2.7%1.2%, and $211$132 million, or 2.4%1.6%, during the three and six months ended June 30, 20192020, respectively, compared to the similar periods in 2018. This decrease was2019, primarily driven bydue to the change in the mix of net depreciable assets.

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Other Consolidated Results
Other Income (Expense), Net
Additional information relating to Other income (expense), net is as follows:
 Three Months Ended      Six Months Ended     
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Interest income$31
 $20
 $11
 55.0 % $60
 $36
 $24
 66.7 %
Other components of net periodic benefit cost185
 254
 (69) (27.2) 465
 509
 (44) (8.6)
Other, net(1,528) 86
 (1,614) nm
 (1,542) (260) (1,282) nm
Total$(1,312) $360
 $(1,672) nm
 $(1,017) $285
 $(1,302) nm

Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Interest income$16  $31  $(15) (48.4)%$36  $60  $(24) (40.0)%
Other components of net periodic benefit cost132  185  (53) (28.6) 233  465  (232) (49.9) 
Other, net(220) (1,528) 1,308  (85.6) (198) (1,542) 1,344  (87.2) 
Total$(72) $(1,312) $1,240  (94.5) $71  $(1,017) $1,088  nm
nm - not meaningful

Other income (expense), net, reflects certain items not directly related to our core operations, including interest income, gains and losses from non-operating asset dispositions, debt extinguishment costs, and components of net periodic pension and postretirement benefit costs.costs and foreign exchange gains and losses. The decreasechange in Other income (expense), net during the three months ended June 30, 2019,2020, compared to the similar period in 2018,2019, was primarily driven by losses onattributable to a comparative decrease in early debt redemptionsredemption costs of $1.5$1.4 billion, partially offset by a pension remeasurement loss of $153 million recorded during 2019.the three months ended June 30, 2020. The decreasechange in Other income (expense), net during the six months ended June 30, 2019,2020, compared to the similar period in 2018,2019, was primarily driven by an increaseattributable to a comparative decrease in early debt redemption costs of $1.3 billion. In addition, we recorded a $96 million benefit, primarily attributable to$1.4 billion, partially offset by a pension remeasurement gain,loss of $335 million recorded during the six months ended June 30, 2019.


Interest Expense
 Three Months Ended      Six Months Ended     
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Total interest costs on debt balances$1,377
 $1,421
 $(44) (3.1)% $2,744
 $2,798
 $(54) (1.9)%
Less capitalized interest costs162
 199
 (37) (18.6) 319
 375
 (56) (14.9)
Total$1,215
 $1,222
 $(7) (0.6) $2,425
 $2,423
 $2
 0.1
                
Average debt outstanding$115,163
 $117,800
     $114,414
 $117,719
    
Effective interest rate4.8% 4.8%     4.8% 4.8%    

Total interest expense decreased during the three months ended June 30, 2019,2020, compared to the similar periods in 2018, primarily due to lower average debt balances, offset by lower capitalized interest costs. Total interest expense increasedwith a pension remeasurement gain of $96 million recorded during the six months ended June 30, 2019. See "Special Items" for additional information. In addition, the increases in Other income (expense), net during the six months ended June 30, 2020, compared to the similar period in 2019, were partially offset by foreign exchange losses.

Interest Expense
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Total interest costs on debt balances$1,205  $1,377  $(172) (12.5)%$2,392  $2,744  $(352) (12.8)%
Less capitalized interest costs116  162  (46) (28.4) 269  319  (50) (15.7) 
Total$1,089  $1,215  $(126) (10.4) $2,123  $2,425  $(302) (12.5) 
Average debt outstanding (1) (3)
$117,239  $115,163  $114,950  $114,414  
Effective interest rate (2) (3)
4.1 %4.8 %4.2 %4.8 %
(1)The average debt outstanding is a financial measure and is calculated by applying a simple average of the 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 decreased during both the three and six months ended June 30, 2020, compared to the similar periods in 2018,2019, primarily due to lower capitalizeddecreases in interest costs offsetting lower averageon debt balances.and derivative activities.

Provision for Income Taxes
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Provision for income taxes$1,348  $1,236  $112  9.1 %$2,737  $2,864  $(127) (4.4)%
Effective income tax rate21.8 %23.3 %23.1 %23.7 %
 Three Months Ended    Six Months Ended   
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Provision for income taxes$1,236
 $1,281
 $(45) (3.5)% $2,864
 $2,669
 $195
 7.3%
Effective income tax rate23.3% 23.2%     23.7% 23.0%    

The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The effective income tax rate and the provision for income taxes for the three months ended June 30, 2019 is comparable to the similar period in 2018. The increasedecrease in the effective income tax rate during the three and six months ended June 30, 2019,2020, compared to the similar periodperiods in 2018,2019, was primarily due to aggregate tax benefits from funding employee benefit obligations in the prior period that did not reoccura series of legal entity restructurings in the current period. The increase in the provision for income taxes during the sixthree months ended June 30, 2019,2020, compared to the similar period in 2018,2019, was primarily due to the impact of an increase in income before income taxes in the current period. The decrease in the provision for income taxes during the six months ended June 30, 2020, compared to the similar period in 2019, was due to the decrease in income before income taxes as well as aggregate tax benefits from a series of legal entity restructurings in the current period. 

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Unrecognized Tax Benefits
Unrecognized tax benefits were $2.8 billion at June 30, 2019 and $2.9 billion at both June 30, 2020 and December 31, 2018.2019. Interest and penalties related to unrecognized tax benefits were $367$369 million (after-tax) and $348$385 million (after-tax) at June 30, 20192020 and December 31, 2018,2019, respectively.

Verizon and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. As a large taxpayer, we are under audit by the Internal Revenue Service and multiple state and foreign jurisdictions for various open tax years. It is reasonably possible that the amount of the liability for unrecognized tax benefits could change by a significant amount in the next twelve months. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved.

Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA
Consolidated EBITDA and Consolidated Adjusted EBITDA, which are presented below, are non-generally accepted accounting principles (GAAP) 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, and depreciation and amortization expenses to net income.

Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following non-operational items: equity in losses of unconsolidated businesses and other income and expense, net, as well as the effect of 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, depreciation and depreciationamortization 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 provide relevant and useful information, which is used byin addition to the GAAP measures allows management, investors and other users of our financial information as well as by our management in assessingto 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.

 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2020201920202019
Consolidated Net Income$4,839  $4,074  $9,126  $9,234  
Add:
Provision for income taxes1,348  1,236  2,737  2,864  
Interest expense (1)
1,089  1,215  2,123  2,425  
Depreciation and amortization expense4,181  4,232  8,331  8,463  
Consolidated EBITDA$11,457  $10,757  $22,317  $22,986  
Add (Less):
Other (income) expense, net (2)
$72  $1,312  $(71) $1,017  
Equity in losses of unconsolidated businesses13  13  25  19  
Loss on spectrum license auction—  —  1,195  —  
Consolidated Adjusted EBITDA$11,542  $12,082  $23,466  $24,022  
(1) Includes Early debt redemption costs, where applicable. See "Special Items" for additional information.
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
Consolidated Net Income$4,074
 $4,246
 $9,234
 $8,912
Add:
      
Provision for income taxes1,236
 1,281
 2,864
 2,669
Interest expense1,215
 1,222
 2,425
 2,423
Depreciation and amortization expense4,232
 4,350
 8,463
 8,674
Consolidated EBITDA*$10,757
 $11,099
 $22,986
 $22,678
        
Add (Less):       
Other (income) expense, net†$1,312
 $(360) $1,017
 $(285)
Equity in losses of unconsolidated businesses13
 228
 19
 247
Severance, pension and benefits charges—
 339
 —
 339
Acquisition and integration related charges‡
—
 109
 —
 214
Product realignment charges‡
—
 450
 —
 450
Consolidated Adjusted EBITDA$12,082
 $11,865
 $24,022
 $23,643

* Prior period figures have been amended to conform to the current period's calculation of Consolidated EBITDA.
† (2) Includes Pension and benefits mark-to-market adjustments and earlyEarly debt redemption costs, where applicable. See "Special Items" for additional information.
‡ Excludes depreciation and amortization expense.

The changes in Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA in the table above during the three and six months ended June 30, 2019,2020, compared to the similar periodperiods in 2018,2019, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Segment Results of Operations
We have two reportablethree segments that we operate and manage as strategic business units, Consumer, Business and Business.Media, of which Consumer and Business are our reportable segments. We measure and evaluate our reportable 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, we usemanagement uses the following operating statistics to evaluate the overall effectiveness of our segments:segments. We believe these operating statistics are useful to investors and other users of
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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.connections as of the end of the period. Retail connections under an account may include those from smartphones and basic phones (collectively, phones), as well as tablets and other Internetinternet devices, including 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.connections as of the end of the period. Retail connections under an account may include those from phones, as well as tablets and other Internetinternet devices, including 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.

Fios Internetinternet connections are the total number of connections to the Internetinternet using Fios Internet services.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.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.

Broadband connections are the total number of connections to the Internetinternet using Digital Subscriber Line (DSL) and Fios Internet services.internet services as of the end of the period. Broadband connections are calculated by adding broadband net additions in the period to prior period broadband connections. Broadband net additions are calculated by subtracting the broadband disconnects from the broadband new connections.

Voice connections are the total number of traditional switched access lines in service and Fios digital voice connections as of the end of the period. Voice connections are calculated by adding voice net additions in the period to prior period voice connections. Voice net additions are calculated by subtracting the voice disconnects from the voice new connections.

Wireless retail connections, net additions are the total number of additional retail customer device postpaid and prepaid connections, less the number of device disconnects withinin the currentperiod. 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 withinin the currentperiod. 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 postpaid phone connections, net additions are the total number of additional retail customer postpaid phone connections, less the number of phone disconnects withinin the currentperiod. 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.

Fios internet, net additions are the total number of additional Fios internet connections, less the number of disconnects in the period. Fios internet, net additions are calculated by subtracting the Fios internet disconnects from the Fios internet new connections in the period.

Wireless Churn is the rate at which service to either retail, retail postpaid, or retail postpaid retailphone connections is terminated on a monthly basis.average in the period. The churn rate in each period presented is calculated by dividing retail disconnections, retail postpaid disconnections, or retail postpaid phone disconnections 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 whichin the period. Wireless retail postpaid service revenue does not include recurring device payment plan billings related to the Verizon device payment program.program, plan billings related to total mobile protection packages 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 Wireless brand and use its services.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 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 accountis 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.
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Wireless retail postpaid gross additions are new retail postpaid connections that have activated service on the wireless network in the period. Wireless retail postpaid gross additions are calculated as the total number of new retail postpaid phone, tablet and other device connections in the period.

Wireless retail postpaid upgrades are retail postpaid connections that have upgraded a retail postpaid device in the period. Wireless retail postpaid upgrades are calculated as the total number of retail postpaid connections that upgraded retail postpaid phones, tablets and other devices in the period.

Wireless retail postpaid device activations are retail postpaid devices sold and activated on the wireless network during the period. Wireless retail postpaid device activations are calculated by adding the total of retail postpaid gross additions and the total number of retail postpaid upgrades in the period.

Fios internet gross additions are new Fios internet connections that have activated service at a new location in the period. Fios internet gross additions are calculated as the total number of new Fios internet connections activated in the period.

Verizon Media monthly active users are internet users who have visited Verizon Media products during a one-month period. Verizon Media monthly active users are calculated as the total number of users who visited Verizon Media products via desktop, laptop, smartphone or tablet devices by browsers or mobile applications during a one month period. Yahoo Finance and Yahoo News monthly active users are calculated as the total number of users who visited Yahoo Finance or Yahoo News products within Verizon Media's portfolio via desktop, laptop, smartphone or tablet devices by browsers or mobile applications during a one-month 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 expenses 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. You can find additional information about our segments in Note 1110 to the condensed consolidated financial statements.

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 Wireless brand and through wholesale and other arrangements. 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 under theby our Verizon Fios brandproduct portfolio and over a traditional copper-based network to customers who are not served by Fios.

Our revenues and expenses in the first half of 2020 were impacted by COVID-19 as a result of the actions we took to care for our employees and keep our customers connected and as a result of our customers’ changing activities, restrictions on activities and the global economic slowdown. See "Overview" for more information.
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Operating Revenues and Selected Operating Statistics
Three Months EndedSix Months Ended
June 30,Increase/June 30,Increase/
(dollars in millions, except ARPA)20202019(Decrease)20202019(Decrease)
Service$15,900  $16,350  $(450) (2.8)%$32,241  $32,609  $(368) (1.1)%
Wireless equipment3,209  3,903  (694) (17.8)6,586  8,069  (1,483) (18.4)
Other2,004  1,742  262  15.04,051  3,465  586  16.9
Total Operating Revenues$21,113  $21,995  $(882) (4.0)$42,878  $44,143  $(1,265) (2.9)
Connections (‘000):(1)
Wireless retail connections93,975  93,896  79  0.1
Wireless retail postpaid connections89,977  89,630  347  0.4
Fios internet connections5,971  5,837  134  2.3
Fios video connections3,987  4,270  (283) (6.6)
Broadband connections6,468  6,474  (6) (0.1)
Voice connections5,444  6,058  (614) (10.1)
Net Additions in Period (‘000):(2)
Wireless retail84  (87) 171  nm(525) (464) (61) (13.1)
Wireless retail postpaid72  126  (54) (42.9)(453) (75) (378) nm
Wireless retail postpaid phones97  73  24  32.9(210) (90) (120) nm
Churn Rate:
Wireless retail0.86 %1.23 %1.03 %1.28 %
Wireless retail postpaid0.69 %0.97 %0.85 %1.03 %
Wireless retail postpaid phones0.51 %0.72 %0.64 %0.76 %
Account Statistics:
Wireless retail postpaid ARPA$116.02  $118.15  $(2.13) (1.8)$117.44  $117.80  $(0.36) (0.3)
Wireless retail postpaid accounts (‘000) (1)
33,695  33,924  (229) (0.7)
Wireless retail postpaid connections per account (1)
2.67  2.64  0.03  1.1
 Three Months Ended    Six Months Ended   
 June 30,  Increase/ June 30,  Increase/
(dollars in millions, except ARPA)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Service$16,350
 $16,049
 $301
 1.9 % $32,609
 $31,873
 $736
 2.3 %
Wireless equipment3,903
 4,251
 (348) (8.2) 8,069
 8,521
 (452) (5.3)
Other1,742
 1,703
 39
 2.3
 3,465
 3,236
 229
 7.1
Total Operating Revenues$21,995
 $22,003
 $(8) —
 $44,143
 $43,630
 $513
 1.2
                
Connections (‘000): (1)
               
Wireless retail connections        93,896
 93,816
 80
 0.1
Wireless retail postpaid connections        89,630
 88,984
 646
 0.7
Fios Internet connections        5,837
 5,663
 174
 3.1
Fios video connections        4,270
 4,487
 (217) (4.8)
Broadband connections        6,474
 6,447
 27
 0.4
Voice connections        6,058
 6,631
 (573) (8.6)
                
Net Additions in Period (‘000): (2)
               
Wireless retail(87) (89) 2
 2.2
 (464) (479) 15
 3.1
Wireless retail postpaid126
 147
 (21) (14.3) (75) 92
 (167) nm
Wireless retail postpaid phones73
 17
 56
 nm
 (90) (136) 46
 33.8
                
Churn Rate:               
Wireless retail1.23% 1.19%     1.28% 1.25%    
Wireless retail postpaid0.97% 0.93%     1.03% 0.97%    
Wireless retail postpaid phones0.72% 0.71%     0.76% 0.74%    
                
Account Statistics:               
Wireless retail postpaid ARPA$118.15
 $115.53
 $2.62
 2.3
 $117.80
 $114.49
 $3.31
 2.9
Wireless retail postpaid accounts (‘000) (1)
        33,924
 34,045
 (121) (0.4)
Wireless retail postpaid connections per account (1)
        2.64
 2.61
 0.03
 1.1
(1)As of end of period
(1)
(2)Includes certain adjustments
As of end of period
(2)
Excluding acquisitions and adjustments

nm - not meaningful


Consumer’s total operating revenues were unchanged and increased $513decreased $882 million, or 1.2%, during the three and six months ended June 30, 2019, respectively, compared to the similar periods in 2018, primarily as a result of increases in Service and Other revenues, partially offset by decreases in Wireless equipment revenue.

Service Revenue
Service revenue increased $301 million, or 1.9%4.0%, and $736 million,$1.3 billion, or 2.3%, during the three and six months ended June 30, 2019, respectively, compared to the similar periods in 2018. These increases were driven by increases in wireless service and Fios revenues, partially offset by decreases in wireline voice and DSL services.

Wireless service revenue increased 2.5% and 3.1%, during the three and six months ended June 30, 2019, respectively, compared to the similar periods in 2018. These increases were due to increases in wireless access revenue, driven by customers shifting to higher access plans including unlimited plans and increases in the number of devices per account, the declining fixed-term subsidized plan base, and data usage growth from reseller accounts. Wireless retail postpaid ARPA increased 2.3% and 2.9%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018.2019, primarily as a result of decreases in Service and Wireless equipment revenues, partially offset by increases in Other revenue.

Service Revenue
Service revenue decreased $450 million, or 2.8%, and $368 million, or 1.1%, during the three and six months ended June 30, 2020, respectively, compared to the similar periods in 2019. These decreases were primarily due to decreases in wireless service and wireline voice and video services primarily driven by customers' changing activities and actions taken to keep our customers connected due to COVID-19.

Wireless service revenue decreased $369 million, or 2.7%, and $250 million, or 0.9%, during the three and six months ended June 30, 2020, respectively, compared to the similar periods in 2019. These decreases were due to decreases in data overage revenues driven by waivers of these charges due to COVID-19 as well as the shift to unlimited plans, decreases in roaming and TravelPass revenues primarily due to customers' changing activities due to COVID-19, and waived fees as part of customer assistance initiatives taken by Verizon due to COVID-19. These decreases were partially offset by growth from reseller accounts. Wireless retail postpaid ARPA decreased 1.8% and 0.3% during the three and six months ended June 30, 2020, respectively, compared to the similar periods in 2019.

For the three and six months ended June 30, 2019,2020, Fios service revenue totaled $2.8$2.6 billion and $5.5$5.2 billion, respectively, and increased 1.2%decreased 0.7%, and $64 million, or 1.2%increased 0.3%, respectively, compared to the similar periods in 2018. These increases are2019. The decrease during the three months ended June 30, 2020 was due to a 3.1% increasedecrease in Fios Internetvideo revenues, reflecting the ongoing shift from traditional linear video to over-the-top offerings, partially offset by increases in Fios internet connections, reflecting increased demand for higher broadband speeds. The increase during the six months ended June 30, 2020 was due to a 2.3% increase in Fios internet connections, reflecting increased demand for higher broadband speeds, partially offset by a 4.8%6.6% decrease in Fios video connections, reflecting the ongoing shift from traditional linear video to over-the-top (OTT) offerings.

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Service revenue attributable to wireline voice and DSL broadband services declined during the three and six months ended June 30, 2019,2020, compared to the similar periods in 2018.2019. The declines arewere primarily due to a decrease of 8.6%10.1% in voice connections resulting primarily from competition and technology substitution with wireless and competing Voice over Internet Protocol (VoIP) and cable telephony services.

Wireless Equipment Revenue
Wireless equipment revenue decreased $348$694 million, or 8.2%17.8%, and $452 million,$1.5 billion, or 5.3%18.4%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, as a result of overall declines in wireless device sales primarily due to an elongation of the handset upgrade cycle, as well as increased promotions,and declines in activation and upgrade volumes primarily due to COVID-19. These decreases were partially offset by a shift to higher priced units in the mix of wireless devices sold.sold and a decline in the number of promotions.

Other Revenue
Other revenue includes non-service revenues such as regulatory fees, cost recovery surcharges, revenues associated with our device protection package,offerings, leasing and interest on equipment financed under a device payment plan agreement when sold to the customer by an authorized agent.

Other revenue increased 2.3%$262 million, or 15.0%, and $229$586 million, or 7.1%16.9%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily due to volumedriven by pricing and subscriber increases related to our wireless device protection plans. Pricing increases related to our wireless device protection plans also contributed to the increase in Other revenue during the six months ended June 30, 2019.offerings, as well as cost recovery surcharges.

Operating Expenses
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Cost of services$3,885  $3,847  $38  1.0 %$7,815  $7,726  $89  1.2 %
Cost of wireless equipment3,299  3,909  (610) (15.6) 6,750  8,051  (1,301) (16.2) 
Selling, general and administrative expense4,016  4,022  (6) (0.1) 8,298  8,005  293  3.7  
Depreciation and amortization expense2,849  2,881  (32) (1.1) 5,669  5,775  (106) (1.8) 
Total Operating Expenses$14,049  $14,659  $(610) (4.2) $28,532  $29,557  $(1,025) (3.5) 
 Three Months Ended    Six Months Ended   
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Cost of services$3,847
 $3,842
 $5
 0.1 % $7,726
 $7,615
 $111
 1.5 %
Cost of wireless equipment3,909
 4,296
 (387) (9.0) 8,051
 8,569
 (518) (6.0)
Selling, general and administrative expense4,022
 3,808
 214
 5.6
 8,005
 7,479
 526
 7.0
Depreciation and amortization expense2,881
 2,997
 (116) (3.9) 5,775
 5,972
 (197) (3.3)
Total Operating Expenses$14,659
 $14,943
 $(284) (1.9) $29,557
 $29,635
 $(78) (0.3)

Cost of Services
Cost of services increased 0.1%1.0%, and $111$89 million, or 1.5%1.2%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily due to increases in digital content costs, increases in rent expense as a result of adding capacity to the networks to support demand and volume-driven increases in employee-related costs. These increases were partially offset by decreases in costs related to the device protection package offeredofferings to our wireless retail postpaid customers. These increases were partially offset by both decreases in employee related costs as well ascustomers and decreases in access costs and roaming for the three and six months ended June 30, 2019.primarily driven by a decrease in international travel due to COVID-19.

Cost of Wireless Equipment
Cost of wireless equipment decreased $387$610 million, or 9.0%15.6%, and $518 million,$1.3 billion, or 6.0%16.2%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018, primarily2019, as a result of declines in the number of wireless devices sold as a result ofdue to an elongation of the handset upgrade cycle, and declines in activation and upgrade volumes primarily due to COVID-19. These decreases were partially offset by shiftsa shift to higher priced devices in the mix of wireless devices sold.


Selling, General and Administrative Expense
Selling, general and administrative expense decreased 0.1%, and increased $214$293 million, or 5.6%, and $526 million, or 7.0%3.7%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018, primarily2019. The decrease during the three months ended June 30, 2020 was due to a decrease in the allowance for credit losses, partially offset by an increase in sales commission expense. The increase during the six months ended June 30, 2020 was due to increases in advertising costs, sales commission expense and bad debtallowance for credit losses, partially offset by decreases in personnel costs, data network systems charges and advertising expense. The increase in the allowance for credit losses was primarily due to COVID-19. The increases in sales commission expense isduring the three and six months ended June 30, 2020 were due to a lower net deferral of commission costs in the current year as compared to the prior year, as a resultwell as incremental sales compensation while certain of the adoption of Topic 606 on January 1, 2018 using a modified retrospective approach. These increases were partially offset by decreases in employee related costs primarilyour stores and agent locations are closed due to the Voluntary Separation Program.COVID-19.

Depreciation and Amortization Expense
Depreciation and amortization expense decreased $1161.1%, and $106 million, or 3.9%, and $197 million, or 3.3%1.8%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, driven by the change in the mix of total Verizon depreciable assets and Consumer'sthe Consumer segment's usage of those assets.

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Segment Operating Income and EBITDA 
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Segment Operating Income$7,064  $7,336  $(272) (3.7)%$14,346  $14,586  $(240) (1.6)%
Add Depreciation and amortization expense2,849  2,881  (32) (1.1) 5,669  5,775  (106) (1.8) 
Segment EBITDA$9,913  $10,217  $(304) (3.0) $20,015  $20,361  $(346) (1.7) 
Segment operating income margin33.5 %33.4 %33.5 %33.0 %
Segment EBITDA margin47.0 %46.5 %46.7 %46.1 %
 Three Months Ended    Six Months Ended   
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Segment Operating Income$7,336
 $7,060
 $276
 3.9 % $14,586
 $13,995
 $591
 4.2 %
Add Depreciation and amortization expense2,881
 2,997
 (116) (3.9) 5,775
 5,972
 (197) (3.3)
Segment EBITDA$10,217
 $10,057
 $160
 1.6
 $20,361
 $19,967
 $394
 2.0
Segment operating income margin33.4% 32.1%     33.0% 32.1%    
Segment EBITDA margin46.5% 45.7%     46.1% 45.8%    

The changes in the table above during the three and six months ended June 30, 2019,2020, compared to the similar periods in 2018,2019, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Verizon Business Group
Our Business segment provides wireless and wireline communications services and products, including data, video and dataconferencing 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 select products and services to customers around the world. The Business segment is organized in four customer groups: Global Enterprise, Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale.


Our revenues and expenses in the first half of 2020 were impacted by COVID-19 as a result of the actions we took to care for our employees and keep our customers connected and as a result of our customers’ changing activities, restrictions on activities and the global economic slowdown. See "Overview" for more information.


Operating Revenues and Selected Operating Statistics
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Small and Medium Business$2,601  $2,785  $(184) (6.6)%$5,405  $5,493  $(88) (1.6)%
Global Enterprise2,589  2,673  (84) (3.1) 5,220  5,364  (144) (2.7) 
Public Sector and Other1,523  1,492  31  2.1  2,997  2,963  34  1.1  
Wholesale769  818  (49) (6.0) 1,541  1,667  (126) (7.6) 
Total Operating Revenues(1)
$7,482  $7,768  $(286) (3.7) $15,163  $15,487  $(324) (2.1) 
Connections (‘000):(2)
Wireless retail postpaid connections25,897  24,144  1,753  7.3  
Fios internet connections327  316  11  3.5  
Fios video connections75  76  (1) (1.3) 
Broadband connections491  494  (3) (0.6) 
Voice connections4,758  5,163  (405) (7.8) 
Net Additions in Period (‘000):(3)
Wireless retail postpaid280  326  (46) (14.1) 755  590  165  28.0  
Wireless retail postpaid phones76  171  (95) (55.6) 315  291  24  8.2  
Churn Rate:
Wireless retail postpaid1.12 %1.21 %1.21 %1.23 %
Wireless retail postpaid phones0.90 %0.97 %0.96 %0.99 %
 Three Months Ended      Six Months Ended     
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Global Enterprise$2,673
 $2,808
 $(135) (4.8)% $5,364
 $5,634
 $(270) (4.8)%
Small and Medium Business2,785
 2,642
 143
 5.4
 5,493
 5,176
 317
 6.1
Public Sector and Other1,492
 1,437
 55
 3.8
 2,963
 2,867
 96
 3.3
Wholesale818
 964
 (146) (15.1) 1,667
 1,957
 (290) (14.8)
Total Operating Revenues (1)
$7,768
 $7,851
 $(83) (1.1) $15,487
 $15,634
 $(147) (0.9)
                
Connections (‘000): (2)
               
Wireless retail postpaid connections

 

 

 

 24,221
 22,638
 1,583
 7.0
Fios Internet connections
 
 
 
 316
 296
 20
 6.8
Fios video connections

 

 

 

 76
 73
 3
 4.1
Broadband connections
 
 
 
 494
 509
 (15) (2.9)
Voice connections

 

 

 

 5,163
 5,639
 (476) (8.4)
                
Net additions in period (‘000): (3)
               
Wireless retail postpaid325
 384
 (59) (15.4) 587
 699
 (112) (16.0)
Wireless retail postpaid phones172
 182
 (10) (5.5) 291
 311
 (20) (6.4)
                
Churn Rate:               
Wireless retail postpaid1.21% 1.16%     1.23% 1.16%    
Wireless retail postpaid phones0.97% 0.96%     0.99% 0.96%    
(1)Service and other revenues included in our Business segment amounted to approximately $7.0 billion for both the three months ended June 30, 2020 and 2019. Service and other revenues included in our Business segment amounted to approximately $13.9 billion for both the six months ended June 30, 2020 and 2019. Wireless equipment revenues included in our Business segment amounted to $546 million and $1.3 billion for the three and six months ended June 30, 2020, respectively, and $814 million and $1.6 billion for the three and six months ended June 30, 2019, respectively.
(1)
(2)As of end of period
(3)Includes certain adjustments

Service and other revenues included in our Business segment amounted to approximately $7.0 billion and $13.9 billion for the three and six months ended June 30, 2019, respectively, and approximately $7.1 billion and $14.0 billion for the three and six months ended June 30, 2018, respectively. Wireless equipment revenues included in our Business segment amounted to approximately $814 million and $1.6 billion for the three and six months ended June 30, 2019, respectively, and approximately $793 million and $1.6 billion for the three and six months ended June 30, 2018, respectively.
(2)
As of end of period
(3)
Excluding acquisitions and adjustments

Business’s total operating revenues decreased $83$286 million, or 1.1%3.7%, and $147$324 million, or 0.9%2.1%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018. Both periods’ decrease were2019, primarily as a result of decreases in Small and Medium Business, Global Enterprise and Wholesale revenues, partially offset by increases in Small and Medium Business and Public Sector and Other revenues.
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Small and Medium Business
Small and Medium Business offers wireless services and equipment, conferencing services, tailored voice and networking products, Fios services, IP networking, advanced voice solutions, security and managed information technology services to U.S.-based small and medium businesses that do not meet the requirements to be categorized as Global Enterprise, as described below.

Small and Medium Business revenues decreased $184 million, or 6.6%, and $88 million, or 1.6%, during the three and six months ended June 30, 2020, respectively, compared to the similar periods in 2019, primarily due to decreased wireless equipment revenue and declines related to the loss of voice and DSL service connections. Wireless equipment revenue decreased as a result of declines in the number of wireless devices sold primarily due to an elongation of the handset upgrade cycle, declines in activation and upgrade volumes due to decreased demand and store closures due to COVID-19. The decreases were partially offset by a shift to higher priced units in the mix of wireless devices sold and a decline in the number of promotions. These revenue decreases were partially offset by increases in wireless retail postpaid service revenue of 1.9% and 5.5% during the three and six months ended June 30, 2020, respectively, as a result of increases in the amount of wireless retail postpaid connections, partially offset by lower roaming and usage due to COVID-19. These increases were further driven by increased revenue related to our wireless device protection package, as well as increased revenue related to Fios services.

For the three and six months ended June 30, 2020, Fios revenues totaled $227 million and $462 million, respectively, and were unchanged and increased 1.2%, respectively, compared to the similar periods in 2019. The increase in Fios revenues during the six months ended June 30, 2020 reflects the increase in total connections, as well as increased demand for higher broadband speeds.

Global Enterprise
Global Enterprise offers services to large businesses, which are identified based on their size and volume of business with Verizon, as well as non-U.S. public sector customers.

Global Enterprise revenues decreased $135$84 million, or 4.8%3.1%, and $270$144 million, or 4.8%2.7%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily due to declines in traditional data and voice communication services as a result of competitive price pressures.

Small and Medium Business
Small and Medium Business offers wireless services and equipment, tailored voice and networking products, Fios services, IP Networking, advanced voice solutions, security, and managed information technology services to our U.S.-based customers that do not meet the requirements to be categorizedpressures, as Global Enterprise.

Small and Medium Business revenues increased $143 million, or 5.4%, and $317 million, or 6.1%, during the three and six months ended June 30, 2019, respectively compared to the similar periods in 2018, largely due to increases in wireless postpaid service revenue,well as a result of an increase in the amount of wireless retail postpaid connections. These increases were further driven bydecreased wireless equipment revenue due to lower volumes due to COVID-19. During the increase inthree months ended June 30, 2020, the number of smartphone units sold, as well as increasesdecrease in revenue related to Fios services. These increases werewas partially offset by revenue declines relatedan increase in advanced communication services revenues, partially due to the loss of voiceCOVID-19, and DSL service connections.customer premise equipment revenues. During the six months ended June 30, 2019, there30. 2020, the decrease in revenue was an increasepartially offset by increases in other revenueadvanced communication services revenues, partially due to volumeCOVID-19, customer premise equipment revenues and rate-driven increases in revenue related to our wireless device protection package.service revenues.

For the three and six months ended June 30, 2019, Fios revenues totaled $227 million and $456 million, respectively, and increased 14.0% and $61 million or 15.4%, respectively, compared to the similar period in 2018, reflecting the increase in total connections as well as increased demand in higher broadband speeds.


Public Sector and Other
Public Sector and Other offers wireless products and services as well as wireline connectivity and managed solutions to U.S. federal, state and local governments and educational institutions. These services include the services offered by Consumer discussed above and business services and connectivity similar to the products and services offered by the Global Enterprise, group, in each case, with features and pricing designed to address the needs of governments and educational institutions.

Public Sector and Other revenues increased $55 million, or 3.8%,2.1% and $96 million, or 3.3%,1.1% during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018, respectively,2019, due to increases in networking, customer premise equipment, as well as wireless equipment revenue, due to a shift in higher priced units in the mix of devices sold and increases in wireless device sales. The increases were further driven by wirelessretail postpaid service revenue as a result of an increase in wireless retail postpaid connections.gross additions partially due to federal, state and educational agencies responding to COVID-19, partially offset by decreases in networking revenue and traditional voice communication services.

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 $1466.0%, and $126 million, or 15.1%, and $290 million, or 14.8%7.6%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018, respectively,2019, due to declines in core data and traditional voice services resulting from the effect of technology substitution and continuing contraction of market rates due to competition.competition, partially offset by an increase in traditional voice communication services due to COVID-19.

Operating Expenses
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Cost of services$2,641  $2,581  $60  2.3 %$5,230  $5,172  $58  1.1 %
Cost of wireless equipment812  1,109  (297) (26.8) 1,902  2,166  (264) (12.2) 
Selling, general and administrative expense2,069  1,961  108  5.5  4,103  3,942  161  4.1  
Depreciation and amortization expense1,014  1,046  (32) (3.1) 2,028  2,088  (60) (2.9) 
Total Operating Expenses$6,536  $6,697  $(161) (2.4) $13,263  $13,368  $(105) (0.8) 

47
 Three Months Ended    Six Months Ended   
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Cost of services$2,581
 $2,660
 $(79) (3.0)% $5,172
 $5,370
 $(198) (3.7)%
Cost of wireless equipment1,109
 1,101
 8
 0.7
 2,166
 2,137
 29
 1.4
Selling, general and administrative expense1,961
 1,930
 31
 1.6
 3,942
 3,794
 148
 3.9
Depreciation and amortization expense1,046
 1,059
 (13) (1.2) 2,088
 2,118
 (30) (1.4)
Total Operating Expenses$6,697
 $6,750
 $(53) (0.8) $13,368
 $13,419
 $(51) (0.4)
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Cost of Services
Cost of services decreased $79increased $60 million, or 3.0%2.3%, and $198$58 million, or 3.7%1.1%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily relateddue to decreasesan increase in customer premise equipment, higher personnel costs due to a lower headcount primarily as a result of the Voluntary Separation Program and decreases in access costs due to a reduction of voice connections,regulatory fees, which were partially offset by increases in wireline equipmentlower access costs as well as lower facilities and fleet costs.

Cost of Wireless Equipment
Cost of wireless equipment increased 0.7%decreased $297 million, or 26.8%, and 1.4%$264 million, or 12.2%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily driven bydue to a decrease in the number of wireless devices sold resulting from declines in activation and upgrade volumes, primarily due to COVID-19, an elongation of the handset upgrade cycle, and a shift to higherlower priced units in the mix of wireless devices sold. During the six months ended, the increases were further driven by the number of smartphone units sold.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 1.6%$108 million, or 5.5%, and $148$161 million, or 3.9%4.1%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, primarily driven by increases in personnel costs, advertising expenses and sales commission expense, whichexpense. For the six months ended June 30, 2020, these increases were partially offset by decreasesa one-time international tax benefit. The increases in employee related costs primarilysales commission expense during the three and six months ended June 30, 2020 were due to a lower net deferral of commission costs in the Voluntary Separation Program.current year as compared to the prior year, as well as incremental sales compensation while certain of our stores and agent locations are closed due to COVID-19.

Depreciation and Amortization Expense
Depreciation and amortization expense decreased 1.2%3.1%, and 1.4%$60 million, or 2.9%, during the three and six months ended June 30, 2019,2020, respectively, compared to the similar periods in 2018,2019, driven by the change in the mix of total Verizon depreciable assets and Business'sthe Business segment's usage of those assets.


Segment Operating Income and EBITDA 
 Three Months EndedSix Months Ended
June 30,Increase/June 30,Increase/
(dollars in millions)20202019(Decrease)20202019(Decrease)
Segment Operating Income$946  $1,071  $(125) (11.7)%$1,900  $2,119  $(219) (10.3)%
Add Depreciation and amortization expense1,014  1,046  (32) (3.1)%2,028  2,088  (60) (2.9) 
Segment EBITDA$1,960  $2,117  $(157) (7.4) $3,928  $4,207  $(279) (6.6) 
Segment operating income margin12.6 %13.8 %12.5 %13.7 %
Segment EBITDA margin26.2 %27.3 %25.9 %27.2 %
 Three Months Ended    Six Months Ended   
 June 30,  Increase/ June 30,  Increase/
(dollars in millions)2019
 2018
 (Decrease) 2019
 2018
 (Decrease)
Segment Operating Income$1,071
 $1,101
 $(30) (2.7)% $2,119
 $2,215
 $(96) (4.3)%
Add Depreciation and amortization expense1,046
 1,059
 (13) (1.2)% 2,088
 2,118
 (30) (1.4)
Segment EBITDA$2,117
 $2,160
 $(43) (2.0) $4,207
 $4,333
 $(126) (2.9)
                
Segment operating income margin13.8% 14.0%     13.7% 14.2%    
Segment EBITDA margin27.3% 27.5%     27.2% 27.7%    

The changes in the table above during the three and six months ended June 30, 2019,2020, compared to the similar periods in 2018,2019, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Special Items
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2020201920202019
Severance, pension and benefits charges (credits)
Other income (expense), net$153  $—  $335  $(96) 
Early debt redemption costs
Other income (expense), net129  1,544  129  1,544  
Interest expense(27) —  (27) —  
Loss on spectrum license auction
Selling, general and administrative expense—  —  1,195  —  
Total$255  $1,544  $1,632  $1,448  
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(dollars in millions)2019
 2018
 2019
 2018
Severance, pension and benefits charges       
Selling, general and administrative expense$—
 $339
 $—
 $339
Other income (expense), net—
 —
 (96) —
Acquisition and integration related charges       
Selling, general and administrative expense—
 109
 —
 214
Depreciation and amortization expense—
 11
 —
 13
Product realignment charges       
Cost of services—
 303
 —
 303
Selling, general and administrative expense—
 147
 —
 147
Equity in losses of unconsolidated businesses—
 207
 —
 207
Depreciation and amortization expense—
 1
 —
 1
Early debt redemption costs       
Other income (expense), net1,544
 —
 1,544
 249
Total$1,544
 $1,117
 $1,448
 $1,473

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA discussion (see "Consolidated Results of Operations") excludes all of the amounts included above, as described below.
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The income and expenses related to special items included in our condensed consolidated results of operations were as follows:
Three Months Ended  Six Months Ended  Three Months EndedSix Months Ended
June 30,  June 30, June 30,June 30,
(dollars in millions)2019
 2018
 2019
 2018
(dollars in millions)2020201920202019
Within Total Operating Expenses$—
 $910
 $—
 $1,017
Within Total Operating Expenses$—  $—  $1,195  $—  
Within Equity in losses of unconsolidated businesses—
 207
 —
 207
Within Other income (expense), net1,544
 —
 1,448
 249
Within Other income (expense), net282  1,544  464  1,448  
Within Interest expenseWithin Interest expense(27) —  (27) —  
Total$1,544
 $1,117
 $1,448
 $1,473
Total$255  $1,544  $1,632  $1,448  
Severance, Pension and Benefits Charges (Credits)
During the three and six months ended June 30, 2020, we recorded net pre-tax remeasurement losses of $153 million and $335 million, respectively, in our pension plans triggered by settlements.

During the three months ended June 30, 2020, we recorded a net pre-tax remeasurement loss of $153 million primarily driven by a $163 million charge mainly due to the difference between our estimated return on assets and our actual return on assets and changes in our lump sum interest rate assumptions used to determine the current year liabilities of our pension plans, offset by a credit due to changes in our discount rate.

During the three months ended March 31, 2020, we recorded a net pre-tax remeasurement loss of $182 million primarily driven by a $196 million charge mainly due to changes in our discount rate and lump sum interest rate assumptions used to determine the current year liabilities of our pension plans, offset by a credit due to the difference between our estimated return on assets and our actual return on assets. Pension and benefit activity was recorded in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur.

During the six months ended June 30, 2019, we recorded a net pre-tax remeasurement creditgain of $96 million in our pension plans triggered by the Voluntary Separation Program for select U.S.-based management employees and other headcount reduction initiatives, primarily driven by a $150 million credit due to the difference between our estimated return on assets and our actual return on assets, offset by a $54 million charge due to a change in our discount rate assumption used to determine the current year liabilities of our pension plans. Pension and benefit activity was recorded in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur.

During both the three and six months ended June 30, 2018, we recorded a pre-tax severance charge of approximately $339 million, exclusive of acquisition related severance charges.

See Note 98 to the condensed consolidated financial statements for additional information related to our 2019 pension and benefits charges and credits.

Acquisition and Integration Related Charges
Acquisition and integration related charges recorded during the three and six months ended June 30, 2018 primarily related to the acquisition of Yahoo’s operating business in June 2017.

Product Realignment Charges
During the three months ended June 30, 2018, we recorded product realignment charges of $658 million. Product realignment charges primarily relate to the discontinuation of the go90 platform and associated content. These charges were recorded in Selling, general and administrative expense, Cost of services, Equity in losses of unconsolidated businesses, and Depreciation and amortization expense on our condensed consolidated statements of income for the three and six months ended June 30, 2018.

Early Debt Redemption Costs
During both the three and six months ended June 30, 2020, we recorded net pre-tax early debt redemption costs of $102 million in connection with the redemptions of securities issued by Verizon and open market repurchases. See Note 5 to the condensed consolidated financial statements for additional information on these redemptions.

During both the three and six months ended June 30, 2019, we recorded pre-tax losses on early debt redemptions of $1.5 billion in connection with the tender offers of notes issued by Verizon with coupon rates ranging from 4.672% to 5.012% and maturity dates ranging from 2054 to 2055. These losses were recorded in Other income (expense), net

Loss on our condensed consolidated statement of income.

Spectrum License Auction
During the six months ended June 30, 2018,2020, we recorded losses on early debt redemptionsa pre-tax net loss of $249 million$1.2 billion as a result of the conclusion of the FCC incentive auction for spectrum licenses in connection with the tender offers for 13 series of notes issued by Verizon with coupon rates ranging from 1.750%upper 37 GHz, 39 GHz and 47 GHz bands. See Note 3 to 5.012% and maturity dates ranging from 2021 to 2055. These losses were recorded in Other income (expense), net on ourthe condensed consolidated statement of income.financial statements for additional information.

Consolidated Financial Condition
 Six Months Ended 
June 30,
(dollars in millions)20202019Change
Cash Flows Provided By (Used In)
Operating activities$23,552  $15,836  $7,716  
Investing activities(12,124) (8,589) (3,535) 
Financing activities(6,232) (8,043) 1,811  
Increase (decrease) in cash, cash equivalents and restricted cash$5,196  $(796) $5,992  
 Six Months Ended   
 June 30,   
(dollars in millions)2019
 2018
 Change
Cash Flows Provided By (Used In)     
Operating activities$15,836
 $16,433
 $(597)
Investing activities(8,589) (8,728) 139
Financing activities(8,043) (7,865) (178)
Decrease in cash, cash equivalents and restricted cash$(796) $(160) $(636)

We 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, 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. We expect that our capital spending requirements will continue to be financed primarily through internally
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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 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.

Our available external financing arrangements include an active commercial paper program, credit available under credit facilities and other bank lines of credit, vendor financing arrangements, issuances of registered debt or equity securities, U.S. retail medium-term notes and other capital market securities that are privately-placed or offered overseas. In addition, we monetize our device payment plan agreement receivables through asset-backed debt transactions.


Cash Flows Provided By Operating Activities
Our primary source of funds continues to be cash generated from operations. Net cash provided by operating activities decreased $597 millionincreased $7.7 billion during the six months ended June 30, 2019,2020, compared to the similar period in 2018,2019, primarily due to an increase in earnings and a decrease in discretionary contributions to qualified employee benefit plans, offset by changesimprovements in working capital, which includes the COVID-19 related postponement of approximately $2.0 billion of second quarter tax payments to July 15th, the receipt of the $2.2 billion cash tax benefit related to preferred shares in a foreign affiliate sold during the fourth quarter 2019, and lower volumes. In addition, an increase in cash income taxes,employee benefits contribution and voluntary separation program severance payments as a result of the Voluntary Separation Program during the six months ended June 30, 2019, compared to the similar perioddid not repeat in 2018.2020. These comparative increases were partially offset by lower earnings. We made a $300 million and $1.7 billion in discretionary employee benefits contributionscontribution during the six months ended June 30,first quarter 2019 and 2018, respectively, to our defined benefit pension plan. As a result of the 2019 discretionary pension contributions,contribution, we expect that there will be no required pension funding until 2024, which will continue2025, subject to benefit future cash flows. Further,changes in market conditions. The 2019 contribution also improved the funded status of our qualified pension plan improved as a result of the contributions.plan.

Cash Flows Used In Investing Activities
Capital Expenditures
Capital expenditures continue to relate primarily to the use of capital resources to increase 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, maintain the existing infrastructure and increase the operating efficiency and productivity of our networks.challenges.

Capital expenditures, including capitalized software, for the six months ended June 30, 2020 and 2019 were as follows:
 Six Months Ended 
 June 30, 
(dollars in millions)2019
 2018
Capital expenditures (including capitalized software)$7,967
 $7,838
Total as a percentage of revenue12.4% 12.3%

$9.9 billion and $8.0 billion, respectively. Capital expenditures increased approximately $1.9 billion, or 23.6%, during the six months ended June 30, 2020, compared to the similar period in 2019, primarily due to an increasea change in the timing of investments to support multi-use fiber assets, which support the densification of our 4G LTE network and a continued focus onour 5G technology deployment. Our investments are primarily related to network infrastructure to support the business.

Acquisitions
In 2019,March 2020, the Federal Communications Commission (FCC)FCC completed two millimeter wavean incentive auction for spectrum license auctions. Verizon participatedlicenses. Through June 30, 2020, we paid approximately $1.6 billion, including $101 million paid in these auctions and was the high bidder on 9 and 1,066 licenses, respectively, in the 24 Gigahertz (GHz) and 28 GHz bands. We submitted an applicationDecember 2019. See Note 3 to the FCC and paid cash of approximately $521 million for the licenses that will be issued. The deposits related to these spectrum licenses are classified within Other assets in our condensed consolidated balance sheets as of June 30, 2019.financial statements for additional information.

During both the three and six months ended June 30, 2019,2020, we entered into and completed various other wireless license acquisitions for cash consideration of approximately $177 million.

In April 2020, we entered into a definitive purchase agreement to acquire BlueJeans Network, Inc. (BlueJeans), an enterprise-grade video conferencing and event platform, whose services are sold to Business customers globally. The transaction closed in May 2020. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $396 million, net of cash acquired. During the six months ended June 30, 2020, we completed various other acquisitions for an insignificant amountamounts of cash consideration.

Cash Flows Used In Financing Activities
We seek to maintain a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. During the six months ended June 30, 2020, net cash used in financing activities was $6.2 billion. During the six months ended June 30, 2019, and 2018, net cash used in financing activities was $8.0 billion and $7.9 billion, respectively.billion.

During the six months ended June 30, 2019,2020, our net cash used in financing activities of $8.0$6.2 billion was primarily driven by repayments, redemptions and repurchases of long-term borrowings and finance lease obligations of $9.6$8.5 billion, cash dividends of $5.0$5.1 billion, and repayments of asset-backed long-term borrowings of $2.8$4.6 billion. These uses of cash were partially offset by proceeds from long-term borrowings of $6.2$9.3 billion and proceeds from asset-backed long-term borrowings of $4.0$2.8 billion.

At June 30, 2020, our total debt of $112.8 billion included unsecured debt of $102.2 billion and secured debt of $10.6 billion. At December 31, 2019, our total debt increased to $113.4of $111.5 billion compared to $113.1included unsecured debt of $99.1 billion at December 31, 2018.and secured debt of $12.4 billion. During the six months ended June 30, 20192020 and 2018,2019, our effective interest rate was 4.2% and 4.8%., respectively. See Note 65 to the condensed consolidated financial statements for additional information regarding our debt activity.

Verizon may continue to acquire debt securities issued by Verizon and its affiliates in the future through open market purchases, 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.

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Asset-Backed Debt
Cash collections on the device payment plan agreement receivables collateralizing 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 condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included in our condensed consolidated balance sheets.


See Note 65 to the condensed consolidated financial statements for additional information.

Other, net
Other, net financing activities during the six months ended June 30, 2019 includes $526 million premium paid due to early extinguishment of debt.

Long-Term Credit Facilities
At June 30, 2020
(dollars in millions)MaturitiesFacility CapacityUnused CapacityPrincipal Amount Outstanding
Verizon revolving credit facility (1)
2022$9,500  $9,392  n/a
Various export credit facilities (2)
2022-20277,000  1,500  4,206  
Total$16,500  $10,892  $4,206  
(1)As of June 30, 2019, the unused borrowing capacity under our $9.5 billion credit facility was approximately $9.4 billion. 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. We use theThe revolving credit facility provides for the issuance of letters of credit and for general corporate purposes.credit.

(2) These credit facilities are used to finance equipment-related purchases. Borrowings under certain of these facilities amortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding.
In March 2016,July 2020, we drew $500 million from a $1.5 billion export credit facility entered into a $1.0 billion credit facility insured by Eksportkreditnamnden,in June 2020 and fully drew down $500 million from an export credit agency with a maturity date of December 2024. As of June 30, 2019, the outstanding balance was $647 million. We used this credit facility to finance network equipment-related purchases. In July 2017, we entered into credit facilities insured by various export credit agencies providing us with the ability to borrow up to $4.0 billion to finance equipment-related purchases with maturity dates ranging fromin July 2022 to May 2027. The facilities have multiple borrowings available, portions of which extend through October 2019 contingent upon the amount of eligible equipment-related purchases that we make. During the three and six months ended June 30, 2019, we drew $450 million and $874 million, respectively from these facilities. As of June 30, 2019, we had an outstanding balance of $3.5 billion.2020.

Dividends
As in prior periods, dividend payments were a significant use of capital resources. We paid $5.0$5.1 billion and $4.8$5.0 billion in cash dividends during the six months ended June 30, 20192020 and 2018,2019, respectively.

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.

Change In Cash, Cash Equivalents and Restricted Cash
Our Cash and cash equivalents at June 30, 20192020 totaled $1.9$7.9 billion, a $796 million decrease$5.3 billion increase compared to December 31, 2018,2019, primarily as a result of the factors discussed above.

Restricted cash totaled $1.2 billion and $1.3 billion at both June 30, 20192020 and December 31, 2018,2019, respectively, primarily related to cash collections on the device payment plan agreement receivables 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 purchases of fixed assets 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.acquisitions or wireless licenses. Therefore, we believe it is important to view free cash flow as a complement to our entire condensed consolidated statements of cash flows.

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The following table reconciles net cash provided by operating activities to free cash flow:
 Six Months Ended 
June 30,
(dollars in millions)20202019Change
Net cash provided by operating activities$23,552  $15,836  $7,716  
Less Capital expenditures (including capitalized software)9,850  7,967  1,883  
Free cash flow$13,702  $7,869  $5,833  
 Six Months Ended   
 June 30,   
(dollars in millions)2019
 2018
 Change
Net cash provided by operating activities$15,836
 $16,433
 $(597)
Less Capital expenditures (including capitalized software)7,967
 7,838
 129
Free cash flow$7,869
 $8,595
 $(726)

The decreaseincrease in free cash flow during the six months ended June 30, 2019,2020, compared to the similar period in 2018,2019, is a reflection of the decreaseincrease in operating cash flows, andpartially offset by the increase in capital expenditures discussed above.


Market Risk
We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes, foreign currency exchange rate fluctuations, changes in investment, equity and commodity prices and changes in corporate tax rates. We employ risk management strategies, which may include the use of a variety of derivatives including but not limited to, cross currency swaps, forward starting interest rate swaps, interest rate swaps, interest rate caps, treasury rate locks and foreign exchange forwards. We do not hold derivatives for trading purposes.

It is our general policy to enter into interest rate, foreign currency and other derivative transactions only to the extent necessary to achieve our desired objectives in optimizing exposure to various market risks. Our objectives include maintaining 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. We do not hedge our market risk exposure in a manner that would completely eliminate the effect of changes in interest rates and foreign exchange rates on our earnings.

Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements which provide rules for collateral exchange. Negotiations and executions of new ISDA master agreements and CSA agreements with our counterparties continued throughout 2018 and 2019. The newly executed CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in outstanding positions as compared to established thresholds and changes in credit ratings. At June 30, 20192020, we held approximately $0.1$0.3 billion and at December 31, 2018 we posted approximately $0.1 billionan insignificant amount of collateral related to derivative contracts under collateral exchange arrangements,agreements, which were recorded as Other current liabilities and Prepaid expenses and other, respectively, in our condensed consolidated balance sheets.sheet. At December 31, 2019, we held an insignificant amount of collateral related to derivative contracts under collateral exchange arrangements, which were recorded as Other current liabilities in our condensed consolidated balance sheet. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote and do not expect that any such nonperformance would result in a significant effect on our results of operations or financial condition due to our diversified pool of counterparties. See Note 87 to the condensed consolidated financial statements for additional information regarding the derivative portfolio.

Interest Rate Risk
We are exposed to changes in interest rates, primarily on our short-term debt and the portion of long-term debt that carries floating interest rates. As of June 30, 2019,2020, approximately 78%80% of the aggregate principal amount of our total debt portfolio consisted of fixed rate indebtedness, including the effect of interest rate swap agreements designated as hedges. The impact of a 100-basis-point change in interest rates affecting our floating rate debt would result in a change in annual interest expense, including our interest rate swap agreements that are designated as hedges, of approximately $258$232 million. The interest rates on our existing long-term debt obligations are unaffected by changes to our credit ratings.

Certain of our floating rate debt and our interest rate derivative transactions utilize interest rates that are linked to the London Inter-Bank Offered Rate (LIBOR) as the benchmark rate. LIBOR is the subject of recent U.S. and international regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to become unavailable or to perform or be reported differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our floating rate debt or exposure under our interest rate derivative transactions. We do not anticipate a significant impact to our financial position given our current mix of variable and fixed-rate debt, taking into account the impact of our interest rate hedging.

Interest Rate Swaps
We enter into interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates that are currently based on the London Interbank Offered Rate,LIBOR, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against interest rate risk exposure of designated debt issuances. At June 30, 2020, the fair value of the asset and liability of these contracts were $1.9 billion and $340 million, respectively. At December 31, 2019, the fair value of the asset and liability of these contracts were $529$568 million and $189$173 million, respectively. At December 31, 2018, the fair value of the asset and liability of these contracts were insignificant and $813 million, respectively. Atboth June 30, 20192020 and December 31, 2018,2019, the total notional amount of the interest rate swaps was $19.1 billion and $19.8 billion, respectively.$17.0 billion.

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Forward Starting Interest Rate Swaps
We have entered into forward starting interest rate swaps designated as cash flow hedges in order to manage our exposure to interest rate changes on future forecasted transactions. At June 30, 2020, the fair value of the liability of these contracts was $1.1 billion. At December 31, 2019, the fair value of the liability of these contracts was $536 million. At December 31, 2018, the fair value of the liability of these contracts was $60$604 million. At June 30, 20192020 and December 31, 2018,2019, the total notional amount of the forward starting interest rate swaps was $3.0$2.0 billion and $4.0$3.0 billion, respectively.

Interest Rate Caps
We also have interest rate caps which we use as an economic hedge but for which we have elected not to apply hedge accounting. We enter into interest rate caps to mitigate our interest exposure to interest rate increases on our ABS Financing Facilities and ABS Notes. The fair value of the asset and liability of these contracts were insignificant at both June 30, 20192020 and December 31, 2018.2019. At June 30, 20192020 and December 31, 2018,2019, the total notional value of these contracts was $1.3 billion$158 million and $2.2 billion,$679 million, respectively.

Foreign Currency TranslationRisk
The functional currency for our foreign operations is primarily the local currency. The translation of income statement and balance sheet amounts of our foreign operations into U.S. dollars is recorded as cumulative translation adjustments, which are included in Accumulated other comprehensive income in our condensed consolidated balance sheets. Gains and losses on foreign currency transactions are recorded in the condensed consolidated statements of income in Other income (expense), net. At June 30, 2019,2020, our primary translation exposure was to the British Pound Sterling, Euro, Australian Dollar, Canadian Dollar and Japanese Yen.

Cross Currency Swaps
We have entered into cross currency swaps designated as cash flow hedges to exchange our British Pound Sterling, Euro, Swiss Franc, Canadian Dollar and Australian Dollar-denominated cash flows into U.S. dollars and to fix our cash payments in U.S. dollars, as well as to mitigate the impact of foreign currency transaction gains or losses. TheAt June 30, 2020, the fair value of the asset and liability of these contracts was $170$89 million at June 30, 2019 and $220 million

at$2.6 billion, respectively. At December 31, 2018. At June 30, 2019, and December 31, 2018, the fair value of the asset and liability of these contracts was $814$211 million and $536$912 million, respectively. At June 30, 20192020 and December 31, 2018,2019, the total notional amount of the cross currency swaps was $20.1$24.7 billion and $16.6$23.1 billion, respectively.

Foreign Exchange Forwards
We also have foreign exchange forwards which we use as an economic hedge but for which we have elected not to apply hedge accounting. We enter into British Pound Sterling and Euro foreign exchange forwards to mitigate our foreign exchange rate risk related to non-functional currency denominated monetary assets and liabilities of international subsidiaries.subsidiaries, as well as foreign exchange risk related to debt settlements. At both June 30, 2020 and December 31, 2019, the fair value of the asset of these contracts was insignificant. At June 30, 20192020 and December 31, 2018,2019, the total notional amount of the foreign exchange forwards was $1.0 billion and $600 million,$1.1 billion, respectively.

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. See Note 3 to the condensed consolidated financial statements for additional information.

BlueJeans Network, Inc.
In April 2020, we entered into a definitive purchase agreement to acquire BlueJeans, an enterprise-grade video conferencing and event platform, whose services are sold to Business customers globally. The transaction closed in May 2020. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $396 million, net of cash acquired. See Note 3 to the condensed consolidated financial statements for additional information.

Other
From time to time, we enter into strategic agreements to acquire various other businesses and investments. See Note 3 to the condensed consolidated financial statements for additional information.

Other Factors That May Affect Future Results
Regulatory and Competitive Trends
There have been no material changesThe information related to our Regulatory and Competitive Trends as previously disclosed in Part I, Item I. "Business" included in our Annual Report on Form 10-K for the year ended December 31, 2018, except as a result of our segment realignment.
Environmental Matters
Reserves have been established to cover environmental matters relating to discontinued businesses and past telecommunications activities. These reserves include funds to address contamination at2019 is updated by the site of a former Sylvania facility in Hicksville, NY, which had processed nuclear fuel rods in the 1950s and 1960s. In September 2005, the Army Corps of Engineers (ACE) accepted the site into its Formerly Utilized Sites Remedial Action Program. As a result, the ACE has taken primary responsibility for addressing the contamination at the site. An adjustment to the reserves may be made after a cost allocation is conducted with respect to the past and future expenses of alldisclosure included above under "Impacts of the parties. Adjustments to the environmental reserve may also be made based upon the actual conditions found at other sites requiring remediation.Recent Novel Coronavirus (COVID-19)".

Recently Issued Accounting Standards
See Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting standard updates not yet adopted as of June 30, 2019.

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 Cautionary Statement Concerning Forward-Looking Statements
In this report we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates," "believes," "estimates," "expects," "hopes" or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

The following important factors, along with those discussed elsewhere in this report and in other filings with the Securities and Exchange Commission (SEC), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements:

•cyber attacks impacting our networks or systems and any resulting financial or reputational impact;

•natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial or reputational impact;

•the impact of the global outbreak of COVID-19 on our operations, our employees and the ways in which our customers use our networks and other products and services;

•disruption of our key suppliers’ or vendors' provisioning of products or services, including as a result of the COVID-19 outbreak;

•material adverse conditionschanges in the U.S.labor matters and international economies;any resulting financial or operational impact;

•the effects of competition in the markets in which we operate;

material•failure to take advantage of developments in technology and address changes in technologyconsumer demand;

•performance issues or technology substitution;


disruptiondelays in the deployment of our key suppliers’ provisioning5G network resulting in significant costs or a reduction in the anticipated benefits of products or services;the enhancement to our networks;

•the inability to implement our business strategy;

•adverse conditions in the U.S. and international economies;

•changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks;business;

breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance;

•our high level of indebtedness;

•an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing;

material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact;

•significant increases in benefit plan costs or lower investment returns on plan assets;

•changes in tax laws or treaties, or in their interpretation; and

•changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings;earnings.

the inability to implement our business strategies; and

the inability to realize the expected benefits of strategic transactions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information relating to market risk is included in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption "Market Risk."

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Item 4. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report, that ensure that information relating to the registrant which is required to be disclosed in this report is recorded, processed, summarized and reported within required time periods using the criteria for effective internal control established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 2019.2020.

In the ordinary course of business, we routinely review our system of internal control over financial reporting and make changes to our systems and processes that are intended to ensure an effective internal control environment. We modified certain internal controls in connection with the new segment reporting structure, which was effective as of April 1, 2019. Other than the above-noted change, thereThere were no changes in the Company’s internal control over financial reporting during the second quarter of 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings
In October 2013, the California Attorney General’s Office notified certain Verizon companies of potential violations of California state hazardous waste statutes primarily arising from the disposal of electronic components, batteries and aerosol cans at certain California facilities. We are cooperating with this investigation and continue to reviewmonitor our operations relating to the management of hazardous waste. While penalties relating to the alleged violations could exceed $100,000, we do not expect that any penalties ultimately incurred will be material.

See Note 1211 to the condensed consolidated financial statements for additional information regarding legal proceedings.

Item 1A. Risk Factors
There have been no material changes to our risk factors as previously disclosed in Part I, Item 1A. included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2018.2019 and in Part II, Item 1A. included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In March 2017,February 2020, the Verizon Board of Directors authorized a share buyback program to repurchase up to 100 million shares of the Company’sCompany's common stock. The program will terminate when the aggregate number of shares purchased reaches 100 million or ata new share repurchase plan superseding the close of business on February 28, 2020,current plan is authorized, whichever is sooner. Under the program, shares may be repurchased in privately negotiated transactions, and on the open market, or otherwise, including through plans complying with Rule 10b5-1(c)10b5-1 under the Exchange Act. The timing and number of shares purchased under the program, if any, will depend on market conditions and the Company’sCompany's capital allocation priorities.

Verizon did not repurchase any shares of Verizon common stock during the three months ended June 30, 2019.2020. At June 30, 2019,2020, the maximum number of shares that could be purchased by or on behalf of Verizon under our share buyback program was 100 million.


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Item 6. Exhibits
Exhibit
Number		Description
Exhibit
Number
4.1		DescriptionFifth Supplemental Indenture between Verizon, both individually and as successor in interest to Verizon Global Funding Corp., and U.S. Bank National Association, as successor trustee to Wachovia Bank, National Association, formerly known as First Union National Bank, as Trustee, dated as of May 15, 2020 (incorporated by reference to Form 8-K filed on May 15, 2020, Exhibit 4.1).
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.PREXBRL Taxonomy Presentation Linkbase Document.
101.CALXBRL Taxonomy Calculation Linkbase Document.
101.LABXBRL Taxonomy Label Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VERIZON COMMUNICATIONS INC.
Date: July 28, 2020VERIZON COMMUNICATIONS INC.
By/s/
Date: August 8, 2019By/s/ Anthony T. Skiadas
Anthony T. Skiadas
Senior Vice President and Controller
(Principal Accounting Officer)

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Exhibit
Number		Description
Exhibit
Number4.1
DescriptionFifth Supplemental Indenture between Verizon, both individually and as successor in interest to Verizon Global Funding Corp., and U.S. Bank National Association, as successor trustee to Wachovia Bank, National Association, formerly known as First Union National Bank, as Trustee, dated as of May 15, 2020 (incorporated by reference to Form 8-K filed on May 15, 2020, Exhibit 4.1).
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.PREXBRL Taxonomy Presentation Linkbase Document.
101.CALXBRL Taxonomy Calculation Linkbase Document.
101.LABXBRL Taxonomy Label Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).




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