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OFFON

VERIZON COMMUNICATIONS

(VZ)
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VERIZON COMMUNICATIONS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/28/2021 | 08:27am EDT

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, technology, information and entertainment products and services
to consumers, businesses and government entities. With a presence around the
world, we offer data, video and voice services and solutions on our networks and
platforms that are designed to meet customers' demand for mobility, reliable
network connectivity, security and control.

To compete effectively in today's dynamic marketplace, we are focused on the
capabilities of our high-performing networks to drive growth based on delivering
what customers want and need in the new digital world. In 2021, 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, platforms and solutions.
We are creating business value by earning customers', employees' and
shareholders' trust, limiting our environmental impact and continuing 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
secure 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, will simplify operations by eliminating
legacy network elements, speed the deployment of 5G wireless technology and
create new opportunities in the business market in a cost efficient manner. Our
network leadership is the hallmark of our brand and the foundation for the
connectivity, platforms and solutions upon which we build our competitive
advantage.

Highlights of Our Financial Results for the Three Months Ended June 30, 2021 and
2020
(dollars in millions)

[[Image Removed: vz-20210630_g1.jpg]][[Image Removed: vz-20210630_g2.jpg]][[Image Removed: vz-20210630_g3.jpg]]

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Highlights of Our Financial Results for the Six Months Ended June 30, 2021 and
2020
(dollars in millions)

[[Image Removed: vz-20210630_g4.jpg]][[Image Removed: vz-20210630_g5.jpg]][[Image Removed: vz-20210630_g6.jpg]]

[[Image Removed: vz-20210630_g7.jpg]][[Image Removed: vz-20210630_g8.jpg]]


Business Overview
We have two reportable segments that we operate and manage as strategic business
units - Verizon Consumer Group (Consumer) and Verizon Business Group (Business).

Revenue by Segment for the Three Months Ended June 30, 2021 and 2020

[[Image Removed: vz-20210630_g9.jpg]][[Image Removed: vz-20210630_g10.jpg]]

                     [[Image Removed: vz-20210630_g11.jpg]]

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Note: Excludes eliminations.

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Revenue by Segment for the Six Months Ended June 30, 2021 and 2020

[[Image Removed: vz-20210630_g12.jpg]][[Image Removed: vz-20210630_g13.jpg]]

                     [[Image Removed: vz-20210630_g11.jpg]]

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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.) under
the Verizon brand and through wholesale and other arrangements. Fixed wireless
access (FWA) is also provided to consumers for broadband access through our
wireless networks. Our wireline services are provided in nine states in the
Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100%
fiber-optic network through our Verizon Fios product portfolio and over a
traditional copper-based network to customers who are not served by Fios. Our
Consumer segment's wireless and wireline products and services are available to
our retail customers, as well as resellers that purchase wireless network access
from us on a wholesale basis.

Customers can obtain our wireless services on a postpaid or prepaid basis. Our
postpaid service is generally billed one month in advance for a monthly access
charge in return for access to and usage of network services. Our prepaid
service is offered only to Consumer customers and enables individuals to obtain
wireless services without credit verification by paying for all services in
advance. The Consumer segment also offers several categories of wireless
equipment to customers, including a variety of smartphones and other handsets,
wireless-enabled internet devices, such as tablets and other wireless-enabled
connected devices, such as smart watches.

In addition to the wireless services and equipment discussed above, Consumer
sells residential fixed connectivity solutions, including internet, video and
voice services, and wireless network access to resellers on a wholesale basis.
The Consumer segment's operating revenues for the three and six months ended
June 30, 2021 totaled $23.5 billion and $46.3 billion, respectively,
representing an increase of 11.2% and 7.9%, respectively, compared to the
similar periods in 2020. See "Segment Results of Operations" for additional
information regarding our Consumer segment's operating performance and selected
operating statistics.

Verizon Business Group
Our Business segment provides wireless and wireline communications services and
products, including data, video and conferencing services, corporate networking
solutions, security and managed network services, local and long distance voice
services and network access to deliver various Internet of Things (IoT) services
and products, including solutions that support fleet tracking management,
compliance management, field service management, asset tracking and other types
of mobile resource management. FWA is also provided to business customers for
broadband access through our wireless networks. 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, 2021 totaled $7.8 billion and $15.5 billion, respectively, representing
an increase of 3.7% and 2.5%, respectively, compared to the similar periods in
2020. See "Segment Results of Operations" for additional information regarding
our Business segment's operating performance and selected operating statistics.

Corporate and Other
Corporate and other includes the results of our media business, Verizon Media,
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 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 as well as mail, news, finance,
sports and entertainment content, e-commerce and subscription 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 $2.1 billion and $3.9 billion, respectively, for
the three and six months ended June 30, 2021, which represents an increase of
49.7% and 28.1%, respectively, compared to the similar periods in 2020. On May
2,
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2021, Verizon entered into a definitive agreement with an affiliate of Apollo
Global Management Inc. pursuant to which we agreed to sell Verizon Media to the
affiliate. The sale is subject to customary regulatory approvals and closing
conditions and is expected to close in the second half of 2021. See Note 3 to
the condensed consolidated financial statements for additional information.

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, 2021, these investments
included $8.7 billion for capital expenditures. See "Cash Flows Used in
Investing Activities" for additional information. Capital expenditures for 2021
are currently expected to be in the range of $17.5 billion to $18.5 billion,
including the further expansion of our 5G network in new and existing markets,
the densification of our 4G Long-Term Evolution (LTE) wireless network to manage
future traffic demands, and the continued deployment of our fiber
infrastructure. Expenditures related to the deployment of our C-Band spectrum
will be in addition to this amount, and are expected to be approximately
$10 billion over three years, with $2 billion to $3 billion expected in 2021. As
of June 30, 2021, our capital expenditures include $164 million related to our
C-Band deployment. 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
LTE network, while also building our next generation 5G network. We are
densifying our networks by utilizing small cell technology, in-building
solutions and distributed antenna systems. Network densification enables us to
add capacity to address increasing mobile video consumption and the growing
demand for IoT products and services on our 4G LTE and 5G 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 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-connected devices grows. As of
June 30, 2021, 5G Ultra Wideband is available in parts of 75 U.S. cities and 5G
Home is available in parts of 40 U.S. cities. 5G Nationwide is available in over
2,700 U.S. markets. 5G Nationwide uses low and mid-band spectrum and dynamic
spectrum sharing (DSS) technology, which allows 5G service to run simultaneously
with 4G LTE on multiple spectrum bands. With DSS, whenever customers move
outside Verizon's high-band Ultra Wideband coverage area, their 5G-enabled
devices will remain on 5G technology using the lower spectrum bands where the 5G
Nationwide network is available. This allows us to more fully and effectively
utilize our current spectrum resources to serve both 4G and 5G customers.

To compensate for the shrinking market for traditional copper-based products, we
continue to build fiber-based networks supporting data, video and advanced
business services - areas where demand for reliable high-speed connections is
growing. We are evolving the architecture of our networks to our Intelligent
Edge Network, 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 expect that this new
architecture will simplify operations by eliminating legacy network elements,
speed the deployment of 5G wireless technology and create new opportunities in
the business market in a cost efficient manner.

Impact of the Novel Coronavirus (COVID-19) Pandemic
For a discussion of the impacts on and the risks to our business from COVID-19,
refer to Item 1A Risk Factors and "Impacts of the Novel Coronavirus (COVID-19)
Pandemic" in Item 7 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, 2020. The impacts from the COVID-19 Pandemic on our
operations were most significant during the second quarter of 2020, which also
significantly impact the comparability of the results from the second quarter of
2021 to the second quarter of 2020.

Recent Development
On July 23, 2021 Verizon received the wireless licenses from the Federal
Communications Commission (FCC) in connection with C-Band wireless spectrum
Auction 107. Following the receipt of the corresponding wireless licenses, the
purchase cost for these licenses inclusive of related capitalized interest was
reclassified from Deposits for wireless licenses to Wireless licenses in our
condensed consolidated balance sheet.

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