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 September 30, 2017

For the quarterly period ended September 30, 2021

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.)
1095 Avenue of the Americas
New York, New York
10036
New York,New York
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (212) 395-1000

Table of Contents

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
1.625% Notes due 2024VZ24BNew York Stock Exchange
4.073% Notes due 2024VZ24CNew York Stock Exchange
0.875% Notes due 2025VZ25New York Stock Exchange
3.250% Notes due 2026VZ26New York Stock Exchange
1.375% Notes due 2026VZ26BNew York Stock Exchange
0.875% Notes due 2027VZ27ENew York Stock Exchange
1.375% Notes due 2028VZ28New York Stock Exchange
1.125% Notes due 2028VZ28ANew York Stock Exchange
2.350% Fixed Rate Notes due 2028VZ28CNew York Stock Exchange
1.875% Notes due 2029VZ29BNew York Stock Exchange
0.375% Notes due 2029VZ29DNew York Stock Exchange
1.250% Notes due 2030VZ30New York Stock Exchange
1.875% Notes due 2030VZ30ANew York Stock Exchange
2.625% Notes due 2031VZ31New York Stock Exchange
2.500% Notes due 2031VZ31ANew York Stock Exchange
3.000% Fixed Rate Notes due 2031VZ31DNew York Stock Exchange
0.875% Notes due 2032VZ32New York Stock Exchange
0.750% Notes due 2032VZ32ANew York Stock Exchange
1.300% Notes due 2033VZ33BNew York Stock Exchange
4.750% Notes due 2034VZ34New York Stock Exchange
3.125% Notes due 2035VZ35New York Stock Exchange
1.125% Notes due 2035VZ35ANew York Stock Exchange
3.375% Notes due 2036VZ36ANew York Stock Exchange
2.875% Notes due 2038VZ38BNew York Stock Exchange
1.875% Notes due 2038VZ38CNew 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
3.850% Fixed Rate Notes due 2041VZ41CNew York Stock Exchange

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   ☒  Yes   ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
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☐☐  (Do not check if a smaller reporting company)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 September 30, 2017, 4,079,440,8362021, 4,140,163,896 shares of the registrant’s common stock were outstanding, after deducting 162,933,404151,269,750 shares held in treasury.


Table of Contents

Table of ContentsTABLE OF CONTENTS

Item No.Page
Page
PART I - FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Statements of Income
34
Three and nine months ended September 30, 20172021 and 20162020
Condensed Consolidated Statements of Comprehensive Income
45
Three and nine months ended September 30, 20172021 and 20162020
Condensed Consolidated Balance Sheets
56
At September 30, 20172021 and December 31, 20162020
Condensed Consolidated Statements of Cash Flows
67
Nine months ended September 30, 20172021 and 20162020
Notes to Condensed Consolidated Financial Statements
78
Item 2.
2933
Item 3.
5055
Item 4.
5055
Item 1.
5056
Item 1A.
5056
Item 2.
5056
Item 6.
5157
5258

















Table of Contents

Part I - Financial Information
Item 1. Financial Statements
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
Verizon Communications Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Verizon Communications Inc. and Subsidiaries
Three Months Ended  Nine Months Ended Three Months EndedNine Months Ended
September 30,  September 30,  September 30,September 30,
(dollars in millions, except per share amounts) (unaudited)2017
 2016
 2017
 2016
(dollars in millions, except per share amounts) (unaudited)2021202020212020
       
Operating Revenues       Operating Revenues
Service revenues and other$27,365
 $26,813
 $79,665
 $81,858
Service revenues and other$27,565 $27,431 $83,709 $81,604 
Wireless equipment revenues4,352
 4,124
 12,414
 11,782
Wireless equipment revenues5,350 4,112 15,837 11,996 
Total Operating Revenues31,717
 30,937
 92,079
 93,640
Total Operating Revenues32,915 31,543 99,546 93,600 
       
Operating Expenses       Operating Expenses
Cost of services (exclusive of items shown below)7,640
 6,989
 21,573
 22,180
Cost of services (exclusive of items shown below)7,855 7,955 24,199 23,348 
Wireless cost of equipment4,965
 5,240
 14,808
 14,882
Selling, general and administrative expense (including net gain on sale of divested       
businesses of $1,774 and $1,007 for the nine months ended September 30, 2017       
and 2016, respectively)7,632
 8,226
 20,579
 25,601
Cost of wireless equipmentCost of wireless equipment5,673 4,379 17,106 13,031 
Selling, general and administrative expenseSelling, general and administrative expense6,521 7,339 21,246 23,080 
Depreciation and amortization expense4,272
 3,942
 12,498
 11,941
Depreciation and amortization expense3,961 4,192 12,155 12,523 
Total Operating Expenses24,509
 24,397
 69,458
 74,604
Total Operating Expenses24,010 23,865 74,706 71,982 
       
Operating Income7,208
 6,540
 22,621
 19,036
Operating Income8,905 7,678 24,840 21,618 
Equity in losses of unconsolidated businesses(22) (23) (71) (63)
Equity in earnings (losses) of unconsolidated businessesEquity in earnings (losses) of unconsolidated businesses1 (9)10 (34)
Other income (expense), net(511) 97
 (1,376) (1,697)Other income (expense), net269 (774)1,172 (703)
Interest expense(1,164) (1,038) (3,514) (3,239)Interest expense(801)(1,044)(2,746)(3,167)
Income Before Provision For Income Taxes5,511
 5,576
 17,660
 14,037
Income Before Provision For Income Taxes8,374 5,851 23,276 17,714 
Provision for income taxes(1,775) (1,829) (5,893) (5,029)Provision for income taxes(1,820)(1,347)(5,395)(4,084)
Net Income$3,736
 $3,747
 $11,767
 $9,008
Net Income$6,554 $4,504 $17,881 $13,630 
       
Net income attributable to noncontrolling interests$116
 $127
 $335
 $376
Net income attributable to noncontrolling interests$147 $147 $429 $417 
Net income attributable to Verizon3,620
 3,620
 11,432
 8,632
Net income attributable to Verizon6,407 4,357 17,452 13,213 
Net Income$3,736
 $3,747
 $11,767
 $9,008
Net Income$6,554 $4,504 $17,881 $13,630 
       
Basic Earnings Per Common Share       Basic Earnings Per Common Share
Net income attributable to Verizon$0.89
 $0.89
 $2.80
 $2.12
Net income attributable to Verizon$1.55 $1.05 $4.21 $3.19 
Weighted-average shares outstanding (in millions)4,084
 4,079
 4,083
 4,080
Weighted-average shares outstanding (in millions)4,142 4,140 4,141 4,139 
       
Diluted Earnings Per Common Share       Diluted Earnings Per Common Share
Net income attributable to Verizon$0.89
 $0.89
 $2.80
 $2.11
Net income attributable to Verizon$1.55 $1.05 $4.21 $3.19 
Weighted-average shares outstanding (in millions)4,089
 4,086
 4,088
 4,086
Weighted-average shares outstanding (in millions)4,144 4,142 4,143 4,141 
       
Dividends declared per common share$0.5900
 $0.5775
 $1.7450
 $1.7075
See Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Statements of Comprehensive Income
Verizon Communications Inc. and Subsidiaries

4
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions) (unaudited)2017
 2016
 2017
 2016
        
Net Income$3,736
 $3,747
 $11,767
 $9,008
Other Comprehensive Income (loss), net of taxes       
Foreign currency translation adjustments117
 (78) 205
 (23)
Unrealized gain (loss) on cash flow hedges104
 147
 (94) (58)
Unrealized gain (loss) on marketable securities1
 (19) (5) (35)
Defined benefit pension and postretirement plans177
 (139) (96) 2,324
Other comprehensive income (loss) attributable to Verizon399
 (89) 10
 2,208
Total Comprehensive Income$4,135
 $3,658
 $11,777
 $11,216
        
Comprehensive income attributable to noncontrolling interests$116
 $127
 $335
 $376
Comprehensive income attributable to Verizon4,019
 3,531
 11,442
 10,840
Total Comprehensive Income$4,135
 $3,658
 $11,777
 $11,216
Table of Contents

Condensed Consolidated Statements of Comprehensive Income
Verizon Communications Inc. and Subsidiaries
 Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions) (unaudited)2021202020212020
Net Income$6,554 $4,504 $17,881 $13,630 
Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit
Foreign currency translation adjustments, net of tax of $(6), $10, $(13) and $10(146)124 (126)81 
Unrealized gain (loss) on cash flow hedges, net of tax of $61, $(176), $15 and $483(174)505 (42)(1,391)
Unrealized gain (loss) on marketable securities, net of tax of $1, $(1), $2 and $(2)— 2 (5)7 
Defined benefit pension and postretirement plans, net of tax of $51, $55, $154 and $166(155)(169)(465)(507)
Other comprehensive income (loss) attributable to Verizon(475)462 (638)(1,810)
Total Comprehensive Income$6,079 $4,966 $17,243 $11,820 
Comprehensive income attributable to noncontrolling interests$147 $147 $429 $417 
Comprehensive income attributable to Verizon5,932 4,819 16,814 11,403 
Total Comprehensive Income$6,079 $4,966 $17,243 $11,820 
See Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Balance Sheets
Verizon Communications Inc. and Subsidiaries
5
 At September 30,
 At December 31,
(dollars in millions, except per share amounts) (unaudited)2017
 2016
    
Assets   
Current assets   
Cash and cash equivalents$4,487
 $2,880
Accounts receivable, net of allowances of $908 and $84521,549
 17,513
Inventories1,276
 1,202
Assets held for sale275
 882
Prepaid expenses and other3,280
 3,918
Total current assets30,867
 26,395
    
Plant, property and equipment242,608
 232,215
Less accumulated depreciation155,986
 147,464
Plant, property and equipment, net86,622
 84,751
    
Investments in unconsolidated businesses1,054
 1,110
Wireless licenses87,883
 86,673
Goodwill28,725
 27,205
Other intangible assets, net10,993
 8,897
Non-current assets held for sale—
 613
Other assets8,538
 8,536
Total assets$254,682
 $244,180
    
Liabilities and Equity   
Current liabilities   
Debt maturing within one year$2,180
 $2,645
Accounts payable and accrued liabilities18,434
 19,593
Other8,316
 8,102
Total current liabilities28,930
 30,340
    
Long-term debt115,317
 105,433
Employee benefit obligations21,131
 26,166
Deferred income taxes48,345
 45,964
Other liabilities12,508
 12,245
    
Equity   
Series preferred stock ($.10 par value; none issued)—
 —
Common stock ($.10 par value; 4,242,374,240 shares issued in each period)424
 424
Contributed capital11,098
 11,182
Reinvested earnings19,373
 15,059
Accumulated other comprehensive income2,683
 2,673
Common stock in treasury, at cost(7,141) (7,263)
Deferred compensation – employee stock ownership plans and other411
 449
Noncontrolling interests1,603
 1,508
Total equity28,451
 24,032
Total liabilities and equity$254,682
 $244,180
Table of Contents

Condensed Consolidated Balance Sheets
Verizon Communications Inc. and Subsidiaries
At September 30,At December 31,
(dollars in millions, except per share amounts) (unaudited)20212020
Assets
Current assets
Cash and cash equivalents$9,936 $22,171 
Accounts receivable23,165 25,169 
Less Allowance for credit losses970 1,252 
Accounts receivable, net22,195 23,917 
Inventories2,303 1,796 
Prepaid expenses and other5,843 6,710 
Total current assets40,277 54,594 
Property, plant and equipment287,421 279,737 
Less Accumulated depreciation191,665 184,904 
Property, plant and equipment, net95,756 94,833 
Investments in unconsolidated businesses1,100 589 
Wireless licenses145,767 96,097 
Deposits for wireless licenses— 2,772 
Goodwill24,887 24,773 
Other intangible assets, net7,022 9,413 
Operating lease right-of-use assets27,969 22,531 
Other assets10,679 10,879 
Total assets$353,457 $316,481 
Liabilities and Equity
Current liabilities
Debt maturing within one year$7,623 $5,889 
Accounts payable and accrued liabilities20,153 20,658 
Current operating lease liabilities3,606 3,485 
Other current liabilities9,976 9,628 
Total current liabilities41,358 39,660 
Long-term debt143,352 123,173 
Employee benefit obligations16,516 18,657 
Deferred income taxes38,481 35,711 
Non-current operating lease liabilities23,507 18,000 
Other liabilities11,754 12,008 
Total long-term liabilities233,610 207,549 
Commitments and Contingencies (Note 12)00
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 shares issued in each period)429 429 
Additional paid in capital13,402 13,404 
Retained earnings70,062 60,464 
Accumulated other comprehensive loss(709)(71)
Common stock in treasury, at cost (151,269,750 and 153,304,088 shares outstanding)(6,630)(6,719)
Deferred compensation – employee stock ownership plans (ESOPs) and other490 335 
Noncontrolling interests1,445 1,430 
Total equity78,489 69,272 
Total liabilities and equity$353,457 $316,481 
See Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Statements of Cash Flows
Verizon Communications Inc. and Subsidiaries
6
 Nine Months Ended 
 September 30, 
(dollars in millions) (unaudited)2017
 2016
    
Cash Flows from Operating Activities   
Net Income$11,767
 $9,008
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization expense12,498
 11,941
Employee retirement benefits(334) 4,531
Deferred income taxes2,577
 (2,331)
Provision for uncollectible accounts842
 963
Equity in losses of unconsolidated businesses, net of dividends received100
 94
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses(5,513) (4,010)
Discretionary contributions to qualified pension plans(3,411) (186)
Net gain on sale of divested businesses(1,774) (1,007)
Other, net469
 (1,279)
Net cash provided by operating activities17,221
 17,724
    
Cash Flows from Investing Activities   
Capital expenditures (including capitalized software)(11,282) (11,398)
Acquisitions of businesses, net of cash acquired(6,295) (963)
Acquisitions of wireless licenses(469) (410)
Proceeds from dispositions of businesses3,614
 9,882
Other, net731
 350
Net cash used in investing activities(13,701) (2,539)
    
Cash Flows from Financing Activities   
Proceeds from long-term borrowings21,915
 8,152
Proceeds from asset-backed long-term borrowings2,878
 2,594
Repayments of long-term borrowings and capital lease obligations(16,457) (14,510)
Decrease in short-term obligations, excluding current maturities(160) (120)
Dividends paid(7,067) (6,908)
Other, net(3,022) (2,422)
Net cash used in financing activities(1,913) (13,214)
    
Increase in cash and cash equivalents1,607
 1,971
Cash and cash equivalents, beginning of period2,880
 4,470
Cash and cash equivalents, end of period$4,487
 $6,441
Table of Contents

Condensed Consolidated Statements of Cash Flows
Verizon Communications Inc. and Subsidiaries
Nine Months Ended
 September 30,
(dollars in millions) (unaudited)20212020
Cash Flows from Operating Activities
Net Income$17,881 $13,630 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense12,155 12,523 
Employee retirement benefits(1,928)867 
Deferred income taxes2,970 530 
Provision for expected credit losses604 1,100 
Equity in losses of unconsolidated businesses, net of dividends received32 67 
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses603 1,345 
Other, net(1,155)2,410 
Net cash provided by operating activities31,162 32,472 
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)(13,861)(14,168)
Acquisitions of businesses, net of cash acquired(459)(507)
Acquisitions of wireless licenses(47,027)(3,757)
Proceeds from disposition of business4,122 — 
Other, net207 (37)
Net cash used in investing activities(57,018)(18,469)
Cash Flows from Financing Activities
Proceeds from long-term borrowings32,482 12,387 
Proceeds from asset-backed long-term borrowings2,695 4,439 
Repayments of long-term borrowings and finance lease obligations(7,904)(8,853)
Repayments of asset-backed long-term borrowings(3,887)(6,726)
Dividends paid(7,797)(7,636)
Other, net(2,120)(1,348)
Net cash provided by (used in) financing activities13,469 (7,737)
Increase (decrease) in cash, cash equivalents and restricted cash(12,387)6,266 
Cash, cash equivalents and restricted cash, beginning of period23,498 3,917 
Cash, cash equivalents and restricted cash, end of period (Note 1)$11,111 $10,183 
See Notes to Condensed Consolidated Financial Statements


Notes to Condensed Consolidated Financial Statements
Verizon Communications Inc. and Subsidiaries
(Unaudited)

7
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1.
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 (SEC) 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 included in the Verizon Communications Inc.'s (Verizon or the Company) Annual Report on Form 10-K for the year ended December 31, 2016.2020. 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. We

Certain amounts have been reclassified certain prior period amounts to conform to the current periodperiod’s presentation.


Earnings Per Common Share
There were a total of approximately 52 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and nine months ended September 30, 2017, respectively. There were a total2021 and September 30, 2020.

Cash, Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of approximately 7 million90 days or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximates quoted market value and 6 million outstanding dilutiveincludes amounts held in money market funds.

Cash collections on the device payment plan agreement receivables collateralizing our asset-backed debt securities primarily consisting ofare required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted stock units,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 computationfollowing line items in the condensed consolidated balance sheets:
At September 30,At December 31,Decrease
(dollars in millions)20212020
Cash and cash equivalents$9,936 $22,171 $(12,235)
Restricted cash:
Prepaid expenses and other1,074 1,195 (121)
Other assets101 132 (31)
Cash, cash equivalents and restricted cash$11,111 $23,498 $(12,387)

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

Revenue by Category
We have 2 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 (Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale) within Business. See Note 11 for additional information on revenue by segment.

Corporate and other primarily includes insurance captives as well as the historical results of the divested Verizon Media Group (Verizon Media). On September 1, 2021, we completed the sale of Verizon Media to an affiliate of Apollo Global Management Inc. Under our ownership, Verizon Media generated revenues from contracts with customers under Accounting Standards Updated (ASU) 2014-09, "Revenue from Contracts with Customers" (Topic 606) of approximately $1.4 billion and $5.3 billion during the three and nine months ended September 30, 2016,2021, respectively. Under our ownership, Verizon Media generated revenues from contracts with customers under Topic 606 of approximately $1.7 billion and $4.7 billion during the three and nine months ended September 30, 2020, respectively. Refer to Note 3 for additional information on the sale of Verizon Media.

We also earn revenues that are not accounted for under Topic 606 from leasing arrangements (such as those for towers and equipment), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed under a device payment plan agreement when sold to the customer by an authorized agent. As allowed by the practical expedient within 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 nine months ended September 30, 2021, revenues from arrangements that were not accounted for under Topic 606 were approximately $803 million and $2.3 billion, respectively. During the three and nine months ended September 30, 2020, revenues from arrangements that were not accounted for under Topic 606 were approximately $715 million and $2.3 billion, respectively.


Recently Adopted Accounting Standards
8
Table of Contents
In January 2017,
Remaining Performance Obligations
When allocating the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendments in this update eliminate the requirementtotal contract transaction price to perform step twoidentified performance obligations, a portion of the goodwill impairment test,total transaction price may relate to service performance obligations which requires a hypothetical purchase price allocation when an impairment is determined to have occurred. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value,were not to exceed the carrying amount of goodwill. This standard update is effectivesatisfied or are partially satisfied as of the first quarter of 2020; however, early adoption is permitted for any interim or annual impairment tests performed after January 1, 2017. Verizon early adopted this standard as of January 1, 2017.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This standard update intends to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This standard update is effective as of the first quarter of 2017. The adoption of this standard update did not have a significant impact on our condensed consolidated financial statements.

Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments in this update simplify the application of hedge accounting and increase the transparency of hedge results. The updated standard also amends the presentation and disclosure requirements and changes how companies can assess the effectiveness of their hedging relationships. Companies will now have until the end of the first quarterreporting period. Below we disclose information relating to these unsatisfied performance obligations. We 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 September 30, 2021, month-to-month service contracts represented approximately 93% of our wireless postpaid contracts and approximately 83% of our wireline Consumer and Small and Medium Business contracts, compared to September 30, 2020, for which month-to-month service contracts represented approximately 90% of our wireless postpaid contracts and 70% 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 canceled 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 contracts that are not accounted for as month-to-month contracts.

Our Consumer group customers also include traditional wholesale resellers that purchase and resell wireless service under their own brands to their respective customers. Reseller arrangements generally include a hedge is entered into to perform an initial assessment ofstated contract term, which typically extends longer than two years and, in some cases, include a hedge’s effectiveness. After initial qualification,periodic minimum revenue commitment over the new guidance permitscontract term 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 qualitative effectiveness assessment for certain hedges instead of a quantitative test if the company can reasonably support an expectation of high effectiveness throughout theservice term of two years or shorter than twelve 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 hedge. An initial quantitative testcontract 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 that have a contractual minimum fee over the total contract term. We cannot predict the time period when revenue will be recognized related to establishthose contracts; thus, they are excluded from the time bands below. These contracts have varying terms spanning over approximately seven years ending in January 2029 and have aggregate contract minimum payments totaling $2.7 billion.

At September 30, 2021, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the hedge relationship is highly effective is still required. For cash flow hedges, if the hedge is highly effective, allremainder of 2021, 2022 and thereafter was $4.7 billion, $14.5 billion and $6.3 billion, respectively. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations and changes in the fair valuetiming and scope of contracts, arising from contract modifications.

Accounts Receivable and Contract Balances
The timing of revenue recognition may differ from the derivative hedging instrument will be recordedtime of billing to our customers. Receivables presented in Other comprehensive income (loss). These changes in fair value will be reclassified to earnings when the hedged item impacts earnings. The standard update is effective as of the first quarter of 2019; however, early adoption is permitted within an interim period. We intend to early adopt this standard in the fourth quarter of 2017 and do not expect it to have a significant impact on our condensed consolidated financial statements.

In March 2017,balance sheets 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 FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improvingcustomer in advance of receiving all or partial consideration for such goods and services from the Presentationcustomer, or the customer has made payment to Verizon in advance of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The amendments in this update require an employerobtaining control of the goods and/or services promised to report the service cost componentcustomer in the same line itemcontract.

Contract assets primarily relate to our rights to consideration for goods or itemsservices 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 other compensation costs arising fromwireless services rendered byare provided and billed. We have the pertinent employees duringright to bill the period.customer as service is provided over time, which results in our right to the payment being unconditional. The other components of net benefit cost, including the recognition of prior service credits, will becontract asset balances are presented in our condensed consolidated balance sheets as Prepaid expenses and other and Other assets. We recognize the income statement separatelyallowance for credit losses at inception and reassess quarterly based on management’s expectation of the 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 sheets as Other current liabilities and Other liabilities.

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The following table presents information about receivables from contracts with customers:
At September 30,At January 1,At September 30,At January 1,
(dollars in millions)2021202120202020
Receivables(1)
$10,088 $12,029 $11,094 $12,078 
Device payment plan agreement receivables(2)
11,178 10,358 9,559 11,741 
(1)Balances do not include receivables related to the following contracts: leasing arrangements (such as those for towers and equipment), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed under 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 derived from the service cost componentsale of equipment on a device payment plan through an authorized agent.

The following table presents information about contract balances:
At September 30,At January 1,At September 30,At January 1,
(dollars in millions)2021202120202020
Contract asset$878 $937 $923 $1,150 
Contract liability (1)
6,034 5,598 5,321 5,307 
(1) Revenue recognized related to contract liabilities existing at January 1, 2021 were $161 million and outside a subtotal of income from operations. The amendments in this update also allow only the service cost component of pension and other postretirement benefit costs to be eligible for capitalization when applicable. The amendments in this update would be applied retrospectively for the presentation of the service cost component and other components of net periodic benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic benefit cost in assets. Disclosures of the nature of and reason for the change in accounting principle would be required in the first interim and annual reporting periods of adoption. This standard update is effective as of the first quarter of 2018; however, early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued. We will adopt this standard in the first quarter of 2018. The impact of the retrospective adoption of this standard update will be a decrease to consolidated operating income of approximately $0.2 billion and $0.7$4.2 billion for the three and nine months ended September 30, 2017, respectively,2021, respectively. Revenue recognized related to contract liabilities existing at January 1, 2020 were $124 million and an increase to consolidated operating income of approximately $0.4 billion and $4.1$4.2 billion, for the three and nine months ended September 30, 2016,2020, respectively. There

The balance of contract assets and contract liabilities recorded in our condensed consolidated balance sheets were as follows:
At September 30,At December 31,
(dollars in millions)20212020
Assets
Prepaid expenses and other$701 $733 
Other assets177 204 
Total$878 $937 
Liabilities
Other current liabilities$5,159 $4,843 
Other liabilities875 755 
Total$6,034 $5,598 

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.

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 deferred contract costs, and amortized over a two-to six-year period. Deferred contract costs are classified as current or non-current within Prepaid expenses and other and Other assets, respectively.

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The balances of deferred contract costs included in our condensed consolidated balance sheets were as follows:
At September 30,At December 31,
(dollars in millions)20212020
Assets
Prepaid expenses and other$2,366 $2,472 
Other assets2,151 2,070 
Total$4,517 $4,542 

For the three and nine months ended September 30, 2021, we recognized expense of $751 million and $2.3 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 nine months ended September 30, 2020, we recognized expense of $763 million and $2.3 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

We assess our deferred 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 no impact to consolidated net incomeimpairment charges recognized for the three and nine months ended September 30, 2017 and 2016.2021 or September 30, 2020.


Note 3. Acquisitions and Divestitures
Spectrum License Transactions
In February 2017,March 2020, the FASB issued ASU 2017-05, “Other Income - Gains and Losses From the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and AccountingFederal Communications Commission's (FCC) incentive auction, Auction 103, for Partial Sales of Nonfinancial Assets.” The new guidance defines an “in substance nonfinancial asset” as an asset or group of assets for which substantially all of the fair value consists of nonfinancial assets and the group or subsidiary is not a business. The standard requires entities to derecognize nonfinancial assets or in substance nonfinancial assets when the entity no longer has (or ceases to have) a controlling financial interestspectrum licenses in the legal entity that holds the assetupper 37 Gigahertz (GHz), 39 GHz, and the entity transfers control of the asset. The standard update also unifies guidance related to partial sales of nonfinancial assets to be more consistent with the sale of a business. This standard update is effective as of the first quarter of 2018; however, early adoption is permitted. We do not expect that this standard update will have a significant impact on our condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments47 GHz bands concluded. Verizon participated in this update provideincentive auction and was the high bidder on 4,940 licenses, which primarily consisted of 37 GHz and, to a framework,lesser extent, 39 GHz spectrum. As an incumbent licensee, our 39 GHz licenses provided us with incentive payments that were applied towards the screen,purchase price of spectrum in which to evaluate whether a set of transferred assets and activities is a business.the auction. The screen requires that the set is not a business when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a grouplicenses won by Verizon amounted to $3.4 billion, of similar identifiable assets. The standard also aligns the definition of outputs with how outputs are described in Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. This standard is effective as of the first quarter of 2018; however, early adoption is permitted. We plan to early adopt this standard, on a prospective basis in the fourth quarter of 2017.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The amendments in this update require that cash and cash equivalent balances in a statement of cash flows include those amounts deemed to be restricted cash and restricted cash equivalents. This standard update is effective as of the first quarter of 2018; however, early adoption is permitted. We do not expect the adoption of this standard will have a significant impact on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This standard update addresses eight specific cash flow issueswhich $1.8 billion was settled with the objectiverelinquished 39 GHz licenses. The remaining balance was settled in cash of reducing the existing diversity in practice for these issues. Among the updates, this standard update requires cash receipts from payments on a transferor’s beneficial interests in securitized trade receivables to be classified as cash inflows from investing activities. This standard update is effective as of the first quarter of 2018; however, early adoption is permitted. We expect the amendment relating to beneficial interests in securitization transactions will have an impact on our presentation of collections of the deferred purchase price from sales of wireless device payment plan agreement receivables in our condensed consolidated statements of cash flows. Upon adoption of this standard update in the first quarter of 2018, we expect to retrospectively reclassify approximately $0.6$1.6 billion, of collectionswhich $101 million was paid in December 2019. In connection with the incentive auction, a pre-tax net loss of deferred purchase price related to collections from customers from Cash flows from operating activities to Cash flows from investing activities$1.2 billion ($914 million after-tax) was recorded in ourSelling, general and administrative expense in the condensed consolidated statement of cash flows forincome during the nine months ended September 30, 20172020 because the exchange of the previously held licenses for new licenses had commercial substance. See Note 4 for additional information. The new reconfigured licenses were received in the second quarter 2020 and $1.1 billionare included in Wireless licenses in our condensed consolidated statementbalance sheet.

In September 2020, the FCC completed Auction 105 for Priority Access Licenses. Verizon participated in the auction and was the high bidder on 557 licenses in the 3.5 GHz band valued at approximately $1.9 billion. Verizon made payments for these licenses in 2020 and received them from the FCC in March 2021. The purchase cost for these licenses and related capitalized interest, to the extent qualifying activities have occurred, are included in Wireless licenses in our condensed consolidated balance sheet.

In February 2021, the FCC concluded Auction 107 for C-Band wireless spectrum. Verizon was the winning bidder on 3,511 licenses, consisting of cash flowscontiguous C-Band spectrum bands ranging between 140 and 200 megahertz of C-Band spectrum in all 406 markets available in the auction. Verizon paid $45.5 billion for the year ended December 31, 2016.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurementlicenses it won, of Credit Losses on Financial Instruments.” This standard update requires that certain financial assets 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. This standard update is effective as ofwhich $44.6 billion was paid in the first quarter of 2020; however, early adoption2021. In accordance with the rules applicable to the auction, Verizon is permitted. Werequired to make additional payments to acquire the licenses. The payments are currently evaluatingfor our allocable share of clearing costs incurred by, and incentive payments due to, the impact that this standard update will have on our condensed consolidated financial statements.

incumbent license holders associated with the auction, which are estimated to be $7.7 billion. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This standard update intends to increase transparency and improve comparability by requiring entities to recognize assets and liabilities on the balance sheetSeptember 2021, we made a payment of $1.3 billion for all leases, with certain exceptions. In addition, through improved disclosure requirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update is effective as of the first quarter of 2019; however, early adoption is permitted. Verizon’s current operating lease portfolio is primarily comprised of network, real estate, and equipment leases. Upon adoption of this standard, we expect our balance sheet to include a right of use asset and liabilityobligations related to substantially all operating lease arrangements.projected clearing costs associated with the auction. We have established a cross-functional coordinated implementation teamexpect to implement the standard updatemake payments related to leases. We areaccelerated clearing incentives later in the process of determining the scope of arrangements that will be subject to this standard as well as assessing the impact to our systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard for United States (U.S.) generally accepted accounting principles (GAAP). The standard update also amends current guidance2021 for the recognition of costsinitial 46 markets. We expect to obtaincontinue to make payments related to clearing cost and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of financial statementsincentive payment obligations through improved disclosure requirements. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the standard is applied only to the most current period presented and the cumulative effect of applying the standard would be recognized at the date of initial application. In August 2015, an accounting standard update was issued that delayed the effective date of this standard until the first quarter of 2018, at which time we plan to adopt the standard using the modified retrospective approach.


We are in the process of evaluating the impact of the standard update. The ultimate impact on revenue resulting from the application of the new standard will be subject to assessments that2024. These payments are dependent on many variables,the incumbent license holders accelerated clearing of the spectrum for Verizon’s use and, therefore, the final timing and amounts could differ based on the incumbent holders’ execution of their clearing process. In accordance with the FCC order, the clearing must be completed by December 2025.

The carrying value of the wireless spectrum won in Auction 107 will consist of all payments required to participate and purchase licenses in the auction, including but not limitedVerizon’s allocable share of clearing costs incurred by, and incentive payments due to, the terms of our contractual arrangements and our mix of business. Upon adoption,incumbent license holders associated with the auction that we expect thatare obligated to pay in order to acquire the allocation of revenue between equipment and service for our wireless fixed-term service plans will result in more revenue allocated to equipment and recognized earlier as compared with current GAAP. We expect the timing of recognition of our sales commission expenseslicenses. Carrying value will also be impacted, as a substantial portion of these costs, which are currently expensed, will beinclude capitalized and amortized as described above. In 2016, total sales commission expenses were approximately $4.2 billion. In 2017, we expect total sales commission expenses to decline as our wireless customers continue to migrate from our fixed-term service plans to device payment plans which have lower commission structures.

We have established a cross-functional coordinated implementation team to implement the standard update relatedinterest to the recognition of revenueextent qualifying activities have occurred. The licenses were received from contracts with customers. We have identifiedthe FCC in July 2021 and are in the process of implementing changes to our systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

2.Acquisitions and Divestitures

Wireless
Spectrum License Transactions
During the fourth quarter of 2016, we entered into a license exchange agreement with affiliates of AT&T Inc. to exchange certain Advanced Wireless Services (AWS) and Personal Communication Services (PCS) spectrum licenses. This non-cash exchange was completed in February 2017, at which time we received $1.0 billion of AWS and PCS spectrum licenses at fair value and recorded a pre-tax gain of $0.1 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2017.

During the first quarter of 2017, we entered into a license exchange agreement with affiliates of Sprint Corporation, which provides for the exchange of certain PCS spectrum licenses. This non-cash exchange was completed in May 2017. As a result, we received $0.1 billion of PCS spectrum licenses at fair value and recorded an insignificant gain in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2017.

During the third quarter of 2017, we entered into a license exchange agreement with affiliates of T-Mobile USA, Inc. to exchange certain AWS and PCS spectrum licenses. As a result of this agreement, $0.3 billion ofincluded within Wireless licenses are classified as held for sale onin our condensed consolidated balance sheet atas of September 30, 2017. This non-cash exchange is subject2021. The average remaining renewal period for these acquired licenses was 15 years.

Refer to customary closing conditions and is expected to be completed in the fourth quarter of 2017. Upon completion of this transaction, we expect to record a gain which will be determined upon the closing of the transaction.Note 6 for further details on significant debt transactions.


During the three and nine months ended September 30, 2017,2021, we entered into and completed various other wireless license transactionsacquisitions for cash consideration of an insignificant amount and approximately $95 million, respectively. We recognized a pre-tax loss in connection with the sale of certain wireless licenses during the nine months ended September 30, 2021 of $223 million ($167 million after-tax).

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Blue Jeans Network, Inc.
In April 2020, we entered into a definitive purchase agreement to acquire Blue Jeans 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 $397 million, net of cash consideration.acquired.


Straight PathTracFone Wireless, Inc.
On May 11, 2017,In September 2020, we entered into a purchase agreement (Tracfone Purchase Agreement) with América Móvil to acquire Straight Path CommunicationsTracFone Wireless, Inc. (Straight Path)(Tracfone), a holderprovider of millimeter wave spectrum configured for fifth-generation (5G) wirelessprepaid and value mobile services for consideration reflecting an enterprise value of approximately $3.1 billion.in the U.S. Under the terms of the purchase agreement,Tracfone Purchase Agreement, we agreed to pay (i) Straight Path shareholders $184.00 per share, payablewill acquire all of the stock of Tracfone for approximately $3.1 billion in cash and $3.1 billion in Verizon common stock, subject to customary adjustments, at closing. The number of shares and (ii) certain transaction costs payable in cashissued will be based on an average trading price determined as of approximately $0.7 billion, consisting primarily of a fee to be paid to the Federal Communications Commission (FCC). The acquisitionclosing date and is subject to customarya minimum number of shares issuable of 47,124,445 and a maximum number of shares issuable of 57,596,544. The Tracfone Purchase Agreement also includes up to an additional $650 million in future cash consideration related to the achievement of certain performance measures and other commercial arrangements. The transaction is subject to regulatory approvals and closing conditions and is expected to close byin the end of the firstfourth quarter of 2018.2021.


WirelineBluegrass Cellular
XO Holdings
In February 2016, we entered into a purchase agreement to acquire XO Holdings’ wireline business (XO), which owns and operates one of the largest fiber-based Internet Protocol (IP) and Ethernet networks. Concurrently, we entered into a separate agreement to lease certain wireless spectrum from a wholly-owned subsidiary of XO Holdings that holds its wireless spectrum, which included an option, subject to certain conditions, to buy the subsidiary. In February 2017, we completed our acquisition of XO for total cash consideration of approximately $1.8 billion, of which $0.1 billion was paid in 2015. In April 2017, we exercised our option to buy the subsidiary for approximately $0.2 billion, subject to certain adjustments. The transaction is subject to customary regulatory approvals and is expected to close by the end of 2017. Upon closing, the spectrum acquired as part of the transaction will be used for our 5G technology deployment.

The condensed consolidated financial statements include the results of XO’s operations from the date the acquisition closed. If the acquisition of XO had been completed as of January 1, 2016, the results of operations of Verizon would not have been significantly different than our previously reported results of operations.

The acquisition of XO was accounted for as a business combination. Since the business combination and the lease agreement with the purchase option were entered into contemporaneously, the total cash consideration of $1.8 billion has been preliminarily allocated between them on a relative fair value basis. The preliminary allocation of the purchase price for the business combination will be finalized within 12 months following the close of the acquisition. We preliminarily recorded approximately $0.4 billion of goodwill, and $0.3 billion of other intangible assets. 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 recorded as a result of the XO transaction represents future economic benefits we expect to achieve as a result of the acquisition. The goodwill related to this acquisition is included within our Wireline segment (see Note 3 for additional information).

Data Center Sale
On December 6, 2016,October 2020, we entered into a definitive agreement which was subsequently amended on March 21, 2017, with Equinix, Inc. pursuant to which we agreedacquire certain assets of Bluegrass Cellular (Bluegrass), a rural wireless operator serving central Kentucky. Bluegrass provides wireless service to sell 23 customer-facing data center sites210,000 customers in the U.S.34 counties in rural service areas 3, 4, and Latin America, for approximately $3.6 billion, subject to certain adjustments (Data Center Sale).5 in Central Kentucky. The transaction closed on May 1, 2017.in March 2021. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $412 million, net of cash acquired, which is subject to customary closing adjustments.


ForThe financial results of Bluegrass are included in the nine months ended September 30, 2017 andconsolidated results of Verizon from the date of acquisition. For the three and nine months ended September 30, 2016, these sites generated an insignificant amount of revenues and earnings. As a result of the closing of the transaction, we derecognized assets with a carrying value of $1.4 billion, primarily consisting of goodwill, plant, property and equipment and other intangible assets. The liabilities associated with the sale were insignificant.

In connection with the Data Center Sale and other insignificant transactions, we recorded a net gain on sale of divested businesses of approximately $1.8 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2017.

WideOpenWest, Inc.
On August 1, 2017, we entered into a definitive agreement to purchase certain fiber-optic network assets in the Chicago market from WideOpenWest, Inc. (WOW!), a leading provider of communications services. The transaction is expected to close by the end of 2017. In addition, the parties entered into a separate agreement pursuant to which WOW! will complete the build-out of the network assets by the second half of 2018. The total cash consideration for the transactions is expected to be approximately $0.3 billion.

Other
Acquisition of Yahoo! Inc.’s Operating Business
On July 23, 2016, Verizon entered into a stock purchase agreement (the Purchase Agreement) with Yahoo! Inc. (Yahoo). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we agreed to acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments (the Transaction).

On February 20, 2017, Verizon and Yahoo entered into an amendment to the Purchase Agreement, pursuant to which the Transaction purchase price was reduced by $350 million to approximately $4.48 billion in cash, subject to certain adjustments. Subject to certain exceptions, the parties also agreed that certain user security and data breaches incurred by Yahoo (and the losses arising therefrom) were to be disregarded (1) for purposes of specified conditions to Verizon’s obligations to close the Transaction and (2) in determining whether a “Business Material Adverse Effect” under the Purchase Agreement has occurred.

Concurrently with the amendment of the Purchase Agreement, Yahoo and Yahoo Holdings, Inc., a wholly-owned subsidiary of Yahoo that Verizon agreed to purchase pursuant to the Transaction, also entered into an amendment to the related reorganization agreement, pursuant to which Yahoo (which changed its name to Altaba Inc. following the closing of the Transaction) retains 50% of certain post-closing liabilities arising out of governmental or third-party investigations, litigations or other claims2021, revenue related to certain user securityBluegrass was insignificant and data breaches incurred by Yahoo prior to its acquisition by Verizon, including an August 2013 data breach disclosed by Yahoo on December 14, 2016. At that time, Yahoo disclosed that more than one billion of the approximately three billion accounts existing in 2013 had likely been affected. In accordance with the original Transaction agreements, Yahoo will continue to retain 100% of any liabilities arising out of any shareholder lawsuits (including derivative claims) and investigations and actions by the SEC.$88 million, respectively.

Prior to the closing of the Transaction, pursuant to a related reorganization agreement, Yahoo transferred all of the assets and liabilities constituting Yahoo’s operating business to the subsidiaries that we acquired in the Transaction. The assets that we acquired did not include Yahoo’s ownership interests in Alibaba, Yahoo! Japan and certain other investments, certain undeveloped land recently divested by Yahoo, certain non-core intellectual property or its cash, other than the cash from its operating business we acquired. We received for our benefit and that of our current and certain future affiliates a non-exclusive, worldwide, perpetual, royalty-free license to all of Yahoo’s intellectual property that was not conveyed with the business.

On June 13, 2017, we completed the Transaction. The aggregate purchase consideration at the closing of the Transaction was approximately $4.8 billion.

On October 3, 2017, based upon new intelligence that we received in connection with our integration of Yahoo's operating business, we disclosed that we believe that the August 2013 data breach previously disclosed by Yahoo affected all of its accounts.

Oath, our newly branded organization that combines Yahoo’s operating business with our existing Media business, is a diverse house of more than 50 media and technology brands that engages approximately a billion people around the world. We believe that the Transaction represents a critical step in growing the global scale needed for our digital media company and building the future of brands using powerful technology, trusted content and differentiated data.



The acquisition of Yahoo’s operating business has beenBluegrass was accounted for as a business combination. We are currently assessing the identification and measurement of the assets acquired and liabilities assumed. The preliminary results, which are summarized below, will be finalized within 12 months following the close of the acquisition. The preliminary results do not include any amount for potential liability arising from certain user security and data breaches since a reasonable estimate of loss, if any, cannot be determined at this time. We will continue to evaluate the accounting for these contingencies in conjunction with finalizing our accounting for this business combination and thereafter. When the valuations are finalized, any changes to the preliminary valuation of assets acquired and liabilities assumed may result in adjustments to the preliminary fair value of the net identifiable assets acquired and goodwill.

Thebased on their fair values of the assets acquired and liabilities assumed were determined using the income, cost, market and multiple period excess earnings approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820, Fair Value Measurement, other than long-term debt assumed in the acquisition. The income approach was primarily used to value the intangible assets, consisting primarily of acquired technology and customer relationships. The income approach indicates value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a required rate of return that reflects the relative risk of achieving the cash flow and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

The following table summarizes the consideration to Yahoo’s shareholders and the preliminary identification of the assets acquired, including cash acquired of $0.2 billion, and liabilities assumed as of the close of the acquisition, as well as the fair value at the acquisition dateacquisition. Preliminarily, we recorded approximately $141 million of Yahoo’s noncontrolling interests:
(dollars in millions)As of June 13, 2017
Cash payment to Yahoo’s equity holders$4,723
Estimated liabilities to be paid38
Total consideration$4,761
  
Assets acquired: 
Goodwill$1,041
Intangible assets subject to amortization2,519
Property, plant, and equipment1,805
Other1,332
Total assets acquired6,697
  
Liabilities assumed: 
Total liabilities assumed1,885
  
Net assets acquired:4,812
Noncontrolling interest(51)
Total consideration$4,761

On the closing dateplant, property and equipment, $135 million of the Transaction, each unvestedintangible assets and outstanding Yahoo restricted stock unit award that was held by an employee who became an employee$92 million of Verizon was replaced with a Verizon restricted stock unit award, which is generally payable in cash upon the applicable vesting date. The value of those outstanding restricted stock units on the acquisition date was approximately $1.0 billion.

goodwill. 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 is primarily attributablerepresents future economic benefits that we expect to increased synergies that are expected to be achieved fromachieve as a result of the integration of Yahoo’s operating business into our Media business.acquisition. The preliminary goodwill related to this acquisition is included within CorporateConsumer.

Verizon Media
On May 2, 2021, Verizon entered into a definitive agreement with an affiliate of Apollo Global Management Inc. (the Apollo Affiliate) pursuant to which we agreed to sell Verizon Media in return for consideration of $4.3 billion in cash, subject to customary adjustments, $750 million in non-convertible preferred limited partnership units of the Apollo Affiliate, and other (see Note 3 for additional information).10% of the fully-diluted common limited partnership units of the Apollo Affiliate.


TheOn September 1, 2021, we completed the sale of Verizon Media. As of the close of the transaction, cash proceeds, the fair value of the non-convertible preferred limited partnership units of the Apollo Affiliate, and the fair value of 10% of the fully-diluted common limited partnership units of the Apollo Affiliate were $4.3 billion, $496 million, and $124 million, respectively. We recorded a pre-tax gain on sale of approximately $1.1 billion (after-tax $1.1 billion) in Selling general and administrative expense in our condensed consolidated financial statements includestatement of income for the resultsthree and nine months ended September 30, 2021. In addition, we incurred $346 million of Yahoo’s operating business from the date the acquisition closed. If the acquisition of Yahoo’s operating business had been completed as of January 1, 2016, the results of operations of Verizon would not have been significantly different than our previously reported results of operations.


Acquisition and Integration Related Charges
In connectionvarious costs associated with the Yahoo Transaction, we recognized the following charges,this disposition which wereare primarily recorded in Selling general and administrative expense onin our condensed consolidated statementsstatement of income:income for the three and nine months ended September 30, 2021.

Upon the closing of the transaction, Verizon’s preferred limited partnership interest in the Apollo Affiliate and 10% common interest in the Apollo Affiliate were recognized at their initial fair value of $496 million and $124 million, respectively. The fair values were both estimated using a combination of the market approach and the income approach. The valuations are both considered Level 3 fair value measurements due to the use of significant judgment and unobservable inputs, which include the amount and timing of future cash flows, and a discount rate reflecting risks inherent in the future cash flows and market prices. Verizon’s preferred limited partnership interest is accounted for at cost, and is subject to impairment and other changes resulting from observable price changes in orderly transactions for identical or similar investments of the issuer. On September 28, 2021, the Apollo Affiliate redeemed $100 million of Verizon’s preferred limited partnership interest reducing the carrying value of our preferred interest at September 30, 2021 to $396 million. The redemption is reflected within Net cash used in investing activities in our condensed consolidated statement of cash flows for the nine months ended September 30, 2021. Verizon’s 10% common interest in the Apollo Affiliate is accounted for as an equity method investment. The post-sale results of Verizon’s common ownership interest in the Apollo Affiliate are recorded through the equity method of accounting, within our Corporate and other segment.

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 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Severance$84
 $—
 $454
 $—
Transaction costs1
 —
 67
 —
Integration costs60
 —
 116
 —
 $145
 $—
 $637
 $—

The following table summarizes the assets and liabilities which were disposed as a result of the closing of the transaction:
September 1,
(dollars in millions)2021
Assets:
Cash, cash equivalents and restricted cash$168
3.Accounts receivable1,597
Prepaid expenses and other134
Property, plant and equipment, net1,235
Other intangible assets, net2,579
Other assets221
    Total assets$5,934
Liabilities:
Accounts payable and accrued liabilities$1,411
Other current liabilities315
Other liabilities310
    Total liabilities$2,036

The operating results of Verizon Media are included within our Corporate and other segment for all periods presented through the date of the sale. Refer to Note 2 for further details on revenues generated by Verizon Media under Topic 606.

In connection with the closing of the transaction, we entered into Transition Services Agreements with the Apollo Affiliate, under which Verizon will continue to provide and receive specified administrative and technical services to support operations for up to 12 months and 18 months, respectively.

Other
During the three and nine months ended September 30, 2021, we completed other acquisitions for cash consideration of an insignificant amount and $51 million, respectively.

Note 4. Wireless Licenses, Goodwill, and Other Intangible Assets

Wireless Licenses
Changes in theThe carrying amountamounts of our Wireless licenses, as well as wireless spectrum for which licenses had not yet been received, are as follows:
At September 30,At December 31,
(dollars in millions)20212020
Wireless licenses$145,767 $96,097 
Deposits for wireless licenses— 2,772 
 (dollars in millions)
Balance at January 1, 2017$86,673
Acquisitions (Note 2)108
Capitalized interest on wireless licenses361
Reclassifications, adjustments and other741
Balance at September 30, 2017$87,883

Reclassifications, adjustments and other includes $1.0 billion received in exchanges of wireless licenses, offset by $0.3 billion of wireless licenses that are classified as Assets held for sale on our condensed consolidated balance sheet at September 30, 2017.


At September 30, 2017,2021 and 2020, approximately $10.0$54.8 billion and $6.9 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. We recorded approximately $1.1 billion and $171 million of capitalized interest on wireless licenses for the nine months ended September 30, 2021 and 2020, respectively.


In July 2021, we received the wireless licenses won in connection with the FCC's auction for C-Band wireless spectrum, Auction 107. As a result, these wireless licenses, including capitalized interest, were reclassified from Deposits for wireless licenses to Wireless licenses in our condensed consolidated balance sheet. Refer to Note 3 for additional information regarding spectrum license transactions.

In the first quarter of 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, Auction 103. 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) in 2020. The new reconfigured licenses were received in the second quarter 2020 and had a value of $3.4 billion.

During the nine months ended September 30, 2021, we renewed various wireless licenses in accordance with FCC regulations. The average remaining renewal period for our wirelessthese licenses portfolio was 5.4 years as10 years.

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Goodwill
Changes in the carrying amount of Goodwill are as follows:
(dollars in millions)ConsumerBusinessOtherTotal
Balance at January 1, 2021 (1)
$17,222 $7,535 $16 $24,773 
Acquisitions (2)
92 — 37 129 
Reclassifications, adjustments and other3 (17)(1)(15)
Balance at September 30, 2021 (1)
$17,317 $7,518 $52 $24,887 
(dollars in millions)Wireless
 Wireline
 Other
 Total
Balance at January 1, 2017$18,393
 $3,784
 $5,028
 $27,205
Acquisitions (Note 2)4
 443
 1,068
 1,515
Reclassifications, adjustments and other—
 1
 4
 5
Balance at September 30, 2017$18,397
 $4,228
 $6,100
 $28,725
(1) Goodwill is net of accumulated impairment charges of $4.8 billion, related to our historical Media reporting unit, which included Verizon Media. On September 1, 2021, we completed the sale of Verizon Media. See Note 3 for additional information.

At September 30, 2017, we recognized preliminary(2) The change in goodwill of $1.0 billion in Corporatedue to acquisitions is related to Bluegrass and other as a result of the acquisition of Yahoo’s operating business, and $0.4 billion in Wireline as a result of the acquisition of XO.insignificant transactions. See Note 23 for additional information.


Other Intangible Assets
The following table displays the composition of Other intangible assets, net:net as well as the respective amortization period:
 At September 30, 2021At December 31, 2020
(dollars in millions)
Gross (1)
Amount
Accumulated
Amortization		Net
Amount		Gross
Amount		Accumulated
Amortization		Net
Amount
Customer lists (8 to 13 years)$1,933 $(1,033)$900 $4,021 $(1,961)$2,060 
Non-network internal-use software (5 to 7 years)20,525 (14,524)6,001 21,685 (15,104)6,581 
Other (4 to 25 years)869 (748)121 1,771 (999)772 
Total$23,327 $(16,305)$7,022 $27,477 $(18,064)$9,413 
 At September 30, 2017  At December 31, 2016 
(dollars in millions)
Gross
Amount

 
Accumulated
Amortization

 
Net
Amount

 
Gross
Amount

 
Accumulated
Amortization

 
Net
Amount

Customer lists (5 to 13 years)$4,062
 $(623) $3,439
 $2,884
 $(480) $2,404
Non-network internal-use software (5 to 7 years)17,663
 (11,922) 5,741
 16,135
 (10,913) 5,222
Other (2 to 25 years)2,529
 (716) 1,813
 1,854
 (583) 1,271
Total$24,254
 $(13,261) $10,993
 $20,873
 $(11,976) $8,897

At September 30, 2017, we recognized preliminary other(1) Other intangible assets are net of $2.5 billion in Corporate and otherassets disposed as a result of the acquisition of Yahoo’s operating business, and $0.3 billion in Wireline as a resultclosing of the acquisition of XO.Verizon Media sale on September 1, 2021. See Note 23 for additional information.



The amortization expense for Other intangible assets was as follows: 
Three Months EndedNine Months Ended
(dollars in millions)September 30,September 30,
2021$430 $1,539 
2020621 1,818 
 Three Months Ended
 Nine Months Ended
(dollars in millions)September 30,
 September 30,
2017$536
 $1,473
2016419
 1,255


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 2021$440 
20221,632 
20231,426 
20241,187 
2025994 
2026758 
Years(dollars in millions)
Remainder of 2017$547
20182,036
20191,763
20201,469
20211,239
20221,045

4.DebtNote 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, and other various types of assets for use in our operations. Our leases have remaining lease terms ranging from 1 year to 30 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.
Changes
In April 2021, Verizon executed agreements that modified the tenure and payment terms for certain existing cell tower operating leases to support the build out of our fifth generation wireless network.

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The components of net lease cost were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)Classification2021202020212020
Operating lease cost (1)
Cost of services
Selling, general and administrative expense		$1,332 $1,279 $3,917 $3,766 
Finance lease cost:
Amortization of right-of-use assetsDepreciation and amortization expense65 9 198 300 
Interest on lease liabilitiesInterest expense9 9 26 29 
Short-term lease cost (1)
Cost of services
Selling, general and administrative expense		7 5 16 17 
Variable lease cost (1)
Cost of services
Selling, general and administrative expense		75 74 234 226 
Sublease incomeService revenues and other(47)(72)(144)(216)
Total net lease cost$1,441 $1,304 $4,247 $4,122 
(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 or equipment that the rent is being paid on. Refer to the consolidated financial statements included in Verizon's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information. Variable lease costs represent payments that are dependent on a rate or index, or on usage of the asset.

The Company's maturity analysis of operating and finance lease liabilities as of September 30, 2021 were as follows:
(dollars in millions)
YearsOperating LeasesFinance Leases
Remainder of 2021$1,085 $107 
20224,233 399 
20234,017 337 
20243,760 268 
20253,380 149 
Thereafter14,661 111 
Total lease payments31,136 1,371 
Less interest4,023 70 
Present value of lease liabilities27,113 1,301 
Less current obligation3,606 393 
Long-term obligation at September 30, 2021$23,507 $908 

Note 6. Debt
Significant Debt Transactions
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.

The following tables show the significant transactions involving the senior unsecured debt securities of Verizon and its subsidiaries that occurred during the nine months ended September 30, 2017 are as follows:2021.

(dollars in millions)
Debt 
Maturing
within One
Year

 
Long-term
Debt

 Total
Balance at January 1, 2017$2,645
 $105,433
 $108,078
Proceeds from long-term borrowings65
 21,850
 21,915
Proceeds from asset-backed long-term borrowings—
 2,878
 2,878
Repayments of long-term borrowings and capital leases obligations(4,503) (11,954) (16,457)
Decrease in short-term obligations, excluding current maturities(160) —
 (160)
Reclassifications of long-term debt3,945
 (3,945) —
Other188
 1,055
 1,243
Balance at September 30, 2017$2,180
 $115,317
 $117,497

February Exchange Offers and Cash Offers
In February 2017, we completed private
(dollars in millions)Principal Amount ExchangedPrincipal Amount Issued
Verizon 0.750% - 4.150% notes and floating rate notes, due 2024 - 2026$4,480 $— 
Verizon 2.355% notes due 2032 (1)
— 4,664 
Three and Nine Months Ended September 30, 2021 total (2)
$4,480 $4,664 
(1) The principal amount issued in exchange and tender offers for 18 seriesdoes not include either an insignificant amount of notes issued by Verizon Communications (February Old Notes) for (i)cash paid in lieu of the issuance of fractional new notes issued by Verizon Communications (and, for certain series, cash) (February Exchange Offers) or (ii) cash (February Cash Offers). The February Old Notes had coupon rates ranging from 1.375% to 8.950% and maturity dates ranging from 2018 to 2043. In connection with the February Exchange Offers, we issued $3.2 billion aggregate principal amount of Verizon Communications 2.946% Notes due 2022, $1.7 billion aggregate principal amount of Verizon Communications 4.812% Notes due 2039 and $4.1 billion aggregate principal amount of Verizon Communications 5.012% Notes due 2049, plus applicable cash of $0.6 billion, in exchange for $8.3 billion aggregate principal amount of February Old Notes. In connection with the February Cash Offers, we paid $0.5 billion cash to purchase $0.5 billion aggregate principal amount of February Old Notes. We subsequently purchased an additional $0.1 billion aggregate principal amount of February Old Notes for $0.1 billion cash, from certain holders whose tenders of notes in the February Cash Offers had been rejected. In addition to the exchange or purchase price, any accrued and unpaid interest on Old February Notes was paid at settlement.

Term Loan Credit Agreement
In March 2017, we prepaid $1.7 billion of the outstanding $3.3 billion term loan that had an original maturity date of July 2019. During April 2017, we repaid the remaining outstanding amount under the term loan agreement.

March Tender Offers
In March 2017, we completed tender offers for 30 series of notes issued by Verizon Communications and certain of its subsidiaries with coupon rates ranging from 5.125% to 8.950% and maturity dates ranging from 2018 to 2043 (March Tender Offers). In connection with the March Tender Offers, we purchased $2.8 billion aggregate principal amount of Verizon Communications notes, $0.2 billion aggregate principal amount of our operating telephone company subsidiary debentures and $0.1 billion aggregate principal amount of GTE LLC notes for total cash consideration of $3.8 billion. In addition to the purchase price, any accrued and unpaid interest on the purchasedold notes was paidaccepted for exchange to the date of purchase.exchange.

August Exchange Offers and Cash Offers
In August 2017, we completed private(2) The debt exchange and tender offers above meet the criteria to be accounted for 17 seriesas a modification of notes issued by Verizon Communications and GTE LLC (August Old Notes) for (i) new notes issued by Verizon Communications (and, for certain series, cash) or (ii) cash (August Exchange Offers and Cash Offers). The August Old Notes had coupon rates ranging from 1.375% to 8.750%, and maturity dates ranging from 2018 to 2023. In connection withdebt. As a result, the August Exchange Offers and Cash Offers, we issued $4.0 billion of Verizon Communications 3.376% Notes due 2025, in exchange for $4.0 billion aggregate principal amount of August Old Notes and paid $3.0 billion cash to purchase $3.0 billion aggregate principal amount of August Old Notes. In addition to the exchange or purchase price, any accrued and unpaid interest on Old August Notes was paid at settlement.
August Tender Offers
In August 2017, we completed tender offers for 29 series of notes issued by Verizon Communications and certain of its subsidiaries with coupon rates ranging from 5.050% to 8.950% and maturity dates ranging from 2022 to 2043 (August Tender Offers). In connection with the August Tender Offers, we purchased $1.5 billion aggregate principal amount of Verizon Communications notes, $0.1 billion aggregate principal amount of our operating telephone company subsidiary debentures, $0.2 billion aggregate principal amount of Alltel Corporation notes, and an insignificant amount of GTE LLC notes, for total cash consideration of $2.1 billion. In addition to the purchase price, any accrued and unpaid interest on the purchased notes was paid to the date of purchase.
Debt Issuances and Redemptions
During February 2017, we redeemed $0.2 billion of the $0.6 billion 6.940% GTE LLC Notes due 2028 at 124.8%excess of the principal amount of new notes issued over the principal amount of notes repurchased (see “Early Debt Redemptions”).exchanged of $184 million was recorded as a discount to Long-term debt in the condensed consolidated balance sheets.


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Repayments, Redemptions and Repurchases
(dollars in millions)Principal Repaid/ Redeemed/ Repurchased
Amount Paid (1)
Three Months Ended June 30, 2021
Verizon 2.946% notes due 2022$713 $730 
Verizon 2.450% notes due 2022794 819 
Verizon 5.150% notes due 20233,190 3,519 
Open market repurchases of various Verizon and subsidiary notes1,994 2,440 
Three Months Ended June 30, 2021 total6,691 7,508 
Nine Months Ended September 30, 2021 total$6,691 $7,508 
(1) Represents amount paid to repay, redeem, or repurchase, excluding interest or dividend.

During February 2017,October 2021, we issuednotified investors of our intention to redeem in November 2021 all of the approximately $1.5 billion$478 million outstanding aggregate principal amount of 4.950% Notes4.150% notes due 2047. The issuance of these notes resulted in cash2024.

Issuances
(amounts in millions)Principal Amount Issued
Net Proceeds (1)
Three Months Ended March 31, 2021
Verizon 0.750% notes due 2024$1,750 $1,746 
Verizon floating rate (Compounded SOFR(2) + 0.500%) notes due 2024
750 748 
Verizon 1.450% notes due 20262,750 2,737 
Verizon floating rate (Compounded SOFR(2) + 0.790%) notes due 2026
750 748 
Verizon 2.100% notes due 20283,000 2,988 
Verizon 2.550% notes due 20314,250 4,216 
Verizon 3.400% notes due 20413,750 3,726 
Verizon 3.550% notes due 20514,500 4,426 
Verizon 3.700% notes due 20613,500 3,439 
Verizon 0.375% notes due 2029 (3)
€1,000 1,186 
Verizon 0.750% notes due 2032 (3)
€1,000 1,181 
Verizon 1.125% notes due 2035 (3)
€750 878 
Verizon 2.375% notes due 2028 (3)
C$1,000 800 
Verizon 4.050% notes due 2051 (3)
C$500 399 
Verizon 2.350% notes due 2028 (3)
A$600 463 
Verizon 3.000% notes due 2031 (3)
A$500 385 
Verizon 3.850% notes due 2041 (3)
A$150 116 
Verizon 0.193% bonds due 2028 (3)
CHF375 403 
Verizon 0.555% bonds due 2031 (3)
CHF325 349 
Three Months Ended March 31, 2021 total$30,934 
Three Months Ended September 30, 2021
Verizon 2.850% notes due 2041 (4)
$1,000 $991 
Three Months Ended September 30, 2021 total$1,000 $991 
Nine Months Ended September 30, 2021 total$31,925 
(1) Net proceeds of approximately $1.5 billion,were net of underwriting discounts and other issuance costs and after reimbursement of certain expenses. Thecosts. In addition, for securities denominated in a currency other than the U.S. dollar, net proceeds were used for general corporate purposes.are shown on a U.S. dollar equivalent basis.

During March 2017, we issued $11.0 billion aggregate principal amount(2) Compounded Secured Overnight Financing Rate (SOFR) is calculated using the SOFR Index published by the Federal Reserve Bank of fixed and floating rateNew York in accordance with the terms of the notes. The issuance of these notes resultedCompounded SOFR for the interest period ending in cash proceeds of approximately $10.9 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The issuance consisted ofSeptember 2021 was 0.050%.
(3) See Note 8 for information on derivative transactions related to the following series of notes: $1.4 billion aggregate principalissuances.
(4) An amount of Floating Rate Notes due 2022, $1.85 billion aggregate principal amount of 3.125% Notes due 2022, $3.25 billion aggregate principal amount of 4.125% Notes due 2027, $3.0 billion aggregate principal amount of 5.250% Notes due 2037, and $1.5 billion aggregate principal amount of 5.500% Notes due 2047. The floating rate notes bear interest at a rate equal to the three-month London Interbank Offered Rate (LIBOR) plus 1.000% which rate will be reset quarterly. The net proceeds were primarilyfrom this green bond is expected to be used forto fund, in whole or in part, certain renewable energy projects, including new and existing investments made by us during the March Tender Offers and general corporate purposes, including discretionary contributions to our qualified pension plans of $3.4 billion. We also used certainperiod from December 1, 2020 through the maturity date of the net proceeds to finance our acquisition of Yahoo’s operating business.green bond.


During April 2017, we redeemed in whole $0.5 billion aggregate principal amount of Verizon Communications 6.100% Notes due 2018 at 104.485% of the principal amount of such notes and $0.5 billion aggregate principal amount of Verizon Communications 5.500% Notes due 2018 at 103.323% of the principal amount of such notes, plus accrued and unpaid interest to the date of redemption.Asset-Backed Debt

During May 2017, we issued $1.5 billion aggregate principal amount of Floating Rate Notes due 2020. The issuance of these notes resulted in cash proceeds of approximately $1.5 billion, net of discounts and issuance costs. The floating rate notes bear interest at a rate equal to three-month LIBOR plus 0.550% which will be reset quarterly. The net proceeds were primarily used for general corporate purposes, which included the repayment of outstanding indebtedness. In addition we issued CHF 0.6 billion aggregate principal amount of 0.375% Bonds due 2023, and CHF 0.4 billion aggregate principal amount of 1.000% Bonds due 2027. The issuance of these bonds resulted in cash proceeds of approximately $1.0 billion, net of discounts and issuance costs. The net proceeds were primarily used for general corporate purposes including the repayment of debt.

During May 2017, we initiated a retail notes program in connection with the issuance and sale from time to time of our notes that are due nine months or more from the date of issue. As of September 30, 2017 we have issued $0.7 billion of retail notes with interest rates ranging from 2.600% to 4.900% and maturity dates ranging from 2022 to 2047.

During June 2017, $1.3 billion of Verizon Communications floating rate notes matured and were repaid.

During June 2017, we redeemed in whole $0.5 billion aggregate principal amount of Verizon Communications 1.100% Notes due 2017 at 100.003% of the principal amount of such notes, plus accrued and unpaid interest to the date of redemption.

During August 2017, we issued $3.0 billion aggregate principal amount of 4.500% Notes due 2033 resulting in cash proceeds of approximately $3.0 billion, net of discounts and issuance costs. In addition, we issued the following four series of Australian Dollar (AUD) denominated notes resulting in cash proceeds of $1.7 billion net of discounts and issuance costs: AUD 0.55 billion aggregate principal amount of 3.500% Notes due 2023, AUD 0.45 billion aggregate principal amount of 4.050% Notes due 2025, AUD 0.7 billion aggregate principal amount of 4.500% Notes due 2027 and AUD 0.5 billion aggregate principal amount of Floating Rate Notes due 2023. The floating rate notes bear interest at a rate equal to the three-month Bank Bill Swap Reference Rate plus 1.220% which will be reset quarterly. In addition, we issued $1.0 billion aggregate principal amount of 5.150% Notes due 2050 resulting in cash proceeds of approximately $0.9 billion, net of discounts, issuance costs and

reimbursement of certain expenses. The proceeds of the notes issued during August 2017 were used for general corporate purposes including the repayment of debt.

During September 2017, we redeemed in whole $1.3 billion aggregate principal amount of Verizon Communications 3.650% Notes due 2018, at 101.961% of the principal amount of such notes, plus accrued and unpaid interest to the date of redemption.

Asset-Backed Debt
As of September 30, 2017,2021, the carrying value of our asset-backed debt was $7.9$9.4 billion. Our asset-backed debt includes notes (the Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facility)Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed securitizationdebt bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS
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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, we transfer device payment plan agreement receivables from Cellco Partnership (Cellco), a wholly-owned subsidiary of Verizon, 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 and residual interests, as applicable, in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.


Our asset-backed debt is secured by the transferred 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 Partnership and the Originators to the ABS Entities.


Cash collections on the device payment plan agreement receivables collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets onin our condensed consolidated balance sheets.


Proceeds from our asset-backed debt transactions deposits to the segregated accounts and payments to the Originators in respect of additional transfers of device payment plan agreement receivables are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Repayments of our asset-backed debt and related interest payments made from the segregated accounts are non-cash activities and therefore not reflected within 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 onin our condensed consolidated balance sheets.


Asset-BackedABS Notes
In March 2017,During the nine months ended September 30, 2021, we issued approximately $1.3 billion aggregate principal amount of senior and junior Asset-Backedcompleted the following ABS Notes through an ABS Entity. The Class A senior Asset-Backed Notes had an expected weighted-average life to maturity of 2.6 years at issuance and bear interest at 2.060% per annum, the Class B junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.38 years at issuance and bear interest at 2.450% per annum and the Class C junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.64 years at issuance and bear interest at 2.650% per annum.transactions:

(dollars in millions)Interest Rates %Expected Weighted-average Life to Maturity (in years)Principal Amount Issued
May 2021
A Senior class notes0.5002.99$1,500 
B Junior class notes0.6902.99119 
C Junior class notes0.8902.9981 
Total$1,700 
In June 2017, we issued approximately $1.3 billion aggregate principal amount of senior and junior Asset-Backed Notes through an ABS Entity. The Class A senior Asset-Backed Notes had an expected weighted-average life to maturity of 2.47 years at issuance and bear interest at 1.920% per annum, the Class B junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.11 years at issuance and bear interest at 2.220% per annum and the Class C junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.34 years at issuance and bear interest at 2.380% per annum.

In October 2017, we issued approximately $1.4 billion aggregate principal amount of senior and junior Asset-Backed Notes through an ABS Entity. The Class A-1a senior Asset-Backed Notes had an expected weighted-average life to maturity of 2.48 years at issuance and bear interest at 2.060% per annum, the Class A-1b senior Asset-Backed Notes had an expected weighted -average life to maturity of 2.48 years at issuance and bear interest at one-month LIBOR + 0.270%, which rate will be reset monthly, the Class B junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.12 years at issuance and bear interest at 2.380% per annum and the Class C junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.35 years at issuance and bear interest at 2.530% per annum.
Under the terms of the Asset-Backedeach series of ABS Notes, there is a two-year revolving period that is two years or up to three years, as applicable, during which we may transfer additional receivables to the ABS Entity. During the three and nine months ended September 30, 2021, we made aggregate principal repayments of $894 million and $2.4 billion, respectively, on ABS Notes that have entered the amortization period, including principal payments made in connection with clean-up redemptions.


ABS Financing Facility
As of September 30, 2017,In March 2021, we borrowed an additional $1.0 billion under the loan agreement outstanding in connection with the ABS Financing Facility. In May 2021, the aggregate outstanding borrowings under two loansbalance of $1.5 billion was fully repaid and there was no outstanding balance under the ABS Financing Facility were approximately $2.8 billion. The ABS Financing Facility has a two year revolving period, which may be extended, during which we may transfer additional receivables to the ABS Entity. Subject to certain conditions, we may also remove receivables from the ABS Entity.


Although both loans under the ABS Financing Facility are fully drawn as of September 30, 2017, we have the right to prepay all or a portion thereof at any time without penalty, but in certain cases, with breakage costs. If we choose to prepay, the amount prepaid shall be available for further drawdowns until September 2018, except in certain circumstances.2021.


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.


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The assets and liabilities related to our asset-backed debt arrangements included onin our condensed consolidated balance sheets were as follows:
At September 30,At December 31,
(dollars in millions)20212020
Assets
Account receivable, net$8,845 $9,257 
Prepaid expenses and other1,073 1,128 
Other assets3,309 2,950 
Liabilities
Accounts payable and accrued liabilities7 8 
Debt maturing within one year4,429 4,191 
Long-term debt4,996 6,413 
 At September 30,
 At December 31,
(dollars in millions)2017
 2016
Assets   
Account receivable, net$7,395
 $3,383
Prepaid expenses and other444
 236
Other assets2,666
 2,383
    
Liabilities   
Accounts payable and accrued liabilities4
 4
Short-term portion of long-term debt633
 —
Long-term debt7,237
 4,988


See Note 57 for additional information on device payment plan agreement receivables used to secure asset-backed debt.


Long-Term Credit Facilities
As of September 30, 2017, the unused borrowing capacity under our $9.0 billion credit facility was approximately $8.9 billion.
At September 30, 2021
(dollars in millions)MaturitiesFacility CapacityUnused CapacityPrincipal Amount Outstanding
Verizon revolving credit facility (1)
2024$9,500 $9,413 N/A
Various export credit facilities (2)
2022 - 20297,500 530 $4,823 
Total$17,000 $9,943 $4,823 
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 and for general corporate purposes.credit.

We had fully drawn from(2) During the $1.0 billion equipment credit facility entered into in March 2016 insured by Eksportkreditnamnden Stockholm, Sweden (EKN), the Swedish export credit agency. As ofnine months ended September 30, 2017,2021, we had an outstanding balance of $0.9 billion to repay. We used this credit facility to finance network equipment-related purchases.

In July 2017, we entered into equipmentdrew down $470 million from these facilities. These credit facilities insured by various export credit agencies with the ability to borrow up to $4.0 billionare used to finance equipment-related purchases. TheBorrowings under certain of these facilities have borrowingsamortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.

In September 2021, we submitted an irrevocable request to borrow the remaining $530 million available through October 2019, contingent upon the amount of eligible equipment-related purchases made by Verizon. At September 30, 2017, we have not drawn on these facilities.under our export credit facilities in November 2021.


Additional Financing Activities (Non-Cash Transaction)Non-Cash Transactions
During the nine months ended September 30, 20172021 and 2020, we financed, primarily through alternative financing arrangements, the purchase of approximately $0.4$337 million and $1.3 billion, respectively, of long-lived assets consisting primarily of network equipment. AtAs of September 30, 2017, $1.12021 and December 31, 2020, $1.3 billion and $1.6 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 onin our condensed consolidated statements of cash flows.


Early Debt RedemptionsExtinguishment Losses
During both the three months ended September 30, 2021 and September 30, 2020, we did not record debt extinguishment losses. During the nine months ended September 30, 2017,2021 and 2020, we recorded early debt redemption costsextinguishment losses of $0.5$1.1 billion and $1.3 billion,$102 million, respectively.

We recognize early debt redemption costs The losses are recorded in Other income (expense), net onin our condensed consolidated statements of income.


Guarantees
We guarantee the debentures of our operating telephone company subsidiaries. As of September 30, 2017, $1.0 billion2021, $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 September 30, 2017, $0.8 billion2021, $391 million aggregate principal amount of these obligations remainremained outstanding.


Covenants

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


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5.WirelessNote 7. 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 September 30, 2021
(dollars in millions)Device payment plan agreementWireless
service
Other receivables(1)
Total
Accounts receivable$12,370 $5,055 $5,740 $23,165 
Less Allowance for credit losses573 140 257 970 
Accounts receivable, net of allowance$11,797 $4,915 $5,483 $22,195 
(1) Other receivables primarily include wireline receivables and other receivables, the allowances for which are individually insignificant.

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 standard wireless monthly bill. As of January 2017, weWe no longer offer consumersConsumer customers new fixed-term, subsidized service plans for phones.devices; 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, that continue to be recognized in our condensed consolidated balance sheets:
At September 30,At December 31,
(dollars in millions)20212020
Device payment plan agreement receivables, gross$18,991 $17,959 
Unamortized imputed interest(365)(453)
Device payment plan agreement receivables, at amortized cost18,626 17,506 
Allowance (1)
(838)(940)
Device payment plan agreement receivables, net$17,788 $16,566 
Classified in our condensed consolidated balance sheets:
Accounts receivable, net$11,797 $11,601 
Other assets5,991 4,965 
Device payment plan agreement receivables, net$17,788 $16,566 
 At September 30,
 At December 31,
(dollars in millions)2017
 2016
Device payment plan agreement receivables, gross$15,434
 $11,797
Unamortized imputed interest(716) (511)
Device payment plan agreement receivables, net of unamortized imputed interest14,718
 11,286
Allowance for credit losses(727) (688)
Device payment plan agreement receivables, net$13,991
 $10,598
    
Classified on our condensed consolidated balance sheets:   
Accounts receivable, net$9,860
 $6,140
Other assets4,131
 4,458
Device payment plan agreement receivables, net$13,991
 $10,598
(1) Includes allowance for both short-term and long-term device payment plan agreement receivables.


Included in our device payment plan agreement receivables net at both September 30, 2017,2021 and December 31, 2020, are net device payment plan agreement receivables of $10.0$12.1 billion, thatwhich have been transferred to ABS Entities and continue to be reported in our condensed consolidated balance sheet.

sheets. See Note 6 for additional information. We may offer our customers certain promotions where a customer can trade-in his or her owned device in connection withbelieve the purchase of a new device. Under these types of promotions, the customer receives a credit for thecarrying 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 atthese receivables approximate their fair value which is approximated 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 September 30, 2017, the amount of trade-in liability was insignificant.using a Level 3 expected cash flow model.


From time to time, on select devices, certain marketing promotions have been revocably offered toFor indirect channel wireless contracts with 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.

At the time of the sale of a device, 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 onin our condensed consolidated statements of income, is recognized over the financed device payment term.


Promotions
In connection with certain device payment plan agreements, we may offer a promotion to 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 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. We recognize a liability 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. At September 30, 2021 and December 31, 2020, the amount of the guarantee liability was $66 million and insignificant, respectively.

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. At September 30, 2021 and December 31, 2020, the amount of trade-in liability was $192 million and $70 million, respectively.

In addition, we may provide the customer with additional future billing credits that will be applied against the customer’s monthly bill as long as service is maintained. These future billing credits are accounted for as consideration payable to a customer and are included in the determination of total transaction price, resulting in a contract liability.

Device payment plan agreement receivables, net, does not reflect the trade-in liability, additional future credits or the guarantee liability.

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Origination of 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 abilityreliability to pay inmake future payments. Customers 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 future. Externalcustomers 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. This includes an account level spending limit and a specifiedmaximum amount of credit allowed per device for Consumer customers or a required down payment percentage for Business customers.

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

The following table presents device payment plan agreement receivables, originated from customers assigned toat amortized cost, as of September 30, 2021, by credit classes requiring no downquality indicator and year of origination:
Year of Origination
(dollars in millions)20212020
Prior to 2020(1)
Total
New customers$1,846 $869 $75 $2,790 
Existing customers9,980 5,388 468 15,836 
Total$11,826 $6,257 $543 $18,626 
(1) Includes accounts that have been suspended at a point in time.

The data presented in the table above was last updated on September 30, 2021.

We assess indicators for the quality of our wireless service receivables portfolio as one overall pool. As of September 30, 2021, wireless service receivables, at amortized cost, originating in 2021 and 2020 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 represent the lowest risk. Deviceplan agreement and wireless service receivables portfolios.

For device payment plan agreement receivables, originatedwe record bad debt expense based on a default and loss calculation using our proprietary loss model. The expected loss rate is determined based on customer credit scores and other qualitative factors as noted above. The loss rate is assigned individually on a customer by customer basis and the custom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted-average loss rate used for determining the allowance balance.

We monitor the collectability of our wireless service receivables as one overall pool. Wireline service receivables are disaggregated and pooled by the following customer groups: consumer, small and medium business, global enterprise, public sector and wholesale. For wireless service receivables and wireline consumer and small and medium business receivables, the allowance is calculated based on a 12 month rolling average write-off balance multiplied by the average life-cycle of an account from customers assignedbilling to write-off. The risk of loss is assessed over the contractual life of the receivables and is adjusted based on the historical loss amounts for current and future conditions based on management’s qualitative considerations. For global enterprise, public sector and wholesale wireline receivables, the allowance for credit classes requiring a downlosses is based on historical write-off experience and individual customer credit risk, if applicable.

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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, 2021$940 $262 
Current period provision for expected credit losses349 126 
Write-offs charged against the allowance(482)(296)
Recoveries collected31 48 
Balance at September 30, 2021$838 $140 
(1) Includes allowance for both short-term and long-term device payment represent a higher risk.plan agreement receivables.



Subsequent to origination, Verizon Wireless monitorsWe 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 whichthat 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 considersand wireless service receivables, we 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. The risk class determines the speed and severity of the collections effort including initiatives taken to facilitate customer payment.


The balance and aging of the device payment plan agreement receivables, on a gross basisat amortized cost, were as follows:
 At September 30,
 At December 31,
(dollars in millions)2017
 2016
Unbilled$14,508
 $11,089
Billed:   
Current760
 557
Past due166
 151
Device payment plan agreement receivables, gross$15,434
 $11,797

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:
(dollars in millions)2017
 2016
Balance at January 1,$688
 $444
Bad debt expense477
 437
Write-offs(438) (347)
Allowance related to receivables sold—
 59
Other—
 8
Balance at September 30,$727
 $601

Sales of Wireless Device Payment Plan Agreement Receivables
During 2015 and 2016, we established programs pursuant to a Receivables Purchase Agreement, or RPA, to sell from time to time, on an uncommitted basis, eligible device payment plan agreement receivables to a group of primarily relationship banks (Purchasers) on both a revolving (Revolving Program) and non-revolving (Non-Revolving Program) basis. The receivables sold under the RPA are no longer considered assets of Verizon. The outstanding portfolio of device payment plan agreement receivables derecognized from our condensed consolidated balance sheets, but which we continue to service, was $0.6 billion at September 30, 2017 and $6.4 billion at September 30, 2016. At September 30, 2017, the total portfolio of device payment plan agreement receivables, including derecognized device payment plan agreement receivables that we are servicing was $16.0 billion.

Under the Non-Revolving Program, we transferred eligible device payment plan agreement receivables to wholly-owned subsidiaries that are bankruptcy remote special purpose entities (Sellers). The Sellers sold the receivables to the Purchasers for upfront cash proceeds and additional consideration upon settlement of the receivables (the deferred purchase price). As of September 30, 2017, no sold receivables remain outstanding under the Non-Revolving program. Under the Revolving Program, the Sellers sold eligible device payment plan agreement receivables on a revolving basis, subject to a maximum funding limit, to the Purchasers. Sales of eligible receivables by the Sellers, once initiated, generally occurred and were settled on a monthly basis. Customer payments made towards receivables sold under the Revolving Program were available to purchase additional eligible device payment plan agreement receivables originated during the revolving period. We elected to end the revolving period in July 2016.

We continue to bill and collect on the receivables in exchange for a monthly servicing fee, which is insignificant. Eligible receivables under the RPA excluded device payment plan agreements where a new customer was required to provide a down payment. The sales of receivables under the RPA did not have a significant impact on our condensed consolidated statements of income. The cash proceeds received from the Purchasers were recorded within Cash flows provided by operating activities on our condensed consolidated statements of cash flows.

There were no sales of device payment plan agreement receivables under the Revolving Program or the Non-Revolving Program during the three and nine months ended September 30, 2017. There were no sales of device payment plan agreement receivables during the three months ended September 30, 2016. During the nine months ended September 30, 2016, we sold $3.3 billion of receivables, net of allowances and imputed interest, under the Revolving Program. We received cash proceeds from new transfers of $2.0 billion and cash proceeds from reinvested collections of $0.9 billion and recorded a deferred purchase price of $0.4 billion.

Deferred Purchase Price
Under the RPA, the deferred purchase price was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device trade-in considers prices expected to be offered to us by independent third parties. This estimate contemplates changes in value after the launch of a device. The fair value measurements are considered to be Level 3 measurements within the

fair value hierarchy. The collection of the deferred purchase price is contingent on collections from customers. Collections, which were returned as deferred purchase price and recorded within Cash flows provided by operating activities on our condensed consolidated statements of cash flows, were insignificant and $0.6 billion, during the three and nine months ended September 30, 2017, respectively, and $0.4 billion and $0.5 billion during the three and nine months ended September 30, 2016, respectively. Collections, recorded within Cash flows used in investing activities on our condensed consolidated statements of cash flows, were $0.5 billion during the three and nine months ended September 30, 2017, respectively, and insignificant during both the three and nine months ended September 30, 2016. At September 30, 2017, our deferred purchase price receivable, which is held by the Sellers, was comprised of $0.5 billion included within Prepaid expenses and other in our condensed consolidated balance sheet. At December 31, 2016, our deferred purchase price receivable was comprised of $1.2 billion included within Prepaid expenses and other and $0.4 billion included within Other assets in our condensed consolidated balance sheet.

Variable Interest Entities (VIEs)
Under the RPA, the Sellers’ sole business consists of the acquisition of the receivables from Cellco Partnership and certain other affiliates of Verizon and the resale of the receivables to the Purchasers. The assets of the Sellers are not available to be used to satisfy obligations of any Verizon entities other than the Sellers. We determined that the Sellers are VIEs as they lack sufficient equity to finance their activities. Given that we have the power to direct the activities of the Sellers that most significantly impact the Sellers’ economic performance, we are deemed to be the primary beneficiary of the Sellers. As a result, we consolidate the assets and liabilities of the Sellers into our condensed consolidated balance sheets.

Continuing Involvement
Verizon has continuing involvement with the sold receivables as it services the receivables. We continue to service the customer and their related receivables on behalf of the Purchasers, including facilitating customer payment collection, in exchange for a monthly servicing fee. While servicing the receivables, the same policies and procedures are applied to the sold receivables that apply to owned receivables, and we continue to maintain normal relationships with our customers. The credit quality of the customers we continue to service is consistent throughout the periods presented. To date, we have collected and remitted to the Purchasers approximately $10.1 billion, net of fees. At September 30, 2017, the amount remaining to be remitted to the Purchasers is insignificant. Credit losses on receivables sold were insignificant during both the nine months ended September 30, 2017 and 2016.

In addition, we have continuing involvement related to the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the agreements. The Company’s maximum exposure to loss related to the involvement with the Sellers is limited to the amount of the outstanding deferred purchase price, which was $0.5 billion as of September 30, 2017. The maximum exposure to loss represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby the Company would not receive the portion of the proceeds withheld by the Purchasers. As we believe the probability of these circumstances occurring is remote, the maximum exposure to loss is not an indication of the Company’s expected loss.
At September 30,
6.(dollars in millions)2021
Unbilled$17,473
Billed:
Current973
Past due180
Device payment plan agreement receivables, at amortized cost$18,626

Note 8. 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 atas of September 30, 2017:2021:

(dollars in millions)
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:
Prepaid expenses and other:
Interest rate swaps$— $217 $— $217 
Cross currency swaps— 10 — 10 
Other assets:
Fixed income securities— 448 — 448 
Interest rate swaps— 283 — 283 
Cross currency swaps— 620 — 620 
Total$— $1,578 $— $1,578 
Liabilities:
Other current liabilities:
Interest rate swaps$— $4 $— $4 
Foreign exchange forwards— 12 — 12 
Cross currency swaps— 197 — 197 
Forward starting interest rate swaps— 281 — 281 
Other liabilities:
Interest rate swaps— 612 — 612 
Cross currency swaps— 1,165 — 1,165 
Total$— $2,271 $— $2,271 

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(dollars in millions)
Level 1(1)

 
Level 2(2)

 
Level 3(3)

 Total
Assets:       
Other assets:       
Equity securities$79
 $—
 $—
 $79
Fixed income securities—
 378
 —
 378
Interest rate swaps—
 162
 —
 162
Cross currency swaps—
 333
 —
 333
Interest rate cap—
 3
 —
 3
Total$79
 $876
 $—
 $955
        
Liabilities:       
Other liabilities:       
Interest rate swaps$—
 $183
 $—
 $183
Cross currency swaps—
 1,058
 —
 1,058
Total$—
 $1,241
 $—
 $1,241
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The following table presents the balances of assets and liabilities measured at fair value on a recurring basis atas of December 31, 2016:2020:

(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$— $12 $— $12 
Other assets:       Other assets:
Equity securities$123
 $—
 $—
 $123
Fixed income securities10
 566
 —
 576
Fixed income securities— 459 — 459 
Interest rate swaps—
 71
 —
 71
Interest rate swaps— 787 — 787 
Cross currency swaps—
 45
 —
 45
Cross currency swaps— 1,446 — 1,446 
Interest rate caps—
 10
 —
 10
Total$133
 $692
 $—
 $825
Total$— $2,704 $— $2,704 
       
Liabilities:       Liabilities:
Other current liabilities:Other current liabilities:
Forward starting interest rate swapsForward starting interest rate swaps$— $409 $— $409 
Foreign exchange forwardsForeign exchange forwards— 2 — 2 
Other liabilities:       Other liabilities:
Interest rate swaps$—
 $236
 $—
 $236
Interest rate swaps— 303 — 303 
Cross currency swaps—
 1,803
 —
 1,803
Cross currency swaps— 196 — 196 
Forward starting interest rate swapsForward starting interest rate swaps— 388 — 388 
Total$—
 $2,039
 $—
 $2,039
Total$— $1,298 $— $1,298 
(1)Quoted prices in active markets for identical assets or liabilities.
(1)
quoted prices in active markets for identical assets or liabilities
(2)
observable
(2)Observable inputs other than quoted prices in active markets for identical assets and liabilities
(3)
no observable pricing inputs in the market

Equity securities consist of investments in common stock of domestic and international corporations measured using quoted prices in active markets.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 September 30, 2021 and December 31, 2020, the carrying amount of our investments without readily determinable fair values were $843 million and $402 million, respectively. During both the three and nine months ended September 30, 2021, there were insignificant adjustments due to observable price changes and there were insignificant impairment charges. Cumulative adjustments due to observable price changes and impairment charges were $115 million and $50 million, respectively.

Fixed income securities consist primarily of investments in municipal bonds as well as U.S. Treasury securities. We usebonds. The valuation of the fixed income securities are based on the quoted prices for similar assets in active markets for our U.S. Treasury securities, thereforeor identical assets in inactive markets or models that apply inputs from observable market data. The valuation determines that these securities are classified as Level 1. For all other 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 derivative instruments are recorded on a gross basis.


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 nine months ended September 30, 2017 and 2016.


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 capitalfinance leases, was as follows:
 Fair Value
(dollars in millions)Carrying
Amount		Level 1Level 2Level 3Total
At December 31, 2020$127,778 $103,967 $52,785 $— $156,752 
At September 30, 2021149,674 113,042 59,177 — 172,219 
 At September 30,  At December 31, 
 2017  2016 
(dollars in millions)
Carrying
Amount

 Fair Value
 
Carrying
Amount

 Fair Value 
Short- and long-term debt, excluding capital leases$116,512
 $128,096
 $107,128
 $117,584


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, swaptions and foreign exchange forwards. We do not hold derivatives for trading purposes.

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The following table sets forth the notional amounts of our outstanding derivative instruments:
At September 30,At December 31,
(dollars in millions)20212020
Interest rate swaps$17,756 $17,768 
Cross currency swaps32,502 26,288 
Forward starting interest rate swaps1,000 2,000 
Foreign exchange forwards870 1,405 
 At September 30,
 At December 31,
 2017
 2016
(dollars in millions)Notional Amount
 Notional Amount 
Interest rate swaps$20,168
 $13,099
Cross currency swaps15,666
 12,890
Interest rate caps2,840
 2,540


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, 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 onin 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 first quarterthree months ended September 30, 2021, we did not enter into any interest rate swaps and we settled interest rate swaps with a total notional value of 2017,$851 million. During the nine months ended September 30, 2021, we entered into and settled interest rate swaps with a total notional value of $2.6 billion and $3.5 billion, respectively. During the three months ended September 30, 2020, we entered into interest rate swaps with a total notional value of $3.5 billion.

$1.1 billion and we did not settle any interest rate swaps. During the third quarter of 2017,nine months ended September 30, 2020, we entered into interest rate swaps with a total notional value of $4.0 billion and settled interest rate swaps with a total notional value of $0.5 billion.$3.5 billion and $2.4 billion, respectively.


The ineffective portion of ourthese interest rate swaps waswere zero and an insignificant amount of gains for the three and nine months ended September 30, 2017 and 2016.

Forward Interest Rate Swaps
In order to manage our exposure to future2021, respectively. The ineffective portion of these interest rate changes, we previously entered into forward interest rate swaps. We designated these contracts as cash flow hedges. During the third quarter of 2016, we settled all outstanding forward interest rate swaps. Duringswaps were insignificant losses and gains for the three and nine months ended September 30, 2016, pre-tax losses of an insignificant amount and $0.2 billion, respectively,2020, respectively.

The following amounts were recognizedrecorded in Other comprehensive income (loss).Long-term debt in our condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges:

At September 30,At December 31,
(dollars in millions)20212020
Carrying amount of hedged liabilities$17,223 $18,849 
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities(29)557 
Cumulative amount of fair value hedging adjustment remaining for which hedge accounting has been discontinued603 627 

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.


During the second quarter of 2017,three months ended September 30, 2021, we did not enter into or settle any cross currency swaps. During the nine months ended September 30, 2021, we entered into cross currency swaps with a total notional value of $1.0 billion.

$6.2 billion and we did not settle any cross currency swaps. During the third quarterthree and nine months ended September 30, 2021, a pre-tax loss of 2017,$1.1 billion and $2.0 billion, respectively, was recognized in Other comprehensive income (loss). During the three months ended September 30, 2020, we did not enter into or settle any cross currency swaps. During the nine months ended September 30, 2020, we entered into cross currency swaps with a total notional value of approximately $1.8$3.3 billion and we settled cross currency swaps with a total notional value of $1.6 billion.

During the three and nine months ended September 30, 2017,2020, a pre-tax gainsgain of $0.5$1.5 billion and $1.0 billion, respectively, were recognized in Other comprehensive income (loss). During the three and nine months ended September 30, 2016,a pre-tax gainsloss of $0.3 billion and $0.1 billion$420 million, respectively, were recognized in Other comprehensive income (loss). A portion of the gains and losses 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. See Note 10 for additional information.


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 both the three and nine months ended September 30, 2021, we did not enter into any new forward starting interest rate swaps. During the three months ended September 30, 2021, we did not settle any forward starting interest rate swaps. During the nine months ended September 30, 2021, we settled forward starting interest rate swaps with a total notional value of $1.0 billion. During both the three and nine months ended September 30, 2020, we did not enter into any new forward starting interest rate swaps. During the three months ended September 30, 2020, we did not settle any forward starting interest rate swaps. During the nine months ended September 30, 2020, we settled forward starting interest rate swaps with a total notional value of $1.0 billion. During the nine months ended September 30, 2021 and 2020,
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we paid $237 million and $293 million, respectively, for the settlement of forward starting interest rate swaps, which was recorded in Other, net within Cash Flow from Operating Activities. During the three and nine months ended September 30, 2021, an insignificant pre-tax gain and pre-tax gain of $279 million, respectively, were recognized in Other comprehensive income (loss), resulting from interest rate movements. During the three and nine months ended September 30, 2020, a pre-tax gain of $141 million and a pre-tax loss of $668 million, respectively, were recognized in Other comprehensive income (loss), resulting from interest rate movements.

Treasury Rate Locks
We enter into treasury rate locks to mitigate our future interest rate risk. During both the three months ended September 30, 2021 and 2020, we did not enter into or settle any treasury rate locks designated as cash flow hedges, and we did not recognize any amount in Other comprehensive income (loss). During the nine months ended September 30, 2021, we entered into and settled treasury rate locks designated as cash flow hedges with a total notional value of $4.7 billion, and we recognized $251 million in Other comprehensive income (loss). During the nine months ended September 30, 2021, we received $251 million from the settlement of treasury rate locks designated as cash flow hedges, which was recorded in Other, net within Cash Flow from Operating Activities. During the nine months ended September 30, 2020, we entered into and settled treasury rate locks designated as cash flow hedges with a total notional value of $500 million, and we recognized an insignificant pre-tax loss in Other comprehensive income (loss).

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. In March 2021, we de-designated the existing net investment hedge and designated a new net investment hedge using a different Euro-denominated note. The notional amount of the Euro-denominated debt designated as a net investment hedge was $0.9 billion and $0.8 billion at€750 million as of both September 30, 20172021 and December 31, 2016, respectively.2020.


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


Interest Rate CapsForeign Exchange Forwards
We enter into interest rate capsBritish Pound Sterling and Euro foreign exchange forwards to mitigate our interest exposureforeign exchange rate risk related to interest rate increases on our ABS Financing Facility.non-functional currency denominated monetary assets and liabilities of international subsidiaries, as well as foreign exchange risk related to debt settlements. During the second quarter of 2017,three months ended September 30, 2021, we entered into interest rate capsand settled foreign exchange forwards with a total notional value of $0.3 billion.$2.7 billion and $3.4 billion, respectively. During the nine months ended September 30, 2021, we entered into and settled foreign exchange forwards with a total notional value of $10.0 billion and $10.5 billion, respectively. During the three months ended September 30, 2020, we entered into and settled foreign exchange forwards with a total notional value of $3.4 billion and $3.1 billion, respectively. During the nine months ended September 30, 2020, we entered into and settled foreign exchange forwards with a total notional value of $10.3 billion and $10.2 billion, respectively. During the three and nine months ended September 30, 2017,2021, pre-tax losses of an insignificant amount and $51 million, respectively, were recognized in Other income (expense), net. During the three and nine months ended September 30, 2020, pre-tax gains of an insignificant amount and $89 million, respectively, were recognized in Other income (expense), net.

Treasury Rate Locks
We enter into treasury rate locks to mitigate our future interest rate risk. During both the three and nine months ended September 30, 2021, we did not enter into or settle any treasury rate locks that were not designated in hedging relationships, and we did not recognize any amount in our condensed consolidated financial statements. During the three months ended September 30, 2020, we did not enter into or settle any treasury rate locks, and we did not recognize any amount in our condensed consolidated financial statements. During the nine months ended September 30, 2020, we entered into and settled treasury rate locks with a total notional value of $1.6 billion, and we recognized an insignificant increasepre-tax gain in Interest expense.


Swaptions
We enter into swaptions to achieve a targeted mix of fixed and variable rate debt. During both the three and nine months ended September 30, 2021, we sold payer swaptions with a notional amount of $1.0 billion to enter into future pay-floating interest rate swaps indexed to SOFR that were not designated in hedging relationships. Losses for both the three and nine months ended September 30, 2021 were insignificant.

In October 2021, we sold payer swaptions with a notional amount of $1.0 billion to enter into future pay-floating interest rate swaps indexed to SOFR that were not designated in hedging relationships.

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 also major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements (CSA) which provide rules for collateral exchange. Our CSAs generally require collateralized arrangements withThe CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in connection with uncleared derivatives, butoutstanding
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positions as ofcompared to established thresholds and changes in credit ratings. We do not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments recognized at fair value. At September 30, 2017,2021, we have entered into amendmentsheld and posted an insignificant amount of collateral related to derivative contracts under collateral exchange agreements, which were recorded as Other current liabilities and Prepaid expenses and other, respectively, in our CSA agreements with substantially allcondensed consolidated balance sheet. At December 31, 2020, we held $0.2 billion of collateral related to derivative contracts under collateral exchange arrangements, which were recorded as Other current liabilities in our counterparties that suspend the requirement for cash collateral posting for a specified period of time by both counterparties.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. During the first and second quarter of 2017, we paid an insignificant amount of cash to extend certain of such amendments to certain collateral exchange arrangements. As a result of the amendments to the CSA agreements, we did not post any collateral at September 30, 2017. At December 31, 2016, we posted collateral of approximately $0.2 billion related to derivative contracts under collateral exchange arrangements, which were recorded as Prepaid expenses and other in our condensed consolidated balance sheet.


7.Stock-Based CompensationNote 9. Employee Benefits

Verizon Communications Long-Term Incentive Plan
In May 2017, Verizon’s shareholders approved the 2017 Long-Term Incentive Plan (the 2017 Plan) and terminated Verizon’s authority to grant new awards under the Verizon 2009 Long-Term Incentive Plan (the 2009 Plan). Consistent with the 2009 Plan, the 2017 Plan provides for broad-based equity grants to employees, including executive officers, and permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other awards. Upon approval of the 2017 Plan, Verizon reserved the 91 million shares that were reserved but not issued under the 2009 Plan for future issuance under the 2017 Plan.

Restricted Stock Units
The 2009 Plan and 2017 Plan provide for grants of Restricted Stock Units (RSUs). For RSUs granted prior to 2017, vesting generally occurs at the end of the third year. For the 2017 grants, vesting generally occurs in three equal installments on each anniversary of the grant date. The RSUs are generally classified as equity awards because the RSUs will be paid in Verizon common stock upon vesting. The RSU equity awards are measured using the grant date fair value of Verizon common stock and are not remeasured at the end of each reporting period. Dividend equivalent units are also paid to participants at the time the RSU award is paid, and in the same proportion as the RSU award.

In connection with our acquisition of Yahoo’s operating business, on the closing date of the Transaction each unvested and outstanding Yahoo RSU award that was held by an employee who became an employee of Verizon was replaced with a Verizon RSU award, which is generally payable in cash upon the applicable vesting date. These awards are classified as liability awards and are measured at fair value at the end of each reporting period.

Performance Stock Units
The 2009 Plan and 2017 Plan also provide for grants of Performance Stock Units (PSUs) that generally vest at the end of the third year after the grant. As defined by the 2009 Plan and 2017 Plan, the Human Resources Committee of the Board of Directors determines the number of PSUs a participant earns based on the extent to which the corresponding performance goals have been achieved over the three-year performance cycle. The PSUs are classified as liability awards because the PSU awards are paid in cash upon vesting. The PSU award liability is measured at its fair value at the end of each reporting period and, therefore, will fluctuate based on the price of Verizon common stock as well as performance relative to the targets. Dividend equivalent units are also paid to participants at the time that the PSU award is determined and paid, and in the same proportion as the PSU award. The granted and cancelled activity for the PSU award includes adjustments for the performance goals achieved.

The following table summarizes the Restricted Stock Unit and Performance Stock Unit activity: 
 Restricted Stock Units     
Performance
Stock Units

(shares in thousands)Equity Awards
 Liability Awards
 
Outstanding, January 1, 201713,308
 —
 17,919
Granted6,360
 22,073
 6,564
Payments(4,987) (4,909) (6,031)
Cancelled/Forfeited(198) (1,686) (321)
Outstanding, September 30, 201714,483
 15,478
 18,131

As of September 30, 2017, unrecognized compensation expense related to the unvested portion of Verizon’s RSUs and PSUs was approximately $1.2 billion and is expected to be recognized over approximately two years.

The equity RSUs granted in 2017 have a weighted-average grant date fair value of $49.93 per unit.
8.Employee Benefits

We maintain non-contributory defined benefit pension plans for many of ourcertain 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 recentcurrent and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include service costs associated with pension and benefit relatedother postretirement benefits while other credits and/or charges based on actuarial assumptions, including projected discount rates, and an estimated return on plan assets.assets, and impact from health care trend rates are reported in Other income (expense), net. These estimates are updated in the fourth quarter or upon a remeasurement event to reflect actual return on plan assets and updated actuarial assumptions.assumptions or upon a remeasurement event. The adjustment will beis recognized in our consolidatedthe income statement of income 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) cost related to our pension and postretirement health care and life insurance plans:
(dollars in millions)
PensionHealth Care and Life
Three Months Ended September 30,2021202020212020
Service cost - Cost of services$59 $61 $24 $22 
Service cost - Selling, general and administrative expense8 15 4 5 
Service cost$67 $76 $28 $27 
Amortization of prior service cost (credit)$16 $16 $(223)$(242)
Expected return on plan assets(309)(295)(6)(7)
Interest cost102 124 72 108 
Remeasurement loss, net144 1,092 — — 
Other components$(47)$937 $(157)$(141)
Total$20 $1,013 $(129)$(114)
(dollars in millions)
(dollars in millions)Pension Health Care and Life 
Three Months Ended September 30,2017
 2016
 2017
 2016
PensionHealth Care and Life
Nine months ended September 30,Nine months ended September 30,2021202020212020
Service cost - Cost of servicesService cost - Cost of services$186 $179 $71 $67 
Service cost - Selling, general and administrative expenseService cost - Selling, general and administrative expense26 43 14 15 
Service cost$70
 $82
 $37
 $40
Service cost$212 $222 $85 $82 
Amortization of prior service cost (credit)10
 10
 (235) (235)Amortization of prior service cost (credit)$46 $46 $(670)$(725)
Expected return on plan assets(315) (257) (13) (13)Expected return on plan assets(927)(888)(17)(20)
Interest cost171
 162
 164
 162
Interest cost296 401 217 322 
Remeasurement loss, net—
 555
 —
 —
Net periodic benefit (income) cost$(64) $552
 $(47) $(46)
Termination benefits—
 4
 —
 —
Remeasurement loss (gain), netRemeasurement loss (gain), net(1,170)1,427 — — 
Other componentsOther components$(1,755)$986 $(470)$(423)
Total$(64) $556
 $(47) $(46)Total$(1,543)$1,208 $(385)$(341)

(dollars in millions)Pension Health Care and Life 
Nine Months Ended September 30,2017
 2016
 2017
 2016
Service cost$210
 $238
 $111
 $153
Amortization of prior service cost (credit)29
 12
 (705) (421)
Expected return on plan assets(947) (785) (39) (41)
Interest cost513
 518
 494
 583
Remeasurement loss, net—
 1,977
 —
 2,293
Net periodic benefit (income) cost$(195) $1,960
 $(139) $2,567
Termination benefits—
 4
 —
 —
Total$(195) $1,964
 $(139) $2,567

Changes in Other Postretirement Benefit Plans
During the three months ended September 30, 2017, amendments were made to certain postretirement plans related to retiree medical benefits for management and certain union represented employees and retirees.  The impactservice cost component of the plan amendments was a reduction in our postretirement benefit plan obligations of approximately $0.5 billion, which has been recorded as a net increase to Accumulated other comprehensive income of $0.3 billion (net of taxes of $0.2 billion).  The impact of the amount recorded in Accumulated other comprehensive income that will be reclassified to net periodic benefit cost (income) is minimal. 

Severance, Pensionrecorded in Cost of services and Benefit Charges
During the threeSelling, general and nine months ended September 30, 2017, we recorded a pre-tax severance charge of approximately $0.1 billion and $0.7 billion, respectively, primarily in connection with the acquisition of Yahoo's operating business.

During the nine months ended September 30, 2016, we recorded a net pre-tax curtailment gain of $0.5 billion due to the elimination of the accrual of benefits for some or all future services of a significant number of employees covered by three of our defined benefit pension plans and one of our other postretirement benefit plans.

During the three months ended September 30, 2016, we recorded net pre-tax severance, pension and benefit charges of approximately $0.8 billion primarily for our pension plans in accordance with our accounting policy to recognize actuarial gains and lossesadministrative expense in the periodcondensed consolidated statements of income while the other components, including remeasurement adjustments, if any, are recorded in which they occur. The pension remeasurement charges of $0.6 billion primarily related to settlements for employees who received lump-sum distributions in five of our defined benefit pension plans. The charges were primarily driven by a decrease in our discount rate assumption of $0.8 billion used to determine the current year liabilities of our pension plans, partially offset by the difference between our expected return on assets of 7.0% and our annualized actual return on assets of 11.0% at August 31, 2016 ($0.2 billion). Our weighted-average discount rate assumption was 3.61% at August 31, 2016. As part of this charge, we recorded severance costs of $0.2 billion under our existing separation plans.Other income (expense), net.

During the three months ended June 30, 2016 we recorded net pre-tax pension and benefit remeasurement charges of approximately $3.6 billion in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. These charges were comprised of a net pre-tax pension and benefit remeasurement charge of $0.8 billion measured as of April 1, 2016 related to curtailments in three of our defined benefit pension plans and one of our other postretirement benefit plans, a net pre-tax pension and benefit remeasurement charge of $2.7 billion measured as of May 31, 2016 in two of our defined benefit pension plans and three of our other postretirement benefit plans as a result of our accounting for the contractual healthcare caps and bargained for changes, and a net pre-tax pension and benefit remeasurement charge of $0.1 billion measured as of May 31, 2016 related to settlements for employees who received lump-sum distributions in three of Verizon’s defined benefit pension plans. The pension and benefit remeasurement charges were primarily driven by a decrease in our discount rate assumption used to determine the current year liabilities of our pension and other postretirement benefit plans ($2.7 billion) and updated healthcare cost trend rate assumptions ($0.9 billion). Our weighted-average discount rate assumption decreased from 4.60% at December 31, 2015 to 3.99% at May 31, 2016.


During the three months ended March 31, 2016, we also recorded a net pre-tax pension and benefit remeasurement charge of $0.2 billion related to settlements for employees who received lump-sum distribution in one of Verizon’s defined benefit pension plans.


Severance Payments
During the three and nine months ended September 30, 2017,2021, we paid severance benefits of $0.2 billionan insignificant amount and $0.6 billion,$169 million, respectively. AtDuring the three and nine months ended September 30, 2017,2021, we recorded pre-tax severance charges of $109 million and $124 million, respectively, both primarily due to a $103 million charge related to voluntary separations under our existing plans. At
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September 30, 2021, we had a remaining severance liability of $0.6 billion,$529 million, a portion of which includes future contractual payments to employees separated as of September 30, 2017.employees.


Employer Contributions
During both the three and nine months ended September 30, 2017,2021 and September 30, 2020, we contributed $0.2 billion and $4.0 billion, respectively,made no contributions to our qualified pension plans which included $3.4 billion of discretionary contributions during the nine months ended September 30, 2017. Theand made insignificant contributions to our nonqualified pension plans were $0.1 billion during the three and nine months ended September 30, 2017.plans. We do not expect mandatory pension funding through December 31, 2021. There have been no significant changes with respect to the nonqualified pension and other postretirement benefit plans contributions in 2017 as previously disclosed in Part II. Item 7 “Management’s Discussion2021.

Remeasurement loss (gain), net
During the three and Analysisnine months ended September 30, 2021, we recorded a net pre-tax remeasurement loss of Financial Condition$144 million and Resultsa net pre-tax remeasurement gain of Operations”$1.2 billion, respectively in our Annual Reportpension plans triggered by settlements.

During the three months ended September 30, 2021, we recorded a pre-tax remeasurement loss of $144 million in our pension plans driven by a $667 million charge due to changes in our discount rate and other assumption changes, offset by a $523 million credit resulting from the difference between our estimated and our actual return on Form 10-K forassets.

During the three months ended June 30, 2021, we recorded a pre-tax remeasurement gain of $1.3 billion in our pension plans triggered by settlements, primarily driven by a $1.2 billion credit mainly due to changes in our discount rate and changes in our lump sum interest rate assumptions used to determine the current year liabilities of our pension plans and a $122 million credit resulting from the difference between our estimated and our actual return on assets.

During the three and nine months ended DecemberSeptember 30, 2020, we recorded net pre-tax remeasurement losses of $1.1 billion and $1.4 billion, respectively, in our pension plans triggered by settlements.

During the three months ended September 30, 2020, we recorded a net pre-tax remeasurement loss of $1.1 billion primarily driven by a $1.8 billion charge 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 $689 million credit resulting from the difference between our estimated and our actual return on assets.

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 resulting from the difference between our estimated 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, 2016.2020, 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 resulting from the difference between our estimated and our actual return on assets.

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9.Note 10. Equity and Accumulated Other Comprehensive Income (Loss)

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 September 30,20212020
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 period13,403 13,281 
Other(1)123 
Balance at end of period13,402 13,404 
Retained Earnings
Balance at beginning of period66,310 56,746 
Net income attributable to Verizon6,407 4,357 
Dividends declared ($0.6400, $0.6275 per share)(2,651)(2,597)
Other(4)(33)
Balance at end of period70,062 58,473 
Accumulated Other Comprehensive Loss
Balance at beginning of period attributable to Verizon(234)(1,274)
Foreign currency translation adjustments(146)124 
Unrealized gain (loss) on cash flow hedges(174)505 
Unrealized gain on marketable securities— 2 
Defined benefit pension and postretirement plans(155)(169)
Other comprehensive income (loss)(475)462 
Balance at end of period attributable to Verizon(709)(812)
Treasury Stock
Balance at beginning of period(151,318)(6,632)(153,380)(6,722)
Employee plans48 2 41 1 
Balance at end of period(151,270)(6,630)(153,339)(6,721)
Deferred Compensation-ESOPs and Other
Balance at beginning of period408 237 
Restricted stock equity grant85 62 
Amortization(3)(3)
Balance at end of period490 296 
Noncontrolling Interests
Balance at beginning of period1,428 1,416 
Total comprehensive income147 147 
Distributions and other(130)(102)
Balance at end of period1,445 1,461 
Total Equity$78,489 $66,530 

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 Attributable
 Noncontrolling
 Total
(dollars in millions)to Verizon
 Interests
 Equity
Balance at January 1, 2017$22,524
 $1,508
 $24,032
      
Net income11,432
 335
 11,767
Other comprehensive income10
 —
 10
Comprehensive income11,442
 335
 11,777
      
Contributed capital(84) —
 (84)
Dividends declared(7,118) —
 (7,118)
Common stock in treasury122
 —
 122
Distributions and other(38) (240) (278)
Balance at September 30, 2017$26,848
 $1,603
 $28,451
(dollars in millions, except per share amounts, and shares in thousands)
Nine months ended September 30,20212020
SharesAmountSharesAmount
Common Stock
Balance at beginning of year4,291,434 $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 year13,404 13,419 
Other(2)(15)
Balance at end of period13,402 13,404 
Retained Earnings
Balance at beginning of year60,464 53,147 
Opening balance sheet adjustment— 

(200)(1)
Adjusted opening balance60,464 52,947 
Net income attributable to Verizon17,452 13,213 
Dividends declared ($1.8950, $1.8575 per share)(7,850)(7,687)
Other(4)— 
Balance at end of period70,062 58,473 
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year attributable to Verizon(71)998 
Foreign currency translation adjustments(126)81 
Unrealized loss on cash flow hedges(42)(1,391)
Unrealized gain (loss) on marketable securities(5)7 
Defined benefit pension and postretirement plans(465)(507)
Other comprehensive loss(638)(1,810)
Balance at end of period attributable to Verizon(709)(812)
Treasury Stock
Balance at beginning of year(153,304)(6,719)(155,606)(6,820)
Employee plans2,031 89 2,263 99 
Shareholder plans3 — 4 — 
Balance at end of period(151,270)(6,630)(153,339)(6,721)
Deferred Compensation-ESOPs and Other
Balance at beginning of year335 222 
Restricted stock equity grant315 234 
Amortization(160)(160)
Balance at end of period490 296 
Noncontrolling Interests
Balance at beginning of year1,430 1,440 
Total comprehensive income429 417 
Distributions and other(414)(396)
Balance at end of period1,445 1,461 
Total Equity$78,489 $66,530 

(1) Opening balance sheet adjustment for the nine months ended September 30, 2020 is due to the adoption of Topic 326, ASU 2016-13, Financial Instruments-Credit Losses and other ASUs on January 1, 2020. Refer to the consolidated financial statements included in Verizon's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.

Common Stock
On March 3, 2017, the Verizon Board of Directors approved a new share buyback program, which authorized the repurchase of up to 100 million shares of Verizon common stock terminating no later than the close of business on February 28, 2020. The program permits Verizon to repurchase shares over time, with the amount and timing of repurchases depending on market conditions and corporate needs.

Verizon did not repurchase any shares of Verizon common stock through its previously authorized share buyback program during the nine months ended September 30, 2017.2021. At September 30, 2021, 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 2.82.0 million common shares issued from Treasury stock during the nine months ended September 30, 2017.2021.

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Accumulated Other Comprehensive Income (Loss)
The changes in the balances of Accumulated other comprehensive income (loss) by component arewere as follows:
(dollars in millions)Foreign 
currency
translation
adjustments		Unrealized loss on cash flow hedgesUnrealized gain (loss) on marketable securitiesDefined
benefit
pension and
postretirement
plans		Total
Balance at January 1, 2021$(404)$(1,387)$25 $1,695 $(71)
Other comprehensive loss(126)(1,077)(5)— (1,208)
Amounts reclassified to net income— 1,035 — (465)570 
Net other comprehensive loss(126)(42)(5)(465)(638)
Balance at September 30, 2021$(530)$(1,429)$20 $1,230 $(709)
(dollars in millions)
Foreign 
currency
translation
adjustments

 
Unrealized
loss on cash
flow hedges

 
Unrealized
loss on
marketable
securities

 
Defined
benefit
pension and
postretirement
plans

 Total
Balance at January 1, 2017$(713) $(80) $46
 $3,420
 $2,673
Other comprehensive income205
 619
 14
 316
 1,154
Amounts reclassified to net income—
 (713) (19) (412) (1,144)
Net other comprehensive income (loss)205
 (94) (5) (96) 10
Balance at September 30, 2017$(508) $(174) $41
 $3,324
 $2,683


The amounts presented above in netNet other comprehensive income (loss)loss are net of taxes. The amounts reclassified to net income related to unrealized loss on cash flow hedges in the table above are included in Other income (expense), net and Interest expense onin our condensed consolidated statements of income (seeincome. See Note 68 for additional information). The amounts reclassified to net income related to marketable securities in the table above are included in Other income (expense), net on our condensed consolidated statements of income.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 onOther income (expense), net in our condensed consolidated statements of income (seeincome. See Note 89 for additional information).information.

10.Note 11. Segment Information

Reportable Segments
We have two2 reportable segments Wireless and Wireline, whichthat we operate and manage as strategic business units - Consumer and organize by products and services, and customer groups, respectively.Business. 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 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 through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios.
SegmentDescription
WirelessVerizon
Business Group		Wireless’Our Business segment provides wireless and wireline communications products and services include wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the U.S.
WirelineWireline’s voice,products, including data, and video communications products and enhanced services include broadband video and data,conferencing services, corporate networking solutions, security and managed network services, and local and long distance voice services.services and network access to deliver various IoT services and products. We provide these products and services to consumers in the U.S., as well as to carriers, businesses, and government customers both inand wireless and wireline carriers across the U.S. and select products and services to customers around the world.

DuringOur 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 first quarter of 2017, Verizon reorganized theprimary customer groups within its Wireline segment. Previously, the customer groups in the Wireline segment consisted of Mass Markets (which included Consumer Retailtargeted by these offerings: Small and SmallMedium Business, subgroups), Global Enterprise, Public Sector and GlobalOther, and Wholesale. Pursuant to the reorganization, there are now four customer groups within the Wireline segment: Consumer Markets, which includes the customers previously included in Consumer Retail; Enterprise Solutions, which includes the large business customers, including multinational corporations, and federal government customers previously included in Global Enterprise; Partner Solutions, which includes the customers previously included in Global Wholesale; and Business Markets, a new customer group, which includes U.S.-based small business customers previously included in Mass Markets and U.S.-based medium business customers, state and local government customers and educational institutions previously included in Global Enterprise.


Corporate and other primarily includes the results of our Media business, branded Oath, our telematics and other businesses,insurance captives, investments in unconsolidated businesses and development stage businesses that support our strategic initiatives, as well as unallocated corporate expenses, certain pension and other employee benefit related costs and lease financing.interest and financing expenses. Corporate and other also includes the historical results of divested businesses including Verizon Media, 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 all segment results as these items are included in the chief operating decision maker’s assessment of segment performance. We completed our acquisition of Yahoo’s operating business on June 13, 2017.


On April 1, 2016, weWe completed the sale of our local exchange business and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service and long distance voice accounts in these three statesVerizon Media on September 1, 2021. Refer to Frontier Communications Corporation (Frontier). The transaction, which includedNote 3 for additional information on the acquisition by Frontier of the equity interests of Verizon’s incumbent local exchange carriers (ILECs) in California, Florida and Texas, did not involve any assets or liabilitiessale of Verizon Wireless. Additionally, on May 1, 2017, we completed the Data Center Sale (see Note 2 for additional information). The results of operations for these divestitures and other insignificant transactions is included within Corporate and other for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker.Media.

In addition, Corporate and other includes the results of our telematics businesses for all periods presented, which were reclassified from our Wireline segment effective April 1, 2016. The impact of this reclassification was insignificant to our condensed consolidated financial statements or our segment results of operations.


The reconciliation of segment operating revenues and expenses to consolidated operating revenues and expenses below includes the effects of special items that managementthe chief operating decision maker does not consider in assessing segment performance, primarily because of their nature.


We have adjusted prior period consolidated and segment information, where applicable, to conform to the current period presentation.
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The following table provides operating financial information for our two2 reportable segments:
 Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
External Operating Revenues
Consumer
Service$16,889 $16,255 $50,159 $48,496 
Wireless equipment4,530 3,403 13,461 9,989 
Other1,852 2,014 5,807 5,946 
Total Consumer23,271 21,672 69,427 64,431 
Business
Small and Medium Business2,929 2,737 8,644 8,132 
Global Enterprise2,551 2,594 7,690 7,811 
Public Sector and Other1,548 1,639 4,807 4,636 
Wholesale645 763 2,038 2,279 
Total Business7,673 7,733 23,179 22,858 
Total reportable segments$30,944 $29,405 $92,606 $87,289 
Intersegment Revenues
Consumer$57 $64 $176 $183 
Business16 16 53 54 
Total reportable segments$73 $80 $229 $237 
Total Operating Revenues
Consumer$23,328 $21,736 $69,603 $64,614 
Business(1)
7,689 7,749 23,232 22,912 
Total reportable segments$31,017 $29,485 $92,835 $87,526 
Operating Income
Consumer$7,590 $7,437 $22,606 $21,783 
Business886 923 2,641 2,823 
Total reportable segments$8,476 $8,360 $25,247 $24,606 
(1) Service and other revenues included in our Business segment amounted to approximately $6.9 billion and $7.0 billion for the three months ended September 30, 2021 and 2020, respectively. Service and other revenues included in our Business segment amounted to approximately $20.9 billion for both the nine months ended September 30, 2021 and 2020. Wireless equipment revenues included in our Business segment amounted to approximately $820 million and $709 million for the three months ended September 30, 2021 and 2020, respectively. Wireless equipment revenues included in our Business segment amounted to approximately $2.4 billion and $2.0 billion for the nine months ended September 30, 2021 and 2020, respectively.

The following table provides Fios revenue for our 2 reportable segments:
Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
Consumer$2,893 $2,773 $8,648 $8,326 
Business287 263 844 785 
Total Fios revenue$3,180 $3,036 $9,492 $9,111 

The following table provides Wireless service revenue for our reportable segments and includes intersegment activity:
Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
Consumer$13,982 $13,442 $41,460 $40,005 
Business3,097 2,990 9,247 8,732 
Total Wireless service revenue$17,079 $16,432 $50,707 $48,737 

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 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
External Operating Revenues       
Wireless       
Service$15,823
 $16,647
 $47,158
 $50,108
Equipment4,352
 4,124
 12,414
 11,782
Other1,328
 1,249
 3,916
 3,661
Total Wireless21,503
 22,020
 63,488
 65,551
        
Wireline       
Consumer Markets3,203
 3,174
 9,588
 9,519
Enterprise Solutions2,262
 2,273
 6,881
 6,887
Partner Solutions997
 990
 2,993
 3,015
Business Markets903
 834
 2,700
 2,534
Other48
 76
 183
 242
Total Wireline7,413
 7,347
 22,345
 22,197
Total reportable segments$28,916
 $29,367
 $85,833
 $87,748
        
Intersegment Revenues       
Wireless$77
 $81
 $252
 $258
Wireline249
 229
 718
 706
Total reportable segments$326
 $310
 $970
 $964
        
Total Operating Revenues       
Wireless$21,580
 $22,101
 $63,740
 $65,809
Wireline7,662
 7,576
 23,063
 22,903
Total reportable segments$29,242
 $29,677
 $86,803
 $88,712
        
Operating Income (Loss)       
Wireless$7,603
 $7,647
 $22,089
 $23,544
Wireline65
 73
 318
 (631)
Total reportable segments$7,668
 $7,720
 $22,407
 $22,913

 At September 30,
 At December 31,
(dollars in millions)2017
 2016
Assets   
Wireless$228,238
 $211,345
Wireline70,049
 66,679
Total reportable segments298,287
 278,024
Corporate and other224,236
 213,787
Eliminations(267,841) (247,631)
Total consolidated - reported$254,682
 $244,180

Reconciliation to Consolidated Financial Information
A reconciliation of the reportable segment operating revenues to consolidated operating revenues is as follows:
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Total reportable segment operating revenues$29,242
 $29,677
 $86,803
 $88,712
Corporate and other2,796
 1,403
 6,034
 4,078
Eliminations(375) (354) (1,126) (1,060)
Operating results from divested businesses54
 211
 368
 1,910
Total consolidated operating revenues$31,717
 $30,937
 $92,079
 $93,640


Fios revenues are included within our Wireline segment and amounted to approximately $2.9 billion and $8.7 billion, respectively, for the three and nine months ended September 30, 2017. Fios revenues amounted to approximately $2.8 billion and $8.3 billion, respectively, for the three and nine months ended September 30, 2016.

Three Months EndedNine Months Ended
 September 30,September 30,
(dollars in millions)2021202020212020
Total reportable segment operating revenues$31,017 $29,485 $92,835 $87,526 
Corporate and other2,009 2,203 7,093 6,442 
Eliminations(111)(145)(382)(368)
Total consolidated operating revenues$32,915 $31,543 $99,546 $93,600 
A reconciliation of the total of the reportable segments’segment's operating income to consolidated income before provision for income taxes is as follows:
 Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
Total reportable segment operating income$8,476 $8,360 $25,247 $24,606 
 Corporate and other621 (479)392 (1,183)
Other components of net periodic benefit charges (Note 9)(192)(203)(576)(610)
Loss on spectrum licenses (Note 3)— — (223)(1,195)
Total consolidated operating income8,905 7,678 24,840 21,618 
Equity in earnings (losses) of unconsolidated businesses1 (9)10 (34)
Other income (expense), net269 (774)1,172 (703)
Interest expense(801)(1,044)(2,746)(3,167)
Income Before Provision For Income Taxes$8,374 $5,851 $23,276 $17,714 
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Total reportable segment operating income$7,668
 $7,720
 $22,407
 $22,913
Corporate and other(311) (466) (910) (1,432)
Severance, pension and benefit charges (Note 8) (1)
—
 (797) (195) (4,512)
Net gain on sale of divested businesses (Note 2)—
 —
 1,774
 1,007
Acquisition and integration related charges (Note 2, Note 8) (1)
(166) —
 (730) —
Gain on spectrum license transaction (Note 2)—
 —
 126
 142
Operating results from divested businesses17
 83
 149
 918
Total consolidated operating income7,208
 6,540
 22,621
 19,036
        
Equity in losses of unconsolidated businesses(22) (23) (71) (63)
Other income (expense), net(511) 97
 (1,376) (1,697)
Interest expense(1,164) (1,038) (3,514) (3,239)
Income Before Provision For Income Taxes$5,511
 $5,576
 $17,660
 $14,037

(1) certain amounts have been reclassified to conform to the current period's presentation


No single customer accounted for more than 10% of our total operating revenues during the three and nine months ended September 30, 2017 and 2016.2021 or 2020.

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 based on proportional usage.

11.Note 12. 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 significant.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, includingincluding: (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 significantmaterial effect on our financial condition, but it could have a significantmaterial 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 4020 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 maycould 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 the nine months ended September 30, 2021, Verizon entered into a renewable energy purchase agreement (REPA) with a third party. The REPA is based on the expected operation of a renewable energy-generating facility and has a fixed price term of 15 years from the commencement of the facility's entry into commercial operation, which is expected to occur in 2022. The REPA generally is expected to be financially settled based on the prevailing market price as energy is generated by the facility.
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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, technology, information and entertainment products and services to consumers, businesses and governmental agencies.government entities. With a presence around the world, we offer voice, data, video and videovoice services and solutions on our wirelessnetworks and wireline networksplatforms that are designed to meet customers’ demand for mobility, reliable network connectivity, security and control. We have two reportable segments, Wireless and Wireline. Our wireless business, operating as Verizon Wireless, provides voice and data services and equipment sales across the United States (U.S.) using one of the most extensive and reliable wireless networks. Our wireline business provides consumer, business and government customers with communications products and enhanced services, including broadband video and data, corporate networking solutions, security and managed network services and local and long distance voice services, and also owns and operates one of the most expansive end-to-end Global Internet Protocol (IP) networks. We have a highly skilled, diverse and dedicated workforce of approximately 160,100 employees as of September 30, 2017.


To compete effectively in today’s dynamic marketplace, we are focused on transforming around the capabilities of our high-performing networks with a goal of futureto drive growth based on delivering what customers want and need in the new digital world. Our priorities for 2017In 2021, we are to leveragefocused on leveraging our network leadership, retainleadership; retaining and growgrowing our high qualityhigh-quality customer base while balancing profitability, enhanceprofitability; enhancing ecosystems in mediagrowth businesses; and telematics, and drivedriving 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-optic networkfiber 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. In addition, protectingWe expect that our next-generation multi-use platform, which we call the privacyIntelligent Edge Network, will simplify operations by eliminating legacy network elements, speed the deployment of our customers’ information5G wireless technology and create new opportunities in the security of our systems and networks will continue to bebusiness market in a priority at Verizon.cost efficient manner. Our network leadership will continue to beis the hallmark of our brand and provide the fundamental strength atfoundation for the connectivity, platformplatforms and solutions layers upon which we build our competitive advantage.


Strategic Transactions
AcquisitionHighlights of Yahoo! Inc.’s Operating Business
On July 23, 2016, Verizon entered into a stock purchase agreement (the Purchase Agreement) with Yahoo! Inc. (Yahoo). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we agreed to acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments (the Transaction).

On February 20, 2017, Verizon and Yahoo entered into an amendment to the Purchase Agreement, pursuant to which the Transaction purchase price was reduced by $350 million to approximately $4.48 billion in cash, subject to certain adjustments. Subject to certain exceptions, the parties also agreed that certain user security and data breaches incurred by Yahoo (and the losses arising therefrom) were to be disregarded (1) for purposes of specified conditions to Verizon’s obligations to close the Transaction and (2) in determining whether a “Business Material Adverse Effect” under the Purchase Agreement has occurred.

Concurrently with the amendment of the Purchase Agreement, Yahoo and Yahoo Holdings, Inc., a wholly-owned subsidiary of Yahoo that Verizon agreed to purchase pursuant to the Transaction, also entered into an amendment to the related reorganization agreement, pursuant to which Yahoo (which changed its name to Altaba Inc. following the closing of the Transaction) retains 50% of certain post-closing liabilities arising out of governmental or third-party investigations, litigations or other claims related to certain user security and data breaches incurred by Yahoo prior to its acquisition by Verizon, including an August 2013 data breach disclosed by Yahoo on December 14, 2016. At that time, Yahoo disclosed that more than one billion of the approximately three billion accounts existing in 2013 had likely been affected. In accordance with the original Transaction agreements, Yahoo will continue to retain 100% of any liabilities arising out of any shareholder lawsuits (including derivative claims) and investigations and actions by the Securities and Exchange Commission (SEC).

On June 13, 2017, we completed the Transaction. The aggregate purchase consideration at the closing of the Transaction was approximately $4.8 billion.

On October 3, 2017, based upon new intelligence that we received in connection with our integration of Yahoo's operating business, we disclosed that we believe that the August 2013 data breach previously disclosed by Yahoo affected all of its accounts.

Network Evolution
We are reinventing our network architecture around a common fiber platform that will support both our wireless and wireline technologies. Our multi-use fiber build is critical to expand the future capabilities of both our wireless and wireline networks, while reducing the cost to deliver services to our customers. We expect that this new “One Fiber” architecture will improve our 4G Long-Term Evolution (LTE) coverage, speed the deployment of 5G technology, deliver high-speed Fios broadband to homes and businesses and create new opportunities in the small and medium business market. We expect to have further opportunities for expansion with our acquisition of XO Holdings’ wireline business (XO), which at the time of acquisition, was one of the largest fiber-based IP and Ethernet networks. We completed this acquisition on February 1, 2017 for total cash consideration of approximately $1.8 billion, of which $0.1 billion was paid in 2015.


In April 2017, we exercised our option to buy a wholly-owned subsidiary of XO Holdings that holds its wireless spectrum for approximately $0.2 billion, subject to certain adjustments. The transaction is subject to customary regulatory approvals and is expected to close by the end of 2017. Upon closing, the spectrum acquired as part of the transaction will be used for our 5G technology deployment.

On May 11, 2017, we entered into a purchase agreement to acquire Straight Path Communications Inc. (Straight Path), a holder of millimeter wave spectrum configured for 5G wireless services, for consideration reflecting an enterprise value of approximately $3.1 billion. Under the terms of the purchase agreement, we agreed to pay (i) Straight Path shareholders $184.00 per share, payable in Verizon shares, and (ii) certain transaction costs payable in cash of approximately $0.7 billion, consisting primarily of a fee to be paid to the Federal Communications Commission (FCC). The acquisition is subject to customary regulatory approvals and closing conditions, and is expected to close by the end of the first quarter of 2018.

On August 1, 2017, we entered into a definitive agreement to purchase certain fiber-optic network assets in the Chicago market from WideOpenWest, Inc. (WOW!), a leading provider of communications services. The transaction is expected to close by the end of 2017. In addition, the parties entered into a separate agreement pursuant to which WOW! will complete the build-out of the network assets by the second half of 2018. The total cash considerationFinancial Results for the transactions is expected to be approximately $0.3 billion.Three Months Ended September 30, 2021 and 2020

(dollars in millions)
Data Center Sale
On December 6, 2016, we entered into a definitive agreement, which was subsequently amended on March 21, 2017, with Equinix, Inc. (Equinix) pursuant to which we agreed to sell 23 customer-facing data center sitesvz-20210930_g1.jpgvz-20210930_g2.jpgvz-20210930_g3.jpg



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Highlights of Our Financial Results for the Nine Months Ended September 30, 2021 and 2020
(dollars in the U.S. and Latin America, for approximately $3.6 billion, subject to certain adjustments (Data Center Sale). The transaction closed on May 1, 2017 (see Note 2 to the condensed consolidated financial statements for additional information).millions)


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Business Overview
In the sections that follow, we provide information about the important aspects of our operations and investments, both at the consolidated and segment levels, and discuss our results of operations, financial position and sources and uses of cash. We have two reportable segments Wireless and Wireline, whichthat we operate and manage as strategic business units - Verizon Consumer Group (Consumer) and organizeVerizon Business Group (Business).

Revenue by productsSegment for the Three Months Ended September 30, 2021 and 2020
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Note: Excludes eliminations.

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Revenue by Segment for the Nine Months Ended September 30, 2021 and 2020
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Note: Excludes eliminations.

Verizon Consumer Group
Our Consumer segment provides consumer-focused wireless and wireline communications services and customer groups, respectively.

Wireless
products. Our Wireless segment, doing business as Verizon Wireless, provides wireless communications products and services are provided across one of the most extensive wireless networks in the U.S. We provide theseUnited 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 and equipment sales to consumer, business and government customersare 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 andor prepaid basis. Postpaid connections represent individual lines ofOur postpaid service for which a customer is generally billed one month in advance for a monthly access charge in return for a monthly network service allowance,access to and usage beyond the allowance is billed monthly in arrears.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.

We offer various postpaid account service plans, The Consumer segment also offers several categories of wireless equipment to customers, including shared data plans, single connection plansa variety of smartphones and other plans tailoredhandsets, wireless-enabled internet devices, such as tablets and other wireless-enabled connected devices, such as smart watches.

In addition to the needs of our customers. Our shared data plans typically feature domestic unlimited voice minutes, unlimited domesticwireless services and international text,equipment discussed above, Consumer sells residential fixed connectivity solutions, including internet, video and picture messaging,voice services, and a single data allowance that can be shared among the wireless devicesnetwork access to resellers on a customer’s account. These allowances will vary from time to time as partwholesale basis. The Consumer segment's operating revenues for the three and nine months ended September 30, 2021 totaled $23.3 billion and $69.6 billion, respectively, representing an increase of promotional offers or in response to market circumstances. Our unlimited plans, available to our consumer7.3% and small business customers, offer among other things, unlimited domestic voice, data and texting. Both our shared data plans and unlimited plans include our High Definition Voice and Video Calling, while certain plans also include Mobile Hotspot services, on compatible devices.

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, or on a compatible device that they already own, pay lower service fees (unsubsidized service pricing) as7.7%, respectively, compared to those under fixed-term service plans. Asthe similar periods in 2020. See "Segment Results of January 2017, we no longer offer consumers fixed-term service plansOperations" for phones.additional information regarding our Consumer segment’s operating performance and selected operating statistics.


We are focusing our wireless capital spending on adding capacity and density to our 4G LTE network. Approximately 98% of our total data traffic in September 2017 was carried on our 4G LTE network. We are investing in the densification of our network by utilizing small cell technology, in-building solutions and distributed antenna systems. Densification enables us to add capacity to manage mobile video consumption and demand for Internet of Things (IoT), as well as position us for future 5G technology. We are committed to developing and deploying 5G wireless technology. We are working with key partners to ensure the aggressive pace of innovation, standards development and appropriate requirements for this next generation of wireless technology. Based on the outcome of our ongoing pre-commercial trials, we intend to be the first company to deploy a 5G fixed wireless broadband network in the U.S. We expect to launch a fixed commercial wireless service supported by this network in 2018, depending on the results of pre-commercial trials, which are ongoing.

WirelineVerizon Business Group
Our WirelineBusiness segment provides voice,wireless and wireline communications services and products, including data, and video communications products and enhanced services, including broadband video and data,conferencing services, corporate networking solutions, security and managed network services, and local and long distance voice services.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 consumers in the U.S., as well as to carriers, businesses, and government customers both inand wireless and wireline carriers across the U.S. and select products and services to customers around the world.

In our Wireline business, to compensate The Business segment's operating revenues for the shrinking marketthree and nine months ended September 30, 2021 totaled $7.7 billion and $23.2 billion, respectively, representing a decrease of 0.8% and an increase of 1.4%, respectively, compared to the similar periods in 2020. See "Segment Results of Operations" for traditional voice service, we continue to buildadditional information regarding our Wireline segment around data, videoBusiness segment’s operating performance and advanced business services – areas where demand for reliable high-speed connections is growing. We expect our One Fiber initiative will aid in the densification of our 4G LTE wireless network and position us for future 5G technology. The expansion of our multi-useselected operating statistics.

fiber footprint also creates opportunities to generate revenue from fiber-based services in our Wireline business. We continue to seek ways to increase revenue and further realize operating and capital efficiencies as well as maximize profitability for our Fios services.


Corporate and Other
Corporate and other primarily includes the results of our Media business, branded Oath, telematics and other businesses,insurance captives, investments in unconsolidated businesses and development stage businesses that support our strategic initiatives, as well as unallocated corporate expenses, certain pension and other employee benefit related costs and lease financing.interest and financing expenses. Corporate and other also includes the historical results of divested businesses including Verizon Media, 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 all segment results as these items are included in the chief operating decision maker’s assessment of segment performance.


Oath, our newly branded organization that combines Yahoo’s operating businessOn May 2, 2021, Verizon entered into a definitive agreement with our existingan affiliate of Apollo Global Management Inc. (the Apollo Affiliate) pursuant to which we agreed to sell Verizon Media business, is a diverse house of more than 50 media and technology brands that engages approximately a billion people aroundto the world. We believe that the Transaction represents a critical step in growing the global scale needed for our digital media company and building the future of brands using powerful technology, trusted content and differentiated data. For the three months endedaffiliate. The transaction closed on September 30, 2017, Oath generated revenues of approximately $2.0 billion.1, 2021. See Note 23 to the condensed consolidated financial statements for additional information. Under our ownership, Verizon Media's total operating revenues were $1.4 billion

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On April 1, 2016, we completed the sale (Access Line Sale) of our local exchange business
and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service (HSI) and long distance voice accounts in these three states to Frontier Communications Corporation (Frontier). The transaction, which includes the acquisition by Frontier of the equity interests of Verizon’s incumbent local exchange carriers (ILECs) in California, Florida and Texas, did not involve any assets or liabilities of Verizon Wireless. On May 1, 2017, we completed the sale of 23 customer-facing data center sites in the United States and Latin America (see Note 2 to the condensed consolidated financial statements$5.3 billion, respectively, for additional information). The results of operations for these divestitures and other insignificant transactions are included within Corporate and other for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker. See “Operating Results From Divested Businesses” and Note 10 to the condensed consolidated financial statements for additional information.

In addition, Corporate and other includes the results of our telematics businesses for all periods presented, which were reclassified from our Wireline segment effective April 1, 2016. The impact of this reclassification was insignificant to our condensed consolidated financial statements or our segment results of operations.

We are also building our growth capabilities in the emerging IoT market by developing business models to monetize usage on our network at the connectivity and platform layers. For the three and nine months ended September 30, 2017, we recognized IoT revenues,2021, reflective of results through the date the transaction closed, which represent revenues on IoT productrepresents a decrease of 17.2% and connectivity service revenues,an increase of $0.4 billion and $1.1 billion, a 55% and 69% increase,12.1%, respectively, compared to the prior year period. This increase was primarily attributable to our acquisitions of Fleetmatics Group PLC and Telogis, Inc.similar periods in the second half of 2016, which enable us to provide a comprehensive suite of services and solutions in the Telematics market.2020.


Capital Expenditures and Investments
We continue to invest in our wireless network,networks, high-speed fiber and other advanced technologies to position ourselves at the center of growth trends for the future. During the nine months ended September 30, 2017,2021, these investments included $11.3$13.9 billion for capital expenditures.expenditures, inclusive of the C-Band capital expenditures described below. See “Cash"Cash Flows Used in Investing Activities” and “Operating Environment and Trends”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 September 30, 2021, our capital expenditures include approximately $1.0 billion 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.


Operating EnvironmentGlobal Network and TrendsTechnology
ThereWe 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 no significant changesleading 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 information relatednumber of internet-connected devices grows. As of September 30, 2021, 5G Ultra Wideband is available in parts of 82 U.S. cities and 5G Home is available in parts of 57 U.S. cities. 5G Nationwide uses low and mid-band spectrum and dynamic spectrum sharing (DSS) technology, which allows 5G service to trends affectingrun 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 that was disclosedfrom COVID-19, refer to Item 1A Risk Factors and "Impacts of the Novel Coronavirus (COVID-19) Pandemic" in “Management’sItem 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016.2020. The impacts from the COVID-19 pandemic on our operations were significant during the second and third quarters of 2020, which affects the comparability of the results from both the three months ended and the nine months ended September 30, 2021 to September 30, 2020. The COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain, including the recent surge of the Delta variant across the U.S. We remain committed to caring for the health and safety of our employees and our customers through this challenge while supporting the communities in which we operate. While we have not experienced a material impact on our business from the Delta variant thus far in 2021, we cannot predict with certainty the ultimate impact it may have on our results of operations in the future, and will continue to monitor its daily evolution.


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. In “Segment"Segment Results of Operations,”" we review the performance of our two reportable segments in more detail.


Consolidated Revenues
 Three Months Ended  Nine Months Ended  
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Consumer$23,328 $21,736 $1,592 7.3 %$69,603 $64,614 $4,989 7.7 %
Business7,689 7,749 (60)(0.8)23,232 22,912 320 1.4 
Corporate and other2,009 2,203 (194)(8.8)7,093 6,442 651 10.1 
Eliminations(111)(145)34 (23.4)(382)(368)(14)3.8 
Consolidated Revenues$32,915 $31,543 $1,372 4.3 $99,546 $93,600 $5,946 6.4 

Consolidated Revenues
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 Three Months Ended      Nine Months Ended     
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Wireless$21,580
 $22,101
 $(521) (2.4)% $63,740
 $65,809
 $(2,069) (3.1)%
Wireline7,662
 7,576
 86
 1.1
 23,063
 22,903
 160
 0.7
Corporate and other2,850
 1,614
 1,236
 76.6
 6,402
 5,988
 414
 6.9
Eliminations(375) (354) (21) 5.9
 (1,126) (1,060) (66) 6.2
Consolidated Revenues$31,717
 $30,937
 $780
 2.5
 $92,079
 $93,640
 $(1,561) (1.7)

DuringConsolidated revenues increased during both the three and nine months ended September 30, 2021 compared to the similar periods in 2020. The increase in revenues during the three months ended September 30, 2017, consolidated revenues increased $0.8 billion, or 2.5%, compared to the similar period in 2016,2021 was due to an increase in revenues within Corporate and other,our Consumer segment, partially offset by a declinedecreases in our Business segment and Corporate and other. The increase in revenues at our Wireless segment. Duringduring the nine months ended September 30, 2017, consolidated revenues decreased $1.6 billion, or 1.7%, compared to the similar period in 2016,2021 was due to a declineincreases in revenues at our WirelessConsumer segment, partially offset by an increase in revenues withinBusiness segment and Corporate and other.


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


Corporate and other revenues increased $1.2 billion, or 76.6%, during the three months ended September 30, 2017, compared to the similar period in 2016, primarily due to an increase in revenue as a result of the acquisition of Yahoo’s operating business in the second quarter of 2017 as well as fleet service revenue growth in our telematics business, partially offset by the Data Center Sale on May 1, 2017decreased and other insignificant transactions (see “Operating Results From Divested Businesses”).

Corporate and other revenues increased $0.4 billion, or 6.9%, during the nine months ended September 30, 2017, compared to the similar period in 2016, primarily due to an increase in revenue as a result of the acquisition of Yahoo’s operating business on June 13, 2017 and fleet service revenue growth in our telematics business. These increases were partially offset by the Access Line Sale on April 1, 2016 and the Data Center Sale on May 1, 2017 and other insignificant transactions (see “Operating Results From Divested Businesses”). During the nine months ended September 30, 2017, our Media business represented approximately 62% of revenues in Corporate and other.
Consolidated Operating Expenses
 Three Months Ended      Nine Months Ended     
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Cost of services$7,640
 $6,989
 $651
 9.3 % $21,573
 $22,180
 $(607) (2.7)%
Wireless cost of equipment4,965
 5,240
 (275) (5.2) 14,808
 14,882
 (74) (0.5)
Selling, general and administrative expense7,632
 8,226
 (594) (7.2) 20,579
 25,601
 (5,022) (19.6)
Depreciation and amortization expense4,272
 3,942
 330
 8.4
 12,498
 11,941
 557
 4.7
Consolidated Operating Expenses$24,509
 $24,397
 $112
 0.5
 $69,458
 $74,604
 $(5,146) (6.9)

Cost of Services
Cost of services increased $0.7 billion, or 9.3%, during the three months ended September 30, 2017, compared to the similar period in 2016, primarily due to the acquisition of Yahoo’s operating business as well as an increase in content costs and access costs at our Wireline segment.

Cost of services decreased $0.6 billion, or 2.7%, during the nine months ended September 30, 2017, compared to the similar period in 2016, primarily due to the completion of the Access Line Sale on April 1, 2016 and the Data Center Sale on May 1, 2017 and other insignificant transactions (see “Operating Results From Divested Businesses”), the fact that we did not incur incremental costs in 2017 as a result of the union work stoppage that commenced on April 13, 2016 and ended on June 1, 2016 (2016 Work Stoppage), and a decline in net pension and postretirement benefit costs primarily driven by collective bargaining agreements ratified in June 2016 at our Wireline segment. These decreases were partially offset by an increase in expenses as a result of the acquisition of Yahoo's operating business.

Wireless Cost of Equipment
Cost of equipment decreased $0.3 billion, or 5.2%, and $0.1 billion, or 0.5%, respectively, during the three and nine months ended September 30, 2017,2021, respectively, compared to the similar periods in 2016,2020. The decrease during the three months ended September 30, 2021 was primarily asdue to the fact that we completed the Verizon Media sale on September 1, 2021, and therefore had one less month of operating revenues from Verizon Media in the 2021 period. The increase during the nine months ended September 30, 2021 was primarily due to an increase of $573 million in revenues within Verizon Media. See Note 3 to the condensed consolidated financial statements for additional information on the Verizon Media Sale.

Consolidated Operating Expenses
 Three Months Ended  Nine Months Ended  
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Cost of services$7,855 $7,955 $(100)(1.3)%$24,199 $23,348 $851 3.6 %
Cost of wireless equipment5,673 4,379 1,294 29.6 17,106 13,031 4,075 31.3 
Selling, general and administrative expense6,521 7,339 (818)(11.1)21,246 23,080 (1,834)(7.9)
Depreciation and amortization expense3,961 4,192 (231)(5.5)12,155 12,523 (368)(2.9)
Consolidated Operating Expenses$24,010 $23,865 $145 0.6 $74,706 $71,982 $2,724 3.8 

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 resultservice: salaries and wages, benefits, materials and supplies, content costs, contracted services, network access and transport costs, customer provisioning costs, computer systems support, costs to support our outsourcing contracts and technical facilities and traffic acquisition costs. Aggregate customer service costs, which include billing and service provisioning, are allocated between Cost of services and Selling, general and administrative expense.

The decrease in cost of services during the three months ended September 30, 2021 compared to the similar period in 2020 was primarily due to:
•a decrease of $119 million in access costs primarily related to a decline in voice services;
•a decrease of $107 million in personnel costs primarily related to the numbersale of smartphoneVerizon Media;
•a decrease of $57 million in traffic acquisition costs driven by the impact of one less month of costs from Verizon Media in 2021;
•an increase of $106 million in rent expense related to both adding capacity to the networks to support demand and internet units sold, partially offsetlease modifications for certain existing cell towers including C-Band;
•an increase of $60 million related to the device protection offerings to our wireless retail postpaid customers; and
•an increase of $32 million in buildings and facilities costs primarily driven by higher utility rates.

The increase in cost of services during the nine months ended September 30, 2021 compared to the similar period in 2020 was primarily due to:
•an increase of $324 million in traffic acquisition costs driven by display and search advertising costs related to Verizon Media;
•an increase of $234 million in rent expense related to both adding capacity to the networks to support demand and lease modifications for certain existing cell towers;
•an increase of $180 million in regulatory fees related to a higher Federal Universal Service Fund (FUSF) rate;
•an increase of $165 million in direct costs related to professional services;
•an increase of $146 million related to the device protection offerings to our wireless retail postpaid customers; and
•a decrease of $240 million in access costs primarily related to a decline in voice services.

See Note 3 and Note 5 to the condensed consolidated financial statements for additional information on the sale of Verizon Media and lease modifications, respectively.

Cost of Wireless Equipment
Cost of wireless equipment increased during both the three and nine months ended September 30, 2021 compared to the similar periods in 2020.

The increase during the three months ended September 30, 2021 was primarily due to:
•an increase of $1.3 billion primarily related to a shift to higher priced unitsequipment in the mix of wireless devices and accessories sold.

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The increase during the nine months ended September 30, 2021 was primarily due to:
•an increase of $2.8 billion related to a shift to higher priced equipment in the mix of wireless devices and accessories sold; and
•an increase of $1.2 billion driven by a higher volume of wireless devices sold.


Selling, General and Administrative Expense
Selling, general and administrative expense includes salaries and wages and benefits not directly attributable to a service or product, the provision for credit losses, taxes other than income taxes, advertising and sales commission costs, call center and information technology costs, regulatory fees, professional service fees and rent and utilities for administrative space. Also included is a portion of the aggregate customer care costs as discussed above in "Cost of Services."

Selling, general and administrative expense decreased $0.6 billion, or 7.2%,during both the three and nine months ended September 30, 2021 compared to the similar periods in 2020.

The decrease during the three months ended September 30, 2017, compared2021 was primarily due to:
•the $706 million net gain related to the similar period in 2016, primarily due to sale of Verizon Media. We recorded a pre-tax gain on sale of approximately $1.1 billion and $346 million of various costs associated with this disposition;
•a decrease in severance, pension and benefit charges (see “Special Items”), and a decline inpersonnel expense of $145 million related to additional sales commission expense employee related costs, bad debt expenseto actions taken in 2020 in response to the COVID-19 pandemic, as well as the impact of one less month of expenses from Verizon Media in 2021; and advertising expense at our Wireless segment. These decreases were partially

offset by •an increase in expenses as a resultadvertising and promotion costs of the acquisition of Yahoo's operating business$131 million related to brand messaging in the second quarter of 20172021 as well as acquisition and integrationlower expenses in 2020 related charges primarily in connection withto customer behavior during the acquisition of Yahoo's operating business (see “Special Items”).COVID-19 pandemic.


Selling, general and administrative expense decreased $5.0 billion, or 19.6%,The decrease during the nine months ended September 30, 2017,2021 was primarily due to:
•the $706 million net gain related to the sale of Verizon Media. We recorded a pre-tax gain on sale of approximately $1.1 billion and $346 million of various costs associated with this disposition;
•the $1.2 billion loss during 2020 resulting from the spectrum license Auction 103, compared to the $223 million loss recognized during 2021 resulting from agreements we entered into to sell certain wireless licenses;
•a decrease of $496 million in provision for credit losses related to both improvement in payment trends in 2021 as well as actions taken in 2020 in response to the COVID-19 pandemic;
•a decrease in personnel expense of $374 million primarily related to additional sales commission expense related to actions taken in 2020 in response to the COVID-19 pandemic;
•an increase in advertising and promotion costs of $437 million related to brand messaging in 2021 as well as lower expenses in 2020 related to customer behavior during the COVID-19 pandemic; and
•an increase of $231 million in regulatory and compliance expense primarily related to insurance and regulatory settlements.

See Note 3 to the condensed consolidated financial statements for additional information on both the sale of Verizon Media and loss on spectrum licenses.

Depreciation and Amortization Expense
Depreciation and amortization expense decreased during both the three and nine months ended September 30, 2021, compared to the similar periodperiods in 2016,2020, primarily due toas a decrease in severance, pensionresult of certain assets of Verizon Media reclassified as assets held for sale during the three months ended June 30, 2021 and benefit charges, an increase insubsequently derecognized during the net gain on sale of divested businesses (see “Special Items”), a decline in sales commission expense, employee related costs, bad debt expense and advertising at our Wireless segment, and a decrease due to the Access Line Sale on April 1, 2016 and the Data Center Sale on May 1, 2017 and other insignificant transactions (see “Operating Results From Divested Businesses”). These decreases were partially offset by an increase in expensesthree months ended September 30, 2021, both as a result of the acquisition of Yahoo's operating business on June 13, 2017, acquisition and integration related charges primarily in connection with the acquisition of Yahoo’s operating business (see “Special Items”), and the impact of costs relatedVerizon Media sale. See Note 3 to the natural disasters in Florida and Texas.condensed consolidated financial statements for additional information.


Special Charges (Credits)
Special charges (credits) included in operating expenses were as follows:
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Net gain on sale of divested businesses$—
 $—
 $(1,774) $(1,007)
Acquisition and integration related charges166
 —
 730
 —
Severance, pension and benefit charges—
 797
 195
 4,512
Gain on spectrum license transaction—
 —
 (126) (142)

See “Special Items” for a description of these special items.

Operating Results From Divested Businesses
On April 1, 2016, we completed the Access Line Sale. On May 1, 2017, we completed the Data Center Sale. The results of operations related to these divestitures and other insignificant transactions are included within Corporate and other for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker. The results of operations related to these divestitures included within Corporate and other are as follows:
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Operating Results From Divested Businesses       
Operating revenues$54
 $211
 $368
 $1,910
Cost of services24
 71
 129
 677
Selling, general and administrative expense13
 25
 68
 218
Depreciation and amortization expense—
 32
 22
 97

Other Consolidated Results

Other Income (Expense), Net
Additional information relating to Other income (expense), net is as follows:
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Interest income$11 $13 $(2)(15.4)%$37 $49 $(12)(24.5)%
Other components of net periodic benefit income204 (796)1,000 nm2,225 (563)2,788 nm
Other, net54 9 45 nm(1,090)(189)(901)nm
Total$269 $(774)$1,043 nm$1,172 $(703)$1,875 nm
 Three Months Ended      Nine Months Ended     
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Interest income$23
 $16
 $7
 43.8% $57
 $42
 $15
 35.7 %
Other, net(534) 81
 (615) nm
 (1,433) (1,739) 306
 (17.6)
Total$(511) $97
 $(608) nm
 $(1,376) $(1,697) $321
 (18.9)

nm-nm - not meaningful


The change in Other income (expense), net, during the three months ended September 30, 2017, comparedreflects certain items not directly related to the similar period in 2016 was driven by earlyour core operations, including interest income, gains and losses from non-operating asset dispositions, debt redemptionextinguishment costs, components of $0.5 billion recorded during the third quarter of 2017. The change during the nine months ended September 30, 2017, compared to the similar period in 2016, was driven by early debt redemption costs of $1.3 billion, compared to $1.8 billion recorded during 2016 (see “Special Items”).net periodic pension and postretirement benefit cost and income and foreign exchange gains and losses.



Special Charges
Special charges included in Other income (expense), net were as follows:
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Early debt redemption costs$454
 $—
 $1,302
 $1,822

Interest Expense
 Three Months Ended      Nine Months Ended     
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Total interest costs on debt balances$1,338
 $1,214
 $124
 10.2 % $4,030
 $3,770
 $260
 6.9 %
Less capitalized interest costs174
 176
 (2) (1.1) 516
 531
 (15) (2.8)
Total$1,164
 $1,038
 $126
 12.1
 $3,514
 $3,239
 $275
 8.5
                
Average debt outstanding$117,753
 $103,247
     $114,792
 $105,153
    
Effective interest rate4.5% 4.7%     4.7% 4.8%    

Total interest costs on debt balances increased during both the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016,2020.

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The increase during the three months ended September 30, 2021 was primarily due to:
•a decrease in net pension remeasurement loss of $948 million during 2021.

The increase during the nine months ended September 30, 2021 was primarily due to:
•a pension remeasurement gain of $1.2 billion recorded during 2021, compared with a net pension remeasurement loss of $1.4 billion recorded during 2020; and
•an increase of $1.0 billion in early debt redemption costs during 2021.

See "Special Items" for more information.

Interest Expense
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Total interest costs on debt balances$1,348 $1,192 $156 13.1 %$4,020 $3,584 $436 12.2 %
Less capitalized interest costs547 148 399 nm1,274 417 857 nm
Total$801 $1,044 $(243)(23.3)$2,746 $3,167 $(421)(13.3)
Average debt outstanding (1) (3)
$151,347 $113,774 $145,984 $114,690 
Effective interest rate (2) (3)
3.6 %4.2 %3.7 %4.2 %
(1)The average debt outstanding is a financial measure and is calculated by applying a simple average of prior months 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.
nm - not meaningful

Total interest expense decreased during both the three and nine months ended September 30, 2021 compared to the similar periods in 2020, primarily due to:
•an increase in interest costs on debt balances as a result of higher average debt balances, (see “Consolidated Financial Condition”).partially offset by lower average interest rates as a result of our continuing focus on optimizing our debt footprint and total borrowing costs; and

•an increase in capitalized interest costs as a result of C-Band licenses won.

See Note 4 and Note 6 to the condensed consolidated financial statements for additional information on spectrum licenses and debt transactions, respectively.

Provision for Income Taxes
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Provision for income taxes$1,820 $1,347 $473 35.1 %$5,395 $4,084 $1,311 32.1 %
Effective income tax rate21.7 %23.0 %23.2 %23.1 %
 Three Months Ended    Nine Months Ended   
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Provision for income taxes$1,775
 $1,829
 $(54) (3.0)% $5,893
 $5,029
 $864
 17.2%
Effective income tax rate32.2% 32.8%     33.4% 35.8%    


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 September 30, 2017 is comparable to the similar period in 2016. The decrease in the effective income tax rate during the ninethree months ended September 30, 2017,2021 compared to the similar period in 2016,2020 was primarily due to lower unfavorable tax impacts from goodwill not deductible for tax purposes in connection with the Data Center Salesale of Verizon Media in the current period compared to the Access Line Sale in the prior period as well as theperiod. The effective income tax rate impact of lower income before income taxes duefor the nine months ended September 30, 2021 was comparable to pension and benefit charges recordedthe similar period in the prior period.2020. The increase in the provision for income taxes during both the three and nine months ended September 30, 2017,2021 compared to the similar periodperiods in 2016,2020 was primarily due to the impact of higherincrease in income before income taxes in the current period.


Unrecognized Tax Benefits
Unrecognized tax benefits were $2.3$2.7 billion and $2.9 billion at September 30, 20172021 and $1.9 billion at December 31, 2016.2020, respectively. Interest and penalties related to unrecognized tax benefits were $0.2 billion$345 million (after-tax) and $388 million (after-tax) at September 30, 20172021 and $0.1 billion (after-tax) at December 31, 2016. The increase in unrecognized tax benefits was primarily related to the acquisition of Yahoo’s operating business.2020, 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 (IRS) 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.


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Consolidated Net Income, Operating Income, Consolidated EBITDA and Consolidated Adjusted EBITDA

Consolidated earnings before interest, taxes, depreciation and amortization expenses (Consolidated EBITDA) and Consolidated Adjusted EBITDA, which are presented below, are non-GAAPnon-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, depreciation and amortization expense,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 (expense),and expense, net, to net income.


Consolidated Adjusted EBITDA is calculated by excludingas well as the effect of special items from the calculation of Consolidated EBITDA.items. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. We believe that Consolidated Adjusted EBITDA is widely used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes, and depreciation and amortization policies. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis. See “Special Items”"Special Items" for additional details regarding these special items.information.

Operating expenses include pension and other postretirement benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. Such estimates are updated at least annually at the end of the fiscal year to reflect actual return on plan assets and updated actuarial assumptions or more frequently if significant events arise which require an interim remeasurement. The adjustment has been 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/losses. We believe the exclusion of these actuarial gains or losses enables management, investors and other users of our financial information to assess our performance on a more comparable basis and is consistent with management’s own evaluation of performance.


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 EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
Consolidated Net Income$6,554 $4,504 $17,881 $13,630 
Add:
Provision for income taxes1,820 1,347 5,395 4,084 
Interest expense (1)
801 1,044 2,746 3,167 
Depreciation and amortization expense3,961 4,192 12,155 12,523 
Consolidated EBITDA$13,136 $11,087 $38,177 $33,404 
Add (Less):
Other (income) expense, net (2)
$(269)$774 $(1,172)$703 
Equity in losses (earnings) of unconsolidated businesses(1)9 (10)34 
Loss on spectrum licenses— — 223 1,195 
Severance charges103 — 103 — 
Net gain from sale of Media(706)— (706)— 
Consolidated Adjusted EBITDA$12,263 $11,870 $36,615 $35,336 
(1) Includes Early debt redemption costs, where applicable. See "Special Items" for additional information.
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Consolidated Net Income$3,736
 $3,747
 $11,767
 $9,008
Add (Less):       
Provision for income taxes1,775
 1,829
 5,893
 5,029
Interest expense1,164
 1,038
 3,514
 3,239
Other (income) expense, net511
 (97) 1,376
 1,697
Equity in losses of unconsolidated businesses22
 23
 71
 63
Consolidated Operating Income$7,208
 $6,540
 $22,621
 $19,036
Add Depreciation and amortization expense4,272
 3,942
 12,498
 11,941
Consolidated EBITDA$11,480
 $10,482
 $35,119
 $30,977
        
Add (Less):       
Net gain on sale of divested businesses—
 —
 (1,774) (1,007)
Acquisition and integration related charges166
 —
 725
 —
Severance, pension and benefit charges—
 797
 195
 4,512
Gain on spectrum license transaction—
 —
 (126) (142)
Consolidated Adjusted EBITDA$11,646
 $11,279
 $34,139
 $34,340
(2) Includes Pension and benefits mark-to-market adjustments and Early debt redemption costs, where applicable. See "Special Items" for additional information.


The changes in Consolidated Net Income, Consolidated Operating Income, Consolidated EBITDA and Consolidated Adjusted EBITDA in the table above during the three and nine months ended September 30, 2017,2021, compared to the similar periods in 2016,2020, were primarily a result of the factors described in connection with operating revenues and operating expenses.


Segment Results of Operations

We have two reportable segments Wireless and Wireline, whichthat we operate and manage as strategic business units - Consumer and organize by products and services, and customer groups, respectively.Business. 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, management uses the following operating statistics to evaluate the overall effectiveness of our segments. We believe these operating statistics are useful to investors and other users of our financial information because they provide additional insight into drivers of our segments’ operating results, key trends and performance relative to our peers. These operating statistics may be determined or calculated differently by other companies and may not be directly comparable to those statistics of other companies.

Wireless retail connections are retail customer device postpaid and prepaid connections as of the end of the period. Retail connections under an account may include those from smartphones and basic phones (collectively, phones), as well as tablets and other internet devices,
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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 as of the end of the period. Retail connections under an account may include those from phones, as well as tablets and other internet 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 internet connections are the total number of connections to the internet using Fios internet services as of the end of the period. Fios internet connections are calculated by adding Fios internet new connections in the period to prior period Fios internet connections, and subtracting Fios internet disconnects in the period.

Fios video connections are the total number of connections to traditional linear video programming using Fios video services as of the end of the period. Fios video connections are calculated by adding Fios video net additions in the period to prior period Fios video connections. Fios video net additions are calculated by subtracting the Fios video disconnects from the Fios video new connections.

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

Wireless retail connections, net additions are thetotal number of additional retail customer device postpaid and prepaid connections, less the number of device disconnects in the period. Wireless retail connections, net additions in each period presented are calculated by subtracting the total retail postpaid and prepaid disconnects, net of certain adjustments, from the total retail postpaid and prepaid new connections in the period.

Wireless retail postpaid connections, net additions are the total number of additional retail customer device postpaid connections, less the number of device disconnects in the period. Wireless retail postpaid connections, net additions in each period presented are calculated by subtracting the retail postpaid disconnects, net of certain adjustments, from the retail postpaid new connections in the period.

Wireless retail postpaid phone connections, net additions are the total number of additional retail customer postpaid phone connections, less the number of phone disconnects in the period. Wireless retail postpaid phone connections, net additions in each period presented are calculated by subtracting the retail postpaid phone disconnects, net of certain adjustments, from the retail postpaid phone new connections in the period.

Wireless Churn is the rate at which service to retail, retail postpaid, or retail postpaid phone connections is terminated on average in the period. The churn rate in each period presented is calculated by dividing retail 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 in the period. Wireless retail postpaid service revenue does not include recurring device payment plan billings related to the Verizon device payment program, plan billings related to device warranty and insurance or regulatory fees. Wireless retail postpaid ARPA in each period presented is calculated by dividing retail postpaid service revenue by the average retail postpaid accounts in the period.

Wireless retail postpaid accounts are wireless retailcustomers that are directly served and managed under the Verizon brand and use its services as of the end of the period. Accounts include unlimited plans, shared data plans and corporate accounts, as well as legacy single connection plans and multi-connection family plans. A single account may include monthly wireless services for a variety of connected devices. Wireless retail postpaid accounts are calculated by adding retail postpaid new accounts to the prior period retail postpaid accounts.

Wireless retail postpaid connections per account is the calculated average number of retail postpaid connections per retail postpaid account as of the end of the period. Wireless retail postpaid connections per accountis calculated by dividing the total number of retail postpaid connections by the number of retail postpaid accounts as of the end of the period.

Segment operating income margin reflects the profitability of the segment as a percentage of revenue. Segment operating income margin is calculated by dividing total segment operating income by total segment operating revenues.

Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA), which is presented below, is a non-GAAP measure and does not purport to be an alternative to operating income (loss) as a measure of operating performance. We believe this measure is useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as it excludes the depreciation and amortization 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 1011 to the condensed consolidated financial statements.


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Wireless

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 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 through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios.

Operating Revenues and Selected Operating Statistics
Three Months EndedNine Months Ended
September 30,Increase/September 30,Increase/
(dollars in millions, except ARPA)20212020(Decrease)20212020(Decrease)
Service$16,891$16,255$636 3.9%$50,169$48,496$1,673 3.4%
Wireless equipment4,5303,4031,127 33.113,4619,9893,472 34.8
Other1,9072,078(171)(8.2)5,9736,129(156)(2.5)
Total Operating Revenues$23,328$21,736$1,592 7.3$69,603$64,614$4,989 7.7
Connections (‘000):(1)
Wireless retail connections94,98894,101887 0.9
Wireless retail postpaid connections90,91690,026890 1.0
Fios internet connections6,4906,110380 6.2
Fios video connections3,6423,926(284)(7.2)
Wireline broadband connections6,8586,581277 4.2
Net Additions in Period (‘000):(2)
Wireless retail419 213 206 96.7480(312)792 nm
Wireless retail postpaid423 136 287 nm447(317)764 nm
Wireless retail postpaid phones267 142 125 88.0239(68)307 nm
Churn Rate:
Wireless retail0.98 %0.95 %1.02 %1.00 %
Wireless retail postpaid0.84 %0.80 %0.88 %0.84 %
Wireless retail postpaid phones0.67 %0.63 %0.69 %0.64 %
Account Statistics:
Wireless retail postpaid ARPA$123.04$118.52$4.523.8$121.71$117.80$3.91 3.3
Wireless retail postpaid accounts (‘000) (1)
33,64033,712(72)(0.2)
Wireless retail postpaid connections per account (1)
2.702.670.03 1.1
 Three Months Ended    Nine Months Ended   
(dollars in millions, exceptSeptember 30,  Increase/ September 30,  Increase/
    ARPA and I-ARPA)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Service$15,841
 $16,684
 $(843) (5.1)% $47,241
 $50,234
 $(2,993) (6.0)%
Equipment4,352
 4,124
 228
 5.5
 12,414
 11,782
 632
 5.4
Other1,387
 1,293
 94
 7.3
 4,085
 3,793
 292
 7.7
Total Operating Revenues$21,580
 $22,101
 $(521) (2.4) $63,740
 $65,809
 $(2,069) (3.1)
                
Connections (‘000): (1)
               
Retail        115,274
 113,676
 1,598
 1.4
Retail postpaid        109,686
 108,220
 1,466
 1.4
                
Net additions in period (‘000): (2)
               
Retail connections742
 525
 217
 41.3
 1,051
 1,573
 (522) (33.2)
Retail postpaid connections603
 442
 161
 36.4
 910
 1,697
 (787) (46.4)
                
Churn Rate:               
Retail connections1.19% 1.28%     1.25% 1.23%    
Retail postpaid connections0.97% 1.04%     1.02% 0.98%    
                
Account Statistics:               
Retail postpaid ARPA$136.31
 $144.94
 $(8.63) (6.0) $136.06
 $145.12
 $(9.06) (6.2)
Retail postpaid I-ARPA$166.98
 $169.49
 $(2.51) (1.5) $165.98
 $167.23
 $(1.25) (0.7)
                
Retail postpaid accounts (‘000) (1)
        35,364
 35,530
 (166) (0.5)
Retail postpaid connections per account (1)
        3.10
 3.05
 0.05
 1.6
(1)As of end of period
(1)
As of end of period
(2)
Excluding acquisitions and adjustments

(2)Includes certain adjustments
Wireless’nm - not meaningful

Consumer’s total operating revenues decreased by $0.5 billion, or 2.4%, and $2.1 billion, or 3.1%, respectively, during the three and nine months ended September 30, 2017, compared to the similar periods in 2016, primarily as a result of a decline in service revenues, partially offset by an increase in equipment revenues.

Accounts and Connections
Retail postpaid accounts primarily represent retail customers with Verizon Wireless that are directly served and managed by Verizon Wireless and use its branded services. Accounts include shared data plans, unlimited 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.

Retail connections represent our retail customer device postpaid and prepaid connections. Churn is the rate at which service to connections is terminated. Retail connections under an account may include those from smartphones and basic phones (collectively, phones) as well as tablets and other devices connected to the Internet, including retail IoT devices. The U.S. wireless market has achieved a high penetration of smartphones which reduces the opportunity for new phone connection growth for the industry. Retail postpaid connection net additions increased during the three months ended September 30, 2017, compared to the similar period in 2016, primarily due to a lower retail postpaid connection churn rate, driven by lower churn on postpaid phone connections, partially offset by a decrease in retail postpaid gross additions. Retail postpaid connection net additions decreased during the nine months ended September 30, 2017, compared to the similar period in 2016, primarily due to a decrease in retail postpaid gross additions as well as a higher retail postpaid connection churn rate, driven by higher churn on tablet connections.

Retail Postpaid Connections per Account
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. Retail postpaid connections per account increased 1.6% as of September 30, 2017, compared to September 30, 2016. The increase in retail postpaid connections per account is primarily due to an increase in Internet devices, which represented 18.6% of our retail postpaid connection base as of September 30, 2017, compared to 18.1% as of September 30, 2016.


Service Revenue
Service revenue, which does not include recurring device payment plan billings related to the Verizon device payment program, decreased by $0.8 billion, or 5.1%, and $3.0 billion, or 6.0%, respectively, during the three and nine months ended September 30, 2017, compared to the similar periods in 2016, primarily due to lower postpaid service revenue, including decreased overage revenue and access revenue. Overage revenue pressure was primarily related to the ongoing migration to the pricing plans introduced in 2016, which feature safety mode and carryover data, and the introduction of unlimited pricing plans in 2017. Service revenue was also negatively impacted as a result of the ongoing customer migration to plans with unsubsidized service pricing. The pace of migration to unsubsidized price plans is slowing, as the majority of customers are already on such plans.

Customer migration to unsubsidized service pricing is driven in part by an increase in the activation of devices purchased under the Verizon device payment program. For both the three and nine months ended September 30, 2017, phone activations under the Verizon device payment program represented approximately 77% of retail postpaid phones activated compared to approximately 70% and 69%, respectively, during the three and nine months ended September 30, 2016. At September 30, 2017, approximately 78% of our retail postpaid phone connections were on unsubsidized service pricing compared to approximately 60% at September 30, 2016. At September 30, 2017, approximately 49% of our retail postpaid phone connections participated in the Verizon device payment program compared to approximately 41% at September 30, 2016.

Service revenue plus recurring device payment plan billings related to the Verizon device payment program, which represents the total value received from our wireless connections, decreased 1.1% and 1.0%, respectively, during the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016.

Retail postpaid ARPA (the average service revenue per account from retail postpaid accounts), which does not include recurring device payment plan billings related to the Verizon device payment program, was negatively impacted during the three and nine months ended September 30, 2017, compared to the similar periods in 2016,2020 as a result of customer migration to plans with unsubsidized service pricing, including our new price plans launched during 2016, which feature safety modeincreases in Service and carryover data, and the introduction of unlimited data plans in 2017. Retail postpaid I-ARPA (the average service revenue per account from retail postpaid accounts plus recurring device payment plan billings), which represents the monthly recurring value received on a per account basis from our retail postpaid accounts, decreased 1.5% and 0.7%, respectively, during the three and nine months ended September 30, 2017, compared to the similar periods in 2016. The decrease is driven by service revenue decline,Wireless equipment, partially offset by increasing recurring device payment plan billings.a decrease in Other revenues.


EquipmentService Revenue
EquipmentService revenue increased $0.2 billion, or 5.5%, and $0.6 billion, or 5.4%, respectively, during the three and nine months ended September 30, 2017, compared to the similar periods in 2016, as a result of an increase in the Verizon device payment program take rate and an increase in the price of devices partially offset by an overall decline in device sales.

Under the Verizon device payment program, we recognize a higher amount of equipment revenue at the time of sale of devices. For both the three and nine months ended September 30, 2017, phone activations under the Verizon device payment program represented approximately 77% of retail postpaid phones activated2021 compared to approximately 70%the similar periods in 2020. These increases were primarily driven by increases in wireless and 69%, respectively,Fios service revenues.

Wireless service revenue increased $540 million during the three months ended September 30, 2021 and was primarily due to:
•an increase of $365 million in access revenues related to our postpaid plans driven by additional subscribers and migrations to higher priced plans, as well as growth related to content offerings, cloud services and mobile security products included in certain protection packages;
•an increase of $112 million related to growth in non-retail service revenue primarily driven by reseller accounts; and
•an increase of $64 million related to a gradual recovery in TravelPass revenue in 2021 compared to 2020, primarily as a result of customer behavior during the COVID-19 pandemic.

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Wireless service revenue increased $1.5 billion during the nine months ended September 30, 2021 and was primarily due to:
•an increase of $917 million in access revenues related to our postpaid plans driven by additional subscribers and migrations to higher priced plans as well as growth related to content offerings, cloud services and mobile security products included in certain protection packages; and
•an increase of $355 million related to growth in non-retail service revenue primarily driven by reseller accounts.

For the three months ended September 30, 2021, Fios service revenue totaled $2.7 billion, representing an increase of $121 million compared to the similar period in 2020 primarily resulting from an increase in Fios internet connections, reflecting increased demand for higher broadband speeds, partially offset by a decrease in Fios voice revenues.

For the nine months ended September 30, 2021, Fios service revenue totaled $8.1 billion, representing an increase of $292 million compared to the similar period in 2020, primarily resulting from an increase in Fios internet connections, reflecting increased demand for higher broadband speeds, partially offset by a decrease in Fios video revenues, reflecting the ongoing shift from traditional linear video to over-the-top offerings and a decrease in Fios voice revenues.

Wireless Equipment Revenue
Wireless equipment revenue increased during both the three and nine months ended September 30, 2016.2021 compared to the similar periods in 2020.


The increase during the three months ended September 30, 2021 was primarily due to:
•an increase of $740 million related to a shift to higher priced equipment in the mix of wireless devices and accessories sold; and
•an increase of $387 million driven by a higher volume of wireless devices and accessories sold, partially offset by related promotions.

The increase during the nine months ended September 30, 2021 was primarily due to:
•an increase of $2.0 billion related to a shift to higher priced equipment in the mix of wireless devices and accessories sold; and
•an increase of $1.5 billion driven by a higher volume of wireless devices and accessories sold, partially offset by related promotions.

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

Other revenue increased $0.1 billion, or 7.3%, and $0.3 billion, or 7.7%, respectively,decreased during both the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016,2020.

The decrease during the three months ended September 30, 2021 was primarily due to financing revenuesto:
•a decrease of $160 million that resulted from our device payment program and a volume-driven increase in revenues relatedan update to our device protection package.offering which increased the price of the bundled offering and changed the product mix within the offering such that a smaller amount of the overall device protection revenue is recognized in Other revenue.


The decrease during the nine months ended September 30, 2021 was primarily due to:
•a decrease of $262 million that resulted from an update to our device protection offering which increased the price of the bundled offering and changed the product mix within the offering such that a smaller amount of the overall device protection revenue is recognized in Other revenue; and
•an increase of $120 million related to cost recovery surcharges.

Operating Expenses
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Cost of services$4,149 $3,971 $178 4.5 %$12,330 $11,786 $544 4.6 %
Cost of wireless equipment4,611 3,411 1,200 35.2 13,857 10,161 3,696 36.4 
Selling, general and administrative expense4,060 4,055 5 0.1 12,131 12,353 (222)(1.8)
Depreciation and amortization expense2,918 2,862 56 2.0 8,679 8,531 148 1.7 
Total Operating Expenses$15,738 $14,299 $1,439 10.1 $46,997 $42,831 $4,166 9.7 
 Three Months Ended    Nine Months Ended   
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Cost of services$2,052
 $2,006
 $46
 2.3 % $6,007
 $5,932
 $75
 1.3 %
Cost of equipment4,965
 5,240
 (275) (5.2) 14,808
 14,882
 (74) (0.5)
Selling, general and administrative expense4,594
 4,921
 (327) (6.6) 13,785
 14,589
 (804) (5.5)
Depreciation and amortization expense2,366
 2,287
 79
 3.5
 7,051
 6,862
 189
 2.8
Total Operating Expenses$13,977
 $14,454
 $(477) (3.3) $41,651
 $42,265
 $(614) (1.5)


Cost of Services
Cost of services increased 2.3%, and $0.1 billion, or 1.3%, respectively, during both the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016,2020.

The increase during the three months ended September 30, 2021 was primarily due to higher rent expense as a resultto:
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•an increase in macrorent expense of $95 million related to adding capacity to the networks to support demand and smalllease modifications for certain existing cell sites supporting network capacity expansion and densification, as well as a volume-driventowers;
•an increase in costsof $57 million related to the device protection package offeredofferings to our customers. Partially offsetting these increases were decreaseswireless retail postpaid customers; and
•an increase in digital content costs of $28 million driven by additional streaming service subscriptions, partially offset by a decline in traditional linear content costs.

The increase during the nine months ended September 30, 2021 was primarily due to:
•an increase in rent expense of $218 million related to long distanceadding capacity to the networks to support demand and roaming.                 lease modifications for certain existing cell towers;

•an increase of $139 million related to the device protection offerings to our wireless retail postpaid customers;

•an increase in digital content costs of $76 million driven by additional streaming service subscriptions, partially offset by a decline in traditional linear content costs; and
•an increase in regulatory fees of $73 million related to a higher FUSF rate.

See Note 5 to the condensed consolidated financial statements for additional information on related lease modifications.

Cost of Wireless Equipment
Cost of wireless equipment decreased $0.3 billion, or 5.2%, and $0.1 billion, or 0.5%,increased during both the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016,2020.

The increase during the three months ended September 30, 2021 was primarily as a resultdue to:
•an increase of a decline in the number of smartphone and internet units sold, partially offset by$640 million related to a shift to higher priced unitsequipment in the mix of wireless devices sold.and accessories sold; and

•an increase of $571 million driven by a higher volume of wireless devices and accessories sold.

The increase during the nine months ended September 30, 2021 was primarily due to:
•an increase of $1.9 billion driven by a higher volume of wireless devices and accessories sold; and
•an increase of $1.7 billion related to a shift to higher priced equipment in the mix of wireless devices and accessories sold.

Selling, General and Administrative Expense
Selling,The change in selling, general and administrative expense decreased $0.3 billion, or 6.6%, and $0.8 billion, or 5.5%, respectively, during the three months ended September 30, 2021 compared to the similar period in 2020 was primarily due to:
•an increase in advertising expenses of $120 million related to brand messaging in 2021 as well as lower expenses in 2020 related to customer behavior during the COVID-19 pandemic; and
•a decrease in provision for credit losses of $104 million related to both improvement in payment trends in 2021 as well as actions taken in 2020 in response to the COVID-19 pandemic.

The decrease in selling, general and administrative expense during the nine months ended September 30, 2017,2021 compared to the similar periodsperiod in 2016,2020 was primarily due to:
•a decrease in provision for credit losses of $478 million related to both improvement in payment trends in 2021 as well as actions taken in 2020 in response to the COVID-19 pandemic;
•a $0.1 billion and $0.4 billion declinedecrease in personnel expense of $245 million primarily related to additional sales commission expense respectively,related to actions taken in 2020 in response to the COVID-19 pandemic;
•an increase in advertising expenses of $386 million related to brand messaging in 2021 as well as a declinelower expenses in employee related costs primarily due to reduced headcount, bad debt expense and advertising expense, offset by the impact of costs2020 related to the natural disasters in Florida and Texas. The decline in sales commission expensecustomer behavior during the threeCOVID-19 pandemic; and nine months ended September 30, 2017, compared to the similar periods in 2016, was driven by
•an increase in the proportionbuilding and facilities of activations under the Verizon device payment program, which has$102 million primarily related to a lower commission per unit than activations under traditional fixed-term service plans, as well as an overall declinechange in activations.utility rates.


Depreciation and Amortization Expense
Depreciation and amortization expense increased $0.1 billion, or 3.5%, and $0.2 billion, or 2.8%, during both the three and nine months ended September 30, 2017,2021, compared to the similar periods in 2016, primarily2020, driven by an increasethe change in netthe mix of total Verizon depreciable assets and Consumer's usage of those assets.


Segment Operating Income and EBITDA 
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Segment Operating Income$7,590 $7,437 $153 2.1 %$22,606 $21,783 $823 3.8 %
Add Depreciation and amortization expense2,918 2,862 56 2.0 8,679 8,531 148 1.7 
Segment EBITDA$10,508 $10,299 $209 2.0 $31,285 $30,314 $971 3.2 
Segment operating income margin32.5 %34.2 %32.5 %33.7 %
Segment EBITDA margin45.0 %47.4 %44.9 %46.9 %

44
 Three Months Ended    Nine Months Ended   
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Segment Operating Income$7,603
 $7,647
 $(44) (0.6)% $22,089
 $23,544
 $(1,455) (6.2)%
Add Depreciation and amortization expense2,366
 2,287
 79
 3.5
 7,051
 6,862
 189
 2.8
Segment EBITDA$9,969
 $9,934
 $35
 0.4
 $29,140
 $30,406
 $(1,266) (4.2)
Segment operating income margin35.2% 34.6%     34.7% 35.8%    
Segment EBITDA margin46.2% 44.9%     45.7% 46.2%    
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The changes in the table above during the three and nine months ended September 30, 2017,2021, compared to the similar periods in 2016,2020, were primarily a result of the factors described in connection with operating revenues and operating expenses.


Verizon Business Group
Wireline

During the first quarter of 2017, Verizon reorganized the customer groups within its Wireline segment. Previously, the customer groups in the WirelineOur Business segment consisted of Mass Markets (which included Consumer Retailprovides wireless and Small Business subgroups), Global Enterprisewireline communications services and Global Wholesale. Pursuantproducts, including data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to the reorganization, there are now four customer groups within the Wireline segment: Consumer Markets, which includes the customers previously included in Consumer Retail; Enterprise Solutions, which includes the large business customers, including multinational corporations,deliver various IoT services and federal government customers previously included in Global Enterprise; Partner Solutions, which includes the customers previously included in Global Wholesale;products. We provide these products and Business Markets, a new customer group, which includes U.S.-based small business customers previously included in Mass Markets and U.S.-based medium business customers, state and localservices to businesses, government customers and educational institutions previously includedwireless 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: Small and Medium Business, Global Enterprise.Enterprise, Public Sector and Other, and Wholesale.

The operating revenues from XO are included in the Wireline segment results as of February 2017, following the completion of the acquisition, and are included with the Enterprise Solutions, Partner Solutions and Business Markets customer groups. Total operating revenues of XO for the three and nine months ended September 30, 2017 were $0.3 billion and $0.8 billion, respectively.

The operating results and statistics for all periods presented below exclude the results of the Access Line Sale on April 1, 2016, the Data Center Sale on May 1, 2017 and other insignificant transactions (see “Operating Results From Divested Businesses”). The results were adjusted to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker.



Operating Revenues and Selected Operating Statistics
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Small and Medium Business$2,937 $2,742 $195 7.1 %$8,662$8,147$515 6.3 %
Global Enterprise2,552 2,595 (43)(1.7)7,6947,815(121)(1.5)
Public Sector and Other1,547 1,639 (92)(5.6)4,8074,636171 3.7 
Wholesale653 773 (120)(15.5)2,0692,314(245)(10.6)
Total Operating Revenues(1)
$7,689 $7,749 $(60)(0.8)$23,232$22,912$320 1.4 
Connections (‘000):(2)
Wireless retail postpaid connections26,99826,223775 3.0 
Fios internet connections35233220 6.0 
Fios video connections7274(2)(2.7)
Wireline broadband connections479488(9)(1.8)
Net Additions in Period (‘000):(3)
Wireless retail postpaid276 417 (141)(33.8)6101,172(562)(48.0)
Wireless retail postpaid phones162 141 21 14.9 287456(169)(37.1)
Churn Rate:
Wireless retail postpaid1.29 %1.19 %1.28%1.20%
Wireless retail postpaid phones1.04 %0.96 %1.04%0.96%
 Three Months Ended      Nine Months Ended     
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Consumer Markets$3,204
 $3,174
 $30
 0.9 % $9,589
 $9,519
 $70
 0.7 %
Enterprise Solutions2,262
 2,273
 (11) (0.5) 6,882
 6,888
 (6) (0.1)
Partner Solutions1,244
 1,219
 25
 2.1
 3,708
 3,722
 (14) (0.4)
Business Markets903
 834
 69
 8.3
 2,700
 2,534
 166
 6.6
Other49
 76
 (27) (35.5) 184
 240
 (56) (23.3)
Total Operating Revenues$7,662
 $7,576
 $86
 1.1
 $23,063
 $22,903
 $160
 0.7
                
Connections (‘000):(1)
               
Total voice connections        13,100
 14,194
 (1,094) (7.7)
                
Total Broadband connections        6,978
 7,038
 (60) (0.9)
Fios Internet subscribers        5,803
 5,585
 218
 3.9
Fios Video subscribers        4,648
 4,673
 (25) (0.5)
(1)Service and other revenues included in our Business segment amounted to approximately $6.9 billion and $7.0 billion for the three months ended September 30, 2021 and 2020, respectively. Service and other revenues included in our Business segment amounted to approximately $20.9 billion for both the nine months ended September 30, 2021 and 2020. Wireless equipment revenues included in our Business segment amounted to approximately $820 million and $709 million for the three months ended September 30, 2021 and 2020, respectively. Wireless equipment revenues included in our Business segment amounted to approximately $2.4 billion and $2.0 billion for the nine months ended September 30, 2021 and 2020, respectively

(1)
As of end of period

(2)As of end of period
Wireline’s(3)Includes certain adjustments

Business’s total operating revenues increased $0.1 billion, or 1.1%,decreased and $0.2 billion, or 0.7%, respectively,increased during the three and nine months ended September 30, 2017,2021, respectively, compared to the similar periods in 2016, primarily as2020. The decrease during the three months ended September 30, 2021 was a result of increasesdecreases in Business Markets, as a result of the acquisition of XO,Wholesale, Public Sector and FiosOther and Global Enterprise revenues, partially offset by an increase in Small and Medium Business revenues. The increase during the nine months ended September 30, 20172021 was a result of increases in Small and Medium Business and Public Sector and Other, partially offset by declinesdecreases in Partner SolutionsWholesale and Global Enterprise revenues. The 2016 Work Stoppage negatively impacted revenue for the nine months ended September 30, 2016.


Small and Medium Business
Small and Medium Business offers wireless services and equipment, conferencing services, tailored voice and networking products, Fios revenues were $2.9 billionservices, Internet Protocol networking, advanced voice solutions and $8.7 billion, respectively, during the threesecurity and nine months ended September 30, 2017, compared to $2.8 billion and $8.3 billion during the similar periods in 2016. During the nine months ended September 30, 2017, our Fios Internet subscriber base grew by 3.9% and our Fios Video subscriber base decreased by 0.5%, compared to the similar period in 2016, reflecting the ongoing shift from traditional linear video to over-the-top offerings.

Consumer Markets
Consumer Markets operations provide broadband Internet and video services (including HSI, Fios Internet and Fios video services) and local and long distance voicemanaged information technology services to residential subscribers.our U.S.-based small and medium businesses that do not meet the requirements to be categorized as Global Enterprise, as described below.


Consumer MarketsSmall and Medium Business revenues increased 0.9% and 0.7%, respectively, during the three and nine months ended September 30, 2017, compared to the similar periods in 2016, as increases in Fios revenues due to subscriber growth for Fios services (Internet, video and voice) and higher pay-per-view sales due to marquee events during the third quarter were partially offset by the continued decline of voice service revenues.

Consumer Fios revenues increased $0.1 billion, or 4.6%, and $0.3 billion, or 4.4%, respectively, during the three and nine months ended September 30, 2017, compared to the similar periods in 2016. Fios represented approximately 85% of Consumer revenue for both the three and nine months ended September 30, 2017,2021 compared to approximately 82% during the similar periods in 2016.2020.


The decline of voice service revenuesincrease during the three months ended September 30, 2021 was primarily due to:
•an increase in wireless equipment revenue of $117 million related to a 7.1% declinehigher volume and a shift to higher priced equipment in the mix of devices and accessories sold, partially offset by an increase in promotions; and
•an increase in wireless service revenue of $93 million driven by an increase in the amount of wireless retail residence voicepostpaid connections.

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The increase during the nine months ended September 30, 2021 was primarily due to:
•an increase in wireless equipment revenue of $323 million driven by a higher volume and a shift to higher priced equipment in the mix of devices and accessories sold, partially offset by an increase in promotions;
•an increase in wireless service revenue of $262 million driven by an increase in the amount of wireless retail postpaid connections, resulting primarily from competition and technology substitution with wireless, competing VoIP (voice over IP) and cable telephony services. Total voice connections include traditional switched access lines in service as well as Fios digitalincreases in usage and non-recurring fees related to the impacts of the COVID-19 pandemic in the prior year; and
•a decrease of $103 million related to the loss of voice and DSL service connections.


Enterprise Solutions
Enterprise Solutions helps customers deliver an adaptive enterprise while mitigating risk and maintaining continuity, to capitalize on the data driven world and create personalized experiences. Enterprise Solutions offers traditional circuit-based network services, and advanced networking solutions including Private IP, Ethernet, and Software Defined Wide Area Network, along with our traditional voice services and advanced workforce productivity and customer contact center solutions. Our Enterprise Solutions include security services to manage, monitor, and mitigate cyber-attacks. Enterprise Solutions provides professional and integrated managed services, delivering solutions for large businesses, including multinational corporations, and federal government customers.

Enterprise Solutions revenues decreased 0.5% and 0.1%, respectively, duringFor the three and nine months ended September 30, 2017,2021, Fios revenues totaled $248 million and $732 million, respectively, which represents an increase of $18 million and $40 million, respectively, compared to the similar periods in 2016.2020. The decreaseincreases were primarily related to increases 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 during both the three and nine months ended September 30, 2017 is2021 compared to the similar periods in 2020.

The decrease during the three months ended September 30, 2021 was primarily due to declinesto:
•a decrease of $115 million in traditional data and voice communicationscommunication services related to secular pressures in the marketplace;
•an increase of $35 million in wireless equipment revenue primarily related to a shift to higher priced equipment in the mix of wireless devices and accessories sold; and
•an increase of $30 million in customer premise equipment related to volumes.

The decrease during the nine months ended September 30, 2021 was primarily due to:
•a decrease of $343 million in traditional data and voice communication services related to secular pressures in the marketplace;
•an increase of $73 million related to a higher FUSF rate and resulting surcharges; and
•an increase of $80 million in customer premise equipment related to volumes.

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 business services and connectivity similar to the products and services offered by Global Enterprise, in each case, with features and pricing designed to address the needs of governments and educational institutions.

The decrease in Public Sector and Other during the three months ended September 30, 2021 compared to the similar period in 2020 was primarily due to:
•a decrease of $42 million in wireless equipment revenue primarily driven by a decrease in the number of wireless devices sold as a result of competitive price pressures,a reduction in activations partly related to COVID-19 impacts in the prior year. The decrease is partially offset by a shift to higher priced equipment in the acquisitionmix of XO.wireless devices and accessories sold;

•a decrease of $19 million in customer premise equipment due to volume; and
Partner Solutions•a decrease of $18 million in networking revenue and traditional voice communication services.
Partner Solutions provides
The increase in Public Sector and Other during the nine months ended September 30, 2021 compared to the similar period in 2020 was primarily due to:
•an increase in wireless service revenue of $251 million primarily related to a higher volume of wireless connections driven by shifting technology needs in remote business environments, particularly in education.

Wholesale
Wholesale offers wireline communications services including data, voice, and local dial tone and broadband services primarily to local, long distance, and otherwireless carriers that use our facilities to provide services to their customers.


Partner SolutionsWholesale revenues increased 2.1% and decreased 0.4%, respectively, during both the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016. 2020.

The increasedecrease during the three months ended September 30, 20172021 was primarily due to the acquisitionto:
•a decrease of XO during February 2017, offset by$119 million related to declines in traditional voice revenues due to the effectcommunication and network connectivity as a result of technology substitution as well as continuing contractionand rationalization of market rates due to competition. international traffic.

The decrease during the nine months ended September 30, 20172021 was primarily due to:
•a decrease of $245 million related to declines in traditional voice revenues due to the effect of technology substitution as well as continuing contraction of market rates due to competition, offset by an increase in data revenuescommunication and network connectivity as a result of technology substitution.

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Operating Expenses
Three Months EndedNine Months Ended
 September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Cost of services$2,647 $2,739 $(92)(3.4)%$8,066 $7,969 $97 1.2 %
Cost of wireless equipment1,061 968 93 9.6 3,248 2,870 378 13.2 
Selling, general and administrative expense2,077 2,092 (15)(0.7)6,231 6,195 36 0.6 
Depreciation and amortization expense1,018 1,027 (9)(0.9)3,046 3,055 (9)(0.3)
Total Operating Expenses$6,803 $6,826 $(23)(0.3)$20,591 $20,089 $502 2.5 

Cost of Services
The decrease in cost of services during the acquisition of XO. As a result of technology substitution, the number of core data circuits atthree months ended September 30, 2017 decreased 19.5%2021 compared to the similar period in 2020 was primarily due to:
•a decrease in access costs of $117 million resulting from a decline in network and voice services.

The increase in cost of services during the nine months ended September 30, 2016. The2021 compared to the similar period in 2020 was primarily due to:
•an increase in direct costs of $144 million related to professional services;
•an increase in regulatory fees of $107 million related to a higher FUSF rate;
•an increase in building and facilities costs of $80 million primarily related to a change in utility rates;
•a decrease in access costs of $214 million related to a decline in traditionalnetwork and voice revenue is driven by services; and
•a 7.4% declinedecrease in domestic wholesale connections at September 30, 2017, comparedpersonnel costs of $35 million related to September 30, 2016.lower consulting fees and employee travel.


Business MarketsCost of Wireless Equipment
Business Markets offers traditional voice and networking products, Fios services, IP Networking, advanced voice solutions, security, and managed IT services to U.S.-based small and medium businesses, state and local governments, and educational institutions.

Business Markets revenuesCost of wireless equipment increased $0.1 billion, or 8.3% and $0.2 billion, or 6.6%, respectively, during both the three and nine months ended September 30, 2017,2021 compared to the similar periods in 2016, primarily due to2020.

The increase during the acquisition of XO during February 2017, offset by revenue declines related to the loss of voice and HSI connections as a result of competitive price pressures. Business Markets northeast footprint delivers ILEC voice and data products, which face secular declines.

Operating Expenses
 Three Months Ended    Nine Months Ended   
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Cost of services$4,496
 $4,369
 $127
 2.9 % $13,457
 $13,996
 $(539) (3.9)%
Selling, general and administrative expense1,552
 1,667
 (115) (6.9) 4,716
 4,998
 (282) (5.6)
Depreciation and amortization expense1,549
 1,467
 82
 5.6
 4,572
 4,540
 32
 0.7
Total Operating Expenses$7,597
 $7,503
 $94
 1.3
 $22,745
 $23,534
 $(789) (3.4)

Cost of Services
Cost of services increased $0.1 billion, or 2.9%, during thethan three months ended September 30, 2017, compared to the similar period in 2016,2021 was primarily due to to:
•an increase of $407 million related to a shift to higher priced equipment in content costs associated with continued programming license fee increasesthe mix of wireless devices and Fios subscriber growthaccessories sold; and an
•a decrease of $313 million driven by a lower volume of wireless devices sold.

The increase in access costs as a result of the acquisition of XO during February 2017.

Cost of services decreased $0.5 billion, or 3.9%, during the nine months ended September 30, 2017, compared to the similar period in 2016,2021 was primarily due to:
•an increase of $728 million related to a shift to higher priced equipment in the fact that we did not incur incremental costs in 2017 asmix of wireless devices and accessories sold;
•an increase of $68 million related to a resultrecall undertaken for certain jetpack units; and
•a decrease of the 2016 Work Stoppage, and a decline in net pension and postretirement benefit costs primarily$420 million driven by collective bargaining agreements ratified in June 2016. These decreases were partially offset by an increase in content costs associated with continued programming license fee increases and Fios subscriber growth and an increase in access costs as a resultlower volume of the acquisition of XO.wireless devices sold.


Selling, General and Administrative Expense
Selling, general and administrative expense decreased $0.1 billion, or 6.9% during the three months ended September 30, 2017, compared to the similar period in 2016, due to decreases in transaction taxes and regulatory expenses and contracted services, partially offset by the acquisition of XO.

Selling, general and administrative expense decreased $0.3 billion, or 5.6%, during the nine months ended September 30, 2017, compared to the similar period in 2016, due to a decline in net pension and postretirement benefit costs, primarily driven by collective bargaining agreements ratified in June 2016, transaction taxes and regulatory expenses, contracted services, and the fact that there were no 2016 Work Stoppage costs in 2017, partially offset by the acquisition of XO.

Depreciation and Amortization Expense
Depreciation and amortization expense increased $0.1 billion, or 5.6%, during the three months ended September 30, 2017, compared to the similar period in 2016, and 0.7% during the nine months ended September 30, 2017, compared to the similar period in 2016, primarily due to increases in net depreciable assets, as a result of the acquisition of XO.


Segment Operating Income (Loss) and EBITDA 
 Three Months EndedNine Months Ended
September 30,Increase/September 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Segment Operating Income$886 $923 $(37)(4.0)%$2,641 $2,823 $(182)(6.4)%
Add Depreciation and amortization expense1,018 1,027 (9)(0.9)3,046 3,055 (9)(0.3)
Segment EBITDA$1,904 $1,950 $(46)(2.4)$5,687 $5,878 $(191)(3.2)
Segment operating income margin11.5 %11.9 %11.4 %12.3 %
Segment EBITDA margin24.8 %25.2 %24.5 %25.7 %
 Three Months Ended    Nine Months Ended   
 September 30,  Increase/ September 30,  Increase/
(dollars in millions)2017
 2016
 (Decrease) 2017
 2016
 (Decrease)
Segment Operating Income (Loss)$65
 $73
 $(8) (11.0)% $318
 $(631) $949
 nm
Add Depreciation and amortization expense1,549
 1,467
 82
 5.6
 4,572
 4,540
 32
 0.7%
Segment EBITDA$1,614
 $1,540
 $74
 4.8
 $4,890
 $3,909
 $981
 25.1
Segment operating income (loss) margin0.8% 1.0%     1.4% (2.8)%    
Segment EBITDA margin21.1% 20.3%     21.2% 17.1 %    

nm - not meaningful


The changes in the table above during the three and nine months ended September 30, 2017,2021 compared to the similar periodsperiod in 2016,2020 were primarily a result of the factors described in connection with operating revenues and operating expenses.


Items excluded from our Wireline segment Operating income (loss), which were reclassified to Corporate and other,
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Special Items
Special items included in Income Before Provision For Income Taxes were as follows:
 Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
Severance, pension and benefits charges (credits)
Selling, general and administrative expense$103 $— $103 $— 
Other income (expense), net144 1,092 (1,170)1,427 
Net gain from sale of Media
Selling, general and administrative expense(706)— (706)— 
Early debt redemption costs
Other income (expense), net— — 1,132 129 
Interest expense— — — (27)
Loss on spectrum licenses
Selling, general and administrative expense— — 223 1,195 
Total$(459)$1,092 $(418)$2,724 
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
(dollars in millions)2017
 2016
 2017
 2016
Operating results from divested businesses$(17) $(83) $(149) $(918)

Special Items
Early Debt Redemption Costs

During the three and nine months ended September 30, 2017, we recorded early debt redemption costs of $0.5 billion and $1.3 billion, respectively.

During the nine months ended September 30, 2016, we recorded net debt redemption costs of $1.8 billion in connection with early redemptions and notes tendered during the year.

See Note 4 to the condensed consolidated financial statements for additional information related to our early debt redemptions.
Net Gain on Sale of Divested Businesses

During the second quarter of 2017, we completed the Data Center Sale. In connection with the Data Center Sale and other insignificant transactions, we recorded a net gain on the sale of divested businesses of approximately $1.8 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2017.

During the second quarter of 2016, we completed the sale of the local exchange business and related landline activities in California, Florida and Texas. As a result of this transaction, we recorded a pre-tax gain of approximately $1.0 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016. The pre-tax gain included a $0.5 billion pension and postretirement benefit curtailment gain due to the elimination of the accrual of pension and other postretirement benefits for some or all future services of a significant number of employees covered in three of our defined benefit pension plans and one of our other postretirement benefit plans.


The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Net Income, Operating IncomeConsolidated EBITDA and Consolidated Adjusted EBITDA discussion (See “Consolidated(see "Consolidated Results of Operations”Operations") excludes all of the net gain on saleamounts included above, as described below.

The income and expenses related to special items included in our condensed consolidated results of divested businesses described above. operations were as follows:
 Three Months EndedNine Months Ended
September 30,September 30,
(dollars in millions)2021202020212020
Within Total Operating Expenses$(603)$— $(380)$1,195 
Within Other income (expense), net144 1,092 (38)1,556 
Within Interest expense— — — (27)
Total$(459)$1,092 $(418)$2,724 
Acquisition and Integration Related Charges


Severance, Pension and Benefits Charges (Credits)
During the second quarter of 2017, we completed the acquisition of Yahoo’s operating business. We recorded acquisition and integration related charges of approximately $0.1 billion and $0.7 billion during the three and nine months ended September 30, 2017,2021, we recorded net pre-tax remeasurement losses of $144 million and a net pre-tax remeasurement gain of $1.2 billion, respectively including $0.1 billionin our pension plans triggered by settlements. Pension and $0.5 billionbenefit activity is recognized in the income statement during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of acquisition related severance charges duringactuarial gains and losses. During both the three and nine months ended September 30, 2017, respectively, primarily2021, we also recorded pre-tax severance charges of $103 million related to the acquisition of Yahoo’s operating business. These charges were primarily recordedvoluntary separations under our existing plans in Selling, general and administrative expense onin our condensed consolidated statements of income for the three and nine months ended September 30, 2017.income.


The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Net Income, Operating Income and EBITDA discussion (See “Consolidated Results of Operations”) excludes the acquisition and integration related charges described above.

Severance, Pension and Benefit Charges

During the nine months ended September 30, 2017, we recorded a pre-tax severance charge of approximately $0.2 billion, exclusive of acquisition related severance charges.

During the three months ended September 30, 2016,2021, we recorded a net pre-tax severance, pensionremeasurement loss of $144 million driven by a $667 million charge due to changes in our discount rate and benefit chargesother assumption changes, offset by a $523 million credit resulting from the difference between our estimated and our actual return on assets.

During the three months ended June 30, 2021, we recorded a pre-tax remeasurement gain of approximately $0.8$1.3 billion primarily for our pension plans in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges of $0.6 billion primarily related to settlements for employees who received lump-sum distributions in five of our defined benefit pension plans. The charges were primarily driven by a decrease$1.2 billion credit mainly due to changes in our discount rate assumption of $0.8 billionand changes in our lump sum interest rate assumptions used to determine the current year liabilities of our pension plans partially offset byand a $122 million credit resulting from the difference between our expected return on assets of 7.0%estimated and our annualized actual return on assets of 11.0% at August 31, 2016 ($0.2 billion). Our weighted-average discount rate assumption was 3.61% at August 31, 2016. As part of this charge,assets.

During the three and nine months ended September 30, 2020, we recorded severance costsnet pre-tax remeasurement losses of $0.2$1.1 billion underand $1.4 billion, respectively, in our existing separation plans.pension plans triggered by settlements.


During the three months ended JuneSeptember 30, 2016,2020, we recorded net pre-tax pension and benefit remeasurement charges of approximately $3.6 billion in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. These charges were comprised of a net pre-tax pension and benefit remeasurement chargeloss of $0.8$1.1 billion measured as of April 1, 2016 related to curtailments in three of our defined benefit pension plans and one of our other postretirement benefit plans, a net pre-tax pension and benefit remeasurement charge of $2.7 billion measured as of May 31, 2016 in two of our defined benefit pension plans and three of our other postretirement benefit plans as a result of our accounting for the contractual healthcare caps and bargained for changes, and a net pre-tax pension and benefit remeasurement charge of $0.1 billion measured as of May 31, 2016 related to settlements for employees who received lump-sum distributions in three of Verizon’s defined benefit pension plans. The pension and benefit remeasurement charges were primarily driven by a decrease$1.8 billion charge due to changes in our discount rate assumptionand lump sum interest rate assumptions used to determine the current year liabilities of our pension plans, offset by a $689 million credit due to the difference between our estimated and other postretirement benefit plans ($2.7 billion)our actual return on assets.

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 resulting from the difference between our estimated and updated healthcare cost trendour actual return on assets and changes in our lump sum interest rate assumptions ($0.9 billion). Our weighted-averageused to determine the current year liabilities of our pension plans, offset by a credit due to changes in our discount rate assumption decreased from 4.60% at December 31, 2015 to 3.99% at May 31, 2016.rate.


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During the three months ended March 31, 2016,2020, we also 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 resulting from the difference between our estimated and benefit remeasurement charge of $0.2 billionour actual return on assets.

See Note 9 to the condensed consolidated financial statements for additional information related to settlements for employees who received lump-sum distribution in one of Verizon’s defined benefit pension plans.

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Net Income, Operating Income and EBITDA discussion (See “Consolidated Results of Operations”) excludes theour severance, pension and benefitbenefits charges described above.and credits.

Gain on Spectrum License Transactions

Net Gain from Sale of Media
During both the first quarter of 2017, we completed a license exchange transaction with affiliates of AT&T Inc. (AT&T) to exchange certain Advanced Wireless Services (AWS)three and Personal Communication Services (PCS) spectrum licenses. As a result of this non-cash exchange, we received $1.0 billion of AWS and PCS spectrum licenses at fair value andnine months ended September 30, 2021, we recorded a net pre-tax gain of approximately $0.1 billion$706 million in Selling, general and administrative expense on ourconnection with the sale of Verizon Media. See Note 3 to the condensed consolidated statement of incomefinancial statements for additional information.

Early Debt Redemption Costs
During the nine months ended September 30, 2017.

During the first quarter of 2016, we completed a license exchange transaction with affiliates of AT&T to exchange certain AWS and PCS spectrum licenses. As a result of this non-cash exchange, we received $0.4��billion of AWS and PCS spectrum licenses at fair value and2021, we recorded a pre-tax gainearly debt redemption costs of approximately $0.1$1.1 billion in Selling, generalconnection with the redemptions of securities issued by Verizon and administrative expense on our condensed consolidated statementopen market repurchases of income forvarious Verizon and subsidiary notes.

During the nine months ended September 30, 2016.2020, 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.


The Consolidated Adjusted EBITDA non-GAAP measure presentedSee Note 6 to the condensed consolidated financial statements for additional information.

Loss on Spectrum Licenses
During the nine months ended September 30, 2021, we recognized a pre-tax loss of $223 million as a result of signing two agreements to sell certain wireless licenses.

During the nine months ended September 30, 2020, we recorded a pre-tax net loss of $1.2 billion as a result of the conclusion of the FCC incentive auction, Auction 103, for spectrum licenses in the Consolidated Net Income, Operating Incomeupper 37 Gigahertz (GHz), 39 GHz and EBITDA discussion (see “Consolidated Results of Operations”) excludes47 GHz bands.

See Note 3 to the gains on the spectrum license transactions described above.condensed consolidated financial statements for additional information.

Operating Results From Divested BusinessesConsolidated Financial Condition

 Nine Months Ended 
September 30,
(dollars in millions)20212020Change
Cash Flows Provided By (Used In)
Operating activities$31,162 $32,472 $(1,310)
Investing activities(57,018)(18,469)(38,549)
Financing activities13,469 (7,737)21,206 
Increase (decrease) in cash, cash equivalents and restricted cash$(12,387)$6,266 $(18,653)
On April 1, 2016, we completed the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier. On May 1, 2017, we completed the Data Center Sale.

Consolidated Financial Condition
 Nine Months Ended   
 September 30,   
(dollars in millions)2017
 2016
 Change
Cash Flows Provided By (Used In)     
Operating activities$17,221
 $17,724
 $(503)
Investing activities(13,701) (2,539) (11,162)
Financing activities(1,913) (13,214) 11,301
Increase In Cash and Cash Equivalents$1,607
 $1,971
 $(364)



We use the net cash generated from our operations to fund network expansion and modernization of our networks, service and repay external financing, pay dividends, invest in new businesses and spectrum and, when appropriate, buy back shares of our outstanding common stock. Our sources of funds, primarily from operations and, to the extent necessary, from external financing arrangements, are sufficient to meet ongoing operating and investing requirements. We expect that our capital spending requirements will continue to be financed primarily through internally generated funds. Debt or equity financing may be needed to fund additional investments or development activities or to maintain an appropriate capital structure to ensure our financial flexibility. Our cash and cash equivalents are primarily held both domestically and internationally, and are invested to maintain principal and provide liquidity. Accordingly, we do not have significant exposure to foreign currency fluctuations. See “Market Risk”"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 privately-placedother capital market securities.securities that are privately-placed or offered overseas. In addition, our available arrangements towe monetize our device payment plan agreement receivables includethrough asset-backed securitizationsdebt transactions.

We made the decision at the beginning of the COVID-19 pandemic to maintain a higher cash balance than our historical norm to further protect the Company against the economic uncertainties associated with the pandemic. We expect to continue to evaluate our cash balance throughout 2021 and sales of selected receivablesmay determine to relationship banks.adjust it further depending on economic conditions.


Cash Flows Provided By Operating Activities
Cash Flows Provided By Operating Activities

Our primary source of funds continues to be cash generated from operations, primarily from our Wireless segment.operations. Net cash provided by operating activities decreased $1.3 billion during the nine months ended September 30, 2017 decreased by $0.5 billion,2021, compared to the similar period in 2016,2020, primarily due to our discretionary contributions to qualified pension plans of $3.4 billion (approximately $2.1 billion, net of tax benefit), the change in the method in which we monetize device payment plan receivables, as discussed below, and changes in working capital, which includes higher volumes in 2021, as well as activity during 2020 including the receipt of a $2.2 billion cash tax benefit related to the
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sale of preferred shares in a foreign affiliate which did not repeat in 2021. In addition, we made a payment of $237 million for the settlement of forward starting interest rate swaps in 2021. These decreases were partially offset by an increase in earnings.earnings of $4.3 billion and the receipt of $251 million from the settlement of treasury rate locks. As a result of prior years' discretionary contributions and the discretionary pension contribution, our mandatoryfact that actual asset returns have been higher than expected, we expect that there will be no required pension funding through 2020 is expected2030, subject to be minimal, which will benefit future cash flows. Further, the funded status of our qualified pension plan is improved.changes in market conditions.


During 2016, we changed the method in which we monetize device payment plan receivables from sales of device payment plan receivables, which were recorded within cash flows provided by operating activities, to asset-backed securitization transactions, which are recorded in cash flows from financing activities. During the nine months ended September 30, 2016, we received cash proceeds related to new sales of wireless device payment plan agreement receivables of approximately $2.0 billion. See Note 5 to the condensed consolidated financial statements for additional information. During the nine months ended September 30, 2017, we received proceeds from asset-backed securitization transactions of approximately $2.9 billion. See Note 4 to the condensed consolidated financial statements and “Cash Flows Used In Financing Activities” for additional information.

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 and increase the operating efficiency and productivity of our networks.challenges.


Capital expenditures, including capitalized software, for the nine months ended September 30, 2021 and 2020 were as follows:
 Nine Months Ended 
 September 30, 
(dollars in millions)2017
 2016
Wireless$6,927
 $7,776
Wireline3,358
 2,856
Other997
 766
 $11,282
 $11,398
Total as a percentage of revenue12.3% 12.2%

$13.9 billion and $14.2 billion, respectively. Capital expenditures decreased at Wirelessapproximately $307 million, or 2.2%, during the nine months ended September 30, 2017,2021, compared to the similar period in 2016,2020, primarily due to the timing of investments, as well as capital efficiencies from our business excellence initiatives. Our investments primarily relate to increaseour network assets which support the capacity of our 4G LTE network. Capital expenditures increased at Wireline as a result of an increase in capital expenditures used for fiber assets.business.


Acquisitions of Wireless Licenses
In February 2017, Verizon acquired XO, which owns and operates one of2021, the largest fiber-based IP and Ethernet networks,FCC completed an auction, Auction 107, for total cash consideration ofmid-band spectrum known as C-Band. During the nine months ended September 30, 2021, we paid approximately $1.8$45.9 billion for spectrum licenses in connection with this auction, of which $0.1$1.3 billion was paid in 2015.for certain obligations related to projected clearing costs associated with the auction.

On June 13, 2017, Verizon acquired Yahoo’s operating business for cash consideration of approximately $4.5 billion, net of cash acquired.

Dispositions
During the nine months ended September 30, 2017,2021, we entered into and completed various other wireless license acquisitions for cash consideration of $95 million.

During the nine months ended September 30, 2021, we recorded capitalized interest related to wireless licenses of $1.1 billion.

Acquisitions of Businesses, Net of Cash Acquired
In October 2020, we entered into a definitive agreement to acquire certain assets of Bluegrass Cellular, a rural wireless operator serving central Kentucky. The transaction closed in March 2021. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $412 million, net of cash acquired, which is subject to customary closing adjustments.

Disposition of Business
During the nine months ended September 30, 2021, we received net cash proceeds of $3.5$4.1 billion in connection with the Data Center Sale on May 1, 2017. We also completed other insignificant transactions duringsale of Verizon Media. See Note 3 to the nine months ended September 30, 2017.condensed consolidated financial statements for additional information.


Cash Flows Used InCash Flows Provided By (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 nine months ended September 30, 2017 and 2016,2021, net cash provided by financing activities was $13.5 billion. During the nine months ended September 30, 2020, net cash used in financing activities was $1.9 billion and $13.2 billion, respectively.$7.7 billion.


During the nine months ended September 30, 2017,2021, our net cash used inprovided by financing activities of $1.9 billion was primarily driven by repayments of long-term borrowings and capital lease obligations of $16.5 billion, $7.1 billion paid in cash dividends and net debt related costs of $2.2 billion. These uses of cash were partially offset by proceeds from long-term borrowings of $21.9$32.5 billion and proceeds from asset-backed long-term borrowings of $2.9$2.7 billion. These proceeds were partially offset by repayments, redemptions and repurchases of long-term borrowings and finance lease obligations of $7.9 billion, cash dividends of $7.8 billion, and repayments of asset-backed long-term borrowings of $3.9 billion.

Proceeds from and Repayments of Long-Term Borrowings
At September 30, 2017,2021, our total debt increased to $117.5of $151.0 billion compared to $108.1included unsecured debt of $141.6 billion atand secured debt of $9.4 billion. At December 31, 2016.2020, our total debt of $129.1 billion included unsecured debt of $118.5 billion and secured debt of $10.6 billion. During the nine months ended September 30, 20172021 and 2016,2020, our effective interest rate was 4.7%3.7% and 4.8%4.2%, respectively. See Note 46 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, redemptions, privately negotiated transactions, tender offers, exchange offers, or otherwise, upon such terms and at such prices as Verizon may from time to time determine, for cash or other consideration.


Asset-Backed Debt
As of September 30, 2017, the carrying value of our asset-backed debt was $7.9 billion. Our asset-backed debt includes notes (the Asset-Backed Notes) issued to third-party investors (Investors) and loans (ABS Financing Facility) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed securitization 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, we transfer device payment plan agreement receivables from Cellco Partnership and certain other affiliates of Verizon (collectively, the Originators) 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 Partnership and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets onin our condensed consolidated balance sheets.


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Proceeds from our asset-backed debt transactions deposits to the segregated accounts and payments to the Originators in respect of additional transfers of device payment plan agreement receivables are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Repayments of our asset-backed debt and related interest payments made from the segregated accounts are non-cash activities and therefore not reflected within 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 onin our condensed consolidated balance sheets.


Other, netSee Note 6 to the condensed consolidated financial statements for additional information.
Other, net financing activities during the nine months ended September 30, 2017 includes net debt related costs of $2.2 billion.

Long-Term Credit Facilities
As of September 30, 2017, the unused borrowing capacity under our $9.0 billion credit facility was approximately $8.9 billion.
At September 30, 2021
(dollars in millions)MaturitiesFacility CapacityUnused CapacityPrincipal Amount Outstanding
Verizon revolving credit facility (1)
2024$9,500 $9,413 N/A
Various export credit facilities (2)
2022 - 20297,500 530 $4,823 
Total$17,000 $9,943 $4,823 
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 and for general corporate purposes.credit.

We had fully drawn from(2)During the $1.0 billion equipment credit facility entered into in March 2016 insured by Eksportkreditnamnden Stockholm, Sweden (EKN), the Swedish export credit agency. As ofnine months ended September 30, 2017,2021, we had an outstanding balance of $0.9 billion to repay. We used this credit facility to finance network equipment-related purchases.


In July 2017, we entered into equipmentdrew down $470 million from these facilities. These credit facilities insured by various export credit agencies with the ability to borrow up to $4.0 billionare used to finance equipment-related purchases. TheBorrowings under certain of these facilities have borrowingsamortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.

In September 2021, we submitted an irrevocable request to borrow the remaining $530 million available through October 2019 contingent uponunder our export credit facilities in November 2021.

Other, Net
Other, net financing activities during the amount of eligible equipment-related purchases made by Verizon. Atnine months ended September 30, 2017, we have not drawn2021 includes $295 million in payments related to vendor financing arrangements, $167 million in postings of derivative collateral and early debt redemption costs. See "Special Items" for additional information on these facilities.the early debt redemption costs.


Dividends
As in prior periods, dividend payments were a significant use of capital resources. During the third quarter of 2017, Verizon's Board of Directors increased our quarterly dividend payments by 2.2% to $0.5900 per share from $0.5775 per shareWe paid $7.8 billion and $7.6 billion in the prior year period. Duringcash dividends during the nine months ended September 30, 2017, we paid $7.1 billion in cash dividends.2021 and 2020, 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 financialrestrictive covenants in our debt agreements.

Change In Cash, Cash Equivalents and restrictive covenants.

Change InRestricted Cash and Cash Equivalents

Our Cash and cash equivalents at September 30, 20172021 totaled $4.5$9.9 billion, a $1.6$12.2 billion increasedecrease compared to Cash and cash equivalents at December 31, 2016,2020, primarily as a result of the factors discussed above.


Restricted cash totaled $1.2 billion and $1.3 billion as of September 30, 2021 and December 31, 2020, 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 capitalfinance 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. Free cash flow is calculated by subtracting capital expenditures from net cash provided by operating activities.


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The following table reconciles net cash provided by operating activities to Freefree cash flow:
 Nine Months Ended 
September 30,
(dollars in millions)20212020Change
Net cash provided by operating activities$31,162 $32,472 $(1,310)
Less Capital expenditures (including capitalized software)13,861 14,168 (307)
Free cash flow$17,301 $18,304 $(1,003)
 Nine Months Ended   
 September 30,   
(dollars in millions)2017
 2016
 Change
Net cash provided by operating activities$17,221
 $17,724
 $(503)
Less Capital expenditures (including capitalized software)11,282
 11,398
 (116)
Free cash flow$5,939
 $6,326
 $(387)


The changedecrease in Freefree cash flow during the nine months ended September 30, 2017,2021, compared to the similar period in 2016, was primarily due to our discretionary contributions to qualified pension plans of $3.4 billion (approximately $2.1 billion, net of tax benefit), the change in the method in which we monetize device payment plan receivables, as discussed below, and changes in working capital, partially offset by an increase in earnings. As2020, is a resultreflection of the discretionary pension contribution, our mandatory pension funding through 2020 is expected to be minimal, which will benefit future cash flows. Further, the funded status of our qualified pension plan is improved.

During 2016, we changed the methoddecrease in which we monetize device payment plan receivables from sales of device payment plan receivables, which were recorded withinoperating cash flows, provided by operating activities, to asset-backed securitization transactions, which are recordedas well as the decrease in cash flows from financing activities. During the nine months ended September 30, 2016, we received cash proceeds related to new sales of wireless device payment plan agreement receivables of approximately $2.0 billion. See Note 5 to the condensed consolidated financial statements for additional information. During the nine months ended September 30, 2017, we received proceeds from asset-backed securitization transactions of approximately $2.9 billion. See Note 4 to the condensed consolidated financial statements and “Cash Flows Used In Financing Activities” for additional information.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 cross currency swaps, forward starting interest rate swaps, interest rate swaps, and interest rate caps.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 also major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements (CSA) which provide rules for collateral exchange. Our CSAs generally require collateralized arrangements withThe CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in connection with uncleared derivatives, butoutstanding positions as of compared to established thresholds and changes in credit ratings. We do not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments recognized at fair value. At September 30, 2017,2021, we have entered into amendmentsheld and posted an insignificant amount of collateral related to derivative contracts under collateral exchange agreements, which were recorded as Other current liabilities and Prepaid expenses and other, respectively, in our CSA agreements with substantially all condensed consolidated balance sheet. At December 31, 2020, we held $0.2 billion of collateral related to derivative contracts under collateral exchange arrangements, which were recorded as Other current liabilities in our counterparties that suspend the requirement for cash collateral posting for a specified period of time by both counterparties.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. During the first and second quarter of 2017, we paid an insignificant amount of cash to extend certain of such amendments to certain collateral exchange arrangements. As a result of the amendments to the CSA agreements, we did not post any collateral at September 30, 2017. At December 31, 2016, we posted collateral of approximately $0.2 billion related to derivative contracts under collateral exchange arrangements, which were recorded as Prepaid expenses and other in our condensed consolidated balance sheet. See Note 68 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 September 30, 2017,2021, approximately 76%86% of the aggregate principal amount of our total debt portfolio consisted of fixed ratefixed-rate indebtedness, including the effect of interest rate swap agreements designated as hedges. The impact of a 100 basis point100-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 $0.3 billion.$216 million. The interest rates on substantially all of our existing long-term debt obligations are unaffected by changes to our credit ratings.


Certain of our floating rate debt and certain of 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 for reform. Regulators have announced that one-week and two-month U.S. dollar LIBOR rates will cease publication after December 31, 2021, and other U.S. dollar LIBOR rates will cease publication after June 30, 2023. 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. The floating rate senior unsecured notes issued in March 2021 and certain of our interest rate derivative transactions utilize interest rates that are linked to the Secured Overnight Financing Rate as the benchmark rate.

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, based on the London Interbank Offered Rate, 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 September 30, 2017,2021, the fair value of the asset and liability of these contracts were $0.2 billion,$500 million and $616 million, respectively. At December 31, 2016,2020, the fair value of the asset and liability of these contracts were $0.1 billion$787 million and $0.2 billion,$303 million, respectively. At both September 30, 20172021 and December 31, 2016,2020, the total notional amount of the interest rate swaps was $20.2 billion and $13.1 billion, respectively.$17.8 billion.

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Forward Starting Interest Rate CapsSwaps
We also have entered into forward starting interest rate caps which we useswaps designated as an economic hedge but for which we have elected notcash flow hedges in order to apply hedge accounting. During 2016, we entered into interest rate caps to mitigatemanage our interest exposure to interest rate increaseschanges on our ABS Financing Facility. Thefuture forecasted transactions. At September 30, 2021, the fair value of the liability of these contracts was insignificant at September 30, 2017 and$281 million. At December 31, 2016, respectively. At September 30, 2017 and December 31, 2016,2020, the total notionalfair value of the liability of these contracts was $2.8$797 million. At September 30, 2021 and December 31, 2020, the total notional amount of the forward starting interest rate swaps was $1.0 billion and $2.5$2.0 billion, respectively.


Treasury Rate Locks
Foreign Currency Translation
We enter into treasury rate locks to mitigate our future interest rate risk. There was no outstanding notional amount for treasury rate locks at September 30, 2021 or December 31, 2020 .


Foreign Currency Risk
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 incomeloss 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 September 30, 2017,2021, our primary translation exposure was to the British Pound Sterling, Euro, Australian Dollar and Japanese Yen.


Cross Currency Swaps
We enterhave 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 debtcash flows intoU.S.dollars and to fix our future interest and principalcash payments in U.S. dollars, as well as to mitigate the effectimpact of foreign currency transaction gains or losses. These swaps are designated as cash flow hedges. The fair value asset of these contracts was $0.3 billion and insignificant at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017 and December 31, 2016,2021, the fair value of the asset and liability of these contracts was $1.1$630 million and $1.4 billion, respectively. At December 31, 2020, the fair value of the asset and liability of these contracts was $1.4 billion and $1.8 billion,$196 million, respectively. At September 30, 20172021 and December 31, 2016,2020, the total notional amount of the cross currency swaps was $15.7$32.5 billion and $12.9$26.3 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, as well as foreign exchange risk related to debt settlements. At September 30, 2021, the fair value of the asset and liability of these contracts was zero and insignificant, respectively. At December 31, 2020, the fair value of the asset and liability of these contracts was insignificant. At September 30, 2021 and December 31, 2020, the total notional amount of the foreign exchange forwards was $870 million and $1.4 billion, respectively.


Acquisitions and Divestitures

Wireless
Spectrum License Transactions
From time to time, we enter into agreements to buy, sell or exchange spectrum licenses. We believe these spectrum license transactions have allowed us to continue to enhance the reliability of our wireless network, while also resulting in a more efficient use of spectrum.

In March 2020, the FCC's incentive auction, Auction 103, for spectrum licenses in the upper 37 GHz, 39 GHz, and 47 GHz bands concluded. Verizon participated in this incentive auction and was the high bidder on 4,940 licenses, which primarily consisted of 37 GHz and, to a lesser extent, 39 GHz spectrum. As an incumbent licensee, our 39 GHz licenses provided us with incentive payments that were applied towards the purchase price of spectrum in the auction. 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 licenses. The new reconfigured licenses were received in the second quarter 2020 and are included in Wireless licenses in our condensed consolidated balance sheet.

In September 2020, the FCC completed Auction 105 for Priority Access Licenses. Verizon participated in the auction and was the high bidder on 557 licenses in the 3.5 GHz band valued at approximately $1.9 billion. Verizon made payments for these licenses in 2020 and received them from the FCC in March 2021. The purchase cost for these licenses and related capitalized interest, to the extent qualifying activities have occurred, are included in Wireless licenses in our condensed consolidated balance sheet.

In February 2021, the FCC concluded Auction 107 for C-Band wireless spectrum. Verizon was the winning bidder on 3,511 licenses, consisting of contiguous C-Band spectrum bands ranging between 140 and 200 megahertz of C-Band spectrum in all 406 markets available in the auction. Verizon paid $45.5 billion for the licenses it won, of which $44.6 billion was paid in the first quarter of 2021. The carrying value of the wireless spectrum won in Auction 107 will consist of all payments required to participate and purchase licenses in the auction, including Verizon’s allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction that we are obligated to pay in order to acquire the licenses. Carrying value will also include capitalized interest to the extent qualifying activities have occurred. The licenses were received from the FCC in July 2021 and are included within Wireless licenses in our condensed consolidated balance sheet as of September 30, 2021.

See Note 23 to the condensed consolidated financial statements for additional information regarding our spectrum license transactions.


Straight Path
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On
Blue Jeans Network, Inc.
In April 2020, we entered into a definitive purchase agreement to acquire Blue Jeans Network, Inc. (BlueJeans), an enterprise-grade video conferencing and event platform, whose services are sold to Business customers globally. The transaction closed in May 11, 2017,2020. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $397 million, net of cash acquired.

TracFone Wireless, Inc.
In September 2020, we entered into a purchase agreement (Tracfone Purchase Agreement) with América Móvil to acquire Straight Path,Tracfone, a holderprovider of millimeter wave spectrum configured for 5G wirelessprepaid and value mobile services for consideration reflecting an enterprise value of approximately $3.1 billion.in the U.S. Under the terms of the purchase agreement,Tracfone Purchase Agreement, we agreed to pay (i) Straight Path shareholders $184.00 per share, payablewill acquire all of the stock of Tracfone for approximately $3.1 billion in cash and $3.1 billion in Verizon common stock, subject to customary adjustments, at closing. The number of shares and (ii) certain transaction costs payable in cashissued will be based on an average trading price determined as of approximately $0.7 billion, consisting primarily of a fee to be paid to the FCC. The acquisitionclosing date and is subject to customarya minimum number of shares issuable of 47,124,445 and a maximum number of shares issuable of 57,596,544. The Tracfone Purchase Agreement also includes up to an additional $650 million in future cash consideration related to the achievement of certain performance measures and other commercial arrangements. The transaction is subject to regulatory approvals and closing conditions and is expected to close byin the end of the firstfourth quarter of 2018.2021.


WirelineBluegrass Cellular
XO Holdings
In February 2016, we entered into a purchase agreement to acquire XO, which owns and operates one of the largest fiber-based IP and Ethernet networks. Concurrently, we entered into a separate agreement to lease certain wireless spectrum from a wholly-owned subsidiary of XO Holdings that holds its wireless spectrum, which included an option, subject to certain conditions, to buy the subsidiary. In February 2017, we completed our acquisition of XO for total cash consideration of approximately $1.8 billion, of which $0.1 billion was paid in 2015. In April 2017, we exercised our option to buy the subsidiary for approximately $0.2 billion, subject to certain adjustments. The transaction is subject to customary regulatory approvals and is expected to close by the end of 2017. Upon closing, the spectrum acquired as part of the transaction will be used for our 5G technology deployment.

Data Center Sale
On December 6, 2016, we entered into a definitive agreement, which was subsequently amended on March 21, 2017, with Equinix pursuant to which we agreed to sell 23 customer-facing data center sites in the U.S. and Latin America, for approximately $3.6 billion, subject to certain adjustments. The transaction closed on May 1, 2017.

WideOpenWest, Inc.
On August 1, 2017,October 2020, we entered into a definitive agreement to purchaseacquire certain fiber-optic network assets in the Chicago market from WOW!of Bluegrass Cellular (Bluegrass), a leading provider of communications services.rural wireless operator serving central Kentucky. Bluegrass provides wireless service to 210,000 customers in 34 counties in rural service areas 3, 4, and 5 in Central Kentucky. The transaction is expected to close by the end of 2017. In addition, the parties entered into a separate agreement pursuant to which WOW! will complete the build-out of the network assets by the second half of 2018.closed in March 2021. The totalaggregate cash consideration for the transactions is expected to be approximately $0.3 billion.

Other
Acquisition of Yahoo! Inc.’s Operating Business
On July 23, 2016, Verizon entered into a stock purchase agreement with Yahoo. Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we agreed to acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments.

On February 20, 2017, Verizon and Yahoo entered into an amendment to the Purchase Agreement, pursuant to which the Transaction purchase price was reduced by $350 million to approximately $4.48 billion in cash, subject to certain adjustments. Subject to certain exceptions, the parties also agreed that certain user security and data breaches incurred by Yahoo (and the losses arising therefrom) were to be disregarded (1) for purposes of specified conditions to Verizon’s obligations to close the Transaction and (2) in determining whether a “Business Material Adverse Effect” under the Purchase Agreement has occurred.

Concurrently with the amendment of the Purchase Agreement, Yahoo and Yahoo Holdings, Inc., a wholly-owned subsidiary of Yahoo that Verizon agreed to purchase pursuant to the Transaction, also entered into an amendment to the related reorganization agreement, pursuant to which Yahoo (which changed its name to Altaba Inc. following the closing of the Transaction) retains 50% of certain post-closing liabilities arising out of governmental or third-party investigations, litigations or other claims related to certain user security and data breaches incurred by Yahoo prior to its acquisitionpaid by Verizon including an August 2013 data breach disclosed by Yahoo on December 14, 2016. At that time, Yahoo disclosed that more than one billion of the approximately three billion accounts existing in 2013 had likely been affected. In accordance with the original Transaction agreements, Yahoo will continue to retain 100% of any liabilities arising out of any shareholder lawsuits (including derivative claims) and investigations and actions by the SEC.

Prior to the closing of the Transaction, pursuant to a related reorganization agreement, Yahoo transferred all of the assets and liabilities constituting Yahoo’s operating business to the subsidiaries that we acquired in the Transaction. The assets that we acquired did not include Yahoo’s ownership interests in Alibaba, Yahoo! Japan and certain other investments, certain undeveloped land recently divested by Yahoo, certain non-core intellectual

property or its cash, other than the cash from its operating business we acquired. We received for our benefit and that of our current and certain future affiliates a non-exclusive, worldwide, perpetual, royalty-free license to all of Yahoo’s intellectual property that was not conveyed with the business.

On June 13, 2017, we completed the Transaction. The aggregate purchase consideration at the closing of the Transactiontransaction was approximately $4.8 billion.

On October 3, 2017, based upon new intelligence that we received in connection with our integration$412 million, net of Yahoo's operating business, we disclosed that we believe that the August 2013 data breach previously disclosed by Yahoo affected all of its accounts.

Oath, our newly branded organization that combines Yahoo’s operating business with our existing Media business,cash acquired, which is a diverse house of more than 50 media and technology brands that engages approximately a billion people around the world. We believe that the Transaction represents a critical step in growing the global scale needed for our digital media company and building the future of brands using powerful technology, trusted content and differentiated data.subject to customary closing adjustments. See Note 23 to the condensed consolidated financial statements for additional information.


Verizon Media
On May 2, 2021, Verizon entered into a definitive agreement with an affiliate of Apollo Global Management Inc. (the Apollo Affiliate) pursuant to which we agreed to sell Verizon Media in return for consideration of $4.3 billion in cash, subject to customary adjustments, $750 million in non-convertible preferred limited partnership units of the Apollo Affiliate, and 10% of the fully-diluted common limited partnership units of the Apollo Affiliate.

On September 1, 2021, we completed the sale of Verizon Media. As of the close of the transaction, cash proceeds, the fair value of the non-convertible preferred limited partnership units of the Apollo Affiliate, and the fair value of 10% of the fully-diluted common limited partnership units of the Apollo Affiliate were $4.3 billion, $496 million, and $124 million, respectively. We recorded a pre-tax gain on sale of approximately $1.1 billion (after-tax $1.1 billion) in Selling general and administrative expense in our condensed consolidated statement of income for the three and nine months ended September 30, 2021. In addition, we incurred various costs associated with this disposition amounting to approximately $346 million which are primarily recorded in Selling general and administrative expense in our condensed consolidated statement of income for the three and nine months ended September 30, 2021. 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 23 to the condensed consolidated financial statements for additional information.


Other Factors That May Affect Future Results
Regulatory and Competitive Trends

In the “Regulatory and Competitive Trends” sectionTrends
There have been no material changes to Regulatory and Competitive Trends as previously disclosed in Part I, Item 1. “Business”I. "Business" in our Annual Report on Form 10-K for the year ended December 31, 2016, we reported in the Privacy and Data Security subsection that the FCC released new privacy and data security rules in November 2016 that would have applied to all telecommunications services, including our fixed and mobile voice and broadband services. On April 3, 2017, the President signed into law a bill that nullifies those rules. We also reported in the Broadband subsection on the status of the FCC’s treatment of broadband Internet access services. In May 2017, the FCC released a notice proposing to reverse the 2015 Title II Order and return to “light touch” regulation of broadband internet access services. In addition, in the Intercarrier Compensation and Network Access subsection, we noted that the FCC regulates some of the rates that carriers pay each other for the exchange of voice traffic over different networks and other aspects of interconnection for some voice services, as well as some of the rates and terms and conditions for certain wireline “business data services” and other services and network facilities. Verizon is both a seller and a buyer of these services, and both makes and receives interconnection payments. In April 2017, the FCC issued an order, which is currently under appeal that revised the regulatory structure for business data services, eliminating tariffing obligations and ex ante price regulations in markets the FCC determined to be competitive.2020.

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 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.

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 September 30, 2017.



 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,” “hopes”"anticipates," "believes," "estimates," "expects," "hopes," "forecasts," "plans" 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;
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•natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial or reputational impact;

•the impact of the COVID-19 pandemic 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 pandemic;

•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;networks or businesses;
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"Market Risk.”"


Item 4. Controls and Procedures
Our chief executive officerChief Executive Officer and chief financial officerChief 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 officerChief Executive Officer and chief financial officerChief Financial Officer have concluded that the registrant’s disclosure controls and procedures were effective as of September 30, 2017.2021.


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. In the third quarter of 2020, we began a multi-year implementation of a new global enterprise resource planning (ERP) system, which will replace many of our existing core financial systems. The ERP system is designed to enhance the flow of financial information, facilitate data analysis and accelerate information reporting. The implementation is expected to occur in phases over the next several years.

As the phased implementation of the new ERP system continues, we could have changes to our processes and procedures which, in turn, could result in changes to our internal controls over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting during the third quarter of 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II – Other Information


Item 1. Legal Proceedings
In October 2013,Verizon is not subject to any administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the California Attorney General’s Office notified Verizon California Inc. and other Verizon companiesdischarge of potential violationsmaterials into the environment or primarily for the purpose of California state hazardous waste statutes primarily arising fromprotecting the disposalenvironment that is likely to result in monetary sanctions of electronic components, batteries and aerosol cans at certain California facilities. We are cooperating with this investigation and continue to review our operations relating$1 million or more.

See Note 12 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. On April 1, 2016, we completed the sale to Frontier of our landline business operated by Verizon California Inc. and certain other Verizon landline companies. As a result of this transaction, Frontier now owns and operates Verizon California Inc. and has assumed the liabilities of Verizon California Inc. that may arise as a result of these alleged violations.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. ofincluded in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 3, 2017,In February 2020, the Verizon Board of Directors authorized a new share buyback program to repurchase up to 100 million shares of the Company’sCompany's common stock. The new 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 September 30, 2017.2021. At September 30, 2017,2021, the maximum number of shares that could be purchased by or on behalf of Verizon under our share buyback program was 100 million.

56

Table of Contents

Item 6.   Exhibits
Item 6. Exhibits
Exhibit
Number		Description
Exhibit
Number
31.1		Description
12Computation of Ratio of Earnings to Fixed Charges.
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.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).

57
Table of Contents

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: October 26, 20172021By/s//s/ Anthony T. Skiadas
Anthony T. Skiadas
Senior Vice President and Controller
(Principal Accounting Officer)

58
Exhibit Index
Table of Contents

Exhibit
Number		Description
Exhibit
Number31.1
Description
12
Computation of Ratio of Earnings to Fixed Charges.
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.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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