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VERIZON COMMUNICATIONS INC - Quarter Report: 2021 June (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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)
Delaware 23-2259884
(State or other jurisdiction
of incorporation or organization)
 (I.R.S. Employer Identification No.)
1095 Avenue of the Americas10036
New York,New York
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (212) 395-1000


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

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

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

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

At June 30, 2021, 4,140,116,007 shares of the registrant’s common stock were outstanding, after deducting 151,317,639 shares held in treasury.


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TABLE OF CONTENTS
Item No. Page
Item 1.
Three and six months ended June 30, 2021 and 2020
Three and six months ended June 30, 2021 and 2020
At June 30, 2021 and December 31, 2020
Six months ended June 30, 2021 and 2020
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
















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Part I - Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Statements of Income
Verizon Communications Inc. and Subsidiaries
Three Months EndedSix Months Ended
 June 30,June 30,
(dollars in millions, except per share amounts) (unaudited)2021202020212020
Operating Revenues
Service revenues and other
$28,221 $26,692 $56,144 $54,173 
Wireless equipment revenues
5,543 3,755 10,487 7,884 
Total Operating Revenues33,764 30,447 66,631 62,057 
Operating Expenses
Cost of services (exclusive of items shown below)
8,324 7,639 16,344 15,393 
Cost of wireless equipment
5,931 4,110 11,433 8,652 
Selling, general and administrative expense
7,324 7,156 14,725 15,741 
Depreciation and amortization expense
4,020 4,181 8,194 8,331 
Total Operating Expenses25,599 23,086 50,696 48,117 
Operating Income8,165 7,361 15,935 13,940 
Equity in earnings (losses) of unconsolidated businesses1 (13)9 (25)
Other income (expense), net502 (72)903 71 
Interest expense(844)(1,089)(1,945)(2,123)
Income Before Provision For Income Taxes7,824 6,187 14,902 11,863 
Provision for income taxes(1,875)(1,348)(3,575)(2,737)
Net Income$5,949 $4,839 $11,327 $9,126 
Net income attributable to noncontrolling interests$149 $139 $282 $270 
Net income attributable to Verizon5,800 4,700 11,045 8,856 
Net Income$5,949 $4,839 $11,327 $9,126 
Basic Earnings Per Common Share
Net income attributable to Verizon$1.40 $1.14 $2.67 $2.14 
Weighted-average shares outstanding (in millions)4,141 4,139 4,141 4,139 
Diluted Earnings Per Common Share
Net income attributable to Verizon$1.40 $1.13 $2.67 $2.14 
Weighted-average shares outstanding (in millions)4,143 4,141 4,143 4,141 
See Notes to Condensed Consolidated Financial Statements

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Condensed Consolidated Statements of Comprehensive Income
Verizon Communications Inc. and Subsidiaries
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions) (unaudited)2021202020212020
Net Income$5,949 $4,839 $11,327 $9,126 
Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit
Foreign currency translation adjustments, net of tax of $(15), $4, $(7) and $0
58 77 20 (43)
Unrealized gain (loss) on cash flow hedges, net of tax of $294, $(133), $(46) and $659
(777)314 132 (1,896)
Unrealized gain (loss) on marketable securities, net of tax of $0, $(2), $1 and $(1)
 (5)
Defined benefit pension and postretirement plans, net of tax of $52, $55, $103 and $111
(155)(169)(310)(338)
Other comprehensive income (loss) attributable to Verizon(874)228 (163)(2,272)
Total Comprehensive Income$5,075 $5,067 $11,164 $6,854 
Comprehensive income attributable to noncontrolling interests$149 $139 $282 $270 
Comprehensive income attributable to Verizon4,926 4,928 10,882 6,584 
Total Comprehensive Income$5,075 $5,067 $11,164 $6,854 
See Notes to Condensed Consolidated Financial Statements
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Condensed Consolidated Balance Sheets
Verizon Communications Inc. and Subsidiaries
At June 30,At December 31,
(dollars in millions, except per share amounts) (unaudited)20212020
Assets
Current assets
Cash and cash equivalents
$4,657 $22,171 
Accounts receivable
22,237 25,169 
Less Allowance for credit losses
980 1,252 
Accounts receivable, net 21,257 23,917 
Inventories
1,421 1,796 
Prepaid expenses and other
8,291 6,710 
Total current assets35,626 54,594 
Property, plant and equipment283,654 279,737 
Less Accumulated depreciation
189,452 184,904 
Property, plant and equipment, net94,202 94,833 
Investments in unconsolidated businesses560 589 
Wireless licenses98,034 96,097 
Deposits for wireless licenses45,910 2,772 
Goodwill24,915 24,773 
Other intangible assets, net7,002 9,413 
Operating lease right-of-use assets28,180 22,531 
Other assets14,761 10,879 
Total assets$349,190 $316,481 
Liabilities and Equity
Current liabilities
Debt maturing within one year$7,023 $5,889 
Accounts payable and accrued liabilities17,328 20,658 
Current operating lease liabilities3,881 3,485 
Other current liabilities11,846 9,628 
Total current liabilities40,078 39,660 
Long-term debt144,894 123,173 
Employee benefit obligations16,713 18,657 
Deferred income taxes37,534 35,711 
Non-current operating lease liabilities23,360 18,000 
Other liabilities11,499 12,008 
Total long-term liabilities234,000 207,549 
Commitments and Contingencies (Note 12)
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)
429 429 
Additional paid in capital13,403 13,404 
Retained earnings66,310 60,464 
Accumulated other comprehensive loss(234)(71)
Common stock in treasury, at cost (151,317,639 and 153,304,088 shares outstanding)
(6,632)(6,719)
Deferred compensation – employee stock ownership plans (ESOPs) and other408 335 
Noncontrolling interests1,428 1,430 
Total equity75,112 69,272 
Total liabilities and equity$349,190 $316,481 
See Notes to Condensed Consolidated Financial Statements
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Condensed Consolidated Statements of Cash Flows
Verizon Communications Inc. and Subsidiaries
Six Months Ended
 June 30,
(dollars in millions) (unaudited)20212020
Cash Flows from Operating Activities
Net Income$11,327 $9,126 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense8,194 8,331 
Employee retirement benefits(1,819)(32)
Deferred income taxes1,978 (120)
Provision for expected credit losses409 831 
Equity in losses of unconsolidated businesses, net of dividends received25 46 
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses82 3,297 
Other, net242 2,073 
Net cash provided by operating activities20,438 23,552 
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)(8,716)(9,850)
Acquisitions of businesses, net of cash acquired(458)(399)
Acquisitions of wireless licenses(45,278)(1,801)
Other, net51 (74)
Net cash used in investing activities(54,401)(12,124)
Cash Flows from Financing Activities
Proceeds from long-term borrowings31,444 9,305 
Proceeds from asset-backed long-term borrowings2,695 2,844 
Repayments of long-term borrowings and finance lease obligations(7,559)(8,533)
Repayments of asset-backed long-term borrowings(2,993)(4,612)
Dividends paid(5,198)(5,090)
Other, net(1,839)(146)
Net cash provided by (used in) financing activities16,550 (6,232)
Increase (decrease) in cash, cash equivalents and restricted cash(17,413)5,196 
Cash, cash equivalents and restricted cash, beginning of period23,498 3,917 
Cash, cash equivalents and restricted cash, end of period (Note 1)$6,085 $9,113 
See Notes to Condensed Consolidated Financial Statements

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Notes to Condensed Consolidated Financial Statements (Unaudited)
Verizon Communications Inc. and Subsidiaries
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States (U.S.) and based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements included in Verizon Communications Inc.'s (Verizon or the Company) Annual Report on Form 10-K for the year ended December 31, 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.

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

Earnings Per Common Share
There were a total of approximately 2 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and six months ended June 30, 2021 and June 30, 2020.

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

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

Assets held for sale include cash, cash equivalents and restricted cash in our media business, Verizon Media. See Note 3 for additional information.

Cash, cash equivalents and restricted cash are included in the following line items in the condensed consolidated balance sheets:
At June 30,At December 31,Increase / (Decrease)
(dollars in millions)
20212020
Cash and cash equivalents$4,657 $22,171 $(17,514)
Restricted cash:
Prepaid expenses and other
1,189 1,195 (6)
Other assets
94 132 (38)
Assets held for sale:
Prepaid expenses and other
145 — 145 
Cash, cash equivalents and restricted cash$6,085 $23,498 $(17,413)

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

Revenue by Category
We have two 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 includes the results of our media business, Verizon Media Group (Verizon Media), and other businesses. Verizon Media generated revenues from contracts with customers under Accounting Standards Updated (ASU) 2014-09, "Revenue from Contracts with Customers" (Topic 606) of approximately $2.1 billion and $3.9 billion during the three and six months ended June 30, 2021, respectively. Verizon Media generated revenues from contracts with customers under Topic 606 of approximately $1.4 billion and $3.1 billion during the three and six months ended June 30, 2020, respectively.     

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 six months ended June 30, 2021, revenues from
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arrangements that were not accounted for under Topic 606 were approximately $768 million and $1.5 billion, respectively. During the three and six months ended June 30, 2020, revenues from arrangements that were not accounted for under Topic 606 were approximately $785 million and $1.6 billion, respectively.

Remaining Performance Obligations
When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price may relate to service performance obligations which were not satisfied or are partially satisfied as of the end of the reporting period. Below we disclose information relating to these unsatisfied performance obligations. 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 June 30, 2021, month-to-month service contracts represented approximately 92% of our wireless postpaid contracts and approximately 80% of our wireline Consumer and Small and Medium Business contracts, compared to June 30, 2020, for which month-to-month service contracts represented approximately 89% of our wireless postpaid contracts and 67% 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 stated contract term, which typically extends longer than two years and, in some cases, include a periodic minimum revenue commitment over the contract 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 service 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 contract or commitments over the entire specified contract term; however, a significant number of contracts for wireline services with our Business customers have a contract term that is twelve months or less.

Additionally, there are certain contracts with Business customers for wireline and telematics services and certain Verizon Media contracts with customers that have a contractual minimum fee over the total contract term. We cannot predict the time period when revenue will be recognized related to those contracts; thus, they are excluded from the time bands below. These contracts have varying terms spanning over approximately seven years ending in January 2029 and have aggregate contract minimum payments totaling $2.8 billion.

At June 30, 2021, the transaction price related to unsatisfied performance obligations for total Verizon that is expected to be recognized for the remainder of 2021, 2022 and thereafter was $9.4 billion, $11.7 billion and $3.4 billion, respectively. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations and changes in the timing and scope of contracts, arising from contract modifications.

Accounts Receivable and Contract Balances
The timing of revenue recognition may differ from the time of billing to our customers. Receivables presented in our condensed consolidated balance 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 customer in advance of receiving all or partial consideration for such goods and services from the customer, or the customer has made payment to Verizon in advance of obtaining control of the goods and/or services promised to the customer in the contract.

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

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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.

The following table presents information about receivables from contracts with customers:
At June 30,At January 1,At June 30,At January 1,
(dollars in millions)2021202120202020
Receivables(1)
$9,387 $12,029 $10,967 $12,078 
Device payment plan agreement receivables(2)
10,836 10,358 10,047 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 sale of equipment on a device payment plan through an authorized agent.

The following table presents information about contract balances:
At June 30,At January 1,At June 30,At January 1,
(dollars in millions)2021202120202020
Contract asset$972 $937 $993 $1,150 
Contract liability (1)
5,846 5,598 5,275 5,307 
(1) Revenue recognized related to contract liabilities existing at January 1, 2021 were $199 million and $4.1 billion for the three and six months ended June 30, 2021, respectively. Revenue recognized related to contract liabilities existing at January 1, 2020 were $204 million and $4.0 billion, for the three and six months ended June 30, 2020, respectively.

The balance of contract assets and contract liabilities recorded in our condensed consolidated balance sheets were as follows:
At June 30,At December 31,
(dollars in millions)20212020
Assets
Prepaid expenses and other$772 $733 
Other assets200 204 
Total$972 $937 
Liabilities
Other current liabilities$4,985 $4,843 
Other liabilities861 755 
Total$5,846 $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.

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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.

The balances of deferred contract costs included in our condensed consolidated balance sheets were as follows:
At June 30,At December 31,
(dollars in millions)20212020
Assets
Prepaid expenses and other$2,401 $2,472 
Other assets2,113 2,070 
Total$4,514 $4,542 

For the three and six months ended June 30, 2021, we recognized expense of $743 million and $1.5 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income. For the three and six months ended June 30, 2020, we recognized expense of $767 million and $1.5 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

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 impairment charges recognized for the three and six months ended June 30, 2021 or June 30, 2020.

Note 3. Acquisitions and Divestitures
Spectrum License Transactions
In March 2020, the Federal Communications Commission's (FCC) incentive auction, Auction 103, for spectrum licenses in the upper 37 Gigahertz (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 remaining balance was settled in cash of $1.6 billion, of which $101 million was paid in December 2019. In connection with the incentive auction, a pre-tax net loss of $1.2 billion ($914 million after-tax) was recorded in Selling, general and administrative expense in the condensed consolidated statement of income during the six months ended June 30, 2020 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 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. In accordance with the rules applicable to the auction, Verizon is required to make additional payments to acquire the licenses. The payments are for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction, which are estimated to be $7.4 billion. We expect to begin making these payments in 2021 for the initial 46 markets and continue to do so for the remaining markets through 2024. These payments are dependent on 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. Per 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 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. On July 23, 2021 Verizon received the wireless licenses from the FCC. The carrying value is recorded within Deposits for wireless licenses in our condensed consolidated balance sheet as of June 30, 2021, and has been subsequently reclassified to Wireless licenses upon receipt of the corresponding licenses in July 2021.

Refer to Note 6 for further details on significant debt transactions.

During the three and six months ended June 30, 2021, we entered into and completed various other wireless license acquisitions for cash consideration of an insignificant amount and approximately $90 million, respectively. In March 2021, we reached two agreements to sell certain wireless licenses for insignificant cash consideration. As of June 30, 2021, these wireless licenses are classified as assets held for sale
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within Other assets and we recognized a pre-tax loss during the six months ended June 30, 2021 of $223 million ($167 million after-tax). The agreements are subject to regulatory approval and buyer financing conditions.

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 acquired.

TracFone Wireless, Inc.
In September 2020, we entered into a purchase agreement (Tracfone Purchase Agreement) with América Móvil to acquire TracFone Wireless, Inc. (Tracfone), a provider of prepaid and value mobile services in the U.S. Under the terms of the Tracfone Purchase Agreement, we will 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 issued will be based on an average trading price determined as of the closing date and is subject to a 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 in the second half of 2021.

Bluegrass Cellular
In October 2020, we entered into a definitive agreement to acquire certain assets of Bluegrass Cellular (Bluegrass), a 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 closed in March 2021. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $410 million, net of cash acquired, which is subject to customary closing adjustments.

The financial results of Bluegrass are included in the consolidated results of Verizon from the date of acquisition. These amounts are insignificant for the three months and six months ended June 30, 2021.

The acquisition of Bluegrass was accounted for as a business combination. We are currently assessing the identification and measurement of the assets acquired and liabilities assumed based on their fair values as of the close of the acquisition. Preliminarily, we recorded approximately $141 million of plant, property and equipment, $135 million of intangible assets and $91 million of 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 represents future economic benefits that we expect to achieve as a result of the acquisition. The goodwill related to this acquisition is included within Consumer.

Verizon Media
On May 2, 2021, Verizon entered into a definitive agreement with an affiliate of Apollo Global Management Inc. 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 affiliate, and 10% of the fully-diluted common limited partnership units of the affiliate. The sale is subject to customary regulatory approvals and closing conditions and is expected to close in the second half of 2021.

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The following table summarizes the major classes of assets and liabilities of Verizon Media which are currently included in Verizon's continuing operations and classified as held for sale in our condensed consolidated balance sheet as of June 30, 2021:
At June 30,
(dollars in millions)2021
Assets held for sale:
Prepaid expenses and other
Cash and cash equivalents$100 
Restricted cash45 
Accounts receivable1,843 
Other 127 
$2,115 
Other assets
Property, plant and equipment, net$1,140 
Other intangible assets, net2,469 
Other227 
$3,836 
Liabilities held for sale:
Other current liabilities
Accounts payable and accrued liabilities$1,665 
Other280 
$1,945 
Other liabilities$390 

The sale includes all of the assets of Verizon Media, including its brands, businesses, and web domains. The operating results of this business are included within our Corporate and other segment for all periods presented. Refer to Note 2 for further details on revenues generated by Verizon Media under Topic 606.

Other
During the three and six months ended June 30, 2021, we completed other acquisitions for insignificant amounts of cash consideration.

Note 4. Wireless Licenses, Goodwill, and Other Intangible Assets
Wireless Licenses
The carrying amounts of our Wireless licenses, as well as wireless spectrum for which licenses have not yet been received, are as follows:
At June 30,At December 31,
(dollars in millions)20212020
Wireless licenses$98,034 $96,097 
Deposits for wireless licenses45,910 2,772 

At June 30, 2021 and 2020, approximately $53.5 billion and $3.5 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. At June 30, 2021, the $53.5 billion was comprised of $8.0 billion recorded in Wireless licenses and $45.5 billion recorded in Deposits for wireless licenses. At June 30, 2020, $3.5 billion was recorded in Wireless licenses. We recorded approximately $154 million and $101 million of capitalized interest on wireless licenses for the six months ended June 30, 2021 and 2020, respectively. We recorded approximately $455 million of capitalized interest on Deposits for wireless licenses during the six months ended June 30, 2021.

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 six months ended June 30, 2021, we renewed various wireless licenses in accordance with FCC regulations. The average renewal period for these licenses was 10 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)
91  37 128 
Reclassifications, adjustments and other3 11  14 
Balance at June 30, 2021 (1)
$17,316 $7,546 $53 $24,915 
(1) Goodwill is net of accumulated impairment charges of $4.8 billion, related to our Media reporting unit.
(2) The change in goodwill due to acquisitions is related to Bluegrass and other insignificant transactions. See Note 3 for additional information.

Other Intangible Assets
The following table displays the composition of Other intangible assets, net as well as the respective amortization period:
 At June 30, 2021At December 31, 2020
(dollars in millions)Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
Customer lists (8 to 13 years)
$1,951 $(996)$955 $4,021 $(1,961)$2,060 
Non-network internal-use software (5 to 7 years)
20,080 (14,182)5,898 21,685 (15,104)6,581 
Other (4 to 25 years)
901 (752)149 1,771 (999)772 
Total$22,932 $(15,930)$7,002 $27,477 $(18,064)$9,413 

The amortization expense for Other intangible assets was as follows: 
Three Months EndedSix Months Ended
(dollars in millions)June 30,June 30,
2021$480 $1,109 
2020605 1,197 

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$786 
20221,565 
20231,350 
20241,114 
2025911 
2026538 

Note 5. Leasing Arrangements
We enter into various lease arrangements for network equipment including towers, distributed antenna systems, small cells, real estate and connectivity mediums including dark fiber, equipment, 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.

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 EndedSix Months Ended
June 30,June 30,
(dollars in millions)Classification2021202020212020
Operating lease cost (1)
Cost of services
Selling, general and administrative expense
$1,341 $1,254 $2,585 $2,475 
Finance lease cost:
Amortization of right-of-use assetsDepreciation and amortization expense66 40 133 291 
Interest on lease liabilitiesInterest expense9 10 17 20 
Short-term lease cost (1)
Cost of services
Selling, general and administrative expense
4 9 12 
Variable lease cost (1)
Cost of services
Selling, general and administrative expense
78 76 159 163 
Sublease incomeService revenues and other(49)(74)(97)(144)
Total net lease cost$1,449 $1,311 $2,806 $2,817 
(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 June 30, 2021 were as follows:
(dollars in millions)
YearsOperating LeasesFinance Leases
Remainder of 2021$2,186 $204 
20224,148 376 
20233,924 310 
20243,663 241 
20253,292 120 
Thereafter14,516 97 
Total lease payments31,729 1,348 
Less interest4,488 73 
Present value of lease liabilities27,241 1,275 
Less current obligation3,881 377 
Long-term obligation at June 30, 2021$23,360 $898 

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 six months ended June 30, 2021.

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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 2022
794 819 
Verizon 5.150% notes due 2023
3,190 3,519 
Open market repurchases of various Verizon and subsidiary notes1,994 2,440 
Three Months Ended June 30, 2021 total6,691 7,508 
Six Months Ended June 30, 2021 total$6,691 $7,508 
(1) Represents amount paid to repay, redeem, or repurchase, excluding interest or dividend.

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 2026
2,750 2,737 
Verizon floating rate (Compounded SOFR(2) + 0.790%) notes due 2026
750 748 
Verizon 2.100% notes due 2028
3,000 2,988 
Verizon 2.550% notes due 2031
4,250 4,216 
Verizon 3.400% notes due 2041
3,750 3,726 
Verizon 3.550% notes due 2051
4,500 4,426 
Verizon 3.700% notes due 2061
3,500 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 total30,934 
Six Months Ended June 30, 2021 total$30,934 
(1) Net proceeds were net of underwriting discounts and other issuance costs. In addition, for securities denominated in a currency other than the U.S. dollar, net proceeds are shown on a U.S. dollar equivalent basis.
(2) Compounded Secured Overnight Financing Rate (SOFR) is calculated using the SOFR Index published by the Federal Reserve Bank of New York in accordance with the terms of the notes. The Compounded SOFR for the initial interest period ending in June 2021 was 0.010%.
(3) See Note 8 for information on derivative transactions related to the issuances.

Asset-Backed Debt
As of June 30, 2021, the carrying value of our asset-backed debt was $10.3 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco), a wholly-owned subsidiary of 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
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of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.

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

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

ABS Notes
During the six months ended June 30, 2021, we completed the following ABS Notes 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 

Under the terms of each series of ABS Notes, there is a 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 six months ended June 30, 2021, we made aggregate principal repayments of $761 million and $1.5 billion, respectively, on ABS Notes that have entered the amortization period, including principal payments made in connection with clean-up redemptions. In July 2021, in connection with an optional acquisition of receivables and redemption of ABS Notes, we made a principal payment, in whole, for $125 million.

ABS Financing Facility
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 balance of $1.5 billion was fully repaid and there was no outstanding balance under the ABS Financing Facility as of June 30, 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.

The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:
At June 30,At December 31,
(dollars in millions)20212020
Assets
Account receivable, net$8,877 $9,257 
Prepaid expenses and other1,189 1,128 
Other assets3,248 2,950 
Liabilities
Accounts payable and accrued liabilities9 
Debt maturing within one year4,344 4,191 
Long-term debt5,971 6,413 

See Note 7 for additional information on device payment plan agreement receivables used to secure asset-backed debt.

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Long-Term Credit Facilities
At June 30, 2021
(dollars in millions)MaturitiesFacility CapacityUnused Capacity Principal Amount Outstanding
Verizon revolving credit facility (1)
2024$9,500 $9,392 N/A
Various export credit facilities (2)
2022 - 20297,500 530 $5,029 
Total$17,000 $9,922 $5,029 
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. The revolving credit facility provides for the issuance of letters of credit.
(2) During the six months ended June 30, 2021, we drew down $470 million from these facilities. These credit facilities are used to finance equipment-related purchases. Borrowings under certain of these facilities amortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.

Non-Cash Transactions
During the six months ended June 30, 2021 and 2020, we financed, primarily through alternative financing arrangements, the purchase of approximately $145 million and $673 million, respectively, of long-lived assets consisting primarily of network equipment. As of June 30, 2021 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 in our condensed consolidated statements of cash flows.

Debt Extinguishment Losses
During both the three and six months ended June 30, 2021 and June 30, 2020, we recorded debt extinguishment losses of $1.1 billion and $102 million, respectively. The losses are recorded in Other income (expense), net in our condensed consolidated statements of income.

Guarantees
We guarantee the debentures of our operating telephone company subsidiaries. As of June 30, 2021, $765 million aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

We also guarantee the debt obligations of GTE LLC as successor in interest to GTE Corporation that were issued and outstanding prior to July 1, 2003. As of June 30, 2021, $391 million aggregate principal amount of these obligations remained outstanding.

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

Note 7. Device Payment Plan Agreement and Wireless Service Receivables
The following table presents information about accounts receivable, net of allowances, recorded in our condensed consolidated balance sheet:
At June 30, 2021
(dollars in millions)Device payment plan agreementWireless
service
Other receivables(1)
Total
Accounts receivable$12,157 $5,006 $5,074 $22,237 
Less Allowance for credit losses575 145 260 980 
Accounts receivable, net of allowance$11,582 $4,861 $4,814 $21,257 
(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 wireless monthly bill. We no longer offer Consumer customers new fixed-term, subsidized service plans for 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.

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The following table displays device payment plan agreement receivables, net, recognized in our condensed consolidated balance sheets:
At June 30,At December 31,
(dollars in millions)20212020
Device payment plan agreement receivables, gross$18,537 $17,959 
Unamortized imputed interest(397)(453)
Device payment plan agreement receivables, at amortized cost18,140 17,506 
Allowance (1)
(833)(940)
Device payment plan agreement receivables, net$17,307 $16,566 
Classified in our condensed consolidated balance sheets:
Accounts receivable, net$11,582 $11,601 
Other assets5,725 4,965 
Device payment plan agreement receivables, net$17,307 $16,566 
(1) Includes allowance for both short-term and long-term device payment plan agreement receivables.

Included in our device payment plan agreement receivables at June 30, 2021 and December 31, 2020, are net device payment plan agreement receivables of $12.0 billion and $12.1 billion, respectively, which have been transferred to ABS Entities and continue to be reported in our condensed consolidated balance sheets. See Note 6 for additional information. We believe the carrying value of these receivables approximate their fair value using a Level 3 expected cash flow model.

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

Promotions
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 June 30, 2021 and December 31, 2020, the amount of the guarantee liability was $52 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 June 30, 2021 and December 31, 2020, the amount of trade-in liability was $174 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.

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. Verizon’s experience has been that the payment attributes of longer tenured customers are highly predictive for estimating their reliability to make 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 customers are "established customers" or "short-tenured customers." If a Consumer customer has been a customer for 45 days or more, or if a Business customer has been a customer for 12 months or more, the customer is considered an "established customer." For established customers, the credit decision and ongoing credit monitoring processes rely on a combination of internal and external data sources. 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 decision and credit monitoring 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 for Consumer customers. The custom credit risk score is generated automatically from the applicant’s credit data using proprietary custom credit 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 short-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, alternative credit data is used for the risk assessment. For Business customers, we also verify the existence of the business with external data sources.

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Based on the custom credit risk score, we assign each customer to a credit class, each of which has specified offers of credit including an account level spending limit and either a maximum amount of credit allowed per device or a required down payment percentage.

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 one for existing customers. The model for new customers pools all Consumer and Business wireless customers based on 210 days and 12 months or less, respectively, as "new customers." The model for existing customers pools all Consumer and Business wireless customers based on 210 days and 12 months or more, respectively, as "existing customers."

The following table presents device payment plan agreement receivables, at amortized cost, as of June 30, 2021, by credit quality indicator and year of origination:
Year of Origination
(dollars in millions)20212020
Prior to 2020(1)
Total
New customers$1,335 $1,183 $218 $2,736 
Existing customers7,074 7,072 1,258 15,404 
Total$8,409 $8,255 $1,476 $18,140 
(1) Includes accounts that have been suspended at a point in time.

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

We assess indicators for the quality of our wireless service receivables portfolio as one overall pool. As of June 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 plan agreement and wireless service receivables portfolios.

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

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 billing to write-off. The risk of loss is assessed over the contractual life of the receivables and is adjusted based on the historical loss amounts for current and future conditions based on management’s qualitative considerations. For global enterprise, public sector and wholesale wireline receivables, the allowance for credit losses is based on historical write-off experience and individual customer credit risk, if applicable.

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 losses235 87 
Write-offs charged against the allowance(365)(238)
Recoveries collected23 34 
Balance at June 30, 2021$833 $145 
(1) Includes allowance for both short-term and long-term device payment plan agreement receivables.

We monitor delinquency and write-off experience based on the quality of our device payment plan agreement and wireless service receivables portfolios. The extent of our collection efforts with respect to a particular customer are based on the results of our proprietary custom internal scoring models that analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These custom 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. For device payment plan agreement 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. For wireless service receivables, an account is considered delinquent 34 days after the bill cycle date. The risk class determines the speed and severity of the collections effort including initiatives taken to facilitate customer payment.
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The balance and aging of the device payment plan agreement receivables, at amortized cost, were as follows:
At June 30,
(dollars in millions)2021
Unbilled$17,040 
Billed:
Current
948 
Past due
152 
Device payment plan agreement receivables, at amortized cost$18,140 

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 as of June 30, 2021:

(dollars in millions)
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:
Prepaid expenses and other:
Interest rate swaps$ $184 $ $184 
Cross currency swaps 12  12 
Other assets:
Fixed income securities 464  464 
Interest rate swaps 330  330 
Cross currency swaps 1,068  1,068 
Total$ $2,058 $ $2,058 
Liabilities:
Other current liabilities:
Foreign exchange forwards$ $13 $ $13 
Cross currency swaps 295  295 
Forward starting interest rate swaps 281  281 
Other liabilities:
Interest rate swaps 572  572 
Cross currency swaps 462  462 
Total$ $1,623 $ $1,623 

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The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:

(dollars in millions)
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:
Prepaid expenses and other:
Foreign exchange forwards$— $12 $— $12 
Other assets:
Fixed income securities— 459 — 459 
Interest rate swaps— 787 — 787 
Cross currency swaps— 1,446 — 1,446 
Total$— $2,704 $— $2,704 
Liabilities:
Other current liabilities:
Forward starting interest rate swaps$— $409 $— $409 
Foreign exchange forwards
— — 
Other liabilities:
Interest rate swaps
— 303 — 303 
Cross currency swaps
— 196 — 196 
Forward starting interest rate swaps
— 388 — 388 
Total$— $1,298 $— $1,298 
(1)Quoted prices in active markets for identical assets or liabilities.
(2)Observable inputs other than quoted prices in active markets for identical assets and liabilities.
(3)Unobservable pricing inputs in the market.

Certain of our equity investments do not have readily determinable fair values and are excluded from the tables above. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer and are included in Investments in unconsolidated businesses in our condensed consolidated balance sheets. As of June 30, 2021 and December 31, 2020, the carrying amount of our investments without readily determinable fair values were $413 million and $402 million, respectively. During both the three and six months ended June 30, 2021, there were insignificant adjustments due to observable price changes. Cumulative adjustments due to observable price changes were $87 million.

Fixed income securities consist primarily of investments in municipal bonds. The valuation of the fixed income securities are based on the quoted prices for similar assets in active markets or identical assets in inactive markets or models that apply inputs from observable market data. The valuation determines that these securities are 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.

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 debt instruments, which is a Level 1 measurement, as well as quoted prices for similar debt instruments with comparable terms and maturities, which is a Level 2 measurement.

The fair value of our short-term and long-term debt, excluding finance leases, was as follows:
 Fair Value
(dollars in millions)Carrying
Amount
Level 1Level 2Level 3Total
At December 31, 2020$127,778 $103,967 $52,785 $— $156,752 
At June 30, 2021150,641 112,613 61,703  174,316 

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

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The following table sets forth the notional amounts of our outstanding derivative instruments:
At June 30,At December 31,
(dollars in millions)20212020
Interest rate swaps$17,608 $17,768 
Cross currency swaps32,502 26,288 
Forward starting interest rate swaps1,000 2,000 
Foreign exchange forwards1,490 1,405 

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, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against interest rate risk exposure of designated debt issuances. We record the interest rate swaps at fair value in our condensed consolidated balance sheets as assets and liabilities. Changes in the fair value of the interest rate swaps are recorded to Interest expense, which are offset by changes in the fair value of the hedged debt due to changes in interest rates.

During the three months ended June 30, 2021, we entered into and settled interest rate swaps with a total notional value of $1.6 billion and $1.8 billion, respectively. During the six months ended June 30, 2021, we entered into and settled interest rate swaps with a total notional value of $2.6 billion and $2.7 billion, respectively. During the three months ended June 30, 2020, we did not enter into any interest rate swaps and we settled interest rate swaps with a total notional value of $929 million. During the six months ended June 30, 2020, we entered into and settled interest rate swaps with a total notional value of $2.4 billion.

The ineffective portion of these interest rate swaps were zero and an insignificant amount of gains for the three and six months ended June 30, 2021, respectively. The ineffective portion of these interest rate swaps were losses of an insignificant amount and gains of $56 million for the three and six months ended June 30, 2020, respectively.

The following amounts were recorded in Long-term debt in our condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges:
At June 30,At December 31,
(dollars in millions)20212020
Carrying amount of hedged liabilities$18,021 $18,849 
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities25 557 
Cumulative amount of fair value hedging adjustment remaining for which hedge accounting has been discontinued637 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 three months ended June 30, 2021, we did not enter into or settle any cross currency swaps. During the six months ended June 30, 2021, we entered into cross currency swaps with a total notional value of $6.2 billion and we did not settle any cross currency swaps. During the three and six months ended June 30, 2021, a pre-tax loss of $701 million and $927 million, respectively, was recognized in Other comprehensive income (loss). During both the three and six months ended June 30, 2020, we entered into cross currency swaps with a total notional value of $3.3 billion and we settled cross currency swaps with a total notional value of $1.6 billion. During the three and six months ended June 30, 2020, a pre-tax gain of $1.0 billion and a pre-tax loss of $1.9 billion, respectively, were recognized in Other comprehensive income (loss). A portion of the gains recognized in Other comprehensive income (loss) was reclassified to Other income (expense), net to offset the related pre-tax foreign currency transaction gain or loss on the underlying hedged item. 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 six months ended June 30, 2021 and 2020, we did not enter into any new forward starting interest rate swaps. During both the three months ended June 30, 2021 and 2020, we did not settle any forward starting interest rate swaps. During both the six months ended June 30, 2021 and 2020, we settled forward starting interest rate swaps with a total notional value of $1.0 billion. During the six months ended June 30, 2021 and 2020, 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 six months ended June 30, 2021, a pre-tax loss of $121 million and a pre-tax gain of $279 million, respectively, were recognized in Other comprehensive income (loss),
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resulting from interest rate movements. During the three and six months ended June 30, 2020, an insignificant pre-tax gain and a pre-tax loss of $809 million, respectively, was 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 June 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 six months ended June 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 six months ended June 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 six months ended June 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 Euro-denominated debt designated as a net investment hedge was €750 million as of both June 30, 2021 and December 31, 2020.

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

Foreign Exchange Forwards
We enter into British Pound Sterling and Euro foreign exchange forwards to mitigate our foreign exchange rate risk related to non-functional currency denominated monetary assets and liabilities of international subsidiaries, as well as foreign exchange risk related to debt settlements. During the three months ended June 30, 2021, we entered into and settled foreign exchange forwards with a total notional value of $3.7 billion and $3.5 billion, respectively. During the six months ended June 30, 2021, we entered into and settled foreign exchange forwards with a total notional value of $7.2 billion and $7.1 billion, respectively. During the three months ended June 30, 2020, we entered into and settled foreign exchange forwards with a total notional value of $4.3 billion and $4.2 billion, respectively. During the six months ended June 30, 2020, we entered into and settled foreign exchange forwards with a total notional value of $6.9 billion and $7.1 billion, respectively. During the three and six months ended June 30, 2021, insignificant pre-tax gains and insignificant pre-tax losses, respectively, were recognized in Other income (expense), net. During the three and six months ended June 30, 2020, pre-tax gains of $81 million and an insignificant amount, 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 six months ended June 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 statement. During the three months ended June 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 six months ended June 30, 2020, we entered into and settled treasury rate locks with a total notional value of $1.6 billion, and we recognized an insignificant pre-tax gain in Interest expense.

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

Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements which provide rules for collateral exchange. The CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in outstanding positions as compared to established thresholds and changes in credit ratings. 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 June 30, 2021, we held $0.1 billion 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 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 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.

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Note 9. Employee Benefits
We maintain non-contributory defined benefit pension plans for certain employees. In addition, we maintain postretirement health care and life insurance plans for certain retirees and their dependents, which are both contributory and non-contributory, and include a limit on our share of the cost for certain current and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include service costs associated with pension and other postretirement benefits while other credits and/or charges based on actuarial assumptions, including projected discount rates, an estimated return on plan assets, and impact from health care trend rates are reported in Other income (expense), net. These estimates are updated in the fourth quarter to reflect actual return on plan assets and updated actuarial assumptions or upon a remeasurement event. The adjustment is recognized in the income statement during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses.

Net Periodic Benefit Cost (Income)
The following table summarizes the components of net periodic benefit cost (income) related to our pension and postretirement health care and life insurance plans:
(dollars in millions)
PensionHealth Care and Life
Three Months Ended June 30,2021202020212020
Service cost - Cost of services$62 $59 $23 $23 
Service cost - Selling, general and administrative expense9 14 5 
Service cost$71 $73 $28 $28 
Amortization of prior service cost (credit)$15 $15 $(224)$(242)
Expected return on plan assets(309)(296)(5)(6)
Interest cost99 137 73 107 
Remeasurement loss (gain), net(1,314)153  — 
Other components$(1,509)$$(156)$(141)
Total$(1,438)$82 $(128)$(113)
(dollars in millions)
PensionHealth Care and Life
Six Months Ended June 30,2021202020212020
Service cost - Cost of services$127 $118 $47 $45 
Service cost - Selling, general and administrative expense18 28 10 10 
Service cost$145 $146 $57 $55 
Amortization of prior service cost (credit)$30 $30 $(447)$(483)
Expected return on plan assets(618)(593)(11)(13)
Interest cost194 277 145 214 
Remeasurement loss (gain), net(1,314)335  — 
Other components$(1,708)$49 $(313)$(282)
Total$(1,563)$195 $(256)$(227)
The service cost component of net periodic benefit cost (income) is recorded in Cost of services and Selling, general and administrative expense in the condensed consolidated statements of income while the other components, including remeasurement adjustments, if any, are recorded in Other income (expense), net.

Severance Payments
During the three and six months ended June 30, 2021, we paid severance benefits of an insignificant amount and $129 million, respectively. During the six months ended June 30, 2021, we recorded pre-tax severance charges of an insignificant amount. At June 30, 2021, we had a remaining severance liability of $490 million, a portion of which includes future contractual payments to separated employees.

Employer Contributions
During both the three and six months ended June 30, 2021 and June 30, 2020, we made no contributions to our qualified pension plans and made insignificant contributions to our nonqualified pension 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 2021.

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Remeasurement loss (gain), net
During both the three and six 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 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, 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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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 June 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 period13,408 13,302 
Other(5)(21)
Balance at end of period13,403 13,281 
Retained Earnings
Balance at beginning of period63,107 54,557 
Net income attributable to Verizon5,800 4,700 
Dividends declared ($0.6275, $0.6150 per share)
(2,597)(2,544)
Other 33 
Balance at end of period66,310 56,746 
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period attributable to Verizon640 (1,502)
Foreign currency translation adjustments58 77 
Unrealized gain (loss) on cash flow hedges(777)314 
Unrealized gain (loss) on marketable securities 
Defined benefit pension and postretirement plans(155)(169)
Other comprehensive income (loss)(874)228 
Balance at end of period attributable to Verizon(234)(1,274)
Treasury Stock
Balance at beginning of period(151,366)(6,634)(153,438)(6,725)
Employee plans48 2 58 
Balance at end of period(151,318)(6,632)(153,380)(6,722)
Deferred Compensation-ESOPs and Other
Balance at beginning of period282 149 
Restricted stock equity grant131 157 
Amortization(5)(69)
Balance at end of period408 237 
Noncontrolling Interests
Balance at beginning of period1,451 1,443 
Total comprehensive income149 139 
Distributions and other(172)(166)
Balance at end of period1,428 1,416 
Total Equity$75,112 $64,113 

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(dollars in millions, except per share amounts, and shares in thousands)
Six months ended June 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(1)(138)
Balance at end of period13,403 13,281 
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 Verizon11,045 8,856 
Dividends declared ($1.2550, $1.2300 per share)
(5,199)(5,090)
Other 33 
Balance at end of period66,310 56,746 
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year attributable to Verizon(71)998 
Foreign currency translation adjustments20 (43)
Unrealized gain (loss) on cash flow hedges132 (1,896)
Unrealized gain (loss) on marketable securities(5)
Defined benefit pension and postretirement plans(310)(338)
Other comprehensive loss(163)(2,272)
Balance at end of period attributable to Verizon(234)(1,274)
Treasury Stock
Balance at beginning of year(153,304)(6,719)(155,606)(6,820)
Employee plans1,983 87 2,222 98 
Shareholder plans3  — 
Balance at end of period(151,318)(6,632)(153,380)(6,722)
Deferred Compensation-ESOPs and Other
Balance at beginning of year335 222 
Restricted stock equity grant230 172 
Amortization(157)(157)
Balance at end of period408 237 
Noncontrolling Interests
Balance at beginning of year1,430 1,440 
Total comprehensive income282 270 
Distributions and other(284)(294)
Balance at end of period1,428 1,416 
Total Equity$75,112 $64,113 
(1) Opening balance sheet adjustment for the six months ended June 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
Verizon did not repurchase any shares of Verizon common stock through its previously authorized share buyback program during the six months ended June 30, 2021. At June 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 2.0 million common shares issued from Treasury stock during the six months ended June 30, 2021.
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Accumulated Other Comprehensive Income (Loss)
The changes in the balances of Accumulated other comprehensive income (loss) by component were as follows:
(dollars in millions)Foreign 
currency
translation
adjustments
Unrealized gain (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 $(71)
Other comprehensive income (loss)20 (294)(5) (279)
Amounts reclassified to net income 426  (310)116 
Net other comprehensive income (loss)20 132 (5)(310)(163)
Balance at June 30, 2021$(384)$(1,255)$20 $1,385 $(234)

The amounts presented above in net other comprehensive income (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 in our condensed consolidated statements of income. See Note 8 for additional information. The amounts reclassified to net income related to defined benefit pension and postretirement plans in the table above are included in Other income (expense), net in our condensed consolidated statements of income. See Note 9 for additional information.

Note 11. Segment Information
Reportable Segments
We have two reportable segments that we operate and manage as strategic business units - Consumer and 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.
Verizon
Business Group
Our Business segment provides wireless and wireline communications services and products, including data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and select products and services to customers around the world.
Our Consumer segment’s wireless and wireline products and services are available to our retail customers, as well as resellers that purchase wireless network access from us on a wholesale basis. Our Business segment’s wireless and wireline products and services are organized by the primary customer groups targeted by these offerings: Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale.

Corporate and other includes the results of our media business, Verizon Media, and other businesses, investments in unconsolidated businesses, unallocated corporate expenses, certain pension and other employee benefit related costs and interest and financing expenses. Corporate and other also includes the historical results of divested businesses and other adjustments and gains and losses that are not allocated in assessing segment performance due to their nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses from these transactions that are not individually significant are included in segment results as these items are included in the chief operating decision maker’s assessment of segment performance.

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

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The following table provides operating financial information for our two reportable segments:
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
External Operating Revenues
Consumer
Service
$16,704 $15,898 $33,270 $32,241 
Wireless equipment
4,739 3,209 8,931 6,586 
Other
1,973 1,946 3,955 3,932 
Total Consumer
23,416 21,053 46,156 42,759 
Business
Small and Medium Business
2,890 2,597 5,715 5,395 
Global Enterprise
2,582 2,587 5,139 5,217 
Public Sector and Other
1,614 1,523 3,259 2,997 
Wholesale
658 756 1,393 1,516 
Total Business
7,744 7,463 15,506 15,125 
Total reportable segments$31,160 $28,516 $61,662 $57,884 
Intersegment Revenues
Consumer$61 $60 $119 $119 
Business18 19 37 38 
Total reportable segments$79 $79 $156 $157 
Total Operating Revenues
Consumer$23,477 $21,113 $46,275 $42,878 
Business(1)
7,762 7,482 15,543 15,163 
Total reportable segments$31,239 $28,595 $61,818 $58,041 
Operating Income
Consumer$7,497 $7,064 $15,016 $14,346 
Business856 946 1,755 1,900 
Total reportable segments$8,353 $8,010 $16,771 $16,246 
(1) Service and other revenues included in our Business segment amounted to approximately $7.0 billion for both the three months ended June 30, 2021 and 2020, respectively. Service and other revenues included in our Business segment amounted to approximately $14.0 billion and $13.9 billion for the six months ended June 30, 2021 and 2020, respectively. Wireless equipment revenues included in our Business segment amounted to approximately $804 million and $546 million for the three months ended June 30, 2021 and 2020, respectively. Wireless equipment revenues included in our Business segment amounted to approximately $1.6 billion and $1.3 billion for the six months ended June 30, 2021 and 2020, respectively.

The following table provides Fios revenue for our two reportable segments:
Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
Consumer$2,895 $2,754 $5,755 $5,553 
Business281 260 557 522 
Total Fios revenue$3,176 $3,014 $6,312 $6,075 

The following table provides Wireless service revenue for our reportable segments and includes intersegment activity:
Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
Consumer$13,794 $13,087 $27,478 $26,563 
Business3,090 2,861 6,150 5,742 
Total Wireless service revenue$16,884 $15,948 $33,628 $32,305 

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Reconciliation to Consolidated Financial Information
A reconciliation of the reportable segment operating revenues to consolidated operating revenues is as follows:
Three Months EndedSix Months Ended
 June 30,June 30,
(dollars in millions)2021202020212020
Total reportable segment operating revenues$31,239 $28,595 $61,818 $58,041 
Corporate and other
2,662 1,967 5,084 4,239 
Eliminations
(137)(115)(271)(223)
Total consolidated operating revenues$33,764 $30,447 $66,631 $62,057 

A reconciliation of the total reportable segment's operating income to consolidated income before provision for income taxes is as follows:
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
Total reportable segment operating income$8,353 $8,010 $16,771 $16,246 
 Corporate and other
4 (445)(229)(704)
Other components of net periodic benefit charges (Note 9)(192)(204)(384)(407)
Loss on spectrum licenses (Note 3) — (223)(1,195)
Total consolidated operating income8,165 7,361 15,935 13,940 
Equity in earnings (losses) of unconsolidated businesses1 (13)9 (25)
Other income (expense), net502 (72)903 71 
Interest expense(844)(1,089)(1,945)(2,123)
Income Before Provision For Income Taxes$7,824 $6,187 $14,902 $11,863 

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

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 material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including: (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. We continuously monitor these proceedings as they develop and adjust any accrual or disclosure as needed. We do not expect that the ultimate resolution of any pending regulatory or legal matter in future periods will have a material effect on our financial condition, but it could have a material effect on our results of operations for a given reporting period.

Verizon is currently involved in approximately 20 federal district court actions alleging that Verizon is infringing various patents. Most of these cases are brought by non-practicing entities and effectively seek only monetary damages; a small number are brought by companies that have sold products and could seek injunctive relief as well. These cases have progressed to various stages and a small number may go to trial in the coming 12 months if they are not otherwise resolved.

In connection with the execution of agreements for the sales of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as indemnity from certain financial losses. From time to time, counterparties may make claims under these provisions, and Verizon will seek to defend against those claims and resolve them in the ordinary course of business.

Subsequent to the sale of Verizon Information Services Canada in 2004, we continue to provide a guarantee to publish directories, which was issued when the directory business was purchased in 2001 and had a 30-year term (before extensions). The preexisting guarantee continues, without modification, despite the subsequent sale of Verizon Information Services Canada and the spin-off of our domestic print and internet 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 six months ended June 30, 2021, Verizon entered into one 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 government entities. With a presence around the world, we offer data, video and voice services and solutions on our networks and platforms that are designed to meet customers’ demand for mobility, reliable network connectivity, security and control.

To compete effectively in today’s dynamic marketplace, we are focused on the capabilities of our high-performing networks to drive growth based on delivering what customers want and need in the new digital world. In 2021, we are focused on leveraging our network leadership; retaining and growing our high-quality customer base while balancing profitability; enhancing ecosystems in growth businesses; and driving monetization of our networks, platforms and solutions. We are creating business value by earning customers', employees' and shareholders' trust, limiting our environmental impact and continuing our customer base growth while creating social benefit through our products and services. Our strategy requires significant capital investments primarily to acquire wireless spectrum, put the spectrum into service, provide additional capacity for growth in our networks, invest in the fiber that supports our businesses, evolve and maintain our networks and develop and maintain significant advanced information technology systems and data system capabilities. We believe that steady and consistent investments in our networks and platforms will drive innovative products and services and fuel our growth.

We are consistently deploying new network architecture and technologies to secure our leadership in both fourth-generation (4G) and fifth-generation (5G) wireless networks. We expect that our next-generation multi-use platform, which we call the Intelligent Edge Network, will simplify operations by eliminating legacy network elements, speed the deployment of 5G wireless technology and create new opportunities in the business market in a cost efficient manner. Our network leadership is the hallmark of our brand and the foundation for the connectivity, platforms and solutions upon which we build our competitive advantage.

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

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

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

Revenue by Segment for the Three Months Ended June 30, 2021 and 2020
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———
Note: Excludes eliminations.

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

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

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

Verizon Business Group
Our Business segment provides wireless and wireline communications services and products, including data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various Internet of Things (IoT) services and products, including solutions that support fleet tracking management, compliance management, field service management, asset tracking and other types of mobile resource management. FWA is also provided to business customers for broadband access through our wireless networks. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and select products and services to customers around the world. The Business segment's operating revenues for the three and six months ended June 30, 2021 totaled $7.8 billion and $15.5 billion, respectively, representing an increase of 3.7% and 2.5%, respectively, compared to the similar periods in 2020. See "Segment Results of Operations" for additional information regarding our Business segment’s operating performance and selected operating statistics.

Corporate and Other
Corporate and other includes the results of our media business, Verizon Media, and other businesses, investments in unconsolidated businesses, insurance captives, unallocated corporate expenses, certain pension and other employee benefit related costs and interest and financing expenses. Corporate and other also includes the historical results of divested businesses and other adjustments and gains and losses that are not allocated in assessing segment performance due to their nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses from transactions that are not individually significant are included in segment results as these items are included in the chief operating decision maker’s assessment of segment performance.

Verizon Media includes diverse media and technology brands that serve both consumers and businesses. Verizon Media provides consumers with owned and operated and third-party search properties as well as mail, news, finance, sports and entertainment content, e-commerce and subscription offerings, and provides other businesses and partners access to consumers through digital advertising, content delivery and video streaming platforms. Verizon Media's total operating revenues were $2.1 billion and $3.9 billion, respectively, for the three and six months ended June 30, 2021, which represents an increase of 49.7% and 28.1%, respectively, compared to the similar periods in 2020. On May 2,
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2021, Verizon entered into a definitive agreement with an affiliate of Apollo Global Management Inc. pursuant to which we agreed to sell Verizon Media to the affiliate. The sale is subject to customary regulatory approvals and closing conditions and is expected to close in the second half of 2021. See Note 3 to the condensed consolidated financial statements for additional information.

Capital Expenditures and Investments
We continue to invest in our wireless networks, high-speed fiber and other advanced technologies to position ourselves at the center of growth trends for the future. During the six months ended June 30, 2021, these investments included $8.7 billion for capital expenditures. See "Cash Flows Used in Investing Activities" for additional information. Capital expenditures for 2021 are currently expected to be in the range of $17.5 billion to $18.5 billion, including the further expansion of our 5G network in new and existing markets, the densification of our 4G Long-Term Evolution (LTE) wireless network to manage future traffic demands, and the continued deployment of our fiber infrastructure. Expenditures related to the deployment of our C-Band spectrum will be in addition to this amount, and are expected to be approximately $10 billion over three years, with $2 billion to $3 billion expected in 2021. As of June 30, 2021, our capital expenditures include $164 million related to our C-Band deployment. We believe that our investments aimed at expanding our portfolio of products and services will provide our customers with an efficient, reliable infrastructure for competing in the information economy.

Global Network and Technology
We are focusing our capital spending on adding capacity and density to our 4G LTE network, while also building our next generation 5G network. We are densifying our networks by utilizing small cell technology, in-building solutions and distributed antenna systems. Network densification enables us to add capacity to address increasing mobile video consumption and the growing demand for IoT products and services on our 4G LTE and 5G networks. Over the past several years, we have been leading the development of 5G wireless technology industry standards and the ecosystems for fixed and mobile 5G wireless services. We expect that 5G technology will provide higher throughput and lower latency than the current 4G LTE technology and enable our networks to handle more traffic as the number of internet-connected devices grows. As of June 30, 2021, 5G Ultra Wideband is available in parts of 75 U.S. cities and 5G Home is available in parts of 40 U.S. cities. 5G Nationwide is available in over 2,700 U.S. markets. 5G Nationwide uses low and mid-band spectrum and dynamic spectrum sharing (DSS) technology, which allows 5G service to run simultaneously with 4G LTE on multiple spectrum bands. With DSS, whenever customers move outside Verizon’s high-band Ultra Wideband coverage area, their 5G-enabled devices will remain on 5G technology using the lower spectrum bands where the 5G Nationwide network is available. This allows us to more fully and effectively utilize our current spectrum resources to serve both 4G and 5G customers.

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

Impact of the Novel Coronavirus (COVID-19) Pandemic
For a discussion of the impacts on and the risks to our business from COVID-19, refer to Item 1A Risk Factors and "Impacts of the Novel Coronavirus (COVID-19) Pandemic" in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020. The impacts from the COVID-19 Pandemic on our operations were most significant during the second quarter of 2020, which also significantly impact the comparability of the results from the second quarter of 2021 to the second quarter of 2020.

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

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

Consolidated Revenues
 Three Months Ended  Six Months Ended  
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Consumer$23,477 $21,113 $2,364 11.2 %$46,275 $42,878 $3,397 7.9 %
Business7,762 7,482 280 3.7 15,543 15,163 380 2.5 
Corporate and other2,662 1,967 695 35.3 5,084 4,239 845 19.9 
Eliminations(137)(115)(22)19.1 (271)(223)(48)21.5 
Consolidated Revenues$33,764 $30,447 $3,317 10.9 $66,631 $62,057 $4,574 7.4 

Consolidated revenues increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, due to revenue increases in our Consumer segment, Business segment and Corporate and other.

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

Corporate and other revenues increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily due to an increase of $687 million and $862 million, respectively, in revenues within Verizon Media.

Consolidated Operating Expenses
 Three Months Ended  Six Months Ended  
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Cost of services$8,324 $7,639 $685 9.0 %$16,344 $15,393 $951 6.2 %
Cost of wireless equipment5,931 4,110 1,821 44.3 11,433 8,652 2,781 32.1 
Selling, general and administrative expense7,324 7,156 168 2.3 14,725 15,741 (1,016)(6.5)
Depreciation and amortization expense4,020 4,181 (161)(3.9)8,194 8,331 (137)(1.6)
Consolidated Operating Expenses$25,599 $23,086 $2,513 10.9 $50,696 $48,117 $2,579 5.4 

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

Cost of Services
Cost of services includes the following costs directly attributable to a service: salaries and wages, benefits, materials and supplies, content costs, contracted services, network access and transport costs, customer provisioning costs, computer systems support, 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.

Cost of services increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily due to increases in traffic acquisition costs, professional services, and costs related to the device protection offerings to our wireless retail postpaid customers. These increases were further driven by increases in regulatory fees as a result of an increase in the Federal Universal Service Fund (FUSF) rate, rent expense as a result of both adding capacity to the networks to support demand and lease modifications for certain existing cell towers, and building and facilities costs primarily due to increased utility rates. See Note 5 to the condensed consolidated financial statements for additional information on the lease modifications. These increases were partially offset by a decrease in access costs resulting from a decline in voice services.

Cost of Wireless Equipment
Cost of wireless equipment increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily due to increases in the number of wireless devices sold as well as a shift to higher priced devices in the mix of wireless devices sold. For the six months ended June 30, 2021, a further increase was driven by a recall undertaken for certain jetpack units.

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."

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Selling, general and administrative expense increased and decreased during the three and six months ended June 30, 2021, respectively, compared to the similar periods in 2020. The increase during the three months ended June 30, 2021 was primarily due to an increase in advertising expense from brand messaging in 2021 as well as lower expenses in 2020 as a result of customer behavior during the COVID-19 pandemic, insurance and regulatory settlements, and costs related to data and network systems. The increase was partially offset by a decrease in sales commission expense as a result of actions taken in 2020 in response to the COVID-19 pandemic, and provision for credit losses as a result of both improvement in payment trends in 2021 as well as actions taken in 2020 in response to the COVID-19 pandemic. The decrease during the six months ended June 30, 2021 was primarily due to a $1.2 billion loss during the six months ended June 30, 2020 resulting from the spectrum license Auction 103, compared to the $223 million loss recognized during the six months ended June 30, 2021 resulting from agreements we entered into to sell certain wireless licenses. See "Special Items" for additional information. This decrease was further driven by a decrease in sales commission expense as a result of actions taken in 2020 in response to the COVID-19 pandemic, and provision for credit losses as a result of both improvement in payment trends in 2021 as well as actions taken in 2020 in response to the COVID-19 pandemic. The decreases were partially offset by increases in advertising expense due to brand messaging in 2021 as well as lower expenses in 2020 as a result of customer behavior during the COVID-19 pandemic and costs related to data and network systems.

Depreciation and Amortization Expense
Depreciation and amortization expense decreased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily as a result of ceasing depreciation and amortization of certain assets of Verizon Media that were reclassified as assets held for sale during the quarter. See Note 3 to the condensed consolidated financial statements for additional information on the Verizon Media sale.

Other Consolidated Results
Other Income (Expense), Net
Additional information relating to Other income (expense), net is as follows:
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Interest income$11 $16 $(5)(31.3)%$26 $36 $(10)(27.8)%
Other components of net periodic benefit income1,665 132 1,533 nm2,021 233 1,788 nm
Other, net(1,174)(220)(954)nm(1,144)(198)(946)nm
Total$502 $(72)$574 nm$903 $71 $832 nm
nm - not meaningful

Other income (expense), net, reflects certain items not directly related to our core operations, including interest income, gains and losses from non-operating asset dispositions, debt extinguishment costs, components of net periodic pension and postretirement benefit cost and income and foreign exchange gains and losses.

The changes in Other income (expense), net during the three and six months ended June 30, 2021, compared to the similar periods in 2020, were primarily attributable to a pension remeasurement gain of $1.3 billion recorded during both the three and six months ended June 30, 2021, compared with pension remeasurement losses of $153 million and $335 million recorded during the three and six months ended June 30, 2020, respectively. This was partially offset by an increase in early debt redemption costs of $1.0 billion recorded during both the three and six months ended June 30, 2021. See "Special Items" for additional information.

Interest Expense
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Total interest costs on debt balances$1,397 $1,205 $192 15.9 %$2,672 $2,392 $280 11.7 %
Less capitalized interest costs553 116 437 nm727 269 458 nm
Total Interest Expense$844 $1,089 $(245)(22.5)%$1,945 $2,123 $(178)(8.4)%
Average debt outstanding (1) (3)
$155,251 $117,239 $143,767 $114,950 
Effective interest rate (2) (3)
3.6 %4.1 %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.
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Total interest expense decreased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily due to higher capitalized interest costs related to C-Band licenses won, partially offset by higher interest costs on higher average debt balances, which was partially offset by lower average interest rates as a result of our continued focus on optimizing our debt footprint and total borrowing costs. See Note 4 and Note 6 to the condensed consolidated financial statements for additional information.

Provision for Income Taxes
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Provision for income taxes$1,875 $1,348 $527 39.1 %$3,575 $2,737 $838 30.6 %
Effective income tax rate24.0 %21.8 %24.0 %23.1 %

The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The increase in the effective income tax rate during both the three and six months ended June 30, 2021 compared to the similar periods in 2020 was primarily due to a larger tax benefit recognized in the prior period from a series of legal entity restructurings compared to the current period. The increase in the provision for income taxes during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, was primarily due to the increase in income before income taxes in the current period.    

Unrecognized Tax Benefits
Unrecognized tax benefits were $2.7 billion and $2.9 billion at June 30, 2021 and December 31, 2020, respectively. Interest and penalties related to unrecognized tax benefits were $352 million (after-tax) and $388 million (after-tax) at June 30, 2021 and December 31, 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 and multiple state and foreign jurisdictions for various open tax years. It is reasonably possible that the amount of the liability for unrecognized tax benefits could change by a significant amount in the next twelve months. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved.

Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA
Consolidated earnings before interest, taxes, depreciation and amortization expenses (Consolidated EBITDA) and Consolidated Adjusted EBITDA, which are presented below, are non-generally accepted accounting principles (GAAP) measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to Verizon’s competitors. Consolidated EBITDA is calculated by adding back interest, taxes, depreciation and amortization expenses to net income.

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

It is management’s intent to provide non-GAAP financial information to enhance the understanding of Verizon’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
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 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
Consolidated Net Income$5,949 $4,839 $11,327 $9,126 
Add:
Provision for income taxes1,875 1,348 3,575 2,737 
Interest expense (1)
844 1,089 1,945 2,123 
Depreciation and amortization expense4,020 4,181 8,194 8,331 
Consolidated EBITDA$12,688 $11,457 $25,041 $22,317 
Add (Less):
Other (income) expense, net (2)
$(502)$72 $(903)$(71)
Equity in losses (earnings) of unconsolidated businesses(1)13 (9)25 
Loss on spectrum licenses — 223 1,195 
Consolidated Adjusted EBITDA$12,185 $11,542 $24,352 $23,466 
(1) Includes Early debt redemption costs, where applicable. See "Special Items" for additional information.
(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 EBITDA and Consolidated Adjusted EBITDA in the table above during the three and six months ended June 30, 2021, compared to the similar periods in 2020, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Segment Results of Operations
We have three segments that we operate and manage as strategic business units, Consumer, Business and Media, of which Consumer and Business are our reportable segments. We measure and evaluate our segments based on segment operating income. The use of segment operating income is consistent with the chief operating decision maker’s assessment of segment performance.

To aid in the understanding of segment performance as it relates to segment operating income, management uses the following operating statistics to evaluate the overall effectiveness of our segments. We believe these operating statistics are useful to investors and other users of our financial information because they provide additional insight into drivers of our segments’ operating results, key trends and performance relative to our peers. These operating statistics may be determined or calculated differently by other companies and may not be directly comparable to those statistics of other companies.

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

Wireless retail postpaid connections are retail postpaid customer device connections 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.

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

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

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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 Total Mobile Protection packages or regulatory fees. Wireless retail postpaid ARPA in each period presented is calculated by dividing retail postpaid service revenue by the average retail postpaid accounts in the period.

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

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

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

Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA), which is presented below, is a non-GAAP measure and does not purport to be an alternative to operating income (loss) as a measure of operating performance. We believe this measure is useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as it excludes the depreciation and amortization 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 11 to the condensed consolidated financial statements.

Verizon Consumer Group
Our Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon 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.

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Operating Revenues and Selected Operating Statistics
Three Months EndedSix Months Ended
June 30,Increase/June 30,Increase/
(dollars in millions, except ARPA)20212020(Decrease)20212020(Decrease)
Service$16,709$15,900$809 5.1 %$33,278$32,241$1,037 3.2 %
Wireless equipment4,7393,2091,530 47.7 8,9316,5862,345 35.6 
Other2,0292,00425 1.2 4,0664,05115 0.4 
Total Operating Revenues$23,477$21,113$2,364 11.2 $46,275$42,878$3,397 7.9 
Connections (‘000):(1)
Wireless retail connections94,58993,975614 0.7
Wireless retail postpaid connections90,51489,977537 0.6
Fios internet connections6,3925,971421 7.1
Fios video connections3,7103,987(277)(6.9)
Broadband connections6,7836,468315 4.9
Net Additions in Period (‘000):(2)
Wireless retail 36884284 nm61(525)586 nm
Wireless retail postpaid 35072278 nm24(453)477 nm
Wireless retail postpaid phones19797100 nm(28)(210)182 86.7
Churn Rate:
Wireless retail 0.97 %0.86 %1.04 %1.03 %
Wireless retail postpaid 0.83 %0.69 %0.90 %0.85 %
Wireless retail postpaid phones 0.65 %0.51 %0.71 %0.64 %
Account Statistics:
Wireless retail postpaid ARPA$121.24$116.02$5.22 4.5$121.05$117.44$3.61 3.1
Wireless retail postpaid accounts (‘000) (1)
33,60633,695(89)(0.3)
Wireless retail postpaid connections per account (1)
2.692.670.02 0.7
(1)As of end of period
(2)Includes certain adjustments
nm - not meaningful

Consumer’s total operating revenues increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, as a result of increases in Service, Wireless equipment and Other revenues.

Service Revenue
Service revenue increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020. These increases were primarily driven by increases in wireless service revenues.

Wireless service revenue increased $707 million, or 5.4%, and $915 million, or 3.4%, during the three and six months ended June 30, 2021, respectively, compared to the similar periods in 2020. These increases were primarily due to growth in mobile security products included in certain protection packages, growth from reseller accounts, growth in revenues related to content offerings and growth in access revenues related to our postpaid plans. These increases were further driven by waived fees as part of customer assistance initiatives taken by Verizon in 2020 due to the COVID-19 pandemic that did not repeat.

For the three and six months ended June 30, 2021, Fios service revenue totaled $2.7 billion and $5.4 billion, respectively, and increased $124 million, or 4.8%, and $171 million, or 3.3%, respectively, compared to the similar periods in 2020. These increases were due to increases in Fios internet connections, reflecting increased demand for higher broadband speeds. The increases were partially offset by decreases in Fios video revenues, reflecting the ongoing shift from traditional linear video to over-the-top offerings, and decreases in Fios voice revenues.

Wireless Equipment Revenue
Wireless equipment revenue increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, due to increases in the number of wireless devices sold partially as a result of increased promotions and a shift to higher priced devices in the mix of wireless devices sold.

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Operating Expenses
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Cost of services$4,181 $3,885 $296 7.6 %$8,181 $7,815 $366 4.7 %
Cost of wireless equipment4,854 3,299 1,555 47.1 9,246 6,750 2,496 37.0 
Selling, general and administrative expense4,045 4,016 29 0.7 8,071 8,298 (227)(2.7)
Depreciation and amortization expense2,900 2,849 51 1.8 5,761 5,669 92 1.6 
Total Operating Expenses$15,980 $14,049 $1,931 13.7 $31,259 $28,532 $2,727 9.6 

Cost of Services
Cost of services increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020. These increases were primarily due to increases in costs related to the device protection offerings to our wireless retail postpaid customers, rent expense as a result of both adding capacity to the networks to support demand and lease modifications for certain existing cell towers, regulatory fees as a result of an increase in the FUSF rate and personnel costs due to increase in compensation costs.

Cost of Wireless Equipment
Cost of wireless equipment increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, due to increases in the number of wireless devices sold as well as a shift to higher priced devices in the mix of wireless devices sold. For the six months ended June 30, 2021, a further increase was driven by a recall undertaken for certain jetpack units.

Selling, General and Administrative Expense
Selling, general and administrative expense remained relatively flat and decreased during the three and six months ended June 30, 2021, respectively, compared to the similar periods in 2020. The changes during the three and six months ended June 30, 2021 were primarily due to decreases in sales commission expense as a result of actions taken in 2020 in response to the COVID-19 pandemic, and provision for credit losses as a result of both improvement in payment trends in 2021 as well as actions taken in 2020 in response to the COVID-19 pandemic. For the three and six months ended June 30, 2021, the decreases were more than offset and partially offset, respectively, by increases in advertising expense due to brand messaging in 2021 as well as lower expenses in 2020 as a result of customer behavior during the COVID-19 pandemic.

Depreciation and Amortization Expense
Depreciation and amortization expense increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, driven by the change in the mix of total Verizon depreciable assets and Consumer's usage of those assets.

Segment Operating Income and EBITDA 
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Segment Operating Income$7,497 $7,064 $433 6.1 %$15,016 $14,346 $670 4.7 %
Add Depreciation and amortization expense
2,900 2,849 51 1.8 5,761 5,669 92 1.6 
Segment EBITDA$10,397 $9,913 $484 4.9 $20,777 $20,015 $762 3.8 
Segment operating income margin31.9 %33.5 %32.4 %33.5 %
Segment EBITDA margin44.3 %47.0 %44.9 %46.7 %

The changes in the table above during the three and six months ended June 30, 2021, compared to the similar periods in 2020, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Verizon Business Group
Our Business segment provides wireless and wireline communications services and products, including data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and select products and services to customers around the world. The Business segment is organized in four customer groups: Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale.

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Operating Revenues and Selected Operating Statistics
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Small and Medium Business$2,895 $2,601 $294 11.3 %$5,725$5,405$320 5.9 %
Global Enterprise2,583 2,589 (6)(0.2)5,1425,220(78)(1.5)
Public Sector and Other1,614 1,523 91 6.0 3,2602,997263 8.8 
Wholesale670 769 (99)(12.9)1,4161,541(125)(8.1)
Total Operating Revenues(1)
$7,762 $7,482 $280 3.7 $15,543$15,163$380 2.5 
Connections (‘000):(2)
Wireless retail postpaid connections26,74025,897843 3.3 
Fios internet connections34632719 5.8 
Fios video connections7275(3)(4.0)
Broadband connections480491(11)(2.2)
Net Additions in Period (‘000):(3)
Wireless retail postpaid178 280 (102)(36.4)334755(421)(55.8)
Wireless retail postpaid phones78 76 2.6 125315(190)(60.3)
Churn Rate:
Wireless retail postpaid 1.30 %1.12 %1.27 %1.21 %
Wireless retail postpaid phones1.07 %0.90 %1.04 %0.96 %
(1)Service and other revenues included in our Business segment amounted to approximately $7.0 billion for both the three months ended June 30, 2021 and 2020. Service and other revenues included in our Business segment amounted to approximately $14.0 billion and $13.9 billion for the six months ended June 30, 2021 and 2020, respectively. Wireless equipment revenues included in our Business segment amounted to $804 million and $1.6 billion for the three and six months ended June 30, 2021, respectively, and $546 million and $1.3 billion for the three and six months ended June 30, 2020, respectively.
(2)As of end of period
(3)Includes certain adjustments

Business’s total operating revenues increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily as a result of increases in Public Sector and Other and Small and Medium Business revenues, partially offset by decreases in Global Enterprise and Wholesale revenues.

Small and Medium Business
Small and Medium Business offers wireless services and equipment, conferencing services, tailored voice and networking products, Fios services, Internet Protocol networking, advanced voice solutions and security and managed information technology services to our U.S.-based small and medium businesses that do not meet the requirements to be categorized as Global Enterprise, as described below.

Small and Medium Business revenues increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020. The increases are due to higher wireless retail postpaid service revenue as a result of increases in the amount of wireless retail postpaid connections, as well as increases in usage and non-recurring fees due to the impacts of the COVID-19 pandemic in the prior year. This was further driven by increases in wireless equipment revenue primarily due to an increase in the number of wireless devices sold and a shift to higher priced devices in the mix of wireless devices sold. The increases were partially offset by declines related to the loss of voice and DSL service connections.

For the three and six months ended June 30, 2021, Fios revenues totaled $244 million and $483 million, respectively, which represents an increase of 7.5% and 4.6%, respectively, compared to the similar periods in 2020. This change reflects the increase in total connections, as well as increased demand for higher broadband speeds.

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

Global Enterprise revenues decreased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily due to declines in both traditional data and voice communication services as a result of competitive price pressures. The decreases were further driven by decreases in advanced communication services due to a decline in usage, as a result of the COVID-19 pandemic, partially offset by increases due to the BlueJeans Network, Inc. (BlueJeans) acquisition. The decreases in revenue were partially offset by increases in wireless equipment revenue due to an increase in the number of wireless devices sold and a shift to higher priced devices in the
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mix of wireless devices, customer premise equipment due to volumes, and FUSF surcharges due to a rate increase. See Note 3 to the condensed consolidated financial statements for additional information on the BlueJeans acquisition.

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.

Public Sector and Other revenues increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily driven by increases in wireless service revenue as a result of an increase in wireless connections. These increases were driven by shifting technology needs in remote business environments, particularly in education.

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

Wholesale revenues decreased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily due to decreases in traditional voice communication and network connectivity due to technology substitution. For the six months ended June 30, 2021, the decrease was partially offset by increases in core data due to minimum commitment payments.

Operating Expenses
Three Months EndedSix Months Ended
 June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Cost of services$2,729 $2,641 $88 3.3 %$5,419 $5,230 $189 3.6 %
Cost of wireless equipment1,076 812 264 32.5 2,187 1,902 285 15.0 
Selling, general and administrative expense2,086 2,069 17 0.8 4,154 4,103 51 1.2 
Depreciation and amortization expense1,015 1,014 0.1 2,028 2,028 — — 
Total Operating Expenses$6,906 $6,536 $370 5.7 $13,788 $13,263 $525 4.0 

Cost of Services
Cost of services increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020, primarily driven by increases in direct costs related to increases in professional services, building and facilities costs due to increased utility rates, and increased regulatory fees as a result of an increase in the FUSF rate. These increases were partially offset by decreases in access costs resulting from a decline in voice services.

Cost of Wireless Equipment
Cost of wireless equipment increased during both the three and six months ended June 30, 2021, compared to the similar periods in 2020. For the three months ended June 30, 2021, the increase was primarily due to increases in the number of wireless devices sold and a shift to higher priced devices in the mix of wireless devices sold. For the six months ended June 30, 2021, the increase was primarily due to a shift to higher priced devices in the mix of wireless devices sold and an increase in expenses as a result of a recall undertaken for certain jetpack units partially offset by a decline in the volume of wireless equipment sold.

Selling, General and Administrative Expense
Selling, general and administrative expense remained relatively flat and increased during the three and six months ended June 30, 2021, respectively, compared to the similar periods in 2020. For the six months ended June 30, 2021 the increases were primarily driven by an increase in costs related to data and network systems.
Segment Operating Income and EBITDA 
 Three Months EndedSix Months Ended
June 30,Increase/June 30,Increase/
(dollars in millions)20212020(Decrease)20212020(Decrease)
Segment Operating Income$856 $946 $(90)(9.5)%$1,755 $1,900 $(145)(7.6)%
Add Depreciation and amortization expense1,015 1,014 0.1 2,028 2,028 — — 
Segment EBITDA$1,871 $1,960 $(89)(4.5)$3,783 $3,928 $(145)(3.7)
Segment operating income margin11.0 %12.6 %11.3 %12.5 %
Segment EBITDA margin24.1 %26.2 %24.3 %25.9 %

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The changes in the table above during the three and six months ended June 30, 2021, compared to the similar periods in 2020, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Special Items
Special items included in Income Before Provision For Income Taxes were as follows:
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
Pension and benefits charges (credits)
Other income (expense), net$(1,314)$153 $(1,314)$335 
Early debt redemption costs
Other income (expense), net1,132 129 1,132 129 
Interest expense (27) (27)
Loss on spectrum licenses
Selling, general and administrative expense — 223 1,195 
Total$(182)$255 $41 $1,632 

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA discussion (see "Consolidated Results of Operations") excludes all of the amounts included above, as described below.

The income and expenses related to special items included in our condensed consolidated results of operations were as follows:
 Three Months EndedSix Months Ended
June 30,June 30,
(dollars in millions)2021202020212020
Within Total Operating Expenses$ $— $223 $1,195 
Within Other income (expense), net(182)282 (182)464 
Within Interest expense (27) (27)
Total$(182)$255 $41 $1,632 

Pension and Benefits Charges (Credits)
During both the three and six 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. Pension and benefit 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 actuarial gains and losses

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

During the three months ended June 30, 2020, we recorded a net pre-tax remeasurement loss of $153 million primarily driven by a $163 million charge mainly 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, 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.

See Note 9 to the condensed consolidated financial statements for additional information related to our pension and benefits charges and credits.

Early Debt Redemption Costs
During both the three and six months ended June 30, 2021, we recorded pre-tax early debt redemption costs of $1.1 billion in connection with the redemptions of securities issued by Verizon and open market repurchases of various Verizon and subsidiary notes.

During both the three and six months ended June 30, 2020, we recorded net pre-tax early debt redemption costs of $102 million in connection with the redemptions of securities issued by Verizon and open market repurchases.

See Note 6 to the condensed consolidated financial statements for additional information on these redemptions.
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Loss on Spectrum Licenses
During the six months ended June 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 six months ended June 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 upper 37 Gigahertz (GHz), 39 GHz and 47 GHz bands.

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

Consolidated Financial Condition
 Six Months Ended 
June 30,
(dollars in millions)20212020Change
Cash Flows Provided By (Used In)
Operating activities
$20,438 $23,552 $(3,114)
Investing activities
(54,401)(12,124)(42,277)
Financing activities
16,550 (6,232)22,782 
Increase (decrease) in cash, cash equivalents and restricted cash$(17,413)$5,196 $(22,609)

We use the net cash generated from our operations to fund expansion and modernization of our networks, service and repay external financing, pay dividends, invest in new businesses and 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 held both domestically and internationally, and are invested to maintain principal and provide liquidity. See "Market Risk" for additional information regarding our foreign currency risk management strategies.

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

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. Based on the state of the economic recovery, in the second quarter of 2021 we significantly reduced our cash balance. We expect to continue to evaluate our cash balance throughout 2021 and may determine to adjust it further depending on economic conditions.

Cash Flows Provided By Operating Activities
Our primary source of funds continues to be cash generated from operations. Net cash provided by operating activities decreased $3.1 billion during the six months ended June 30, 2021, compared to the similar period in 2020, primarily due to changes in working capital, which includes higher volumes in 2021, as well as activity during 2020 including tax benefits of approximately $2.0 billion from the postponement of second quarter 2020 tax payments and the receipt of a $2.2 billion cash tax benefit related to the sale of preferred shares in a foreign affiliate, both of 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 of $2.2 billion and the receipt of $251 million from the settlement of treasury rate locks. As a result of prior years' discretionary contributions and the fact that actual asset returns have been higher than expected, we expect that there will be no required pension funding through 2030, subject to changes in market conditions.

Cash Flows Used In Investing Activities
Capital Expenditures
Capital expenditures continue to relate primarily to the use of capital resources to 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.

Capital expenditures, including capitalized software, for the six months ended June 30, 2021 and 2020 were $8.7 billion and $9.9 billion, respectively. Capital expenditures decreased approximately $1.1 billion, or 11.5%, during the six months ended June 30, 2021, compared to the similar period in 2020, primarily due to the timing of investments, as well as capital efficiencies from our business excellence initiatives. Our investments primarily relate to our network assets which support the business.

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Acquisitions of Wireless Licenses
In February 2021, the FCC completed an auction, Auction 107, for mid-band spectrum known as C-Band. During the six months ended June 30, 2021, we paid approximately $44.6 billion for spectrum licenses in connection with this auction.

During the six months ended June 30, 2021, we entered into and completed various other wireless license acquisitions for cash consideration of $90 million.

During the six months ended June 30, 2021, we recorded capitalized interest related to wireless licenses and deposits for wireless licenses of $154 million and $455 million, respectively.

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 $410 million, net of cash acquired, which is subject to customary closing adjustments.

Cash 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 six months ended June 30, 2021, net cash provided by financing activities was $16.6 billion. During the six months ended June 30, 2020, net cash used in financing activities was $6.2 billion.

During the six months ended June 30, 2021, our net cash provided by financing activities was primarily driven by proceeds from long-term borrowings of $31.4 billion and proceeds from asset-backed long-term borrowings of $2.7 billion. These proceeds were partially offset by repayments, redemptions and repurchases of long-term borrowings and finance lease obligations of $7.6 billion, cash dividends of $5.2 billion, and repayments of asset-backed long-term borrowings of $3.0 billion.

At June 30, 2021, our total debt of $151.9 billion included unsecured debt of $141.6 billion and secured debt of $10.3 billion. At December 31, 2020, our total debt of $129.1 billion included unsecured debt of $118.5 billion and secured debt of $10.6 billion. During the six months ended June 30, 2021 and 2020, our effective interest rate was 3.7% and 4.2%, respectively. See Note 6 to the condensed consolidated financial statements for additional information regarding our debt activity.

Verizon may acquire debt securities issued by Verizon and its affiliates through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers, or otherwise, upon such terms and at such prices as Verizon may from time to time determine, for cash or other consideration.

Asset-Backed Debt
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 in our condensed consolidated balance sheets.

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

See Note 6 to the condensed consolidated financial statements for additional information.

Long-Term Credit Facilities
At June 30, 2021
(dollars in millions)MaturitiesFacility CapacityUnused Capacity Principal Amount Outstanding
Verizon revolving credit facility (1)
2024$9,500 $9,392 N/A
Various export credit facilities (2)
2022 - 20297,500 530 $5,029 
Total$17,000 $9,922 $5,029 
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. The revolving credit facility provides for the issuance of letters of credit.
(2) During the six months ended June 30, 2021, we drew down $470 million from these facilities. These credit facilities are used to finance equipment-related purchases. Borrowings under certain of these facilities amortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.
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Other, Net
Other, net financing activities during the six months ended June 30, 2021 includes $295 million in payments related to vendor financing arrangements, $150 million in postings of derivative collateral and early debt redemption costs. See "Special Items" for additional information on the early debt redemption costs.

Dividends
As in prior periods, dividend payments were a significant use of capital resources. We paid $5.2 billion and $5.1 billion in cash dividends during the six months ended June 30, 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 restrictive covenants in our debt agreements.

Change In Cash, Cash Equivalents and Restricted Cash
Our Cash and cash equivalents at June 30, 2021 totaled $4.7 billion, a $17.5 billion decrease compared to December 31, 2020, primarily as a result of the factors discussed above.

Restricted cash totaled $1.3 billion as of both June 30, 2021 and December 31, 2020, 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.

Assets held for sale includes cash, cash equivalents and restricted cash in our media business, Verizon Media, and totaled $145 million as of June 30, 2021. See Note 3 to the condensed consolidated financial statements for additional information.

Free Cash Flow
Free cash flow is a non-GAAP financial measure that reflects an additional way of viewing our liquidity that, we believe, when viewed with our GAAP results, provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. Free cash flow is calculated by subtracting capital expenditures (including capitalized software) from net cash provided by operating activities. We believe it is a more conservative measure of cash flow since purchases of fixed assets are necessary for ongoing operations. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on finance lease obligations or cash payments for business acquisitions 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.

The following table reconciles net cash provided by operating activities to free cash flow:
 Six Months Ended 
June 30,
(dollars in millions)20212020Change
Net cash provided by operating activities$20,438 $23,552 $(3,114)
Less Capital expenditures (including capitalized software)8,716 9,850 (1,134)
Free cash flow$11,722 $13,702 $(1,980)

The decrease in free cash flow during the six months ended June 30, 2021, compared to the similar period in 2020, is a reflection of the decrease in operating cash flows, as well as the decrease in capital expenditures discussed above.

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

It is our general policy to enter into interest rate, foreign currency and other derivative transactions only to the extent necessary to achieve our desired objectives in optimizing exposure to various market risks. Our objectives include maintaining a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. We do not hedge our market risk exposure in a manner that would completely eliminate the effect of changes in interest rates and foreign exchange rates on our earnings.

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Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements which provide rules for collateral exchange. The CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in outstanding positions as compared to established thresholds and changes in credit ratings. 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 June 30, 2021, we held $0.1 billion 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 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 condensed consolidated balance sheet. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote and do not expect that any such nonperformance would result in a significant effect on our results of operations or financial condition due to our diversified pool of counterparties. See Note 8 to the condensed consolidated financial statements for additional information regarding the derivative portfolio.

Interest Rate Risk
We are exposed to changes in interest rates, primarily on our short-term debt and the portion of long-term debt that carries floating interest rates. As of June 30, 2021, approximately 85% of the aggregate principal amount of our total debt portfolio consisted of fixed-rate indebtedness, including the effect of interest rate swap agreements designated as hedges. The impact of a 100-basis-point change in interest rates affecting our floating rate debt would result in a change in annual interest expense, including our interest rate swap agreements that are designated as hedges, of approximately $229 million. The interest rates on our existing long-term debt obligations are unaffected by changes to our credit ratings.

Certain of our floating rate debt and 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, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against interest rate risk exposure of designated debt issuances. At June 30, 2021, the fair value of the asset and liability of these contracts were $514 million and $572 million, respectively. At December 31, 2020, the fair value of the asset and liability of these contracts were $787 million and $303 million, respectively. At June 30, 2021 and December 31, 2020, the total notional amount of the interest rate swaps was $17.6 billion and $17.8 billion, respectively.

Forward Starting Interest Rate Swaps
We have entered into forward starting interest rate swaps designated as cash flow hedges in order to manage our exposure to interest rate changes on future forecasted transactions. At June 30, 2021, the fair value of the liability of these contracts was $281 million. At December 31, 2020, the fair value of the liability of these contracts was $797 million. At June 30, 2021 and December 31, 2020, the total notional amount of the forward starting interest rate swaps was $1.0 billion and $2.0 billion, respectively.

Treasury Rate Locks
We enter into treasury rate locks to mitigate our future interest rate risk. There was no outstanding notional amount for treasury rate locks at June 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 loss in our condensed consolidated balance sheets. Gains and losses on foreign currency transactions are recorded in the condensed consolidated statements of income in Other income (expense), net. At June 30, 2021, our primary translation exposure was to the British Pound Sterling, Euro, Australian Dollar, Canadian Dollar and Japanese Yen.

Cross Currency Swaps
We have entered into cross currency swaps designated as cash flow hedges to exchange our British Pound Sterling, Euro, Swiss Franc, Canadian Dollar and Australian Dollar-denominated cash flows into U.S. dollars and to fix our cash payments in U.S. dollars, as well as to mitigate the impact of foreign currency transaction gains or losses. At June 30, 2021, the fair value of the asset and liability of these contracts was $1.1 billion and $757 million, respectively. At December 31, 2020, the fair value of the asset and liability of these contracts was
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$1.4 billion and $196 million, respectively. At June 30, 2021 and December 31, 2020, the total notional amount of the cross currency swaps was $32.5 billion and $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 June 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 June 30, 2021 and December 31, 2020, the total notional amount of the foreign exchange forwards was $1.5 billion and $1.4 billion, respectively.

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

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. On July 23, 2021 Verizon received the wireless licenses from the FCC. The carrying value is recorded within Deposits for wireless licenses in our condensed consolidated balance sheet as of June 30, 2021, and has been subsequently reclassified to Wireless licenses upon receipt of the corresponding licenses in July 2021.

See Note 3 to the condensed consolidated financial statements for additional information regarding our spectrum license transactions.

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 acquired.

TracFone Wireless, Inc.
In September 2020, we entered into a purchase agreement (Tracfone Purchase Agreement) with América Móvil to acquire Tracfone, a provider of prepaid and value mobile services in the U.S. Under the terms of the Tracfone Purchase Agreement, we will 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 issued will be based on an average trading price determined as of the closing date and is subject to a 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 in the second half of 2021.

Bluegrass Cellular
In October 2020, we entered into a definitive agreement to acquire certain assets of Bluegrass Cellular (Bluegrass), a 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 closed in March 2021. The aggregate cash consideration paid by Verizon at the closing of the transaction was approximately $410 million, net of cash acquired, which is subject to customary closing adjustments. See Note 3 to the condensed consolidated financial statements for additional information.

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Verizon Media
On May 2, 2021, Verizon entered into a definitive agreement with an affiliate of Apollo Global Management Inc. 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 affiliate, and 10% of the fully-diluted common limited partnership units of the affiliate. The sale is subject to customary regulatory approvals and closing conditions and is expected to close in the second half of 2021. See Note 3 to the condensed consolidated financial statements for additional information.

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

Other Factors That May Affect Future Results
Regulatory and Competitive Trends
There have been no material changes to Regulatory and Competitive Trends as previously disclosed in Part I, Item I. "Business" in our Annual Report on Form 10-K for the year ended December 31, 2020.

 Cautionary Statement Concerning Forward-Looking Statements
In this report we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates," "believes," "estimates," "expects," "hopes," "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;

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 changes in labor matters and any resulting financial or operational impact;

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

failure to take advantage of developments in technology and address changes in consumer demand;

performance issues or delays in the deployment of our 5G network resulting in significant costs or a reduction in the anticipated benefits of 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 or businesses;

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;

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

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

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

Item 4. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report, that ensure that information relating to the registrant which is required to be disclosed in this report is recorded, processed, summarized and reported within required time periods using the criteria for effective internal control established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 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. During the second quarter of 2021, we have made changes to our internal controls to address processes impacted by the ERP system implementation.

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.

Other than the above-noted changes, there were no changes in the Company’s internal control over financial reporting during the second quarter 2021 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
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 discharge of materials into the environment or primarily for the purpose of protecting the environment that is likely to result in monetary sanctions of $1 million or more.

See Note 12 to the condensed consolidated financial statements for additional information regarding legal proceedings.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In February 2020, the Verizon Board of Directors authorized a share buyback program to repurchase up to 100 million shares of the Company's common stock. The program will terminate when the aggregate number of shares purchased reaches 100 million or a new share repurchase plan superseding the current plan is authorized, whichever is sooner. Under the program, shares may be repurchased in privately negotiated transactions, on the open market, or otherwise, including through plans complying with Rule 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's capital allocation priorities.

Verizon did not repurchase any shares of Verizon common stock during the three months ended June 30, 2021. At June 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.
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Item 6. Exhibits
Exhibit
Number
Description
10
Description of Special Cash Retention Award for G. Gowrappan.
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.PREXBRL Taxonomy Presentation Linkbase Document.
101.CALXBRL Taxonomy Calculation Linkbase Document.
101.LABXBRL Taxonomy Label Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 VERIZON COMMUNICATIONS INC.
Date: July 28, 2021 By/s/Anthony T. Skiadas
  Anthony T. Skiadas
  Senior Vice President and Controller
  (Principal Accounting Officer)
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Exhibit
Number
Description
Description of Special Cash Retention Award for G. Gowrappan.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.PREXBRL Taxonomy Presentation Linkbase Document.
101.CALXBRL Taxonomy Calculation Linkbase Document.
101.LABXBRL Taxonomy Label Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
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