Segment Information (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of segment results

The results of our two reportable segments, enterprise and consumer, are summarized below:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
	(Dollars in millions)
Total reportable segment revenues	$	3,558		3,916		10,943		11,776
Total reportable segment expenses	1,913			2,068		5,720		6,009
Total reportable segment income	$	1,645		1,848		5,223		5,767
Total margin percentage	46		%	47	%	48	%	49	%
Enterprise segment:
Revenues	$	2,171		2,444		6,742		7,321
Expenses	1,292			1,425		3,907		4,116
Income	$	879		1,019		2,835		3,205
Margin percentage	40		%	42	%	42	%	44	%
Consumer segment:
Revenues	$	1,387		1,472		4,201		4,455
Expenses	621			643		1,813		1,893
Income	$	766		829		2,388		2,562
Margin percentage	55		%	56	%	57	%	58	%

Schedule of operating revenues by products and services

Our operating revenue detail for our products and services consisted of the following categories:

	Three Months Ended September 30,			Nine Months Ended September 30,
	2017		2016	2017	2016
	(Dollars in millions)
Strategic services
Enterprise high-bandwidth data services (1)	$	767	744	2,296	2,235
Other enterprise strategic services (2)	182		334	735	989
IT and managed services (3)	169		160	483	483
Consumer broadband services (4)	673		674	1,995	2,023
Other consumer strategic services (5)	101		115	311	340
Total strategic services revenues	1,892		2,027	5,820	6,070
Legacy services
Enterprise voice services (6)	551		601	1,682	1,834
Enterprise low-bandwidth data services (7)	289		339	905	1,056
Other enterprise legacy services (8)	252		265	754	809
Consumer voice services (6)	541		605	1,678	1,854
Other consumer legacy services (9)	72		78	216	237
Total legacy services revenues	1,705		1,888	5,235	5,790
Data integration
Enterprise data integration	130		161	370	398
IT and managed services data integration	4		2	14	3
Consumer data integration	—		—	1	1
Total data integration revenues	134		163	385	402
Other revenues
High-cost support revenue (10)	165		171	501	518
Other revenue (11)	138		133	392	401
Total other revenues	303		304	893	919
Total revenues	$	4,034	4,382	12,333	13,181

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(1)	Includes MPLS, Ethernet and wavelength revenue
(2)	Includes primarily colocation, broadband, VOIP, video and fiber lease revenue
(3)	Includes primarily IT services, managed hosting, cloud hosting and hosting area network revenue
(4)	Includes broadband and related services revenue
(5)	Includes video and other revenue
(6)	Includes local and long-distance voice revenue
(7)	Includes private line (including special access) revenue
(8)	Includes UNEs, public access, switched access and other ancillary revenue
(9)	Includes other ancillary revenue
(10)	Includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue
(11)	Includes USF surcharges and failed-sale-leaseback rental income

Reconciliation of operating profit (loss) from segments to consolidated net income

The following table reconciles total reportable segment income to net income:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
	(Dollars in millions)
Total reportable segment income	$	1,645		1,848		5,223		5,767
Non-reportable segment revenues	173			162		497		486
Other operating revenues	303			304		893		919
Depreciation and amortization	(910		)	(995	)	(2,739	)	(2,958	)
Other operating expenses	(724		)	(726	)	(2,389	)	(2,286	)
Total other expense, net	(348		)	(344	)	(999	)	(982	)
Income before income tax expense	139			249		486		946
Income tax expense	(47		)	(97	)	(214	)	(362	)
Net income	$	92		152		272		584