Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information

Segment Information

As described in more detail below, our segments are managed based on the direct costs of providing services to their customers and the associated selling, general and administrative costs (primarily salaries and commissions). Shared costs are managed separately and included in "Operations and Other", in the tables below. We reclassified certain prior period amounts to conform to the current period presentation, See Note 1— Background for further detail on these changes.

At June 30, 2020, we had the following five reportable segments:

•International and Global Accounts Management ("IGAM") Segment. Under our IGAM segment, we provide our products and services to approximately 200 global enterprise customers and to enterprises and carriers in three operating regions: Europe Middle East and Africa, Latin America and Asia Pacific;

•Enterprise Segment. Under our enterprise segment, we provide our products and services to large and regional domestic and global enterprises, as well as public sector, which includes the U.S. Federal government, state and local governments and research and education institutions;

•Small and Medium Business ("SMB") Segment. Under our SMB segment, we provide our products and services to small and medium businesses directly and through our indirect channel partners;

•Wholesale Segment. Under our wholesale segment, we provide our products and services to a wide range of other communication providers across the wireline, wireless, cable, voice and data center sectors. Our wholesale customers range from large global telecom providers to small regional providers; and

•Consumer Segment. Under our consumer segment, we provide our products and services to residential customers. Additionally, Connect America Fund ("CAF") federal support revenue and other revenue from leasing and subleasing are reported in our consumer segment as regulatory revenue.

Product and Service Categories

We categorize our products and services revenue among the following four categories for the IGAM, Enterprise, SMB and Wholesale segments:

•IP and Data Services, which includes primarily VPN data networks, Ethernet, IP, content delivery and other ancillary services;

•Transport and Infrastructure, which includes wavelengths, dark fiber, private line, colocation and data center services, including cloud, hosting and application management solutions, professional services and other ancillary services;

•Voice and Collaboration, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary services, as well as VoIP services; and

•IT and Managed Services, which includes information technology services and managed services, which may be purchased in conjunction with our other network services.

We categorize our products and services revenue among the following four categories for the Consumer segment:

•Broadband, which includes high-speed, fiber based and lower speed DSL broadband services;

•Voice, which includes local and long-distance services;

•Regulatory Revenue, which consists of (i) CAF and other support payments designed to reimburse us for various costs related to certain telecommunications services and (ii) other operating revenue from the leasing and subleasing of space; and

•Other, which includes retail video services (including our linear and TV services), professional services and other ancillary services.

The following tables summarize our segment results for the three months ended June 30, 2020 and 2019 based on the segment categorization we were operating under at June 30, 2020.

	Three Months Ended June 30, 2020
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	386	623	263	320	—	1,592	—	1,592
Transport and Infrastructure	311		381	91	433	—	1,216	—	1,216
Voice and Collaboration	97		371	282	195	—	945	—	945
IT and Managed Services	55		58	10	—	—	123	—	123
Broadband	—		—	—	—	726	726	—	726
Voice	—		—	—	—	409	409	—	409
Regulatory	—		—	—	—	154	154	—	154
Other	—		—	—	—	27	27	—	27
Total revenue	849		1,433	646	948	1,316	5,192	—	5,192
Expenses:
Cost of services and products	232		463	99	132	42	968	1,264	2,232
Selling, general and administrative	61		135	109	16	119	440	455	895
Less: share-based compensation	—		—	—	—	—	—	(20)	(20)
Total expense	293		598	208	148	161	1,408	1,699	3,107
Total adjusted EBITDA	$	556	835	438	800	1,155	3,784	(1,699)	2,085

	Three Months Ended June 30, 2019
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	409	632	271	337	—	1,649	—	1,649
Transport and Infrastructure	323		354	94	482	—	1,253	—	1,253
Voice and Collaboration	89		358	312	191	—	950	—	950
IT and Managed Services	56		65	11	2	—	134	—	134
Broadband	—		—	—	—	718	718	—	718
Voice	—		—	—	—	467	467	—	467
Regulatory	—		—	—	—	157	157	—	157
Other	—		—	—	—	47	47	—	47
Total revenue	877		1,409	688	1,012	1,389	5,375	—	5,375
Expenses:
Cost of services and products	232		434	102	140	51	959	1,284	2,243
Selling, general and administrative	67		141	115	15	137	475	485	960
Less: share-based compensation	—		—	—	—	—	—	(43)	(43)
Total expense	299		575	217	155	188	1,434	1,726	3,160
Total adjusted EBITDA	$	578	834	471	857	1,201	3,941	(1,726)	2,215

The following tables summarize our segment results for the six months ended June 30, 2020 and 2019 based on the segment categorization we were operating under at June 30, 2020.

	Six Months Ended June 30, 2020
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	786	1,251	532	647	—	3,216	—	3,216
Transport and Infrastructure	627		761	180	880	—	2,448	—	2,448
Voice and Collaboration	188		727	572	378	—	1,865	—	1,865
IT and Managed Services	113		114	20	1	—	248	—	248
Broadband	—		—	—	—	1,448	1,448	—	1,448
Voice	—		—	—	—	830	830	—	830
Regulatory	—		—	—	—	310	310	—	310
Other	—		—	—	—	55	55	—	55
Total revenue	1,714		2,853	1,304	1,906	2,643	10,420	—	10,420
Expenses:
Cost of services and products	465		910	203	263	84	1,925	2,542	4,467
Selling, general and administrative	126		271	219	33	234	883	865	1,748
Less: share-based compensation	—		—	—	—	—	—	(89)	(89)
Total expense	591		1,181	422	296	318	2,808	3,318	6,126
Total adjusted EBITDA	$	1,123	1,672	882	1,610	2,325	7,612	(3,318)	4,294

	Six Months Ended June 30, 2019
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue:
IP and Data Services	$	817	1,270	547	675	—	3,309	—	3,309
Transport and Infrastructure	632		701	189	977	—	2,499	—	2,499
Voice and Collaboration	178		724	629	386	—	1,917	—	1,917
IT and Managed Services	113		139	23	4	—	279	—	279
Broadband	—		—	—	—	1,440	1,440	—	1,440
Voice	—		—	—	—	944	944	—	944
Regulatory	—		—	—	—	314	314	—	314
Other	—		—	—	—	100	100	—	100
Total revenue	1,740		2,834	1,388	2,042	2,798	10,802	—	10,802
Expenses:
Cost of services and products	463		862	207	274	109	1,915	2,628	4,543
Selling, general and administrative	134		289	239	29	281	972	920	1,892
Less: share-based compensation	—		—	—	—	—	—	(76)	(76)
Total expense	597		1,151	446	303	390	2,887	3,472	6,359
Total adjusted EBITDA	$	1,143	1,683	942	1,739	2,408	7,915	(3,472)	4,443

Revenue and Expenses

Our segment revenue includes all revenue from our five segments as described in more detail above. Our segment revenue is based upon each customer's classification. We report our segment revenue based upon all services provided to that segment's customers. Our segment expenses include specific cost of service expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are directly associated with specific segment customers or activities.

The following items are excluded from our segment results, because they are centrally managed and not monitored by or reported to our chief operating decision maker by segment:

•Network expenses not incurred as a direct result of providing services and products to segment customers;

•centrally managed expenses such as Operations, Finance, Human Resources, Legal, Marketing, Product Management and IT, which are reported as "Operations and Other";

•depreciation and amortization expense or impairments;

•interest expense, because we manage our financing on a consolidated basis and have not allocated assets or debt to specific segments;

•stock-based compensation; and

•other income and expense items are not monitored as a part of our segment operations.

The following table reconciles total segment adjusted EBITDA to net income (loss):

	Three Months Ended June 30,			Six Months Ended June 30,
	2020		2019	2020	2019
	(Dollars in millions)
Total segment adjusted EBITDA	$	3,784	3,941	7,612	7,915
Depreciation and amortization	(1,162)		(1,196)	(2,322)	(2,384)
Impairment of goodwill	—		—	—	(6,506)
Other operating expenses	(1,699)		(1,726)	(3,318)	(3,472)
Stock-based compensation	(20)		(43)	(89)	(76)
Operating income (loss)	903		976	1,883	(4,523)
Total other expense, net	(390)		(474)	(937)	(1,002)
Income (loss) before income taxes	513		502	946	(5,525)
Income tax expense	136		131	255	269
Net income (loss)	$	377	371	691	(5,794)