Goodwill, Customer Relationships and Other Intangible Assets

6 Months Ended

Jun. 30, 2025

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Customer Relationships and Other Intangible Assets

Note 3—Goodwill, Customer Relationships and Other Intangible Assets

Goodwill, customer relationships and other intangible assets consisted of the following:

	June 30, 2025		December 31, 2024
	(Dollars in millions)
Goodwill(1)	$	—	1,964
Indefinite-lived intangible assets	$	—	9
Other intangible assets subject to amortization:
Customer relationships, less accumulated amortization of $4,648 and $4,504(2)	2,899		3,196
Capitalized software, less accumulated amortization of $3,789 and $4,067(2)	1,560		1,529
Patents and other, less accumulated amortization of $93 and $86	66		72
Total other intangible assets, net	$	4,525	4,806

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(1)     As of June 30, 2025, this amount excluded goodwill classified as held for sale of approximately $1.3 billion. See Note 2—Planned Divestiture of the Mass Markets Fiber-to-the-Home Business.

(2)    Certain customer relationships with a gross carrying value of $161 million and capitalized software with a gross carrying value of $211 million became fully amortized during 2024 and were retired during the first quarter of 2025.

As of June 30, 2025 and December 31, 2024, the gross carrying amount of goodwill, customer relationships, indefinite-lived, and other intangible assets was $13.1 billion and $15.4 billion, respectively.

Our goodwill was derived from numerous acquisitions where the purchase price exceeded the fair value of the net assets acquired. We report our results within two segments: Business and Mass Markets. See Note 11—Segment Information for more information on these segments.

We are required to assess our goodwill and other indefinite-lived intangible assets for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our assessment determines the carrying value of equity of any of our reporting units exceeds its fair value. Our annual impairment assessment date for goodwill is October 31, at which date we assess our reporting units.

On May 21, 2025 (the date we agreed to sell the disposal group), we had three reporting units: (i) Mass Markets, (ii) North American Business ("NA Business"), and (iii) Asia Pacific region ("APAC"). Our reporting units are not discrete legal entities with discrete full financial statements. Our assets and liabilities are deployed in, and relate to the operations of, multiple reporting units. When we assess goodwill for impairment, we compare the estimated fair value of each reporting unit's equity to the carrying value of equity that we assign to the reporting unit. If the estimated fair value of the reporting unit is greater than the carrying value, we conclude that no impairment exists. If the estimated fair value of the reporting unit is less than the carrying value, we record a non-cash impairment charge equal to the excess amount. Depending on the facts and circumstances, we typically estimate the fair value of our reporting units by considering either or both of (i) a discounted cash flow method, which is based on the present value of projected cash flows over a discrete projection period and a terminal value, which is based on the expected normalized cash flows of the reporting units following the discrete projection period, and (ii) a market approach, which includes the use of market multiples of publicly-traded companies whose services are comparable to ours.

We determined that the classification of the Mass Markets fiber-to-the-home business as held for sale as described in Note 2—Planned Divestiture of the Mass Markets Fiber-to-the-Home Business was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of April 30, 2025. We performed a pre-classification goodwill impairment assessment, as of April 30, 2025, using the market approach to test for impairment prior to the classification of these assets as held for sale and to determine the fair value of our Mass Markets reporting unit for the assignment of goodwill held for sale. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and earnings before interest, tax, depreciation and amortization ("EBITDA") multiples between 1.8x and 3.1x and 5.8x and 8.0x, respectively. We reconciled the estimated fair values of the reporting units to our market capitalization as of April 30, 2025 and concluded that the indicated control premium of approximately 42% was reasonable based on recent market transactions. We concluded no impairment existed at any of our reporting units as of our April 30, 2025 assessment date.

We also performed a post-classification goodwill impairment test using the market approach to evaluate whether the fair value of our reporting units that will remain following the divestiture exceeds the carrying value of the equity of such reporting units after classification of assets held for sale and concluded the indicated control premium of approximately 4% was reasonable based on recent market transactions. As a result of this analysis, we determined that the Mass Markets reporting unit was fully impaired, resulting in a non-cash, non-tax-deductible goodwill impairment charge of $628 million for the three and six months ended June 30, 2025.

The market approach we used in the quarter ended June 30, 2025 incorporated estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives. In developing the market multiples applicable for each reporting unit, we considered observed trends of our industry participants. Our assessment included many factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments.

The following table shows the rollforward of goodwill assigned to our reportable segments from December 31, 2024 to June 30, 2025.

	Business		Mass Markets	Total
	(Dollars in Millions)
As of December 31, 2024(1)	$	—	1,964	1,964
Impairment	—		(628)	(628)
Reclassified as held for sale(2)	—		(1,336)	(1,336)
As of June 30, 2025(1)	$	—	—	—

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(1)     Goodwill at June 30, 2025 and December 31, 2024 is net of accumulated impairment losses of $22.3 billion and $21.7 billion, respectively.

(2)    Reflects the $1.3 billion of goodwill, net of accumulated impairment loss, reclassified as held for sale related to our pending divestiture. See Note 2—Planned Divestiture of the Mass Markets Fiber-to-the-Home Business

Total amortization expense for finite-lived intangible assets for the three months ended June 30, 2025 and 2024 totaled $248 million and $277 million, respectively, and for the six months ended June 30, 2025 and 2024 totaled $500 million and $549 million, respectively.