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, 2022

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 Americas		10036
New York,	New York
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 395-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.10	VZ	New York Stock Exchange
Common Stock, par value $0.10	VZ	The NASDAQ Global Select Market
1.625% Notes due 2024	VZ24B	New York Stock Exchange
4.073% Notes due 2024	VZ24C	New York Stock Exchange
0.875% Notes due 2025	VZ25	New York Stock Exchange
3.250% Notes due 2026	VZ26	New York Stock Exchange
1.375% Notes due 2026	VZ26B	New York Stock Exchange
0.875% Notes due 2027	VZ27E	New York Stock Exchange
1.375% Notes due 2028	VZ28	New York Stock Exchange
1.125% Notes due 2028	VZ28A	New York Stock Exchange
2.350% Fixed Rate Notes due 2028	VZ28C	New York Stock Exchange
1.875% Notes due 2029	VZ29B	New York Stock Exchange
0.375% Notes due 2029	VZ29D	New York Stock Exchange
1.250% Notes due 2030	VZ30	New York Stock Exchange
1.875% Notes due 2030	VZ30A	New York Stock Exchange
2.625% Notes due 2031	VZ31	New York Stock Exchange
2.500% Notes due 2031	VZ31A	New York Stock Exchange
3.000% Fixed Rate Notes due 2031	VZ31D	New York Stock Exchange
0.875% Notes due 2032	VZ32	New York Stock Exchange
0.750% Notes due 2032	VZ32A	New York Stock Exchange
1.300% Notes due 2033	VZ33B	New York Stock Exchange
4.750% Notes due 2034	VZ34	New York Stock Exchange

Securities registered pursuant to Section 12(b) of the Act (continued):

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
3.125% Notes due 2035	VZ35	New York Stock Exchange
1.125% Notes due 2035	VZ35A	New York Stock Exchange
3.375% Notes due 2036	VZ36A	New York Stock Exchange
2.875% Notes due 2038	VZ38B	New York Stock Exchange
1.875% Notes due 2038	VZ38C	New York Stock Exchange
1.500% Notes due 2039	VZ39C	New York Stock Exchange
3.500% Fixed Rate Notes due 2039	VZ39D	New York Stock Exchange
1.850% Notes due 2040	VZ40	New York Stock Exchange
3.850% Fixed Rate Notes due 2041	VZ41C	New 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, 2022, 4,199,714,676 shares of the registrant’s common stock were outstanding, after deducting 91,718,970 shares held in treasury.

TABLE OF CONTENTS

Item No.		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income	4
	Three and six months ended June 30, 2022 and 2021
	Condensed Consolidated Statements of Comprehensive Income	5
	Three and six months ended June 30, 2022 and 2021
	Condensed Consolidated Balance Sheets	6
	At June 30, 2022 and December 31, 2021
	Condensed Consolidated Statements of Cash Flows	7
	Six months ended June 30, 2022 and 2021
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 6.	Exhibits	60
Signature		61
Certifications

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Statements of Income

Verizon Communications Inc. and Subsidiaries

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(dollars in millions, except per share amounts) (unaudited)	2022		2021		2022		2021
Operating Revenues
Service revenues and other	$	27,115	$	28,221	$	54,333	$	56,144
Wireless equipment revenues	6,674		5,543		13,010		10,487
Total Operating Revenues	33,789		33,764		67,343		66,631
Operating Expenses
Cost of services (exclusive of items shown below)	6,932		8,324		14,159		16,344
Cost of wireless equipment	7,488		5,931		14,611		11,433
Selling, general and administrative expense	7,496		7,324		14,668		14,725
Depreciation and amortization expense	4,321		4,020		8,557		8,194
Total Operating Expenses	26,237		25,599		51,995		50,696
Operating Income	7,552		8,165		15,348		15,935
Equity in earnings of unconsolidated businesses	41		1		38		9
Other income (expense), net	49		502		(875)		903
Interest expense	(785)		(844)		(1,571)		(1,945)
Income Before Provision For Income Taxes	6,857		7,824		12,940		14,902
Provision for income taxes	(1,542)		(1,875)		(2,914)		(3,575)
Net Income	$	5,315	$	5,949	$	10,026	$	11,327
Net income attributable to noncontrolling interests	$	116	$	149	$	247	$	282
Net income attributable to Verizon	5,199		5,800		9,779		11,045
Net Income	$	5,315	$	5,949	$	10,026	$	11,327
Basic Earnings Per Common Share
Net income attributable to Verizon	$	1.24	$	1.40	$	2.33	$	2.67
Weighted-average shares outstanding (in millions)	4,201		4,141		4,201		4,141
Diluted Earnings Per Common Share
Net income attributable to Verizon	$	1.24	$	1.40	$	2.33	$	2.67
Weighted-average shares outstanding (in millions)	4,202		4,143		4,202		4,143

See Notes to Condensed Consolidated Financial Statements

4

Condensed Consolidated Statements of Comprehensive Income

Verizon Communications Inc. and Subsidiaries

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(dollars in millions) (unaudited)	2022		2021		2022		2021
Net Income	$	5,315	$	5,949	$	10,026	$	11,327
Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit
Foreign currency translation adjustments, net of tax of $(11), $(15), $(17) and $(7)	(136)		58		(165)		20
Unrealized gain (loss) on cash flow hedges, net of tax of $(19), $294, $(91) and $(46)	72		(777)		279		132
Unrealized loss on fair value hedges, net of tax of $88, $0 $88 and $0	(272)		—		(272)		—
Unrealized loss on marketable securities, net of tax of $2, $0, $7 and $1	(6)		—		(24)		(5)
Defined benefit pension and postretirement plans, net of tax of $24, $52, $72 and $103	(72)		(155)		(211)		(310)
Other comprehensive loss attributable to Verizon	(414)		(874)		(393)		(163)
Total Comprehensive Income	$	4,901	$	5,075	$	9,633	$	11,164
Comprehensive income attributable to noncontrolling interests	$	116	$	149	$	247	$	282
Comprehensive income attributable to Verizon	4,785		4,926		9,386		10,882
Total Comprehensive Income	$	4,901	$	5,075	$	9,633	$	11,164

See Notes to Condensed Consolidated Financial Statements

5

Condensed Consolidated Balance Sheets

Verizon Communications Inc. and Subsidiaries

	At June 30,		At December 31,
(dollars in millions, except per share amounts) (unaudited)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	1,857	$	2,921
Accounts receivable	24,740		24,742
Less Allowance for credit losses	831		896
Accounts receivable, net	23,909		23,846
Inventories	3,646		3,055
Prepaid expenses and other	8,087		6,906
Total current assets	37,499		36,728
Property, plant and equipment	296,700		289,897
Less Accumulated depreciation	195,390		190,201
Property, plant and equipment, net	101,310		99,696
Investments in unconsolidated businesses	1,113		1,061
Wireless licenses	148,724		147,619
Goodwill	28,638		28,603
Other intangible assets, net	11,286		11,677
Operating lease right-of-use assets	27,098		27,883
Other assets	14,479		13,329
Total assets	$	370,147	$	366,596
Liabilities and Equity
Current liabilities
Debt maturing within one year	$	12,873	$	7,443
Accounts payable and accrued liabilities	20,956		24,833
Current operating lease liabilities	3,912		3,859
Other current liabilities	11,483		11,025
Total current liabilities	49,224		47,160
Long-term debt	136,184		143,425
Employee benefit obligations	15,125		15,410
Deferred income taxes	42,154		40,685
Non-current operating lease liabilities	22,597		23,203
Other liabilities	17,506		13,513
Total long-term liabilities	233,566		236,236
Commitments and Contingencies (Note 11)
Equity
Series preferred stock ($0.10 par value; 250,000,000 shares authorized; none issued)	—		—
Common stock ($0.10 par value; 6,250,000,000 shares authorized in each period; 4,291,433,646 shares issued in each period)	429		429
Additional paid in capital	13,872		13,861
Retained earnings	76,401		71,993
Accumulated other comprehensive loss	(1,320)		(927)
Common stock in treasury, at cost (91,718,970 and 93,634,725 shares outstanding)	(4,020)		(4,104)
Deferred compensation – employee stock ownership plans (ESOPs) and other	654		538
Noncontrolling interests	1,341		1,410
Total equity	87,357		83,200
Total liabilities and equity	$	370,147	$	366,596

See Notes to Condensed Consolidated Financial Statements

6

Condensed Consolidated Statements of Cash Flows

Verizon Communications Inc. and Subsidiaries

	Six Months Ended
	June 30,
(dollars in millions) (unaudited)	2022		2021
Cash Flows from Operating Activities
Net Income	$	10,026	$	11,327
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	8,557		8,194
Employee retirement benefits	(121)		(1,819)
Deferred income taxes	1,514		1,978
Provision for expected credit losses	665		409
Equity in losses (earnings) of unconsolidated businesses, net of dividends received	(18)		25
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses	(1,959)		82
Other, net	(999)		242
Net cash provided by operating activities	17,665		20,438
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)	(10,491)		(8,716)
Cash received (paid) related to acquisitions of businesses, net of cash acquired	247		(458)
Acquisitions of wireless licenses	(2,275)		(45,278)
Other, net	(2,137)		51
Net cash used in investing activities	(14,656)		(54,401)
Cash Flows from Financing Activities
Proceeds from long-term borrowings	3,617		31,444
Proceeds from asset-backed long-term borrowings	5,053		2,695
Repayments of long-term borrowings and finance lease obligations	(7,405)		(7,559)
Repayments of asset-backed long-term borrowings	(2,695)		(2,993)
Dividends paid	(5,378)		(5,198)
Other, net	2,971		(1,839)
Net cash provided by (used in) financing activities	(3,837)		16,550
Decrease in cash, cash equivalents and restricted cash	(828)		(17,413)
Cash, cash equivalents and restricted cash, beginning of period	4,161		23,498
Cash, cash equivalents and restricted cash, end of period (Note 1)	$	3,333	$	6,085

See Notes to Condensed Consolidated Financial Statements

7

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, 2021. 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.

Earnings Per Common Share

There were a total of approximately 1.4 million and 1.5 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, 2022, respectively. There were a total of approximately 1.9 million and 1.8 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, respectively.

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.

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)	2022		2021
Cash and cash equivalents	$	1,857	$	2,921	$	(1,064)
Restricted cash:
Prepaid expenses and other	1,322		1,094		228
Other assets	154		146		8
Cash, cash equivalents and restricted cash	$	3,333	$	4,161	$	(828)

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 10 for additional information on revenue by segment. Corporate and other primarily includes insurance captive revenues.

We also earn revenues that are not accounted for under Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers" (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, 2022, revenues from arrangements that were not accounted for under Topic 606 were approximately $775 million and $1.6 billion, respectively. During the three and six months ended June 30, 2021, revenues from arrangements that were not accounted for under Topic 606 were approximately $768 million and $1.5 billion, respectively.

8

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, 2022, month-to-month service contracts represented approximately 94% of our wireless postpaid contracts and approximately 89% of our wireline Consumer and Small and Medium Business contracts, compared to June 30, 2021, for which month-to-month service contracts represented approximately 92% of our wireless postpaid contracts and 80% 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, with or without promotional credits that require maintenance of service, are generally either month-to-month and cancellable at any time, are considered to contain terms ranging from greater than one month to up to thirty-six months (typically under a device payment plan), or contain terms ranging from greater than one month to up to twenty-four months (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 cancelled 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 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 nine years ending in August 2031 and have aggregate contract minimum payments totaling $1.9 billion.

At June 30, 2022, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2022, 2023 and thereafter was $10.9 billion, $15.2 billion and $9.7 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.

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

9

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)	2022		2022		2021		2021
Receivables(1)	$	10,620	$	10,758	$	9,387	$	12,029
Device payment plan agreement receivables(2)	14,439		12,888		10,836		10,358

(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 6. Receivables derived from the sale of equipment on a device payment plan through an authorized agent are excluded.

The following table presents information about contract balances:

	At June 30,		At January 1,		At June 30,		At January 1,
(dollars in millions)	2022		2022		2021		2021
Contract asset	$	880	$	934	$	972	$	937
Contract liability(1)	7,706		7,229		5,846		5,598

(1) Revenue recognized related to contract liabilities existing at January 1, 2022 were $365 million and $4.7 billion for the three and six months ended June 30, 2022, respectively. 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.

The balances 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)	2022		2021
Assets
Prepaid expenses and other	$	697	$	739
Other assets	183		195
Total	$	880	$	934
Liabilities
Other current liabilities	$	6,310	$	6,053
Other liabilities	1,396		1,176
Total	$	7,706	$	7,229

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 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.

10

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)	2022		2021
Assets
Prepaid expenses and other	$	2,509	$	2,432
Other assets	2,309		2,259
Total	$	4,818	$	4,691

For the three and six months ended June 30, 2022, we recognized expense of $735 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, 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.

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, 2022 or June 30, 2021.

Note 3. Acquisitions and Divestitures

Spectrum License Transactions

In February 2021, the FCC concluded Auction 107 for C-Band wireless spectrum. 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 payments 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 $7.7 billion. During the year ended December 31, 2021, we made payments of $1.3 billion primarily related to certain obligations for projected clearing costs. In January 2022, we made additional payments of $1.4 billion for obligations related to accelerated clearing incentives, which were accrued as of December 31, 2021. We expect to continue to make payments related to clearing cost and incentive payment obligations 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. In accordance with the FCC order, the clearing must be completed by December 2025. The carrying value of the wireless spectrum won in Auction 107 consists 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, as well as capitalized interest to the extent qualifying activities have occurred.

In March 2022, Verizon signed agreements with satellite operators in which operators agreed to clear C-Band spectrum in certain markets and frequencies ahead of the previously expected December 2023 timeframe. Verizon incurred costs of approximately $164 million associated with these agreements, which were accrued for as of June 30, 2022. This early clearance, if successful, would accelerate Verizon's access to more spectrum in a number of key markets to support its 5G initiatives.

During both the three and six months ended June 30, 2022, we entered into and completed various other wireless license acquisitions for cash consideration of an insignificant amount. During the six months ended June 30, 2021, we recognized a pre-tax loss of $223 million ($167 million after-tax) in connection with the sale of certain wireless licenses.

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 leading provider of prepaid and value mobile services in the U.S. The transaction closed on November 23, 2021 (the Acquisition Date). The acquisition positions Verizon as the leading prepaid, value and premium wireless carrier by expanding Verizon’s portfolio, bringing enhanced access of our wireless network and comprehensive suite of mobility products and services to a new customer base.

In accordance with the terms of the TracFone Purchase Agreement, Verizon acquired all of TracFone's outstanding stock in exchange for approximately $3.5 billion in cash, net of cash acquired and working capital and other adjustments, subject to customary adjustments, 57,596,544 shares of Verizon common stock valued at approximately $3.0 billion, and up to an additional $650 million in future cash contingent consideration related to the achievement of certain performance measures and

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other commercial arrangements. The fair value of the Verizon common stock was determined on the basis of its closing market price on the Acquisition Date. The estimated fair value of the contingent consideration as of the Acquisition Date was approximately $545 million and represents a Level 3 measurement as defined in ASC 820, Fair Value Measurements and Disclosures. See Note 7 for additional information. The contingent consideration payable is based on the achievement of certain revenue and operational targets, measured over a two-year earn out period, as defined in the TracFone Purchase Agreement. Payments related to the contingent consideration are expected to begin in the second half of 2022 and continue through 2024.

In May 2022, Verizon received net cash proceeds of $248 million for the final settlement of working capital, which was included in our consideration as of the Acquisition Date.

The TracFone acquisition was accounted for as a business combination. The purchase consideration was preliminarily allocated to the assets acquired and liabilities assumed based on their fair values as of the Acquisition Date.

The following table summarizes the preliminary allocation of the consideration paid and payable to the identified assets acquired and liabilities assumed as of the Acquisition Date. The purchase price allocation is preliminary and is subject to revision as additional information about the fair value of the assets acquired and liabilities assumed, including related deferred income taxes, become available.

	November 23,		Measurement Period Adjustments(1)		Adjusted
(dollars in millions)	2021				Fair Value
Consideration:
Cash, net of cash acquired and working capital and other adjustments	$	3,491	$	17	$	3,508
Fair value of Verizon common stock (57,596,544 shares)	2,981		—		2,981
Fair value of contingent consideration to be paid	542		3		545
Total consideration	$	7,014	$	20	$	7,034
Assets acquired:
Current assets	$	1,370	$	9	$	1,379
Property, plant and equipment, net	96		(5)		91
Goodwill	3,723		70		3,793
Other intangible assets	4,374		—		4,374
Other assets	731		23		754
Total assets acquired	$	10,294	$	97	$	10,391
Liabilities assumed:
Current liabilities	1,433		63		1,496
Deferred income taxes	1,007		19		1,026
Other liabilities	840		(5)		835
Total liabilities assumed	$	3,280	$	77	$	3,357
Net assets acquired	$	7,014	$	20	$	7,034

(1) Adjustments to the fair value measurements reflect new information obtained about facts and circumstances that existed as of the Acquisition Date, that if known, would have affected the measurement of the amounts recognized as of that date. The most significant adjustments related to an increase in goodwill, deferred commission costs and deferred income taxes.

Other intangible assets include $2.3 billion related to customer relationships, $1.3 billion related to distribution relationships, $744 million related to trade names and $110 million related to acquired technology.

Goodwill is calculated as the difference between the Acquisition Date fair value of the consideration paid and payable and the fair value of the net assets acquired, representing future economic benefits that we expect to achieve as a result of the acquisition. The goodwill related to this acquisition is included within the Consumer segment.

Pursuant to the TracFone Purchase Agreement, América Móvil agreed to indemnify Verizon against certain pre-acquisition tax matters and other contingencies. We have recorded total contingent liabilities and offsetting indemnification assets of $753 million for the expected reimbursement of these matters that had not been resolved as of the Acquisition Date. The liabilities are presented in Other liabilities and the indemnification assets are presented in Other assets, within our condensed consolidated balance sheets. The amounts recognized represent reasonable estimates based on an evaluation of current facts and circumstances. Actual outcome may differ significantly from these estimates. We expect that any additional liabilities that may arise related to these indemnified matters would be indemnified and reimbursed by América Móvil.

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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 $412 million, net of cash acquired.

Verizon Media Divestiture

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

On September 1, 2021, we completed the sale of Verizon Media. As of the close of the transaction, cash proceeds, the fair value of the non-convertible preferred limited partnership units of the Apollo Affiliate, and the fair value of 10% of the fully-diluted common limited partnership units of the Apollo Affiliate were $4.3 billion, $496 million, and $124 million, respectively.

On September 28, 2021, the Apollo Affiliate redeemed $100 million of Verizon’s preferred limited partnership interest. The carrying value of our preferred limited partnership interest as of June 30, 2022 was $396 million. Verizon’s 10% common interest in the Apollo Affiliate is accounted for as an equity method investment. The post-sale results of Verizon’s common ownership interest in the Apollo Affiliate are recorded through the equity method of accounting, within Corporate and other, which are insignificant.

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