Segment Information

3 Months Ended

Mar. 31, 2020

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 that were previously reported in segments 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 March 31, 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 March 31, 2020 and 2019 based on the segment categorization we were operating under at March 31, 2020.



	Three Months Ended March 31, 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	$	400	628	269	327	—	1,624	—		1,624
Transport and Infrastructure	316		380	89	447	—	1,232	—		1,232
Voice and Collaboration	91		356	290	183	—	920	—		920
IT and Managed Services	58		56	10	1	—	125	—		125
Broadband	—		—	—	—	722	722	—		722
Voice	—		—	—	—	421	421	—		421
Regulatory	—		—	—	—	156	156	—		156
Other	—		—	—	—	28	28	—		28
Total revenue	865		1,420	658	958	1,327	5,228	—		5,228
Expenses:
Cost of services and products	233		447	104	131	42	957	1,278		2,235
Selling, general and administrative	65		136	110	17	115	443	410		853
Less: share-based compensation	—		—	—	—	—	—	(69	)	(69	)
Total expense	298		583	214	148	157	1,400	1,619		3,019
Total adjusted EBITDA	$	567	837	444	810	1,170	3,828	(1,619	)	2,209



	Three Months Ended March 31, 2019
	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Total Segments	Operations and Other		Total
	(Dollars in millions)
Revenue⁽¹⁾:
IP and Data Services	$	408	638	276	338	—	1,660	—		1,660
Transport and Infrastructure	309		347	95	495	—	1,246	—		1,246
Voice and Collaboration	89		366	317	195	—	967	—		967
IT and Managed Services	57		74	12	2	—	145	—		145
Broadband	—		—	—	—	722	722	—		722
Voice	—		—	—	—	477	477	—		477
Regulatory	—		—	—	—	157	157	—		157
Other	—		—	—	—	53	53	—		53
Total revenue	863		1,425	700	1,030	1,409	5,427	—		5,427
Expenses:
Cost of services and products⁽¹⁾	231		428	105	134	58	956	1,344		2,300
Selling, general and administrative ⁽¹⁾	67		148	124	14	144	497	435		932
Less: share-based compensation	—		—	—	—	—	—	(33	)	(33	)
Total expense ⁽¹⁾	298		576	229	148	202	1,453	1,746		3,199
Total adjusted EBITDA ⁽¹⁾	$	565	849	471	882	1,207	3,974	(1,746	)	2,228

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⁽¹⁾ Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020, in addition to customer and cost assignment reporting changes. Refer to Note 1 - Background and our Form 8-K filing dated April 30, 2020 for further information.

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 March 31,
	2020			2019
	(Dollars in millions)
Total segment adjusted EBITDA ⁽¹⁾	$	3,828		3,974
Depreciation and amortization	(1,160		)	(1,188	)
Impairment of goodwill	—			(6,506	)
Other operating expenses ⁽¹⁾	(1,619		)	(1,746	)
Stock-based compensation	(69		)	(33	)
Operating income (loss)	980			(5,499	)
Total other expense, net	(547		)	(528	)
Income (loss) before income taxes	433			(6,027	)
Income tax expense	119			138
Net income (loss)	$	314		(6,165	)

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