10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2016
	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 New York, New York	10036
(Address of principal executive offices)	(Zip Code)

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

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.	x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

At September 30, 2016, 4,076,633,952 shares of the registrant’s common stock were outstanding, after deducting 165,740,288 shares held in treasury.

Table of Contents

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income Three and nine months ended September 30, 2016 and 2015		3
	Condensed Consolidated Statements of Comprehensive Income Three and nine months ended September 30, 2016 and 2015		4
	Condensed Consolidated Balance Sheets At September 30, 2016 and December 31, 2015		5
	Condensed Consolidated Statements of Cash Flows Nine months ended September 30, 2016 and 2015		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		57
Item 4.	Controls and Procedures		57
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		57
Item 1A.	Risk Factors		57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		57
Item 6.	Exhibits		58
Signature			59
Certifications

Part I - Financial Information

Item 1. Financial Statements

Condensed Consolidated Statements of Income

Verizon Communications Inc. and Subsidiaries

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions, except per share amounts) (unaudited)	2016			2015			2016			2015
Operating Revenues
Service revenues and other	$	26,813		$	28,866		$	81,858		$	85,840
Wireless equipment revenues		4,124			4,292			11,782			11,526
Total Operating Revenues		30,937			33,158			93,640			97,366
Operating Expenses
Cost of services (exclusive of items shown below)		6,989			7,589			22,180			21,571
Wireless cost of equipment		5,240			5,716			14,882			16,279
Selling, general and administrative expense		8,226			8,309			25,601			24,222
Depreciation and amortization expense		3,942			4,009			11,941			11,978
Total Operating Expenses		24,397			25,623			74,604			74,050
Operating Income		6,540			7,535			19,036			23,316
Equity in losses of unconsolidated businesses		(23	)		(18	)		(63	)		(70	)
Other income and (expense), net		97			51			(1,697	)		158
Interest expense		(1,038	)		(1,202	)		(3,239	)		(3,742	)
Income Before Provision For Income Taxes		5,576			6,366			14,037			19,662
Provision for income taxes		(1,829	)		(2,195	)		(5,029	)		(6,800	)
Net Income	$	3,747		$	4,171		$	9,008		$	12,862
Net income attributable to noncontrolling interests	$	127		$	133		$	376		$	374
Net income attributable to Verizon		3,620			4,038			8,632			12,488
Net Income	$	3,747		$	4,171		$	9,008		$	12,862
Basic Earnings Per Common Share
Net income attributable to Verizon	$	.89		$	.99		$	2.12		$	3.05
Weighted-average shares outstanding (in millions)		4,079			4,072			4,080			4,089
Diluted Earnings Per Common Share
Net income attributable to Verizon	$	.89		$	.99		$	2.11		$	3.05
Weighted-average shares outstanding (in millions)		4,086			4,078			4,086			4,095
Dividends declared per common share	$	0.5775		$	0.5650		$	1.7075		$	1.6650

See Notes to Condensed Consolidated Financial Statements

3

Condensed Consolidated Statements of Comprehensive Income

Verizon Communications Inc. and Subsidiaries

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions) (unaudited)	2016			2015			2016			2015
Net Income	$	3,747		$	4,171		$	9,008		$	12,862
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments		(78	)		(74	)		(23	)		(161	)
Unrealized gain (loss) on cash flow hedges		147			(90	)		(58	)		(196	)
Unrealized loss on marketable securities		(19	)		(13	)		(35	)		(22	)
Defined benefit pension and postretirement plans		(139	)		(44	)		2,324			(132	)
Other comprehensive income (loss) attributable to Verizon		(89	)		(221	)		2,208			(511	)
Total Comprehensive Income	$	3,658		$	3,950		$	11,216		$	12,351
Comprehensive income attributable to noncontrolling interests	$	127		$	133		$	376		$	374
Comprehensive income attributable to Verizon		3,531			3,817			10,840			11,977
Total Comprehensive Income	$	3,658		$	3,950		$	11,216		$	12,351

See Notes to Condensed Consolidated Financial Statements

4

Condensed Consolidated Balance Sheets

Verizon Communications Inc. and Subsidiaries

(dollars in millions, except per share amounts) (unaudited)	At September 30, 2016			At December 31, 2015
Assets
Current assets
Cash and cash equivalents	$	6,441		$	4,470
Short-term investments		–			350
Accounts receivable, net of allowances of $800 and $882		14,832			13,457
Inventories		1,318			1,252
Assets held for sale		–			792
Prepaid expenses and other		3,030			2,034
Total current assets		25,621			22,355
Plant, property and equipment		228,909			220,163
Less accumulated depreciation		145,495			136,622
Plant, property and equipment, net		83,414			83,541
Investments in unconsolidated businesses		1,119			796
Wireless licenses		87,407			86,575
Goodwill		25,970			25,331
Other intangible assets, net		7,692			7,592
Non-current assets held for sale		–			10,267
Other assets		8,275			7,718
Total assets	$	239,498		$	244,175
Liabilities and Equity
Current liabilities
Debt maturing within one year	$	3,852		$	6,489
Accounts payable and accrued liabilities		18,002			19,362
Liabilities related to assets held for sale		–			463
Other		8,444			8,738
Total current liabilities		30,298			35,052
Long-term debt		102,739			103,240
Employee benefit obligations		28,285			29,957
Deferred income taxes		44,617			45,484
Non-current liabilities related to assets held for sale		–			959
Other liabilities		11,576			11,641
Equity
Series preferred stock ($.10 par value; none issued)		–			–
Common stock ($.10 par value; 4,242,374,240 shares issued in each period)		424			424
Contributed capital		11,179			11,196
Reinvested earnings		12,918			11,246
Accumulated other comprehensive income		2,758			550
Common stock in treasury, at cost		(7,264	)		(7,416	)
Deferred compensation – employee stock ownership plans and other		445			428
Noncontrolling interests		1,523			1,414
Total equity		21,983			17,842
Total liabilities and equity	$	239,498		$	244,175

See Notes to Condensed Consolidated Financial Statements

5

Condensed Consolidated Statements of Cash Flows

Verizon Communications Inc. and Subsidiaries

	Nine Months Ended September 30,
(dollars in millions) (unaudited)	2016			2015
Cash Flows from Operating Activities
Net Income	$	9,008		$	12,862
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		11,941			11,978
Employee retirement benefits		4,531			1,184
Deferred income taxes		(2,331	)		890
Provision for uncollectible accounts		963			1,136
Equity in losses of unconsolidated businesses, net of dividends received		94			98
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses		(4,010	)		1,443
Other, net		(2,567	)		(1,165	)
Net cash provided by operating activities		17,629			28,426
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)		(11,398	)		(12,540	)
Acquisitions of businesses, net of cash acquired		(963	)		(3,205	)
Acquisitions of wireless licenses		(410	)		(9,811	)
Proceeds from dispositions of businesses		9,882			–
Other, net		350			960
Net cash used in investing activities		(2,539	)		(24,596	)
Cash Flows from Financing Activities
Proceeds from long-term borrowings		8,152			6,497
Proceeds from asset-backed long-term borrowings		2,594			–
Repayments of long-term borrowings and capital lease obligations		(14,510	)		(7,168	)
Decrease in short-term obligations, excluding current maturities		(120	)		(305	)
Dividends paid		(6,908	)		(6,373	)
Proceeds from sale of common stock		3			31
Purchase of common stock for treasury		–			(5,134	)
Other, net		(2,330	)		1,899
Net cash used in financing activities		(13,119	)		(10,553	)
Increase (decrease) in cash and cash equivalents		1,971			(6,723	)
Cash and cash equivalents, beginning of period		4,470			10,598
Cash and cash equivalents, end of period	$	6,441		$	3,875

See Notes to Condensed Consolidated Financial Statements

6

Notes to Condensed Consolidated Financial Statements

Verizon Communications Inc. and Subsidiaries

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared based upon Securities and Exchange Commission (SEC) 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 for the year ended December 31, 2015 of Verizon Communications Inc. (Verizon or the Company) included in its Current Report on Form 8-K dated July 29, 2016. 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. We have reclassified certain prior year amounts to conform to the current year presentation.

Earnings Per Common Share

There were a total of approximately 7 million and 6 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and nine months ended September 30, 2016, respectively. There were a total of approximately 6 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and nine months ended September 30, 2015, respectively. There were no outstanding options to purchase shares that would have been anti-dilutive for the three and nine months ended September 30, 2016 and 2015, respectively.

Recently Adopted Accounting Standards

During the first quarter of 2016, we adopted the accounting standard update related to the simplification of the accounting for measurement-period adjustments in business combinations. This standard update requires an acquirer to recognize measurement-period adjustments in the reporting period in which the adjustments are determined and to record the effects on earnings of any changes resulting from the change in provisional amounts, calculated as if the accounting had been completed at the acquisition date. The prospective adoption of this standard update did not have a significant impact on our condensed consolidated financial statements.

During the first quarter of 2016, we adopted the accounting standard update related to disclosures for investments in certain entities that calculate net asset value per share. This standard update removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The standard update limits the required disclosures to investments for which the entity has elected to measure the fair value using the practical expedient. The retrospective adoption of this standard update did not have a significant impact on our condensed consolidated financial statements.

During the first quarter of 2016, we adopted the accounting standard update related to the simplification of the presentation of debt issuance costs. This standard update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. During the first quarter of 2016, we also adopted the accounting standard update related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. This standard adds SEC paragraphs pursuant to an SEC Staff Announcement that the SEC staff would not object to an entity deferring and presenting debt issuance costs associated with a line-of-credit arrangement as an asset and subsequently amortizing the costs ratably over the term of the arrangement. We applied the amendments in these accounting standard updates retrospectively to all periods presented. The adoption of these standard updates did not have a significant impact on our condensed consolidated financial statements.

During the first quarter of 2016, we adopted the accounting standard update related to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The prospective adoption of this standard update did not have an impact on our condensed consolidated financial statements.

During the second quarter of 2016, we prospectively changed our method for determining the date at which we remeasure plan assets and obligations as a result of a significant event during an interim period in accordance with Accounting Standards Update (ASU) 2015-04, Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets. As a practical expedient, we elected to remeasure defined benefit plan assets and obligations using the month-end that is closest to the date of the significant event.

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Recently Issued Accounting Standards

In August 2016, the accounting standard update related to the classification of certain cash receipts and cash payments was issued. This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective as of the first quarter of 2018; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements.

In June 2016, the standard update related to the measurement of credit losses on financial instruments was issued. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard update is effective as of the first quarter of 2020; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements.

In March 2016, the accounting standard update related to employee share-based payment accounting was issued. This standard update intends to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This standard update is effective as of the first quarter of 2017; however, early adoption is permitted. The adoption of this standard update is not expected to have a significant impact on our condensed consolidated financial statements.

In February 2016, the accounting standard update related to leases was issued. This standard update intends to increase transparency and improve comparability by requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, through improved disclosure requirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update is effective as of the first quarter of 2019; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements.

In May 2014, the accounting standard update related to the recognition of revenue from contracts with customers was issued. This standard update clarifies the principles for recognizing revenue and develops a common revenue standard for generally accepted accounting principles in the United States (U.S. GAAP) and International Financial Reporting Standards. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers requiring that all incremental costs of obtaining and direct costs of fulfilling contracts with customers be deferred and recognized over the expected customer life. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of financial statements through improved disclosure requirements. Upon adoption of this standard update, we expect that the allocation and timing of revenue recognition as well as timing of recognition of certain contract costs will be impacted. In August 2015, an accounting standard update was issued that delayed the effective date of this standard until the first quarter of 2018.

There are two adoption methods available for implementation of the standard update related to the recognition of revenue from contracts with customers. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied only to the most current period presented, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. We are currently evaluating these adoption methods and the impact that this standard update will have on our condensed consolidated financial statements.

We have established a cross-functional coordinated implementation team to implement the standard update related to the recognition of revenue from contracts with customers. We have identified and are in the process of implementing changes to our systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

2. Acquisitions and Divestitures

Wireless

Spectrum License Transactions

During the fourth quarter of 2015, we entered into a license exchange agreement with affiliates of AT&T Inc. (AT&T) to exchange certain Advanced Wireless Services (AWS) and Personal Communication Services (PCS) spectrum licenses. This non-cash exchange was completed in March 2016. As a result, we received $0.4 billion of AWS and PCS spectrum licenses at fair value and recorded a pre-tax gain of $0.1 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016.

8

During the first quarter of 2016, we entered into a license exchange agreement with affiliates of Sprint Corporation, which provides for the exchange of certain AWS and PCS spectrum licenses. This non-cash exchange was completed in September 2016. As a result, we received $0.3 billion of AWS and PCS spectrum licenses at fair value and recorded an immaterial gain in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016.

During the fourth quarter of 2016, we entered into a license exchange agreement with affiliates of AT&T to exchange certain AWS and PCS spectrum licenses. This non-cash exchange is subject to customary closing conditions and is expected to be completed in the first half of 2017. Upon completion of this transaction, we expect to record a gain which will be determined upon the closing of the transaction.

During the three and nine months ended September 30, 2016, we acquired various other wireless licenses for cash consideration that was not significant.

Wireline

Access Line Sale

On February 5, 2015, we entered into a definitive agreement with Frontier Communications Corporation (Frontier) pursuant to which Verizon agreed to sell its local exchange business and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service and long distance voice accounts in these three states for approximately $10.5 billion (approximately $7.3 billion net of income taxes), subject to certain adjustments and including the assumption of $0.6 billion of indebtedness from Verizon by Frontier. The transaction, which includes the acquisition by Frontier of the equity interests of Verizon’s incumbent local exchange carriers (ILECs) in California, Florida and Texas, did not involve any assets or liabilities of Verizon Wireless. The transaction closed on April 1, 2016.

The transaction resulted in Frontier acquiring approximately 3.3 million voice connections, 1.6 million Fios Internet subscribers, 1.2 million Fios video subscribers and the related ILEC businesses from Verizon. For the nine months ended September 30, 2016, these businesses generated revenues of approximately $1.3 billion and operating income of $0.7 billion for Verizon. For the three and nine months ended September 30, 2015, these businesses generated revenues of $1.3 billion and $4.0 billion, respectively, and operating income of $0.7 billion and $2.1 billion, respectively. The operating results of these businesses are excluded from our Wireline segment for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker.

During April 2016, Verizon used the net cash proceeds received of $9.9 billion to reduce its consolidated indebtedness (see Note 4). The assets and liabilities that were sold were included in Verizon’s continuing operations and classified as assets held for sale and liabilities related to assets held for sale on our condensed consolidated balance sheets through the completion of the transaction on April 1, 2016. As a result of the closing of the transaction, we derecognized plant, property, and equipment of $9.0 billion, goodwill of $1.3 billion, $0.7 billion of defined benefit pension and other postretirement benefit plan obligations and $0.6 billion of indebtedness assumed by Frontier.

We recorded a pre-tax gain of approximately $1.0 billion in Selling, general and administrative expense on our condensed consolidated statement of income for nine months ended September 30, 2016. The pre-tax gain included a $0.5 billion pension and postretirement benefit curtailment gain due to the elimination of the accrual of pension and other postretirement benefits for some or all future services of a significant number of employees covered by three of our defined benefit pension plans and one of our other postretirement benefit plans.

XO Holdings

On February 20, 2016, Verizon entered into a purchase agreement to acquire XO Holdings’ wireline business which owns and operates one of the largest fiber-based IP and Ethernet networks outside of Verizon’s footprint for approximately $1.8 billion, subject to adjustment. The transaction is targeted to close by the end of the first quarter of 2017, subject to regulatory approvals. Separately, Verizon entered into an agreement to lease certain wireless spectrum from XO Holdings and has an option, exercisable under certain circumstances, to buy the XO Holdings’ entity that owns its wireless spectrum.

9

Other

Acquisition of AOL Inc.

On May 12, 2015, we entered into an Agreement and Plan of Merger (the Merger Agreement) with AOL Inc. (AOL) pursuant to which we commenced a tender offer to acquire all of the outstanding shares of common stock of AOL at a price of $50.00 per share, net to the seller in cash, without interest and less any applicable withholding taxes.

On June 23, 2015, we completed the tender offer and merger, and AOL became a wholly-owned subsidiary of Verizon. The aggregate cash consideration paid by Verizon at the closing of these transactions was approximately $3.8 billion. Holders of approximately 6.6 million shares exercised appraisal rights under Delaware law. If they had not exercised these rights, Verizon would have paid an additional $330 million for such shares at the closing.

AOL is a leader in the digital content and advertising platform space. Verizon has been investing in emerging technology that taps into the market shift to digital content and advertising. AOL’s business model aligns with this approach, and we believe that its combination of owned and operated content properties plus a digital advertising platform enhances our ability to further develop future revenue streams.

The acquisition of AOL has been accounted for as a business combination. The identification of the assets acquired and liabilities assumed are finalized.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Accounting Standards Codification (ASC) 820, other than long-term debt assumed in the acquisition. The income approach was primarily used to value the intangible assets, consisting primarily of acquired technology and customer relationships. The income approach indicates value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a required rate of return that reflects the relative risk of achieving the cash flow and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

The following table summarizes the consideration to AOL’s shareholders and the identification of the assets acquired, including cash acquired of $0.5 billion, and liabilities assumed as of the close of the acquisition, as well as the fair value at the acquisition date of AOL’s noncontrolling interests:

(dollars in millions)	As of June 23, 2015
Cash payment to AOL’s equity holders	$	3,764
Estimated liabilities to be paid(1)		377
Total consideration	$	4,141
Assets acquired:
Goodwill	$	1,938
Intangible assets subject to amortization		2,504
Other		1,551
Total assets acquired		5,993
Liabilities assumed:
Total liabilities assumed		1,851
Net assets acquired:		4,142
Noncontrolling interest		(1	)
Total consideration	$	4,141

⁽¹⁾  During the nine months ended September 30, 2016, we made cash payments of $179 million in respect of acquisition-date estimated liabilities to be paid. As of September 30, 2016, the remaining balance of estimated liabilities to be paid was $198 million.

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Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired. The goodwill recorded as a result of the AOL transaction represents future economic benefits we expect to achieve as a result of combining the operations of AOL and Verizon as well as assets acquired that could not be individually identified and separately recognized. The goodwill related to this acquisition is included within Corporate and other.

Acquisition of Yahoo! Inc.’s Operating Business

On July 23, 2016, we entered into a stock purchase agreement (the Purchase Agreement) with Yahoo! Inc. (Yahoo). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we will acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments (the Transaction). Prior to the closing of the Transaction, pursuant to a reorganization agreement, Yahoo will transfer all of the assets and liabilities constituting Yahoo’s operating business to the subsidiaries to be acquired in the Transaction. The assets to be acquired will not include Yahoo’s cash, its ownership interests in Alibaba, Yahoo! Japan and certain other investments, certain undeveloped land recently divested by Yahoo or certain non-core intellectual property. We will receive for our benefit and that of our current and certain future affiliates a non-exclusive, worldwide, perpetual, royalty-free license to all of Yahoo’s intellectual property that is not being conveyed with the business.

Yahoo employees who transfer to Verizon will have any unvested Yahoo restricted stock units that they hold converted into cash-settleable Verizon restricted stock units, which will have the same vesting schedule as their Yahoo restricted stock units. The value of those outstanding restricted stock units on the date of signing was approximately $1.1 billion.

The Transaction is subject to customary regulatory approvals and closing conditions, including the approval of Yahoo’s stockholders.

On September 22, 2016, Yahoo announced that it had confirmed that a copy of certain information associated with at least 500 million user accounts was stolen from its network in late 2014. This could result in a material adverse effect under the terms of our agreement. We are continuing to evaluate the impacts of this event on the transaction.

Other

On July 29, 2016, Verizon acquired Telogis, Inc., a global, cloud-based mobile enterprise management software business for $0.9 billion of cash consideration. Upon closing, we recorded $0.6 billion of goodwill that is included within Corporate and other.

On July 30, 2016, we entered into an agreement (the Transaction Agreement) to acquire Fleetmatics Group PLC, a public limited company incorporated in Ireland (Fleetmatics). Fleetmatics is a leading global provider of fleet and mobile workforce management solutions. Under the terms of the Transaction Agreement, we will acquire Fleetmatics pursuant to a scheme of arrangement under the Irish Companies Act 2014 for $60.00 per ordinary share in cash, representing a value of approximately $2.4 billion. The acquisition is subject to customary regulatory approvals and closing conditions, including the approval of Fleetmatics’ shareholders and the sanction of the scheme of arrangement by the Irish High Court. Approval from Fleetmatics’ shareholders has been obtained. We expect this transaction to close in the fourth quarter of 2016.

On September 12, 2016, Verizon announced an agreement to acquire a leading provider of Internet of Things (IoT) solutions for smart communities for cash consideration that is not significant. The transaction was completed in October 2016.

During the nine months ended September 30, 2016, we acquired various other businesses and investments for cash consideration that was not significant.

3. Wireless Licenses, Goodwill and Other Intangible Assets

Wireless Licenses

Changes in the carrying amount of Wireless licenses are as follows:

(dollars in millions)
Balance at January 1, 2016	$	86,575
Acquisitions (Note 2)		26
Capitalized interest on wireless licenses		384
Reclassifications, adjustments and other		422
Balance at September 30, 2016	$	87,407

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Reclassifications, adjustments and other includes the exchanges of wireless licenses in 2016 (see Note 2 for additional details).

At September 30, 2016, approximately $10.4 billion of wireless licenses were under development for commercial service for which we were capitalizing interest costs.

The average remaining renewal period for our wireless licenses portfolio was 5.2 years as of September 30, 2016.

Goodwill

Changes in the carrying amount of Goodwill are as follows:

(dollars in millions)	Wireless		Wireline			Other		Total
Balance at January 1, 2016	$	18,393	$	4,331		$	2,607	$	25,331
Acquisitions (Note 2)		–		–			641		641
Reclassifications, adjustments and other		–		(113	)		111		(2	)
Balance at September 30, 2016	$	18,393	$	4,218		$	3,359	$	25,970

We recognized goodwill of $0.6 billion in Corporate and other as a result of an acquisition in the third quarter of 2016 (see Note 2 for additional details). During the second quarter of 2016, we allocated $0.1 billion of Goodwill on a relative fair value basis from Wireline to Corporate and other as a result of the reclassification of our vehicle original equipment manufacturer (OEM) and Networkfleet businesses (see Note 10 for additional details).

Other Intangible Assets

The following table displays the composition of Other intangible assets, net:

	At September 30, 2016							At December 31, 2015
(dollars in millions)	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer lists (6 to 14 years)	$	3,963	$	(2,355	)	$	1,608	$	4,139	$	(2,365	)	$	1,774
Non-network internal-use software (3 to 8 years)		15,530		(10,593	)		4,937		14,542		(9,620	)		4,922
Other (5 to 25 years)		1,688		(541	)		1,147		1,346		(450	)		896
Total	$	21,181	$	(13,489)		$	7,692	$	20,027	$	(12,435)		$	7,592

The amortization expense for Other intangible assets was as follows:

(dollars in millions)	Three Months Ended September 30,		Nine Months Ended September 30,
2016		$       419		$       1,255
2015		438		1,247

The estimated future amortization expense for Other intangible assets is as follows:

Years	(dollars in millions)
Remainder of 2016		$    416
2017		1,505
2018		1,327
2019		1,121
2020		892

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4. Debt

Changes to debt during the nine months ended September 30, 2016 are as follows:

(dollars in millions)	Debt Maturing within One Year			Long-term Debt			Total
Balance at January 1, 2016	$	6,489		$	103,240		$	109,729
Proceeds from borrowings		–			8,152			8,152
Proceeds from asset-backed borrowings		–			2,594			2,594
Repayments of borrowings and capital leases obligations		(6,110	)		(8,400	)		(14,510	)
Decrease in short-term obligations, excluding current maturities		(120	)		–			(120	)
Reclassifications of long-term debt		3,412			(3,412	)		–
Other		181			565			746
Balance at September 30, 2016	$	3,852		$	102,739		$	106,591

April Tender Offers

On March 4, 2016, we announced the commencement of three concurrent, but separate, tender offers (the April Tender Offers) to purchase for cash (1) any and all of the series of notes listed below in the Group 1 Any and All Offer, (2) any and all of the series of notes listed below in the Group 2 Any and All Offer and (3) up to $5.5 billion aggregate purchase price, excluding accrued and unpaid interest and any fees or commissions, of the series of notes listed below in the Group 3 Offer.

The April Tender Offers for each series of notes were conditioned upon the closing of the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier and the receipt of at least $9.5 billion of the purchase price cash at closing (the Sale Condition). The Sale Condition was satisfied and the April Tender Offers were settled on April 4, 2016, resulting in the notes listed below being repurchased and cancelled for $10.2 billion, inclusive of accrued interest of $0.1 billion.

The table below lists the series of notes included in the Group 1 Any and All Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price (1)		Principal Amount Purchased
Verizon Communications Inc.		2.50	%		2016	$	2,182	$	1,007.60	$	1,272
		2.00	%		2016		1,250		1,007.20		731
		6.35	%		2019		1,750		1,133.32		970
										$	2,973

⁽¹⁾  Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

The table below lists the series of notes included in the Group 2 Any and All Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price (1)		Principal Amount Purchased
Verizon Delaware LLC		8.375	%		2019	$	15	$	1,182.11	$	15
		8.625	%		2031		15		1,365.39		5
Verizon Maryland LLC		8.00	%		2029		50		1,301.32		22
		8.30	%		2031		100		1,347.26		76
		5.125	%		2033		350		1,012.50		171
Verizon New England Inc.		7.875	%		2029		349		1,261.63		176
Verizon New Jersey Inc.		8.00	%		2022		200		1,238.65		54
		7.85	%		2029		149		1,311.32		63
Verizon New York Inc.		6.50	%		2028		100		1,151.71		28
		7.375	%		2032		500		1,201.92		256
Verizon Pennsylvania LLC		6.00	%		2028		125		1,110.47		57
		8.35	%		2030		175		1,324.10		127
		8.75	%		2031		125		1,356.47		72
Verizon Virginia LLC		7.875	%		2022		100		1,227.79		43
		8.375	%		2029		100		1,319.78		81
										$	1,246

⁽¹⁾ Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

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The table below lists the series of notes included in the Group 3 Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price (1)		Principal Amount Purchased
Verizon Communications Inc.		8.95	%		2039	$	353	$	1,506.50	$	63
		7.75	%		2032		251		1,315.19		33
		7.35	%		2039		480		1,293.50		68
		7.75	%		2030		1,206		1,377.92		276
		6.55	%		2043		6,585		1,291.74		2,340
		6.40	%		2033		2,196		1,220.28		466
		6.90	%		2038		477		1,243.29		92
		6.25	%		2037		750		1,167.66		114
		6.40	%		2038		866		1,176.52		116
		5.85	%		2035		1,500		1,144.68		250
		6.00	%		2041		1,000		1,164.56		–
		5.15	%		2023		8,517		1,152.83		–
Alltel Corporation		7.875	%		2032		452		1,322.92		115
		6.80	%		2029		235		1,252.93		47
GTE Corporation		6.94	%		2028		800		1,261.35		237
		8.75	%		2021		300		1,307.34		93
										$	4,310

⁽¹⁾  Per $1,000 principal amount of notes

April Early Debt Redemption

On April 8, 2016, we redeemed in whole the following series of outstanding notes which were called for redemption on April 5, 2016 (collectively, April Early Debt Redemption): $0.9 billion aggregate principal amount of Verizon Communications 2.50% Notes due 2016 at 100.8% of the principal amount of such notes, $0.5 billion aggregate principal amount of Verizon Communications 2.00% Notes due 2016 at 100.8% of the principal amount of such notes, and $0.8 billion aggregate principal amount of Verizon Communications 6.35% Notes due 2019 at 113.5% of the principal amount of such notes. These notes were repurchased and cancelled for $2.3 billion, inclusive of an immaterial amount of accrued interest.

Debt Issuances

During August 2016, we issued $6.2 billion aggregate principal amount of fixed and floating rate notes. The issuance of these Notes resulted in cash proceeds of approximately $6.1 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The issuance consisted of the following series of notes: $0.4 billion aggregate principal amount of Verizon Communications Floating Rate Notes due 2019, $1.0 billion aggregate principal amount of Verizon Communications 1.375% Notes due 2019, $1.0 billion aggregate principal amount of Verizon Communications 1.750% Notes due 2021, $2.3 billion aggregate principal amount of Verizon Communications 2.625% Notes due 2026, and $1.5 billion aggregate principal amount of Verizon Communications 4.125% Notes due 2046. The floating rate notes bear interest at a rate equal to the three-month London

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Interbank Offered Rate (LIBOR) plus 0.370%, which rate will be reset quarterly. The net proceeds were used for general corporate purposes, including to repay at maturity on September 15, 2016, $2.3 billion aggregate principal amount of our floating rate notes, plus accrued interest on the notes.

During September 2016, we issued $2.1 billion aggregate principal amount of 4.20% Notes due 2046. The issuance of these Notes resulted in cash proceeds of approximately $2.0 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The net proceeds were used to redeem in whole $0.9 billion aggregate principal amount of Verizon Communications 4.80% Notes due 2044 at 100% of the principal amount of such notes, plus any accrued and unpaid interest to the date of redemption, for an immaterial loss. Proceeds not used for the redemption of these notes were used for general corporate purposes.

Asset-Backed Debt

As of September 30, 2016, the carrying value of our asset-backed debt was $2.6 billion. Our asset-backed debt includes notes (the Asset-Backed Notes) issued to third-party investors (Investors) and loans (the ABS Financing Facility) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed securitization bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, we transfer device payment plan agreement receivables from Cellco Partnership and certain other affiliates of Verizon (collectively, the Originators) to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt and do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco Partnership and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables 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 on our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions, deposits to the segregated accounts and payments to the Originators in respect of additional transfers of device payment plan agreement receivables are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Repayments of our asset-backed debt and related interest payments made from the segregated accounts are non-cash activities and therefore not reflected within Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included on our condensed consolidated balance sheets.

Asset-Backed Notes

In July 2016, we issued $1.2 billion aggregate principal amount of senior and junior asset-backed notes through an ABS Entity, of which $1.1 billion of notes were sold to Investors. The senior asset-backed notes have an expected weighted average life of about 2.5 years and bear interest at 1.42% per annum. The junior asset-backed notes have an expected weighted average life of about 3.2 years and bear interest at a weighted-average rate of 1.53%. Under the terms of the asset-backed notes, there is a two year revolving period during which we may transfer additional receivables to the ABS Entity.

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ABS Financing Facility

During the third quarter of 2016, we entered into a device payment plan agreement financing facility with a number of financial institutions. Under the terms of the ABS Financing Facility, such counterparties made advances under asset-backed loans backed by device payment plan agreement receivables for proceeds of $1.5 billion, and we have the option of requesting an additional $1.5 billion of committed funding. These loans have an expected weighted average life of about 2.6 years and bear interest at floating rates. There is a two year revolving period, which may be extended, during which we may transfer additional receivables to the ABS Entity. Subject to certain conditions, we may also remove receivables from the ABS Entity. We may prepay the outstanding amounts of the loans without penalty, but in certain cases, with breakage costs. As of September 30, 2016, outstanding borrowings under the ABS Financing Facility were $1.5 billion.

Variable Interest Entities

The ABS Entities meet the definition of a variable interest entity (VIE) for which we have determined that we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included on our condensed consolidated balance sheets were as follows:

(dollars in millions)	September 30, 2016		December 31, 2015
Assets
Account receivable, net	$	1,733	$	–
Prepaid expenses and other		71		–
Other assets		1,296		–
Liabilities
Long-term debt		2,595		–

See Note 5 for more information on device payment plan agreement receivables used to secure asset-backed debt.

Credit Facility

On September 23, 2016, we amended our $8.0 billion credit facility to increase the availability to $9.0 billion and extend the maturity to September 23, 2020. As of September 30, 2016, the unused borrowing capacity under our $9.0 billion credit facility was approximately $8.9 billion.

Additional Financing Activities (Non-Cash Transaction)

During the nine months ended September 30, 2016, we financed, primarily through vendor financing arrangements, the purchase of approximately $0.4 billion of long-lived assets, consisting primarily of network equipment. At September 30, 2016, $1.1 billion relating to vendor financing arrangements, including those entered into in prior years, remained outstanding. These purchases are non-cash financing activities and therefore not reflected within Capital expenditures on our condensed consolidated statements of cash flows.

Early Debt Redemptions

During the second quarter of 2016, we recorded a net pre-tax loss on early debt redemption of $1.8 billion in connection with the April Tender Offers and the April Early Debt Redemption.

We recognize early debt redemption costs in Other income and (expense), net on our condensed consolidated statements of income.

Guarantees

We guarantee the debentures of our operating telephone company subsidiaries. As of September 30, 2016, $1.2 billion aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

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As a result of the closing of the Frontier transaction, as of April 1, 2016, GTE Southwest Inc., Verizon California Inc. and Verizon Florida LLC are no longer wholly-owned subsidiaries of Verizon, and the guarantees of $0.6 billion aggregate principal amount of debentures and first mortgage bonds of those entities have terminated pursuant to their terms.

We also guarantee the debt obligations of GTE Corporation that were issued and outstanding prior to July 1, 2003. As of September 30, 2016, $1.1 billion aggregate principal amount of these obligations were outstanding.

5. Wireless Device Payment Plans

Under the Verizon device payment program, our eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fees as compared to those under our fixed-term service plans, and their device payment plan charge is included on their standard wireless monthly bill.

Wireless Device Payment Plan Agreement Receivables

The following table displays device payment plan agreement receivables, net, that continue to be recognized in our condensed consolidated balance sheets:

(dollars in millions)	At September 30, 2016			At December 31, 2015
Device payment plan agreement receivables, gross	$	7,735		$	3,720
Unamortized imputed interest		(332	)		(142	)
Device payment plan agreement receivables, net of unamortized imputed interest		7,403			3,578
Allowance for credit losses		(601	)		(444	)
Device payment plan agreement receivables, net	$	6,802		$	3,134
Classified on our condensed consolidated balance sheets:
Accounts receivable, net	$	4,000		$	1,979
Other assets		2,802			1,155
Device payment plan agreement receivables, net	$	6,802		$	3,134

Included in our device payment plan agreement receivables, net at September 30, 2016 are net device payment plan agreement receivables of $3.0 billion that have been transferred to ABS Entities and continue to be reported in our condensed consolidated financial statements.

At the time of the sale of a device, we impute risk adjusted interest on the device payment plan agreement receivables. We record the imputed interest as a reduction to the related accounts receivable. Interest income, which is included within Service revenues and other on our condensed consolidated statements of income, is recognized over the financed device payment term.

When originating device payment plan agreements, we use internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program. If a customer is either new to Verizon Wireless or has less than 210 days of customer tenure with Verizon Wireless (a new customer), the credit decision process relies more heavily on external data sources. If the customer has 210 days or more of customer tenure with Verizon Wireless (an existing customer), the credit decision process relies on internal data sources. Verizon Wireless’ experience has been that the payment attributes of longer tenured customers are highly predictive when considering their ability to pay in the future. External data sources include obtaining a credit report from a national consumer credit reporting agency, if available. Verizon Wireless uses its internal data and/or credit data obtained from the credit reporting agencies to create a custom credit risk score. The custom credit risk score is generated automatically (except with respect to a small number of applications where the information needs manual intervention) from the applicant’s credit data using Verizon Wireless’ proprietary custom credit models, which are empirically derived, demonstrably and statistically sound. The credit risk score measures the likelihood that the potential customer will become severely delinquent and be disconnected for non-payment. For a small portion of new customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternate credit data is used for the risk assessment.

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Based on the custom credit risk score, we assign each customer to a credit class, each of which has a specified required down payment percentage and specified credit limits. Device payment plan agreement receivables originated from customers assigned to credit classes requiring no down payment represent the lowest risk. Device payment plan agreement receivables originated from customers assigned to credit classes requiring a down payment represent a higher risk.

Subsequent to origination, Verizon Wireless monitors delinquency and write-off experience as key credit quality indicators for its portfolio of device payment plan agreements and fixed-term service plans. The extent of our collection efforts with respect to a particular customer are based on the results of proprietary custom empirically derived internal behavioral scoring models which analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These customer scoring models assess a number of variables, including origination characteristics, customer account history and payment patterns. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. We continuously monitor collection performance results and the credit quality of our device payment plan agreement receivables based on a variety of metrics, including aging. Verizon Wireless considers an account to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date.

The balance and aging of the device payment plan agreement receivables on a gross basis was as follows:

(dollars in millions)	At September 30, 2016		At December 31, 2015
Unbilled	$	7,261	$	3,420
Billed:
Current		375		227
Past due		99		73
Device payment plan agreement receivables, gross	$	7,735	$	3,720

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:

(dollars in millions)
Balance at January 1, 2016	$	444
Bad debt expense		437
Write-offs		(347	)
Allowance related to receivables sold		59
Other		8
Balance at September 30, 2016	$	601

Customers that entered into device payment plan agreements prior to May 31, 2015 have the right to upgrade their device, subject to certain conditions, including making a stated portion of the required device payment plan agreement payments and trading in their device in good working order. Generally, customers entering into device payment plan agreements on or after June 1, 2015 are required to repay all amounts due under their device payment plan agreements before being eligible to upgrade their device. However, on select devices, certain marketing promotions have been revocably offered to customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device or for a device that is subject to an upgrade promotion, we may record a guarantee liability in accordance with our accounting policy. The gross guarantee liability related to the upgrade program, which was $0.1 billion at September 30, 2016 and approximately $0.2 billion at December 31, 2015, is included in Other current liabilities on our condensed consolidated balance sheets.

Sales of Wireless Device Payment Plan Agreement Receivables

During 2015 and 2016, we established programs pursuant to a Receivables Purchase Agreement, or RPA, to sell from time to time, on an uncommitted basis, eligible device payment plan agreement receivables to a group of primarily relationship banks (Purchasers) on both a revolving (Revolving Program) and non-revolving (Non-Revolving Program) basis. The receivables sold under the RPA are no longer considered assets of Verizon. The outstanding portfolio of device payment plan agreement receivables derecognized from our condensed consolidated balance sheet, but which we continue to service, was $6.4 billion at September 30, 2016. As of September 30, 2016, the total portfolio of device payment plan agreement receivables, including derecognized device payment plan agreement receivables, that we are servicing was $14.1 billion.

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Under the Non-Revolving Program, we transfer the eligible receivables to wholly-owned subsidiaries that are bankruptcy remote special purpose entities (Sellers). The Sellers then sell the receivables to the Purchasers for upfront cash proceeds and additional consideration upon settlement of the receivables (the deferred purchase price). Under the Revolving Program, we sell eligible device payment plan agreement receivables on a revolving basis, subject to a maximum funding limit, to the Purchasers. Sales of eligible receivables by the Sellers, once initiated, generally occur and are settled on a monthly basis. Customer payments made towards receivables sold under the Revolving Program will be available to purchase additional eligible device payment plan agreement receivables originated during the revolving period. We elected to end the revolving period in July 2016.

We continue to bill and collect on the receivables in exchange for a monthly servicing fee, which is not material. Eligible receivables under the RPA excluded device payment plan agreements where a new customer was required to provide a down payment. The sales of receivables under the RPA did not have a material impact on our condensed consolidated statements of income. The cash proceeds received from the Purchasers are recorded within Cash flows provided by operating activities on our condensed consolidated statements of cash flows.

There were no sales of device payment plan agreement receivables during the three months ended September 30, 2016. During the nine months ended September 30, 2016, we sold $3.3 billion of receivables, net of allowances and imputed interest. We received cash proceeds from new transfers of $2.0 billion and cash proceeds from reinvested collections of $0.9 billion, and recorded a deferred purchase price of $0.4 billion.

During the three and nine months ended September 30, 2015, we sold $2.4 billion and $6.1 billion, respectively, of receivables, net of allowances and imputed interest, and received cash proceeds from new transfers of $2.0 billion and $4.5 billion, respectively. Additionally, during the three and nine months ended September 30, 2015, we recorded a deferred purchase price of $0.4 billion and $1.7 billion, respectively.

Deferred Purchase Price

Under the RPA, the deferred purchase price was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device trade-in considers prices expected to be offered to us by independent third parties. This estimate contemplates changes in value after the launch of a device. The fair value measurements are considered to be Level 3 measurements within the fair value hierarchy. The collection of the deferred purchase price is contingent on collections from customers. To date, we have collected $0.5 billion which was returned as deferred purchase price and recorded within Cash flows provided by operating activities on our condensed consolidated statements of cash flows. At September 30, 2016, our deferred purchase price receivable, which is held by the Sellers, was comprised of $1.2 billion included within Prepaid expenses and other and $1.0 billion included within Other assets in our condensed consolidated balance sheets. At December 31, 2015, our deferred purchase price receivable was $2.2 billion, which was included within Other assets in our condensed consolidated balance sheets.

Variable Interest Entities

Under the RPA, the Sellers’ sole business consists of the acquisition of the receivables from Cellco Partnership and certain other affiliates of Verizon and the resale of the receivables to the Purchasers. The assets of the Sellers are not available to be used to satisfy obligations of any Verizon entities other than the Sellers. We determined that the Sellers are VIEs as they lack sufficient equity to finance their activities. Given that we have the power to direct the activities of the Sellers that most significantly impact the Sellers’ economic performance, we are deemed to be the primary beneficiary of the Sellers. As a result, we consolidate the assets and liabilities of the Sellers into our condensed consolidated financial statements.

Continuing Involvement

Verizon has continuing involvement with the sold receivables as it services the receivables. We continue to service the customer and their related receivables on behalf of the Purchasers, including facilitating customer payment collection, in exchange for a monthly servicing fee. While servicing the receivables, the same policies and procedures are applied to the sold receivables that apply to owned receivables, and we continue to maintain normal relationships with our customers. The credit quality of the customers we continue to service is consistent throughout the periods presented. To date, we have collected and remitted approximately $5.7 billion, net of fees. To date, cash proceeds received, net of remittances, were $4.4 billion. During the nine months ended September 30, 2016, credit losses on receivables sold were $0.1 billion.

In addition, we have continuing involvement related to the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the agreements. The Company’s maximum exposure to loss related to the involvement with the Sellers is limited to the amount of the deferred purchase price, which was $2.2 billion as of September 30, 2016. The maximum exposure to loss represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby the Company would not receive the portion of the proceeds withheld by the Purchasers. As we believe the probability of these circumstances occurring is remote, the maximum exposure to loss is not an indication of the Company’s expected loss.

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6. Fair Value Measurements

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2016:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Other assets:
Equity securities	$	126	$	–	$	–	$	126
Fixed income securities		15		605		–		620
Interest rate swaps		–		420		–		420
Net investment hedge		–		6		–		6
Interest rate cap		–		3		–		3
Total	$	141	$	1,034	$	–	$	1,175
Liabilities:
Other liabilities:
Interest rate swaps	$	–	$	2	$	–	$	2
Net investment hedge		–		1		–		1
Cross currency swaps		–		1,536		–		1,536
Total	$	–	$	1,539	$	–	$	1,539

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2015:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Short-term investments:
Equity securities	$	265	$	–	$	–	$	265
Fixed income securities		–		85		–		85
Other current assets:
Fixed income securities		250		–		–		250
Other assets:
Fixed income securities		–		928		–		928
Interest rate swaps		–		128		–		128
Net investment hedges		–		13		–		13
Cross currency swaps		–		1		–		1
Total	$	515	$	1,155	$	–	$	1,670
Liabilities:
Other liabilities:
Interest rate swaps	$	–	$	19	$	–	$	19
Cross currency swaps		–		1,638		–		1,638
Forward interest rate swaps		–		24		–		24
Total	$	–	$	1,681	$	–	$	1,681

⁽¹⁾  quoted prices in active markets for identical assets or liabilities

⁽²⁾  observable inputs other than quoted prices in active markets for identical assets and liabilities

⁽³⁾  no observable pricing inputs in the market

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Equity securities consist of investments in common stock of domestic and international corporations measured using quoted prices in active markets.

Fixed income securities consist primarily of investments in municipal bonds as well as U.S. Treasury securities. We use quoted prices in active markets for our U.S. Treasury securities, therefore these securities are classified as Level 1. For all other fixed income securities that do not have quoted prices in active markets, we use alternative matrix pricing resulting in these debt securities being classified as Level 2.

Derivative contracts are valued using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are classified within Level 2. We use mid-market pricing for fair value measurements of our derivative instruments. Our derivative instruments are recorded on a gross basis.

We recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the fair value hierarchy during the nine months ended September 30, 2016.

Fair Value of Short-term and Long-term Debt

The fair value of our debt is determined using various methods, including quoted prices for identical terms and maturities, which is a Level 1 measurement, as well as quoted prices for similar terms and maturities in inactive markets and future cash flows discounted at current rates, which are Level 2 measurements. The fair value of our short-term and long-term debt, excluding capital leases, was as follows:

	At September 30, 2016				At December 31, 2015
(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Short- and long-term debt, excluding capital leases	$	105,628	$	122,520	$	108,772	$	118,216

Derivative Instruments

We enter into derivative transactions to manage our exposure to fluctuations in foreign currency exchange rates, interest rates, and equity and commodity prices. We employ risk management strategies, which may include the use of a variety of derivatives including cross currency swaps, foreign currency and prepaid forwards and collars, interest rate swap agreements, commodity swap and forward agreements, interest rate locks and interest rate caps. We do not hold derivatives for trading purposes. We posted collateral of approximately $0.2 billion and $0.1 billion related to derivative contracts under collateral exchange arrangements at September 30, 2016 and December 31, 2015, respectively, which was recorded as Prepaid expenses and other on our condensed consolidated balance sheets. During 2015, we paid an immaterial amount of cash to enter into amendments to certain collateral exchange arrangements. These amendments suspend cash collateral posting for a specified period of time by both counterparties.

We measure all derivatives at fair value and recognize them as either assets or liabilities on our condensed consolidated balance sheets. Changes in the fair values of derivative instruments not qualifying as hedges or any ineffective portion of hedges are recognized in earnings in the current period. Changes in the fair values of derivative instruments used effectively as fair value hedges are recognized in earnings, along with changes in the fair value of the hedged item. Changes in the fair value of the effective portions of cash flow hedges are reported in Other comprehensive income (loss) and recognized in earnings when the hedged item is recognized in earnings. Changes in the fair value of the effective portion of net investment hedges of certain of our foreign operations are reported in Other comprehensive income (loss) as part of the cumulative translation adjustment and partially offset the impact of foreign currency changes on the value of our net investment.

Interest Rate Swaps

We enter into domestic interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates based on LIBOR, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against changes in the fair value of our debt portfolio. During the third quarter of 2016, we entered into interest rate swaps with a total notional value of $1.1 billion. During the third quarter of 2016, we settled $0.9 billion notional amount of interest rate swaps. The ineffective portion of these interest rate swaps was not material for the three and nine months ended September 30, 2016 and 2015, respectively.

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Forward Interest Rate Swaps

In order to manage our exposure to future interest rate changes, we have entered into forward interest rate swaps. We designated these contracts as cash flow hedges. During the first quarter of 2016, we entered into forward interest rate swaps with a total notional value of $1.3 billion. During the third quarter of 2016, we settled $2.0 billion notional amount of these forward interest rate swaps. During the three and nine months ended September 30, 2016, pre-tax losses of an immaterial amount and $0.2 billion, respectively, were recognized in Other comprehensive income (loss). During the three and nine months ended September 30, 2015, pre-tax gains of $0.2 billion, respectively, were recognized in Other comprehensive income (loss).

Cross Currency Swaps

We enter into cross currency swaps to exchange British Pound Sterling and Euro-denominated debt into U.S. dollars and to fix our future interest and principal payments in U.S. dollars, as well as to mitigate the effect of foreign currency transaction gains or losses. These swaps are designated as cash flow hedges. During the second quarter of 2016, we settled $0.1 billion of these cross currency swaps upon redemption of the related debt. A portion of the gains and losses recognized in Other comprehensive income (loss) was reclassified to Other income and (expense), net to offset the related pre-tax foreign currency transaction gain or loss on the underlying debt obligations. During the three and nine months ended September 30, 2016, pre-tax gains of $0.3 billion and $0.1 billion, respectively, were recognized in Other comprehensive income (loss). During the three and nine months ended September 30, 2015, pre-tax losses of $0.2 billion and $0.9 billion, respectively, were recognized in Other comprehensive income (loss).

Net Investment Hedges

We enter into foreign currency forward contracts that are designated as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates.

Interest Rate Caps

We enter into interest rate caps to mitigate our interest exposure on our ABS Financing Facility against changes in interest rates. We have not applied hedge accounting to these interest rate caps. During the third quarter of 2016, we entered into interest rate caps with a notional value of $1.5 billion.

The following table sets forth the notional amounts of our outstanding derivative instruments:

	At September 30, 2016		At December 31, 2015
(dollars in millions)	Notional Amount		Notional Amount
Interest rate swaps	$	7,850	$	7,620
Forward interest rate swaps		–		750
Cross currency swaps		9,606		9,675
Net investment hedge		864		864
Interest rate caps		1,540		–

7. Stock-Based Compensation

Verizon Communications Long-Term Incentive Plan

The Verizon Communications Inc. Long-Term Incentive Plan (the Plan) permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other awards. The maximum number of shares available for awards from the Plan is 119.6 million shares.

Restricted Stock Units

The Plan provides for grants of Restricted Stock Units (RSUs) that generally vest at the end of the third year after the grant. The RSUs are classified as equity awards because the RSUs will be paid in Verizon common stock upon vesting. The RSU equity awards are measured using the grant date fair value of Verizon common stock and are not remeasured at the end of each reporting period. Dividend equivalent units are also paid to participants at the time the RSU award is paid, and in the same proportion as the RSU award.

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Performance Stock Units

The Plan also provides for grants of Performance Stock Units (PSUs) that generally vest at the end of the third year after the grant. As defined by the Plan, the Human Resources Committee of the Board of Directors determines the number of PSUs a participant earns based on the extent to which the corresponding performance goals have been achieved over the three-year performance cycle. The PSUs are classified as liability awards because the PSU awards are paid in cash upon vesting. The PSU award liability is measured at its fair value at the end of each reporting period and, therefore, will fluctuate based on the price of Verizon common stock as well as performance relative to the targets. Dividend equivalent units are also paid to participants at the time that the PSU award is determined and paid, and in the same proportion as the PSU award. The granted and cancelled activity for the PSU award includes adjustments for the performance goals achieved.

The following table summarizes the Restricted Stock Unit and Performance Stock Unit activity:

(shares in thousands)	Restricted Stock Units			Performance Stock Units
Outstanding, January 1, 2016		13,903			17,203
Granted		4,044			6,124
Payments		(4,736	)		(4,702	)
Cancelled/Forfeited		(94	)		(131	)
Adjustments		–			170
Outstanding, September 30, 2016		13,117			18,664

As of September 30, 2016, unrecognized compensation expense related to the unvested portion of Verizon’s RSUs and PSUs was approximately $0.4 billion and is expected to be recognized over approximately two years.

The RSUs granted in 2016 have a weighted-average grant date fair value of $51.90 per unit.

8. Employee Benefits

We maintain non-contributory defined benefit pension plans for many of our employees. In addition, we maintain postretirement health care and life insurance plans for certain retirees and their dependents, which are both contributory and non-contributory, and include a limit on our share of the cost for certain recent and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include pension and benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. These estimates are updated in the fourth quarter or upon a remeasurement event to reflect actual return on plan assets and updated actuarial assumptions. The adjustment will be recognized in our consolidated statement of income during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses.

Net Periodic Cost

The following table summarizes the benefit (income) cost related to our pension and postretirement health care and life insurance plans:

(dollars in millions)	Pension						Health Care and Life
Three Months Ended September 30,	2016			2015			2016			2015
Service cost	$	82		$	93		$	40		$	81
Amortization of prior service cost (credit)		10			(1	)		(235	)		(72	)
Expected return on plan assets		(257	)		(317	)		(13	)		(25	)
Interest cost		162			242			162			280
Remeasurement loss, net		555			342			–			–
Net periodic benefit (income) cost	$	552		$	359		$	(46	)	$	264
Termination benefits		4			–			–			–
Total	$	556		$	359		$	(46	)	$	264

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(dollars in millions)	Pension						Health Care and Life
Nine Months Ended September 30,	2016			2015			2016			2015
Service cost	$	238		$	280		$	153		$	243
Amortization of prior service cost (credit)		12			(3	)		(421	)		(215	)
Expected return on plan assets		(785	)		(952	)		(41	)		(76	)
Interest cost		518			727			583			838
Remeasurement loss, net		1,977			342			2,293			–
Net periodic benefit (income) cost	$	1,960		$	394		$	2,567		$	790
Termination benefits		4			–			–			–
Total	$	1,964		$	394		$	2,567		$	790

Changes in Accounting for Benefit Plans

Effective January 1, 2016, we changed the method we use to estimate the interest component of net periodic benefit cost for pension and other postretirement benefits. Historically, we estimated the interest cost component utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. We have elected to utilize a full yield curve approach in the estimation of interest cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. We have made this change to provide a more precise measurement of interest cost by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. We have accounted for this change as a change in accounting estimate and accordingly will account for it prospectively.

For the three and nine months ended September 30, 2016, the impact of this change was a reduction of the interest cost component of net periodic benefit cost and an increase to operating income of approximately $0.1 billion and $0.3 billion, respectively. The use of the full yield curve approach does not impact how we measure our total benefit obligations at December 31 or our annual net periodic benefit cost as any change in the interest cost component is completely offset by the actuarial gain or loss measured at year end which is immediately recognized in our consolidated statements of income. Accordingly, this change in estimate will not impact our income from continuing operations, net income or earnings per share as measured on an annual basis.

2016 Collective Bargaining Negotiations

In the collective bargaining agreements ratified in June 2016, Verizon’s annual postretirement benefit obligation for retiree healthcare remains capped at the levels established by the previous contracts ratified in 2012. Effective January 2016, prior to reaching these new collective bargaining agreements, certain retirees began to pay for the costs of retiree healthcare in accordance with the provisions relating to caps in the previous contracts. In reaching new collective bargaining agreements in 2016, there is a mutual understanding that the substantive postretirement benefit plans provide that Verizon’s annual postretirement benefit obligation for retiree healthcare is capped and, accordingly, we began accounting for the contractual healthcare caps in June 2016. We also adopted changes to our defined benefit pension plans and other postretirement benefit plans to reflect the agreed upon terms and conditions of the collective bargaining agreements. The impact is a reduction in our postretirement benefit plan obligations of approximately $5.1 billion and an increase in our defined benefit pension plan obligations of approximately $0.4 billion, which have been recorded as a net increase to Accumulated other comprehensive income of $2.9 billion (net of taxes of $1.8 billion) during the nine months ended September 30, 2016. The amount recorded in Accumulated other comprehensive income will be reclassified to net periodic benefit cost on a straight-line basis over the average remaining service period of the respective plans’ participants which, on a weighted-average basis, is 12.2 years for defined benefit pension plans and 7.8 years for other postretirement benefit plans. The above noted reclassification will result in a decrease to net periodic benefit cost and an increase to pre-tax income of approximately $0.4 billion for the seven months ended December 31, 2016, of which $0.2 billion has been reclassified to net periodic cost during the three and nine months ended September 30, 2016.

Severance, Pension and Benefit Charges (Credits)

During the nine months ended September 30, 2016, we recorded a net pre-tax curtailment gain of $0.5 billion due to the elimination of the accrual of benefits for some or all future services of a significant number of employees covered by three of our defined benefit pension plans and one of our other postretirement benefit plans (see Note 2 for additional details).

During the three months ended September 30, 2016, we recorded net pre-tax severance, pension and benefit charges of approximately $0.8 billion primarily for our pension plans in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges of $0.6 billion primarily related to settlements

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for employees who received lump-sum distributions in five of our defined benefit pension plans. The charges were primarily driven by a decrease in our discount rate assumption of $0.8 billion used to determine the current year liabilities of our pension plans, partially offset by the difference between our expected return on assets of 7.0% and our annualized actual return on assets of 11.0% at August 31, 2016 ($0.2 billion). Our weighted average discount rate assumption was 3.61% at August 31, 2016. As part of this charge, we recorded severance costs of $0.2 billion under our existing separation plans.

During the three months ended June 30, 2016, we recorded net pre-tax pension and benefit remeasurement charges of approximately $3.6 billion in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. These charges were comprised of a net pre-tax pension and benefit remeasurement charge of $0.8 billion measured as of April 1, 2016 related to curtailments in three of our defined benefit pension plans and one of our other postretirement benefit plans, a net pre-tax pension and benefit remeasurement charge of $2.7 billion measured as of May 31, 2016 in two defined benefit pension plans and three other postretirement benefit plans as a result of our accounting for the contractual healthcare caps and bargained for changes, and a net pre-tax pension and benefit remeasurement charge of $0.1 billion measured as of May 31, 2016 related to settlements for employees who received lump-sum distributions in three of Verizon’s defined benefit pension plans. The pension and benefit remeasurement charges were primarily driven by a decrease in our discount rate assumption used to determine the current year liabilities of our pension and other postretirement benefit plans ($2.7 billion) and updated healthcare cost trend rate assumptions ($0.9 billion). Our weighted-average discount rate assumption decreased from 4.60% at December 31, 2015 to 3.99% at May 31, 2016.

During the three months ended March 31, 2016, we also recorded a net pre-tax pension and benefit remeasurement charge of $0.2 billion related to settlements for employees who received lump-sum distributions in one of Verizon’s defined benefit pension plans.

During the three and nine months ended September 30, 2015, we recorded net pre-tax pension remeasurement charges of approximately $0.3 billion, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges relate to settlements for employees who received lump-sum distributions in four of Verizon’s seven defined benefit pension plans. The pension remeasurement charges from the impacted plans were primarily driven by a $0.7 billion loss resulting from the difference between our expected return on assets assumption of 7.25% at December 31, 2014 and our annualized actual return on assets of 1.96% at September 30, 2015, as well as other losses of $0.1 billion. These losses were partially offset by a gain of $0.5 billion resulting from an increase in our discount rate assumption used to determine the current year liabilities of our pension plans. Our weighted-average discount rate assumption increased from 4.2% at December 31, 2014 to 4.5% at September 30, 2015.

Severance Payments

During the three and nine months ended September 30, 2016, we paid severance benefits of $0.1 billion and $0.4 billion, respectively. At September 30, 2016, we had a remaining severance liability of $0.6 billion, a portion of which includes future contractual payments to employees separated as of September 30, 2016.

Employer Contributions

During the three and nine months ended September 30, 2016, we contributed $0.2 billion and $0.9 billion, respectively, to our other postretirement benefit plans. During the three and nine months ended September 30, 2016, we contributed $0.5 billion and $0.8 billion, respectively, to our qualified pension plans, which included $0.2 billion of discretionary contributions. The contributions to our nonqualified pension plans were $0.1 billion during the three and nine months ended September 30, 2016. There have been no material changes with respect to the qualified and nonqualified pension contributions in 2016 as previously disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2015 included in our Current Report on Form 8-K dated July 29, 2016.

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9. Equity and Accumulated Other Comprehensive Income

Equity

Changes in the components of Total equity were as follows:

(dollars in millions)	Attributable to Verizon			Noncontrolling Interests			Total Equity
Balance at January 1, 2016	$	16,428		$	1,414		$	17,842
Net income		8,632			376			9,008
Other comprehensive income		2,208			–			2,208
Comprehensive income		10,840			376			11,216
Contributed capital		(17	)		–			(17	)
Dividends declared		(6,960	)		–			(6,960	)
Common stock in treasury		152			–			152
Distributions and other		17			(267	)		(250	)
Balance at September 30, 2016	$	20,460		$	1,523		$	21,983

Common Stock

Verizon did not repurchase any shares of Verizon common stock through its previously authorized share buyback program during the nine months ended September 30, 2016. At September 30, 2016, the maximum number of shares that could be purchased by or on behalf of Verizon under our share buyback program was 97.2 million.

Common stock has been used from time to time to satisfy some of the funding requirements of employee and shareowner plans, including 3.5 million common shares issued from Treasury stock during the nine months ended September 30, 2016.

Accumulated Other Comprehensive Income

The changes in the balances of Accumulated other comprehensive income by component are as follows:

(dollars in millions)	Foreign currency translation adjustments			Unrealized loss on cash flow hedges			Unrealized loss on marketable securities			Defined benefit pension and postretirement plans			Total
Balance at January 1, 2016	$	(554	)	$	(278	)	$	101		$	1,281		$	550
Other comprehensive income (loss)		(23	)		(91	)		8			2,902			2,796
Amounts reclassified to net income		–			33			(43	)		(578	)		(588	)
Net other comprehensive income (loss)		(23	)		(58	)		(35	)		2,324			2,208
Balance at September 30, 2016	$	(577	)	$	(336	)	$	66		$	3,605		$	2,758

The amounts presented above in net other comprehensive income (loss) are net of taxes which are not significant except as noted below. For the nine months ended September 30, 2016, the amounts reclassified to net income related to defined benefit pension and postretirement plans in the table above are included in Cost of services and Selling, general and administrative expense on our condensed consolidated statements of income. For the nine months ended September 30, 2016, the amounts reclassified to net income related to unrealized loss on marketable securities in the table above are included in Other income and (expense), net on our condensed consolidated statements of income. For the nine months ended September 30, 2016, the amounts reclassified to net income related to unrealized loss on cash flow hedges in the table above are included in Other income and (expense), net and Interest expense on our condensed consolidated statements of income.

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Defined Benefit Pension and Postretirement Plans

The change in defined benefit and postretirement plans for the nine months ended September 30, 2016 of $4.7 billion ($2.9 billion net of taxes) was due to the change in prior service credit as a result of our accounting for contractual healthcare caps and bargained for changes (see Note 8 for additional detail).

Reclassification adjustments on defined benefit pension and postretirement plans for the nine months ended September 30, 2016 include the reclassification to Selling, general and administrative expense of a pre-tax pension and postretirement benefit curtailment gain of $0.5 billion ($0.3 billion net of taxes) due to the transfer of employees to Frontier, which caused the elimination of a significant amount of future service in three of our defined benefit pension plans and one of our other postretirement benefit plans requiring us to recognize a portion of the prior service credits (see Note 2 for additional detail).

10. Segment Information

Reportable Segments

We have two reportable segments, Wireless and Wireline, which we operate and manage as strategic business units and organize by products and services. We measure and evaluate our reportable segments based on segment operating income, consistent with the chief operating decision maker’s assessment of segment performance.

Corporate and other includes the operations of AOL and related businesses, unallocated corporate expenses, the results of other insignificant businesses, such as our vehicle OEM and Networkfleet businesses and investments in unconsolidated businesses accounted for on an equity method basis, pension and other employee benefit related costs and lease financing. Corporate and other also includes the historical results of divested operations and other adjustments and gains and losses that are not allocated in assessing segment performance due to their non-operational nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses that are not individually significant are included in all segment results as these items are included in the chief operating decision maker’s assessment of segment performance.

The reconciliation of segment operating revenues and expenses to consolidated operating revenues and expenses below also includes those items of a non-operational nature. We exclude from segment results the effects of certain items that management does not consider in assessing segment performance, primarily because of their non-operational nature.

On April 1, 2016, we completed the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier (see Note 2). Accordingly, the corresponding Wireline results for these operations have been reclassified to Corporate and other for all comparative periods presented consistent with the information regularly reviewed by our chief operating decision maker.

In addition, Corporate and other includes the results of our vehicle OEM and Networkfleet businesses for all periods presented, which were reclassified from our Wireline segment effective April 1, 2016. The impact of this reclassification was not material to our condensed consolidated financial statements or our segment results of operations.

We have adjusted prior period consolidated and segment information, where applicable, to conform to current period presentation.

Our reportable segments and their principal activities consist of the following:

Segment	Description
Wireless	Wireless’ communications products and services include wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the United States.
Wireline	Wireline’s voice, data and video communications products and enhanced services include broadband video and data, corporate networking solutions, data center and cloud services, security and managed network services and local and long distance voice services. We provide these products and services to consumers in the United States, as well as to carriers, businesses and government customers both in the United States and around the world.

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The following table provides operating financial information for our two reportable segments:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	2016		2015			2016			2015
External Operating Revenues
Wireless
Service revenue	$	16,647	$	17,580		$	50,108		$	53,146
Equipment		4,124		4,292			11,782			11,526
Other		1,249		1,108			3,661			3,196
Total Wireless		22,020		22,980			65,551			67,868
Wireline
Consumer retail		3,174		3,168			9,519			9,470
Small business		411		434			1,241			1,320
Mass Markets		3,585		3,602			10,760			10,790
Global Enterprise		2,886		2,987			8,748			9,040
Global Wholesale		1,009		1,046			3,071			3,209
Other		78		87			248			256
Total Wireline		7,558		7,722			22,827			23,295
Total reportable segments	$	29,578	$	30,702		$	88,378		$	91,163
Intersegment Revenues
Wireless	$	81	$	25		$	258		$	78
Wireline		229		245			706			735
Total reportable segments	$	310	$	270		$	964		$	813
Total Operating Revenues
Wireless	$	22,101	$	23,005		$	65,809		$	67,946
Wireline		7,787		7,967			23,533			24,030
Total reportable segments	$	29,888	$	30,972		$	89,342		$	91,976
Operating Income (Loss)
Wireless	$	7,647	$	7,668		$	23,544		$	23,174
Wireline		156		(109	)		(374	)		(528	)
Total reportable segments	$	7,803	$	7,559		$	23,170		$	22,646

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(dollars in millions)	At September 30, 2016			At December 31, 2015
Assets
Wireless	$	204,409		$	185,405
Wireline		63,586			78,305
Total reportable segments		267,995			263,710
Corporate and other		208,837			205,476
Eliminations		(237,334	)		(225,011	)
Total consolidated – reported	$	239,498		$	244,175

A reconciliation of the reportable segment operating revenues to consolidated operating revenues is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Total reportable segment operating revenues	$	29,888		$	30,972		$	89,342		$	91,976
Corporate and other		1,403			1,170			4,078			2,259
Eliminations		(354	)		(291	)		(1,060	)		(845	)
Impact of divested operations		–			1,307			1,280			3,976
Total consolidated operating revenues	$	30,937		$	33,158		$	93,640		$	97,366

Fios revenues are included within our Wireline segment and amounted to approximately $2.8 billion and $8.3 billion, respectively, for the three and nine months ended September 30, 2016. Fios revenues amounted to approximately $2.7 billion and $8.0 billion, respectively, for the three and nine months ended September 30, 2015.

A reconciliation of the total of the reportable segments’ operating income to consolidated income before provision for income taxes is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Total reportable segment operating income	$	7,803		$	7,559		$	23,170		$	22,646
Corporate and other		(466	)		(399	)		(1,432	)		(1,097	)
Severance, pension and benefit charges (Note 8)		(797	)		(342	)		(4,512	)		(342	)
Gain on access line sale (Note 2)		–			–			1,007			–
Gain on spectrum license transaction (Note 2)		–			–			142			–
Impact of divested operations		–			717			661			2,109
Total consolidated operating income		6,540			7,535			19,036			23,316
Equity in losses of unconsolidated businesses		(23	)		(18	)		(63	)		(70	)
Other income and (expense), net		97			51			(1,697	)		158
Interest expense		(1,038	)		(1,202	)		(3,239	)		(3,742	)
Income Before Provision For Income Taxes	$	5,576		$	6,366		$	14,037		$	19,662

No single customer accounted for more than 10% of our total operating revenues during the three and nine months ended September 30, 2016 and 2015.

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11. Commitments and Contingencies

In the ordinary course of business, Verizon is involved in various commercial litigation and regulatory proceedings at the state and federal level. Where it is determined, in consultation with counsel based on litigation and settlement risks, that a loss is probable and estimable in a given matter, the Company establishes an accrual. In none of the currently pending matters is the amount of accrual material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. We continuously monitor these proceedings as they develop and adjust any accrual or disclosure as needed. We do not expect that the ultimate resolution of any pending regulatory or legal matter in future periods, including the Hicksville matter described below, will have a material effect on our financial condition, but it could have a material effect on our results of operations for a given reporting period.

Reserves have been established to cover environmental matters relating to discontinued businesses and past telecommunications activities. These reserves include funds to address contamination at the site of a former Sylvania facility in Hicksville, NY, which had processed nuclear fuel rods in the 1950s and 1960s. In September 2005, the Army Corps of Engineers (ACE) accepted the site into its Formerly Utilized Sites Remedial Action Program. As a result, the ACE has taken primary responsibility for addressing the contamination at the site. An adjustment to the reserves may be made after a cost allocation is conducted with respect to the past and future expenses of all of the parties. Adjustments to the environmental reserve may also be made based upon the actual conditions found at other sites requiring remediation.

Verizon is currently involved in approximately 40 federal district court actions alleging that Verizon is infringing various patents. Most of these cases are brought by non-practicing entities and effectively seek only monetary damages; a small number are brought by companies that have sold products and seek injunctive relief as well. These cases have progressed to various stages and a small number may go to trial in the coming 12 months if they are not otherwise resolved.

In connection with the execution of agreements for the sales of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as indemnity from certain financial losses. From time to time, counterparties may make claims under these provisions, and Verizon will seek to defend against those claims and resolve them in the ordinary course of business.

Subsequent to the sale of Verizon Information Services Canada in 2004, we continue to provide a guarantee to publish directories, which was issued when the directory business was purchased in 2001 and had a 30-year term (before extensions). The preexisting guarantee continues, without modification, despite the subsequent sale of Verizon Information Services Canada and the spin-off of our domestic print and Internet yellow pages directories business. The possible financial impact of the guarantee, which is not expected to be adverse, cannot be reasonably estimated as a variety of the potential outcomes available under the guarantee result in costs and revenues or benefits that may offset each other. We do not believe performance under the guarantee is likely.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Verizon Communications Inc. (Verizon or the Company) is a holding company that, acting through its subsidiaries, is one of the world’s leading providers of communications, information and entertainment products and services to consumers, businesses and governmental agencies. With a presence around the world, we offer voice, data and video services and solutions on our wireless and wireline networks that are designed to meet customers’ demand for mobility, reliable network connectivity, security and control. We have two reportable segments, Wireless and Wireline. Our wireless business, operating as Verizon Wireless, provides voice and data services and equipment sales across the United States (U.S.) using one of the most extensive and reliable wireless networks. Our wireline business provides consumer, business and government customers with communications products and enhanced services, including broadband data and video, corporate networking solutions, data center and cloud services, security and managed network services and local and long distance voice services, and also owns and operates one of the most expansive end-to-end global Internet Protocol (IP) networks. We have a highly skilled, diverse and dedicated workforce of approximately 162,000 employees as of September 30, 2016.

To compete effectively in today’s dynamic marketplace, we are focused on transforming around the capabilities of our high-performing networks with a goal of future growth based on delivering what customers want and need in the new digital world. Our three tier strategy is to lead at the network connectivity level in the markets we serve, develop new business models through global platforms in video and Internet of Things (IoT) and create certain opportunities in applications and content for incremental monetization. Our strategy requires significant capital investments primarily to acquire wireless spectrum, put the spectrum into service, provide additional capacity for growth in our networks, invest in the fiber optic network that supports our businesses, maintain our networks and develop and maintain significant advanced information technology systems and data system capabilities. We believe that steady and consistent investments in our networks and platforms will drive innovative products and services and fuel our growth. Our network leadership will continue to be the hallmark of our brand, and provide the fundamental strength at the connectivity, platform and solutions layers upon which we build our competitive advantage.

Strategic Transactions

During the nine months ended September 30, 2016, we announced several strategic transactions.

Acquisition of Yahoo! Inc.

On July 23, 2016, we entered into a stock purchase agreement (the Purchase Agreement) with Yahoo! Inc. (Yahoo). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we will acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments (the Transaction). The Transaction is subject to customary regulatory approvals and closing conditions, including the approval of Yahoo’s stockholders.

We believe that our acquisition of Yahoo’s operating business will help us become a major competitor in mobile media. Yahoo’s operations will provide us with a valuable portfolio of online content, mobile applications and viewers. Additionally, our acquisition of Yahoo’s operating business will expand our analytics and ad tech capabilities which we expect will enhance both our competitive position in the mobile media marketplace and value proposition to advertisers.

On September 22, 2016, Yahoo announced that it had confirmed that a copy of certain information associated with at least 500 million user accounts was stolen from its network in late 2014. This could result in a material adverse effect under the terms of our agreement. We are continuing to evaluate the impacts of this event on the transaction.

IoT and Telematics

We are also building our growth capabilities in the emerging IoT market by developing business models to monetize usage on our network at the connectivity and platform layers. On July 30, 2016, we entered into a definitive agreement to acquire Fleetmatics Groups PLC (Fleetmatics), a leading global provider of fleet and mobile workforce management solutions. The acquisition is subject to customary regulatory approvals and closing conditions, including the approval of Fleetmatics’ shareholders and the sanction of the scheme of arrangement by the Irish High Court. Approval from Fleetmatics’ shareholders has been obtained. We expect this transaction to close in the fourth quarter of 2016. In July 2016, we also closed on the acquisition of Telogis, Inc. For the three months ended September 30, 2016, we recognized IoT revenues of $0.2 billion, a 36% increase compared to the prior year period.

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Network Evolution

In April 2016, we announced our One Fiber initiative for the city of Boston. This initiative will create a single fiber-optic network platform capable of supporting wireless and wireline technologies and multiple projects. In February 2016, we also entered into a purchase agreement to acquire XO Holdings’ wireline business, which owns and operates one of the largest fiber-based IP and Ethernet networks outside of Verizon’s footprint, for approximately $1.8 billion, subject to adjustment. The transaction is subject to customary regulatory approvals and is targeted to close by the end of the first quarter of 2017.

Access Line Sale

On February 5, 2015, we entered into a definitive agreement with Frontier Communications Corporation (Frontier) pursuant to which Verizon agreed to sell its local exchange business and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service and long distance voice accounts in these three states for approximately $10.5 billion (approximately $7.3 billion net of income taxes), subject to certain adjustments and including the assumption of $0.6 billion of indebtedness from Verizon by Frontier. The transaction, which includes the acquisition by Frontier of the equity interests of Verizon’s incumbent local exchange carriers (ILECs) in California, Florida and Texas, did not involve any assets or liabilities of Verizon Wireless. The transaction closed on April 1, 2016.

The transaction resulted in Frontier acquiring approximately 3.3 million voice connections, 1.6 million Fios Internet subscribers, 1.2 million Fios video subscribers and the related ILEC businesses from Verizon. Approximately 9,300 Verizon employees who served customers in California, Florida and Texas continued employment with Frontier. The operating results of these businesses, collectively, are excluded from our Wireline segment for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker.

Business Overview

Wireless

In our Wireless business, revenues decreased 3.9% during the three months ended September 30, 2016, compared to the similar period in 2015 as a result of a 5.2% decline in service revenue and a 3.9% decrease in equipment revenue. We continue to manage through revenue transformation while growing high-quality retail postpaid connections. At September 30, 2016, retail postpaid connections were 3.0% higher than at September 30, 2015. The decline in service revenue was driven by customer migration to plans with lower service fees (unsubsidized service pricing) as compared to those under fixed-term service plans. At September 30, 2016, approximately 60% of our retail postpaid phone connections were on unsubsidized service pricing compared to approximately 33% at September 30, 2015. The decrease in equipment revenue was driven by a decline in overall sales volume, partially offset by an increase in device sales under the Verizon device payment program. During the three months ended September 30, 2016 and 2015, the percentage of phone activations under the Verizon device payment program was approximately 70% and 58%, respectively.

We are focusing our wireless capital spending on adding capacity and density to our fourth generation (4G) Long Term Evolution (LTE) network. Approximately 94% of our total data traffic in September 2016 was carried on our 4G LTE network. We are investing in the densification of our network by utilizing small cell technology, in-building solutions and distributed antenna solutions. Densification enables us to add capacity to manage mobile video consumption and demand for IoT, as well as position us for future fifth-generation (5G) technology. We are committed to developing and deploying 5G wireless technology and we are working with key partners to ensure the aggressive pace of innovation, standards development and appropriate requirements for this next generation of wireless technology.

Wireline

In our Wireline business, revenues declined 2.3% during the three months ended September 30, 2016, compared to the similar period in 2015, primarily due to revenue declines in Global Enterprise and Global Wholesale resulting from lower voice services and data networking revenues. To compensate for the shrinking market for traditional voice service, we continue to build our Wireline segment around data, video and advanced business services – areas where demand for reliable high-speed connections is growing. We continue to experience revenue increases in Consumer retail driven by Fios. During the three months ended September 30, 2016, Fios represented approximately 82% of Consumer retail revenue compared to approximately 79% during the similar period in 2015.

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Capital Expenditures and Investments

We continue to invest in our wireless network, high-speed fiber and other advanced technologies to position ourselves at the center of growth trends for the future. During the nine months ended September 30, 2016, these investments included $11.4 billion for capital expenditures. We believe that our investments aimed at expanding our portfolio of products and services will provide our customers with an even more efficient, reliable infrastructure for competing in the information economy.

Trends

In our Wireless segment, total operating revenues and service revenue continue to be negatively impacted by customer migrations to unsubsidized service pricing, and we expect this trend to continue through the remainder of 2016. As a result of an increase in activations under the Verizon device payment program, we also expect a decrease in our overall wireless operating costs compared to the prior year period.

Except to the extent described above, there have been no significant changes to the information related to trends affecting our business that was disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2015 included in our Current Report on Form 8-K dated July 29, 2016.

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Consolidated Results of Operations

In this section, we discuss our overall results of operations and highlight items of a non-operational nature that are not included in our segment results. We have two reportable segments, Wireless and Wireline, which we operate and manage as strategic business units and organize by products and services. In “Segment Results of Operations,” we review the performance of our two reportable segments.

Corporate and other includes the operations of AOL Inc. (AOL) and related businesses, unallocated corporate expenses, the results of other insignificant businesses, such as our vehicle original equipment manufacturer (OEM) and Networkfleet businesses and investments in unconsolidated businesses accounted for on an equity method basis, pension and other employee benefit related costs and lease financing. Corporate and other also includes the historical results of divested operations and other adjustments and gains and losses that are not allocated in assessing segment performance due to their non-operational nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses that are not individually significant are included in all segment results as these items are included in the chief operating decision maker’s assessment of segment performance. We believe that this presentation assists users of our financial statements in better understanding our results of operations and trends from period to period.

On April 1, 2016, we completed the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier. Accordingly, the results of operations related to this divestiture are included within Corporate and other for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker, as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2016		2015		2016		2015
Impact of Divested Operations
Operating revenues	$	–	$	1,307	$	1,280	$	3,976
Cost of services		–		466		482		1,374
Selling, general and administrative expense		–		124		137		405
Depreciation and amortization expense		–		–		–		88

In addition, Corporate and other includes the results of our vehicle OEM and Networkfleet businesses for all periods presented, which were reclassified from our Wireline segment effective April 1, 2016. The impact of this reclassification was not material to our condensed consolidated financial statements or our segment results of operations.

Consolidated Revenues

	Three Months Ended											Nine Months Ended
	September 30,						Increase/					September 30,						Increase/
(dollars in millions)	2016			2015			(Decrease)					2016			2015			(Decrease)
Wireless
Service	$	16,684		$	17,598		$	(914	)	(5.2	)%	$	50,234		$	53,201		$	(2,967	)	(5.6	)%
Equipment		4,124			4,292			(168	)	(3.9	)		11,782			11,526			256		2.2
Other		1,293			1,115			178		16.0			3,793			3,219			574		17.8
Total		22,101			23,005			(904	)	(3.9	)		65,809			67,946			(2,137	)	(3.1	)
Wireline
Mass Markets		3,585			3,602			(17	)	(0.5	)		10,760			10,790			(30	)	(0.3	)
Global Enterprise		2,886			2,988			(102	)	(3.4	)		8,749			9,042			(293	)	(3.2	)
Global Wholesale		1,239			1,289			(50	)	(3.9	)		3,778			3,938			(160	)	(4.1	)
Other		77			88			(11	)	(12.5	)		246			260			(14	)	(5.4	)
Total		7,787			7,967			(180	)	(2.3	)		23,533			24,030			(497	)	(2.1	)
Corporate and other		1,403			2,477			(1,074	)	(43.4	)		5,358			6,235			(877	)	(14.1	)
Eliminations		(354	)		(291	)		(63	)	21.6			(1,060	)		(845	)		(215	)	25.4
Consolidated Revenues	$	30,937		$	33,158		$	(2,221	)	(6.7	)	$	93,640		$	97,366		$	(3,726	)	(3.8	)

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The decrease in consolidated revenues during the three and nine months ended September 30, 2016, compared to the similar period in 2015, was primarily due to declines in revenues at our Wireless and Wireline segments, as well as declines in revenues within Corporate and other.

Wireless’ revenues decreased $0.9 billion, or 3.9%, and $2.1 billion, or 3.1%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of declines in service and equipment revenues for the three months ended September 30, 2016 and a decline in service revenue partially offset by increases in equipment and other revenues for the nine months ended September 30, 2016. Service revenue, which does not include recurring device payment plan billings related to the Verizon device payment program, decreased by $0.9 billion, or 5.2%, and $3.0 billion, or 5.6%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily driven by customer migration to plans with unsubsidized service pricing. Equipment revenue decreased by $0.2 billion, or 3.9%, during the three months ended September 30, 2016, compared to the similar period in 2015, as a result of a decline in overall sales volume, partially offset by an increase in device sales under the Verizon device payment program. Equipment revenue increased $0.3 billion, or 2.2%, during the nine months ended September 30, 2016, compared to the similar period in 2015, as a result of an increase in device sales, primarily smartphones, under the Verizon device payment program, partially offset by a decline in device sales under the traditional fixed-term service plans as well as a decline in overall sales volume.

Wireline’s revenue decreased $0.2 billion, or 2.3%, and $0.5 billion, or 2.1%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of declines in Global Enterprise and Global Wholesale. Wireline’s revenues during the nine months ended September 30, 2016 were also partially impacted by a reduction in Fios marketing activities during the union work stoppage that commenced April 13, 2016 and ended on June 1, 2016. Fios revenues were $2.8 billion and $8.3 billion during the three and nine months ended September 30, 2016, respectively, compared to $2.7 billion and $8.0 billion during the three and nine months ended September 30, 2015, respectively. Global Enterprise revenues decreased $0.1 billion, or 3.4%, and $0.3 billion, or 3.2%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, due to declines in traditional data and advanced networking solutions, Cloud and IT services and voice communications services. Global Wholesale revenues decreased $0.1 billion, or 3.9%, and $0.2 billion, or 4.1%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to declines in data revenues and traditional voice revenues driven by the effect of technology substitution as well as continuing contraction of market rates due to competition.

Corporate and other revenues decreased $1.1 billion, or 43.4%, and $0.9 billion, or 14.1%, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of the sale of our local exchange business and related landline activities in California, Florida and Texas that was completed on April 1, 2016. During the three months ended September 30, 2016, this decrease was partially offset by advertising revenue growth from programmatic platforms in AOL and related businesses. During the nine months ended September 30, 2016, this decrease was partially offset by the inclusion of the revenues of AOL from the date of acquisition on June 23, 2015.

Consolidated Operating Expenses

	Three Months Ended									Nine Months Ended
	September 30,				Increase/					September 30,				Increase/
(dollars in millions)	2016		2015		(Decrease)					2016		2015		(Decrease)
Cost of services	$	6,989	$	7,589	$	(600	)	(7.9	)%	$	22,180	$	21,571	$	609		2.8	%
Wireless cost of equipment		5,240		5,716		(476	)	(8.3	)		14,882		16,279		(1,397	)	(8.6	)
Selling, general and administrative expense		8,226		8,309		(83	)	(1.0	)		25,601		24,222		1,379		5.7
Depreciation and amortization expense		3,942		4,009		(67	)	(1.7	)		11,941		11,978		(37	)	(0.3	)
Consolidated Operating Expenses	$	24,397	$	25,623	$	(1,226	)	(4.8	)	$	74,604	$	74,050	$	554		0.7

Cost of Services

Cost of services decreased $0.6 billion, or 7.9%, during the three months ended September 30, 2016, compared to the similar period in 2015, primarily due to the sale of our local exchange business and related landline activities in California, Florida and Texas on April 1, 2016, a decline in net pension and postretirement benefit cost as well as a decline in access costs at our Wireline segment, partially offset by an increase in traffic acquisition costs at AOL and related businesses. Cost of services

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increased $0.6 billion, or 2.8%, during the nine months ended September 30, 2016, compared to the similar period in 2015, primarily due to an increase in costs as a result of the acquisition of AOL on June 23, 2015, the launch of go90 in the third quarter of 2015, and $0.4 billion of incremental costs incurred as a result of the union work stoppage that commenced on April 13, 2016 and ended on June 1, 2016. Partially offsetting these increases was a decline in cost of service as a result of the sale of our local exchange business and related landline activities in California, Florida and Texas on April 1, 2016.

Wireless Cost of Equipment

Wireless cost of equipment decreased $0.5 billion, or 8.3%, and $1.4 billion, or 8.6%, respectively, at our Wireless segment during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of a decline in the number of smartphone units sold as well as a decrease in the average cost per unit for smartphones, driven by a shift to lower priced units in the mix of devices sold.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $1.4 billion, or 5.7%, during the nine months ended September 30, 2016, compared to the similar period in 2015, primarily due to an increase in severance, pension and benefit remeasurement charges (see “Other Items”), an increase in costs as a result of the acquisition of AOL on June 23, 2015, and the launch of go90 in the third quarter of 2015, partially offset by a gain on and decline in costs as a result of the sale of our local exchange business and related landline activities in California, Florida and Texas on April 1, 2016 (see “Other Items”), declines in sales commission expense at our Wireless segment and declines in employee-related costs at our Wireline Segment.

Non-operational Credits (Charges)

Non-operational credits (charges) included in operating expenses were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Severance, pension and benefit charges	$	(797	)	$	(342	)	$	(4,512	)	$	(342	)
Gain on access line sale		–			–			1,007			–
Gain on spectrum license transaction		–			–			142			–

See “Other Items” for a description of non-operational items.

Consolidated Operating Income and EBITDA

Consolidated earnings before interest, taxes, depreciation and amortization expenses (Consolidated EBITDA) and Consolidated Adjusted EBITDA, which are presented below, are non-GAAP financial measures and do not purport to be alternatives to operating income as a measure of operating performance. We believe these measures are useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as they exclude depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior periods, as well as in evaluating operating performance in relation to Verizon’s competitors. Consolidated EBITDA is calculated by adding back interest, taxes, depreciation and amortization expense, equity in losses of unconsolidated businesses and other income and (expense), net to net income.

Consolidated Adjusted EBITDA is calculated by excluding the effect of non-operational items and the impact of divested operations from the calculation of Consolidated EBITDA. We believe this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. We believe Consolidated Adjusted EBITDA is widely used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes and depreciation policies. Further, the exclusion of non-operational items and the impact of divested operations enables comparability to prior period performance and trend analysis. Consolidated Adjusted EBITDA is also used by rating agencies, lenders and other parties to evaluate our creditworthiness. See “Other Items” for additional details regarding these non-operational items.

Operating expenses include pension and other postretirement benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. These estimates will be updated in the fourth quarter or upon a remeasurement event to reflect actual return on plan assets and updated actuarial assumptions. The adjustment will be recognized in the income statement during the fourth quarter or upon a remeasurement event pursuant to our

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accounting policy for the recognition of actuarial gains/losses. During the three and nine months ended September 30, 2016, we recorded pension and benefit remeasurement charges in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. During the fourth quarter of 2016, we will remeasure our pension and other postretirement assets and liabilities based on updated actuarial assumptions. This remeasurement could result in significant charges or credits to one or more of our pension plans and other postretirement benefit plans.

It is management’s intent to provide non-GAAP financial information to enhance the understanding of Verizon’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that non-GAAP measures provide relevant and useful information, which is used by management, investors and other users of our financial information in assessing both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies.

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(dollars in millions)	2016		2015			2016			2015
Consolidated Operating Income	$	6,540	$	7,535		$	19,036		$	23,316
Add Depreciation and amortization expense		3,942		4,009			11,941			11,978
Consolidated EBITDA	$	10,482	$	11,544		$	30,977		$	35,294
Add Severance, pension and benefit charges		797		342			4,512			342
Less Gain on spectrum license transaction		–		–			(142	)		–
Less Gain on access line sale		–		–			(1,007	)		–
Less Impact of divested operations		–		(717	)		(661	)		(2,197	)
Consolidated Adjusted EBITDA	$	11,279	$	11,169		$	33,679		$	33,439

The changes in the table above during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, were a result of the factors described in connection with operating revenues and operating expenses.

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Other Consolidated Results

Other Income and (Expense), Net

Additional information relating to Other income and (expense), net is as follows:

	Three Months Ended											Nine Months Ended
	September 30,						Increase/					September 30,						Increase/
(dollars in millions)	2016			2015			(Decrease)					2016			2015			(Decrease)
Interest income	$	16		$	14		$	2		14.3	%	$	42		$	100		$	(58	)	(58.0	)%
Other, net		81			37			44		nm			(1,739	)		58			(1,797	)	nm
Total	$	97		$	51		$	46		90.2		$	(1,697	)	$	158		$	(1,855	)	nm
nm – not meaningful The change in Other income and (expense), net during the nine months ended September 30, 2016, compared to the similar period in 2015 was primarily driven by net early debt redemption costs of $1.8 billion recorded during the second quarter of 2016 (see “Other Items”). Interest Expense
	Three Months Ended											Nine Months Ended
	September 30,						Increase/					September 30,						Increase/
(dollars in millions)	2016			2015			(Decrease)					2016			2015			(Decrease)
Total interest costs on debt balances	$	1,214		$	1,386		$	(172	)	(12.4	)%	$	3,770		$	4,147		$	(377	)	(9.1	)%
Less capitalized interest costs		176			184			(8	)	(4.3	)		531			405			126		31.1
Total	$	1,038		$	1,202		$	(164	)	(13.6	)	$	3,239		$	3,742		$	(503	)	(13.4	)
Average debt outstanding	$	103,247		$	112,446							$	105,153		$	113,459
Effective interest rate		4.7	%		4.9	%							4.8	%		4.9	%

Total interest costs on debt balances decreased during the three and nine months ended September 30, 2016, compared to the similar periods in 2015. The decrease during the three and nine months ended September 30, 2016 was primarily due to lower average debt balances and a lower effective interest rate (see “Consolidated Financial Condition”). Capitalized interest costs were higher during the nine months ended September 30, 2016, compared to the similar period in 2015, primarily due to an increase in wireless licenses that are currently under development, which was a result of our winning bid in the FCC spectrum license auction during 2015. The FCC granted us those wireless licenses on April 8, 2015.

Provision for Income Taxes

	Three Months Ended											Nine Months Ended
	September 30,						Increase/					September 30,						Increase/
(dollars in millions)	2016			2015			(Decrease)					2016			2015			(Decrease)
Provision for income taxes	$	1,829		$	2,195		$	(366	)	(16.7	)%	$	5,029		$	6,800		$	(1,771	)	(26.0	)%
Effective income tax rate		32.8	%		34.5	%							35.8	%		34.6	%

The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The decrease in the effective income tax rate during the three months ended September 30, 2016, compared to the similar period in 2015, was primarily due to lower income taxes from an internal restructure in the current period as well as the effective income tax rate impact of lower income before income taxes due to greater severance, pension and benefit charges recorded in the current period. The increase in the effective income tax rate during the nine months ended September 30, 2016, compared to the similar period in 2015, was primarily due to the impact of $527 million included in the provision for income taxes from goodwill not deductible for tax purposes in connection with the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier on April 1, 2016 as well as the effective income tax rate impact of lower income before income taxes due to severance, pension and benefit charges recorded in the current period. The decrease in the provision for income taxes during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, was primarily due to the impact of lower income before income taxes due to severance, pension and benefit charges recorded in the current period.

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Unrecognized Tax Benefits

Unrecognized tax benefits were $1.8 billion at September 30, 2016 and $1.6 billion at December 31, 2015. Interest and penalties related to unrecognized tax benefits were $0.2 billion (after-tax) at September 30, 2016 and $0.1 billion (after-tax) at December 31, 2015, respectively.

Verizon and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. As a large taxpayer, we are under audit by the IRS and multiple state and foreign jurisdictions for various open tax years. It is reasonably possible that the amount of the liability for unrecognized tax benefits could change by a significant amount in the next twelve months. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved.

Segment Results of Operations

We have two reportable segments, Wireless and Wireline, which we operate and manage as strategic business units and organize by products and services. We measure and evaluate our reportable segments based on segment operating income. The use of segment operating income is consistent with the chief operating decision maker’s assessment of segment performance.

Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA), which is presented below, is a non-GAAP measure and does not purport to be an alternative to operating income (loss) as a measure of operating performance. We believe this measure is useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as it excludes the depreciation and amortization expenses related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to segment operating income (loss). Segment EBITDA margin is calculated by dividing Segment EBITDA by total segment operating revenues. You can find additional information about our segments in Note 10 to the condensed consolidated financial statements.

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Wireless

Our Wireless segment, doing business as Verizon Wireless, provides wireless communications services across one of the most extensive wireless networks in the United States. We provide these services and equipment sales to consumer, business and government customers in the United States on a postpaid and prepaid basis. Postpaid connections represent individual lines of service for which a customer is billed in advance a monthly access charge in return for a monthly network service allowance, and usage beyond the allowance is billed monthly in arrears. Our prepaid service enables individuals to obtain wireless services without credit verification by paying for all services in advance.

Operating Revenues and Selected Operating Statistics

	Three Months Ended											Nine Months Ended
(dollars in millions, except	September 30,						Increase/					September 30,						Increase/
ARPA and I-ARPA)	2016			2015			(Decrease)					2016			2015			(Decrease)
Service	$	16,684		$	17,598		$	(914	)	(5.2	)%	$	50,234		$	53,201		$	(2,967	)	(5.6	)%
Equipment		4,124			4,292			(168	)	(3.9	)		11,782			11,526			256		2.2
Other		1,293			1,115			178		16.0			3,793			3,219			574		17.8
Total Operating Revenues	$	22,101		$	23,005		$	(904	)	(3.9	)	$	65,809		$	67,946		$	(2,137	)	(3.1	)
Connections (‘000): (1)
Retail connections													113,676			110,760			2,916		2.6
Retail postpaid connections													108,220			105,023			3,197		3.0
Net additions in period (‘000): (2)
Retail connections		525			1,209			(684	)	(56.6	)		1,573			2,594			(1,021	)	(39.4	)
Retail postpaid connections		442			1,289			(847	)	(65.7	)		1,697			2,988			(1,291	)	(43.2	)
Churn Rate:
Retail connections		1.28	%		1.21	%							1.23	%		1.24	%
Retail postpaid connections		1.04	%		0.93	%							0.98	%		0.95	%
Account Statistics:
Retail postpaid ARPA	$	144.94		$	152.38		$	(7.44	)	(4.9	)	$	145.12		$	154.08		$	(8.96	)	(5.8	)
Retail postpaid I-ARPA	$	169.49		$	164.31		$	5.18		3.2		$	167.23		$	163.37		$	3.86		2.4
Retail postpaid accounts (‘000) (1)													35,530			35,677			(147	)	(0.4	)
Retail postpaid connections per account (1)													3.05			2.94			0.11		3.7

⁽¹⁾ As of end of period

⁽²⁾ Excluding acquisitions and adjustments

Wireless’ total operating revenues decreased by $0.9 billion, or 3.9%, and $2.1 billion, or 3.1%, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of declines in service and equipment revenues for the three months ended September 30, 2016 and a decline in service revenue partially offset by increases in equipment and other revenues for the nine months ended September 30, 2016.

Accounts and Connections

Retail postpaid accounts primarily represent retail customers with Verizon Wireless that are directly served and managed by Verizon Wireless and use its branded services. Accounts include shared data plans, such as our Verizon Plan and More Everything plans, and corporate accounts, as well as legacy single connection plans and family plans. A single account may include monthly wireless services for a variety of connected devices.

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Under the Verizon device payment program, our eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program, or on a compatible device that they already own, pay lower service fees (unsubsidized service pricing) as compared to those under fixed-term service plans.

Retail connections represent our retail customer device connections. Churn is the rate at which service to connections is terminated. Retail connections under an account may include: smartphones and basic phones (collectively, phones) as well as tablets, LTE Internet (Installed) and other connected devices, including retail IoT connections. Retail postpaid connection net additions decreased during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to a decrease in retail postpaid connection gross additions as well as a higher retail postpaid connection churn rate.

Retail Postpaid Connections per Account

Retail postpaid connections per account is calculated by dividing the total number of retail postpaid connections by the number of retail postpaid accounts as of the end of the period. Retail postpaid connections per account increased 3.7% as of September 30, 2016, compared to September 30, 2015. The increase in retail postpaid connections per account is primarily due to increases in Internet devices, which represented 18.1% of our retail postpaid connection base as of September 30, 2016, compared to 16.0% as of September 30, 2015.

Service Revenue

Service revenue, which does not include recurring device payment plan billings related to the Verizon device payment program, decreased by $0.9 billion, or 5.2%, and $3.0 billion, or 5.6%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily driven by lower retail postpaid service revenue. Retail postpaid service revenue was negatively impacted as a result of customer migration to plans with unsubsidized service pricing. Customer migration to unsubsidized service pricing is driven in part by an increase in the activation of devices purchased under the Verizon device payment program. At September 30, 2016, approximately 60% of our retail postpaid phone connections were on unsubsidized service pricing compared to approximately 33% at September 30, 2015. At September 30, 2016, approximately 41% of our retail postpaid phone connections participated in the Verizon device payment program compared to approximately 22% at September 30, 2015. The decrease in service revenues was partially offset by an increase in retail postpaid connections compared to the prior year period. Service revenue plus recurring device payment plan billings related to the Verizon device payment program, which represents the total value received from our wireless connections, increased 2.3% and 2.1%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015.

Retail postpaid ARPA (the average service revenue per account from retail postpaid accounts), which does not include recurring device payment plan billings related to the Verizon device payment program, was negatively impacted during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, as a result of customer migration to plans with unsubsidized service pricing. Retail postpaid I-ARPA (the average service revenue per account from retail postpaid accounts plus recurring device payment plan billings), which represents the monthly recurring value received on a per account basis from our retail postpaid accounts, increased 3.2% and 2.4%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015.

Equipment Revenue

Equipment revenue decreased $0.2 billion, or 3.9%, during the three months ended September 30, 2016, compared to the similar period in 2015, as a result of a decline in overall sales volume, partially offset by an increase in device sales under the Verizon device payment program. Equipment revenue increased by $0.3 billion, or 2.2%, during the nine months ended September 30, 2016, compared to the similar period in 2015, as a result of an increase in device sales, primarily smartphones, under the Verizon device payment program, partially offset by a decline in device sales under the traditional fixed-term service plans as well as a decline in overall sales volumes.

Under the Verizon device payment program, we recognize a higher amount of equipment revenue at the time of sale of devices. For the three and nine months ended September 30, 2016, phone activations under the Verizon device payment program represented approximately 70% and 69%, respectively, of retail postpaid phones activated compared to approximately 58% and 49%, respectively, during the three and nine months ended September 30, 2015.

Other Revenue

Other revenue includes non-service revenues such as regulatory fees, cost recovery surcharges, revenues associated with our device protection package, sublease rentals and financing revenue. Other revenue increased $0.2 billion, or 16.0%, and $0.6 billion, or 17.8%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to financing revenues from our device payment program, cost recovery surcharges and a volume-driven increase in revenues related to our device protection package.

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Operating Expenses

	Three Months Ended September 30,				Increase/					Nine Months Ended September 30,				Increase/
(dollars in millions)	2016		2015		(Decrease)					2016		2015		(Decrease)
Cost of services	$	2,006	$	2,010	$	(4	)	(0.2	)%	$	5,932	$	5,809	$	123		2.1	%
Cost of equipment		5,240		5,716		(476	)	(8.3	)		14,882		16,279		(1,397	)	(8.6	)
Selling, general and administrative expense		4,921		5,351		(430	)	(8.0	)		14,589		16,009		(1,420	)	(8.9	)
Depreciation and amortization expense		2,287		2,260		27		1.2			6,862		6,675		187		2.8
Total Operating Expenses	$	14,454	$	15,337	$	(883	)	(5.8	)	$	42,265	$	44,772	$	(2,507	)	(5.6	)

Cost of Services

Cost of services increased $0.1 billion, or 2.1%, during the nine months ended September 30, 2016, compared to the similar period in 2015, primarily due to higher rent expense as a result of an increase in macro and small cell sites, as well as a volume-driven increase in costs related to the device protection package offered to our customers. Partially offsetting these increases were decreases in network connection costs and cost of roaming.

Cost of Equipment

Cost of equipment decreased $0.5 billion, or 8.3%, and $1.4 billion, or 8.6%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of a decline in the number of smartphone units sold as well as a decrease in the average cost per unit for smartphones, driven by a shift to lower priced units in the mix of devices sold.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $0.4 billion, or 8.0%, and $1.4 billion, or 8.9%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to declines in sales commission expense, bad debt expense, employee related costs and non-income taxes. In addition, advertising expense decreased during the nine months ended September 30, 2016. The declines in sales commission expense of $0.2 billion, or 18.2%, and $1.0 billion, or 27.9%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, was driven by an overall decline in activations as well as an increase in the proportion of activations under the Verizon device payment program, which has a lower commission per unit than activations under traditional fixed-term service plans. The decline in employee related costs was a result of reduced headcount.

Depreciation and Amortization Expense

Depreciation and amortization expense increased during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily driven by an increase in net depreciable assets.

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Segment Operating Income and EBITDA

	Three Months Ended September 30,						Increase/					Nine Months Ended September 30,						Increase/
(dollars in millions)	2016			2015			(Decrease)					2016			2015			(Decrease)
Segment Operating Income	$	7,647		$	7,668		$	(21	)	(0.3	)%	$	23,544		$	23,174		$	370	1.6	%
Add Depreciation and amortization expense		2,287			2,260			27		1.2			6,862			6,675			187	2.8
Segment EBITDA	$	9,934		$	9,928		$	6		0.1		$	30,406		$	29,849		$	557	1.9
Segment operating income margin		34.6	%		33.3	%							35.8	%		34.1	%
Segment EBITDA margin		44.9	%		43.2	%							46.2	%		43.9	%

The changes in the table above during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Non-operational items excluded from our Wireless segment Operating income were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	2016			2015		2016			2015
Gain on spectrum license transaction	$	–		$	–	$	142		$	–
Severance, pension and benefit charges		(53	)		–		(53	)		–
	$	(53	)	$	–	$	89		$	–

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Wireline

Our Wireline segment provides voice, data and video communications products and enhanced services including broadband video and data, corporate networking solutions, data center and cloud services, security and managed network services and local and long distance voice services. We provide these products and services to consumers in the United States, as well as to carriers, businesses and government customers both in the United States and around the world.

The operating results and statistics for all periods presented below exclude the results of Verizon’s local exchange business and related landline activities in California, Florida and Texas, which were sold to Frontier on April 1, 2016, to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker.

Operating Revenues and Selected Operating Statistics

	Three Months Ended September 30,				Increase/					Nine Months Ended September 30,				Increase/
(dollars in millions)	2016		2015		(Decrease)					2016		2015		(Decrease)
Consumer retail	$	3,174	$	3,168	$	6		0.2	%	$	9,519	$	9,470	$	49		0.5	%
Small business		411		434		(23	)	(5.3	)		1,241		1,320		(79	)	(6.0	)
Mass Markets		3,585		3,602		(17	)	(0.5	)		10,760		10,790		(30	)	(0.3	)
Global Enterprise		2,886		2,988		(102	)	(3.4	)		8,749		9,042		(293	)	(3.2	)
Global Wholesale		1,239		1,289		(50	)	(3.9	)		3,778		3,938		(160	)	(4.1	)
Other		77		88		(11	)	(12.5	)		246		260		(14	)	(5.4	)
Total Operating Revenues	$	7,787	$	7,967	$	(180	)	(2.3	)	$	23,533	$	24,030	$	(497	)	(2.1	)
Connections (‘000):(1)
Total voice connections											14,194		15,324		(1,130	)	(7.4	)
Total Broadband connections											7,038		7,074		(36	)	(0.5	)
Fios Internet subscribers											5,585		5,336		249		4.7
Fios video subscribers											4,673		4,610		63		1.4

⁽¹⁾ As of end of period

Wireline’s revenues decreased $0.2 billion, or 2.3%, and $0.5 billion, or 2.1%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily as a result of declines in Global Enterprise and Global Wholesale. Wireline’s revenues during the nine months ended September 30, 2016 were also partially impacted by a reduction in Fios marketing activities during the union work stoppage that commenced April 13, 2016 and ended on June 1, 2016. Fios revenues were $2.8 billion and $8.3 billion, respectively, during the three and nine months ended September 30, 2016, compared to $2.7 billion and $8.0 billion, respectively, during the similar periods in 2015.

Mass Markets

Mass Markets operations provide broadband Internet and video services (including high-speed Internet, Fios Internet and Fios video services), local exchange (basic service and end-user access) and long distance (including regional toll) voice services to residential and small business subscribers.

Mass Markets revenues decreased 0.5% and 0.3%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, as the continued decline of local exchange revenues was partially offset by increases in Fios revenues due to subscriber growth for Fios services (Internet, video and voice).

We grew our subscriber base by 0.2 million Fios Internet subscribers and 0.1 million Fios video subscribers, while also improving penetration rates within our Fios service areas for Fios Internet. As of September 30, 2016, we achieved a penetration rate of 40.4% for Fios Internet, compared to a penetration rate of 40.1% for Fios Internet as of September 30, 2015. Our Fios connection growth for the nine months ended September 30, 2016 was impacted by installation delays as a result of the union work stoppage that commenced on April 13, 2016 and ended on June 1, 2016. Consumer Fios revenues increased $0.1 billion, or 4.2%, and $0.3 billion, or 4.4%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015. Fios represented approximately 82% of Consumer retail revenue for both the three and nine months ended September 30, 2016, compared to approximately 79% during the similar periods in 2015.

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The decline of local exchange revenues was primarily due to a 7.3% decline in Consumer retail voice connections resulting primarily from competition and technology substitution with wireless, competing VoIP (voice over IP) and cable telephony services. Total voice connections include traditional switched access lines in service as well as Fios digital voice connections. There was also a 7.6% decline in Small business retail voice connections, reflecting competition and a shift to both IP and high-speed circuits, primarily in areas outside of our Fios footprint.

Global Enterprise

Global Enterprise offers advanced information and communication technology services and other traditional communications services to medium and large business customers, multinational corporations and state and federal government customers.

Global Enterprise revenues decreased $0.1 billion, or 3.4%, and $0.3 billion, or 3.2%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, due to declines in traditional data and advanced networking solutions, Cloud and IT services and voice communications services. Also contributing to the decrease was the negative impact of foreign exchange rates. Our traditional data networking services, which consist of traditional circuit-based services such as frame relay, private line and legacy data networking services, our advanced networking solutions, which include Private IP, Public Internet, Ethernet and optical network services, and our Cloud and IT services declined as a result of competitive pressures.

Global Wholesale

Global Wholesale provides communications services including data, voice and local dial tone and broadband services primarily to local, long distance and other carriers that use our facilities to provide services to their customers.

Global Wholesale revenues decreased $0.1 billion, or 3.9%, and $0.2 billion, or 4.1%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to declines in data revenues and traditional voice revenues driven by the effect of technology substitution as well as continuing contraction of market rates due to competition. As a result of technology substitution, the number of core data circuits at September 30, 2016 experienced a 16.3% decline compared to September 30, 2015. The decline in traditional voice revenue is driven by a 6.1% decline in domestic wholesale connections at September 30, 2016, compared to September 30, 2015.

Operating Expenses

	Three Months Ended September 30,				Increase/				Nine Months Ended September 30,				Increase/
(dollars in millions)	2016		2015		(Decrease)				2016		2015		(Decrease)
Cost of services	$	4,440	$	4,695	$	(255)	(5.4	)%	$	14,191	$	14,184	$	7	–	%
Selling, general and administrative expense		1,693		1,770		(77)	(4.4	)		5,080		5,421		(341)	(6.3	)
Depreciation and amortization expense		1,498		1,611		(113)	(7.0	)		4,636		4,953		(317)	(6.4	)
Total Operating Expenses	$	7,631	$	8,076	$	(445)	(5.5	)	$	23,907	$	24,558	$	(651)	(2.7	)

Cost of Services

Cost of services decreased $0.3 billion, or 5.4% and were unchanged, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015. The decrease during the three months ended September 30, 2016 was due to a decline in net pension and postretirement benefit cost as well as a decline in access costs, driven by declines in overall wholesale long distance volumes and rates. These decreases were partially offset by an increase in content costs associated with programming license fee increases and continued Fios subscriber growth. During the nine months ended September 30, 2016, cost of services was impacted by $0.4 billion of incremental costs incurred as a result of the union work stoppage that commenced on April 13, 2016 and ended on June 1, 2016 as well as an increase in content costs associated with programming license fee increases and continued Fios subscriber growth partially offset by a decline in access costs, driven by declines in overall wholesale long distance volumes and rates, a decline in net pension and postretirement benefit cost, as well as declines in employee costs as a result of reduced headcount.

45

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $0.1 billion, or 4.4%, and $0.3 billion, or 6.3%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to decreases in transaction taxes and regulatory expenses, a decline in net pension and postretirement benefit cost as well as declines in employee costs as a result of reduced headcount.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $0.1 billion, or 7.0%, and $0.3 billion, or 6.4%, respectively, during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, primarily due to decreases in net depreciable assets.

Segment Operating Income (Loss) and EBITDA

	Three Months Ended September 30,						Increase/					Nine Months Ended September 30,						Increase/
(dollars in millions)	2016			2015			(Decrease)					2016			2015			(Decrease)
Segment Operating Income (Loss)	$	156		$	(109	)	$	265		nm		$	(374	)	$	(528	)	$	154		(29.2	)%
Add Depreciation and amortization expense		1,498			1,611			(113	)	(7.0	)%		4,636			4,953			(317	)	(6.4	)
Segment EBITDA	$	1,654		$	1,502		$	152		10.1		$	4,262		$	4,425		$	(163	)	(3.7	)
Segment operating income (loss) margin		2.0	%		(1.4	)%							(1.6	)%		(2.2	)%
Segment EBITDA margin		21.2	%		18.9	%							18.1	%		18.4	%

nm – not meaningful

The changes in the table above during the three and nine months ended September 30, 2016, compared to the similar periods in 2015, were primarily a result of the factors described in connection with operating revenues and operating expenses.

Non-operational items excluded from our Wireline segment Operating income (loss) were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2016		2015		2016		2015
Impact of divested operations	$	–	$	717	$	661	$	2,109

Other Items

Early Debt Redemption Costs

During April 2016, we recorded net debt redemption costs of $1.8 billion in connection with the early redemption of $2.2 billion aggregate principal amount of Verizon Communications Inc. notes called and redeemed in whole as well as the early redemption pursuant to three concurrent, but separate, tender offers of the following: $3.0 billion aggregate principal amount of Verizon Communications Inc. notes included in the Group 1 Any and All Offer; $1.2 billion aggregate principal amount of debentures of our operating telephone company subsidiaries included in the Group 2 Any and All Offer; $3.8 billion aggregate principal amount of Verizon Communications Inc. notes, $0.2 billion aggregate principal amount of Alltel Corporation debentures and $0.3 billion aggregate principal amount of GTE Corporation debentures included in the Group 3 Offer. See Note 4 to the condensed consolidated financial statements for additional details related to our early debt redemptions.

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Gain on Access Line Sale

During the second quarter of 2016, we completed the sale of the local exchange business and related landline activities in California, Florida and Texas. As a result of this transaction, we recorded a pre-tax gain of approximately $1.0 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016. The pre-tax gain included a $0.5 billion pension and postretirement benefit curtailment gain due to the elimination of the accrual of pension and other postretirement benefits for some or all future services of a significant number of employees covered in three of our defined benefit pension plans and one of our other postretirement benefit plans.

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Operating Income and EBITDA discussion (See “Consolidated Results of Operations”) excludes the gain on the access line sale described above.

Severance, Pension and Benefit Charges

During the three months ended September 30, 2016, we recorded net pre-tax severance, pension and benefit charges of approximately $0.8 billion primarily for our pension plans in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges of $0.6 billion primarily related to settlements for employees who received lump-sum distributions in five of our defined benefit pension plans. The charges were primarily driven by a decrease in our discount rate assumption of $0.8 billion used to determine the current year liabilities of our pension plans, partially offset by the difference between our expected return on assets of 7.0% and our annualized actual return on assets of 11.0% at August 31, 2016 ($0.2 billion). Our weighted average discount rate assumption was 3.61% at August 31, 2016. As part of this charge, we recorded severance costs of $0.2 billion under our existing separation plans.

During the three months ended June 30, 2016, we recorded net pre-tax pension and benefit remeasurement charges of approximately $3.6 billion in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. These charges were comprised of a net pre-tax pension and benefit remeasurement charge of $0.8 billion measured as of April 1, 2016 related to curtailments in three of our defined benefit pension plans and one of our other postretirement benefit plans, a net pre-tax pension and benefit remeasurement charge of $2.7 billion measured as of May 31, 2016 in two defined benefit pension plans and three other postretirement benefit plans as a result of our accounting for the contractual healthcare caps and bargained for changes, and a net pre-tax pension and benefit remeasurement charge of $0.1 billion measured as of May 31, 2016 related to settlements for employees who received lump-sum distributions in three of Verizon’s defined benefit pension plans. The pension and benefit remeasurement charges were primarily driven by a decrease in our discount rate assumption used to determine the current year liabilities of our pension and other postretirement benefit plans ($2.7 billion) and updated healthcare cost trend rate assumptions ($0.9 billion). Our weighted-average discount rate assumption decreased from 4.60% at December 31, 2015 to 3.99% at May 31, 2016.

During the three months ended March 31, 2016, we also recorded a net pre-tax pension and benefit remeasurement charge of $0.2 billion related to settlements for employees who received lump-sum distributions in one of Verizon’s defined benefit pension plans.

During the three and nine months ended September 30, 2015, we recorded net pre-tax pension remeasurement charges of approximately $0.3 billion, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges relate to settlements for employees who received lump-sum distributions in four of Verizon’s seven defined benefit pension plans. The pension remeasurement charges from the impacted plans were primarily driven by a $0.7 billion loss resulting from the difference between our expected return on assets assumption of 7.25% at December 31, 2014 and our annualized actual return on assets of 1.96% at September 30, 2015, as well as other losses of $0.1 billion. These losses were partially offset by a gain of $0.5 billion resulting from an increase in our discount rate assumption used to determine the current year liabilities of our pension plans. Our weighted-average discount rate assumption increased from 4.2% at December 31, 2014 to 4.5% at September 30, 2015.

In accordance with our accounting policy for pension and other postretirement benefits, in the fourth quarter of 2016 we will remeasure our pension and other postretirement assets and liabilities based on updated actuarial assumptions. This remeasurement could result in significant charges or credits to one or more of our pension and other postretirement benefit plans.

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Operating Income and EBITDA discussion (See “Consolidated Results of Operations”) excludes the pension and benefit remeasurement described above.

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Gain on Spectrum License Transaction

During the first quarter of 2016, we completed a license exchange transaction with affiliates of AT&T Inc. (AT&T) to exchange certain Advanced Wireless Services (AWS) and Personal Communication Services (PCS) spectrum licenses. As a result of this non-cash exchange, we received $0.4 billion of AWS and PCS spectrum licenses at fair value and we recorded a pre-tax gain of approximately $0.1 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016.

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Operating Income and EBITDA discussion (See “Consolidated Results of Operations”) excludes the gain on the spectrum license transaction described above.

Impact of Divested Operations

On April 1, 2016, we completed the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier.

The Consolidated Adjusted EBITDA non-GAAP measure presented in the Consolidated Operating Income and EBITDA discussion (See “Consolidated Results of Operations”) excludes the historical financial results of the divested operations described above.

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Consolidated Financial Condition

	Nine Months Ended September 30,
(dollars in millions)	2016			2015			Change
Cash Flows Provided By (Used In)
Operating activities	$	17,629		$	28,426		$	(10,797	)
Investing activities		(2,539	)		(24,596	)		22,057
Financing activities		(13,119	)		(10,553	)		(2,566	)
Increase (Decrease) In Cash and Cash Equivalents	$	1,971		$	(6,723	)	$	8,694

We use the net cash generated from our operations to fund network expansion and modernization, service and repay external financing, pay dividends, invest in new businesses and, when appropriate, buy back shares of our outstanding common stock. Our sources of funds, primarily from operations and, to the extent necessary, from external financing arrangements, are sufficient to meet ongoing operating and investing requirements. We expect that our capital spending requirements will continue to be financed primarily through internally generated funds. Debt or equity financing may be needed to fund additional investments or development activities or to maintain an appropriate capital structure to ensure our financial flexibility. Our cash and cash equivalents are primarily held domestically and are invested to maintain principal and provide liquidity. Accordingly, we do not have significant exposure to foreign currency fluctuations. See “Market Risk” for additional information regarding our foreign currency risk management strategies.

Our available external financing arrangements include an active commercial paper program, credit available under credit facilities and other bank lines of credit, vendor financing arrangements, issuances of registered debt or equity securities and privately-placed capital market securities. In addition, our available arrangements to monetize our device payment plan agreement receivables include asset-backed securitizations and sales of selected receivables to relationship banks.

Cash Flows Provided By Operating Activities

Our primary source of funds continues to be cash generated from operations, primarily from our Wireless segment. Net cash provided by operating activities during the nine months ended September 30, 2016 decreased by $10.8 billion, compared to the similar period in 2015, primarily due to working capital impacts related to our asset-backed securitizations, an increase in income taxes paid as a result of the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier, one-time favorable tax law changes in 2015 that do not recur in 2016 and the timing of tax payments under the estimated payment rules, a decline in earnings, as well as $2.4 billion of proceeds received in the nine months ended September 30, 2015 as a result of our transaction (Tower Monetization Transaction) with American Tower Corporation (American Tower).

During the nine months ended September 30, 2016 and 2015, we received cash proceeds related to new sales of wireless device payment plan agreement receivables to a group of primarily relationship banks of $2.0 billion and $4.5 billion, respectively, which were recorded within cash flow provided by operating activities. See Note 5 to the condensed consolidated financial statements for more information. During the nine months ended September 30, 2016, we began to monetize our wireless device payment plan agreement receivables through asset-backed debt transactions, which were recorded within cash flow used in financing activities. See Note 4 to the condensed consolidated financial statements and “Cash Flows Used in Financing Activities” for more information.

We completed the Tower Monetization Transaction in March 2015, pursuant to which American Tower acquired the exclusive rights to lease and operate approximately 11,300 of our wireless towers for an upfront payment of $5.0 billion, of which $2.4 billion related to a portion of the towers for which the right-of-use has passed to the tower operator.

Cash Flows Used In Investing Activities

Capital Expenditures

Capital expenditures continue to be a primary use of capital resources as they facilitate the introduction of new products and services, enhance responsiveness to competitive challenges and increase the operating efficiency and productivity of our networks.

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Capital expenditures, including capitalized software, were as follows:

	Nine Months Ended September 30,
(dollars in millions)	2016			2015
Wireless	$	7,776		$	8,466
Wireline		2,856			3,413
Other		766			661
	$	11,398		$	12,540
Total as a percentage of revenue		12.2	%		12.9	%

Capital expenditures decreased at Wireless during the nine months ended September 30, 2016, compared to the similar period in 2015, primarily due to the timing of investments to increase the capacity of our 4G LTE network. Capital expenditures declined at Wireline as a result of reduced capital spending during the work stoppage that commenced April 13, 2016 and ended June 1, 2016, and capital expenditures related to the local exchange business and related landline activities in California, Florida and Texas that were sold to Frontier on April 1, 2016.

Acquisitions

On July 29, 2016, Verizon acquired Telogis, Inc., a global, cloud-based mobile enterprise management software business for $0.9 billion of cash consideration.

During the nine months ended September 30, 2016, we acquired various other businesses and investments for cash consideration that was not significant.

Dispositions

During the nine months ended September 30, 2016, we received cash proceeds of $9.9 billion in connection with the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier on April 1, 2016.

Cash Flows Used In Financing Activities

We seek to maintain a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. During the nine months ended September 30, 2016 and 2015, net cash used in financing activities was $13.1 billion and $10.6 billion, respectively.

During the nine months ended September 30, 2016, our net cash used in financing activities of $13.1 billion was primarily driven by repayments of long-term debt borrowings and capital lease obligations of $14.5 billion and $6.9 billion paid in cash dividends. These uses of cash were partially offset by proceeds from long-term borrowings of $10.7 billion, including proceeds of $2.6 billion from our asset-backed debt transactions.

Proceeds from and Repayments of Long-Term Borrowings

At September 30, 2016, our total debt decreased to $106.6 billion compared to $109.7 billion at December 31, 2015, primarily as a result of early debt redemptions during the second quarter of 2016 partially offset by issuances of long-term debt in the third quarter of 2016. During the nine months ended September 30, 2016 and 2015, our effective interest rate was 4.8% and 4.9%, respectively. See Note 4 to the condensed consolidated financial statements for additional details regarding our debt activity.

At September 30, 2016, approximately $8.1 billion, or 7.6%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily the Euro and British Pound Sterling. We have entered into cross currency swaps in order to fix our future interest and principal payments in U.S. dollars and mitigate the impact of foreign currency transaction gains or losses. See “Market Risk” for additional information.

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Verizon may continue to acquire debt securities issued by Verizon and its affiliates in the future through open market purchases, privately negotiated transactions, tender offers, exchange offers, or otherwise, upon such terms and at such prices as Verizon may from time to time determine for cash or other consideration.

Asset-Backed Debt

As of September 30, 2016, the carrying value of our asset-backed debt was $2.6 billion. Our asset-backed debt includes notes (the Asset-Backed Notes) issued to third-party investors (Investors) and loans (the ABS Financing Facility) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed securitization bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, we transfer device payment plan agreement receivables from Cellco Partnership and certain other affiliates of Verizon (collectively, the Originators) to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt and do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco Partnership and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables 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 on our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions, deposits to the segregated accounts and payments to the Originators in respect of additional transfers of device payment plan agreement receivables are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Repayments of our asset-backed debt and related interest payments made from the segregated accounts are non-cash activities and therefore not reflected within Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included on our condensed consolidated balance sheets.

Other, net

Other, net financing activities during the nine months ended September 30, 2016 includes net early debt redemption costs of $1.8 billion. See “Other Items” for additional information related to the early debt redemption costs incurred during the second quarter of 2016.

Credit Facility

On September 23, 2016, we amended our $8.0 billion credit facility to increase the availability to $9.0 billion and extend the maturity to September 23, 2020. As of September 30, 2016, the unused borrowing capacity under our $9.0 billion credit facility was approximately $8.9 billion.

Dividends

As in prior periods, dividend payments were a significant use of capital resources. During the third quarter of 2016, Verizon’s Board of Directors increased our quarterly dividend payments by 2.2% to $.5775 per share from $.565 cents per share in the prior year period. During the nine months ended September 30, 2016, we paid $6.9 billion in cash dividends.

Covenants

Our credit agreements contain covenants that are typical for large, investment grade companies. These covenants include requirements to pay interest and principal in a timely fashion, pay taxes, maintain insurance with responsible and reputable insurance companies, preserve our corporate existence, keep appropriate books and records of financial transactions, maintain our properties, provide financial and other reports to our lenders, limit pledging and disposition of assets and mergers and consolidations, and other similar covenants. Additionally, our term loan credit agreement requires us to maintain a leverage ratio (as such term is defined in the agreement) not in excess of 3.50:1.00 until our credit ratings are equal to or higher than A3 and A-.

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We and our consolidated subsidiaries are in compliance with all of our financial and restrictive covenants.

Change In Cash and Cash Equivalents

Our Cash and cash equivalents at September 30, 2016 totaled $6.4 billion, a $2.0 billion increase compared to Cash and cash equivalents at December 31, 2015, primarily as a result of the factors discussed above.

Free Cash Flow

Free cash flow is a non-GAAP financial measure that management believes is useful to investors and other users of Verizon’s financial information in evaluating cash available to pay debt and dividends. Free cash flow is calculated by subtracting capital expenditures from net cash provided by operating activities. The following table reconciles net cash provided by operating activities to Free cash flow:

	Nine Months Ended September 30,
(dollars in millions)	2016		2015		Change
Net cash provided by operating activities	$	17,629	$	28,426	$	(10,797	)
Less Capital expenditures (including capitalized software)		11,398		12,540		(1,142	)
Free cash flow	$	6,231	$	15,886	$	(9,655	)

The change in Free cash flow during the nine months ended September 30, 2016, compared to the similar period in 2015, was primarily due to working capital impacts related to our asset-backed securitizations, an increase in income taxes paid as a result of the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier, one-time favorable tax law changes in 2015 that do not recur in 2016 and the timing of tax payments under the estimated payment rules, a decline in earnings as well as $2.4 billion of proceeds received in the nine months ended September 30, 2015 related to the Tower Monetization Transaction attributable to the portion of the towers for which the right-of-use has passed to the tower operator. These decreases were partially offset by a $1.1 billion decrease in capital expenditures.

Market Risk

We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes, foreign currency exchange rate fluctuations, changes in investment, equity and commodity prices and changes in corporate tax rates. We employ risk management strategies, which may include the use of a variety of derivatives including cross currency swaps, foreign currency and prepaid forwards and collars, interest rate swap agreements, commodity swap and forward agreements, interest rate locks and interest rate caps. We do not hold derivatives for trading purposes.

It is our general policy to enter into interest rate, foreign currency and other derivative transactions only to the extent necessary to achieve our desired objectives in optimizing exposure to various market risks. Our objectives include maintaining a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. We do not hedge our market risk exposure in a manner that would completely eliminate the effect of changes in interest rates and foreign exchange rates on our earnings. We posted collateral of approximately $0.2 billion and $0.1 billion related to derivative contracts under collateral exchange arrangements at September 30, 2016 and December 31, 2015, respectively. During 2015, we paid an immaterial amount of cash to enter into amendments to certain collateral exchange arrangements. These amendments suspend cash collateral posting for a specified period of time by both counterparties. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote. As such, we do not expect that our results of operations or financial condition will be materially affected by these risk management strategies.

Interest Rate Risk

We are exposed to changes in interest rates, primarily on our short-term debt and the portion of long-term debt that carries floating interest rates. As of September 30, 2016, approximately 81% of the aggregate principal amount of our total debt portfolio consisted of fixed rate indebtedness, including the effect of interest rate swap agreements designated as hedges. The impact of a 100 basis point change in interest rates affecting our floating rate debt would result in a change in annual interest expense, including our interest rate swap agreements that are designated as hedges, of approximately $0.2 billion. The interest rates on substantially all of our existing long-term debt obligations are unaffected by changes to our credit ratings.

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Interest Rate Swaps

We enter into domestic interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates based on the London Interbank Offered Rate, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against changes in the fair value of our debt portfolio. At September 30, 2016 and December 31, 2015, the fair value of these contracts was $0.4 billion and $0.1 billion, respectively, which was primarily included within Other assets on our condensed consolidated balance sheets. At September 30, 2016 and December 31, 2015, the total notional amount of the interest rate swaps was $7.9 billion and $7.6 billion, respectively.

Forward Interest Rate Swaps

In order to manage our exposure to future interest rate changes, we have entered into forward interest rate swaps. We designated these contracts as cash flow hedges. These forward interest rate swaps were settled during the third quarter. The fair value of these contracts, which was included within Other liabilities on our condensed consolidated balance sheet, was not material at December 31, 2015. At December 31, 2015, these swaps had a notional value of $0.8 billion.

Interest Rate Caps

During the third quarter of 2016, we entered into interest rate caps to mitigate our interest exposure on our ABS Financing Facility against changes in interest rates. We have not applied hedge accounting to these interest rate caps. The fair value of these contracts was not material at September 30, 2016. At September 30, 2016, the total notional value of these contracts was $1.5 billion.

Foreign Currency Translation

The functional currency for our foreign operations is primarily the local currency. The translation of income statement and balance sheet amounts of our foreign operations into U.S. dollars is recorded as cumulative translation adjustments, which are included in Accumulated other comprehensive income in our condensed consolidated balance sheets. Gains and losses on foreign currency transactions are recorded in the condensed consolidated statements of income in Other income and (expense), net. At September 30, 2016, our primary translation exposure was to the British Pound Sterling, Euro, Australian Dollar and Japanese Yen.

Cross Currency Swaps

We enter into cross currency swaps to exchange British Pound Sterling and Euro-denominated debt into U.S. dollars and to fix our future interest and principal payments in U.S. dollars, as well as to mitigate the effect of foreign currency transaction gains or losses. These swaps are designated as cash flow hedges. The fair value of the outstanding swaps, which was primarily included within Other liabilities on our condensed consolidated balance sheets, was $1.5 billion at September 30, 2016 and $1.6 billion at December 31, 2015. At September 30, 2016 and December 31, 2015, the total notional amount of the cross currency swaps was $9.6 billion and $9.7 billion, respectively.

Net Investment Hedges

We enter into foreign currency forward contracts that are designated as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. The fair value of these contracts was not material at September 30, 2016 and December 31, 2015, respectively. At September 30, 2016 and December 31, 2015, the total notional value of these contracts was $0.9 billion, respectively.

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Acquisitions and Divestitures

Wireless

Spectrum License Transactions

From time to time, we enter into agreements to buy, sell or exchange spectrum licenses. We believe these spectrum license transactions have allowed us to continue to enhance the reliability of our network while also resulting in a more efficient use of spectrum. See Note 2 to the condensed consolidated financial statements for additional details regarding our spectrum license transactions.

During the fourth quarter of 2016, we entered into a license exchange agreement with affiliates of AT&T to exchange certain AWS and PCS spectrum licenses. This non-cash exchange is subject to customary closing conditions and is expected to be completed in the first half of 2017. Upon completion of this transaction, we expect to record a gain which will be determined upon the closing of the transaction.

Wireline

Access Line Sale

On February 5, 2015, we entered into a definitive agreement with Frontier pursuant to which Verizon agreed to sell its local exchange business and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service and long distance voice accounts in these three states for approximately $10.5 billion (approximately $7.3 billion net of income taxes), subject to certain adjustments and including the assumption of $0.6 billion of indebtedness from Verizon by Frontier. The transaction, which included the acquisition by Frontier of the equity interests of Verizon’s ILECs in California, Florida and Texas, did not involve any assets or liabilities of Verizon Wireless. The transaction closed on April 1, 2016. See Note 2 to the condensed consolidated financial statements for additional information.

XO Holdings

On February 20, 2016, Verizon entered into a purchase agreement to acquire XO Holdings’ wireline business which owns and operates one of the largest fiber-based IP and Ethernet networks outside of Verizon’s footprint for approximately $1.8 billion, subject to adjustment. The transaction is targeted to close by the end of the first quarter of 2017, subject to regulatory approvals. Separately, Verizon entered into an agreement to lease certain wireless spectrum from XO Holdings and has an option, exercisable under certain circumstances, to buy the XO Holdings’ entity that owns its wireless spectrum.

Other

Acquisition of Yahoo! Inc.’s Operating Business

On July 23, 2016, we entered into the Purchase Agreement with Yahoo. Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we will acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments. Prior to the closing of the Transaction, pursuant to a reorganization agreement, Yahoo will transfer all of the assets and liabilities constituting Yahoo’s operating business to the subsidiaries to be acquired in the Transaction. The assets to be acquired will not include Yahoo’s cash, its ownership interests in Alibaba, Yahoo! Japan and certain other investments, certain undeveloped land recently divested by Yahoo or certain non-core intellectual property. We will receive for our benefit and that of our current and certain future affiliates a non-exclusive, worldwide, perpetual, royalty-free license to all of Yahoo’s intellectual property that is not being conveyed with the business.

Yahoo employees who transfer to Verizon will have any unvested Yahoo restricted stock units that they hold converted into cash-settleable Verizon restricted stock units, which will have the same vesting schedule as their Yahoo restricted stock units. The value of those outstanding restricted stock units on the date of signing was approximately $1.1 billion.

The Transaction is subject to customary regulatory approvals and closing conditions, including the approval of Yahoo’s stockholders.

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On September 22, 2016, Yahoo announced that it had confirmed that a copy of certain information associated with at least 500 million user accounts was stolen from its network in late 2014. This could result in a material adverse effect under the terms of our agreement. We are continuing to evaluate the impacts of this event on the transaction.

Other

On July 29, 2016, Verizon acquired Telogis, Inc., a global, cloud-based mobile enterprise management software business for $0.9 billion of cash consideration.

On July 30, 2016, we entered into an agreement (the Transaction Agreement) to acquire Fleetmatics, a public limited company incorporated in Ireland. Fleetmatics is a leading global provider of fleet and mobile workforce management solutions. Under the terms of the Transaction Agreement, we will acquire Fleetmatics pursuant to a scheme of arrangement under the Irish Companies Act 2014 for $60.00 per ordinary share in cash, representing a value of approximately $2.4 billion. The acquisition is subject to customary regulatory approvals and closing conditions, including the approval of Fleetmatics’ shareholders and the sanction of the scheme of arrangement by the Irish High Court. Approval from Fleetmatics’ shareholders has been obtained. We expect this transaction to close in the fourth quarter of 2016.

From time to time, we enter into strategic agreements to acquire various other businesses and investments. See Note 2 to the condensed consolidated financial statements for additional information.

Other Factors That May Affect Future Results

Regulatory and Competitive Trends

There have been no material changes to Regulatory and Competitive Trends as previously disclosed in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and Part I, Item 1. “Business” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Environmental Matters

Reserves have been established to cover environmental matters relating to discontinued businesses and past telecommunications activities. These reserves include funds to address contamination at the site of a former Sylvania facility in Hicksville, NY, which had processed nuclear fuel rods in the 1950s and 1960s. In September 2005, the Army Corps of Engineers (ACE) accepted the site into its Formerly Utilized Sites Remedial Action Program. As a result, the ACE has taken primary responsibility for addressing the contamination at the site. An adjustment to the reserves may be made after a cost allocation is conducted with respect to the past and future expenses of all of the parties. Adjustments to the environmental reserve may also be made based upon the actual conditions found at other sites requiring remediation.

Critical Accounting Estimates

Goodwill

Our goodwill is treated as an indefinite-lived intangible asset and, therefore, is not amortized. Instead, our goodwill is tested for impairment annually in the fourth fiscal quarter, unless there are events requiring an earlier assessment or changes in circumstances during an interim period that indicate these assets may not be recoverable. We believe our estimates and assumptions are reasonable and represent appropriate marketplace considerations as of the valuation date. Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates are uncertain by nature and can vary from actual results. It is possible that in the future there may be changes in our assumptions, including estimated cash flow projections, margins, growth rates and discount rate, which could result in different fair value estimates and an impairment charge.

Recently Issued Accounting Standards

See Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting standard updates not yet adopted as of September 30, 2016.

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Cautionary Statement Concerning Forward-Looking Statements

In this report we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

The following important factors, along with those discussed elsewhere in this report and in other filings with the Securities and Exchange Commission (SEC), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements:

• adverse conditions in the U.S. and international economies;

• the effects of competition in the markets in which we operate;

• material changes in technology or technology substitution;

• disruption of our key suppliers’ provisioning of products or services;

• changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks;

• breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance;

• our high level of indebtedness;

• an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing;

• material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact;

• significant increases in benefit plan costs or lower investment returns on plan assets;

• changes in tax laws or treaties, or in their interpretation;

• changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings;

• the inability to implement our business strategies; and

• the inability to realize the expected benefits of strategic transactions.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information relating to market risk is included in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Market Risk.”

Item 4. Controls and Procedures

Our chief executive officer and chief financial officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report that ensure that information relating to the registrant which is required to be disclosed in this report is recorded, processed, summarized and reported within required time periods using the criteria for effective internal control established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, our chief executive officer and chief financial officer have concluded that the registrant’s disclosure controls and procedures were effective as of September 30, 2016.

In the ordinary course of business, we routinely review our system of internal control over financial reporting and make changes to our systems and processes that are intended to ensure an effective internal control environment. We are continuing an initiative to standardize and centralize transaction-processing activities within our accounting and finance processes, which we expect to continue over the next several years. This initiative will incorporate certain changes in personnel as well. In connection with this initiative and the resulting changes in our accounting processes, the Company has reviewed the design and documentation of our internal control system and enhanced our processes as needed to ensure that controls over our financial reporting remain effective.

Except as noted above, there were no changes in the Company’s internal control over financial reporting during the third quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

In October 2013, the California Attorney General’s Office notified Verizon California Inc. and other Verizon companies of potential violations of California state hazardous waste statutes primarily arising from the disposal of electronic components, batteries and aerosol cans at certain California facilities. We are cooperating with this investigation and continue to review our operations relating to the management of hazardous waste. While penalties relating to the alleged violations could exceed $100,000, we do not expect that any penalties ultimately incurred will be material. On April 1, 2016, we completed the sale to Frontier of our landline business operated by Verizon California Inc. and certain other Verizon landline companies. As a result of this transaction, Frontier now owns and operates Verizon California Inc. and has assumed the liabilities of Verizon California Inc. that may arise as a result of these alleged violations.

Item 1A. Risk Factors

There have been no material changes to our risk factors as previously disclosed in Part II, Item 1A. of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In March 2014, the Verizon Board of Directors authorized a three-year share buyback program to repurchase up to 100 million shares of the Company’s common stock. Under the program, shares may be repurchased in privately negotiated transactions and on the open market, including through plans complying with Rule 10b5-1(c) under the Exchange Act. The timing and number of shares purchased under the program, if any, will depend on market conditions and the Company’s capital allocation priorities.

Verizon did not repurchase any shares of Verizon common stock during the three months ended September 30, 2016. At September 30, 2016, the maximum number of shares that could be purchased by or on behalf of Verizon under our share buyback program was 97.2 million.

57

Item 6. Exhibits

Exhibit Number	Description
12	Computation of Ratio of Earnings to Fixed Charges.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.PRE	XBRL Taxonomy Presentation Linkbase Document.
101.CAL	XBRL Taxonomy Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Label Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

58

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VERIZON COMMUNICATIONS INC.
Date: October 26, 2016	By	/s/ Anthony T. Skiadas
		Anthony T. Skiadas
		Senior Vice President and Controller
		(Principal Accounting Officer)

59

Exhibit Index

Exhibit Number	Description
12	Computation of Ratio of Earnings to Fixed Charges.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.PRE	XBRL Taxonomy Presentation Linkbase Document.
101.CAL	XBRL Taxonomy Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Label Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

60

EX-12

EXHIBIT 12

Computation of Ratio of Earnings to Fixed Charges

Verizon Communications Inc. and Subsidiaries

(dollars in millions)	Nine Months Ended September 30, 2016
Earnings:
Income before provision for income taxes	$	14,037
Equity in losses of unconsolidated businesses		63
Dividends from unconsolidated businesses		31
Interest expense (1)		3,239
Portion of rent expense representing interest		893
Amortization of capitalized interest		140
Earnings, as adjusted	$	18,403
Fixed Charges:
Interest expense (1)	$	3,239
Portion of rent expense representing interest		893
Capitalized interest		531
Fixed charges	$	4,663
Ratio of earnings to fixed charges		3.95

⁽¹⁾ We classify interest expense recognized on uncertain tax positions as income tax expense and therefore such interest expense is not included in the Ratio of Earnings to Fixed Charges.

EX-31.1

EXHIBIT 31.1

I, Lowell C. McAdam, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Verizon Communications Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2016	/s/ Lowell C. McAdam
	Lowell C. McAdam
	Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Francis J. Shammo, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Verizon Communications Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2016	/s/ Francis J. Shammo
	Francis J. Shammo
	Executive Vice President          and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, Lowell C. McAdam, Chairman and Chief Executive Officer of Verizon Communications Inc. (the Company), certify that:

(1) the report of the Company on Form 10-Q for the quarterly period ending September 30, 2016 (the Report) fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (the Exchange Act); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods referred to in the Report.

Date: October 26, 2016	/s/ Lowell C. McAdam
	Lowell C. McAdam
	Chairman and Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Verizon Communications Inc. and will be retained by Verizon Communications Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, Francis J. Shammo, Executive Vice President and Chief Financial Officer of Verizon Communications Inc. (the Company), certify that:

(1) the report of the Company on Form 10-Q for the quarterly period ending September 30, 2016 (the Report) fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (the Exchange Act); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods referred to in the Report.

Date: October 26, 2016	/s/ Francis J. Shammo
	Francis J. Shammo
	Executive Vice President          and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Verizon Communications Inc. and will be retained by Verizon Communications Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2016 shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Trading Symbol	VZ
Entity Registrant Name	VERIZON COMMUNICATIONS INC
Entity Central Index Key	0000732712
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	4,076,633,952

XML

Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Operating Revenues
Service revenues and other	$ 26,813	$ 28,866	$ 81,858	$ 85,840
Wireless equipment revenues	4,124	4,292	11,782	11,526
Total Operating Revenues	30,937	33,158	93,640	97,366
Operating Expenses
Cost of services (exclusive of items shown below)	6,989	7,589	22,180	21,571
Wireless cost of equipment	5,240	5,716	14,882	16,279
Selling, general and administrative expense	8,226	8,309	25,601	24,222
Depreciation and amortization expense	3,942	4,009	11,941	11,978
Total Operating Expenses	24,397	25,623	74,604	74,050
Operating Income	6,540	7,535	19,036	23,316
Equity in losses of unconsolidated businesses	(23)	(18)	(63)	(70)
Other income and (expense), net	97	51	(1,697)	158
Interest expense	(1,038)	(1,202)	(3,239)	(3,742)
Income Before Provision For Income Taxes	5,576	6,366	14,037	19,662
Provision for income taxes	(1,829)	(2,195)	(5,029)	(6,800)
Net Income	3,747	4,171	9,008	12,862
Net income attributable to noncontrolling interests	127	133	376	374
Net income attributable to Verizon	$ 3,620	$ 4,038	$ 8,632	$ 12,488
Basic Earnings Per Common Share
Net income attributable to Verizon	$ 0.89	$ 0.99	$ 2.12	$ 3.05
Weighted-average shares outstanding (in millions)	4,079	4,072	4,080	4,089
Diluted Earnings Per Common Share
Net income attributable to Verizon	$ 0.89	$ 0.99	$ 2.11	$ 3.05
Weighted-average shares outstanding (in millions)	4,086	4,078	4,086	4,095
Dividends declared per common share	$ 0.5775	$ 0.5650	$ 1.7075	$ 1.6650

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net Income	$ 3,747	$ 4,171	$ 9,008	$ 12,862
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments	(78)	(74)	(23)	(161)
Unrealized gain (loss) on cash flow hedges	147	(90)	(58)	(196)
Unrealized loss on marketable securities	(19)	(13)	(35)	(22)
Defined benefit pension and postretirement plans	(139)	(44)	2,324	(132)
Other comprehensive income (loss) attributable to Verizon	(89)	(221)	2,208	(511)
Total Comprehensive Income	3,658	3,950	11,216	12,351
Comprehensive income attributable to noncontrolling interests	127	133	376	374
Comprehensive income attributable to Verizon	$ 3,531	$ 3,817	$ 10,840	$ 11,977

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 6,441	$ 4,470
Short-term investments		350
Accounts receivable, net of allowances of $800 and $882	14,832	13,457
Inventories	1,318	1,252
Assets held for sale		792
Prepaid expenses and other	3,030	2,034
Total current assets	25,621	22,355
Plant, property and equipment	228,909	220,163
Less accumulated depreciation	145,495	136,622
Plant, property and equipment, net	83,414	83,541
Investments in unconsolidated businesses	1,119	796
Wireless licenses	87,407	86,575
Goodwill	25,970	25,331
Other intangible assets, net	7,692	7,592
Non-current assets held for sale		10,267
Other assets	8,275	7,718
Total assets	239,498	244,175
Current liabilities
Debt maturing within one year	3,852	6,489
Accounts payable and accrued liabilities	18,002	19,362
Liabilities related to assets held for sale		463
Other	8,444	8,738
Total current liabilities	30,298	35,052
Long-term debt	102,739	103,240
Employee benefit obligations	28,285	29,957
Deferred income taxes	44,617	45,484
Non-current liabilities related to assets held for sale		959
Other liabilities	11,576	11,641
Equity
Series preferred stock ($.10 par value; none issued)
Common stock ($.10 par value; 4,242,374,240 shares issued in each period)	424	424
Contributed capital	11,179	11,196
Reinvested earnings	12,918	11,246
Accumulated other comprehensive income	2,758	550
Common stock in treasury, at cost	(7,264)	(7,416)
Deferred compensation - employee stock ownership plans and other	445	428
Noncontrolling interests	1,523	1,414
Total equity	21,983	17,842
Total liabilities and equity	$ 239,498	$ 244,175

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Accounts receivable, allowances	$ 800	$ 882
Series preferred stock, par value	$ 0.10	$ 0.10
Series preferred stock, issued	0	0
Common stock, par value	$ 0.10	$ 0.10
Common stock, shares issued	4,242,374,240	4,242,374,240

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash Flows from Operating Activities
Net Income	$ 9,008	$ 12,862
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	11,941	11,978
Employee retirement benefits	4,531	1,184
Deferred income taxes	(2,331)	890
Provision for uncollectible accounts	963	1,136
Equity in losses of unconsolidated businesses, net of dividends received	94	98
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses	(4,010)	1,443
Other, net	(2,567)	(1,165)
Net cash provided by operating activities	17,629	28,426
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)	(11,398)	(12,540)
Acquisitions of businesses, net of cash acquired	(963)	(3,205)
Acquisitions of wireless licenses	(410)	(9,811)
Proceeds from dispositions of businesses	9,882
Other, net	350	960
Net cash used in investing activities	(2,539)	(24,596)
Cash Flows from Financing Activities
Proceeds from long-term borrowings	8,152	6,497
Proceeds from asset-backed long-term borrowings	2,594
Repayments of long-term borrowings and capital lease obligations	(14,510)	(7,168)
Decrease in short-term obligations, excluding current maturities	(120)	(305)
Dividends paid	(6,908)	(6,373)
Proceeds from sale of common stock	3	31
Purchase of common stock for treasury		(5,134)
Other, net	(2,330)	1,899
Net cash used in financing activities	(13,119)	(10,553)
Increase (decrease) in cash and cash equivalents	1,971	(6,723)
Cash and cash equivalents, beginning of period	4,470	10,598
Cash and cash equivalents, end of period	$ 6,441	$ 3,875

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2016

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared based upon Securities and Exchange Commission (SEC) 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 for the year ended December 31, 2015 of Verizon Communications Inc. (Verizon or the Company) included in its Current Report on Form 8-K dated July 29, 2016. 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. We have reclassified certain prior year amounts to conform to the current year presentation.

Earnings Per Common Share

There were a total of approximately 7 million and 6 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and nine months ended September 30, 2016, respectively. There were a total of approximately 6 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and nine months ended September 30, 2015, respectively. There were no outstanding options to purchase shares that would have been anti-dilutive for the three and nine months ended September 30, 2016 and 2015, respectively.

Recently Adopted Accounting Standards

During the first quarter of 2016, we adopted the accounting standard update related to the simplification of the accounting for measurement-period adjustments in business combinations. This standard update requires an acquirer to recognize measurement-period adjustments in the reporting period in which the adjustments are determined and to record the effects on earnings of any changes resulting from the change in provisional amounts, calculated as if the accounting had been completed at the acquisition date. The prospective adoption of this standard update did not have a significant impact on our condensed consolidated financial statements.

During the first quarter of 2016, we adopted the accounting standard update related to disclosures for investments in certain entities that calculate net asset value per share. This standard update removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The standard update limits the required disclosures to investments for which the entity has elected to measure the fair value using the practical expedient. The retrospective adoption of this standard update did not have a significant impact on our condensed consolidated financial statements.

During the first quarter of 2016, we adopted the accounting standard update related to the simplification of the presentation of debt issuance costs. This standard update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. During the first quarter of 2016, we also adopted the accounting standard update related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. This standard adds SEC paragraphs pursuant to an SEC Staff Announcement that the SEC staff would not object to an entity deferring and presenting debt issuance costs associated with a line-of-credit arrangement as an asset and subsequently amortizing the costs ratably over the term of the arrangement. We applied the amendments in these accounting standard updates retrospectively to all periods presented. The adoption of these standard updates did not have a significant impact on our condensed consolidated financial statements.

During the first quarter of 2016, we adopted the accounting standard update related to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The prospective adoption of this standard update did not have an impact on our condensed consolidated financial statements.

During the second quarter of 2016, we prospectively changed our method for determining the date at which we remeasure plan assets and obligations as a result of a significant event during an interim period in accordance with Accounting Standards Update (ASU) 2015-04, Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets. As a practical expedient, we elected to remeasure defined benefit plan assets and obligations using the month-end that is closest to the date of the significant event.

Recently Issued Accounting Standards

In August 2016, the accounting standard update related to the classification of certain cash receipts and cash payments was issued. This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective as of the first quarter of 2018; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements.

In June 2016, the standard update related to the measurement of credit losses on financial instruments was issued. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard update is effective as of the first quarter of 2020; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements.

In March 2016, the accounting standard update related to employee share-based payment accounting was issued. This standard update intends to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This standard update is effective as of the first quarter of 2017; however, early adoption is permitted. The adoption of this standard update is not expected to have a significant impact on our condensed consolidated financial statements.

In February 2016, the accounting standard update related to leases was issued. This standard update intends to increase transparency and improve comparability by requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, through improved disclosure requirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update is effective as of the first quarter of 2019; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements.

In May 2014, the accounting standard update related to the recognition of revenue from contracts with customers was issued. This standard update clarifies the principles for recognizing revenue and develops a common revenue standard for generally accepted accounting principles in the United States (U.S. GAAP) and International Financial Reporting Standards. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers requiring that all incremental costs of obtaining and direct costs of fulfilling contracts with customers be deferred and recognized over the expected customer life. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of financial statements through improved disclosure requirements. Upon adoption of this standard update, we expect that the allocation and timing of revenue recognition as well as timing of recognition of certain contract costs will be impacted. In August 2015, an accounting standard update was issued that delayed the effective date of this standard until the first quarter of 2018.

There are two adoption methods available for implementation of the standard update related to the recognition of revenue from contracts with customers. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied only to the most current period presented, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. We are currently evaluating these adoption methods and the impact that this standard update will have on our condensed consolidated financial statements.

We have established a cross-functional coordinated implementation team to implement the standard update related to the recognition of revenue from contracts with customers. We have identified and are in the process of implementing changes to our systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

XML

Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2016

Acquisitions and Divestitures

2. Acquisitions and Divestitures

Wireless

Spectrum License Transactions

During the fourth quarter of 2015, we entered into a license exchange agreement with affiliates of AT&T Inc. (AT&T) to exchange certain Advanced Wireless Services (AWS) and Personal Communication Services (PCS) spectrum licenses. This non-cash exchange was completed in March 2016. As a result, we received $0.4 billion of AWS and PCS spectrum licenses at fair value and recorded a pre-tax gain of $0.1 billion in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016.

During the first quarter of 2016, we entered into a license exchange agreement with affiliates of Sprint Corporation, which provides for the exchange of certain AWS and PCS spectrum licenses. This non-cash exchange was completed in September 2016. As a result, we received $0.3 billion of AWS and PCS spectrum licenses at fair value and recorded an immaterial gain in Selling, general and administrative expense on our condensed consolidated statement of income for the nine months ended September 30, 2016.

During the fourth quarter of 2016, we entered into a license exchange agreement with affiliates of AT&T to exchange certain AWS and PCS spectrum licenses. This non-cash exchange is subject to customary closing conditions and is expected to be completed in the first half of 2017. Upon completion of this transaction, we expect to record a gain which will be determined upon the closing of the transaction.

During the three and nine months ended September 30, 2016, we acquired various other wireless licenses for cash consideration that was not significant.

Wireline

Access Line Sale

On February 5, 2015, we entered into a definitive agreement with Frontier Communications Corporation (Frontier) pursuant to which Verizon agreed to sell its local exchange business and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service and long distance voice accounts in these three states for approximately $10.5 billion (approximately $7.3 billion net of income taxes), subject to certain adjustments and including the assumption of $0.6 billion of indebtedness from Verizon by Frontier. The transaction, which includes the acquisition by Frontier of the equity interests of Verizon’s incumbent local exchange carriers (ILECs) in California, Florida and Texas, did not involve any assets or liabilities of Verizon Wireless. The transaction closed on April 1, 2016.

The transaction resulted in Frontier acquiring approximately 3.3 million voice connections, 1.6 million Fios Internet subscribers, 1.2 million Fios video subscribers and the related ILEC businesses from Verizon. For the nine months ended September 30, 2016, these businesses generated revenues of approximately $1.3 billion and operating income of $0.7 billion for Verizon. For the three and nine months ended September 30, 2015, these businesses generated revenues of $1.3 billion and $4.0 billion, respectively, and operating income of $0.7 billion and $2.1 billion, respectively. The operating results of these businesses are excluded from our Wireline segment for all periods presented to reflect comparable segment operating results consistent with the information regularly reviewed by our chief operating decision maker.

During April 2016, Verizon used the net cash proceeds received of $9.9 billion to reduce its consolidated indebtedness (see Note 4). The assets and liabilities that were sold were included in Verizon’s continuing operations and classified as assets held for sale and liabilities related to assets held for sale on our condensed consolidated balance sheets through the completion of the transaction on April 1, 2016. As a result of the closing of the transaction, we derecognized plant, property, and equipment of $9.0 billion, goodwill of $1.3 billion, $0.7 billion of defined benefit pension and other postretirement benefit plan obligations and $0.6 billion of indebtedness assumed by Frontier.

We recorded a pre-tax gain of approximately $1.0 billion in Selling, general and administrative expense on our condensed consolidated statement of income for nine months ended September 30, 2016. The pre-tax gain included a $0.5 billion pension and postretirement benefit curtailment gain due to the elimination of the accrual of pension and other postretirement benefits for some or all future services of a significant number of employees covered by three of our defined benefit pension plans and one of our other postretirement benefit plans.

XO Holdings

On February 20, 2016, Verizon entered into a purchase agreement to acquire XO Holdings’ wireline business which owns and operates one of the largest fiber-based IP and Ethernet networks outside of Verizon’s footprint for approximately $1.8 billion, subject to adjustment. The transaction is targeted to close by the end of the first quarter of 2017, subject to regulatory approvals. Separately, Verizon entered into an agreement to lease certain wireless spectrum from XO Holdings and has an option, exercisable under certain circumstances, to buy the XO Holdings’ entity that owns its wireless spectrum.

Other

Acquisition of AOL Inc.

On May 12, 2015, we entered into an Agreement and Plan of Merger (the Merger Agreement) with AOL Inc. (AOL) pursuant to which we commenced a tender offer to acquire all of the outstanding shares of common stock of AOL at a price of $50.00 per share, net to the seller in cash, without interest and less any applicable withholding taxes.

On June 23, 2015, we completed the tender offer and merger, and AOL became a wholly-owned subsidiary of Verizon. The aggregate cash consideration paid by Verizon at the closing of these transactions was approximately $3.8 billion. Holders of approximately 6.6 million shares exercised appraisal rights under Delaware law. If they had not exercised these rights, Verizon would have paid an additional $330 million for such shares at the closing.

AOL is a leader in the digital content and advertising platform space. Verizon has been investing in emerging technology that taps into the market shift to digital content and advertising. AOL’s business model aligns with this approach, and we believe that its combination of owned and operated content properties plus a digital advertising platform enhances our ability to further develop future revenue streams.

The acquisition of AOL has been accounted for as a business combination. The identification of the assets acquired and liabilities assumed are finalized.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Accounting Standards Codification (ASC) 820, other than long-term debt assumed in the acquisition. The income approach was primarily used to value the intangible assets, consisting primarily of acquired technology and customer relationships. The income approach indicates value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a required rate of return that reflects the relative risk of achieving the cash flow and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

The following table summarizes the consideration to AOL’s shareholders and the identification of the assets acquired, including cash acquired of $0.5 billion, and liabilities assumed as of the close of the acquisition, as well as the fair value at the acquisition date of AOL’s noncontrolling interests:

(dollars in millions)	As of June 23, 2015
Cash payment to AOL’s equity holders	$	3,764
Estimated liabilities to be paid(1)		377
Total consideration	$	4,141
Assets acquired:
Goodwill	$	1,938
Intangible assets subject to amortization		2,504
Other		1,551
Total assets acquired		5,993
Liabilities assumed:
Total liabilities assumed		1,851
Net assets acquired:		4,142
Noncontrolling interest		(1	)
Total consideration	$	4,141

⁽¹⁾  During the nine months ended September 30, 2016, we made cash payments of $179 million in respect of acquisition-date estimated liabilities to be paid. As of September 30, 2016, the remaining balance of estimated liabilities to be paid was $198 million.

Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired. The goodwill recorded as a result of the AOL transaction represents future economic benefits we expect to achieve as a result of combining the operations of AOL and Verizon as well as assets acquired that could not be individually identified and separately recognized. The goodwill related to this acquisition is included within Corporate and other.

Acquisition of Yahoo! Inc.’s Operating Business

On July 23, 2016, we entered into a stock purchase agreement (the Purchase Agreement) with Yahoo! Inc. (Yahoo). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, we will acquire the stock of one or more subsidiaries of Yahoo holding all of Yahoo’s operating business, for approximately $4.83 billion in cash, subject to certain adjustments (the Transaction). Prior to the closing of the Transaction, pursuant to a reorganization agreement, Yahoo will transfer all of the assets and liabilities constituting Yahoo’s operating business to the subsidiaries to be acquired in the Transaction. The assets to be acquired will not include Yahoo’s cash, its ownership interests in Alibaba, Yahoo! Japan and certain other investments, certain undeveloped land recently divested by Yahoo or certain non-core intellectual property. We will receive for our benefit and that of our current and certain future affiliates a non-exclusive, worldwide, perpetual, royalty-free license to all of Yahoo’s intellectual property that is not being conveyed with the business.

Yahoo employees who transfer to Verizon will have any unvested Yahoo restricted stock units that they hold converted into cash-settleable Verizon restricted stock units, which will have the same vesting schedule as their Yahoo restricted stock units. The value of those outstanding restricted stock units on the date of signing was approximately $1.1 billion.

The Transaction is subject to customary regulatory approvals and closing conditions, including the approval of Yahoo’s stockholders.

On September 22, 2016, Yahoo announced that it had confirmed that a copy of certain information associated with at least 500 million user accounts was stolen from its network in late 2014. This could result in a material adverse effect under the terms of our agreement. We are continuing to evaluate the impacts of this event on the transaction.

Other

On July 29, 2016, Verizon acquired Telogis, Inc., a global, cloud-based mobile enterprise management software business for $0.9 billion of cash consideration. Upon closing, we recorded $0.6 billion of goodwill that is included within Corporate and other.

On July 30, 2016, we entered into an agreement (the Transaction Agreement) to acquire Fleetmatics Group PLC, a public limited company incorporated in Ireland (Fleetmatics). Fleetmatics is a leading global provider of fleet and mobile workforce management solutions. Under the terms of the Transaction Agreement, we will acquire Fleetmatics pursuant to a scheme of arrangement under the Irish Companies Act 2014 for $60.00 per ordinary share in cash, representing a value of approximately $2.4 billion. The acquisition is subject to customary regulatory approvals and closing conditions, including the approval of Fleetmatics’ shareholders and the sanction of the scheme of arrangement by the Irish High Court. Approval from Fleetmatics’ shareholders has been obtained. We expect this transaction to close in the fourth quarter of 2016.

On September 12, 2016, Verizon announced an agreement to acquire a leading provider of Internet of Things (IoT) solutions for smart communities for cash consideration that is not significant. The transaction was completed in October 2016.

During the nine months ended September 30, 2016, we acquired various other businesses and investments for cash consideration that was not significant.

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Wireless Licenses, Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2016

Wireless Licenses, Goodwill and Other Intangible Assets

3. Wireless Licenses, Goodwill and Other Intangible Assets

Wireless Licenses

Changes in the carrying amount of Wireless licenses are as follows:

(dollars in millions)
Balance at January 1, 2016	$	86,575
Acquisitions (Note 2)		26
Capitalized interest on wireless licenses		384
Reclassifications, adjustments and other		422
Balance at September 30, 2016	$	87,407

Reclassifications, adjustments and other includes the exchanges of wireless licenses in 2016 (see Note 2 for additional details).

At September 30, 2016, approximately $10.4 billion of wireless licenses were under development for commercial service for which we were capitalizing interest costs.

The average remaining renewal period for our wireless licenses portfolio was 5.2 years as of September 30, 2016.

Goodwill

Changes in the carrying amount of Goodwill are as follows:

(dollars in millions)	Wireless		Wireline			Other		Total
Balance at January 1, 2016	$	18,393	$	4,331		$	2,607	$	25,331
Acquisitions (Note 2)		–		–			641		641
Reclassifications, adjustments and other		–		(113	)		111		(2	)
Balance at September 30, 2016	$	18,393	$	4,218		$	3,359	$	25,970

We recognized goodwill of $0.6 billion in Corporate and other as a result of an acquisition in the third quarter of 2016 (see Note 2 for additional details). During the second quarter of 2016, we allocated $0.1 billion of Goodwill on a relative fair value basis from Wireline to Corporate and other as a result of the reclassification of our vehicle original equipment manufacturer (OEM) and Networkfleet businesses (see Note 10 for additional details).

Other Intangible Assets

The following table displays the composition of Other intangible assets, net:

	At September 30, 2016							At December 31, 2015
(dollars in millions)	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer lists (6 to 14 years)	$	3,963	$	(2,355	)	$	1,608	$	4,139	$	(2,365	)	$	1,774
Non-network internal-use software (3 to 8 years)		15,530		(10,593	)		4,937		14,542		(9,620	)		4,922
Other (5 to 25 years)		1,688		(541	)		1,147		1,346		(450	)		896
Total	$	21,181	$	(13,489)		$	7,692	$	20,027	$	(12,435)		$	7,592

The amortization expense for Other intangible assets was as follows:

(dollars in millions)	Three Months Ended September 30,		Nine Months Ended September 30,
2016		$       419		$       1,255
2015		438		1,247

The estimated future amortization expense for Other intangible assets is as follows:

Years	(dollars in millions)
Remainder of 2016		$    416
2017		1,505
2018		1,327
2019		1,121
2020		892

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Debt

9 Months Ended

Sep. 30, 2016

Debt

4. Debt

Changes to debt during the nine months ended September 30, 2016 are as follows:

(dollars in millions)	Debt Maturing within One Year			Long-term Debt			Total
Balance at January 1, 2016	$	6,489		$	103,240		$	109,729
Proceeds from borrowings		–			8,152			8,152
Proceeds from asset-backed borrowings		–			2,594			2,594
Repayments of borrowings and capital leases obligations		(6,110	)		(8,400	)		(14,510	)
Decrease in short-term obligations, excluding current maturities		(120	)		–			(120	)
Reclassifications of long-term debt		3,412			(3,412	)		–
Other		181			565			746
Balance at September 30, 2016	$	3,852		$	102,739		$	106,591

April Tender Offers

On March 4, 2016, we announced the commencement of three concurrent, but separate, tender offers (the April Tender Offers) to purchase for cash (1) any and all of the series of notes listed below in the Group 1 Any and All Offer, (2) any and all of the series of notes listed below in the Group 2 Any and All Offer and (3) up to $5.5 billion aggregate purchase price, excluding accrued and unpaid interest and any fees or commissions, of the series of notes listed below in the Group 3 Offer.

The April Tender Offers for each series of notes were conditioned upon the closing of the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier and the receipt of at least $9.5 billion of the purchase price cash at closing (the Sale Condition). The Sale Condition was satisfied and the April Tender Offers were settled on April 4, 2016, resulting in the notes listed below being repurchased and cancelled for $10.2 billion, inclusive of accrued interest of $0.1 billion.

The table below lists the series of notes included in the Group 1 Any and All Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price (1)		Principal Amount Purchased
Verizon Communications Inc.		2.50	%		2016	$	2,182	$	1,007.60	$	1,272
		2.00	%		2016		1,250		1,007.20		731
		6.35	%		2019		1,750		1,133.32		970
										$	2,973

⁽¹⁾  Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

The table below lists the series of notes included in the Group 2 Any and All Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price (1)		Principal Amount Purchased
Verizon Delaware LLC		8.375	%		2019	$	15	$	1,182.11	$	15
		8.625	%		2031		15		1,365.39		5
Verizon Maryland LLC		8.00	%		2029		50		1,301.32		22
		8.30	%		2031		100		1,347.26		76
		5.125	%		2033		350		1,012.50		171
Verizon New England Inc.		7.875	%		2029		349		1,261.63		176
Verizon New Jersey Inc.		8.00	%		2022		200		1,238.65		54
		7.85	%		2029		149		1,311.32		63
Verizon New York Inc.		6.50	%		2028		100		1,151.71		28
		7.375	%		2032		500		1,201.92		256
Verizon Pennsylvania LLC		6.00	%		2028		125		1,110.47		57
		8.35	%		2030		175		1,324.10		127
		8.75	%		2031		125		1,356.47		72
Verizon Virginia LLC		7.875	%		2022		100		1,227.79		43
		8.375	%		2029		100		1,319.78		81
										$	1,246

⁽¹⁾ Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

The table below lists the series of notes included in the Group 3 Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price (1)		Principal Amount Purchased
Verizon Communications Inc.		8.95	%		2039	$	353	$	1,506.50	$	63
		7.75	%		2032		251		1,315.19		33
		7.35	%		2039		480		1,293.50		68
		7.75	%		2030		1,206		1,377.92		276
		6.55	%		2043		6,585		1,291.74		2,340
		6.40	%		2033		2,196		1,220.28		466
		6.90	%		2038		477		1,243.29		92
		6.25	%		2037		750		1,167.66		114
		6.40	%		2038		866		1,176.52		116
		5.85	%		2035		1,500		1,144.68		250
		6.00	%		2041		1,000		1,164.56		–
		5.15	%		2023		8,517		1,152.83		–
Alltel Corporation		7.875	%		2032		452		1,322.92		115
		6.80	%		2029		235		1,252.93		47
GTE Corporation		6.94	%		2028		800		1,261.35		237
		8.75	%		2021		300		1,307.34		93
										$	4,310

⁽¹⁾  Per $1,000 principal amount of notes

April Early Debt Redemption

On April 8, 2016, we redeemed in whole the following series of outstanding notes which were called for redemption on April 5, 2016 (collectively, April Early Debt Redemption): $0.9 billion aggregate principal amount of Verizon Communications 2.50% Notes due 2016 at 100.8% of the principal amount of such notes, $0.5 billion aggregate principal amount of Verizon Communications 2.00% Notes due 2016 at 100.8% of the principal amount of such notes, and $0.8 billion aggregate principal amount of Verizon Communications 6.35% Notes due 2019 at 113.5% of the principal amount of such notes. These notes were repurchased and cancelled for $2.3 billion, inclusive of an immaterial amount of accrued interest.

Debt Issuances

During August 2016, we issued $6.2 billion aggregate principal amount of fixed and floating rate notes. The issuance of these Notes resulted in cash proceeds of approximately $6.1 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The issuance consisted of the following series of notes: $0.4 billion aggregate principal amount of Verizon Communications Floating Rate Notes due 2019, $1.0 billion aggregate principal amount of Verizon Communications 1.375% Notes due 2019, $1.0 billion aggregate principal amount of Verizon Communications 1.750% Notes due 2021, $2.3 billion aggregate principal amount of Verizon Communications 2.625% Notes due 2026, and $1.5 billion aggregate principal amount of Verizon Communications 4.125% Notes due 2046. The floating rate notes bear interest at a rate equal to the three-month London Interbank Offered Rate (LIBOR) plus 0.370%, which rate will be reset quarterly. The net proceeds were used for general corporate purposes, including to repay at maturity on September 15, 2016, $2.3 billion aggregate principal amount of our floating rate notes, plus accrued interest on the notes.

During September 2016, we issued $2.1 billion aggregate principal amount of 4.20% Notes due 2046. The issuance of these Notes resulted in cash proceeds of approximately $2.0 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The net proceeds were used to redeem in whole $0.9 billion aggregate principal amount of Verizon Communications 4.80% Notes due 2044 at 100% of the principal amount of such notes, plus any accrued and unpaid interest to the date of redemption, for an immaterial loss. Proceeds not used for the redemption of these notes were used for general corporate purposes.

Asset-Backed Debt

As of September 30, 2016, the carrying value of our asset-backed debt was $2.6 billion. Our asset-backed debt includes notes (the Asset-Backed Notes) issued to third-party investors (Investors) and loans (the ABS Financing Facility) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed securitization bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, we transfer device payment plan agreement receivables from Cellco Partnership and certain other affiliates of Verizon (collectively, the Originators) to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt and do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco Partnership and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables 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 on our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions, deposits to the segregated accounts and payments to the Originators in respect of additional transfers of device payment plan agreement receivables are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Repayments of our asset-backed debt and related interest payments made from the segregated accounts are non-cash activities and therefore not reflected within Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included on our condensed consolidated balance sheets.

Asset-Backed Notes

In July 2016, we issued $1.2 billion aggregate principal amount of senior and junior asset-backed notes through an ABS Entity, of which $1.1 billion of notes were sold to Investors. The senior asset-backed notes have an expected weighted average life of about 2.5 years and bear interest at 1.42% per annum. The junior asset-backed notes have an expected weighted average life of about 3.2 years and bear interest at a weighted-average rate of 1.53%. Under the terms of the asset-backed notes, there is a two year revolving period during which we may transfer additional receivables to the ABS Entity.

ABS Financing Facility

During the third quarter of 2016, we entered into a device payment plan agreement financing facility with a number of financial institutions. Under the terms of the ABS Financing Facility, such counterparties made advances under asset-backed loans backed by device payment plan agreement receivables for proceeds of $1.5 billion, and we have the option of requesting an additional $1.5 billion of committed funding. These loans have an expected weighted average life of about 2.6 years and bear interest at floating rates. There is a two year revolving period, which may be extended, during which we may transfer additional receivables to the ABS Entity. Subject to certain conditions, we may also remove receivables from the ABS Entity. We may prepay the outstanding amounts of the loans without penalty, but in certain cases, with breakage costs. As of September 30, 2016, outstanding borrowings under the ABS Financing Facility were $1.5 billion.

Variable Interest Entities

The ABS Entities meet the definition of a variable interest entity (VIE) for which we have determined that we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included on our condensed consolidated balance sheets were as follows:

(dollars in millions)	September 30, 2016		December 31, 2015
Assets
Account receivable, net	$	1,733	$	–
Prepaid expenses and other		71		–
Other assets		1,296		–
Liabilities
Long-term debt		2,595		–

See Note 5 for more information on device payment plan agreement receivables used to secure asset-backed debt.

Credit Facility

On September 23, 2016, we amended our $8.0 billion credit facility to increase the availability to $9.0 billion and extend the maturity to September 23, 2020. As of September 30, 2016, the unused borrowing capacity under our $9.0 billion credit facility was approximately $8.9 billion.

Additional Financing Activities (Non-Cash Transaction)

During the nine months ended September 30, 2016, we financed, primarily through vendor financing arrangements, the purchase of approximately $0.4 billion of long-lived assets, consisting primarily of network equipment. At September 30, 2016, $1.1 billion relating to vendor financing arrangements, including those entered into in prior years, remained outstanding. These purchases are non-cash financing activities and therefore not reflected within Capital expenditures on our condensed consolidated statements of cash flows.

Early Debt Redemptions

During the second quarter of 2016, we recorded a net pre-tax loss on early debt redemption of $1.8 billion in connection with the April Tender Offers and the April Early Debt Redemption.

We recognize early debt redemption costs in Other income and (expense), net on our condensed consolidated statements of income.

Guarantees

We guarantee the debentures of our operating telephone company subsidiaries. As of September 30, 2016, $1.2 billion aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

As a result of the closing of the Frontier transaction, as of April 1, 2016, GTE Southwest Inc., Verizon California Inc. and Verizon Florida LLC are no longer wholly-owned subsidiaries of Verizon, and the guarantees of $0.6 billion aggregate principal amount of debentures and first mortgage bonds of those entities have terminated pursuant to their terms.

We also guarantee the debt obligations of GTE Corporation that were issued and outstanding prior to July 1, 2003. As of September 30, 2016, $1.1 billion aggregate principal amount of these obligations were outstanding.

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Wireless Device Payment Plans

9 Months Ended

Sep. 30, 2016

Wireless Device Payment Plans

5. Wireless Device Payment Plans

Under the Verizon device payment program, our eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fees as compared to those under our fixed-term service plans, and their device payment plan charge is included on their standard wireless monthly bill.

Wireless Device Payment Plan Agreement Receivables

The following table displays device payment plan agreement receivables, net, that continue to be recognized in our condensed consolidated balance sheets:

(dollars in millions)	At September 30, 2016			At December 31, 2015
Device payment plan agreement receivables, gross	$	7,735		$	3,720
Unamortized imputed interest		(332	)		(142	)
Device payment plan agreement receivables, net of unamortized imputed interest		7,403			3,578
Allowance for credit losses		(601	)		(444	)
Device payment plan agreement receivables, net	$	6,802		$	3,134
Classified on our condensed consolidated balance sheets:
Accounts receivable, net	$	4,000		$	1,979
Other assets		2,802			1,155
Device payment plan agreement receivables, net	$	6,802		$	3,134

Included in our device payment plan agreement receivables, net at September 30, 2016 are net device payment plan agreement receivables of $3.0 billion that have been transferred to ABS Entities and continue to be reported in our condensed consolidated financial statements.

At the time of the sale of a device, we impute risk adjusted interest on the device payment plan agreement receivables. We record the imputed interest as a reduction to the related accounts receivable. Interest income, which is included within Service revenues and other on our condensed consolidated statements of income, is recognized over the financed device payment term.

When originating device payment plan agreements, we use internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program. If a customer is either new to Verizon Wireless or has less than 210 days of customer tenure with Verizon Wireless (a new customer), the credit decision process relies more heavily on external data sources. If the customer has 210 days or more of customer tenure with Verizon Wireless (an existing customer), the credit decision process relies on internal data sources. Verizon Wireless’ experience has been that the payment attributes of longer tenured customers are highly predictive when considering their ability to pay in the future. External data sources include obtaining a credit report from a national consumer credit reporting agency, if available. Verizon Wireless uses its internal data and/or credit data obtained from the credit reporting agencies to create a custom credit risk score. The custom credit risk score is generated automatically (except with respect to a small number of applications where the information needs manual intervention) from the applicant’s credit data using Verizon Wireless’ proprietary custom credit models, which are empirically derived, demonstrably and statistically sound. The credit risk score measures the likelihood that the potential customer will become severely delinquent and be disconnected for non-payment. For a small portion of new customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternate credit data is used for the risk assessment.

Based on the custom credit risk score, we assign each customer to a credit class, each of which has a specified required down payment percentage and specified credit limits. Device payment plan agreement receivables originated from customers assigned to credit classes requiring no down payment represent the lowest risk. Device payment plan agreement receivables originated from customers assigned to credit classes requiring a down payment represent a higher risk.

Subsequent to origination, Verizon Wireless monitors delinquency and write-off experience as key credit quality indicators for its portfolio of device payment plan agreements and fixed-term service plans. The extent of our collection efforts with respect to a particular customer are based on the results of proprietary custom empirically derived internal behavioral scoring models which analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These customer scoring models assess a number of variables, including origination characteristics, customer account history and payment patterns. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. We continuously monitor collection performance results and the credit quality of our device payment plan agreement receivables based on a variety of metrics, including aging. Verizon Wireless considers an account to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date.

The balance and aging of the device payment plan agreement receivables on a gross basis was as follows:

(dollars in millions)	At September 30, 2016		At December 31, 2015
Unbilled	$	7,261	$	3,420
Billed:
Current		375		227
Past due		99		73
Device payment plan agreement receivables, gross	$	7,735	$	3,720

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:

(dollars in millions)
Balance at January 1, 2016	$	444
Bad debt expense		437
Write-offs		(347	)
Allowance related to receivables sold		59
Other		8
Balance at September 30, 2016	$	601

Customers that entered into device payment plan agreements prior to May 31, 2015 have the right to upgrade their device, subject to certain conditions, including making a stated portion of the required device payment plan agreement payments and trading in their device in good working order. Generally, customers entering into device payment plan agreements on or after June 1, 2015 are required to repay all amounts due under their device payment plan agreements before being eligible to upgrade their device. However, on select devices, certain marketing promotions have been revocably offered to customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device or for a device that is subject to an upgrade promotion, we may record a guarantee liability in accordance with our accounting policy. The gross guarantee liability related to the upgrade program, which was $0.1 billion at September 30, 2016 and approximately $0.2 billion at December 31, 2015, is included in Other current liabilities on our condensed consolidated balance sheets.

Sales of Wireless Device Payment Plan Agreement Receivables

During 2015 and 2016, we established programs pursuant to a Receivables Purchase Agreement, or RPA, to sell from time to time, on an uncommitted basis, eligible device payment plan agreement receivables to a group of primarily relationship banks (Purchasers) on both a revolving (Revolving Program) and non-revolving (Non-Revolving Program) basis. The receivables sold under the RPA are no longer considered assets of Verizon. The outstanding portfolio of device payment plan agreement receivables derecognized from our condensed consolidated balance sheet, but which we continue to service, was $6.4 billion at September 30, 2016. As of September 30, 2016, the total portfolio of device payment plan agreement receivables, including derecognized device payment plan agreement receivables, that we are servicing was $14.1 billion.

Under the Non-Revolving Program, we transfer the eligible receivables to wholly-owned subsidiaries that are bankruptcy remote special purpose entities (Sellers). The Sellers then sell the receivables to the Purchasers for upfront cash proceeds and additional consideration upon settlement of the receivables (the deferred purchase price). Under the Revolving Program, we sell eligible device payment plan agreement receivables on a revolving basis, subject to a maximum funding limit, to the Purchasers. Sales of eligible receivables by the Sellers, once initiated, generally occur and are settled on a monthly basis. Customer payments made towards receivables sold under the Revolving Program will be available to purchase additional eligible device payment plan agreement receivables originated during the revolving period. We elected to end the revolving period in July 2016.

We continue to bill and collect on the receivables in exchange for a monthly servicing fee, which is not material. Eligible receivables under the RPA excluded device payment plan agreements where a new customer was required to provide a down payment. The sales of receivables under the RPA did not have a material impact on our condensed consolidated statements of income. The cash proceeds received from the Purchasers are recorded within Cash flows provided by operating activities on our condensed consolidated statements of cash flows.

There were no sales of device payment plan agreement receivables during the three months ended September 30, 2016. During the nine months ended September 30, 2016, we sold $3.3 billion of receivables, net of allowances and imputed interest. We received cash proceeds from new transfers of $2.0 billion and cash proceeds from reinvested collections of $0.9 billion, and recorded a deferred purchase price of $0.4 billion.

During the three and nine months ended September 30, 2015, we sold $2.4 billion and $6.1 billion, respectively, of receivables, net of allowances and imputed interest, and received cash proceeds from new transfers of $2.0 billion and $4.5 billion, respectively. Additionally, during the three and nine months ended September 30, 2015, we recorded a deferred purchase price of $0.4 billion and $1.7 billion, respectively.

Deferred Purchase Price

Under the RPA, the deferred purchase price was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device trade-in considers prices expected to be offered to us by independent third parties. This estimate contemplates changes in value after the launch of a device. The fair value measurements are considered to be Level 3 measurements within the fair value hierarchy. The collection of the deferred purchase price is contingent on collections from customers. To date, we have collected $0.5 billion which was returned as deferred purchase price and recorded within Cash flows provided by operating activities on our condensed consolidated statements of cash flows. At September 30, 2016, our deferred purchase price receivable, which is held by the Sellers, was comprised of $1.2 billion included within Prepaid expenses and other and $1.0 billion included within Other assets in our condensed consolidated balance sheets. At December 31, 2015, our deferred purchase price receivable was $2.2 billion, which was included within Other assets in our condensed consolidated balance sheets.

Variable Interest Entities

Under the RPA, the Sellers’ sole business consists of the acquisition of the receivables from Cellco Partnership and certain other affiliates of Verizon and the resale of the receivables to the Purchasers. The assets of the Sellers are not available to be used to satisfy obligations of any Verizon entities other than the Sellers. We determined that the Sellers are VIEs as they lack sufficient equity to finance their activities. Given that we have the power to direct the activities of the Sellers that most significantly impact the Sellers’ economic performance, we are deemed to be the primary beneficiary of the Sellers. As a result, we consolidate the assets and liabilities of the Sellers into our condensed consolidated financial statements.

Continuing Involvement

Verizon has continuing involvement with the sold receivables as it services the receivables. We continue to service the customer and their related receivables on behalf of the Purchasers, including facilitating customer payment collection, in exchange for a monthly servicing fee. While servicing the receivables, the same policies and procedures are applied to the sold receivables that apply to owned receivables, and we continue to maintain normal relationships with our customers. The credit quality of the customers we continue to service is consistent throughout the periods presented. To date, we have collected and remitted approximately $5.7 billion, net of fees. To date, cash proceeds received, net of remittances, were $4.4 billion. During the nine months ended September 30, 2016, credit losses on receivables sold were $0.1 billion.

In addition, we have continuing involvement related to the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the agreements. The Company’s maximum exposure to loss related to the involvement with the Sellers is limited to the amount of the deferred purchase price, which was $2.2 billion as of September 30, 2016. The maximum exposure to loss represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby the Company would not receive the portion of the proceeds withheld by the Purchasers. As we believe the probability of these circumstances occurring is remote, the maximum exposure to loss is not an indication of the Company’s expected loss.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Measurements

6. Fair Value Measurements

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2016:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Other assets:
Equity securities	$	126	$	–	$	–	$	126
Fixed income securities		15		605		–		620
Interest rate swaps		–		420		–		420
Net investment hedge		–		6		–		6
Interest rate cap		–		3		–		3
Total	$	141	$	1,034	$	–	$	1,175
Liabilities:
Other liabilities:
Interest rate swaps	$	–	$	2	$	–	$	2
Net investment hedge		–		1		–		1
Cross currency swaps		–		1,536		–		1,536
Total	$	–	$	1,539	$	–	$	1,539

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2015:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Short-term investments:
Equity securities	$	265	$	–	$	–	$	265
Fixed income securities		–		85		–		85
Other current assets:
Fixed income securities		250		–		–		250
Other assets:
Fixed income securities		–		928		–		928
Interest rate swaps		–		128		–		128
Net investment hedges		–		13		–		13
Cross currency swaps		–		1		–		1
Total	$	515	$	1,155	$	–	$	1,670
Liabilities:
Other liabilities:
Interest rate swaps	$	–	$	19	$	–	$	19
Cross currency swaps		–		1,638		–		1,638
Forward interest rate swaps		–		24		–		24
Total	$	–	$	1,681	$	–	$	1,681

⁽¹⁾  quoted prices in active markets for identical assets or liabilities

⁽²⁾  observable inputs other than quoted prices in active markets for identical assets and liabilities

⁽³⁾  no observable pricing inputs in the market

Equity securities consist of investments in common stock of domestic and international corporations measured using quoted prices in active markets.

Fixed income securities consist primarily of investments in municipal bonds as well as U.S. Treasury securities. We use quoted prices in active markets for our U.S. Treasury securities, therefore these securities are classified as Level 1. For all other fixed income securities that do not have quoted prices in active markets, we use alternative matrix pricing resulting in these debt securities being classified as Level 2.

Derivative contracts are valued using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are classified within Level 2. We use mid-market pricing for fair value measurements of our derivative instruments. Our derivative instruments are recorded on a gross basis.

We recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the fair value hierarchy during the nine months ended September 30, 2016.

Fair Value of Short-term and Long-term Debt

The fair value of our debt is determined using various methods, including quoted prices for identical terms and maturities, which is a Level 1 measurement, as well as quoted prices for similar terms and maturities in inactive markets and future cash flows discounted at current rates, which are Level 2 measurements. The fair value of our short-term and long-term debt, excluding capital leases, was as follows:

	At September 30, 2016				At December 31, 2015
(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Short- and long-term debt, excluding capital leases	$	105,628	$	122,520	$	108,772	$	118,216

Derivative Instruments

We enter into derivative transactions to manage our exposure to fluctuations in foreign currency exchange rates, interest rates, and equity and commodity prices. We employ risk management strategies, which may include the use of a variety of derivatives including cross currency swaps, foreign currency and prepaid forwards and collars, interest rate swap agreements, commodity swap and forward agreements, interest rate locks and interest rate caps. We do not hold derivatives for trading purposes. We posted collateral of approximately $0.2 billion and $0.1 billion related to derivative contracts under collateral exchange arrangements at September 30, 2016 and December 31, 2015, respectively, which was recorded as Prepaid expenses and other on our condensed consolidated balance sheets. During 2015, we paid an immaterial amount of cash to enter into amendments to certain collateral exchange arrangements. These amendments suspend cash collateral posting for a specified period of time by both counterparties.

We measure all derivatives at fair value and recognize them as either assets or liabilities on our condensed consolidated balance sheets. Changes in the fair values of derivative instruments not qualifying as hedges or any ineffective portion of hedges are recognized in earnings in the current period. Changes in the fair values of derivative instruments used effectively as fair value hedges are recognized in earnings, along with changes in the fair value of the hedged item. Changes in the fair value of the effective portions of cash flow hedges are reported in Other comprehensive income (loss) and recognized in earnings when the hedged item is recognized in earnings. Changes in the fair value of the effective portion of net investment hedges of certain of our foreign operations are reported in Other comprehensive income (loss) as part of the cumulative translation adjustment and partially offset the impact of foreign currency changes on the value of our net investment.

Interest Rate Swaps

We enter into domestic interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates based on LIBOR, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against changes in the fair value of our debt portfolio. During the third quarter of 2016, we entered into interest rate swaps with a total notional value of $1.1 billion. During the third quarter of 2016, we settled $0.9 billion notional amount of interest rate swaps. The ineffective portion of these interest rate swaps was not material for the three and nine months ended September 30, 2016 and 2015, respectively.

Forward Interest Rate Swaps

In order to manage our exposure to future interest rate changes, we have entered into forward interest rate swaps. We designated these contracts as cash flow hedges. During the first quarter of 2016, we entered into forward interest rate swaps with a total notional value of $1.3 billion. During the third quarter of 2016, we settled $2.0 billion notional amount of these forward interest rate swaps. During the three and nine months ended September 30, 2016, pre-tax losses of an immaterial amount and $0.2 billion, respectively, were recognized in Other comprehensive income (loss). During the three and nine months ended September 30, 2015, pre-tax gains of $0.2 billion, respectively, were recognized in Other comprehensive income (loss).

Cross Currency Swaps

We enter into cross currency swaps to exchange British Pound Sterling and Euro-denominated debt into U.S. dollars and to fix our future interest and principal payments in U.S. dollars, as well as to mitigate the effect of foreign currency transaction gains or losses. These swaps are designated as cash flow hedges. During the second quarter of 2016, we settled $0.1 billion of these cross currency swaps upon redemption of the related debt. A portion of the gains and losses recognized in Other comprehensive income (loss) was reclassified to Other income and (expense), net to offset the related pre-tax foreign currency transaction gain or loss on the underlying debt obligations. During the three and nine months ended September 30, 2016, pre-tax gains of $0.3 billion and $0.1 billion, respectively, were recognized in Other comprehensive income (loss). During the three and nine months ended September 30, 2015, pre-tax losses of $0.2 billion and $0.9 billion, respectively, were recognized in Other comprehensive income (loss).

Net Investment Hedges

We enter into foreign currency forward contracts that are designated as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates.

Interest Rate Caps

We enter into interest rate caps to mitigate our interest exposure on our ABS Financing Facility against changes in interest rates. We have not applied hedge accounting to these interest rate caps. During the third quarter of 2016, we entered into interest rate caps with a notional value of $1.5 billion.

The following table sets forth the notional amounts of our outstanding derivative instruments:

	At September 30, 2016		At December 31, 2015
(dollars in millions)	Notional Amount		Notional Amount
Interest rate swaps	$	7,850	$	7,620
Forward interest rate swaps		–		750
Cross currency swaps		9,606		9,675
Net investment hedge		864		864
Interest rate caps		1,540		–

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2016

Stock-Based Compensation

7. Stock-Based Compensation

Verizon Communications Long-Term Incentive Plan

The Verizon Communications Inc. Long-Term Incentive Plan (the Plan) permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other awards. The maximum number of shares available for awards from the Plan is 119.6 million shares.

Restricted Stock Units

The Plan provides for grants of Restricted Stock Units (RSUs) that generally vest at the end of the third year after the grant. The RSUs are classified as equity awards because the RSUs will be paid in Verizon common stock upon vesting. The RSU equity awards are measured using the grant date fair value of Verizon common stock and are not remeasured at the end of each reporting period. Dividend equivalent units are also paid to participants at the time the RSU award is paid, and in the same proportion as the RSU award.

Performance Stock Units

The Plan also provides for grants of Performance Stock Units (PSUs) that generally vest at the end of the third year after the grant. As defined by the Plan, the Human Resources Committee of the Board of Directors determines the number of PSUs a participant earns based on the extent to which the corresponding performance goals have been achieved over the three-year performance cycle. The PSUs are classified as liability awards because the PSU awards are paid in cash upon vesting. The PSU award liability is measured at its fair value at the end of each reporting period and, therefore, will fluctuate based on the price of Verizon common stock as well as performance relative to the targets. Dividend equivalent units are also paid to participants at the time that the PSU award is determined and paid, and in the same proportion as the PSU award. The granted and cancelled activity for the PSU award includes adjustments for the performance goals achieved.

The following table summarizes the Restricted Stock Unit and Performance Stock Unit activity:

(shares in thousands)	Restricted Stock Units			Performance Stock Units
Outstanding, January 1, 2016		13,903			17,203
Granted		4,044			6,124
Payments		(4,736	)		(4,702	)
Cancelled/Forfeited		(94	)		(131	)
Adjustments		–			170
Outstanding, September 30, 2016		13,117			18,664

As of September 30, 2016, unrecognized compensation expense related to the unvested portion of Verizon’s RSUs and PSUs was approximately $0.4 billion and is expected to be recognized over approximately two years.

The RSUs granted in 2016 have a weighted-average grant date fair value of $51.90 per unit.

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Employee Benefits

9 Months Ended

Sep. 30, 2016

Employee Benefits

8. Employee Benefits

We maintain non-contributory defined benefit pension plans for many of our employees. In addition, we maintain postretirement health care and life insurance plans for certain retirees and their dependents, which are both contributory and non-contributory, and include a limit on our share of the cost for certain recent and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include pension and benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. These estimates are updated in the fourth quarter or upon a remeasurement event to reflect actual return on plan assets and updated actuarial assumptions. The adjustment will be recognized in our consolidated statement of income during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses.

Net Periodic Cost

The following table summarizes the benefit (income) cost related to our pension and postretirement health care and life insurance plans:

(dollars in millions)	Pension						Health Care and Life
Three Months Ended September 30,	2016			2015			2016			2015
Service cost	$	82		$	93		$	40		$	81
Amortization of prior service cost (credit)		10			(1	)		(235	)		(72	)
Expected return on plan assets		(257	)		(317	)		(13	)		(25	)
Interest cost		162			242			162			280
Remeasurement loss, net		555			342			–			–
Net periodic benefit (income) cost	$	552		$	359		$	(46	)	$	264
Termination benefits		4			–			–			–
Total	$	556		$	359		$	(46	)	$	264

(dollars in millions)	Pension						Health Care and Life
Nine Months Ended September 30,	2016			2015			2016			2015
Service cost	$	238		$	280		$	153		$	243
Amortization of prior service cost (credit)		12			(3	)		(421	)		(215	)
Expected return on plan assets		(785	)		(952	)		(41	)		(76	)
Interest cost		518			727			583			838
Remeasurement loss, net		1,977			342			2,293			–
Net periodic benefit (income) cost	$	1,960		$	394		$	2,567		$	790
Termination benefits		4			–			–			–
Total	$	1,964		$	394		$	2,567		$	790

Changes in Accounting for Benefit Plans

Effective January 1, 2016, we changed the method we use to estimate the interest component of net periodic benefit cost for pension and other postretirement benefits. Historically, we estimated the interest cost component utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. We have elected to utilize a full yield curve approach in the estimation of interest cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. We have made this change to provide a more precise measurement of interest cost by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. We have accounted for this change as a change in accounting estimate and accordingly will account for it prospectively.

For the three and nine months ended September 30, 2016, the impact of this change was a reduction of the interest cost component of net periodic benefit cost and an increase to operating income of approximately $0.1 billion and $0.3 billion, respectively. The use of the full yield curve approach does not impact how we measure our total benefit obligations at December 31 or our annual net periodic benefit cost as any change in the interest cost component is completely offset by the actuarial gain or loss measured at year end which is immediately recognized in our consolidated statements of income. Accordingly, this change in estimate will not impact our income from continuing operations, net income or earnings per share as measured on an annual basis.

2016 Collective Bargaining Negotiations

In the collective bargaining agreements ratified in June 2016, Verizon’s annual postretirement benefit obligation for retiree healthcare remains capped at the levels established by the previous contracts ratified in 2012. Effective January 2016, prior to reaching these new collective bargaining agreements, certain retirees began to pay for the costs of retiree healthcare in accordance with the provisions relating to caps in the previous contracts. In reaching new collective bargaining agreements in 2016, there is a mutual understanding that the substantive postretirement benefit plans provide that Verizon’s annual postretirement benefit obligation for retiree healthcare is capped and, accordingly, we began accounting for the contractual healthcare caps in June 2016. We also adopted changes to our defined benefit pension plans and other postretirement benefit plans to reflect the agreed upon terms and conditions of the collective bargaining agreements. The impact is a reduction in our postretirement benefit plan obligations of approximately $5.1 billion and an increase in our defined benefit pension plan obligations of approximately $0.4 billion, which have been recorded as a net increase to Accumulated other comprehensive income of $2.9 billion (net of taxes of $1.8 billion) during the nine months ended September 30, 2016. The amount recorded in Accumulated other comprehensive income will be reclassified to net periodic benefit cost on a straight-line basis over the average remaining service period of the respective plans’ participants which, on a weighted-average basis, is 12.2 years for defined benefit pension plans and 7.8 years for other postretirement benefit plans. The above noted reclassification will result in a decrease to net periodic benefit cost and an increase to pre-tax income of approximately $0.4 billion for the seven months ended December 31, 2016, of which $0.2 billion has been reclassified to net periodic cost during the three and nine months ended September 30, 2016.

Severance, Pension and Benefit Charges (Credits)

During the nine months ended September 30, 2016, we recorded a net pre-tax curtailment gain of $0.5 billion due to the elimination of the accrual of benefits for some or all future services of a significant number of employees covered by three of our defined benefit pension plans and one of our other postretirement benefit plans (see Note 2 for additional details).

During the three months ended September 30, 2016, we recorded net pre-tax severance, pension and benefit charges of approximately $0.8 billion primarily for our pension plans in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges of $0.6 billion primarily related to settlements for employees who received lump-sum distributions in five of our defined benefit pension plans. The charges were primarily driven by a decrease in our discount rate assumption of $0.8 billion used to determine the current year liabilities of our pension plans, partially offset by the difference between our expected return on assets of 7.0% and our annualized actual return on assets of 11.0% at August 31, 2016 ($0.2 billion). Our weighted average discount rate assumption was 3.61% at August 31, 2016. As part of this charge, we recorded severance costs of $0.2 billion under our existing separation plans.

During the three months ended June 30, 2016, we recorded net pre-tax pension and benefit remeasurement charges of approximately $3.6 billion in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. These charges were comprised of a net pre-tax pension and benefit remeasurement charge of $0.8 billion measured as of April 1, 2016 related to curtailments in three of our defined benefit pension plans and one of our other postretirement benefit plans, a net pre-tax pension and benefit remeasurement charge of $2.7 billion measured as of May 31, 2016 in two defined benefit pension plans and three other postretirement benefit plans as a result of our accounting for the contractual healthcare caps and bargained for changes, and a net pre-tax pension and benefit remeasurement charge of $0.1 billion measured as of May 31, 2016 related to settlements for employees who received lump-sum distributions in three of Verizon’s defined benefit pension plans. The pension and benefit remeasurement charges were primarily driven by a decrease in our discount rate assumption used to determine the current year liabilities of our pension and other postretirement benefit plans ($2.7 billion) and updated healthcare cost trend rate assumptions ($0.9 billion). Our weighted-average discount rate assumption decreased from 4.60% at December 31, 2015 to 3.99% at May 31, 2016.

During the three months ended March 31, 2016, we also recorded a net pre-tax pension and benefit remeasurement charge of $0.2 billion related to settlements for employees who received lump-sum distributions in one of Verizon’s defined benefit pension plans.

During the three and nine months ended September 30, 2015, we recorded net pre-tax pension remeasurement charges of approximately $0.3 billion, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement charges relate to settlements for employees who received lump-sum distributions in four of Verizon’s seven defined benefit pension plans. The pension remeasurement charges from the impacted plans were primarily driven by a $0.7 billion loss resulting from the difference between our expected return on assets assumption of 7.25% at December 31, 2014 and our annualized actual return on assets of 1.96% at September 30, 2015, as well as other losses of $0.1 billion. These losses were partially offset by a gain of $0.5 billion resulting from an increase in our discount rate assumption used to determine the current year liabilities of our pension plans. Our weighted-average discount rate assumption increased from 4.2% at December 31, 2014 to 4.5% at September 30, 2015.

Severance Payments

During the three and nine months ended September 30, 2016, we paid severance benefits of $0.1 billion and $0.4 billion, respectively. At September 30, 2016, we had a remaining severance liability of $0.6 billion, a portion of which includes future contractual payments to employees separated as of September 30, 2016.

Employer Contributions

During the three and nine months ended September 30, 2016, we contributed $0.2 billion and $0.9 billion, respectively, to our other postretirement benefit plans. During the three and nine months ended September 30, 2016, we contributed $0.5 billion and $0.8 billion, respectively, to our qualified pension plans, which included $0.2 billion of discretionary contributions. The contributions to our nonqualified pension plans were $0.1 billion during the three and nine months ended September 30, 2016. There have been no material changes with respect to the qualified and nonqualified pension contributions in 2016 as previously disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2015 included in our Current Report on Form 8-K dated July 29, 2016.

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Equity and Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2016

Equity and Accumulated Other Comprehensive Income

9. Equity and Accumulated Other Comprehensive Income

Equity

Changes in the components of Total equity were as follows:

(dollars in millions)	Attributable to Verizon			Noncontrolling Interests			Total Equity
Balance at January 1, 2016	$	16,428		$	1,414		$	17,842
Net income		8,632			376			9,008
Other comprehensive income		2,208			–			2,208
Comprehensive income		10,840			376			11,216
Contributed capital		(17	)		–			(17	)
Dividends declared		(6,960	)		–			(6,960	)
Common stock in treasury		152			–			152
Distributions and other		17			(267	)		(250	)
Balance at September 30, 2016	$	20,460		$	1,523		$	21,983

Common Stock

Verizon did not repurchase any shares of Verizon common stock through its previously authorized share buyback program during the nine months ended September 30, 2016. At September 30, 2016, the maximum number of shares that could be purchased by or on behalf of Verizon under our share buyback program was 97.2 million.

Common stock has been used from time to time to satisfy some of the funding requirements of employee and shareowner plans, including 3.5 million common shares issued from Treasury stock during the nine months ended September 30, 2016.

Accumulated Other Comprehensive Income

The changes in the balances of Accumulated other comprehensive income by component are as follows:

(dollars in millions)	Foreign currency translation adjustments			Unrealized loss on cash flow hedges			Unrealized loss on marketable securities			Defined benefit pension and postretirement plans			Total
Balance at January 1, 2016	$	(554	)	$	(278	)	$	101		$	1,281		$	550
Other comprehensive income (loss)		(23	)		(91	)		8			2,902			2,796
Amounts reclassified to net income		–			33			(43	)		(578	)		(588	)
Net other comprehensive income (loss)		(23	)		(58	)		(35	)		2,324			2,208
Balance at September 30, 2016	$	(577	)	$	(336	)	$	66		$	3,605		$	2,758

The amounts presented above in net other comprehensive income (loss) are net of taxes which are not significant except as noted below. For the nine months ended September 30, 2016, the amounts reclassified to net income related to defined benefit pension and postretirement plans in the table above are included in Cost of services and Selling, general and administrative expense on our condensed consolidated statements of income. For the nine months ended September 30, 2016, the amounts reclassified to net income related to unrealized loss on marketable securities in the table above are included in Other income and (expense), net on our condensed consolidated statements of income. For the nine months ended September 30, 2016, the amounts reclassified to net income related to unrealized loss on cash flow hedges in the table above are included in Other income and (expense), net and Interest expense on our condensed consolidated statements of income.

Defined Benefit Pension and Postretirement Plans

The change in defined benefit and postretirement plans for the nine months ended September 30, 2016 of $4.7 billion ($2.9 billion net of taxes) was due to the change in prior service credit as a result of our accounting for contractual healthcare caps and bargained for changes (see Note 8 for additional detail).

Reclassification adjustments on defined benefit pension and postretirement plans for the nine months ended September 30, 2016 include the reclassification to Selling, general and administrative expense of a pre-tax pension and postretirement benefit curtailment gain of $0.5 billion ($0.3 billion net of taxes) due to the transfer of employees to Frontier, which caused the elimination of a significant amount of future service in three of our defined benefit pension plans and one of our other postretirement benefit plans requiring us to recognize a portion of the prior service credits (see Note 2 for additional detail).

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Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information

10. Segment Information

Reportable Segments

We have two reportable segments, Wireless and Wireline, which we operate and manage as strategic business units and organize by products and services. We measure and evaluate our reportable segments based on segment operating income, consistent with the chief operating decision maker’s assessment of segment performance.

Corporate and other includes the operations of AOL and related businesses, unallocated corporate expenses, the results of other insignificant businesses, such as our vehicle OEM and Networkfleet businesses and investments in unconsolidated businesses accounted for on an equity method basis, pension and other employee benefit related costs and lease financing. Corporate and other also includes the historical results of divested operations and other adjustments and gains and losses that are not allocated in assessing segment performance due to their non-operational nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses that are not individually significant are included in all segment results as these items are included in the chief operating decision maker’s assessment of segment performance.

The reconciliation of segment operating revenues and expenses to consolidated operating revenues and expenses below also includes those items of a non-operational nature. We exclude from segment results the effects of certain items that management does not consider in assessing segment performance, primarily because of their non-operational nature.

On April 1, 2016, we completed the sale of our local exchange business and related landline activities in California, Florida and Texas to Frontier (see Note 2). Accordingly, the corresponding Wireline results for these operations have been reclassified to Corporate and other for all comparative periods presented consistent with the information regularly reviewed by our chief operating decision maker.

In addition, Corporate and other includes the results of our vehicle OEM and Networkfleet businesses for all periods presented, which were reclassified from our Wireline segment effective April 1, 2016. The impact of this reclassification was not material to our condensed consolidated financial statements or our segment results of operations.

We have adjusted prior period consolidated and segment information, where applicable, to conform to current period presentation.

Our reportable segments and their principal activities consist of the following:

Segment	Description
Wireless	Wireless’ communications products and services include wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the United States.
Wireline	Wireline’s voice, data and video communications products and enhanced services include broadband video and data, corporate networking solutions, data center and cloud services, security and managed network services and local and long distance voice services. We provide these products and services to consumers in the United States, as well as to carriers, businesses and government customers both in the United States and around the world.

The following table provides operating financial information for our two reportable segments:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	2016		2015			2016			2015
External Operating Revenues
Wireless
Service revenue	$	16,647	$	17,580		$	50,108		$	53,146
Equipment		4,124		4,292			11,782			11,526
Other		1,249		1,108			3,661			3,196
Total Wireless		22,020		22,980			65,551			67,868
Wireline
Consumer retail		3,174		3,168			9,519			9,470
Small business		411		434			1,241			1,320
Mass Markets		3,585		3,602			10,760			10,790
Global Enterprise		2,886		2,987			8,748			9,040
Global Wholesale		1,009		1,046			3,071			3,209
Other		78		87			248			256
Total Wireline		7,558		7,722			22,827			23,295
Total reportable segments	$	29,578	$	30,702		$	88,378		$	91,163
Intersegment Revenues
Wireless	$	81	$	25		$	258		$	78
Wireline		229		245			706			735
Total reportable segments	$	310	$	270		$	964		$	813
Total Operating Revenues
Wireless	$	22,101	$	23,005		$	65,809		$	67,946
Wireline		7,787		7,967			23,533			24,030
Total reportable segments	$	29,888	$	30,972		$	89,342		$	91,976
Operating Income (Loss)
Wireless	$	7,647	$	7,668		$	23,544		$	23,174
Wireline		156		(109	)		(374	)		(528	)
Total reportable segments	$	7,803	$	7,559		$	23,170		$	22,646

(dollars in millions)	At September 30, 2016			At December 31, 2015
Assets
Wireless	$	204,409		$	185,405
Wireline		63,586			78,305
Total reportable segments		267,995			263,710
Corporate and other		208,837			205,476
Eliminations		(237,334	)		(225,011	)
Total consolidated – reported	$	239,498		$	244,175

A reconciliation of the reportable segment operating revenues to consolidated operating revenues is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Total reportable segment operating revenues	$	29,888		$	30,972		$	89,342		$	91,976
Corporate and other		1,403			1,170			4,078			2,259
Eliminations		(354	)		(291	)		(1,060	)		(845	)
Impact of divested operations		–			1,307			1,280			3,976
Total consolidated operating revenues	$	30,937		$	33,158		$	93,640		$	97,366

Fios revenues are included within our Wireline segment and amounted to approximately $2.8 billion and $8.3 billion, respectively, for the three and nine months ended September 30, 2016. Fios revenues amounted to approximately $2.7 billion and $8.0 billion, respectively, for the three and nine months ended September 30, 2015.

A reconciliation of the total of the reportable segments’ operating income to consolidated income before provision for income taxes is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Total reportable segment operating income	$	7,803		$	7,559		$	23,170		$	22,646
Corporate and other		(466	)		(399	)		(1,432	)		(1,097	)
Severance, pension and benefit charges (Note 8)		(797	)		(342	)		(4,512	)		(342	)
Gain on access line sale (Note 2)		–			–			1,007			–
Gain on spectrum license transaction (Note 2)		–			–			142			–
Impact of divested operations		–			717			661			2,109
Total consolidated operating income		6,540			7,535			19,036			23,316
Equity in losses of unconsolidated businesses		(23	)		(18	)		(63	)		(70	)
Other income and (expense), net		97			51			(1,697	)		158
Interest expense		(1,038	)		(1,202	)		(3,239	)		(3,742	)
Income Before Provision For Income Taxes	$	5,576		$	6,366		$	14,037		$	19,662

No single customer accounted for more than 10% of our total operating revenues during the three and nine months ended September 30, 2016 and 2015.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies

11. Commitments and Contingencies

In the ordinary course of business, Verizon is involved in various commercial litigation and regulatory proceedings at the state and federal level. Where it is determined, in consultation with counsel based on litigation and settlement risks, that a loss is probable and estimable in a given matter, the Company establishes an accrual. In none of the currently pending matters is the amount of accrual material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. We continuously monitor these proceedings as they develop and adjust any accrual or disclosure as needed. We do not expect that the ultimate resolution of any pending regulatory or legal matter in future periods, including the Hicksville matter described below, will have a material effect on our financial condition, but it could have a material effect on our results of operations for a given reporting period.

Reserves have been established to cover environmental matters relating to discontinued businesses and past telecommunications activities. These reserves include funds to address contamination at the site of a former Sylvania facility in Hicksville, NY, which had processed nuclear fuel rods in the 1950s and 1960s. In September 2005, the Army Corps of Engineers (ACE) accepted the site into its Formerly Utilized Sites Remedial Action Program. As a result, the ACE has taken primary responsibility for addressing the contamination at the site. An adjustment to the reserves may be made after a cost allocation is conducted with respect to the past and future expenses of all of the parties. Adjustments to the environmental reserve may also be made based upon the actual conditions found at other sites requiring remediation.

Verizon is currently involved in approximately 40 federal district court actions alleging that Verizon is infringing various patents. Most of these cases are brought by non-practicing entities and effectively seek only monetary damages; a small number are brought by companies that have sold products and seek injunctive relief as well. These cases have progressed to various stages and a small number may go to trial in the coming 12 months if they are not otherwise resolved.

In connection with the execution of agreements for the sales of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as indemnity from certain financial losses. From time to time, counterparties may make claims under these provisions, and Verizon will seek to defend against those claims and resolve them in the ordinary course of business.

Subsequent to the sale of Verizon Information Services Canada in 2004, we continue to provide a guarantee to publish directories, which was issued when the directory business was purchased in 2001 and had a 30-year term (before extensions). The preexisting guarantee continues, without modification, despite the subsequent sale of Verizon Information Services Canada and the spin-off of our domestic print and Internet yellow pages directories business. The possible financial impact of the guarantee, which is not expected to be adverse, cannot be reasonably estimated as a variety of the potential outcomes available under the guarantee result in costs and revenues or benefits that may offset each other. We do not believe performance under the guarantee is likely.

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Acquisitions and Divestitures (Tables)

9 Months Ended

Sep. 30, 2016

AOL Inc

Purchase Price Identified Based on Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the consideration to AOL’s shareholders and the identification of the assets acquired, including cash acquired of $0.5 billion, and liabilities assumed as of the close of the acquisition, as well as the fair value at the acquisition date of AOL’s noncontrolling interests:

(dollars in millions)	As of June 23, 2015
Cash payment to AOL’s equity holders	$	3,764
Estimated liabilities to be paid(1)		377
Total consideration	$	4,141
Assets acquired:
Goodwill	$	1,938
Intangible assets subject to amortization		2,504
Other		1,551
Total assets acquired		5,993
Liabilities assumed:
Total liabilities assumed		1,851
Net assets acquired:		4,142
Noncontrolling interest		(1	)
Total consideration	$	4,141

⁽¹⁾  During the nine months ended September 30, 2016, we made cash payments of $179 million in respect of acquisition-date estimated liabilities to be paid. As of September 30, 2016, the remaining balance of estimated liabilities to be paid was $198 million.

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Wireless Licenses, Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2016

Changes in Carrying Amount of Wireless Licenses

Changes in the carrying amount of Wireless licenses are as follows:

(dollars in millions)
Balance at January 1, 2016	$	86,575
Acquisitions (Note 2)		26
Capitalized interest on wireless licenses		384
Reclassifications, adjustments and other		422
Balance at September 30, 2016	$	87,407

Changes in Carrying Amount of Goodwill

Changes in the carrying amount of Goodwill are as follows:

(dollars in millions)	Wireless		Wireline			Other		Total
Balance at January 1, 2016	$	18,393	$	4,331		$	2,607	$	25,331
Acquisitions (Note 2)		–		–			641		641
Reclassifications, adjustments and other		–		(113	)		111		(2	)
Balance at September 30, 2016	$	18,393	$	4,218		$	3,359	$	25,970

Composition of Other Intangible Assets, Net

The following table displays the composition of Other intangible assets, net:

	At September 30, 2016							At December 31, 2015
(dollars in millions)	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer lists (6 to 14 years)	$	3,963	$	(2,355	)	$	1,608	$	4,139	$	(2,365	)	$	1,774
Non-network internal-use software (3 to 8 years)		15,530		(10,593	)		4,937		14,542		(9,620	)		4,922
Other (5 to 25 years)		1,688		(541	)		1,147		1,346		(450	)		896
Total	$	21,181	$	(13,489)		$	7,692	$	20,027	$	(12,435)		$	7,592

Amortization Expense for Other Intangible Assets

The amortization expense for Other intangible assets was as follows:

(dollars in millions)	Three Months Ended September 30,		Nine Months Ended September 30,
2016		$       419		$       1,255
2015		438		1,247

Estimated Future Amortization Expense for Other Intangible Assets

The estimated future amortization expense for Other intangible assets is as follows:

Years	(dollars in millions)
Remainder of 2016		$    416
2017		1,505
2018		1,327
2019		1,121
2020		892

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Debt (Tables)

9 Months Ended

Sep. 30, 2016

Combined Schedule of Current and Noncurrent Debt and Capital Lease Obligations

Changes to debt during the nine months ended September 30, 2016 are as follows:

(dollars in millions)	Debt Maturing within One Year			Long-term Debt			Total
Balance at January 1, 2016	$	6,489		$	103,240		$	109,729
Proceeds from borrowings		–			8,152			8,152
Proceeds from asset-backed borrowings		–			2,594			2,594
Repayments of borrowings and capital leases obligations		(6,110	)		(8,400	)		(14,510	)
Decrease in short-term obligations, excluding current maturities		(120	)		–			(120	)
Reclassifications of long-term debt		3,412			(3,412	)		–
Other		181			565			746
Balance at September 30, 2016	$	3,852		$	102,739		$	106,591

Schedule of Notes included in the Tender Offers

The table below lists the series of notes included in the Group 1 Any and All Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price(1)		Principal Amount Purchased
Verizon Communications Inc.		2.50	%		2016	$	2,182	$	1,007.60	$	1,272
		2.00	%		2016		1,250		1,007.20		731
		6.35	%		2019		1,750		1,133.32		970
										$	2,973

⁽¹⁾  Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

The table below lists the series of notes included in the Group 2 Any and All Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price(1)		Principal Amount Purchased
Verizon Delaware LLC		8.375	%		2019	$	15	$	1,182.11	$	15
		8.625	%		2031		15		1,365.39		5
Verizon Maryland LLC		8.00	%		2029		50		1,301.32		22
		8.30	%		2031		100		1,347.26		76
		5.125	%		2033		350		1,012.50		171
Verizon New England Inc.		7.875	%		2029		349		1,261.63		176
Verizon New Jersey Inc.		8.00	%		2022		200		1,238.65		54
		7.85	%		2029		149		1,311.32		63
Verizon New York Inc.		6.50	%		2028		100		1,151.71		28
		7.375	%		2032		500		1,201.92		256
Verizon Pennsylvania LLC		6.00	%		2028		125		1,110.47		57
		8.35	%		2030		175		1,324.10		127
		8.75	%		2031		125		1,356.47		72
Verizon Virginia LLC		7.875	%		2022		100		1,227.79		43
		8.375	%		2029		100		1,319.78		81
										$	1,246

⁽¹⁾ Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

The table below lists the series of notes included in the Group 3 Offer:

(dollars in millions, except for Purchase Price)	Interest Rate			Maturity		Principal Amount Outstanding		Purchase Price(1)		Principal Amount Purchased
Verizon Communications Inc.		8.95	%		2039	$	353	$	1,506.50	$	63
		7.75	%		2032		251		1,315.19		33
		7.35	%		2039		480		1,293.50		68
		7.75	%		2030		1,206		1,377.92		276
		6.55	%		2043		6,585		1,291.74		2,340
		6.40	%		2033		2,196		1,220.28		466
		6.90	%		2038		477		1,243.29		92
		6.25	%		2037		750		1,167.66		114
		6.40	%		2038		866		1,176.52		116
		5.85	%		2035		1,500		1,144.68		250
		6.00	%		2041		1,000		1,164.56		–
		5.15	%		2023		8,517		1,152.83		–
Alltel Corporation		7.875	%		2032		452		1,322.92		115
		6.80	%		2029		235		1,252.93		47
GTE Corporation		6.94	%		2028		800		1,261.35		237
		8.75	%		2021		300		1,307.34		93
										$	4,310

⁽¹⁾  Per $1,000 principal amount of notes

Schedule of Assets and Liabilities Related to Asset-backed Debt Arrangements

The assets and liabilities related to our asset-backed debt arrangements included on our condensed consolidated balance sheets were as follows:

(dollars in millions)	September 30, 2016		December 31, 2015
Assets
Account receivable, net	$	1,733	$	–
Prepaid expenses and other		71		–
Other assets		1,296		–
Liabilities
Long-term debt		2,595		–

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Wireless Device Payment Plans (Tables)

9 Months Ended

Sep. 30, 2016

Device Payment Plan Agreement Receivables

The following table displays device payment plan agreement receivables, net, that continue to be recognized in our condensed consolidated balance sheets:

(dollars in millions)	At September 30, 2016			At December 31, 2015
Device payment plan agreement receivables, gross	$	7,735		$	3,720
Unamortized imputed interest		(332	)		(142	)
Device payment plan agreement receivables, net of unamortized imputed interest		7,403			3,578
Allowance for credit losses		(601	)		(444	)
Device payment plan agreement receivables, net	$	6,802		$	3,134
Classified on our condensed consolidated balance sheets:
Accounts receivable, net	$	4,000		$	1,979
Other assets		2,802			1,155
Device payment plan agreement receivables, net	$	6,802		$	3,134

Balance and Aging of Device Payment Plan Agreement Receivables on Gross Basis

The balance and aging of the device payment plan agreement receivables on a gross basis was as follows:

(dollars in millions)	At September 30, 2016		At December 31, 2015
Unbilled	$	7,261	$	3,420
Billed:
Current		375		227
Past due		99		73
Device payment plan agreement receivables, gross	$	7,735	$	3,720

Activity in Allowance for Credit Losses for Device Payment Plan Agreement Receivables

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:

(dollars in millions)
Balance at January 1, 2016	$	444
Bad debt expense		437
Write-offs		(347	)
Allowance related to receivables sold		59
Other		8
Balance at September 30, 2016	$	601

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2016:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Other assets:
Equity securities	$	126	$	–	$	–	$	126
Fixed income securities		15		605		–		620
Interest rate swaps		–		420		–		420
Net investment hedge		–		6		–		6
Interest rate cap		–		3		–		3
Total	$	141	$	1,034	$	–	$	1,175
Liabilities:
Other liabilities:
Interest rate swaps	$	–	$	2	$	–	$	2
Net investment hedge		–		1		–		1
Cross currency swaps		–		1,536		–		1,536
Total	$	–	$	1,539	$	–	$	1,539

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2015:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Short-term investments:
Equity securities	$	265	$	–	$	–	$	265
Fixed income securities		–		85		–		85
Other current assets:
Fixed income securities		250		–		–		250
Other assets:
Fixed income securities		–		928		–		928
Interest rate swaps		–		128		–		128
Net investment hedges		–		13		–		13
Cross currency swaps		–		1		–		1
Total	$	515	$	1,155	$	–	$	1,670
Liabilities:
Other liabilities:
Interest rate swaps	$	–	$	19	$	–	$	19
Cross currency swaps		–		1,638		–		1,638
Forward interest rate swaps		–		24		–		24
Total	$	–	$	1,681	$	–	$	1,681

⁽¹⁾  quoted prices in active markets for identical assets or liabilities

⁽²⁾  observable inputs other than quoted prices in active markets for identical assets and liabilities

⁽³⁾  no observable pricing inputs in the market

Schedule of Fair Value of Short-Term and Long-Term Debt, Excluding Capital Leases

The fair value of our short-term and long-term debt, excluding capital leases, was as follows:

	At September 30, 2016				At December 31, 2015
(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Short- and long-term debt, excluding capital leases	$	105,628	$	122,520	$	108,772	$	118,216

Notional Amounts of Outstanding Derivative Instruments

The following table sets forth the notional amounts of our outstanding derivative instruments:

	At September 30, 2016		At December 31, 2015
(dollars in millions)	Notional Amount		Notional Amount
Interest rate swaps	$	7,850	$	7,620
Forward interest rate swaps		–		750
Cross currency swaps		9,606		9,675
Net investment hedge		864		864
Interest rate caps		1,540		–

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2016

Schedule of Restricted and Performance Stock Unit Activity

The following table summarizes the Restricted Stock Unit and Performance Stock Unit activity:

(shares in thousands)	Restricted Stock Units			Performance Stock Units
Outstanding, January 1, 2016		13,903			17,203
Granted		4,044			6,124
Payments		(4,736	)		(4,702	)
Cancelled/Forfeited		(94	)		(131	)
Adjustments		–			170
Outstanding, September 30, 2016		13,117			18,664

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Employee Benefits (Tables)

9 Months Ended

Sep. 30, 2016

Benefit or (Income) Cost Related to Pension and Postretirement Health Care and Life Insurance

The following table summarizes the benefit (income) cost related to our pension and postretirement health care and life insurance plans:

(dollars in millions)	Pension						Health Care and Life
Three Months Ended September 30,	2016			2015			2016			2015
Service cost	$	82		$	93		$	40		$	81
Amortization of prior service cost (credit)		10			(1	)		(235	)		(72	)
Expected return on plan assets		(257	)		(317	)		(13	)		(25	)
Interest cost		162			242			162			280
Remeasurement loss, net		555			342			–			–
Net periodic benefit (income) cost	$	552		$	359		$	(46	)	$	264
Termination benefits		4			–			–			–
Total	$	556		$	359		$	(46	)	$	264

(dollars in millions)	Pension						Health Care and Life
Nine Months Ended September 30,	2016			2015			2016			2015
Service cost	$	238		$	280		$	153		$	243
Amortization of prior service cost (credit)		12			(3	)		(421	)		(215	)
Expected return on plan assets		(785	)		(952	)		(41	)		(76	)
Interest cost		518			727			583			838
Remeasurement loss, net		1,977			342			2,293			–
Net periodic benefit (income) cost	$	1,960		$	394		$	2,567		$	790
Termination benefits		4			–			–			–
Total	$	1,964		$	394		$	2,567		$	790

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Equity and Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2016

Schedule of Changes in Components of Total Equity

Changes in the components of Total equity were as follows:

(dollars in millions)	Attributable to Verizon			Noncontrolling Interests			Total Equity
Balance at January 1, 2016	$	16,428		$	1,414		$	17,842
Net income		8,632			376			9,008
Other comprehensive income		2,208			–			2,208
Comprehensive income		10,840			376			11,216
Contributed capital		(17	)		–			(17	)
Dividends declared		(6,960	)		–			(6,960	)
Common stock in treasury		152			–			152
Distributions and other		17			(267	)		(250	)
Balance at September 30, 2016	$	20,460		$	1,523		$	21,983

Schedule of Components in Accumulated Other Comprehensive Income

The changes in the balances of Accumulated other comprehensive income by component are as follows:

(dollars in millions)	Foreign currency translation adjustments			Unrealized loss on cash flow hedges			Unrealized loss on marketable securities			Defined benefit pension and postretirement plans			Total
Balance at January 1, 2016	$	(554	)	$	(278	)	$	101		$	1,281		$	550
Other comprehensive income (loss)		(23	)		(91	)		8			2,902			2,796
Amounts reclassified to net income		–			33			(43	)		(578	)		(588	)
Net other comprehensive income (loss)		(23	)		(58	)		(35	)		2,324			2,208
Balance at September 30, 2016	$	(577	)	$	(336	)	$	66		$	3,605		$	2,758

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2016

Summary of Operating Financial Information for Reportable Segments

The following table provides operating financial information for our two reportable segments:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	2016		2015			2016			2015
External Operating Revenues
Wireless
Service revenue	$	16,647	$	17,580		$	50,108		$	53,146
Equipment		4,124		4,292			11,782			11,526
Other		1,249		1,108			3,661			3,196
Total Wireless		22,020		22,980			65,551			67,868
Wireline
Consumer retail		3,174		3,168			9,519			9,470
Small business		411		434			1,241			1,320
Mass Markets		3,585		3,602			10,760			10,790
Global Enterprise		2,886		2,987			8,748			9,040
Global Wholesale		1,009		1,046			3,071			3,209
Other		78		87			248			256
Total Wireline		7,558		7,722			22,827			23,295
Total reportable segments	$	29,578	$	30,702		$	88,378		$	91,163
Intersegment Revenues
Wireless	$	81	$	25		$	258		$	78
Wireline		229		245			706			735
Total reportable segments	$	310	$	270		$	964		$	813
Total Operating Revenues
Wireless	$	22,101	$	23,005		$	65,809		$	67,946
Wireline		7,787		7,967			23,533			24,030
Total reportable segments	$	29,888	$	30,972		$	89,342		$	91,976
Operating Income (Loss)
Wireless	$	7,647	$	7,668		$	23,544		$	23,174
Wireline		156		(109	)		(374	)		(528	)
Total reportable segments	$	7,803	$	7,559		$	23,170		$	22,646

Summary of Reconciliation of Segment Assets

(dollars in millions)	At September 30, 2016			At December 31, 2015
Assets
Wireless	$	204,409		$	185,405
Wireline		63,586			78,305
Total reportable segments		267,995			263,710
Corporate and other		208,837			205,476
Eliminations		(237,334	)		(225,011	)
Total consolidated – reported	$	239,498		$	244,175

Summary of Reconciliation of Segment Operating Revenues

Areconciliation of the reportable segment operating revenues to consolidated operating revenues is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Total reportable segment operating revenues	$	29,888		$	30,972		$	89,342		$	91,976
Corporate and other		1,403			1,170			4,078			2,259
Eliminations		(354	)		(291	)		(1,060	)		(845	)
Impact of divested operations		–			1,307			1,280			3,976
Total consolidated operating revenues	$	30,937		$	33,158		$	93,640		$	97,366

Summary of Reconciliation of Segment Operating Income

Are conciliation of the total of the reportable segments’ operating income to consolidated income before provision for income taxes is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2016			2015			2016			2015
Total reportable segment operating income	$	7,803		$	7,559		$	23,170		$	22,646
Corporate and other		(466	)		(399	)		(1,432	)		(1,097	)
Severance, pension and benefit charges (Note 8)		(797	)		(342	)		(4,512	)		(342	)
Gain on access line sale (Note 2)		–			–			1,007			–
Gain on spectrum license transaction (Note 2)		–			–			142			–
Impact of divested operations		–			717			661			2,109
Total consolidated operating income		6,540			7,535			19,036			23,316
Equity in losses of unconsolidated businesses		(23	)		(18	)		(63	)		(70	)
Other income and (expense), net		97			51			(1,697	)		158
Interest expense		(1,038	)		(1,202	)		(3,239	)		(3,742	)
Income Before Provision For Income Taxes	$	5,576		$	6,366		$	14,037		$	19,662

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Basis of Presentation - Additional Information (Detail) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Basis of Presentation [Line Items]
Restricted stock units outstanding to purchase shares included in diluted earnings per common share	7	6	6	6

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Acquisitions and Divestitures - Additional Information (Detail) $ / shares in Units, shares in Millions, $ in Millions								1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 22, 2016 Customer	Jul. 30, 2016 USD ($) $ / shares	Jul. 29, 2016 USD ($)	Jul. 23, 2016 USD ($)	Feb. 20, 2016 USD ($)	Jun. 23, 2015 USD ($) shares	Feb. 05, 2015 USD ($)	Apr. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) plan	Sep. 30, 2015 USD ($)	Apr. 01, 2016 USD ($) Customer Unit	Dec. 31, 2015 USD ($)	May 12, 2015 $ / shares
Business Acquisition [Line Items]
Pre-tax gain on sale of wireless licenses											$ 142
Proceeds from dispositions of businesses											9,882
Operating Revenues									$ 30,937	$ 33,158	93,640	$ 97,366
Operating Income									6,540	7,535	19,036	23,316
Goodwill									$ 25,970		25,970			$ 25,331
Access Line Sale with Frontier
Business Acquisition [Line Items]
Proceeds from dispositions of businesses							$ 10,500
Net consideration from disposition of businesses							7,300
Debt assumed by Frontier							$ 600
Number of FiOS Internet subscribers divested | Customer													1,600,000
Number of voice connections divested | Unit													3,300,000
Number of FiOS video subscribers divested | Customer													1,200,000
Operating Revenues										1,300	1,300	4,000
Operating Income										$ 700	700	$ 2,100
Net cash proceeds received used to reduce consolidated indebtedness								$ 9,900
Derecognition of net assets, plant, property, and equipment													$ 9,000
Derecognition of net assets, goodwill													1,300
Derecognition of net assets, defined benefit pension and other postretirement benefit plan obligations													700
Derecognition of debt assumed by Frontier													$ 600
Pre-tax gain on sale of business											$ 1,007
Access Line Sale with Frontier | Pension
Business Acquisition [Line Items]
Number of defined benefit plans from which elimination of accrual of pension benefits for some or all future services of a significant number of employees covered occurred | plan											3
Access Line Sale with Frontier | Other Postretirement Benefit Plan
Business Acquisition [Line Items]
Number of defined benefit plans from which elimination of accrual of pension benefits for some or all future services of a significant number of employees covered occurred | plan											1
Access Line Sale with Frontier | Selling, general and administrative expense
Business Acquisition [Line Items]
Pre-tax gain on sale of business											$ 1,000
Curtailment gain											500
Advanced Wireless Services Spectrum Licenses
Business Acquisition [Line Items]
Pre-tax gain on sale of wireless licenses											100
Acquisitions											400
Advanced Wireless Services Spectrum Licenses | Sprint Corporation
Business Acquisition [Line Items]
Acquisitions											300
AOL Inc
Business Acquisition [Line Items]
Business acquisition, purchase price in cash						$ 3,764					$ 179
Business acquisition, share price | $ / shares															$ 50.00
Number of shares exercised under appraisal rights of Delaware law | shares						6.6
Business acquisition, potential additional payment						$ 330
Cash acquired						500
Goodwill						$ 1,938
Yahoo! Inc.
Business Acquisition [Line Items]
Business acquisition, purchase price in cash				$ 4,830
Yahoo! Inc. | Minimum
Business Acquisition [Line Items]
Number of user accounts | Customer	500,000,000
Yahoo! Inc. | Restricted Stock Units
Business Acquisition [Line Items]
Outstanding restricted stock units to be awarded to employees who transferred from yahoo				$ 1,100
XO Holdings
Business Acquisition [Line Items]
Business acquisition, purchase price in cash					$ 1,800
Telogis Inc
Business Acquisition [Line Items]
Business acquisition, purchase price in cash			$ 900
Telogis Inc | Corporate and Other
Business Acquisition [Line Items]
Goodwill			$ 600
Fleetmatics Group PLC
Business Acquisition [Line Items]
Business acquisition, purchase price in cash		$ 2,400
Business acquisition, share price | $ / shares		$ 60.00

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Consideration and Preliminary Identification of Assets Acquired, Including Cash Acquired and Liabilities Assumed as well as Fair Value Of Noncontrolling Interests (Detail) - USD ($) $ in Millions			9 Months Ended
	Jun. 23, 2015		Sep. 30, 2016	Dec. 31, 2015
Assets acquired:
Goodwill			$ 25,970	$ 25,331
AOL Inc
Business Acquisition [Line Items]
Cash payment to AOL's equity holders	$ 3,764		179
Estimated liabilities to be paid	377	[1]	$ 198
Total consideration	4,141
Assets acquired:
Goodwill	1,938
Intangible assets subject to amortization	2,504
Other	1,551
Total assets acquired	5,993
Liabilities assumed:
Total liabilities assumed	1,851
Net assets acquired:	4,142
Noncontrolling interest	(1)
Total consideration	$ 4,141

[1] During the nine months ended September 30, 2016, we made cash payments of $179 million in respect of acquisition-date estimated liabilities to be paid. As of September 30, 2016, the remaining balance of estimated liabilities to be paid was $198 million.

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Consideration and Preliminary Identification of Assets Acquired, Including Cash Acquired and Liabilities Assumed as well as Fair Value Of Noncontrolling Interests (Parenthetical) (Detail) - AOL Inc - USD ($) $ in Millions			9 Months Ended
	Jun. 23, 2015		Sep. 30, 2016
Business Acquisition [Line Items]
Cash payment to AOL's equity holders	$ 3,764		$ 179
Estimated liabilities to be paid	$ 377	[1]	$ 198

[1] During the nine months ended September 30, 2016, we made cash payments of $179 million in respect of acquisition-date estimated liabilities to be paid. As of September 30, 2016, the remaining balance of estimated liabilities to be paid was $198 million.

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Changes in Carrying Amount of Wireless Licenses (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Indefinite-lived Intangible Assets [Line Items]
Beginning balance	$ 86,575
Ending balance	87,407
Wireless Licenses
Indefinite-lived Intangible Assets [Line Items]
Beginning balance	86,575
Acquisitions (Note 2)	26
Capitalized interest on wireless licenses	384
Reclassifications, adjustments and other	422
Ending balance	$ 87,407

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Wireless Licenses, Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2016
Indefinite-lived Intangible Assets [Line Items]
Acquisitions (Note 2)			$ 641
Reclassifications, adjustments and other			(2)
Other Operating Segments
Indefinite-lived Intangible Assets [Line Items]
Acquisitions (Note 2)	$ 600		641
Reclassifications, adjustments and other		$ 100	111
Wireless Licenses
Indefinite-lived Intangible Assets [Line Items]
Wireless licenses under development	$ 10,400		$ 10,400
Average remaining renewal period of wireless license portfolio (in years)			5 years 2 months 12 days

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Changes in Carrying Amount of Goodwill (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2016
Goodwill [Line Items]
Beginning balance			$ 25,331
Acquisitions (Note 2)			641
Reclassifications, adjustments and other			(2)
Ending balance	$ 25,970		25,970
Wireless
Goodwill [Line Items]
Beginning balance			18,393
Ending balance	18,393		18,393
Wireline
Goodwill [Line Items]
Beginning balance			4,331
Reclassifications, adjustments and other			(113)
Ending balance	4,218		4,218
Other Operating Segments
Goodwill [Line Items]
Beginning balance			2,607
Acquisitions (Note 2)	600		641
Reclassifications, adjustments and other		$ 100	111
Ending balance	$ 3,359		$ 3,359

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Composition of Other Intangible Assets Net (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 21,181	$ 20,027
Accumulated Amortization	(13,489)	(12,435)
Net Amount	7,692	7,592
Customer Lists
Finite-Lived Intangible Assets [Line Items]
Gross Amount	3,963	4,139
Accumulated Amortization	(2,355)	(2,365)
Net Amount	$ 1,608	1,774
Customer Lists | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life for finite-lived intangible assets, years	6 years
Customer Lists | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life for finite-lived intangible assets, years	14 years
Non-Network Internal-Use Software
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 15,530	14,542
Accumulated Amortization	(10,593)	(9,620)
Net Amount	$ 4,937	4,922
Non-Network Internal-Use Software | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life for finite-lived intangible assets, years	3 years
Non-Network Internal-Use Software | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life for finite-lived intangible assets, years	8 years
Other Intangible Assets
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 1,688	1,346
Accumulated Amortization	(541)	(450)
Net Amount	$ 1,147	$ 896
Other Intangible Assets | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life for finite-lived intangible assets, years	5 years
Other Intangible Assets | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life for finite-lived intangible assets, years	25 years

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Amortization Expense for Other Intangible Assets (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Finite-Lived Intangible Assets [Line Items]
Amortization expense for other intangible assets	$ 419	$ 438	$ 1,255	$ 1,247

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Estimated Future Amortization Expense for Other Intangible Assets (Detail) $ in Millions	Sep. 30, 2016 USD ($)
Finite-Lived Intangible Assets [Line Items]
Remainder of 2016	$ 416
2017	1,505
2018	1,327
2019	1,121
2020	$ 892

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Changes to Debt (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Debt Instrument [Line Items]
Balance at January 1, 2016	$ 6,489
Balance at January 1, 2016	103,240
Balance at January 1, 2016	109,729
Proceeds from borrowings	8,152	$ 6,497
Proceeds from asset-backed borrowings	2,594
Repayments of borrowings and capital leases obligations	(14,510)	(7,168)
Decrease in short-term obligations, excluding current maturities	(120)	$ (305)
Other	746
Balance at September 30, 2016	3,852
Balance at September 30, 2016	102,739
Balance at September 30, 2016	106,591
Debt Maturing Within One Year
Debt Instrument [Line Items]
Balance at January 1, 2016	6,489
Repayments of borrowings and capital leases obligations	(6,110)
Decrease in short-term obligations, excluding current maturities	(120)
Reclassifications of long-term debt	3,412
Other	181
Balance at September 30, 2016	3,852
Long-term Debt
Debt Instrument [Line Items]
Balance at January 1, 2016	103,240
Proceeds from borrowings	8,152
Proceeds from asset-backed borrowings	2,594
Repayments of borrowings and capital leases obligations	(8,400)
Reclassifications of long-term debt	3,412
Other	565
Balance at September 30, 2016	$ 102,739

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Debt - Additional Information (Detail) - USD ($)							1 Months Ended			3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 15, 2016	Apr. 08, 2016	Apr. 05, 2016	Apr. 04, 2016	Apr. 01, 2016	Sep. 30, 2016	Aug. 31, 2016	Jul. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Net pre-tax loss on early debt redemption											$ (1,800,000,000)
Principal amount outstanding in connection with the guarantee of debt obligations							$ 106,591,000,000			$ 106,591,000,000		$ 106,591,000,000	$ 109,729,000,000
Credit Facility
Debt Instrument [Line Items]
Borrowing capacity	$ 9,000,000,000						9,000,000,000			9,000,000,000		9,000,000,000
Amount of unused borrowing capacity under credit facility							8,900,000,000			8,900,000,000		8,900,000,000
Credit facility expiry date	Sep. 23, 2020
Previously Disclosed | Credit Facility
Debt Instrument [Line Items]
Borrowing capacity	$ 8,000,000,000
Network Equipment | Vendor Financing Facility
Debt Instrument [Line Items]
Value of purchase assets financed												400,000,000
Long-term debt maturing within one year							1,100,000,000			1,100,000,000		1,100,000,000
April Early Debt Redemption
Debt Instrument [Line Items]
Extinguishment of Debt, Amount			$ 2,300,000,000
2016 Tender Offers
Debt Instrument [Line Items]
Aggregate purchase price					$ 9,500,000,000
Tender offer for notes, settlement date					Apr. 04, 2016
Repayment of debt					$ 10,200,000,000
Accrued interest paid					100,000,000
2016 Tender Offers | Maximum
Debt Instrument [Line Items]
Aggregate purchase price					$ 5,500,000,000
2.50% Notes due 2016 | April Early Debt Redemption
Debt Instrument [Line Items]
Amount of notes repaid			$ 900,000,000
Stated interest rate on debt instrument			2.50%
Debt instrument maturity date			2016
Notes purchased price of principal amount of note, percentage				100.80%
2.00% Notes due 2016 | April Early Debt Redemption
Debt Instrument [Line Items]
Amount of notes repaid			$ 500,000,000
Stated interest rate on debt instrument			2.00%
Debt instrument maturity date			2016
Notes purchased price of principal amount of note, percentage				100.80%
6.35% Notes due 2019 | April Early Debt Redemption
Debt Instrument [Line Items]
Amount of notes repaid			$ 800,000,000
Stated interest rate on debt instrument			6.35%
Debt instrument maturity date			2019
Notes purchased price of principal amount of note, percentage				113.50%
Guarantee Of Debentures And First Mortgage Bonds Of Operating Telephone Company Subsidiaries
Debt Instrument [Line Items]
Termination of guarantee for aggregate principal amount of debentures						$ 600,000,000
August Debt Issuance
Debt Instrument [Line Items]
Amount of notes repaid		$ 2,300,000,000
Debt instrument face amount								$ 6,200,000,000
Proceeds from long-term borrowings								$ 6,100,000,000
August Debt Issuance | Floating Rate Notes
Debt Instrument [Line Items]
Debt instrument maturity date								2019
Debt instrument face amount								$ 400,000,000
August Debt Issuance | 1.375% Notes Due 2019
Debt Instrument [Line Items]
Stated interest rate on debt instrument								1.375%
Debt instrument maturity date								2019
Debt instrument face amount								$ 1,000,000,000
August Debt Issuance | 1.750% Notes Due 2021
Debt Instrument [Line Items]
Stated interest rate on debt instrument								1.75%
Debt instrument maturity date								2021
Debt instrument face amount								$ 1,000,000,000
August Debt Issuance | 2.625% Notes Due 2026
Debt Instrument [Line Items]
Stated interest rate on debt instrument								2.625%
Debt instrument maturity date								2026
Debt instrument face amount								$ 2,300,000,000
August Debt Issuance | 4.125% Notes Due 2046
Debt Instrument [Line Items]
Stated interest rate on debt instrument								4.125%
Debt instrument maturity date								2046
Debt instrument face amount								$ 1,500,000,000
August Debt Issuance | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Debt instrument, percentage points added to the reference rate								0.37%
Guarantee of Debentures of Operating Telephone Company Subsidiaries
Debt Instrument [Line Items]
Principal amount outstanding in connection with the guarantee of debt obligations							1,200,000,000			1,200,000,000		1,200,000,000
Guarantee of Debt Obligations of GTE Corporation
Debt Instrument [Line Items]
Principal amount outstanding in connection with the guarantee of debt obligations							$ 1,100,000,000			$ 1,100,000,000		$ 1,100,000,000
September Debt Issuance | 4.20% Notes Due 2046
Debt Instrument [Line Items]
Stated interest rate on debt instrument							4.20%			4.20%		4.20%
Debt instrument maturity date							2046
Debt instrument face amount							$ 2,100,000,000			$ 2,100,000,000		$ 2,100,000,000
Proceeds from long-term borrowings							2,000,000,000
4.80% Notes Due 2044 | September Debt Redemption
Debt Instrument [Line Items]
Amount of notes repaid							$ 900,000,000
Stated interest rate on debt instrument							4.80%			4.80%		4.80%
Debt instrument maturity date							2044
Notes purchased price of principal amount of note, percentage							100.00%
Asset-Backed Debt
Debt Instrument [Line Items]
Asset-backed debt, carrying value							$ 2,600,000,000			$ 2,600,000,000		$ 2,600,000,000
Asset Backed Notes
Debt Instrument [Line Items]
Collateral revolving period									2 years
Asset Backed Notes | Senior and junior asset-backed notes
Debt Instrument [Line Items]
Debt instrument face amount									$ 1,200,000,000
Asset Backed Notes | Senior asset-backed notes
Debt Instrument [Line Items]
Stated interest rate on debt instrument									1.42%
Debt instrument maturity period									2 years 6 months
Asset Backed Notes | Junior asset-backed notes
Debt Instrument [Line Items]
Debt instrument maturity period									3 years 2 months 12 days
Debt instrument weighted average interest rate									1.53%
Asset Backed Notes | Third Party Investors | Senior and junior asset-backed notes
Debt Instrument [Line Items]
Debt instrument face amount									$ 1,100,000,000
ABS Financing Facility
Debt Instrument [Line Items]
Asset-backed debt, carrying value							1,500,000,000			$ 1,500,000,000		1,500,000,000
Debt instrument maturity period										2 years 7 months 6 days
Collateral revolving period										2 years
Borrowing capacity							1,500,000,000			$ 1,500,000,000		1,500,000,000
Additional borrowing capacity							$ 1,500,000,000			$ 1,500,000,000		$ 1,500,000,000

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Tender Offer to Purchase for Cash any and all of the Group 1 Any and All Notes (Detail) $ in Millions	Apr. 04, 2016 USD ($)
Verizon Communications Inc | 2.50% Notes due 2016
Debt Instrument [Line Items]
Interest Rate	2.50%
Maturity	2016
Principal Amount Outstanding	$ 2,182
Purchase Price	1,007.60	[1]
Principal Amount Purchased	$ 1,272
Verizon Communications Inc | 2.0% Notes due 2016
Debt Instrument [Line Items]
Interest Rate	2.00%
Maturity	2016
Principal Amount Outstanding	$ 1,250
Purchase Price	1,007.20	[1]
Principal Amount Purchased	$ 731
Verizon Communications Inc | 6.35% Notes due 2019
Debt Instrument [Line Items]
Interest Rate	6.35%
Maturity	2019
Principal Amount Outstanding	$ 1,750
Purchase Price	1,133.32	[1]
Principal Amount Purchased	$ 970
Tender Offer to Purchase for Cash Any and All of the Group 1 Any and All Notes
Debt Instrument [Line Items]
Principal Amount Purchased	$ 2,973

[1] Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

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Tender Offer to Purchase for Cash Any and All of the Group 2 Any and All Notes (Detail) $ in Millions	Apr. 04, 2016 USD ($)
Verizon Delaware LLC | 8.375% Debentures due 2019
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.375%
Debt instrument maturity date	2019
Principal Amount Outstanding	$ 15
Purchase Price	1,182.11	[1]
Principal Amount Purchased	$ 15
Verizon Delaware LLC | 8.625% Debentures due 2031
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.625%
Debt instrument maturity date	2031
Principal Amount Outstanding	$ 15
Purchase Price	1,365.39	[1]
Principal Amount Purchased	$ 5
Verizon Maryland LLC | 8.00% Debentures due 2029
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.00%
Debt instrument maturity date	2029
Principal Amount Outstanding	$ 50
Purchase Price	1,301.32	[1]
Principal Amount Purchased	$ 22
Verizon Maryland LLC | 8.30% Debentures due 2031
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.30%
Debt instrument maturity date	2031
Principal Amount Outstanding	$ 100
Purchase Price	1,347.26	[1]
Principal Amount Purchased	$ 76
Verizon Maryland LLC | 5.125% Debentures due 2033
Debt Instrument [Line Items]
Stated interest rate on debt instrument	5.125%
Debt instrument maturity date	2033
Principal Amount Outstanding	$ 350
Purchase Price	1,012.50	[1]
Principal Amount Purchased	$ 171
Verizon New England Inc | 7.875% Debentures due 2029
Debt Instrument [Line Items]
Stated interest rate on debt instrument	7.875%
Debt instrument maturity date	2029
Principal Amount Outstanding	$ 349
Purchase Price	1,261.63	[1]
Principal Amount Purchased	$ 176
Verizon New Jersey Inc | 8.00% Debentures due 2022
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.00%
Debt instrument maturity date	2022
Principal Amount Outstanding	$ 200
Purchase Price	1,238.65	[1]
Principal Amount Purchased	$ 54
Verizon New Jersey Inc | 7.85% Debentures due 2029
Debt Instrument [Line Items]
Stated interest rate on debt instrument	7.85%
Debt instrument maturity date	2029
Principal Amount Outstanding	$ 149
Purchase Price	1,311.32	[1]
Principal Amount Purchased	$ 63
Verizon New York Inc | 6.50% Debentures due 2028
Debt Instrument [Line Items]
Stated interest rate on debt instrument	6.50%
Debt instrument maturity date	2028
Principal Amount Outstanding	$ 100
Purchase Price	1,151.71	[1]
Principal Amount Purchased	$ 28
Verizon New York Inc | 7.375% Debentures due 2032
Debt Instrument [Line Items]
Stated interest rate on debt instrument	7.375%
Debt instrument maturity date	2032
Principal Amount Outstanding	$ 500
Purchase Price	1,201.92	[1]
Principal Amount Purchased	$ 256
Verizon Pennsylvania LLC | 6.00% Debentures due 2028
Debt Instrument [Line Items]
Stated interest rate on debt instrument	6.00%
Debt instrument maturity date	2028
Principal Amount Outstanding	$ 125
Purchase Price	1,110.47	[1]
Principal Amount Purchased	$ 57
Verizon Pennsylvania LLC | 8.35% Debentures due 2030
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.35%
Debt instrument maturity date	2030
Principal Amount Outstanding	$ 175
Purchase Price	1,324.10	[1]
Principal Amount Purchased	$ 127
Verizon Pennsylvania LLC | 8.75% Debentures due 2031
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.75%
Debt instrument maturity date	2031
Principal Amount Outstanding	$ 125
Purchase Price	1,356.47	[1]
Principal Amount Purchased	$ 72
Verizon Virginia LLC | 7.875% Debentures due 2022
Debt Instrument [Line Items]
Stated interest rate on debt instrument	7.875%
Debt instrument maturity date	2022
Principal Amount Outstanding	$ 100
Purchase Price	1,227.79	[1]
Principal Amount Purchased	$ 43
Verizon Virginia LLC | 8.375% Debentures due 2029
Debt Instrument [Line Items]
Stated interest rate on debt instrument	8.375%
Debt instrument maturity date	2029
Principal Amount Outstanding	$ 100
Purchase Price	1,319.78	[1]
Principal Amount Purchased	$ 81
Tender Offer to Purchase for Cash Any and All of the Group 2 Any and All Notes
Debt Instrument [Line Items]
Principal Amount Purchased	$ 1,246

[1] Per $1,000 principal amount of notes tendered and not withdrawn prior to early expiration.

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Tender Offer to Purchase for Cash Group 3 Notes (Detail) $ in Millions	Apr. 04, 2016 USD ($)
Verizon Communications Inc | 8.95% Notes due 2039
Debt Instrument [Line Items]
Interest Rate	8.95%
Maturity	2039
Principal Amount Outstanding	$ 353
Purchase Price	1,506.50	[1]
Principal Amount Purchased	$ 63
Verizon Communications Inc | 7.75% Notes due 2032
Debt Instrument [Line Items]
Interest Rate	7.75%
Maturity	2032
Principal Amount Outstanding	$ 251
Purchase Price	1,315.19	[1]
Principal Amount Purchased	$ 33
Verizon Communications Inc | 7.35% Notes due 2039
Debt Instrument [Line Items]
Interest Rate	7.35%
Maturity	2039
Principal Amount Outstanding	$ 480
Purchase Price	1,293.50	[1]
Principal Amount Purchased	$ 68
Verizon Communications Inc | 7.75% Notes due 2030
Debt Instrument [Line Items]
Interest Rate	7.75%
Maturity	2030
Principal Amount Outstanding	$ 1,206
Purchase Price	1,377.92	[1]
Principal Amount Purchased	$ 276
Verizon Communications Inc | 6.55% Notes due 2043
Debt Instrument [Line Items]
Interest Rate	6.55%
Maturity	2043
Principal Amount Outstanding	$ 6,585
Purchase Price	1,291.74	[1]
Principal Amount Purchased	$ 2,340
Verizon Communications Inc | 6.40% Notes due 2033
Debt Instrument [Line Items]
Interest Rate	6.40%
Maturity	2033
Principal Amount Outstanding	$ 2,196
Purchase Price	1,220.28	[1]
Principal Amount Purchased	$ 466
Verizon Communications Inc | 6.90% Notes due 2038
Debt Instrument [Line Items]
Interest Rate	6.90%
Maturity	2038
Principal Amount Outstanding	$ 477
Purchase Price	1,243.29	[1]
Principal Amount Purchased	$ 92
Verizon Communications Inc | 6.25% Notes due 2037
Debt Instrument [Line Items]
Interest Rate	6.25%
Maturity	2037
Principal Amount Outstanding	$ 750
Purchase Price	1,167.66	[1]
Principal Amount Purchased	$ 114
Verizon Communications Inc | 6.40% Notes due 2038
Debt Instrument [Line Items]
Interest Rate	6.40%
Maturity	2038
Principal Amount Outstanding	$ 866
Purchase Price	1,176.52	[1]
Principal Amount Purchased	$ 116
Verizon Communications Inc | 5.85% Notes due 2035
Debt Instrument [Line Items]
Interest Rate	5.85%
Maturity	2035
Principal Amount Outstanding	$ 1,500
Purchase Price	1,144.68	[1]
Principal Amount Purchased	$ 250
Verizon Communications Inc | 6.00% Notes due 2041
Debt Instrument [Line Items]
Interest Rate	6.00%
Maturity	2041
Principal Amount Outstanding	$ 1,000
Purchase Price	1,164.56	[1]
Verizon Communications Inc | 5.15% Notes Due 2023
Debt Instrument [Line Items]
Interest Rate	5.15%
Maturity	2023
Principal Amount Outstanding	$ 8,517
Purchase Price	1,152.83	[1]
Alltel Corporation | 7.875% Debentures due 2032
Debt Instrument [Line Items]
Interest Rate	7.875%
Maturity	2032
Principal Amount Outstanding	$ 452
Purchase Price	1,322.92	[1]
Principal Amount Purchased	$ 115
Alltel Corporation | 6.80% Debentures Due 2029
Debt Instrument [Line Items]
Interest Rate	6.80%
Maturity	2029
Principal Amount Outstanding	$ 235
Purchase Price	1,252.93	[1]
Principal Amount Purchased	$ 47
GTE Corporation | 6.94% Debentures due 2028
Debt Instrument [Line Items]
Interest Rate	6.94%
Maturity	2028
Principal Amount Outstanding	$ 800
Purchase Price	1,261.35	[1]
Principal Amount Purchased	$ 237
GTE Corporation | 8.75% Debentures due 2021
Debt Instrument [Line Items]
Interest Rate	8.75%
Maturity	2021
Principal Amount Outstanding	$ 300
Purchase Price	1,307.34	[1]
Principal Amount Purchased	$ 93
Tender Offer to Purchase for Cash Waterfall Series of Notes
Debt Instrument [Line Items]
Principal Amount Purchased	$ 4,310

[1] Per $1,000 principal amount of notes

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Schedule of Assets and Liabilities Related to Asset-backed Debt Arrangements (Detail) $ in Millions	Sep. 30, 2016 USD ($)
Accounts Receivable, net
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	$ 1,733
Prepaid Expenses and Other
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	71
Other Assets
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	1,296
Long-term Debt
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Liabilities	$ 2,595

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Device Payment Plan Agreement Receivables, Net (Detail) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Device payment plan agreement receivables, gross	$ 7,735	$ 3,720
Unamortized imputed interest	(332)	(142)
Device payment plan agreement receivables, net of unamortized imputed interest	7,403	3,578
Allowance for credit losses	(601)	(444)
Device payment plan agreement receivables, net	6,802	3,134
Accounts Receivable, net
Accounts, Notes, Loans and Financing Receivable [Line Items]
Device payment plan agreement receivables, net	4,000	1,979
Other Assets
Accounts, Notes, Loans and Financing Receivable [Line Items]
Device payment plan agreement receivables, net	$ 2,802	$ 1,155

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Wireless Device Payment Plans - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables transferred to ABS Entities	$ 3,000,000,000		$ 3,000,000,000
Number of customer tenure days			210 days
Guarantee liability	100,000,000		$ 100,000,000		$ 200,000,000
Receivables derecognized under receivable securitization program	6,400,000,000		6,400,000,000
Total portfolio of device payment plan agreement receivables	14,100,000,000		14,100,000,000
Device payment plan agreement receivables sold, net	0	$ 2,400,000,000	3,300,000,000	$ 6,100,000,000
Cash proceeds received from new transfers		2,000,000,000	2,000,000,000	4,500,000,000
Cash proceeds received from reinvested collections			900,000,000
Deferred purchase price recorded		$ 400,000,000	400,000,000	$ 1,700,000,000
Deferred purchase price receivable collected			500,000,000
Finance receivables collected and remitted, net of fees			5,700,000,000
Cash proceeds received, net of remittances	4,400,000,000		4,400,000,000
Credit losses on receivables sold			100,000,000
Maximum exposure to loss related to involvement with sellers	2,200,000,000		2,200,000,000
Other Assets
Accounts, Notes, Loans and Financing Receivable [Line Items]
Deferred purchase price receivable	1,000,000,000		1,000,000,000		$ 2,200,000,000
Prepaid Expenses and Other Assets
Accounts, Notes, Loans and Financing Receivable [Line Items]
Deferred purchase price receivable	$ 1,200,000,000		$ 1,200,000,000

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Balance and Aging of Device Payment Plan Agreement Receivables on Gross Basis (Detail) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Device payment plan agreement receivables, gross	$ 7,735	$ 3,720
Unbilled
Accounts, Notes, Loans and Financing Receivable [Line Items]
Device payment plan agreement receivables, current	7,261	3,420
Billed
Accounts, Notes, Loans and Financing Receivable [Line Items]
Device payment plan agreement receivables, current	375	227
Device payment plan agreement receivables, past due	$ 99	$ 73

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Activity in Allowance for Credit Losses for Device Payment Plan Agreement Receivables (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance at January 1, 2016	$ 444
Bad debt expense	437
Write-offs	(347)
Allowance related to receivables sold	59
Other	8
Balance at September 30, 2016	$ 601

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Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - Fair Value, Measurements, Recurring - USD ($) $ in Millions		Sep. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis		$ 1,175	$ 1,670
Fair value of liabilities measured on a recurring basis		1,539	1,681
Other Assets | Interest Rate Caps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis		3
Other Assets | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis		126
Other Assets | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis		620	928
Other Assets | Interest Rate Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis		420	128
Other Assets | Net Investment Hedges
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis		6	13
Other Assets | Cross Currency Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis			1
Other Liabilities | Interest Rate Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis		2	19
Other Liabilities | Net Investment Hedges
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis		1
Other Liabilities | Cross Currency Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis		1,536	1,638
Other Liabilities | Forward Interest Rate Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis			24
Short-term Investments | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis			265
Short-term Investments | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis			85
Other current assets | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis			250
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[1]	141	515
Level 1 | Other Assets | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[1]	126
Level 1 | Other Assets | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[1]	15
Level 1 | Short-term Investments | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[1]		265
Level 1 | Other current assets | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[1]		250
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]	1,034	1,155
Fair value of liabilities measured on a recurring basis	[2]	1,539	1,681
Level 2 | Other Assets | Interest Rate Caps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]	3
Level 2 | Other Assets | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]	605	928
Level 2 | Other Assets | Interest Rate Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]	420	128
Level 2 | Other Assets | Net Investment Hedges
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]	6	13
Level 2 | Other Assets | Cross Currency Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]		1
Level 2 | Other Liabilities | Interest Rate Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis	[2]	2	19
Level 2 | Other Liabilities | Net Investment Hedges
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis	[2]	1
Level 2 | Other Liabilities | Cross Currency Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis	[2]	$ 1,536	1,638
Level 2 | Other Liabilities | Forward Interest Rate Swaps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of liabilities measured on a recurring basis	[2]		24
Level 2 | Short-term Investments | Fixed Income Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets measured on a recurring basis	[2]		$ 85

[1] quoted prices in active markets for identical assets or liabilities

[2] observable inputs other than quoted prices in active markets for identical assets and liabilities

XML

Fair Value of Short Term and Long Term Debt Excluding Capital Leases (Detail) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short- and long-term debt	$ 106,591	$ 109,729
Carrying Amount, Fair Value Disclosure | Excluding Capital Leases
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short- and long-term debt	105,628	108,772
Estimate of Fair Value Measurement | Excluding Capital Leases
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short- and long-term debt	$ 122,520	$ 118,216

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Fair Value Measurements and Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Derivative liability fair value of collateral	$ 200		$ 200				$ 100
New Interest Rate Swaps | Fair Value Hedges
Derivatives, Fair Value [Line Items]
Notional amount	1,100		1,100
Settled Interest Rate Swaps | Fair Value Hedges
Derivatives, Fair Value [Line Items]
Notional amount	900		900
New Forward Interest Rate Swaps
Derivatives, Fair Value [Line Items]
Notional amount						$ 1,300
Settled Forward Interest Rate Swaps
Derivatives, Fair Value [Line Items]
Notional amount	2,000		2,000
Forward Interest Rate Swaps
Derivatives, Fair Value [Line Items]
Notional amount							750
Pre-tax gain (loss) recognized in other comprehensive income (loss)		$ 200	(200)	$ 200
Cross Currency Swaps
Derivatives, Fair Value [Line Items]
Notional amount	9,606		9,606				$ 9,675
Pre-tax gain (loss) recognized in other comprehensive income (loss)	300	$ (200)	100	$ (900)
Cross Currency Swaps | Cash Flow Hedges | Settled
Derivatives, Fair Value [Line Items]
Notional amount					$ 100
Interest Rate Cap
Derivatives, Fair Value [Line Items]
Notional amount	$ 1,540		$ 1,540

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Notional Amounts of Outstanding Derivative Instruments (Detail) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Net Investment Hedges
Derivative [Line Items]
Notional amount	$ 864	$ 864
Interest Rate Swaps
Derivative [Line Items]
Notional amount	7,850	7,620
Forward Interest Rate Swaps
Derivative [Line Items]
Notional amount		750
Cross Currency Swaps
Derivative [Line Items]
Notional amount	9,606	$ 9,675
Interest Rate Caps
Derivative [Line Items]
Notional amount	$ 1,540

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Stock Based Compensation - Additional Information (Detail) $ / shares in Units, $ in Billions	9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares available for awards under the Long-Term Incentive Plan | shares	119,600,000
Restricted Stock Units and Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to the unvested portion of RSUs and PSUs | $	$ 0.4
Weighted-average period of unrecognized compensation expense related to the unvested portion of RSUs and PSUs (in years)	2 years
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value per unit | $ / shares	$ 51.90

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Restricted and Performance Stock Unit Activity (Detail) shares in Thousands	9 Months Ended
	Sep. 30, 2016 shares
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance	13,903
Granted	4,044
Payments	(4,736)
Cancelled/Forfeited	(94)
Ending Balance	13,117
Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance	17,203
Granted	6,124
Payments	(4,702)
Cancelled/Forfeited	(131)
Adjustments	170
Ending Balance	18,664

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Benefit or Income Cost Related to Pension and Postretirement Health Care and Life Insurance Plans (Detail) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Defined Benefit Plan Disclosure [Line Items]
Remeasurement loss, net	$ 797	$ 3,600	$ 342	$ 4,512	$ 342
Pension
Defined Benefit Plan Disclosure [Line Items]
Service cost	82		93	238	280
Amortization of prior service cost (credit)	10		(1)	12	(3)
Expected return on plan assets	(257)		(317)	(785)	(952)
Interest cost	162		242	518	727
Remeasurement loss, net	555		342	1,977	342
Net periodic benefit (income) cost	552		359	1,960	394
Termination benefits	4			4
Total	556		359	1,964	394
Health Care And Life
Defined Benefit Plan Disclosure [Line Items]
Service cost	40		81	153	243
Amortization of prior service cost (credit)	(235)		(72)	(421)	(215)
Expected return on plan assets	(13)		(25)	(41)	(76)
Interest cost	162		280	583	838
Remeasurement loss, net				2,293
Net periodic benefit (income) cost	(46)		264	2,567	790
Total	$ (46)		$ 264	$ 2,567	$ 790

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Employee Benefits - Additional Information (Detail) $ in Millions				3 Months Ended				7 Months Ended	9 Months Ended		12 Months Ended
	Aug. 31, 2016	May 31, 2016 USD ($) plan	Apr. 01, 2016 USD ($) plan	Sep. 30, 2016 USD ($) plan	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($) plan	Sep. 30, 2015 USD ($) plan	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($) plan	Sep. 30, 2015 USD ($) plan	Dec. 31, 2014 plan	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)				$ (797)	$ (3,600)		$ (342)		$ (4,512)	$ (342)
Severance, pension and benefit charges				200
Amount paid in severance benefits over the period				100					400
Post employment benefits liability				600					600
Weighted Average
Defined Benefit Plan Disclosure [Line Items]
Discount rate assumption	3.61%	3.99%					4.50%			4.50%	4.20%	4.60%
Access Line Sale with Frontier | Selling, general and administrative expense
Defined Benefit Plan Disclosure [Line Items]
Curtailment gain									500
Curtailment
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)			$ (800)
Contractual Healthcare Caps and Bargain
Defined Benefit Plan Disclosure [Line Items]
Change in defined benefit and postretirement plans, due to change in prior service credit, net of taxes									2,900
Change in defined benefit and postretirement plans, due to change in prior service credit, tax									1,800
Reclassification to net periodic cost				200					200
Pension and benefit remeasurement credit (charge)		$ (2,700)
Contractual Healthcare Caps and Bargain | Scenario, Forecast
Defined Benefit Plan Disclosure [Line Items]
Reclassification to net periodic cost								$ (400)
Increase in pre-tax income								$ 400
Pension
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)				(555)			$ (342)		$ (1,977)	$ (342)
Pension | Access Line Sale with Frontier
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit plans from which elimination of accrual of pension benefits for some or all future services of a significant number of employees covered occurred | plan									3
Pension | Curtailment
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit pension plans | plan			3
Pension | Contractual Healthcare Caps and Bargain
Defined Benefit Plan Disclosure [Line Items]
Average remaining service period of defined benefit pension plans									12 years 2 months 12 days
(Reduction) Increase in benefit obligation				400					$ 400
Number of defined benefit pension plans | plan		2
Pension | Lump Sum Distributions
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)		$ (100)		$ (600)		$ (200)
Number of defined benefit pension plans | plan		3		5		1	4		5	4	7
Other Postretirement Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan contributions by employer				$ 200					$ 900
Other Postretirement Benefit Plan | Access Line Sale with Frontier
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit plans from which elimination of accrual of pension benefits for some or all future services of a significant number of employees covered occurred | plan									1
Other Postretirement Benefit Plan | Curtailment
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit pension plans | plan			1
Other Postretirement Benefit Plan | Contractual Healthcare Caps and Bargain
Defined Benefit Plan Disclosure [Line Items]
Average remaining service period of defined benefit pension plans									7 years 9 months 18 days
(Reduction) Increase in benefit obligation				(5,100)					$ (5,100)
Number of defined benefit pension plans | plan		3
Charges Primarily Driven By Decrease In Discount Rate Assumption
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)		$ (2,700)		(800)
Charges Driven by Healthcare Cost Trend Rate Assumptions
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)		$ (900)
Pension Credit (Charge) Driven By Difference Between Expected Return on Assets and Annualized Actual Return On Assets
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)				200			$ (700)			$ (700)
Expected return on assets assumption	7.00%										7.25%
Actual return on assets	11.00%									1.96%
Pension Charges Driven By Other
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)							(100)			$ (100)
Pension Remeasurement Gain Primarily Driven By Increase In Discount Rate Assumption
Defined Benefit Plan Disclosure [Line Items]
Pension and benefit remeasurement credit (charge)							$ 500			$ 500
Qualified pension plans
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan contributions by employer				500					800
Defined benefit plan discretionary contributions by employer				200					200
Non Qualified Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan contributions by employer				100					100
Change method used to estimate interest component of net periodic benefit cost for pension and other Postretirement benefits
Defined Benefit Plan Disclosure [Line Items]
Reduction of interest cost				100					300
Increase to operating income				$ 100					$ 300

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Changes in Components of Total equity (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Equity Note [Line Items]
Balance at January 1, 2016			$ 17,842
Net Income	$ 3,747	$ 4,171	9,008	$ 12,862
Other comprehensive income			2,208
Total Comprehensive Income	3,658	$ 3,950	11,216	$ 12,351
Contributed capital			(17)
Dividends declared			(6,960)
Common stock in treasury			152
Distributions and other			(250)
Balance at September 30, 2016	21,983		21,983
Verizon
Equity Note [Line Items]
Balance at January 1, 2016			16,428
Net Income			8,632
Other comprehensive income			2,208
Total Comprehensive Income			10,840
Contributed capital			(17)
Dividends declared			(6,960)
Common stock in treasury			152
Distributions and other			17
Balance at September 30, 2016	20,460		20,460
Noncontrolling Interests
Equity Note [Line Items]
Balance at January 1, 2016			1,414
Net Income			376
Total Comprehensive Income			376
Distributions and other			(267)
Balance at September 30, 2016	$ 1,523		$ 1,523

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Equity and Accumulated Other Comprehensive Income - Additional Information (Detail) $ in Billions	9 Months Ended
	Sep. 30, 2016 USD ($) plan shares
Equity and Comprehensive Income [Line Items]
Common shares issued from Treasury stock | shares	3,500,000
Contractual Healthcare Caps and Bargain
Equity and Comprehensive Income [Line Items]
Change in defined benefit and postretirement plans, due to change in prior service credit, before tax	$ 4.7
Change in defined benefit and postretirement plans, due to change in prior service credit, net of taxes	$ 2.9
Access Line Sale with Frontier | Pension
Equity and Comprehensive Income [Line Items]
Number of defined benefit plans from which elimination of accrual of pension benefits for some or all future services of a significant number of employees covered occurred | plan	3
Access Line Sale with Frontier | Other Postretirement Benefit Plan
Equity and Comprehensive Income [Line Items]
Number of defined benefit plans from which elimination of accrual of pension benefits for some or all future services of a significant number of employees covered occurred | plan	1
Selling, general and administrative expense | Access Line Sale with Frontier
Equity and Comprehensive Income [Line Items]
Curtailment gain	$ 0.5
Curtailment gain net of tax	$ 0.3
Share Buyback Program
Equity and Comprehensive Income [Line Items]
Number of shares repurchased | shares	0
Share Buyback Program | Maximum
Equity and Comprehensive Income [Line Items]
Number of shares authorized for repurchase | shares	97,200,000

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Changes in Balances of Accumulated Other Comprehensive Income by Component (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Equity And Accumulated Other Comprehensive Income [Line Items]
Balance at January 1, 2016	$ 17,842
Net other comprehensive income (loss)	2,208
Balance at September 30, 2016	21,983
Foreign currency translation adjustments
Equity And Accumulated Other Comprehensive Income [Line Items]
Balance at January 1, 2016	(554)
Other comprehensive income (loss)	(23)
Net other comprehensive income (loss)	(23)
Balance at September 30, 2016	(577)
Unrealized loss on cash flow hedges
Equity And Accumulated Other Comprehensive Income [Line Items]
Balance at January 1, 2016	(278)
Other comprehensive income (loss)	(91)
Amounts reclassified to net income	33
Net other comprehensive income (loss)	(58)
Balance at September 30, 2016	(336)
Unrealized loss on marketable securities
Equity And Accumulated Other Comprehensive Income [Line Items]
Balance at January 1, 2016	101
Other comprehensive income (loss)	8
Amounts reclassified to net income	(43)
Net other comprehensive income (loss)	(35)
Balance at September 30, 2016	66
Defined benefit pension and postretirement plans
Equity And Accumulated Other Comprehensive Income [Line Items]
Balance at January 1, 2016	1,281
Other comprehensive income (loss)	2,902
Amounts reclassified to net income	(578)
Net other comprehensive income (loss)	2,324
Balance at September 30, 2016	3,605
Accumulated Other Comprehensive Income
Equity And Accumulated Other Comprehensive Income [Line Items]
Balance at January 1, 2016	550
Other comprehensive income (loss)	2,796
Amounts reclassified to net income	(588)
Net other comprehensive income (loss)	2,208
Balance at September 30, 2016	$ 2,758

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Segment Information - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) Segment	Sep. 30, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | Segment			2
Segment reporting information, revenue	$ 30,937	$ 33,158	$ 93,640	$ 97,366
Number of customers individually accounting for more than ten percent of total operating revenues			No single customer accounted for more than 10% of our total operating revenues during the three and nine months ended September 30, 2016 and 2015.
Wireline
Segment Reporting Information [Line Items]
Segment reporting information, revenue	7,787	7,967	$ 23,533	24,030
Fios revenues | Wireline
Segment Reporting Information [Line Items]
Segment reporting information, revenue	$ 2,800	$ 2,700	$ 8,300	$ 8,000

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Operating Financial Information for Reportable Segments (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Segment Reporting Information [Line Items]
Operating Revenues	$ 30,937	$ 33,158	$ 93,640	$ 97,366
Operating income (Loss)	6,540	7,535	19,036	23,316
Wireless
Segment Reporting Information [Line Items]
Operating Revenues	22,101	23,005	65,809	67,946
Operating income (Loss)	7,647	7,668	23,544	23,174
Wireline
Segment Reporting Information [Line Items]
Operating Revenues	7,787	7,967	23,533	24,030
Operating income (Loss)	156	(109)	(374)	(528)
Operating Segments
Segment Reporting Information [Line Items]
Operating Revenues	29,888	30,972	89,342	91,976
Operating income (Loss)	7,803	7,559	23,170	22,646
Operating Segments | Wireless
Segment Reporting Information [Line Items]
Operating Revenues	22,020	22,980	65,551	67,868
Operating Segments | Wireless | Service Revenue
Segment Reporting Information [Line Items]
Operating Revenues	16,647	17,580	50,108	53,146
Operating Segments | Wireless | Equipment Revenue
Segment Reporting Information [Line Items]
Operating Revenues	4,124	4,292	11,782	11,526
Operating Segments | Wireless | Other External Operating Non-Service Revenues
Segment Reporting Information [Line Items]
Operating Revenues	1,249	1,108	3,661	3,196
Operating Segments | Wireline
Segment Reporting Information [Line Items]
Operating Revenues	7,558	7,722	22,827	23,295
Operating Segments | Wireline | Mass Markets Consumer Retail
Segment Reporting Information [Line Items]
Operating Revenues	3,174	3,168	9,519	9,470
Operating Segments | Wireline | Mass Markets Small Business
Segment Reporting Information [Line Items]
Operating Revenues	411	434	1,241	1,320
Operating Segments | Wireline | Mass Markets
Segment Reporting Information [Line Items]
Operating Revenues	3,585	3,602	10,760	10,790
Operating Segments | Wireline | Global Enterprise
Segment Reporting Information [Line Items]
Operating Revenues	2,886	2,987	8,748	9,040
Operating Segments | Wireline | Global Wholesale
Segment Reporting Information [Line Items]
Operating Revenues	1,009	1,046	3,071	3,209
Operating Segments | Wireline | Other
Segment Reporting Information [Line Items]
Operating Revenues	78	87	248	256
Operating Segments | Reportable Segment
Segment Reporting Information [Line Items]
Operating Revenues	29,578	30,702	88,378	91,163
Intersegment Revenues | Wireless
Segment Reporting Information [Line Items]
Operating Revenues	81	25	258	78
Intersegment Revenues | Wireline
Segment Reporting Information [Line Items]
Operating Revenues	229	245	706	735
Intersegment Revenues | Reportable Segment
Segment Reporting Information [Line Items]
Operating Revenues	$ 310	$ 270	$ 964	$ 813

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Reconciliation of Segment Assets (Detail) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Assets	$ 239,498	$ 244,175
Operating Segments
Segment Reporting Information [Line Items]
Assets	267,995	263,710
Operating Segments | Wireless
Segment Reporting Information [Line Items]
Assets	204,409	185,405
Operating Segments | Wireline
Segment Reporting Information [Line Items]
Assets	63,586	78,305
Corporate and Other
Segment Reporting Information [Line Items]
Assets	208,837	205,476
Eliminations
Segment Reporting Information [Line Items]
Assets	$ (237,334)	$ (225,011)

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Summary of Reconciliation of Segment Operating Revenues (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Segment Reporting, Revenue Reconciling Item [Line Items]
Segment reporting information, revenue	$ 30,937	$ 33,158	$ 93,640	$ 97,366
Operating Segments
Segment Reporting, Revenue Reconciling Item [Line Items]
Segment reporting information, revenue	29,888	30,972	89,342	91,976
Corporate and Other
Segment Reporting, Revenue Reconciling Item [Line Items]
Segment reporting information, revenue	1,403	1,170	4,078	2,259
Eliminations
Segment Reporting, Revenue Reconciling Item [Line Items]
Segment reporting information, revenue	$ (354)	(291)	(1,060)	(845)
Revenue Generated By Assets Sold
Segment Reporting, Revenue Reconciling Item [Line Items]
Segment reporting information, revenue		$ 1,307	$ 1,280	$ 3,976

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Reconciliation of Total Reportable Segments Operating Income to Consolidated Income before Provision for Income Taxes (Detail) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Segment Reporting Information [Line Items]
Severance, pension and benefit charges (Note 8)	$ (797)	$ (3,600)	$ (342)	$ (4,512)	$ (342)
Gain on spectrum license transaction (Note 2)				142
Operating Income	6,540		7,535	19,036	23,316
Equity in losses of unconsolidated businesses	(23)		(18)	(63)	(70)
Other income and (expense), net	97		51	(1,697)	158
Interest expense	(1,038)		(1,202)	(3,239)	(3,742)
Income Before Provision For Income Taxes	5,576		6,366	14,037	19,662
Access Line Sale with Frontier
Segment Reporting Information [Line Items]
Gain on access line sale (Note 2)				1,007
Operating Income			700	700	2,100
Operating Segments
Segment Reporting Information [Line Items]
Operating Income	7,803		7,559	23,170	22,646
Corporate and Other
Segment Reporting Information [Line Items]
Operating Income	$ (466)		(399)	(1,432)	(1,097)
Operating Income Generated By Assets Sold
Segment Reporting Information [Line Items]
Operating Income			$ 717	$ 661	$ 2,109

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Commitments and Contingencies - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2016 LegalMatter
Loss Contingencies [Line Items]
Approximate number of federal district court actions alleged for patent infringement	40
Guarantee obligations, year term (in years)	30 years