Case Study: AT&T VERSUS VERIZON: A FINANCIAL COMPARISON

917-543 |AT&T Versus Verizon: A Financial Comparisonplatforms represented the next catalyst for industry growth. Providers had responded by bundling services to attract and retain customers. At the same time, the proliferation of internet-enabled products had shifted most customers away from buying subsidized phones that locked them into long-term service contracts.2Most customers were buying handsets on an installment basis, which allowed them to upgrade their phones more frequently, incur lower monthly service charges, and eliminate service contracts. To discourage customers from dropping their service, providers required customers to pay the outstanding equipment balance in full if they switched phone companies. The shift from subsidized devices toward installment plans had also shifted providers revenue models. In the past, carriers had often used equipment as a loss leader and instead maximized service revenues and margins. As customers shifted toward installment plans, however, service revenues and margins had decreased, while equipment revenues and margins had increased.3Ninety-four percent of the U.S. population lived in an area with at least four providers.4Apple, Google, Microsoft, and Skype, as well as regional and bulk resellers, enabled customers to make wireless calls.5Most competition focused on price, network coverage, reliability, customer service, and the availability of new products and services.6Network utilization and spectrum efficiency were key competitive drivers.Wireline SectorWireline networks provided voice, data, and video services to consumers, large and small enterprises, and other carriers on a wholesale basis.bLegacy circuit-switched networks had continued to decline as more customers cut the cord, opting for wireless service or Voice over Internet Protocol (VoIP) and data services using cable or fiber optics.cThe growth of mobile platforms did not mean, however, that fixed networks would be extinct.Most of a packets journey was made over a wire; only the transmission between the device and a cell tower or WiFi router was wireless.dLike in the wireless sector, trends in customer and carrier behavior were intertwined with advances in technology. These advances had improved network capacity, decreasing the marginal cost of moving a packet from point A to point B. In turn, improved efficiency and lower costs made new products and services available. This pattern was most evident in the movement toward IP-based data and video, where streaming entertainment services and use of cloud-based applications had become more popular. In addition, the movement toward IP-based networks changed the competitive dynamic. In most markets, network providers competed on the pricing of bundled services as well as on broadband capacity and reliability.7Net NeutralityOn February 26, 2015, the Federal Communications Commission (FCC) reclassified internet broadband services as telecommunications services. The ruling favored net neutrality, meaning that network providers of fixed broadband could not employ differential pricing or service quality based on application, site, user, or content. Traffic over fixed networks must be handled on a first-come, first-served basis. The ruling mandated the following: (i) internet broadband providers could not block bWireline, or landline, is physical wire or cable that connects two endpoints in a communications network. The term is synonymous with traditional telephony using twisted pairs of copper wire.cLegacy circuit-switched networks using twist pair refers to the traditional means of establishing a telecommunications channel using copper wires. This type of networking establishes a single physical connection between two endpoints that remains for the duration of a call.dPackets are units of data that are encoded based on internet protocol (IP) and travel along a network. Data packets contain raw information as well as routing information and certain types of metadata.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

AT&T Versus Verizon: A Financial Comparison|917-543access to lawful content, services, applications, (ii) internet broadband providers could not discriminate, or throttle, the transmission of network traffic, (iii) broadband providers could not offer paid prioritization of traffic, and (iv) fixed broadband providers had to be transparent about how they managed their networks.8Overview of AT&T9AT&T was a communications network provider. It offered consumers and businesses wireless, wireline, broadband data, and video services along with managed networking and wholesale services.AT&T was organized into two operating units: wireless and wireline. Its wireless business covered every major metropolitan area within the United States, and through roaming agreements, many foreign countries. The wireline segment was the incumbent local exchange carrier (ILEC) in 21 states with retail and wholesale operations.eWireless SectorAT&Ts wireless networks covered 300 million people, and the companys total subscriber base had grown from 85.1 million at the end of 2009 to 120.6 million at the end of 2014. (See Exhibit 1Cfor data on AT&Ts wireless business.) Its most important segment of customerspostpaid subscribers, who usually had a contract and switched carriers less frequentlyhad grown by a compound annual rate of only 3.3% over the same period. Tagert believed this had led to a less favorable customer mix by decreasing average revenue per user (ARPU). She also noted that AT&T had mentioned spectrum constraints in its public filings. To ameliorate these constraints, AT&T planned to free up spectrum by migrating its 2G customers to the faster 3G and 4G networks.On the expense side, AT&Ts increased equipment sales and continued penetration of smartphones had resulted in a $2.67 billion increase in the cost of goods sold (COGS), reflected in operations and support expense.fHigher network maintenance, energy, and lease expenses had increased the systems costs by another $578 million. Selling, general, and administrative (SG&A) expenses had also increased by $1.1 billion due to higher marketing and customer retention costs, bad debt expense, and higher professional service costs. Tagert believed the confluence of customer mix, ARPU, network constraints, and increasing costs had caused AT&Ts wireless operating margins to shrink by 2.5% from 2013.Wireline SectorAT&Ts wireline business provided traditional and IP-based voice connections, as well as broadband and video services to consumer and wholesale markets. Traditional circuit-switched voice services had been in decline as customers migrated to wireless and VoIP solutions. (See Exhibit 1Dfor data on AT&Ts wireline business.) To stem the tide, AT&Ts managementadopted a bundled services strategy that combined broadband internet and video over its U-verse network along with wireless services. Tagert noticed that both U-verse offerings had enjoyed steady customer growth; according to the companys management, advanced IP-data services represented 35% of wireline revenue. She wondered whether these services could fill the hole left by the decline in circuit-switched business.eIncumbent local exchange carriers are the local, or regional, telephone companies that had a monopoly on providing telecom services prior to the industry opening to competition. In the United States, these companies were the Regional Bell Operating Companies (RBOCs) that began operating when AT&T was divested into separate entities.fNote the company does not break out the cost of goods sold independently from the cost of service revenue or other operating expenses.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

917-543 |AT&T Versus Verizon: A Financial ComparisonThe broadband, video, and VoIP offered through U-verse had shown consistently high growth for several years. U-verse was available in more than 57 million locations by the end of 2014. However, operating margins for the wireline segment had fallen since 2010, and U-verse content costs had increased by $621 million in 2014. Tagert also believed that many of the companys business customers who had discontinued traditional voice and data services that had moved to competitors networks. Finally, there was some uncertainty surrounding U-verse video services, which were regulated as a TV service. Numerous municipalities and cable companies had petitioned to have U-verse regulated as a cable service. This classification would affect how AT&T provisioned public, educational, and governmental programming. According to AT&Ts management, there could be a material adverse effect on the cost and extent of U-verses offerings if the petitioners were successful.Recent AcquisitionsxIn July 2013, AT&T had agreed to acquire Leap Wireless, a prepaid wireless provider operating under the Cricket brand name. The transaction was valued at $1.26 billion, plus a contingent payment from the sale of 700 MHz spectrum in the Chicago market. Leap had a CDMA network covering approximately 96 million people and an LTE network covering an additional 21 million people. It had 4.5 million subscribers.xIn September 2013, AT&T had agreed to acquire Atlantic Tele-Network for $806 million in cash.Atlantic Tele-Network had 550,000 wireless subscribers.xIn December 2013, AT&T had consummated a transaction with Crown Castle International for 9,675 cell towers. The transaction was valued at $4.8 billion, and AT&T had agreed to lease the towers at market rates for an average of 10 years. As the leases expired, Crown Castle would have the option to purchase the towers. The approximate value of the purchase options was $4.2 billion.xIn May 2014, AT&T agreed to purchase DIRECTV for a combination of cash and stock that valued DIRECTV at $48.5 billion. The transaction was expected to close during the first half of 2015. DIRECTV had 20 million digital TV subscribers in the United States and an additional 18 million subscribers in Latin America. Within three years of closing, AT&T expected to realize $1.6 billion in annual synergies from increased video scale.xIn January 2015, AT&T had completed the acquisition of GSF Telecom. The transaction was valued at $2.5 billion, less net debt of $700 million. GSF was a wireless provider operating in Mexico, with a network covering approximately 70% of the countrys 120 million people.xIn January 2015, AT&T had also entered an agreement to purchase Nextel Mexico from NII for approximately $1.88 billion. Nextel Mexico had 3.0 million subscribers.Overview of Verizon Communications10Verizon Communications was a communications network provider that serviced businesses, governments, and consumers with voice, data, and video solutions using wireless and wireline networks. Its wireless network was available in over 500 markets, covering 98% of the U.S. population. It was the largest wireless provider in the United States in terms of revenue and customers. The companys wireline business offered voice, data, and video, as well as data center, networking, cloud,and security services to businesses, consumers, government, and other carriers. In 2014, Verizon was the second-largest ILEC in the United States, with operating revenue of $38.4 billion.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

AT&T Versus Verizon: A Financial Comparison|917-543Wireless SectorVerizon Wireless was the largest wireless provider in the United States in terms of revenue. It offered voice, data, and video services nationwide to more than 108 million customers. The business had been organized as a joint venture, with Vodafone of the United Kingdom owning 45% of the unit.However, in September 2013, Verizon had agreed to purchase Vodafones interest for $130 billion. That transaction closed in February 2014.Verizon Wirelesss 108.2 million subscriber base comprised 102 million postpaid users and 6.1 million prepaid customers. (See Exhibit 2Cfor dataon Verizons wireless business.) Further, Tagert noticed that although the compound annual growth in total subscribers was only 2.3%, the growth in postpaid subscribers was 4.9%. In contrast, Verizons base of prepaid users had declined by 17.5%. She viewed the shifting customer mix as favorable. In the most recent 10-K filing, management had cited growth in 4G smartphones and tablets and growth in connections per postpaid account as service revenue drivers. (Table Abelow shows this growth.)Table AGrowth in Revenue and Postpaid Accounts for Verizon, 200920142009 2010 2011 2012 2013 2014 Average Monthly Revenue Per Postpaid Account ($)NA125.75 134.51 144.04 153.93 159.86 Postpaid Accounts (000s)NA34,268 34,561 35,057 35,083 35,616 Source: Verizon Communications, Inc. December 31, 2014 10-K, filed February 23, 2015.The shift away from subsidized sales and toward installment sales had affected Verizon. According toVerizons management, the $5.3 billion increase in the cost of services and sales was driven primarily by increases in device sales and unit costs. Tagert saw that a shift in operating costs had occurred. Selling, general, and administrative costs as a percent of operating revenue had decreased, and the percentage costs of service revenue had increased. She also noted the segment operating margin had decreased.Wireline SectorLike AT&T, Verizons wireline business offered voice, data, and video services, as well as networking, data center, security, and cloud-based solutions. Its wireline business had suffered, as customers had moved away from traditional voice and circuit-switched services. The number of circuit-switched connections had decreased steadily, leading to a decrease in revenue. (See Exhibit 2Dfor data on Verizons wireline business.) To counter these trends, Verizons managementhad focused on higher growth and margin businesses such as wireless and IP-based wireline services includingbroadband, video, network management, and cloud-based services. It had also reduced its wireline footprint. In 2010 and 2015, it shed much of its ILEC business to Frontier Communications in successive transactions. (See recent acquisitions below.) Again, like AT&T, Verizons IP-based broadband and video services had improved this segments results. VerizonsFiOS internet and video services had grown over 15% on a compound annual basis over the preceding five years, and the companys most recent 10-K filing noted that these services had constituted 76% of wireline consumer retail revenue by the end of 2014. At that time, FiOS services were available to nearly 20 million premises, and internet and video services had penetration rates of 41.1% and 35.8%, respectively. Management believed the companys passive optical network technology would continue to be a catalyst for growth as consumers demanded more bandwidth for applications like streaming video, which would require more symmetric services for cloud-based storage and solutions. Nonetheless, Tagert noticed the global enterprise and wholesale segments had For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

917-543 |AT&T Versus Verizon: A Financial Comparisondeclined in recent years, and wondered about competition and margins in those segments. She noted managements comment that the recent declines in the cost of services and selling, general, and administrative expenses were due mainly to a reduction in headcount.Recent TransactionsxIn July 2010, Verizon completed the spinoff of its ILEC businesses in 14 states to Frontier Communications. Verizon shareholders received approximately $8.6 billion, of which $5.3 billion was in Frontier stock.xIn April 2011, Verizon acquired Terremark Worldwide for approximately $1.3 billion. Terremark was a global provider of IT and cloud-based services with a focus on the government market.xIn June 2012, Verizon acquired Hughes Telematics for $600 million. Telematics was used for vehicular information, tracking, and control. xIn February 2014, Verizon completed the acquisition of Vodafone PLCs 45% interest in Verizon Wireless for cash, stock, and other consideration totaling approximately $130.0 billion.xIn February 2015, Verizon sold its ILEC businesses in California, Texas, and Florida to Frontier Communications for approximately $10.5 billion. Frontier agreed to acquire the associated FiOS customers, which included 1.5 million internet and 1.2 million video customers. The business units sold generated approximately $5.4 billion of revenue.xIn February 2015, American Tower agreed to pay Verizon $5.0 billion upfront, and received the right to operate and lease 11,300 cell towers for 28 years. Verizon agreed to lease the towers at market rates for 10 years.Understanding Historical PerformanceTagert also noticed both firms had large, highly-unionized workforces with substantial benefit obligations to retirees. These obligations came with significant actuarial gains and losses. This meant changes in assumptions related to the returns on plan assets (among other things) could have a significant impact on operating results, as these non-cash gains and losses flowed through the income statement.11It also meant she needed to decide how to handle these benefit obligations in her analysis. Table Bshows the non-cash gains and losses that affected operating income for AT&T and Verizon.Table BNon-Cash Actuarial Gains and Losses at AT&T and Verizon, 20092014 ($ millions)2009 2010 2011 2012 2013 2014 AT&T(215)(2,521)(6,280)(9,994)7,584 (7,869)Verizon(2,964)(3,988)(7,426)(8,198)5,052 (8,130)Sources: AT&T, Inc. December 31, 2014 10-K, filed February 20, 2015 and Verizon Communications, Inc. December 31, 2014 10-K, filed February 23, 2015.Tagert felt the past could provide insight about how each firm got to its respective position and how these positions might influence each firms future. She decided she needed to understand each firms operating performance, investment in operations, free cash flow generation, and operating efficiency.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

AT&T Versus Verizon: A Financial Comparison|917-543Exhibit 1AAT&T Income StatementsOperating Results ($ millions):2010 2011 2012 2013 2014 Total Operating Revenue124,280 126,723 127,434 128,752 132,447 Less: Cost of Services (Excluding Depreciation)52,379 57,374 55,228 51,464 60,611 Less: Selling, General & Administrative32,864 38,844 41,066 28,414 39,697 Less: Impairment & Other Charges85 2,910 0 0 2,120 EBITDA38,952 27,595 31,140 48,874 30,019 Less: Depreciation & Amortization19,379 18,377 18,143 18,395 18,273 EBIT19,573 9,218 12,997 30,479 11,746 Less: Interest Expense2,994 3,535 3,444 3,940 3,613 Plus: Equity in Net Income of Affiliates762 784 752 642 175 Plus: Other Incomea1,676 249 134 596 1,652 EBT19,017 6,716 10,439 27,777 9,960 Less: Taxes(1,162)2,532 2,900 9,224 3,442 Net Income20,179 4,184 7,539 18,553 6,518 Less: Income Attributable to Minority Interest315 240 275 304 294 Net Income Attributable to AT&T Shareholders19,864 3,944 7,264 18,249 6,224 aOther income for 2010 includes $779 million of income from discontinued operations.Source: Adapted from Company 10-Ks.Exhibit 1BAT&T Balance SheetsAssets ($ millions):2009 2010 2011 2012 2013 2014 Cash & Cash Equivalents3,741 1,437 3,045 4,868 3,339 8,603 Accounts Receivable14,845 13,610 13,231 12,657 12,918 14,527 Prepaid Expenses1,562 1,458 1,102 1,035 960 831 Deferred Taxes1,247 1,170 1,470 1,036 1,199 1,142 Other Current Assets3,792 2,276 4,137 3,110 4,780 6,925 Total Current Assets25,187 19,951 22,985 22,706 23,196 32,028 Property, Plant & Equipment99,519 103,196 107,087 109,767 110,968 112,898 Licenses48,741 50,372 51,374 52,352 56,433 60,824 Goodwill & Other Intangibles78,276 79,041 76,054 74,805 75,052 75,831 Customer Lists7,393 4,708 2,757 1,391 0 0 Investments in Affiliates2,921 4,515 3,718 4,581 3,860 250 Other Assets6,275 6,705 6,467 6,713 8,278 10,998 Total Assets268,312 268,488 270,442 272,315 277,787 292,829 Liabilities & OwnersEquity ($ millions):Accounts Payable & Accrued Liabilities21,260 20,055 19,956 20,911 21,107 23,592 Prepaid Revenue & Customer Deposits4,170 4,086 3,872 3,808 4,212 4,105 Deferred Taxes1,681 72 1,003 1,026 1,774 1,091 Dividends Payable2,479 2,542 2,608 2,556 2,404 2,438 Current Portion of Long-Term Debt7,361 7,196 3,453 3,486 5,498 6,056 Total Current Liabilities36,951 33,951 30,892 31,787 34,995 37,282 Long-Term Debt64,720 58,971 61,300 66,358 69,290 76,011 Post-Retirement Obligations27,847 28,803 34,011 41,392 29,946 37,079 Deferred Taxes23,579 22,070 25,748 28,491 36,308 37,544 Other Long-Term Liabilities13,226 12,743 12,694 11,592 15,766 17,989 Total OwnersEquity101,989 111,950 105,797 92,695 91,482 86,924 Total Liabilities & OwnersEquity268,312 268,488 270,442 272,315 277,787 292,829 Source: Adapted from Company 10-Ks.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

917-543 |AT&T Versus Verizon: A Financial ComparisonExhibit 1CAT&T Wireless Segment Data Wireless Operating Results ($ millions):a2009 2010 2011 2012 2013 2014 Service Revenue48,563 53,510 56,726 59,186 61,552 61,032 Equipment Revenue4,941 4,990 6,486 7,577 8,347 12,960 Total Segment Operating Revenue53,504 58,500 63,212 66,763 69,899 73,992 Less: Operations & Support Expense33,631 36,746 41,581 43,296 44,508 48,924 Less: Depreciation & Amortization6,043 6,497 6,324 6,873 7,468 7,941 Total Segment Operating Income13,830 15,257 15,307 16,594 17,923 17,127 Plus: Net Income (Loss) in Affiliates9 9 (29)(62)(75)(112)Total Wireless Segment Income13,839 15,266 15,278 16,532 17,848 17,015 Wireless Subscribers (000s):2009 2010 2011 2012 2013 2014 Postpaid 64,627 68,041 69,309 70,497 72,638 75,931 Prepaid 5,350 6,524 7,225 7,328 7,384 10,986 Resellers 10,439 11,645 13,644 14,875 14,028 13,855 Connected Devices 4,704 9,326 13,069 14,257 16,326 19,782 Total Wireless Subscribers85,120 95,536 103,247 106,957 110,376 120,554 Net Wireless Additions (000s):Postpaid4,199 2,153 1,429 1,438 1,776 3,290 Prepaid(801)952 674 128 (13)(775)Reseller1,803 1,140 1,874 1,027 (1,074)(346)Connected Devices2,077 4,608 3,722 1,171 2,032 3,439 Total Net Wireless Additions7,278 8,853 7,699 3,764 2,721 5,608 Total Churn Rate 1.47%1.31%1.37%1.35%1.37%1.45%Postpaid Churn Rate 1.13%1.09%1.18%1.09%1.06%1.04%a Segment results are net of actuarial gains and losses from post-retirement benefits.Source: Adapted from Company 10-Ks.Exhibit 1DAT&T Wireline Segment Data Wireline Operating Results ($ millions):a2009 2010 2011 2012 2013 2014 Service RevenueNANANA58,271 57,700 57,405 Equipment RevenueNANANA1,302 1,114 1,020 Total Segment Operating Revenue63,621 61,300 59,765 59,573 58,814 58,425 Less: Operations & Support Expense42,439 41,096 40,879 41,207 41,638 42,471 Less: Depreciation & Amortization12,743 12,371 11,615 11,123 10,907 10,323 Total Segment Operating Income8,439 7,833 7,271 7,243 6,269 5,631 Plus: Equity in Income (Loss) of Affiliates17 11 0 (1)2 0 Total Wireline Segment Income8,456 7,844 7,271 7,242 6,271 5,631 Wireline Broadband Connections (000s):2009 2010 2011 2012 2013 2014 U-verse High Speed InternetNANANA7,717 10,375 12,205 DSL & Other Broadband ConnectionsNANANA8,673 6,050 3,823 Total Wireline Broadband Connections15,789 16,309 16,427 16,390 16,425 16,028 Wireline Video Connections (000s):U-verse Video Connections2,065 2,987 3,791 4,536 5,460 5,943 Wireline Voice Connections (000s):Consumer Switched Access26,378 22,515 18,954 15,707 12,403 9,243 Business Switched Access18,486 17,006 15,613 11,483 10,363 8,939 Wholesale Switched Access2,590 2,300 2,120 1,776 1,627 1,514 Total Switched Access Lines47,454 41,821 36,687 28,966 24,393 19,696 U-verse VoIP ConnectionsNANANA2,905 3,849 4,759 Total Wireline Voice Connections47,454 41,821 36,687 31,871 28,242 24,455 a Segment results are net of actuarial gains and losses from post-retirement benefits.Source: Adapted from Company 10-Ks.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

AT&T Versus Verizon: A Financial Comparison|917-543Exhibit 2AVerizon Income Statements Operating Results ($ millions):2010 2011 2012 2013 2014 Total Operating Revenue106,565 110,875 115,846 120,550 127,079 Less: Cost of Services (Excluding Depreciation)44,149 45,875 46,275 44,887 49,931 Less: Selling, General & Administrative31,366 35,624 39,951 27,089 41,016 EBITDA31,050 29,376 29,620 48,574 36,132 Less: Depreciation & Amortization16,405 16,496 16,460 16,606 16,533 EBIT14,645 12,880 13,160 31,968 19,599 Less: Interest Expense2,523 2,827 2,571 2,667 4,915 Plus: Equity in Net Income of Affiliates508 444 324 142 1,780 Plus: Other Income (Expense)54 (14)(1,016)(166)(1,194)EBT12,684 10,483 9,897 29,277 15,270 Less: Taxes2,467 285 (660)5,730 3,314 Net Income10,217 10,198 10,557 23,547 11,956 Less: Income Attributable to Noncontrolling Interest7,668 7,794 9,682 12,050 2,331 Net Income Attributable to Verizon Shareholders2,549 2,404 875 11,497 9,625 Source: Adapted from Company 10-Ks.Exhibit 2BVerizon Balance SheetsAssets ($ millions):2009 2010 2011 2012 2013 2014 Cash & Cash Equivalents2,009 6,668 13,362 3,093 53,528 10,598 Short-Term Investments490 545 592 470 601 555 Accounts Receivable12,573 11,781 11,776 12,576 12,439 13,993 Inventory1,426 1,131 940 1,075 1,020 1,153 Prepaid Expenses & Other Current Assets5,247 2,223 4,269 4,021 3,406 3,324 Total Current Assets21,745 22,348 30,939 21,235 70,994 29,623 Property, Plant & Equipment91,985 87,711 88,434 88,642 88,956 89,947 Wireless Licenses72,067 72,996 73,250 77,744 75,747 75,341 Goodwill & Other Intangibles29,236 27,818 29,235 30,072 30,434 30,367 Investments in Unconsolidated Businesses3,118 3,497 3,448 3,401 3,432 802 Other Assets8,756 5,635 5,155 4,128 4,535 6,628 Total Assets226,907 220,005 230,461 225,222 274,098 232,708 Liabilities & OwnersEquity ($ millions):Accounts Payable & Accrued Liabilities15,223 15,702 14,689 16,182 16,453 16,680 Other Current Liabilities6,708 7,353 11,223 6,405 6,664 8,649 Current Portion of Long-Term Debt7,205 7,542 4,849 4,369 3,933 2,735 Total Current Liabilities29,136 30,597 30,761 26,956 27,050 28,064 Long-Term Debt55,051 45,252 50,303 47,618 89,658 110,536 Post-Retirement Obligations32,622 28,164 32,957 34,346 27,682 33,280 Deferred Taxes19,190 22,818 25,060 24,667 28,639 41,578 Other Long-Term Liabilities6,765 6,262 5,472 6,092 5,653 5,574 Total Equity Attributable to Shareholders41,382 38,569 35,970 33,157 38,836 12,298 Plus: Non-Controlling Interest42,761 48,343 49,938 52,376 56,580 1,378 Total OwnersEquity84,143 86,912 85,908 85,533 95,416 13,676 Total Liabilities & OwnersEquity226,907 220,005 230,461 225,212 274,098 232,708 Source: Adapted from Company 10-Ks.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

917-543 |AT&T Versus Verizon: A Financial ComparisonExhibit 2CVerizon Wireless Segment Data Wireless Operating Results ($ millions)a2009 2010 2011 2012 2013 2014 Service Revenue52,046 55,629 59,157 63,733 69,033 72,630 Equipment & Other Revenue8,279 7,778 10,997 12,135 11,990 15,016 Total Segment Revenue60,325 63,407 70,154 75,868 81,023 87,646 Less: Cost of Service Revenue19,348 19,245 24,086 24,490 23,648 28,825 Less: Selling, General & Administrative17,309 18,082 19,579 21,650 23,176 23,602 Less: Depreciation & Amortization7,030 7,356 7,962 7,960 8,202 8,459 Segment Operating Income16,638 18,724 18,527 21,768 25,997 26,760 Wireless Subscribers (000s):b2009 2010 2011 2012 2013 2014 Postpaid80,495 83,125 87,382 92,530 96,752 102,079 Prepaid16,000 19,121 20,416 5,700 6,047 6,132 Total Wireless Subscribers96,495 102,246 107,798 98,230 102,799 108,211 Net Wireless Additions (000s):cPostpaid3,987 2,529 4,252 5,024 4,118 5,482 Prepaid948 2,988 1,167 893 354 86 Total Net Wireless Additions4,935 5,517 5,419 5,917 4,472 5,568 Total Churn Rate1.41%1.38%1.26%1.19%1.27%1.33%Postpaid Churn Rate1.07%1.02%0.95%0.91%0.97%1.04%Average Monthly Revenue Per Postpaid Account ($)NA125.75 134.51 144.04 153.93 159.86 Postpaid Accounts (000s)NA34,268 34,561 35,057 35,083 35,616 Postpaid Connections Per AccountNA2.43 2.53 2.64 2.76 2.87 aPension and other post-retirement benefits are excluded from segment results.bAs of the end of the period.cExcludes acquisition adjustments.Source: Adapted from Company 2009 to 2014 10-Ks.Exhibit 2DVerizon Wireline Segment DataWireline Operating Results ($ millions)a2009 2010 2011 2012 2013 2014 Consumer & Small Business16,115 16,256 16,337 16,746 17,383 18,047 Global Enterprise15,289 15,316 15,622 14,577 14,182 13,684 Global Wholesale9,533 8,746 7,973 7,094 6,594 6,222 Other Revenue1,514 909 750 528 465 476 Total Segment Revenue42,451 41,227 40,682 38,945 38,624 38,429 Less: Cost of Services & Sales22,693 22,618 22,158 21,657 21,396 21,332 Less: Selling, General & Administrative9,947 9,372 9,107 8,860 8,571 8,180 Less: Depreciation & Amortization8,238 8,469 8,458 8,424 8,327 7,882 Segment Operating Income1,573 768 959 4 330 1,035 Wireline Broadband Connections (000s):2009 2010 2011 2012 2013 2014 FiOS Internet Subscribers3,286 4,082 4,817 5,424 6,072 6,616 Circuit-Switched Broadband4,874 4,310 3,853 3,371 2,943 2,589 Total Wireline Broadband Connections8,160 8,392 8,670 8,795 9,015 9,205 FiOS Video Subscribers2,750 3,472 4,173 4,726 5,262 5,649 Total Voice Connections28,323 26,001 24,137 22,503 21,085 19,795 a Pension and other post-retirement benefits are excluded from segment results.Source: Adapted from Company 2009 to 2014 10-Ks.For the exclusive use of E. NASH, 2018.This document is authorized for use only by ERIC NASH in MGT510 taught by Riley Busenelener, University of Holy Cross from Sep 2018 to Mar 2019.

Questions: 1.) For each company, consider the consolidated financial results and provide a margin analysis. What themes are being played out for either/both companies? 2.) Has either, or both company(s) been reinvesting in its business? Please provide your evidence. 3.) Calculate the unlevered free cash flow for each firm.