ANNUAL REPORT 2019 - Verizon

ANNUALREPORT2019

Financial and operational highlightsVerizon strategicallyreorganized thebusiness effectiveApril 1, 2019.Under its new reportingstructure, Verizon 2.0,there are two reportablesegments that the companyoperates and manages asstrategic business units:Consumer and Business.Verizon previously operatedand managed the businessunder its historical Wirelessand Wireline segments.For comparison purposes,highlights for both thecurrent and previousoperating structures arerepresented here.as of December 31, 20192019 highlights 4.81 10.013thadjustedearnings pershare (non-GAAP)billion incash dividendpaymentsconsecutive yearof annual dividendincreases 35.7 131.9 91.1billion incash flow fromoperationsbillion inconsolidatedrevenuebillion inconsumerrevenues 31.4 94.2 28.6billion inbusinessrevenuesbillion in historicalwireless revenues(non-GAAP)billion in historicalwireline revenues(non-GAAP)Dividends declared per share2019 2.4352018 2.3852019 2.435Up 2.1%2017 2.335year over yearSee our investor website (www.verizon.com/about/investors)s for reconciliations to U.S. generally accepted accounting principles (GAAP) for the non-GAAP financialmeasures included in this annual report.Forward-looking statementsIn this communication we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks anduncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements alsoinclude those preceded or followed by the words “anticipates,” “believes,” “estimates,” “expects,” “hopes” or similar expressions. For those statements, we claim theprotection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise orpublicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned notto place undue reliance on such forward-looking statements. The following important factors, along with those discussed in our filings with the Securities and ExchangeCommission (the “SEC”), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: cyber attacksimpacting our networks or systems and any resulting financial or reputational impact; natural disasters, terrorist attacks or acts of war or significant litigation and anyresulting financial or reputational impact; disruption of our key suppliers’ or vendors' provisioning of products or services; material adverse changes in labor matters andany resulting financial or operational impact; the effects of competition in the markets in which we operate; failure to take advantage of developments in technology andaddress changes in consumer demand; performance issues or delays in the deployment of our 5G network resulting in significant costs or a reduction in the anticipatedbenefits of the enhancement to our networks; the inability to implement our business strategy; adverse conditions in the U.S. and international economies; changes in theregulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks; our high level of indebtedness; an adverse changein the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interestrates, and/or availability of further financing; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or intheir interpretation; and changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules ortheir application, which could result in an impact on earnings.2verizon.com/2019AnnualReport

Dear Shareholder,Hans VestbergChairman andChief Executive OfficerAs we began 2019, Verizon hadjust launched the world's firstcommercial 5G network, and withit, a technology that would definethe future of our company – andour industry – for years to come.Establishing the promise of what 5G can deliver for ourcustomers, for our company, for our investors, and for societyas a whole, was a key objective for Verizon in 2019, but so wascontinued strong performance in our core business.This was the impetus for our Verizon 2.0 strategy, theimplementation of which was a critical priority for 2019.We demonstrated that “5G Built Right” – the kind of networkthat only Verizon is in a position to deliver – will generate notonly a Fourth Industrial Revolution, but a new era of sustainableinnovation and inclusive growth.First, to preserve the immense advantages that thiscompany has inherited from its proud past.This conviction guided our strategy for 2019 and shapedeverything we accomplished over the course of a veryexciting year.We’ve long believed that 5G would be so much more thanmerely a “next generation” of wireless. In some ways, it’s morelike an entirely new technology.In order to ensure that the market fully appreciates both thetransformative potential of 5G and Verizon’s unique capacity fordelivering on that potential, our company has reshaped itself toaddress the needs, expectations, and requirements of currentand potential customers.Three imperatives guided us in the execution of this strategy:These include a highly skilled workforce; a deeply trusted brand;and a network infrastructure that is second to none.Second, to strengthen these core assets inorder to retain market leadership at a timeof increased competition.Our skilled workforce would need new training; new tools; andnew organizational structures that maximize openness andinnovation. Our brand would need new resonance in a marketdefined by ever-increasing consumer choice. Our networkinfrastructure would need an accelerating progress toward 5G.Third, and most important, to transform ouroperations wherever needed in order to not onlykeep pace with change, but to drive the change.Verizon Communications Inc. and Subsidiaries 2019 Annual Report3

The first major manifestation of Verizon 2.0 was thereorganization of our entire company into three groups –Verizon Consumer, Verizon Business, and Verizon Media – whichare defined by our customer-facing operations. This structurereflects our conviction that 5G and its related technologiesrequire us to reimagine how we serve customers’ needs – bothnow and in the future.Each of these groups is led by an outstanding senior executive:Ronan Dunne, EVP and Group CEO - Verizon Consumer, TamiErwin, EVP and Group CEO - Verizon Business, and GuruGowrappan, EVP and Group CEO - Verizon Media.With the Verizon 2.0 organizational structure in place, wefocused on the technology that had necessitated the revamp inthe first place – 5G.In my start-of-year keynote at the Consumer Electronics Showin Las Vegas, I introduced the themes that would guide ourthinking and our actions on 5G over the rest of 2019, includingour devotion to the concept of “5G Built Right.”In order to enable the full promise of 5G, a network needs tobe built to deliver what we refer to as “currencies” – specificcapabilities of fifth-generation technology.These include such qualities as a peak data rate at least 10times (or more) greater than 4G, mobile data volumes 1,000times higher than anything seen before, and latency (or signallag) only about one-tenth that of 4G.Only a network built on millimeter wave spectrum, like Verizon’s,will be able to fully take advantage of all of 5G’s currencies.Thanks to our investment of capital and effort over the last severalyears, Verizon is positioned to bring together all of the componentsthat a transformational 5G network requires – the fiber, the realestate, the millimeter-wave spectrum, the small-cell infrastructure,and other key ingredients of a 5G network built right.4verizon.com/2019AnnualReportOnly 5G built on this type of foundation will be able to fullysupport virtual reality, augmented reality, the Internet of Things,advanced robotics, 3D printing, wearable tech, and the othernext-generation technologies that our customers will belooking for.Our progress toward a fully operational and transformational5G network reached some important milestones in 2019. OnApril 3, Verizon became the first company in the world to givecustomers a 5G-enabled smartphone linked to a 5G network,and the number of cities receiving Verizon 5G reached 31 byyear end.We have also seen growth in the number of businesses interestedin using 5G as companies large and small are beginning to deploythis technology to generate results. Among them is Corning,which is turning to 5G to enhance efficiency at one of the world’slargest fiber optic cable manufacturing facilities.We’re just getting started. This year our 5G Labs madebreakthroughs in edge-of-network cloud technologies that willmake mobile devices much more powerful.Our expansion in 5G is also helping us to address ourresponsibilities in a world where consumers and investorsare increasingly calling upon corporations to uphold such valuesas environmental sustainability, economic inclusivity,and workforce diversity.We regard these values as wholly consistent with – evenessential to – the advancement of our business objectives.In fact, we see our business as a catalyst for the humanconnections and technological progress that the world needs totackle the challenges of our time.Our company’s purpose statement that we introduced inNovember captures the powerful relationship betweenconnectivity and progress: “We create the networks that movethe world forward.”

Our company’s purpose statement captures thepowerful relationship between connectivity andprogress: “We create the networks that movethe world forward.”At around the same time, we unveiled one of the ways we’reputting power behind our purpose: A new volunteerismprogram that will enable the 135,000-strong V-Team to havea greater impact than ever.All of this – the introduction of Verizon 2.0, the investmentsin 5G, the attention to our role as a corporate citizen – isintended to further establish our company as a greatplace for our employees to work and a great place for ourcustomers to place their trust.We’re focusing our company’s social responsibility effortsand volunteering campaign on three pillars – digital inclusion,climate protection, and human prosperity – and our goalis to dedicate 2.5 million volunteer hours to these prioritiesby 2025.Everything we have done in 2019 was directed toward thesegoals, and we are looking forward to making extraordinaryprogress in the new year and the new decade ahead.Hans VestbergChairman and Chief Executive OfficerVerizon Communications Inc.The evolution of wireless networksEnabled talkingon a phone almostanywhere without acord attached.Advanced textingas a new wayto chat.Provided thenetwork speedsneeded forsmartphones andsending images.Boostedconnectivityoptions withgreater datatransfer speeds.Combines heightenedprocessing power andgreater data transferspeeds to enableIoT connectivity on amassive scale.Verizon Communications Inc. and Subsidiaries 2019 Annual Report5