financials > notes to consolidated financial statements > note 18
note 18 (page 1 of 2)
SEGMENT INFORMATION

Reportable Segments
We have four reportable segments, 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 income. This segment income excludes unallocated corporate expenses and other adjustments arising during each period. The other adjustments include transactions that the chief operating decision makers exclude in assessing business unit performance due primarily to their non-recurring and/or 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, since these items are included in the chief operating decision makers’ assessment of unit performance. These are mostly contained in Information Services and International since they actively manage investment portfolios.

Our segments and their principal activities consist of the following:

Domestic Telecom
Domestic wireline communications services, principally representing our telephone operations that provide local telephone services in 29 states and Washington, D.C. These services include voice and data transport, enhanced and custom calling features, network access, directory assistance, private lines and public telephones. This segment also provides long distance services, customer premises equipment distribution, data solutions and systems integration, billing and collections, Internet access services and inventory management services.

Domestic Wireless
Domestic wireless products and services include wireless voice and data services and equipment sales across the United States.

Information Services
Directory publishing business, including print directories, SuperPages.com online search services, as well as website creation and other electronic commerce services. This segment has operations principally in the United States.

International
International wireline and wireless communications operations and investments primarily in the Americas, as well as investments in Europe.

The following table provides operating financial information for our four reportable segments:
(dollars in millions )
Domestic   Domestic   Information      
Total  
2004 Telecom   Wireless   Services   International  
Segments  
External revenues $ 37,689   $ 27,586   $ 3,615   $ 1,982  
$ 70,872  
Intersegment revenues   862     76     –     32  
  970  
   Total operating revenues   38,551     27,662     3,615     2,014  
  71,842  
Cost of services and sales   15,019     7,747     546     626  
  23,938  
Selling, general & administrative expense   8,781     9,591     1,331     471  
  20,174  
Depreciation & amortization expense   8,939     4,486     87     324  
  13,836  
   Total operating expenses   32,739     21,824     1,964     1,421  
  57,948  
Operating income   5,812     5,838     1,651     593  
  13,894  
Equity in earnings of
   unconsolidated businesses		   –     45     –     1,031  
  1,076  
Income from other unconsolidated businesses   –     –     –     31  
  31  
Other income and (expense), net   103     11     15     35  
  164  
Interest expense   (1,638 )   (661 )   (33 )   (85 )
  (2,417 )
Minority interest   –     (2,323 )   (6 )   (80 )
  (2,409 )
Provision for income taxes   (1,530 )   (1,265 )   (629 )   (300 )
  (3,724 )
Segment income $ 2,747   $ 1,645   $ 998   $ 1,225  
$ 6,615  
Assets $ 78,824   $ 68,027   $ 1,680   $ 14,885  
$ 163,416  
Investments in unconsolidated businesses   3     148     4     4,914  
  5,069  
Plant, property and equipment, net   50,608     20,516     179     2,391  
  73,694  
Capital expenditures   7,118     5,633     87     382  
  13,220  
2003                
   
External revenues $ 38,828   $ 22,436   $ 3,830   $ 1,921  
$ 67,015  
Intersegment revenues   774     53     –     28  
  855  
   Total operating revenues   39,602     22,489     3,830     1,949  
  67,870  
Cost of services and sales   14,708     6,460     559     574  
  22,301  
Selling, general & administrative expense   8,517     8,057     1,400     691  
  18,665  
Depreciation & amortization expense   9,217     3,888     79     346  
  13,530  
Sales of businesses, net   –     –     (141 )   –  
  (141 )
   Total operating expenses   32,442     18,405     1,897     1,611  
  54,355  
Operating income   7,160     4,084     1,933     338  
  13,515  
Equity in earnings (loss) of
   unconsolidated businesses		   –     15     (1 )   1,091  
  1,105  
Income (loss) from other
   unconsolidated businesses		   (4 )   –     –     169  
  165  
Other income and (expense), net   47     12     6     32  
  97  
Interest expense   (1,682 )   (626 )   (38 )   (160 )
  (2,506 )
Minority interest   –     (1,554 )   (8 )   (20 )
  (1,582 )
Provision for income taxes   (2,186 )   (848 )   (735 )   (58 )
  (3,827 )
Segment income $ 3,335   $ 1,083   $ 1,157   $ 1,392  
$ 6,967  
Assets $ 82,087   $ 65,166   $ 1,726   $ 11,872  
$ 160,851  
Investments in unconsolidated businesses   64     288     4     4,555  
  4,911  
Plant, property and equipment, net   53,378     18,998     190     2,164  
  74,730  
Capital expenditures   6,820     4,590     74     358  
  11,842  
2002                
   
External revenues $ 40,260   $ 19,424   $ 4,039   $ 2,191  
$ 65,914  
Intersegment revenues   579     49     –     28  
  656  
   Total operating revenues   40,839     19,473     4,039     2,219  
  66,570  
Cost of services and sales   13,390     5,456     643     586  
  20,075  
Selling, general & administrative expense   9,048     7,084     1,343     610  
  18,085  
Depreciation & amortization expense   9,456     3,293     66     376  
  13,191  
   Total operating expenses   31,894     15,833     2,052     1,572  
  51,351  
Operating income   8,945     3,640     1,987     647  
  15,219  
Equity in earnings of
   unconsolidated businesses		   –     13     1     644  
  658  
Income from other unconsolidated businesses   –     –     –     218  
  218  
Other income and (expense), net   84     28     10     61  
  183  
Interest expense   (1,745 )   (626 )   (35 )   (238 )
  (2,644 )
Minority interest   –     (1,349 )   (16 )   (102 )
  (1,467 )
Provision for income taxes   (2,920 )   (740 )   (736 )   (78 )
  (4,474 )
Segment income $ 4,364   $ 966   $ 1,211   $ 1,152  
$ 7,693  
Assets $ 82,257   $ 63,470   $ 3,591   $ 10,650  
$ 159,968  
Investments in unconsolidated businesses   70     289     9     3,603  
  3,971  
Plant, property and equipment, net   52,582     17,690     237     2,432  
  72,941  
Capital expenditures   8,004     4,414     158     421  
  12,997  
For continuation of Note 18, see next page.
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