Verizon Wireless 2013 Annual Report Download - page 24

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Operating Expenses (dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2013 2012 2011 2013 vs. 2012 2012 vs. 2011
Cost of services and sales $ 21,928 $ 22,413 $ 22,158 $ (485) (2.2)% $ 255 1.2 %
Selling, general and administrative expense 8,595 8,883 9,107 (288) (3.2) (224) (2.5)
Depreciation and amortization expense 8,327 8,424 8,458 (97) (1.2) (34) (0.4)
Total Operating Expenses $ 38,850 $ 39,720 $ 39,723 $ (870) (2.2) $ (3) –
Selling, General and Administrative Expense
Selling, general and administrative expense decreased during 2013 com-
pared to 2012 primarily due to declines in employee costs, primarily as
a result of reduced headcount, and declines in rent expenses, partially
oset by higher transaction and property tax expenses.
Selling, general and administrative expense decreased during 2012 com-
pared to 2011 primarily due to lower allocations related to centralized
administrative functions, and to a lesser extent, lower property and trans-
action tax expenses and employee costs.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased during 2013 com-
pared to 2012, as well as 2012 compared to 2011, due to decreases in net
depreciable assets, partially oset by an increase in amortization expense
related to non-network software.
Cost of Services and Sales
Cost of services and sales decreased during 2013 compared to 2012, pri-
marily due to a decrease in costs related to customer premise equipment
which reected our focus on improving margins by de-emphasizing sales
of equipment that are not part of an overall enterprise solutions bundle,
a decline in access costs resulting primarily from declines in overall
wholesale long distance volumes and the net eect of storm-related
insurance recoveries. These decreases were partially oset by higher con-
tentcostsassociatedwithcontinuedFiOSsubscribergrowthandvendor
rate increases.
Cost of services and sales increased during 2012 compared to 2011,
primarilyduetohighercontentcostsassociatedwithcontinuedFiOS
subscriber growth and vendor rate increases and increased expenses
related to our cloud and data center oerings. Cost of services and sales
wasalsoimpactedbyhighercostsrelatedtoFiOSinstallation,aswellas
higher repair and maintenance expenses caused by storm-related events
in 2012 compared to 2011. The increases were partially oset by a decline
in access costs primarily from management actions to reduce exposure
to unprotable international wholesale routes and declines in overall
wholesale long distance volumes. Costs related to customer premise
equipment also decreased, which reected our focus on improving mar-
gins by de-emphasizing sales of equipment that are not part of an overall
enterprise solutions bundle.
The changes inWireline’s Operating income, Segment EBITDA and
SegmentEBITDAmarginduringtheperiodspresentedwereprimarily
a result of the factors described in connection with operating revenues
and operating expenses.
During 2012, $0.1 billion of non-recurring or non-operational items were
excludedfromWireline’sOperatingincome.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Segment Operating Income and EBITDA (dollars in millions)
Increase/(Decrease)
Years Ended December 31, 2013 2012 2011 2013 vs. 2012 2012 vs. 2011
Segment Operating Income $ 373 $ 60 $ 959 $ 313 nm $ (899) (93.7)%
Add Depreciation and amortization expense 8,327 8,424 8,458 (97) (1.2)% (34) (0.4)
Segment EBITDA $ 8,700 $ 8,484 $ 9,417 $ 216 2.5 $ (933) (9.9)
Segment operating income margin 1.0% 0.2% 2.4%
Segment EBITDA margin 22.2% 21.3% 23.1%
nm - not meaningful