Matthew D. Ellis
Executive Vice President and Chief Financial Officer at Verizon Communications
Thank you, Hans, and good morning everyone. I'm pleased to be with you today to share our fourth quarter and full year 2021 results where we continue to deliver strong financial and operating performance.
Before I get into the 2021 results, let me add my own congratulations to the Verizon team for achieving our C-Band build targets well ahead of schedule and for the successful commercial launch last week. The C-Band deployment provides so many opportunities for us.
As Hans mentioned, our strategy is working and these results demonstrate our ability to compete effectively to drive new high-quality customers to our platforms, while also serving our best-in-class customer base. We do this with a financial discipline that enables us to deliver attractive service revenue growth and profitability as evidenced by another strong earnings performance with healthy cash generation. It starts with our award winning networks, which enable both our consumer and business organizations to deliver the best products, services and experiences to customers.
With the acquisition of TracFone, the deployment of C-Band spectrum, new mix and match plans, and the strongest and most innovative team in the industry, 2022 is positioned to be our best year yet.
Let's take a look at these results, beginning on Slide 6. In the fourth quarter, consolidated total revenue was $34.1 billion, down 1.8% from the prior year. Adjusting for the sale of Verizon Media Group on September 1, consolidated revenue grew 4.8%. Strong wireless service revenue growth and wireless equipment revenue were offset by continued declines in legacy wireline products.
Total wireless service revenue was up 6.5% for the quarter. The results were driven by a combination of ARPA and volume growth, consistent with our strategy and the contribution from the TracFone acquisition. For the full year, wireless service revenue grew 4.7%, including TracFone and was in line with the increased guidance we provided at the end of the third quarter when adjusted for the TracFone acquisition.
Total Fios revenue was $3.2 billion and grew 5.7% for the fourth quarter, driven by strong customer demand for our high-quality connectivity services. Full year Fios revenue was approximately $12.7 billion, up 4.6% over the prior year.
Service and other revenue grew 2.6% in the fourth quarter, excluding the impact of the sale of Verizon Media, while on a reported basis it declined 5.4% from the prior year.
Consolidated adjusted EBITDA in the fourth quarter was $11.8 billion, relatively flat compared to last year as growth in consumer was offset by declines in business and the impact of the Verizon Media Group sale. Full year consolidated adjusted EBITDA totaled $48.4 billion, up 2.8% from the prior year. The adjusted EBITDA margin was 36.2%, down 50 basis points, primarily due to higher equipment revenues.
Earlier in the year, and ahead of schedule, we achieved our $10 billion business excellent cost savings goal. We continue to drive efficiency in the business, while operating with the best cost structure in the industry and expect strong operating leverage as we execute across all of our five vectors of growth.
As Brady mentioned, for the fourth quarter, adjusted EPS was $1.31, up 8.3% year-over-year, demonstrating the strength of our business. For the full year, adjusted EPS of $5.39 was at the high end of our upwardly revised guidance range and is a 10% increase over 2020 results.
Now, let's take a look at our consolidated metrics. The strength of our networks and brand, combined with our effective go-to-market strategy, are driving improved competitive performance in the market. We continue to expand our high-quality mobility base with strong performance across consumer and business, at the same time accelerating fixed wireless sales, our complement in strong Fios results, expanding our broadband growth opportunity.
For the quarter, we delivered 558,000 wireless retail postpaid phone net adds, an increase over the 279,000 achieved during the same period last year. Postpaid phone churn for the quarter was 0.81%, roughly in line with the same period last year and better than pre-pandemic levels, reflecting the enduring loyalty of our customer base through ordinary and extraordinary times.
Total broadband net adds, which includes consumer and business Fios, DSL and fixed wireless, totaled 106,000, up 30,000 from the prior year. Fios Internet net adds were 55,000, another strong result. Even with a slight uptick in involuntary churn, we continue to experience exceptionally low Fios Internet churn as customers trust the reliability of our network and value the simplicity of our mix and match pricing. Our full year Internet net adds of 360,000 represented the best annual performance since 2014, and we now have 6.9 million Fios Internet customers.
Demand for our fixed wireless access services continue to grow even before our C-Band deployment. FWA net adds, which include both consumer and business fixed wireless products, totaled 78,000, up from 55,000 last quarter. This brings our total FWA customer base to approximately 223,000 at the end of the year.
Now let's turn to our Consumer Group results. Fourth quarter represented another strong financial performance for Consumer, highlighted by our best Fios revenue growth in the 2.0 era, wireless service revenue momentum and healthy profitability. We are clearly seeing the benefits of a focused go-to-market organization.
Consumer operating revenue for the fourth quarter was $25.7 billion, up 7.4% year-over-year. Service and other revenue of $19.4 billion was up 5.2% versus the prior year due to strong wireless and Fios revenue growth and a partial quarter contribution from TracFone. As Brady mentioned, the net revenue change from TracFone was approximately $700 million in the quarter, which included incremental service revenue of approximately $500 million year-over-year.
For the full year, total Consumer revenue increased 7.6% from a year ago to $95.3 billion and service and other revenue rose 3.4% to $75.5 billion. Consumer wireless service revenue for the quarter rose 7.7% to $14.6 billion, reflecting ongoing step-ups into unlimited and premium plans, as well as a contribution from TracFone.
Postpaid ARPA increased 3.2% from the year-ago period, driven by a higher premium unlimited mix and growth from products and services such as content, cloud and device protection plans. For the full year, Consumer wireless service revenue was $56.1 billion, up 4.7% from 2020 levels. Consumer Fios revenue totaled $2.9 billion for the fourth quarter, up 5.6% from the year-ago period, driven primarily by the strong growth in our broadband base.
For the quarter, EBITDA was $10.3 billion, up 4.1% year-over-year or more than $400 million driven by the service revenue growth. Margins were 40.3%, down 120 basis points from last year due to higher equipment revenues associated with increased volumes. For the full year, EBITDA was $41.6 billion, up approximately $1.4 billion or 3.4% versus the prior year. Margins were 43.7%, down from 45.5% the prior year as a result of the approximately 28% equipment revenue growth in the year.
Now let's turn to Slide 9 to discuss our Consumer operating metrics. Our flexible mix and match plans are the heart of our go-to-market strategy, supporting continued strong demand for higher tier premium mobility and broadband offerings. Postpaid phone net adds were 336,000 in the quarter. We competed effectively during the holiday season even as the switcher pool remained soft compared to pre-pandemic levels due to elevated retention promotions in the marketplace.
Fourth quarter phone gross adds were up approximately 11% compared to the same period last year, but were approximately 15% lower than the 2019 levels. We continue to achieve strong customer retention with postpaid phone churn of 0.77% for the fourth quarter, relatively flat compared to the same period last year and well below pre-pandemic levels even as trading volumes pick. We maintain the momentum of attracting high quality customers with approximately 60% of new accounts taking a premium unlimited plan and over one-third of our base accounts now on a premium unlimited tier.
5G penetration continue to expand with approximately 34% of our phone base now equipped with a 5G capable device at year-end. We expect to drive further 5G Ultra Wideband adoption with the launch last week of our C-Band spectrum to more than 90 million POPs, combined with our updated mix and match offerings introduced earlier this month.
With the close of the acquisition, TracFone results are now included in Consumer prepaid. We finished the year as the nation's leading value segment provider with approximately 24 million total prepaid customers, including the approximately 20 million customers acquired from TracFone.
For the quarter, prepaid net customer losses totaled 85,000, which included 52,000 net losses on the TracFone businesses stemming from stronger demand for postpaid plans due to promos in that segment, coupled with handset supply constraints.
Now let's move to Slide 10 to review the Business Group results. Operating revenue for the Business segment was $7.8 billion in the fourth quarter, down 3.0% year-over-year. We faced elevated pressures in the quarter in both public sector and wholesale and we expect these pressures to moderate in 2022. Full-year operating revenue was $31.0 billion, up slightly year-over-year, driven by strong wireless performance. Wireless service revenue increased 1.5% and wireless equipment revenue was up 9.6% in the fourth quarter. Wireless service revenue was driven by growth in small and medium business and enterprise performance improved for the fourth consecutive quarter and was the highest growth since the start of the pandemic. While this was partially offset by decline in public sector, due to the elevated distance learning activity in the year-ago period, our Verizon Frontline campaign is resonating with stakeholders, helping drive new customer growth.
Wireline trends remain under pressure as we continue to face prior year comps that included pandemic buying. In addition, approximately one-third of our declines came from voice services where we continue to feel the impact of our strategic initiative to exit the low-margin international wholesale voice market.
Business segment EBITDA was $1.8 billion, down 7.4% from the same quarter last year. Business segment EBITDA margin was 23.5% in the quarter reflecting pressure in legacy wireline products and our commitment to invest in new product growth and drive customer demand for our wireless solutions. Full year margins were 24.2%, down 120 basis points from last year.
We exited the year with strong momentum in Business activity and demand for our wireless products. With the recent launch of our C-Band spectrum, we are in an even better position to serve the 5G needs of our Business customers throughout 2022.
For the quarter, phone gross adds were up approximately 22% year-over-year and 8% from 4Q 2019 levels. The fourth quarter represented the strongest quarterly phone gross add performance for small and medium business and enterprise since launching Verizon 2.0. Segment postpaid phone churn was 1.01% in the quarter, which was up slightly over the prior year. As a result, total postpaid phone net adds were 222,000, our best quarterly performance since the onset of the pandemic.
Now let's move to our consolidated cash flow summary. Cash generation remained strong for 2021 as we achieved our financial targets and executed on our capital allocation plan. We spent over $45 billion for C-Band spectrum and expanded our portfolio with the TracFone acquisition, all while increasing our dividend for the 15th straight year and making progress to maintain a healthy balance sheet.
The business continues to generate strong cash flow. Cash flow from operating activities totaled $39.5 billion for the year, a decline of $2.2 billion. This result primarily reflects strong performance in the business with increased adjusted EBITDA of $1.3 billion, offset by higher working capital from device payments receivables and slightly higher cash taxes.
Capital spending in 2021 totaled $20.3 billion as we continue to support traffic growth on our 4G LTE network, while initiating the first phase of C-Band deployment covering 90 million POP. C-Band-related capex was approximately $2.1 billion in 2021. As a result, free cash flow for the full year was $19.3 billion dollars, down from $23.6 billion in 2020.
The highlight of our financing activity in 2021 was efficiently funding our C-Band spectrum investment in the first quarter. Since then, we have focused on further optimizing our cash position and debt maturity profile with activity to reduce or extend near term maturities, while deploying excess cash to retire longer-dated high coupon bonds. We accomplished this while maintaining ample flexibility to invest in our business, such as funding the recent TracFone acquisition. We were also active with our ABS funding program to finance the increased device payment receivables as consumers upgrade to 5G phones.
We exited the year with $133.7 billion of net unsecured debt, a $3.7 billion reduction from the end of the first quarter. Our unsecured debt to adjusted EBITDA ratio was approximately 2.8 times at year-end, in line with our 2021 Investor Day guidance. Our financing activities over the past two years have reduced our average portfolio borrowing costs by about 1% as compared to 2019, albeit with higher debt levels. Our cash equivalents [Phonetic] at the end of the year was $2.9 billion, down approximately $7.0 billion sequentially, bringing us back to normal levels.
Let's move on to Slide 13 to discuss our outlook for 2022. We have great momentum from the strong operating and financial results last year, and are well-positioned heading into the New Year and that momentum is reflected in our guidance for 2022.
We took many strategic actions to position the company for better growth and our increased guidance disclosures provide greater insight into our financial outlook. At our Investor Day last year, we provided guidance of at least 3% service and other revenue for 2022 and 2023. For 2022, we expect organic service and other revenue growth of around 3%. On a reported basis, which includes the net impact of the sale of Verizon Media Group and our ownership of TracFone, service and other revenue growth is expected to range between 1.0% and 1.5%.
Similarly, on a reported basis, wireless service revenue growth for 2022 is expected to be in the range of 9% to 10% driven by growth from our tiered unlimited strategy, the impact of the TracFone acquisition and a ramping fixed wireless access contribution. Excluding the impact of the TracFone acquisition, wireless service revenue is expected to grow at least 3%.
We expect total adjusted EBITDA to grow 2% to 3% in 2022, driven by topline growth and ongoing cost discipline. Full year adjusted earnings per share is expected to be $5.40 to $5.55. As the waterfall chart shows, we expect adjusted EBITDA growth, including a small positive net contribution from the TracFone and media transactions, to be offset by headwinds from below-the-line items. These items include approximately $0.15 from our C-Band investment, including higher depreciation and lower capitalized interest as we put the spectrum into service; $0.07 share dilution as a result of shares issued in the TracFone acquisition; and other non-cash impacts such as D&A and pension and OPEB expense.
Our adjusted effective income tax rate is expected in the range of 23% to 25% based on current legislation. Capital spending for the full year, excluding C-Band, is expected to be between $16.5 billion and $17.5 billion, a decrease from the $18.2 billion in 2021 as we have started our progress towards lower capital intensity. C-Band capital spend is anticipated to be between $5 billion to $6 billion as we continue to build out the initial markets and begin preparations for deploying Phase 2 spectrum.
For 2022, cash flow from operations are expected to be driven by higher operating income, offset by increased working capital from device payment receivables, as well as higher cash taxes. We are extremely excited for 2022 and expect it to be our biggest year yet. The second wave of 5G is here and we are leading the way into the future of connectivity. We have the necessary assets and strategy to unlock the full potential of our growth vectors.
With that, I will hand it over to Hans to discuss our 2022 strategic priorities.