Tony Skiadas
Executive Vice President & Chief Financial Officer at Verizon Communications
Thanks, Hans, and good morning.
Our results for the second quarter demonstrate our progress towards our three priorities of growing wireless service revenue, delivering healthy consolidated adjusted EBITDA and increasing free cash flow. Our focus on execution is working, and we remain on track to meet our financial guidance for 2023. We are happy with our progress, but we have more work to do. We are focused on continuing to improve our performance while remaining financially disciplined.
In the second quarter, our Consumer segment demonstrated better operating results, both sequentially and year-over-year in postpaid phone net adds. Additionally, we experienced continued strong performance within our Business segment, both in terms of mobility and FWA subscriber growth. The results reflect the benefits of our ongoing C-Band deployment and improved go-to-market execution.
Consumer postpaid phone net losses totaled 136,000 for the quarter compared to 215,000 net losses in the second quarter of 2022. Consumer postpaid phone gross adds were strong once again, up 6.9% year-over-year, driven by new to Verizon gross adds, which increased approximately 19% over the prior year period. We also saw notable growth in consumer postpaid ARPA, which was up 6.2% year-over-year.
The recent launch of myPlan reflects a more segmented and targeted approach. While it's still early, myPlan is driving a significantly higher premium mix with nearly 70% of myPlan customers taking the unlimited plus option. We are also encouraged by the step activity we are seeing.
Consumer postpaid phone churn for the quarter was 0.76%, up 1 basis point compared with the same period last year. Higher involuntary churn drove the year-over-year increase, offsetting a modest improvement in voluntary churn. Our involuntary churn rates remained at pre-pandemic levels and were flat for the third consecutive quarter. It is important to note our performance in existing C-Band markets. In the 46 markets where we initially deployed C-Band, postpaid phone gross add growth was more than 100 basis points higher in the quarter than in non-C-Band markets. Additionally, phone churn was 4 basis points lower in C-Band markets and our premium mix in C-Band markets was 11 percentage points higher.
Let's now look at our business results. Verizon Business once again delivered a solid performance and continues to expand on its industry-leading wireless market share. Demand continues to be strong in all three customer groups, resulting in 144,000 phone net adds for the second quarter compared to 227,000 for the same period last year, which benefited from some large deals. As Hans mentioned, this marks the eighth consecutive quarter where we have delivered over 125,000 business phone net adds. We continue to win high-value business based on the strength of our network performance and value proposition. Notably, we had a recent government contract win where we took share from two of our competitors at attractive ARPUs.
Moving on to Broadband, we maintained our strong performance with 418,000 total broadband net additions in the second quarter. In the past four quarters, we've added more than 1.6 million broadband subscribers, growing our total broadband subscriber base by more than 21% during that time. Growth in FWA remained healthy with 384,000 net adds, up from 256,000 in the prior year period. We now have nearly 2.3 million customers on our FWA product, and we expect growth to continue at a fairly similar pace in the third quarter.
On the Fios side, Internet net adds for the second quarter were 54,000, up from 36,000 in the second quarter of last year. Despite continued softness in household move activity, gross adds rose year-over-year and our retention levels continue to be strong. Our value market team continues to take steps to address some of the softness we saw in the first half of the year. Prepaid net losses totaled 304,000 in the second quarter.
Our year-to-date net add performance should represent a low point as we continue to make progress integrating TracFone, while taking actions to better position us for growth, including scaling our Visible and Total by Verizon brands. As Hans mentioned, we expect to see sequential improvements beginning in the third quarter.
Let's now look at our financials, starting with consolidated revenue for the quarter, which was $32.6 billion, down 3.5% year-over-year. The decline can be attributed to reduced wireless equipment revenue, which was nearly 21% lower than the prior year as postpaid phone upgrade activity declined 34% versus the same period last year. Service and other revenue grew 0.8%, driven by wireless service revenue growth.
Total wireless service revenue was $19.1 billion, up 3.8% year-over-year and more than $200 million sequentially. In the second quarter, we continued to benefit from pricing actions, including a recent change to our Verizon Mobile Protect offering. Additionally, the larger allocation of our administrative and telco recovery fees from other revenue into wireless service revenue and growth in fixed wireless access drove revenue improvements. These benefits were partially offset by continued pressure from the amortization of handset promotions.
We are on track to deliver our wireless service revenue guidance for the year. We continue to assess opportunities to take targeted pricing actions to better monetize our products and services as we deliver great value for our customers. For example, we recently announced an increase in our FWA bundled pricing for new customers, which we expect will provide service revenue benefits in the second half of the year. Additionally, we expect less pressure from the amortization of promotional costs in the second half of the year given the software upgrade environment and our disciplined approach to promotional spending.
Consolidated adjusted EBITDA in the quarter was $12 billion, up 0.8% compared to the prior year. Adjusted EBITDA margin improved by 160 basis points over the prior year, primarily driven by lower consumer postpaid upgrade volumes and improved service revenue. These benefits were partially offset by higher marketing expenses in the quarter related to the myPlan launch as well as a $194 million increase in bad debt year-over-year. Bad debt was relatively flat from the prior quarter and payment trends remain consistent with recent quarters and pre-pandemic levels.
Operating expenses, excluding depreciation and amortization and special items, were down 5.9% year-over-year, primarily due to lower-cost of equipment from reduced upgrade volumes. As Hans mentioned, we continue to execute on our cost savings program, including through initiatives within our Verizon Global Services organization. During the quarter, we took actions to rationalize our workforce as we continue to see benefits from rationalizing certain legacy wireline products. We are on track to deliver $200 million to $300 million of savings this year from our transformation efforts and continue to make progress towards achieving our goal of $2 billion to $3 billion of annual cost savings by 2025.
Cash flow from operating activities for the second quarter was $9.7 billion and for the first half of the year totaled $18 billion compared to $17.7 billion in the prior year period. The increase continues to be related to working capital improvements associated with lower inventory levels and fewer upgrades, which were offset in part by higher cash income taxes and interest expense.
CapEx for the quarter came in at $4.1 billion, which reflects the completion of our $10 billion accelerated C-Band program. Capital spending for the first half of the year totaled $10.1 billion, which was over $400 million less than last year. We continue to expect 2023 capital spending to be within our guidance of $18.25 billion to $19.25 billion. Our peak capital spend is behind us and we are now at a business as usual run rate for CapEx, which we expect will continue into 2024.
The net result of cash flow from operations and capital spending is free cash flow for the quarter of $5.6 billion. Free cash flow for the first half of the year is $8 billion, a nearly $800 million improvement from the previous year, driven by a combination of our lower CapEx spend compared to the prior year and operating cash flow benefits previously mentioned. While we do not normally guide on free cash flow, our strong results give us a clear line of sight to more than $17 billion of free cash flow for the full year
Net unsecured debt at the end of the quarter was $126.6 billion, an improvement of $3.2 billion compared to the end of the previous quarter and $4.1 billion lower year-over-year. We ended the quarter with $4.8 billion of cash on hand. We are well positioned with respect to our unsecured debt maturities with no remaining obligations for the rest of the year. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.6 times as of the end of the second quarter, a 0.1 time improvement, both sequentially and year-over-year.
We continue to monitor the current interest rate environment closely, given recent comments from the Federal Reserve on planned rate increases later in the year. As previously stated, we expect higher interest expense to impact our full-year earnings per share by $0.25 to $0.30, and there is no change to that view.
Our strong second quarter results support our capital allocation priorities, which remain unchanged.
Before I hand the call back to Hans, I'd like to address the recent media reports on lead sheath cables in our network. Here is what we currently know. We still have some legacy lead sheath cable in our copper network. As a result of the age of this infrastructure and the history of the industry, records are incomplete as to exactly how much of the cable on our network has lead sheathing. However, to give you a sense of the scale of the infrastructure we are talking about, our copper network is comprised of less than 540,000 miles of cable, roughly half of which is aerial and lead sheath cable makes up a small percentage of our copper network. This number excludes the network elements previously owned by MCI and XO Communications, because we are still reviewing the historical records of those companies. We're not disturbed the likelihood of exposure to lead from lead sheath cables is low.
In addition, because the lead sheath cable was used as a feeder and distribution cable and does not run into individual homes or apartments, it is generally in locations that minimize the potential for public contact. We are working with a third-party expert to conduct our own testing at our sites that were identified by the media. We will not have the results of our testing for several weeks. When we have the results of our testing, we will work closely with our industry and others to address any concerns and issues.
Now, I think it's important to address a question we've received from a lot of investors, which is about the process for and potential cost of removal of the lead sheath cable in our network. Given where we are in this process, it is far too soon to make any projection on what the potential financial impact might be to the company. There are a number of unknowns in this area, including whether there is a health risk presented by undisturbed lead sheath cable, and if there is a risk, how that risk should be addressed. As a result, we do not believe there's a meaningful way to estimate any potential cost to the company or that any such estimate would even be useful. We won't be able to provide any additional color during the Q&A session. As we have more information we can share on the topic, we will certainly do that.
I will now turn the call back to Hans for his closing thoughts before we open it up to your questions.
