10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2013
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to     

Commission File Number 1-8610

AT&T INC.

Incorporated under the laws of the State of Delaware

I.R.S. Employer Identification Number 43-1301883

208 S. Akard St., Dallas, Texas 75202

Telephone Number:  (210) 821-4105

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]   No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]   No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[X]		Accelerated filer	[   ]
Non-accelerated filer	[   ]	(Do not check if a smaller reporting company)	Smaller reporting company	[   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]   No [X]

At July 31, 2013 there were 5,311 million common shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Operating Revenues	$	32,075		$	31,575		$	63,431		$	63,397
Operating Expenses
Cost of services and sales (exclusive of depreciation
and amortization shown separately below)		13,270			12,254			25,824			25,071
Selling, general and administrative		8,121			8,005			16,454			16,349
Depreciation and amortization		4,571			4,499			9,100			9,059
Total operating expenses		25,962			24,758			51,378			50,479
Operating Income		6,113			6,817			12,053			12,918
Other Income (Expense)
Interest expense		(825	)		(941	)		(1,652	)		(1,800	)
Equity in net income of affiliates		218			132			403			355
Other income (expense) – net		288			23			320			75
Total other income (expense)		(319	)		(786	)		(929	)		(1,370	)
Income Before Income Taxes		5,794			6,031			11,124			11,548
Income tax expense		1,914			2,066			3,471			3,931
Net Income		3,880			3,965			7,653			7,617
Less: Net Income Attributable to Noncontrolling Interest		(58	)		(63	)		(131	)		(131	)
Net Income Attributable to AT&T	$	3,822		$	3,902		$	7,522		$	7,486
Basic Earnings Per Share Attributable to AT&T	$	0.71		$	0.67		$	1.38		$	1.27
Diluted Earnings Per Share Attributable to AT&T	$	0.71		$	0.66		$	1.38		$	1.27
Weighted Average Number of Common Shares
Outstanding – Basic (in millions)		5,381			5,855			5,446			5,886
Weighted Average Number of Common Shares
Outstanding – with Dilution (in millions)		5,397			5,876			5,463			5,907
Dividends Declared Per Common Share	$	0.45		$	0.44		$	0.90		$	0.88
See Notes to Consolidated Financial Statements.

2 

AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Net income	$	3,880		$	3,965		$	7,653		$	7,617
Other comprehensive income, net of tax:
Foreign Currency:
Translation adjustments (includes $(1), $(1), $(1)            and $0 attributable to noncontrolling interest), net of taxes of            $(127), $(55), $(65) and $76		(239	)		(101	)		(118	)		142
Reclassification adjustment included in net income,             net of taxes of $19, $0, $19 and $0		34			-			34			-
Available-for-sale securities:
Net unrealized gains (losses), net of taxes of $6, $(27), $46            and $27		11			(52	)		86			49
Reclassification adjustment realized in net income, net of            taxes of $(1), $(3), $(5) and $(6)		(3	)		(6	)		(10	)		(12	)
Cash flow hedges:
Net unrealized gains (losses), net of taxes of $66, $(58),            $115 and $(58)		120			(107	)		210			(107	)
Reclassification adjustment included in net income,            net of taxes of $4, $4, $8 and $7		8			7			15			13
Defined benefit postretirement plans:
Net actuarial gain (loss) from equity method investees arising            during period, net of taxes of $0, $(29), $0 and $(29)		-			(53	)		-			(53	)
Reclassification adjustment included in net income, net of            taxes $5, $0, $5, and $0		8			-			8			-
Amortization of net prior service credit included in            net income, net of taxes of $(109), $(87), $(218)            and $(171)		(177	)		(137	)		(355	)		(274	)
Other		-			1			-			1
Other comprehensive loss		(238	)		(448	)		(130	)		(241	)
Total comprehensive income		3,642			3,517			7,523			7,376
Less: Total comprehensive income attributable to      noncontrolling interest		(57	)		(62	)		(130	)		(131	)
Total Comprehensive Income Attributable to AT&T	$	3,585		$	3,455		$	7,393		$	7,245
See Notes to Consolidated Financial Statements.

3 

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	June 30,			December 31,
	2013			2012
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	4,548		$	4,868
Accounts receivable - net of allowances for doubtful accounts of $520 and $547		12,508			12,657
Prepaid expenses		1,038			1,035
Deferred income taxes		953			1,036
Other current assets		2,381			3,110
Total current assets		21,428			22,706
Property, plant and equipment		276,833			270,907
Less: accumulated depreciation and amortization		(166,099	)		(161,140	)
Property, Plant and Equipment – Net		110,734			109,767
Goodwill		69,770			69,773
Licenses		53,665			52,352
Customer Lists and Relationships – Net		1,015			1,391
Other Intangible Assets – Net		5,018			5,032
Investments in and Advances to Equity Affiliates		3,888			4,581
Other Assets		6,575			6,713
Total Assets	$	272,093		$	272,315
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	3,256		$	3,486
Accounts payable and accrued liabilities		19,438			20,494
Advanced billing and customer deposits		4,029			4,225
Accrued taxes		2,065			1,026
Dividends payable		2,401			2,556
Total current liabilities		31,189			31,787
Long-Term Debt		71,917			66,358
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		29,400			28,491
Postemployment benefit obligation		41,994			41,392
Other noncurrent liabilities		11,278			11,592
Total deferred credits and other noncurrent liabilities		82,672			81,475
Stockholders’ Equity
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2013 and
December 31, 2012: issued 6,495,231,088 at June 30, 2013 and December 31, 2012)		6,495			6,495
Additional paid-in capital		90,985			91,038
Retained earnings		25,212			22,481
Treasury stock (1,159,998,643 at June 30, 2013 and 913,836,325
at December 31, 2012, at cost)		(41,819	)		(32,888	)
Accumulated other comprehensive income		5,107			5,236
Noncontrolling interest		335			333
Total stockholders’ equity		86,315			92,695
Total Liabilities and Stockholders’ Equity	$	272,093		$	272,315
See Notes to Consolidated Financial Statements.

4 

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)
	Six months ended
	June 30,
	2013			2012
Operating Activities
Net income	$	7,653		$	7,617
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,100			9,059
Undistributed earnings from investments in equity affiliates		(198	)		(355	)
Provision for uncollectible accounts		439			572
Deferred income tax expense and noncurrent unrecognized tax benefits		926			(639	)
Net (gain) loss from sale of investments, net of impairments		(260	)		2
Changes in operating assets and liabilities:
Accounts receivable		(290	)		(460	)
Other current assets		784			1,468
Accounts payable and accrued liabilities		(340	)		592
Other - net		(103	)		(531	)
Total adjustments		10,058			9,708
Net Cash Provided by Operating Activities		17,711			17,325
Investing Activities
Construction and capital expenditures:
Capital expenditures		(9,665	)		(8,742	)
Interest during construction		(140	)		(130	)
Acquisitions, net of cash acquired		(1,182	)		(477	)
Dispositions		825			800
Sales (purchases) of securities, net		-			124
Return of advances to and investments in equity affiliates		301			-
Other		(4	)		-
Net Cash Used in Investing Activities		(9,865	)		(8,425	)
Financing Activities
Issuance of other short-term borrowings		1,476			-
Repayment of other short-term borrowings		(233	)		-
Issuance of long-term debt		6,416			6,935
Repayment of long-term debt		(1,823	)		(7,035	)
Purchase of treasury stock		(9,217	)		(4,623	)
Issuance of treasury stock		104			376
Dividends paid		(4,930	)		(5,187	)
Other		41			(534	)
Net Cash Used in Financing Activities		(8,166	)		(10,068	)
Net decrease in cash and cash equivalents		(320	)		(1,168	)
Cash and cash equivalents beginning of year		4,868			3,045
Cash and Cash Equivalents End of Period	$	4,548		$	1,877
Cash paid during the six months ended June 30 for:
Interest	$	2,002		$	2,133
Income taxes, net of refunds	$	591		$	127
See Notes to Consolidated Financial Statements.

5 

AT&T INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	June 30, 2013
	Shares		Amount
Common Stock
Balance at beginning of year	6,495		$	6,495
Issuance of stock	-			-
Balance at end of period	6,495		$	6,495
Additional Paid-In Capital
Balance at beginning of year			$	91,038
Issuance of treasury stock				(8	)
Share-based payments				(45	)
Balance at end of period			$	90,985
Retained Earnings
Balance at beginning of year			$	22,481
Net income attributable to AT&T ($1.38 per diluted share)				7,522
Dividends to stockholders ($0.90 per share)				(4,791	)
Balance at end of period			$	25,212
Treasury Stock
Balance at beginning of year	(914	)	$	(32,888	)
Repurchase of common stock	(257	)		(9,217	)
Issuance of treasury stock	11			286
Balance at end of period	(1,160	)	$	(41,819	)
Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
Balance at beginning of year			$	5,236
Other comprehensive loss attributable to AT&T				(129	)
Balance at end of period			$	5,107
Noncontrolling Interest
Balance at beginning of year			$	333
Net income attributable to noncontrolling interest				131
Distributions				(128	)
Translation adjustments attributable to noncontrolling interest, net of taxes				(1	)
Balance at end of period			$	335
Total Stockholders’ Equity at beginning of year			$	92,695
Total Stockholders’ Equity at end of period			$	86,315
See Notes to Consolidated Financial Statements.

6 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollars in millions except per share amounts

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of Presentation  Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” We believe that these consolidated financial statements include all adjustments, consisting only of normal recurring accruals, that are necessary to present fairly the results for the presented interim periods. The results for the interim periods are not necessarily indicative of those for the full year. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries and affiliates. Our subsidiaries and affiliates operate in the communications services industry both domestically and internationally, providing wireless communications services, traditional wireline voice services, data/broadband and Internet services, video services, telecommunications equipment, managed networking and wholesale services.

All significant intercompany transactions are eliminated in the consolidation process. Investments in partnerships and less than majority-owned subsidiaries where we have significant influence are accounted for under the equity method. Earnings from certain foreign equity investments accounted for using the equity method are included for periods ended within up to one month of our period end. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items, including actuarial gains and losses on pension and other postretirement benefit obligations.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of probable losses and expenses. Actual results could differ from those estimates. Certain amounts have been reclassified to conform to the current period’s presentation.

Stock Repurchase Program  In May 2013, we completed a repurchase authorization that was approved by our Board of Directors in July 2012. In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock. During the first six months of 2013, we repurchased 257 million shares for $9,217 under these authorizations. At June 30, 2013, we had 272 million shares remaining under the March 2013 authorization. The authorization has no expiration date.

7 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for net income attributable to AT&T for the three and six months ended June 30, 2013 and 2012, are shown in the table below:

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Numerators
Numerator for basic earnings per share:
Net Income	$	3,880	$	3,965	$	7,653	$	7,617
Net income attributable to noncontrolling interest		(58)		(63)		(131)		(131)
Net Income attributable to AT&T		3,822		3,902		7,522		7,486
Dilutive potential common shares:
Share-based payment		2		2		6		6
Numerator for diluted earnings per share	$	3,824	$	3,904	$	7,528	$	7,492
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		5,381		5,855		5,446		5,886
Dilutive potential common shares:
Share-based payment		16		21		17		21
Denominator for diluted earnings per share		5,397		5,876		5,463		5,907
Basic earnings per share attributable to AT&T	$	0.71	$	0.67	$	1.38	$	1.27
Diluted earnings per share attributable to AT&T	$	0.71	$	0.66	$	1.38	$	1.27

At June 30, 2013 and 2012, we had issued and outstanding options to purchase approximately 13 million and 22 million shares of AT&T common stock. For the quarter ended June 30, 2013 and 2012, the exercise prices of 2 million and 4 million shares were above the market price of AT&T stock for the respective periods. Accordingly, we did not include these amounts in determining the dilutive potential common shares. At June 30, 2013 and 2012, the exercise prices of 11 million and 17 million vested stock options were below market price.

8 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 3. OTHER COMPREHENSIVE INCOME

Changes in the balances of each component of other comprehensive income (OCI) included in accumulated OCI for the six months ended June 30, 2013, are presented below. All amounts are net of tax and exclude noncontrolling interest.

At June 30, 2013 and for the period ended:
			Foreign Currency Translation Adjustment			Net Unrealized Gain (Loss) on Available- for-Sale Securities			Net Unrealized Gains (Losses) on Cash Flow Hedges			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of January 1, 2013		$	(284)		$	272		$	(110)		$	5,358		$	5,236
Other comprehensive income    (loss) before reclassifications			(117)			86			210			-			179
Amounts reclassified    from accumulated OCI			34	1		(10)	2		15	3		(347)	4		(308)
Net other comprehensive    income (loss)			(83)			76			225			(347)			(129)
Balance as of June 30, 2013		$	(367)		$	348		$	115		$	5,011		$	5,107
1	Pre-tax translation loss reclassifications are included in Other income (expense) - net in the consolidated statements of income.
2	Pre-tax gains are included in Other income (expense) - net in the consolidated statements of income.
3	(Gains) losses are included in interest expense in the consolidated statements of income. See Note 6 for additional information.
4	Prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor, are included in Cost of services and sales and Selling, general and administrative
	in the consolidated statements of income (see Note 5). Actuarial loss reclassifications related to our equity method investees are included in Other income (expense) - net in the consolidated
	statements of income.

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. We analyze our operating segments based on segment income before income taxes. We make our capital allocation decisions based on the strategic needs of the business, needs of the network (wireless or wireline) provided services, and demands to provide emerging services to our customers. Actuarial gains and losses from pension and other postretirement benefits, interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. Therefore, these items are not included in each reportable segment’s results. The customers and long-lived assets of our reportable segments are predominantly in the United States. We have three reportable segments: (1) Wireless, (2) Wireline and (3) Other. Our operating results prior to May 9, 2012, also included our Advertising Solutions segment, which was subsequently sold.

The Wireless segment uses our nationwide network to provide consumer and business customers with wireless data and voice communications services. This segment includes our portion of the results from our mobile payment joint venture marketed as the Isis Mobile WalletTM (ISIS), which is accounted for as an equity method investment.

The Wireline segment uses our regional, national and global network to provide consumer and business customers with data and voice communications services, AT&T U-verse® high-speed broadband, video and voice services and managed networking to business customers. Additionally, we receive commissions on sales of satellite television services offered through our agency arrangements.

9 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The Other segment includes our portion of the results from our international equity investments, our equity interest in YP Holdings LLC (YP Holdings), and costs to support corporate-driven activities and operations. Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

In the following tables, we show how our segment results are reconciled to our consolidated results reported.

For the three months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	5,356	$	8,400	$	-	$	-	$	-	$	13,756
Voice, text and other		10,014		5,141		-		-		-		15,155
Equipment and other		1,921		1,232		-		11		-		3,164
Total segment operating revenues		17,291		14,773		-		11		-		32,075
Operations and support expenses		10,770		10,417		-		204		-		21,391
Depreciation and amortization expenses		1,843		2,722		-		6		-		4,571
Total segment operating expenses		12,613		13,139		-		210		-		25,962
Segment operating income (loss)		4,678		1,634		-		(199)		-		6,113
Interest expense		-		-		-		-		825		825
Equity in net income (loss) of affiliates		(19)		-		-		237		-		218
Other income (expense) – net		-		-		-		-		288		288
Segment income (loss) before    income taxes	$	4,659	$	1,634	$	-	$	38	$	(537)	$	5,794
For the six months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	10,481	$	16,562	$	-	$	-	$	-	$	27,043
Voice, text and other		19,951		10,447		-		-		-		30,398
Equipment and other		3,550		2,419		-		21		-		5,990
Total segment operating revenues		33,982		29,428		-		21		-		63,431
Operations and support expenses		20,950		20,752		-		576		-		42,278
Depreciation and amortization expenses		3,678		5,410		-		12		-		9,100
Total segment operating expenses		24,628		26,162		-		588		-		51,378
Segment operating income (loss)		9,354		3,266		-		(567)		-		12,053
Interest expense		-		-		-		-		1,652		1,652
Equity in net income (loss) of affiliates		(37)		1		-		439		-		403
Other income (expense) – net		-		-		-		-		320		320
Segment income (loss) before    income taxes	$	9,317	$	3,267	$	-	$	(128)	$	(1,332)	$	11,124

10 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	4,471	$	7,935	$	-	$	-	$	-	$	12,406
Voice, text and other		10,294		5,696		-		-		-		15,990
Equipment and other		1,588		1,276		305		10		-		3,179
Total segment operating revenues		16,353		14,907		305		10		-		31,575
Operations and support expenses		9,590		10,201		226		242		-		20,259
Depreciation and amortization expenses		1,696		2,766		29		8		-		4,499
Total segment operating expenses		11,286		12,967		255		250		-		24,758
Segment operating income (loss)		5,067		1,940		50		(240)		-		6,817
Interest expense		-		-		-		-		941		941
Equity in net income (loss) of affiliates		(15)		(1)		-		148		-		132
Other income (expense) – net		-		-		-		-		23		23
Segment income (loss) before    income taxes	$	5,052	$	1,939	$	50	$	(92)	$	(918)	$	6,031
For the six months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	8,706	$	15,735	$	-	$	-	$	-	$	24,441
Voice, text and other		20,625		11,588		-		-		-		32,213
Equipment and other		3,158		2,513		1,049		23		-		6,743
Total segment operating revenues		32,489		29,836		1,049		23		-		63,397
Operations and support expenses		19,568		20,603		773		476		-		41,420
Depreciation and amortization expenses		3,362		5,574		106		17		-		9,059
Total segment operating expenses		22,930		26,177		879		493		-		50,479
Segment operating income (loss)		9,559		3,659		170		(470)		-		12,918
Interest expense		-		-		-		-		1,800		1,800
Equity in net income (loss) of affiliates		(28)		(1)		-		384		-		355
Other income (expense) – net		-		-		-		-		75		75
Segment income (loss) before    income taxes	$	9,531	$	3,658	$	170	$	(86)	$	(1,725)	$	11,548

NOTE 5. PENSION AND POSTRETIREMENT BENEFITS

Substantially all of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance, and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to meet the plans’ obligations to provide benefits to employees upon their retirement. During 2013, we have a required contribution to our pension plans of approximately $175.

In October 2012, we filed an application with the U.S. Department of Labor for approval to make a voluntary contribution of a preferred equity interest in our Mobility business to the trust used to pay qualified pension benefits under plans sponsored by AT&T. At the time we filed the application, the interest had a fair market value of $9,500. We anticipate approval in 2013, and expect to make the contribution at that time. As currently proposed, the preferred equity interest will constitute a qualified plan asset for ERISA funding purposes, but may not be included in plan assets in our consolidated financial statements upon contribution. Final determination of whether it will qualify as a plan asset for financial reporting purposes is subject to the final terms of the preferred equity interest.

We recognize actuarial gains and losses on pension and postretirement plan assets in our operating results at our annual measurement date of December 31, unless earlier remeasurements are required. The following table details pension and postretirement benefit costs included in operating expenses in the accompanying consolidated statements of income.

11 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

In the following table, expense credits are denoted with parentheses. A portion of these expenses is capitalized as part of internal construction projects, providing a small reduction in the net expense recorded.

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Pension cost:
Service cost – benefits earned during the period	$	330	$	304	$	660	$	614
Interest cost on projected benefit obligation		607		700		1,214		1,400
Expected return on assets		(828)		(880)		(1,656)		(1,760)
Amortization of prior service (credit)		(23)		(4)		(46)		(8)
Net pension cost	$	86	$	120	$	172	$	246
Postretirement cost:
Service cost – benefits earned during the period	$	96	$	82	$	191	$	166
Interest cost on accumulated postretirement benefit obligation		389		447		779		894
Expected return on assets		(178)		(201)		(356)		(401)
Amortization of prior service (credit)		(262)		(215)		(525)		(432)
Net postretirement cost	$	45	$	113	$	89	$	227
Combined net pension and postretirement cost	$	131	$	233	$	261	$	473

Our combined net pension and postretirement cost decreased $102 in the second quarter and $212 for the first six months of 2013. The decrease reflects lower interest costs, which are driven by the prior year’s declining bond rates and reflects higher amortization of prior service credits due to plan changes, including changes to retiree costs for continued healthcare coverage. This decrease is partially offset by lower expected long-term return on plan assets reflecting each plan’s asset mix and continued uncertainty in the securities markets and the U.S. economy.

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental retirement pension benefits cost, which is not included in the table above, was $28 in the second quarter of 2013, of which $26 was interest cost, and $55 for the first six months, of which $51 was interest cost. In 2012, net supplemental retirement pension benefits cost was $32 in the second quarter, of which $29 was interest cost, and $63 for the first six months, of which $58 was interest cost.

12 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 6. FAIR VALUE MEASUREMENTS AND DISCLOSURE

The Fair Value Measurement and Disclosure framework provides a three-tiered fair value hierarchy that gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.

Level 2 Inputs to the valuation methodology include:

·   Quoted prices for similar assets and liabilities in active markets.

·   Quoted prices for identical or similar assets or liabilities in inactive markets.

·   Inputs other than quoted market prices that are observable for the asset or liability.

·   Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

·   Fair value is often based on developed models in which there are few, if any, external observations.

The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2012.

Long-Term Debt and Other Financial Instruments

The carrying amounts and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:

	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures	$	73,664	$	79,581	$	69,578	$	81,310
Commercial paper		1,243		1,243		-		-
Bank borrowings		1		1		1		1
Investment securities		2,407		2,407		2,218		2,218

The carrying value of debt with an original maturity of less than one year approximates market value. The fair value measurements used for notes and debentures are considered Level 2.

13 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Investment Securities

Our investment securities include equities, fixed income bonds and other securities. A substantial portion of the fair values of our available-for-sale securities were estimated based on quoted market prices. Investments in securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Realized gains and losses on securities are included in “Other income (expense) – net” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCI). Unrealized losses that are considered other than temporary are recorded in “Other income (expense) – net” with the corresponding reduction to the carrying basis of the investment. Fixed income investments of $113 have maturities of less than one year, $278 within one to three years, $184 within three to five years, and $256 for five or more years, which approximate fair value.

Our short-term investments (including money market securities) and customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Our investment securities are recorded in “Other Assets” on the consolidated balance sheets.

Following is the fair value leveling for available-for-sale securities and derivatives as of June 30, 2013 and December 31, 2012:

		June 30, 2013
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	1,015	$	-	$	-	$	1,015
International equities			498		-		-		498
Fixed income bonds			-		831		-		831
Asset Derivatives1
Interest rate swaps			-		210		-		210
Cross-currency swaps			-		668		-		668
Liability Derivatives1
Interest rate swaps			-		(9)		-		(9)
Cross-currency swaps			-		(750)		-		(750)
		December 31, 2012
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	873	$	-	$	-	$	873
International equities			469		-		-		469
Fixed income bonds			-		837		-		837
Asset Derivatives1
Interest rate swaps			-		287		-		287
Cross-currency swaps			-		752		-		752
Foreign exchange contracts			-		1		-		1
Liability Derivatives1
Cross-currency swaps			-		(672)		-		(672)
1	Derivatives designated as hedging instruments are reflected as Other assets, Other noncurrent liabilities and, for a portion of interest rate swaps, Other current assets.

14 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Derivative Financial Instruments

We employ derivatives to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.

The majority of our derivatives are designated either as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), or as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge).

Fair Value Hedging We designate our fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount. Accrued and realized gains or losses from interest rate swaps impact interest expense on the consolidated statements of income. Unrealized gains on interest rate swaps are recorded at fair market value as assets, and unrealized losses on interest rate swaps are recorded at fair market value as liabilities. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed-rate notes payable they hedge due to changes in the designated benchmark interest rate and are recognized in interest expense. Gains or losses realized upon early termination of our fair value hedges are recognized in interest expense. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Cash Flow Hedging Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities, both for the period they are outstanding. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of accumulated OCI until reclassified into interest expense in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized as other income or expense in each period.

We designate our cross-currency swaps as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from the issuance of our Euro and British pound sterling denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominations to fixed U.S. denominated amounts, to be exchanged at a specified rate, which was determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed foreign-denominated rate to a fixed U.S. denominated interest rate. We evaluate the effectiveness of our cross-currency swaps each quarter. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to “Other income (expense) – net” in the consolidated statements of income. Over the next 12 months, we expect to reclassify $45 from accumulated OCI to interest expense due to the amortization of net losses on historical interest rate locks.

We may hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we often enter into foreign exchange contracts to provide currency at a fixed rate. Some of these instruments are designated as cash flow hedges while others remain nondesignated, largely based on size and duration. Gains and losses at the time we settle or take delivery on our designated foreign exchange contracts are amortized into income in the same period the hedged transaction affects earnings, except where an amount is deemed to be ineffective, which would be immediately reclassified to “Other income (expense) – net” in the consolidated statements of income. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

15 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Collateral and Credit-Risk Contingency  We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2013, we had posted collateral of $35 (a deposit asset) and held collateral of $708 (a receipt liability). Under the agreements, if our credit rating had been downgraded one rating level by Moody’s Investors Service and Standards & Poor’s and two rating levels by Fitch, Inc., before the final collateral exchange in June, we would have been required to post additional collateral of $169. At December 31, 2012, we had posted collateral of $22 (a deposit asset) and held collateral of $543 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative instruments.

Following is the notional amount of our outstanding derivative positions:

	June 30,		December 31,
	2013		2012
Interest rate swaps	$	4,250	$	3,000
Cross-currency swaps		14,136		12,071
Foreign exchange contracts		4		51
Total	$	18,390	$	15,122

Following is the related hedged items affecting our financial position and performance:
Effect of Derivatives on the Consolidated Statements of Income
Fair Value Hedging Relationships	Three months ended								Six months ended
	June 30, 2013				June 30, 2012				June 30, 2013				June 30, 2012
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps		$	(63	)		$	(76	)		$	(87	)		$	(137	)
Gain (Loss) on long-term debt			63				76				87				137

In addition, the net swap settlements that accrued and settled in the quarter ended June 30 were offset against interest expense.

	Three months ended						Six months ended
Cash Flow Hedging Relationships	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI	$	184		$	(160	)	$	325		$	(165	)
Interest rate locks:
Interest income (expense) reclassified from    accumulated OCI into income		(12	)		(11	)		(23	)		(20	)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI		2			(5	)		-			-

16 

AT&T INC.

JUNE 30, 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 7. SUBSEQUENT EVENTS

On July 12, 2013, we announced an agreement to acquire Leap Wireless International, Inc. (Leap), a provider of prepaid wireless service, for fifteen dollars per outstanding share of Leap’s common stock, or approximately $1,260, plus one non-transferable contingent right that entitles each Leap stockholder to a share of the net proceeds of the future sale of the Chicago 700 MHz A-band FCC license held by Leap. As of June 30, 2013, Leap had approximately $2,700 of debt, net of cash.

Under the terms of the agreement, we will acquire all of Leap’s stock and, thereby, acquire all of its wireless properties, including spectrum licenses, network assets, retail stores and approximately 5 million subscribers. The agreement must be approved by Leap’s stockholders. The transaction also is subject to review by the FCC and the Department of Justice and to other customary closing conditions and is expected to close in approximately six to nine months from the announcement. The agreement also provides both parties with certain termination rights if the transaction does not close by July 11, 2014, extendable by either party to January 11, 2015 if required regulatory approvals have not been obtained. Under certain circumstances, Leap may be required to pay a termination fee or AT&T may be required to provide a three-year roaming agreement to Leap for LTE data coverage if the transaction does not close. If Leap enters into the roaming agreement, AT&T may purchase, or may be required by Leap to purchase, specified Leap spectrum assets.

17 

AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Dollars in millions except per share amounts

RESULTS OF OPERATIONS

For ease of reading, AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document, and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate in the communications services industry both in the United States and internationally, providing wireless and wireline telecommunication services and equipment. You should read this discussion in conjunction with the consolidated financial statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2012. A reference to a “Note” in this section refers to the accompanying Notes to Consolidated Financial Statements. In the tables throughout this section, percentage increases and decreases that are not considered meaningful are denoted with a dash. Certain amounts have been reclassified to conform to the current period’s presentation.

Consolidated Results  Our financial results in the second quarter and for the first six months of 2013 and 2012 are summarized as follows:

	Second Quarter							Six-Month Period
	2013		2012		Percent Change			2013		2012		Percent Change
Operating Revenues	$	32,075	$	31,575		1.6	%	$	63,431	$	63,397		0.1	%
Operating expenses
Cost of services and sales		13,270		12,254		8.3			25,824		25,071		3.0
Selling, general and administrative		8,121		8,005		1.4			16,454		16,349		0.6
Depreciation and amortization		4,571		4,499		1.6			9,100		9,059		0.5
Total Operating Expenses		25,962		24,758		4.9			51,378		50,479		1.8
Operating Income		6,113		6,817		(10.3)			12,053		12,918		(6.7)
Income Before Income Taxes		5,794		6,031		(3.9)			11,124		11,548		(3.7)
Net Income		3,880		3,965		(2.1)			7,653		7,617		0.5
Net Income Attributable to AT&T	$	3,822	$	3,902		(2.1)	%	$	7,522	$	7,486		0.5	%

Overview

Operating income decreased $704, or 10.3%, in the second quarter and $865, or 6.7%, for the first six months of 2013. Both operating revenues and expenses in 2012 include results for our sold Advertising Solutions segment, which had a negative impact on comparisons to 2013 operating income. The decline in operating income also reflected increased handset upgrades, which contributed to higher wireless equipment and commission costs, increased expenses supporting AT&T U-verse® (U-verse) subscriber growth and declines in wireline voice and wireless voice and text revenues. Wireless data and equipment revenues and wireline data revenues helped to offset these impacts. Our operating income margin in the second quarter decreased from 21.6% in 2012 to 19.1% in 2013 and for the first six months decreased from 20.4% in 2012 to 19.0% in 2013.

Operating revenues increased $500, or 1.6%, in the second quarter and $34, or 0.1%, for the first six months of 2013. Wireless data and equipment revenues increased, reflecting the increasing percentage of wireless subscribers choosing smartphones. Continued growth in U-verse services from residential customers and strategic business services also contributed to higher operating revenues. The revenue increases were partially offset by the sale of the Advertising Solutions segment and continued declines in wireline voice and wireless voice and text revenues.

As the telecommunications industry continues to evolve from voice-oriented services into an industry driven by data-based services, technology, and efficiencies, our products, services and plans have also changed as we transition from traditional voice and basic data services to sophisticated, high-speed, IP-based alternatives. This transition of our offerings will result in continued growth in our wireless and wireline IP-based data revenues as we bundle and price plans with greater focus on the data services that our customers desire, provide new products and services, and transition customers from their current traditional services. We expect continued declines in voice revenues and our basic wireline data services as customers choose these next-generation services.

18

AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Cost of services and sales expenses increased $1,016, or 8.3%, in the second quarter and $753, or 3.0%, for the first six months of 2013. The increases were primarily due to increased wireless equipment costs related to handset upgrades, increased wireline costs attributable to U-verse subscriber growth and wireless network costs. The increases were partially offset by the sale of the Advertising Solutions segment, decreased wireless interconnect and long-distance costs and lower costs associated with Universal Service Fund (USF) fees.

Selling, general and administrative expenses increased $116, or 1.4%, in the second quarter and $105, or 0.6%, for the first six months of 2013. The increases were primarily due to increased commissions related to smartphone upgrades and higher advertising expenses, partially offset by the sale of the Advertising Solutions segment, decreased employee related expenses and lower financing-related costs associated with our pension and postretirement benefits (referred to as Pension/OPEB expenses).

Depreciation and amortization expense increased $72, or 1.6%, in the second quarter and $41, or 0.5%, for the first six months of 2013. Expenses increased due to ongoing capital spending for network upgrades and expansion, partially offset by fully depreciated assets and lower amortization of intangibles for customer lists related to acquisitions. The sale of our Advertising Solutions segment also contributed to lower depreciation and amortization expenses.

Interest expense decreased $116, or 12.3%, in the second quarter and $148, or 8.2%, for the first six months of 2013. Interest expense in 2012 was higher due to charges associated with the early redemption of debt. The decrease in 2013 also reflects lower average interest rates, partially offset by higher average debt balances.

Equity in net income of affiliates increased $86, or 65.2%, in the second quarter and $48, or 13.5%, for the first six months of 2013. Increased equity in net income of affiliates in the second quarter was due to increased earnings at América Móvil, S.A. de C.V. (América Móvil) and YP Holdings LLC (YP Holdings). Increased equity in net income of affiliates for the first six months was primarily due to increased earnings from YP Holdings, partially offset by foreign exchange impacts at América Móvil.

Other income (expense) – net We had other income of $288 in the second quarter and $320 for the first six months of 2013, compared to other income of $23 in the second quarter and $75 for the first six months of 2012. Results in the second quarter and for the first six months of 2013 included a net gain on the sale of América Móvil shares and other investments of $249 and $260, interest and dividend income of $23 and $40 and leveraged lease income of $10 and $15, respectively.

Other income in the second quarter and for the first six months of 2012 included interest and dividend income of $19 and $34 and leveraged lease income of $8 and $41 and a net loss on the sale of investments of $11 and $1, respectively.

Income taxes decreased $152, or 7.4%, in the second quarter and $460, or 11.7%, for the first six months of 2013. Our effective tax rate was 33.0% for the second quarter and 31.2% for the first six months of 2013, as compared to 34.3% for the second quarter and 34.0% for the first six months of 2012. The decrease in effective tax rate for both the second quarter and the first six months was primarily due to recognition of benefits related to tax audit settlements.

19 

AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Selected Financial and Operating Data
	June 30,
	2013	2012
Wireless subscribers (000)	107,884	105,206
Network access lines in service (000)	26,849	31,604
Total wireline broadband connections (000)	16,453	16,434
Debt ratio1	46.6%	38.4%
Ratio of earnings to fixed charges2	5.45	5.36
Number of AT&T employees	245,350	242,380

1 Debt ratios are calculated by dividing total debt (debt maturing within one year plus long-term debt) by total capital (total debt plus total stockholders’ equity) and do not consider cash available to pay down debt. See our “Liquidity and Capital Resources” section for discussion.

2 See exhibit 12

Segment Results

Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. Our operating segment results presented in Note 4 and discussed below for each segment follow our internal management reporting. We analyze our operating segments based on segment income before income taxes. We make our capital allocation decisions based on the strategic needs of the business, needs of the network (wireless or wireline) provided services, and demands to provide emerging services to our customers. Actuarial gains and losses from pension and other postemployment benefits, interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. We have three reportable segments: (1) Wireless, (2) Wireline and (3) Other. Our operating results prior to May 9, 2012, also included Advertising Solutions, which was previously a reportable segment.

The Wireless segment uses our nationwide network to provide consumer and business customers with wireless data and voice communications services. This segment includes our portion of the results from our mobile payment joint venture marketed as the ISIS Mobile WalletTM (ISIS), which is accounted for as an equity method investment.

The Wireline segment uses our regional, national and global network to provide consumer and business customers with data and voice communications services, U-verse high-speed broadband, video, voice services, and managed networking to business customers. Additionally, we receive commissions on sales of satellite television services offered through our agency arrangements.

The Advertising Solutions segment included our directory operations, which published Yellow and White Pages directories and sold directory advertising, Internet-based advertising and local search through May 8, 2012.

The Other segment includes our portion of the results from our international equity investments, our equity interest in YP Holdings, and costs to support corporate-driven activities and operations. Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

The following sections discuss our operating results by segment. Operations and support expenses include certain network planning and engineering expenses; information technology; our repair technicians and repair services; property taxes; bad debt expense; advertising costs; sales and marketing functions, including customer service centers; real estate costs, including maintenance and utilities on all buildings; credit and collection functions; and corporate support costs, such as finance, legal, human resources and external affairs. Pension and postretirement service costs, net of amounts capitalized as part of construction labor, are also included to the extent that they are associated with employees who perform these functions.

We discuss capital expenditures for each segment in “Liquidity and Capital Resources.”

20 

AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Wireless
Segment Results
	Second Quarter							Six-Month Period
	2013		2012		Percent Change			2013		2012		Percent Change
Segment operating revenues
Data	$	5,356	$	4,471		19.8	%	$	10,481	$	8,706		20.4	%
Voice, text and other service		10,014		10,294		(2.7)			19,951		20,625		(3.3)
Equipment		1,921		1,588		21.0			3,550		3,158		12.4
Total Segment Operating Revenues		17,291		16,353		5.7			33,982		32,489		4.6
Segment operating expenses
Operations and support		10,770		9,590		12.3			20,950		19,568		7.1
Depreciation and amortization		1,843		1,696		8.7			3,678		3,362		9.4
Total Segment Operating Expenses		12,613		11,286		11.8			24,628		22,930		7.4
Segment Operating Income		4,678		5,067		(7.7)			9,354		9,559		(2.1)
Equity in Net Loss of Affiliates		(19)		(15)		(26.7)			(37)		(28)		(32.1)
Segment Income	$	4,659		5,052		(7.8)	%	$	9,317	$	9,531		(2.2)	%

21 

AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

The following table highlights other key measures of performance for the Wireless segment:

	Second Quarter							Six-Month Period
	2013		2012		Percent Change			2013		2012		Percent Change
(Subscribers in 000s)
Wireless Subscribers1									107,884		105,206		2.5	%
Gross Subscriber Additions2		5,000		4,970		0.6	%		9,727		10,248		(5.1)
Net Subscriber Additions2		632		1,266		(50.1)			923		1,992		(53.7)
Total Churn3		1.36%		1.18%	18 BP				1.37%		1.32%	5 BP
Postpaid Smartphone Subscribers									49,462		43,131		14.7	%
Postpaid Data-Centric Device and Other    Phone Subscribers									21,816		26,535		(17.8)
Total Postpaid Subscribers									71,278		69,666		2.3
Net Postpaid Subscriber Additions2		551		320		72.2	%		847		507		67.1
Postpaid Churn3		1.02%		0.97%	5 BP				1.03%		1.03%	0 BP
Prepaid Subscribers									7,084		7,473		(5.2)	%
Net Prepaid Subscriber Additions2		11		92		(88.0)	%		(173)		217		-
Reseller Subscribers									14,330		14,382		(0.4)	%
Net Reseller Subscriber Additions2		(414)		472		-			(666)		656		-
Connected Device Subscribers4									15,192		13,685		11.0	%
Net Connected Device Subscriber       Additions		484		382		26.7	%		915		612		49.5

1	Represents 100% of AT&T Mobility wireless subscribers.
2	Excludes merger and acquisition-related additions during the period.
3	Calculated by dividing the aggregate number of wireless subscribers who canceled service during a period divided by the total number of wireless subscribers at the beginning of that period.
	The churn rate for the period is equal to the average of the churn rate for each month of that period.
4	Includes data-centric devices such as eReaders, automobile monitoring systems, and fleet management - excludes tablet, subscribers, which are primarily reflected in our postpaid subscriber
	category, with the remainder in prepaid.

Wireless Subscriber Relationships

As the wireless industry continues to mature, we believe that future wireless growth will increasingly depend on our ability to offer innovative services and devices and a wireless network that has sufficient spectrum and capacity to support these innovations and make them available to more subscribers. To attract and retain subscribers, we offer a broad handset line and a wide variety of service plans.

As technology evolves, rapid changes are occurring in the handset and device industry with the continual introduction of new models or significant revisions of existing models. We believe a broad offering of a wide variety of smartphones reduces dependence on any single operating system or manufacturer as these products continue to evolve in terms of technology and subscriber appeal. In the first six months of 2013, we continued to see increasing use of smartphones by our postpaid subscribers. Of our total postpaid phone subscriber base, 73.3% (or 49.5 million subscribers) use smartphones, up from 64.0% (or 43.1 million subscribers) a year earlier. As is common in the industry, most of our subscribers’ phones are designed to work only with our wireless technology, requiring subscribers who desire to move to a new carrier with a different technology to purchase a new device.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Our postpaid subscribers typically sign a two-year contract, which includes discounted handsets and early termination fees. About 90% of our postpaid smartphone subscribers are on FamilyTalk® Plans (family plans), Mobile Share plans or business plans, which provide for service on multiple devices at reduced rates, and such subscribers tend to have higher retention and lower churn rates. We offer our Mobile to Any Mobile feature, which enables our subscribers on these and other qualifying plans to make unlimited mobile calls to any mobile number in the United States, subject to certain conditions. We also offer data plans at different price levels (usage-based data plans) to attract a wide variety of subscribers and to differentiate us from our competitors. Our postpaid subscribers on data plans increased 11.5% year over year. A growing percentage of our postpaid smartphone subscribers are on usage-based data plans, with 71.0% (or 35.1 million) on these plans as of June 30, 2013, up from 61.6% (or 26.6 million) as of June 30, 2012. About 80% of subscribers on usage-based data plans have chosen the higher-priced plans. We recently expanded our Mobile Share data plans (which allow postpaid subscribers to share data at discounted prices among devices covered by their plan) to include additional, larger usage levels. Participation in these plans continues to increase. Such offerings are intended to encourage existing subscribers to upgrade their current services and/or add connected devices, attract subscribers from other providers, and minimize subscriber churn.

As of June 30, 2013, about 65% of our postpaid smartphone subscribers use a 4G-capable device (i.e., a device that would operate on our HSPA+ or LTE network), and more than 35% of our postpaid smartphone subscribers use an LTE device. Due to substantial increases in the demand for wireless service in the United States, AT&T is facing significant spectrum and capacity constraints on its wireless network in certain markets. We expect such constraints to increase and expand to additional markets in the coming years. While we are continuing to invest significant capital in expanding our network capacity, our capacity constraints could affect the quality of existing voice and data services and our ability to launch new, advanced wireless broadband services, unless we are able to obtain more spectrum. Any long-term spectrum solution will require that the Federal Communications Commission (FCC) make new or existing spectrum available to the wireless industry to meet the expanding needs of our subscribers. We will continue to attempt to address spectrum and capacity constraints on a market-by-market basis.

Wireless Metrics

Subscriber Additions As of June 30, 2013, we served 107.9 million wireless subscribers, an increase of 2.5%. Market saturation and competition in the wireless industry will continue to limit the rate of growth in the industry’s subscriber base, which has contributed to the modest 0.6% increase in gross subscriber additions (gross additions) when compared to the second quarter of 2012 and a 5.1% decrease when compared to the first six months of 2012. Lower net subscriber additions (net additions) were primarily attributable to losses in reseller low-revenue accounts. The increases in net postpaid additions reflect the migration of prepaid tablet subscribers to our postpaid plans, contributing to an increase in postpaid tablet subscribers of 398,000 in the second quarter and 763,000 for the first six months of 2013.

Average service revenue per user (ARPU) – Postpaid increased 1.8% in the second quarter and 1.3% for the first six months of 2013. Postpaid data services ARPU increased 17.6% in the second quarter and 17.8% for the first six months of 2013, reflecting greater use of smartphones and data-centric devices by our subscribers.

The growth in postpaid data services ARPU was partially offset by a 4.8% decrease in postpaid voice, text and other service ARPU in the second quarter and 5.4% decrease for the first six months of 2013. Voice, text and other service ARPU declined due to lower access and airtime charges, triggered in part by postpaid subscribers on our discount plans and lower roaming revenues.

ARPU – Total increased 1.3% in the second quarter and 0.7% for the first six months of 2013, reflecting growth in data services as more subscribers are using smartphones and tablets and choosing higher-priced usage-based data plans. Data services ARPU increased 16.6% in the second quarter and 16.8% for the first six months of 2013. Voice, text and other service ARPU declined 5.4% in the second quarter and 6.2% for the first six months of 2013 primarily due to voice access and usage trends and a shift toward a greater percentage of data-centric devices, as well as lower regulatory fees. We expect continued growth in data services ARPU as more subscribers use smartphones and data-centric devices and continue to choose higher-priced usage-based data plans. As we continue to expand our network, we also expect continued pressure on voice, text and other service ARPU.

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AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Churn  The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. The total churn rate was higher in the second quarter and for the first six months of 2013, primarily associated with the disconnection of reseller low-revenue accounts. The postpaid churn rate was slightly higher in the second quarter and flat for the first six months of 2013.

Operating Results

Our Wireless segment operating income margin in the second quarter decreased from 31.0% in 2012 to 27.1% in 2013 and for the first six months decreased from 29.4% in 2012 to 27.5% in 2013. Wireless segment operating income decreased $389, or 7.7%, in the second quarter and $205, or 2.1%, for the first six months of 2013. The decreases in operating margin and income reflected higher costs associated with upgrade activity and subsidies associated with growing smartphone sales, partially offset by continuing data revenue growth.

Voice, text and other service revenues decreased $280, or 2.7%, in the second quarter and $674, or 3.3%, for the first six months of 2013. While we had a 2.5% year-over-year increase in the number of wireless subscribers, these revenues continue to decline due to lower access and airtime charges.

Data service revenues increased $885, or 19.8%, in the second quarter and $1,775, or 20.4%, for the first six months of 2013. The increases were primarily due to the increased number of subscribers using smartphones and data-centric devices, such as eReaders, tablets, and mobile navigation devices. Data service revenues accounted for 34.4% of our wireless service revenues for the first six months of 2013, compared to 29.7% last year.

Equipment revenues increased $333, or 21.0%, in the second quarter and $392, or 12.4%, for the first six months of 2013 due to year-over-year increases in smartphone sales as a percentage of total device sales to postpaid subscribers and higher device upgrades.

Operations and support expensesincreased $1,180, or 12.3%, in the second quarter and $1,382, or 7.1%, for the first six months of 2013. The increases in the second quarter and for the first six months were primarily due to the following:

·   Equipment costs increased $875 and $1,005 reflecting an increase in upgrade activity and total device sales, as well as the sales of more expensive smartphones.

·   Commission expenses increased $258 and $211 due primarily to higher upgrade activity and total device sales and a year-over-year increase insmartphone sales as a percentage of total device sales.

·   Selling expenses (other than commissions) and administrative expenses increased $143 and $341 due primarily to increases of: $85 and $162 in employee-related costs; $79 and $147 in advertising costs; and $28 and $108 in information technology costs in conjunction with ongoing support systems development. Partially offsetting these increases were bad debt expense declines of $47 and $102.

·   Network system costs increased $66 and $155 due to higher network traffic and personnel-related network support costs and cell site related costs in conjunction with our network enhancement efforts.

Partially offsetting these increases were the following:

·   Interconnect and long-distance costs decreased $108 and $212 due to third-party credits and lower usage costs in the current period.

·   USF fees decreased $33 and $98 primarily due to federal rate decreases, which are offset by lower USF revenues.

Depreciation and amortization expenses increased $147, or 8.7%, in the second quarter and $316, or 9.4%, for the first six months of 2013. Depreciation expense increased $216, or 13.8%, in the second quarter and $457, or 14.8%, for the first six months primarily due to ongoing capital spending for network upgrades and expansion. Amortization expense decreased $69, or 52.7%, in the second quarter and $141, or 50.2%, for the first six months primarily due to lower amortization of intangibles for customer lists related to acquisitions.

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AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Wireline
Segment Results
	Second Quarter							Six-Month Period
	2013		2012		Percent Change			2013		2012		Percent Change
Segment operating revenues
Data	$	8,400	$	7,935		5.9	%	$	16,562	$	15,735		5.3	%
Voice		5,141		5,696		(9.7)			10,447		11,588		(9.8)
Other		1,232		1,276		(3.4)			2,419		2,513		(3.7)
Total Segment Operating Revenues		14,773		14,907		(0.9)			29,428		29,836		(1.4)
Segment operating expenses
Operations and support		10,417		10,201		2.1			20,752		20,603		0.7
Depreciation and amortization		2,722		2,766		(1.6)			5,410		5,574		(2.9)
Total Segment Operating Expenses		13,139		12,967		1.3			26,162		26,177		(0.1)
Segment Operating Income		1,634		1,940		(15.8)			3,266		3,659		(10.7)
Equity in Net Income (Loss) of    Affiliates		-		(1)		-			1		(1)		-
Segment Income	$	1,634	$	1,939		(15.7)	%	$	3,267	$	3,658		(10.7)	%

Operating Results

Our Wireline segment operating income margin in the second quarter decreased from 13.0% in 2012 to 11.1% in 2013, and for the first six months decreased from 12.3% in 2012 to 11.1% in 2013. Segment operating income decreased $306, or 15.8%, in the second quarter and $393, or 10.7%, for the first six months of 2013. The decrease in operating margins and income was driven primarily by lower voice revenue and higher operations and support expense, partially offset by data revenue growth and lower depreciation and amortization expenses.

Data revenues increased $465, or 5.9%, in the second quarter and $827, or 5.3%, for the first six months of 2013. Data revenues accounted for approximately 56% of wireline operating revenues for the first six months of 2013 and 53% for the first six months of 2012. Data revenue includes IP, strategic business and traditional data services.

·   IP data revenues (excluding strategic business services below) increased $410, or 11.2%, in the second quarter and $809, or 11.3%, for the first six months of 2013 primarily driven by higher U-verse penetration, customer additions, and migration from our legacy voice and DSL services. In the second quarter and for the first six months U-verse revenue from consumer customers increased $312 and $639 for high speed Internet access, $246 and $492 for video and $74 and $122 for voice, respectively. These increases were partially offset by a decrease of $186 and $366 in DSL revenue as customers continue to shift to our strategic high speed Internet access offerings. We expect DSL revenue to continue to decline as a percentage of our overall data revenues.

·   Strategic business services, which include VPNs, Ethernet, hosting, IP conferencing, VoIP, Ethernet-access to Managed Internet Service (EaMIS), security services, and U-verse services provided to business customers, increased $287, or 15.8%, in the second quarter and $479, or 13.3%, for the first six months of 2013 primarily driven by migration from our legacy services. In the second quarter and for the first six months revenue from Ethernet increased $76 and $139, VPN increased by $87 and $135, U-verse services increased $46 and $71, and EaMIS increased $28 and $56, respectively.

·   Traditional data revenues, which include circuit-based and packet-switched data services, decreased $234, or 9.5%, in the second quarter and $468, or 9.4%, for the first six months of 2013. This decrease was primarily due to lower demand as customers continue to shift to more advanced IP-based technology such as Ethernet, VPN, U-verse High Speed Internet access and managed Internet services. We expect these traditional services to continue to decline as a percentage of our overall data revenues.

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AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Voice revenues decreased $555, or 9.7%, in the second quarter and $1,141, or 9.8%, for the first six months of 2013 primarily due to declining demand for traditional voice services by our consumer and business customers. Included in voice revenues are revenues from local voice, long-distance (including international) and local wholesale services. Voice revenues do not include VoIP revenues, which are included in data revenues.

·   Local voice revenues decreased $350, or 10.0%, in the second quarter and $710, or 9.9%, for the first six months of 2013. The decrease was driven primarily by a 15.0% decline in total switched access lines. We expect our local voice revenue to continue to be negatively affected by competition from alternative technologies and continued declines in switched access lines.

·   Long-distance revenues decreased $202, or 10.5%, in the second quarter and $425, or 10.8%, for the first six months of 2013. Lower demand for long-distance service from our business and consumer customers decreased revenues $167 in the second quarter and $356 for the first six months of 2013. Additionally, expected declines in the number of our national mass-market customers decreased revenues $35 in the second quarter and $70 for the first six months of 2013.

Other operating revenues decreased $44, or 3.4%, in the second quarter and $94, or 3.7%, for the first six months of 2013. Major items included in other operating revenues are integration services and customer premises equipment, government-related services and outsourcing, which account for approximately 60% of total other revenue for the periods reported.

Operations and support expensesincreased $216, or 2.1%, in the second quarter and $149, or 0.7%, for the first six months of 2013. Operations and support expenses consist of costs incurred to provide our products and services, including costs of operating and maintaining our networks and personnel costs, such as compensation and benefits.

The increase in the second quarter of 2013 was primarily due to increased cost of sales of $203, primarily related to U-verse related expenses, contract services of $96, advertising expense of $53 and materials and supplies expense of $42. These increases were partially offset by lower employee related expenses of $151 and USF fees of $43, which are offset by lower USF revenue.

The increase for the first six months of 2013 was primarily due to increased cost of sales of $366, primarily related to U-verse related expenses, and advertising expense of $115. These increases were partially offset by lower employee related expenses of $244 and USF fees of $118, which are offset by lower USF revenue.

Depreciation and amortization expenses decreased $44, or 1.6%, in the second quarter and $164, or 2.9%, for the first six months of 2013. The decrease was primarily related to lower amortization of intangibles for the customer lists associated with acquisitions and lower depreciation as assets become fully depreciated.

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AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Supplemental Information

Wireline Broadband, Telephone and Video Connections Summary

Our broadband, switched access lines and other services provided at June 30, 2013 and 2012 are shown below and trends are addressed throughout this segment discussion.

	June 30,		June 30,		Percent
(in 000s)	2013		2012		Change
U-verse High Speed Internet		9,090		6,494		40.0	%
DSL and Other Broadband Connections		7,363		9,940		(25.9)
Total Wireline Broadband Connections1		16,453		16,434		0.1
Total U-verse Video Connections		5,001		4,146		20.6
Retail Consumer Switched Access Lines		13,983		17,298		(19.2)
U-verse Consumer VoIP Connections		3,379		2,567		31.6
Total Retail Consumer Voice Connections		17,362		19,865		(12.6)
Switched Access Lines
Retail Consumer		13,983		17,298		(19.2)
Retail Business		10,905		12,115		(10.0)
Retail Subtotal		24,888		29,413		(15.4)
Wholesale Subtotal		1,685		1,860		(9.4)
Total Switched Access Lines2		26,849		31,604		(15.0)	%

1 Total wireline broadband connections include DSL, U-verse High Speed Internet and satellite broadband.

2 Total switched access lines includes access lines provided to national mass markets and private payphone service providers of 276 at June 30, 2013 and 331 at June 30, 2012.

Advertising Solutions
Segment Results
	Second Quarter							Six-Month Period
	2013		2012			Percent Change		2013			2012			Percent Change
Total Segment Operating Revenues	$	-		$	305		-		$	-		$	1,049		-
Segment operating expenses
Operations and support		-			226		-			-			773		-
Depreciation and amortization		-			29		-			-			106		-
Total Segment Operating Expenses		-			255		-			-			879		-
Segment Income	$	-		$	50		-		$	-		$	170		-

On May 8, 2012, we completed the sale of our Advertising Solutions segment to an affiliate of Cerberus Capital Management, L.P.

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AT&T INC.

JUNE 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Other
Segment Results
	Second Quarter								Six-Month Period
	2013		2012			Percent Change			2013			2012			Percent Change
Total Segment Operating Revenues	$	11		$	10		10.0	%		$	21		$	23		(8.7)	%
Total Segment Operating Expenses		210			250		(16.0)				588			493		19.3
Segment Operating Loss		(199)			(240)		17.1				(567)			(470)		(20.6)
Equity in Net Income of Affiliates		237			148		60.1				439			384		14.3
Segment Income (Loss)	$	38		$	(92)		-			$	(128)		$	(86)		(48.8)	%

The Other segment includes our portion of the results from our international equity method investment, our equity interest in YP Holdings, and costs to support corporate-driven activities and operations. Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

Segment operating revenues increased $1, or 10.0%, in the second quarter and decreased $2, or 8.7%, for the first six months of 2013. Operating revenues are from leased equipment programs.

Segment operating expenses decreased $40, or 16.0%, in the second quarter and increased $95, or 19.3%, for the first six months of 2013. Lower operating expenses in the second quarter were primarily due to lower Pension/OPEB and other employee related charges. These decreases were partially offset by higher new product development expenses and higher corporate support and capital leasing operations costs. Increased costs over the first six months were due to higher new product development costs, as well as higher corporate support and capital leasing operations expenses. These increases were partially offset by lower Pension/OPEB financing costs and decreased employee related costs.

Our Other segment also includes our equity method investments in América Móvil and YP Holdings, the income from which we report as equity in net income of affiliates. Our earnings from foreign affiliates are sensitive to exchange-rate changes in the value of the respective local currencies.

Equity in net income of affiliates increased $89, or 60.1%, in the second quarter and $55, or 14.3%, for the first six months of 2013. Increased equity in net income of affiliates in the second quarter was primarily due to increased earnings from América Móvil and YP Holdings. The increase for the first six months was primarily due to increased earnings from YP Holdings, partially offset by foreign exchange impacts at América Móvil.

Our equity in net income of affiliates by major investment is listed below:

	Second Quarter				Six-Month Period
	2013		2012		2013		2012
América Móvil	$	174	$	127	$	325	$	364
YP Holdings		63		19		115		19
Other		-		2		(1)		1
Other Segment Equity in Net Income of Affiliates	$	237	$	148	$	439	$	384

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

OTHER BUSINESS MATTERS

U-verse Services  As of June 30, 2013, we are marketing U-verse services to approximately 25.3 million customer locations (locations eligible to receive U-verse service). As of June 30, 2013, we had 9.4 million total U-verse subscribers (high-speed Internet and video), including 9.1 million Internet and 5.0 million video subscribers (subscribers to both services are only counted once in the total). As part of Project Velocity IP (VIP), we plan to expand our U-verse services to a total of approximately 33 million customer locations and expect to be essentially complete by year-end 2015.

We believe that our U-verse TV service is a “video service” under the Federal Communications Act. However, some cable providers and municipalities have claimed that certain IP services should be treated as a traditional cable service and therefore subject to the applicable state and local cable regulation. Petitions have been filed at the FCC alleging that the manner in which we provision “public, educational and governmental” (PEG) programming over our U-verse TV service conflicts with federal law, and a lawsuit has been filed in a California state superior court raising similar allegations under California law. If courts having jurisdiction where we have significant deployments of our U-verse services were to decide that federal, state and/or local cable regulation were applicable to our U-verse services, or if the FCC, state agencies or the courts were to rule that we must deliver PEG programming in a manner substantially different from the way we do today or in ways that are inconsistent with our current network architecture, it could have a material adverse effect on the cost and extent of our U-verse offerings.

Wage and Hour Litigation Two wage and hour cases were filed in federal court in December 2009 each asserting claims under the Fair Labor Standards Act (Luque et al. v. AT&T Corp. et al., U.S. District Court in the Northern District of California) (Lawson et al. v. BellSouth Telecommunications, Inc., U.S. District Court in the Northern District of Georgia). Luque also alleges violations of a California wage and hour law, which varies from the federal law. In April 2012, we settled these cases, subject to court approval, on terms that will not have a material effect on our financial statements. On April 23, 2013, the court granted approval of the settlement in Lawson. On April 26, 2013, the court granted final approval following its earlier preliminary approval of the settlement in Luque.

Atlantic Tele-Network, Inc. Transaction  In January 2013, we announced an agreement to acquire Atlantic Tele-Network, Inc.’s U.S. retail wireless operations, operated under the Alltel brand, for $780 in cash. Under the terms of the agreement, we will acquire wireless properties, including licenses, network assets, retail stores and approximately 585,000 subscribers. The transaction is subject to review by the FCC and the Department of Justice (DOJ) and to other customary closing conditions and is expected to close in the second half of 2013.

Spectrum Acquisitions  In January 2013, we announced an agreement to acquire spectrum in the 700 MHz B band from Verizon Wireless for $1,900 in cash and an assignment of Advanced Wireless Service (AWS) spectrum licenses in five markets. The 700 MHz licenses to be acquired by AT&T cover 42 million people in 18 states. The transaction is subject to review by the FCC and DOJ. We expect to close the transaction in the second half of 2013.

Leap Acquisition  On July 12, 2013, we announced an agreement to acquire Leap Wireless International, Inc. (Leap), a provider of prepaid wireless service, for fifteen dollars per outstanding share of Leap’s common stock, or approximately $1,260, plus one non-transferable contingent value right (CVR) per share. The CVR will entitle each Leap stockholder to a pro rata share of the net proceeds of the future sale of the Chicago 700 MHz A-band FCC license held by Leap. As of June 30, 2013, Leap had approximately $2,700 of debt, net of cash. Under the terms of the agreement, we will acquire all of Leap’s stock and, thereby, acquire all of its wireless properties, including spectrum licenses, network assets, retail stores and approximately 5 million subscribers. Leap’s spectrum licenses include Personal Communications Services (PCS) and AWS bands and are largely complementary to our licenses. Leap’s network covers approximately 96 million people in 35 states and consists of a 3G Code Division Multiple Access (CDMA) network and an LTE network covering approximately 21 million people.

The agreement must be approved by Leap’s stockholders and stockholders holding approximately 29.9 percent of the outstanding common stock have agreed to support the transaction. The transaction also is subject to review by the FCC and the DOJ and to other customary closing conditions and is expected to close in approximately six to nine months from the announcement. The agreement also provides both parties with certain termination rights if the transaction does not close by July 11, 2014, which can be extended until January 11, 2015 if certain conditions have not been met by that date. Under certain circumstances, Leap may be required to pay a termination fee or AT&T may be required to provide Leap with a three-year roaming agreement for LTE data coverage in certain Leap markets lacking LTE coverage, if the transaction does not close. If Leap enters into the roaming agreement, AT&T will then have the option within 30 days after entry into the roaming agreement to purchase certain specified Leap spectrum assets. If AT&T does not exercise its right to purchase all of the specified Leap spectrum assets, Leap can then within 60 days after expiration of AT&T’s option require AT&T to purchase all of the specified spectrum assets.

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AT&T INC.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Labor Contracts  As of June 30, 2013, we employed approximately 245,000 persons. Approximately 54 percent of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. In June 2013, approximately 3,000 Connecticut-based wireline employees represented by the CWA ratified a new four-year contract; the previous contract had expired in April 2012. In May 2013, approximately 6,500 wireline employees represented by the IBEW and located mainly in the Midwest ratified a new four-year contract.

COMPETITIVE AND REGULATORY ENVIRONMENT

Overview  AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided, and regulation is generally limited to operational licensing authority for the provision of services to enterprise customers.

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumers. However, since the Telecom Act was passed, the FCC and some state regulatory commissions have maintained or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. We are pursuing, at both the state and federal levels, additional legislative and regulatory measures to reduce regulatory burdens that are no longer appropriate in a competitive telecommunications market and that inhibit our ability to compete more effectively and offer services wanted and needed by our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not extended to broadband or wireless services, which are subject to vigorous competition.

In addition, states representing a majority of our local service access lines have adopted legislation that enables new video entrants to acquire a single statewide or state-approved franchise (as opposed to the need to acquire hundreds or even thousands of municipal-approved franchises) to offer competitive video services. We also are supporting efforts to update and improve regulatory treatment for retail services. Regulatory reform and passage of legislation is uncertain and depends on many factors.

We provide wireless services in robustly competitive markets, but those services are subject to substantial and increasing governmental regulation. Wireless communications providers must obtain licenses from the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the FCC rules and policies governing the use of the spectrum. The FCC has recognized that the explosive growth of bandwidth-intensive wireless data services requires the U.S. Government to make more spectrum available. In February 2012, Congress authorized the FCC to conduct an “incentive auction,” to make available for wireless broadband use certain spectrum that is currently used by broadcast television licensees. The FCC has initiated a proceeding to establish rules that would govern this process. It also initiated a separate proceeding to review its policies governing mobile spectrum holdings and consider whether there should be limits on the amount of spectrum a wireless service provider may possess. We seek to ensure that we have the opportunity, through the incentive auction and otherwise, to obtain the spectrum we need to provide our customers with high-quality service. While wireless communications providers’ prices and service offerings are generally not subject to state regulation, states sometimes attempt to regulate or legislate various aspects of wireless services, such as in the area of consumer protection.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

Intercarrier Compensation/Universal Service  In October 2011, the FCC adopted an order fundamentally overhauling its high-cost universal service program, through which it disburses approximately $4,500 per year to carriers providing telephone service in high-cost areas, and its existing intercarrier compensation (ICC) rules, which govern payments between carriers for the exchange of traffic. The order adopted rules to immediately address certain practices that artificially increase ICC payments, as well as other practices to avoid such payments. The order also established a new ICC regime that will result in the elimination of virtually all terminating switched access charges and reciprocal compensation payments over a six-year transition. In the order, the FCC also repurposed its high-cost universal service program to encourage providers to deploy broadband facilities in unserved areas. To accomplish this goal, the FCC will transition support amounts disbursed through its existing high-cost program to its new Connect America Fund, which eventually will award targeted high-cost support amounts to providers through a competitive process. We support many aspects of the order and new rules. AT&T and other parties have filed appeals of the FCC’s rules, which are pending in the Tenth Circuit Court of Appeals. Our appeal challenges only certain, narrow aspects of the order; AT&T intervened in support of the broad framework adopted by the order. We do not expect the FCC’s rules to have a material impact on our operating results.

Transition to IP-Based Network  In November 2012, we announced plans to significantly expand and enhance our wireless and wireline broadband networks to support future IP data growth and new services (referred to as Project VIP). In conjunction with Project VIP, we filed a petition with the FCC asking it to open a proceeding to facilitate the “telephone” industry’s transition from traditional transmission platforms and services to all IP-based networks and services. Our petition asks the FCC to conduct trial runs of the transition to next-generation services, including the upgrading of traditional telephone facilities and offerings and their replacement with IP-based alternatives. The objective of the trials is to inform policymakers and other stakeholders regarding the technological and policy dimensions of the IP transition and, in the process, identify the regulatory reforms needed to promote consumer interests and preserve private incentives to upgrade America’s broadband infrastructure. In May 2013, the FCC’s Technology Transition Task Force sought comment on potential trials to obtain data to assist the FCC in managing the transition to next-generation networks. We expect the FCC will decide by the end of this year whether to conduct such trials. We expect to transition wireline customers to an all IP-based network by 2020.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

LIQUIDITY AND CAPITAL RESOURCES

We had $4,548 in cash and cash equivalents available at June 30, 2013. Cash and cash equivalents included cash of $328 and money market funds and other cash equivalents of $4,220. In the first six months of 2013, cash outflows were primarily used to meet the needs of the business, including, but not limited to, payment of operating expenses, funding capital expenditures, and the acquisition of wireless spectrum. Cash flows were also used to return value to stockholders through dividends and stock repurchases. We discuss many of these factors in detail below.

Cash Provided by or Used in Operating Activities

During the first six months of 2013, cash provided by operating activities was $17,711, compared to $17,325 for the first six months of 2012.

Cash Used in or Provided by Investing Activities

For the first six months of 2013, cash used in investing activities totaled $9,865, which consisted primarily of $9,665 for capital expenditures (excluding interest during construction), and wireless spectrum acquisitions of $1,169. These expenditures were partially offset by cash receipts of approximately $771 from the sale of a portion of our shares in América Móvil, $200 from the repayment of advances to YP Holdings and $101 from the return of investment in YP Holdings.

Virtually all of our capital expenditures are spent on our wireless and wireline networks, our U-verse services, and support systems for our communications services. Capital spending in our Wireless segment of $5,227 represented 54% of our total spending and increased 14% in the first six months. Wireless expenditures were primarily used for network capacity expansion, integration and the deployment of LTE equipment upgrades and our High-Speed Downlink Packet Access network. The Wireline segment, which includes U-verse services, represented 46% of total capital expenditures and increased 7% in the first six months.

We continue to expect our capital expenditures during 2013 to be in the $21,000 range and expect capital expenditures for 2014 and 2015 to each be in the $20,000 range.

Cash Used in or Provided by Financing Activities

For the first six months of 2013, our financing activities included proceeds of $6,416 from the following debt issuances:

·   February 2013 issuance of $1,000 of 0.900% global notes due 2016 and $1,250 of floating rate notes due 2016. The floating rate for the note is based upon the three-month London Interbank Offered Rate (LIBOR), reset quarterly, plus 38.5 basis points.

·   March 2013 issuance of $500 of 1.400% global notes due 2017.

·   March 2013 issuance of €1,250 of 2.500% global notes due 2023 (equivalent to $1,626 when issued) and €400 of 3.550% global notes due 2032 (equivalent to $520 when issued).

·   May 2013 issuance of £1,000 of 4.250% global notes due 2043 (equivalent to approximately $1,560 when issued).

In March 2013, we repaid €1,250 of 4.375% notes (equivalent to $1,641 when repaid) and $147 of 6.5% notes. Additionally, in May 2013, we announced the redemption of $300 of 7.375% notes, which was completed in July 2013.

In May 2013, we completed a repurchase authorization that was approved by our Board of Directors in July 2012. In March 2013, our Board of Directors authorized the repurchase of an additional 300 million shares of our common stock. During the first six months of 2013, we repurchased 257 million shares for $9,217 under these authorizations. At the end of the second quarter, we had 272 million shares remaining on the March 2013 authorization. We expect to make future repurchases opportunistically, which will slow the pace of buybacks compared to recent activity.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

We paid dividends of $4,930 during the first six months of 2013, compared with $5,187 for the first six months of 2012, primarily reflecting the decline in shares outstanding due to our repurchases during the year, which offset the increase in the quarterly dividend approved by our Board of Directors in November 2012. Dividends declared by our Board of Directors totaled $0.45 per share in the second quarter of 2013 and $0.90 per share for the first six months of 2013 and $0.44 per share in the second quarter and $0.88 per share for the first six months of 2012. Our dividend policy considers the expectations and requirements of stockholders, internal requirements of AT&T and long-term growth opportunities. It is our intent to provide the financial flexibility to allow our Board of Directors to consider dividend growth and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.

At June 30, 2013, we had $3,256 of debt maturing within one year, $1,991 of which were long-term debt issuances. Debt maturing within one year includes the following notes that may be put back to us by the holders:

·   $1,000 of annual put reset securities issued by BellSouth Corporation (BellSouth) that may be put back to us each April until maturity in 2021.

·   An accreting zero-coupon note that may be redeemed each May until maturity in 2022. If the zero-coupon note (issued for principal of $500 in 2007) is held to maturity, the redemption amount will be $1,030.

We have two revolving credit agreements with a syndicate of banks: a $5,000 agreement expiring in December 2016 and a $3,000 agreement expiring in December 2017. Advances under either agreement may be used for general corporate purposes. Advances are not conditioned on the absence of a material adverse change. All advances must be repaid no later than the date on which lenders are no longer obligated to make any advances under each agreement. Under each agreement, we can terminate, in whole or in part, amounts committed by the lenders in excess of any outstanding advances; however, we cannot reinstate any such terminated commitments. Under each agreement, we must maintain a debt-to-EBITDA, including modifications described in the agreement, ratio of not more than three-to-one as of the last day of each fiscal quarter for the four quarters then ended. Both agreements also contain a negative pledge covenant, which generally provides that if we pledge assets or permit liens on our property, then any advances must also be secured. At June 30, 2013, we had no advances outstanding under either agreement and were in compliance with all covenants under each agreement.

Other

Our total capital consists of debt (long-term debt and debt maturing within one year) and stockholders’ equity. Our capital structure does not include debt issued by América Móvil or YP Holdings. At June 30, 2013, our debt ratio was 46.6%, compared to 38.4% at June 30, 2012, and 43.0% at December 31, 2012. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances.

In October 2012, we filed an application with the U.S. Department of Labor (DOL) for approval to contribute a preferred equity interest in our Mobility business to the trust used to pay pension benefits under plans sponsored by AT&T. At the time we filed the application, the interest had a fair market value of $9,500. Prior to the contribution of the preferred interest, the estimated pension funding contribution for 2013 (required under ERISA) is approximately $175. We continue to work with the DOL to be able to make the contribution before the end of 2013. Our current financial statements reflect the impact of making this tax deductible contribution as a component of deferred tax expense and deferred tax liabilities. If we make the contribution after our 2012 tax return due date of September 16, 2013, we will take a tax deduction for our 2013 tax return and estimated payments.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At June 30, 2013, we had interest rate swaps with a notional value of $4,250 and a fair value of $201.

We have fixed-to-fixed cross-currency swaps on foreign-currency-denominated debt instruments with a U.S. dollar notional value of $14,136 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of $(82) at June 30, 2013. We have foreign exchange contracts with a notional value of $4 and a net fair value of less than $1 at June 30, 2013.

Item 4. Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The chief executive officer and chief financial officer have performed an evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of June 30, 2013. Based on that evaluation, the chief executive officer and chief financial officer concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 2013.

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CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the “Risk Factors” section. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:

·   Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates and terms.

·   Changes in available technology and the effects of such changes, including product substitutions and deployment costs.

·   Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates, adverse medical cost trends, unfavorable or delayed implementation of healthcare legislation, regulations or related court decisions.

·   The final outcome of FCC and other federal or state agency proceedings (including judicial review, if any, of such proceedings) involving issues that are important to our business, including, without limit, intercarrier compensation, interconnection obligations, the transition from legacy technologies to IP-based infrastructure, universal service, broadband deployment, E911 services, competition policy, net neutrality, unbundled network elements and other wholesale obligations, availability of new spectrum from the FCC on fair and balanced terms, wireless license awards and renewals.

·   The final outcome of state and federal legislative efforts involving issues that are important to our business, including deregulation of IP-based services, relief from Carrier of Last Resort obligations, and elimination of state commission review of the withdrawal of services.

·   Enactment of additional state, federal and/or foreign regulatory and tax laws and regulations pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.

·   Our ability to absorb revenue losses caused by increasing competition, including offerings that use alternative technologies (e.g., cable, wireless and VoIP) and our ability to maintain capital expenditures.

·   The extent of competition and the resulting pressure on customer and access line totals and wireline and wireless operating margins.

·   Our ability to develop attractive and profitable product/service offerings to offset increasing competition in our wireless and wireline markets.

·   The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and nonregulation of comparable alternative technologies (e.g., VoIP).

·   The continued development of attractive and profitable U-verse service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.

·   Our continued ability to attract and offer a diverse portfolio of wireless devices, some on an exclusive basis.

·   The availability and cost of additional wireless spectrum and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.

·   Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.

·   The outcome of pending, threatened or potential litigation, including patent and product safety claims by or against third parties.

·   The impact on our networks and business from major equipment failures; security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; or severe weather conditions, natural disasters, pandemics, energy shortages, wars or terrorist attacks.

·   The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.

·   The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations and the resolution of disputes with any taxing jurisdictions.

·   Our ability to adequately fund our wireless operations, including payment for additional spectrum network upgrades and technological advancements.

·   Changes in our corporate strategies, such as changing network requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments.

·   The uncertainty surrounding further congressional action to address spending reductions, which may result in a significant reduction in government spending and reluctance of businesses and consumers to spend in general and on our products and services specifically, due to this fiscal uncertainty.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.

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PART II – OTHER INFORMATION

Dollars in millions except per share amounts

Item 1A. Risk Factors

We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed. For the second quarter 2013, there were no such material developments.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
(c) A summary of our repurchases of common stock during the second quarter of 2013 is as follows:
Period		(a) Total Number of Shares (or Units)  Purchased 1,2	(b) Average Price Paid Per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs 1	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs
April 1, 2013 - April 30, 2013		44,085,719	$	37.46	44,080,000	317,097,255
May 1, 2013 - May 31, 2013		22,902,175		37.18	22,900,000	294,197,255
June 1, 2013 - June 30, 2013		22,650,002		35.50	22,649,704	271,547,551
Total		89,637,896	$	36.89	89,629,704
1	In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock. In July 2012, our Board of Directors authorized the repurchase of up to
	an additional 300 million shares of our common stock, which we completed in May 2013, and we completed the December 2010 authorization last year. The March 2013 authorization has no expiration date.
2	Of the shares repurchased, 8,192 shares were acquired through the withholding of taxes on the vesting of restricted stock or through the payment in stock of taxes on the exercise price of options.

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Item 6. Exhibits

Exhibits identified in parentheses below, on file with the Securities and Exchange Commission, are incorporated by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.

10	AT&T Inc. Health Plan, amended and restated effective January 1, 2014
12	Computation of Ratios of Earnings to Fixed Charges
31	Rule 13a-14(a)/15d-14(a) Certifications 31.1Certification of Principal Executive Officer 31.2Certification of Principal Financial Officer
32	Section 1350 Certifications
101	XBRL Instance Document

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 AT&T Inc.

August 2, 2013                                                                                        /s/ John J. Stephens

 John J. Stephens

 Senior Executive Vice President

      and Chief Financial Officer

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EX-10

Exhibit 10

AT&T HEALTH PLAN

Amended and Restated Effective:  January 1, 2014 (unless otherwise provided herein)

ARTICLE 1   PURPOSE

The AT&T Health Plan ("Plan") provides Participants with supplemental medical, dental, and vision benefits.  Effective March 23, 2010, the Plan shall be frozen to new Participants, as further described in Section 2.16.  The Company intends this Plan to be a “grandfathered health plan” under the Patient Protection and Affordable Care Act (the “Affordable Care Act”).  Appendix C hereto contains the required Participant disclosure regarding the Plan’s grandfathered status under the Affordable Care Act.

ARTICLE 2   DEFINITIONS

For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

2.1Active Participant.  “Active Participant” shall mean an Active Employee Participant and his Dependents.

2.2Active Employee Participant.  “Active Employee Participant” shall mean an Eligible Employee electing to participate in the Plan while in active service, on a Leave of Absence or while receiving short term disability benefits under the Officer Disability Plan.

2.3Annual Deductible.  “Annual Deductible” shall mean the amount the Active Participant must pay for Covered Health Services in a Plan Year before the Plan will begin paying for Covered Benefits in that calendar year.  The Annual Deductible applies to all Covered Health Services.  The Annual Deductible does not apply to Preventive Care, Dental Services and Vision Services.  Solely for purposes of this Plan, the Annual Deductible will operate on a combined basis with the Annual Deductible (both the “Network/ONA” and “Non-Network Benefit” annual deductibles) applicable in the AT&T Medical Plan.  Once the Participant meets his applicable Annual Deductible, the Plan will begin to pay Covered Benefits, subject to any required Coinsurance, in accordance with and as governed by Section 4.1.  The applicable Annual Deductible is set forth in Appendix A to this Plan.

2.4Annual Out-of-Pocket Maximum.  “Annual Out-of-Pocket Maximum” shall mean the maximum amount of Covered Health Services an Active Participant must pay out-of-pocket every calendar year, including the Participant’s Annual Deductible.  Solely for purposes of this Plan, the Annual Out-of-Pocket Maximum will operate on a combined basis with the Annual Out-of-Pocket Maximum (both the “Network/ONA” and “Non-Network Benefit annual out-of-pocket maximums) applicable in the AT&T Medical Plan (or the Annual Out-of-Pocket Maximum in the AT&T International Health Plan for Officers serving in expatriate positions with the Company).  Once the Participant reaches the applicable Annual Out-of-Pocket Maximum, Covered Benefits for those Covered Health Services that apply to the Annual Out-of-Pocket Maximum are payable in accordance with and as governed by Section 4.1 during the rest of that Plan Year.  The following costs shall never apply toward the Annual Out-of-Pocket Maximum:  (a) any applicable Monthly Contributions and (b) any charges for Non-Covered Health Services.  Even when the Annual Out-of-Pocket Maximum has been reached, Covered Benefits will not be provided for the following:  (a) any applicable Monthly Contributions and (b) any charges for Non-Covered Health Services.  The applicable Annual Out-of-Pocket Maximum is set forth in Appendix A to this Plan.

1

 2.5AT&T.  “AT&T” shall mean AT&T Inc.  References to “Company” shall mean AT&T.

2.6Basic Plan(s). “Basic Plan(s)” shall mean AT&T’s group medical (known as the “AT&T Medical Plan” (or the “AT&T International Health Plan” for Officers serving in expatriate positions with the Company)), dental (non-DHMO option), and vision care plans (including the AT&T Retiree Vision Care Program).  For a Participant who Retired on or before August 31, 1992, Basic Plans shall mean the AT&T Medical and Group Life Insurance Plan–CustomCare (“CustomCare”) and dental (non-DHMO option) plans. For this purpose, the Plan Administrator maintains governing records setting forth the names of those Participants who Retired on or before August 31, 1992.

2.7CEO.  "CEO" shall mean the Chief Executive Officer of AT&T Inc.

2.8COBRA.  “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

2.9Coinsurance.  “Coinsurance” shall mean the amount an Active Participant must pay each time he receives Covered Health Services, after he meets the applicable Annual Deductible.  Coinsurance payments are calculated as a percentage of Covered Health Services, rather than a set dollar amount.  Coinsurance does not apply to Preventive Care, Dental Services and Vision Services (or Medical Services for Retired Participants as provided in Section 4.1(c)).  The applicable Coinsurance percentage is set forth in Appendix A to this Plan.

2.10Committee.  "Committee" shall mean the Human Resources Committee of the Board of Directors of AT&T Inc.

2 

2.11Covered Benefits.  “Covered Benefits” shall mean the benefits provided by the Plan, as provided for and governed by Section 4.1 of the Plan.

2.12Covered Health Services.  “Covered Health Services” means all Medical Services or Preventive Care that would qualify as deductible medical expenses for federal income tax purposes, whether deducted or not.  Dental Services and Vision Services are not included in the definition of Covered Health Services.

2.13Dental Services.  “Dental Services” shall mean services for dental and orthodontic care.   The Plan Administrator, in its sole discretion, shall determine whether a particular service is classified as Preventive Care or a Dental, Medical or Vision Service.

2.14Dependent(s).  “Dependent(s)” shall mean those individuals who would qualify as a Participant’s dependent(s) under the terms of the group medical Basic Plan in which the Participant participates, or, if applicable, Substitute Basic Coverage.

2.15Disability.  "Disability" shall mean qualification for long term disability benefits under Section 3.1 of the Officer Disability Plan.

2.16Eligible Employee.  "Eligible Employee" shall mean an Officer.  Notwithstanding the foregoing, the CEO may, from time to time, exclude any Officer or group of Officers from being an “Eligible Employee” under this Plan.  Employees of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as such by the CEO.  Notwithstanding the foregoing, only the Committee shall have the authority to exclude from participation or take any action with respect to Executive Officers.

Notwithstanding the foregoing provisions, individuals hired, rehired or promoted to an Officer level position on or after March 23, 2010 shall be excluded from the term Eligible Employee, and such individuals (and their Dependents) shall not be eligible to participate in this Plan.

2.17Employer.  "Employer" shall mean AT&T Inc. or any of its Subsidiaries.

2.18Executive Officer.  “Executive Officer” shall mean any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934.

2.19Leave of Absence.  “Leave of Absence” shall mean a Company-approved leave of absence.

2.20Medical Services.  “Medical Services” shall mean medical/surgical, mental health/substance abuse and prescription pharmacy services.  The Plan Administrator, in its sole discretion, shall determine whether a particular service is classified as Preventive Care or a Medical, Dental or Vision Service.  Medical Services do not include Dental Services and Vision Services.

3

2.21Monthly Contributions.  “Monthly Contributions” shall mean the monthly premiums or contributions required for participation in this Plan as further governed by Article 7 of the Plan.  The applicable Monthly Contributions are set forth in Exhibit A to this Plan.

2.22Non-Covered Health Services.  “Non-Covered Health Services” shall mean any Medical Services or Preventive Care which do not meet the definition of Covered Health Services.

2.23Officer.  "Officer" shall mean an individual who is designated as an officer level employee for compensation purposes on the records of AT&T.

2.24Participant.  “Participant” shall mean an Active Participant or Retired Participant or both, as the context indicates.

2.25Plan Administrator.  “Plan Administrator” shall mean the SEVP-HR, or any other person or persons whom the Committee may appoint to administer the Plan; provided that the Committee may act as the Plan Administrator at any time.

2.26Plan Year. ”Plan Year” shall mean the calendar year.

2.27Preventive Care.  “Preventive Care” shall have the same meaning as such term has in the AT&T Medical Plan.  The plan administrator for the AT&T Medical Plan shall determine whether a particular service constitutes Preventive Care and the Plan Administrator for this Plan shall rely upon such determination.

2.28Qualified Dependent.  “Qualified Dependent” shall mean a Dependent who loses coverage under a COBRA eligible program due to a Qualifying Event.

2.29Qualifying Event.“Qualifying Event” shall mean any of the following events if, but for COBRA continuation coverage, they would result in a Participant’s loss of coverage under this Plan:

 (1) death of a covered Eligible Employee;

 (2) termination (other than by reason of such Eligible Employee’s gross  misconduct) of an Employee’s employment;

 (3) reduction in hours of an Eligible Employee;

 (4) divorce or legal separation of an Eligible Employee or dissolution of an Eligible Employee’s registered domestic partnership;

 (5) an Eligible Employee’s entitlement to Medicare benefits; or

 (6) a Dependent child ceasing to qualify as a Dependent under the group medical Basic Plan, or, if applicable, Substitute Basic Coverage.

4

2.30Retire, Retired or Retirement.  “Retire,” “Retired” or "Retirement" shall mean the termination of an Active Employee Participant's employment with AT&T or any of its Subsidiaries, for reasons other than death, on or after the earlier of the following dates:  (1) the date such Active Employee Participant has attained age 55, and, for an Active Employee Participant on or after January 1, 2002, has five (5) years of service, or (2) the date the Active Employee Participant has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997: 

Net Credited Service                     Age

25 years or more                                                     50 or older

30 years or more                                                     Any age

2.31  Retired Participant.  “Retired Participant” shall mean a Retired Employee Participant and his Dependents.

2.32  Retired Employee Participant.  “Retired Employee Participant” shall mean a former Active Employee Participant who has Retired within the meaning of Section 2.30 and who meets the additional requirements of Section 3.2 to be eligible for coverage in Retirement.

2.33  SEVP-HR.  “SEVP-HR” shall mean AT&T’s highest ranking Officer, specifically responsible for human resources matters.

2.34  Subsidiary.  "Subsidiary" shall mean any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest.  The Committee may, at its sole discretion, designate any other corporation, partnership, venture or other entity a Subsidiary for the purpose of participating in this Plan.  Notwithstanding anything herein to the contrary, unless designated a “Subsidiary” pursuant to the immediately preceding sentence, Cingular Wireless LLC, Sterling Commerce, Inc., and their respective subsidiaries shall not be considered a Subsidiary under this Plan.

2.35  Vision Services.  “Vision Services” shall mean services for vision care.  The Plan Administrator, in its sole discretion, shall determine whether a particular service is classified as Preventive Care or a Vision, Medical or Dental Service.

ARTICLE 3   ELIGIBILITY

3.1Active Participants.Each Eligible Employee shall be eligible to participate in this Plan along with his/her Dependent(s) beginning on the effective date of the employee becoming an Eligible Employee.

Upon becoming an Eligible Employee, he/she shall have 90 days to elect to participate in this Plan.  In order to continue participation, the Active Participant must pay all applicable Monthly Contributions.  If an Active Employee Participant terminates participation in this Plan at any time for any reason, that Participant and his/her Dependent(s) shall be ineligible to participate in the Plan at any time in the future.

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3.2Retired Participants.  Provisions of this Plan will continue in effect during Retirement for each Retired Employee Participant and his/her Dependent(s) with respect to any Eligible Employee who became a Participant before January 1, 1999.  Neither an Eligible Employee who became a Participant after December 31, 1998 nor his/her Dependent(s) shall be eligible for participation hereunder on or after such Participant’s Retirement. Coverage for Retired Participants shall be subject to the payment of all applicable Monthly Contributions, as governed by Article 7.  The provisions of this Plan related to Retired Participants, including the level of Covered Benefits and the applicable Monthly Premiums, shall begin to apply on the first day of the month following the month in which the Active Employee Participant Retires.  If a Retired Employee Participant terminates participation at any time for any reason, participation of that Retired Employee participant and his/her Dependent(s) may not be reinstated for any reason.

3.3Requirement to Enroll and Participate in Basic Plans and Medicare.  Notwithstanding any provision in this plan to the contrary, as a condition to participation in the Plan, each Participant must be enrolled in, paying for, and participating in (i) the Basic Plans, or, if applicable, Substitute Basic Coverage, and (ii) all parts of Medicare for which such Participant is eligible and for which Medicare would be primary if enrolled therein, except for Medicare Part D relating to prescription drug coverage.

Notwithstanding any other provision of the Plan to the contrary, an individual who first becomes an Eligible Employee in the middle of a Plan Year and who is enrolled in AT&T sponsored group health plans other than the Basic Plans, will be allowed to participate in the Plan for the remainder of the Plan Year along with his/her Dependent(s) who are enrolled in such other AT&T sponsored health plans, as if they were participating in the Basic Plans.  At the next group enrollment opportunity for the Basic Plans, the Active Employee Participant and his/her Dependent(s) must enroll in the Basic Plans to continue participation in this Plan.

ARTICLE 4   BENEFITS

4.1Covered Benefits. Subject to the limitations in this Plan (including but not limited to the loyalty conditions set forth in Article 8 below), this Plan provides the benefits described below.  Monthly Contributions for participation in this Plan, the Basic Plans, Medicare, or any other health plan are not considered “services”, and are therefore are not Covered Benefits under this Plan.

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             (a)   Active Participants (Medical Services and Preventive Care) -

Medical Services - After the Annual Deductible has been met, 100% payment of Covered Health Services not paid under the AT&T Medical Plan (or AT&T International Health Plan with respect to Officers serving in expatriate positions with the Company) or Medicare minus the amount of Coinsurance, until the Active Participant reaches the Annual Out-of-Pocket Maximum, at which time coverage is 100% of Covered Health Services not paid under the AT&T Medical Plan (or AT&T International Health Plan with respect to Officers serving in expatriate positions with the Company) .

Preventive Care - Preventive Care, whether received as a “Network/ONA” service or “Non-Network” service, as defined in the AT&T Medical Plan, is covered at 100%, not subject to the Annual Deductible or Coinsurance.

              (b)   Active Participants (Dental Services and Vision Services) -

100% payment, through reimbursement or otherwise, of all Dental Services and Vision Services not paid under the Active Participant’s (i) Basic Plans or (ii) Medicare, provided expenses for such services would qualify as deductible medical expenses for federal income tax purposes, whether deducted or not.

             (c)   Retired Participants –

100% payment, through reimbursement or otherwise, of all Medical, Dental, Vision and Preventive services not paid under the Retired Participant’s (i) Basic Plans or, if applicable, Substitute Basic Coverage, or (ii) Medicare, provided expenses for such services would qualify as deductible medical expenses for federal income tax purposes, whether deducted or not.

4.2Covered Benefit Limits.  RESERVED

4.3Priority of Paying Covered Claims.  Claims for benefits will be applied against the various health plans and coordinated with Medicare in the following order:

 (1) Medicare, to the extent the Participant is eligible therefore and such claim is actually paid by Medicare,

 (2) Basic Plans,

 (3) CarePlus, if elected,

 (4) Long Term Care Plan, if elected,

 (5) this Plan.

4.4Substitute Basic Coverage.  Notwithstanding any other provision of this Plan to the contrary, if a Retired Employee Participant is eligible for participation under this Plan during Retirement, but not eligible to participate under the Basic Plans, the Plan shall provide medical, dental, and vision benefits for the Retired Employee Participant and his/her Dependent(s) substantially equivalent to the benefits under the Basic Plans through an insured product (hereinafter, "Substitute Basic Coverage").  Eligibility for Substitute Basic Coverage is conditioned upon the Retired Participant’s payment of contributions in the same amount that a similarly situated retired Basic Plan participant is required to pay under the Basic Plans. Such Substitute Basic Coverage shall constitute such Retired Participant’s Basic Plans for all purposes under this Plan.  The costs of Substitute Basic Coverage (except for the required monthly contributions referenced in this paragraph) shall be borne by AT&T, and the costs of Substitute Basic Coverage shall not be included in the determination of any Retired Participant’s annual Plan contribution amount as provided in Article 7.  In addition, certain other Retired Employee Participants participate in the “Separation Medical Plan” rather than the Basic Plans.  References to Substitute Basic Coverage throughout this Plan shall be deemed to include the Separation Medical Plan.  The Plan Administrator maintains records governing the names of those Retired Employee Participants who have Substitute Basic Coverage or Separation Medical Plan coverage.

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ARTICLE 5   TERMINATION OF PARTICIPATION

5.1Termination of Participation.  Participation will cease on the last day of the month in which one of the following conditions occurs:

   (1)   The Participant is no longer a participant in the Basic Plans or Substitute Basic Coverage, in which case participation ceases for such Participant;

   (2)   A Participant eligible to enroll in Medicare is no longer a participant in all parts of Medicare for which such Participant is eligible to enroll and for which Medicare would be primary if enrolled therein, except for Medicare Part D relating to prescription drug coverage, in which case participation ceases for such Participant;

   (3)   The Active Employee Participant’s termination of employment for reasons other than Death, Disability, or Retirement by an individual who meets the applicable requirements of Section 3.2 in order to qualify for Plan benefits in Retirement, in which case participation ceases for the Participant and his/her Dependent(s);

   (4)   The demotion or designation of an Active Employee Participant so as to no longer be eligible to participate in the Plan, in which case participation ceases for the Participant and his/her Dependent(s);

   (5)   The Active Employee Participant (or Retired Employee Participant) participates in an activity that constitutes engaging in competitive activity with AT&T or engaging in conduct disloyal to AT&T under Article 8, in which case participation ceases for the Active Employee Participant (or Retired Employee Participant) and his/her Dependent(s); or

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   (6)   Discontinuance of the Plan by AT&T, or, with respect to a Subsidiary’s Active Employee Participants (or Retired Employee Participants), such Subsidiary’s failure to make the benefits hereunder available to Active Employee Participants employed by it (or its Retired Employee Participants).

5.2Dependents Failure to Participate in Basic Plans.  If a Dependent ceases participation under a Basic Plan or, if applicable, Substitute Basic Coverage, such Dependent’s participation under this Plan will cease with the same effective date.

5.3Death.  In the event of the Active Employee Participant’s (or Retired Employee’s Participant’s) death, his  Dependents may continue participation in this Plan as follows:

(1) In the event of the death of a Retired Employee Participant such Retired Employee Participant’s Dependents may continue participation in this Plan, eligible for the Covered Benefits described in Section 4.1(c) of the Plan, for so long as such Dependents are participating in the Basic Plans (or, if applicable, Substitute Basic Coverage) and are paying any applicable contributions for this Plan as provided in Article 7. If a surviving spouse of such deceased Active Employee Participant otherwise eligible for participation in the Plan remarries, his/her participation and the participation of any otherwise eligible Dependents will cease with the effective date of his/ her marriage.

(2) In the event of an in-service death of an Active Employee Participant eligible to participate in the Plan in Retirement as provided under Article 3.2, who was Retirement eligible, within the meaning of Section 2.30, at the time of death, such Active Employee Participant’s surviving Dependents may continue participation in this Plan, eligible for the Covered Benefits described in Section 4.1(a) and (b),  for so long as such Dependents are participating in the Basic Plans (or, if applicable Substitute Basic Coverage) and are paying any applicable contributions for this Plan as provided in Article 7.  If a surviving spouse of such deceased Active Employee Participant otherwise eligible for participation in the Plan remarries, his/her participation and the participation of any otherwise eligible Dependents will cease with the effective date of his/ her marriage.

(3) In the event of (i) an in-service death of an Active Employee Participant not eligible to participate in the Plan in Retirement as provided in Article 3.2 or (ii) an in-service death of an Active Employee Participant eligible to participate in the Plan in Retirement as provided in Article 3.2 but the individual was not Retirement eligible, within the meaning of Section 2.30, at the time of death, such Active Employee Participant’s Dependent(s) may continue participation in this Plan, eligible for the Covered Benefits described in Sections 4.1(a) and (b), for a 36-month period commencing the month following the month in which such Active Employee Participant dies as long as such Dependent(s) are participating in the Basic Plans and subject to the payment of Active Participant Contributions for the first 12 months and payment of Active COBRA Contributions for the remaining 24 months, as provided by Articles 7 and 10.1.  If the Active Employee Participant’s Dependent(s) are eligible for COBRA, they will automatically be enrolled in COBRA so that there is no lapse in coverage, and this 36-month coverage will be integrated and run concurrently with COBRA coverage.

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ARTICLE 6   DISABILITY

6.1Disability.  With respect to any Active Employee Participant who commences receipt of short term or long term disability benefits under the Officer Disability Plan, participation under this Plan will be as follows:

(1) The Participant will continue to participate in this Plan, eligible for the Covered Benefits described in Section 4.1(a) and (b), for as long as he/she receives short term disability benefits under the Officer Disability Plan and pays the applicable contributions for this Plan as provided by Article 7.

(2) An Active Employee Participant not eligible to participate in the Plan in Retirement as provided in Article 3.2 who commences long term disability benefits under the Officer Disability Plan or an Active Employee Participant eligible to participate in the Plan in Retirement as provided in Article 3.2 but who is not Retirement eligible, within the meaning of Section 2.30, at the time long term disability benefits under the Officer Disability Plan commence, will cease participation in this Plan (along with his/her Dependents) effective as of the last day of the calendar month in which such long term disability benefits commence, unless such benefits commence on the first day of a calendar month, in which case participation in this Plan shall cease effective as of the last day of the prior month.

(3) An Active Employee Participant eligible to participate in the Plan in Retirement as provided in Article 3.2 ,who is Retirement eligible, within the meaning of Section 2.30, at the time long term disability benefits under the Officer Disability Plan commence, will be eligible to continue participation in this Plan on the same terms and conditions that participation would be available to such Participant in Retirement, subject to the payment of applicable contributions for this Plan as provided by Article 7, regardless of his/her continued receipt of long term disability benefits under the Officer Disability Plan.

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ARTICLE 7   COSTS

7.1Provision of Benefits under the Plan.  Except as provided below in this Article 7 with respect to required Monthly Contributions or with respect to any required Coinsurance, the benefits available to Participants under this Plan shall be provided through an insurance policy maintained by AT&T.

7.2Active Participant Contributions.  An Active Participant electing to participate in the Plan will pay Monthly Contributions to participate in the Plan while in active service, while on Leave of Absence or while receiving short term disability benefits under the Officer Disability Plan. The Monthly Contribution for participation may change annually, effective at the beginning of each Plan Year.  Contributions to be made by Active Participants electing to participate in the Plan shall be set annually by the SEVP-HR, determined in the SEVP-HR’s sole and absolute discretion.  The SEVP-HR may adopt tiered rates for similarly situated groups of Participants based on factors such as the number of Dependents covered or Medicare eligibility.  Notwithstanding the foregoing, required Monthly Contributions for Executive Officers shall be approved by the Committee.

7.3Retired Participant Contributions.  Retired Participants who elect to participate will pay Monthly Contributions to participate in the Plan. The Monthly Contribution for participation may change annually, effective at the beginning of each Plan Year.  Contributions to be made by Retired Participants who elect to participate shall be set annually by the SEVP-HR (in his/her sole and absolute discretion), to the extent their contributions have not previously been provided for in a separate agreement.

7.4Survivor Contributions.  Upon the death of a Participant, the Participant’s Dependents shall be required to pay Monthly Contributions to participate in the Plan.  The Monthly Contributions shall be set annually by the SEVP-HR, in the SEVP-HR’s sole and absolute discretion.  Any changes to the Monthly Contributions shall be effective at the beginning of each Plan Year.

7.5Contributions for Participants on Disability.  Participants continuing benefits while on Disability shall be required to pay Monthly Contributions to participate in the Plan.  The Monthly Contributions shall be set annually by the SEVP-HR, determined in the SEVP-HR’s sole and absolute discretion.  Any changes to the Monthly Contributions shall be effective at the beginning of each Plan Year.

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ARTICLE 8   LOYALTY CONDITIONS

8.1Participants acknowledge that no coverage and benefits would be provided under this Plan on and after January 1, 2010 but for the loyalty conditions and covenants set forth in this Article, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan coverage and benefits for the Participants on or after January 1, 2010.  Accordingly, as a condition of receiving coverage and any Plan benefits on or after January 1, 2010, each Participant is deemed to agree that he shall not, without obtaining the written consent of the Plan Administrator in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section.  Further and notwithstanding any other provision of this Plan, all coverage and benefits under this Plan on and after January 1, 2010 with respect to a Participant and his or her Dependents shall be subject in their entirety to the enforcement provisions of this Section if the Participant, without the Plan Administrator’s consent, participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as defined below.  The provisions of this Article 8 as in effect immediately before such date shall be applicable to Participants who retire before January 1, 2010.

8.2Definitions.  For purposes of this Article and of the Plan generally

(1)an “Employer Business” shall mean AT&T, any Subsidiary, or any business in which AT&T or a Subsidiary or an affiliated company of AT&T has a substantial ownership or joint venture interest;

(2)“engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two (2) years after the Participant’s termination of employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.

(3)“engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two  (2) years after the Participant’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1)  year prior to the termination of the Participant’s employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the termination of the Participant’s employment, for any reason to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media, on behalf of any Employer Business during the two (2) years prior to the termination of Participant’s employment for any reason (“Customer”), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.

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(4)“Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to the Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by the Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by the Participant from a third party; (iii) was known to the Participant prior to receipt from the Employer Business; or (iv) was independently developed by the Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by the Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.

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8.3Forfeiture of Benefits.  Subject to the provisions of Section 1001(5) of the Affordable Care Act, coverage and benefits shall be forfeited and shall not be provided under this Plan for any period as to which the Plan Administrator determines that, within the time period and without the written consent specified, Participant has been either engaging in competition with AT&T or engaging in conduct disloyal to AT&T.

8.4Equitable Relief.  The parties recognize that any Participant’s breach of any of the covenants in this Article 8 will cause irreparable injury to AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan coverage and benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and payment of Plan benefits for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this Article, the Plan Administrator, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Article 8.  In addition, AT&T shall pay for any Plan expenses that the Plan Administrator incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  To enforce its repayment rights with respect to a Participant, the Plan shall have a first priority, equitable lien on all Plan benefits provided to or for the Participant and his or her Dependents.  In the event the Plan Administrator succeeds in enforcing the terms of this Article through a written settlement with the Participant or a court order granting an injunction hereunder, the Participant shall be entitled to collect Plan benefits collect Plan benefits prospectively, if the Participant is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Participant), provided that the Participant complies with said settlement or injunction.

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8.5Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s accrual or receipt of benefits under the Plan after January 1, 2010 that each and all of the following conditions apply to all Participants and to any benefits that are paid or are payable under the Plan:

(1)ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan, and as its “named fiduciary” within the meaning of ERISA.

(2)All litigation between the parties relating to this Article shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.

(3)If the Plan Administrator determines in its sole discretion either (I) that AT&T or its affiliate that employed the Participant terminated the Participant’s employment for cause, or (II) that equitable relief enforcing the Participant’s covenants under this Article 8 is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Participant has sued in state court, or has otherwise sought remedies not available under ERISA, then in any and all of such instances the Participant shall not be entitled to collect any Plan benefits, and if any Plan benefits have been paid to the, the Participant shall immediately repay all Plan benefits to the Plan (with such repayments being used within such year for increased benefits for other Participants in any manner determined in the Plan Administrator’s discretion) upon written demand from the Plan Administrator.  Furthermore, the Participant shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.

ARTICLE 9  MISCELLANEOUS

9.1Administration.  The Plan Administrator is the named fiduciary of the Plan and has the power and duty to do all things necessary to carry out the terms of the Plan.  The Plan Administrator has the sole and absolute discretion to interpret the provisions of the Plan, to make findings of fact, to determine the rights and status of Participants and other under the Plan, to determine which expenses and benefits qualify as Covered Health Services or Covered Benefits, to make all benefit determinations under the Plan, to decide disputes under the Plan and to delegate all or a part of this discretion to third parties and insurers.  To the fullest extent permitted by law, such interpretations, findings, determinations and decisions shall be final, binding and conclusive on all persons for all purposes of the Plan.  The Plan Administrator may delegate any or all of its authority and responsibility under the Plan to other individuals, committees, third party administrators, claims administrators or insurers for any purpose, including, but not limited to the processing of benefits and claims related thereto.  In carrying out these functions, these individuals or entities have been delegated responsibility and discretion for interpreting the provisions of the Plan, making findings of fact, determining the rights and status of Participants and others under the Plan, and deciding disputes under the Plan and such interpretations, findings, determinations and decisions shall be final, binding and conclusive on all persons for all purposes of the Plan.

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9.2Amendments and Termination.  This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations.

9.3Newborns' and Mothers' Health Protection Act of 1996.  To the extent this Plan provides benefits for hospital lengths of stay in connection with childbirth, the Plan will cover the minimum length of stay required for deliveries (i.e., a 48-hour hospital stay after a vaginal delivery or a 96-hour stay following a delivery by Cesarean section.)  The mother’s or newborn’s attending physician, after consulting with the mother, may discharge the mother or her newborn earlier than the minimum length of stay otherwise required by law.  Such coverage shall be subject to all other provisions of this Plan.

9.4Women's Health and Cancer Rights Act of 1998.  To the extent this Plan provides benefits for mastectomies, it will provide, for an individual who is receiving benefits in connection with a mastectomy and who elects breast reconstruction in connection with such mastectomy, coverage for reconstruction on the breast on which the mastectomy was performed, surgery and reconstruction on the other breast to give a symmetrical appearance, and prosthesis and coverage for physical complications of all stages of the mastectomy, including lymphedemas.  Such coverage shall be subject to all other provisions of this Plan.

9.5Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008.   To the extent this Plan provides mental health benefits or substance use disorder benefits it will not place annual or lifetime maximums for such benefits that are lower than the annual and lifetime maximums for physical health benefits.  In addition, the financial requirements (e.g., deductibles and co-payments) and treatment limitations (e.g., number of visits or days of coverage) that apply to mental health benefits or substance use disorder benefits will not be more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits; mental health benefits and substance use disorder benefits will not be subject to any separate cost sharing requirements or treatment limitations that only apply to such benefits; if the Plan provides for out of network medical/surgical or substance use disorder benefits, it will provide for out of network mental health and substance use disorder benefits and standards for medical necessity determinations and reasons for any denial of benefits relating to mental health benefits and substance use disorder benefits will be made available upon request to plan participants.  Such coverage shall be subject to all other provisions of this Plan.

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9.6Continuation of Coverage During Family or Medical Leave.  During any period which an Active Employee Participant is on a family or medical leave as defined in the Family or Medical Leave Act, any benefit elections in force for such Participant shall remain in effect.  While the Participant is on paid leave, contributions shall continue.  If the Participant is on an unpaid leave, the Participant may elect to prepay required contributions on a pre-tax basis before the commencement of such unpaid leave.  Alternatively, the Participant may elect to make such payments on an after-tax basis monthly in accordance with an arrangement that the Plan Administrator shall provide.  If coverage is not continued during the entire period of the family or medical leave because the Participant declines to pay the premium, the coverage must be reinstated upon reemployment with no exclusions or waiting periods, notwithstanding any other provision of this Plan to the contrary. If the Participant does not return to work upon completion of the leave, the Participant must pay the full cost of any health care coverage that was continued on his/her behalf during the leave.  These rules apply to the COBRA eligible programs.

9.7Rights While on Military Leave.  Pursuant to the provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994, an Active Employee Participant on military leave will be considered to be on a Leave of Absence and will be entitled during the leave to the health and welfare benefits that would be made available to other similarly situated employees if they were on a Leave of Absence.  This entitlement will end if the individual provides written notice of intent not to return to work following the completion of the military leave.  The individual shall have the right to continue his/her coverage, including any Dependent coverage, for the lesser of the length of the leave or 18 months.  If the military leave is for a period of 31 days or more, the individual may be required to pay 102 percent of the total premium (determined in the same manner as a COBRA continuation coverage premium).  If coverage is not continued during the entire period of the military leave because the individual declines to pay the premium or the leave extends beyond 18 months, the coverage must be reinstated upon reemployment with no pre-existing condition exclusions (other than for service-related illnesses or injuries) or waiting periods (other than those applicable to all Eligible Employees).

9.8Qualified Medical Child Support Orders.  The Plan will comply with any Qualified Medical Child Support Order issued by a court of competent jurisdiction or administrative body that requires the Plan to provide medical coverage to a Dependent child of an Active Employee or Retired Employee Participant.  The Plan Administrator will establish reasonable procedures for determining whether a court order or administrative decree requiring medical coverage for a Dependent child meets the requirements for a Qualified Medical Child Support Order.  The cost of coverage or any additional cost of such coverage, if any, shall be borne by the Participant.

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9.9Right of Recovery.  If the Plan has made an erroneous or excess payment to any Participant, the Plan Administrator shall be entitled to recover such excess from the individual or entity to whom such payments were made.  The recovery of such overpayment may be made by offsetting the amount of any other benefit or amount payable by the amount of the overpayment under the Plan.

ARTICLE 10   COBRA

10.1Continuation of Coverage Under COBRA.  Participants shall have all COBRA continuation rights required by federal law and all conversion rights.  COBRA continuation coverage shall be continued as provided in this Article 10.

10.2COBRA Continuation Coverage for Terminated Participants.  A covered Active Employee Participant may elect COBRA continuation coverage, at his/her own expense, if his participation under this Plan would terminate as a result of one of the following Qualifying Events: an Employee’s termination of employment or reduction of hours with an Employer.

10.3COBRA Continuation Coverage for Dependents.  A Qualified Dependent may elect COBRA continuation coverage, at his/her own expense, if his/her participation under this Plan would terminate as a result of a Qualifying Event.

10.4Period of Continuation Coverage for Covered Participants.  A covered Active Employee Participant who qualifies for COBRA continuation coverage as a result of a Participant’s termination of employment or reduction in hours of employment described in Subsection 10.2 may elect COBRA continuation coverage for up to 18 months measured from the date of the Qualifying Event.

Coverage under this Subsection 10.4 may not continue beyond the:

(1)   date on which the Active Employee Participant’s Employer ceases to maintain this Plan;

(2)   last day of the month for which premium payments have been made with respect to this Plan, if the individual fails to make premium payments on time, in accordance with Subsection 10.6;

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(3)   date the covered Active Employee Participant becomes entitled to Medicare; or

(4)   date the covered Participant is no longer subject to a pre-existing condition exclusion under the Participant's other coverage or new employer plan for the type of coverage available under the COBRA eligible program for which the COBRA election was made.

10.5Period of COBRA Continuation Coverage for Dependents.  If a Qualified Dependent elects COBRA continuation coverage under a COBRA eligible program as a result of the an Active Employee Participant’s termination of employment as described in Subsection 10.2, continuation coverage may be continued for up to 18 months measured from the date of the Qualifying Event.  COBRA continuation coverage for all other Qualifying Events may continue for up to 36 months.

Continuation coverage under this Subsection 10.5 with respect to a COBRA eligible program may not continue beyond the date:

(1)   on which premium payments have not been made, in accordance with Subsection 10.6 below;

(2)   the Qualified Dependent  becomes entitled to Medicare;

(3)   on which the Employer ceases to maintain this Plan; or

(4)   the Qualified Dependent is no longer subject to a pre-existing condition exclusion under the Participant’s other coverage or new employer plan for the type of coverage available under this Plan.

10.6Contribution Requirements for COBRA Continuation Coverage.  Covered Participants and Qualified Dependents who elect COBRA continuation coverage as a result of a Qualifying Event will be required to pay continuation coverage payments.  Continuation coverage payments are the payments required for COBRA continuation coverage that is an amount equal to a reasonable estimate of the cost to this Plan of providing coverage for all covered Participants at the time of the Qualifying Event plus a 2% administrative expense.  In the case of a disabled individual who receives an additional 11-month extended coverage under COBRA, the Employer may assess up to 150% of the cost for this extended coverage period.  Such cost shall be determined on an actuarial basis and take into account such factors as the Secretary of the Treasury may prescribe in regulations.

Covered Participants and Qualified Dependents must make the continuation coverage payment prior to the first day of the month in which such coverage will take effect.  However, a covered Participant or Qualified Dependent has 45 days from the date of an affirmative election to pay the continuation coverage payment for the first month's payment and the cost for the period between the date medical coverage would otherwise have terminated due to the Qualifying Event and the date the covered Participant and/or Qualified Dependent actually elects COBRA continuation coverage.

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The covered Participant and/or Qualified Dependent shall have a 30-day grace period to make the continuation coverage payments due thereafter.  Continuation coverage payments must be postmarked on or before the completion of the 30-day grace period.  If continuation coverage payments are not made on a timely basis, COBRA continuation coverage will terminate as of the last day of the month for which timely premiums were made.  The 30-day grace period shall not apply to the 45-day period for the first month’s payment of COBRA premiums as set out in the section above.

If payment is received that is significantly less than the required continuation coverage payment, then continuation coverage will terminate as of the last day of the month for which premiums were paid.  A payment is considered significantly less than the amount due if it is greater than the lesser of $50 or 10% of the required continuation coverage payment.  Upon receipt of a continuation coverage payment that is insignificantly less than the required amount, the Plan Administrator must notify the covered Participant or Qualified Dependent of the amount of the shortfall and provide them with an additional 30-day grace period from the date of the notice for this payment only.

10.7Limitation on Participant's Rights to COBRA Continuation Coverage.

(1)   If a Qualified Dependent loses, or will lose medical coverage under this Plan as a result of divorce, legal separation, entitlement to Medicare, or ceasing to be a Dependent, such Qualified Dependent is responsible for notifying the Plan Administrator in writing within 60 days of the Qualifying Event.  Failure to make timely notification will terminate the Qualified Dependent's rights to COBRA continuation coverage under this Article.

(2)   A Participant must complete and return the required enrollment materials within 60 days from the later of (a) the date of loss of coverage, or (b) the date the Plan Administrator sends notice of eligibility for COBRA continuation coverage.  Failure to enroll for COBRA continuation coverage during this 60-day period will terminate all rights to COBRA continuation coverage under this Article.  An affirmative election of COBRA continuation coverage by a Participant or his/her spouse shall be deemed to be an election for that Participant's Dependent(s) who would otherwise lose coverage under the Plan.

10.8Subsequent Qualifying Event.  If a second Qualifying Event occurs during an 18-month extension explained above, coverage may be continued for a maximum of 36 months from the date of the first Qualifying Event.  In the event the Dependent loses coverage due to a Qualifying Event and after such date the Participant becomes entitled to Medicare, the Dependent shall have available up to 36 months of coverage measured from the date of the Qualifying Event that causes the loss of coverage.  If the Participant was entitled to Medicare prior to the Qualifying Event, the Dependent shall have up to 36 months of coverage measured from the date of entitlement to Medicare.

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10.9Extension of COBRA Continuation Period for Disabled Individuals.  The period of continuation shall be extended to 29 months in total (measured from the date of the Qualifying Event) in the event the individual is disabled as determined by the Social Security laws within 60 days of the Qualifying Event.  The individual must provide evidence to the Plan Administrator of such Social Security determination prior to the earlier of 60 days after the date of the Social Security determination, or the expiration of the initial 18 months of COBRA continuation coverage.  In such event, the Employer may charge the individual up to 150% of the COBRA cost of the coverage.

ARTICLE 11   PRIVACY OF MEDICAL INFORMATION

11.1Definitions.  For purposes of this Article 11, the following defined terms shall have the meaning assigned to such terms in this subsection:

(1) “Business Associate” shall have the meaning assigned to such phrase at 45 C.F.R. § 160.103;

(2) “Health Care Operations” shall have the meaning assigned to such phrase at 45 C.F.R. § 164.501;

(3) “HIPAA” shall mean Parts 160 (“General Administrative Requirements”) and 164 (“Security and Privacy”) of Title 45 of the Code of Federal Regulations as such parts are amended from time to time;

(4) “Payment” shall have the meaning assigned to such phrase at 45 C.F.R § 160.103;

(5) “Protected Health Information” or “PHI” shall have the meaning assigned to such phrase at 45 C.F.R. § 160.103; and

(6) “Treatment” shall have the meaning assigned to such phrase at 45 C.F.R. § 164.501.

11.2 Privacy Provisions Relating to Protected Health Information (“PHI”).  The Plan and its Business Associates shall use and disclose PHI to the extent permitted by, and in accordance with, HIPAA, for purposes of providing benefits under the Plan and for purposes of administering the plan, including, by way of illustration and not by way of limitation, for purposes of Treatment, Payment, and Health Care Operations.

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11.3Disclosure of De-Identified or Summary Health Information.  The HIPAA Plan, or, with respect to the HIPAA Plan, a health insurance issuer, may disclose summary health information (as that phrase is defined at 45 C.F.R. § 160.5049a))  to the Plan Sponsor of the HIPAA Plan (and its affiliates) if such entity requests such information for the purpose of:

(1) Obtaining premium bids from health plans for providing health insurance coverage under the HIPAA Plan;

(2) Modifying, amending or terminating the group health benefits under the HIPAA Plan.

In addition, the HIPAA Plan or a health insurance insurer with respect to the HIPAA Plan may disclose to the Plan Sponsor of the HIPAA Plan (or its affiliates) information on whether an individual is participating in the group health benefits provided by the HIPAA Plan or is enrolled in, or has ceased enrollment with health insurance offered by the HIPAA Plan.

11.4The HIPAA Plan Will Use and Disclose PHI as Required by Law or as Permitted by the Authorization of the Participant or Beneficiary.

Upon submission of an authorization signed by a Participant, beneficiary, subscriber or personal representative that meets HIPAA requirements, the HIPAA Plan will disclose PHI.

In addition, PHI will be disclosed to the extent permitted or required by law, without the submission of an authorization form.

11.5Disclosure of PHI to the Plan Sponsor.  The HIPAA Plan will disclose information to the Plan Sponsor only upon certification from the Plan Sponsor that the HIPAA Plan documents have been amended to incorporate the assurances provided below.

The Plan Sponsor agrees to:

(1) not use or further disclose PHI other than as permitted or required by the HIPAA Plan document or as required by law;

(2) ensure that any affiliates or agents, including a subcontractor, to whom the Plan Sponsor provides PHI received from the HIPAA Plan, agrees to the same restrictions and conditions that apply to the Plan Sponsor with respect to such PHI;

(3) not use or disclose PHI for employment-related actions and decisions unless authorized by the individual to whom the PHI relates;

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(4) not use or disclose PHI in connection with any other benefits or employee benefit plan of the Plan Sponsor or its affiliates unless permitted by the Plan or authorized by an individual to whom the PHI relates;

(5) report to the Plan any PHI use or disclosure that is inconsistent with the uses or disclosures provided for of which it becomes aware;

(6) make PHI available to an individual in accordance with HIPAA’s access rules;

(7) make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA;

(8) make available the information required to provide an accounting of disclosures;

(9) make internal practices, books and records relating to the use and disclosure of PHI received from the HIPAA Plan available to the Secretary of the United States Department of Health and Human Resources for purposes of determining the Plan’s compliance with HIPAA; and

(10) if feasible, return or destroy all PHI received from the HIPAA Plan that the Plan Sponsor still maintains in any form, and retain no copies of such PHI when no longer needed for the purpose for which disclosure was made (or if return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction infeasible).

11.6Separation Between the Plan Sponsor and the HIPAA Plan.  In accordance with HIPAA, only the following employees and Business Associate personnel shall be given access to PHI:

(1) employees of the AT&T Benefits and/or AT&T Executive Compensation organizations responsible for administering group health plan benefits under the HIPAA Plan, including those employees whose functions in the regular course of business include Payment, Health Care Operations or other matters pertaining to the health care programs under a HIPAA Plan;

(2) employees who supervise the work of the employees described in (1), above;

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(3) support personnel, including other employees outside of the AT&T Benefits or AT&T Executive Compensation organizations whose duties require them to rule on health plan-related appeals or perform functions concerning the HIPAA Plan;

(4) investigatory personnel to the limited extent that such PHI is necessary to conduct investigations of possible fraud;

(5) outside and in-house legal counsel providing counsel to the HIPAA Plan;

(6) consultants providing advice concerning the administration of the HIPAA Plan; and

(7) the employees of Business Associates charged with providing services to the HIPAA Plan.

The persons identified above shall have access to and use PHI to the extent that such access and use is necessary for the administration of group health benefits under a HIPAA Plan.  If these persons do not comply with this Plan document, the Plan Sponsor shall provide a mechanism for resolving issues of noncompliance, including disciplinary sanctions.

11.7Enforcement.

Enforcement of this Article 11 shall be as provided for by HIPAA. In particular, participants and beneficiaries are not authorized to sue with regard to purported breaches of this Article 11 except as explicitly permitted by HIPAA.

ARTICLE 12                                CLAIM AND APPEAL PROCESS

12.1  Claims for Benefits under the Plan. – See Appendix B.

12.2  Claims Related to Basic Eligibility for Coverage under the Plan and Claims Related to the Article 8 Loyalty Conditions.

 (a)           Claims.  A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) based on a claim for basic eligibility for coverage under the Plan or a claim related to the Article 8 Loyalty Conditions may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.

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 (b)           Claim Decision.  Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90)- day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety (90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Administration Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.

 If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under this section and for conducting the review under this section ; and (vi)  a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under this section.

 (c)           Request for Review. Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in this section, the Claimant may request in writing that the Plan Administrator review the determination of the AT&T Executive Compensation Administration Department.  Such request must be addressed to the Plan Administrator at the address provided in the written decision regarding the claim.  To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Plan Administrator and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Committee.  If the Claimant does not request a review by the Plan Administrator of the AT&T Executive Compensation Administration Department’s decision within such sixty (60)-day period, the Claimant shall be barred and estopped from challenging the determination of the AT&T Executive Compensation Administration Department.

 (d)           Review of Decision.  Within sixty (60) days after the Plan Administrator’s receipt of a request for review, the Plan Administrator will review the decision of the AT&T Executive Compensation Administration Department.  If the Plan Administrator determines that special circumstances require an extension of time beyond the initial sixty (60)-day review period, the Plan Administrator shall notify the Claimant in writing within the initial sixty (60)-day period and explain the special circumstances that require the extension and state the date by which the Plan Administrator expects to render its decision on the review of the claim.  If this notice is provided, the Plan Administrator may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.

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 During its review of the claim, the Plan Administrator shall:

 (1)           Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to this section;

 (2)           Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and

 (3)           Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.

 After considering all materials presented by the Claimant, the Plan Administrator will render a decision, written in a manner designed to be understood by the Claimant.  If the Plan Administrator denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Plan Administrator and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.

 In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.

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Appendix A

AT&T Health Plan

2014 Monthly Contributions, Annual Deductible, Coinsurance Percentages and

Annual Out-of-Pocket Maximum

Active Participants

Monthly Contributions	Individual - $67 Individual +1 - $67 Individual +2 or more - $137
Annual Deductible (combined with group medical plan annual deductible)	Individual - $1,250 Individual + 1 - $2,500 Individual +2 or more - $2,500
Coinsurance Percentage (Note 1)	10% after the Annual Deductible is met. Coinsurance applies until the Annual Out-of-Pocket Maximum is reached.
Annual Out-of-Pocket Maximum	Individual - $4,125 Individual +1 - $6,188 Individual +2 or more - $8,250

Note 1:  For prescription pharmacy services, the Coinsurance shall equal the lesser of (i) the Coinsurance Percentage multiplied by the amount of the Covered Health Services or (ii) the amount payable by the Participant for such services under the Basic Plan.

Retired Participants – Monthly Contributions

Retired Prior to August 31, 1992 and Surviving Spouses	$129
Retired on or after September 1, 1992 and Surviving Spouses Note:  The Plan Administrator shall maintain records governing whether a Retired Participant is in Class A, B, C or D.	Class A	Individual - $552 Individual +1 - $567 Individual +2 or more - $567
	Class B	Individual - $669 Individual +1 - $694 Individual +2 or more - $694
	Class C	Individual - $685 Individual +1 - $868 Individual +2 or more - $876
	Class D	Individual - $685 Individual +1 - $1,337 Individual +2 or more - $1,392

Monthly Contributions for COBRA Continuation Coverage

Active COBRA	Individual - $664 Individual + 1 - $1,297 Individual +2 or more - $1,862
Retiree COBRA	Individual - $904 Individual +1 - $1,765 Individual +2 or more - $2,535

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Appendix B

Claims Procedure Applicable to Claims for Benefits under the Plan

Claim for Benefits Procedures

You, your covered dependents or a duly authorized person has the right under ERISA and the Plan to file a written claim for benefits under the Plan. The following describes the procedures used by the Plan to process claims for benefits, along with your rights and responsibilities. These procedures were designed to comply with the rules of the Department of Labor (DOL) concerning claims for Benefits. It is important that you follow these procedures to make sure that you receive full benefits under the Plan.

The Plan is an ERISA plan, and you may file suit in federal court if you are denied benefits you believe are due you under the Plan. However, you must complete the full claims and appeal process offered under the Plan before filing a lawsuit.

Filing a Claim for Benefits

When filing a claim for benefits, you should file the claim with the Claims Administrator.  The Claims Administrator is the third party to whom claims and appeal responsibility has been delegated as permitted under Section 9.1 of the Plan.

The following are not considered claims for benefits under the Plan:

·   A claim related to basic eligibility for coverage under the Plan (See Section 12.2 of the Plan).

·   A claim related to the Loyalty Conditions contained in Article 8 of the Plan (See Section 12.2 of the Plan).

Claim Filing Limits

A request for payment of benefits must be submitted within one year after the date of service or the date the prescription was provided.

Required Information

When you request payment of benefits from the Plan, you must provide certain information as requested by the Claims Administrator.

Benefit Determinations

Post-Service Claims

Post-service claims are those claims that are filed for payment of benefits after medical care has been received. If your post-service claim is denied, you will receive a written notice from the Claims Administrator within 30 days of receipt of the claim, as long as all needed information identified above and any other information that the Claims Administrator may request in connection with services rendered to you was provided with the claim. The Claims Administrator will notify you within this 30-day period if additional information is needed to process the Claim and may request a one-time extension not longer than 15 days and pend your Claim until all information is received.

Once notified of the extension, you then have 45 days to provide this information. If all of the needed information is received within the 45-day time frame and the claim is denied, the claims Administrator will notify you of the denial within 15 days after the information is received. If you don't provide the needed information within the 45-day period, your claim will be denied.

A denial notice will explain the reason for denial, refer to the part of the Plan on which the denial is based, and provide the claim appeal procedures.

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Pre-Service Claims

Pre-service claims are those claims that require notification or approval prior to receiving medical care or require notification within a specified time period after service begins as required under the Plan provisions. If your claim is a pre-service claim and is submitted properly with all needed information, you will receive written notice of the claim decision from the Claims Administrator within 15 days of receipt of the claim. If you file a pre-service claim improperly, the Claims Administrator will notify you of the improper filing and how to correct it within five days after the pre-service claim is received. If additional information is needed to process the pre-service claim, the Claims Administrator will notify you of the information needed within 15 days after the claim was received and may request a one-time extension not longer than 15 days and pend your claim until all information is received. Once notified of the extension, you then have 45 days to provide this information. If all of the needed information is received within the 45-day time frame, the Claims Administrator will notify you of the determination within 15 days after the information is received. If you don't provide the needed information within the 45-day period, your claim will be denied. A denial notice will explain the reason for denial, refer to the part of the Plan on which the denial is based, and provide the claim appeal procedures.

Urgent Care Claims That Require Immediate Action

Urgent care claims are those claims that require notification or approval prior to receiving medical care in which a delay in treatment could seriously jeopardize your life or health or the ability to regain maximum function or, in the opinion of a physician with knowledge of your medical condition, could cause severe pain. In these situations:

·   You will receive notice of the benefit determination in writing or electronically within 72 hours after the Claims Administrator receives all necessary information, taking into account the seriousness of your condition.

·   Notice of denial may be oral with a written or electronic confirmation to follow within three days.

If you filed an urgent claim improperly, the Claims Administrator will notify you of the improper filing and how to correct it within 24 hours after the urgent claim was received. If additional information is needed to process the claim, the Claims Administrator will notify you of the information needed within 24 hours after the claim was received. You then have 48 hours to provide the requested information.

You will be notified of a determination no later than 48 hours after either:

·   The Claims Administrator's receipt of the requested information.

·   The end of the 48-hour period within which you were to provide the additional information, if the information is not received within that time.

A denial notice will explain the reason for denial, refer to the part of the Plan on which the denial is based, and provide the claim appeal procedures.

Concurrent Care Claims

If an ongoing course of treatment was previously approved for a specific period of time or number of treatments, and your request to extend the treatment is an urgent care claim as defined above, your request will be decided within 24 hours, provided your request is made at least 24 hours prior to the end of the approved treatment. The Claims Administrator will make a determination on your request for the extended treatment within 24 hours from receipt of your request.

If your request for extended treatment is not made at least 24 hours prior to the end of the approved treatment, the request will be treated as an urgent care claim and decided according to the time frames described above. If an ongoing course of treatment was previously approved for a specific period of time or number of treatments, and you request to extend treatment in a non-urgent circumstance, your request will be considered a new claim and decided according to post-service or pre-service timeframes, whichever applies.

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How to Appeal a Claim Decision

If you disagree with a pre-service or post-service claim determination after following the above steps, you can contact the applicable Claims Administrator in writing to formally request an appeal. Your first appeal request must be submitted to the Claims Administrator within 180 days after you receive the Claim denial.

Appeal Process

A qualified individual who was not involved in the decision being appealed will be appointed to decide the appeal. The Claims Administrator may consult with, or seek the participation of, medical experts as part of the appeal resolution process. You must consent to this referral and the sharing of pertinent medical claim information. Upon written request and free of charge you have the right to reasonable access to and copies of all documents, records and other information relevant to your claim for benefits.

Appeals Determinations

Pre-Service and Post-Service Claim Appeals

You will be provided written or electronic notification of the decision on your appeal as follows:

·   For appeals of pre-service claims, the first-level appeal will be conducted and you will be notified by the Claims Administrator of the decision within 15 days from receipt of a request for appeal of a denied Claim. The second-level appeal will be conducted and you will be notified by the Claims Administrator of the decision within 15 days from receipt of a request for review of the first-level appeal decision.

·   For appeals of post-service claims, the first-level appeal will be conducted and you will be notified by the Claims Administrator of the decision within 30 days from receipt of a request for appeal of a denied claim. The second-level appeal will be conducted and you will be notified by the Claims Administrator of the decision within 30 days from receipt of a request for review of the first-level appeal decision.

·   For procedures associated with urgent Claims, refer to the following "Urgent Claim Appeals That Require Immediate Action" section.

·   If you are not satisfied with the first-level appeal decision of the Claims Administrator, you have the right to request a second-level appeal from the Claims Administrator. Your second level appeal request must be submitted to the Claims Administrator in writing within 60 days from receipt of the first-level appeal decision.

·   For pre-service and post-service claim appeals, the Plan Administrator has delegated to the Claims Administrator the exclusive right to interpret and administer the provisions of the Plan. The Claims Administrator's decisions are conclusive and binding.

Please note that the Claims Administrator's decision is based only on whether or not benefits are available under the Plan for the proposed treatment or procedure. The determination as to whether the pending health service is necessary or appropriate is between you and your physician.

Urgent Claim Appeals That Require Immediate Action

Your appeal may require immediate action if a delay in treatment could significantly increase the risk to your health or the ability to regain maximum function or cause severe pain.

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In these urgent situations, the appeal does not need to be submitted in writing. You or your physician should call the Claims Administrator as soon as possible. The Claims Administrator will provide you with a written or electronic determination within 72 hours following receipt by the Claims Administrator of your request for review of the determination taking into account the seriousness of your condition.

For urgent claim appeals, the Plan Administrator has delegated to the applicable Claims Administrator the exclusive right to interpret and administer the provisions of the Plan. The Claims Administrator's decisions are conclusive and binding.

In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue and exhaust all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.

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APPENDIX C

DISCLOSURE OF GRANDFATHERED STATUS

MODEL NOTICE

AT&T, as plan sponsor, believes this Plan is a “grandfathered health plan” under the Patient Protection and Affordable Care Act (the “Affordable Care Act”).  As permitted by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted.  Being a grandfathered health plan means that the plan may not include certain consumer protections of the Affordable Care Act that apply to other plans, for example, the requirement for the provision of preventive health services without any cost sharing.  However, grandfathered health plans must comply with certain other consumer protections of the Affordable Care Act, for example, the elimination of lifetime limits on benefits.

Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at P.O. Box 30558, Salt Lake City, Utah  84130-0558.  You may also contact the Employee Benefits Security Administration, U.S. Department of labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform.  This website has a table summarizing which protections do and do not apply to grandfathered health plans.

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EX-12

															EXHIBIT 12
AT&T INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Dollars in Millions
			Six Months Ended				Year Ended December 31,
			June 30,
			2013		2012		2012		2011		2010		20091				2008
Earnings:
	Income (loss) from continuing operations before income taxes		$	11,124	$	11,548	$	10,439	$	6,716	$	18,238	$	18,518		$	(4,572)
	Equity in net income of affiliates included above			(403)		(355)		(752)		(784)		(762)		(734)			(819)
	Fixed charges			2,426		2,539		4,943		4,900		4,786		5,071			4,943
	Distributed income of equity affiliates			205		-		137		161		161		317			164
	Interest			(140)		(130)		(263)		(162)		(772)		(740)			(659)
		Earnings, as adjusted	$	13,212	$	13,602	$	14,504	$	10,831	$	21,651	$	22,432		$	-
Fixed Charges:
	Interest expense		$	1,652	$	1,800	$	3,444	$	3,535	$	2,994	$	3,368		$	3,369
	Interest capitalized			140		130		263		162		772		740			659
	Dividends on preferred securities			-		-		-		-		-		-			4
	Portion of rental expense representative of interest factor			634		609		1,236		1,203		1,020		963			911
		Fixed Charges	$	2,426	$	2,539	$	4,943	$	4,900	$	4,786	$	5,071		$	4,943
	Ratio of Earnings to Fixed Charges			5.45		5.36		2.93		2.21		4.52		4.42			-
1Earnings were not sufficient to cover fixed charges in 2008. The deficit was $943.

EX-31.1

CERTIFICATION

I, Randall Stephenson, certify that:

1.   I have reviewed this report on Form 10-Q of AT&T Inc.

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2013

/s/ Randall Stephenson

Randall Stephenson

Chairman of the Board,

  Chief Executive Officer and President

EX-31.2

CERTIFICATION

I, John J. Stephens, certify that:

1.   I have reviewed this report on Form 10-Q of AT&T Inc.

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2013

/s/ John J. Stephens

John J. Stephens

Senior Executive Vice President

    and Chief Financial Officer

EX-32

Certification of Periodic Financial Reports

Pursuant to 18 U.S.C. Section 1350, each of the undersigned officers of AT&T Inc. (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 August 2, 2013 August 2, 2013

 By: /s/ Randall Stephenson By:           /s/ John J. Stephens

Randall Stephenson   John J. Stephens

Chairman of the Board, Chief Executive Officer   Senior Executive Vice President

and President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”) or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to AT&T Inc. and will be retained by AT&T Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Preparation Of Interim Financial Statements (Policy)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Basis of Presentation Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” We believe that these consolidated financial statements include all adjustments, consisting only of normal recurring accruals, that are necessary to present fairly the results for the presented interim periods. The results for the interim periods are not necessarily indicative of those for the full year. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries and affiliates. Our subsidiaries and affiliates operate in the communications services industry both domestically and internationally, providing wireless communications services, traditional wirelinevoice services, data/broadband and Internet services, video services, telecommunications equipment, managed networking and wholesale services.

All significant intercompany transactions are eliminated in the consolidation process. Investments in partnerships and less than majority-owned subsidiaries where we have significant influence are accounted for under the equity method. Earnings from certain foreign equity investments accounted for using the equity method are included for periods ended within up to one month of our period end. We also record our proportionate share of our equity method investees' other comprehensive income (OCI) items, including actuarial gains and losses on pension and other postretirement benefit obligations.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of probable losses and expenses. Actual results could differ from those estimates. Certain amounts have been reclassified to conform to the current period's presentation.

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements of Comprehensive Income [Abstract]
Foreign currency translation adjustments, attributable to noncontrolling interest, net of taxes	$ (1)	$ (1)	$ (1)	$ 0
Foreign currency translation adjustments, tax effect	(127)	(55)	(65)	76
Foreign currency translation adjustment reclassification - tax effect	19	0	19	0
Net unrealized gains (losses) on available-for-sale securities - tax effect	6	(27)	46	27
Reclassification adjustment included in net income on available-for-sale securities - tax effect	(1)	(3)	(5)	(6)
Net unrealized gains (losses) on cash flow hedges - tax effect	66	(58)	115	(58)
Reclassification adjustment included in net income on cash flow hedges - tax effect	4	4	8	7
Net actuarial loss from equity method investees arising during period - tax effect	0	(29)	0	(29)
Reclassification adjustment in net income on actuarial loss from equity method investees - tax effect	5	0	5	0
Amortization of net prior service credit included in net income, tax effect	$ (109)	$ (87)	$ (218)	$ (171)

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Preparation Of Interim Financial Statements

6 Months Ended

Jun. 30, 2013

Preparation Of Interim Financial Statements Disclosure [Abstract]

Preparation Of Interim Financial Statements

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of Presentation Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” We believe that these consolidated financial statements include all adjustments, consisting only of normal recurring accruals, that are necessary to present fairly the results for the presented interim periods. The results for the interim periods are not necessarily indicative of those for the full year. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries and affiliates. Our subsidiaries and affiliates operate in the communications services industry both domestically and internationally, providing wireless communications services, traditional wirelinevoice services, data/broadband and Internet services, video services, telecommunications equipment, managed networking and wholesale services.

All significant intercompany transactions are eliminated in the consolidation process. Investments in partnerships and less than majority-owned subsidiaries where we have significant influence are accounted for under the equity method. Earnings from certain foreign equity investments accounted for using the equity method are included for periods ended within up to one month of our period end. We also record our proportionate share of our equity method investees' other comprehensive income (OCI) items, including actuarial gains and losses on pension and other postretirement benefit obligations.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of probable losses and expenses. Actual results could differ from those estimates. Certain amounts have been reclassified to conform to the current period's presentation.

Stock Repurchase Program In May 2013, we completed a repurchase authorization that was approved by our Board of Directors in July 2012. In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock. During the first six months of 2013, we repurchased 257million shares for $9,217under these authorizations. At June 30, 2013, we had 272million shares remaining under the March 2013 authorization. The authorization has no expiration date.

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Pension And Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2013

Pension And Postretirement Benefits

Pension And Postretirement Benefit Costs Included In Operating Expenses

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Pension cost:
Service cost – benefits earned during the period	$	330	$	304	$	660	$	614
Interest cost on projected benefit obligation		607		700		1,214		1,400
Expected return on assets		(828)		(880)		(1,656)		(1,760)
Amortization of prior service (credit)		(23)		(4)		(46)		(8)
Net pension cost	$	86	$	120	$	172	$	246
Postretirement cost:
Service cost – benefits earned during the period	$	96	$	82	$	191	$	166
Interest cost on accumulated postretirement benefit obligation		389		447		779		894
Expected return on assets		(178)		(201)		(356)		(401)
Amortization of prior service (credit)		(262)		(215)		(525)		(432)
Net postretirement cost	$	45	$	113	$	89	$	227
Combined net pension and postretirement cost	$	131	$	233	$	261	$	473

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Segment Information (Policy)

6 Months Ended

Jun. 30, 2013

Segment Information

Segment Reporting Pensions And Other Postretirement Plans

Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

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Subsequent Events (Narrative) (Details) (Acquisition [Member], Leap Wireless International [Member], USD $) In Millions, except Per Share data, unless otherwise specified	0 Months Ended
	Jul. 12, 2013	Jan. 11, 2015	Jul. 11, 2014	Jun. 30, 2013
Subsequent Event [Line Items]
Date of announcement to acquire subsidiary	Jul. 12, 2013
Subsequent event description	On July 12, 2013, we announced an agreement to acquire Leap Wireless International, Inc. (Leap), a provider of prepaid wireless service, for fifteen dollars per outstanding share of Leap’s common stock, or approximately $1,260, plus one non-transferable contingent right that entitles each Leap stockholder to a share of the net proceeds of the future sale of the Chicago 700 MHz A-band FCC license held by Leap. As of June 30, 2013, Leap had approximately $2,700 of debt, net of cash.
Projected cash payment to acquire entity (per share)	$ 15
Projected cash payment to acquire entity	$ 1,260
Other noncash consideration to be given to acquire entity	one non-transferable contingent right
Debt, net of cash, to be assumed in a proposed business combination				$ 2,700
Number of subscribers to be acquired in a proposed business acquisition (as shown)	5,000,000
Date agreement termination rights are granted			Jul. 11, 2014
Date agreement termination rights end		Jan. 11, 2015
Contingent consideration arrangements description	AT&T may be required to provide a three-year roaming agreement for LTE data coverage if the transaction does not close
Minimum Number Of Months [Member]
Subsequent Event [Line Items]
Business Acquisition Agreement Close Timeline	6
Maximum Number Of Months [Member]
Subsequent Event [Line Items]
Business Acquisition Agreement Close Timeline	9

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Earnings Per Share (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share
Net income	$ 3,880	$ 3,965	$ 7,653	$ 7,617
Net income attributable to noncontrolling interest	(58)	(63)	(131)	(131)
Net Income attributable to AT&T	3,822	3,902	7,522	7,486
Share-based payment	2	2	6	6
Numerator for diluted earnings per share	$ 3,824	$ 3,904	$ 7,528	$ 7,492
Weighted average number of common shares outstanding	5,381	5,855	5,446	5,886
Share-based payment (in shares)	16	21	17	21
Denominator for diluted earnings per share	5,397	5,876	5,463	5,907
Basic Earnings Per Share Attributable to AT&T	$ 0.71	$ 0.67	$ 1.38	$ 1.27
Diluted Earnings Per Share Attributable to AT&T	$ 0.71	$ 0.66	$ 1.38	$ 1.27
Stock options issued and outstanding	13	22	13	22
Stock options with exercise prices above average market price of company stock	2	4
Vested stock options with exercise prices below market price of company stock	11	17	11	17

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Preparation Of Interim Financial Statements (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Stock Repurchase Program March 2013 [Member]	Mar. 31, 2013 Stock Repurchase Program March 2013 [Member]
Equity, Class of Treasury Stock [Line Items]
Stock Repurchase Program, Number of Shares Authorized to be Repurchased			300
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased		272
Treasury Stock, Value, Acquired, Cost Method	$ 9,217
Treasury Stock, Shares, Acquired	257

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Fair Value Measurements And Disclosure (Long-Term Debt And Other Financial Instruments) (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Carrying Amount [Member]
Schedule of Fair Value of Separate Accounts by Major Category of Investment [Line Items]
Notes and debentures	$ 73,664	$ 69,578
Commercial paper	1,243	0
Bank borrowings	1	1
Investment securities	2,407	2,218
Fair Value [Member]
Schedule of Fair Value of Separate Accounts by Major Category of Investment [Line Items]
Commercial paper	1,243	0
Bank borrowings	1	1
Investment securities	2,407	2,218
Fair Value [Member] | Level 2 [Member]
Schedule of Fair Value of Separate Accounts by Major Category of Investment [Line Items]
Notes and debentures	$ 79,581	$ 81,310

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Pension And Postretirement Benefits (Narrative) (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Oct. 31, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2013
Pension And Postretirement Benefits
Combined net pension and postretirement cost increase (decrease)		$ (102)		$ (212)
Net supplemental retirement pension benefits costs		28	32	55	63
Net supplemental retirement pension benefits costs - interest cost		26	29	51	58
Estimated Future Pension Contribution						9,500
Application Filing Date	2012-10
Expected Pension Contribution Year						2013
Required contribution to our pension plans in 2013						$ 175

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Fair Value Measurements And Disclosure (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Long-Term Debt And Other Financial Instruments

	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures	$	73,664	$	79,581	$	69,578	$	81,310
Commercial paper		1,243		1,243		-		-
Bank borrowings		1		1		1		1
Investment securities		2,407		2,407		2,218		2,218

Fair Value Leveling

		June 30, 2013
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	1,015	$	-	$	-	$	1,015
International equities			498		-		-		498
Fixed income bonds			-		831		-		831
Asset Derivatives1
Interest rate swaps			-		210		-		210
Cross-currency swaps			-		668		-		668
Liability Derivatives1
Interest rate swaps			-		(9)		-		(9)
Cross-currency swaps			-		(750)		-		(750)
		December 31, 2012
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	873	$	-	$	-	$	873
International equities			469		-		-		469
Fixed income bonds			-		837		-		837
Asset Derivatives1
Interest rate swaps			-		287		-		287
Cross-currency swaps			-		752		-		752
Foreign exchange contracts			-		1		-		1
Liability Derivatives1
Cross-currency swaps			-		(672)		-		(672)
1	Derivatives designated as hedging instruments are reflected as Other assets, Other noncurrent liabilities and, for a portion of interest
	rate swaps, Other current assets.

Notional Amount Of Outstanding Derivative Positions

	June 30,		December 31,
	2013		2012
Interest rate swaps	$	4,250	$	3,000
Cross-currency swaps		14,136		12,071
Foreign exchange contracts		4		51
Total	$	18,390	$	15,122

Effect Of Derivatives On The Consolidated Statements Of Income

Following is the related hedged items affecting our financial position and performance:
Effect of Derivatives on the Consolidated Statements of Income
Fair Value Hedging Relationships	Three months ended				Six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	$	(63)	$	(76)	$	(87)	$	(137)
Gain (Loss) on long-term debt		63		76		87		137

Cash Flow Hedging Relationships	Three months ended				Six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI	$	184	$	(160)	$	325	$	(165)
Interest rate locks:
Interest income (expense) reclassified from accumulated OCI into income		(12)		(11)		(23)		(20)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI		2		(5)		-		-

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Consolidated Balance Sheets (Unaudited)
Allowances for doubtful accounts	$ 520	$ 547
Common stock, par value	$ 1	$ 1
Common stock, authorized	14,000,000,000	14,000,000,000
Common stock, issued	6,495,231,088	6,495,231,088
Treasury stock, held	1,159,998,643	913,836,325

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Consolidated Statement Of Changes In Stockholders' Equity (USD $) In Millions	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income Attributable to AT&T, net of tax [Member]	Noncontrolling Interest [Member]
Balance at beginning of year at Dec. 31, 2012	$ 92,695	$ 6,495	$ 91,038	$ 22,481	$ (32,888)	$ 5,236	$ 333
Balance at beginning of year (in shares) at Dec. 31, 2012		6,495			(914)
Issuance of stock		0
Issuance of stock (in shares)		0
Repurchase of common stock	(9,217)				(9,217)
Repurchase of common stock (in shares)	(257)				(257)
Issuance of treasury stock			(8)		286
Issuance of treasury stock, (in shares)					11
Share-based payments			(45)
Net income attributable to AT&T ($1.38 per diluted share)	7,522			7,522
Dividends to stockholders ($0.90 per share)				(4,791)
Other comprehensive income (loss) attributable to AT&T	(129)					(129)
Net income attributable to noncontrolling interest	131						131
Distributions							(128)
Translation adjustments attributable to noncontrolling interest, net of taxes	(1)						(1)
Balance at end of period at Jun. 30, 2013	$ 86,315	$ 6,495	$ 90,985	$ 25,212	$ (41,819)	$ 5,107	$ 335
Balance at end of period (in shares) at Jun. 30, 2013		6,495			(1,160)

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Earnings Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share

Earnings Per Share

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for net income attributable to AT&T for the three and sixmonths ended June 30, 2013and 2012, are shown in the table below:

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Numerators
Numerator for basic earnings per share:
Net Income	$	3,880	$	3,965	$	7,653	$	7,617
Net income attributable to noncontrolling interest		(58)		(63)		(131)		(131)
Net Income attributable to AT&T		3,822		3,902		7,522		7,486
Dilutive potential common shares:
Share-based payment		2		2		6		6
Numerator for diluted earnings per share	$	3,824	$	3,904	$	7,528	$	7,492
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		5,381		5,855		5,446		5,886
Dilutive potential common shares:
Share-based payment		16		21		17		21
Denominator for diluted earnings per share		5,397		5,876		5,463		5,907
Basic earnings per share attributable to AT&T	$	0.71	$	0.67	$	1.38	$	1.27
Diluted earnings per share attributable to AT&T	$	0.71	$	0.66	$	1.38	$	1.27

At June 30, 2013and 2012, we had issued and outstanding options to purchase approximately 13 million and 22million shares of AT&T common stock.For the quarter endedJune 30, 2013and 2012, the exercise prices of 2million and 4million shares were above the market price of AT&T stock for the respective periods.Accordingly, we did not include these amounts in determining the dilutive potential common shares.At June 30, 2013 and 2012, the exercise prices of 11million and 17million vested stock options were below market price.

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Consolidated Statement Of Changes In Stockholders' Equity (Parenthetical) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements Of Changes In Stockholders' Equity (Unaudited)
Net income attributable to AT&T, per diluted share	$ 0.71	$ 0.66	$ 1.38	$ 1.27
Dividends to stockholders, per share	$ 0.45	$ 0.44	$ 0.90	$ 0.88

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Other Comprehensive Income (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Other Comprehensive Income
Foreign currency translation adjustments, as of January 1, 2013, net of tax			$ (284)
Foreign currency translation adjustments, before reclassification adjustment, net of tax			(117)
Reclassification adjustment included in net income, net of taxes of $19, $0, $19 and $0	34	0	34	0
Foreign currency translation adjustment, net of tax			(83)
Foreign currency translation adjustments, as of June 30, 2013, net of tax	(367)		(367)
Net unrealized gain (loss) on available-for-sale securities, as of January 1, 2013, net of tax			272
Net unrealized gain (loss) on available-for-sale securities, before reclassification adjustment, net of tax			86
Net unrealized gain (loss) on available-for-sale securities reclassified from accumulated OCI, net of tax	(3)	(6)	(10)	(12)
Net unrealized gain (loss) on available-for-sale securities, net of tax			76
Net unrealized gain (loss) on available-for-sale securities, as of June 30, 2013, net of tax	348		348
Net unrealized gains (losses) on cash flow hedges, as of January 1, 2013, net of tax			(110)
Net unrealized gains (losses) on cash flow hedges, before reclassification adjustment, net of tax	120	(107)	210	(107)
Net unrealized gains (losses) on cash flow hedges reclassified from accumulated OCI, net of tax	8	7	15	13
Net unrealized gains (losses) on cash flow hedges, net of tax			225
Net unrealized gains (losses) on cash flow hedges, as of June 30, 2013, net of tax	115		115
Defined benefit postretirement plans, as of January 1, 2013, net of tax			5,358
Defined benefit postretirement plans, before reclassification, net of tax			0
Defined benefit postretirement plans reclassified from accumulated OCI, net of tax			(347)
Defined benefit postretirement plans, net of tax			(347)
Defined benefit postretirement plans, as of June 30, 2013, net of tax	5,011		5,011
Accumulated other comprehensive income, Balance as of January 1, 2013			5,236
Accumulated other comprehensive income before reclassification, net of tax			179
Amounts reclassifed from accumulated OCI, net of tax			(308)
Net other comprehensive income (loss), net of tax			(129)
Accumulated other comprehensive income, Balance as of June 30, 2013	$ 5,107		$ 5,107

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Pension And Postretirement Benefits (Pension And Postretirement Benefit Costs Included In Operating Expenses) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Defined Benefit Plan Disclosure [Line Items]
Net cost	$ 131	$ 233	$ 261	$ 473
Pension Benefit Cost [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost - benefits earned during the period	330	304	660	614
Interest cost on benefit obligation	607	700	1,214	1,400
Expected return on assets	(828)	(880)	(1,656)	(1,760)
Amortization of prior service (credit)	(23)	(4)	(46)	(8)
Net cost	86	120	172	246
Postretirement Benefit Cost [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost - benefits earned during the period	96	82	191	166
Interest cost on benefit obligation	389	447	779	894
Expected return on assets	(178)	(201)	(356)	(401)
Amortization of prior service (credit)	(262)	(215)	(525)	(432)
Net cost	$ 45	$ 113	$ 89	$ 227

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Fair Value Measurements And Disclosure (Effect Of Derivatives On The Consolidated Statements Of Income) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Fair Value Hedging Relationships [Member] | Interest Rate Swaps [Member] | Interest expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on interest rate swaps	$ (63)	$ (76)	$ (87)	$ (137)
Gain (Loss) on long-term debt	63	76	87	137
Cash Flow Hedging Relationships [Member] | Cross-Currency Swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) recognized in accumulated OCI	184	(160)	325	(165)
Cash Flow Hedging Relationships [Member] | Interest Rate Locks [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest income (expense) reclassified from accumulated OCI into income	(12)	(11)	(23)	(20)
Cash Flow Hedging Relationships [Member] | Foreign Exchange Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) recognized in accumulated OCI	$ 2	$ (5)	$ 0	$ 0

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Consolidated Statements Of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 3,880	$ 3,965	$ 7,653	$ 7,617
Foreign Currency:
Translation adjustments (includes $(1), $(1), $(1) and $0 attributable to noncontrolling interest), net of taxes of $(127), $(55), $(65) and $76	(239)	(101)	(118)	142
Reclassification adjustment included in net income, net of taxes of $19, $0, $19 and $0	34	0	34	0
Available-for-sale securities:
Net unrealized gains (losses), net of taxes of $6, $(27), $46 and $27	11	(52)	86	49
Reclassification adjustment realized in net income, net of taxes of $(1), $(3), $(5) and $(6)	(3)	(6)	(10)	(12)
Cash flow hedges:
Net unrealized gains (losses), net of taxes of $66, $(58), $115 and $(58)	120	(107)	210	(107)
Reclassification adjustment included in net income, net of taxes of $4, $4, $8 and $7	8	7	15	13
Defined benefit postretirement plans:
Net actuarial gain (loss) from equity method investees arising during period, net of taxes of $0, $(29), $0 and $(29)	0	(53)	0	(53)
Reclassification adjustment included in net income, net of taxes $5, $0, $5, and $0	8	0	8	0
Amortization of net prior service credit included in net income, net of taxes of $(109), $(87), $(218) and $(171)	(177)	(137)	(355)	(274)
Other	0	1	0	1
Other comprehensive income (loss)	(238)	(448)	(130)	(241)
Total comprehensive income	3,642	3,517	7,523	7,376
Less: Total comprehensive income attributable to noncontrolling interest	(57)	(62)	(130)	(131)
Total Comprehensive Income Attributable to AT&T	$ 3,585	$ 3,455	$ 7,393	$ 7,245

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Pension And Postretirement Benefits

6 Months Ended

Jun. 30, 2013

Pension And Postretirement Benefits

Pension And Postretirement Benefits

NOTE 5.PENSION AND POSTRETIREMENT BENEFITS

Substantially all of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance, and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to meet the plans' obligations to provide benefits to employees upon their retirement. During 2013, we have a required contribution to our pension plans of approximately $175.

In October 2012, we filed an application with the U.S. Department of Labor for approval to make a voluntary contribution of a preferred equity interest in our Mobility business to the trust used to pay qualified pension benefits under plans sponsored by AT&T. At the time we filed the application, the interest had a fair market value of $9,500. We anticipate approval in 2013, and expect to make the contribution at that time. As currently proposed, the preferred equity interest will constitute a qualified plan asset for ERISA funding purposes, but may not be included in plan assets in our consolidated financial statements upon contribution. Final determination of whether it will qualify as a plan asset for financial reporting purposes is subject to the final terms of the preferred equity interest.

We recognize actuarial gains and losses on pension and postretirement plan assets in our operating results at our annual measurement date of December 31, unless earlier remeasurements are required.The following table details pension and postretirement benefit costs included in operating expenses in the accompanying consolidated statements of income.

In the following table, expense credits are denoted with parentheses. A portion of these expenses is capitalized as part of internal construction projects, providing a small reduction in the net expense recorded.

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Pension cost:
Service cost – benefits earned during the period	$	330	$	304	$	660	$	614
Interest cost on projected benefit obligation		607		700		1,214		1,400
Expected return on assets		(828)		(880)		(1,656)		(1,760)
Amortization of prior service (credit)		(23)		(4)		(46)		(8)
Net pension cost	$	86	$	120	$	172	$	246
Postretirement cost:
Service cost – benefits earned during the period	$	96	$	82	$	191	$	166
Interest cost on accumulated postretirement benefit obligation		389		447		779		894
Expected return on assets		(178)		(201)		(356)		(401)
Amortization of prior service (credit)		(262)		(215)		(525)		(432)
Net postretirement cost	$	45	$	113	$	89	$	227
Combined net pension and postretirement cost	$	131	$	233	$	261	$	473

Our combined net pension and postretirement cost decreased $102 in the second quarter and $212 for the first six months of 2013. The decrease reflects lower interest costs, which are driven by the prior year's declining bond ratesand reflects higher amortization of prior service credits due to plan changes, including changes to retiree costs for continued healthcare coverage. This decrease is partially offset by lower expected long-term return on plan assets reflecting eachplan's asset mix and continued uncertainty in the securities markets and the U.S. economy.

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental retirement pension benefits cost, which is not included in the table above, was $28 in the second quarter of 2013, of which $26 was interest cost, and $55 for the first six months, of which $51 was interest cost. In 2012, net supplemental retirement pension benefits cost was $32 in the second quarter, of which $29 was interest cost, and $63 for the first six months, of which $58 was interest cost.

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Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current Assets
Cash and cash equivalents	$ 4,548	$ 4,868
Accounts receivable - net of allowances for doubtful accounts of $520 and $547	12,508	12,657
Prepaid expenses	1,038	1,035
Deferred income taxes	953	1,036
Other current assets	2,381	3,110
Total current assets	21,428	22,706
Property, plant and equipment	276,833	270,907
Less: accumulated depreciation and amortization	(166,099)	(161,140)
Property, Plant and Equipment - Net	110,734	109,767
Goodwill	69,770	69,773
Licenses	53,665	52,352
Customer Lists and Relationships - Net	1,015	1,391
Other Intangible Assets - Net	5,018	5,032
Investments in and Advances to Equity Affiliates	3,888	4,581
Other Assets	6,575	6,713
Total Assets	272,093	272,315
Current Liabilities
Debt maturing within one year	3,256	3,486
Accounts payable and accrued liabilities	19,438	20,494
Advanced billing and customer deposits	4,029	4,225
Accrued taxes	2,065	1,026
Dividends payable	2,401	2,556
Total current liabilities	31,189	31,787
Long-Term Debt	71,917	66,358
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes	29,400	28,491
Postemployment benefit obligation	41,994	41,392
Other noncurrent liabilities	11,278	11,592
Total deferred credits and other noncurrent liabilities	82,672	81,475
Stockholders' Equity
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2013 and December 31, 2012: issued 6,495,231,088 at June 30, 2013 and December 31, 2012)	6,495	6,495
Additional paid-in capital	90,985	91,038
Retained earnings	25,212	22,481
Treasury stock (1,159,998,643 at June 30, 2013 and 913,836,325 at December 31, 2012, at cost)	(41,819)	(32,888)
Accumulated other comprehensive income	5,107	5,236
Noncontrolling interest	335	333
Total stockholders' equity	86,315	92,695
Total Liabilities and Stockholders' Equity	$ 272,093	$ 272,315

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Consolidated Statements Of Income (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements Of Income (Unaudited)
Operating Revenues	$ 32,075	$ 31,575	$ 63,431	$ 63,397
Operating Expenses
Cost of services and sales (exclusive of depreciation and amortization shown separately below)	13,270	12,254	25,824	25,071
Selling, general and administrative	8,121	8,005	16,454	16,349
Depreciation and amortization	4,571	4,499	9,100	9,059
Total operating expenses	25,962	24,758	51,378	50,479
Operating Income	6,113	6,817	12,053	12,918
Other Income (Expense)
Interest expense	(825)	(941)	(1,652)	(1,800)
Equity in net income of affiliates	218	132	403	355
Other income (expense) - net	288	23	320	75
Total other income (expense)	(319)	(786)	(929)	(1,370)
Income Before Income Taxes	5,794	6,031	11,124	11,548
Income tax expense	1,914	2,066	3,471	3,931
Net Income	3,880	3,965	7,653	7,617
Less: Net Income Attributable to Noncontrolling Interest	(58)	(63)	(131)	(131)
Net Income Attributable to AT&T	$ 3,822	$ 3,902	$ 7,522	$ 7,486
Basic Earnings Per Share Attributable to AT&T	$ 0.71	$ 0.67	$ 1.38	$ 1.27
Diluted Earnings Per Share Attributable to AT&T	$ 0.71	$ 0.66	$ 1.38	$ 1.27
Weighted Average Number of Common Shares Outstanding - Basic (in millions)	5,381	5,855	5,446	5,886
Weighted Average Number of Common Shares Outstanding - with Dilution (in millions)	5,397	5,876	5,463	5,907
Dividends Declared Per Common Share	$ 0.45	$ 0.44	$ 0.90	$ 0.88

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Segment Information (Summary Of Operating Revenues And Expenses By Segment) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting Information [Line Items]
Data	$ 13,756	$ 12,406	$ 27,043	$ 24,441
Voice, text and other	15,155	15,990	30,398	32,213
Equipment and other	3,164	3,179	5,990	6,743
Total segment operating revenues	32,075	31,575	63,431	63,397
Operations and support expenses	21,391	20,259	42,278	41,420
Depreciation and amortization expenses	4,571	4,499	9,100	9,059
Total segment operating expenses	25,962	24,758	51,378	50,479
Segment operating income (loss)	6,113	6,817	12,053	12,918
Interest expense	825	941	1,652	1,800
Equity in net income (loss) of affiliates	218	132	403	355
Other income (expense) - net	288	23	320	75
Segment income (loss) before income taxes	5,794	6,031	11,124	11,548
Wireless [Member]
Segment Reporting Information [Line Items]
Data	5,356	4,471	10,481	8,706
Voice, text and other	10,014	10,294	19,951	20,625
Equipment and other	1,921	1,588	3,550	3,158
Total segment operating revenues	17,291	16,353	33,982	32,489
Operations and support expenses	10,770	9,590	20,950	19,568
Depreciation and amortization expenses	1,843	1,696	3,678	3,362
Total segment operating expenses	12,613	11,286	24,628	22,930
Segment operating income (loss)	4,678	5,067	9,354	9,559
Interest expense	0	0	0	0
Equity in net income (loss) of affiliates	(19)	(15)	(37)	(28)
Other income (expense) - net	0	0	0	0
Segment income (loss) before income taxes	4,659	5,052	9,317	9,531
Wireline [Member]
Segment Reporting Information [Line Items]
Data	8,400	7,935	16,562	15,735
Voice, text and other	5,141	5,696	10,447	11,588
Equipment and other	1,232	1,276	2,419	2,513
Total segment operating revenues	14,773	14,907	29,428	29,836
Operations and support expenses	10,417	10,201	20,752	20,603
Depreciation and amortization expenses	2,722	2,766	5,410	5,574
Total segment operating expenses	13,139	12,967	26,162	26,177
Segment operating income (loss)	1,634	1,940	3,266	3,659
Interest expense	0	0	0	0
Equity in net income (loss) of affiliates	0	(1)	1	(1)
Other income (expense) - net	0	0	0	0
Segment income (loss) before income taxes	1,634	1,939	3,267	3,658
Advertising Solutions [Member]
Segment Reporting Information [Line Items]
Data	0	0	0	0
Voice, text and other	0	0	0	0
Equipment and other	0	305	0	1,049
Total segment operating revenues	0	305	0	1,049
Operations and support expenses	0	226	0	773
Depreciation and amortization expenses	0	29	0	106
Total segment operating expenses	0	255	0	879
Segment operating income (loss)	0	50	0	170
Interest expense	0	0	0	0
Equity in net income (loss) of affiliates	0	0	0	0
Other income (expense) - net	0	0	0	0
Segment income (loss) before income taxes	0	50	0	170
Other Segment [Member]
Segment Reporting Information [Line Items]
Data	0	0	0	0
Voice, text and other	0	0	0	0
Equipment and other	11	10	21	23
Total segment operating revenues	11	10	21	23
Operations and support expenses	204	242	576	476
Depreciation and amortization expenses	6	8	12	17
Total segment operating expenses	210	250	588	493
Segment operating income (loss)	(199)	(240)	(567)	(470)
Interest expense	0	0	0	0
Equity in net income (loss) of affiliates	237	148	439	384
Other income (expense) - net	0	0	0	0
Segment income (loss) before income taxes	38	(92)	(128)	(86)
Consolidations [Member]
Segment Reporting Information [Line Items]
Data	0	0	0	0
Voice, text and other	0	0	0	0
Equipment and other	0	0	0	0
Total segment operating revenues	0	0	0	0
Operations and support expenses	0	0	0	0
Depreciation and amortization expenses	0	0	0	0
Total segment operating expenses	0	0	0	0
Segment operating income (loss)	0	0	0	0
Interest expense	825	941	1,652	1,800
Equity in net income (loss) of affiliates	0	0	0	0
Other income (expense) - net	288	23	320	75
Segment income (loss) before income taxes	$ (537)	$ (918)	$ (1,332)	$ (1,725)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Information

Summary Of Operating Revenues And Expenses By Segment

For the three months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	5,356	$	8,400	$	-	$	-	$	-	$	13,756
Voice, text and other		10,014		5,141		-		-		-		15,155
Equipment and other		1,921		1,232		-		11		-		3,164
Total segment operating revenues		17,291		14,773		-		11		-		32,075
Operations and support expenses		10,770		10,417		-		204		-		21,391
Depreciation and amortization expenses		1,843		2,722		-		6		-		4,571
Total segment operating expenses		12,613		13,139		-		210		-		25,962
Segment operating income (loss)		4,678		1,634		-		(199)		-		6,113
Interest expense		-		-		-		-		825		825
Equity in net income (loss) of affiliates		(19)		-		-		237		-		218
Other income (expense) – net		-		-		-		-		288		288
Segment income (loss) before income taxes	$	4,659	$	1,634	$	-	$	38	$	(537)	$	5,794
For the six months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	10,481	$	16,562	$	-	$	-	$	-	$	27,043
Voice, text and other		19,951		10,447		-		-		-		30,398
Equipment and other		3,550		2,419		-		21		-		5,990
Total segment operating revenues		33,982		29,428		-		21		-		63,431
Operations and support expenses		20,950		20,752		-		576		-		42,278
Depreciation and amortization expenses		3,678		5,410		-		12		-		9,100
Total segment operating expenses		24,628		26,162		-		588		-		51,378
Segment operating income (loss)		9,354		3,266		-		(567)		-		12,053
Interest expense		-		-		-		-		1,652		1,652
Equity in net income (loss) of affiliates		(37)		1		-		439		-		403
Other income (expense) – net		-		-		-		-		320		320
Segment income (loss) before income taxes	$	9,317	$	3,267	$	-	$	(128)	$	(1,332)	$	11,124
For the three months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	4,471	$	7,935	$	-	$	-	$	-	$	12,406
Voice, text and other		10,294		5,696		-		-		-		15,990
Equipment and other		1,588		1,276		305		10		-		3,179
Total segment operating revenues		16,353		14,907		305		10		-		31,575
Operations and support expenses		9,590		10,201		226		242		-		20,259
Depreciation and amortization expenses		1,696		2,766		29		8		-		4,499
Total segment operating expenses		11,286		12,967		255		250		-		24,758
Segment operating income (loss)		5,067		1,940		50		(240)		-		6,817
Interest expense		-		-		-		-		941		941
Equity in net income (loss) of affiliates		(15)		(1)		-		148		-		132
Other income (expense) – net		-		-		-		-		23		23
Segment income (loss) before income taxes	$	5,052	$	1,939	$	50	$	(92)	$	(918)	$	6,031
For the six months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	8,706	$	15,735	$	-	$	-	$	-	$	24,441
Voice, text and other		20,625		11,588		-		-		-		32,213
Equipment and other		3,158		2,513		1,049		23		-		6,743
Total segment operating revenues		32,489		29,836		1,049		23		-		63,397
Operations and support expenses		19,568		20,603		773		476		-		41,420
Depreciation and amortization expenses		3,362		5,574		106		17		-		9,059
Total segment operating expenses		22,930		26,177		879		493		-		50,479
Segment operating income (loss)		9,559		3,659		170		(470)		-		12,918
Interest expense		-		-		-		-		1,800		1,800
Equity in net income (loss) of affiliates		(28)		(1)		-		384		-		355
Other income (expense) – net		-		-		-		-		75		75
Segment income (loss) before income taxes	$	9,531	$	3,658	$	170	$	(86)	$	(1,725)	$	11,548

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Fair Value Measurements And Disclosure (Fair Value Leveling) (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Interest Rate Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	$ 210	$ 287
Liability Derivatives (at fair value)	(9)
Cross-Currency Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	668	752
Liability Derivatives (at fair value)	(750)	(672)
Foreign Exchange Contracts [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)		1
Domestic Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	1,015	873
International Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	498	469
Fixed Income Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	831	837
Level 1 [Member] | Interest Rate Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	0	0
Liability Derivatives (at fair value)	0
Level 1 [Member] | Cross-Currency Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	0	0
Liability Derivatives (at fair value)	0	0
Level 1 [Member] | Foreign Exchange Contracts [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)		0
Level 1 [Member] | Domestic Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	1,015	873
Level 1 [Member] | International Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	498	469
Level 1 [Member] | Fixed Income Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	0	0
Level 2 [Member] | Interest Rate Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	210	287
Liability Derivatives (at fair value)	(9)
Level 2 [Member] | Cross-Currency Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	668	752
Liability Derivatives (at fair value)	(750)	(672)
Level 2 [Member] | Foreign Exchange Contracts [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)		1
Level 2 [Member] | Domestic Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	0	0
Level 2 [Member] | International Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	0	0
Level 2 [Member] | Fixed Income Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	831	837
Level 3 [Member] | Interest Rate Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	0	0
Liability Derivatives (at fair value)	0
Level 3 [Member] | Cross-Currency Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)	0	0
Liability Derivatives (at fair value)	0	0
Level 3 [Member] | Foreign Exchange Contracts [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset Derivatives (at fair value)		0
Level 3 [Member] | Domestic Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	0	0
Level 3 [Member] | International Equities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	0	0
Level 3 [Member] | Fixed Income Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities (at fair value)	$ 0	$ 0

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Fair Value Measurements And Disclosure (Notional Amount Of Our Outstanding Derivative Positions) (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Derivative Instruments, Gain (Loss) [Line Items]
Notional Amount of Outstanding Derivative Positions	$ 18,390	$ 15,122
Interest Rate Swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Notional Amount of Outstanding Derivative Positions	4,250	3,000
Cross-Currency Swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Notional Amount of Outstanding Derivative Positions	14,136	12,071
Foreign Exchange Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Notional Amount of Outstanding Derivative Positions	$ 4	$ 51

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Segment Information

6 Months Ended

Jun. 30, 2013

Segment Information

Segment Information

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. We analyze our operating segments based on segment income before income taxes. We make our capital allocation decisions based on the strategic needs of the business, needs of the network (wireless or wireline) provided services, and demands to provide emerging services to our customers. Actuarial gains and losses from pension and other postretirement benefits, interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. Therefore, these items are not included in each reportable segment's results. The customers and long-lived assets of our reportable segments are predominantly in the United States. We have three reportable segments: (1) Wireless, (2) Wireline and (3) Other. Our operating results prior to May 9, 2012, also included our Advertising Solutions segment, which was subsequently sold.

The Wireless segment uses our nationwide network to provide consumer and business customers with wireless data and voice communications services. This segment includes our portion of the results from our mobile payment joint venture marketed as the Isis Mobile WalletTM (ISIS), which is accounted for as an equity method investment.

The Wireline segment uses our regional, national and global network to provide consumer and business customers with data and voice communications services, AT&T U-verse® high-speed broadband, video and voice services and managed networking to business customers. Additionally, we receive commissions on sales of satellite television services offered through our agency arrangements.

The Other segment includes our portion of the results from our international equity investments, our equity interest in YP Holdings LLC (YP Holdings), and costs to support corporate-driven activities and operations. Also included in the Other segment are impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

In the following tables, we show how our segment results are reconciled to our consolidated results reported.

For the three months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	5,356	$	8,400	$	-	$	-	$	-	$	13,756
Voice, text and other		10,014		5,141		-		-		-		15,155
Equipment and other		1,921		1,232		-		11		-		3,164
Total segment operating revenues		17,291		14,773		-		11		-		32,075
Operations and support expenses		10,770		10,417		-		204		-		21,391
Depreciation and amortization expenses		1,843		2,722		-		6		-		4,571
Total segment operating expenses		12,613		13,139		-		210		-		25,962
Segment operating income (loss)		4,678		1,634		-		(199)		-		6,113
Interest expense		-		-		-		-		825		825
Equity in net income (loss) of affiliates		(19)		-		-		237		-		218
Other income (expense) – net		-		-		-		-		288		288
Segment income (loss) before income taxes	$	4,659	$	1,634	$	-	$	38	$	(537)	$	5,794
For the six months ended June 30, 2013						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	10,481	$	16,562	$	-	$	-	$	-	$	27,043
Voice, text and other		19,951		10,447		-		-		-		30,398
Equipment and other		3,550		2,419		-		21		-		5,990
Total segment operating revenues		33,982		29,428		-		21		-		63,431
Operations and support expenses		20,950		20,752		-		576		-		42,278
Depreciation and amortization expenses		3,678		5,410		-		12		-		9,100
Total segment operating expenses		24,628		26,162		-		588		-		51,378
Segment operating income (loss)		9,354		3,266		-		(567)		-		12,053
Interest expense		-		-		-		-		1,652		1,652
Equity in net income (loss) of affiliates		(37)		1		-		439		-		403
Other income (expense) – net		-		-		-		-		320		320
Segment income (loss) before income taxes	$	9,317	$	3,267	$	-	$	(128)	$	(1,332)	$	11,124
For the three months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	4,471	$	7,935	$	-	$	-	$	-	$	12,406
Voice, text and other		10,294		5,696		-		-		-		15,990
Equipment and other		1,588		1,276		305		10		-		3,179
Total segment operating revenues		16,353		14,907		305		10		-		31,575
Operations and support expenses		9,590		10,201		226		242		-		20,259
Depreciation and amortization expenses		1,696		2,766		29		8		-		4,499
Total segment operating expenses		11,286		12,967		255		250		-		24,758
Segment operating income (loss)		5,067		1,940		50		(240)		-		6,817
Interest expense		-		-		-		-		941		941
Equity in net income (loss) of affiliates		(15)		(1)		-		148		-		132
Other income (expense) – net		-		-		-		-		23		23
Segment income (loss) before income taxes	$	5,052	$	1,939	$	50	$	(92)	$	(918)	$	6,031
For the six months ended June 30, 2012						Advertising Solutions						Consolidated Results
		Wireless		Wireline				Other		Consolidations
Data	$	8,706	$	15,735	$	-	$	-	$	-	$	24,441
Voice, text and other		20,625		11,588		-		-		-		32,213
Equipment and other		3,158		2,513		1,049		23		-		6,743
Total segment operating revenues		32,489		29,836		1,049		23		-		63,397
Operations and support expenses		19,568		20,603		773		476		-		41,420
Depreciation and amortization expenses		3,362		5,574		106		17		-		9,059
Total segment operating expenses		22,930		26,177		879		493		-		50,479
Segment operating income (loss)		9,559		3,659		170		(470)		-		12,918
Interest expense		-		-		-		-		1,800		1,800
Equity in net income (loss) of affiliates		(28)		(1)		-		384		-		355
Other income (expense) – net		-		-		-		-		75		75
Segment income (loss) before income taxes	$	9,531	$	3,658	$	170	$	(86)	$	(1,725)	$	11,548

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Segment Information (Summary Of Operating Revenues And Expenses By Segment) (Narrative) (Details)	6 Months Ended
	Jun. 30, 2013
Business Segment Transaction [Abstract]
Number of Reportable Segments	3

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Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events

Subsequent Events

NOTE 7. SUBSEQUENT EVENTS

On July 12, 2013, we announced an agreement to acquire Leap Wireless International, Inc. (Leap), a provider of prepaid wireless service, for fifteen dollars per outstanding share of Leap's common stock, or approximately $1,260, plus one non-transferable contingent right that entitles each Leap stockholder to a share of the net proceeds of the future sale of the Chicago 700 MHz A-band FCC license held by Leap. As of June 30, 2013, Leap had approximately $2,700 of debt, net of cash.

Under the terms of the agreement, we will acquire all of Leap's stock and, thereby, acquire all of its wireless properties, including spectrum licenses, network assets, retail stores and approximately 5 million subscribers. The agreement must be approved by Leap's stockholders. The transaction also is subject to review by the FCC and the Department of Justice and to other customary closing conditions and is expected to close in approximately six to nine monthsfrom the announcement. The agreement also provides both parties with certain termination rights if the transaction does not close by July 11, 2014, extendable by either party to January 11, 2015 if required regulatory approvals have not been obtained. Under certain circumstances, Leap may be required to pay a termination fee or AT&T may be required to provide a three-year roaming agreement to Leap for LTE data coverage if the transaction does not close. If Leap enters into the roaming agreement, AT&T may purchase, or may be required by Leap to purchase, specified Leap spectrum assets.

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Other Comprehensive Income

6 Months Ended

Jun. 30, 2013

Other Comprehensive Income

Other Comprehensive Income

NOTE 3.OTHER COMPREHENSIVE INCOME

Changes in the balances of each component of other comprehensive income (OCI) included in accumulated OCI for the six months ended June 30, 2013, are presented below. All amounts are net of tax and exclude noncontrolling interest.

At June 30, 2013 and for the period ended:
			Foreign Currency Translation Adjustment			Net Unrealized Gain (Loss) on Available-for-Sale Securities			Net Unrealized Gains (Losses) on Cash Flow Hedges			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of January 1, 2013		$	(284)		$	272		$	(110)		$	5,358		$	5,236
Other comprehensive income (loss) before reclassifications			(117)			86			210			-			179
Amounts reclassified from accumulated OCI			34	1		(10)	2		15	3		(347)	4		(308)
Net other comprehensive income (loss)			(83)			76			225			(347)			(129)
Balance as of June 30, 2013		$	(367)		$	348		$	115		$	5,011		$	5,107
1	Pre-tax translation loss reclassifications are included in Other income (expense) - net in the consolidated statements of income.
2	Pre-tax gains are included in Other income (expense) - net in the consolidated statements of income.
3	(Gains) losses are included in interest expense in the consolidated statements of income. See Note 6 for additional information.
4	Prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor, are
	included in Cost of services and sales and Selling, general and administrative in the consolidated statements of income
	(see Note 5). Actuarial loss reclassifications related to our equity method investees are included in Other income (expense) - net
	in the consolidated statements of income.

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Consolidated Statements Of Cash Flows (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Operating Activities
Net income	$ 7,653	$ 7,617
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,100	9,059
Undistributed earnings from investments in equity affiliates	(198)	(355)
Provision for uncollectible accounts	439	572
Deferred income tax expense and noncurrent unrecognized tax benefits	926	(639)
Net (gain) loss from sale of investments, net of impairments	(260)	2
Changes in operating assets and liabilities:
Accounts receivable	(290)	(460)
Other current assets	784	1,468
Accounts payable and accrued liabilities	(340)	592
Other - net	(103)	(531)
Total adjustments	10,058	9,708
Net Cash Provided by Operating Activities	17,711	17,325
Investing Activities
Capital expenditures	(9,665)	(8,742)
Interest during construction	(140)	(130)
Acquisitions, net of cash acquired	(1,182)	(477)
Dispositions	825	800
Sales (purchases) of securities, net	0	124
Return of advances to and investments in equity affiliates	301	0
Other	(4)	0
Net Cash Used in Investing Activities	(9,865)	(8,425)
Financing Activities
Issuance of other short-term borrowings	1,476	0
Repayment of other short-term borrowings	(233)	0
Issuance of long-term debt	6,416	6,935
Repayment of long-term debt	(1,823)	(7,035)
Purchase of treasury stock	(9,217)	(4,623)
Issuance of treasury stock	104	376
Dividends paid	(4,930)	(5,187)
Other	41	(534)
Net Cash Used in Financing Activities	(8,166)	(10,068)
Net decrease in cash and cash equivalents	(320)	(1,168)
Cash and cash equivalents beginning of year	4,868	3,045
Cash and Cash Equivalents End of Period	4,548	1,877
Cash paid during the six months ended June 30 for:
Interest	2,002	2,133
Income taxes, net of refunds	$ 591	$ 127

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Fair Value Measurements And Disclosure (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value Disclosures [Abstract]
Fixed income investments - maturities less than 1 year	$ 113
Fixed income investments - maturities within 1 to 3 years	278
Fixed income investments - maturities within 3 to 5 years	184
Fixed income investments - maturities for 5 or more years	256
Anticipated reclassification of holding losses during the next 12 months - cash flow hedges	45
Collateral received from counterparty	708	543
Collateral submitted to counterparty	35	22
Collateral contingently payable to the counterparty	$ 169

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Pension And Postretirement Benefits (Policy)

6 Months Ended

Jun. 30, 2013

Pension And Postretirement Benefits

Capitalization Of Benefit Plan Costs

A portion of these expenses is capitalized as part of internal construction projects, providing a small reduction in the net expense recorded.

Recognition Of Actuarial Gains And Losses

We recognize actuarial gains and losses on pension and postretirement plan assets in our operating results at our annual measurement date of December 31, unless earlier remeasurements are required.

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Fair Value Measurements And Disclosure

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements And Disclosure

NOTE 6.FAIR VALUE MEASUREMENTS AND DISCLOSURE

The Fair Value Measurement and Disclosure framework provides a three-tiered fair value hierarchy that gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1       Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.

Level 2       Inputs to the valuation methodology include:

• Quoted prices for similar assets and liabilities in active markets.
• Quoted prices for identical or similar assets or liabilities in inactive markets.
• Inputs other than quoted market prices that are observable for the asset or liability.
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3       Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

• Fair value is often based on developed models in which there are few, if any, external observations.

The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2012.

Long-Term Debt and Other Financial Instruments

The carrying amounts and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:

	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures	$	73,664	$	79,581	$	69,578	$	81,310
Commercial paper		1,243		1,243		-		-
Bank borrowings		1		1		1		1
Investment securities		2,407		2,407		2,218		2,218

The carrying value of debt with an original maturity of less than one year approximates market value. The fair value measurements used for notes and debentures are considered Level 2.

Investment Securities

Our investment securities include equities, fixed income bonds and other securities. A substantial portionof the fair values of our available-for-sale securities were estimated based on quoted market prices. Investments in securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Realized gains and losses on securities are included in “Other income (expense) – net” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCI). Unrealized losses that are considered other than temporary are recorded in “Other income (expense) – net” with the corresponding reduction to the carrying basis of the investment. Fixed income investments of $113have maturities of less than one year, $278 within one to three years, $184 within three to five years, and $256 for five or more years, which approximate fair value.

Our short-term investments (including money market securities) and customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values.Our investment securities are recorded in “Other Assets” on the consolidated balance sheets.

Following is the fair value leveling for available-for-sale securities and derivatives as of June 30, 2013and December 31, 2012:

		June 30, 2013
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	1,015	$	-	$	-	$	1,015
International equities			498		-		-		498
Fixed income bonds			-		831		-		831
Asset Derivatives1
Interest rate swaps			-		210		-		210
Cross-currency swaps			-		668		-		668
Liability Derivatives1
Interest rate swaps			-		(9)		-		(9)
Cross-currency swaps			-		(750)		-		(750)
		December 31, 2012
		Level 1		Level 2		Level 3		Total
Available-for-Sale Securities
Domestic equities		$	873	$	-	$	-	$	873
International equities			469		-		-		469
Fixed income bonds			-		837		-		837
Asset Derivatives1
Interest rate swaps			-		287		-		287
Cross-currency swaps			-		752		-		752
Foreign exchange contracts			-		1		-		1
Liability Derivatives1
Cross-currency swaps			-		(672)		-		(672)
1	Derivatives designated as hedging instruments are reflected as Other assets, Other noncurrent liabilities and, for a portion of interest
	rate swaps, Other current assets.

Derivative Financial Instruments

We employ derivatives to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.

The majority of our derivatives are designated either as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), or as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge).

Fair Value Hedging We designate our fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount. Accrued and realized gains or losses from interest rate swaps impact interest expense on the consolidated statements of income. Unrealized gains on interest rate swaps are recorded at fair market value as assets, and unrealized losses on interest rate swaps are recorded at fair market value as liabilities. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed-rate notes payable they hedge due to changes in the designated benchmark interest rate and are recognized in interest expense. Gains or losses realized upon early termination of our fair value hedges are recognized in interest expense. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Cash Flow Hedging Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities, both for the period they are outstanding. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of accumulated OCI until reclassified into interest expense in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized as other income or expense in each period.

We designate our cross-currency swaps as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from the issuance of our Euro and British pound sterling denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominations to fixed U.S. denominated amounts, to be exchanged at a specified rate, which was determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed foreign-denominated rate to a fixed U.S. denominated interest rate. We evaluate the effectiveness of our cross-currency swaps each quarter. In the six months ended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to “Other income (expense) – net” in the consolidated statements of income. Over the next 12 months, we expect to reclassify $45 from accumulated OCI to interest expense due to the amortization of net losses on historical interest rate locks.

We may hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we often enter into foreign exchange contracts to provide currency at a fixed rate. Some of these instruments are designated as cash flow hedges while others remain nondesignated, largely based on size and duration. Gains and losses at the time we settle or take delivery on our designated foreign exchange contracts are amortized into income in the same period the hedged transaction affects earnings, except where an amount is deemed to be ineffective, which would be immediately reclassified to “Other income (expense) – net” in the consolidated statements of income. In the six monthsended June 30, 2013 and June 30, 2012, no ineffectiveness was measured.

Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2013, we had posted collateral of $35 (a deposit asset) and held collateral of $708 (a receipt liability). Under the agreements, if our credit rating had been downgraded one rating level by Moody's Investors Service and Standards & Poor's and two rating levels by Fitch, Inc., before the final collateral exchange in June, we would have been required to post additional collateral of $169. At December 31, 2012, we had posted collateral of $22 (a deposit asset) and held collateral of $543 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative instruments.

Following is the notional amount of our outstanding derivative positions:

	June 30,		December 31,
	2013		2012
Interest rate swaps	$	4,250	$	3,000
Cross-currency swaps		14,136		12,071
Foreign exchange contracts		4		51
Total	$	18,390	$	15,122

Following is the related hedged items affecting our financial position and performance:
Effect of Derivatives on the Consolidated Statements of Income
Fair Value Hedging Relationships	Three months ended				Six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	$	(63)	$	(76)	$	(87)	$	(137)
Gain (Loss) on long-term debt		63		76		87		137

In addition, the net swap settlements that accrued and settled in the quarter ended June 30 were offset against interest expense.

Cash Flow Hedging Relationships	Three months ended				Six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI	$	184	$	(160)	$	325	$	(165)
Interest rate locks:
Interest income (expense) reclassified from accumulated OCI into income		(12)		(11)		(23)		(20)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI		2		(5)		-		-

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Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2013

Other Comprehensive Income

Other Comprehensive Income

At June 30, 2013 and for the period ended:
			Foreign Currency Translation Adjustment			Net Unrealized Gain (Loss) on Available-for-Sale Securities			Net Unrealized Gains (Losses) on Cash Flow Hedges			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of January 1, 2013		$	(284)		$	272		$	(110)		$	5,358		$	5,236
Other comprehensive income (loss) before reclassifications			(117)			86			210			-			179
Amounts reclassified from accumulated OCI			34	1		(10)	2		15	3		(347)	4		(308)
Net other comprehensive income (loss)			(83)			76			225			(347)			(129)
Balance as of June 30, 2013		$	(367)		$	348		$	115		$	5,011		$	5,107
1	Pre-tax translation loss reclassifications are included in Other income (expense) - net in the consolidated statements of income.
2	Pre-tax gains are included in Other income (expense) - net in the consolidated statements of income.
3	(Gains) losses are included in interest expense in the consolidated statements of income. See Note 6 for additional information.
4	Prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor, are
	included in Cost of services and sales and Selling, general and administrative in the consolidated statements of income
	(see Note 5). Actuarial loss reclassifications related to our equity method investees are included in Other income (expense) - net
	in the consolidated statements of income.

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Fair Value Measurements And Disclosure (Policy)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Derivatives, Offsetting Fair Value Amounts, Policy [Policy Text Block]

We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative instruments.

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Document And Entity Information In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Document Period End Date	Jun. 30, 2013
Current Fiscal Year End Date	--12-31
Entity Central Index Key	0000732717
Entity Filer Category	Large Accelerated Filer
Entity Registrant Name	AT&T Inc.
Entity Common Stock, Shares Outstanding		5,311

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share

Reconciliation Of The Numerators And Denominators Of Basic Earnings Per Share And Diluted Earnings Per Share

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Numerators
Numerator for basic earnings per share:
Net Income	$	3,880	$	3,965	$	7,653	$	7,617
Net income attributable to noncontrolling interest		(58)		(63)		(131)		(131)
Net Income attributable to AT&T		3,822		3,902		7,522		7,486
Dilutive potential common shares:
Share-based payment		2		2		6		6
Numerator for diluted earnings per share	$	3,824	$	3,904	$	7,528	$	7,492
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		5,381		5,855		5,446		5,886
Dilutive potential common shares:
Share-based payment		16		21		17		21
Denominator for diluted earnings per share		5,397		5,876		5,463		5,907
Basic earnings per share attributable to AT&T	$	0.71	$	0.67	$	1.38	$	1.27
Diluted earnings per share attributable to AT&T	$	0.71	$	0.66	$	1.38	$	1.27