8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) October 24, 2018

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-8610	43-1301883
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

208 S. Akard St., Dallas, Texas	75202
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (210) 821-4105

__________________________________

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 8.01  Other Events.

Throughout this document, AT&T Inc. is referred to as “we” or “AT&T.” AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries.

Overview

We announced on October 24, 2018 that third-quarter 2018 net income attributable to AT&T totaled $4.7 billion, or $0.65 per diluted share, reflecting our acquisition of Time Warner Inc. (Time Warner), favorable impacts from U.S. corporate tax reform and new revenue accounting rules, compared to $3.0 billion, or $0.49 per diluted share in the third quarter of 2017. Third-quarter 2018 revenues were $45.7 billion, up 15.3 percent from the third-quarter 2017. Third-quarter revenues reflect increased revenues primarily from our acquisition of Time Warner and higher equipment revenues. Revenue increases were partially offset by our adoption of a new revenue accounting standard, including the netting of approximately $920 million Universal Service Fund (USF) fees in the third quarter of 2018, and continued declines in video and legacy services. Compared with results for the third quarter of 2017, current year operating expenses were $38.5 billion, up 13.6 percent; operating income was $7.3 billion, up 25.2 percent; and AT&T’s operating income margin was 15.9 percent, compared to 14.6 percent. Third-quarter 2018 cash from operating activities was $12.3 billion, up $1.5 billion when compared to the third quarter of 2017, due to contributions from acquired businesses.

We reported a net gain of 4.3 million North American wireless subscribers in the third quarter of 2018, of which 3.4 million were domestic. At September 30, 2018, our North American wireless customer base was approximately 167.6 million compared to 152.2 million in the prior year, and our domestic wireless subscribers totaled 150.3 million compared to 138.4 million. During the third quarter, net adds in North America were as follows:

● Branded net adds (combined postpaid and prepaid) were 1.2 million, of which 338,000 were domestic.

o Prepaid subscriber net adds were 1.4 million, of which 570,000 were domestic.

o Postpaid subscriber net adds were a loss of 159,000, of which 232,000 were domestic.

● Total domestic postpaid tablet and computing device net adds were a loss of 420,000.

● Reseller net adds were a loss of 402,000, with 434,000 in the U.S.

● Connected device net adds were 3.5 million, 2.2 million of which were primarily attributable to wholesale connected cars.

We offer subscribers the choice to purchase devices on installment (AT&T Next) or to bring their own device (BYOD). During the third quarter of 2018, we sold 4.0 million smartphones under our AT&T Next program and had BYOD gross adds of 545,000. Sales under our equipment installment programs represented nearly 80 percent of all postpaid smartphone gross adds and upgrades, consistent with the prior year. At September 30, 2018, about 52 percent of the postpaid smartphone base is on AT&T Next, consistent with the prior year.

At September 30, 2018, we had 38.8 million video subscribers (including 1.9 million DIRECTV NOW) compared with 38.6 million at September 30, 2017. Including the impact of gains from our over-the-top (OTT) video service, DIRECTV NOW, total video subscribers decreased by 369,000 in the third quarter of 2018, of which 296,000 were in the U.S. (including Entertainment Group and Business Wireline subscribers).

Our total broadband connections were 15.7 million at September 30, 2018, and 15.7 million at September 30, 2017. During the third quarter, we added 35,000 IP broadband subscribers, for a total of 14.7 million at September 30, 2018. Total broadband net adds were a loss of 25,000 in the quarter.

At September 30, 2018, our total switched access lines were 10.4 million compared with 12.2 million at September 30, 2017. The number of U-verse voice connections (which use VoIP technology and therefore are not included in the access line total) decreased by 175,000 in the quarter, totaling 5.3 million at September 30, 2018, compared to 5.8 million at September 30, 2017.

Segment Summary

During the third-quarter of 2018, we announced that, following our June 14, 2018 acquisition of Time Warner and effective for the quarter ended September 30, 2018, we revised our operating segments to align with the new management structure and organizational responsibilities. Our new reportable segments are: Communications, WarnerMedia, Latin America and Xandr.

We analyze our segments based on segment contribution, which consists of operating income, excluding acquisition-related costs and other significant items, and equity in net income (loss) of affiliates for investments managed within each segment.

Communications

Our Communications segment consists of our Mobility, Entertainment Group and Business Wireline business units. Third-quarter 2018 operating revenues were $36.2 billion, down 2.4 percent versus third-quarter 2017, with segment operating contribution of $8.2 billion, up 1.4% versus the year-ago quarter. Our adoption of new revenue accounting rules reduced third-quarter 2018 revenues by $836 million and increased operating contribution by $584 million. The Communications operating income margin was 22.6 percent, compared to 21.7 percent in the year-earlier quarter.

Mobility

Mobility revenues for the third quarter of 2018 were $17.9 billion, up 3.3 percent versus the third quarter of 2017, driven by device sales that were partially offset by revenue declines resulting from our election to net USF fees. Mobility operating expenses totaled $12.3 billion, up 2.5 percent versus the third quarter of 2017. The increase was largely driven equipment expense associated with higher device sales, partially offset by our adoption of new accounting rules that resulted in the netting of USF fees and commission deferrals. Mobility’s operating income margin was 31.2 percent compared to 30.7 percent in the year-ago quarter.

For the quarter ended September 30, 2018, postpaid phone-only ARPU decreased 5.1 percent versus the year-earlier quarter, primarily due to new revenue accounting rules.

Postpaid phone only churn was 0.93 percent, compared to 0.84 percent in the third quarter of 2017. Total postpaid churn was 1.17 percent, compared to 1.06 percent in the year-ago quarter.

Entertainment Group

Entertainment Group (Entertainment) revenues for the third quarter of 2018 were $11.6 billion, down 7.0 percent versus the year-ago quarter reflecting continued pressure in video revenues from declines in linear video subscribers and the revenue impact of a significant pay-per-view event in the prior year. Our adoption of the new revenue accounting standard, including changes in our USF policy, also pressured revenues in the third quarter of 2018. Entertainment operating expenses totaled $10.5 billion, down 6.2 percent versus the third quarter of 2017. The decrease was largely driven by commission deferrals resulting from new accounting rules, cost initiatives and lower volumes that were partially offset by content-cost increases and an additional week of NFL SUNDAY TICKET. The Entertainment operating income margin was 9.5 percent compared to 10.3 percent in the year-earlier quarter.

At September 30, 2018, Entertainment revenue connections included:

● Approximately 25.2 million video connections (including 1.9 million DIRECTV NOW subscribers) at September 30, 2018 compared to 25.1 million at September 30, 2017. During the third quarter of 2018, including the impact of gains from DIRECTV NOW, total video subscribers decreased 297,000. DIRECTV NOW subscribers included approximately 46,000 on free or substantially free trials. At September 30, 2018 and 2017, about 84 percent of traditional video subscribers are on the satellite platform.

● Approximately 14.4 million broadband connections at September 30, 2018 compared to 14.3 million at September 30, 2017. During the third quarter, we added 31,000 IP broadband subscribers, for a total of 13.7 million at September 30, 2018. Total broadband subscribers decreased 14,000 in the quarter.

● Approximately 8.9 million wired voice connections at September 30, 2018 compared to 10.3 million at September 30, 2017. Voice connections include switched access lines and VoIP connections.

Business Wireline

Business Wireline (Business) revenues for the third quarter of 2018 were $6.7 billion, down 7.9 percent versus the year-ago quarter reflecting continued declines in legacy service revenues, partially offset by growth in strategic services. Business operating expenses totaled $5.2 billion, down 10.3 percent versus the third quarter of 2017. The decrease was largely driven by our adoption of new accounting rules, which included our policy election to record USF fees on a net basis, and cost efficiencies. The Business operating income margin was 22.0 percent compared to 20.0 percent in the year-earlier quarter.

During the third quarter of 2018, we added 5,000 high-speed internet business subscribers, bringing total business IP broadband to 1.0 million subscribers. Total business broadband had a loss of 11,000 subscribers in the quarter.

WarnerMedia

Our WarnerMedia segment consists of our Turner, Home Box Office and Warner Bros. business units. Third-quarter 2018 operating revenues were $8.2 billion, with segment operating contribution of $2.5 billion and an operating income margin of 31.3 percent. Our WarnerMedia segment does not include results from Time Warner operations for the periods prior to our June 14, 2018 acquisition.

Turner

Turner is comprised of the WarnerMedia businesses managed by Turner as well as our Regional Sports Networks (RSN), which represents the 2017 results reported in this business unit.

Turner revenues for the third quarter of 2018 were $3.0 billion, compared to $107 million in the third quarter of 2017. Revenues during the quarter included $1.9 billion of subscription, $944 million of advertising and $189 million of content and other revenues. Turner operating expenses totaled $1.5 billion, compared to $98 million in the third quarter of 2017. Turner’s operating income margin was 48.3 percent compared to 8.4 percent in the year-ago quarter. The increases were predominantly due to our June 2018 acquisition of Time Warner.

Home Box Office (HBO)

HBO revenues for the third quarter of 2018 were $1.6 billion and included $1.5 billion of subscription and $127 million of content and other revenues. HBO operating expenses totaled $1.0 billion and the operating income margin was 38.2 percent. All increases were due to our June 2018 acquisition of Time Warner.

Warner Bros.

Warner Bros. revenues for the third quarter of 2018 were $3.7 billion and included revenues of $1.7 billion from theatrical product, $1.6 billion from television product and $435 million from video games and other. Warner Bros. operating expenses totaled $3.1 billion, and the operating income margin was 15.5 percent. All increases were due to our June 2018 acquisition of Time Warner.

Latin America

Our Latin America segment consists of our Vrio and Mexico business units and is subject to foreign currency fluctuations. Third-quarter 2018 operating revenues were $1.8 billion, down 12.7 percent versus the prior year, with segment operating contribution of $(201) million, down 60.8% versus third-quarter 2017. The Latin America operating income margin was (11.5) percent, compared to (6.8) percent in the year-earlier quarter.

Vrio

Video service revenues were $1.1 billion, down 19.1 percent versus the prior year, primarily resulting from foreign exchange pressure offset by pricing increases driven by macroeconomic conditions. Operating expenses were $1.0 billion, down 18.4 percent and Vrio’s operating income margin was 5.2 percent, compared to 6.0 percent in the year-earlier quarter.

We had approximately 13.6 million Latin America video connections at September 30, 2018 compared to 13.5 million at September 30, 2017. During the third quarter of 2018, video net adds were a loss of 73,000.

Mexico

Wireless revenues were $731 million, down 0.7 percent when compared to the third quarter of 2017. Decreased revenues were largely due to competitive pricing, the shutdown of a wholesale business in the fourth-quarter of 2017 and our adoption of the new revenue accounting standard, partially offset by gains in equipment revenues. Operating expenses were $1.0 billion, up 4.0 percent and Mexico’s operating income margin was (36.5) percent, compared to (30.4) percent in the year-earlier quarter.

We had approximately 17.3 million Mexican wireless subscribers at September 30, 2018 compared to 13.8 million at September 30, 2017. During the third quarter of 2018, we had branded net adds of 875,000 (prepaid net adds were 802,000 and postpaid net adds were 73,000).

Xandr

Our Xandr segment provides advertising services utilizing data insights to develop higher value targeted advertising. Certain revenues in this segment are also reported by the Communications segment and are eliminated upon consolidation. Third-quarter 2018 operating revenues were $445 million, up 33.6 percent versus the prior year, reflecting the acquisition of AppNexus. Xandr segment operating contribution was $333 million, up 13.3% versus third-quarter 2017. The Xandr segment operating income margin was 74.8 percent, compared to 88.3 percent in the year-earlier quarter.

Supplemental Discussions

As a supplemental discussion of our operating results, for comparison purposes, we are providing (1) our AT&T Business Solutions results which include both wireless and wireline operations and (2) a combined view of reported advertising revenues across all segments of AT&T. A reconciliation of the non-GAAP numbers in this supplemental discussion is attached as exhibit 99.2 hereto.

AT&T Business Solutions

Revenues from AT&T Business Solutions for the third quarter of 2018 were $9.2 billion, down 4.9 percent versus the year-ago quarter driven by our adoption of a new revenue accounting standard, which included changes in our USF policy, and declines in our legacy services. Partially offsetting the decreases were higher wireless revenues and growth in strategic services. Operating expenses totaled $7.1 billion, down 6.1 percent versus the third quarter of 2017, largely due to commission deferrals resulting from new accounting rules and increased cost efficiencies, partially offset by wireless sales costs. AT&T Business Solutions operating income margin was 22.6 percent, compared to 21.6 percent in the year-earlier quarter.

AT&T Total Advertising Revenues

Total AT&T Advertising revenues for the third quarter of 2018 were $1.5 billion compared to $389 million in the year-ago quarter, with the increase primarily driven by our acquisition of Time Warner, primarily from Turner.

Supplemental Segment Results

As a supplemental presentation of our operating results, we are providing certain segment and business unit results under the comparative historical accounting method prior to our adoption of Financial Accounting Standards Board Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” as modified (ASC 606), which is included in Exhibit 99.1 hereto.

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this filing contains financial estimates and other forward-looking statements that are subject to risks and uncertainties. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this filing based on new information or otherwise.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are filed as part of this report:

(d)   Exhibits

99.1  AT&T Inc. selected financial statements and operating data.

99.2  Discussion and reconciliation of non-GAAP measures.

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 hereunto duly authorized.

	AT&T INC.
Date: October 24, 2018	By:/s/Debra L. Dial                                   .   Debra L. Dial Senior Vice President and Controller

EX-99.1

AT&T Inc.
Financial Data
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Third Quarter						Nine-Month Period
		2018		2017 As Adjusted	Percent Change			2018		2017 As Adjusted	Percent Change
Operating Revenues
Service	$	41,297	$	36,378	13.5	%	$	109,849	$	109,372	0.4	%
Equipment		4,442		3,290	35.0	%		12,914		9,498	36.0	%
Total Operating Revenues		45,739		39,668	15.3	%		122,763		118,870	3.3	%
Operating Expenses
Cost of revenues
Equipment		4,828		4,191	15.2	%		14,053		12,177	15.4	%
Broadcast, programming and operations		7,227		5,284	36.8	%		17,842		15,156	17.7	%
Other cost of revenues (exclusive of depreciation   and amortization shown separately below)		8,651		9,694	(10.8)	%		24,215		28,551	(15.2)	%
Selling, general and administrative		9,598		8,650	11.0	%		26,179		25,981	0.8	%
Depreciation and amortization		8,166		6,042	35.2	%		20,538		18,316	12.1	%
Total Operating Expenses		38,470		33,861	13.6	%		102,827		100,181	2.6	%
Operating Income		7,269		5,807	25.2	%		19,936		18,689	6.7	%
Interest Expense		(2,051)		(1,686)	21.6	%		(5,845)		(4,374)	33.6	%
Equity in Net Income (Loss) of Affiliates		(64)		11	-	%		(71)		(148)	52.0	%
Other Income (Expense) - Net		1,053		842	25.1	%		5,108		2,255	-	%
Income Before Income Taxes		6,207		4,974	24.8	%		19,128		16,422	16.5	%
Income Tax Expense		1,391		1,851	(24.9)	%		4,305		5,711	(24.6)	%
Net Income		4,816		3,123	54.2	%		14,823		10,711	38.4	%
Less: Net Income Attributable to     Noncontrolling Interest		(98)		(94)	(4.3)	%		(311)		(298)	(4.4)	%
Net Income Attributable to AT&T	$	4,718	$	3,029	55.8	%	$	14,512	$	10,413	39.4	%
Basic Earnings Per Share Attributable to AT&T	$	0.65	$	0.49	32.7	%	$	2.19	$	1.69	29.6	%
Weighted Average Common        Shares Outstanding (000,000)		7,284		6,162	18.2	%		6,603		6,164	7.1	%
Diluted Earnings Per Share Attributable to AT&T	$	0.65	$	0.49	32.7	%	$	2.19	$	1.69	29.6	%
Weighted Average Common         Shares Outstanding with Dilution (000,000)		7,320		6,182	18.4	%		6,630		6,184	7.2	%

1

AT&T Inc.
Financial Data
Consolidated Balance Sheets
Dollars in millions
Unaudited		Sep. 30,		Dec. 31,
		2018		2017
Assets
Current Assets
Cash and cash equivalents	$	8,657	$	50,498
Accounts receivable - net of allowances for doubtful accounts of $845 and $663		26,312		16,522
Prepaid expenses		1,860		1,369
Other current assets		16,278		10,757
Total current assets		53,107		79,146
Noncurrent Inventories and Theatrical Film and Television Production Costs		7,221		-
Property, Plant and Equipment - Net		130,348		125,222
Goodwill		146,475		105,449
Licenses		96,077		96,136
Trademarks and Trade Names - Net		24,389		7,021
Distribution Networks		16,962		-
Other Intangible Assets - Net		28,673		11,119
Investments in and Advances to Equity Affiliates		6,128		1,560
Other Assets		25,490		18,444
Total Assets	$	534,870	$	444,097
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	14,905	$	38,374
Accounts payable and accrued liabilities		39,375		34,470
Advanced billing and customer deposits		6,045		4,213
Accrued taxes		1,460		1,262
Dividends payable		3,635		3,070
Total current liabilities		65,420		81,389
Long-Term Debt		168,513		125,972
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		60,495		43,207
Postemployment benefit obligation		28,981		31,775
Other noncurrent liabilities		26,490		19,747
Total deferred credits and other noncurrent liabilities		115,966		94,729
Stockholders' Equity
Common stock		7,621		6,495
Additional paid-in capital		125,706		89,563
Retained earnings		57,624		50,500
Treasury stock		(12,486)		(12,714)
Accumulated other comprehensive income		5,383		7,017
Noncontrolling interest		1,123		1,146
Total stockholders' equity		184,971		142,007
Total Liabilities and Stockholders' Equity	$	534,870	$	444,097

2

AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited		Nine-Month Period
			2018		2017 As Adjusted
Operating Activities
Net income		$	14,823	$	10,711
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		20,538		18,316
	Amortization of film and television costs		1,608		-
	Undistributed earnings from investments in equity affiliates		312		171
	Provision for uncollectible accounts		1,240		1,216
	Deferred income tax expense		2,934		3,254
	Net (gain) loss from sale of investments, net of impairments		(501)		(114)
	Actuarial (gain) loss on pension and postretirement benefits		(2,726)		(259)
Changes in operating assets and liabilities:
	Accounts receivable		(1,018)		(652)
	Other current assets, inventories and theatrical film and television production costs		(2,729)		(106)
	Accounts payable and other accrued liabilities		(1,385)		(1,437)
	Equipment installment receivables and related sales		220		451
	Deferred customer contract acquisition and fulfillment costs		(2,657)		(1,102)
Retirement benefit funding			(420)		(420)
Other - net			1,283		(1,556)
Total adjustments			16,699		17,762
Net Cash Provided by Operating Activities			31,522		28,473
Investing Activities
Capital expenditures:
	Purchase of property and equipment		(16,695)		(15,756)
	Interest during construction		(404)		(718)
Acquisitions, net of cash acquired			(43,116)		1,154
Dispositions			983		56
(Purchases) sales of securities, net			(234)		235
Advances to and investments in equity affiliates, net			(1,021)		-
Cash collections of deferred purchase price			500		665
Net Cash Used in Investing Activities			(59,987)		(14,364)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less			1		(2)
Issuance of other short-term borrowings			4,852		-
Repayment of other short-term borrowings			(2,147)		-
Issuance of long-term debt			38,325		46,761
Repayment of long-term debt			(43,579)		(10,309)
Purchase of treasury stock			(577)		(460)
Issuance of treasury stock			359		26
Dividends paid			(9,775)		(9,030)
Other			(1,138)		1,716
Net Cash (Used in) Provided by Financing Activities			(13,679)		28,702
Net (decrease) increase in cash and cash equivalents and restricted cash			(42,144)		42,811
Cash and cash equivalents and restricted cash beginning of year			50,932		5,935
Cash and Cash Equivalents and Restricted Cash End of Period		$	8,788	$	48,746

3

AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
Dollars in millions except per share amounts
Unaudited		Third Quarter				Percent		Nine-Month Period					Percent
			2018		2017	Change			2018		2017		Change
Capital expenditures
	Purchase of property and equipment	$	5,736	$	5,006	14.6	%	$	16,695	$	15,756		6.0	%
	Interest during construction		137		245	(44.1)	%		404		718		(43.7)	%
Total Capital Expenditures		$	5,873	$	5,251	11.8	%	$	17,099	$	16,474		3.8	%
Dividends Declared per Share		$	0.50	$	0.49	2.0	%	$	1.50	$	1.47		2.0	%
End of Period Common Shares Outstanding (000,000)									7,270		6,139		18.4	%
Debt Ratio									49.8	%	56.4	%	(660)	BP
Total Employees									269,280		256,800		4.9	%
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								Nine-Month Period					Percent
									2018		2017		Change
Wireless Subscribers
	Domestic								150,252		138,445		8.5	%
	Mexico								17,305		13,779		25.6	%
Total Wireless Subscribers									167,557		152,224		10.1	%
Total Branded Wireless Subscribers									110,982		105,717		5.0	%
Video Connections
	Domestic								25,176		25,110		0.3	%
	Latin America								13,640		13,490		1.1	%
Total Video Connections									38,816		38,600		0.6	%
Broadband Connections
	IP								14,744		14,384		2.5	%
	DSL								1,002		1,331		(24.7)	%
Total Broadband Connections									15,746		15,715		0.2	%
Voice Connections
	Network Access Lines								10,399		12,249		(15.1)	%
	U-verse  VoIP Connections								5,274		5,774		(8.7)	%
Total Retail Voice Connections									15,673		18,023		(13.0)	%
		Third Quarter				Percent		Nine-Month Period					Percent
			2018		2017	Change			2018		2017		Change
Wireless Net Additions
	Domestic		3,363		2,341	43.7	%		9,057		6,717		34.8	%
	Mexico		907		697	30.1	%		2,206		1,806		22.1	%
Total Wireless Net Additions			4,270		3,038	40.6	%		11,263		8,523		32.1	%
Total Branded Wireless Net Additions			1,213		1,173	3.4	%		3,351		2,812		19.2	%
Video Net Additions
	Domestic		(296)		(90)	-	%		(93)		(450)		79.3	%
	Latin America		(73)		(132)	44.7	%		52		(97)		-	%
Total Video Net Additions			(369)		(222)	(66.2)	%		(41)		(547)		92.5	%
Broadband Net Additions
	IP		35		150	(76.7)	%		257		520		(50.6)	%
	DSL		(60)		(121)	50.4	%		(230)		(410)		43.9	%
Total Broadband Net Additions			(25)		29	-	%		27		110		(75.5)	%

4

COMMUNICATIONS SEGMENT
The Communications segment provides wireless and wireline telecom, video and broadband services to consumers located in the U.S. or in U.S. territories and businesses globally. The Communications segment contains three reporting units: Mobility, Entertainment Group, and Business Wireline.
Segment Results
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Mobility	$	17,938	$	17,370	3.3	%	$	52,575	$	51,922	1.3	%
	Entertainment Group		11,589		12,467	(7.0)	%		34,498		37,435	(7.8)	%
	Business Wireline		6,703		7,278	(7.9)	%		20,100		21,911	(8.3)	%
Total Segment Operating Revenues			36,230		37,115	(2.4)	%		107,173		111,268	(3.7)	%
Segment Operating Contribution
	Mobility		5,603		5,333	5.1	%		16,267		15,929	2.1	%
	Entertainment Group		1,104		1,283	(14.0)	%		3,888		4,470	(13.0)	%
	Business Wireline		1,475		1,455	1.4	%		4,468		4,422	1.0	%
Total Segment Operating Contribution		$	8,182	$	8,071	1.4	%	$	24,623	$	24,821	(0.8)	%

Mobility
Mobility provides nationwide wireless service and equipment.
Mobility Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Service	$	13,989	$	14,475		(3.4)	%	$	41,074	$	43,414		(5.4)	%
	Equipment		3,949		2,895		36.4	%		11,501		8,508		35.2	%
Total Operating Revenues			17,938		17,370		3.3	%		52,575		51,922		1.3	%
Operating Expenses
Operations and support			10,255		10,029		2.3	%		30,020		30,005		-	%
Depreciation and amortization			2,079		2,008		3.5	%		6,287		5,988		5.0	%
Total Operating Expenses			12,334		12,037		2.5	%		36,307		35,993		0.9	%
Operating Income			5,604		5,333		5.1	%		16,268		15,929		2.1	%
Equity in Net Income (Loss) of Affiliates			(1)		-		-	%		(1)		-		-	%
Operating  Contribution		$	5,603	$	5,333		5.1	%	$	16,267	$	15,929		2.1	%
Operating Income Margin			31.2	%	30.7	%	50	BP		30.9	%	30.7	%	20	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Nine-Month Period					Percent
										2018		2017		Change
Mobility Subscribers
	Postpaid									76,996		77,034		-	%
	Prepaid									16,894		15,136		11.6	%
Branded										93,890		92,170		1.9	%
Reseller										8,183		9,877		(17.2)	%
Connected Devices										48,179		36,398		32.4	%
Total Mobility Subscribers										150,252		138,445		8.5	%
		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Mobility Net Additions
	Postpaid		(232)		134		-	%		(110)		83		-	%
	Prepaid		570		324		75.9	%		1,264		873		44.8	%
Branded			338		458		(26.2)	%		1,154		956		20.7	%
Reseller			(434)		(391)		(11.0)	%		(1,266)		(1,341)		5.6	%
Connected Devices			3,459		2,274		52.1	%		9,169		7,102		29.1	%
Total Mobility Net Additions			3,363		2,341		43.7	%		9,057		6,717		34.8	%
Branded Churn			1.70	%	1.70	%	-	BP		1.62	%	1.66	%	(4)	BP
Postpaid Churn			1.17	%	1.06	%	11	BP		1.08	%	1.06	%	2	BP
Postpaid Phone-Only Churn			0.93	%	0.84	%	9	BP		0.87	%	0.84	%	3	BP

5

Entertainment Group
Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communication services primarily to residential customers. This business unit also sells advertising on DIRECTV and U-verse distribution platforms.
Entertainment Group Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Video entertainment	$	8,283	$	9,052		(8.5)	%	$	24,681	$	26,967		(8.5)	%
	High-speed internet		2,045		1,916		6.7	%		5,904		5,784		2.1	%
	Legacy voice and data services		740		913		(18.9)	%		2,317		2,889		(19.8)	%
	Other service and equipment		521		586		(11.1)	%		1,596		1,795		(11.1)	%
Total Operating Revenues			11,589		12,467		(7.0)	%		34,498		37,435		(7.8)	%
Operating Expenses
Operations and support			9,155		9,804		(6.6)	%		26,623		28,711		(7.3)	%
Depreciation and amortization			1,331		1,379		(3.5)	%		3,986		4,254		(6.3)	%
Total Operating Expenses			10,486		11,183		(6.2)	%		30,609		32,965		(7.1)	%
Operating Income			1,103		1,284		(14.1)	%		3,889		4,470		(13.0)	%
Equity in Net Income (Loss) of Affiliates			1		(1)		-	%		(1)		-		-	%
Operating Contribution		$	1,104	$	1,283		(14.0)	%	$	3,888	$	4,470		(13.0)	%
Operating Income Margin			9.5	%	10.3	%	(80)	BP		11.3	%	11.9	%	(60)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Nine-Month Period					Percent
										2018		2017		Change
Video Connections
	Satellite									19,625		20,605		(4.8)	%
	U-verse									3,669		3,691		(0.6)	%
	DIRECTV NOW									1,858		787		-	%
Total Video Connections										25,152		25,083		0.3	%
Broadband Connections
	IP									13,723		13,367		2.7	%
	DSL									718		964		(25.5)	%
Total Broadband Connections										14,441		14,331		0.8	%
Voice Connections
	Retail Consumer Switched Access Lines									4,144		4,996		(17.1)	%
	U-verse Consumer VoIP Connections									4,757		5,337		(10.9)	%
Total Retail Consumer Voice Connections										8,901		10,333		(13.9)	%
		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Video Net Additions1
	Satellite		(359)		(251)		(43.0)	%		(833)		(407)		-	%
	U-verse		13		(134)		-	%		38		(562)		-	%
	DIRECTV NOW		49		296		(83.4)	%		703		520		35.2	%
Total Video Net Additions			(297)		(89)		-	%		(92)		(449)		79.5	%
Broadband Net Additions
	IP		31		125		(75.2)	%		261		479		(45.5)	%
	DSL		(45)		(96)		53.1	%		(170)		(327)		48.0	%
Total Broadband Net Additions			(14)		29		-	%		91		152		(40.1)	%
	1 Includes the impact of customers that migrated to DIRECTV NOW.

6

Business Wireline
Business Wireline unit provides advanced IP-based services, as well as traditional data services to business customers.
Business Wireline Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Strategic services	$	3,059	$	3,018		1.4	%	$	9,168	$	8,880		3.2	%
	Legacy voice and data services		2,615		3,343		(21.8)	%		8,176		10,314		(20.7)	%
	Other service and equipment		1,029		917		12.2	%		2,756		2,717		1.4	%
Total Operating Revenues			6,703		7,278		(7.9)	%		20,100		21,911		(8.3)	%
Operating Expenses
Operations and support			4,030		4,635		(13.1)	%		12,084		13,906		(13.1)	%
Depreciation and amortization			1,197		1,189		0.7	%		3,547		3,583		(1.0)	%
Total Operating Expenses			5,227		5,824		(10.3)	%		15,631		17,489		(10.6)	%
Operating Income			1,476		1,454		1.5	%		4,469		4,422		1.1	%
Equity in Net Income (Loss) of Affiliates			(1)		1		-	%		(1)		-		-	%
Operating Contribution		$	1,475	$	1,455		1.4	%	$	4,468	$	4,422		1.0	%
Operating Income Margin			22.0	%	20.0	%	200	BP		22.2	%	20.2	%	200	BP

Business Solutions
As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship, and underscores the importance of mobile solutions to serving our business customers.
Business Solutions Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Wireless service	$	1,877	$	2,023		(7.2)	%	$	5,497	$	6,030		(8.8)	%
	Strategic services		3,059		3,018		1.4	%		9,168		8,880		3.2	%
	Legacy voice and data services		2,615		3,343		(21.8)	%		8,176		10,314		(20.7)	%
	Other service and equipment		1,029		917		12.2	%		2,756		2,717		1.4	%
	Wireless equipment		590		340		73.5	%		1,752		988		77.3	%
Total Operating Revenues			9,170		9,641		(4.9)	%		27,349		28,929		(5.5)	%
Operating Expenses
Operations and support			5,598		6,096		(8.2)	%		16,808		18,147		(7.4)	%
Depreciation and amortization			1,499		1,466		2.3	%		4,444		4,409		0.8	%
Total Operating Expenses			7,097		7,562		(6.1)	%		21,252		22,556		(5.8)	%
Operating Income			2,073		2,079		(0.3)	%		6,097		6,373		(4.3)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		-	%		(1)		-		-	%
Operating Contribution		$	2,072	$	2,079		(0.3)	%	$	6,096	$	6,373		(4.3)	%
Operating Income Margin			22.6	%	21.6	%	100	BP		22.3	%	22.0	%	30	BP

7

WARNERMEDIA  SEGMENT
The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. Results from AT&T's Regional Sports Network (RSN) and Otter Media Holdings are also included in the WarnerMedia segment. The WarnerMedia segment contains three business units: Turner, Home Box Office, and Warner Bros.
Segment Results
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Turner	$	2,988	$	107	-	%	$	3,767	$	323	-	%
	Home Box Office		1,644		-	-	%		1,925		-	-	%
	Warner Bros.		3,720		-	-	%		4,227		-	-	%
	Eliminations and other		(148)		-	-	%		(210)		-	-	%
Total Segment Operating Revenues			8,204		107	-	%		9,709		323	-	%
Segment Operating Contribution
	Turner		1,449		22	-	%		1,802		79	-	%
	Home Box Office		630		-	-	%		734		-	-	%
	Warner Bros.		553		-	-	%		642		-	-	%
	Eliminations and other		(104)		(20)	-	%		(186)		(58)	-	%
Total Segment Operating Contribution		$	2,528	$	2	-	%	$	2,992	$	21	-	%

Turner
Turner is comprised of the WarnerMedia businesses managed by Turner as well as our RSN. This business unit creates and programs branded news, entertainment, sports and kids multi-platform content that is sold to various distribution affiliates. Turner also sells advertising on its networks and digital properties.
Turner Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Subscription	$	1,855	$	90		-	%	$	2,363	$	271		-	%
	Advertising		944		17		-	%		1,181		52		-	%
	Content and other		189		-		-	%		223		-		-	%
Total Operating Revenues			2,988		107		-	%		3,767		323		-	%
Operating Expenses
Operations and support			1,487		97		-	%		1,933		273		-	%
Depreciation and amortization			59		1		-	%		71		3		-	%
Total Operating Expenses			1,546		98		-	%		2,004		276		-	%
Operating Income			1,442		9		-	%		1,763		47		-	%
Equity in Net Income of Affiliates			7		13		(46.2)	%		39		32		21.9	%
Operating Contribution		$	1,449	$	22		-	%	$	1,802	$	79		-	%
Operating Income Margin			48.3	%	8.4	%	-	BP		46.8	%	14.6	%	-	BP

8

Home Box Office
Home Box Office consists of premium pay television and OTT services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment.
Home Box Office Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Subscription	$	1,517	$	-		-	%	$	1,787	$	-		-	%
	Content and other		127		-		-	%		138		-		-	%
Total Operating Revenues			1,644		-		-	%		1,925		-		-	%
Operating Expenses
Operations and support			991		-		-	%		1,162		-		-	%
Depreciation and amortization			25		-		-	%		30		-		-	%
Total Operating Expenses			1,016		-		-	%		1,192		-		-	%
Operating Income			628		-		-	%		733		-		-	%
Equity in Net Income of Affiliates			2		-		-	%		1		-		-	%
Operating Contribution		$	630	$	-		-	%	$	734	$	-		-	%
Operating Income Margin			38.2	%	-	%	-	BP		38.1	%	-	%	-	BP

Warner Bros.
Warner Bros. consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.
Warner Bros. Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Theatrical product	$	1,694	$	-		-	%	$	1,917	$	-		-	%
	Television product		1,591		-		-	%		1,794		-		-	%
	Games and other		435		-		-	%		516		-		-	%
Total Operating Revenues			3,720		-		-	%		4,227		-		-	%
Operating Expenses
Operations and support			3,104		-		-	%		3,507		-		-	%
Depreciation and amortization			40		-		-	%		54		-		-	%
Total Operating Expenses			3,144		-		-	%		3,561		-		-	%
Operating Income			576		-		-	%		666		-		-	%
Equity in Net Income (Loss) of Affiliates			(23)		-		-	%		(24)		-		-	%
Operating Contribution		$	553	$	-		-	%	$	642	$	-		-	%
Operating Income Margin			15.5	%	-	%	-	BP		15.8	%	-	%	-	BP

9

LATIN AMERICA SEGMENT
The Latin America segment provides entertainment and wireless service outside of the U.S. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates. The Latin America segment contains two business units: Vrio and Mexico.
Segment Results
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Vrio	$	1,102	$	1,363	(19.1)	%	$	3,710	$	4,065	(8.7)	%
	Mexico		731		736	(0.7)	%		2,099		1,989	5.5	%
Total Segment Operating Revenues			1,833		2,099	(12.7)	%		5,809		6,054	(4.0)	%
Segment Operating Contribution
	Vrio		66		99	(33.3)	%		281		362	(22.4)	%
	Mexico		(267)		(224)	(19.2)	%		(743)		(619)	(20.0)	%
Total Segment Operating Contribution		$	(201)	$	(125)	(60.8)	%	$	(462)	$	(257)	(79.8)	%

Vrio
Vrio provides entertainment services to customers utilizing satellite technology in Latin America and the Caribbean.
Vrio Results
Dollars in millions
Unaudited	Third Quarter					Percent		Nine-Month Period					Percent
		2018		2017		Change			2018		2017		Change
Operating Revenues	$	1,102	$	1,363		(19.1)	%	$	3,710	$	4,065		(8.7)	%
Operating Expenses
Operations and support		877		1,075		(18.4)	%		2,894		3,123		(7.3)	%
Depreciation and amortization		168		206		(18.4)	%		559		642		(12.9)	%
Total Operating Expenses		1,045		1,281		(18.4)	%		3,453		3,765		(8.3)	%
Operating Income		57		82		(30.5)	%		257		300		(14.3)	%
Equity in Net Income of Affiliates		9		17		(47.1)	%		24		62		(61.3)	%
Operating Contribution	$	66	$	99		(33.3)	%	$	281	$	362		(22.4)	%
Operating Income Margin		5.2	%	6.0	%	(80)	BP		6.9	%	7.4	%	(50)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								Nine-Month Period					Percent
									2018		2017		Change
Vrio Satellite Subscribers									13,640		13,490		1.1	%
		Third Quarter							Nine-Month Period
		2018		2017					2,018		2,017
Vrio Satellite Net Subscriber Additions		(73)		(132)		44.7	%		52		(97)		-	%

10

Mexico
Mexico provides wireless services and equipment to customers in Mexico.
Mexico Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Wireless service	$	440	$	536		(17.9)	%	$	1,261	$	1,546		(18.4)	%
	Wireless equipment		291		200		45.5	%		838		443		89.2	%
Total Operating Revenues			731		736		(0.7)	%		2,099		1,989		5.5	%
Operating Expenses
Operations and support			869		862		0.8	%		2,459		2,345		4.9	%
Depreciation and amortization			129		98		31.6	%		383		263		45.6	%
Total Operating Expenses			998		960		4.0	%		2,842		2,608		9.0	%
Operating Income (Loss)			(267)		(224)		(19.2)	%		(743)		(619)		(20.0)	%
Operating Contribution		$	(267)	$	(224)		(19.2)	%	$	(743)	$	(619)		(20.0)	%
Operating Income Margin			(36.5)	%	(30.4)	%	(610)	BP		(35.4)	%	(31.1)	%	(430)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Nine-Month Period					Percent
										2018		2017		Change
Mexico Wireless Subscribers
	Postpaid									5,822		5,316		9.5	%
	Prepaid									11,270		8,231		36.9	%
Branded										17,092		13,547		26.2	%
Reseller										213		232		(8.2)	%
Total Mexico Wireless Subscribers										17,305		13,779		25.6	%
		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Mexico Wireless Net Additions
	Postpaid		73		129		(43.4)	%		324		351		(7.7)	%
	Prepaid		802		585		37.1	%		1,873		1,504		24.5	%
Branded			875		714		22.5	%		2,197		1,855		18.4	%
Reseller			32		(17)		-	%		9		(49)		-	%
Total Mexico Wireless Net Subscriber Additions			907		697		30.1	%		2,206		1,806		22.1	%

11

XANDR SEGMENT
The Xandr segment provides advertising services. These services utilize data insights to develop higher value targeted advertising. Certain revenues in this segment are also reported by the Communications segment and are eliminated upon consolidation.
Segment Operating Results
Dollars in millions
Unaudited	Third Quarter					Percent		Nine-Month Period					Percent
		2018		2017		Change			2018		2017		Change
Segment Operating Revenues	$	445	$	333		33.6	%	$	1,174	$	992		18.3	%
Segment Operating Expenses
Operations and support		109		39		-	%		218		118		84.7	%
Depreciation and amortization		3		-		-	%		4		1		-	%
Total Segment Operating Expenses		112		39		-	%		222		119		86.6	%
Operating Income		333		294		13.3	%		952		873		9.0	%
Segment Operating Contribution	$	333	$	294		13.3	%	$	952	$	873		9.0	%
Segment Operating Income Margin		74.8	%	88.3	%	(1,350)	BP		81.1	%	88.0	%	(690)	BP

Supplemental AT&T Advertising Revenues
As a supplemental presentation to our Xandr segment operating results, we are providing a view of total advertising revenues generated by AT&T, which combines the advertising revenues recorded across all operating segments. This combined view presents the entire portfolio of revenues generated from AT&T assets and represents a significant strategic initiative and growth opportunity for AT&T.
Advertising Revenues
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Operating Revenues
	WarnerMedia	$	983	$	17	-	%	$	1,222	$	52	-	%
	Communications		478		368	29.9	%		1,284		1,093	17.5	%
	Xandr		445		333	33.6	%		1,174		992	18.3	%
	Eliminations		(401)		(329)	(21.9)	%		(1,122)		(980)	(14.5)	%
Total Advertising Revenues		$	1,505	$	389	-	%	$	2,558	$	1,157	-	%

12

SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
September 30, 2018
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,938	$	10,255	$	7,683	$	2,079	$	5,604	$	(1)	$	5,603
Entertainment Group		11,589		9,155		2,434		1,331		1,103		1		1,104
Business Wireline		6,703		4,030		2,673		1,197		1,476		(1)		1,475
Total Communications		36,230		23,440		12,790		4,607		8,183		(1)		8,182
WarnerMedia
Turner		2,988		1,487		1,501		59		1,442		7		1,449
Home Box Office		1,644		991		653		25		628		2		630
Warner Bros.		3,720		3,104		616		40		576		(23)		553
Other		(148)		(79)		(69)		10		(79)		(25)		(104)
Total WarnerMedia		8,204		5,503		2,701		134		2,567		(39)		2,528
Latin America
Vrio		1,102		877		225		168		57		9		66
Mexico		731		869		(138)		129		(267)		-		(267)
Total Latin America		1,833		1,746		87		297		(210)		9		(201)
Xandr		445		109		336		3		333		-		333
Segment Total		46,712		30,798		15,914		5,041		10,873		(31)		10,842
Corporate and Other
Corporate		308		(18)		326		797		(471)
Acquisition-related items		-		362		(362)		2,329		(2,691)
Certain significant items		-		75		(75)		-		(75)
Eliminations and consolidations		(1,281)		(913)		(368)		(1)		(367)
AT&T Inc.	$	45,739	$	30,304	$	15,435	$	8,166	$	7,269
September 30, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,370	$	10,029	$	7,341	$	2,008	$	5,333	$	-	$	5,333
Entertainment Group		12,467		9,804		2,663		1,379		1,284		(1)		1,283
Business Wireline		7,278		4,635		2,643		1,189		1,454		1		1,455
Total Communications		37,115		24,468		12,647		4,576		8,071		-		8,071
WarnerMedia
Turner		107		97		10		1		9		13		22
Home Box Office		-		-		-		-		-		-		-
Warner Bros.		-		-		-		-		-		-		-
Other		-		1		(1)		-		(1)		(19)		(20)
Total WarnerMedia		107		98		9		1		8		(6)		2
Latin America
Vrio		1,363		1,075		288		206		82		17		99
Mexico		736		862		(126)		98		(224)		-		(224)
Total Latin America		2,099		1,937		162		304		(142)		17		(125)
Xandr		333		39		294		-		294		-		294
Segment Total		39,654		26,542		13,112		4,881		8,231		11		8,242
Corporate and Other
Corporate		382		801		(419)		24		(443)
Acquisition-related items		-		134		(134)		1,136		(1,270)
Certain significant items		(89)		325		(414)		1		(415)
Eliminations and consolidations		(279)		17		(296)		-		(296)
AT&T Inc.	$	39,668	$	27,819	$	11,849	$	6,042	$	5,807

13

SUPPLEMENTAL SEGMENT RECONCILIATION
Nine Months Ended
Dollars in millions
Unaudited
September 30, 2018
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	52,575	$	30,020	$	22,555	$	6,287	$	16,268	$	(1)	$	16,267
Entertainment Group		34,498		26,623		7,875		3,986		3,889		(1)		3,888
Business Wireline		20,100		12,084		8,016		3,547		4,469		(1)		4,468
Total Communications		107,173		68,727		38,446		13,820		24,626		(3)		24,623
WarnerMedia
Turner		3,767		1,933		1,834		71		1,763		39		1,802
Home Box Office		1,925		1,162		763		30		733		1		734
Warner Bros.		4,227		3,507		720		54		666		(24)		642
Other		(210)		(106)		(104)		11		(115)		(71)		(186)
Total WarnerMedia		9,709		6,496		3,213		166		3,047		(55)		2,992
Latin America
Vrio		3,710		2,894		816		559		257		24		281
Mexico		2,099		2,459		(360)		383		(743)		-		(743)
Total Latin America		5,809		5,353		456		942		(486)		24		(462)
Xandr		1,174		218		956		4		952		-		952
Segment Total		123,865		80,794		43,071		14,932		28,139		(34)		28,105
Corporate and Other
Corporate		961		1,378		(417)		938		(1,355)
Acquisition-related items		-		750		(750)		4,669		(5,419)
Certain significant items		-		407		(407)		-		(407)
Eliminations and consolidations		(2,063)		(1,040)		(1,023)		(1)		(1,022)
AT&T Inc.	$	122,763	$	82,289	$	40,474	$	20,538	$	19,936
September 30, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	51,922	$	30,005	$	21,917	$	5,988	$	15,929	$	-	$	15,929
Entertainment Group		37,435		28,711		8,724		4,254		4,470		-		4,470
Business Wireline		21,911		13,906		8,005		3,583		4,422		-		4,422
Total Communications		111,268		72,622		38,646		13,825		24,821		-		24,821
WarnerMedia
Turner		323		273		50		3		47		32		79
Home Box Office		-		-		-		-		-		-		-
Warner Bros.		-		-		-		-		-		-		-
Other		-		3		(3)		-		(3)		(55)		(58)
Total WarnerMedia		323		276		47		3		44		(23)		21
Latin America
Vrio		4,065		3,123		942		642		300		62		362
Mexico		1,989		2,345		(356)		263		(619)		-		(619)
Total Latin America		6,054		5,468		586		905		(319)		62		(257)
Xandr		992		118		874		1		873		-		873
Segment Total		118,637		78,484		40,153		14,734		25,419		39		25,458
Corporate and Other
Corporate		1,182		2,440		(1,258)		73		(1,331)
Acquisition-related items		-		622		(622)		3,508		(4,130)
Certain significant items		(89)		302		(391)		1		(392)
Eliminations and consolidations		(860)		17		(877)		-		(877)
AT&T Inc.	$	118,870	$	81,865	$	37,005	$	18,316	$	18,689

14

As a supplemental discussion of our operating results, we are providing results under the comparative historical accounting method prior to our adoption of ASC 606 and other accounting changes.
SUPPLEMENTAL INCOME STATEMENT
Supplemental Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited		Third Quarter
		2018		Accounting Impact		Historical 2018		2017	Percent Change
Operating Revenues
Service	$	41,297	$	(1,384)	$	42,681	$	36,378	17.3	%
Equipment		4,442		516		3,926		3,290	19.3	%
Total Operating Revenues		45,739		(868)		46,607		39,668	17.5	%
Operating Expenses
Cost of revenues
Equipment		4,828		-		4,828		4,191	15.2	%
Broadcast, programming and operations		7,227		-		7,227		5,284	36.8	%
Other cost of revenues (exclusive of depreciation           and amortization shown separately below)		8,651		(917)		9,568		9,694	(1.3)	%
Selling, general and administrative		9,598		(547)		10,145		8,650	17.3	%
Depreciation and amortization		8,166		-		8,166		6,042	35.2	%
Total Operating Expenses		38,470		(1,464)		39,934		33,861	17.9	%
Operating Income		7,269		596		6,673		5,807	14.9	%
Interest Expense		(2,051)		-		(2,051)		(1,686)	21.6	%
Equity in Net Income (Loss) of Affiliates		(64)		-		(64)		11	-	%
Other Income (Expense) - Net		1,053		-		1,053		842	25.1	%
Income Before Income Taxes		6,207		596		5,611		4,974	12.8	%
Income Tax Expense		1,391		146		1,245		1,851	(32.7)	%
Net Income		4,816		450		4,366		3,123	39.8	%
Less: Net Income Attributable to     Noncontrolling Interest		(98)		(5)		(93)		(94)	1.1	%
Net Income Attributable to AT&T	$	4,718	$	445	$	4,273	$	3,029	41.1	%
Basic Earnings Per Share Attributable to AT&T	$	0.65	$	0.06	$	0.59	$	0.49	20.4	%
Weighted Average Common        Shares Outstanding (000,000)		7,284		-		7,284		6,162	18.2	%
Diluted Earnings Per Share Attributable to AT&T	$	0.65	$	0.06	$	0.59	$	0.49	20.4	%
Weighted Average Common        Shares Outstanding with Dilution (000,000)		7,320		-		7,320		6,182	18.4	%

15

Supplemental Mobility
Supplemental Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Service	$	13,989	$	(821)	$	14,810	$	14,475		2.3	%
	Equipment		3,949		505		3,444		2,895		19.0	%
Total Operating Revenues			17,938		(316)		18,254		17,370		5.1	%
Operating Expenses
Operations and support			10,255		(650)		10,905		10,029		8.7	%
EBITDA			7,683		334		7,349		7,341		0.1	%
Depreciation and amortization			2,079		-		2,079		2,008		3.5	%
Total Operating Expenses			12,334		(650)		12,984		12,037		7.9	%
Operating Income			5,604		334		5,270		5,333		(1.2)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		(1)		-		-	%
Operating Contribution		$	5,603	$	334	$	5,269	$	5,333		(1.2)	%
Operating Income Margin			31.2	%			28.9	%	30.7	%	(180)	BP
EBITDA Margin			42.8	%			40.3	%	42.3	%	(200)	BP
EBITDA Service Margin			54.9	%			49.6	%	50.7	%	(110)	BP

Supplemental Entertainment Group
Supplemental Entertainment Group Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Video entertainment	$	8,283	$	(113)	$	8,396	$	9,052		(7.2)	%
	High-speed internet		2,045		-		2,045		1,916		6.7	%
	Legacy voice and data services		740		(29)		769		913		(15.8)	%
	Other service and equipment		521		(64)		585		586		(0.2)	%
Total Operating Revenues			11,589		(206)		11,795		12,467		(5.4)	%
Operating Expenses
Operations and support			9,155		(431)		9,586		9,804		(2.2)	%
EBITDA			2,434		225		2,209		2,663		(17.0)	%
Depreciation and amortization			1,331		-		1,331		1,379		(3.5)	%
Total Operating Expenses			10,486		(431)		10,917		11,183		(2.4)	%
Operating Income			1,103		225		878		1,284		(31.6)	%
Equity in Net Income (Loss) of Affiliates			1		-		1		(1)		-	%
Contribution		$	1,104	$	225	$	879	$	1,283		(31.5)	%
Operating Income Margin			9.5	%			7.4	%	10.3	%	(290)	BP
EBITDA Margin			21.0	%			18.7	%	21.4	%	(270)	BP

16

Supplemental Business Wireline
Supplemental Business Wireline Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Strategic services	$	3,059	$	(3)	$	3,062	$	3,018		1.5	%
	Legacy voice and data services		2,615		(242)		2,857		3,343		(14.5)	%
	Other service and equipment		1,029		(69)		1,098		917		19.7	%
Total Operating Revenues			6,703		(314)		7,017		7,278		(3.6)	%
Operating Expenses
Operations and support			4,030		(339)		4,369		4,635		(5.7)	%
EBITDA			2,673		25		2,648		2,643		0.2	%
Depreciation and amortization			1,197		-		1,197		1,189		0.7	%
Total Operating Expenses			5,227		(339)		5,566		5,824		(4.4)	%
Operating Income			1,476		25		1,451		1,454		(0.2)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		(1)		1		-	%
Operating Contribution		$	1,475	$	25	$	1,450	$	1,455		(0.3)	%
Operating Income Margin			22.0	%			20.7	%	20.0	%	70	BP
EBITDA Margin			39.9	%			37.7	%	36.3	%	140	BP

Supplemental Latin America
Supplemental Segment Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Segment Operating Revenues
	Vrio	$	1,102	$	-	$	1,102	$	1,363		(19.1)	%
	Mexico		731		(24)		755		736		2.6	%
Total Segment Operating Revenues			1,833		(24)		1,857		2,099		(11.5)	%
Segment Operating Expenses
Operations and support			1,746		(38)		1,784		1,937		(7.9)	%
EBITDA			87		14		73		162		(54.9)	%
Depreciation and amortization			297		-		297		304		(2.3)	%
Total Segment Operating Expenses			2,043		(38)		2,081		2,241		(7.1)	%
Segment Operating Income (Loss)			(210)		14		(224)		(142)		(57.7)	%
Equity in Net Income of Affiliates			9		-		9		17		(47.1)	%
Segment Contribution		$	(201)	$	14	$	(215)	$	(125)		(72.0)	%
Operating Income Margin			(11.5)	%			(12.1)	%	(6.8)	%	(530)	BP
EBITDA Margin			4.7	%			3.9	%	7.7	%	(380)	BP

17

Supplemental Business Solutions
As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship, and underscores the importance of mobile solutions to serving our business customers.
Supplemental Operating Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact			Historical 2018		2017		Percent Change
Operating Revenues
	Wireless service	$	1,877	$	(206)		$	2,083	$	2,023		3.0	%
	Strategic services		3,059		(3)			3,062		3,018		1.5	%
	Legacy voice and data services		2,615		(242)			2,857		3,343		(14.5)	%
	Other service and equipment		1,029		(69)			1,098		917		19.7	%
	Wireless equipment		590		167			423		340		24.4	%
Total Operating Revenues			9,170		(353)			9,523		9,641		(1.2)	%
Operating Expenses
Operations and support			5,598		(404)			6,002		6,096		(1.5)	%
EBITDA			3,572		51			3,521		3,545		(0.7)	%
Depreciation and amortization			1,499		-			1,499		1,466		2.3	%
Total Operating Expenses			7,097		(404)			7,501		7,562		(0.8)	%
Operating Income			2,073		51			2,022		2,079		(2.7)	%
Equity in Net Income (Loss) of Affiliates			(1)		-			(1)		-		-	%
Operating Contribution		$	2,072	$	51	$		2,021	$	2,079		(2.8)	%
Operating Income Margin			22.6	%				21.2	%	21.6	%	(40)	BP
EBITDA Margin			39.0	%				37.0	%	36.8	%	20	BP

18

EX-99.2

Discussion and Reconciliation of Non-GAAP Measures

Supplemental Operational Measures

We provide a supplemental discussion of our business solutions operations that is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
		Three Months Ended
		September 30, 2018								September 30, 2017
		Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	13,989	$	-	$	(12,112)	$	1,877	$	14,475	$	-	$	(12,452)	$	2,023
Strategic services		-		3,059		-		3,059		-		3,018		-		3,018
Legacy voice and data services		-		2,615		-		2,615		-		3,343		-		3,343
Other services and equipment		-		1,029		-		1,029		-		917		-		917
Wireless equipment		3,949		-		(3,359)		590		2,895		-		(2,555)		340
Total Operating Revenues		17,938		6,703		(15,471)		9,170		17,370		7,278		(15,007)		9,641
Operations and support		10,255		4,030		(8,687)		5,598		10,029		4,635		(8,568)		6,096
EBITDA		7,683		2,673		(6,784)		3,572		7,341		2,643		(6,439)		3,545
Depreciation and amortization		2,079		1,197		(1,777)		1,499		2,008		1,189		(1,731)		1,466
Total Operating Expenses		12,334		5,227		(10,464)		7,097		12,037		5,824		(10,299)		7,562
Operating Income	$	5,604	$	1,476	$	(5,007)	$	2,073	$	5,333	$	1,454	$	(4,708)	$	2,079
Equity in net Income of Affiliates		(1)		(1)		1		(1)		-		1		(1)		-
Contribution		5,603		1,475		(5,006)		2,072		5,333		1,455		(4,709)		2,079
1 Non-business wireless reported in the Communication segment under the Mobility business unit.
Supplemental Operational Measure
		Nine Months Ended
		September 30, 2018								September 30, 2017
		Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	41,074	$	-	$	(35,577)	$	5,497	$	43,414	$	-	$	(37,384)	$	6,030
Strategic services		-		9,168		-		9,168		-		8,880		-		8,880
Legacy voice and data services		-		8,176		-		8,176		-		10,314		-		10,314
Other services and equipment		-		2,756		-		2,756		-		2,717		-		2,717
Wireless equipment		11,501		-		(9,749)		1,752		8,508		-		(7,520)		988
Total Operating Revenues		52,575		20,100		(45,326)		27,349		51,922		21,911		(44,904)		28,929
Operating Expenses
Operations and support		30,020		12,084		(25,296)		16,808		30,005		13,906		(25,764)		18,147
EBITDA		22,555		8,016		(20,030)		10,541		21,917		8,005		(19,140)		10,782
Depreciation and amortization		6,287		3,547		(5,390)		4,444		5,988		3,583		(5,162)		4,409
Total Operating Expenses		36,307		15,631		(30,686)		21,252		35,993		17,489		(30,926)		22,556
Operating Income	$	16,268	$	4,469	$	(14,640)	$	6,097	$	15,929	$	4,422	$	(13,978)	$	6,373
Equity in net Income of Affiliates		(1)		(1)		1		(1)		-		-		-		-
Contribution		16,267		4,468		(14,639)		6,096		15,929		4,422		(13,978)		6,373
1 Non-business wireless reported in the Communication segment under the Mobility business unit.

1