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) July 24, 2019

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))

Securities registered pursuant to Section 12(b) of the Act

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
Common Shares (Par Value $1.00 Per Share)	T	New York Stock Exchange
Floating Rate AT&T Inc.	T 20C	New York Stock Exchange
Global Notes due August 3, 2020
1.875% AT&T Inc.	T 20	New York Stock Exchange
Global Notes due December 4, 2020

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
2.65% AT&T Inc.	T 21B	New York Stock Exchange
Global Notes due December 17, 2021
1.45% AT&T Inc.	T 22B	New York Stock Exchange
Global Notes due June 1, 2022
2.50% AT&T Inc.	T 23	New York Stock Exchange
Global Notes due March 15, 2023
2.75% AT&T Inc.	T 23C	New York Stock Exchange
Global Notes due May 19, 2023
Floating Rate AT&T Inc.	T23 D	New York Stock Exchange
Global Notes due September 5, 2023
1.05% AT&T Inc.	T 23E	New York Stock Exchange
Global Notes due September 5, 2023
1.30% AT&T Inc.	T 23A	New York Stock Exchange
Global Notes due September 5, 2023
1.950% AT&T Inc.	T 23F	New York Stock Exchange
Global Notes due September 15, 2023
2.40% AT&T Inc.	T 24A	New York Stock Exchange
Global Notes due March 15, 2024
3.50% AT&T Inc.	T 25	New York Stock Exchange
Global Notes due December 17, 2025
1.80% AT&T Inc.	T 26D	New York Stock Exchange
Global Notes due September 5, 2026
2.90% AT&T Inc.	T 26A	New York Stock Exchange
Global Notes due December 4, 2026
2.35% AT&T Inc.	T 29D	New York Stock Exchange
Global Notes due September 5, 2029
4.375% AT&T Inc.	T 29B	New York Stock Exchange
Global Notes due September 14, 2029
2.60% AT&T Inc.	T 29A	New York Stock Exchange
Global Notes due December 17, 2029

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
3.55% AT&T Inc.	T 32	New York Stock Exchange
Global Notes due December 17, 2032
5.20% AT&T Inc.	T 33	New York Stock Exchange
Global Notes due November 18, 2033
3.375% AT&T Inc.	T 34	New York Stock Exchange
Global Notes due March 15, 2034
2.45% AT&T Inc.	T 35	New York Stock Exchange
Global Notes due March 15, 2035
3.15% AT&T Inc.	T 36A	New York Stock Exchange
Global Notes due September 4, 2036
7.00% AT&T Inc.	T 40	New York Stock Exchange
Global Notes due April 30, 2040
4.25% AT&T Inc.	T 43	New York Stock Exchange
Global Notes due June 1, 2043
4.875% AT&T Inc.	T 44	New York Stock Exchange
Global Notes due June 1, 2044
5.35% AT&T Inc.	TBB	New York Stock Exchange
Global Notes due November 1, 2066
5.625% AT&T Inc.	TBC	New York Stock Exchange
Global Notes due August 1, 2067

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 2.02 Results of Operations and Financial Condition.

The registrant announced on July 24, 2019, its results of operations for the second quarter of 2019. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

(d)          Exhibits

99.1	Press release dated July 24, 2019 reporting financial results for the first quarter ended June 30, 2019.
99.2	AT&T Inc. selected financial statements and operating data.
99.3	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: July 24, 2019	By: /s/ Debra L. Dial                                           Debra L. Dial Senior Vice President and Controller

EX-99.1

AT&T Reports Second-Quarter Results

Second-Quarter Consolidated Results

● Diluted EPS of $0.51 as reported compared to $0.81 in the year-ago quarter

● Adjusted EPS of $0.89 compared to $0.91 in the year-ago quarter

● Consolidated revenues of $45.0 billion, up 15.3%

● Cash from operations of $14.3 billion, up 40% 

● Capital expenditures of $5.5 billion

● Free cash flow of $8.8 billion

Company Raises Free Cash Flow Guidance to $28 Billion Range¹;

Reaffirms Remainder of 2019 Guidance:

● Low single-digit adjusted EPS growth²;

● Dividend payout ratio in the 50s% range¹;

● End-of-year net debt to adjusted EBITDA in the 2.5x range;

● Gross capital investment in the $23 billion range³

Note: AT&T's second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, July 24, 2019. The webcast and related materials will be available on AT&T’s Investor Relations website at https://investors.att.com.

DALLAS, July 24, 2019— AT&T Inc. (NYSE:T) reported solid operating results in the second quarter, including consolidated revenue growth, expanding operating income margin and record operating and free cash flow.

“We’re halfway through the year and on track to deliver on all our 2019 priorities,” said Randall Stephenson, AT&T chairman and CEO. “We continue to pay down debt and are more confident than ever that we’ll meet our yearend deleveraging goal, and we’ll take a look at buying back stock.  Our FirstNet build is not only running ahead of schedule – it’s become a driver of our wireless network leadership in speed, reliability and network performance. It also sets us up to have nationwide commercially available 5G coverage in the first half of 2020.

“On top of all this, our operating teams continue to deliver solid results. Our wireless business grew revenues, profitability and phone customers, both postpaid and prepaid. WarnerMedia delivered another strong quarter with both revenue and operating income growth. And our Entertainment Group profitability continued to stabilize, and even grow. Across the board, it was a solid quarter that puts us in position to have a really strong year.”

Second-Quarter Results

Communications Highlights

● Mobility:

o Recognized as the nation’s fastest⁴, best⁵ and most reliable⁶ network

o Service revenues up 2.4%, operating income and EBITDA growth with 355,000 phone net adds

o  144,000 postpaid smartphones net adds

● 72,000 postpaid phone net adds

o 341,000 prepaid net adds of which 283,000 were phones

● Entertainment Group:

o 2.6% operating income growth with solid video and broadband ARPU gains

o 1.1% EBITDA growth as company targets stability

o Focus on long-term value customer base

● 21.6 million premium TV subscribers – 778,000 net loss

● 1.3 million DIRECTV NOW subscribers – 168,000 net loss

o AT&T TV, company’s new thin client video service, expected to begin trials in the third quarter

o IP broadband revenue growth of 6.5%; 318,000 AT&T Fiber gains

o Nearly 14 million customer locations passed with fiber

WarnerMedia Highlights

● Solid revenue growth with strong operating income growth with gains in all business units

o Original content drives strong HBO digital subscriber growth

o HBO Max slated to launch Spring 2020

o Strong Warner Bros. operating income growth

o Continued Turner subscription revenue growth

Consolidated Financial Results

AT&T's consolidated revenues for the second quarter totaled $45.0 billion versus $39.0 billion in the year-ago quarter, up 15.3%, primarily due to the Time Warner acquisition (Deal closed on June 14, 2018). Declines in revenues from legacy wireline services, Vrio, domestic video and wireless equipment were more than offset by the addition of WarnerMedia and growth in domestic wireless services, strategic and managed business services, IP broadband and Xandr. Operating expenses were $37.5 billion versus $32.5 billion in the year-ago quarter, an increase of about $4.9 billion due in part to the Time Warner acquisition, partially offset by cost efficiencies and lower Entertainment Group and wireless equipment costs.

Operating income was $7.5 billion versus $6.5 billion in the year-ago quarter, primarily due to the Time Warner acquisition, with operating income margin of 16.7% versus 16.6%.  When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $9.9 billion versus $8.2 billion in the year-ago quarter, and operating income margin was 22.0% versus 21.1% in the year-ago quarter primarily due to the acquisition of Time Warner.

Second-quarter net income attributable to AT&T was $3.7 billion, or $0.51 per diluted share, versus $5.1 billion, or $0.81 per diluted share, in the year-ago quarter. Adjusting for $0.38, which includes merger-amortization costs, a non-cash actuarial loss on benefit plans, merger- and integration-related expenses and other items, earnings per diluted share was $0.89 compared to an adjusted $0.91 in the year-ago quarter.

Cash from operating activities was $14.3 billion, and capital expenditures were $5.5 billion. Capital investment – which consists of capital expenditures plus cash payments for vendor financing – totaled $6.5 billion, which includes about $1.0 billion of cash payments for vendor financing. Free cash flow — cash from operating activities minus capital expenditures — was a record $8.8 billion for the quarter.

The Company now expects:

Free cash flow guidance in the $28 billion range¹

Dividend payout ratio in the 50s% range¹

^{• 1} Free cash flow is cash from operating activities minus capital expenditures. The increase in guidance reflects higher cash from operations driven by incremental working capital efforts. Free cash flow dividend payout ratio is dividends divided by free cash flow.

Low single-digit adjusted EPS growth²

^{• 2} Adjustments include merger-related adjusted amortization costs in the range of $7.5 billion, a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. The mark-to-market adjustment is driven by interest rates and investment returns that are not reasonably estimable and can be a significant item. Accordingly, we cannot provide a reconciliation between forecasted adjusted diluted EPS and reported diluted EPS without unreasonable effort.

Gross capital investment in the $23 billion range³

^{• 3} Excludes expected FirstNet reimbursement in the $1 billion range; includes vendor financing.

⁴Based on GWS OneScore Sept. 2018

⁵Based on analysis by Ookla^® of Speedtest Intelligence^® data average download speeds for Q2 2019

⁶Based on PC Mag June 2019

*About AT&T

AT&T Inc. (NYSE:T) is a diversified, global leader in telecommunications, media and entertainment, and technology. It executes in the market under four operating units. WarnerMedia is a leading media and entertainment company that creates and distributes premium and popular content to global audiences through its consumer brands including: HBO, Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim, Turner Classic Movies and others. AT&T Communications provides more than 100 million U.S. consumers with entertainment and communications experiences across TV, mobile and broadband services. Plus, it serves nearly 3 million business customers with high-speed, highly secure connectivity and smart solutions. AT&T Latin America provides pay-TV services across 11 countries and territories in Latin America and the Caribbean, and is the fastest growing wireless provider in Mexico, serving consumers and businesses. Xandr provides marketers with innovative and relevant advertising solutions for consumers around premium video content and digital advertising through its AppNexus platform.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2019 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. 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 and revise statements contained in this news release based on new information or otherwise.

This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at https://investors.att.com.

For more information, contact:

Erin McGrath

AT&T Inc.

Phone: 214-862-0651

Email: erin.mcgrath@att.com

EX-99.2

AT&T Inc.
Financial Data
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Second Quarter				Percent		Six-Month Period				Percent
		2019		2018	Change			2019		2018	Change
Operating Revenues
Service	$	41,023	$	34,906	17.5	%	$	81,707	$	68,552	19.2	%
Equipment		3,934		4,080	(3.6)	%		8,077		8,472	(4.7)	%
Total Operating Revenues		44,957		38,986	15.3	%		89,784		77,024	16.6	%
Operating Expenses
Cost of revenues
Equipment		4,061		4,377	(7.2)	%		8,563		9,225	(7.2)	%
Broadcast, programming and operations		7,730		5,449	41.9	%		15,382		10,615	44.9	%
Other cost of revenues (exclusive of depreciation           and amortization shown separately below)		8,721		7,632	14.3	%		17,306		15,564	11.2	%
Selling, general and administrative		9,844		8,684	13.4	%		19,493		16,581	17.6	%
Depreciation and amortization		7,101		6,378	11.3	%		14,307		12,372	15.6	%
Total Operating Expenses		37,457		32,520	15.2	%		75,051		64,357	16.6	%
Operating Income		7,500		6,466	16.0	%		14,733		12,667	16.3	%
Interest Expense		2,149		2,023	6.2	%		4,290		3,794	13.1	%
Equity in Net Income (Loss) of Affiliates		40		(16)	-	%		33		(7)	-	%
Other Income (Expense) - Net		(318)		2,353	-	%		(32)		4,055	-	%
Income Before Income Taxes		5,073		6,780	(25.2)	%		10,444		12,921	(19.2)	%
Income Tax Expense		1,099		1,532	(28.3)	%		2,122		2,914	(27.2)	%
Net Income		3,974		5,248	(24.3)	%		8,322		10,007	(16.8)	%
Less: Net Income Attributable to     Noncontrolling Interest		(261)		(116)	-	%		(513)		(213)	-	%
Net Income Attributable to AT&T	$	3,713	$	5,132	(27.7)	%	$	7,809	$	9,794	(20.3)	%
Basic Earnings Per Share Attributable to AT&T	$	0.51	$	0.81	(37.0)	%	$	1.06	$	1.56	(32.1)	%
Weighted Average Common     Shares Outstanding (000,000)		7,323		6,351	15.3	%		7,318		6,257	17.0	%
Diluted Earnings Per Share Attributable to AT&T	$	0.51	$	0.81	(37.0)	%	$	1.06	$	1.56	(32.1)	%
Weighted Average Common      Shares Outstanding with Dilution (000,000)		7,353		6,374	15.4	%		7,347		6,277	17.0	%

AT&T Inc.
Financial Data
Consolidated Balance Sheets
Dollars in millions
Unaudited		Jun. 30,		Dec. 31,
		2019		2018
Assets
Current Assets
Cash and cash equivalents	$	8,423	$	5,204
Accounts receivable - net of allowances for doubtful accounts of $1,086 and $907		22,381		26,472
Prepaid expenses		1,441		2,047
Other current assets		14,973		17,704
Total current assets		47,218		51,427
Noncurrent Inventories and Theatrical Film and Television Production Costs		10,685		7,713
Property, Plant and Equipment – Net		132,074		131,473
Goodwill		146,662		146,370
Licenses – Net		97,125		96,144
Trademarks and Trade Names – Net		24,088		24,345
Distribution Networks – Net		16,262		17,069
Other Intangible Assets – Net		23,284		26,269
Investments in and Advances to Equity Affiliates		4,133		6,245
Operating Lease Right-of-Use Assets		22,650		-
Other Assets		22,733		24,809
Total Assets	$	546,914	$	531,864
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	12,625	$	10,255
Accounts payable and accrued liabilities		42,082		43,184
Advanced billings and customer deposits		5,734		5,948
Accrued taxes		2,062		1,179
Dividends payable		3,726		3,854
Total current liabilities		66,229		64,420
Long-Term Debt		157,937		166,250
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		58,713		57,859
Postemployment benefit obligation		21,210		19,218
Operating lease liabilities		20,568		-
Other noncurrent liabilities		28,176		30,233
Total deferred credits and other noncurrent liabilities		128,667		107,310
Stockholders’ Equity
Common stock		7,621		7,621
Additional paid-in capital		125,109		125,525
Retained earnings		59,389		58,753
Treasury stock		(11,151)		(12,059)
Accumulated other comprehensive income		3,289		4,249
Noncontrolling interest		9,824		9,795
Total stockholders’ equity		194,081		193,884
Total Liabilities and Stockholders' Equity	$	546,914	$	531,864

AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited		Six-Month Period
			2019		2018
Operating Activities
Net income		$	8,322	$	10,007
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		14,307		12,372
	Amortization of film and television costs		5,199		168
	Undistributed earnings from investments in equity affiliates		76		235
	Provision for uncollectible accounts		1,216		808
	Deferred income tax expense (benefit)		1,080		2,285
	Net (gain) loss from investments, net of impairments		(905)		(29)
	Actuarial (gain) loss on pension and postretirement benefits		2,131		(2,726)
Changes in operating assets and liabilities:
	Accounts receivable		3,540		233
	Other current assets, inventories and theatrical film and television production costs		(5,422)		1,039
	Accounts payable and other accrued liabilities		(3,056)		(3,890)
	Equipment installment receivables and related sales		1,144		490
	Deferred customer contract acquisition and fulfillment costs		(614)		(1,725)
Retirement benefit funding			(1,232)		(933)
Other - net			(450)		842
Total adjustments			17,014		9,169
Net Cash Provided by Operating Activities			25,336		19,176
Investing Activities
Capital expenditures:
	Purchase of property and equipment		(10,542)		(10,959)
	Interest during construction		(112)		(267)
Acquisitions, net of cash acquired			(320)		(40,715)
Dispositions			3,593		59
(Purchases), sales and settlement of securities and investments, net			396		(218)
Advances to and investments in equity affiliates, net			(314)		(1,035)
Cash collections of deferred purchase price			-		500
Net Cash Used in Investing Activities			(7,299)		(52,635)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less			119		2,227
Issuance of other short-term borrowings			3,067		4,839
Repayment of other short-term borrowings			(3,148)		-
Issuance of long-term debt			10,030		26,478
Repayment of long-term debt			(16,124)		(29,447)
Purchase of treasury stock			(240)		(564)
Issuance of treasury stock			455		12
Dividends paid			(7,436)		(6,144)
Other			(1,506)		(1,121)
Net Cash Used in Financing Activities			(14,783)		(3,720)
Net increase (decrease) in cash and cash equivalents and restricted cash			3,254		(37,179)
Cash and cash equivalents and restricted cash beginning of year			5,400		50,932
Cash and Cash Equivalents and Restricted Cash End of Period		$	8,654	$	13,753

AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
Dollars in millions except per share amounts
Unaudited		Second Quarter				Percent		Six-Month Period					Percent
			2019		2018	Change			2019		2018		Change
Capital expenditures
	Purchase of property and equipment	$	5,421	$	5,002	8.4	%	$	10,542	$	10,959		(3.8)	%
	Interest during construction		51		106	(51.9)	%		112		267		(58.1)	%
Total Capital Expenditures		$	5,472	$	5,108	7.1	%	$	10,654	$	11,226		(5.1)	%
Dividends Declared per Share		$	0.51	$	0.50	2.0	%	$	1.02	$	1.00		2.0	%
End of Period Common Shares Outstanding (000,000)									7,305		7,261		0.6	%
Debt Ratio									46.8	%	50.8	%	(400)	BP
Total Employees									257,790		273,210		(5.6)	%
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								June 30,					Percent
									2019		2018		Change
Wireless Subscribers
	Domestic								159,665		146,889		8.7	%
	Mexico								18,021		16,398		9.9	%
Total Wireless Subscribers									177,686		163,287		8.8	%
Video Connections
	Domestic								22,945		25,473		(9.9)	%
	Latin America								13,473		13,713		(1.8)	%
Total Video Connections									36,418		39,186		(7.1)	%
Broadband Connections
	IP								14,860		14,709		1.0	%
	DSL								838		1,063		(21.2)	%
Total Broadband Connections									15,698		15,772		(0.5)	%
Voice Connections
	Network Access Lines								9,207		10,832		(15.0)	%
	U-verse  VoIP Connections								4,766		5,449		(12.5)	%
Total Retail Voice Connections									13,973		16,281		(14.2)	%
		Second Quarter				Percent		Six-Month Period					Percent
			2019		2018	Change			2019		2018		Change
Wireless Net Additions
	Domestic		3,932		3,064	28.3	%		6,659		5,694		16.9	%
	Mexico		299		756	(60.4)	%		392		1,299		(69.8)	%
Total Wireless Net Additions			4,231		3,820	10.8	%		7,051		6,993		0.8	%
Video Net Additions
	Domestic		(946)		79	-	%		(1,572)		203		-	%
	Latin America		(111)		140	-	%		(143)		125		-	%
Total Video Net Additions			(1,057)		219	-	%		(1,715)		328		-	%
Broadband Net Additions
	IP		8		72	(88.9)	%		108		222		(51.4)	%
	DSL		(47)		(75)	37.3	%		(111)		(169)		34.3	%
Total Broadband Net Additions			(39)		(3)	-	%		(3)		53		-	%

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		Second Quarter				Percent		Six-Month Period				Percent
			2019		2018	Change			2019		2018	Change
Segment Operating Revenues
	Mobility	$	17,512	$	17,282	1.3	%	$	35,079	$	34,637	1.3	%
	Entertainment Group		11,368		11,478	(1.0)	%		22,696		22,909	(0.9)	%
	Business Wireline		6,628		6,650	(0.3)	%		13,126		13,397	(2.0)	%
Total Segment Operating Revenues			35,508		35,410	0.3	%		70,901		70,943	(0.1)	%
Segment Operating Contribution
	Mobility		5,833		5,506	5.9	%		11,184		10,664	4.9	%
	Entertainment Group		1,514		1,475	2.6	%		2,992		2,784	7.5	%
	Business Wireline		1,390		1,433	(3.0)	%		2,613		2,993	(12.7)	%
Total Segment Operating Contribution		$	8,737	$	8,414	3.8	%	$	16,789	$	16,441	2.1	%

Mobility
Mobility provides nationwide wireless service and equipment.
Mobility Results
Dollars in millions
Unaudited	Second Quarter					Percent		Six-Month Period					Percent
		2019		2018		Change			2019		2018		Change
Operating Revenues
Service	$	14,006	$	13,682		2.4	%	$	27,798	$	27,085		2.6	%
Equipment		3,506		3,600		(2.6)	%		7,281		7,552		(3.6)	%
Total Operating Revenues		17,512		17,282		1.3	%		35,079		34,637		1.3	%
Operating Expenses
Operations and support		9,654		9,663		(0.1)	%		19,835		19,765		0.4	%
Depreciation and amortization		2,025		2,113		(4.2)	%		4,060		4,208		(3.5)	%
Total Operating Expenses		11,679		11,776		(0.8)	%		23,895		23,973		(0.3)	%
Operating Income		5,833		5,506		5.9	%		11,184		10,664		4.9	%
Equity in Net Income of Affiliates		-		-		-	%		-		-		-	%
Operating  Contribution	$	5,833	$	5,506		5.9	%	$	11,184	$	10,664		4.9	%
Operating Income Margin		33.3	%	31.9	%	140	BP		31.9	%	30.8	%	110	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								June 30,					Percent
									2019		2018		Change
Mobility Subscribers
Postpaid smartphones									60,737		60,183		0.9	%
Postpaid feature phones and data-centric devices									15,545		17,189		(9.6)	%
Postpaid									76,282		77,372		(1.4)	%
Prepaid									17,602		16,217		8.5	%
Reseller									7,392		8,582		(13.9)	%
Connected Devices									58,389		44,718		30.6	%
Total Mobility Subscribers									159,665		146,889		8.7	%
Postpaid Phone Subscribers									63,415		63,543		(0.2)	%
Total Phone Subscribers									80,003		78,919		1.4	%
	Second Quarter							Six-Month Period					Percent
		2019		2018					2019		2018		Change
Mobility Net Additions
Postpaid		(154)		73		-	%		(358)		122		-	%
Prepaid		341		453		(24.7)	%		437		694		(37.0)	%
Reseller		(214)		(444)		51.8	%		(467)		(832)		43.9	%
Connected Devices		3,959		2,982		32.8	%		7,047		5,710		23.4	%
Total Mobility Net Additions		3,932		3,064		28.3	%		6,659		5,694		16.9	%
Postpaid Phone Net Additions		72		51		41.2	%		152		(9)		-	%
Total Phone Net Additions		355		407		(12.8)	%		520		539		(3.5)	%
Postpaid Churn		1.08	%	1.02	%	6	BP		1.12	%	1.04	%	8	BP
Postpaid Phone-Only Churn		0.86	%	0.82	%	4	BP		0.89	%	0.83	%	6	BP

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 video distribution platforms.
Entertainment Group Results
Dollars in millions
Unaudited		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Operating Revenues
Video entertainment		$	8,035	$	8,173		(1.7)	%	$	16,109	$	16,398		(1.8)	%
High-speed internet			2,109		1,981		6.5	%		4,179		3,859		8.3	%
Legacy voice and data services			658		772		(14.8)	%		1,341		1,578		(15.0)	%
Other service and equipment			566		552		2.5	%		1,067		1,074		(0.7)	%
Total Operating Revenues			11,368		11,478		(1.0)	%		22,696		22,909		(0.9)	%
Operating Expenses
Operations and support			8,515		8,657		(1.6)	%		17,042		17,468		(2.4)	%
Depreciation and amortization			1,339		1,345		(0.4)	%		2,662		2,655		0.3	%
Total Operating Expenses			9,854		10,002		(1.5)	%		19,704		20,123		(2.1)	%
Operating Income			1,514		1,476		2.6	%		2,992		2,786		7.4	%
Equity in Net Income (Loss) of Affiliates			-		(1)		-	%		-		(2)		-	%
Operating Contribution		$	1,514	$	1,475		2.6	%	$	2,992	$	2,784		7.5	%
Operating Income Margin			13.3	%	12.9	%	40	BP		13.2	%	12.2	%	100	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									June 30,					Percent
										2019		2018		Change
Video Connections
Premium TV										21,581		23,640		(8.7)	%
DIRECTV NOW										1,340		1,809		(25.9)	%
Total Video Connections										22,921		25,449		(9.9)	%
Broadband Connections
IP										13,822		13,692		0.9	%
DSL										598		763		(21.6)	%
Total Broadband Connections										14,420		14,455		(0.2)	%
Fiber Broadband Connections (included in IP)										3,378		2,204		53.3	%
Voice Connections
Retail Consumer Switched Access Lines										3,630		4,333		(16.2)	%
U-verse Consumer VoIP Connections										4,211		4,950		(14.9)	%
Total Retail Consumer Voice Connections										7,841		9,283		(15.5)	%
		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Video Net Additions
Premium TV1			(778)		(262)		-	%		(1,322)		(449)		-	%
DIRECTV NOW			(168)		342		-	%		(251)		654		-	%
Total Video Net Additions			(946)		80		-	%		(1,573)		205		-	%
Broadband Net Additions
IP			-		76		-	%		93		230		(59.6)	%
DSL			(34)		(53)		35.8	%		(82)		(125)		34.4	%
Total Broadband Net Additions			(34)		23		-	%		11		105		(89.5)	%
Fiber Broadband Net Additions (included in IP)			318		249		27.7	%		615		475		29.5	%
1	Includes the impact of customers that migrated to DIRECTV NOW.

Business Wireline
Business Wireline unit provides advanced IP-based services, as well as traditional data services to business customers. Revenues have been recast to conform to the current period's presentation.
Business Wireline Results
Dollars in millions
Unaudited		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Operating Revenues
	Strategic and managed services	$	3,848	$	3,603		6.8	%	$	7,640	$	7,198		6.1	%
	Legacy voice and data services		2,331		2,730		(14.6)	%		4,735		5,595		(15.4)	%
	Other service and equipment		449		317		41.6	%		751		604		24.3	%
Total Operating Revenues			6,628		6,650		(0.3)	%		13,126		13,397		(2.0)	%
Operating Expenses
Operations and support			3,982		4,038		(1.4)	%		8,022		8,054		(0.4)	%
Depreciation and amortization			1,256		1,180		6.4	%		2,491		2,350		6.0	%
Total Operating Expenses			5,238		5,218		0.4	%		10,513		10,404		1.0	%
Operating Income			1,390		1,432		(2.9)	%		2,613		2,993		(12.7)	%
Equity in Net Income of Affiliates			-		1		-	%		-		-		-	%
Operating Contribution		$	1,390	$	1,433		(3.0)	%	$	2,613	$	2,993		(12.7)	%
Operating Income Margin			21.0	%	21.5	%	(50)	BP		19.9	%	22.3	%	(240)	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. Revenues have been recast to conform to the current period's presentation.
Business Solutions Results
Dollars in millions
Unaudited		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Operating Revenues
	Wireless service	$	2,022	$	1,829		10.6	%	$	3,935	$	3,620		8.7	%
	Strategic and managed services		3,848		3,603		6.8	%		7,640		7,198		6.1	%
	Legacy voice and data services		2,331		2,730		(14.6)	%		4,735		5,595		(15.4)	%
	Other service and equipment		449		317		41.6	%		751		604		24.3	%
	Wireless equipment		622		584		6.5	%		1,218		1,162		4.8	%
Total Operating Revenues			9,272		9,063		2.3	%		18,279		18,179		0.6	%
Operating Expenses
Operations and support			5,539		5,616		(1.4)	%		11,179		11,210		(0.3)	%
Depreciation and amortization			1,561		1,487		5.0	%		3,102		2,945		5.3	%
Total Operating Expenses			7,100		7,103		-	%		14,281		14,155		0.9	%
Operating Income			2,172		1,960		10.8	%		3,998		4,024		(0.6)	%
Equity in Net Income of Affiliates			-		1		-	%		-		-		-	%
Operating Contribution		$	2,172	$	1,961		10.8	%	$	3,998	$	4,024		(0.6)	%
Operating Income Margin			23.4	%	21.6	%	180	BP		21.9	%	22.1	%	(20)	BP

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 Turner, Home Box Office and Warner Bros. businesses are combined with AT&T's Regional Sports Network (RSN) and Otter Media Holdings in the WarnerMedia segment.
Segment Results
Dollars in millions
Unaudited		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Operating Revenues
	Subscription	$	3,536	$	687		-	%	$	6,905	$	785		-	%
	Advertising		1,285		225		-	%		2,564		239		-	%
	Content and other		3,529		481		-	%		7,260		481		-	%
Total Operating Revenues			8,350		1,393		-	%		16,729		1,505		-	%
Operating Expenses
Operations and support			6,289		911		-	%		12,282		993		-	%
Depreciation and amortization			91		31		-	%		234		32		-	%
Total Operating Expenses			6,380		942		-	%		12,516		1,025		-	%
Operating Income			1,970		451		-	%		4,213		480		-	%
Equity in Net Income (Loss) of Affiliates			55		(26)		-	%		122		(16)		-	%
Operating Contribution		$	2,025	$	425		-	%	$	4,335	$	464		-	%
Operating Income Margin			23.6	%	32.4	%	(880)	BP		25.2	%	31.9	%	(670)	BP

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		Second Quarter				Percent		Six-Month Period				Percent
			2019		2018	Change			2019		2018	Change
Segment Operating Revenues
	Vrio	$	1,032	$	1,254	(17.7)	%	$	2,099	$	2,608	(19.5)	%
	Mexico		725		697	4.0	%		1,376		1,368	0.6	%
Total Segment Operating Revenues			1,757		1,951	(9.9)	%		3,475		3,976	(12.6)	%
Segment Operating Contribution
	Vrio		(2)		67	-	%		30		215	(86.0)	%
	Mexico		(207)		(217)	4.6	%		(412)		(476)	13.4	%
Total Segment Operating Contribution		$	(209)	$	(150)	(39.3)	%	$	(382)	$	(261)	(46.4)	%

Vrio
Vrio provides entertainment services to customers utilizing satellite technology in Latin America and the Caribbean.
Vrio Results
Dollars in millions
Unaudited		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Operating Revenues		$	1,032	$	1,254		(17.7)	%	$	2,099	$	2,608		(19.5)	%
Operating Expenses
Operations and support			881		1,016		(13.3)	%		1,747		2,017		(13.4)	%
Depreciation and amortization			165		186		(11.3)	%		334		391		(14.6)	%
Total Operating Expenses			1,046		1,202		(13.0)	%		2,081		2,408		(13.6)	%
Operating Income			(14)		52		-	%		18		200		(91.0)	%
Equity in Net Income of Affiliates			12		15		(20.0)	%		12		15		(20.0)	%
Operating Contribution		$	(2)	$	67		-	%	$	30	$	215		(86.0)	%
Operating Income Margin			(1.4)	%	4.1	%	(550)	BP		0.9	%	7.7	%	(680)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									June 30,					Percent
										2019		2018		Change
Vrio Video Subscribers1										13,473		13,713		-1.8	%
		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Vrio Video Net Subscriber Additions			(111)		140		-	%		(143)		125		-	%
1	2019 excludes the impact of 222 subscriber disconnections resulting from conforming our video credit policy across the region,
	which is reflected in beginning of period subscribers.

Mexico
Mexico provides wireless services and equipment to customers in Mexico.
Mexico Results
Dollars in millions
Unaudited		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Operating Revenues
Wireless service		$	479	$	417		14.9	%	$	921	$	821		12.2	%
Wireless equipment			246		280		(12.1)	%		455		547		(16.8)	%
Total Operating Revenues			725		697		4.0	%		1,376		1,368		0.6	%
Operating Expenses
Operations and support			813		787		3.3	%		1,538		1,590		(3.3)	%
Depreciation and amortization			119		127		(6.3)	%		250		254		(1.6)	%
Total Operating Expenses			932		914		2.0	%		1,788		1,844		(3.0)	%
Operating Income (Loss)			(207)		(217)		4.6	%		(412)		(476)		13.4	%
Equity in Net Income of Affiliates			-		-		-	%		-		-		-	%
Operating Contribution		$	(207)	$	(217)		4.6	%	$	(412)	$	(476)		13.4	%
Operating Income Margin			(28.6)	%	(31.1)	%	250	BP		(29.9)	%	(34.8)	%	490	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									June 30,					Percent
										2019		2018		Change
Mexico Wireless Subscribers1
Postpaid										5,489		5,749		(4.5)	%
Prepaid										12,180		10,468		16.4	%
Reseller										352		181		94.5	%
Total Mexico Wireless Subscribers										18,021		16,398		9.9	%
		Second Quarter					Percent		Six-Month Period					Percent
			2019		2018		Change			2019		2018		Change
Mexico Wireless Net Additions
Postpaid			(153)		142		-	%		(222)		251		-	%
Prepaid			401		611		(34.4)	%		515		1,070		(51.9)	%
Reseller			51		3		-	%		99		(22)		-	%
Total Mexico Wireless Net Subscriber Additions			299		756		(60.4)	%		392		1,299		(69.8)	%
1	2019 excludes the impact of 692 subscriber disconnections resulting from the churn of customers related to sales by certain
	third-party distributors and the sunset of 2G services in Mexico, which are reflected in beginning of period subscribers.

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	Second Quarter					Percent		Six-Month Period					Percent
		2019		2018		Change			2019		2018		Change
Segment Operating Revenues	$	485	$	392		23.7	%	$	911	$	729		25.0	%
Segment Operating Expenses
Operations and support		147		59		-	%		307		109		-	%
Depreciation and amortization		13		-		-	%		26		1		-	%
Total Segment Operating Expenses		160		59		-	%		333		110		-	%
Operating Income		325		333		(2.4)	%		578		619		(6.6)	%
Equity in Net Income of Affiliates		-		-		-	%		-		-		-	%
Segment Operating Contribution	$	325	$	333		(2.4)	%	$	578	$	619		(6.6)	%
Segment Operating Income Margin		67.0	%	84.9	%	(1,790)	BP		63.4	%	84.9	%	(2,150)	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		Second Quarter				Percent		Six-Month Period				Percent
			2019		2018	Change			2019		2018	Change
Operating Revenues
	WarnerMedia	$	1,285	$	225	-	%	$	2,564	$	239	-	%
	Communications		470		431	9.0	%		887		806	10.0	%
	Xandr		485		392	23.7	%		911		729	25.0	%
	Eliminations		(399)		(387)	(3.1)	%		(749)		(721)	(3.9)	%
Total Advertising Revenues		$	1,841	$	661	-	%	$	3,613	$	1,053	-	%

SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
June 30, 2019
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,512	$	9,654	$	7,858	$	2,025	$	5,833	$	-	$	5,833
Entertainment Group		11,368		8,515		2,853		1,339		1,514		-		1,514
Business Wireline		6,628		3,982		2,646		1,256		1,390		-		1,390
Total Communications		35,508		22,151		13,357		4,620		8,737		-		8,737
WarnerMedia		8,350		6,289		2,061		91		1,970		55		2,025
Latin America
Vrio		1,032		881		151		165		(14)		12		(2)
Mexico		725		813		(88)		119		(207)		-		(207)
Total Latin America		1,757		1,694		63		284		(221)		12		(209)
Xandr		485		147		338		13		325		-		325
Segment Total		46,100		30,281		15,819		5,008		10,811		67		10,878
Corporate and Other
Corporate		209		626		(417)		134		(551)
Acquisition-related items		(30)		316		(346)		1,960		(2,306)
Certain significant items		-		94		(94)		-		(94)
Eliminations and consolidations		(1,322)		(961)		(361)		(1)		(360)
AT&T Inc.	$	44,957	$	30,356	$	14,601	$	7,101	$	7,500
June 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	$	17,282	$	9,663	$	7,619	$	2,113	$	5,506	$	-	$	5,506
Entertainment Group		11,478		8,657		2,821		1,345		1,476		(1)		1,475
Business Wireline		6,650		4,038		2,612		1,180		1,432		1		1,433
Total Communications		35,410		22,358		13,052		4,638		8,414		-		8,414
WarnerMedia		1,393		911		482		31		451		(26)		425
Latin America
Vrio		1,254		1,016		238		186		52		15		67
Mexico		697		787		(90)		127		(217)		-		(217)
Total Latin America		1,951		1,803		148		313		(165)		15		(150)
Xandr		392		59		333		-		333		-		333
Segment Total		39,146		25,131		14,015		4,982		9,033		(11)		9,022
Corporate and Other
Corporate		320		661		(341)		118		(459)
Acquisition-related items		-		321		(321)		1,278		(1,599)
Certain significant items		-		152		(152)		-		(152)
Eliminations and consolidations		(480)		(123)		(357)		-		(357)
AT&T Inc.	$	38,986	$	26,142	$	12,844	$	6,378	$	6,466

SUPPLEMENTAL SEGMENT RECONCILIATION
Six Months Ended
Dollars in millions
Unaudited
June 30, 2019
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	35,079	$	19,835	$	15,244	$	4,060	$	11,184	$	-	$	11,184
Entertainment Group		22,696		17,042		5,654		2,662		2,992		-		2,992
Business Wireline		13,126		8,022		5,104		2,491		2,613		-		2,613
Total Communications		70,901		44,899		26,002		9,213		16,789		-		16,789
WarnerMedia		16,729		12,282		4,447		234		4,213		122		4,335
Latin America
Vrio		2,099		1,747		352		334		18		12		30
Mexico		1,376		1,538		(162)		250		(412)		-		(412)
Total Latin America		3,475		3,285		190		584		(394)		12		(382)
Xandr		911		307		604		26		578		-		578
Segment Total		92,016		60,773		31,243		10,057		21,186	$	134	$	21,320
Corporate and Other
Corporate		418		1,139		(721)		303		(1,024)
Acquisition-related items		(72)		389		(461)		3,948		(4,409)
Certain significant items		-		342		(342)		-		(342)
Eliminations and consolidations		(2,578)		(1,899)		(679)		(1)		(678)
AT&T Inc.	$	89,784	$	60,744	$	29,040	$	14,307	$	14,733
June 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	$	34,637	$	19,765	$	14,872	$	4,208	$	10,664	$	-	$	10,664
Entertainment Group		22,909		17,468		5,441		2,655		2,786		(2)		2,784
Business Wireline		13,397		8,054		5,343		2,350		2,993		-		2,993
Total Communications		70,943		45,287		25,656		9,213		16,443		(2)		16,441
WarnerMedia		1,505		993		512		32		480		(16)		464
Latin America
Vrio		2,608		2,017		591		391		200		15		215
Mexico		1,368		1,590		(222)		254		(476)		-		(476)
Total Latin America		3,976		3,607		369		645		(276)		15		(261)
Xandr		729		109		620		1		619		-		619
Segment Total		77,153		49,996		27,157		9,891		17,266	$	(3)	$	17,263
Corporate and Other
Corporate		653		1,396		(743)		141		(884)
Acquisition-related items		-		388		(388)		2,340		(2,728)
Certain significant items		-		332		(332)		-		(332)
Eliminations and consolidations		(782)		(127)		(655)		-		(655)
AT&T Inc.	$	77,024	$	51,985	$	25,039	$	12,372	$	12,667

EX-99.3

Discussion and Reconciliation of Non-GAAP Measures

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP).

Free Cash Flow

Free cash flow is defined as cash from operations minus capital expenditures. Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the percentage of dividends paid to free cash flow.  We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Cash Paid for Capital Investment
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Net cash provided by operating activities	$	14,284	$	10,229	$	25,336	$	19,176
Less: Capital expenditures		(5,472)		(5,108)		(10,654)		(11,226)
Free Cash Flow		8,812		5,121		14,682		7,950
Less: Dividends paid		(3,722)		(3,074)		(7,436)		(6,144)
Fee Cash Flow after Dividends	$	5,090	$	2,047	$	7,246	$	1,806
Free Cash Flow Dividend Payout Ratio		42.2%		60.0%		50.6%		77.3%

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems.

Cash Paid for Capital Investment
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Capital Expenditures	$	(5,472)	$	(5,108)	$	(10,654)	$	(11,226)
Cash paid for vendor financing		(1,016)		(85)		(1,836)		(257)
Cash paid for Capital Investment	$	(6,488)	$	(5,193)	$	(12,490)	$	(11,483)

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. generally accepted accounting principles (GAAP).

EBITDA service margin is calculated as EBITDA divided by service revenues.

1

When discussing our segment, business unit and supplemental results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from operating contribution.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing operating performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. For market comparability, management analyzes performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Net Income	$	3,974	$	5,248	$	8,322	$	10,007
Additions:
Income Tax Expense		1,099		1,532		2,122		2,914
Interest Expense		2,149		2,023		4,290		3,794
Equity in Net (Income) Loss of Affiliates		(40)		16		(33)		7
Other (Income) Expense - Net		318		(2,353)		32		(4,055)
Depreciation and amortization		7,101		6,378		14,307		12,372
EBITDA		14,601		12,844		29,040		25,039
Total Operating Revenues		44,957		38,986		89,784		77,024
Service Revenues		41,023		34,906		81,707		68,552
EBITDA Margin		32.5%		32.9%		32.3%		32.5%
EBITDA Service Margin		35.6%		36.8%		35.5%		36.5%

2

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Communications Segment
Operating Contribution	$	8,737	$	8,414	$	16,789	$	16,441
Additions:
Equity in Net (Income) Loss of Affiliates		-		-		-		2
Depreciation and amortization		4,620		4,638		9,213		9,213
EBITDA		13,357		13,052		26,002		25,656
Total Operating Revenues		35,508		35,410		70,901		70,943
Operating Income Margin		24.6%		23.8%		23.7%		23.2%
EBITDA Margin		37.6%		36.9%		36.7%		36.2%
Mobility
Operating Contribution	$	5,833	$	5,506	$	11,184	$	10,664
Additions:
Depreciation and amortization		2,025		2,113		4,060		4,208
EBITDA		7,858		7,619		15,244		14,872
Total Operating Revenues		17,512		17,282		35,079		34,637
Service Revenues		14,006		13,682		27,798		27,085
Operating Income Margin		33.3%		31.9%		31.9%		30.8%
EBITDA Margin		44.9%		44.1%		43.5%		42.9%
EBITDA Service Margin		56.1%		55.7%		54.8%		54.9%
Entertainment Group
Operating Contribution	$	1,514	$	1,475	$	2,992	$	2,784
Additions:
Equity in Net (Income) Loss of Affiliates		-		1		-		2
Depreciation and amortization		1,339		1,345		2,662		2,655
EBITDA		2,853		2,821		5,654		5,441
Total Operating Revenues		11,368		11,478		22,696		22,909
Operating Income Margin		13.3%		12.9%		13.2%		12.2%
EBITDA Margin		25.1%		24.6%		24.9%		23.8%
Business Wireline
Operating Contribution	$	1,390	$	1,433	$	2,613	$	2,993
Additions:
Equity in Net (Income) Loss of Affiliates		-		(1)		-		-
Depreciation and amortization		1,256		1,180		2,491		2,350
EBITDA		2,646		2,612		5,104		5,343
Total Operating Revenues		6,628		6,650		13,126		13,397
Operating Income Margin		21.0%		21.5%		19.9%		22.3%
EBITDA Margin		39.9%		39.3%		38.9%		39.9%

3

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
WarnerMedia Segment
Operating Contribution	$	2,025	$	425	$	4,335	$	464
Additions:
Equity in Net (Income) of Affiliates		(55)		26		(122)		16
Depreciation and amortization		91		31		234		32
EBITDA		2,061		482		4,447		512
Total Operating Revenues		8,350		1,393		16,729		1,505
Operating Income Margin		23.6%		32.4%		25.2%		31.9%
EBITDA Margin		24.7%		34.6%		26.6%		34.0%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Latin America Segment
Operating Contribution	$	(209)	$	(150)	$	(382)	$	(261)
Additions:
Equity in Net (Income) of Affiliates		(12)		(15)		(12)		(15)
Depreciation and amortization		284		313		584		645
EBITDA		63		148		190		369
Total Operating Revenues		1,757		1,951		3,475		3,976
Operating Income Margin		-12.6%		-8.5%		-11.3%		-6.9%
EBITDA Margin		3.6%		7.6%		5.5%		9.3%
Vrio
Operating Contribution	$	(2)	$	67	$	30	$	215
Additions:
Equity in Net (Income) of Affiliates		(12)		(15)		(12)		(15)
Depreciation and amortization		165		186		334		391
EBITDA		151		238		352		591
Total Operating Revenues		1,032		1,254		2,099		2,608
Operating Income Margin		-1.4%		4.1%		0.9%		7.7%
EBITDA Margin		14.6%		19.0%		16.8%		22.7%
Mexico
Operating Contribution	$	(207)	$	(217)	$	(412)	$	(476)
Additions:
Depreciation and amortization		119		127		250		254
EBITDA		(88)		(90)		(162)		(222)
Total Operating Revenues		725		697		1,376		1,368
Operating Income Margin		-28.6%		-31.1%		-29.9%		-34.8%
EBITDA Margin		-12.1%		-12.9%		-11.8%		-16.2%

4

Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Xandr
Operating Contribution	$	325	$	333	$	578	$	619
Additions:
Depreciation and amortization		13		-		26		1
EBITDA		338		333		604		620
Total Operating Revenues		485		392		911		729
Operating Income Margin		67.0%		84.9%		63.4%		84.9%
EBITDA Margin		69.7%		84.9%		66.3%		85.0%

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.

Adjusting Items
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Operating Revenues
Time Warner merger adjustment	$	30	$	-	$	72	$	-
Adjustments to Operating Revenues		30		-		72		-
Operating Expenses
Time Warner and other merger costs		316		339		389		431
Employee separation costs		94		133		342		184
Natural disaster costs		-		-		-		104
Adjustments to Operations and Support Expenses		410		472		731		719
Amortization of intangible assets		1,959		1,278		3,948		2,340
Adjustments to Operating Expenses		2,369		1,750		4,679		3,059
Other
Merger-related interest and fees1		-		636		-		1,029
(Gains) losses on sale of investments		(638)		-		(638)		-
Special termination charges, debt redemption costs and other adjustments		140		48		351		48
Actuarial (gain) loss		1,699		(1,796)		2,131		(2,726)
Adjustments to Income Before Income Taxes		3,600		638		6,595		1,410
Tax impact of adjustments		779		44		1,428		217
Tax-related items		-		(96)		141		(96)
Adjustments to Net Income	$	2,821	$	690	$	5,026	$	1,289
1 Includes interest expense incurred on debt issued, redemption premiums and interest income earned on cash held prior to the close of merger transactions.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

5

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Operating Income	$	7,500	$	6,466	$	14,733	$	12,667
Adjustments to Operating Revenues		30		-		72		-
Adjustments to Operating Expenses		2,369		1,750		4,679		3,059
Adjusted Operating Income		9,899		8,216		19,484		15,726
EBITDA		14,601		12,844		29,040		25,039
Adjustments to Operating Revenues		30		-		72		-
Adjustments to Operations and Support Expenses		410		472		731		719
Adjusted EBITDA		15,041		13,316		29,843		25,758
Total Operating Revenues		44,957		38,986		89,784		77,024
Adjustments to Operating Revenues		30		-		72		-
Total Adjusted Operating Revenue		44,987		38,986		89,856		77,024
Service Revenues		41,023		34,906		81,707		68,552
Adjustments to Service Revenues		30		-		72		-
Adjusted Service Revenue		41,053		34,906		81,779		68,552
Operating Income Margin		16.7%		16.6%		16.4%		16.4%
Adjusted Operating Income Margin		22.0%		21.1%		21.7%		20.4%
Adjusted EBITDA Margin		33.4%		34.2%		33.2%		33.4%
Adjusted EBITDA Service Margin		36.6%		38.1%		36.5%		37.6%

Adjusted Diluted EPS
		Second Quarter				Six-Month Period
		2019		2018		2019		2018
Diluted Earnings Per Share (EPS)	$	0.51	$	0.81	$	1.06	$	1.56
Amortization of intangible assets		0.21		0.16		0.42		0.29
Merger integration items1		0.05		0.14		0.07		0.20
(Gain) loss on sale of assets, impairments       and other adjustments2		(0.06)		0.01		(0.01)		0.05
Actuarial (gain) loss3		0.18		(0.21)		0.23		(0.33)
Tax-related items		-		-		(0.02)		-
Adjusted EPS	$	0.89	$	0.91	$	1.75	$	1.77
Year-over-year growth - Adjusted		-2.2%				-1.1%
Weighted Average Common Shares Outstanding with Dilution (000,000)		7,353		6,374		7,347		6,277
1Includes combined merger integration items and merger-related interest income and expense, and redemption premiums.
2Includes gains on transactions, natural disaster adjustments and charges, and employee-related and other costs.
3Includes adjustments for actuarial gains or losses (losses of $1.7 billion in the second quarter and $2.1 billion for the first six months of 2019) associated with our pension benefit plan. As a result, adjusted EPS reflects an expected return on plan assets of $880 million in the second quarter and $1,731 million for the first six months (based on an expected return on plan assets of 7.00%), rather than the actual return of $1.4 billion in the quarter and $3.4 billion for the first six months (actual return of 4.2% for the quarter and 10.0% for the first six months), included in the GAAP measure of income.

6

Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt.

Net Debt to Adjusted EBITDA
Dollars in millions
		Three Months Ended
		Sep. 30,		Dec. 31,		Mar. 31,		June 30,		Four Quarters
		20181		20181		20191		2019
Adjusted EBITDA1,2	$	15,872	$	15,029	$	14,802	$	15,041	$	60,744
Add back severance		(76)		(327)		-		-		(403)
Net Debt Adjusted EBITDA		15,796		14,702		14,802		15,041		60,341
End-of-period current debt										12,625
End-of-period long-term debt										157,937
Total End-of-Period Debt										170,562
Less: Cash and Cash Equivalents										8,423
Net Debt Balance										162,139
Annualized Net Debt to Adjusted EBITDA Ratio										2.69
1 As reported in AT&T's Form 8-K filed October 24, 2018, January 30, 2019 and April 24, 2019.
2 Includes the purchase accounting reclassification of released content amortization of $772 million in the third quarter of 2018, $545 million in the fourth quarter of 2018, $150 million and $112 million reported by AT&T in the first and second quarters of 2019, respectively.

7

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
		Second Quarter
		June 30, 2019								June 30, 2018
		Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	14,006	$	-	$	(11,984)	$	2,022	$	13,682	$	-	$	(11,853)	$	1,829
Strategic and managed services		-		3,848		-		3,848		-		3,603		-		3,603
Legacy voice and data services		-		2,331		-		2,331		-		2,730		-		2,730
Other services and equipment		-		449		-		449		-		317		-		317
Wireless equipment		3,506		-		(2,884)		622		3,600		-		(3,016)		584
Total Operating Revenues		17,512		6,628		(14,868)		9,272		17,282		6,650		(14,869)		9,063
Operating Expenses
Operations and support		9,654		3,982		(8,097)		5,539		9,663		4,038		(8,085)		5,616
EBITDA		7,858		2,646		(6,771)		3,733		7,619		2,612		(6,784)		3,447
Depreciation and amortization		2,025		1,256		(1,720)		1,561		2,113		1,180		(1,806)		1,487
Total Operating Expenses		11,679		5,238		(9,817)		7,100		11,776		5,218		(9,891)		7,103
Operating Income		5,833		1,390		(5,051)		2,172		5,506		1,432		(4,978)		1,960
Equity in net Income of Affiliates		-		-		-		-		-		1		-		1
Operating Contribution	$	5,833	$	1,390	$	(5,051)	$	2,172	$	5,506	$	1,433	$	(4,978)	$	1,961
1 Non-business wireless reported in the Communication segment under the Mobility business unit.
Supplemental Operational Measure
		Six-Month Period
		June 30, 2019								June 30, 2018
		Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	27,798	$	-	$	(23,863)	$	3,935	$	27,085	$	-	$	(23,465)	$	3,620
Strategic and managed services		-		7,640		-		7,640		-		7,198		-		7,198
Legacy voice and data services		-		4,735		-		4,735		-		5,595		-		5,595
Other services and equipment		-		751		-		751		-		604		-		604
Wireless equipment		7,281		-		(6,063)		1,218		7,552		-		(6,390)		1,162
Total Operating Revenues		35,079		13,126		(29,926)		18,279		34,637		13,397		(29,855)		18,179
Operating Expenses
Operations and support		19,835		8,022		(16,678)		11,179		19,765		8,054		(16,609)		11,210
EBITDA		15,244		5,104		(13,248)		7,100		14,872		5,343		(13,246)		6,969
Depreciation and amortization		4,060		2,491		(3,449)		3,102		4,208		2,350		(3,613)		2,945
Total Operating Expenses		23,895		10,513		(20,127)		14,281		23,973		10,404		(20,222)		14,155
Operating Income		11,184		2,613		(9,799)		3,998		10,664		2,993		(9,633)		4,024
Equity in net Income of Affiliates		-		-		-		-		-		-		-		-
Operating Contribution	$	11,184	$	2,613	$	(9,799)	$	3,998	$	10,664	$	2,993	$	(9,633)	$	4,024
1 Non-business wireless reported in the Communication segment under the Mobility business unit.

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