AT&T INC. (Form: 8-K, Received: 01/30/2019 06:51:02)

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) January 30, 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))

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 January 30, 2019, its results of operations for the fourth quarter of 2018. 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 January 30, 2019 reporting financial results for the fourth quarter ended December 31, 2018.

	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: January 30, 2019	By: / s/ Debra L. Dial Debra L. Dial Senior Vice President and Controller

AT&T Reports Fourth-Quarter Results

Full-Year Consolidated Results

●	Diluted EPS of $2.85 as reported compared to $4.76 in the prior year (2017 impacted by tax reform)

●	Adjusted EPS of $3.52 compared to $3.05 in the prior year

●	Cash from operations of $43.6 billion, up 15%

●	Capital expenditures of $21.3 billion

●	Free cash flow of $22.4 billion, up 36%

●	Dividend payout ratio of 60% ¹

●	Consolidated revenues of $170.8 billion

Fourth-Quarter Consolidated Results

●	Diluted EPS of $0.66 as reported compared to $3.08 in the year-ago quarter (2017 impacted by tax reform)

●	Net income of $4.9 billion compared to $19.0 billion in the year-ago quarter (2017 impacted by tax reform)

●	Adjusted EPS of $0.86 compared to $0.78 in the year-ago quarter

●	Cash from operations of $12.1 billion, up 27%

●	Capital expenditures of $4.2 billion

●	Dividend payout ratio 46% ¹

●	Free cash flow of $7.9 billion, up 78%

●	Consolidated revenues of $48.0 billion

As Part of Fourth-Quarter Results, AT&T Reports:

●	Strong Cash from Operations and Record Free Cash Flow

●	Consolidated Pro Forma Adjusted EBITDA Growth

●	Deleveraging Plan on Track

●	2019 Guidance Reaffirmed

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

DALLAS, January 30, 2019 — AT&T Inc . ( NYSE:T ) r eported strong Mobility and WarnerMedia results in the fourth quarter, including solid domestic wireless service revenue growth with record fourth-quarter wireless service margins. (On a GAAP basis, domestic service revenues declined 3.0%; however, on a comparable basis, service revenues grew 2.9%.)

“Our top priority for 2018 and 2019 is reducing our debt and I couldn’t be more pleased with how we closed the year. In 2018, we generated record free cash flow while investing at near-record levels. Our dividend payout as a percent of free cash flow was 46% for the quarter and 60% for the year, allowing us to increase the dividend for the 35th consecutive year,” said Randall Stephenson, AT&T chairman and CEO. “This momentum will carry us into 2019 allowing us to continue reducing our debt while investing in the business and continuing our strong record for paying dividends.”

Fourth-Quarter Results

North America Wireless Highlights:

●	3.8 million total wireless net adds:

o	2.8 million in U.S., driven by connected devices and smartphones

o	1.0 million in Mexico

Communications Highlights

●	Operating income up 3.1% on a comparable basis; EBITDA up 1.9%

●

Mobility:

o	Service revenues up 2.9% on a comparable basis; operating income up 18.7% with EBITDA up 13.3% on a comparable basis

o	147,000 phone net adds in the U.S.

●	134,000 postpaid phone net adds

●	13,000 prepaid phone net adds

o	467,000 branded smartphones added to base

●	Entertainment Group:

o	Focus on profitability and reduced promotions leads to losses in video subscribers

o	More than 11 million customer locations passed with fiber

WarnerMedia Highlights

●	Revenues up with operating income gains in all business units

o	Strong Warner Bros. theatrical and television licensing revenue growth

o	Turner subscription revenue growth

o	HBO digital subscriber growth continued

o	11 Academy Award® nominations

Latin America Highlights

●	3.2 million Mexico wireless full-year net adds

●	250,000 full-year Vrio net adds

Xandr Highlights

●	Advertising revenues grew BY 48.6%; up 26.0% excluding the AppNexus acquisition

●	Continued progress in strategic initiatives

Consolidated Financial Results ²

AT&T's consolidated revenues for the fourth quarter totaled $48.0 billion versus $41.7 billion in the year-ago quarter, up 15.2%, primarily due to the Time Warner acquisition partially offset by the impact of ASC 606 which includes the policy election of netting of approximately $980 million of USF revenues with operating expenses. Without the accounting change, revenues were $48.9 billion, an increase of 17.2% primarily due to the Time Warner acquisition. Declines in legacy wireline services, wireless equipment, domestic video and Vrio were more than offset by WarnerMedia and growth in domestic wireless services and Xandr.

Operating expenses were $41.8 billion versus $40.4 billion in the year-ago quarter, primarily due to the Time Warner acquisition, partially offset by the netting of USF and other regulatory fees and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $43.3 billion, an increase of about $2.9 billion due to the Time Warner acquisition and Entertainment Group content cost pressure, partially offset by the write-off of certain network assets in the prior year, lower wireless equipment costs and cost efficiencies.

Versus results from the fourth quarter of 2017, operating income was $6.2 billion versus $1.3 billion, primarily due to the Time Warner acquisition and the write-off of certain network assets in the prior year; and operating income margin was 12.8% versus 3.1%. On a comparative basis, operating income was $5.6 billion and operating income margin was 11.4%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $9.4 billion, or $8.8 billion on a comparative basis, versus $6.3 billion in the year-ago quarter, and operating income margin was 19.6%, or 18.1% on a comparative basis, versus 15.1% in the year-ago quarter due to the acquisition of Time Warner and impact of ASC 606.

Fourth-quarter net income attributable to AT&T was $4.9 billion, or $0.66 per diluted share, versus $19.0 billion, or $3.08 per diluted share, in the year-ago quarter which reflected the impact of the December 2017 federal Tax Cuts and Jobs Act. Adjusting for $0.20, which includes amortization costs, merger- and integration-related expenses and other items, a true-up of deferred tax liability remeasurement and other tax items and a non-cash actuarial gain on benefit plans from the annual remeasurement process, earnings per diluted share was $0.86 compared to an adjusted $0.78 in the year-ago quarter, a 10% increase.

Cash from operating activities was $12.1 billion, and capital expenditures were $4.2 billion. Capital investment included about $270 million in FirstNet capital costs and $1.1 billion in FirstNet capital reimbursements. Free cash flow — cash from operating activities minus capital expenditures — was $7.9 billion for the quarter.

Full-Year Results

For full-year 2018 when compared with 2017 results, AT&T's consolidated revenues totaled $170.8 billion versus $160.5 billion, up 6.4%, primarily due to the Time Warner acquisition partially offset by the impact of ASC 606 which includes the policy election of netting approximately $3.7 billion of USF revenues with operating expenses. Without the accounting change, revenues were $174.3 billion, an increase of 8.6% primarily due to the Time Warner acquisition.

Operating expenses were $144.7 billion compared with $140.6 billion, primarily due to the Time Warner acquisition partially offset by the netting of USF and other regulatory fees and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $150.6 billion, an increase of about $10.0 billion due to the Time Warner acquisition, Entertainment Group content cost pressure and higher wireless equipment costs, partially offset by the write-off of certain network assets in the prior year and cost efficiencies.

Versus results from 2017, operating income was $26.1 billion, up 30.7% primarily due to the Time Warner acquisition and the write-off of certain network assets in the prior year; and operating income margin was 15.3% versus 12.4%. On a comparative basis, operating income was $23.7 billion and operating income margin was 13.6%. With adjustments for both years, operating income was $35.2 billion, or $32.8 billion on a comparable basis, versus $29.5 billion in 2017, and operating income margin was 20.6%, or 18.8% on a comparative basis, versus 18.4% in 2017 .

2018 net income attributable to AT&T was $19.4 billion, or $2.85 per diluted share, versus $29.5 billion, or $4.76 per diluted share in 2017. With adjustments for both years, earnings per diluted share was $3.52 compared to an adjusted $3.05 in 2017, up 15% primarily due to lower rates associated with tax reform, the impact of ASC 606 and the acquisition of Time Warner.

AT&T's full-year cash from operating activities was $43.6 billion versus $38.0 billion in 2017. Capital expenditures, including capitalized interest, totaled $21.3 billion versus $21.6 billion in 2017. Capital investment included about $1.2 billion in FirstNet capital costs and $1.4 billion in FirstNet capital reimbursements. Full-year free cash flow was $22.4 billion compared to $16.5 billion in 2017, up 36%. The company’s free cash flow dividend payout ratio for the full year was 60%. ¹

2019 Outlook ³

AT&T expects in 2019:

●	Free cash flow in the $26 billion range;

●	Low single-digit adjusted EPS growth;

●	Dividend payout ratio in the high 50s% range;

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

●	Gross capital investment in the $23 billion range ⁴

³ Adjustments to EPS include merger-related amortization in the range of $7.5 billion, a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. We expect the mark-to-market adjustment which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be a significant item. Our EPS, free cash flow and EBITDA estimates depend on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between our non-GAAP metrics and the reported GAAP metrics without unreasonable effort. (Our 2019 outlook for Net Debt to Adjusted EBITDA ratio excludes the impact of a new accounting standard for leases (ASC 842) that is effective beginning January 1, 2019 to be consistent with our existing multi-year guidance on this debt ratio . )

¹ Free cash flow dividend payout ratio is dividends divided by free cash flow .

² AT&T adopted new U.S. accounting standards that deal with revenue recognition (ASC 606), post-employment benefit costs and certain cash receipts on installment receivables. These changes impact the company’s income statements and cash flows. With the adoption of ASC 606, the company made a policy decision to record Universal Service Fees (USF) and other regulatory fees on a net basis. The company is providing comparable results in addition to GAAP to help investors better understand the impact on financials from ASC 606 and the policy decision. Historical income statements and cash flows have been recast to show only the impact of the adoption of the other two accounting standards.

⁴ Excludes expected FirstNet reimbursements in the $1 billion range; includes potential vendor financing.

*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’s HBO, Turner and Warner Bros. divisions are world leaders in creating premium content, operate one of the world’s largest TV and film studios, and own a world-class library of entertainment. 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 more than 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:

Name: Erin McGrath

AT&T Inc.

Phone: 214-862-0651

Email: Erin.McGrath@att.com

EXHIBIT 99.2

AT&T Inc.
Financial Data


Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Fourth Quarter				Percent		Year Ended				Percent
		2018		2017	Change			2018		2017	Change
Operating Revenues
Service	$	42,496	$	36,225	17.3	%	$	152,345	$	145,597	4.6	%
Equipment		5,497		5,451	0.8	%		18,411		14,949	23.2	%
Total Operating Revenues		47,993		41,676	15.2	%		170,756		160,546	6.4	%

Operating Expenses
Cost of revenues
Equipment		5,733		6,532	(12.2)	%		19,786		18,709	5.8	%
Broadcast, programming and operations		8,885		6,003	48.0	%		26,727		21,159	26.3	%
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		8,691		9,391	(7.5)	%		32,906		37,942	(13.3)	%
Selling, general and administrative		10,586		9,484	11.6	%		36,765		35,465	3.7	%
Asset abandonment and impairments		46		2,914	(98.4)	%		46		2,914	(98.4)	%
Depreciation and amortization		7,892		6,071	30.0	%		28,430		24,387	16.6	%
Total Operating Expenses		41,833		40,395	3.6	%		144,660		140,576	2.9	%
Operating Income		6,160		1,281	-	%		26,096		19,970	30.7	%
Interest Expense		(2,112)		(1,926)	9.7	%		(7,957)		(6,300)	26.3	%
Equity in Net Income (Loss) of Affiliates		23		20	15.0	%		(48)		(128)	62.5	%
Other Income (Expense) - Net		1,674		(658)	-	%		6,782		1,597	-	%
Income (Loss) Before Income Taxes		5,745		(1,283)	-	%		24,873		15,139	64.3	%
Income Tax (Benefit) Expense		615		(20,419)	-	%		4,920		(14,708)	-	%
Net Income		5,130		19,136	(73.2)	%		19,953		29,847	(33.1)	%
Less: Net Income Attributable to Noncontrolling Interest		(272)		(99)	-	%		(583)		(397)	(46.9)	%
Net Income Attributable to AT&T	$	4,858	$	19,037	(74.5)	%	$	19,370	$	29,450	(34.2)	%


Basic Earnings Per Share Attributable to AT&T	$	0.66	$	3.08	(78.6)	%	$	2.85	$	4.77	(40.3)	%
Weighted Average Common Shares Outstanding (000,000)		7,296		6,163	18.4	%		6,778		6,164	10.0	%

Diluted Earnings Per Share Attributable to AT&T	$	0.66	$	3.08	(78.6)	%	$	2.85	$	4.76	(40.1)	%
Weighted Average Common Shares Outstanding with Dilution (000,000)		7,328		6,182	18.5	%		6,806		6,183	10.1	%

AT&T Inc.
Financial Data


Consolidated Balance Sheets
Dollars in millions
Unaudited		Dec. 31,		Dec. 31,
		2018		2017
Assets
Current Assets
Cash and cash equivalents	$	5,204	$	50,498
Accounts receivable - net of allowances for doubtful accounts of $907 and $663		26,472		16,522
Prepaid expenses		2,047		1,369
Other current assets		17,704		10,757
Total current assets		51,427		79,146
Noncurrent Inventories and Theatrical Film and Television Production Costs		7,713		-
Property, Plant and Equipment – Net		131,473		125,222
Goodwill		146,370		105,449
Licenses		96,144		96,136
Trademarks and Trade Names - Net		24,345		7,021
Distribution Networks - Net		17,069		-
Other Intangible Assets – Net		26,269		11,119
Investments in and Advances to Equity Affiliates		6,245		1,560
Other Assets		24,809		18,444
Total Assets	$	531,864	$	444,097

Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	10,255	$	38,374
Accounts payable and accrued liabilities		43,184		34,470
Advanced billings and customer deposits		5,948		4,213
Accrued taxes		1,179		1,262
Dividends payable		3,854		3,070
Total current liabilities		64,420		81,389
Long-Term Debt		166,250		125,972
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		57,859		43,207
Postemployment benefit obligation		19,218		31,775
Other noncurrent liabilities		30,233		19,747
Total deferred credits and other noncurrent liabilities		107,310		94,729
Stockholders’ Equity
Common stock		7,621		6,495
Additional paid-in capital		125,525		89,563
Retained earnings		58,753		50,500
Treasury stock		(12,059)		(12,714)
Accumulated other comprehensive income		4,249		7,017
Noncontrolling interest		9,795		1,146
Total stockholders’ equity		193,884		142,007
Total Liabilities and Stockholders' Equity	$	531,864	$	444,097

AT&T Inc.
Financial Data


Consolidated Statements of Cash Flows
Dollars in millions
Unaudited		Year Ended
			2018		2017
Operating Activities
Net income		$	19,953	$	29,847
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		28,430		24,387
	Amortization of film and television costs		3,772		-
	Undistributed earnings from investments in equity affiliates		292		174
	Provision for uncollectible accounts		1,791		1,642
	Deferred income tax expense (benefit)		610		(15,940)
	Net (gain) loss from sale of investments, net of impairments		(739)		(282)
	Actuarial (gain) loss on pension and postretirement benefits		(3,412)		1,258
	Asset abandonments and impairments		46		2,914
Changes in operating assets and liabilities:
	Accounts receivable		(1,244)		(986)
	Other current assets, inventories and theatrical film and television production costs		(6,442)		(778)
	Accounts payable and other accrued liabilities		1,602		816
	Equipment installment receivables and related sales		(490)		(1,239)
	Deferred customer contract acquisition and fulfillment costs		(3,458)		(1,422)
Retirement benefit funding			(500)		(1,066)
Other - net			3,391		(1,315)
Total adjustments			23,649		8,163
Net Cash Provided by Operating Activities			43,602		38,010

Investing Activities
Capital expenditures:
	Purchase of property and equipment		(20,758)		(20,647)
	Interest during construction		(493)		(903)
Acquisitions, net of cash acquired			(43,309)		1,123
Dispositions			2,148		59
(Purchases) sales of securities, net			(185)		449
Advances to and investments in equity affiliates, net			(1,050)		-
Cash collections of deferred purchase price			500		976
Other			2		-
Net Cash Used in Investing Activities			(63,145)		(18,943)

Financing Activities
Net change in short-term borrowings with original maturities of three months or less			(821)		(2)
Issuance of other short-term borrowings			4,898		-
Repayment of other short-term borrowings			(2,098)		-
Issuance of long-term debt			41,875		48,793
Repayment of long-term debt			(52,643)		(12,339)
Purchase of treasury stock			(609)		(463)
Issuance of treasury stock			745		33
Dividends paid			(13,410)		(12,038)
Other			(3,926)		1,946
Net Cash (Used in) Provided by Financing Activities			(25,989)		25,930
Net (decrease) increase in cash and cash equivalents and restricted cash			(45,532)		44,997
Cash and cash equivalents and restricted cash beginning of year			50,932		5,935
Cash and Cash Equivalents and Restricted Cash End of Year		$	5,400	$	50,932

AT&T Inc.
Consolidated Supplementary Data


Supplementary Financial Data
Dollars in millions except per share amounts
Unaudited		Fourth Quarter				Percent		Year Ended					Percent
			2018		2017	Change			2018		2017		Change
Capital expenditures
	Purchase of property and equipment	$	4,063	$	4,891	(16.9)	%	$	20,758	$	20,647		0.5	%
	Interest during construction		89		185	(51.9)	%		493		903		(45.4)	%
Total Capital Expenditures		$	4,152	$	5,076	(18.2)	%	$	21,251	$	21,550		(1.4)	%

Dividends Declared per Share		$	0.51	$	0.50	2.0	%	$	2.01	$	1.97		2.0	%

End of Period Common Shares Outstanding (000,000)									7,282		6,139		18.6	%
Debt Ratio									47.7	%	53.6	%	(590)	BP
Total Employees									268,220		254,000		5.6	%


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								Year Ended					Percent
									2018		2017		Change
Wireless Subscribers
	Domestic								153,006		141,202		8.4	%
	Mexico								18,321		15,099		21.3	%
Total Wireless Subscribers									171,327		156,301		9.6	%

Total Branded Wireless Subscribers									111,958		107,740		3.9	%

Video Connections
	Domestic								24,517		25,270		(3.0)	%
	Latin America								13,838		13,629		1.5	%
Total Video Connections									38,355		38,899		(1.4)	%

Broadband Connections
	IP								14,751		14,487		1.8	%
	DSL								950		1,232		(22.9)	%
Total Broadband Connections									15,701		15,719		(0.1)	%

Voice Connections
	Network Access Lines								10,002		11,753		(14.9)	%
	U-verse VoIP Connections								5,114		5,682		(10.0)	%
Total Retail Voice Connections									15,116		17,435		(13.3)	%



		Fourth Quarter				Percent		Year Ended					Percent
			2018		2017	Change			2018		2017		Change
Wireless Net Additions
	Domestic		2,753		2,757	(0.1)	%		11,810		9,474		24.7	%
	Mexico		1,016		1,320	(23.0)	%		3,222		3,126		3.1	%
Total Wireless Net Additions			3,769		4,077	(7.6)	%		15,032		12,600		19.3	%

Total Branded Wireless Net Additions			1,016		2,046	(50.3)	%		4,367		4,858		(10.1)	%

Video Net Additions
	Domestic		(660)		159	-	%		(753)		(291)		-	%
	Latin America		198		139	42.4	%		250		42		-	%
Total Video Net Additions			(462)		298	-	%		(503)		(249)		-	%

Broadband Net Additions
	IP		7		103	(93.2)	%		264		623		(57.6)	%
	DSL		(53)		(99)	46.5	%		(282)		(509)		44.6	%
Total Broadband Net Additions			(46)		4	-	%		(18)		114		-	%

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		Fourth Quarter				Percent		Year Ended				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Mobility	$	18,769	$	19,168	(2.1)	%	$	71,344	$	71,090	0.4	%
	Entertainment Group		11,962		12,560	(4.8)	%		46,460		49,995	(7.1)	%
	Business Wireline		6,727		7,382	(8.9)	%		26,827		29,293	(8.4)	%
Total Segment Operating Revenues			37,458		39,110	(4.2)	%		144,631		150,378	(3.8)	%

Segment Operating Contribution
	Mobility		5,455		4,275	27.6	%		21,722		20,204	7.5	%
	Entertainment Group		825		1,001	(17.6)	%		4,713		5,471	(13.9)	%
	Business Wireline		1,359		1,588	(14.4)	%		5,827		6,010	(3.0)	%
Total Segment Operating Contribution		$	7,639	$	6,864	11.3	%	$	32,262	$	31,685	1.8	%

Mobility
Mobility provides nationwide wireless service and equipment.


Mobility Results
Dollars in millions
Unaudited		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Service	$	13,859	$	14,282		(3.0)	%	$	54,933	$	57,696		(4.8)	%
	Equipment		4,910		4,886		0.5	%		16,411		13,394		22.5	%
Total Operating Revenues			18,769		19,168		(2.1)	%		71,344		71,090		0.4	%

Operating Expenses
Operations and support			11,246		12,866		(12.6)	%		41,266		42,871		(3.7)	%
Depreciation and amortization			2,068		2,027		2.0	%		8,355		8,015		4.2	%
Total Operating Expenses			13,314		14,893		(10.6)	%		49,621		50,886		(2.5)	%
Operating Income			5,455		4,275		27.6	%		21,723		20,204		7.5	%
Equity in Net Income (Loss) of Affiliates			-		-		-	%		(1)		-		-	%
Operating Contribution		$	5,455	$	4,275		27.6	%	$	21,722	$	20,204		7.5	%

Operating Income Margin			29.1	%	22.3	%	680	BP		30.4	%	28.4	%	200	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Year Ended					Percent
										2018		2017		Change
Mobility Subscribers
	Postpaid									76,889		77,510		(0.8)	%
	Prepaid									17,000		15,335		10.9	%
Branded										93,889		92,845		1.1	%
Reseller										7,782		9,366		(16.9)	%
Connected Devices										51,335		38,991		31.7	%
Total Mobility Subscribers										153,006		141,202		8.4	%


		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Mobility Net Additions
	Postpaid		13		558		(97.7)	%		(97)		641		-	%
	Prepaid		26		140		(81.4)	%		1,290		1,013		27.3	%
Branded			39		698		(94.4)	%		1,193		1,654		(27.9)	%
Reseller			(438)		(530)		17.4	%		(1,704)		(1,871)		8.9	%
Connected Devices			3,152		2,589		21.7	%		12,321		9,691		27.1	%
Total Mobility Net Additions			2,753		2,757		(0.1)	%		11,810		9,474		24.7	%

Branded Churn			1.82	%	1.75	%	7	BP		1.67	%	1.68	%	(1)	BP
Postpaid Churn			1.24	%	1.11	%	13	BP		1.12	%	1.07	%	5	BP
Postpaid Phone-Only Churn			1.00	%	0.89	%	11	BP		0.90	%	0.85	%	5	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 DIRECTV and U-verse distribution platforms.


Entertainment Group Results
Dollars in millions
Unaudited		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Video entertainment	$	8,676	$	9,200		(5.7)	%	$	33,357	$	36,167		(7.8)	%
	High-speed internet		2,052		1,890		8.6	%		7,956		7,674		3.7	%
	Legacy voice and data services		724		878		(17.5)	%		3,041		3,767		(19.3)	%
	Other service and equipment		510		592		(13.9)	%		2,106		2,387		(11.8)	%
Total Operating Revenues			11,962		12,560		(4.8)	%		46,460		49,995		(7.1)	%

Operating Expenses
Operations and support			9,807		10,192		(3.8)	%		36,430		38,903		(6.4)	%
Depreciation and amortization			1,329		1,367		(2.8)	%		5,315		5,621		(5.4)	%
Total Operating Expenses			11,136		11,559		(3.7)	%		41,745		44,524		(6.2)	%
Operating Income			826		1,001		(17.5)	%		4,715		5,471		(13.8)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		-	%		(2)		-		-	%
Operating Contribution		$	825	$	1,001		(17.6)	%	$	4,713	$	5,471		(13.9)	%

Operating Income Margin			6.9	%	8.0	%	(110)	BP		10.1	%	10.9	%	(80)	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Year Ended					Percent
										2018		2017		Change
Video Connections
	Satellite									19,222		20,458		(6.0)	%
	U-verse									3,681		3,631		1.4	%
	DIRECTV NOW									1,591		1,155		37.7	%
Total Video Connections										24,494		25,244		(3.0)	%

Broadband Connections
	IP									13,729		13,462		2.0	%
	DSL									680		888		(23.4)	%
Total Broadband Connections										14,409		14,350		0.4	%

Voice Connections
	Retail Consumer Switched Access Lines									3,967		4,774		(16.9)	%
	U-verse Consumer VoIP Connections									4,582		5,222		(12.3)	%
Total Retail Consumer Voice Connections										8,549		9,996		(14.5)	%



		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Video Net Additions ¹
	Satellite		(403)		(147)		-	%		(1,236)		(554)		-	%
	U-verse		12		(60)		-	%		50		(622)		-	%
	DIRECTV NOW		(267)		368		-	%		436		888		(50.9)	%
Total Video Net Additions			(658)		161		-	%		(750)		(288)		-	%

Broadband Net Additions
	IP		6		95		(93.7)	%		267		574		(53.5)	%
	DSL		(38)		(76)		50.0	%		(208)		(403)		48.4	%
Total Broadband Net Additions			(32)		19		-	%		59		171		(65.5)	%
	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.

Business Wireline Results
Dollars in millions
Unaudited		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Strategic services	$	3,142	$	3,070		2.3	%	$	12,310	$	11,950		3.0	%
	Legacy voice and data services		2,521		3,251		(22.5)	%		10,697		13,565		(21.1)	%
	Other service and equipment		1,064		1,061		0.3	%		3,820		3,778		1.1	%
Total Operating Revenues			6,727		7,382		(8.9)	%		26,827		29,293		(8.4)	%

Operating Expenses
Operations and support			4,161		4,586		(9.3)	%		16,245		18,492		(12.2)	%
Depreciation and amortization			1,207		1,206		0.1	%		4,754		4,789		(0.7)	%
Total Operating Expenses			5,368		5,792		(7.3)	%		20,999		23,281		(9.8)	%
Operating Income			1,359		1,590		(14.5)	%		5,828		6,012		(3.1)	%
Equity in Net Income (Loss) of Affiliates			-		(2)		-	%		(1)		(2)		50.0	%
Operating Contribution		$	1,359	$	1,588		(14.4)	%	$	5,827	$	6,010		(3.0)	%

Operating Income Margin			20.2	%	21.5	%	(130)	BP		21.7	%	20.5	%	120	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		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Wireless service	$	1,900	$	1,979		(4.0)	%	$	7,397	$	8,009		(7.6)	%
	Strategic services		3,142		3,070		2.3	%		12,310		11,950		3.0	%
	Legacy voice and data services		2,521		3,251		(22.5)	%		10,697		13,565		(21.1)	%
	Other service and equipment		1,064		1,061		0.3	%		3,820		3,778		1.1	%
	Wireless equipment		780		564		38.3	%		2,532		1,552		63.1	%
Total Operating Revenues			9,407		9,925		(5.2)	%		36,756		38,854		(5.4)	%

Operating Expenses
Operations and support			5,911		6,349		(6.9)	%		22,719		24,496		(7.3)	%
Depreciation and amortization			1,507		1,492		1.0	%		5,951		5,901		0.8	%
Total Operating Expenses			7,418		7,841		(5.4)	%		28,670		30,397		(5.7)	%
Operating Income			1,989		2,084		(4.6)	%		8,086		8,457		(4.4)	%
Equity in Net Income (Loss) of Affiliates			-		(1)		-	%		(1)		(1)		-	%
Operating Contribution		$	1,989	$	2,083		(4.5)	%	$	8,085	$	8,456		(4.4)	%

Operating Income Margin			21.1	%	21.0	%	10	BP		22.0	%	21.8	%	20	BP

W ARNER M EDIA 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		Fourth Quarter				Percent		Year Ended				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Turner	$	3,212	$	107	-	%	$	6,979	$	430	-	%
	Home Box Office		1,673		-	-	%		3,598		-	-	%
	Warner Bros.		4,476		-	-	%		8,703		-	-	%
	Eliminations and other		(129)		-	-	%		(339)		-	-	%
Total Segment Operating Revenues			9,232		107	-	%		18,941		430	-	%

Segment Operating Contribution
	Turner		1,306		61	-	%		3,108		140	-	%
	Home Box Office		650		-	-	%		1,384		-	-	%
	Warner Bros.		807		-	-	%		1,449		-	-	%
	Eliminations and other		(60)		(20)	-	%		(246)		(78)	-	%
Total Segment Operating Contribution		$	2,703	$	41	-	%	$	5,695	$	62	-	%

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		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Subscription	$	1,844	$	94		-	%	$	4,207	$	365		-	%
	Advertising		1,149		13		-	%		2,330		65		-	%
	Content and other		219		-		-	%		442		-		-	%
Total Operating Revenues			3,212		107		-	%		6,979		430		-	%

Operating Expenses
Operations and support			1,861		58		-	%		3,794		331		-	%
Depreciation and amortization			60		1		-	%		131		4		-	%
Total Operating Expenses			1,921		59		-	%		3,925		335		-	%
Operating Income			1,291		48		-	%		3,054		95		-	%
Equity in Net Income of Affiliates			15		13		15.4	%		54		45		20.0	%
Operating Contribution		$	1,306	$	61		-	%	$	3,108	$	140		-	%

Operating Income Margin			40.2	%	44.9	%	(470)	BP		43.8	%	22.1	%	2,170	BP

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		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Subscription	$	1,414	$	-		-	%	$	3,201	$	-		-	%
	Content and other		259		-		-	%		397		-		-	%
Total Operating Revenues			1,673		-		-	%		3,598		-		-	%

Operating Expenses
Operations and support			1,025		-		-	%		2,187		-		-	%
Depreciation and amortization			26		-		-	%		56		-		-	%
Total Operating Expenses			1,051		-		-	%		2,243		-		-	%
Operating Income			622		-		-	%		1,355		-		-	%
Equity in Net Income of Affiliates			28		-		-	%		29		-		-	%
Operating Contribution		$	650	$	-		-	%	$	1,384	$	-		-	%

Operating Income Margin			37.2	%	-	%	-	BP		37.7	%	-	%	-	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		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Theactrical product	$	2,085	$	-		-	%	$	4,002	$	-		-	%
	Television product		1,827		-		-	%		3,621		-		-	%
	Video games and other		564		-		-	%		1,080		-		-	%
Total Operating Revenues			4,476		-		-	%		8,703		-		-	%

Operating Expenses
Operations and support			3,623		-		-	%		7,130		-		-	%
Depreciation and amortization			42		-		-	%		96		-		-	%
Total Operating Expenses			3,665		-		-	%		7,226		-		-	%
Operating Income			811		-		-	%		1,477		-		-	%
Equity in Net Income (Loss) of Affiliates			(4)		-		-	%		(28)		-		-	%
Operating Contribution		$	807	$	-		-	%	$	1,449	$	-		-	%

Operating Income Margin			18.1	%	-	%	-	BP		17.0	%	-	%	-	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		Fourth Quarter				Percent		Year Ended				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Vrio	$	1,074	$	1,391	(22.8)	%	$	4,784	$	5,456	(12.3)	%
	Mexico		769		824	(6.7)	%		2,868		2,813	2.0	%
Total Segment Operating Revenues			1,843		2,215	(16.8)	%		7,652		8,269	(7.5)	%

Segment Operating Contribution
	Vrio		66		160	(58.8)	%		347		522	(33.5)	%
	Mexico		(314)		(169)	(85.8)	%		(1,057)		(788)	(34.1)	%
Total Segment Operating Contribution		$	(248)	$	(9)	-	%	$	(710)	$	(266)	-	%

Vrio

Vrio provides entertainment services to customers utilizing satellite technology in Latin America and the Caribbean.

Vrio Results
Dollars in millions
Unaudited	Fourth Quarter					Percent		Year Ended					Percent
		2018		2017		Change			2018		2017		Change
Operating Revenues	$	1,074	$	1,391		(22.8)	%	$	4,784	$	5,456		(12.3)	%

Operating Expenses
Operations and support		849		1,049		(19.1)	%		3,743		4,172		(10.3)	%
Depreciation and amortization		169		207		(18.4)	%		728		849		(14.3)	%
Total Operating Expenses		1,018		1,256		(18.9)	%		4,471		5,021		(11.0)	%
Operating Income		56		135		(58.5)	%		313		435		(28.0)	%
Equity in Net Income of Affiliates		10		25		(60.0)	%		34		87		(60.9)	%
Operating Contribution	$	66	$	160		(58.8)	%	$	347	$	522		(33.5)	%

Operating Income Margin		5.2	%	9.7	%	(450)	BP		6.5	%	8.0	%	(150)	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								Year Ended					Percent
									2018		2017		Change
Vrio Satellite Subscribers									13,838		13,629		1.5	%

		Fourth Quarter							Year Ended
		2018		2017					2,018		2,017
Vrio Satellite Net Subscriber Additions		198		139		42.4	%		250		42		-	%

Mexico

Mexico provides wireless services and equipment to customers in Mexico.

Mexico Results
Dollars in millions
Unaudited		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Wireless service	$	440	$	501		(12.2)	%	$	1,701	$	2,047		(16.9)	%
	Wireless equipment		329		323		1.9	%		1,167		766		52.3	%
Total Operating Revenues			769		824		(6.7)	%		2,868		2,813		2.0	%

Operating Expenses
Operations and support			956		887		7.8	%		3,415		3,232		5.7	%
Depreciation and amortization			127		106		19.8	%		510		369		38.2	%
Total Operating Expenses			1,083		993		9.1	%		3,925		3,601		9.0	%
Operating Income (Loss)			(314)		(169)		(85.8)	%		(1,057)		(788)		(34.1)	%
Operating Contribution		$	(314)	$	(169)		(85.8)	%	$	(1,057)	$	(788)		(34.1)	%

Operating Income Margin			(40.8)	%	(20.5)	%	(2,030)	BP		(36.9)	%	(28.0)	%	(890)	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Year Ended					Percent
										2018		2017		Change
Mexico Wireless Subscribers
	Postpaid									5,805		5,498		5.6	%
	Prepaid									12,264		9,397		30.5	%
Branded										18,069		14,895		21.3	%
Reseller										252		204		23.5	%
Total Mexico Wireless Subscribers										18,321		15,099		21.3	%


		Fourth Quarter					Percent		Year Ended					Percent
			2018		2017		Change			2018		2017		Change
Mexico Wireless Net Additions
	Postpaid		(17)		182		-	%		307		533		(42.4)	%
	Prepaid		994		1,165		(14.7)	%		2,867		2,670		7.4	%
Branded			977		1,347		(27.5)	%		3,174		3,203		(0.9)	%
Reseller			39		(27)		-	%		48		(77)		-	%
Total Mexico Wireless Net Subscriber Additions			1,016		1,320		(23.0)	%		3,222		3,126		3.1	%

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	Fourth Quarter					Percent		Year Ended					Percent
		2018		2017		Change			2018		2017		Change
Segment Operating Revenues	$	566	$	381		48.6	%	$	1,740	$	1,373		26.7	%

Segment Operating Expenses
Operations and support		180		51		-	%		398		169		-	%
Depreciation and amortization		5		1		-	%		9		2		-	%
Total Segment Operating Expenses		185		52		-	%		407		171		-	%
Operating Income		381		329		15.8	%		1,333		1,202		10.9	%
Segment Operating Contribution	$	381	$	329		15.8	%	$	1,333	$	1,202		10.9	%

Segment Operating Income Margin		67.3	%	86.4	%	(1,910)	BP		76.6	%	87.5	%	(1,090)	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		Fourth Quarter				Percent		Year Ended				Percent
			2018		2017	Change			2018		2017	Change
Operating Revenues
	WarnerMedia	$	1,239	$	13	-	%	$	2,461	$	65	-	%
	Communications		543		420	29.3	%		1,827		1,513	20.8	%
	Xandr		566		381	48.6	%		1,740		1,373	26.7	%
	Eliminations		(473)		(377)	(25.5)	%		(1,595)		(1,357)	(17.5)	%
Total Advertising Revenues		$	1,875	$	437	-	%	$	4,433	$	1,594	-	%

SUPPLEMENTAL SEGMENT RECONCILIATION


Three Months Ended
Dollars in millions
Unaudited
*December 31, 2018*
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	18,769	$	11,246	$	7,523	$	2,068	$	5,455	$	-	$	5,455
Entertainment Group		11,962		9,807		2,155		1,329		826		(1)		825
Business Wireline		6,727		4,161		2,566		1,207		1,359		-		1,359
Total Communications		37,458		25,214		12,244		4,604		7,640		(1)		7,639
WarnerMedia
Turner		3,212		1,861		1,351		60		1,291		15		1,306
Home Box Office		1,673		1,025		648		26		622		28		650
Warner Bros.		4,476		3,623		853		42		811		(4)		807
Other		(129)		(39)		(90)		11		(101)		41		(60)
Total WarnerMedia		9,232		6,470		2,762		139		2,623		80		2,703
Latin America
Vrio		1,074		849		225		169		56		10		66
Mexico		769		956		(187)		127		(314)		-		(314)
Total Latin America		1,843		1,805		38		296		(258)		10		(248)
Xandr		566		180		386		5		381		-		381
Segment Total		49,099		33,669		15,430		5,044		10,386		89		10,475
Corporate and Other
Corporate		279		252		27		560		(533)
Acquisition-related items		(49)		435		(484)		2,262		(2,746)
Certain significant items		-		492		(492)		26		(518)
Eliminations and consolidations		(1,336)		(907)		(429)		-		(429)
AT&T Inc.	$	47,993	$	33,941	$	14,052	$	7,892	$	6,160

December 31, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	19,168	$	12,866	$	6,302	$	2,027	$	4,275	$	-	$	4,275
Entertainment Group		12,560		10,192		2,368		1,367		1,001		-		1,001
Business Wireline		7,382		4,586		2,796		1,206		1,590		(2)		1,588
Total Communications		39,110		27,644		11,466		4,600		6,866		(2)		6,864
WarnerMedia
Turner		107		58		49		1		48		13		61
Home Box Office		-		-		-		-		-		-		-
Warner Bros.		-		-		-		-		-		-		-
Other		-		1		(1)		-		(1)		(19)		(20)
Total WarnerMedia		107		59		48		1		47		(6)		41
Latin America
Vrio		1,391		1,049		342		207		135		25		160
Mexico		824		887		(63)		106		(169)		-		(169)
Total Latin America		2,215		1,936		279		313		(34)		25		(9)
Xandr		381		51		330		1		329		-		329
Segment Total		41,813		29,690		12,123		4,915		7,208		17		7,225
Corporate and Other
Corporate		340		866		(526)		24		(550)
Acquisition-related items		-		176		(176)		1,100		(1,276)
Certain significant items		(154)		3,578		(3,732)		32		(3,764)
Eliminations and consolidations		(323)		14		(337)		-		(337)
AT&T Inc.	$	41,676	$	34,324	$	7,352	$	6,071	$	1,281

SUPPLEMENTAL SEGMENT RECONCILIATION


Twelve Months Ended
Dollars in millions
Unaudited
*December 31, 2018*
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	71,344	$	41,266	$	30,078	$	8,355	$	21,723	$	(1)	$	21,722
Entertainment Group		46,460		36,430		10,030		5,315		4,715		(2)		4,713
Business Wireline		26,827		16,245		10,582		4,754		5,828		(1)		5,827
Total Communications		144,631		93,941		50,690		18,424		32,266		(4)		32,262
WarnerMedia
Turner		6,979		3,794		3,185		131		3,054		54		3,108
Home Box Office		3,598		2,187		1,411		56		1,355		29		1,384
Warner Bros.		8,703		7,130		1,573		96		1,477		(28)		1,449
Other		(339)		(145)		(194)		22		(216)		(30)		(246)
Total WarnerMedia		18,941		12,966		5,975		305		5,670		25		5,695
Latin America
Vrio		4,784		3,743		1,041		728		313		34		347
Mexico		2,868		3,415		(547)		510		(1,057)		-		(1,057)
Total Latin America		7,652		7,158		494		1,238		(744)		34		(710)
Xandr		1,740		398		1,342		9		1,333		-		1,333
Segment Total		172,964		114,463		58,501		19,976		38,525		55		38,580
Corporate and Other
Corporate		1,240		1,630		(390)		1,498		(1,888)
Acquisition-related items		(49)		1,185		(1,234)		6,931		(8,165)
Certain significant items		-		899		(899)		26		(925)
Eliminations and consolidations		(3,399)		(1,947)		(1,452)		(1)		(1,451)
AT&T Inc.	$	170,756	$	116,230	$	54,526	$	28,430	$	26,096

December 31, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	71,090	$	42,871	$	28,219	$	8,015	$	20,204	$	-	$	20,204
Entertainment Group		49,995		38,903		11,092		5,621		5,471		-		5,471
Business Wireline		29,293		18,492		10,801		4,789		6,012		(2)		6,010
Total Communications		150,378		100,266		50,112		18,425		31,687		(2)		31,685
WarnerMedia
Turner		430		331		99		4		95		45		140
Home Box Office		-		-		-		-		-		-		-
Warner Bros.		-		-		-		-		-		-		-
Other		-		4		(4)		-		(4)		(74)		(78)
Total WarnerMedia		430		335		95		4		91		(29)		62
Latin America
Vrio		5,456		4,172		1,284		849		435		87		522
Mexico		2,813		3,232		(419)		369		(788)		-		(788)
Total Latin America		8,269		7,404		865		1,218		(353)		87		(266)
Xandr		1,373		169		1,204		2		1,202		-		1,202
Segment Total		160,450		108,174		52,276		19,649		32,627		56		32,683
Corporate and Other
Corporate		1,522		3,306		(1,784)		97		(1,881)
Acquisition-related items		-		798		(798)		4,608		(5,406)
Certain significant items		(243)		3,880		(4,123)		33		(4,156)
Eliminations and consolidations		(1,183)		31		(1,214)		-		(1,214)
AT&T Inc.	$	160,546	$	116,189	$	44,357	$	24,387	$	19,970

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		Fourth Quarter
		2018		Accounting Impact		Historical 2018		2017	Percent Change
Operating Revenues
Service	$	42,496	$	(1,435)	$	43,931	$	36,225	21.3	%
Equipment		5,497		571		4,926		5,451	(9.6)	%
Total Operating Revenues		47,993		(864)		48,857		41,676	17.2	%

Operating Expenses
Cost of revenues
Equipment		5,733		-		5,733		6,532	(12.2)	%
Broadcast, programming and operations		8,885		-		8,885		6,003	48.0	%
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		8,691		(981)		9,672		9,391	3.0	%
Selling, general and administrative		10,586		(466)		11,052		9,484	16.5	%
Asset abandonments and impairments		46		-		46		2,914	(98.4)	%
Depreciation and amortization		7,892		-		7,892		6,071	30.0	%
Total Operating Expenses		41,833		(1,447)		43,280		40,395	7.1	%
Operating Income		6,160		583		5,577		1,281	-	%
Interest Expense		(2,112)		-		(2,112)		(1,926)	9.7	%
Equity in Net Income (Loss) of Affiliates		23		-		23		20	15.0	%
Other Income (Expense) - Net		1,674		-		1,674		(658)	-	%
Income Before Income Taxes		5,745		583		5,162		(1,283)	-	%
Income Tax Expense (Benefit)		615		143		472		(20,419)	-	%
Net Income		5,130		440		4,690		19,136	(75.5)	%
Less: Net Income Attributable to Noncontrolling Interest		(272)		(6)		(266)		(99)	-	%
Net Income Attributable to AT&T	$	4,858	$	434	$	4,424	$	19,037	(76.8)	%


Basic Earnings Per Share Attributable to AT&T	$	0.66	$	0.05	$	0.61	$	3.08	(80.2)	%
Weighted Average Common Shares Outstanding (000,000)		7,296		-		7,296		6,163	18.4	%

Diluted Earnings Per Share Attributable to AT&T	$	0.66	$	0.05	$	0.61	$	3.08	(80.2)	%
Weighted Average Common Shares Outstanding with Dilution (000,000)		7,328		-		7,328		6,182	18.5	%

Supplemental Mobility

Supplemental Results
Dollars in millions
Unaudited			Fourth Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Service	$	13,859	$	(840)	$	14,699	$	14,282		2.9	%
	Equipment		4,910		555		4,355		4,886		(10.9)	%
Total Operating Revenues			18,769		(285)		19,054		19,168		(0.6)	%

Operating Expenses
Operations and support			11,246		(667)		11,913		12,866		(7.4)	%
EBITDA			7,523		382		7,141		6,302		13.3	%
Depreciation and amortization			2,068		-		2,068		2,027		2.0	%
Total Operating Expenses			13,314		(667)		13,981		14,893		(6.1)	%
Operating Income			5,455		382		5,073		4,275		18.7	%
Equity in Net Income (Loss) of Affiliates			-		-		-		-		-	%
Operating Contribution		$	5,455	$	382	$	5,073	$	4,275		18.7	%

Operating Income Margin			29.1	%			26.6	%	22.3	%	430	BP
EBITDA Margin			40.1	%			37.5	%	32.9	%	460	BP
EBITDA Service Margin			54.3	%			48.6	%	44.1	%	450	BP

Supplemental Entertainment Group

Supplemental Entertainment Group Results
Dollars in millions
Unaudited			Fourth Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Video entertainment	$	8,676	$	(117)	$	8,793	$	9,200		(4.4)	%
	High-speed internet		2,052		-		2,052		1,890		8.6	%
	Legacy voice and data services		724		(34)		758		878		(13.7)	%
	Other service and equipment		510		(66)		576		592		(2.7)	%
Total Operating Revenues			11,962		(217)		12,179		12,560		(3.0)	%

Operating Expenses
Operations and support			9,807		(374)		10,181		10,192		(0.1)	%
EBITDA			2,155		157		1,998		2,368		(15.6)	%
Depreciation and amortization			1,329		-		1,329		1,367		(2.8)	%
Total Operating Expenses			11,136		(374)		11,510		11,559		(0.4)	%
Operating Income			826		157		669		1,001		(33.2)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		(1)		-		-	%
Contribution		$	825	$	157	$	668	$	1,001		(33.3)	%

Operating Income Margin			6.9	%			5.5	%	8.0	%	(250)	BP
EBITDA Margin			18.0	%			16.4	%	18.9	%	(250)	BP

Supplemental Business Wireline

Supplemental Business Wireline Results
Dollars in millions
Unaudited			Fourth Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Strategic services	$	3,142	$	(3)	$	3,145	$	3,070		2.4	%
	Legacy voice and data services		2,521		(267)		2,788		3,251		(14.2)	%
	Other service and equipment		1,064		(76)		1,140		1,061		7.4	%
Total Operating Revenues			6,727		(346)		7,073		7,382		(4.2)	%

Operating Expenses
Operations and support			4,161		(368)		4,529		4,586		(1.2)	%
EBITDA			2,566		22		2,544		2,796		(9.0)	%
Depreciation and amortization			1,207		-		1,207		1,206		0.1	%
Total Operating Expenses			5,368		(368)		5,736		5,792		(1.0)	%
Operating Income			1,359		22		1,337		1,590		(15.9)	%
Equity in Net Income of Affiliates			-		-		-		(2)		-	%
Operating Contribution		$	1,359	$	22	$	1,337	$	1,588		(15.8)	%

Operating Income Margin			20.2	%			18.9	%	21.5	%	(260)	BP
EBITDA Margin			38.1	%			36.0	%	37.9	%	(190)	BP

Supplemental Latin America

Supplemental Segment Results
Dollars in millions
Unaudited			Fourth Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Segment Operating Revenues
	Vrio	$	1,074	$	-	$	1,074	$	1,391		(22.8)	%
	Mexico		769		(9)		778		824		(5.6)	%
Total Segment Operating Revenues			1,843		(9)		1,852		2,215		(16.4)	%

Segment Operating Expenses
Operations and support			1,805		(30)		1,835		1,936		(5.2)	%
EBITDA			38		21		17		279		(93.9)	%
Depreciation and amortization			296		-		296		313		(5.4)	%
Total Segment Operating Expenses			2,101		(30)		2,131		2,249		(5.2)	%
Segment Operating Income (Loss)			(258)		21		(279)		(34)		-	%
Equity in Net Income of Affiliates			10		-		10		25		(60.0)	%
Segment Contribution		$	(248)	$	21	$	(269)	$	(9)		-	%

Operating Income Margin			(14.0)	%			(15.1)	%	(1.5)	%	(1,360)	BP
EBITDA Margin			2.1	%			0.9	%	12.6	%	(1,170)	BP

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			Fourth Quarter
			2018		Accounting Impact			Historical 2018		2017		Percent Change
Operating Revenues
	Wireless service	$	1,900	$	(209)		$	2,109	$	1,979		6.6	%
	Strategic services		3,142		(3)			3,145		3,070		2.4	%
	Legacy voice and data services		2,521		(267)			2,788		3,251		(14.2)	%
	Other service and equipment		1,064		(76)			1,140		1,061		7.4	%
	Wireless equipment		780		210			570		564		1.1	%
Total Operating Revenues			9,407		(345)			9,752		9,925		(1.7)	%

Operating Expenses
Operations and support			5,911		(470)			6,381		6,349		0.5	%
EBITDA			3,496		125			3,371		3,576		(5.7)	%
Depreciation and amortization			1,507		-			1,507		1,492		1.0	%
Total Operating Expenses			7,418		(470)			7,888		7,841		0.6	%
Operating Income			1,989		125			1,864		2,084		(10.6)	%
Equity in Net Income (Loss) of Affiliates			-		-			-		(1)		-	%
Operating Contribution		$	1,989	$	125	$		1,864	$	2,083		(10.5)	%

Operating Income Margin			21.1	%				19.1	%	21.0	%	(190)	BP
EBITDA Margin			37.2	%				34.6	%	36.0	%	(140)	BP

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		Year Ended
		2018		Accounting Impact		Historical 2018		2017	Percent Change
Operating Revenues
Service	$	152,345	$	(5,634)	$	157,979	$	145,597	8.5	%
Equipment		18,411		2,087		16,324		14,949	9.2	%
Total Operating Revenues		170,756		(3,547)		174,303		160,546	8.6	%

Operating Expenses
Cost of revenues
Equipment		19,786		-		19,786		18,709	5.8	%
Broadcast, programming and operations		26,727		-		26,727		21,159	26.3	%
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		32,906		(3,730)		36,636		37,942	(3.4)	%
Selling, general and administrative		36,765		(2,196)		38,961		35,465	9.9	%
Asset abandonments and impairments		46		-		46		2,914	(98.4)	%
Depreciation and amortization		28,430		-		28,430		24,387	16.6	%
Total Operating Expenses		144,660		(5,926)		150,586		140,576	7.1	%
Operating Income		26,096		2,379		23,717		19,970	18.8	%
Interest Expense		(7,957)		-		(7,957)		(6,300)	26.3	%
Equity in Net Income (Loss) of Affiliates		(48)		-		(48)		(128)	62.5	%
Other Income (Expense) - Net		6,782		-		6,782		1,597	-	%
Income Before Income Taxes		24,873		2,379		22,494		15,139	48.6	%
Income Tax Expense (Benefit)		4,920		583		4,337		(14,708)	-	%
Net Income		19,953		1,796		18,157		29,847	(39.2)	%
Less: Net Income Attributable to Noncontrolling Interest		(583)		(23)		(560)		(397)	(41.1)	%
Net Income Attributable to AT&T	$	19,370	$	1,773	$	17,597	$	29,450	(40.2)	%


Basic Earnings Per Share Attributable to AT&T	$	2.85	$	0.26	$	2.59	$	4.77	(45.7)	%
Weighted Average Common Shares Outstanding (000,000)		6,778		-		6,778		6,164	10.0	%

Diluted Earnings Per Share Attributable to AT&T	$	2.85	$	0.26	$	2.59	$	4.76	(45.6)	%
Weighted Average Common Shares Outstanding with Dilution (000,000)		6,806		-		6,806		6,183	10.1	%

EXHIBIT 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.

Certain amounts have been conformed to the current period's presentation, including our adoption of new accounting standards; ASU No. 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," and ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash; and our revised operating segments.

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.

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Net cash provided by operating activities	$	12,080	$	9,537	$	43,602	$	38,010
Less: Capital expenditures		(4,152)		(5,076)		(21,251)		(21,550)
Free Cash Flow		7,928		4,461		22,351		16,460

Less: Dividends paid		(3,635)		(3,008)		(13,410)		(12,038)
Free Cash Flow after Dividends	$	4,293	$	1,453	$	8,941	$	4,422
Free Cash Flow Dividend Payout Ratio		45.9%		67.4%		60.0%		73.1%

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.

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. Management compensates for these limitations by carefully analyzing how its competitors present 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
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Net Income	$	5,130	$	19,136	$	19,953	$	29,847
Additions:
Income Tax (Benefit) Expense		615		(20,419)		4,920		(14,708)
Interest Expense		2,112		1,926		7,957		6,300
Equity in Net (Income) Loss of Affiliates		(23)		(20)		48		128
Other (Income) Expense - Net		(1,674)		658		(6,782)		(1,597)
Depreciation and amortization		7,892		6,071		28,430		24,387
EBITDA		14,052		7,352		54,526		44,357

Total Operating Revenues		47,993		41,676		170,756		160,546
Service Revenues		42,496		36,225		152,345		145,597

EBITDA Margin		29.3%		17.6%		31.9%		27.6%
EBITDA Service Margin		33.1%		20.3%		35.8%		30.5%

Supplemental Historical EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Fourth Quarter		Year Ended
		2018		2018
Net Income	$	4,690	$	18,157
Additions:
Income Tax (Benefit) Expense		472		4,337
Interest Expense		2,112		7,957
Equity in Net (Income) Loss of Affiliates		(23)		48
Other (Income) Expense - Net		(1,674)		(6,782)
Depreciation and amortization		7,892		28,430
EBITDA		13,469		52,147

Total Operating Revenues		48,857		174,303
Service Revenues		43,931		157,979

EBITDA Margin		27.6%		29.9%
EBITDA Service Margin		30.7%		33.0%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Communications Segment
Operating Contribution	$	7,639	$	6,864	$	32,262	$	31,685
Additions:
Equity in Net (Income) Loss of Affiliates		1		2		4		2
Depreciation and amortization		4,604		4,600		18,424		18,425
EBITDA		12,244		11,466		50,690		50,112

Total Operating Revenues		37,458		39,110		144,631		150,378

Operating Income Margin		20.4%		17.6%		22.3%		21.1%
EBITDA Margin		32.7%		29.3%		35.0%		33.3%
Mobility
Operating Contribution	$	5,455	$	4,275	$	21,722	$	20,204
Additions:
Equity in Net (Income) of Affiliates		-		-		1		-
Depreciation and amortization		2,068		2,027		8,355		8,015
EBITDA		7,523		6,302		30,078		28,219

Total Operating Revenues		18,769		19,168		71,344		71,090
Service Revenues		13,859		14,282		54,933		57,696

Operating Income Margin		29.1%		22.3%		30.4%		28.4%
EBITDA Margin		40.1%		32.9%		42.2%		39.7%
EBITDA Service Margin		54.3%		44.1%		54.8%		48.9%

Entertainment Group
Operating Contribution	$	825	$	1,001	$	4,713	$	5,471
Additions:
Equity in Net (Income) Loss of Affiliates		1		-		2		-
Depreciation and amortization		1,329		1,367		5,315		5,621
EBITDA		2,155		2,368		10,030		11,092

Total Operating Revenues		11,962		12,560		46,460		49,995

Operating Income Margin		6.9%		8.0%		10.1%		10.9%
EBITDA Margin		18.0%		18.9%		21.6%		22.2%
Business Wireline
Operating Contribution	$	1,359	$	1,588	$	5,827	$	6,010
Additions:
Equity in Net (Income) Loss of Affiliates		-		2		1		2
Depreciation and amortization		1,207		1,206		4,754		4,789
EBITDA		2,566		2,796		10,582		10,801

Total Operating Revenues		6,727		7,382		26,827		29,293

Operating Income Margin		20.2%		21.5%		21.7%		20.5%
EBITDA Margin		38.1%		37.9%		39.4%		36.9%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
WarnerMedia Segment
Operating Contribution	$	2,703	$	41	$	5,695	$	62
Additions:
Equity in Net (Income) of Affiliates		(80)		6		(25)		29
Depreciation and amortization		139		1		305		4
EBITDA		2,762		48		5,975		95

Total Operating Revenues		9,232		107		18,941		430
Operating Income Margin		28.4%		43.9%		29.9%		21.2%
EBITDA Margin		29.9%		44.9%		31.5%		22.1%

Turner
Operating Contribution	$	1,306	$	61	$	3,108	$	140
Additions:
Equity in Net (Income) of Affiliates		(15)		(13)		(54)		(45)
Depreciation and amortization		60		1		131		4
EBITDA		1,351		49		3,185		99

Total Operating Revenues		3,212		107		6,979		430
Operating Income Margin		40.2%		44.9%		43.8%		22.1%
EBITDA Margin		42.1%		45.8%		45.6%		23.0%

Home Box Office
Operating Contribution	$	650	$	-	$	1,384	$	-
Additions:
Equity in Net (Income) Loss of Affiliates		(28)		-		(29)		-
Depreciation and amortization		26		-		56		-
EBITDA		648		-		1,411		-

Total Operating Revenues		1,673		-		3,598		-

Operating Income Margin		37.2%		-		37.7%		-
EBITDA Margin		38.7%		-		39.2%		-
Warner Bros.
Operating Contribution	$	807	$	-	$	1,449	$	-
Additions:
Equity in Net (Income) Loss of Affiliates		4		-		28		-
Depreciation and amortization		42		-		96		-
EBITDA		853		-		1,573		-

Total Operating Revenues		4,476		-		8,703		-

Operating Income Margin		18.1%		-		17.0%		-
EBITDA Margin		19.1%		-		18.1%		-

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Latin America Segment
Operating Contribution	$	(248)	$	(9)	$	(710)	$	(266)
Additions:
Equity in Net (Income) of Affiliates		(10)		(25)		(34)		(87)
Depreciation and amortization		296		313		1,238		1,218
EBITDA		38		279		494		865

Total Operating Revenues		1,843		2,215		7,652		8,269

Operating Income Margin		-14.0%		-1.5%		-9.7%		-4.3%
EBITDA Margin		2.1%		12.6%		6.5%		10.5%

Vrio
Operating Contribution	$	66	$	160	$	347	$	522
Additions:
Equity in Net (Income) of Affiliates		(10)		(25)		(34)		(87)
Depreciation and amortization		169		207		728		849
EBITDA		225		342		1,041		1,284

Total Operating Revenues		1,074		1,391		4,784		5,456

Operating Income Margin		5.2%		9.7%		6.5%		8.0%
EBITDA Margin		20.9%		24.6%		21.8%		23.5%

Mexico
Operating Contribution	$	(314)	$	(169)	$	(1,057)	$	(788)
Additions:
Depreciation and amortization		127		106		510		369
EBITDA		(187)		(63)		(547)		(419)

Total Operating Revenues		769		824		2,868		2,813

Operating Income Margin		-40.8%		-20.5%		-36.9%		-28.0%
EBITDA Margin		-24.3%		-7.6%		-19.1%		-14.9%


Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Xandr
Operating Contribution	$	381	$	329	$	1,333	$	1,202
Additions:
Depreciation and amortization		5		1		9		2
EBITDA		386		330		1,342		1,204

Total Operating Revenues		566		381		1,740		1,373

Operating Income Margin		67.3%		86.4%		76.6%		87.5%
EBITDA Margin		68.2%		86.6%		77.1%		87.7%

Adjusting Items

Adjusting items include revenues and costs we consider nonoperational 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 fourth-quarter results, unless earlier remeasurement is required (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, reflect the actual tax expense or combined marginal rate of approximately 38% for transactions prior to tax reform and 25% for transactions after tax reform.

Adjusting Items
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Operating Revenues
Time Warner deferred revenue	$	49	$	-	$	49	$	-
Natural disaster revenue credits		-		154		-		243
Adjustments to Operating Revenues		49		154		49		243
Operating Expenses
Time Warner and other merger costs		436		63		1,185		214
Employee separation costs		327		177		587		445
Natural disaster costs		77		265		181		384
Asset abandonments and impairments		46		2,914		46		2,914
Holding losses on benefit-related investments		42		-		42		-
DIRECTV merger integration costs		-		95		-		412
Mexico merger integration costs		-		19		-		172
Tax reform special bonus		-		220		-		220
(Gain) loss on transfer of wireless spectrum		-		-		-		(181)
Foreign currency exchange		-		-		43		98
Adjustments to Operations and Support Expenses		928		3,753		2,084		4,678
Amortization of intangible assets		2,261		1,100		6,930		4,608
Impairments		26		33		26		33
Adjustments to Operating Expenses		3,215		4,886		9,040		9,319
Other
Merger-related interest and fees ¹		-		432		1,029		1,104
Actuarial (gain) loss		(686)		1,517		(3,412)		1,258
Holding losses on benefit-related investments		208		-		208		-
(Gain) loss on sale of assets, impairments and other adjustments		(352)		161		(631)		382
Adjustments to Income Before Income Taxes		2,434		7,150		6,283		12,306
Tax impact of adjustments		412		1,908		1,177		3,625
Tax-related items		601		19,455		505		19,309
Adjustments to Net Income	$	1,421	$	(14,213)	$	4,601	$	(10,628)
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.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions
		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Operating Income	$	6,160	$	1,281	$	26,096	$	19,970
Adjustments to Operating Revenues		49		154		49		243
Adjustments to Operating Expenses		3,215		4,886		9,040		9,319
Adjusted Operating Income		9,424		6,321		35,185		29,532

EBITDA		14,052		7,352		54,526		44,357
Adjustments to Operating Revenues		49		154		49		243
Adjustments to Operations and Support Expenses		928		3,753		2,084		4,678
Adjusted EBITDA		15,029		11,259		56,659		49,278

Pro forma as of June 30, 2018
WarnerMedia Operating Income		-				3,047
Additions:
Depreciation and amortization		-				339
Merger costs		-				694
WarnerMedia Adjusted EBITDA		-				4,080
WarnerMedia segment income (post acquisition)		-				(451)
WarnerMedia segment depreciation and amortization (post acquisition)		-				(30)
WarnerMedia merger costs (post acquisition)		-				(159)
Film and television cost amortization (release prior to June 14)		-				1,103
Pro Forma Adjusted EBITDA ¹		15,029				61,202

Total Operating Revenues		47,993		41,676		170,756		160,546
Adjustments to Operating Revenues		49		154		49		243
Total Adjusted Operating Revenue		48,042		41,830		170,805		160,789
Service Revenues		42,496		36,225		152,345		145,597
Adjustments to Service Revenues		49		154		49		243
Adjusted Service Revenue		42,545		36,379		152,394		145,840


Operating Income Margin		12.8%		3.1%		15.3%		12.4%
Adjusted Operating Income Margin		19.6%		15.1%		20.6%		18.4%
Adjusted EBITDA Margin		31.3%		26.9%		33.2%		30.6%
Adjusted EBITDA Service Margin		35.3%		30.9%		37.2%		33.8%

Supplemental Results under Historical Accounting Method
Operating Income		5,577				23,717
Adjustments to Operating Revenues		49				49
Adjustments to Operating Expenses		3,215				9,040
Adjusted Supplemental Operating Income		8,841				32,806

EBITDA		13,469				52,147
Adjustments to Operating Revenues		49				49
Adjustments to Operations and Support Expenses		928				2,084
Adjusted Supplemental EBITDA		14,446				54,280

Supplemental Operating Revenues		48,857				174,303

Adjusted Supplemental Operating Income Margin		18.1%				18.8%
Adjusted Supplemental EBITDA margin		29.6%				31.1%
¹ Pro Forma Adjusted EBITDA reflects the combined results operations of the combined company based on the historical financial statements of AT&T and Time Warner, after giving effect to the merger and certain adjustments, and is intended to reflect the impact of the Time Warner acquisition on AT&T. WarnerMedia operating income, depreciation and amortization expense and merger costs are provided on Item 7.01 Form 8-K filed by AT&T on July 24, 2018. Pro Forma adjustments are to (1) remove the duplication of operating results for the 16-period in which AT&T also reported Time Warner results and (2) to recognize the purchase accounting classification of released content as intangible assets and accordingly reclassify associated content amortization from operating expense to amortization expense. Intercompany revenue and expense eliminations net and do not impact EBITDA.

Adjusted Diluted EPS

		Fourth Quarter				Year Ended
		2018		2017		2018		2017
Diluted Earnings Per Share (EPS)	$	0.66	$	3.08	$	2.85	$	4.76
Amortization of intangible assets		0.25		0.12		0.81		0.50
Merger integration items ¹		0.06		0.07		0.26		0.21
(Gain) loss on sale of assets, impairments and other adjustments ²		0.04		0.48		0.05		0.58
Actuarial (gain) loss ³		(0.07)		0.19		(0.38)		0.16
Tax-related items		(0.08)		(3.16)		(0.07)		(3.16)
Adjusted EPS	$	0.86	$	0.78	$	3.52	$	3.05
Year-over-year growth - Adjusted		10.3%				15.4%
Weighted Average Common Shares Outstanding with Dilution (000,000)		7,328		6,182		6,806		6,183
¹ Includes combined merger integration items and merger-related interest income and expense, and redemption premiums.
² Includes gains on transactions, natural disaster adjustments and charges, and employee-related and other costs.
³ Includes adjustments for actuarial gains or losses associated with our postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded total net actuarial gains of $3.4 billion in 2018. As a result, adjusted EPS reflects an expected return on plan assets of $3.5 billion (based on an average expected return on plan assets of 7.00% for our pension trust and 5.75% for our VEBA trusts), rather than the actual return on plan assets of $1.2 billion loss (actual pension return of -1.4% and VEBA return of -4.2%), included in the GAAP measure of income.

Pro Forma 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 Pro Forma Adjusted EBITDA ratio is calculated by dividing the Net Debt by Annualized Pro Forma 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. Annualized Pro Forma Adjusted EBITDA is calculated by annualizing the year-to-date Pro Forma Adjusted EBITDA.

Our Annualized Net Debt to Pro Forma Adjusted EBITDA ratio for the year ended December 31, 2018 reflects the benefit of amortization of prior service credits of $1,754 in Other Income (Expense) - net rather than EBITDA, consistent with treatment for consolidated reported results. Segment results continue to show this benefit as a reduction in their operating expenses, consistent with treatment prior to adoption of accounting rules in first-quarter 2018. If we had used the historical method of accounting for prior service credits, our 2018 Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio would be 2.75 .

Net Debt to Pro Forma Adjusted EBITDA
Dollars in millions
		Three Months Ended
		Mar. 31,		Jun. 30,		Sep. 30,		Dec. 31,		YTD 2018
		2018		2018		2018		2018		YTD 2018
Pro Forma Adjusted EBITDA ¹	$	15,182	$	15,119	$	15,872	$	15,029	$	61,202
Add back severance		(51)		(133)		(76)		(327)		(587)
Net Debt Pro Forma Adjusted EBITDA		15,131		14,986		15,796		14,702		60,615
Annualized Pro Forma Adjusted EBITDA										60,615
End-of-period current debt										10,255
End-of-period long-term debt										166,250
Total End-of-Period Debt										176,505
Less: Cash and Cash Equivalents										5,204
Net Debt Balance										171,301
Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio										2.83
¹ Includes the purchase accounting reclassification of released content amortization of $612 million pro forma in the first quarter, $491 million pro forma and $98 million reported by AT&T in the second quarter and $772 million reported and $545 million reported by AT&T in the third and fourth quarters of 2018, respectively.

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
		December 31, 2018								December 31, 2017
		Mobility		Business Wireline		Adjustments ¹		Business Solutions		Mobility		Business Wireline		Adjustments ¹		Business Solutions
Operating Revenues
Wireless service	$	13,859	$	-	$	(11,959)	$	1,900	$	14,282	$	-	$	(12,303)	$	1,979
Strategic services		-		3,142		-		3,142		-		3,070		-		3,070
Legacy voice and data services		-		2,521		-		2,521		-		3,251		-		3,251
Other services and equipment		-		1,064		-		1,064		-		1,061		-		1,061
Wireless equipment		4,910		-		(4,130)		780		4,886		-		(4,322)		564
Total Operating Revenues		18,769		6,727		(16,089)		9,407		19,168		7,382		(16,625)		9,925
Operations and support		11,246		4,161		(9,496)		5,911		12,866		4,586		(11,103)		6,349
EBITDA		7,523		2,566		(6,593)		3,496		6,302		2,796		(5,522)		3,576
Depreciation and amortization		2,068		1,207		(1,768)		1,507		2,027		1,206		(1,741)		1,492
Total Operating Expenses		13,314		5,368		(11,264)		7,418		14,893		5,792		(12,844)		7,841
Operating Income		5,455		1,359		(4,825)		1,989		4,275		1,590		(3,781)		2,084
Equity in net Income of Affiliates		-		-		-		-		-		(2)		1		(1)
Contribution	$	5,455	$	1,359	$	(4,825)	$	1,989	$	4,275	$	1,588	$	(3,780)	$	2,083
¹ Non-business wireless reported in the Communication segment under the Mobility business unit.

Supplemental Operational Measure
		Year Ended
		December 31, 2018								December 31, 2017
		Mobility		Business Wireline		Adjustments ¹		Business Solutions		Mobility		Business Wireline		Adjustments ¹		Business Solutions
Operating Revenues
Wireless service	$	54,933	$	-	$	(47,536)	$	7,397	$	57,696	$	-	$	(49,687)	$	8,009
Strategic services		-		12,310		-		12,310		-		11,950		-		11,950
Legacy voice and data services		-		10,697		-		10,697		-		13,565		-		13,565
Other services and equipment		-		3,820		-		3,820		-		3,778		-		3,778
Wireless equipment		16,411		-		(13,879)		2,532		13,394		-		(11,842)		1,552
Total Operating Revenues		71,344		26,827		(61,415)		36,756		71,090		29,293		(61,529)		38,854

Operating Expenses
Operations and support		41,266		16,245		(34,792)		22,719		42,871		18,492		(36,867)		24,496
EBITDA		30,078		10,582		(26,623)		14,037		28,219		10,801		(24,662)		14,358
Depreciation and amortization		8,355		4,754		(7,158)		5,951		8,015		4,789		(6,903)		5,901
Total Operating Expenses		49,621		20,999		(41,950)		28,670		50,886		23,281		(43,770)		30,397
Operating Income		21,723		5,828		(19,465)		8,086		20,204		6,012		(17,759)		8,457
Equity in net Income of Affiliates		(1)		(1)		1		(1)		-		(2)		1		(1)
Contribution	$	21,722	$	5,827	$	(19,464)	$	8,085	$	20,204	$	6,010	$	(17,758)	$	8,456
¹ Non-business wireless reported in the Communication segment under the Mobility business unit.