AT&T INC. (Form: 8-K, Received: 04/24/2019 06:47:40)

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) April 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))

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

Emerging growth company ☐

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

Item 8.01 Other Events.

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

Overview

We announced on April 24, 2019 that first-quarter 2019 net income attributable to AT&T totaled $4.1 billion, or $0.56 per diluted share, compared to $4.7 billion, or $0.75 per diluted share, in the first quarter of 2018. First -quarter 2019 revenues were $44.8 billion, up 17.8 percent from the first quarter of 2018. First-quarter revenues reflect increased revenues primarily from our acquisition of Time Warner Inc. (Time Warner). Compared with results for the first quarter of 2018, current quarter operating expenses were $37.6 billion, up 18.1 percent primarily due to the Time Warner acquisition; first-quarter operating income was $7.2 billion compared to $6.2 billion in the comparable 2018 period; and AT&T’s first-quarter operating income margin was 16.1 percent, compared to 16.3 percent. First-quarter 2019 cash from operating activities was $11.1 billion, up $2.1 billion when compared to 2018, driven by contributions from acquired businesses. Capital expenditures for the first three months of 2019 was $5.2 billion, and when including $820 cash paid for vendor financing, cash paid for capital investment during the first quarter of 2019 was $6.0 billion.

Segment Summary

We analyze our segments based on, among other thing, segment contribution, which consists of operating income, excluding acquisition-related costs and other significant items, and equity in net income (loss) of affiliates for investments managed within each segment. Our reportable segments are: Communications, WarnerMedia, Latin America and Xandr.

Communications

Our Communications segment consists of our Mobility, Entertainment Group and Business Wireline business units. First-quarter 2019 operating revenues were $35.4 billion, down 0.4 percent versus first-quarter 2018, with segment operating contribution of $8.1 billion, up 0.3 percent versus the year-ago quarter. The Communications operating income margin was 22.8 percent, compared to 22.6 percent in the year-earlier quarter.

Mobility

Mobility revenues for the first quarter of 2019 were $17.6 billion, up 1.2 percent versus the first quarter of 2018, with revenue improvement resulting from increased service revenues, partially offset by decreased equipment revenues from lower postpaid smartphone sales. Mobility operating expenses totaled $12.2 billion, up 0.2 percent versus the first quarter of 2018. The increase was driven by higher commission amortization, offset by lower postpaid smartphone volumes and cost efficiencies . Mobility’s operating income margin was 30.5 percent compared to 29.7 percent in the year-ago quarter.

In our Mobility business unit, we reported a net gain of 2.7 million wireless subscribers. At March 31, 2019, wireless subscribers totaled 155.7 million compared to 143.8 million for the prior comparable period. During the first quarter, net adds were as follows:

●	Prepaid subscriber net adds were 96,000.

●	Postpaid subscriber net adds were a loss of 204,000.

o	Domestic postpaid phone net adds were 80,000.

●	Reseller net adds were a loss of 253,000.

●	Connected device net adds were 3.1 million, 2.0 million of which were primarily attributable to wholesale connected cars.

For the quarter ended March 31, 2019, postpaid phone-only ARPU increased 3.7 percent versus the year-earlier quarter.

Postpaid phone-only churn was 0.93 percent, compared to 0.84 percent in the first quarter of 2018. Total postpaid churn was 1.17 percent, compared to 1.06 percent in the year-ago quarter.

Entertainment Group

Entertainment Group (Entertainment) revenues for the first quarter of 2019 were $11.3 billion, down 0.9 percent versus the year-ago quarter reflecting declines in video subscribers and legacy services. Entertainment operating expenses totaled $9.9 billion, down 2.7 percent versus the first quarter of 2018. The decrease was largely driven by lower marketing costs and volumes, cost initiatives, and a one-time gain from recent content negotiations. Also contributing to expense declines was the impact of a prior update to expected subscriber life on deferral amortization. The Entertainment operating income margin was 13.0 percent compared to 11.5 percent in the year-earlier quarter.

At March 31, 2019, Entertainment revenue connections included:

●	Approximately 23.9 million video connections (including 1.5 million DIRECTV NOW subscribers) at March 31, 2019 compared to 25.4 million at March 31, 2018. During the first quarter of 2019, including the impact of losses of 83,000 from DIRECTV NOW, total video subscribers decreased 627,000.

●	Approximately 14.5 million broadband connections at March 31, 2019 compared to 14.4 million at March 31, 2018. During the first quarter, we added 93,000 IP broadband subscribers, for a total of 13.8 million at March 31, 2019.

In the first quarter, we aligned our Entertainment Group billing practices with the industry and AT&T Mobility to extend a customer’s disconnection period to the end of his or her billing cycle, resulting in an increase of a net 38,000 broadband subscribers and a net 117,000 video subscribers in the period.

Business Wireline

Business Wireline (Business) revenues have been recast to conform to the current period’s presentation, most significantly to combine strategic and managed services, which historically had been reported as “other.” Business revenues for the first quarter of 2019 were $6.5 billion, down 3.7 percent versus the year-ago quarter reflecting continued declines in legacy revenues, partially offset by growth in strategic and managed services. Business operating expenses totaled $5.3 billion, up 1.7 percent versus the first quarter of 2018, largely driven by increased depreciation expense. Business operating income margin was 18.8 percent compared to 23.1 percent in the year-earlier quarter.

At March 31, 2019, our total switched access lines (Entertainment and Business) were 9.6 million compared with 11.3 million at March 31, 2018. The number of U-verse voice connections (which use VoIP technology and therefore are not included in the access line total) decreased by 178,000 in the quarter, totaling 4.9 million at March 31, 2019, compared to 5.6 million at March 31, 2018.

WarnerMedia

Our WarnerMedia segment results are not comparable to the year-ago quarter due to the timing of our June 2018 acquisition of Time Warner. WarnerMedia segment operating revenues for the first quarter of 2019 were $8.4 billion. During the quarter, subscription revenues were $3.4 billion, comprised of $2.0 billion from the Turner properties and $1.3 billion from Home Box Office (HBO), and advertising revenues were $1.3 billion. Content and other revenues were $3.7 billion, with $1.5 billion from theatrical product and $1.6 billion from television product at Warner Bros.

WarnerMedia segment operating expenses were $6.1 billion, which include programming and film costs of $3.6 billion. Programming and film costs were comprised of $1.9 billion of original and sports programming, reflecting National Collegiate Athletic Association (NCAA) and National Basketball Association (NBA) programming costs that are typically more significant in the first half of the year and film and television production costs of $1.7 billion. The WarnerMedia segment operating income margin was 26.8 percent.

Latin America

Our Latin America segment consists of our Vrio and Mexico business units and is subject to foreign currency fluctuations. First-quarter 2019 operating revenues were $1.7 billion, down 15.2 percent versus the prior year, with segment operating contribution of $(173) million, versus $(111) million in the comparable 2018 period. The Latin America operating income margin was (10.1) percent, compared to (5.5) percent in the year-earlier quarter.

Vrio

Video service revenues were $1.1 billion, down 21.2 percent versus the prior year, driven by foreign exchange pressures. Operating expenses were $1.0 billion, down 14.2 percent and Vrio’s operating income margin was 3.0 percent, compared to 10.9 percent in the year-earlier quarter.

We had approximately 13.6 million Latin America video connections at March 31, 2019 and 2018. During the first quarter of 2019, video net adds were a loss of 32,000. Video connections reflect a beginning of period subscriber adjustment of 222,000, resulting from conforming our video credit policy across the region.

Mexico

Wireless revenues were $651 million, down 3.0 percent when compared to the first quarter of 2018. Decreased revenues were primarily due to lower equipment sales resulting from the introduction of our equipment installment purchase program in the prior year, which were partially offset by service revenue growth. Operating expenses were $856 million, down 8.0 percent and Mexico’s operating income margin was (31.5) percent, compared to (38.6) percent in the year-earlier quarter.

We had approximately 17.7 million Mexican wireless subscribers at March 31, 2019 compared to 15.6 million at March 31, 2018. During the first quarter of 2019, we had prepaid net adds of 114,000 and postpaid net adds were a loss of 69,000. Wireless subscribers reflect a beginning of period subscriber adjustment of 692,000, resulting from the churn of customers related to sales by certain third-party distributors and the sunset of 2G services in Mexico.

Xandr

Our Xandr segment provides advertising services utilizing data insights to develop higher-value targeted advertising. Certain revenues in this segment are also reported by the Communications segment and are eliminated upon consolidation. First-quarter 2019 operating revenues were $426 million, up 26.4 percent versus the prior year, reflecting the acquisition of AppNexus. Operating expenses were $173 million, versus $51 in the comparable prior-year, driven by costs associated with scaling the business. Xandr segment operating contribution was $253 million, down 11.5 percent versus first-quarter 2018. The Xandr segment operating income margin was 59.4 percent, compared to 84.9 percent in the year-earlier quarter.

Supplemental Discussions

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

AT&T Business Solutions

Revenues from AT&T Business Solutions for the first quarter of 2019 were $9.0 billion, down 1.2 percent versus the year-ago quarter driven by declines in our legacy voice and data services, partially offset by growth in strategic and managed services and wireless service revenues. Operating expenses totaled $7.2 billion, up 1.8 percent versus the first quarter of 2018, largely due to commission deferrals and increased cost efficiencies, partially offset by wireless sales costs. AT&T Business Solutions operating income margin was 20.3 percent, compared to 22.6 percent in the year-earlier quarter.

AT&T Advertising Revenues

Total AT&T Advertising revenues for the first quarter of 2019 were $1.8 billion compared to $392 million in the year-ago quarter, with the increase primarily driven by our acquisition of Time Warner, specifically Turner.

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

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

Item 9.01 Financial Statements and Exhibits.

The following exhibits are filed as part of this report:

(d) Exhibits

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

99.2 Discussion and reconciliation of non-GAAP measures .

Signature

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

	AT&T INC.



Date: April 24, 2019	By: / s/ Debra L. Dial Debra L. Dial Senior Vice President and Controller

AT&T Inc.
Financial Data


Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	First Quarter				Percent
		2019		2018	Change
Operating Revenues
Service	$	40,684	$	33,646	20.9	%
Equipment		4,143		4,392	(5.7)	%
Total Operating Revenues		44,827		38,038	17.8	%

Operating Expenses
Cost of revenues
Equipment		4,502		4,848	(7.1)	%
Broadcast, programming and operations		7,652		5,166	48.1	%
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		8,585		7,932	8.2	%
Selling, general and administrative		9,649		7,897	22.2	%
Depreciation and amortization		7,206		5,994	20.2	%
Total Operating Expenses		37,594		31,837	18.1	%
Operating Income		7,233		6,201	16.6	%
Interest Expense		2,141		1,771	20.9	%
Equity in Net Income (Loss) of Affiliates		(7)		9	-	%
Other Income (Expense) - Net		286		1,702	(83.2)	%
Income Before Income Taxes		5,371		6,141	(12.5)	%
Income Tax Expense		1,023		1,382	(26.0)	%
Net Income		4,348		4,759	(8.6)	%
Less: Net Income Attributable to Noncontrolling Interest		(252)		(97)	-	%
Net Income Attributable to AT&T	$	4,096	$	4,662	(12.1)	%


Basic Earnings Per Share Attributable to AT&T	$	0.56	$	0.75	(25.3)	%
Weighted Average Common Shares Outstanding (000,000)		7,313		6,161	18.7	%

Diluted Earnings Per Share Attributable to AT&T	$	0.56	$	0.75	(25.3)	%
Weighted Average Common Shares Outstanding with Dilution (000,000)		7,342		6,180	18.8	%

AT&T Inc.
Financial Data


Consolidated Balance Sheets
Dollars in millions
Unaudited		Mar. 31,		Dec. 31,
		2019		2018
Assets
Current Assets
Cash and cash equivalents	$	6,516	$	5,204
Accounts receivable - net of allowances for doubtful accounts of $905 and $907		23,863		26,472
Prepaid expenses		1,518		2,047
Other current assets		14,575		17,704
Total current assets		46,472		51,427
Noncurrent Inventories and Theatrical Film and Television Production Costs		10,270		7,713
Property, Plant and Equipment – Net		132,051		131,473
Goodwill		146,434		146,370
Licenses – Net		97,001		96,144
Trademarks and Trade Names – Net		24,218		24,345
Distribution Networks – Net		16,623		17,069
Other Intangible Assets – Net		24,732		26,269
Investments in and Advances to Equity Affiliates		6,230		6,245
Operating Lease Right-of-Use Assets		20,235		-
Other Assets		24,118		24,809
Total Assets	$	548,384	$	531,864

Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	11,538	$	10,255
Accounts payable and accrued liabilities		42,306		43,184
Advanced billings and customer deposits		5,956		5,948
Accrued taxes		1,130		1,179
Dividends payable		3,722		3,854
Total current liabilities		64,652		64,420
Long-Term Debt		163,942		166,250
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		59,207		57,859
Postemployment benefit obligation		19,664		19,218
Operating lease liabilities		18,253		-
Other noncurrent liabilities		27,715		30,233
Total deferred credits and other noncurrent liabilities		124,839		107,310
Stockholders’ Equity
Common stock		7,621		7,621
Additional paid-in capital		125,174		125,525
Retained earnings		59,424		58,753
Treasury stock		(11,452)		(12,059)
Accumulated other comprehensive income		4,345		4,249
Noncontrolling interest		9,839		9,795
Total stockholders’ equity		194,951		193,884
Total Liabilities and Stockholders' Equity	$	548,384	$	531,864

AT&T Inc.
Financial Data


Consolidated Statements of Cash Flows
Dollars in millions
Unaudited		First Quarter
			2019		2018
Operating Activities
Net income		$	4,348	$	4,759
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		7,206		5,994
	Amortization of film and television costs		2,497		-
	Undistributed earnings from investments in equity affiliates		112		(2)
	Provision for uncollectible accounts		592		438
	Deferred income tax expense (benefit)		1,069		1,222
	Net (gain) loss from investments, net of impairments		(175)		2
	Actuarial (gain) loss on pension and postretirement benefits		432		(930)
Changes in operating assets and liabilities:
	Accounts receivable		1,894		(439)
	Other current assets, inventories and theatrical film and television production costs		(2,510)		614
	Accounts payable and other accrued liabilities		(3,686)		(1,962)
	Equipment installment receivables and related sales		652		505
	Deferred customer contract acquisition and fulfillment costs		(375)		(826)
Retirement benefit funding			-		(140)
Other - net			(1,004)		(288)
Total adjustments			6,704		4,188
Net Cash Provided by Operating Activities			11,052		8,947

Investing Activities
Capital expenditures:
	Purchase of property and equipment		(5,121)		(5,957)
	Interest during construction		(61)		(161)
Acquisitions, net of cash acquired			(213)		(234)
Dispositions			10		56
(Purchases) sales of securities, net			(1)		(116)
Advances to and investments in equity affiliates, net			(15)		(1,007)
Cash collections of deferred purchase price			-		267
Net Cash Used in Investing Activities			(5,401)		(7,152)

Financing Activities
Net change in short-term borrowings with original maturities of three months or less			(256)		-
Issuance of other short-term borrowings			296		-
Repayment of other short-term borrowings			(176)		-
Issuance of long-term debt			9,182		2,565
Repayment of long-term debt			(9,840)		(4,911)
Purchase of treasury stock			(189)		(145)
Issuance of treasury stock			167		11
Dividends paid			(3,714)		(3,070)
Other			109		2,048
Net Cash Used in Financing Activities			(4,421)		(3,502)
Net increase (decrease) in cash and cash equivalents and restricted cash			1,230		(1,707)
Cash and cash equivalents and restricted cash beginning of year			5,400		50,932
Cash and Cash Equivalents and Restricted Cash End of Period		$	6,630	$	49,225

AT&T Inc.
Consolidated Supplementary Data


Supplementary Financial Data
Dollars in millions except per share amounts
Unaudited		First Quarter					Percent
			2019		2018		Change
Capital expenditures
	Purchase of property and equipment	$	5,121	$	5,957		(14.0)	%
	Interest during construction		61		161		(62.1)	%
Total Capital Expenditures		$	5,182	$	6,118		(15.3)	%

Dividends Declared per Share		$	0.51	$	0.50		2.0	%

End of Period Common Shares Outstanding (000,000)			7,297		6,148		18.7	%
Debt Ratio			47.4	%	52.6	%	(520)	BP
Total Employees			262,290		249,240		5.2	%


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited		First Quarter					Percent
			2019		2018		Change
Wireless Subscribers
	Domestic		155,732		143,832		8.3	%
	Mexico		17,722		15,642		13.3	%
Total Wireless Subscribers			173,454		159,474		8.8	%

Video Connections
	Domestic		23,891		25,394		(5.9)	%
	Latin America		13,584		13,573		0.1	%
Total Video Connections			37,475		38,967		(3.8)	%

Broadband Connections
	IP		14,852		14,637		1.5	%
	DSL		885		1,138		(22.2)	%
Total Broadband Connections			15,737		15,775		(0.2)	%

Voice Connections
	Network Access Lines		9,576		11,288		(15.2)	%
	U-verse VoIP Connections		4,935		5,585		(11.6)	%
Total Retail Voice Connections			14,511		16,873		(14.0)	%


		First Quarter					Percent
			2019		2018		Change
Wireless Net Additions
	Domestic		2,727		2,630		3.7	%
	Mexico		93		543		(82.9)	%
Total Wireless Net Additions			2,820		3,173		(11.1)	%

Video Net Additions
	Domestic		(626)		124		-	%
	Latin America		(32)		(15)		-	%
Total Video Net Additions			(658)		109		-	%

Broadband Net Additions
	IP		100		150		(33.3)	%
	DSL		(64)		(94)		31.9	%
Total Broadband Net Additions			36		56		(35.7)	%

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		First Quarter				Percent
			2019		2018	Change
Segment Operating Revenues
	Mobility	$	17,567	$	17,355	1.2	%
	Entertainment Group		11,328		11,431	(0.9)	%
	Business Wireline		6,498		6,747	(3.7)	%
Total Segment Operating Revenues			35,393		35,533	(0.4)	%

Segment Operating Contribution
	Mobility		5,351		5,158	3.7	%
	Entertainment Group		1,478		1,309	12.9	%
	Business Wireline		1,223		1,560	(21.6)	%
Total Segment Operating Contribution		$	8,052	$	8,027	0.3	%

Mobility

Mobility provides nationwide wireless service and equipment.

Mobility Results
Dollars in millions
Unaudited	First Quarter					Percent
		2019		2018		Change
Operating Revenues
Service	$	13,792	$	13,403		2.9	%
Equipment		3,775		3,952		(4.5)	%
Total Operating Revenues		17,567		17,355		1.2	%

Operating Expenses
Operations and support		10,181		10,102		0.8	%
Depreciation and amortization		2,035		2,095		(2.9)	%
Total Operating Expenses		12,216		12,197		0.2	%
Operating Income		5,351		5,158		3.7	%
Equity in Net Income (Loss) of Affiliates		-		-		-	%
Operating Contribution	$	5,351	$	5,158		3.7	%

Operating Income Margin		30.5	%	29.7	%	80	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited	First Quarter					Percent
		2019		2018		Change
Mobility Subscribers
Postpaid		76,550		77,431		(1.1)	%
Prepaid		17,180		15,671		9.6	%
Reseller		7,574		9,002		(15.9)	%
Connected Devices		54,428		41,728		30.4	%
Total Mobility Subscribers		155,732		143,832		8.3	%


	First Quarter					Percent
		2019		2018		Change
Mobility Net Additions
Postpaid		(204)		49		-	%
Prepaid		96		241		(60.2)	%
Reseller		(253)		(388)		34.8	%
Connected Devices		3,088		2,728		13.2	%
Total Mobility Net Additions		2,727		2,630		3.7	%

Postpaid Churn		1.17	%	1.06	%	11	BP
Postpaid Phone-Only Churn		0.93	%	0.84	%	9	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	First Quarter					Percent
		2019		2018		Change
Operating Revenues
Video entertainment	$	8,074	$	8,225		(1.8)	%
High-speed internet		2,070		1,878		10.2	%
Legacy voice and data services		683		806		(15.3)	%
Other service and equipment		501		522		(4.0)	%
Total Operating Revenues		11,328		11,431		(0.9)	%

Operating Expenses
Operations and support		8,527		8,811		(3.2)	%
Depreciation and amortization		1,323		1,310		1.0	%
Total Operating Expenses		9,850		10,121		(2.7)	%
Operating Income		1,478		1,310		12.8	%
Equity in Net Income (Loss) of Affiliates		-		(1)		-	%
Operating Contribution	$	1,478	$	1,309		12.9	%

Operating Income Margin		13.0	%	11.5	%	150	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited	First Quarter					Percent
		2019		2018		Change
Video Connections ¹
Premium TV		22,359		23,902		(6.5)	%
DIRECTV NOW		1,508		1,467		2.8	%
Total Video Connections		23,867		25,369		(5.9)	%

Broadband Connections ¹
IP		13,822		13,616		1.5	%
DSL		632		816		(22.5)	%
Total Broadband Connections		14,454		14,432		0.2	%

Voice Connections
Retail Consumer Switched Access Lines		3,787		4,535		(16.5)	%
U-verse Consumer VoIP Connections		4,393		5,105		(13.9)	%
Total Retail Consumer Voice Connections		8,180		9,640		(15.1)	%


	First Quarter					Percent
		2019		2018		Change
Video Net Additions ^1,2
Premium TV		(544)		(187)		-	%
DIRECTV NOW		(83)		312		-	%
Total Video Net Additions		(627)		125		-	%

Broadband Net Additions ¹
IP		93		154		(39.6)	%
DSL		(48)		(72)		33.3	%
Total Broadband Net Additions		45		82		(45.1)	%

¹	2019 includes the impact of conforming our subscriber disconnection policy with that of our wireless business and industry
	practice (to billing cycle basis), resulting in 117 additional video and 38 additional broadband subscribers at March 31, 2019.
²	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		First Quarter					Percent
			2019		2018		Change
Operating Revenues
	Strategic and managed services	$	3,792	$	3,595		5.5	%
	Legacy voice and data services		2,404		2,865		(16.1)	%
	Other service and equipment		302		287		5.2	%
Total Operating Revenues			6,498		6,747		(3.7)	%

Operating Expenses
Operations and support			4,040		4,016		0.6	%
Depreciation and amortization			1,235		1,170		5.6	%
Total Operating Expenses			5,275		5,186		1.7	%
Operating Income			1,223		1,561		(21.7)	%
Equity in Net Income (Loss) of Affiliates			-		(1)		-	%
Operating Contribution		$	1,223	$	1,560		(21.6)	%

Operating Income Margin			18.8	%	23.1	%	(430)	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		First Quarter					Percent
			2019		2018		Change
Operating Revenues
	Wireless service	$	1,913	$	1,791		6.8	%
	Strategic and managed services		3,792		3,595		5.5	%
	Legacy voice and data services		2,404		2,865		(16.1)	%
	Other service and equipment		302		287		5.2	%
	Wireless equipment		596		578		3.1	%
Total Operating Revenues			9,007		9,116		(1.2)	%

Operating Expenses
Operations and support			5,640		5,594		0.8	%
Depreciation and amortization			1,541		1,458		5.7	%
Total Operating Expenses			7,181		7,052		1.8	%
Operating Income			1,826		2,064		(11.5)	%
Equity in Net Income (Loss) of Affiliates			-		(1)		-	%
Operating Contribution		$	1,826	$	2,063		(11.5)	%

Operating Income Margin			20.3	%	22.6	%	(230)	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 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		First Quarter					Percent
			2019		2018		Change
Operating Revenues
	Subscription	$	3,369	$	98		-	%
	Advertising		1,279		14		-	%
	Content and other		3,731		-		-	%
Total Operating Revenues			8,379		112		-	%

Operating Expenses
Operations and support			5,993		82		-	%
Depreciation and amortization			143		1		-	%
Total Operating Expenses			6,136		83		-	%
Operating Income			2,243		29		-	%
Equity in Net Income (Loss) of Affiliates			67		10		-	%
Operating Contribution		$	2,310	$	39		-	%

Operating Income Margin			26.8	%	25.9	%	90	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		First Quarter				Percent
			2019		2018	Change
Segment Operating Revenues
	Vrio	$	1,067	$	1,354	(21.2)	%
	Mexico		651		671	(3.0)	%
Total Segment Operating Revenues			1,718		2,025	(15.2)	%

Segment Operating Contribution
	Vrio		32		148	(78.4)	%
	Mexico		(205)		(259)	20.8	%
Total Segment Operating Contribution		$	(173)	$	(111)	(55.9)	%

Vrio

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

Vrio Results
Dollars in millions
Unaudited	First Quarter					Percent
		2019		2018		Change
Operating Revenues	$	1,067	$	1,354		(21.2)	%

Operating Expenses
Operations and support		866		1,001		(13.5)	%
Depreciation and amortization		169		205		(17.6)	%
Total Operating Expenses		1,035		1,206		(14.2)	%
Operating Income		32		148		(78.4)	%
Equity in Net Income of Affiliates		-		-		-	%
Operating Contribution	$	32	$	148		(78.4)	%

Operating Income Margin		3.0	%	10.9	%	(790)	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited	First Quarter					Percent
		2019		2018		Change
Vrio Video Subscribers ¹		13,584		13,573		0.1	%


	First Quarter					Percent
		2019		2018		Change
Vrio Video Net Subscriber Additions		(32)		(15)		-	%

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	First Quarter					Percent
		2019		2018		Change
Operating Revenues
Wireless service	$	442	$	404		9.4	%
Wireless equipment		209		267		(21.7)	%
Total Operating Revenues		651		671		(3.0)	%

Operating Expenses
Operations and support		725		803		(9.7)	%
Depreciation and amortization		131		127		3.1	%
Total Operating Expenses		856		930		(8.0)	%
Operating Income (Loss)		(205)		(259)		20.8	%
Equity in Net Income of Affiliates		-		-		-	%
Operating Contribution	$	(205)	$	(259)		20.8	%

Operating Income Margin		(31.5)	%	(38.6)	%	710	BP

Supplementary Operating Data
Subscribers and connections in thousands
Unaudited	First Quarter					Percent
		2019		2018		Change
Mexico Wireless Subscribers ¹
Postpaid		5,642		5,607		0.6	%
Prepaid		11,779		9,857		19.5	%
Reseller		301		178		69.1	%
Total Mexico Wireless Subscribers		17,722		15,642		13.3	%

	First Quarter					Percent
		2019		2018		Change
Mexico Wireless Net Additions
Postpaid		(69)		109		-	%
Prepaid		114		459		(75.2)	%
Reseller		48		(25)		-	%
Total Mexico Wireless Net Subscriber Additions		93		543		(82.9)	%

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	First Quarter					Percent
		2019		2018		Change
Segment Operating Revenues	$	426	$	337		26.4	%

Segment Operating Expenses
Operations and support		160		50		-	%
Depreciation and amortization		13		1		-	%
Total Segment Operating Expenses		173		51		-	%
Operating Income		253		286		(11.5)	%
Equity in Net Income of Affiliates		-		-		-	%
Segment Operating Contribution	$	253	$	286		(11.5)	%

Segment Operating Income Margin		59.4	%	84.9	%	(2,550)	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		First Quarter				Percent
			2019		2018	Change
Operating Revenues
	WarnerMedia	$	1,279	$	14	-	%
	Communications		417		375	11.2	%
	Xandr		426		337	26.4	%
	Eliminations		(350)		(334)	(4.8)	%
Total Advertising Revenues		$	1,772	$	392	-	%

SUPPLEMENTAL SEGMENT RECONCILIATION



First Quarter
Dollars in millions
Unaudited
*March 31, 2019*
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,567	$	10,181	$	7,386	$	2,035	$	5,351	$	-	$	5,351
Entertainment Group		11,328		8,527		2,801		1,323		1,478		-		1,478
Business Wireline		6,498		4,040		2,458		1,235		1,223		-		1,223
Total Communications		35,393		22,748		12,645		4,593		8,052		-		8,052
WarnerMedia		8,379		5,993		2,386		143		2,243		67		2,310
Latin America
Vrio		1,067		866		201		169		32		-		32
Mexico		651		725		(74)		131		(205)		-		(205)
Total Latin America		1,718		1,591		127		300		(173)		-		(173)
Xandr		426		160		266		13		253		-		253
Segment Total		45,916		30,492		15,424		5,049		10,375	$	67	$	10,442
Corporate and Other
Corporate		209		513		(304)		169		(473)
Acquisition-related items		(42)		73		(115)		1,988		(2,103)
Certain significant items		-		248		(248)		-		(248)
Eliminations and consolidations		(1,256)		(938)		(318)		-		(318)
AT&T Inc.	$	44,827	$	30,388	$	14,439	$	7,206	$	7,233

March 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	$	17,355	$	10,102	$	7,253	$	2,095	$	5,158	$	-	$	5,158
Entertainment Group		11,431		8,811		2,620		1,310		1,310		(1)		1,309
Business Wireline		6,747		4,016		2,731		1,170		1,561		(1)		1,560
Total Communications		35,533		22,929		12,604		4,575		8,029		(2)		8,027
WarnerMedia		112		82		30		1		29		10		39
Latin America
Vrio		1,354		1,001		353		205		148		-		148
Mexico		671		803		(132)		127		(259)		-		(259)
Total Latin America		2,025		1,804		221		332		(111)		-		(111)
Xandr		337		50		287		1		286		-		286
Segment Total		38,007		24,865		13,142		4,909		8,233	$	8	$	8,241
Corporate and Other
Corporate		333		735		(402)		23		(425)
Acquisition-related items		-		67		(67)		1,062		(1,129)
Certain significant items		-		180		(180)		-		(180)
Eliminations and consolidations		(302)		(4)		(298)		-		(298)
AT&T Inc.	$	38,038	$	25,843	$	12,195	$	5,994	$	6,201

Discussion and Reconciliation of Non-GAAP Measures

Supplemental Operational Measures

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

Supplemental Operational Measure
		First Quarter
		March 31, 2019								March 31, 2018
		Mobility		Business Wireline		Adjustments ¹		Business Solutions		Mobility		Business Wireline		Adjustments ¹		Business Solutions
Operating Revenues
Wireless service	$	13,792	$	-	$	(11,879)	$	1,913	$	13,403	$	-	$	(11,612)	$	1,791
Strategic and managed services		-		3,792		-		3,792		-		3,595		-		3,595
Legacy voice and data services		-		2,404		-		2,404		-		2,865		-		2,865
Other services and equipment		-		302		-		302		-		287		-		287
Wireless equipment		3,775		-		(3,179)		596		3,952		-		(3,374)		578
Total Operating Revenues		17,567		6,498		(15,058)		9,007		17,355		6,747		(14,986)		9,116
Operations and support		10,181		4,040		(8,581)		5,640		10,102		4,016		(8,524)		5,594
EBITDA		7,386		2,458		(6,477)		3,367		7,253		2,731		(6,462)		3,522
Depreciation and amortization		2,035		1,235		(1,729)		1,541		2,095		1,170		(1,807)		1,458
Total Operating Expenses		12,216		5,275		(10,310)		7,181		12,197		5,186		(10,331)		7,052
Operating Income		5,351		1,223		(4,748)		1,826		5,158		1,561		(4,655)		2,064
Equity in net Income of Affiliates		-		-		-		-		-		(1)		-		(1)
Contribution	$	5,351	$	1,223	$	(4,748)	$	1,826	$	5,158	$	1,560	$	(4,655)	$	2,063
¹ Non-business wireless reported in the Communication segment under the Mobility business unit.