0000732717 us-gaap:FundedPlanMember us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember us-gaap:QualifiedPlanMember 2019-01-01 2019-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~

2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number ~~1-8610~~

001-8610

AT&T INC.

Incorporated under the laws of the State of Delaware

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

208 S. Akard St., Dallas, Texas 75202

Telephone Number: (210) 821-4105

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

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
Common Shares (Par Value $1.00 Per Share)	T	New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 5.000% Perpetual Preferred Stock, Series A	T PRA	New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 4.750% Perpetual Preferred Stock, Series C	T PRC	New York Stock Exchange
AT&T Inc. Floating Rate Global Notes due August 3, 2020	T 20C	New York Stock Exchange
AT&T Inc. 1.875% Global Notes due December 4, 2020	T 20	New York Stock Exchange
AT&T Inc. 2.650% Global Notes due December 17, 2021	T 21B	New York Stock Exchange
AT&T Inc. 1.450% Global Notes due June 1, 2022	T 22B	New York Stock Exchange
AT&T Inc. 2.500% Global Notes due March 15, 2023	T 23	New York Stock Exchange
AT&T Inc. 2.750% Global Notes due May 19, 2023	T 23C	New York Stock Exchange
AT&T Inc. Floating Rate Global Notes due September 5, 2023	T 23D	New York Stock Exchange
AT&T Inc. 1.050% Global Notes due September 5, 2023	T 23E	New York Stock Exchange
AT&T Inc. 1.300% Global Notes due September 5, 2023	T 23A	New York Stock Exchange
AT&T Inc. 1.950% Global Notes due September 15, 2023	T 23F	New York Stock Exchange
AT&T Inc. 2.400% Global Notes due March 15, 2024	T 24A	New York Stock Exchange
AT&T Inc. 3.500% Global Notes due December 17, 2025	T 25	New York Stock Exchange

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
AT&T Inc. 0.250% Global Notes due March 4, 2026	T 26E	New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026	T 26D	New York Stock Exchange
AT&T Inc. 2.900% Global Notes due December 4, 2026	T 26A	New York Stock Exchange
AT&T Inc. 1.600% Global Notes due May 19, 2028	T 28C	New York Stock Exchange
AT&T Inc. 2.350% Global Notes due September 5, 2029	T 29D	New York Stock Exchange
AT&T Inc. 4.375% Global Notes due September 14, 2029	T 29B	New York Stock Exchange
AT&T Inc. 2.600% Global Notes due December 17, 2029	T 29A	New York Stock Exchange
AT&T Inc. 0.800% Global Notes due March 4, 2030	T 30B	New York Stock Exchange
AT&T Inc. 2.050% Global Notes due May 19, 2032	T 32A	New York Stock Exchange
AT&T Inc. 3.550% Global Notes due December 17, 2032	T 32	New York Stock Exchange
AT&T Inc. 5.200% Global Notes due November 18, 2033	T 33	New York Stock Exchange
AT&T Inc. 3.375% Global Notes due March 15, 2034	T 34	New York Stock Exchange
AT&T Inc. 2.450% Global Notes due March 15, 2035	T 35	New York Stock Exchange
AT&T Inc. 3.150% Global Notes due September 4, 2036	T 36A	New York Stock Exchange
AT&T Inc. 2.600% Global Notes due May 19, 2038	T 38C	New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 14, 2039	T 39B	New York Stock Exchange
AT&T Inc. 7.000% Global Notes due April 30, 2040	T 40	New York Stock Exchange
AT&T Inc. 4.250% Global Notes due June 1, 2043	T 43	New York Stock Exchange
AT&T Inc. 4.875% Global Notes due June 1, 2044	T 44	New York Stock Exchange
AT&T Inc. 4.000% Global Notes due June 1, 2049	T 49A	New York Stock Exchange
AT&T Inc. 4.250% Global Notes due March 1, 2050	T 50	New York Stock Exchange
AT&T Inc. 3.750% Global Notes due September 1, 2050	T 50A	New York Stock Exchange
AT&T Inc. 5.350% Global Notes due November 1, 2066	TBB	New York Stock Exchange
AT&T Inc. 5.625% Global Notes due August 1, 2067	TBC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes [X] No [ ]

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

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

If an emerging growth company, indicate by checkmark 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.

Yes [ ] No [ ]

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

Yes [ ] No [X]

At ~~October~~July 31, ~~2017,~~2020, there were ~~6,139~~7,125 million common shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
		Three months ended				Six months ended
		June 30,				June 30,
		2020		2019		2020		2019
Operating Revenues
Service	$	37,051	$	41,023	$	75,934	$	81,707
Equipment		3,899		3,934		7,795		8,077
Total operating revenues		40,950		44,957		83,729		89,784

Operating Expenses
Cost of revenues
Equipment		3,978		4,061		8,070		8,563
Broadcast, programming and operations		5,889		7,730		12,643		15,382
Other cost of revenues (exclusive of depreciation and
amortization shown separately below)		8,116		8,721		16,458		17,306
Selling, general and administrative		9,831		9,844		18,591		19,493
Asset impairments and abandonments		2,319		-		2,442		-
Depreciation and amortization		7,285		7,101		14,507		14,307
Total operating expenses		37,418		37,457		72,711		75,051
Operating Income		3,532		7,500		11,018		14,733
Other Income (Expense)
Interest expense		(2,041)		(2,149)		(4,059)		(4,290)
Equity in net income (loss) of affiliates		(10)		40		(16)		33
Other income (expense) – net		1,017		(318)		1,820		(32)
Total other income (expense)		(1,034)		(2,427)		(2,255)		(4,289)
Income Before Income Taxes		2,498		5,073		8,763		10,444
Income tax expense		935		1,099		2,237		2,122
Net Income		1,563		3,974		6,526		8,322
Less: Net Income Attributable to Noncontrolling Interest		(282)		(261)		(635)		(513)
Net Income Attributable to AT&T	$	1,281	$	3,713	$	5,891	$	7,809
Less: Preferred Stock Dividends		(52)		-		(84)		-
Net Income Attributable to Common Stock	$	1,229	$	3,713	$	5,807	$	7,809
Basic Earnings Per Share Attributable to
Common Stock	$	0.17	$	0.51	$	0.81	$	1.06
Diluted Earnings Per Share Attributable to
Common Stock	$	0.17	$	0.51	$	0.81	$	1.06
Weighted Average Number of Common Shares
Outstanding – Basic (in millions)		7,145		7,323		7,166		7,318
Weighted Average Number of Common Shares
Outstanding – with Dilution (in millions)		7,170		7,353		7,192		7,347
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016

Operating Revenues
Service $ 36,378 $ 37,272 $ 109,372 $ 111,515
Equipment 3,290 3,618 9,498 10,430
Total operating revenues 39,668 40,890 118,870 121,945

Operating Expenses
Cost of services and sales
   Equipment 4,191 4,455 12,177 13,090
   Broadcast, programming and operations 5,284 4,909 15,156 14,239
   Other cost of services (exclusive of depreciation and
         amortization shown separately below)
9,431 9,526 27,714 28,436
Selling, general and administrative 8,317 9,013 24,917 26,363
Depreciation and amortization 6,042 6,579 18,316 19,718
Total operating expenses 33,265 34,482 98,280 101,846
Operating Income 6,403 6,408 20,590 20,099
Other Income (Expense)
Interest expense (1,686 ) (1,224 ) (4,374 ) (3,689 )
Equity in net income (loss) of affiliates 11 16 (148 ) 57
Other income (expense) – net 246 (7 ) 354 154
Total other income (expense) (1,429 ) (1,215 ) (4,168 ) (3,478 )
Income Before Income Taxes 4,974 5,193 16,422 16,621
Income tax expense 1,851 1,775 5,711 5,803
Net Income 3,123 3,418 10,711 10,818
Less: Net Income Attributable to Noncontrolling Interest (94 ) (90 ) (298 ) (279 )
Net Income Attributable to AT&T $ 3,029 $ 3,328 $ 10,413 $ 10,539
Basic Earnings Per Share Attributable to AT&T $ 0.49 $ 0.54 $ 1.69 $ 1.70
Diluted Earnings Per Share Attributable to AT&T $ 0.49 $ 0.54 $ 1.69 $ 1.70
Weighted Average Number of Common Shares
   Outstanding – Basic (in millions)
6,162 6,168 6,164 6,171
Weighted Average Number of Common Shares
   Outstanding – with Dilution (in millions)
6,182 6,189 6,184 6,191
Dividends Declared Per Common Share $ 0.49 $ 0.48 $ 1.47 $ 1.44
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income	$	1,563	$	3,974	$	6,526	$	8,322
Other comprehensive income (loss), net of tax:
Foreign currency:
Translation adjustment (includes $(8), $2, $(59) and $2
attributable to noncontrolling interest), net of taxes of
$(135), $(1), $(197) and $48		305		(127)		(1,549)		161
Securities:
Net unrealized gains (losses), net of taxes of $5, $10, $27
and $15		14		26		80		42
Derivative instruments:
Net unrealized gains (losses), net of taxes of $168, $(165),
$(803) and $(131)		631		(617)		(3,026)		(490)
Reclassification adjustment included in net income,
net of taxes of $4, $3, $4 and $5		17		6		17		17
Defined benefit postretirement plans:
Amortization of net prior service credit included in net
income, net of taxes of $(150), $(107), $(301)
and $(220)		(461)		(342)		(922)		(688)
Other comprehensive income (loss)		506		(1,054)		(5,400)		(958)
Total comprehensive income		2,069		2,920		1,126		7,364
Less: Total comprehensive income attributable to
noncontrolling interest		(274)		(263)		(576)		(515)
Total Comprehensive Income Attributable to AT&T	$	1,795	$	2,657	$	550	$	6,849
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	June 30,		December 31,
	2020		2019
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	16,941	$	12,130
Accounts receivable - net of related allowances for credit loss of $1,606 and $1,235		19,127		22,636
Prepaid expenses		1,439		1,631
Other current assets		19,048		18,364
Total current assets		56,555		54,761
Noncurrent Inventories and Theatrical Film and Television Production Costs		14,514		12,434
Property, plant and equipment		332,883		333,538
Less: accumulated depreciation and amortization		(203,938)		(203,410)
Property, Plant and Equipment – Net		128,945		130,128
Goodwill		143,651		146,241
Licenses – Net		98,763		97,907
Trademarks and Trade Names – Net		23,757		23,567
Distribution Networks – Net		14,704		15,345
Other Intangible Assets – Net		18,452		20,798
Investments in and Advances to Equity Affiliates		2,302		3,695
Operating Lease Right-Of-Use Assets		24,692		24,039
Other Assets		21,563		22,754
Total Assets	$	547,898	$	551,669
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	15,576	$	11,838
Accounts payable and accrued liabilities		41,881		45,956
Advanced billings and customer deposits		5,723		6,124
Accrued taxes		2,548		1,212
Dividends payable		3,741		3,781
Total current liabilities		69,469		68,911
Long-Term Debt		153,388		151,309
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		58,387		59,502
Postemployment benefit obligation		18,167		18,788
Operating lease liabilities		22,230		21,804
Other noncurrent liabilities		32,804		29,421
Total deferred credits and other noncurrent liabilities		131,588		129,515
Stockholders’ Equity
Preferred stock ($1 par value, 10,000,000 authorized ):
Series A (48,000 issued and outstanding at June 30, 2020 and December 31, 2019)		-		-
Series B (20,000 issued and outstanding at June 30, 2020
and 0 issued and outstanding at December 31, 2019)		-		-
Series C (70,000 issued and outstanding at June 30, 2020
and 0 issued and outstanding at December 31, 2019)		-		-
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2020 and
December 31, 2019: issued 7,620,748,598 at June 30, 2020 and December 31, 2019)		7,621		7,621
Additional paid-in capital		130,046		126,279
Retained earnings		56,045		57,936
Treasury stock (495,425,902 at June 30, 2020 and 366,193,458 December 31, 2019,
at cost)		(17,945)		(13,085)
Accumulated other comprehensive income		129		5,470
Noncontrolling interest		17,557		17,713
Total stockholders’ equity		193,453		201,934
Total Liabilities and Stockholders’ Equity	$	547,898	$	551,669
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)
	Six months ended
	June 30,
	2020		2019
Operating Activities
Net income	$	6,526	$	8,322
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,507		14,307
Amortization of television and film costs		3,985		5,199
Undistributed earnings from investments in equity affiliates		64		76
Provision for uncollectible accounts		1,199		1,216
Deferred income tax expense		653		1,080
Net (gain) loss on investments, net of impairments		(705)		(905)
Pension and postretirement benefit expense (credit)		(1,495)		(808)
Actuarial (gain) loss on pension and postretirement benefits		-		2,131
Asset impairments and abandonments		2,442		-
Changes in operating assets and liabilities:
Receivables		2,522		3,584
Other current assets, inventories and theatrical film and television production costs		(5,592)		(5,422)
Accounts payable and other accrued liabilities		(3,847)		(3,056)
Equipment installment receivables and related sales		226		1,144
Deferred customer contract acquisition and fulfillment costs		322		(614)
Postretirement claims and contributions		(228)		(424)
Other - net		346		(494)
Total adjustments		14,399		17,014
Net Cash Provided by Operating Activities		20,925		25,336
Investing Activities
Capital expenditures:
Purchase of property and equipment		(9,372)		(10,542)
Interest during construction		(60)		(112)
Acquisitions, net of cash acquired		(1,174)		(320)
Dispositions		347		3,593
(Purchases), sales and settlements of securities and investments, net		47		396
Advances to and investments in equity affiliates, net		(66)		(314)
Net Cash Used in Investing Activities		(10,278)		(7,299)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less		498		119
Issuance of other short-term borrowings		8,440		3,067
Repayment of other short-term borrowings		(5,975)		(3,148)
Issuance of long-term debt		21,060		10,030
Repayment of long-term debt		(17,284)		(16,124)
Payment of vendor financing		(1,354)		(1,836)
Issuance of preferred stock		3,869		-
Purchase of treasury stock		(5,480)		(240)
Issuance of treasury stock		84		455
Dividends paid		(7,474)		(7,436)
Other		(2,295)		330
Net Cash Used in Financing Activities		(5,911)		(14,783)
Net increase in cash and cash equivalents and restricted cash		4,736		3,254
Cash and cash equivalents and restricted cash beginning of year		12,295		5,400
Cash and Cash Equivalents and Restricted Cash End of Period	$	17,031	$	8,654
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	Three months ended						Six months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Preferred Stock - Series A
Balance at beginning of year	-	$	-	-	$	-	-	$	-	-	$	-
Issuance of stock	-		-	-		-	-		-	-		-
Balance at end of period	-	$	-	-	$	-	-	$	-	-	$	-
Preferred Stock - Series B
Balance at beginning of year	-	$	-	-	$	-	-	$	-	-	$	-
Issuance of stock	-		-	-		-	-		-	-		-
Balance at end of period	-	$	-	-	$	-	-	$	-	-	$	-
Preferred Stock - Series C
Balance at beginning of year	-	$	-	-	$	-	-	$	-	-	$	-
Issuance of stock	-		-	-		-	-		-	-		-
Balance at end of period	-	$	-	-	$	-	-	$	-	-	$	-
Common Stock
Balance at beginning of period	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621
Issuance of stock	-		-	-		-	-		-	-		-
Balance at end of period	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621
Additional Paid-In Capital
Balance at beginning of period		$	129,966		$	125,174		$	126,279		$	125,525
Repurchase and acquisition of common stock			-			-			67			-
Issuance of preferred stock			-			-			3,869			-
Issuance of treasury stock			(7)			(50)			(54)			(127)
Share-based payments			87			(15)			(115)			(289)
Balance at end of period		$	130,046		$	125,109		$	130,046		$	125,109
Retained Earnings
Balance at beginning of period		$	58,534		$	59,424		$	57,936		$	58,753
Net income attributable to AT&T			1,281			3,713			5,891			7,809
Preferred stock dividends			(36)			-			(68)			-
Common stock dividends ( $0.52, $0.51,
$1.04, and $1.02 per share)			(3,734)			(3,748)			(7,421)			(7,489)
Cumulative effect of accounting change
and other adjustments			-			-			(293)			316
Balance at end of period		$	56,045		$	59,389		$	56,045		$	59,389
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued
Dollars and shares in millions except per share amounts
(Unaudited)
	Three months ended						Six months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Treasury Stock
Balance at beginning of period	(496)	$	(17,957)	(324)	$	(11,452)	(366)	$	(13,085)	(339)	$	(12,059)
Repurchase and acquisition of common stock	-		(34)	(2)		(72)	(148)		(5,581)	(9)		(280)
Issuance of treasury stock	1		46	10		373	19		721	32		1,188
Balance at end of period	(495)	$	(17,945)	(316)	$	(11,151)	(495)	$	(17,945)	(316)	$	(11,151)
Accumulated Other Comprehensive
Income Attributable to AT&T, net of tax
Balance at beginning of period		$	(385)		$	4,345		$	5,470		$	4,249
Other comprehensive income
attributable to AT&T			514			(1,056)			(5,341)			(960)
Balance at end of period		$	129		$	3,289		$	129		$	3,289
Noncontrolling Interest
Balance at beginning of period		$	17,670		$	9,839		$	17,713		$	9,795
Net income attributable to
noncontrolling interest			282			261			635			513
Interest acquired by noncontrolling owners			-			1			1			10
Distributions			(387)			(279)			(726)			(525)
Translation adjustments attributable to
noncontrolling interest, net of taxes			(8)			2			(59)			2
Cumulative effect of accounting change
and other adjustments			-			-			(7)			29
Balance at end of period		$	17,557		$	9,824		$	17,557		$	9,824
Total Stockholders’ Equity at beginning
of period		$	195,449		$	194,951		$	201,934		$	193,884
Total Stockholders’ Equity at end
of period		$	193,453		$	194,081		$	193,453		$	194,081
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Net income $ 3,123 $ 3,418 $ 10,711 $ 10,818
Other comprehensive income (loss), net of tax:
    Foreign currency:
        Foreign currency translation adjustment (includes $10,
            $21, $6 and $21 attributable to noncontrolling interest),
            net of taxes of $74, $(91), $580 and $35
151 (225 ) 490 (51 )
    Available-for-sale securities:
        Net unrealized gains (losses), net of taxes of $28, $28, $72
            and $15
45 46 128 25
        Reclassification adjustment included in net income, net of
            taxes of $(50), $(3), $(54) and $(3)
(79 ) (5 ) (86 ) (5 )
     Cash flow hedges:
        Net unrealized gains (losses), net of taxes of $178, $240,
            $(94) and $99
330 446 (174 ) 183
        Reclassification adjustment included in net income, net of
            taxes of $5, $5, $15 and $15
10 10 29 29
     Defined benefit postretirement plans:
        Net prior service credit arising during period, net of
            taxes of $0, $0, $594 and $0
- - 969 -
        Amortization of net prior service credit included in net
            income, net of taxes of $(157), $(131), $(447) and $(393)
(256 ) (215 ) (731 ) (644 )
Other comprehensive income (loss) 201 57 625 (463 )
Total comprehensive income 3,324 3,475 11,336 10,355
Less: Total comprehensive income attributable to
        noncontrolling interest
(104 ) (111 ) (304 ) (300 )
Total Comprehensive Income Attributable to AT&T $ 3,220 $ 3,364 $ 11,032 $ 10,055
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
September 30, December 31,
2017 2016
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 48,499 $ 5,788
Accounts receivable - net of allowances for doubtful accounts of $741 and $661 15,876 16,794
Prepaid expenses 1,258 1,555
Other current assets 10,724 14,232
Total current assets 76,357 38,369
Property, plant and equipment 326,240 319,648
   Less: accumulated depreciation and amortization (199,778 ) (194,749 )
Property, Plant and Equipment – Net 126,462 124,899
Goodwill 105,668 105,207
Licenses 96,071 94,176
Customer Lists and Relationships – Net 11,573 14,243
Other Intangible Assets – Net 7,775 8,441
Investments in Equity Affiliates 1,627 1,674
Other Assets 18,332 16,812
Total Assets $ 443,865 $ 403,821

Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 8,551 $ 9,832
Accounts payable and accrued liabilities 28,928 31,138
Advanced billing and customer deposits 4,503 4,519
Accrued taxes 2,703 2,079
Dividends payable 3,008 3,008
Total current liabilities 47,693 50,576
Long-Term Debt 154,728 113,681
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 64,381 60,128
Postemployment benefit obligation 31,231 33,578
Other noncurrent liabilities 19,723 21,748
Total deferred credits and other noncurrent liabilities 115,335 115,454

Stockholders' Equity
Common stock ($1 par value, $14,000,000,000 authorized at September 30, 2017 and
   December 31, 2016: issued 6,495,231,088 at September 30, 2017 and December 31, 2016)
6,495 6,495
Additional paid-in capital 89,527 89,604
Retained earnings 36,074 34,734
Treasury stock (355,897,357 at September 30, 2017 and 356,237,141
   at December 31, 2016, at cost)
(12,716 ) (12,659 )
Accumulated other comprehensive income 5,580 4,961
Noncontrolling interest 1,149 975
Total stockholders' equity 126,109 124,110
Total Liabilities and Stockholders' Equity $ 443,865 $ 403,821
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)
Nine months ended
September 30,
2017 2016
Operating Activities
Net income $ 10,711 $ 10,818
Adjustments to reconcile net income to net cash provided by operating activities:
   Depreciation and amortization 18,316 19,718
   Undistributed loss (earnings) from investments in equity affiliates 171 (22 )
   Provision for uncollectible accounts 1,216 1,036
   Deferred income tax expense 3,254 3,011
   Net loss (gain) from sale of investments, net of impairments (114 ) (88 )
   Actuarial loss (gain) on pension and postretirement benefits (259 ) -
Changes in operating assets and liabilities:
   Accounts receivable (652 ) (1,108 )
   Other current assets (106 ) 1,805
   Accounts payable and other accrued liabilities (1,437 ) (1,173 )
   Equipment installment receivables and related sales 1,116 207
   Deferred fulfillment costs (1,102 ) (1,883 )
Retirement benefit funding (420 ) (770 )
Other - net
(1,420 ) (2,349 )
Total adjustments 18,563 18,384
Net Cash Provided by Operating Activities 29,274 29,202

Investing Activities
Capital expenditures:
   Purchase of property and equipment (15,756 ) (15,283 )
   Interest during construction (718 ) (669 )
Acquisitions, net of cash acquired 1,154 (2,922 )
Dispositions 56 184
(Purchases) sales of securities, net (2 ) 501
Net Cash Used in Investing Activities (15,266 ) (18,189 )

Financing Activities
Issuance of long-term debt 46,761 10,140
Repayment of long-term debt (10,309 ) (10,688 )
Purchase of treasury stock (460 ) (444 )
Issuance of treasury stock 26 137
Dividends paid (9,030 ) (8,850 )
Other 1,715 (534 )
Net Cash Provided by (Used in) Financing Activities 28,703 (10,239 )
Net increase in cash and cash equivalents 42,711 774
Cash and cash equivalents beginning of year 5,788 5,121
Cash and Cash Equivalents End of Period $ 48,499 $ 5,895
Cash paid during the nine months ended September 30 for:
   Interest $ 5,031 $ 4,430
   Income taxes, net of refunds $ 1,861 $ 3,166
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
September 30, 2017
Shares Amount
Common Stock
Balance at beginning of year 6,495 $ 6,495
Issuance of stock - -
Balance at end of period 6,495 $ 6,495

Additional Paid-In Capital
Balance at beginning of year $ 89,604
Issuance of treasury stock 4
Share-based payments (81 )
Balance at end of period $ 89,527

Retained Earnings
Balance at beginning of year $ 34,734
Net income attributable to AT&T ($1.69 per diluted share) 10,413
Dividends to stockholders ($1.47 per share) (9,075 )
Other 2
Balance at end of period $ 36,074

Treasury Stock
Balance at beginning of year (356 ) $ (12,659 )
Repurchase and acquisition of common stock (14 ) (530 )
Issuance of treasury stock 14 473
Balance at end of period (356 ) $ (12,716 )

Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
Balance at beginning of year $ 4,961
Other comprehensive income attributable to AT&T 619
Balance at end of period $ 5,580

Noncontrolling Interest
Balance at beginning of year $ 975
Net income attributable to noncontrolling interest 298
Distributions (270 )
Acquisition of noncontrolling interest 140
Translation adjustments attributable to noncontrolling interest, net of taxes 6
Balance at end of period $ 1,149

Total Stockholders' Equity at beginning of year $ 124,110
Total Stockholders' Equity at end of period $ 126,109
See Notes to Consolidated Financial Statements.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

For ease of reading, AT&T Inc. is referred to as "we," "AT&T" or the "Company" throughout this document, and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate in the communications and digital entertainment services industry. Our subsidiaries and affiliates provide services and equipment that deliver voice, video and broadband services both domestically and internationally. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016. The results for the interim periods are not necessarily indicative of those for the full year.

~~In the tables throughout this document, percentage increases and decreases that are not considered meaningful are denoted with a dash.~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollars in millions except per share amounts

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of Presentation Throughout this document, AT&T Inc. is referred to as “we,” “AT&T” or the “Company.” The consolidated financial statements include the accounts of the Company and subsidiaries and affiliates which we control. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019. The results for the interim periods are not necessarily indicative of those for the full year.These consolidated financial statements include all adjustments that are necessary to present fairly the results for the presented interim periods, consisting of normal recurring accruals and other items. ~~The consolidated financial statements include the accounts of the Company and our subsidiaries and affiliates over which we exercise control.~~

All significant intercompany transactions are eliminated in the consolidation process. Investments in ~~unconsolidated~~ subsidiaries and partnerships ~~where~~which we do not control but have significant influence are accounted for under the equity method. Earnings from certain investments accounted for using the equity method are included for periods ended within up to one quarter of our period end. We also record our proportionate share of our equity method ~~investees'~~investees’ other comprehensive income (OCI) ~~items, including cumulative translation adjustments.~~

items.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions, including potential impacts arising from the COVID-19 pandemic, that affect the amounts reported in the financial statements and accompanying ~~notes, including estimates of probable losses and expenses.~~notes. Actual results could differ from those estimates.

Certain prior period amounts have been conformed to the current period’s presentation, including the combination of our prior Xandr segment with the WarnerMedia segment.

In the tables throughout this document, percentage increases and decreases that are not considered meaningful are denoted with a dash.

~~Recently~~

Adopted and Pending Accounting Standards

~~Income Taxes~~ and Other Changes

Credit Losses As of January 1, ~~2017,~~2020, we adopted, through modified retrospective application, the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) No. ~~2016-16, "Income Taxes~~2016-13, “Financial Instruments—Credit Losses (Topic ~~740)"~~326): Measurement of Credit Losses on Financial Instruments” (ASU ~~2016-16)~~2016-13, as amended), which replaces the incurred loss impairment methodology under prior GAAP with ~~modified retrospective application, resulting in~~an expected credit loss model. ASU 2016-13 affects trade receivables, loans, contract assets, certain beneficial interests, off-balance-sheet credit exposures not accounted for as insurance and other financial assets that are not subject to fair value through net income, as defined by the standard. Under the expected credit loss model, we are required to consider future economic trends to estimate expected credit losses over the lifetime of the asset. Upon adoption, we recorded a $293 reduction to “Retained earnings,” $395 increase to “allowances for doubtful accounts” applicable to our ~~recognition~~trade and loan receivables, $10 reduction of ~~an immaterial adjustment to retained earnings. Under ASU 2016-16, we recognize the~~contract assets, $105 reduction of net deferred income tax ~~effects~~liability and $7 reduction of ~~intercompany sales or transfers~~“Noncontrolling interest” as an opening adjustment. Our adoption of ~~assets other than inventory (e.g., intellectual property or property, plant and equipment) during the period of intercompany sale or transfer instead of the period of either sale or transfer to~~ASU 2016-13 did not have a ~~third party or recognition of depreciation or impairment.~~

~~New Accounting Standards~~

~~Pension and Other Postretirement Benefits~~material impact on our financial statements.

Reference Rate ReformIn March 2017, the Financial Accounting Standards Board (FASB) issued ASU No. 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07), which changes the presentation of periodic benefit cost components. Under ASU 2017-07, we will continue to present service costs within our operating expenses but present amortization of prior service credits and other components of our net periodic benefit cost in "other income (expense) – net" in our consolidated statements of income. ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017. See Note 5 for our components of net periodic benefit cost.

~~Revenue Recognition~~ ~~In May 2014,~~2020, the FASB issued ASU No. ~~2014-09, "Revenue from Contracts with Customers~~2020-04, “Reference Rate Reform (Topic ~~606)" (ASC 606)~~848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04), which provides optional expedients, and ~~has modified~~allows for certain exceptions to existing GAAP, for contract modifications triggered by the ~~standard thereafter. This standard replaces existing revenue recognition rules with a comprehensive revenue measurement~~expected market transition of certain benchmark interest rates to alternative reference rates. ASU 2020-04 applies to contracts, hedging relationships and ~~recognition standard and expanded disclosure requirements. ASC 606, as amended, becomes effective for annual reporting periods beginning~~other arrangements that reference the London Interbank Offering Rate (LIBOR) or any other rates ending after December ~~15, 2017, at which point we plan~~31, 2022. We are evaluating the impact of our adoption of ASU 2020-04, including optional expedients, to ~~adopt~~our financial statements.

Intangible Assets Driven by significant and adverse economic and political environments in Latin America, including the standard using the "modified retrospective method." Under that method, we will apply the rules to all open contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effectimpact of the ~~change~~COVID-19 pandemic, we have experienced accelerated subscriber losses and ~~providing additional disclosures comparing results to previous accounting standards.~~revenue decline in the region, as well as closure of our operations in Venezuela. When combining these business trends and higher weighted-average cost of capital resulting from the increase in country-risk premiums in the region, we concluded that it is more likely than not that the

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

fair value of the Vrio reporting unit, estimated using discounted cash flow and market multiple approaches, is less than its carrying amount. We recorded a $2,212 goodwill impairment in the reporting unit, with $105 attributable to noncontrolling interest. The impairment is not deductible for tax purposes and resulted in an increase in our effective tax rate.

During the first quarter of 2020, we reassessed and changed the estimated economic lives of certain trade names in our Latin America business from indefinite to finite-lived and began amortizing them using the straight-line method over their average remaining economic life of 15 years. This change had an insignificant impact on our financial statements.

Also during the first quarter of 2020, in conjunction with the nationwide launch of AT&T TV and our customers’ continued shift from linear to streaming video services, we reassessed the estimated economic lives and renewal assumptions for our orbital slot licenses. As a result, we have changed the estimated lives of these licenses from indefinite to finite-lived, effective January 1, 2020, and began amortizing our orbital slot licenses using the sum-of-months-digits method over their average remaining economic life of 15 years. This change in accounting increased amortization expense $379, or $0.04 per diluted share available to common stock during the second quarter and $765, or $0.08, per diluted share available to common stock for the first six months of 2020.

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, is shown in the table ~~below:~~

below.

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Numerators
Numerator for basic earnings per share:
Net Income	$	1,563	$	3,974	$	6,526	$	8,322
Less: Net income attributable to noncontrolling interest		(282)		(261)		(635)		(513)
Net Income attributable to AT&T		1,281		3,713		5,891		7,809
Less: Preferred stock dividends		(52)		-		(84)		-
Net income attributable to common stock		1,229		3,713		5,807		7,809
Dilutive potential common shares:
Share-based payment		5		4		11		10
Numerator for diluted earnings per share	$	1,234	$	3,717	$	5,818	$	7,819
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		7,145		7,323		7,166		7,318
Dilutive potential common shares:
Share-based payment (in shares)		25		30		26		29
Denominator for diluted earnings per share		7,170		7,353		7,192		7,347
Basic earnings per share attributable to Common Stock	$	0.17	$	0.51	$	0.81	$	1.06
Diluted earnings per share attributable to Common Stock	$	0.17	$	0.51	$	0.81	$	1.06

In the first quarter of 2020, we completed an accelerated share repurchase agreement with a third-party financial institution to repurchase AT&T common stock. Under the terms of the agreement, we paid the financial institution $4,000 and received 104.8 million shares.

Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Numerators
Numerator for basic earnings per share:
   Net Income $ 3,123 $ 3,418 $ 10,711 $ 10,818
   Less: Net income attributable to noncontrolling interest (94 ) (90 ) (298 ) (279 )
   Net Income attributable to AT&T 3,029 3,328 10,413 10,539
   Dilutive potential common shares:
      Share-based payment 3 3 9 9
Numerator for diluted earnings per share $ 3,032 $ 3,331 $ 10,422 $ 10,548
Denominators (000,000)
Denominator for basic earnings per share:
   Weighted average number of common shares outstanding 6,162 6,168 6,164 6,171
   Dilutive potential common shares:
      Share-based payment (in shares) 20 21 20 20
Denominator for diluted earnings per share 6,182 6,189 6,184 6,191
Basic earnings per share attributable to AT&T $ 0.49 $ 0.54 $ 1.69 $ 1.70
Diluted earnings per share attributable to AT&T $ 0.49 $ 0.54 $ 1.69 $ 1.70

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 3. OTHER COMPREHENSIVE INCOME

Changes in the balances of each component included in accumulated ~~other comprehensive income (accumulated OCI)~~OCI are presented below. All amounts are net of tax and exclude noncontrolling interest.

		Foreign Currency Translation Adjustment			Net Unrealized Gains (Losses) on Securities			Net Unrealized Gains (Losses) on Derivative Instruments			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of December 31, 2019		$	(3,056)		$	48		$	(37)		$	8,515		$	5,470
Other comprehensive income
(loss) before reclassifications			(1,490)			80			(3,026)			-			(4,436)
Amounts reclassified
from accumulated OCI			-	¹		-	¹		17	²		(922)	³		(905)
Net other comprehensive
income (loss)			(1,490)			80			(3,009)			(922)			(5,341)
Balance as of June 30, 2020		$	(4,546)		$	128		$	(3,046)		$	7,593		$	129

		Foreign Currency Translation Adjustment			Net Unrealized Gains (Losses) on Securities			Net Unrealized Gains (Losses) on Derivative Instruments			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of December 31, 2018		$	(3,084)		$	(2)		$	818		$	6,517		$	4,249
Other comprehensive income
(loss) before reclassifications			159			42			(490)			-			(289)
Amounts reclassified
from accumulated OCI			-	¹		-	¹		17	²		(688)	³		(671)
Net other comprehensive
income (loss)			159			42			(473)			(688)			(960)
Balance as of June 30, 2019		$	(2,925)		$	40		$	345		$	5,829		$	3,289
¹	(Gains) losses are included in "Other income (expense) - net" in the consolidated statements of income.
²	(Gains) losses are included in "Interest expense" in the consolidated statements of income (see Note 7).
³	The amortization of prior service credits associated with postretirement benefits are included in "Other income (expense) - net" in the
	consolidated statements of income (see Note 6).

Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Available-for-Sale Securities Net Unrealized Gains (Losses) on Cash Flow Hedges Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income
Balance as of December 31, 2016 $ (1,995) $ 541 $ 744 $ 5,671 $ 4,961
Other comprehensive income
   (loss) before reclassifications
484 128 (174) 969 1,407
Amounts reclassified
   from accumulated OCI
-
¹

(86)
¹

29
²

(731)
³

(788)
Net other comprehensive
   income (loss)
484 42 (145) 238 619
Balance as of September 30, 2017 $ (1,511) $ 583 $ 599 $ 5,909 $ 5,580

Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Available-for-Sale Securities Net Unrealized Gains (Losses) on Cash Flow Hedges Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income
Balance as of December 31, 2015 $ (1,198) $ 484 $ 16 $ 6,032 $ 5,334
Other comprehensive income
   (loss) before reclassifications
(72) 25 183 - 136
Amounts reclassified
   from accumulated OCI
-
¹

(5)
¹

29
²

(644)
³

(620)
Net other comprehensive
   income (loss)
(72) 20 212 (644) (484)
Balance as of September 30, 2016 $ (1,270) $ 504 $ 228 $ 5,388 $ 4,850
¹
(Gains) losses are included in Other income (expense) - net in the consolidated statements of income.
²
(Gains) losses are included in Interest expense in the consolidated statements of income (see Note 6).
³
The amortization of prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor,
are included in Cost of services and sales and Selling, general and administrative in the consolidated statements of income (see Note 5).

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We analyze our segments based on ~~Segment Contribution,~~segment operating contribution, which consists of operating income, excluding acquisition-related costs and other significant items (as discussed below), and equity in net income (loss) of affiliates for investments managed within each segment. We have ~~four~~3 reportable segments: (1) ~~Business Solutions,~~Communications, (2) ~~Entertainment Group,~~WarnerMedia and (3) ~~Consumer Mobility and (4) International.~~

Latin America.

We have recast our segment results for all prior periods to include our prior Xandr segment within our WarnerMedia segment.

We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as ~~Segment Contribution~~operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization. We believe EBITDA to be a relevant and useful measurement to our investors as it is part of our internal management reporting and planning processes and it is an important metric that management uses to evaluate ~~segment~~ operating performance. EBITDA does not give effect

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA margin is EBITDA divided by total revenues.

The ~~Business Solutions~~Communications segment provides wireless and wireline telecom, video and broadband services to consumers located in the U.S. and businesses globally. This segment contains the following business ~~customers,~~units:

Mobility provides nationwide wireless service and equipment.

Entertainment Group provides video, including ~~multinational companies; governmental~~over-the-top (OTT) services, broadband and ~~wholesale customers; and individual subscribers who purchase wireless~~voice communications services ~~through employer-sponsored plans. We provide~~primarily to residential customers. This segment also sells advertising on distribution platforms.

Business Wireline provides advanced IP-based services, ~~including Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred to as fixed strategic services;~~ as well as traditional ~~data and voice products. We utilize our wireless and wired networks to provide a complete communications solution to our business customers.~~

~~The~~ ~~Entertainment Group segment~~ provides video, internet, voice communication, and interactive and targeted advertising services to customers located in the United States or in U.S. territories. We utilize our copper and IP-based wired network and our satellite technology.

~~The~~ ~~Consumer Mobility segment~~ ~~provides nationwide wireless service to consumers, wholesale and resale wireless subscribers located in the United States or in U.S. territories. We utilize our network to provide~~ voice and data services ~~including high-speed internet, video~~to business customers.

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. Historical financial results from Xandr, previously a separate reportable segment, have been combined with the WarnerMedia segment within Eliminations and other. This segment contains the following business units:

Turner primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties.

Home Box Office consists of premium pay television and OTT and streaming services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home ~~monitoring services over wireless devices.~~

entertainment.

Warner Bros. primarily 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.

The ~~International~~Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:

Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.

Mexico provides wireless ~~services~~service and equipment to customers in Mexico. ~~Video entertainment services are provided to primarily residential customers using satellite technology. We utilize~~

Corporate and Other reconciles our regional and national networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries conduct business in their local currency, and operatingsegment results ~~are converted to U.S. dollars using official exchange rates.~~

~~In reconciling items~~ to consolidated operating income and income before income taxes, ~~Corporate~~ and ~~Other~~includes:

Corporate, which consists of: (1) ~~operations that are not considered reportable segments and that are~~businesses no longer integral to our operations or which we no longer actively market, ~~and~~ (2) corporate support functions, (3) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, ~~including interest costs~~ and ~~expected return on plan assets for our pension and postretirement benefit plans.~~

~~Certain~~(4) the reclassification of the amortization of prior service credits, which we continue to report with segment operating ~~items are not allocated~~expenses, to ~~our business segments, and those include:~~

·	~~Acquisition-related items~~ ~~which consists of (1) items associated with the merger and integration of acquired businesses and (2) the noncash amortization of intangible assets acquired in acquisitions.~~

~~Certain significant items~~ which consists of (1) noncash actuarial gains and losses from pension and other postretirement benefits, (2) employee separation charges associated with voluntary and/or strategic offers, (3) losses resulting from abandonment or impairment of assets and (4) other items for which the segments are not being evaluated.

~~Interest expense and other~~consolidated “Other income (expense) – net.”

Acquisition-related items which consists of items associated with the merger and integration of acquired businesses, including amortization of intangible assets.

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Certain significant items includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) losses resulting from abandonment of network assets and impairments and (3) other items for which the segments are not being evaluated.

Eliminations and consolidations, which (1) removes transactions involving dealings between our segments, including content licensing between WarnerMedia and Communications, and (2) includes adjustments for our reporting of the advertising business.

“Interest expense” and “Other income (expense) – net,” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.

Our operating assets are utilized by multiple segments and consist of our wireless and wired networks as well as our satellite fleet. Our domestic communications business strategies reflect bundled product offerings that increasingly cut across product lines and utilize our asset base. Therefore, asset information and capital expenditures by segment are not presented. Depreciation is allocated based on asset utilization by segment.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2017
Revenues
Operations
and Support
Expenses
EBITDA
Depreciation
and
Amortization

Operating
Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment
Contribution

Business Solutions $ 17,061 $ 10,233 $ 6,828 $ 2,325 $ 4,503 $ - $ 4,503
Entertainment Group 12,648 9,953 2,695 1,379 1,316 (6 ) 1,310
Consumer Mobility 7,748 4,551 3,197 877 2,320 - 2,320
International 2,099 1,937 162 304 (142 ) 17 (125 )
Segment Total 39,556 26,674 12,882 4,885 7,997 $ 11 $ 8,008
Corporate and Other 201 89 112 21 91
Acquisition-related items - 134 (134 ) 1,136 (1,270 )
Certain significant items (89 ) 326 (415 ) - (415 )
AT&T Inc. $ 39,668 $ 27,223 $ 12,445 $ 6,042 $ 6,403

For the nine months ended September 30, 2017
For the three months ended June 30, 2020																				For the three months ended June 30, 2020
	Revenues			Operations and Support Expenses		EBITDA			Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates			Segment Contribution				Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	51,016		$	30,722	$	20,294		$	6,972	$	13,322		$	-		$	13,322
Communications
Mobility																				$	17,149	$	9,332	$	7,817	$	2,012	$	5,805	$	-	$	5,805
Entertainment Group		37,953			29,112		8,841			4,256		4,585			(23	)		4,562			10,069		7,730		2,339		1,309		1,030		-		1,030
Consumer Mobility		23,279			13,599		9,680			2,621		7,059			-			7,059
International		6,054			5,468		586			905		(319	)		62			(257	)
Business Wireline																					6,374		3,779		2,595		1,318		1,277		-		1,277
Total Communications																					33,592		20,841		12,751		4,639		8,112		-		8,112
WarnerMedia
Turner																					2,988		1,347		1,641		69		1,572		-		1,572
Home Box Office																					1,627		1,489		138		25		113		(5)		108
Warner Bros.																					3,256		2,583		673		40		633		(19)		614
Eliminations and other																					(1,057)		(685)		(372)		33		(405)		28		(377)
Total WarnerMedia																					6,814		4,734		2,080		167		1,913		4		1,917
Latin America
Vrio																					752		661		91		127		(36)		8		(28)
Mexico																					480		538		(58)		115		(173)		-		(173)
Total Latin America																					1,232		1,199		33		242		(209)		8		(201)
Segment Total		118,302			78,901		39,401			14,754		24,647		$	39		$	24,686			41,638		26,774		14,864		5,048		9,816	$	12	$	9,828
Corporate and Other		657			397		260			54		206
Corporate																					437		933		(496)		93		(589)
Acquisition-related items		-			622		(622	)		3,508		(4,130	)								-		211		(211)		2,145		(2,356)
Certain significant items		(89	)		44		(133	)		-		(133	)								-		3,084		(3,084)		-		(3,084)
Eliminations and consolidations																					(1,125)		(869)		(256)		(1)		(255)
AT&T Inc.	$	118,870		$	79,964	$	38,906		$	18,316	$	20,590								$	40,950	$	30,133	$	10,817	$	7,285	$	3,532

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2016
Revenues
Operations
and Support
Expenses
EBITDA
Depreciation
and
Amortization

Operating
Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment
Contribution

Business Solutions $ 17,767 $ 10,925 $ 6,842 $ 2,539 $ 4,303 $ - $ 4,303
Entertainment Group 12,720 9,728 2,992 1,504 1,488 - 1,488
Consumer Mobility 8,267 4,751 3,516 944 2,572 - 2,572
International 1,879 1,640 239 293 (54 ) 1 (53 )
Segment Total 40,633 27,044 13,589 5,280 8,309 $ 1 $ 8,310
Corporate and Other 270 270 - 17 (17 )
Acquisition-related items - 290 (290 ) 1,282 (1,572 )
Certain significant items (13 ) 299 (312 ) - (312 )
AT&T Inc. $ 40,890 $ 27,903 $ 12,987 $ 6,579 $ 6,408

For the nine months ended September 30, 2016
For the three months ended June 30, 2019																											For the three months ended June 30, 2019
	Revenues				Operations and Support Expenses				EBITDA				Depreciation and Amortization			Operating Income (Loss)				Equity in Net Income (Loss) of Affiliates			Segment Contribution					Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions		$	52,955			$	32,584			$	20,371			$	7,568		$	12,803			$	-		$	12,803
Communications
Mobility																											$	17,292	$	9,522	$	7,770	$	2,003	$	5,767	$	-	$	5,767
Entertainment Group			38,089				28,875				9,214				4,481			4,733				1			4,734			11,368		8,515		2,853		1,339		1,514		-		1,514
Consumer Mobility			24,781				14,343				10,438				2,798			7,640				-			7,640
International			5,374				4,951				423				868			(445	)			24			(421	)
Business Wireline																												6,607		3,975		2,632		1,242		1,390		-		1,390
Total Communications																												35,267		22,012		13,255		4,584		8,671		-		8,671
WarnerMedia
Turner																												3,410		2,217		1,193		39		1,154		11		1,165
Home Box Office																												1,716		1,131		585		12		573		15		588
Warner Bros.																												3,389		2,918		471		31		440		-		440
Eliminations and other																												320		170		150		22		128		29		157
Total WarnerMedia																												8,835		6,436		2,399		104		2,295		55		2,350
Latin America
Vrio																												1,032		881		151		165		(14)		12		(2)
Mexico																												725		813		(88)		119		(207)		-		(207)
Total Latin America																												1,757		1,694		63		284		(221)		12		(209)
Segment Total			121,199				80,753				40,446				15,715			24,731			$	25		$	24,756			45,859		30,142		15,717		4,972		10,745	$	67	$	10,812
Corporate and Other			759				940				(181	)			54			(235	)
Corporate																												450		765		(315)		170		(485)
Acquisition-related items			-				818				(818	)			3,949			(4,767	)									(30)		316		(346)		1,960		(2,306)
Certain significant items			(13	)			(383	)			370				-			370										-		94		(94)		-		(94)
Eliminations and consolidations																												(1,322)		(961)		(361)		(1)		(360)
AT&T Inc.		$	121,945			$	82,128			$	39,817			$	19,718		$	20,099									$	44,957	$	30,356	$	14,601	$	7,101	$	7,500

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2020
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	34,551	$	18,901	$	15,650	$	4,057	$	11,593	$	-	$	11,593
Entertainment Group		20,584		15,621		4,963		2,598		2,365		-		2,365
Business Wireline		12,706		7,730		4,976		2,619		2,357		-		2,357
Total Communications		67,841		42,252		25,589		9,274		16,315		-		16,315
WarnerMedia
Turner		6,150		3,057		3,093		138		2,955		6		2,961
Home Box Office		3,124		2,542		582		46		536		15		551
Warner Bros.		6,496		5,533		963		81		882		(27)		855
Eliminations and other		(1,108)		(711)		(397)		65		(462)		25		(437)
Total WarnerMedia		14,662		10,421		4,241		330		3,911		19		3,930
Latin America
Vrio		1,639		1,444		195		274		(79)		12		(67)
Mexico		1,183		1,252		(69)		249		(318)		-		(318)
Total Latin America		2,822		2,696		126		523		(397)		12		(385)
Segment Total		85,325		55,369		29,956		10,127		19,829	$	31	$	19,860
Corporate and Other
Corporate		825		1,807		(982)		180		(1,162)
Acquisition-related items		-		393		(393)		4,201		(4,594)
Certain significant items		-		2,426		(2,426)		-		(2,426)
Eliminations and consolidations		(2,421)		(1,791)		(630)		(1)		(629)
AT&T Inc.	$	83,729	$	58,204	$	25,525	$	14,507	$	11,018

The following table is a reconciliation of Segment Contribution to "Income Before Income Taxes" reported on our
consolidated statements of income.

Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Business Solutions $ 4,503 $ 4,303 $ 13,322 $ 12,803
Entertainment Group 1,310 1,488 4,562 4,734
Consumer Mobility 2,320 2,572 7,059 7,640
International (125 ) (53 ) (257 ) (421 )
Segment Contribution 8,008 8,310 24,686 24,756
Reconciling Items:
  Corporate and Other 91 (17 ) 206 (235 )
  Merger and integration charges (134 ) (290 ) (622 ) (818 )
  Amortization of intangibles acquired (1,136 ) (1,282 ) (3,508 ) (3,949 )
  Actuarial gain (loss) - - 259 -
  Employee separation costs (208 ) (260 ) (268 ) (314 )
  Gain (loss) on wireless spectrum transactions - (22 ) 181 714
  Natural disaster costs and revenue credits (207 ) (30 ) (207 ) (30 )
  Venezuela devaluation - - (98 ) -
  Segment equity in net (income) loss of affiliates (11 ) (1 ) (39 ) (25 )
AT&T Operating Income 6,403 6,408 20,590 20,099
Interest expense 1,686 1,224 4,374 3,689
Equity in net income (loss) of affiliates 11 16 (148 ) 57
Other income (expense) - net 246 (7 ) 354 154
Income Before Income Taxes $ 4,974 $ 5,193 $ 16,422 $ 16,621

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2019
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	34,655	$	19,563	$	15,092	$	4,016	$	11,076	$	-	$	11,076
Entertainment Group		22,696		17,042		5,654		2,662		2,992		-		2,992
Business Wireline		13,085		8,007		5,078		2,464		2,614		-		2,614
Total Communications		70,436		44,612		25,824		9,142		16,682		-		16,682
WarnerMedia
Turner		6,853		4,353		2,500		99		2,401		36		2,437
Home Box Office		3,226		2,052		1,174		34		1,140		30		1,170
Warner Bros.		6,907		5,837		1,070		83		987		6		993
Eliminations and other		654		347		307		44		263		50		313
Total WarnerMedia		17,640		12,589		5,051		260		4,791		122		4,913
Latin America
Vrio		2,099		1,747		352		334		18		12		30
Mexico		1,376		1,538		(162)		250		(412)		-		(412)
Total Latin America		3,475		3,285		190		584		(394)		12		(382)
Segment Total		91,551		60,486		31,065		9,986		21,079	$	134	$	21,213
Corporate and Other
Corporate		883		1,426		(543)		374		(917)
Acquisition-related items		(72)		389		(461)		3,948		(4,409)
Certain significant items		-		342		(342)		-		(342)
Eliminations and consolidations		(2,578)		(1,899)		(679)		(1)		(678)
AT&T Inc.	$	89,784	$	60,744	$	29,040	$	14,307	$	14,733

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table is a reconciliation of Segment Contributions to “Income Before Income Taxes” reported on our consolidated statements of income:

			Three months ended June 30,				Six months ended June 30,
			2020		2019		2020		2019
Communications		$	8,112	$	8,671	$	16,315	$	16,682
WarnerMedia			1,917		2,350		3,930		4,913
Latin America			(201)		(209)		(385)		(382)
Segment Contribution			9,828		10,812		19,860		21,213
Reconciling Items:
Corporate and Other			(589)		(485)		(1,162)		(917)
Merger and integration items			(211)		(346)		(393)		(461)
Amortization of intangibles acquired			(2,145)		(1,960)		(4,201)		(3,948)
Impairments			(2,319)		-		(2,442)		-
Gain on spectrum transaction¹			-		-		900		-
Employee separation costs and benefit-related losses			(765)		(94)		(884)		(342)
Segment equity in net income of affiliates			(12)		(67)		(31)		(134)
Eliminations and consolidations			(255)		(360)		(629)		(678)
AT&T Operating Income			3,532		7,500		11,018		14,733
Interest Expense			2,041		2,149		4,059		4,290
Equity in net income (loss) of affiliates			(10)		40		(16)		33
Other income (expense) - net			1,017		(318)		1,820		(32)
Income Before Income Taxes		$	2,498	$	5,073	$	8,763	$	10,444
¹	Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income.

The following table presents intersegment revenues by segment:

Intersegment Reconciliation
	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020			2019
Intersegment Revenues
Communications	$	2	$	8	$	4	$	8
WarnerMedia		774		861		1,591		1,719
Latin America		-		-		-		-
Total Intersegment Revenues		776		869		1,595		1,727
Consolidations		349		453		826		851
Eliminations and consolidations	$	1,125	$	1,322	$	2,421	$	2,578

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 5. REVENUE RECOGNITION

Revenue Categories
The following tables set forth reported revenue by category and by business unit:

For the three months ended June 30, 2020
	Service Revenues
		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total
Communications
Mobility	$	13,611	$	-	$	-	$	-	$	-	$	58	$	-	$	3,480	$	17,149
Entertainment Group		-		2,092		560		6,682		-		294		397		44		10,069
Business Wireline		-		3,320		2,067		-		-		-		782		205		6,374
WarnerMedia
Turner		-		-		-		1,804		334		796		54		-		2,988
Home Box Office		-		-		-		1,441		181		-		5		-		1,627
Warner Bros.		-		-		-		16		3,179		1		60		-		3,256
Eliminations and other		-		-		-		71		(1,516)		378		10		-		(1,057)
Latin America
Vrio		-		-		-		752		-		-		-		-		752
Mexico		345		-		-		-		-		-		-		135		480
Corporate and Other		178		10		152		-		-		-		62		35		437
Eliminations and
consolidations		-		-		-		-		(765)		(294)		(66)		-		(1,125)
Total Operating Revenues	$	14,134	$	5,422	$	2,779	$	10,766	$	1,413	$	1,233	$	1,304	$	3,899	$	40,950

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2019
	Service Revenues
		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total
Communications
Mobility	$	13,753	$	-	$	-	$	-	$	-	$	71	$	-	$	3,468	$	17,292
Entertainment Group		-		2,109		658		7,636		-		399		563		3		11,368
Business Wireline		-		3,208		2,324		-		-		-		897		178		6,607
WarnerMedia
Turner		-		-		-		1,943		111		1,266		90		-		3,410
Home Box Office		-		-		-		1,516		198		-		2		-		1,716
Warner Bros.		-		-		-		23		3,175		10		181		-		3,389
Eliminations and other		-		-		-		54		(237)		494		9		-		320
Latin America
Vrio		-		-		-		1,032		-		-		-		-		1,032
Mexico		479		-		-		-		-		-		-		246		725
Corporate and Other		150		14		7		-		-		-		210		39		420
Eliminations and
consolidations		-		-		-		-		(840)		(399)		(83)		-		(1,322)
Total Operating Revenues	$	14,382	$	5,331	$	2,989	$	12,204	$	2,407	$	1,841	$	1,869	$	3,934	$	44,957

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2020
	Service Revenues
		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total
Communications
Mobility	$	27,503	$	-	$	-	$	-	$	-	$	134	$	-	$	6,914	$	34,551
Entertainment Group		-		4,201		1,141		13,664		-		707		816		55		20,584
Business Wireline		-		6,595		4,196		-		-		-		1,535		380		12,706
WarnerMedia
Turner		-		-		-		3,853		420		1,753		124		-		6,150
Home Box Office		-		-		-		2,779		338		-		7		-		3,124
Warner Bros.		-		-		-		26		6,239		3		228		-		6,496
Eliminations and other		-		-		-		134		(2,162)		887		33		-		(1,108)
Latin America
Vrio		-		-		-		1,639		-		-		-		-		1,639
Mexico		812		-		-		-		-		-		-		371		1,183
Corporate and Other		295		24		286		-		-		-		145		75		825
Eliminations and
consolidations		-		-		-		-		(1,559)		(707)		(155)		-		(2,421)
Total Operating Revenues	$	28,610	$	10,820	$	5,623	$	22,095	$	3,276	$	2,777	$	2,733	$	7,795	$	83,729

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2019
	Service Revenues
		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total
Communications
Mobility	$	27,315	$	-	$	-	$	-	$	-	$	138	$	-	$	7,202	$	34,655
Entertainment Group		-		4,179		1,341		15,360		-		749		1,063		4		22,696
Business Wireline		-		6,380		4,721		-		-		-		1,647		337		13,085
WarnerMedia
Turner		-		-		-		3,908		246		2,527		172		-		6,853
Home Box Office		-		-		-		2,850		371		-		5		-		3,226
Warner Bros.		-		-		-		44		6,507		20		336		-		6,907
Eliminations and other		-		-		-		103		(389)		928		12		-		654
Latin America
Vrio		-		-		-		2,099		-		-		-		-		2,099
Mexico		921		-		-		-		-		-		-		455		1,376
Corporate and Other		272		27		14		-		-		-		419		79		811
Eliminations and
consolidations		-		-		-		-		(1,677)		(749)		(152)		-		(2,578)
Total Operating Revenues	$	28,508	$	10,586	$	6,076	$	24,364	$	5,058	$	3,613	$	3,502	$	8,077	$	89,784

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Deferred Customer Contract Acquisition and Fulfillment Costs

Costs to acquire and fulfill customer contracts, including commissions on service activations, for our wireless, business wireline and video entertainment services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years. For contracts with an estimated amortization period of less than one year, we expense incremental costs immediately.

The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets:

		June 30,		December 31,
Consolidated Balance Sheets		2020		2019
Deferred Acquisition Costs
Other current assets	$	2,630	$	2,462
Other Assets		3,117		2,991
Total deferred customer contract acquisition costs	$	5,747	$	5,453

Deferred Fulfillment Costs
Other current assets	$	4,362	$	4,519
Other Assets		5,980		6,439
Total deferred customer contract fulfillment costs	$	10,342	$	10,958

The following table presents deferred customer contract acquisition and fulfillment cost amortization included in “Other cost of revenue” for the six months ended:

		June 30,		June 30,
Consolidated Statements of Income		2020		2019
Deferred acquisition cost amortization	$	1,278	$	1,026
Deferred fulfillment cost amortization		2,636		2,381

Contract Assets and Liabilities

A contract asset is recorded when revenue is recognized in advance of our right to bill and receive consideration. The contract asset will decrease as services are provided and billed. For example, when installment sales include promotional discounts (e.g., “buy one get one free”) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term.

When consideration is received in advance of the delivery of goods or services, a contract liability is recorded for deferred revenue. Reductions in the contract liability will be recorded as we satisfy the performance obligations.

The following table presents contract assets and liabilities on our consolidated balance sheets:

		June 30,		December 31,
Consolidated Balance Sheets		2020		2019

Contract asset	$	2,546	$	2,472
Contract liability		6,533		6,999

Our beginning of period contract liability recorded as customer contract revenue during 2020 was $5,004.

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Our consolidated balance sheets at June 30, 2020 and December 31, 2019 included approximately $1,638 and $1,611, respectively, for the current portion of our contract asset in “Other current assets” and $5,616 and $5,939, respectively, for the current portion of our contract liability in “Advanced billings and customer deposits.”

Remaining Performance Obligations

Remaining performance obligations represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In determining the transaction price allocated, we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless, video and residential internet agreements.

Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of June 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $36,362, of which we expect to recognize approximately 82% by the end of 2021, with the balance recognized thereafter.

NOTE 5.6. PENSION AND POSTRETIREMENT BENEFITS

Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement.

~~In 2013, we made a voluntary contribution of a preferred equity interest~~ We do not have significant funding requirements in AT&T Mobility II LLC (Mobility II), the primary holding company for our domestic wireless business, to the pension trust used to pay benefits under our qualified pension plans. The preferred equity interest had a value of $9,354 at September 30, 2017. The trust is entitled to receive cumulative cash distributions of $560 per annum, which are distributed quarterly by Mobility II to the trust, in equal amounts and accounted for as contributions. Mobility II distributed $420 to the trust during the nine months ended September 30, 2017. So long as those distributions are made, we will have no limitations on our ability to declare a dividend or repurchase shares. This preferred equity interest is a plan asset under ERISA and is recognized as such in the plan's separate financial statements. However, because the preferred equity interest is not unconditionally transferable to an unrelated party, it is not reflected in plan assets in our consolidated financial statements and instead has been eliminated in consolidation.

The preferred equity interest is not transferable by the trust except through its put and call features. In early September 2017, AT&T notified the trust and the fiduciary of the preferred equity interest that AT&T committed that it would not exercise its call option of the preferred interest until at least September 9, 2022, which resulted in an increase in the fair value of the preferred interest of approximately $1,245.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

2020.

We recognize actuarial gains and losses on pension and postretirement plan assets in our ~~operating~~consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required. During the second quarter of 2017, a substantive plan change involving the frequency of considering potential health reimbursement account credit increases was communicated to our retirees. This plan change triggered a remeasurement of our postretirement obligations and resulted in additional prior service credits recognized in other comprehensive income, reducing our liability by $1,563. Such credits amortize through earnings over a period approximating the average service period to full eligibility. Upon our adoption of ASU 2017-07, the amortization of these prior service credits will be recorded in other income (expense) – net.

The following table details pension and postretirement benefit costs included in ~~operating expenses in~~ the accompanying consolidated statements of income. ~~A portion~~The service cost component of ~~these~~net periodic pension cost (benefit) is recorded in operating expenses ~~is capitalized as part of internal construction projects, providing a small reduction~~ in the ~~net expense recorded. Service costs and prior service credits~~consolidated statements of income while the remaining components are ~~reported~~recorded in ~~our segment results while interest costs and expected return on plan assets are included with Corporate and Other (see Note 4).~~“Other income (expense) – net.”

Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Pension cost:
   Service cost – benefits earned during the period $ 282 $ 278 $ 846 $ 834
   Interest cost on projected benefit obligation 484 495 1,452 1,485
   Expected return on assets (783 ) (778 ) (2,350 ) (2,336 )
   Amortization of prior service credit (31 ) (26 ) (93 ) (77 )
   Net pension (credit) cost $ (48 ) $ (31 ) $ (145 ) $ (94 )

Postretirement cost:
   Service cost – benefits earned during the period $ 32 $ 48 $ 107 $ 144
   Interest cost on accumulated postretirement benefit obligation 193 243 617 729
   Expected return on assets (81 ) (88 ) (240 ) (266 )
   Amortization of prior service credit (382 ) (320 ) (1,084 ) (958 )
   Actuarial (gain) loss - - (259 ) -
   Net postretirement (credit) cost $ (238 ) $ (117 ) $ (859 ) $ (351 )

   Combined net pension and postretirement (credit) cost $ (286 ) $ (148 ) $ (1,004 ) $ (445 )

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

As part of our second-quarter 2017 remeasurement, we decreased the weighted-average discount rate used to measure our postretirement benefit obligation to 4.10%. The discount rate in effect for determining postretirement service and interest costs after remeasurement is 4.50% and 3.30%, respectively.

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Pension cost:
Service cost – benefits earned during the period	$	258	$	243	$	515	$	483
Interest cost on projected benefit obligation		422		508		844		1,057
Expected return on assets		(890)		(880)		(1,779)		(1,731)
Amortization of prior service credit		(29)		(24)		(57)		(57)
Actuarial (gain) loss		-		1,699		-		2,131
Net pension (credit) cost	$	(239)	$	1,546	$	(477)	$	1,883

Postretirement cost:
Service cost – benefits earned during the period	$	13	$	18	$	26	$	36
Interest cost on accumulated postretirement benefit obligation		104		186		208		372
Expected return on assets		(45)		(56)		(89)		(112)
Amortization of prior service credit		(582)		(426)		(1,164)		(852)
Net postretirement (credit) cost	$	(510)	$	(278)	$	(1,019)	$	(556)

Combined net pension and postretirement (credit) cost	$	(749)	$	1,268	$	(1,496)	$	1,327

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. ~~For the third quarter ended 2017 and 2016, net~~Net supplemental pension benefits costs not included in the table above were ~~$22~~$19 and ~~$23. For~~$25 in the second quarter and $38 and $50 for the first ~~nine~~six months of ~~2017~~2020 and ~~2016, net supplemental pension benefit costs were $67 and $70.~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

2019, respectively.

NOTE 6.7. FAIR VALUE MEASUREMENTS AND DISCLOSURE

The Fair Value Measurement and Disclosure framework in ASC 820, “Fair Value Measurement,” provides a three-tiered fair value hierarchy ~~that gives highest priority~~based on the reliability of the inputs used to ~~unadjusted~~determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical ~~assets or liabilities (Level 1 measurements)~~assets. Level 2 refers to fair values estimated using significant other observable inputs and ~~the lowest priority to~~Level 3 includes fair values estimated using significant unobservable ~~inputs (Level 3 measurements).~~ inputs.

The ~~three levels of the fair value hierarchy are described below:~~

~~Level 1~~

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

~~Level 2~~

~~Inputs to the valuation methodology include:~~

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

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

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

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

~~Level 3~~

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

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

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

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, ~~2016.~~2019.

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Long-Term Debt and Other Financial Instruments

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

September 30, 2017 December 31, 2016
Carrying Fair Carrying Fair
Amount Value Amount Value
Notes and debentures ¹
$ 162,450 $ 171,025 $ 122,381 $ 128,726
Bank borrowings 2 2 4 4
Investment securities 2,565 2,565 2,587 2,587
¹ Includes credit agreement borrowings.

		June 30, 2020				December 31, 2019
		Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value
Notes and debentures¹		$	164,099	$	190,284	$	161,109	$	182,124
Commercial paper			3,001		3,001		-		-
Bank borrowings			-		-		4		4
Investment securities²			3,632		3,632		3,723		3,723
¹	Includes credit agreement borrowings.
²	Excludes investments accounted for under the equity method.

The carrying amount of debt with an original maturity of less than one year approximates ~~market~~fair value. The fair value measurements used for notes and debentures are considered Level 2 and are determined using various methods, including quoted prices for identical or similar securities in both active and inactive markets.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

Following is the fair value leveling for ~~available-for-sale~~investment securities that are measured at fair value and derivatives as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016:~~2019. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities,” “Other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.

	June 30, 2020
	Level 1		Level 2		Level 3		Total
Equity Securities
Domestic equities	$	832	$	-	$	-	$	832
International equities		141		-		-		141
Fixed income equities		230		-		-		230
Available-for-Sale Debt Securities		-		1,522		-		1,522
Asset Derivatives
Cross-currency swaps		-		67		-		67
Foreign exchange contracts		-		14		-		14
Liability Derivatives
Interest rate swaps		-		(3)		-		(3)
Cross-currency swaps		-		(6,767)		-		(6,767)
Foreign exchange contracts		-		(10)		-		(10)

September 30, 2017
Level 1 Level 2 Level 3 Total
Available-for-Sale Securities
   Domestic equities $ 1,274 $ - $ - $ 1,274
   International equities 380 - - 380
   Fixed income bonds - 659 - 659
Asset Derivatives ¹

   Interest rate swaps - 45 - 45
   Cross-currency swaps - 967 - 967
Liability Derivatives ¹

   Interest rate swaps - (34 ) - (34 )
   Cross-currency swaps - (1,809 ) - (1,809 )
¹Derivatives designated as hedging instruments are reflected as "Other assets," "Other noncurrent liabilities" and, for a portion of
interest rate swaps, "Other current assets" in our consolidated balance sheets.

December 31, 2016
Level 1 Level 2 Level 3 Total
Available-for-Sale Securities
   Domestic equities $ 1,215 $ - $ - $ 1,215
   International equities 594 - - 594
   Fixed income bonds - 508 - 508
Asset Derivatives ¹

   Interest rate swaps - 79 - 79
   Cross-currency swaps - 89 - 89
Liability Derivatives ¹

   Interest rate swaps - (14 ) - (14 )
   Cross-currency swaps - (3,867 ) - (3,867 )
¹Derivatives designated as hedging instruments are reflected as "Other assets," "Other noncurrent liabilities" and, for a portion of
interest rate swaps, "Other current assets" in our consolidated balance sheets.

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

	December 31, 2019
	Level 1		Level 2		Level 3		Total
Equity Securities
Domestic equities	$	844	$	-	$	-	$	844
International equities		183		-		-		183
Fixed income equities		229		-		-		229
Available-for-Sale Debt Securities		-		1,444		-		1,444
Asset Derivatives
Interest rate swaps		-		2		-		2
Cross-currency swaps		-		172		-		172
Interest rate locks		-		11		-		11
Foreign exchange contracts		-		89		-		89
Liability Derivatives
Cross-currency swaps		-		(3,187)		-		(3,187)
Interest rate locks		-		(95)		-		(95)

Investment Securities

Our investment securities include ~~equities, fixed income bonds~~both equity and ~~other securities.~~debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our ~~available-for-sale~~investment securities ~~was~~is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. ~~Realized~~

The components comprising total gains and losses in the period on equity securities are ~~included in "Other income (expense) – net" in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on~~as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Total gains (losses) recognized on equity securities	$	161	$	50	$	(42)	$	210
Gains (Losses) recognized on equity securities sold		9		9		(24)		27
Unrealized gains (losses) recognized on equity securities
held at end of period		152		41		(18)		183

At June 30, 2020, available-for-sale debt securities are recorded in accumulated OCI. Unrealized losses that are considered other than temporary are recorded in "Other income (expense) – net" with the corresponding reduction to the carrying basis of the investment. Fixed income investments of $509totaling $1,522 have maturities ofas follows - less than one ~~year, $33 within~~year: $64; one to three ~~years, $32 within~~years: $175; three to five ~~years and $85 for~~years: $156; five or more ~~years.~~

years: $1,127.

Our cash equivalents (money market securities), short-term investments (certificate and time deposits) and nonrefundable customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments and nonrefundable customer deposits are recorded in ~~"Other~~“Other current ~~assets"~~assets” and our investment securities are recorded in ~~"Other Assets"~~“Other Assets” on the consolidated balance sheets.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

Derivative Financial Instruments

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

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Fair Value Hedging WePeriodically, we enter into and designate ~~our~~ fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount.

We also designate some of our foreign exchange contracts as fair value hedges. The purpose of these contracts is to hedge currency risk associated with foreign-currency-denominated operating assets and liabilities.

Accrued and realized gains or losses from ~~interest rate swaps~~fair value hedges impact ~~interest expense in~~the same category on the consolidated statements of ~~income.~~income as the item being hedged. Unrealized gains on ~~interest rate swaps~~fair value hedges are recorded at fair market value as assets, and unrealized losses ~~on interest rate swaps~~ are recorded at fair market value as liabilities. Changes in the fair ~~values~~value of derivative instruments designated as fair value hedges are offset against the ~~interest rate swaps are exactly offset by changes~~change in ~~the~~ fair value of the ~~underlying debt. Gains~~hedged assets or ~~losses realized upon early termination of our fair value hedges are recognized in interest expense.~~liabilities through earnings. In the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016,~~2019, no ineffectiveness was measured on ~~interest rate swaps designated as~~ fair value hedges.

Cash Flow Hedging We designate our cross-currency swaps as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from the issuance of our ~~Euro, British pound sterling, Canadian dollar and Swiss franc denominated~~foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign currency denominated amounts to fixed U.S. dollar denominated amounts, to be exchanged at a specified rate that is usually determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed or floating foreign currency-denominated interest rate to a fixed U.S. dollar denominated interest rate.

We also designate some of our foreign exchange contracts as cash flow hedges. The purpose of these contracts is to hedge certain film production costs denominated in foreign currencies.

Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses ~~on derivatives designated as cash flow hedges~~ are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, ~~the effective portion is~~changes in fair value are reported as a component of accumulated OCI ~~until~~and are reclassified into ~~interest expense~~the consolidated statements of income in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized as "Other income (expense) – net" in the consolidated statements of income in each period. We evaluate the effectiveness of our cross-currency swaps each quarter. In the nine months ended September 30, 2017 and September 30, 2016, no ineffectiveness was measured on cross-currency swaps designated as cash flow hedges.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related ~~debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to "Other income (expense) – net" in the consolidated statements of income.~~debt. Over the next 12 months, we expect to reclassify ~~$59~~$98 from accumulated OCI to ~~interest expense~~“Interest expense” due to the amortization of net losses on historical interest rate locks.

We ~~hedge a portion~~settled all interest rate locks in May 2020 in conjunction with issuance of fixed rate debt obligations that the ~~exchange risk involved in anticipation~~interest rate locks were hedging. We paid $731 that was largely offset by the return of ~~highly probable foreign currency-denominated transactions. In anticipation of these transactions, we often enter into foreign exchange contracts to provide currency at a fixed rate. Gains and losses~~collateral at the time ~~we settle~~of settlement. Cash flows from the interest rate lock settlements and return of collateral were reported as Financing Activities in our Statement of Cash Flows, consistent with our accounting policy for these instruments.

Net Investment Hedging We have designated €1,450 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or ~~take delivery~~loss on ~~our~~the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign ~~exchange contracts are amortized into income~~operation is recorded as a currency translation adjustment within accumulated OCI, net on the consolidated balance sheet. Net losses on net investment hedges recognized in accumulated OCI in the ~~same period~~second quarter were $30 and for the ~~hedged transaction affects earnings, except where an amount is deemed to be ineffective, which would be immediately reclassified to "Other income (expense) – net" in the consolidated statements~~first six months of ~~income. In the nine months ended September 30, 2017 and September 30, 2016, no ineffectiveness was measured on foreign exchange contracts designated as cash flow hedges.~~

2020 were $5.

Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At ~~September~~June 30, ~~2017,~~2020, we had posted

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

collateral of ~~$837~~$694 (a deposit asset) and held collateral of ~~$338~~$16 (a receipt liability). Under the agreements, if AT~~&T's~~&T’s credit rating had been downgraded one rating level by Fitch Ratings, before the final collateral exchange in ~~September,~~June, we would have been required to post additional collateral of ~~$141.~~$76. If ~~DIRECTV Holdings LLC's~~AT&T’s credit rating had been downgraded ~~below BBB- (S&P),~~four ratings levels by Fitch Ratings, two levels by S&P, and two levels by Moody’s, we would have been required to post additional collateral of ~~$221.~~$5,487. If DIRECTV

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Holdings LLC’s credit rating had been downgraded below BBB- by S&P, we would have been required to post additional collateral of $321. At December 31, ~~2016,~~2019, we had posted collateral of ~~$3,242~~$204 (a deposit asset) and held ~~no collateral.~~collateral of $44 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) exists, against the fair value of the derivative instruments.

Following are the notional amounts of our outstanding derivative positions:

September 30, December 31,
2017 2016
Interest rate swaps $ 10,775 $ 9,650
Cross-currency swaps 38,694 29,642
Total $ 49,469 $ 39,292

Following are the related hedged items affecting our financial position and performance:

Effect of Derivatives on the Consolidated Statements of Income
Three months ended Nine months ended
September 30, September 30,
Fair Value Hedging Relationships 2017 2016 2017 2016
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps $ (3 ) $ (54 ) $ (51 ) $ 17
Gain (Loss) on long-term debt 3 54 51 (17 )

	June 30,		December 31,
	2020		2019
Interest rate swaps	$	21	$	853
Cross-currency swaps		45,606		42,325
Interest rate locks		-		3,500
Foreign exchange contracts		298		269
Total	$	45,925	$	46,947

Following are the related hedged items affecting our financial position and performance:

Effect of Derivatives on the Consolidated Statements of Income
	Three months ended				Six months ended
	June 30,				June 30,
Fair Value Hedging Relationships	2020		2019		2020		2019
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	$	(14)	$	35	$	(4)	$	59
Gain (Loss) on long-term debt		14		(35)		4		(59)

In addition, the net swap settlements that accrued and settled in the ~~quarter~~quarters ended ~~September~~June 30, 2020 and 2019 were offset against interest expense.

The following table presents information for our cash flow hedging relationships:

	Three months ended				Six months ended
	June 30,				June 30,
Cash Flow Hedging Relationships	2020		2019		2020		2019
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI	$	809	$	(763)	$	(3,170)	$	(595)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI		2		4		(11)		(3)
Other income (expense) - net reclassified from
accumulated OCI into income		(3)		7		13		10
Interest rate locks:
Gain (Loss) recognized in accumulated OCI		(12)		(23)		(648)		(23)
Interest income (expense) reclassified from
accumulated OCI into income		(18)		(16)		(34)		(32)

Three months ended Nine months ended
September 30, September 30,
Cash Flow Hedging Relationships 2017 2016 2017 2016
Cross-currency swaps:
     Gain (Loss) recognized in accumulated OCI $ 429 $ 686 $ (268 ) $ 282
Interest rate locks:
     Gain (Loss) recognized in accumulated OCI 79 - - -
     Interest income (expense) reclassified from
        accumulated OCI into income
(15 ) (15 ) (44 ) (44 )

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 7.8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS

Acquisitions

~~Auction 1000~~ ~~On April 13, 2017,~~

HBO Latin America Group (HBO LAG) In May 2020, we acquired the remaining interest in HBO LAG for $141, net of cash acquired. At acquisition, we remeasured the fair value of the total business, which exceeded the carrying amount of our equity method investment and resulted in a pre-tax gain of $68. We consolidated that business upon close and recorded those assets at fair value, including $640 of trade names, $271 of distribution networks and $343 of goodwill that is reported in the WarnerMedia segment. These estimates are preliminary in nature and subject to adjustments, which will be finalized within one year from the date of acquisition.

Spectrum Auctions In June 2020, we completed the acquisition of $2,379 of 37/39 GHz spectrum in a Federal Communications Commission (FCC) ~~announced~~auction. Prior to the auction, we exchanged the 39 GHz licenses with a book value of approximately $300 that we were previously acquired through FiberTower Corporation for vouchers to be applied against the ~~successful bidder for $910~~winning bids and recorded a $900 gain in the first quarter of ~~spectrum in 18 markets. We provided the FCC an initial deposit~~2020. These vouchers yielded a value of ~~$2,348 in July 2016 and received a refund of $1,438 in April 2017,~~approximately $1,200, which was ~~recorded~~applied toward our gross bids. In the second quarter of 2020, we made the final cash payment of $949, bringing the total cash payment to $1,186.

NOTE 9. SALES OF RECEIVABLES

We have agreements with various third-party financial institutions pertaining to the sales of certain types of our accounts receivable. The most significant of these programs are discussed in detail below and generally consist of (1) receivables arising from equipment installment plans, which are sold for cash and a deferred purchase price, and (2) revolving service and trade receivables. Under these programs, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables, where applicable. Under the terms of our agreements for these programs, we continue to bill and collect the payments from our customers on behalf of the financial institutions.

The sales of receivables did not have a material impact on our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheets. We reflect cash receipts on sold receivables as cash flows from ~~investing activities on~~operations in our consolidated statements of cash flows.
Cash receipts on the deferred purchase price are classified as cash flows from investing activities.

Our equipment installment and revolving receivable programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced:

		June 30, 2020				December 31, 2019
		Equipment				Equipment
		Installment		Revolving		Installment		Revolving
Gross receivables:		$	3,931	$	3,745	$	4,576	$	3,324
Balance sheet classification
Accounts receivable
Notes receivable			2,056		-		2,467		-
Trade receivables			496		3,547		477		2,809
Other Assets
Noncurrent notes and trade receivables			1,379		198		1,632		515

Outstanding portfolio of receivables derecognized from
our consolidated balance sheets			8,917		5,300		9,713		4,300
Cash proceeds received, net of remittances¹			6,429		5,300		7,211		4,300
¹	Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

~~Dispositions~~

~~YP Holdings LLC~~ ~~In June 2017, YP Holdings LLC was acquired by Dex Media. Our results include a gain of $36 for our portion of the proceeds.~~

~~Pending Acquisitions~~

~~Time Warner Inc.~~ On October 22, 2016, we entered into and announced a merger agreement (Merger Agreement) to acquire Time Warner Inc. (Time Warner) in a 50% cash and 50% stock transaction for $107.50 per share of Time Warner common stock, or approximately $85,400 at the date of the announcement (Merger). Combined with Time Warner's net debt at September 30, 2017, the total transaction value is approximately $105,834. Each share of Time Warner common stock will be exchanged for $53.75 per share in cash and a number of shares of AT&T common stock equal to the exchange ratio. If the average stock price (as defined in the Merger Agreement) at the time of closing the Merger is between (or equal to) $37.411 and $41.349 per share, the exchange ratio will be the quotient of $53.75 divided by the average stock price. If the average stock price is greater than $41.349, the exchange ratio will be 1.300. If the average stock price is less than $37.411, the exchange ratio will be 1.437. Post-transaction, Time Warner shareholders will own between 14.4% and 15.7% of AT&T shares on a fully-diluted basis based on the number of AT&T shares outstanding. The cash portion of the purchase price will be financed with new debt and cash.

Time Warner is a global leader in media and entertainment whose major businesses encompass an array of some of the most respected and successful media brands. The deal combines Time Warner's vast library of content and ability to create new premium content for audiences around the world with our extensive customer relationships and distribution, one of the world's largest pay-TV subscriber bases and leading scale in TV, mobile and broadband distribution.

The Merger Agreement was approved by Time Warner shareholders on February 15, 2017. The transaction has been approved by all requisite foreign jurisdictions and remains subject to review by the U.S. Department of Justice. The transaction is expected to close before year-end 2017. If the Merger is terminated as a result of reaching the termination date (and at that time one or more of the conditions relating to certain regulatory approvals have not been satisfied) or there is a final, non-appealable order preventing the transaction relating to antitrust laws, communications laws, utilities laws or foreign regulatory laws, then under certain circumstances, we would be obligated to pay Time Warner $500. On October 20, 2017, to facilitate obtaining final regulatory approval required to close the merger, AT&T and Time Warner elected to extend the October 22, 2017 termination date of the agreement for a short period of time.

~~Other Events~~

~~FirstNet~~ On March 30, 2017, the First Responder Network Authority (FirstNet) announced its selection of AT&T to build and manage the first nationwide broadband network dedicated to America's first responders. FirstNet will provide 20 MHz of valuable telecommunications spectrum and success-based payments of $6,500 over the next five years to support network buildout. We expect to spend about $40,000, in part recoverable from FirstNet, over the life of the 25-year contract to build, operate and maintain the network. AT&T will construct and operate the network and provide sustainability payments to FirstNet. Sustainability payments are required to be used for the operating expenses of FirstNet and to fund network improvements included in our $40,000 estimate. FirstNet's operating expenses are anticipated to be in the $75-$100 range annually, and when adjusted for inflation, we expect to be in the $3,000 range over the life of the 25-year contract. After FirstNet's operating expenses are paid, we anticipate that the remaining amount, expected to be in the $15,000 range, will be reinvested into the network. As of November 2, 2017, 30 states and territories have opted-in to the program, representing 38%, or approximately $6,900, of this total sustainability payment commitment. The actual reach of the network and our investment over the 25-year period will be determined by the number of individual states and territories electing to participate in FirstNet.

States have until December 28, 2017 to elect to opt-out of the federally funded program, after which any state that did not formally make an election will automatically be opted-in. We do not expect FirstNet to materially impact our 2017 results.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

~~NOTE 8. SALES OF EQUIPMENT INSTALLMENT RECEIVABLES~~

Equipment Installment Receivables Program

We offer our customers the option to purchase certain wireless devices in installments over a specified period of ~~up to 30 months~~time and, in many cases, once certain conditions are met, they ~~have the right~~may be eligible to trade in the original equipment for a new device ~~within a set period~~ and have the remaining unpaid balance ~~satisfied. As of September 30, 2017 and December 31, 2016, gross equipment installment receivables of $4,176 and $5,665 were included on our consolidated balance sheets, of~~paid or settled.

We maintain a program under which ~~$2,485 and $3,425 are notes receivable that are included in "Accounts receivable - net."~~

In 2014, we entered into an uncommitted agreement pertaining to the sale of equipment installment receivables and related security with Citibank and various other relationship banks as purchasers (collectively, the Purchasers). Under this agreement, we transfer ~~certain~~a portion of these receivables ~~to the Purchasers~~through our bankruptcy-remote subsidiary in exchange for cash and additional consideration upon settlement of the receivables, referred to as the deferred purchase price. Since 2014, we have made beneficial modifications to the agreement. During 2017, we modified the agreement and entered into a second uncommitted agreement with the Purchasers such that we receive more upfront cash consideration at the time the receivables are transferred to the Purchasers. Additionally, inIn the event a customer trades in a device prior to the end of the installment contract period, we agree to make a payment to the ~~Purchasers~~financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation ~~to the Purchasers~~ for this estimated amount at the time the receivables are transferred. Under the terms of the agreement, we continue to bill and collect the payments from our customers on behalf of the Purchasers. Since inception, cash proceeds received, net of remittances (excluding amounts returned as deferred purchase price), were $4,019.

The following table sets forth a summary of equipment installment receivables sold under this program during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~

Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Gross receivables sold $ 1,619 $ 1,485 $ 6,217 $ 5,812
Net receivables sold ¹
1,478 1,336 5,698 5,263
Cash proceeds received 1,292 891 4,139 3,538
Deferred purchase price recorded 285 463 1,767 1,745
Guarantee obligation recorded 65 - 139 -
¹Receivables net of allowance, imputed interest and trade-in right guarantees.

2019:

		Three months ended				Six months ended
		June 30,				June 30,
		2020		2019		2020		2019
Gross receivables sold		$	1,506	$	2,244	$	3,873	$	4,945
Net receivables sold¹			1,449		2,133		3,722		4,679
Cash proceeds received			1,225		1,920		3,175		4,195
Deferred purchase price recorded			232		261		585		570
Guarantee obligation recorded			27		93		71		194
¹	Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

The deferred purchase price and guarantee obligation are initially recorded at estimated fair value and subsequently ~~carried at the lower~~adjusted for changes in present value of ~~cost or net realizable value.~~expected cash flows. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties that contemplate changes in value after the launch of a device model. The fair value measurements used for the deferred purchase price and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 6)7).

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ - ~~Continued~~

~~Dollars in millions except per share amounts~~

The following table ~~shows~~presents the previously transferred equipment installment receivables, ~~previously sold to the Purchasers,~~ which we repurchased in exchange for the associated deferred purchase price during the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~

Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Fair value of repurchased receivables $ 567 $ 749 $ 1,281 $ 1,281
Carrying value of deferred purchase price 507 722 1,147 1,261
Gain (loss) on repurchases ¹
$ 60 $ 27 $ 134 $ 20
¹These gains (losses) are included in "Selling, general and administrative" in the consolidated statements of income.

2019:

		Three months ended				Six months ended
		June 30,				June 30,
		2020		2019		2020		2019
Fair value of repurchased receivables		$	285	$	235	$	573	$	658
Carrying value of deferred purchase price			281		225		558		632
Gain on repurchases¹		$	4	$	10	$	15	$	26
¹	These gains are included in “Selling, general and administrative” in the consolidated statements of income.

At ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, our deferred purchase price receivable was ~~$3,170~~$2,319 and ~~$3,090,~~$2,336, respectively, of which ~~$2,023~~$1,591 and ~~$1,606~~$1,569 are included in ~~"Other~~“Other current ~~assets"~~assets” on our consolidated balance sheets, with the remainder in ~~"Other~~“Other Assets."” The guarantee obligation at June 30, 2020 and December 31, 2019 was $315 and $384, respectively, of which $213 and $148 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our deferred purchase price and guarantee obligation.

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Revolving Receivables Program

In 2019, we entered into a one-year revolving agreement to transfer up to $4,300 of certain receivables through our bankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. In the first quarter of 2020, we expanded the program limit to $5,300. In the second quarter of 2020, we extended the agreement by one year. As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). The ~~sales~~transferred receivables are fully guaranteed by our bankruptcy-remote subsidiaries, which hold additional receivables in the amount of ~~equipment installment receivables did not have a material impact on our consolidated statements~~$3,745 that are pledged as collateral under this agreement. The transfers are recorded at fair value of ~~income or~~the proceeds received and obligations assumed less derecognized receivables. The obligation is subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to ~~"Total Assets" reported on our consolidated balance sheets. We reflect the cash flows~~loss related to these receivables transferred is limited to the ~~arrangement as operating activities in our consolidated statements of cash flows because~~amount outstanding.

The fair value measurement used for the ~~cash received from~~obligation is considered Level 3 under the ~~Purchasers upon both the sale of the receivables~~Fair Value Measurement and ~~the collection of the deferred purchase price is not subject to significant interest rate risk.~~

~~Derecognized Installment Receivables~~

Disclosure framework (see Note 7).

The following table sets forth a summary of receivables sold:

		Three months ended				Six months ended
		June 30,				June 30,
		2020		2019		2020		2019
Gross receivables sold/cash proceeds received¹		$	3,805	$	4,452	$	8,027	$	5,852
Collections reinvested under revolving agreement			3,805		2,127		7,027		2,127
Net cash proceeds received (remitted)		$	-	$	2,325	$	1,000	$	3,725

Net receivables sold²		$	3,819	$	4,134	$	7,957	$	5,497
Obligations recorded (reversed)			(12)		384		114		436
¹	Includes initial sale of receivables of $0 and $2,325 for the three months and $1,000 and $3,725 for the six months ended
	June 30, 2020 and 2019, respectively.
²	Receivables net of allowance, return and incentive reserves and imputed interest

NOTE 10. LEASES

We have operating and finance leases for certain facilities and equipment ~~installment receivables~~used in operations. Our leases generally have remaining lease terms of up to 15 years. Some of our real estate operating leases contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year.

We have recognized a right-of-use asset for both operating and finance leases, and an operating lease liability that represents the present value of our obligation to make payments over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was determined using a portfolio approach based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate in the currency of the lease, which will be updated on a quarterly basis for measurement of new lease liabilities.

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The components of lease expense were ~~sold~~as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Operating lease cost	$	1,449	$	1,610	$	2,826	$	2,852

Finance lease cost:
Amortization of right-of-use assets	$	73	$	70	$	140	$	136
Interest on lease obligation		36		42		77		84
Total finance lease cost	$	109	$	112	$	217	$	220

Supplemental balance sheet information related to ~~Purchasers~~leases is as follows:

	June 30,		December 31,
	2020		2019
Operating Leases
Operating lease right-of-use assets	$	24,692	$	24,039

Accounts payable and accrued liabilities	$	3,474	$	3,451
Operating lease obligation		22,230		21,804
Total operating lease obligation	$	25,704	$	25,255

Finance Leases
Property, plant and equipment, at cost	$	3,468	$	3,534
Accumulated depreciation and amortization		(1,347)		(1,296)
Property, plant and equipment, net	$	2,121	$	2,238

Current portion of long-term debt	$	180	$	162
Long-term debt		1,683		1,872
Total finance lease obligation	$	1,863	$	2,034

Weighted-Average Remaining Lease Term (years)
Operating leases		8.5		8.4
Finance leases		10.2		10.7

Weighted-Average Discount Rate
Operating leases		4.2	%	4.7	%
Finance leases		8.2	%	8.5	%

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Future minimum maturities of lease obligations are as follows:

At June 30, 2020	Operating		Finance
	Leases		Leases
Remainder of 2020	$	2,447	$	190
2021		4,582		309
2022		4,277		291
2023		3,889		262
2024		3,357		242
Thereafter		13,031		1,632
Total lease payments		31,583		2,926
Less imputed interest		(5,879)		(1,063)
Total	$	25,704	$	1,863

NOTE 11. PREFERRED SHARES

We have authorized 10 million preferred shares of AT&T stock, each with a par value of $1.00 per share. Cumulative perpetual preferred shares consist of the following:

Series A: 48 thousand shares outstanding at June 30, 2020 and December 31, 2019, with a $25,000 per share liquidation preference and a dividend rate of 5.00%.

Series B: 20 thousand shares outstanding at June 30, 2020 and 0 issued and outstanding at December 31, 2019, with a €100,000 per share liquidation preference, and an initial dividend rate of 2.875%, subject to reset beginning on May 1, 2025.

Series C: 70 thousand shares outstanding at June 30, 2020 and 0 issued and outstanding at December 31, 2019, with a $25,000 per share liquidation preference and a dividend rate of 4.75%.

So long as the preferred dividends are declared and paid on a timely basis on each series of preferred shares, there are no ~~longer considered~~limitations on our ~~assets.~~

ability to declare a dividend on or repurchase AT&T common shares. The preferred shares are optionally redeemable by AT&T at the liquidation price generally on or after five years from the issuance date, or upon certain other contingent events.

NOTE 12. ADDITIONAL FINANCIAL INFORMATION

Cash and Cash Flows

We typically maintain our restricted cash balances for purchases and sales of certain investment securities and funding of certain deferred compensation benefit payments:

	June 30,				December 31,
		2020		2019		2019		2018
Cash and cash equivalents	$	16,941	$	8,423	$	12,130	$	5,204
Restricted cash in Other current assets		3		15		69		61
Restricted cash in Other Assets		87		216		96		135
Cash and Cash Equivalents and Restricted Cash	$	17,031	$	8,654	$	12,295	$	5,400

2017
Outstanding derecognized receivables at January 1, $ 7,232
Gross receivables sold 6,217
Collections on cash purchase price (3,556 )
Collections on deferred purchase price (665 )
Trade ins and other (295 )
Fair value of repurchased receivables (1,281 )
Outstanding derecognized receivables at September 30, $ 7,652

AT&T INC.

JUNE 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

~~SEPTEMBER~~

Consolidated Statements of Cash Flows	Six months ended
	June 30,
Cash paid (received) during the period for:		2020		2019
Interest	$	4,202	$	4,410
Income taxes, net of refunds		(214)		(32)

	Six months ended
	June 30,
	2020		2019
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations
Operating cash flows from operating leases	$	2,424	$	2,464

Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained
in exchange for new operating lease obligations		2,895		3,899

Other Noncash Investing and Financing Activities In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms (referred to as vendor financing), which are reported as financing activities when paid. For the first six months, we recorded vendor financing commitments related to capital investments of approximately $1,680 in 2020 and $1,265 in 2019.

Financing Activities

Debt Transactions At June 30, ~~2017~~2020, our total long-term debt obligations totaled $168,964. Our debt activity primarily consisted of the following:

Net borrowings of approximately $2,960 of debt under our commercial paper program.

In April 2020, entry into and draw on a $5,500 Term Loan Credit Agreement, with certain commercial banks and Bank of America, N.A., as lead agent, which was redeemed in May 2020 (originally due on December 31, 2020).

Issuance of $16,545 of AT&T global notes due 2027 to 2060.

Issuance of €3,000 million global notes ($3,281 at issuance) due 2028 to 2038.

Redemptions of $12,689 of AT&T global notes due 2020 to 2047.

Redemptions of $1,800 under term loan credit agreements with certain banks.

Redemptions of $1,000 annual put reset securities issued by BellSouth.

Our long-term debt issuances carried a weighted average interest rate of 3.5%, and our long-term debt redemptions had a weighted average interest rate of 3.4%.

Subsequent Events In July 2020, we completed redemptions of $4,264 of AT&T, WarnerMedia and DIRECTV notes due 2022, with an average interest rate of 3.4%.

In August 2020, we issued $11,000 of global notes due 2028 to 2061, with an average interest rate of 2.7%.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~RESULTS OF OPERATIONS~~

OVERVIEW

AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document, and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the ~~communications~~telecommunications, media and ~~digital entertainment services industry. Our subsidiaries and affiliates provide services and equipment that deliver voice, video and broadband services both domestically and internationally.~~technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying ~~notes. A reference~~notes (Notes).

We have three reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America. Our segment results presented in Note 4 and discussed below follow our internal management reporting. We analyze our segments based on segment operating 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. Percentage increases and decreases that are not considered meaningful are denoted with a dash.

We have recast our segment results for all prior periods to ~~a "Note" in this section refers~~include our prior Xandr segment within our WarnerMedia segment.

	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating Revenues
Communications	$	33,592	$	35,267	(4.7)	%	$	67,841	$	70,436	(3.7)	%
WarnerMedia		6,814		8,835	(22.9)			14,662		17,640	(16.9)
Latin America		1,232		1,757	(29.9)			2,822		3,475	(18.8)
Corporate and other		437		420	4.0			825		811	1.7
Eliminations and consolidation		(1,125)		(1,322)	14.9			(2,421)		(2,578)	6.1
AT&T Operating Revenues		40,950		44,957	(8.9)			83,729		89,784	(6.7)

Operating Contribution
Communications		8,112		8,671	(6.4)			16,315		16,682	(2.2)
WarnerMedia		1,917		2,350	(18.4)			3,930		4,913	(20.0)
Latin America		(201)		(209)	3.8			(385)		(382)	(0.8)
Segment Operating Contribution	$	9,828	$	10,812	(9.1)	%	$	19,860	$	21,213	(6.4)	%

The Communications segment provides services to ~~the accompanying Notes to Consolidated Financial Statements.~~

~~Consolidated Results~~ ~~Our financial results~~businesses and consumers located in the ~~third quarter~~U.S. and ~~for~~businesses globally. Our business strategies reflect bundled product offerings that cut across product lines and utilize shared assets. This segment contains the ~~first nine months of 2017~~following business units:

Mobility provides nationwide wireless service and ~~2016 are summarized~~equipment.

Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers. This segment also sells advertising on distribution platforms.

Business Wireline provides advanced IP-based services, as ~~follows:~~

Third Quarter Nine-Month Period
Percent Percent
2017 2016 Change 2017 2016 Change
Operating Revenues
   Service $ 36,378 $ 37,272 (2.4 )% $ 109,372 $ 111,515 (1.9 )%
   Equipment 3,290 3,618 (9.1 ) 9,498 10,430 (8.9 )
Total Operating Revenues 39,668 40,890 (3.0 ) 118,870 121,945 (2.5 )

Operating expenses
   Cost of services and sales
      Equipment 4,191 4,455 (5.9 ) 12,177 13,090 (7.0 )
      Broadcast, programming and
        operations
5,284 4,909 7.6 15,156 14,239 6.4
      Other cost of services 9,431 9,526 (1.0 ) 27,714 28,436 (2.5 )
   Selling, general and administrative 8,317 9,013 (7.7 ) 24,917 26,363 (5.5 )
   Depreciation and amortization 6,042 6,579 (8.2 ) 18,316 19,718 (7.1 )
Total Operating Expenses 33,265 34,482 (3.5 ) 98,280 101,846 (3.5 )
Operating Income 6,403 6,408 (0.1 ) 20,590 20,099 2.4
Income Before Income Taxes 4,974 5,193 (4.2 ) 16,422 16,621 (1.2 )
Net Income 3,123 3,418 (8.6 ) 10,711 10,818 (1.0 )
Net Income Attributable to AT&T $ 3,029 $ 3,328 (9.0 )% $ 10,413 $ 10,539 (1.2 )%

~~Overview~~

~~Operating revenues~~ ~~decreased $1,222, or 3.0%, in the third quarter and $3,075, or 2.5%, for the first nine months of 2017.~~

~~Service~~ ~~revenues decreased $894, or 2.4%, in the third quarter and $2,143, or 1.9%, for the first nine months of 2017. The decreases were primarily due to continued declines in legacy wireline~~well as traditional voice and data products and lower wireless service revenues reflecting increased adoption of unlimited plans. Additionally, we waived $89 in service revenues for customers in areas affected by natural disasters during the third quarter of 2017. These were partially offset by increased revenues from strategicservices to business ~~services.~~customers.

~~Equipment~~ revenues decreased $328, or 9.1%, in the third quarter and $932, or 8.9%, for the first nine months of 2017. The decreases were primarily due to lower wireless handset sales and upgrades. Equipment revenue is becoming increasingly unpredictable as many customers are choosing to upgrade devices less frequently or are bringing their own devices.

~~Operating expenses~~ ~~decreased $1,217, or 3.5%, in the third quarter and $3,566, or 3.5%, for the first nine months of 2017.~~

~~Equipment~~ expenses decreased $264, or 5.9%, in the third quarter and $913, or 7.0%, for the first nine months of 2017. The decreases were driven by a decline in devices sold reflecting a change in customer buying habits.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~Broadcast,~~

Turner primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties.

Warner Bros. primarily consists of the production, distribution and licensing of television programming and ~~operations~~ ~~expenses increased $375,~~feature films, the distribution of home entertainment products and the production and distribution of games.

The Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:

Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.

Mexico provides wireless service and equipment to customers in Mexico.

COVID-19 Update

In March 2020, the World Health Organization designated the coronavirus (COVID-19) a pandemic and the President of the United States declared a national emergency. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or ~~7.6%,~~shutdowns.

Disruptions caused by COVID-19 and measures taken to prevent its spread or mitigate its effects both domestically and internationally have impacted our results of operations. We recorded approximately $320, or $0.03 per diluted share, in the ~~third~~second quarter and ~~$917,~~$750, or ~~6.4%,~~$0.08 per diluted share, for the first ~~nine~~six months of ~~2017, reflecting annual content cost increases~~2020, of incremental costs associated with voluntary corporate actions taken primarily to protect and ~~additional programming~~compensate front-line employees and contractors, and WarnerMedia production disruption costs.

In addition to these incremental costs, ~~for DIRECTV NOW.~~

~~Other cost of services~~ ~~expenses decreased $95,~~we estimate that our operations and comparability were impacted by approximately $510, or ~~1.0%,~~$0.06 per diluted share, in the ~~third~~second quarter and ~~$722,~~$470, or ~~2.5%,~~$0.05 per diluted share, for the first ~~nine~~six months of ~~2017. The decreases reflect our continued focus on cost management~~2020, for the following COVID-19 related pressures: (1) the cancellation and postponement of televised sporting events, resulting in lower advertising revenues and associated expenses, (2) the ~~utilization~~closure of ~~automation~~movie theaters and ~~digitalization where appropriate,~~postponement of theatrical releases, leading to lower content revenues and associated expenses, (3) the imposition of travel restrictions, driving significantly lower international wireless roaming services that do not have a directly correlated expense reduction and most significantly impact profitability and (4) closures of retail stores, contributing to lower wireless equipment sales, with a corresponding reduction in equipment expense.

All subscriber counts at and for the period ended June 30, 2020, exclude customers who we have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge.” For reporting purposes, we count the following nonpaying subscribers as ~~well as lower Federal Universal Service Fund (USF) rates~~if they had disconnected, even though they are still receiving service:

Postpaid subscribers totaling 466,0000 (including 338,000 postpaid phone) in the second quarter and ~~fees. The decrease~~521,000 (including 382,000 postpaid phone) for the first nine months also includes an actuarial gain from the second-quarter 2017 remeasurement of our postretirement benefit obligation. These expense declines were partially offset by an increase in amortization of deferred customer fulfillment cost.

~~Selling, general and administrative~~ ~~expenses decreased $696, or 7.7%,~~six months;

Premium TV connections totaling 91,000 in the ~~third~~second quarter and ~~$1,446, or 5.5%,~~157,000 for the first ~~nine months of 2017. The decreases were attributable to our disciplined cost management, lower selling~~six months; and wireless commission costs from reduced volumes, fewer advertising costs, and, for the nine month period, the actuarial gain resulting from the second-quarter remeasurement of our postretirement benefit obligation. The decreases

Broadband connections totaling 159,000 (including 48,000 fiber) in the ~~third~~second quarter ~~were partially offset by costs arising from natural disasters,~~ and 194,000 (including 58,000 fiber) for the first ~~nine months, lower gains on wireless spectrum transactions during 2017 than in~~six months.

The economic effects of the ~~comparable period~~pandemic and resulting societal changes are currently not predictable. There are a number of ~~2016. We are continuing to assess network damage from~~uncertainties that could impact our future results of operations, including the ~~natural disasters that occurred in~~ effectiveness of COVID-19 mitigation measures; the ~~third quarter as well as~~duration of the ~~recent fires in California, and expect additional pressure in the fourth quarter.~~

~~Depreciation and amortization~~ expense decreased $537, or 8.2%, in the third quarter and $1,402, or 7.1%, for the first nine months of 2017. Depreciation expense decreased $393, or 7.4%, in the third quarter and $962, or 6.1%, for the first nine months of 2017. The decreases were primarily duepandemic; global economic conditions; changes to our ~~fourth-quarter 2016 change~~operations; changes in ~~estimated useful lives~~consumer confidence, behaviors and ~~salvage values~~spending; work from home trends; and the sustainability of ~~certain assets associated with our transition~~ supply chains. We expect operating results and cash flows to ~~an IP-based network, which accounted~~continue to be adversely impacted by COVID-19 for ~~$327~~at least the duration of the ~~decrease in~~pandemic. We expect our third-quarter results to be impacted by the third quarter and $980 of the decrease for the first nine months. Also contributing to lower depreciation expenses were network assets becoming fully depreciated. These decreases were partially offset by increases resulting from ongoing capital spending for upgrades and expansion.following:

Amortization expense decreased $144, or 11.2%, in the third quarter and $440, or 11.1%, for the first nine months of 2017 due to lower amortization of intangibles for the customer lists associated with acquisitions.

~~Operating income~~ decreased $5, or 0.1%, in the third quarter and increased $491, or 2.4%, for the first nine months of 2017. Our operating income margin in the third quarter increased from 15.7% in 2016 to 16.1% in 2017, and for the first nine months increased from 16.5% in 2016 to 17.3% in 2017.

~~Interest expense~~ increased $462, or 37.7%, in the third quarter and $685, or 18.6%, for the first nine months of 2017. The increases were primarily due to higher debt balances in anticipation of closing our acquisition of Time Warner Inc. (Time Warner) and an increase in average interest rates when compared to the prior year. Financing fees related to pending acquisitions also contributed to higher interest expense in 2017.

~~Equity in net income (loss) of affiliates~~ decreased $5, or 31.3%, in the third quarter and $205 for the first nine months of 2017, predominantly from losses from our legacy publishing business (which we sold in June 2017), partially offset by income from our investments in video-related businesses.

~~Other income (expense) – net~~ increased $253 in the third quarter and $200 for the first nine months. The increases were primarily due to higher net gains from the sale of non-strategic assets and investments of $123 and $26, respectively, and growth in interest and dividend income of $91 and $146, including interest on cash held in anticipation of closing our acquisition of Time Warner.

~~Income taxes~~ increased $76, or 4.3%, in the third quarter and decreased $92, or 1.6%, for the first nine months of 2017. Our effective tax rate was 37.2% in the third quarter and 34.8% for the first nine months of 2017, as compared to 34.2% in the third quarter and 34.9% for the first nine months of 2016. The increase in the third quarter was primarily due to state-level legislation changes that resulted in a remeasurement of our deferred tax liabilities offset by lower income before income taxes. The decrease for the first nine months of 2017 was primarily due to lower income before income taxes and the

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~recognition~~

The shift in timing of ~~tax benefits~~advertising revenues from the postponement, restarting or cancellation of sporting events and the related totiming of the ~~restructuring~~sports costs;

Lower revenues from the closure of ~~a portion~~movie theaters and postponement of ~~our wireless business~~theatrical releases, partially offset by ~~state-level legislation changes.~~

Selected Financial and Operating Data
September 30,
Subscribers and connections in (000s) 2017 2016
Domestic wireless subscribers 138,826 133,338
Mexican wireless subscribers 13,779 10,698
North American wireless subscribers 152,605 144,036

North American branded subscribers 106,098 100,821
North American branded net additions 2,782 3,881

Domestic satellite and over-the-top video subscribers 21,392 20,777
AT&T U-verse® (U-verse) video subscribers 3,718 4,544
Latin America satellite video subscribers ¹
13,490 12,476
Total video subscribers 38,600 37,797

Total domestic broadband connections 15,715 15,618

Network access lines in service 12,249 14,603
U-verse VoIP connections 5,774 5,707

Debt ratio ²
56.4 % 50.1 %
Net debt ratio ³
39.7 % 47.8 %
Ratio of earnings to fixed charges ⁴
3.55 3.91
Number of AT&T employees 256,800 273,140

¹~~Excludes subscribers of our International segment equity investments in SKY Mexico, in which we own a 41.3% stake. At June 30, 2017, SKY Mexico had 8.0 million subscribers.~~

²~~Debt ratios are calculated by dividing total debt (debt maturing within one year plus long-term debt) by total capital (total debt plus total stockholders' equity)~~lower production and ~~do not consider cash available to pay down debt. See our "Liquidity and Capital Resources" section for discussion.~~

³~~Net debt ratios are calculated by deriving total debt (debt maturing within one year plus long-term debt) less cash available by total capital (total debt plus total stockholders' equity).~~

⁴ ~~See Exhibit 12.~~

~~Segment Results~~

Our segments are strategic business units that offer different products and services over various technology platforms and/or in different geographies that are managed accordingly. Our segment results presented in Note 4 and discussed below for each segment follow our internal management reporting. We analyze our segments based on Segment Contribution, which consists of operating income, excluding acquisition-relatedmarketing costs, and other ~~significant items,~~programming expenses;

The decline in revenues from international roaming wireless services due to reduced travel;

Higher expenses to protect front-line employees, contractors and ~~equity in net income (loss)~~customers; and

The continued transition of ~~affiliates for investments managed within each segment. We have four reportable segments: (1) Business Solutions, (2) Entertainment Group, (3) Consumer Mobility and (4) International.~~

We also evaluate segment performance based on EBITDA and/or EBITDA margin, which is defined as Segment Contribution, excluding equity in net income (loss) of affiliates and depreciation and amortization. We believe EBITDA to be a relevant and useful measurementcustomers to our ~~investors as it~~fiber broadband services and the acceleration of the disconnection of linear TV services due to the pandemic.

RESULTS OF OPERATIONS

Consolidated Results Our financial results are summarized in the discussions that follow. Additional analysis is ~~part~~discussed in our “Segment Results” section. Certain prior period amounts have been reclassified to conform to the current period’s presentation.

	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating Revenues
Service	$	37,051	$	41,023	(9.7)	%	$	75,934	$	81,707	(7.1)	%
Equipment		3,899		3,934	(0.9)			7,795		8,077	(3.5)
Total Operating Revenues		40,950		44,957	(8.9)			83,729		89,784	(6.7)

Operating expenses
Operations and support		30,133		30,356	(0.7)			58,204		60,744	(4.2)
Depreciation and amortization		7,285		7,101	2.6			14,507		14,307	1.4
Total Operating Expenses		37,418		37,457	(0.1)			72,711		75,051	(3.1)
Operating Income		3,532		7,500	(52.9)			11,018		14,733	(25.2)
Interest expense		2,041		2,149	(5.0)			4,059		4,290	(5.4)
Equity in net income (loss)
of affiliates		(10)		40	-			(16)		33	-
Other income (expense) – net		1,017		(318)	-			1,820		(32)	-
Income Before Income Taxes		2,498		5,073	(50.8)			8,763		10,444	(16.1)
Net Income		1,563		3,974	(60.7)			6,526		8,322	(21.6)
Net Income Attributable to AT&T		1,281		3,713	(65.5)			5,891		7,809	(24.6)
Net Income Attributable to
Common Stock	$	1,229	$	3,713	(66.9)	%	$	5,807	$	7,809	(25.6)	%

Operating revenues decreased in the second quarter and in the first six months of 2020, driven by declines in our ~~internal management reporting~~WarnerMedia, Communications and ~~planning processes~~Latin America segments. Lower WarnerMedia segment revenues reflect lower advertising revenue from cancelled and ~~it is an important metric that management uses~~postponed live sports programming and lower revenue due to ~~evaluate operating performance. EBITDA does not give effect~~postponed theatrical releases. Communications segment revenue declines were driven by continued declines in video and legacy services, and lower wireless revenues from the imposition of international travel restrictions and closure of retail stores. Latin America segment revenue declines were primarily due to ~~cash used for debt~~foreign exchange rate pressure and store closures related to COVID-19. Partially offsetting these decreases were revenue increases in strategic and managed business service ~~requirements~~in our Communications segment.

Operations and ~~thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA margin is EBITDA divided~~supportexpenses decreased in the second quarter and in the first six months of 2020. The decreases were driven by ~~total revenues.~~lower broadcast and programming costs in our Communications and WarnerMedia segments. Expense declines in the first six months were also driven by a noncash gain of $900 on a spectrum transaction, reduced wireless equipment costs

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~The~~ ~~Business Solutions segment~~ ~~provides services~~

resulting from lower device sales and our continued focus on cost management. Partially offsetting expense declines were charges for a goodwill impairment at our Vrio business unit, employee separation charges and incremental costs related to ~~business customers,~~COVID-19, including ~~multinational companies; governmental~~increased first-quarter 2020 bad debt expense. As part of our cost and ~~wholesale customers;~~efficiency initiatives, we expect operations and ~~individual subscribers who purchase wireless services through employer-sponsored plans. We provide advanced IP-based services including Virtual Private Networks (VPN); Ethernet-related products~~support expense improvements to continue as we size our operations to reflect the new economic activity level.

Depreciation and broadband, collectively referred to as fixed strategic services; as well as traditional data and voice products. We utilize our wireless and wired networks to provide a complete integrated communications solution to our business customers.

~~The~~ ~~Entertainment Group segment~~ ~~provides video, internet, voice communication, and interactive and targeted advertising services to customers located~~amortization expense increased in the ~~United States~~second quarter and for the first six months of 2020.

Depreciation expense increased $36, or ~~in U.S. territories. We utilize our copper and IP-based wired network and our satellite technology.~~

~~The~~ ~~Consumer Mobility segment~~ ~~provides nationwide wireless service to consumers, wholesale and resale wireless subscribers located~~0.7% in the ~~United States~~second quarter and $65, or 0.6% for the first six months of 2020, primarily due to ongoing capital spend for network upgrades and expansion in ~~U.S. territories. We utilize~~ our ~~networks~~Communications segment.

Amortization expense increased $148, or 7.1% in the second quarter and $135, or 3.2% for the first six months of 2020 primarily due to ~~provide voice~~the amortization of orbital slot licenses, which began in the first quarter of 2020 (see Note 1).

Operatingincome decreased in the second quarter and ~~data services,~~the first six months of 2020. Our operating income margin for the second quarter decreased from 16.7% in 2019 to 8.6% in 2020 and for the first six months decreased from 16.4% in 2019 to 13.2% in 2020.

Interest expense decreased in the second quarter and first six months of 2020, primarily due to lower debt balances and interest rates.

Equity in net income of affiliates decreased in the second quarter and for the first six months of 2020, reflecting changes in our investment portfolio, including ~~high-speed internet, video and home monitoring services over wireless devices.~~

~~The~~ ~~International segment~~ ~~provides entertainment services~~our second-quarter 2020 acquisition of the remaining interest in HBO Latin America Group (HBO LAG).

Other income (expense) – net increased in the second quarter and ~~wireless services~~for the first six months of 2020. The increases were primarily due to the recognition of actuarial losses in ~~Mexico. Video entertainment services are provided to primarily residential customers using satellite technology. We utilize our regional~~2019, with no comparable interim remeasurement in 2020, totaling $1,699 and ~~national networks~~$2,131 in ~~Mexico to provide consumer~~the second quarter and ~~business customers with wireless data~~for the first six months of 2019, respectively, and ~~voice communication services. Our international subsidiaries conduct business~~higher prior service credit amortization in ~~their local currency,~~2020 (see Note 6). The increase was partially offset by the write-off of certain investments in 2020 and ~~operating results are converted to U.S. dollars using official exchange rates. Our International segment is subject to foreign currency fluctuations.~~

~~Our operating assets are utilized by multiple segments and consist~~the second-quarter 2019 gain on sale of our ~~wireless~~interest in Hulu.

Income taxes decreased in the second quarter and ~~wired networks as well as an international satellite fleet.~~increased for the first six months of 2020. The decrease in income tax expense in the second quarter was primarily attributable to lower income before tax.

Our ~~domestic communications business strategies reflect bundled product offerings that increasingly cut across product lines~~effective tax rate was 37.5% for the second quarter and ~~utilize~~25.5% for the first six months of 2020, versus 21.7% and 20.3% for the comparable year-prior periods, respectively. The increases in our ~~asset base. Therefore asset information and capital expenditures by segment are~~effective tax rates were primarily due to the Vrio goodwill impairment, which is not ~~presented. Depreciation is allocated based on asset utilization by segment.~~ In expectation of the close of our acquisition of Time Warner, we are beginning to realign our operations and strategies. We are pushing down administrative activities into the business units to better manage costs and serve our customers.

deductible for tax purposes.

Business Solutions
Segment Results
Third Quarter Nine-Month Period
2017 2016
Percent
Change
2017 2016
Percent
Change

Segment operating revenues
     Wireless service $ 8,034 $ 8,050 (0.2 )% $ 23,969 $ 23,868 0.4 %
     Fixed strategic services 3,087 2,913 6.0 9,089 8,469 7.3
     Legacy voice and data services 3,434 4,042 (15.0 ) 10,572 12,577 (15.9 )
     Other service and equipment 852 886 (3.8 ) 2,513 2,619 (4.0 )
     Wireless equipment 1,654 1,876 (11.8 ) 4,873 5,422 (10.1 )
Total Segment Operating Revenues 17,061 17,767 (4.0 ) 51,016 52,955 (3.7 )

Segment operating expenses
     Operations and support 10,233 10,925 (6.3 ) 30,722 32,584 (5.7 )
     Depreciation and amortization 2,325 2,539 (8.4 ) 6,972 7,568 (7.9 )
Total Segment Operating Expenses 12,558 13,464 (6.7 ) 37,694 40,152 (6.1 )
Segment Operating Income 4,503 4,303 4.6 13,322 12,803 4.1
Equity in Net Income of Affiliates - - - - - -
Segment Contribution $ 4,503 $ 4,303 4.6 % $ 13,322 $ 12,803 4.1 %

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~The following tables highlight other key measures of performance for the Business Solutions segment:~~

September 30, Percent
(in 000s) 2017 2016 Change
Business Wireless Subscribers
   Postpaid/Branded 51,412 50,014 2.8 %
   Reseller 77 58 32.8
   Connected devices¹
35,909 29,355 22.3
Total Business Wireless Subscribers 87,398 79,427 10.0

Business IP Broadband Connections 1,017 963 5.6 %
¹Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
Excludes postpaid tablets.

Third Quarter Nine-Month Period
Percent Percent
(in 000s) 2017 2016 Change 2017 2016 Change

Business Wireless Net Additions ^{1, 4}

   Postpaid/Branded 15 191 (92.1 )% (74 ) 509 - %
   Reseller 2 1 - 3 (34 ) -
   Connected devices ²
2,292 1,290 77.7 7,015 4,067 72.5
Business Wireless Net Subscriber Additions 2,309 1,482 55.8 6,944 4,542 52.9

Business Wireless Postpaid Churn ^{1, 3, 4}
1.01 % 0.97 % 4 BP 1.02 % 0.97 % 5 BP

Business IP Broadband Net Additions 25 15 66.7 % 41 52 (21.2 )%
¹ Excludes migrations between AT&T segments and/or subscriber categories and acquisition-related additions during the period.

² Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.

Excludes postpaid tablets.
³ Calculated by dividing the aggregate number of wireless subscribers who canceled service during a period divided by the total number

of wireless subscribers at the beginning of that period. The churn rate for the period is equal to the average of the churn rate for
each month of that period.
⁴ 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period subscribers.

COMMUNICATIONS SEGMENT	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Segment Operating Revenues
Mobility	$	17,149	$	17,292	(0.8)	%	$	34,551	$	34,655	(0.3)	%
Entertainment Group		10,069		11,368	(11.4)			20,584		22,696	(9.3)
Business Wireline		6,374		6,607	(3.5)			12,706		13,085	(2.9)
Total Segment Operating Revenues		33,592		35,267	(4.7)			67,841		70,436	(3.7)

Segment Operating Contribution
Mobility		5,805		5,767	0.7			11,593		11,076	4.7
Entertainment Group		1,030		1,514	(32.0)			2,365		2,992	(21.0)
Business Wireline		1,277		1,390	(8.1)			2,357		2,614	(9.8)
Total Segment Operating Contribution	$	8,112	$	8,671	(6.4)	%	$	16,315	$	16,682	(2.2)	%

Selected Subscribers and Connections
		June 30,
(000s)		2020	2019
Mobility Subscribers¹		171,407	158,622
Total domestic broadband connections¹		15,201	15,698
Network access lines in service		7,878	9,207
U-verse VoIP connections		4,058	4,766
¹	Excludes 521 wireless and 194 broadband customers who we have agreed not to terminate service under the FCC's "Keep Americans
	Connected Pledge," which was implemented March 13, 2020.

Operating ~~Revenues~~revenues decreased ~~$706, or 4.0%,~~ in the ~~third~~second quarter and ~~$1,939, or 3.7%,~~ for the first ~~nine~~six months of ~~2017. Revenue~~2020, driven by declines in each of our business units, Entertainment Group, Business Wireline and Mobility. The decreases reflect ~~technological shifts~~the continued shift away from linear video and legacy ~~products, as well as decreasing~~services, lower wireless service revenues from a decline in international travel and waived fees, and suppressed equipment revenues resulting from changes in customer buying habits. These decreases were partially offset by fixed strategic services, which represent 41% of non-wireless revenues. Our revenues continue to be pressured by slower fixed business investment.

~~Wireless service~~ ~~revenues decreased $16, or 0.2%,~~sales in the ~~third~~first quarter of 2020 attributable to store closures. Partially offsetting these declines was growth in our prepaid subscriber base.

Operating contribution decreased in the second quarter and ~~increased $101, or 0.4%,~~ for the first ~~nine~~six months of ~~2017. The decrease~~2020, reflecting declines in our Business Wireline and Entertainment Group business units, largely offset by improvement in our Mobility business unit. Our Communications segment operating income margin in the ~~third~~second quarter ~~was primarily due~~decreased from 24.6% in 2019 to ~~customers shifting to our unlimited plans as well as fewer migrations from our Consumer Mobility segment during the quarter. The increase~~24.1% in 2020 and for the first ~~nine~~six months ~~was primarily due~~increased from 23.7% in 2019 to ~~the migration of customers from our Consumer Mobility segment.~~24.0% in 2020.

At September 30, 2017, we served 87.4 million subscribers, an increase of 10.0% from the prior year. Postpaid subscribers increased 2.8% from the prior year reflecting the addition of new customers as well as migrations from our Consumer Mobility segment, partially offset by continuing competitive pressures in the industry. Connected devices, which have lower average revenue per average subscriber (ARPU) and churn, increased 22.3% from the prior year reflecting growth in our connected car business and other data centric devices that ~~utilize the network to connect and control physical devices using embedded computing systems and/or software, commonly called the Internet of Things (IoT)~~.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Communications Business Unit Discussion
Mobility Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues
Service	$	13,669	$	13,824	(1.1)	%	$	27,637	$	27,453	0.7	%
Equipment		3,480		3,468	0.3			6,914		7,202	(4.0)
Total Operating Revenues		17,149		17,292	(0.8)			34,551		34,655	(0.3)

Operating expenses
Operations and support		9,332		9,522	(2.0)			18,901		19,563	(3.4)
Depreciation and amortization		2,012		2,003	0.4			4,057		4,016	1.0
Total Operating Expenses		11,344		11,525	(1.6)			22,958		23,579	(2.6)
Operating Income		5,805		5,767	0.7			11,593		11,076	4.7
Equity in Net Income (Loss)
of Affiliates		-		-	-			-		-	-
Operating Contribution	$	5,805	$	5,767	0.7	%	$	11,593	$	11,076	4.7	%

The following tables highlight other key measures of performance for Mobility:

Subscribers
		June 30,		Percent
(in 000s)		2020	2019	Change
Postpaid		74,919	75,478	(0.7)	%
Prepaid		18,008	17,434	3.3
Reseller		6,718	7,323	(8.3)
Connected devices¹		71,762	58,387	22.9
Total Mobility Subscribers²		171,407	158,622	8.1	%
¹	Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
²	Excludes 521 customers who we have agreed not to terminate service under the FCC's "Keep Americans Connected Pledge."

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Net Additions
		Second Quarter				Six-Month Period
				Percent				Percent
(in 000s)		2020	2019	Change		2020	2019	Change
Postpaid Phone Net Additions		(151)	74	-	%	12	153	(92.2)	%
Total Phone Net Additions		(16)	357	-		104	525	(80.2)

Postpaid^{2, 5}		(154)	(146)	(5.5)		(127)	(353)	64.0
Prepaid		165	341	(51.6)		120	442	(72.9)
Reseller		(58)	(204)	71.6		(248)	(446)	44.4
Connected devices³		2,255	3,959	(43.0)		5,773	7,047	(18.1)
Mobility Net Subscriber Additions^{1, 5}		2,208	3,950	(44.1)	%	5,518	6,690	(17.5)	%

Postpaid Churn^{4, 5}		1.05	1.07	(2)	BP	1.06	1.12	(6)	BP
Postpaid Phone-Only Churn^{4, 5}		0.84	0.86	(2)	BP	0.85	0.89	(4)	BP
¹	Excludes acquisition-related additions during the period.
²	In addition to postpaid phones, includes tablets and wearables and other. Tablet net (losses) were (159) and (357) for the three months
	and (426) and (767) for the six months ended June 30, 2020 and 2019, respectively. Wearables and other net adds were 155 and 137 for
	the three months and 287 and 264 for the six months ended June 30, 2020 and 2019, respectively.
³	Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes
	postpaid tablets.
⁴	Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number
	of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for
	each month of that period.
⁵	The second quarter and six-month period ended June 30, 2020, exclude 466 (338 phone) and 521 (382 phone), respectively, who we
	have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge.” The second quarter and six-month
	period ended June 30, 2020, postpaid churn includes 21 bps (18 bps phone) and 22 bps (19 bps phone) pressure for these customers.

Service revenue decreased in the second quarter and increased for the first six months of 2020. The second quarter decrease is due to lower roaming revenue from decreased international travel and waived fees, reflecting a full quarter of pandemic-related impacts. Revenues from the first six months were not as affected by the pandemic, with approximately 15 days of impact in the first quarter. Increases in postpaid phone average revenue per subscriber (ARPU) and gains in prepaid subscribers, largely offset by impacts of the pandemic for the first six months.

ARPU

Postpaid ARPU decreased in the second quarter and increased for the first six months. ARPU during 2020 has been pressured by the decline in international roaming revenues and waived fees.

Churn

The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. InPostpaid churn and postpaid phone-only churn were lower in the ~~third~~first six months due to migrations to unlimited plans, continued network improvements and industry-wide store closures from COVID-19, partially offset by higher accrual for subscriber disconnections under the “Keep Americans Connected Pledge.”

Equipment revenue was stable in the second quarter ~~business wireless~~and decreased for the first six months of 2020 driven by lower postpaid ~~churn increased to 1.01%~~smartphone sales reflecting store closures.

Operations and support expenses decreased in ~~2017 from 0.97% in 2016,~~the second quarter and for the first ~~nine months increased to 1.02% in 2017 from 0.97% in 2016.~~

~~Fixed strategic services~~ ~~revenues increased $174, or 6.0%, in the third quarter and $620, or 7.3%, for the first nine~~six months of 2017. Our revenues increased in the third quarter and first nine months of 2017 primarily due to: Ethernet of $77 and $243; Dedicated Internet services of $46 and $150; and VoIP of $41 and $159, respectively.

~~Legacy wired voice and data service~~ revenues decreased $608, or 15.0%, in the third quarter and $2,005, or 15.9%, for the first nine months of 2017. In the third quarter and first nine months of 2017, legacy voice billings decreased $324 and $1,068 and traditional data billings decreased $284 and $937, respectively. These decreases were primarily due to lower demand, as customers continue to shift to our more advanced IP-based offerings or to competitors.

~~Wireless equipment~~ ~~revenues decreased $222, or 11.8%, in the third quarter and $549, or 10.1%, for the first nine months of 2017.~~2020. The decreases were primarily due to ~~decreases~~higher bad debt expense in ~~device upgrades reflecting a change~~2019 resulting from prior-year charges in ~~customer buying habits.~~

~~Operations~~response to credit easing policies, cost initiatives and ~~support~~ ~~expenses decreased $692, or 6.3%, in the third quarter~~asset optimization, and ~~$1,862, or 5.7%, for the first nine months of 2017. Operations~~lower marketing and ~~support expenses consist of~~sales costs, ~~incurred to provide our products and services, including costs of operating and maintaining our networks and personnel costs, such as compensation and benefits.~~

Decreased operations and support expenses in the third quarter and first nine months were primarily due to lower equipment sales and wireless upgrade transactions, which decreased equipment costs by $336 and $732, and efforts to automate and digitize our support activities improved results $146 and $543, respectively. As of September 30, 2017, approximately 45% of our network functions have been moved to software-based systems. Expense reductions also reflect lower administrative costs, contributing to a reduction in expenses of $49 and $213, and fewer traffic compensation and wireless interconnect costs, resulting in declines of $44 and $155, respectively, in access and interconnect costs. Lower selling and wireless commission costs also contributed to decreased expenses for the first nine months.

~~Depreciation~~ expense decreased $214, or 8.4%, in the third quarter and $596, or 7.9%, for the first nine months of 2017. The decreases were primarily due to our fourth-quarter 2016 change in estimated useful lives and salvage value of certain network assets. Also contributing to lower depreciation expenses were network assets becoming fully depreciated, partially offset by ~~ongoing capital spending for network upgrades and expansion.~~higher commission deferral

~~Operating income~~ increased $200, or 4.6%, in the third quarter and $519, or 4.1%, for the first nine months of 2017. Our Business Solutions segment operating income margin in the third quarter increased from 24.2% in 2016 to 26.4% in 2017, and for the first nine months increased from 24.2% in 2016 to 26.1% in 2017. Our Business Solutions EBITDA margin in the third quarter increased from 38.5% in 2016 to 40.0% in 2017, and for the first nine months increased from 38.5% in 2016 to 39.8% in 2017.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Entertainment Group
Segment Results
Third Quarter Nine-Month Period
2017 2016
Percent
Change
2017 2016
Percent
Change

Segment operating revenues
     Video entertainment $ 9,200 $ 9,026 1.9 % $ 27,373 $ 26,893 1.8 %
     High-speed internet 1,916 1,892 1.3 5,784 5,562 4.0
     Legacy voice and data services 949 1,168 (18.8 ) 3,010 3,725 (19.2 )
     Other service and equipment 583 634 (8.0 ) 1,786 1,909 (6.4 )
Total Segment Operating Revenues 12,648 12,720 (0.6 ) 37,953 38,089 (0.4 )

Segment operating expenses
     Operations and support 9,953 9,728 2.3 29,112 28,875 0.8
     Depreciation and amortization 1,379 1,504 (8.3 ) 4,256 4,481 (5.0 )
Total Segment Operating Expenses 11,332 11,232 0.9 33,368 33,356 -
Segment Operating Income 1,316 1,488 (11.6 ) 4,585 4,733 (3.1 )
Equity in Net Income (Loss) of Affiliates (6 ) - - (23 ) 1 -
Segment Contribution $ 1,310 $ 1,488 (12.0 )% $ 4,562 $ 4,734 (3.6 )%

~~The following tables highlight other key measures~~

amortization, including the impacts of ~~performance for~~second-quarter 2020 updates to extend the ~~Entertainment Group segment:~~

September 30, Percent
(in 000s) 2017 2016 Change
Video Connections
   Satellite 20,605 20,777 (0.8 )%
   U-verse 3,691 4,515 (18.3 )
   DIRECTV NOW ¹
787 - -
Total Video Connections 25,083 25,292 (0.8 )

Broadband Connections
   IP 13,367 12,752 4.8
   DSL 964 1,424 (32.3 )
Total Broadband Connections 14,331 14,176 1.1

Retail Consumer Switched Access Lines 4,996 6,155 (18.8 )
U-verse Consumer VoIP Connections 5,337 5,378 (0.8 )
Total Retail Consumer Voice Connections 10,333 11,533 (10.4 )%
¹Consistent with industry practice, DIRECTV NOW includes over-the-top connections that are on a free-trial.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

~~Item 2. Management's Discussion and Analysis~~expected economic life of ~~Financial Condition and Results of Operations - Continued~~

~~Dollars in millions except per share and per subscriber amounts~~

Third Quarter Nine-Month Period
Percent Percent
(in 000s) 2017 2016 Change 2017 2016 Change
Video Net Additions
   Satellite¹
(251 ) 323 - % (407 ) 993 - %
   U-verse¹
(134 ) (326 ) 58.9 (562 ) (1,099 ) 48.9
   DIRECTV NOW²
296 - - 520 - -
Net Video Additions (89 ) (3 ) - (449 ) (106 ) -

Broadband Net Additions
   IP 125 156 (19.9 ) 479 396 21.0
   DSL (96 ) (161 ) 40.4 (327 ) (506 ) 35.4
Net Broadband Additions 29 (5 ) - % 152 (110 ) - %
¹Includes disconnections for customers that migrated to DIRECTV NOW.
²Consistent with industry practice, DIRECTV NOW includes over-the-top connections that are on a free-trial.

~~Operating revenues~~ ~~decreased $72, or 0.6%,~~our Mobility customers.

Depreciation expense increased in the third quarter and $136, or 0.4%, for the first nine months of 2017, largely due to lower revenues from legacy voice and data products, partially offset by growth in revenues from consumer IP broadband services.

As consumers continue to demand more mobile access to video, we provide streaming access to our subscribers, including mobile access for existing satellite and U-verse subscribers. In November 2016, we launched DIRECTV NOW, our newest video streaming option that does not require either satellite or U-verse service (commonly called over-the-top video service).

~~Video entertainment~~ revenues increased $174, or 1.9%, in the third quarter and $480, or 1.8%, for the first nine months of 2017. These increases include a third-quarter 2017 pay-per-view event and reflect a 4.5% and 3.3% increase in average revenue per linear (combined satellite and U-verse) video connection. Advertising revenues also increased $41 and $113, respectively.

Linear video subscriber losses, and associated margin pressure, continued their recent trend, with some of the losses due to the impact from hurricanes as well as tightening of our credit policies. We are also seeing the impact of customers wanting mobile and over-the-top offerings, which is contributing to growth in DIRECTV NOW connections and partially offsetting linear video subscriber losses. DIRECTV NOW connections continue to grow as we add eligible devices and increase content choices. Our strategy to bundle services has positively impacted subscriber trends and churn, with customers who bundle our wireless and video having nearly half the rate of churn as customers with a single service. Customers with linear video but no wireless service through AT&T increased churn during the quarter, partially due to pricing increases associated with annual content cost increases and involuntary churn.

~~High-speed internet~~ revenues increased $24, or 1.3%, in the third quarter and $222, or 4.0%, for the first nine months of 2017, reflecting a 4.8% increase in IP broadband subscribers when compared to the prior year. Average revenue per IP broadband connection (ARPU) decreased 3.7% in the third quarter and 0.8% for the first nine months of 2017. Our bundling strategy is also helping to lower churn for broadband subscribers, with subscribers who bundle broadband with another AT&T service having about 30% lower churn than broadband-only subscribers. To compete more effectively against other broadband providers in the midst of ongoing declines in DSL subscribers, we continued to deploy our all-fiber, high-speed wireline network, which has improved customer retention rates. We also expect our planned 5G national deployment to aid our ability to provide more locations with competitive broadband speeds.

~~Legacy voice and data service~~ revenues decreased $219, or 18.8%, in the third quarter and $715, or 19.2%, for the first nine months of 2017. For the nine months ended September 30, 2017, legacy voice and data services represented approximately 8% of our total Entertainment Group revenue compared to 10% for the September 30, 2016 period, and reflect third quarter and year to date decreases of $148 and $483 in local voice and long-distance, and $70 and $232 in traditional data billings, respectively. The decreases reflect the continued migration of customers to our more advanced IP-based offerings or to

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

~~competitors. At September 30, 2017, approximately 7% of our broadband connections were DSL compared to 10% at September 30, 2016.~~

~~Operations and support~~ expenses increased $225, or 2.3%, in the third quarter and increased $237, or 0.8%, for the first nine months of 2017. Operations and support expenses consist of costs associated with providing video content, and expenses incurred to provide our products and services, which include costs of operating and maintaining our networks, as well as personnel charges for compensation and benefits.

~~Increased operations and support expenses in the third~~second quarter and for the first ~~nine~~six months of ~~2017 were~~2020 primarily due to annual content cost increases, a pay-per-view event, deferred customer fulfillment cost amortization, and video platform development costs. Partially offsetting these increases were the impact of our ongoing focus on cost efficiencies and merger synergies, as well as workforce reductions and lower marketing costs.

~~Depreciation~~ expense decreased $125, or 8.3%, in the third quarter, and $225, or 5.0%, for the first nine months of 2017. The decreases were primarily due to our fourth-quarter 2016 change in estimated useful lives and salvage value of certain assets. Also contributing to lower depreciation expenses were network assets becoming fully depreciated. These decreases were offset by ongoing capital spending for network upgrades and ~~expansion.~~

expansion partially offset by fully depreciated assets.

Operating income ~~decreased $172, or 11.6%,~~ increased in the ~~third~~second quarter ~~and $148, or 3.1%, for the first nine months of 2017. Our Entertainment Group segment operating income margin in third quarter decreased from 11.7% in 2016 to 10.4% in 2017,~~ and for the first nine months decreased from 12.4% in 2016 to 12.1% in 2017. Our Entertainment Group segment EBITDA margin in the third quarter decreased from 23.5% in 2016 to 21.3% in 2017, and for the first nine months decreased from 24.2% in 2016 to 23.3% in 2017.

Consumer Mobility
Segment Results
Third Quarter Nine-Month Period
2017 2016
Percent
Change
2017 2016
Percent
Change

Segment operating revenues
     Service $ 6,507 $ 6,914 (5.9 )% $ 19,644 $ 20,805 (5.6 )%
     Equipment 1,241 1,353 (8.3 ) 3,635 3,976 (8.6 )
Total Segment Operating Revenues 7,748 8,267 (6.3 ) 23,279 24,781 (6.1 )

Segment operating expenses
     Operations and support 4,551 4,751 (4.2 ) 13,599 14,343 (5.2 )
     Depreciation and amortization 877 944 (7.1 ) 2,621 2,798 (6.3 )
Total Segment Operating Expenses 5,428 5,695 (4.7 ) 16,220 17,141 (5.4 )
Segment Operating Income 2,320 2,572 (9.8 ) 7,059 7,640 (7.6 )
Equity in Net Income of Affiliates - - - - - -
Segment Contribution $ 2,320 $ 2,572 (9.8 )% $ 7,059 $ 7,640 (7.6 )%

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

The following tables highlight other key measures of performance for the Consumer Mobility segment:

September 30, Percent
(in 000s) 2017 2016 Change
Consumer Mobility Subscribers
Postpaid 26,003 27,374 (5.0 )%
Prepaid ²
15,136 13,035 16.1
Branded 41,139 40,409 1.8
Reseller 9,800 12,566 (22.0 )
Connected devices ^{1, 2}
489 936 (47.8 )
Total Consumer Mobility Subscribers 51,428 53,911 (4.6 )%
¹ Includes data-centric devices such as session-based tablets, monitoring devices and postpaid automobile systems. Excludes

postpaid tablets. See (2) below.
² Beginning in July 2017, we are reporting prepaid IoT connections, which primarily consist of "connected" cars, as a component of

prepaid subscribers. The prepaid subscriber base at September 30, 2017 now includes approximately 543 subscribers that
were formerly included in connected devices.

Third Quarter Nine-Month Period
Percent Percent
(in 000s) 2017 2016 Change 2017 2016 Change
Consumer Mobility Net Additions ^{1, 4}

Postpaid 102 21 - % 127 89 42.7 %
Prepaid ⁵
324 304 6.6 873 1,169 (25.3 )
Branded Net Additions 426 325 31.1 1,000 1,258 (20.5 )
Reseller (394 ) (316 ) (24.7 ) (1,345 ) (1,140 ) (18.0 )
Connected devices ^{2, 5}
(18 ) 41 - 87 14 -
Consumer Mobility Net Subscriber Additions 14 50 (72.0 )% (258 ) 132 - %

Total Churn ^{1, 3, 4}
2.37 % 2.11 % 26 BP 2.32 % 2.06 % 26 BP
Postpaid Churn ^{1, 3, 4}
1.17 % 1.19 % (2) BP 1.16 % 1.17 % (1) BP
¹ Excludes migrations between AT&T segments and/or subscriber categories and acquisition-related additions during the period.

² Includes data-centric devices such as session-based tablets, monitoring devices and postpaid automobile systems. Excludes

postpaid tablets. See (5) below.
³ Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number

of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for
each month of that period.
⁴ 2017 excludes the impact of the 2G shutdown and a true-up to the reseller subscriber base, which were reflected in beginning of

period subscribers.
⁵ Beginning in July 2017, we are reporting prepaid IoT connections, which primarily consist of "connected" cars, as a component

of prepaid subscribers, resulting in 97 additional prepaid net adds in the quarter. Had we restated our prior periods, prepaid
net adds for the comparable periods would have been 381 in the third quarter of 2016, and 1,060 and 1,324 for the first nine months of ,
2017 and 2016, respectively.

~~Operating Revenues~~ ~~decreased $519, or 6.3%, in the third quarter and $1,502, or 6.1%, for the first nine~~six months of 2017. Decreased revenues reflect declines in postpaid service revenues due to customers migrating to our Business Solutions segment and choosing unlimited plans, partially offset by higher prepaid service revenues.2020. Our business wireless offerings allow for individual subscribers to purchase wireless services through employer-sponsored plans for a reduced price. The migration of these subscribers to the Business Solutions segment negatively impacted our consumer postpaid subscriber total and service revenue growth.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

~~Service~~ revenue decreased $407, or 5.9%, in the third quarter and $1,161, or 5.6%, for the first nine months of 2017. The decreases were largely due to postpaid customers continuing to shift to discounted monthly service charges under our unlimited plans and the migration of subscribers to Business Solutions. Revenues from postpaid customers declined $419, or 8.6%, in the third quarter and $1,422, or 9.5%, for the first nine months of 2017. Without the migration of customers to Business Solutions, postpaid wireless revenues would have decreased approximately 4.6% and 5.2%, respectively. The decreases were partially offset by higher prepaid service revenues of $155, or 10.7%, in the third quarter and $595, or 14.5%, for the first nine months primarily from growth in Cricket and AT&T PREPAID^SM ~~subscribers.~~

~~Equipment~~ revenue decreased $112, or 8.3%, in the third quarter and $341, or 8.6%, for the first nine months of 2017. The decreases in equipment revenues resulted from lower handset sales and upgrades. As previously discussed, equipment revenue is becoming increasingly unpredictable as customers are choosing to upgrade devices less frequently or bring their own.

~~Operations and support~~ expenses decreased $200, or 4.2%, in the third quarter and $744, or 5.2%, for the first nine months of 2017. Operations and support expenses consist of costs incurred to provide our products and services, including costs of operating and maintaining our networks and personnel expenses, such as compensation and benefits.

Decreased operations and support expenses for the third quarter were primarily due to lower volumes of wireless equipment sales and upgrades, which decreased equipment and selling and commission costs, and operational efficiencies. The nine-month period also reflects lower marketing and advertising costs resulting from the timing of scheduled ad campaigns and integrated advertising.

~~Depreciation~~ expense decreased $67, or 7.1%, in the third quarter and $177, or 6.3%, for the first nine months of 2017. The decreases were primarily due to fully depreciated assets, partially offset by ongoing capital spending for network upgrades and expansion.

~~Operating income~~ ~~decreased~~ ~~$252, or 9.8%, in the third quarter and $581, or 7.6%, for the first nine months of 2017. Our Consumer~~ Mobility ~~segment~~ operating income margin in the ~~third~~second quarter ~~decreased~~increased from ~~31.1%~~33.4% in ~~2016~~2019 to ~~29.9%~~33.9% in ~~2017,~~2020, and for the first ~~nine~~six months ~~decreased~~increased from ~~30.8%~~32.0% in ~~2016~~2019 to ~~30.3%~~33.6% in ~~2017.~~2020. Our ~~Consumer~~ Mobility EBITDA margin in the ~~third~~second quarter ~~decreased~~increased from ~~42.5%~~44.9% in ~~2016~~2019 to ~~41.3%~~45.6% in ~~2017,~~2020, and for the first ~~nine months decreased from 42.1% in 2016 to 41.6% in 2017.~~

International
Segment Results
Third Quarter Nine-Month Period
2017 2016
Percent
Change
2017 2016
Percent
Change

Segment operating revenues
     Video entertainment $ 1,363 $ 1,297 5.1 % $ 4,065 $ 3,649 11.4 %
     Wireless service 536 484 10.7 1,546 1,428 8.3
     Wireless equipment 200 98 - 443 297 49.2
Total Segment Operating Revenues 2,099 1,879 11.7 6,054 5,374 12.7

Segment operating expenses
     Operations and support 1,937 1,640 18.1 5,468 4,951 10.4
     Depreciation and amortization 304 293 3.8 905 868 4.3
Total Segment Operating Expenses 2,241 1,933 15.9 6,373 5,819 9.5
Segment Operating Income (Loss) (142 ) (54 ) - (319 ) (445 ) 28.3
Equity in Net Income (Loss)
   of Affiliates
17 1 - 62 24 -
Segment Contribution $ (125 ) $ (53 ) - % $ (257 ) $ (421 ) 39.0 %

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

~~The following tables highlight other key measures of performance for the International segment:~~

September 30, Percent
(in 000s) 2017 2016 Change
Mexican Wireless Subscribers
   Postpaid 5,316 4,733 12.3 %
   Prepaid 8,231 5,665 45.3
Branded 13,547 10,398 30.3
Reseller 232 300 (22.7 )
Total Mexican Wireless Subscribers 13,779 10,698 28.8

Latin America Satellite Subscribers
   PanAmericana 8,201 7,139 14.9
   SKY Brazil ¹
5,289 5,337 (0.9 )
Total Latin America Satellite Subscribers 13,490 12,476 8.1 %
¹Excludes subscribers of our International segment equity investments in SKY Mexico, in which we own a 41.3% stake. SKY Mexico
   had 8.0 million subscribers at June 30, 2017 and 7.9 million subscribers at September 30, 2016.

Third Quarter Nine-Month Period
(in 000s) 2017 2016
Percent
Change
2017 2016
Percent
Change

Mexican Wireless Net Additions
   Postpaid 129 163 (20.9 )% 351 444 (20.9 )%
   Prepaid 585 606 (3.5 ) 1,504 1,670 (9.9 )
Branded Net Additions 714 769 (7.2 ) 1,855 2,114 (12.3 )
Reseller (17 ) (26 ) 34.6 (49 ) (100 ) 51.0
Mexican Wireless
  Net Subscriber Additions
697 743 (6.2 ) 1,806 2,014 (10.3 )

Latin America Satellite Net Additions ¹

   PanAmericana 98 (36 ) - 163 73 -
   SKY Brazil (230 ) (12 ) - (260 ) (107 ) -
Latin America Satellite
Net Subscriber Additions ²
(132 ) (48 ) - % (97 ) (34 ) - %
¹ In 2017, we updated the methodology used to account for prepaid video connections, which were reflected in beginning of period

subscribers.
² Excludes SKY Mexico net subscriber losses of 13 for the six months ended June 30, 2017 and additions of 519 for the six

months of June 30, 2016.

~~Operating Results~~

Our International segment consists of the Latin American operations acquired with DIRECTV as well as our Mexican wireless operations. Video entertainment services are provided to primarily residential customers using satellite technology. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates. Our International segment is subject to foreign currency fluctuations.

~~Operating revenues~~ increased $220, or 11.7%, in the third quarter and $680, or 12.7%, for the first nine months of 2017. The increases include $66 and $416 from video services in Latin America due to price increases driven primarily by macroeconomic conditions with mixed local currencies. Mexico wireless revenues increased $154, or 26.5%, in the third quarter and $264, or 15.3%, for the first nine months of 2017, primarily due to growth in equipment revenues as we have increased our subscriber base, partially offset by competitive pricing for services.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

~~Operations and support~~ expenses increased $297, or 18.1%, in the third quarter and $517, or 10.4%, for the first nine months of 2017. Operations and support expenses consist of costs incurred to provide our products and services, including costs of operating and maintaining our networks and providing video content and personnel expenses, such as compensation and benefits.

The increases in Latin America in the third quarter and for the first nine months were primarily due to higher programming and other operating costs. The nine-month period was partially offset by foreign currency exchange rates and our reassessment of operating tax contingencies in Brazil. The increases in Mexico for the first nine months were primarily driven by higher operational costs, including expenses associated with our network expansion and foreign currency pressures.

~~Depreciation~~ expense increased $11, or 3.8%, in the third quarter and $37, or 4.3%, for the first nine months of 2017. The increases were primarily due to updating the estimated asset lives for video equipment in Latin America and higher capital spending in Mexico.

~~Operating income~~ decreased $88 in the third quarter and increased $126, or 28.3%, for the first nine months of 2017, and were negatively impacted by foreign exchange pressure. Our International segment operating income margin in the third quarter decreased from (2.9)% in 2016 to (6.8)% in 2017, and for the first ninesix months increased from ~~(8.3)%~~43.5% in ~~2016~~2019 to ~~(5.3)%~~45.3% in ~~2017. Our International~~2020. EBITDA ~~margin~~is defined as operating contribution excluding equity in ~~the third quarter decreased from 12.7% in 2016 to 7.7% in 2017,~~net income (loss) of affiliates and ~~for the first nine months increased from 7.9% in 2016 to 9.7% in 2017.~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

~~Supplemental Operating Information~~

As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility). See "Discussion and Reconciliation of Non-GAAP Measure" for a reconciliation of these supplemental measures to the most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles.

AT&T Mobility Results
Third Quarter Nine-Month Period
2017 2016 Percent Change 2017 2016 Percent Change

Operating revenues
   Service $ 14,541 $ 14,964 (2.8 )% $ 43,613 $ 44,673 (2.4 )%
   Equipment 2,895 3,229 (10.3 ) 8,508 9,398 (9.5 )
Total Operating Revenues 17,436 18,193 (4.2 ) 52,121 54,071 (3.6 )

Operating expenses
   Operations and support 10,113 10,697 (5.5 ) 30,308 31,822 (4.8 )
EBITDA 7,323 7,496 (2.3 ) 21,813 22,249 (2.0 )
   Depreciation and amortization 2,010 2,107 (4.6 ) 5,999 6,244 (3.9 )
Total Operating Expenses 12,123 12,804 (5.3 ) 36,307 38,066 (4.6 )
Operating Income $ 5,313 $ 5,389 (1.4 )% $ 15,814 $ 16,005 (1.2 )%

The following tables highlight other key measures of performance for AT&T Mobility:

September 30, Percent
(in 000s) 2017 2016 Change
Wireless Subscribers ¹

Postpaid smartphones 59,277 58,688 1.0 %
Postpaid feature phones and data-centric devices 18,138 18,700 (3.0 )
Postpaid 77,415 77,388 -
Prepaid ³
15,136 13,035 16.1
Branded 92,551 90,423 2.4
Reseller 9,877 12,624 (21.8 )
Connected devices ^{2, 3}
36,398 30,291 20.2
Total Wireless Subscribers 138,826 133,338 4.1

Branded Smartphones 72,242 69,752 3.6
Smartphones under our installment programs at end of period 31,207 29,382 6.2 %
¹ Represents 100% of AT&T Mobility wireless subscribers.

² Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes

postpaid tablets. See (3) below.
³ Beginning in July 2017, we are reporting prepaid IoT connections, which primarily consist of "connected" cars, as a component of

prepaid subscribers. The prepaid subscriber base at September 30, 2017 now includes approximately 543 subscribers
that were formerly included in connected devices.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

Third Quarter Nine-Month Period
Percent Percent
(in 000s) 2017 2016 Change 2017 2016 Change
Wireless Net Additions ^{1, 4}

Postpaid 117 212 (44.8 )% 53 598 (91.1 )%
Prepaid ⁵
324 304 6.6 873 1,169 (25.3 )
Branded Net Additions 441 516 (14.5 ) 926 1,767 (47.6 )
Reseller (392 ) (315 ) (24.4 ) (1,342 ) (1,174 ) (14.3 )
Connected devices ^{2, 5}
2,274 1,331 70.8 7,102 4,081 74.0
Wireless Net Subscriber Additions 2,323 1,532 51.6 6,686 4,674 43.0

Smartphones sold under our installment
programs during period
3,491 4,283 (18.5 )% 10,575 12,378 (14.6 )%

Total Churn^{3, 4}
1.32 % 1.45 % (13) BP 1.35 % 1.41 % (6) BP
Branded Churn^{3, 4}
1.70 % 1.63 % 7 BP 1.66 % 1.57 % 9 BP
Postpaid Churn^{3, 4}
1.07 % 1.05 % 2 BP 1.07 % 1.04 % 3 BP
Postpaid Phone Only Churn^{3, 4}
0.84 % 0.90 % (6) BP 0.84 % 0.90 % (6) BP
¹ Excludes acquisition-related additions during the period.

² Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes

postpaid tablets. See (5) below.
³ Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number

of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period.
⁴ 2017 excludes the impact of the 2G shutdown and a true-up to the reseller subscriber base, which were reflected in beginning of period subscribers.

⁵ Beginning in July 2017, we are reporting prepaid IoT connections, which primarily consist of "connected" cars, as a component

of prepaid subscribers, resulting in 97 additional prepaid net adds in the quarter. Had we restated our prior periods, prepaid
net adds for the comparable periods would have been 381 in the third quarter of 2016, and 1,060 and 1,324 for the first nine months of,
2017 and 2016, respectively.

~~Operating income~~ decreased $76, or 1.4%, in the third quarter and $191, or 1.2%, for the first nine months of 2017. The third-quarter operating income margin of AT&T Mobility increased from 29.6% in 2016 to 30.5% in 2017 and for the first nine months increased from 29.6% in 2016 to 30.3% in 2017. AT&T Mobility's third-quarter EBITDA margin increased from 41.2% in 2016 to 42.0% in 2017 and for the first nine months increased from 41.1% in 2016 to 41.9% in 2017. AT&T Mobility's third-quarter EBITDA service margin increased from 50.1% in 2016 to 50.4% in 2017 and for the first nine months increased from 49.8% in 2016 to 50.0% in 2017 (EBITDA service margin is operating income before depreciation and ~~amortization, divided by total service revenues).~~

amortization.

Subscriber Relationships

As the wireless industry ~~continues to mature,~~has matured, future wireless growth will ~~become increasingly dependent~~depend on our ability to offer innovative services, plans and devices that take advantage of our premier 5G wireless network, which recently went nationwide (in July 2020), and to provide these services in bundled product offerings. Subscribers that purchase two or more services from us have significantly lower churn than subscribers that purchase only one service. To support higher mobile data usage, our priority is to best utilize a wireless network that has sufficient spectrum and capacity to support these innovations on as broad a geographic basis as possible.

To attract and retain subscribers in a ~~maturing~~mature and highly competitive market, we have launched a wide variety of plans, including ~~unlimited, as well as equipment installment programs. Beginning in the first quarter of 2017, we expanded~~ our ~~unlimited wireless data plans to make them available to customers~~FirstNet and prepaid products, and arrangements that ~~do not subscribe to~~bundle our video services.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

~~ARPU~~

Postpaid phone-only ARPU was $58.29 for the third quarter and $58.23 for the first nine months of 2017, compared to $59.64 and $59.66 in 2016. Postpaid phone-only ARPU plus equipment installment billings was $68.95 for the third quarter and $68.94 for the first nine months of 2017, compared to $69.99 and $69.83 in 2016. ARPU has been affected by customers shifting to unlimited plans, which decreases overage revenues; however, customers are adding additional devices helping to offset that decline.

~~Churn~~

The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Total churn was lower for the third quarter and first nine months of 2017. Postpaid churn was higher for the third quarter and first nine months of 2017, driven by higher tablet churn. Postpaid phone-only churn was lower in the third quarter and first nine months of 2017, despite competitive pressure in the industry.

~~Branded Subscribers~~

Branded subscribers increased 1.1% in the third quarter of 2017 when compared to June 30, 2017 and increased 2.4% when compared to September 30, 2016. Both the sequential and year-over-year increases reflect postpaid subscribers remaining essentially flat while prepaid subscribers grew 6.7% and 16.1%, respectively. Beginning in July 2017, we are reporting prepaid IoT connections, which primarily consist of "connected" cars where customers actively subscribe for vehicle connectivity, as a component of prepaid subscribers. The prepaid subscriber base at September 30, 2017 now includes approximately 543,000 subscribers that were formerly included in connected devices.

At September 30, 2017, 92% of our postpaid phone subscriber base used smartphones, compared to 90% at September 30, 2016, with more than 95% of phone sales during both years attributable to smartphones. Virtually all of our postpaid smartphone subscribers are on plans that provide for service on multiple devices at reduced rates, and such subscribers tend to have higher retention and lower churn rates. ~~Device connections on our Mobile Share and~~We offer unlimited ~~wireless~~ data plans ~~now represent 86% of our postpaid customer base, compared~~and such subscribers also tend to ~~83% at September 30, 2016. Such~~have higher retention and lower churn rates. Our offerings are intended to encourage existing subscribers to upgrade their current services and/or add ~~connected~~ devices, attract subscribers from other providers and/or minimize subscriber churn.

~~Our equipment installment purchase programs, including AT&T Next, allow for postpaid subscribers to purchase certain~~

Connected Devices

Connected devices in installments over a period of up to 30 months. Additionally, after a specified period of time, AT&T Next subscribers also have the right to trade in the original device for a new device with a new installment plan and have the remaining unpaid balance satisfied. For installment programs, we recognize equipment revenue at the time of the sale for the amount of the customer receivable, net of the fair value of the trade-in right guarantee and imputed interest. A significant percentage of our customers choosing equipment installment programs pay a lower monthly service charge, which results in lower service revenue recorded for these subscribers. At September 30, 2017, about 53% of the postpaid smartphone base is on an equipment installment program compared to 50% at September 30, 2016. Over 90% of postpaid smartphone gross adds and upgrades for all periods presented were either equipment installment plans or Bring Your Own Device (BYOD). While BYOD customers do not generate equipment revenue or expense, the service revenue helps improve our margins.

~~Connected Devices~~

~~Connected Devices includes~~include data-centric devices such as ~~session-based tablets,~~wholesale automobile systems, monitoring devices, fleet management and ~~primarily wholesale automobile systems. Connected~~ session-based tablets. The number of connected device subscribers increased ~~5.0%~~ in 2020, and during the ~~third quarter when compared to June 30, 2017 and 20.2% when compared to September 30, 2016. During the third~~second quarter and for the first ~~nine~~six months of ~~2017,~~2020, we added approximately ~~1.5~~1.3 million and ~~4.7~~3.6 million wholesale connected cars ~~respectively,~~ through agreements with various carmakers, and experienced strong growth in other ~~IoT connections as well.~~ Internet of Things (IoT) connections. We believe that these connected car agreements give us the opportunity to create future retail relationships with the car owners.

~~OTHER BUSINESS MATTERS~~

~~Time Warner Inc. Acquisition~~ In October 2016, we announced an agreement (Merger Agreement) to acquire Time Warner in a 50% cash and 50% stock transaction for $107.50 per share of Time Warner common stock, or approximately $85,400 at the date of the announcement (Merger). Each share of Time Warner common stock will be exchanged for $53.75 per share in cash and a number of shares of AT&T common stock equal to the exchange ratio. The cash portion of the purchase price will be financed with new debt and cash. The transaction remains subject to review by the U.S. Department of Justice, but is

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Entertainment Group Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues
Video entertainment	$	6,976	$	8,035	(13.2)	%	$	14,371	$	16,109	(10.8)	%
High-speed internet		2,092		2,109	(0.8)			4,201		4,179	0.5
Legacy voice and data services		560		658	(14.9)			1,141		1,341	(14.9)
Other service and equipment		441		566	(22.1)			871		1,067	(18.4)
Total Operating Revenues		10,069		11,368	(11.4)			20,584		22,696	(9.3)

Operating expenses
Operations and support		7,730		8,515	(9.2)			15,621		17,042	(8.3)
Depreciation and amortization		1,309		1,339	(2.2)			2,598		2,662	(2.4)
Total Operating Expenses		9,039		9,854	(8.3)			18,219		19,704	(7.5)
Operating Income		1,030		1,514	(32.0)			2,365		2,992	(21.0)
Equity in Net Income (Loss)
of Affiliates		-		-	-			-		-	-
Operating Contribution	$	1,030	$	1,514	(32.0)	%	$	2,365	$	2,992	(21.0)	%

~~expected to close before year-end 2017. See Note 7 for additional details of the transaction and "Liquidity" for a discussion of our financing arrangements.~~

~~Litigation Challenging DIRECTV's NFL SUNDAY TICKET~~ More than two dozen putative class actions were filed in the U.S. District Courts for the Central District of California and the Southern District of New York against DIRECTV and the National Football League (NFL). These cases were brought by residential and commercial DIRECTV subscribers that have purchased NFL SUNDAY TICKET. The plaintiffs allege that (i) the 32 NFL teams have unlawfully agreed not to compete with each other in the market for nationally televised NFL football games and instead have "pooled" their broadcasts and assigned to the NFL the exclusive right to market them; and (ii) the NFL and DIRECTV have entered into an unlawful exclusive distribution agreement that allows DIRECTV to charge "supra-competitive" prices for the NFL SUNDAY TICKET package. The complaints seek unspecified treble damages and attorneys' fees along with injunctive relief. The first complaint, Abrahamian v. National Football League, Inc., et al., was served in June 2015. In December 2015, the Judicial Panel on Multidistrict Litigation transferred the cases outside the Central District of California to that court for consolidation and management of pre-trial proceedings. In June 2016, the plaintiffs filed a consolidated amended complaint. We vigorously dispute the allegations the complaints have asserted. In August 2016, DIRECTV filed a motion to compel arbitration and the NFL defendants filed a motion to dismiss the complaint. In June 2017, the court granted the NFL defendants' motion to dismiss the complaint without leave to amend, finding that: (1) the plaintiffs did not plead a viable market; (2) the plaintiffs did not plead facts supporting the contention that the exclusive agreement between the NFL and DIRECTV harms competition; (3) the claims failed to overcome the fact that the NFL and its teams must cooperate to sell broadcasts; and (4) the plaintiffs do not have standing to challenge the horizontal agreement among the NFL and the teams. In light of the order granting the motion to dismiss, the court denied DIRECTV's motion to compel arbitration as moot. In July 2017, plaintiffs filed an appeal in the U.S. Court of Appeals for the Ninth Circuit, which is pending.

~~Federal Trade Commission Litigation Involving DIRECTV~~ In March 2015, the Federal Trade Commission (FTC) filed a civil suit in the U.S. District Court for the Northern District of California against DIRECTV seeking injunctive relief and money damages under Section 5 of the Federal Trade Commission Act and Section 4 of the Restore Online Shoppers' Confidence Act. The FTC's allegations concern DIRECTV's advertising, marketing and sale of programming packages. The FTC alleges that DIRECTV did not adequately disclose all relevant terms. We vigorously dispute these allegations. A bench trial began on August 14, 2017, and was suspended on August 25, 2017, after the FTC rested its case, so that the court could consider DIRECTV's motion for judgment. The hearing on the motion occurred on October 25, 2017, and the judge took it under advisement.

~~Unlimited Data Plan Claims~~ In October 2014, the FTC filed a civil suit in the U.S. District Court for the Northern District of California against AT&T Mobility, LLC seeking injunctive relief and unspecified money damages under Section 5 of the Federal Trade Commission Act. The FTC's allegations concern the application of AT&T's Maximum Bit Rate (MBR) program to customers who enrolled in our Unlimited Data Plan from 2007-2010. MBR temporarily reduces in certain instances the download speeds of a small portion of our legacy Unlimited Data Plan customers each month after the customer exceeds a designated amount of data during the customer's billing cycle. MBR is an industry-standard practice that is designed to affect only the most data-intensive applications (such as video streaming). Texts, emails, tweets, social media

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~posts, internet browsing~~

The following tables highlight other key measures of performance for Entertainment Group:

Connections
						June 30,		Percent
(in 000s)						2020	2019	Change
Video Connections
Premium TV¹						17,690	21,581	(18.0)	%
AT&T TV Now						720	1,340	(46.3)
Total Video Connections						18,410	22,921	(19.7)

Total Broadband Connections						13,944	14,420	(3.3)
Fiber Broadband Connections						4,321	3,378	27.9

Retail Consumer Switched Access Lines						3,096	3,630	(14.7)
U-verse Consumer VoIP Connections						3,480	4,211	(17.4)
Total Retail Consumer Voice Connections						6,576	7,841	(16.1)	%
¹	Excludes 157 premium TV and 194 broadband connections who we have agreed not to terminate service under the FCC's "Keep
	Americans Connected Pledge."

Net Additions
		Second Quarter				Six-Month Period
				Percent				Percent
(in 000s)		2020	2019	Change		2020	2019	Change
Video Net Additions
Premium TV¹		(886)	(778)	(13.9)	%	(1,783)	(1,322)	(34.9)	%
AT&T TV Now		(68)	(168)	59.5		(206)	(251)	17.9
Net Video Additions¹		(954)	(946)	(0.8)		(1,989)	(1,573)	(26.4)

Net Broadband Additions¹		(102)	(34)	-		(175)	11	-
Fiber Broadband Net Additions		225	318	(29.2)	%	434	615	(29.4)	%
¹	The second quarter and six-month period ended June 30, 2020, exclude 91 and 157 premium TV and 159 and 194 broadband (48 and 58
	fiber) connections, respectively, who we have agreed not to terminate service under the FCC's "Keep Americans Connected Pledge."

Video entertainment revenues are comprised of subscription and ~~many other applications are typically unaffected. Contrary to~~advertising revenues. Revenues decreased in the ~~FTC's allegations, our MBR program is permitted by our customer contracts, was fully disclosed in advance to our Unlimited Data Plan customers,~~second quarter and ~~was implemented to protect the network~~ for the ~~benefit~~first six months of ~~all customers. In March 2015,~~2020, largely driven by a decline in premium TV and OTT subscribers as we continue to focus on retention of existing subscribers with a particular focus on our ~~motion~~high-value subscribers, and lower subscription-based advertising revenues driven by impacts of the pandemic. Consistent with the rest of the industry, our customers continue to ~~dismiss~~shift from a premium linear service to more economically priced OTT and subscription video on demand services, which has pressured our video revenues.

High-speed internet revenues decreased in the litigation on the grounds that the FTC lacked jurisdiction to file suit was denied. In May 2015, the Court granted our motion to certify its decision for immediate appeal. The United States Court of Appealssecond quarter and increased for the ~~Ninth Circuit subsequently granted our petition to accept~~first six months of 2020. The decrease in the ~~appeal,~~second quarter was driven by a decline in the average subscriber base, partially offset by higher ARPU. The increase for the six months reflects higher ARPU resulting from an increase in high-speed fiber and ~~on August 29, 2016, issued its decision reversing~~pricing.

Legacy voice and data servicerevenues decreased in the ~~district court~~second quarter and ~~finding that~~for the ~~FTC lacked jurisdiction to proceed with~~first six months of 2020, reflecting the ~~action. The FTC asked~~continued decline in the ~~Court~~number of ~~Appeals to reconsider the decision~~ "~~en banc," which the Court agreed to do. The~~ ~~en banc~~ hearing was held on September 19, 2017. We do not expect a decision until early 2018. In addition to the FTC case, several class actions have been filed also challenging our MBR program. We vigorously dispute the allegations the complaints have asserted.customers.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Operations and support expenses decreased in the second quarter and for the first six months of 2020. Contributing to the decreases were lower content and selling costs largely due to fewer subscribers, lower marketing costs and our ongoing focus on cost initiatives. Partially offsetting the decreases were annual content rate increases, higher amortization of fulfillment cost deferrals, including the impact of second-quarter 2020 updates to decrease the estimated economic life for our Entertainment Group customers, and pandemic-related compassion payments.

Depreciation expense decreased in the second quarter and for the first six months of 2020 due to network assets becoming fully depreciated. Partially offsetting the decreases was ongoing capital spending for network upgrades and expansion.

Operating income decreased in the second quarter and for the first six months of 2020. Our Entertainment Group operating income margin in the second quarter decreased from 13.3% in 2019 to 10.2% in 2020, and for the first six months decreased from 13.2% in 2019 to 11.5% in 2020. Our Entertainment Group EBITDA margin in the second quarter decreased from 25.1% in 2019 to 23.2% in 2020, and for the first six months decreased from 24.9% in 2019 to 24.1% in 2020.

Business Wireline Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues
Strategic and managed services	$	3,943	$	3,834	2.8	%	$	7,822	$	7,613	2.7	%
Legacy voice and data services		2,067		2,324	(11.1)			4,196		4,721	(11.1)
Other service and equipment		364		449	(18.9)			688		751	(8.4)
Total Operating Revenues		6,374		6,607	(3.5)			12,706		13,085	(2.9)

Operating expenses
Operations and support		3,779		3,975	(4.9)			7,730		8,007	(3.5)
Depreciation and amortization		1,318		1,242	6.1			2,619		2,464	6.3
Total Operating Expenses		5,097		5,217	(2.3)			10,349		10,471	(1.2)
Operating Income		1,277		1,390	(8.1)			2,357		2,614	(9.8)
Equity in Net Income (Loss)
of Affiliates		-		-	-			-		-	-
Operating Contribution	$	1,277	$	1,390	(8.1)	%	$	2,357	$	2,614	(9.8)	%

Strategic and managed servicesrevenues increased in the second quarter and for the first six months of 2020. Our strategic services are made up of (1) data services, including our VPN, dedicated internet ethernet and broadband, (2) voice service, including VoIP and cloud-based voice solutions, (3) security and cloud solutions, and (4) managed, professional and outsourcing services. Revenue increases were primarily attributable to growth in our security and cloud solutions, dedicated internet and managed services and also includes the impact of higher demand for connectivity due to the pandemic.

Legacy voice and dataservicerevenues decreased in the second quarter and for the first six months of 2020, primarily due to lower demand as customers continue to shift to our more advanced IP-based offerings or our competitors.

Other service and equipmentrevenues decreased in the second quarter and for the first six months of 2020, reflecting prior-year licensing of intellectual property assets. Revenue trends are impacted by the licensing of intellectual property assets, which vary from period-to-period. Other service revenues include project-based revenue, which is nonrecurring in nature, as well as revenues from customer premises equipment.

Operations and support expenses decreased in the second quarter and for the first six months of 2020, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Depreciation expense increased in the second quarter and for the first six months of 2020, primarily due to increases in capital spending for network upgrades and expansion.

Operating income decreased in the second quarter and for the first six months of 2020. Our Business Wireline operating income margin in the second quarter decreased from 21.0% in 2019 to 20.0% in 2020, and for the first six months decreased from 20.0% in 2019 to 18.6% in 2020. Our Business Wireline EBITDA margin in the second quarter increased from 39.8% in 2019 to 40.7% in 2020, and for the first six months increased from 38.8% in 2019 to 39.2% in 2020.

WARNERMEDIA SEGMENT	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Segment Operating Revenues
Turner	$	2,988	$	3,410	(12.4)	%	$	6,150	$	6,853	(10.3)	%
Home Box Office		1,627		1,716	(5.2)			3,124		3,226	(3.2)
Warner Bros.		3,256		3,389	(3.9)			6,496		6,907	(6.0)
Eliminations and other		(1,057)		320	-			(1,108)		654	-
Total Segment Operating Revenues		6,814		8,835	(22.9)			14,662		17,640	(16.9)

Cost of revenues
Turner		965		1,796	(46.3)			2,285		3,476	(34.3)
Home Box Office		1,095		839	30.5			1,911		1,509	26.6
Warner Bros.		2,233		2,492	(10.4)			4,579		4,922	(7.0)
Selling, general and administrative		1,324		1,344	(1.5)			2,788		2,716	2.7
Eliminations and other		(883)		(35)	-			(1,142)		(34)	-
Depreciation and amortization		167		104	60.6			330		260	26.9
Total Operating Expenses		4,901		6,540	(25.1)			10,751		12,849	(16.3)
Operating Income		1,913		2,295	(16.6)			3,911		4,791	(18.4)
Equity in Net Income (Loss) of Affiliates		4		55	(92.7)			19		122	(84.4)
Total Segment Operating Contribution	$	1,917	$	2,350	(18.4)	%	$	3,930	$	4,913	(20.0)	%

Our WarnerMedia segment includes our Turner, Home Box Office (HBO) and Warner Bros. business units. The order of presentation reflects the consistency of revenue streams, rather than overall magnitude as that is subject to timing and frequency of studio releases.

Operating revenues decreased in the second quarter and for the first six months of 2020, primarily due to lower advertising revenues from the postponement or cancellation of televised sporting events at Turner; lower theatrical product revenues, reflecting the pandemic-related closure of movie theaters and postponement of theatrical releases, and unfavorable programming comparisons, including strong carryover revenues in the first quarter of 2019 at Warner Bros.; and lower linear subscription revenue at HBO.

Operating contribution decreased in the second quarter and for the first six months of 2020. The WarnerMedia segment operating income margin in the second quarter increased from 26.0% in 2019 to 28.1% in 2020 and for the first six months decreased from 27.2% in 2019 to 26.7% in 2020.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

WarnerMedia Business Unit Discussion
Turner Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues
Subscription	$	1,804	$	1,943	(7.2)	%	$	3,853	$	3,908	(1.4)	%
Advertising		796		1,266	(37.1)			1,753		2,527	(30.6)
Content and other		388		201	93.0			544		418	30.1
Total Operating Revenues		2,988		3,410	(12.4)			6,150		6,853	(10.3)

Operating expenses
Cost of revenues		965		1,796	(46.3)			2,285		3,476	(34.3)
Selling, general and administrative		382		421	(9.3)			772		877	(12.0)
Depreciation and amortization		69		39	76.9			138		99	39.4
Total Operating Expenses		1,416		2,256	(37.2)			3,195		4,452	(28.2)
Operating Income		1,572		1,154	36.2			2,955		2,401	23.1
Equity in Net Income (Loss) of Affiliates		-		11	-			6		36	(83.3)
Operating Contribution	$	1,572	$	1,165	34.9	%	$	2,961	$	2,437	21.5	%

Operating revenues decreased in the second quarter and for the first six months of 2020, primarily due to decreases in advertising revenue largely resulting from the postponement of the NBA season and the cancellation of the NCAA Division I Men’s Basketball Tournament, in the first quarter of 2020. Subscription revenue declines reflect lower regional sports network revenue and unfavorable exchange rates. These decreases were partially offset by higher content and other revenue, including internal sales to HBO Max, which are eliminated in consolidation within the WarnerMedia segment.

Cost of revenues decreased in the second quarter and for the first six months of 2020, primarily due to lower programming costs, including a decline of approximately $850 in the second quarter and $1,125 for the first six months in sports costs resulting from the postponement of the NBA season, the cancellation of the NCAA tournament and other smaller items.

Selling, general and administrative decreased in the second quarter and for the first six months of 2020, primarily due to lower marketing costs.

Operating income increased in the second quarter and for the first six months of 2020. Our Turner operating income margin in the second quarter increased from 33.8% in 2019 to 52.6% in 2020, and for the first six months increased from 35.0% in 2019 to 48.0% in 2020.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Home Box Office Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues
Subscription	$	1,441	$	1,516	(4.9)	%	$	2,779	$	2,850	(2.5)	%
Content and other		186		200	(7.0)			345		376	(8.2)
Total Operating Revenues		1,627		1,716	(5.2)			3,124		3,226	(3.2)

Operating expenses
Cost of revenues		1,095		839	30.5			1,911		1,509	26.6
Selling, general and administrative		394		292	34.9			631		543	16.2
Depreciation and amortization		25		12	-			46		34	35.3
Total Operating Expenses		1,514		1,143	32.5			2,588		2,086	24.1
Operating Income		113		573	(80.3)			536		1,140	(53.0)
Equity in Net Income (Loss) of Affiliates		(5)		15	-			15		30	(50.0)
Operating Contribution	$	108	$	588	(81.6)	%	$	551	$	1,170	(52.9)	%

Operating revenues decreased in the second quarter and for the first six months of 2020, primarily due to decreases in subscription revenue resulting from domestic linear subscriber decline, including Cinemax depackaging, partially offset by growth in digital and international, including HBO Latin America Group, following our May 2020 acquisition of the remaining interest in this entity. At June 30, 2020, we had 36.3 million U.S. subscribers from HBO Max and HBO, up from 34.6 million at December 31, 2019.

Cost of revenues increased in the second quarter and for the first six months of 2020, primarily due to higher programming costs and expenses related to HBO Max.

Selling, general and administrative increased in the second quarter and for the first six months of 2020, primarily due to higher marketing costs associated with HBO Max.

Operating income decreased in the second quarter and for the first six months of 2020. Our HBO operating income margin in the second quarter decreased from 33.4% in 2019 to 6.9% in 2020, and for the first six months decreased from 35.3% in 2019 to 17.2% in 2020.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Warner Bros. Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues
Theatrical product	$	1,029	$	1,527	(32.6)	%	$	2,135	$	3,033	(29.6)	%
Television product		1,876		1,310	43.2			3,645		2,923	24.7
Games and other		351		552	(36.4)			716		951	(24.7)
Total Operating Revenues		3,256		3,389	(3.9)			6,496		6,907	(6.0)

Operating expenses
Cost of revenues		2,233		2,492	(10.4)			4,579		4,922	(7.0)
Selling, general and administrative		350		426	(17.8)			954		915	4.3
Depreciation and amortization		40		31	29.0			81		83	(2.4)
Total Operating Expenses		2,623		2,949	(11.1)			5,614		5,920	(5.2)
Operating Income		633		440	43.9			882		987	(10.6)
Equity in Net Income (Loss) of Affiliates		(19)		-	-			(27)		6	-
Operating Contribution	$	614	$	440	39.5	%	$	855	$	993	(13.9)	%

Operating revenues decreased in the second quarter and for the first six months of 2020, primarily due to lower theatrical product resulting from the absence of theatrical releases in the second quarter of 2020 and, for the six months, unfavorable comparisons to the prior year, which included, in 2019, carryover revenues from the theatrical release of Aquaman. Games and other revenue declines were primarily due to unfavorable games comparison to the prior year, which included the release of Mortal Kombat 11, and other revenue decreased due to reduced studio operations. Partially offsetting these decreases were higher television product revenues, driven by licensing, including internal sales to HBO Max, partially offset by lower initial telecast revenues resulting from pandemic-related television production delays.

Cost of revenues decreased in the second quarter and for the first six months of 2020, primarily due to lower marketing of theatrical product, partially offset by incremental costs incurred due to the production hiatus.

Selling, general and administrative decreased in the second quarter and increased for the first six months of 2020. The decrease in the quarter was primarily due to lower distribution fees and favorable collection experience that allowed us to reduce our first quarter bad debt estimates for COVID-19. The increase for the six months primarily resulted from higher first-quarter pandemic-relatedbad debt expense and other charges.

Operating income increased in the second quarter and decreased for the first six months of 2020. Our Warner Bros. operating income margin in the second quarter increased from 13.0% in 2019 to 19.4% in 2020, and for the first six months decreased from 14.3% in 2019 to 13.6% in 2020.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

LATIN AMERICA SEGMENT	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Segment Operating Revenues
Vrio	$	752	$	1,032	(27.1)	%	$	1,639	$	2,099	(21.9)	%
Mexico		480		725	(33.8)			1,183		1,376	(14.0)
Total Segment Operating Revenues		1,232		1,757	(29.9)			2,822		3,475	(18.8)

Segment Operating Contribution
Vrio		(28)		(2)	-			(67)		30	-
Mexico		(173)		(207)	16.4			(318)		(412)	22.8
Total Segment Operating Contribution	$	(201)	$	(209)	3.8	%	$	(385)	$	(382)	(0.8)	%

Operating Results

Our Latin America operations conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates, subjecting results to foreign currency fluctuations. In May 2020, we found it necessary to close our DIRECTV operations in Venezuela dueto political instability in the country and to comply with sanctions of the U.S. government.

Operating revenues decreased in the second quarter and for the first six months of 2020 primarily driven by foreign exchange pressures and the impact of COVID-19.

Operating contribution increased in the second quarter and decreased for the first six months of 2020, reflecting foreign exchange pressures and the impact of COVID-19. Our Latin America segment operating income margin in the second quarter decreased from (12.6)% in 2019 to (17.0)% in 2020, and for the first six months decreased from (11.3)% in 2019 to (14.1)% in 2020.

Latin America Business Unit Discussion
Vrio Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating revenues	$	752	$	1,032	(27.1)	%	$	1,639	$	2,099	(21.9)	%

Operating expenses
Operations and support		661		881	(25.0)			1,444		1,747	(17.3)
Depreciation and amortization		127		165	(23.0)			274		334	(18.0)
Total Operating Expenses		788		1,046	(24.7)			1,718		2,081	(17.4)
Operating Income		(36)		(14)	-			(79)		18	-
Equity in Net Income (Loss)
of Affiliates		8		12	(33.3)			12		12	-
Operating Contribution	$	(28)	$	(2)	-	%	$	(67)	$	30	-	%

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

The following tables highlight other key measures of performance for Vrio:

						June 30,		Percent
(in 000s)						2020	2019	Change
Vrio Video Subscribers						10,664	13,473	(20.8)	%


		Second Quarter				Six -Month Period
				Percent				Percent
(in 000s)		2020	2019	Change		2020	2019	Change
Vrio Video Net Additions¹		(312)	(111)	-	%	(426)	(143)	-	%
¹	The second-quarter and six-month period ended June 30, 2020, exclude the impact of 2.2 million subscriber disconnections resulting
	from the closure of our DIRECTV operations in Venezuela.

Operating revenues decreased in the second quarter and for the first six months of 2020, primarily driven by foreign exchange and COVID-19 pressures.

Operations and support expenses decreased in the second quarter and for the first six months of 2020, primarily driven by foreign exchange and COVID-19 pressures. Approximately 21% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation expense decreased in the second quarter and for the first six months of 2020, primarily due to changes in foreign exchange rates.

Operating income decreased in the second quarter and for the first six months of 2020. Our Vrio operating income margin in the second quarter decreased from (1.4)% in 2019 to (4.8)% in 2020, and for the first six months decreased from 0.9% in 2019 to (4.8)% in 2020. Our Vrio EBITDA margin in the second quarter decreased from 14.6% in 2019 to 12.1% in 2020, and for the first six months decreased from 16.8% in 2019 to 11.9% in 2020.

Mexico Results
	Second Quarter						Six-Month Period
	2020		2019		Percent Change		2020		2019		Percent Change
Operating revenues
Service	$	345	$	479	(28.0)	%	$	812	$	921	(11.8)	%
Equipment		135		246	(45.1)			371		455	(18.5)
Total Operating Revenues		480		725	(33.8)			1,183		1,376	(14.0)

Operating expenses
Operations and support		538		813	(33.8)			1,252		1,538	(18.6)
Depreciation and amortization		115		119	(3.4)			249		250	(0.4)
Total Operating Expenses		653		932	(29.9)			1,501		1,788	(16.1)
Operating Income (Loss)		(173)		(207)	16.4			(318)		(412)	22.8
Equity in Net Income (Loss)
of Affiliates		-		-	-			-		-	-
Operating Contribution	$	(173)	$	(207)	16.4	%	$	(318)	$	(412)	22.8	%

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

The following tables highlight other key measures of performance for Mexico:

							June 30,		Percent
(in 000s)							2020	2019	Change
Mexico Wireless Subscribers
Postpaid							4,771	5,489	(13.1)	%
Prepaid							12,777	12,180	4.9
Reseller							425	352	20.7
Total Mexico Wireless Subscribers							17,973	18,021	(0.3)	%

		Second Quarter					Six-Month Period
					Percent				Percent
(in 000s)			2020	2019	Change		2020	2019	Change
Mexico Wireless Net Additions¹
Postpaid			(191)	(153)	(24.8)	%	(332)	(222)	(49.5)	%
Prepaid			(915)	401	-		(807)	515	-
Reseller			21	51	(58.8)		53	99	(46.5)
Mexico Wireless Net Additions			(1,085)	299	-	%	(1,086)	392	-	%
¹	The second-quarter and six-month period ended June 30, 2020, exclude the impact of 101 subscriber disconnections resulting from
	conforming our policy on reporting of fixed wireless resellers.

Service revenues decreased in the second quarter and for the first six months of 2020, primarily due to foreign exchange pressures, as well as lower volumes and store traffic related to COVID-19.

Equipment revenues decreased in the second quarter and for the first six months of 2020, primarily due to lower equipment sales volumes related to COVID-19 and foreign exchange rates.

Operations and support expenses decreased in the second quarter and for the first six months of 2020, primarily due to changes in foreign exchange rates and lower equipment sales. Approximately 8% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortization expense decreased in the second quarter and for the first six months of 2020, primarily due to foreign exchange pressures.

Operating income increased in the second quarter and first six months of 2020. Our Mexico operating income margin in the second quarter decreased from (28.6)% in 2019 to (36.0)% in 2020, and for the first six months increased from (29.9)% in 2019 to (26.9)% in 2020. Our Mexico EBITDA margin in the second quarter was stable at (12.1)% in 2019 and 2020, and for the first six months increased from (11.8)% in 2019 to (5.8)% in 2020.

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

SUPPLEMENTAL TOTAL ADVERTISING REVENUE INFORMATION

As a supplemental presentation, we are providing a view of total advertising revenues generated by AT&T. See revenue categories tables in Note 5 for a reconciliation.

Total Advertising Revenues
	Second Quarter						Six-Month Period
					Percent						Percent
	2020		2019		Change		2020		2019		Change
Operating Revenues
Turner	$	796	$	1,266	(37.1)	%	$	1,753	$	2,527	(30.6)	%
Entertainment Group		294		399	(26.3)			707		749	(5.6)
Xandr		362		485	(25.4)			851		911	(6.6)
Other		75		90	(16.7)			173		175	(1.1)
Eliminations		(294)		(399)	26.3			(707)		(749)	5.6
Total Advertising Revenues	$	1,233	$	1,841	(33.0)	%	$	2,777	$	3,613	(23.1)	%

SUPPLEMENTAL COMMUNICATIONS OPERATING INFORMATION

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 wireline 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. Results have been recast to conform to the current period's classification of consumer and business wireless subscribers. See “Discussion and Reconciliation of Non-GAAP Measure” for a reconciliation of these supplemental measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Business Solutions Results
	Second Quarter						Six-Month Period
	2020		2019		Percent Change		2020		2019		Percent Change
	2020		2019		Percent Change		2020		2019		Percent Change
Operating revenues
Wireless service	$	1,884	$	1,881	0.2	%	$	3,833	$	3,658	4.8	%
Strategic and managed services		3,943		3,834	2.8			7,822		7,613	2.7
Legacy voice and data services		2,067		2,324	(11.1)			4,196		4,721	(11.1)
Other service and equipment		364		449	(18.9)			688		751	(8.4)
Wireless equipment		585		617	(5.2)			1,295		1,207	7.3
Total Operating Revenues		8,843		9,105	(2.9)			17,834		17,950	(0.6)

Operating expenses
Operations and support		5,424		5,512	(1.6)			11,134		11,126	0.1
Depreciation and amortization		1,637		1,545	6.0			3,262		3,070	6.3
Total Operating Expenses		7,061		7,057	0.1			14,396		14,196	1.4
Operating Income		1,782		2,048	(13.0)			3,438		3,754	(8.4)
Equity in Net Income (Loss)
of Affiliates		-		-	-			-		-	-
Operating Contribution	$	1,782	$	2,048	(13.0)	%	$	3,438	$	3,754	(8.4)	%

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

OTHER BUSINESS MATTERS

Spectrum Auction In March 2020, we were the winning bidder of high-frequency 37/39 GHz licenses in FCC Auction 103 covering an average of 786 MHz nationwide for approximately $2,400. Prior to the auction, we exchanged the 39 GHz licenses with a book value of approximately $300 that were previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids and recorded a $900 gain in the first quarter of 2020. These vouchers yielded a value of approximately $1,200 which was applied toward our $2,400 gross bids. We made our final payment of approximately $950 for the Auction 103 payment in April 2020. The FCC granted the licenses in June 2020.

Labor Contracts As of ~~September~~June 30, ~~2017,~~2020, we employed approximately ~~257,000~~243,000 persons. Approximately ~~46%~~40% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the collective bargaining agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached.

A ~~summary of labor~~ contract ~~negotiations,~~covering approximately 7,000 Mobility employees expired in February 2020. In March 2020, a new 4-year contract was ratified by employees and will expire in February 2024.

A contract covering approximately 13,000 wireline employees in our West region ~~or employee group,~~expired in April 2020. In March 2020, a tentative agreement was reached on a new 4-year contract. The tentative agreement is ~~as follows:~~subject to ratification by employees.

A contract covering approximately 14,000 employees in the Southwest region scheduled to expire in April 2021 was extended 4 years and will now expire in April 2025.

Approximately 20,000 mobility employees across the country are covered by a contract that expired in early 2017. We continue to negotiate with labor representatives. On October 30, 2017, we presented a contract that provides for, among other things, compounded annual wage increases totaling nearly 10% over the term of the contract and continued health care coverage. The contract is subject to acceptance and ratification.

·	Approximately 15,000 traditional wireline employees in our West region are covered by a contract that expired in April 2016. In August, these employees, along with 2,300 legacy DIRECTV non-management employees, ratified a new four-year contract that will expire in April 2020.

COMPETITIVE AND REGULATORY ENVIRONMENT

Overview AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided.

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. ~~Since~~Nonetheless, over the ~~Telecom Act was passed,~~ensuing two decades, the ~~Federal Communications Commission (FCC)~~FCC and some state regulatory commissions have maintained or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. ~~However, based on their public statements and written opinions, we expect the new leadership at~~More recently, the FCC ~~to chart~~has pursued a more ~~predictable~~deregulatory agenda, eliminating a variety of antiquated and ~~balanced regulatory course that will encourage long-term investment~~unnecessary regulations and ~~benefit consumers.~~streamlining its processes in a number of areas. In addition, we are pursuing, at both the state and federal levels, additional legislative and regulatory measures to reduce regulatory burdens that are no longer appropriate in a competitive telecommunications market and that inhibit our ability to compete more effectively and offer services wanted and needed by our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not further extended to broadband or wireless services, which are subject to vigorous competition.

~~On April 20, 2017,~~

Communications Segment

Internet The FCC currently classifies fixed and mobile consumer broadband services as information services, subject to light-touch regulation. The D.C. Circuit upheld the FCC’s current classification, although it remanded three discrete issues to the FCC for further consideration. No party sought Supreme Court review of the D.C. Circuit’s decision, so that decision is final, although the FCC’s consideration of the three issues remains pending.

Some states have adopted ~~an order~~legislation or issued executive orders that ~~maintains light touch pricing regulation of packet-based services, extends~~would reimpose net neutrality rules repealed by the FCC. Suits have been filed concerning such light touch pricing regulation to high-speed TDM transport services and to most of our TDM channel termination services, based on a competitive market test for such services. For those services that do not qualify for light touch regulation, the order allows companies to offer volume and term discounts, as well as contract tariffs. Several parties appealed the FCC's decision. These appeals were consolidatedlaws in ~~the U.S. Court of Appeals for the Eighth Circuit, where they remain pending.~~

two states. In October 2016, ~~a sharply divided~~the FCC adopted new rules governing the use of customer information by providers of broadband internet access service. Those rules were more restrictive in certain respects than those governing other participants in the internet economy, including so-called ~~"edge"~~“edge” providers such as Google and

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Facebook. OnIn April 3, 2017, the President signed a resolution passed by Congress repealing the new rules under the Congressional Review ~~Act, which prohibits the issuance~~Act.

Privacy-related legislation has been considered or adopted in a number of ~~a new rule that is substantially the same as a rule repealed under its provisions, or the reissuance~~states. Legislative and regulatory action and ballot initiatives could result in increased costs of ~~the repealed rule, unless the new or reissued rule is specifically authorized by a subsequent act of Congress. In June 2017, the FCC released an order clarifying that providers of~~compliance, claims against broadband internet access service ~~continue~~providers and others, and increased uncertainty in the value and availability of data. Effective as of January 1, 2020, a California state law gives consumers the right to ~~be subject~~know what personal information is being collected about them, and whether and to ~~privacy requirements under section 222~~whom it is sold or disclosed, and to access and request deletion of ~~The Communications Act of 1934 (Communications Act), but not~~this information. Subject to certain exceptions, it also gives California consumers the ~~more restrictive rules that were adopted in October 2016.~~

~~In February 2015, the FCC released an order classifying both fixed and mobile consumer broadband internet access services as telecommunications services, subject~~right to ~~Title II~~opt out of the ~~Communications Act. The FCC's decision significantly expanded its authority to regulate the provision~~sale of ~~fixed and mobile broadband internet access services. AT&T and other providers of~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

broadband internet access services challenged the FCC's decision before the U.S. Court of Appeals for the D.C. Circuit. In June 2016, a panel of the Court of Appeals upheld the FCC's classification of broadband internet access and the attendant rules by a 2-1 vote. On May 1, 2017, the Court of Appeals denied requests for rehearing filed by AT&T and several other parties. In May 2017, the FCC initiated a proceeding to reverse its 2015 decision to classify broadband internet access services as telecommunications services. AT&T fully supports an open internet and believes that Congress should pass bipartisan legislation that codifies core principles of net neutrality while maintaining a stable regulatory environment conducive to investment, future innovation and economic growth. On September 28, 2017, AT&T and other parties filed with the United States Supreme Court petitions for certiorari to review the Court of Appeals decision.

We provide satellite video service through our subsidiary DIRECTV, whose satellites are licensed by the FCC. The Communications Act of 1934 and other related acts give the FCC broad authority to regulate the U.S. operations of DIRECTV. In addition, states representing a majority of our local service access lines have adopted legislation that enables us to provide IP-based service through a single statewide or state-approved franchise (as opposed to the need to acquire hundreds or even thousands of municipal-approved franchises) to offer a competitive video product. We also are supporting efforts to update and improve regulatory treatment for our services. Regulatory reform and passage of legislation is uncertain and depends on many factors.

~~We provide wireless services in robustly competitive markets, but are subject to substantial governmental regulation.~~ personal information.

Wireless communications providers must obtain licenses from the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the FCC rules and policies governing the use of the spectrum. While wireless communications providers' prices and offerings are generally not subject to state or local regulation, states sometimes attempt to regulate or legislate various aspects of wireless services, such as in the areas of consumer protection and the deployment of cell sites and equipment. The ~~anticipated~~ industry-wide deployment of 5G technology, which is needed to satisfy extensive demand for video and internet access, will involve significant deployment of ~~"small cell"~~“small cell” equipment and therefore increase the need for ~~a quick~~local permitting ~~process.~~

~~The FCC has recognized~~processes that allow for the ~~explosive growth~~placement of ~~bandwidth-intensive wireless data~~small cell equipment on reasonable timelines and terms. Federal regulations also can delay and impede the deployment of infrastructure used to provide telecommunications and broadband services, requires the U.S. government to make more spectrum available. The FCC finished its most recent auction in April 2017 of certain spectrum that is currently used by broadcast television licensees (the "600 MHz Auction").

including small cell equipment. In ~~May 2014,~~March, August and September 2018, the FCC ~~issued an~~adopted orders to streamline federal and local wireless infrastructure review processes in order ~~revising its policies governing~~to facilitate deployment of next-generation wireless facilities. Specifically, the FCC’s March 2018 Order streamlined historical, tribal, and environmental review requirements for wireless infrastructure, including by excluding most small cell facilities from such review. The Order was appealed and in August 2019, the D.C. Circuit Court of Appeals vacated the FCC’s finding that most small cell facilities are excluded from review, but otherwise upheld the FCC’s Order. The FCC’s August and September 2018 Orders simplified the regulations for attaching telecommunications equipment to utility poles and clarified when local government right-of-way access and use restrictions can be preempted because they unlawfully prohibit the provision of telecommunications services. Those orders were appealed to the 9th Circuit Court of Appeals, where they remain pending. In addition to the FCC’s actions, to date, 28 states and Puerto Rico have adopted legislation to facilitate small cell deployment.

In December 2018, we introduced the nation’s first commercial mobile ~~spectrum holdings. The FCC rejected~~5G service. In July 2020, we announced nationwide 5G coverage. We anticipate the ~~imposition~~introduction of caps on the amount of spectrum any carrier could acquire, retaining its case-by-case review policy. Moreover, it increased the amount of spectrum that could be acquired before exceeding an aggregation "screen" that would automatically trigger closer scrutiny of5G handsets and devices will contribute to a proposed transaction. On the other hand, it indicated that it will separately consider an acquisition of "low band" spectrum that exceeds one-third of the available low band spectrum as presumptively harmful to competition. The spectrum screen (including the low band screen) recently increased by 23 MHz. On balance, the order and the spectrum screen should allow AT&T to obtain additional spectrum to meet our customers' needs.renewed interest in equipment upgrades.

As the wireless industry continues to mature, future wireless growth will become increasingly dependent on our ability to offer innovative video and data services and a wireless network that has sufficient spectrum and capacity to support these innovations. We continue to invest significant capital in expanding our network capacity, as well as to secure and utilize spectrum that meets our long-term needs. To that end, we have:

·	~~Submitted winning bids for 251 Advanced Wireless Services (AWS) spectrum licenses for a near-nationwide contiguous block of high-quality spectrum in the AWS-3 Auction.~~

·	~~Redeployed spectrum previously used for basic 2G services to support more advanced mobile internet services on our 3G and 4G networks.~~

·	~~Secured the FirstNet contract, which provides us with access to a nationwide low band 20 MHz of spectrum, assuming all states opt-in.~~

Invested in 5G and millimeter-wave technologies with our in-process acquisition of Fiber-Tower Corporation, which holds significant amounts of spectrum in the millimeter wave bands (28 GHz and 39 GHz) that the FCC recently reallocated for mobile broadband services. These bands will help to accelerate our entry into 5G services.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

~~Tax Reform~~ On November 2, 2017, the Tax Cuts and Jobs Act was introduced in the U.S. House of Representatives. If enacted, we expect it would stimulate investment, job creation and economic growth which would result in a positive impact on demand for our services. As written, we anticipate the legislation will have a positive impact on our consolidated operations and cash flows.

LIQUIDITY AND CAPITAL RESOURCES

~~In anticipation of the Time Warner transaction, we~~

We had ~~$48,499~~$16,941 in ~~cash~~“Cash and cash ~~equivalents~~equivalents” available at ~~September~~June 30, ~~2017. Cash~~2020. “Cash and cash ~~equivalents~~equivalents” included cash of ~~$3,707~~$3,781 and money market funds and other cash equivalents of ~~$44,792.~~$13,160. Approximately ~~$888~~$2,529 of our ~~cash~~“Cash and cash ~~equivalents resided~~equivalents” were held by our foreign entities in ~~foreign jurisdictions~~accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation.

The Company's liquidity and capital resources were ~~primarily in foreign currencies; these funds are primarily used~~not materially impacted by COVID-19 and related economic conditions during the first six months of 2020. We will continue to ~~meet working~~monitor impacts on the COVID-19 pandemic on our liquidity and capital ~~requirements of foreign operations.~~

resources.

“Cash and cash ~~equivalents~~equivalents” increased ~~$42,711~~$4,811 since December 31, ~~2016.~~2019. In the first ~~nine~~six months of ~~2017,~~2020, cash inflows were primarily provided by the ~~issuance of long-term debt, and~~ cash receipts from operations, including cash from our sale and transfer of ~~certain wireless equipment installment~~our receivables to third ~~parties. We also received a~~ ~~$1,438~~ ~~deposit refund from~~parties, and the ~~FCC.~~issuances of commercial paper, long-term debt and cumulative preferred stock. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, spectrum acquisitions, debt repayments, funding capital expenditures ~~debt repayments,~~and vendor financing payments, collateral posted to banks and other participants in derivative arrangements, share repurchase and dividends to ~~stockholders, and the acquisition of wireless spectrum and other operations. We discuss many of these factors in detail below.~~

stockholders.

Cash Provided by or Used in Operating Activities

During the first ~~nine~~six months of ~~2017,~~2020, cash provided by operating activities was ~~$29,274,~~$20,925, compared to ~~$29,202~~ $25,336for the first ~~nine~~six months of ~~2016. Higher~~2019. Lower operating cash flows in ~~2017~~2020 were primarily ~~due~~driven by lower incremental receivable securitization (see Note 9).

We actively manage the timing of our supplier payments for non-capital items to ~~higher receipts~~optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost. In addition, for payments to a key supplier, we have arrangements that allow us to extend payment terms up to 90 days at an additional cost to us (referred to as supplier financing). The net impact of supplier financing on cash from ~~our sale of AT&T Next receivables and~~operating activities was to decrease working capital ~~improvements.~~

$1,452 and $496 for the six months ended June 30, 2020 and 2019, respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities

For the first ~~nine~~six months of ~~2017,~~2020, cash used in investing activities totaled ~~$15,266~~$10,278, and consisted primarily of ~~$15,756~~$9,432 (including interest during construction) for capital expenditures, ~~excluding~~final payment of approximately $950 for wireless spectrum licenses won in Auction 103, and $141 for acquiring the remaining interest ~~during construction.~~

~~Investing activities also include a refund~~in HBO LAG.

For capital improvements, we have negotiated favorable vendor payment terms of 120 days or more (referred to as vendor financing) with some of our vendors, which are excluded from capital expenditures and reported as financing activities. For the ~~FCC~~first six months of 2020, vendor financing payments were $1,354, compared to $1,836 for the first six months of 2019. Capital expenditures in the ~~amount~~first six months of ~~$1,438 in April 2017, resulting from~~2020 were $9,432, and when including $1,354 cash paid for vendor financing and excluding $79 of FirstNet reimbursements, gross capital investment was $10,865 ($1,728 lower than the ~~conclusion of the FCC's 600 MHz Auction. We submitted winning bids to purchase spectrum licenses in 18 markets for which we paid $910.~~

prior-year comparable period).

The vast majority of our capital expenditures are spent on our networks, ~~our video services~~including product development and related support systems. ~~Capital expenditures, excluding interest during construction, increased $473~~During the first six months, we placed $1,681 of equipment in service under vendor financing arrangements (compared to $1,265 in the ~~first nine months. The increase was primarily due to our continued fiber buildout~~prior-year comparable period) and ~~timing~~approximately $640 of build schedules in 2017 compared with 2016. Additionally, in connection with capital improvements, we negotiate favorable payment terms (referred to as vendor financing). For the first nine months of 2017, vendor financingassets related to ~~capital investments was $897. We do not report capital expenditures at~~ the ~~segment level.~~

~~We continue~~FirstNet build (compared to ~~expect our 2017 capital expenditures to be~~$600 in the ~~$22,000 range, and we expect our capital expenditures to be in the 15% range of service revenues or lower for each of the years 2017 through 2019.~~prior-year comparable period). The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements. ~~Our capital spending takes into account existing tax law and does not reflect anticipated tax reform. We continue to focus on ensuring DIRECTV merger commitments are met.~~

Cash Provided by or Used in Financing Activities

For the first ~~nine~~six months of ~~2017,~~2020, cash ~~provided by~~used in financing activities totaled ~~$28,703~~$5,911 and ~~included net proceeds~~was comprised of ~~$46,761 primarily from the following long-term~~ debt ~~issuances:~~issuances and repayments, issuances of preferred stock, share repurchase, payments of dividends and required collateral deposits.

·	~~February issuance of $1,250 of 3.200% global notes due 2022.~~

·	~~February issuance of $750 of 3.800% global notes due 2024.~~

·	~~February issuance of $2,000 of 4.250% global notes due 2027.~~

·	~~February issuance of $3,000 of 5.250% global notes due 2037.~~

·	~~February issuance of $2,000 of 5.450% global notes due 2047.~~

·	~~February issuance of $1,000 of 5.700% global notes due 2057.~~

·	~~March issuance of $1,430 of 5.500% global notes due 2047.~~

·	~~March issuance of $800 floating rate global notes due 2020. The floating rate for the notes is based upon the three-month London Interbank Offered Rate (LIBOR), reset quarterly, plus 65 basis points.~~

·	March draw of $300 on a private financing agreement with Banco Nacional de Mexico, S.A. due March 2019. The agreement contains terms similar to that provided under our syndicated credit arrangements; the interest rate is a market rate.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

·	~~May issuance of $1,500 floating rate global notes due 2021. The floating rate for the notes is based upon the three-month LIBOR, reset quarterly, plus 95 basis points.~~

·	~~May issuance of CAD$600 of 2.850% global notes due 2024 and CAD$750 of 4.850% global notes due 2047 (together, equivalent to $994, when issued).~~

·	~~June issuance of £1,000 of 3.550% global notes due 2037, subject to mandatory redemption (equivalent to $1,282 when issued).~~

June issuance of €750 of 1.050% global notes due 2023, €1,750 of 1.800% global notes due 2026, €1,500 of 2.350% global notes due 2029, €1,750 of 3.150% global notes due 2036 and €1,250 of floating rate global notes due 2023. All except the 2036 global notes are subject to mandatory redemption (together, equivalent to $7,883, when issued).

~~August issuance of $750 of floating rate notes due 2023,~~ $1,750 of 2.85% global notes due 2023, $3,000 of 3.40% global notes due 2024, $5,000 of 3.90% global notes due 2027, $4,500 of 4.90% global notes due 2037, $5,000 of 5.15% global notes due 2050 and $2,500 of 5.30% global notes due 2058. All are subject to mandatory redemption.

~~For notes subject to mandatory redemption ($29,801)~~

During the first six months of 2020, debt issuances included proceeds of $8,440 in short-term borrowings and $21,060 of net proceeds from long-term debt. Borrowing activity consisted of approximately $2,940 in commercial paper draws and the following issuances:

Issued and redeemed in 2020:

March draw of $750 on a private financing agreement (repaid in the second quarter).

April draw of $5,500 on a term loan credit agreement with certain commercial banks and Bank of America, N.A., ~~if we do not consummate~~as lead agent (repaid in the ~~Time Warner acquisition pursuant to the merger agreement, on or prior to April 22, 2018, or, if prior to such date, the merger agreement is terminated, then~~second quarter).

Issued and outstanding in ~~either case we must redeem certain~~2020:

February issuance of ~~the notes at a redemption price equal to 101%~~$2,995 of ~~the principal amount of the notes, plus accrued but unpaid interest.~~

~~On October 27, 2017, we issued $1,150 of 5.35%~~4.000% global notes due ~~2066. The underwriters have an option~~2049.

March borrowings of $665 from loan programs with export agencies of foreign governments to ~~purchase up to an additional $173 aggregate principal amount within 30 days~~support network equipment purchases in those countries.

May issuances totaling $12,500 in global notes, comprised of ~~the offering.~~

~~On October 30, 2017, we launched an exchange offer covering approximately $24,000~~$2,500 of 2.300% global notes ~~issued by AT&T Inc.~~due 2027, $3,000 of 2.750% global notes due 2031, $2,500 of 3.500% global notes due 2041, $3,000 of 3.650% global notes due 2051 and $1,500 of 3.850% global notes due 2060.

May issuances totaling €3,000 million in global notes (approximately $3,281 at issuance), ~~DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. due between 2020 and 2023. We may issue up to $8,000~~comprised of ~~new AT&T Inc.~~€1,750 million of 1.600% global notes ~~subject to increase,~~ due 2028, ~~and 2030. Also on October 30, 2017, we offered to exchange approximately $9,000~~€750 million of high-coupon existing AT&T Inc. notes and existing subsidiary notes for new AT&T Inc. notes. The notes covered in the exchange have coupons ranging from 5.85% to 8.75% and maturities from 2022 to 2097. The existing AT&T Inc. notes may be exchanged for new AT&T Inc.2.050% global notes due ~~2046~~2032 and ~~the subsidiary bonds may be exchanged for new AT&T Inc.~~€500 million of 2.600% global notes due ~~2046 or new AT&T Inc.~~2038.

June issuance of $1,050 of 3.750% global notes with identical coupon and maturity as the existing subsidiary notes. We are also seeking consent of bondholders to modify the covenants of the subsidiary indentures to generally conform to AT&T Inc.'s indenture. ~~The exchange offers will expire on November 28, 2017.~~

due 2050.

During the first ~~nine~~six months of ~~2017, we redeemed or repaid $10,309~~2020, repayments of debt ~~primarily consisting~~included $5,975 of short-term borrowings and $17,284 of long-term debt. Repayments were comprised of $475 in commercial paper and the following:

·	~~$1,142 of 2.400% global notes due 2017.~~

·	~~$1,000 of 1.600% global notes due 2017.~~

·	~~$500 of floating rate notes due 2017.~~

·	~~£750 of 5.875% global notes due 2017.~~

·	~~$750 repayment of a private financing agreement with Export Development Canada due 2017.~~

·	~~$1,150 of 1.700% global notes due 2017.~~

·	~~$4,155 repayment of amounts outstanding under our syndicated credit agreement.~~

Notes redeemed at maturity:

$800 of AT&T floating-rate notes in the first quarter.

$687 of AT&T floating-rate notes in the second quarter.

Notes redeemed prior to maturity:

$2,619 of 4.600% AT&T global notes with original maturity in 2045, in the first quarter.

$2,750 of 2.450% AT&T global notes with original maturity in 2020, in the second quarter

$1,000 of annual put reset securities issued by BellSouth, in the second quarter.

$683 of 4.600% AT&T global notes with original maturity in 2021, in the second quarter.

$1,695 of 2.800% AT&T global notes with original maturity in 2021, in the second quarter.

$853 of 4.450% AT&T global notes with original maturity in 2021, in the second quarter.

$1,172 of 3.875% AT&T global notes with original maturity in 2021, in the second quarter.

$1,430 of 5.500% AT&T global notes with original maturity in 2047, in the second quarter.

Credit facilities repaid and other borrowings:

$750 of borrowings under a private financing agreement, in the first quarter.

$750 of borrowings under a private financing agreement, in the second quarter.

$5,500 under our April 2020 term loan credit agreement with certain commercial banks and Bank of America, in the second quarter.

$1,300 under our term loan credit agreement with Bank of America, in the second quarter.

$500 under our term loan credit agreement with Bank of Communications Co., in the second quarter.

Our weighted average interest rate of our entire long-term debt portfolio, including the impact of derivatives, was approximately ~~4.4%~~4.3% as of ~~September~~June 30, ~~2017, compared to 4.2%~~2020 and 4.4% as of December 31, ~~2016.~~2019. We had ~~$162,450~~$164,099 of total notes and debentures outstanding at ~~September~~June 30, ~~2017,~~2020, which included Euro, British pound sterling, Canadian dollar, Swiss franc, Australian dollar, Brazilian real, and Mexican peso ~~and Canadian dollar~~ denominated debt that totaled approximately ~~$37,260.~~$44,798.

As of September 30, 2017, we had approximately 388 million shares remaining from 2013 and 2014 authorizations from our Board of Directors to repurchase shares of our common stock. During the first nine months of 2017, we repurchased approximately 7 million shares totaling $279 under these authorizations. In 2017, we intend to use free cash flow (operating cash flows less construction and capital expenditures) after dividends primarily to pay down debt.

We paid dividends of $9,030 during the first nine months of 2017, compared with $8,850 for the first nine months of 2016, primarily reflecting the increase in the quarterly dividend approved by our Board of Directors in October 2016. Dividends declared by our Board of Directors totaled $0.49 per share in the third quarter and $1.47 per share in the first nine months of 2017 and $0.48 per share in the third quarter and $1.44 for the first nine months of 2016. Our dividend policy considers the

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

At June 30, 2020, we had $15,576 of debt maturing within one year, consisting of $3,001 of commercial paper borrowings and $12,575 of long-term debt issuances. Debt maturing within one year includes the following notes that may be put back to us by the holders:

An accreting zero-coupon note that may be redeemed each May until maturity in 2022. If the remainder of the zero-coupon note (issued for principal of $500 in 2007 and partially exchanged in the 2017 debt exchange offers) is held to maturity, the redemption amount will be $592.

For the first six months of 2020, we paid $1,354 of cash under our vendor financing program, compared to $1,836 in the first six months of 2019. Total vendor financing payables included in our June 30, 2020 consolidated balance sheet were approximately $1,556, with $718 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

Financing activities in the first six months of 2020 also included $3,869 for the February issuance of Series B and Series C preferred stock (see Note 11).

We repurchased approximately 142 million shares of common stock, predominantly in the first quarter, and completed the share repurchase authorization approved by the Board of Directors in 2013. In March 2020, we cancelled an accelerated share repurchase agreement that was planned for the second quarter and other repurchases to maintain flexibility and focus on continued investment in serving our customers, taking care of our employees and enhancing our network, including 5G. At June 30, 2020, we had approximately 178 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014.

We paid dividends on common and preferred shares of $7,474 during the first six months of 2020, compared with $7,436 for the first six months of 2019. Dividends were higher in 2020, primarily due to dividend payments to preferred stockholders and the increase in our quarterly dividend on common stock approved by our Board of Directors in December 2019, partially offset by fewer shares outstanding.

Dividends on common stock declared by our Board of Directors totaled $1.04 per share in the first six months of 2020 and $1.02 per share for the first six months of 2019. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. It is our intent to provide the financial flexibility to allow our Board of Directors to consider dividend growth and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.

~~At September 30, 2017,~~

Financing Activities Subsequent to the Second Quarter

Taking advantage of attractive rates, we ~~had $8,551 of debt maturing within one year, $8,379 of which was related to long-term debt issuances. Debt maturing within one year includes~~completed the following financing activities subsequent to the second quarter of 2020.

In July 2020, we redeemed a total of $4,264 in notes:

$1,457 of 3.000% global notes ~~that may be put back~~due 2022 issued by AT&T.

$1,250 of 3.200% global notes due 2022 issued by AT&T.

$1,012 of 3.800% global notes due 2022 issued by AT&T.

$422 of 4.000% global notes due 2022 issued by AT&T.

$60 of 3.800% senior notes due 2022 issued by DIRECTV.

$63 of 4.00% notes due 2022 issued by WarnerMedia.

In August 2020, we issued a total of $11,000 in global notes and will use the proceeds to ~~us by the holders:~~pay down near-term debt:

$2,250 of 1.650% global notes due 2028.

$2,500 of 2.250 % global notes due 2032.

$2,500 of 3.100% global notes due 2043.

$2,250 of 3.300% global notes due 2052.

$1,500 of 3.500% senior notes due 2061.

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

AT&T INC.

JUNE 30, 2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

·	An accreting zero-coupon note that may be redeemed each May until maturity in 2022. In May 2017, $1 was redeemed by the holder for $1. If the remainder of the zero-coupon note (issued for principal of $500 in 2007) is held to maturity, the redemption amount will be $1,029.

Credit Facilities

The following summary of our various credit and loan agreements does not purport to be complete and is qualified in its entirety by reference to each agreement filed as exhibits to our Annual Report on Form 10-K.

We use credit facilities as a tool in managing our liquidity status. In December ~~2015,~~2018, we amended our five-year revolving credit agreement (the “Amended and Restated Credit Agreement”) and concurrently entered into a new five-year agreement (the “Five Year Credit Agreement”) such that we now have two $7,500 revolving credit agreements totaling $15,000. The Amended and Restated Credit Agreement terminates on December 11, 2021 and the Five Year Credit Agreement terminates on December 11, 2023. No amounts were outstanding under either agreement as of June 30, 2020.

In September 2019, we entered into and drew on a five-year $12,000 revolving credit agreement of which no amounts are outstanding as of September 30, 2017. On September 5, 2017 we repaid all of the amounts outstanding under our $9,155 syndicated credit agreement and terminated the facility. On September 29, 2017, we entered into a five-year $2,250 syndicated$1,300 term loan credit agreement containing (i) a ~~$750 term loan~~1.25 year $400 facility ~~(the "Tranche~~due in 2020 (BAML Tranche A Facility), (ii) a ~~$750 term loan~~2.25 year $400 facility ~~(the "Tranche~~due in 2021 (BAML Tranche B ~~Facility")~~Facility), and (iii) a ~~$750 term loan~~3.25 year $500 facility ~~(the "Tranche~~due in 2022 (BAML Tranche C ~~Facility")~~Facility), with ~~certain investment~~Bank of America, N.A., as agent. These facilities were repaid and terminated in the second quarter of 2020.

On April 6, 2020, we entered into and drew on a $5,500 Term Loan Credit Agreement (Term Loan) with 11 commercial banks and ~~The~~ Bank of ~~Nova Scotia,~~America, N.A. as ~~administrative~~lead agent. ~~No amounts are outstanding under~~We repaid and terminated the ~~Tranche A Facility, the Tranche B Facility or the Tranche C Facility as of September 30, 2017.~~

Term Loan in May 2020.

We also ~~enter into~~utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment ~~purchases.~~

~~In connection with our pending Merger with Time Warner, we entered into~~purchases as well as a $30,000 bridge loan credit agreement ("Bridge Loan") and a $10,000 term loan agreement ("Term Loan"). Following the August issuances of $22,500 of global notes, we reduced the commitments under the Bridge Loan to $0 and terminated the facility. No amounts will be borrowed under the Term Loan prior to the closing of the Merger. Borrowings under the Term Loan will be used solely to finance a portion of the cash to be paid in the Merger, the refinancing of debt of Time Warner and its subsidiaries and the payment of related expenses.

commercial paper program.

Each of our credit and loan agreements contains covenants that are customary for an issuer with an investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.5-to-1. As of ~~September~~June 30, ~~2017,~~2020, we were in compliance with the covenants for our credit facilities.

Collateral Arrangements

During 2019 and 2020, we amended collateral arrangements with certain counterparties to require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, counterparties are still required to post collateral. During the first ~~nine~~six months of ~~2017,~~2020, we ~~received $2,743~~deposited approximately $518 of ~~additional~~ cash collateral, on a net basis ~~from banks and other participants in our derivative arrangements.~~as we exceeded the market value thresholds with some of the counterparties. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. At September 30, 2017, we had posted collateral assets of $837 and received collateral liabilities of $338, compared to December 31, 2016, posted collateral assets of $3,242 and no collateral liabilities. (See Note 6)

Other

Our total capital consists of debt (long-term debt and debt maturing within one year) and ~~stockholders'~~stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At ~~September~~June 30, ~~2017,~~2020, our debt ratio was ~~56.4%~~46.6%, compared to ~~50.1%~~46.8% at ~~September~~June 30, ~~2016,~~2019 and ~~49.9%~~44.7% at December 31, ~~2016.~~2019. Our net debt ratio was ~~39.7%~~41.9% at ~~September~~June 30, ~~2017,~~2020, compared to ~~47.8%~~44.5% at ~~September~~June 30, ~~2016~~2019 and ~~47.5%~~41.4% at December 31, ~~2016.~~2019. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and ~~repayments.~~

repayments and debt acquired in business combinations.

During the first ~~nine~~six months of ~~2017,~~2020, we have received ~~$4,217~~$347 from the disposition of assets, and when combined with working capital monetization ~~of various assets, primarily~~initiatives, which include the sale of ~~certain equipment installment receivables.~~receivables, total cash received from monetization efforts, net of $1,046 of spectrum acquisitions, was approximately $300. We plan to continue to explore similar ~~opportunities.~~opportunities throughout 2020.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

In 2013, we made a voluntary contribution of a preferred equity interest in AT&T Mobility II LLC (Mobility), the holding company for our U.S. wireless operations, to the pension trust used to pay benefits under our qualified pension plans. The preferred equity interest had a value of $9,354 as of September 30, 2017, and $8,477 as of December 31, 2016, does not have any voting rights and has a liquidation value of $8,000. The trust is entitled to receive cumulative cash distributions of $560 per annum, which are distributed quarterly in equal amounts. Mobility II distributed $420 to the trust during the first nine months of 2017. So long as those distributions are made, the terms of the preferred equity interest will not impose any limitations on our ability to declare a dividend or repurchase shares.

During the third quarter, AT&T notified the trust and the fiduciary of the preferred interest that AT&T would not exercise its call option of the preferred interest until at least September 9, 2022, which raised the valuation of the preferred interest by approximately $1,245.

~~AT&T INC.~~

~~SEPTEMBER 30, 2017~~

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

~~Dollars in millions except per share and per subscriber amounts~~

DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURE

We believe the following measure is relevant and useful information to investors as it is used by management as a method of comparing performance with that of many of our competitors. This supplemental measure should be considered in addition to, but not as a substitute of, our consolidated and segment financial information.

~~Supplemental Operational Measure~~

Business Solutions Reconciliation

We provide a supplemental discussion of our ~~domestic wireless~~Business Solutions operations that is calculated by combining our ~~Consumer~~ Mobility and Business ~~Solutions segments,~~Wireline business units, and then adjusting to remove ~~non-wireless~~non-business operations. The following table presents a reconciliation of our supplemental ~~AT&T Mobility~~Business Solutions results.

		Three Months Ended
		June 30, 2020								June 30, 2019
		Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions
Operating Revenues
Wireless service	$	13,669	$	-	$	(11,785)	$	1,884	$	13,824	$	-	$	(11,943)	$	1,881
Strategic and managed services		-		3,943		-		3,943		-		3,834		-		3,834
Legacy voice and data services		-		2,067		-		2,067		-		2,324		-		2,324
Other service and equipment		-		364		-		364		-		449		-		449
Wireless equipment		3,480		-		(2,895)		585		3,468		-		(2,851)		617
Total Operating Revenues		17,149		6,374		(14,680)		8,843		17,292		6,607		(14,794)		9,105

Operating Expenses
Operations and support		9,332		3,779		(7,687)		5,424		9,522		3,975		(7,985)		5,512
EBITDA		7,817		2,595		(6,993)		3,419		7,770		2,632		(6,809)		3,593
Depreciation and amortization		2,012		1,318		(1,693)		1,637		2,003		1,242		(1,700)		1,545
Total Operating Expense		11,344		5,097		(9,380)		7,061		11,525		5,217		(9,685)		7,057
Operating Income		5,805		1,277		(5,300)		1,782		5,767		1,390		(5,109)		2,048
Equity in net income (loss) of affiliates		-		-		-		-		-		-		-		-
Operating Contribution	$	5,805	$	1,277	$	(5,300)	$	1,782	$	5,767	$	1,390	$	(5,109)	$	2,048
¹Non-business wireless reported in the Communications segment under the Mobility business unit.

Three Months Ended
September 30, 2017 September 30, 2016
Consumer Mobility Business Solutions
Adjustments¹
AT&T Mobility Consumer Mobility Business Solutions
Adjustments¹
AT&T Mobility
Operating Revenues
   Wireless service $ 6,507 $ 8,034 $ - $ 14,541 $ 6,914 $ 8,050 $ - $ 14,964
   Fixed strategic services - 3,087 (3,087 ) - - 2,913 (2,913 ) -
   Legacy voice and data services - 3,434 (3,434 ) - - 4,042 (4,042 ) -
   Other service and equipment - 852 (852 ) - - 886 (886 ) -
   Wireless equipment 1,241 1,654 - 2,895 1,353 1,876 - 3,229
Total Operating Revenues 7,748 17,061 (7,373 ) 17,436 8,267 17,767 (7,841 ) 18,193

Operating Expenses
   Operations and support 4,551 10,233 (4,671 ) 10,113 4,751 10,925 (4,979 ) 10,697
EBITDA 3,197 6,828 (2,702 ) 7,323 3,516 6,842 (2,862 ) 7,496
   Depreciation and amortization 877 2,325 (1,192 ) 2,010 944 2,539 (1,376 ) 2,107
Total Operating Expense 5,428 12,558 (5,863 ) 12,123 5,695 13,464 (6,355 ) 12,804
Operating Income $ 2,320 $ 4,503 $ (1,510 ) $ 5,313 $ 2,572 $ 4,303 $ (1,486 ) $ 5,389
¹Non-wireless (fixed) operations reported in Business Solutions segment.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

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

Dollars, subscribers and connections in millions, except per share and per subscriber amounts

Nine Months Ended
September 30, 2017 September 30, 2016
Consumer Mobility Business Solutions
Adjustments¹
AT&T Mobility Consumer Mobility Business Solutions
Adjustments¹
AT&T Mobility
Operating Revenues
   Wireless service $ 19,644 $ 23,969 $ - $ 43,613 $ 20,805 $ 23,868 $ - $ 44,673
   Fixed strategic services - 9,089 (9,089 ) - - 8,469 (8,469 ) -
   Legacy voice and data services - 10,572 (10,572 ) - - 12,577 (12,577 ) -
   Other service and equipment - 2,513 (2,513 ) - - 2,619 (2,619 ) -
   Wireless equipment 3,635 4,873 - 8,508 3,976 5,422 - 9,398
Total Operating Revenues 23,279 51,016 (22,174 ) 52,121 24,781 52,955 (23,665 ) 54,071

Operating Expenses
   Operations and support 13,599 30,722 (14,013 ) 30,308 14,343 32,584 (15,105 ) 31,822
EBITDA 9,680 20,294 (8,161 ) 21,813 10,438 20,371 (8,560 ) 22,249
   Depreciation and amortization 2,621 6,972 (3,594 ) 5,999 2,798 7,568 (4,122 ) 6,244
Total Operating Expense 16,220 37,694 (17,607 ) 36,307 17,141 40,152 (19,227 ) 38,066
Operating Income $ 7,059 $ 13,322 $ (4,567 ) $ 15,814 $ 7,640 $ 12,803 $ (4,438 ) $ 16,005
¹Non-wireless (fixed) operations reported in Business Solutions segment.

		Six Months Ended
		June 30, 2020								June 30, 2019
		Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions
Operating Revenues
Wireless service	$	27,637	$	-	$	(23,804)	$	3,833	$	27,453	$	-	$	(23,795)	$	3,658
Strategic and managed services		-		7,822		-		7,822		-		7,613		-		7,613
Legacy voice and data services		-		4,196		-		4,196		-		4,721		-		4,721
Other service and equipment		-		688		-		688		-		751		-		751
Wireless equipment		6,914		-		(5,619)		1,295		7,202		-		(5,995)		1,207
Total Operating Revenues		34,551		12,706		(29,423)		17,834		34,655		13,085		(29,790)		17,950

Operating Expenses
Operations and support		18,901		7,730		(15,497)		11,134		19,563		8,007		(16,444)		11,126
EBITDA		15,650		4,976		(13,926)		6,700		15,092		5,078		(13,346)		6,824
Depreciation and amortization		4,057		2,619		(3,414)		3,262		4,016		2,464		(3,410)		3,070
Total Operating Expense		22,958		10,349		(18,911)		14,396		23,579		10,471		(19,854)		14,196
Operating Income		11,593		2,357		(10,512)		3,438		11,076		2,614		(9,936)		3,754
Equity in net income (loss) of affiliates		-		-		-		-		-		-		-		-
Operating Contribution	$	11,593	$	2,357	$	(10,512)	$	3,438	$	11,076	$	2,614	$	(9,936)	$	3,754
¹Non-business wireless reported in the Communications segment under the Mobility business unit.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At ~~September~~June 30, ~~2017,~~2020, we had interest rate swaps with a notional value of ~~$10,775~~$21 and a fair value of ~~$11.~~

$(3).

We have fixed-to-fixed and floating-to-fixed cross-currency swaps on foreign currency-denominated debt instruments with a U.S. dollar notional value of ~~$38,694~~$45,606 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of ~~$(842)~~$(6,700) at ~~September~~June 30, ~~2017.~~

2020. We have no rate locks at June 30, 2020.

We have foreign exchange contracts with a U.S. dollar notional value of $298 to provide currency at a fixed rate to hedge a portion of the exchange risk involved in foreign currency-denominated transactions. These foreign exchange contracts include fair value hedges, cash flow hedges and economic (nonqualifying) hedges with a total net fair value of $4 at June 30, 2020.

We have designated €1,450 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated other comprehensive income, net on the consolidated balance sheet.

Item 4. Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the Securities and Exchange ~~Commission's~~Commission’s rules and forms. The chief executive officer and chief financial officer have performed an evaluation of the effectiveness of the design and operation of the ~~registrant's~~registrant’s disclosure controls and procedures as of ~~September~~June 30, ~~2017.~~2020. Based on that evaluation, the chief executive officer and chief financial officer concluded that the ~~registrant's~~registrant’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2020.

There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Due to the COVID-19 pandemic, most of our corporate employees are working remotely. We continue to monitor and assess the COVID-19 situation on our internal controls over financial reporting to address any potential impact on their design and operating effectiveness.

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

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

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

•The severity, magnitude and duration of the COVID-19 pandemic and containment, mitigation and other measures taken in response, including the potential impacts of these matters on our business and operations.

•Our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to impact our business operations, financial performance and results of operations.

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

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

•The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) and legislative efforts involving issues that are important to our business, including, without limitation, pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations and, in particular, siting for 5G service; E911 services; competition policy; privacy; net neutrality; multichannel video programming distributor services and equipment; content licensing and copyright protection; availability of new spectrum on fair and balanced terms; and wireless and satellite license awards and renewals.

•Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.

•Potential changes to the electromagnetic spectrum currently used for broadcast television and satellite distribution being considered by the FCC could negatively impact WarnerMedia’s ability to deliver linear network feeds of its domestic cable networks to its affiliates, and in some cases, WarnerMedia’s ability to produce high-value news and entertainment programming on location.

•U.S. and foreign laws and regulations regarding intellectual property rights protection and privacy, personal data protection and user consent are complex and rapidly evolving and could result in adverse impacts to our business plans, increased costs, or claims against us that may harm our reputation.

•The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including non-regulation of comparable alternative technologies and/or government-owned or subsidized networks.

•Disruption in our supply chain for a number of reasons, including, difficulties in obtaining export licenses for certain technology, inability to secure component parts, general business disruption, natural disasters, safety issues, economic and political instability and public health emergencies.

•The continued development and delivery of attractive and profitable wireless, video and broadband offerings and devices, and, in particular, the success of our new HBO Max platform; the extent to which regulatory and build-out requirements apply to our offerings; our ability to match speeds offered by our competitors and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.

•Our ability to generate advertising revenue from attractive video content, especially from WarnerMedia, in the face of unpredictable and rapidly evolving public viewing habits and legal restrictions on the use of personal data.

•The availability and cost and our ability to adequately fund additional wireless spectrum and network upgrades; and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.

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

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

AT&T INC.

JUNE 30, 2020

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

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

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

The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) involving issues that are important to our business, including, without limitation, special access and business data services; intercarrier compensation; interconnection obligations; pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations; E911 services; competition policy; privacy; net neutrality, including the FCC's order classifying broadband as Title II services subject to much more comprehensive regulation; unbundled network elements and other wholesale obligations; multi-channel video programming distributor services and equipment; availability of new spectrum, on fair and balanced terms; and wireless and satellite license awards and renewals.

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

Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.

Our ability to absorb revenue losses caused by increasing competition, including offerings that use alternative technologies or delivery methods (e.g., cable, wireless, VoIP and over-the-top video service), subscriber reluctance to purchase new wireless handsets, and our ability to maintain capital expenditures.

·	~~The extent of competition including from governmental networks and other providers and the resulting pressure on customer totals and segment operating margins.~~

·	~~Our ability to develop attractive and profitable product/service offerings to offset increasing competition.~~

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

The continued development and delivery of attractive and profitable video and broadband offerings; the extent to which regulatory and build-out requirements apply to our offerings; our ability to match speeds offered by our competitors and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.

·	~~Our continued ability to maintain margins, attract and offer a diverse portfolio of video, wireless service and devices and device financing plans.~~

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

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

·	~~The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties.~~

The impact from major equipment failures on our networks, including satellites operated by DIRECTV; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; and in the case of satellites launched, timely provisioning of services from vendors; or severe weather conditions, natural disasters, pandemics, energy shortages, wars or terrorist attacks.

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

·	~~Our ability to integrate our acquisition of DIRECTV.~~

·	Our ability to close our pending acquisition of Time Warner Inc. and successfully reorganize our operations, including the ability to manage various businesses in widely dispersed business locations and with decentralized management.

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

·	~~Our increased exposure to video competition and foreign economies, including foreign exchange fluctuations as well as regulatory and political uncertainty.~~

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

·	The uncertainty surrounding further congressional action to address spending reductions, which may result in a significant decrease in government spending and reluctance of businesses and consumers to spend in general.

·	~~The uncertainty and impact of anticipated regulatory and corporate tax reform, which may impact the overall economy and incentives for business investments.~~

•The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties.

•The impact from major equipment or software failures on our networks, including satellites operated by DIRECTV; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; and in the case of satellites launched, timely provisioning of services from vendors; or severe weather conditions including flooding and hurricanes, natural disasters including earthquakes and forest fires, pandemics, energy shortages, wars or terrorist attacks.

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

•Our ability to successfully integrate our WarnerMedia operations, including the ability to manage various businesses in widely dispersed business locations and with decentralized management.

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

•The uncertainty surrounding further congressional action to address spending reductions, which may result in a significant decrease in government spending and reluctance of businesses and consumers to spend in general.

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

AT&T INC.

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2020

PART II – OTHER INFORMATION

Dollars in millions except per share amounts

Item 1A. Risk Factors

We discuss in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 various risks that may materially affect our business. We use this section to update this discussion to reflect material ~~developments since our Form 10-K was filed. For~~developments. For the ~~third~~second quarter ~~2017,~~of 2020, there were no such material developments.

66
AT&T INC.
JUNE 30, 2020
PART II – OTHER INFORMATION - CONTINUED
Dollars in millions except per share amounts
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) A summary of our repurchases of common stock during the ~~third~~second quarter of ~~2017~~2020 is as follows:
(a)
(b)
(c)
(d)
Period
Total Number of Shares (or Units) Purchased ^{1, 2, 3}
Average Price Paid Per Share (or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs¹
Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs
~~July~~
April 1, ~~2017~~2020 -
~~July 31, 2017~~
April 30, 2020
~~19,060~~
48,894
$
~~37.45~~
33.41
-
~~388,296,000~~
177,942,230
~~August~~
May 1, ~~2017~~2020 -
~~August~~
May 31, ~~2017~~
2020
~~16,379~~
145,630
~~38.88~~
33.33
-
~~388,296,000~~
177,942,230
~~September~~
June 1, ~~2017~~2020 -
~~September~~
June 30, ~~2017~~
2020
~~618,928~~
937,490
~~38.08~~
29.85
-
~~388,296,000~~
177,942,230
Total
~~654,367~~
1,132,014
$
~~38.10~~
30.45
-
¹
In March 2014, our Board of Directors approved an ~~additional~~ authorization to repurchase up to 300 million shares of our common
stock. ~~In March 2013, our Board of Directors authorized the repurchase of up to an additional 300 million shares of our common stock.~~
The ~~authorizations have~~authorization has no expiration date.
²
Of the shares repurchased, ~~63,861~~556,889 shares were acquired through the withholding of taxes on the vesting of restricted stock
and performance shares or on the exercise price of options.
³
Of the shares repurchased, ~~590,506~~575,125 shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit
Association (VEBA) trusts.
50
~~AT&T INC.~~
~~SEPTEMBER 30, 2017~~
Item 6. Exhibits
The following exhibits are filed or incorporated by reference as a part of this report:
Exhibit
~~Filed~~ ~~Incorporated by Reference~~
Number
Exhibit Description
~~Herewith~~ ~~Form~~ ~~Period Ending~~ ~~Exhibit~~ ~~Filing Date~~
~~10-a~~
3.1
~~Resolution Regarding John Donovan~~Bylaws (Exhibit 3.1 to Form 8-K filed on June 26, 2020)
x
~~10-b~~
4.1
~~Resolution Regarding John Stankey~~Description of AT&T's Securities Registered Under Section 12 of the Exchange Act
x
~~10-c~~
10.1
~~Resolution Regarding John Stephens~~Supplemental Life Insurance Plan (Exhibit 10.1 to Form 8-K filed on June 26, 2020)
x
~~10-d~~
10.2
~~AT&T Health Plan~~Agreement between Jason Kilar and WarnerMedia LLC
x
~~10-e~~
31
~~2005 Supplemental Employee Retirement Plan~~
~~8-K~~ ~~10.1~~ ~~10/4/2017~~
~~10-f~~
~~Term Loan Credit Agreement~~
x
12
~~Computation of Ratios of Earnings to Fixed Charges~~
x
31
Rule 13a-14(a)/15d-14(a) Certifications
31.1 Certification of Principal Executive Officer
x
31.2 Certification of Principal Financial Officer
x
32
Section 1350 Certifications
x
101
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, (formatted as Inline XBRL ~~Instance Document~~
x and contained in Exhibit 101).
67
51
SIGNATURE

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

~~November 3, 2017~~
August 5, 2020
AT&T Inc.
/s/ John J. Stephens
John J. Stephens
Senior Executive Vice President
and Chief Financial Officer

68
52

AT&T INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	September 30, 2017
	Shares			Amount
Common Stock
Balance at beginning of year		6,495		$	6,495
Issuance of stock		-			-
Balance at end of period		6,495		$	6,495

Additional Paid-In Capital
Balance at beginning of year				$	89,604
Issuance of treasury stock					4
Share-based payments					(81	)
Balance at end of period				$	89,527

Retained Earnings
Balance at beginning of year				$	34,734
Net income attributable to AT&T ($1.69 per diluted share)					10,413
Dividends to stockholders ($1.47 per share)					(9,075	)
Other					2
Balance at end of period				$	36,074

Treasury Stock
Balance at beginning of year		(356	)	$	(12,659	)
Repurchase and acquisition of common stock		(14	)		(530	)
Issuance of treasury stock		14			473
Balance at end of period		(356	)	$	(12,716	)

Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
Balance at beginning of year				$	4,961
Other comprehensive income attributable to AT&T					619
Balance at end of period				$	5,580

Noncontrolling Interest
Balance at beginning of year				$	975
Net income attributable to noncontrolling interest					298
Distributions					(270	)
Acquisition of noncontrolling interest					140
Translation adjustments attributable to noncontrolling interest, net of taxes					6
Balance at end of period				$	1,149

Total Stockholders' Equity at beginning of year				$	124,110
Total Stockholders' Equity at end of period				$	126,109
See Notes to Consolidated Financial Statements.

	Three months ended						Nine months ended
	September 30,						September 30,
	2017			2016			2017			2016
Numerators
Numerator for basic earnings per share:
Net Income	$	3,123		$	3,418		$	10,711		$	10,818
Less: Net income attributable to noncontrolling interest		(94	)		(90	)		(298	)		(279	)
Net Income attributable to AT&T		3,029			3,328			10,413			10,539
Dilutive potential common shares:
Share-based payment		3			3			9			9
Numerator for diluted earnings per share	$	3,032		$	3,331		$	10,422		$	10,548
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		6,162			6,168			6,164			6,171
Dilutive potential common shares:
Share-based payment (in shares)		20			21			20			20
Denominator for diluted earnings per share		6,182			6,189			6,184			6,191
Basic earnings per share attributable to AT&T	$	0.49		$	0.54		$	1.69		$	1.70
Diluted earnings per share attributable to AT&T	$	0.49		$	0.54		$	1.69		$	1.70

		Foreign Currency Translation Adjustment			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Net Unrealized Gains (Losses) on Cash Flow Hedges			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of December 31, 2016		$	(1,995)		$	541		$	744		$	5,671		$	4,961
Other comprehensive income (loss) before reclassifications			484			128			(174)			969			1,407
Amounts reclassified from accumulated OCI			-	¹		(86)	¹		29	²		(731)	³		(788)
Net other comprehensive income (loss)			484			42			(145)			238			619
Balance as of September 30, 2017		$	(1,511)		$	583		$	599		$	5,909		$	5,580

		Foreign Currency Translation Adjustment			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Net Unrealized Gains (Losses) on Cash Flow Hedges			Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income
Balance as of December 31, 2015		$	(1,198)		$	484		$	16		$	6,032		$	5,334
Other comprehensive income (loss) before reclassifications			(72)			25			183			-			136
Amounts reclassified from accumulated OCI			-	¹		(5)	¹		29	²		(644)	³		(620)
Net other comprehensive income (loss)			(72)			20			212			(644)			(484)
Balance as of September 30, 2016		$	(1,270)		$	504		$	228		$	5,388		$	4,850
¹	(Gains) losses are included in Other income (expense) - net in the consolidated statements of income.
²	(Gains) losses are included in Interest expense in the consolidated statements of income (see Note 6).
³	The amortization of prior service credits associated with postretirement benefits, net of amounts capitalized as part of construction labor, are included in Cost of services and sales and Selling, general and administrative in the consolidated statements of income (see Note 5).

	September 30, 2017						December 31, 2016
	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value
Notes and debentures ¹		$	162,450		$	171,025		$	122,381		$	128,726
Bank borrowings			2			2			4			4
Investment securities			2,565			2,565			2,587			2,587
¹ Includes credit agreement borrowings.

	2017
Outstanding derecognized receivables at January 1,	$	7,232
Gross receivables sold		6,217
Collections on cash purchase price		(3,556	)
Collections on deferred purchase price		(665	)
Trade ins and other		(295	)
Fair value of repurchased receivables		(1,281	)
Outstanding derecognized receivables at September 30,	$	7,652

	Third Quarter							Nine-Month Period
					Percent							Percent
	2017		2016		Change			2017		2016		Change
Operating Revenues
Service	$	36,378	$	37,272		(2.4	)%	$	109,372	$	111,515		(1.9	)%
Equipment		3,290		3,618		(9.1	)		9,498		10,430		(8.9	)
Total Operating Revenues		39,668		40,890		(3.0	)		118,870		121,945		(2.5	)

Operating expenses
Cost of services and sales
Equipment		4,191		4,455		(5.9	)		12,177		13,090		(7.0	)
Broadcast, programming and operations		5,284		4,909		7.6			15,156		14,239		6.4
Other cost of services		9,431		9,526		(1.0	)		27,714		28,436		(2.5	)
Selling, general and administrative		8,317		9,013		(7.7	)		24,917		26,363		(5.5	)
Depreciation and amortization		6,042		6,579		(8.2	)		18,316		19,718		(7.1	)
Total Operating Expenses		33,265		34,482		(3.5	)		98,280		101,846		(3.5	)
Operating Income		6,403		6,408		(0.1	)		20,590		20,099		2.4
Income Before Income Taxes		4,974		5,193		(4.2	)		16,422		16,621		(1.2	)
Net Income		3,123		3,418		(8.6	)		10,711		10,818		(1.0	)
Net Income Attributable to AT&T	$	3,029	$	3,328		(9.0	)%	$	10,413	$	10,539		(1.2	)%

Selected Financial and Operating Data
	September 30,
Subscribers and connections in (000s)	2017			2016
Domestic wireless subscribers		138,826			133,338
Mexican wireless subscribers		13,779			10,698
North American wireless subscribers		152,605			144,036

North American branded subscribers		106,098			100,821
North American branded net additions		2,782			3,881

Domestic satellite and over-the-top video subscribers		21,392			20,777
AT&T U-verse® (U-verse) video subscribers		3,718			4,544
Latin America satellite video subscribers ¹		13,490			12,476
Total video subscribers		38,600			37,797

Total domestic broadband connections		15,715			15,618

Network access lines in service		12,249			14,603
U-verse VoIP connections		5,774			5,707

Debt ratio ²		56.4	%		50.1	%
Net debt ratio ³		39.7	%		47.8	%
Ratio of earnings to fixed charges ⁴		3.55			3.91
Number of AT&T employees		256,800			273,140

Business Solutions
Segment Results
	Third Quarter							Nine-Month Period
	2017		2016		Percent Change			2017		2016		Percent Change
	2017		2016		Percent Change			2017		2016		Percent Change
Segment operating revenues
Wireless service	$	8,034	$	8,050		(0.2	)%	$	23,969	$	23,868		0.4	%
Fixed strategic services		3,087		2,913		6.0			9,089		8,469		7.3
Legacy voice and data services		3,434		4,042		(15.0	)		10,572		12,577		(15.9	)
Other service and equipment		852		886		(3.8	)		2,513		2,619		(4.0	)
Wireless equipment		1,654		1,876		(11.8	)		4,873		5,422		(10.1	)
Total Segment Operating Revenues		17,061		17,767		(4.0	)		51,016		52,955		(3.7	)

Segment operating expenses
Operations and support		10,233		10,925		(6.3	)		30,722		32,584		(5.7	)
Depreciation and amortization		2,325		2,539		(8.4	)		6,972		7,568		(7.9	)
Total Segment Operating Expenses		12,558		13,464		(6.7	)		37,694		40,152		(6.1	)
Segment Operating Income		4,503		4,303		4.6			13,322		12,803		4.1
Equity in Net Income of Affiliates		-		-		-			-		-		-
Segment Contribution	$	4,503	$	4,303		4.6	%	$	13,322	$	12,803		4.1	%

AT&T Mobility Results
	Third Quarter							Nine-Month Period
	2017		2016		Percent Change			2017		2016		Percent Change
	2017		2016		Percent Change			2017		2016		Percent Change
Operating revenues
Service	$	14,541	$	14,964		(2.8	)%	$	43,613	$	44,673		(2.4	)%
Equipment		2,895		3,229		(10.3	)		8,508		9,398		(9.5	)
Total Operating Revenues		17,436		18,193		(4.2	)		52,121		54,071		(3.6	)

Operating expenses
Operations and support		10,113		10,697		(5.5	)		30,308		31,822		(4.8	)
EBITDA		7,323		7,496		(2.3	)		21,813		22,249		(2.0	)
Depreciation and amortization		2,010		2,107		(4.6	)		5,999		6,244		(3.9	)
Total Operating Expenses		12,123		12,804		(5.3	)		36,307		38,066		(4.6	)
Operating Income	$	5,313	$	5,389		(1.4	)%	$	15,814	$	16,005		(1.2	)%

	Three Months Ended
	September 30, 2017									September 30, 2016
	Consumer Mobility		Business Solutions		Adjustments¹			AT&T Mobility		Consumer Mobility		Business Solutions		Adjustments¹			AT&T Mobility
Operating Revenues
Wireless service	$	6,507	$	8,034	$	-		$	14,541	$	6,914	$	8,050	$	-		$	14,964
Fixed strategic services		-		3,087		(3,087	)		-		-		2,913		(2,913	)		-
Legacy voice and data services		-		3,434		(3,434	)		-		-		4,042		(4,042	)		-
Other service and equipment		-		852		(852	)		-		-		886		(886	)		-
Wireless equipment		1,241		1,654		-			2,895		1,353		1,876		-			3,229
Total Operating Revenues		7,748		17,061		(7,373	)		17,436		8,267		17,767		(7,841	)		18,193

Operating Expenses
Operations and support		4,551		10,233		(4,671	)		10,113		4,751		10,925		(4,979	)		10,697
EBITDA		3,197		6,828		(2,702	)		7,323		3,516		6,842		(2,862	)		7,496
Depreciation and amortization		877		2,325		(1,192	)		2,010		944		2,539		(1,376	)		2,107
Total Operating Expense		5,428		12,558		(5,863	)		12,123		5,695		13,464		(6,355	)		12,804
Operating Income	$	2,320	$	4,503	$	(1,510	)	$	5,313	$	2,572	$	4,303	$	(1,486	)	$	5,389
¹Non-wireless (fixed) operations reported in Business Solutions segment.