~~0000732717 us-gaap:OperatingSegmentsMember t:WarnerMediaMember t:WarnerBrosMember t:SubscriptionArrangementServiceRevenueMember 2018-01-01 2018-09-30~~

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 30, 2019~~March 31, 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 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. ~~2.65%~~2.650% Global Notes due December 17, 2021	T 21B	New York Stock Exchange
AT&T Inc. ~~1.45%~~1.450% Global Notes due June 1, 2022	T 22B	New York Stock Exchange
AT&T Inc. ~~2.50%~~2.500% Global Notes due March 15, 2023	T 23	New York Stock Exchange
AT&T Inc. ~~2.75%~~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. ~~1.05%~~1.050% Global Notes due September 5, 2023	T 23E	New York Stock Exchange
AT&T Inc. ~~1.30%~~1.300% Global Notes due September 5, 2023	T 23A	New York Stock Exchange
AT&T Inc. ~~1.95%~~1.950% Global Notes due September 15, 2023	T 23F	New York Stock Exchange
AT&T Inc. ~~2.40%~~2.400% Global Notes due March 15, 2024	T 24A	New York Stock Exchange
AT&T Inc. ~~3.50%~~3.500% Global Notes due December 17, 2025	T 25	New York Stock Exchange
AT&T Inc. 0.250% Global Notes due March 4, 2026	T 26E	New York Stock Exchange
AT&T Inc. ~~1.80%~~1.800% Global Notes due September 5, 2026	T 26D	New York Stock Exchange
~~AT&T Inc. 2.90% Global Notes due December 4, 2026~~	~~T 26A~~	~~New York Stock Exchange~~

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
AT&T Inc. ~~2.35%~~2.900% Global Notes due December 4, 2026	T 26A	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. ~~2.60%~~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. ~~3.55%~~3.550% Global Notes due December 17, 2032	T 32	New York Stock Exchange
AT&T Inc. ~~5.20%~~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. ~~2.45%~~2.450% Global Notes due March 15, 2035	T 35	New York Stock Exchange
AT&T Inc. ~~3.15%~~3.150% Global Notes due September 4, 2036	T 36A	New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 14, 2039	T 39B	New York Stock Exchange
AT&T Inc. ~~7.00%~~7.000% Global Notes due April 30, 2040	T 40	New York Stock Exchange
AT&T Inc. ~~4.25%~~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. ~~5.35%~~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. 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 every Interactive Data File required to be submitted 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 such files).

Yes [X] No [ ]

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

Large ~~Accelerated Filer~~accelerated filer	[X]	Accelerated ~~Filer~~filer	[ ]
Non-accelerated filer	[ ]	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 31, 2019,~~April 30, 2020, there were ~~7,305~~7,125 million common shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AT&T INC.	AT&T INC.								AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME	CONSOLIDATED STATEMENTS OF INCOME								CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts	Dollars in millions except per share amounts								Dollars in millions except per share amounts
(Unaudited)	(Unaudited)								(Unaudited)
		Three months ended				Nine months ended				Three months ended
		September 30,				September 30,				March 31,
		2019		2018		2019		2018		2020		2019
Operating Revenues
Service	$	40,317	$	41,297	$	122,024	$	109,849	$	38,883	$	40,684
Equipment		4,271		4,442		12,348		12,914		3,896		4,143
Total operating revenues		44,588		45,739		134,372		122,763		42,779		44,827

Operating Expenses
Cost of revenues
Equipment		4,484		4,828		13,047		14,053		4,092		4,502
Broadcast, programming and operations		7,066		7,227		22,448		17,842		6,847		7,652
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		8,604		8,651		25,910		24,215		8,342		8,585
Selling, general and administrative		9,584		9,598		29,077		26,179		8,790		9,649
Depreciation and amortization		6,949		8,166		21,256		20,538		7,222		7,206
Total operating expenses		36,687		38,470		111,738		102,827		35,293		37,594
Operating Income		7,901		7,269		22,634		19,936		7,486		7,233
Other Income (Expense)
Interest expense		(2,083)		(2,051)		(6,373)		(5,845)		(2,018)		(2,141)
Equity in net income (loss) of affiliates		3		(64)		36		(71)		(6)		(7)
Other income (expense) – net		(935)		1,053		(967)		5,108		803		286
Total other income (expense)		(3,015)		(1,062)		(7,304)		(808)		(1,221)		(1,862)
Income Before Income Taxes		4,886		6,207		15,330		19,128		6,265		5,371
Income tax expense		937		1,391		3,059		4,305		1,302		1,023
Net Income		3,949		4,816		12,271		14,823		4,963		4,348
Less: Net Income Attributable to Noncontrolling Interest		(249)		(98)		(762)		(311)		(353)		(252)
Net Income Attributable to AT&T	$	3,700	$	4,718	$	11,509	$	14,512	$	4,610	$	4,096
Basic Earnings Per Share Attributable to AT&T	$	0.50	$	0.65	$	1.57	$	2.19
Diluted Earnings Per Share Attributable to AT&T	$	0.50	$	0.65	$	1.57	$	2.19
Less: Preferred Stock Dividends										(32)		-
Net Income Attributable to Common Stock									$	4,578	$	4,096
Basic Earnings Per Share Attributable to Common Stock									$	0.63	$	0.56
Diluted Earnings Per Share Attributable to Common Stock									$	0.63	$	0.56
Weighted Average Number of Common Shares Outstanding – Basic (in millions)		7,327		7,284		7,321		6,603		7,187		7,313
Weighted Average Number of Common Shares Outstanding – with Dilution (in millions)		7,356		7,320		7,350		6,630		7,214		7,342
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,

2019

2018

2019

2018
Net income
$
3,949

$
4,816

$
12,271

$
14,823
Other comprehensive income (loss), net of tax:

Foreign currency:

Translation adjustment (includes $(17), $(7), $(15) and $(37)

attributable to noncontrolling interest), net of taxes of

$(69), $(2), $(21) and $(145)

(342)

(14)

(181)

(824)
Securities:

Net unrealized gains (losses), net of taxes of $7, $(4), $22

and $(8)

25

(10)

67

(22)
Derivative instruments:

Net unrealized gains (losses), net of taxes of $(168), $0,

$(299) and $68

(516)

4

(1,006)

257
Reclassification adjustment included in net income,

net of taxes of $2, $3, $7 and $9

7

12

24

35
Defined benefit postretirement plans:

Net prior service (cost) credit arising during period, net of taxes of $0, $0, $0 and $173

-

-

-

530
Amortization of net prior service credit included in net

income, net of taxes of $(112), $(108), $(332)

and $(322)

(343)

(332)

(1,031)

(989)
Other comprehensive income (loss)

(1,169)

(340)

(2,127)

(1,013)
Total comprehensive income

2,780

4,476

10,144

13,810
Less: Total comprehensive income attributable to

noncontrolling interest

(232)

(91)

(747)

(274)
Total Comprehensive Income Attributable to AT&T
$
2,548

$
4,385

$
9,397

$
13,536
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
	Three months ended
	March 31,
	2020		2019
Net income	$	4,963	$	4,348
Other comprehensive income (loss), net of tax:
Foreign currency:
Translation adjustment (includes $(51) and $0 attributable to noncontrolling interest),
net of taxes of $(62) and $49		(1,854)		288
Securities:
Net unrealized gains, net of taxes of $22 and $5		66		16
Derivative instruments:
Net unrealized gains (losses), net of taxes of $(971) and $34		(3,657)		127
Reclassification adjustment included in net income, net of taxes of $0 and $2		-		11
Defined benefit postretirement plans:
Amortization of net prior service credit included in net income, net of taxes of $(151)
and $(113)		(461)		(346)
Other comprehensive income (loss)		(5,906)		96
Total comprehensive income (loss)		(943)		4,444
Less: Total comprehensive income attributable to noncontrolling interest		(302)		(252)
Total Comprehensive Income (Loss) Attributable to AT&T	$	(1,245)	$	4,192
See Notes to Consolidated Financial Statements.

AT&T INC.	AT&T INC.				AT&T INC.
CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS				CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts	Dollars in millions except per share amounts				Dollars in millions except per share amounts
	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Assets	(Unaudited)				(Unaudited)
Current Assets
Cash and cash equivalents	$	6,588	$	5,204	$	9,955	$	12,130
Accounts receivable - net of allowances for doubtful accounts of $1,121 and $907		22,921		26,472
Accounts receivable - net of allowances for doubtful accounts of $1,651 and $1,235						19,908		22,636
Prepaid expenses		1,493		2,047		1,600		1,631
Other current assets		19,693		17,704		21,241		18,364
Total current assets		50,695		51,427		52,704		54,761
Noncurrent Inventories and Theatrical Film and Television Production Costs		12,014		7,713
Property, plant and equipment		337,240		330,690
Noncurrent inventories and theatrical film and television production costs						13,276		12,434
Property, Plant and Equipment						329,187		333,538
Less: accumulated depreciation and amortization		(205,924)		(199,217)		(200,266)		(203,410)
Property, Plant and Equipment – Net		131,316		131,473		128,921		130,128
Goodwill		146,106		146,370		145,546		146,241
Licenses – Net		96,026		96,144		96,662		97,907
Trademarks and Trade Names – Net		23,855		24,345		23,293		23,567
Distribution Networks – Net		15,806		17,069		14,886		15,345
Other Intangible Assets – Net		22,060		26,269		19,623		20,798
Investments in and Advances to Equity Affiliates		4,137		6,245		3,606		3,695
Operating lease right-of-use assets		24,477		-		24,008		24,039
Other Assets		22,304		24,809		22,829		22,754
Total Assets	$	548,796	$	531,864	$	545,354	$	551,669

Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	11,608	$	10,255	$	17,067	$	11,838
Accounts payable and accrued liabilities		43,955		43,184		40,771		45,956
Advanced billings and customer deposits		6,097		5,948		5,960		6,124
Accrued taxes		2,741		1,179		2,169		1,212
Dividends payable		3,725		3,854		3,737		3,781
Total current liabilities		68,126		64,420		69,704		68,911
Long-Term Debt		153,568		166,250		147,202		151,309
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		57,786		57,859		58,491		59,502
Postemployment benefit obligation		22,853		19,218		18,324		18,788
Operating lease liabilities		22,288		-		21,584		21,804
Other noncurrent liabilities		29,848		30,233		34,600		29,421
Total deferred credits and other noncurrent liabilities		132,775		107,310		132,999		129,515

Stockholders’ Equity
Common stock ($1 par value, 14,000,000,000 authorized at September 30, 2019 and
December 31, 2018: issued 7,620,748,598 at September 30, 2019 and December 31, 2018)		7,621		7,621
Preferred stock ($1 par value, 10,000,000 authorized):
Series A (48,000 issued and outstanding at March 31, 2020 and December 31, 2019)						-		-
Series B (20,000 issued and outstanding at March 31, 2020
and 0 issued and outstanding at December 31, 2019)						-		-
Series C (70,000 issued and outstanding at March 31, 2020
and 0 issued and outstanding at December 31, 2019)						-		-
Common stock ($1 par value, 14,000,000,000 authorized at March 31, 2020 and
December 31, 2019: issued 7,620,748,598 at March 31, 2020 and at December 31, 2019)						7,621		7,621
Additional paid-in capital		125,139		125,525		129,966		126,279
Retained earnings		59,347		58,753		58,534		57,936
Treasury stock (317,374,689 at September 30, 2019 and 339,120,073 December 31, 2018,
Treasury stock (495,533,462 at March 31, 2020 and 366,193,458 at December 31, 2019,
at cost)		(11,195)		(12,059)		(17,957)		(13,085)
Accumulated other comprehensive income		2,137		4,249		(385)		5,470
Noncontrolling interest		11,278		9,795		17,670		17,713
Total stockholders’ equity		194,327		193,884		195,449		201,934
Total Liabilities and Stockholders’ Equity	$	548,796	$	531,864	$	545,354	$	551,669
See Notes to Consolidated Financial Statements.

AT&T INC.	AT&T INC.				AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS				CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions	Dollars in millions				Dollars in millions
(Unaudited)
	Nine months ended				Three months ended
	September 30,				March 31,
	2019		2018		2020		2019
Operating Activities
Net income	$	12,271	$	14,823	$	4,963	$	4,348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,256		20,538		7,222		7,206
Amortization of television and film costs		7,059		1,608		2,269		2,497
Undistributed earnings from investments in equity affiliates		81		312		39		112
Provision for uncollectible accounts		1,855		1,240		780		592
Deferred income tax expense		1,039		4,337		259		753
Net (gain) loss from investments, net of impairments		(1,014)		(501)
Net (gain) loss on assets, net of impairments						(646)		(175)
Pension and postretirement benefit expense (credit)		(1,297)		(762)		(748)		(369)
Actuarial (gain) loss on pension and postretirement benefits		4,048		(2,726)		-		432
Changes in operating assets and liabilities:
Receivables		2,503		(1,268)		1,695		2,125
Other current assets, inventories and theatrical film and television production costs		(9,337)		(2,729)		(3,267)		(2,510)
Accounts payable and other accrued liabilities		(936)		(1,385)		(3,884)		(3,686)
Equipment installment receivables and related sales		848		220		535		652
Deferred customer contract acquisition and fulfillment costs		(796)		(2,657)		105		(375)
Postretirement claims and contributions		(635)		(630)		(111)		(193)
Other - net		(220)		1,102		(345)		(357)
Total adjustments		24,454		16,699		3,903		6,704
Net Cash Provided by Operating Activities		36,725		31,522		8,866		11,052
Investing Activities
Capital expenditures:
Purchase of property and equipment		(15,683)		(16,695)		(4,938)		(5,121)
Interest during construction		(160)		(404)		(28)		(61)
Acquisitions, net of cash acquired		(1,124)		(43,116)		(100)		(117)
Dispositions		3,775		983		118		10
(Purchases), sales and settlements of securities and investments, net		523		(234)
(Purchases), sales and settlement of securities and investments, net						(6)		(1)
Advances to and investments in equity affiliates, net		(333)		(1,021)		(68)		(111)
Cash collections of deferred purchase price		-		500
Net Cash Used in Investing Activities		(13,002)		(59,987)		(5,022)		(5,401)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less		(22)		(1,071)		1,742		(256)
Issuance of other short-term borrowings		4,012		4,852		1,390		296
Repayment of other short-term borrowings		(4,702)		(1,075)		-		(176)
Issuance of long-term debt		15,034		38,325		4,357		9,182
Repayment of long-term debt		(24,368)		(43,579)		(4,422)		(9,840)
Payment of vendor financing		(2,601)		(347)		(791)		(819)
Issuance of preferred stock						3,869		-
Purchase of treasury stock		(409)		(577)		(5,463)		(189)
Issuance of treasury stock		576		359		58		167
Issuance of preferred interests in subsidiary		1,488		-
Dividends paid		(11,162)		(9,775)		(3,737)		(3,714)
Other		(187)		(791)		(3,102)		928
Net Cash Used in Financing Activities		(22,341)		(13,679)		(6,099)		(4,421)
Net increase (decrease) in cash and cash equivalents and restricted cash		1,382		(42,144)
Net (decrease) increase in cash and cash equivalents and restricted cash						(2,255)		1,230
Cash and cash equivalents and restricted cash beginning of year		5,400		50,932		12,295		5,400
Cash and Cash Equivalents and Restricted Cash End of Period	$	6,782	$	8,788	$	10,040	$	6,630
See Notes to Consolidated Financial Statements.	See Notes to Consolidated Financial Statements.				See Notes to Consolidated Financial Statements.

AT&T INC.	AT&T INC.												AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY												CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts	Dollars and shares in millions except per share amounts												Dollars and shares in millions except per share amounts
(Unaudited)	(Unaudited)
	Three months ended						Nine months ended						March 31, 2020			March 31, 2019
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			Shares	Amount		Shares	Amount
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount

Common Stock
Balance at beginning of period	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	6,495	$	6,495
Preferred Stock - Series A
Balance at beginning of year													-	$	-	-	$	-
Issuance of stock	-		-	-		-	-		-	1,126		1,126	-		-	-		-
Balance at end of period	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	-	$	-	-	$	-

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 year													7,621	$	7,621	7,621	$	7,621
Issuance of stock													-		-	-		-
Balance at end of period													7,621	$	7,621	7,621	$	7,621
Additional Paid-In Capital
Balance at beginning of period		$	125,109		$	125,960		$	125,525		$	89,563
Issuance of common stock			-			-			-			35,473
Balance at beginning of year														$	126,279		$	125,525
Repurchase and acquisition of common stock															67			-
Issuance of preferred stock															3,869			-
Issuance of treasury stock			(1)			(45)			(128)			(49)			(47)			(77)
Share-based payments			31			(209)			(258)			719			(202)			(274)
Balance at end of period		$	125,139		$	125,706		$	125,139		$	125,706		$	129,966		$	125,174

Retained Earnings
Balance at beginning of period		$	59,389		$	56,555		$	58,753		$	50,500
Net income attributable to AT&T ($0.50,
$0.65, $1.57 and $2.19 per diluted share)			3,700			4,718			11,509			14,512
Dividends to stockholders ($0.51, $0.50,
$1.53, and $1.50 per share)			(3,742)			(3,649)			(11,231)			(10,388)
Balance at beginning of year														$	57,936		$	58,753
Net income attributable to AT&T ($0.63 and $0.56
per diluted share)															4,610			4,096
Preferred stock dividends															(32)			-
Common stock dividends ($0.52 and $0.51 per share)															(3,687)			(3,741)
Cumulative effect of accounting changes			-			-			316			3,000
Balance at end of period		$	59,347		$	57,624		$	59,347		$	57,624

Treasury Stock
Balance at beginning of period	(316)	$	(11,151)	(361)	$	(12,872)	(339)	$	(12,059)	(356)	$	(12,714)
Repurchase and acquisition of common stock	(5)		(186)	(1)		(34)	(14)		(466)	(19)		(641)
Issuance of treasury stock	4		142	11		420	36		1,330	24		869
and other adjustments															(293)			316
Balance at end of period	(317)	$	(11,195)	(351)	$	(12,486)	(317)	$	(11,195)	(351)	$	(12,486)		$	58,534		$	59,424
See Notes to Consolidated Financial Statements.	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

Nine months ended

September 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount
Accumulated Other Comprehensive

Income Attributable to AT&T, net of tax

Balance at beginning of period

$
3,289

$
5,716

$
4,249

$
7,017
Other comprehensive income

attributable to AT&T

(1,152)

(333)

(2,112)

(976)
Amounts reclassified to retained earnings

-

-

-

(658)
Balance at end of period

$
2,137

$
5,383

$
2,137

$
5,383

Noncontrolling Interest

Balance at beginning of period

$
9,824

$
1,150

$
9,795

$
1,146
Net income attributable to

noncontrolling interest

249

98

762

311
Interest acquired by noncontrolling owners

1,488

-

1,498

8
Acquisition of noncontrolling interest

-

-

-

1
Acquisition of interests held by

noncontrolling owners

-

(9)

-

(9)
Distributions

(266)

(109)

(791)

(332)
Translation adjustments attributable to

noncontrolling interest, net of taxes

(17)

(7)

(15)

(37)
Cumulative effect of accounting changes

-

-

29

35
Balance at end of period

$
11,278

$
1,123

$
11,278

$
1,123

Total Stockholders’ Equity at beginning

of period

$
194,081

$
184,130

$
193,884

$
142,007
Total Stockholders’ Equity at end

of period

$
194,327

$
184,971

$
194,327

$
184,971
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)
	March 31, 2020			March 31, 2019
	Shares	Amount		Shares	Amount
Treasury Stock
Balance at beginning of year	(366)	$	(13,085)	(339)	$	(12,059)
Repurchase and acquisition of common stock	(148)		(5,547)	(7)		(208)
Issuance of treasury stock	18		675	22		815
Balance at end of period	(496)	$	(17,957)	(324)	$	(11,452)
Accumulated Other Comprehensive Income (Loss)
Attributable to AT&T, net of tax
Balance at beginning of year		$	5,470		$	4,249
Other comprehensive income (loss) attributable to AT&T			(5,855)			96
Balance at end of period		$	(385)		$	4,345
Noncontrolling Interest
Balance at beginning of year		$	17,713		$	9,795
Net income attributable to noncontrolling interest			353			252
Issuance and acquisition of noncontrolling interests			1			9
Distributions			(339)			(246)
Translation adjustments attributable to noncontrolling
interest, net of taxes			(51)			-
Cumulative effect of accounting changes
and other adjustments			(7)			29
Balance at end of period		$	17,670		$	9,839
Total Stockholders’ Equity at beginning of year		$	201,934		$	193,884
Total Stockholders’ Equity at end of period		$	195,449		$	194,951
See Notes to Consolidated Financial Statements.

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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, including the operating results of Warner Media, LLC (referred to as “Time Warner” or “WarnerMedia”), which was acquired on June 14, 2018 (see Note 8). Our operating results for 2018 include the results from Time Warner following the acquisition date.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, ~~2018.~~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.

All significant intercompany transactions are eliminated in the consolidation process. Investments in subsidiaries and partnerships 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’ other comprehensive income (OCI) 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.

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

Adopted and Pending Accounting Standards and Other Changes

~~Leases~~Credit Losses As of January 1, ~~2019,~~2020, we adopted, ~~with~~through modified retrospective application, the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)” (ASC 842), which replaces existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements (see Note 10). ASC 842 requires lessees to recognize most leases on their balance sheets as liabilities, with corresponding “right-of-use” assets. For income statement recognition purposes, leases are classified as either a finance or an operating lease without relying upon bright-line tests.

The key change upon adoption of the standard was balance sheet recognition, given that the recognition of lease expense on our income statement is similar to our historical accounting. Using the modified retrospective transition method of adoption, we did not adjust the balance sheet for comparative periods but recorded a cumulative effect adjustment to retained earnings on January 1, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward our historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements that were not accounted for as leases. We excluded leases with original terms of one year or less. Additionally, we elected to not separate lease and non-lease components for certain classes of assets in arrangements where we are the lessee and for certain classes of assets where we are the lessor. Our accounting for finance leases did not change from our prior accounting for capital leases.

~~The adoption of ASC 842 resulted in the recognition of an operating lease liability of $22,121~~ ~~and an operating right-of-use asset of the same amount. Existing prepaid and deferred rent accruals were recorded as an offset to the right-of-use asset, resulting in a net asset of $20,960. The cumulative effect of the adoption to retained earnings was an increase of $316 reflecting the reclassification of deferred gains related to sale/leaseback transactions.~~ ~~The standard did not materially impact our income statements or statements of cash flows, and had no impact on our debt-covenant compliance under our current agreements.~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~Deferral of Episodic Television and Film Costs~~ ~~In March 2019, the FASB issued ASU No. 2019-02,~~ “Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials” (ASU 2019-02), which we early adopted as of January 1, 2019, with ~~prospective~~ application. The standard eliminates certain revenue-related constraints on capitalization of inventory costs for episodic television that existed under prior guidance. In addition, the balance sheet classification requirements that existed in prior guidance for film production costs and programming inventory were eliminated. As of January 1, 2019, we reclassified $~~2,274~~ ~~of our programming inventory costs from “Other current assets” to “Other Assets” in accordance with the guidance.~~ ~~This change in accounting does not materially impact our income statement.~~

~~Spectrum Licenses in Mexico~~During the first quarter of 2019, in conjunction with the renewal process of certain spectrum licenses in Mexico, we reassessed the estimated economic lives and renewal assumptions for these licenses. As a result, we have changed the life of these licenses from indefinite to finite-lived. On January 1, 2019, we began amortizing our spectrum licenses in Mexico over their average remaining economic life of 25 years. This change in accounting does not materially impact our income statement.

~~Recently Issued Accounting Standards~~

~~Credit Loss Standard~~ ~~In June 2016, the FASB issued ASU~~ No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13, as amended), which replaces the incurred loss impairment methodology under ~~current GAAP.~~prior GAAP with 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. ~~The amendments under~~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 trade and loan receivables, $10 reduction of contract assets, $105 reduction of net deferred income tax liability and $7 reduction of “Noncontrolling interest” as an opening adjustment. Our adoption of ASU 2016-13 ~~will be effective for years beginning after December 15, 2019, and interim periods within those years. We are currently evaluating ASU 2016-13 but do~~did not ~~anticipate it will~~ have a material impact on our financial statements.

Reference Rate ReformIn March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04), which provides optional expedients, and allows for certain exceptions to existing GAAP, for contract modifications triggered by the expected market transition of certain benchmark interest rates to alternative reference rates. ASU 2020-04 applies to contracts, hedging relationships and other arrangements that reference the London Interbank Offering Rate (LIBOR) or any other rates ending after December 31, 2022. We are evaluating the impact of our adoption of ASU 2020-04, including optional expedients, for impact to our financial statements.

Intangible Assets 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 $386, or $0.04 per diluted share available to common stock during the first quarter of 2020.

109

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

We also 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.

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months ended March 31, 2020 and ~~nine months ended September 30,~~ 2019, ~~and 2018,~~ is shown in the table below:

	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2019		2018		2019		2018		2020		2019
Numerators
Numerator for basic earnings per share:
Net Income	$	3,949	$	4,816	$	12,271	$	14,823
Net income									$	4,963	$	4,348
Less: Net income attributable to noncontrolling interest		(249)		(98)		(762)		(311)		(353)		(252)
Net Income attributable to AT&T		3,700		4,718		11,509		14,512
Net income attributable to AT&T										4,610		4,096
Less: Preferred stock dividends										(32)		-
Net income attributable to common stock										4,578		4,096
Dilutive potential common shares:
Share-based payment		6		4		16		13		6		6
Numerator for diluted earnings per share	$	3,706	$	4,722	$	11,525	$	14,525	$	4,584	$	4,102
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		7,327		7,284		7,321		6,603		7,187		7,313
Dilutive potential common shares:
Share-based payment (in shares)		29		36		29		27		27		29
Denominator for diluted earnings per share		7,356		7,320		7,350		6,630		7,214		7,342
Basic earnings per share attributable to AT&T	$	0.50	$	0.65	$	1.57	$	2.19
Diluted earnings per share attributable to AT&T	$	0.50	$	0.65	$	1.57	$	2.19
Basic earnings per share attributable to Common Stock									$	0.63	$	0.56
Diluted earnings per share attributable to Common Stock									$	0.63	$	0.56

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.

1110

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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 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, 2018
$
(3,084)

$
(2)

$
818

$
6,517

$
4,249
Other comprehensive income
(loss) before reclassifications

(166)

67

(1,006)

-

(1,105)
Amounts reclassified
from accumulated OCI

-

-

24
¹

(1,031)
²

(1,007)
Net other comprehensive
income (loss)

(166)

67

(982)

(1,031)

(2,112)
Balance as of September 30, 2019
$
(3,250)

$
65

$
(164)

$
5,486

$
2,137

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, 2017
$
(2,054)

$
660

$
1,402

$
7,009

$
7,017
Other comprehensive income
(loss) before reclassifications

(787)

(22)

257

530

(22)
Amounts reclassified
from accumulated OCI

-

-

35
¹

(989)
²

(954)
Net other comprehensive
income (loss)

(787)

(22)

292

(459)

(976)
Amounts reclassified to
retained earnings

-

(658)
³

-

-

(658)
Balance as of September 30, 2018
$
(2,841)

$
(20)

$
1,694

$
6,550

$
5,383
¹
(Gains) losses are included in Interest expense in the consolidated statements of income (see Note 7).
²
The amortization of prior service credits associated with postretirement benefits are included in Other income (expense) in the
consolidated statements of income (see Note 6).
³
With the adoption of ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Liabilities," the unrealized (gains) losses on our equity investments are reclassified to retained earnings.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

		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			(1,803)			66			(3,657)			-			(5,394)
Amounts reclassified from accumulated OCI			-	¹		-	¹		-	²		(461)	³		(461)
Net other comprehensive
income (loss)			(1,803)			66			(3,657)			(461)			(5,855)
Balance as of March 31, 2020		$	(4,859)		$	114		$	(3,694)		$	8,054		$	(385)

		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			288			16			127			-			431
Amounts reclassified from accumulated OCI			-	¹		-	¹		11	²		(346)	³		(335)
Net other comprehensive
income (loss)			288			16			138			(346)			96
Balance as of March 31, 2019		$	(2,796)		$	14		$	956		$	6,171		$	4,345
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).

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 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 4 reportable segments: (1) Communications, (2) WarnerMedia, (3) Latin America, and (4) Xandr.

We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as 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 operating performance. EBITDA does not

AT&T INC.

MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

give effect 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.

We have recast our segment results for all prior periods to exclude our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands from our Mobility and Business Wireline business units of the Communications segment, instead reporting them with Corporate and Other. (See Note 8)

The 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 units:

Mobility provides nationwide wireless service and 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 ~~DIRECTV and U-verse~~ distribution platforms.

Business Wireline provides advanced IP-based services, as well as traditional voice and data services 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 AT&T’s Regional Sports Networks (RSNs) and equity investments (predominantly Game Show Network and Otter Media), previously included in Entertainment Group, have been reclassified into the WarnerMedia segment and are combined with the Time Warner operations for the period subsequent to our acquisition on June 14, 2018. 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 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 Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:

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

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.

The Xandr segment provides advertising ~~services and includes AppNexus, an advertising technology company we acquired in~~ ~~August 2018. Xandr~~services. These services utilize data insights to develop and deliver targeted advertising across video and digital platforms. Certain revenues in this segment are also reported by the Communications segment and are eliminated upon consolidation.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

Corporate and Other ~~reconcile~~reconciles our segment results to consolidated operating income and income before income taxes, and ~~include:~~includes:

Corporate, which consists of: (1) businesses no longer integral to our operations or which we no longer actively market, (2) corporate support functions, (3) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated and (4) the reclassification of the amortization of prior service credits, which we continue to report with segment operating expenses, to consolidated ~~other~~“Other income (expense) – net and (5) the recharacterization of programming intangible asset amortization, for released programming acquired in the Time Warner acquisition, which we continue to report within WarnerMedia segment operating expense, to consolidated amortization expense. The programming and intangible asset amortization reclass was $108 and $772 in the third quarter and $370 and $870 for the first nine months of 2019 and 2018, respectively.net.”

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

Certain significant items includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) losses resulting from abandonment or impairment of ~~network~~ assets 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~~expense” and ~~other~~“Other income (expense) – net,” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.

1412

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2019
For the three months ended March 31, 2020															For the three months ended March 31, 2020
																										Equity in Net
																		Operations				Depreciation		Operating		Income
																		and Support				and		Income		(Loss)		Segment
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution		Revenues		Expenses		EBITDA		Amortization		(Loss)		Affiliates		Contribution
Communications
Mobility	$	17,701	$	9,948	$	7,753	$	2,011	$	5,742	$	-	$	5,742	$	17,402	$	9,569	$	7,833	$	2,045	$	5,788	$	-	$	5,788
Entertainment Group		11,197		8,797		2,400		1,316		1,084		1		1,085		10,515		7,891		2,624		1,289		1,335		-		1,335
Business Wireline		6,503		4,022		2,481		1,271		1,210		(1)		1,209		6,332		3,951		2,381		1,301		1,080		-		1,080
Total Communications		35,401		22,767		12,634		4,598		8,036		-		8,036		34,249		21,411		12,838		4,635		8,203		-		8,203
WarnerMedia
Turner		3,007		1,460		1,547		68		1,479		10		1,489		3,162		1,710		1,452		69		1,383		6		1,389
Home Box Office		1,819		1,072		747		33		714		10		724		1,497		1,053		444		21		423		20		443
Warner Bros.		3,333		2,706		627		39		588		(25)		563		3,240		2,950		290		41		249		(8)		241
Eliminations and other		(313)		(71)		(242)		10		(252)		20		(232)
Other																(540)		(196)		(344)		12		(356)		(3)		(359)
Total WarnerMedia		7,846		5,167		2,679		150		2,529		15		2,544		7,359		5,517		1,842		143		1,699		15		1,714
Latin America
Vrio		1,013		851		162		162		-		13		13		887		783		104		147		(43)		4		(39)
Mexico		717		774		(57)		122		(179)		-		(179)		703		714		(11)		134		(145)		-		(145)
Total Latin America		1,730		1,625		105		284		(179)		13		(166)		1,590		1,497		93		281		(188)		4		(184)
Xandr		504		162		342		15		327		-		327		489		170		319		20		299		-		299
Segment Total		45,481		29,721		15,760		5,047		10,713	$	28	$	10,741		43,687		28,595		15,092		5,079		10,013	$	19	$	10,032
Corporate and Other
Corporate		407		703		(296)		131		(427)						388		874		(486)		87		(573)
Acquisition-related items		-		190		(190)		1,771		(1,961)						-		182		(182)		2,056		(2,238)
Certain significant items		-		39		(39)		-		(39)						-		(658)		658		-		658
Eliminations and consolidations		(1,300)		(915)		(385)		-		(385)						(1,296)		(922)		(374)		-		(374)
AT&T Inc.	$	44,588	$	29,738	$	14,850	$	6,949	$	7,901					$	42,779	$	28,071	$	14,708	$	7,222	$	7,486

1513

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2018
For the three months ended March 31, 2019															For the three months ended March 31, 2019
																										Equity in Net
																		Operations				Depreciation		Operating		Income
																		and Support				and		Income		(Loss)		Segment
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution		Revenues		Expenses		EBITDA		Amortization		(Loss)		Affiliates		Contribution
Communications
Mobility	$	17,735	$	10,104	$	7,631	$	2,057	$	5,574	$	1	$	5,575	$	17,363	$	10,041	$	7,322	$	2,013	$	5,309	$	-	$	5,309
Entertainment Group		11,589		9,155		2,434		1,331		1,103		1		1,104		11,328		8,527		2,801		1,323		1,478		-		1,478
Business Wireline		6,683		4,022		2,661		1,187		1,474		(3)		1,471		6,478		4,032		2,446		1,222		1,224		-		1,224
Total Communications		36,007		23,281		12,726		4,575		8,151		(1)		8,150		35,169		22,600		12,569		4,558		8,011		-		8,011
WarnerMedia
Turner		2,988		1,487		1,501		59		1,442		7		1,449		3,443		2,136		1,307		60		1,247		25		1,272
Home Box Office		1,644		991		653		25		628		2		630		1,510		921		589		22		567		15		582
Warner Bros.		3,720		3,104		616		40		576		(23)		553		3,518		2,919		599		52		547		6		553
Eliminations and other		(148)		(79)		(69)		10		(79)		(25)		(104)
Other																(92)		17		(109)		9		(118)		21		(97)
Total WarnerMedia		8,204		5,503		2,701		134		2,567		(39)		2,528		8,379		5,993		2,386		143		2,243		67		2,310
Latin America
Vrio		1,102		877		225		168		57		9		66		1,067		866		201		169		32		-		32
Mexico		731		869		(138)		129		(267)		-		(267)		651		725		(74)		131		(205)		-		(205)
Total Latin America		1,833		1,746		87		297		(210)		9		(201)		1,718		1,591		127		300		(173)		-		(173)
Xandr		445		109		336		3		333		-		333		426		160		266		13		253		-		253
Segment Total		46,489		30,639		15,850		5,009		10,841	$	(31)	$	10,810		45,692		30,344		15,348		5,014		10,334	$	67	$	10,401
Corporate and Other
Corporate		531		141		390		829		(439)						433		661		(228)		204		(432)
Acquisition-related items		-		362		(362)		2,329		(2,691)						(42)		73		(115)		1,988		(2,103)
Certain significant items		-		75		(75)		-		(75)						-		248		(248)		-		(248)
Eliminations and consolidations		(1,281)		(913)		(368)		(1)		(367)						(1,256)		(938)		(318)		-		(318)
AT&T Inc.	$	45,739	$	30,304	$	15,435	$	8,166	$	7,269					$	44,827	$	30,388	$	14,439	$	7,206	$	7,233

1614

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the nine months ended September 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
$
52,356

$
29,511

$
22,845

$
6,027

$
16,818

$
(1)

$
16,817
Entertainment Group

33,893

25,839

8,054

3,978

4,076

1

4,077
Business Wireline

19,588

12,029

7,559

3,735

3,824

-

3,824
Total Communications

105,837

67,379

38,458

13,740

24,718

-

24,718
WarnerMedia

Turner

9,860

5,813

4,047

167

3,880

46

3,926
Home Box Office

5,045

3,124

1,921

67

1,854

40

1,894
Warner Bros.

10,240

8,543

1,697

122

1,575

(19)

1,556
Eliminations and other

(570)

(31)

(539)

28

(567)

70

(497)
Total WarnerMedia

24,575

17,449

7,126

384

6,742

137

6,879
Latin America

Vrio

3,112

2,598

514

496

18

25

43
Mexico

2,093

2,312

(219)

372

(591)

-

(591)
Total Latin America

5,205

4,910

295

868

(573)

25

(548)
Xandr

1,415

469

946

41

905

-

905
Segment Total

137,032

90,207

46,825

15,033

31,792

$
162

$
31,954
Corporate and Other

Corporate

1,290

2,129

(839)

505

(1,344)

Acquisition-related items

(72)

579

(651)

5,719

(6,370)

Certain significant items

-

381

(381)

-

(381)

Eliminations and consolidations

(3,878)

(2,814)

(1,064)

(1)

(1,063)

AT&T Inc.
$
134,372

$
90,482

$
43,890

$
21,256

$
22,634

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

For the nine months ended September 30, 2018

Revenues

Operations and Support Expenses

EBITDA

Depreciation and Amortization

Operating Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment Contribution
Communications

Mobility
$
51,965

$
29,603

$
22,362

$
6,218

$
16,144

$
-

$
16,144
Entertainment Group

34,498

26,623

7,875

3,986

3,889

(1)

3,888
Business Wireline

20,035

12,047

7,988

3,520

4,468

(2)

4,466
Total Communications

106,498

68,273

38,225

13,724

24,501

(3)

24,498
WarnerMedia

Turner

3,767

1,933

1,834

71

1,763

39

1,802
Home Box Office

1,925

1,162

763

30

733

1

734
Warner Bros.

4,227

3,507

720

54

666

(24)

642
Eliminations and other

(210)

(106)

(104)

11

(115)

(71)

(186)
Total WarnerMedia

9,709

6,496

3,213

166

3,047

(55)

2,992
Latin America

Vrio

3,710

2,894

816

559

257

24

281
Mexico

2,099

2,459

(360)

383

(743)

-

(743)
Total Latin America

5,809

5,353

456

942

(486)

24

(462)
Xandr

1,174

218

956

4

952

-

952
Segment Total

123,190

80,340

42,850

14,836

28,014

$
(34)

$
27,980
Corporate and Other

Corporate

1,636

1,832

(196)

1,034

(1,230)

Acquisition-related items

-

750

(750)

4,669

(5,419)

Certain significant items

-

407

(407)

-

(407)

Eliminations and consolidations

(2,063)

(1,040)

(1,023)

(1)

(1,022)

AT&T Inc.
$
122,763

$
82,289

$
40,474

$
20,538

$
19,936

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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:~~income.

										Three months ended
		Three months ended September 30,				Nine months ended September 30,				March 31,
		2019		2018		2019		2018		2020		2019
Communications	$	8,036	$	8,150	$	24,718	$	24,498	Communications	$	8,203	$	8,011
WarnerMedia		2,544		2,528		6,879		2,992	WarnerMedia		1,714		2,310
Latin America		(166)		(201)		(548)		(462)	Latin America		(184)		(173)
Xandr		327		333		905		952	Xandr		299		253
Segment Contribution		10,741		10,810		31,954		27,980	Segment Contribution		10,032		10,401
Reconciling Items:									Reconciling Items:
Corporate and Other		(427)		(439)		(1,344)		(1,230)	Corporate and Other		(573)		(432)
Merger and integration items		(190)		(362)		(651)		(794)	Merger and integration items		(182)		(115)
Amortization of intangibles acquired		(1,771)		(2,329)		(5,719)		(4,669)	Amortization of intangibles acquired		(2,056)		(1,988)
Employee separation charges		(39)		(75)		(381)		(259)
Natural disaster items		-		-		-		(104)
Segment equity in net income of affiliates		(28)		31		(162)		34
Impairments									Impairments		(123)		-
Gain on spectrum transaction¹									Gain on spectrum transaction¹		900		-
Employee separation costs and benefit-related losses									Employee separation costs and benefit-related losses		(119)		(248)
Segment equity in net income (loss) of affiliates									Segment equity in net income (loss) of affiliates		(19)		(67)
Eliminations and consolidations		(385)		(367)		(1,063)		(1,022)	Eliminations and consolidations		(374)		(318)
AT&T Operating Income		7,901		7,269		22,634		19,936	AT&T Operating Income		7,486		7,233
Interest Expense		(2,083)		(2,051)		(6,373)		(5,845)	Interest Expense		2,018		2,141
Equity in net income (loss) of affiliates		3		(64)		36		(71)	Equity in net income (loss) of affiliates		(6)		(7)
Other income (expense) - net		(935)		1,053		(967)		5,108	Other income (expense) - net		803		286
Income Before Income Taxes	$	4,886	$	6,207	$	15,330	$	19,128	Income Before Income Taxes	$	6,265	$	5,371
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:~~segment.

Intersegment Revenue Reconciliation
Intersegment Reconciliation
									Three months ended
	Three months ended September 30,				Nine months ended September 30,				March 31,
	2019		2018		2019			2018	2020		2019
Intersegment revenues
Communications	$	2	$	6	$	10	$	8	$	2	$	-
WarnerMedia		812		844		2,531		1,053		816		858
Latin America		-		-		-		-		-		-
Xandr		7		-		7		-		1		-
Total Intersegment Revenues		821		850		2,548		1,061		819		858
Consolidations		479		431		1,330		1,002		477		398
Eliminations and consolidations	$	1,300	$	1,281	$	3,878	$	2,063	$	1,296	$	1,256

1915

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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 September 30, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
13,856

$
-

$
-

$
-

$
-

$
74

$
-

$
3,771

$
17,701
Entertainment Group

-

2,117

628

7,512

-

421

517

2

11,197
Business Wireline

-

3,269

2,252

-

-

-

783

199

6,503
WarnerMedia

Turner

-

-

-

1,927

89

913

78

-

3,007
Home Box Office

-

-

-

1,533

284

-

2

-

1,819
Warner Bros.

-

-

-

23

3,129

13

168

-

3,333
Eliminations and Other

-

-

-

57

(387)

19

(2)

-

(313)
Latin America

Vrio

-

-

-

1,013

-

-

-

-

1,013
Mexico

455

-

-

-

-

-

-

262

717
Xandr

-

-

-

-

-

504

-

-

504
Corporate and Other

124

13

6

-

-

-

227

37

407
Eliminations and
consolidations

-

-

-

-

(798)

(421)

(81)

-

(1,300)
Total Operating Revenues
$
14,435

$
5,399

$
2,886

$
12,065

$
2,317

$
1,523

$
1,692

$
4,271

$
44,588

Revenue Categories

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

For the three months ended March 31, 2020
	Service Revenues
		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total
Communications
Mobility	$	13,892	$	-	$	-	$	-	$	-	$	76	$	-	$	3,434	$	17,402
Entertainment Group		-		2,109		581		6,982		-		413		419		11		10,515
Business Wireline		-		3,275		2,129		-		-		-		753		175		6,332
WarnerMedia
Turner		-		-		-		2,049		86		957		70		-		3,162
Home Box Office		-		-		-		1,338		157		-		2		-		1,497
Warner Bros.		-		-		-		10		3,060		2		168		-		3,240
Eliminations and Other		-		-		-		63		(646)		20		23		-		(540)
Latin America
Vrio		-		-		-		887		-		-		-		-		887
Mexico		467		-		-		-		-		-		-		236		703
Xandr		-		-		-		-		-		489		-		-		489
Corporate and Other		117		14		134		-		-		-		83		40		388
Eliminations and
consolidations		-		-		-		-		(794)		(413)		(89)		-		(1,296)
Total Operating Revenues	$	14,476	$	5,398	$	2,844	$	11,329	$	1,863	$	1,544	$	1,429	$	3,896	$	42,779

2016

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2018
For the three months ended March 31, 2019																			For the three months ended March 31, 2019
	Service Revenues																		Service Revenues
		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total		Wireless		Advanced Data		Legacy Voice & Data		Subscription		Content		Advertising		Other		Equipment		Total
Communications
Mobility	$	13,751	$	-	$	-	$	-	$	-	$	77	$	-	$	3,907	$	17,735	$	13,562	$	-	$	-	$	-	$	-	$	67	$	-	$	3,734	$	17,363
Entertainment Group		-		2,045		739		7,882		-		401		518		4		11,589		-		2,070		683		7,724		-		350		501		-		11,328
Business Wireline		-		3,053		2,602		-		-		-		831		197		6,683		-		3,172		2,397		-		-		-		750		159		6,478
WarnerMedia
Turner		-		-		-		1,855		125		944		64		-		2,988		-		-		-		1,965		135		1,261		82		-		3,443
Home Box Office		-		-		-		1,517		125		-		2		-		1,644		-		-		-		1,334		173		-		3		-		1,510
Warner Bros.		-		-		-		20		3,494		20		186		-		3,720		-		-		-		21		3,332		10		155		-		3,518
Eliminations and Other		-		-		-		27		(199)		19		5		-		(148)		-		-		-		49		(152)		8		3		-		(92)
Latin America
Vrio		-		-		-		1,102		-		-		-		-		1,102		-		-		-		1,067		-		-		-		-		1,067
Mexico		440		-		-		-		-		-		-		291		731		442		-		-		-		-		-		-		209		651
Xandr		-		-		-		-		-		445		-		-		445		-		-		-		-		-		426		-		-		426
Corporate and Other		161		13		7		-		-		-		307		43		531		163		13		7		-		-		-		167		41		391
Eliminations and consolidations		-		-		-		-		(830)		(401)		(50)		-		(1,281)
Eliminations and
consolidations																				-		-		-		-		(837)		(350)		(69)		-		(1,256)
Total Operating Revenues	$	14,352	$	5,111	$	3,348	$	12,403	$	2,715	$	1,505	$	1,863	$	4,442	$	45,739	$	14,167	$	5,255	$	3,087	$	12,160	$	2,651	$	1,772	$	1,592	$	4,143	$	44,827

2117

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the nine months ended September 30, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
41,171

$
-

$
-

$
-

$
-

$
212

$
-

$
10,973

$
52,356
Entertainment Group

-

6,296

1,969

22,872

-

1,170

1,580

6

33,893
Business Wireline

-

9,649

6,973

-

-

-

2,430

536

19,588
WarnerMedia

Turner

-

-

-

5,835

335

3,440

250

-

9,860
Home Box Office

-

-

-

4,383

655

-

7

-

5,045
Warner Bros.

-

-

-

67

9,636

33

504

-

10,240
Eliminations and Other

-

-

-

160

(776)

36

10

-

(570)
Latin America

Vrio

-

-

-

3,112

-

-

-

-

3,112
Mexico

1,376

-

-

-

-

-

-

717

2,093
Xandr

-

-

-

-

-

1,415

-

-

1,415
Corporate and Other

437

40

20

-

-

-

605

116

1,218
Eliminations and
consolidations

-

-

-

-

(2,475)

(1,170)

(233)

-

(3,878)
Total Operating Revenues
$
42,984

$
15,985

$
8,962

$
36,429

$
7,375

$
5,136

$
5,153

$
12,348

$
134,372

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

For the nine months ended September 30, 2018

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
40,432

$
-

$
-

$
-

$
-

$
162

$
-

$
11,371

$
51,965
Entertainment Group

-

5,904

2,317

23,559

-

1,122

1,588

8

34,498
Business Wireline

-

9,101

8,176

-

-

-

2,192

566

20,035
WarnerMedia

Turner

-

-

-

2,363

146

1,181

77

-

3,767
Home Box Office

-

-

-

1,787

136

-

2

-

1,925
Warner Bros.

-

-

-

27

3,949

28

223

-

4,227
Eliminations and Other

-

-

-

27

(255)

13

5

-

(210)
Latin America

Vrio

-

-

-

3,710

-

-

-

-

3,710
Mexico

1,261

-

-

-

-

-

-

838

2,099
Xandr

-

-

-

-

-

1,174

-

-

1,174
Corporate and Other

480

39

28

-

-

-

958

131

1,636
Eliminations and
consolidations

-

-

-

-

(1,039)

(1,122)

98

-

(2,063)
Total Operating Revenues
$
42,173

$
15,044

$
10,521

$
31,473

$
2,937

$
2,558

$
5,143

$
12,914

$
122,763

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~. 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 costs and deferred customer contract fulfillment costs included on our consolidated balance sheets:

		September 30,		December 31,		March 31,		December 31,
Consolidated Balance Sheets		2019		2018		2020		2019
Deferred Acquisition Costs
Other current assets	$	2,190	$	1,901	$	2,592	$	2,462
Other Assets		2,878		2,073		2,997		2,991
Total deferred customer contract acquisition costs		5,068		3,974		5,589		5,453

Deferred Fulfillment Costs
Other current assets		4,589		4,090		4,438		4,519
Other Assets		6,640		7,450		6,279		6,439
Total deferred customer contract fulfillment costs	$	11,229	$	11,540	$	10,717	$	10,958

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

		September 30,		September 30,		March 31,		March 31,
Consolidated Statements of Income		2019		2018		2020		2019
Deferred acquisition cost amortization	$	1,565	$	959	$	636	$	547
Deferred fulfillment cost amortization		3,656		2,983		1,305		1,098

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:

		September 30,		December 31,		March 31,		December 31,
Consolidated Balance Sheets		2019		2018
						2020		2019

Contract asset	$	2,255	$	1,896	$	2,598	$	2,472
Contract liability		6,886		6,856		6,757		6,999

Our ~~December 31, 2018~~beginning of period contract liability recorded as customer contract revenue during ~~2019~~2020 was ~~$5,295.~~$4,519.

2418

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Our consolidated balance sheets at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 included approximately ~~$1,496~~$1,700 and ~~$1,244,~~$1,611, respectively, for the current portion of our contract asset in “Other current assets” and ~~$5,910~~$5,769 and ~~$5,752,~~$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 ~~September 30, 2019,~~March 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$40,216,~~$36,486, of which we expect to recognize approximately ~~70%~~86% by the end of ~~2020,~~2021, with the balance recognized thereafter.

NOTE 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 first quarter of 2019, for certain management participants~~ We do not have significant funding requirements in our pension plan who terminated employment before April 1, 2019, we offered the option of more favorable 2018 interest rates and mortality basis for determining lump-sum distributions. During the first nine months of 2019, we have recorded special termination benefits of $81 in “Other income (expense) – net.” During 2019, we also offered certain terminated vested pension plan participants the opportunity to receive their benefit in a lump-sum amount.2020.

We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required. We anticipated total distributions from the pension plan would exceed the threshold of service and interest costs for 2019, requiring us to follow settlement accounting and remeasure our pension benefit obligation at each quarter-end, resulting in the recognition of actuarial losses of $432, $1,699, and $1,888 in the first, second and third quarters of 2019, respectively.

~~As part of our quarterly 2019 remeasurements, we decreased the weighted-average discount rate used to measure our pension benefit obligation from 4.50% at December 31, 2018 by~~ 40 basis points each quarter to 3.30% at September 30, 2019. Our remeasurements also reflect actual returns on plan assets of 13.40% (nine-month rate). Our expected long-term rate of return on pension plan assets is an annualized 7.00% for 2019.

2519

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table details pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension cost (benefit) is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.”

	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2019		2018		2019		2018		2020		2019
Pension cost:
Service cost – benefits earned during the period	$	260	$	270	$	743	$	845	$	257	$	240
Interest cost on projected benefit obligation		463		551		1,520		1,542		422		549
Expected return on assets		(905)		(761)		(2,636)		(2,276)		(889)		(851)
Amortization of prior service credit		(28)		(28)		(85)		(87)		(28)		(33)
Actuarial (gain) loss		1,888		-		4,019		(1,796)		-		432
Net pension (credit) cost	$	1,678	$	32	$	3,561	$	(1,772)	$	(238)	$	337

Postretirement cost:
Service cost – benefits earned during the period	$	19	$	27	$	55	$	82	$	13	$	18
Interest cost on accumulated postretirement benefit obligation		185		196		557		582		104		186
Expected return on assets		(57)		(76)		(169)		(228)		(44)		(56)
Amortization of prior service credit		(425)		(412)		(1,277)		(1,222)		(582)		(426)
Actuarial (gain) loss		-		-		-		(930)
Net postretirement (credit) cost	$	(278)	$	(265)	$	(834)	$	(1,716)	$	(509)	$	(278)

Combined net pension and postretirement (credit) cost	$	1,400	$	(233)	$	2,727	$	(3,488)	$	(747)	$	59

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. ~~Net~~For the first quarter of 2020 and 2019, net supplemental pension benefits costs not included in the table above were ~~$24~~$19 and ~~$24 in the third quarter and $74 and $65 for the first nine months of 2019 and 2018, respectively. During the third quarter of 2019, we recorded an actuarial loss of $29.~~$25.

NOTE 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 based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.

The 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, ~~2018.~~2019.

2620

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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, 2019				December 31, 2018					March 31, 2020				December 31, 2019
		Carrying		Fair		Carrying		Fair			Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value			Amount		Value		Amount		Value
Notes and debentures¹	Notes and debentures¹	$	160,758	$	180,801	$	171,529	$	172,287	Notes and debentures¹	$	159,386	$	175,902	$	161,109	$	182,124
Commercial paper	Commercial paper		2,439		2,439		3,048		3,048	Commercial paper		3,144		3,144		-		-
Bank borrowings	Bank borrowings		4		4		4		4	Bank borrowings		-		-		4		4
Investment securities²	Investment securities²		3,599		3,599		3,409		3,409	Investment securities²		3,591		3,591		3,723		3,723
¹	Includes credit agreement borrowings.									Includes credit agreement borrowings.
²	Excludes investments accounted for under the equity method.									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.

~~The following tables present~~Following is the fair value leveling for investment securities ~~and derivatives~~ that are measured at fair value and derivatives as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities” and, for a portion of interest rate swaps, “Other current assets” on our consolidated balance sheets.

		September 30, 2019									March 31, 2020
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Equity Securities	Equity Securities									Equity Securities
Domestic equities	Domestic equities	$	781	$	-	$	-	$	781	Domestic equities	$	674	$	-	$	-	$	674
International equities	International equities		171		-		-		171	International equities		143		-		-		143
Fixed income equities	Fixed income equities		227		-		-		227	Fixed income equities		233		-		-		233
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities		-		1,380		-		1,380	Available-for-Sale Debt Securities		-		1,514		-		1,514
Asset Derivatives	Asset Derivatives									Asset Derivatives
Interest rate swaps	Interest rate swaps		-		2		-		2	Interest rate swaps		-		14		-		14
Cross-currency swaps			-		70		-		70
Foreign exchange contracts	Foreign exchange contracts		-		81		-		81	Foreign exchange contracts		-		77		-		77
Liability Derivatives	Liability Derivatives									Liability Derivatives
Cross-currency swaps	Cross-currency swaps		-		(4,553)		-		(4,553)	Cross-currency swaps		-		(8,283)		-		(8,283)
Interest rate locks	Interest rate locks		-		(225)		-		(225)	Interest rate locks		-		(720)		-		(720)
Foreign exchange contracts	Foreign exchange contracts		-		(2)		-		(2)	Foreign exchange contracts		-		(11)		-		(11)

2721

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

		December 31, 2018									December 31, 2019
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Equity Securities	Equity Securities									Equity Securities
Domestic equities	Domestic equities	$	1,061	$	-	$	-	$	1,061	Domestic equities	$	844	$	-	$	-	$	844
International equities	International equities		256		-		-		256	International equities		183		-		-		183
Fixed income equities	Fixed income equities		172		-		-		172	Fixed income equities		229		-		-		229
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities		-		870		-		870	Available-for-Sale Debt Securities		-		1,444		-		1,444
Asset Derivatives	Asset Derivatives									Asset Derivatives
Interest rate swaps										Interest rate swaps		-		2		-		2
Cross-currency swaps	Cross-currency swaps		-		472		-		472	Cross-currency swaps		-		172		-		172
Interest rate locks										Interest rate locks		-		11		-		11
Foreign exchange contracts	Foreign exchange contracts		-		87		-		87	Foreign exchange contracts		-		89		-		89
Liability Derivatives	Liability Derivatives									Liability Derivatives
Interest rate swaps			-		(39)		-		(39)
Cross-currency swaps	Cross-currency swaps		-		(2,563)		-		(2,563)	Cross-currency swaps		-		(3,187)		-		(3,187)
Foreign exchange contracts			-		(2)		-		(2)
Interest rate locks										Interest rate locks		-		(95)		-		(95)

Investment Securities

Our investment securities include both equity and 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 investment securities 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.

The components comprising total gains and losses in the period on equity securities are as follows:

Three months ended

Nine months ended

September 30,

September 30,

2019

2018

2019

2018
Total gains (losses) recognized on equity securities
$
21

$
80

$
231

$
88
Gains (Losses) recognized on equity securities sold

8

(2)

101

(4)
Unrealized gains (losses) recognized on equity securities
held at end of period

13

82

130

92

	Three months ended
	March 31,
	2020		2019
Total gains (losses) recognized on equity securities	$	(203)	$	160
Gains (losses) recognized on equity securities sold		(33)		18
Unrealized gains (losses) recognized on equity securities held at end of period		(170)		142

At ~~September 30, 2019,~~March 31, 2020, available-for-sale debt securities totaling ~~$1,380~~$1,514 have maturities as follows - less than one year: ~~$102;~~$78; one to three years: ~~$177;~~$149; three to five years: ~~$164;~~$160; for five or more years: ~~$937.~~$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 current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets.

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.

2822

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Fair Value Hedging We 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 fair value hedges impact the same category on the consolidated statements of income as the item being hedged. Unrealized gains on fair value hedges are recorded at fair market value as assets, and unrealized losses are recorded at fair market value as liabilities. Changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ no ineffectiveness was measured on 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 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 currency risk associated with variability in anticipated foreign-currency-denominated cash flows, such as unremitted or forecasted royalty and license fees owed to WarnerMedia’s domestic companies for the sale or anticipated sale of U.S. copyrighted products abroad or cash flows for certain film production costs denominated in a foreign ~~currency.~~currencies.

Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses 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 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 cash flow hedges each quarter. In the nine months ended September 30, 2019 and 2018, no ineffectiveness was measured on 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 ~~from the settlement of~~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 ~~$62~~$60 from accumulated OCI to ~~interest expense~~“Interest expense” due to the amortization of net losses on historical interest rate locks.

Net Investment Hedging We have designated ~~€1,450~~€1,364 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 OCI, net on the consolidated balance sheet. Net gains on net investment hedges recognized in accumulated OCI ~~in the third quarter and~~ for ~~the first nine months of 2019 was $~~43.2020 were $25.

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 30, 2019,~~March 31, 2020, we had posted collateral of ~~$407~~$2,809 (a deposit asset) and held ~~collateral of $38 (a receipt liability).~~0 collateral. Under the agreements, if AT&T’s credit rating had been downgraded one rating level by Fitch Ratings before the ~~final collateral exchange in September,~~ end of March, we would not have been required to post any additional collateral ~~of $122.~~. If AT&T’s credit rating had been downgraded four ~~ratings~~rating 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

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~$4,502.~~6,149. If DIRECTV Holdings LLC’s credit rating had been downgraded below BBB- ~~by S&P,~~(S&P), we would have been required to post additional collateral of ~~$288.~~$200. At December 31, ~~2018,~~2019, we had posted collateral of ~~$1,675~~$204 (a deposit asset) and held collateral of ~~$103~~$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.

AT&T INC.

MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Following are the notional amounts of our outstanding derivative positions:

		September 30,		December 31,		March 31,		December 31,
		2019		2018		2020		2019
Interest rate swaps	Interest rate swaps	$	853	$	3,483	$	853	$	853
Cross-currency swaps	Cross-currency swaps		42,792		42,192		42,325		42,325
Interest rate locks	Interest rate locks		3,500		-		3,500		3,500
Foreign exchange contracts	Foreign exchange contracts		473		2,094		106		269
Total	Total	$	47,618	$	47,769	$	46,784	$	46,947

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

Effect of Derivatives on the Consolidated Statements of Income	Effect of Derivatives on the Consolidated Statements of Income
	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
Fair Value Hedging Relationships	2019		2018		2019		2018		2020		2019
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	$	-	$	2	$	59	$	(60)
Gain (Loss) on long-term debt		-		(2)		(59)		60
Gain (loss) on interest rate swaps									$	10	$	24
Gain (loss) on long-term debt										(10)		(24)

In addition, the net swap settlements that accrued and settled in the ~~quarter~~quarters ended ~~September 30~~March 31, 2020 and 2019 were offset against interest expense.

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

Three months ended

Nine months ended

September 30,

September 30,
Cash Flow Hedging Relationships
2019

2018

2019

2018
Cross-currency swaps:

Gain (Loss) recognized in accumulated OCI
$
(487)

$
(13)

$
(1,082)

$
308
Foreign exchange contracts:

Gain (Loss) recognized in accumulated OCI

5

17

2

17
Other income (expense) - net reclassified from
accumulated OCI into income

6

-

16

-
Interest rate locks:

Gain (Loss) recognized in accumulated OCI

(202)

-

(225)

-
Interest income (expense) reclassified from
accumulated OCI into income

(15)

(15)

(47)

(44)

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS~~

~~Acquisitions~~

~~Time Warner~~ ~~On June 14, 2018, we completed our acquisition of Time Warner,~~ ~~a leader in media and entertainment whose major businesses encompass an array of some of the most respected media brands.~~ We paid Time Warner shareholders $36,599 in AT&T stock and $42,100 in cash. Total consideration, including share-based payment arrangements and other adjustments totaled $79,358, excluding Time Warner’s net debt at acquisition.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820, other than cash and long-term debt acquired in the acquisition. The income approach was primarily used to value the intangible assets, consisting primarily of distribution network, released TV and film content, in-place advertising network, trade names, and franchises. The income approach estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a required rate of return that reflects the relative risk of achieving the cash flow and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of the net assets acquired, and represents the future economic benefits that we expect to achieve as a result of the acquisition.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~The following table summarizes the fair values of the Time Warner assets acquired and liabilities assumed and related deferred income taxes as of the acquisition date:~~

Assets acquired

Cash

$
1,889
Accounts receivable

9,020
All other current assets

2,913
Noncurrent inventory and theatrical film and television production costs

5,591
Property, plant and equipment

4,693
Intangible assets subject to amortization

Distribution network

18,040
Released television and film content

10,806
Trademarks and trade names

18,081
Other

10,300
Investments and other assets

9,438
Goodwill

38,801
Total assets acquired

129,572

Liabilities assumed

Current liabilities, excluding current portion of long-term debt

8,294
Debt maturing within one year

4,471
Long-term debt

18,394
Other noncurrent liabilities

19,054
Total liabilities assumed

50,213
Net assets acquired

79,359
Noncontrolling interest

(1)
Aggregate value of consideration paid

$
79,358

~~Purchased goodwill is not expected to be deductible for tax purposes. All of the goodwill was allocated to the WarnerMedia segment.~~

~~Dispositions~~

~~Hudson Yards~~ In ~~June 2019, we sold our ownership in Hudson Yards North Tower Holdings LLC under a sale-leaseback arrangement for cash proceeds of $2,081 and recorded a loss of approximately $100 resulting from transaction costs (primarily real estate transfer taxes).~~

~~Hulu~~ In ~~April 2019, we sold our ownership in Hulu for cash proceeds of $1,430 and recorded a gain of $740.~~

~~Held-for-Sale~~

In ~~October 2019, we entered into an agreement to sell our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands for approximately $1,950. We expect the transaction to close in the first half of 2020, subject to customary closing conditions.~~

In the third quarter of 2019, we applied held-for-sale treatment to the assets and liabilities of these operations, and, accordingly, included the assets in “Other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet at September 30, 2019.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~The assets and liabilities primarily consist of approximately $700 of net property, plant and equipment; $1,100 of FCC licenses; $300 of goodwill; and $400 of net tax liabilities.~~

	Three months ended
	March 31,
Cash Flow Hedging Relationships	2020		2019
Cross-currency swaps:
Gain (loss) recognized in accumulated OCI	$	(3,979)	$	168
Foreign exchange contracts:
Gain (loss) recognized in accumulated OCI		(13)		(7)
Other income (expense) - net reclassified from accumulated OCI into income		16		3
Interest rate locks:
Gain (loss) recognized in accumulated OCI		(636)		-
Interest income (expense) reclassified from accumulated OCI into income		(16)		(16)

NOTE 9.8. 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) ~~receivables related to our WarnerMedia business.~~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 operations in our

AT&T INC.

MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

consolidated statements of cash flows. Cash receipts on the deferred purchase price are classified as cash flows from investing activities.

Our equipment installment and ~~WarnerMedia~~revolving receivable programs are discussed in detail below. AThe following table sets forth a summary of the receivables and accounts being ~~serviced is as follows:~~serviced:

		September 30, 2019				December 31, 2018						March 31, 2020				December 31, 2019
		Equipment				Equipment					Equipment				Equipment
		Installment		WarnerMedia		Installment		WarnerMedia			Installment		Revolving		Installment		Revolving
Gross receivables:	Gross receivables:	$	4,425	$	3,147	$	5,994	$	-	Gross receivables:	$	3,640	$	4,057	$	4,576	$	3,324
Balance sheet classification	Balance sheet classification									Balance sheet classification
Accounts receivable	Accounts receivable									Accounts receivable
Notes receivable	Notes receivable		2,528		-		3,457		-	Notes receivable		1,979		-		2,467		-
Trade receivables	Trade receivables		460		2,626		438		-	Trade receivables		466		3,733		477		2,809
Other Assets	Other Assets									Other Assets
Noncurrent notes and trade receivables	Noncurrent notes and trade receivables		1,437		521		2,099		-	Noncurrent notes and trade receivables		1,195		324		1,632		515

Outstanding portfolio of receivables derecognized from our consolidated balance sheets			9,405		3,456		9,065		-
Outstanding portfolio of receivables derecognized from										Outstanding portfolio of receivables derecognized from
our consolidated balance sheets										our consolidated balance sheets		9,690		5,300		9,713		4,300
Cash proceeds received, net of remittances¹	Cash proceeds received, net of remittances¹		6,920		3,456		6,508		-	Cash proceeds received, net of remittances¹		7,156		5,300		7,211		4,300
¹	Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.									Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

Equipment Installment Receivables Program

We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled.

We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and additional consideration upon settlement of the receivables, referred to as the deferred purchase price. In 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 financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

~~Dollars in millions except per share amounts~~

The following table sets forth a summary of equipment installment receivables sold under this program during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:

		Three months ended				Nine months ended
		September 30,				September 30,					Three months ended March 31,
		2019		2018		2019		2018				2020		2019
Gross receivables sold	Gross receivables sold	$	2,098	$	2,161	$	7,043	$	7,077	Gross receivables sold	$	2,367	$	2,701
Net receivables sold¹	Net receivables sold¹		2,014		2,064		6,693		6,670	Net receivables sold¹		2,273		2,546
Cash proceeds received	Cash proceeds received		1,700		1,752		5,895		5,679	Cash proceeds received		1,950		2,275
Deferred purchase price recorded	Deferred purchase price recorded		352		335		922		1,161	Deferred purchase price recorded		353		309
Guarantee obligation recorded	Guarantee obligation recorded		67		75		261		270	Guarantee obligation recorded		44		101
¹	Receivables net of allowance, imputed interest and equipment trade-in right guarantees.									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

AT&T INC.

MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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 7).

The following table ~~shows~~presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated deferred purchase price during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:

		Three months ended				Nine months ended
		September 30,				September 30,					Three months ended March 31,
		2019		2018		2019		2018				2020		2019
Fair value of repurchased receivables	Fair value of repurchased receivables	$	268	$	-	$	926	$	1,481	Fair value of repurchased receivables	$	288	$	423
Carrying value of deferred purchase price	Carrying value of deferred purchase price		259		-		891		1,393	Carrying value of deferred purchase price		277		407
Gain (loss) on repurchases¹		$	9	$	-	$	35	$	88
Gain on repurchases¹										Gain on repurchases¹	$	11	$	16
¹	These gains (losses) are included in “Selling, general and administrative” in the consolidated statements of income.									These gains are included in “Selling, general and administrative” in the consolidated statements of income.

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, our deferred purchase price receivable was ~~$2,300~~$2,378 and ~~$2,370,~~$2,336, respectively, of which ~~$1,605~~$1,583 and ~~$1,448~~$1,569 are included in “Other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 was ~~$427~~$351 and ~~$439,~~$384, respectively, of which ~~$152~~$189 and ~~$196~~$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.

~~WarnerMedia~~Revolving Receivables Program

In ~~March~~ 2019, we entered into a revolving agreement to transfer ~~$1,400~~up to $4,300 of certain receivables ~~from~~through our ~~WarnerMedia business~~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. 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). ~~In June 2019, we expanded the program another $2,600 for a total maximum outstanding amount of $4,000, of which approximately $3,456 is outstanding at September 30, 2019.~~ The transferred receivables are fully guaranteed by our ~~subsidiary,~~bankruptcy-remote subsidiaries, which ~~holds~~hold additional receivables in the amount of ~~$,3147~~$4,057 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. The obligation is subsequently adjusted for changes in estimated expected credit losses. Our maximum exposure to loss related to ~~selling~~ these receivables transferred is limited to the amount outstanding.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~The fair value measurement used for the obligation is considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

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

~~Dollars in millions except per share amounts~~

The following table sets forth a summary of ~~WarnerMedia~~ receivables ~~sold during the three and nine months ended September 30, 2019 and 2018:~~sold:

		Three months ended				Nine months ended
		September 30,				September 30,						Three months ended March 31,
		2019		2018		2019		2018				2020		2019
Gross receivables sold/cash proceeds received¹	Gross receivables sold/cash proceeds received¹	$	2,873	$	-	$	8,725	$	-	Gross receivables sold/cash proceeds received¹	$	4,222	$	1,400
Collections reinvested under revolving agreement	Collections reinvested under revolving agreement		2,873		-		5,000		-	Collections reinvested under revolving agreement		3,222		-
Collections not reinvested			269		-		269		-
Net cash proceeds received (remitted)	Net cash proceeds received (remitted)	$	(269)	$	-	$	3,456	$	-	Net cash proceeds received (remitted)	$	1,000	$	1,400

Net receivables sold²	Net receivables sold²	$	2,864	$	-	$	8,361	$	-	Net receivables sold²	$	4,138	$	1,363
Obligations recorded	Obligations recorded		39		-		475		-	Obligations recorded		126		52
¹	Includes initial sale of receivables of $0 for the three months ended and $3,725 for the nine months ended September 30, 2019.									Includes initial sale of receivables of $1,000 and $1,400 for the three months ended March 31, 2020 and 2019, respectively.
²	Receivables net of allowance, return and incentive reserves and imputed interest									Receivables net of allowance, return and incentive reserves and imputed interest.

NOTE ~~10.~~9. LEASES

We have operating and finance leases for certain facilities and equipment used in ~~our~~ operations. ~~As of September 30, 2019, our~~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~~year.

.AT&T INC.

MARCH 31, 2020

~~Subsequent to the adoption of ASC 842 on January 1, 2019, we recognize~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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 iswill be updated on a quarterly basis for measurement of new lease ~~obligations.~~liabilities.

The components of lease expense were as follows:

	Three months ended		Nine months ended		Three months ended March 31,
	September 30, 2019		September 30, 2019		2020		2019
Operating lease cost	$	1,481	$	4,333	$	1,377	$	1,242

Finance lease cost:
Amortization of right-of-use assets	$	67	$	203	$	67	$	66
Interest on lease obligation		42		126		41		42
Total finance lease cost	$	109	$	329	$	108	$	108

The following tables set forth supplemental balance sheet information related to leases:

		March 31,	December 31,
	2020		2019
Operating Leases
Operating lease right-of-use assets	$	24,008	$	24,039

Accounts payable and accrued liabilities	$	3,443	$	3,451
Operating lease obligation		21,584		21,804
Total operating lease obligation	$	25,027	$	25,255

Finance Leases
Property, plant and equipment, at cost	$	3,298	$	3,534
Accumulated depreciation and amortization		(1,302)		(1,296)
Property, plant and equipment, net	$	1,996	$	2,238

Current portion of long-term debt	$	158	$	162
Long-term debt		1,581		1,872
Total finance lease obligation	$	1,739	$	2,034

Weighted-Average Remaining Lease Term
Operating leases				8.4	yrs
Finance leases				10.7	yrs

Weighted-Average Discount Rate
Operating leases				4.2	%
Finance leases				8.4	%

3527

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

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

~~Dollars in millions except per share amounts~~

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

At September 30, 2019

Operating Leases

Operating lease right-of-use assets
$
24,477

Accounts payable and accrued liabilities
$
3,453

Operating lease obligation

22,288

Total operating lease obligation
$
25,741

Finance Leases

Property, plant and equipment, at cost
$
3,438

Accumulated depreciation and amortization

(1,215)

Property, plant and equipment, net
$
2,223

Current portion of long-term debt
$
153

Long-term debt

1,823

Total finance lease obligation
$
1,976

Weighted-Average Remaining Lease Term

Operating leases

8.7
yrs
Finance leases

10.4
yrs

Weighted-Average Discount Rate

Operating leases

4.3
%
Finance leases

8.4
%

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

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

Dollars in millions except per share amounts

Future minimum maturities of lease ~~obligations~~liabilities are as follows:

At September 30, 2019	Operating		Finance
At March 31, 2020					Operating		Finance
	Leases		Leases		Leases		Leases
Remainder of 2019	$	1,168	$	100
2020		4,643		306
Remainder of 2020					$	3,519	$	275
2021		4,258		287		4,391		275
2022		3,993		276		4,068		258
2023		3,609		264		3,663		232
2024		2,923		247		3,140		214
Thereafter		11,706		1,591		11,788		1,509
Total lease payments		32,300		3,071		30,569		2,763
Less imputed interest		(6,559)		(1,095)		(5,542)		(1,024)
Total	$	25,741	$	1,976	$	25,027	$	1,739

NOTE 10. 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 March 31, 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 March 31, 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 March 31, 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 limitations on our 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 11. 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. ~~The components comprising cash and cash equivalents and restricted cash are as follows:~~

	September 30,				December 31,				March 31,				December 31,
		2019		2018		2018		2017
Cash and Cash Equivalents and Restricted Cash										2020		2019		2019		2018
Cash and cash equivalents	$	6,588	$	8,657	$	5,204	$	50,498	$	9,955	$	6,516	$	12,130	$	5,204
Restricted cash in Other current assets		15		56		61		6		8		20		69		61
Restricted cash in Other Assets		179		75		135		428		77		94		96		135
Cash and cash equivalents and restricted cash	$	6,782	$	8,788	$	5,400	$	50,932	$	10,040	$	6,630	$	12,295	$	5,400

~~Supplemental disclosures for the statement of cash flows related to operating leases are as follows:~~

Nine months ended

September 30,

2019

2018
Cash Flows from Operating Activities

Cash paid for amounts included in lease obligations

Operating cash flows from operating leases

$
3,338

$
3,694

Supplemental Lease Cash Flow Disclosures

Operating lease right-of-use assets obtained

in exchange for new operating lease obligations

7,068

-

3728

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

~~Cash paid (received) from interest and income taxes during the period are as follows:~~

	Three months ended
	March 31,
Cash Paid (Received) During the Period for:		2020		2019
Interest	$	2,376	$	2,507
Income taxes, net of refunds		(354)		(379)

Nine months ended

September 30,

2019

2018
Interest
$
6,938

$
6,943
Income taxes, net of refunds

420

(537)

	Three months ended
	March 31,
Cash Paid for Amounts Included in Lease Obligations:	2020		2019
Operating cash flows from operating leases	$	1,217	$	1,332


Supplemental Lease Cash Flow Disclosures:
Operating lease right-of-use assets obtained in exchange for new operating lease obligations		1,013		201

~~Other Noncash Investing and~~ Financing ActivitiesIn 2019, we recorded approximately $1,920 of new vendor financing commitments related to capital investments, and we have repaid $2,601 of such obligations during the year. In connection with capital improvements, we negotiate favorable payment terms (referred to as vendor financing), which are excluded from our investing activities and reported as financing activities.

~~Preferred Interests Issued by Subsidiary~~ Term Loan~~In September 2019,~~ On April 6, 2020, we ~~issued $1,500 nonconvertible cumulative preferred interests in~~entered into and drew on a ~~wireless subsidiary that holds interests in various tower assets (Tower Holdings).~~$

5,500 Term Loan Credit Agreement (Term Loan), with certain commercial banks and Bank of America, N.A., as lead agent. The membership interests in Tower Holdings consist of (1) common interests, which are held by a consolidated subsidiary of AT&T, and (2) these newly issued preferred interests (Tower preferred interests), which pay an initial preferred distribution of 5.0% annually,Term Loan is not subject to ~~declaration, resetting every five years. The declaration~~amortization, and ~~payment of distributions~~the entire principal amount will be due and payable on the preferred interests do not impose any limitation on cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. We can call the Tower preferred interests beginning five years from the issuance date or upon the receipt of proceeds from the sale of the underlying assets. The preferred interests are included in “Noncontrolling interest” on the consolidated balance sheet.

The holders of the Tower preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of AT&T to pay the preferred distribution for two or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given upon such an event, all other holders of equal or more subordinate classes of membership interests in Tower Holdings are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes.

December 31, 2020.

3829

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

Item 2. 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

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 telecommunications, media and technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes). We completed the acquisition of Time Warner Inc. (Time Warner) on June 14, 2018, and have included its results after that date. In accordance with U.S. generally accepted accounting principles (GAAP), operating results from Time Warner prior to the acquisition are excluded.

We have four reportable segments: (1) Communications, (2) WarnerMedia, (3) Latin America and (4) Xandr. 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 presented to exclude our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands from our Mobility and Business Wireline business units of the Communications segment, instead reporting them with Corporate and Other (see Note 8).

	Third Quarter						Nine-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating Revenues
Communications	$	35,401	$	36,007	(1.7)	%	$	105,837	$	106,498	(0.6)	%	$	34,249	$	35,169	(2.6)	%
WarnerMedia		7,846		8,204	(4.4)			24,575		9,709	-			7,359		8,379	(12.2)
Latin America		1,730		1,833	(5.6)			5,205		5,809	(10.4)			1,590		1,718	(7.5)
Xandr		504		445	13.3			1,415		1,174	20.5			489		426	14.8
Corporate and other		407		531	(23.4)			1,218		1,636	(25.6)			388		391	(0.8)
Eliminations and consolidation		(1,300)		(1,281)	(1.5)			(3,878)		(2,063)	(88.0)			(1,296)		(1,256)	(3.2)
AT&T Operating Revenues		44,588		45,739	(2.5)			134,372		122,763	9.5			42,779		44,827	(4.6)

Operating Contribution
Communications		8,036		8,150	(1.4)			24,718		24,498	0.9			8,203		8,011	2.4
WarnerMedia		2,544		2,528	0.6			6,879		2,992	-			1,714		2,310	(25.8)
Latin America		(166)		(201)	17.4			(548)		(462)	(18.6)			(184)		(173)	(6.4)
Xandr		327		333	(1.8)			905		952	(4.9)			299		253	18.2
Segment Operating Contribution	$	10,741	$	10,810	(0.6)	%	$	31,954	$	27,980	14.2	%	$	10,032	$	10,401	(3.5)	%

The Communications segment provides services to businesses and consumers located in the U.S. and businesses globally. Our business strategies reflect bundled product offerings that cut across product lines and utilize shared assets. This segment contains the following business units:

Mobility provides nationwide wireless service and 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 ~~DIRECTV and U-verse~~ distribution platforms.

Business Wireline provides advanced IP-based services, as well as traditional voice and data services to business customers.

3930

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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 WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content over various physical and digital formats. 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.

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

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

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.

The Xandr segment provides advertising ~~services and includes our recently acquired AppNexus.~~services. These services utilize data insights to develop and deliver targeted advertising across video and digital platforms.

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 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. In the first quarter of 2020, we recognized approximately $430, or $0.05 per share, of incremental costs associated with bad debt reserves, voluntary corporate actions taken primarily to protect and compensate front-line employees and contractors, and WarnerMedia production shutdown costs. We expect more than half of these incremental charges will be short-term in nature.

In addition to these incremental costs, our operations and comparability were impacted by (1) the cancellation of the NCAA Division I Men’s Basketball Tournament (NCAA tournament), resulting in lower advertising revenues and associated expenses, (2) closures of retail stores, contributing to a decline in wireless equipment sales, with a corresponding reduction in equipment expense and (3) the imposition of travel restrictions, driving significantly lower wireless roaming services that do not have a directly correlated expense reduction. The net impact of these items on profitability was not significant.

All subscriber counts at and for the period ended March 31, 2020, exclude customers who we have agreed not to terminate service under the Federal Communications Commission (FCC) “Keep Americans Connected Pledge.” For reporting purposes, we count these subscribers as if they had disconnected service.

The economic effects of the pandemic and resulting societal changes are currently not predictable. We expect that COVID-19 could affect additional areas of our business in future quarters and that the financial impacts could vary from those seen in the first quarter. There are a number of uncertainties that could impact our future results of operations, including the effectiveness of COVID-19 mitigation measures; the duration of the pandemic; global economic conditions; changes to our operations; changes in consumer confidence, behaviors and spending; work from home trends; and the sustainability of supply chains.

Due to the uncertainty of the COVID-19 pandemic and recovery, we have withdrawn our prior financial guidance.

AT&T INC.

MARCH 31, 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

RESULTS OF OPERATIONS

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

	Third Quarter						Nine-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating Revenues
Service	$	40,317	$	41,297	(2.4)	%	$	122,024	$	109,849	11.1	%	$	38,883	$	40,684	(4.4)	%
Equipment		4,271		4,442	(3.8)			12,348		12,914	(4.4)			3,896		4,143	(6.0)
Total Operating Revenues		44,588		45,739	(2.5)			134,372		122,763	9.5			42,779		44,827	(4.6)

Operating expenses
Operations and support		29,738		30,304	(1.9)			90,482		82,289	10.0			28,071		30,388	(7.6)
Depreciation and amortization		6,949		8,166	(14.9)			21,256		20,538	3.5			7,222		7,206	0.2
Total Operating Expenses		36,687		38,470	(4.6)			111,738		102,827	8.7			35,293		37,594	(6.1)
Operating Income		7,901		7,269	8.7			22,634		19,936	13.5			7,486		7,233	3.5
Interest expense		2,083		2,051	1.6			6,373		5,845	9.0			2,018		2,141	(5.7)
Equity in net income (loss) of affiliates		3		(64)	-			36		(71)	-			(6)		(7)	14.3
Other income (expense) – net		(935)		1,053	-			(967)		5,108	-			803		286	-
Income Before Income Taxes		4,886		6,207	(21.3)			15,330		19,128	(19.9)			6,265		5,371	16.6
Net Income		3,949		4,816	(18.0)			12,271		14,823	(17.2)			4,963		4,348	14.1
Net Income Attributable to AT&T	$	3,700	$	4,718	(21.6)	%	$	11,509	$	14,512	(20.7)	%		4,610		4,096	12.5
Net Income Attributable to Common Stock													$	4,578	$	4,096	11.8	%

Operating revenues decreased in the ~~third~~first quarter ~~and increased in the first nine months~~ of ~~2019.~~2020. The decrease ~~in the third quarter~~ was ~~primarily due to~~driven by declines in our WarnerMedia, Communications ~~WarnerMedia~~ and Latin America segments. Lower WarnerMedia segment revenues reflect unfavorable programming comparisons, including strong carryover theatrical revenues in the first quarter of 2019, and lower advertising revenues from the cancellation of the NCAA tournament. Communications segment ~~decreases were due to continued declines in legacy and video services and lower wireless device upgrades, partially offset by growth in advanced data and wireless services. WarnerMedia segment~~revenue declines were driven by ~~lower theatrical~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

product compared to a more favorable mix of box office releases in the prior year, partially offset by higher international licenses revenues at Home Box Office. Latin America revenues were negatively impacted by foreign exchange pressures.

~~The increase in the first nine months was primarily due to our 2018 acquisition of Time Warner. Partially offsetting the increase were~~continued declines in ~~the Communications segment driven by continued pressure in~~video and legacy ~~and video~~ services and lower wireless equipment ~~upgrades that~~sales resulting from store closures. Latin America segment revenue declines were ~~offset by growth in advanced data and wireless services, and~~primarily due to foreign exchange ~~pressures~~pressure. Partially offsetting these decreases were revenue increases in wireless service and strategic and managed business service in our ~~Latin America~~Communications segment.

Operations and support expenses decreased in the ~~third~~first quarter ~~and increased in the first nine months~~ of ~~2019.~~2020. The decrease ~~in the third quarter~~ was ~~primarily due to declines in content costs reflecting continued declines in premium TV subscribers~~driven by a noncash gain of $900 on a spectrum transaction, lower broadcast and postpaid smartphone volumes in the Communications segment. Lower film and television production costs in the WarnerMedia segment and foreign exchange rate impacts in the Latin America segment also contributed to lower expense in 2019.

~~The increase in the first nine months of 2019 was~~ ~~primarily due to our 2018 acquisition of Time Warner. The increase was partially offset by lower~~programming costs in our Communications ~~segment, including lower content~~ and WarnerMedia segments, reduced wireless equipment costs ~~foreign exchange rate impacts in our Latin America segment,~~resulting from lower device sales and lower ~~expenses due to~~sports licenses from the cancellation of televised sporting events. Expense declines also reflect our continued focus on cost management. Partially offsetting the decreases were incremental costs, including bad debt, associated with COVID-19. As part of our cost and efficiency initiatives, we expect operations and support expense improvements to continue as we size our operations to reflect the new economic activity level.

Depreciation and amortization expense ~~decreased~~increased in the ~~third~~first quarter ~~and increased for the first nine months~~ of ~~2019.~~ 2020.

Depreciation expense increased ~~$5,~~$29, or ~~0.1% in the third quarter and $168, or 1.1% for the first nine months of 2019. The increase in the nine-month period was~~0.6%, primarily due to ~~the Time Warner acquisition.~~ongoing capital spend for network upgrades and expansion in our Communications segment.

Amortization expense decreased ~~$1,222,~~$13, or ~~39.4% in the third quarter and increased $550, or 9.9% for the first nine months of 2019~~0.6%, primarily due to the decreased amortization of intangibles associated with ~~WarnerMedia. We expect continued quarterly declines in amortization expense, reflecting the accelerated method~~WarnerMedia, largely offset by commencement of amortization ~~applied on the WarnerMedia intangibles.~~

~~Operatingincome~~ ~~increased~~for orbital slot licenses, beginning in the ~~third~~first quarter ~~and the first nine months~~ of ~~2019. Our operating income margin for the third quarter increased from 15.9% in 2018 to 17.7% in 2019 and for the first nine months increased from 16.2% in 2018 to 16.8% in 2019.~~

~~Interest expense~~ increased in the third quarter and first nine months of 2019. The increase was primarily due to lower capitalized interest associated with putting spectrum into network service. Higher debt balances related to our acquisition of Time Warner also contributed to higher expense for the nine-month period.

~~Equity in net income of affiliates~~ ~~increased in the third quarter and for the first nine months of 2019, primarily due to changes in our investment portfolio resulting from acquisitions and the second-quarter 2019 sale of Hulu.~~

~~Other income (expense) – net~~ decreased in the third quarter and for the first nine months of 2019. The decrease in the quarter was primarily due to the recognition of a $1,917 actuarial loss in 2019 with no comparable remeasurement in 2018, and higher income in the prior year resulting from a gain on our third-quarter 2018 ~~Otter Media transaction~~2020 (see Note 1).

The decrease for the first nine months was primarily due to the recognition of an actuarial loss of $4,048 in 2019, compared to actuarial gain of $2,726 in 2018, and the prior-year gain on the Otter Media transaction. Partially offsetting the declines was a $740 gain on the second-quarter 2019 sale of our investment in Hulu and lower premiums on debt redemptions.

~~Income taxes~~ decreased in the third quarter and for the first nine months of 2019. Our effective tax rate was 19.2% for the third quarter and 20.0% for the first nine months of 2019, versus 22.4% for the third quarter and 22.5% for the first nine months of 2018. The decrease in income tax expense and the effective tax rate for the third quarter was primarily due to tax benefits related to internal restructurings and lower income before income taxes. The decrease in income tax expense and the effective tax rate for the first nine months was primarily due to benefits from tax settlements, internal restructurings and lower income before income taxes, including impacts of actuarial losses of $1,917 in the third quarter and $4,048 for the first nine months of 2019, compared to actuarial gains of $2,726 for the first nine months of 2018.

4132

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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

COMMUNICATIONS SEGMENT
Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change

Segment Operating Revenues

Mobility
$
17,701

$
17,735
(0.2)
%

$
52,356

$
51,965
0.8
%
Entertainment Group

11,197

11,589
(3.4)

33,893

34,498
(1.8)

Business Wireline

6,503

6,683
(2.7)

19,588

20,035
(2.2)

Total Segment Operating Revenues

35,401

36,007
(1.7)

105,837

106,498
(0.6)

Segment Operating Contribution

Mobility

5,742

5,575
3.0

16,817

16,144
4.2

Entertainment Group

1,085

1,104
(1.7)

4,077

3,888
4.9

Business Wireline

1,209

1,471
(17.8)

3,824

4,466
(14.4)

Total Segment Operating Contribution
$
8,036

$
8,150
(1.4)
%

$
24,718

$
24,498
0.9
%

Operatingincome increased in the first quarter of 2020. Our operating income margin in the first quarter increased from 16.1% in 2019 to 17.5% in 2020.

Selected Subscribers and Connections

September 30,
(000s)
2019

2018
Total domestic broadband connections
15,575

15,747
Network access lines in service
8,831

10,399
U-verse VoIP connections
4,539

5,274

Interest expense decreased in the first quarter of 2020, primarily due to lower debt balances.

~~Results~~Equity in net income (loss) of affiliates was essentially flat in the ~~Mobility~~first quarter of 2020, reflecting changes in our investment portfolio, including the second-quarter 2019 sale of Hulu.

Other income (expense) – net increased in the first quarter of 2020 primarily due to an increase in net benefit credit resulting from lower interest costs on the benefit obligation and ~~Business Wireline business units~~higher prior service credit amortization in 2020 and an actuarial loss on pension benefits in 2019 (see Note 6). Partially offsetting the increase were losses on investments in equity securities resulting from market declines in the first quarter of 2020.

Income taxes increased in the ~~Communications segment have been recast~~first quarter of 2020. Our effective tax rate was 20.8% for ~~all prior periods presented~~the first quarter of 2020, versus 19.0% for the comparable year prior. The increase in income tax expense was primarily due to ~~remove operations in Puerto Rico~~higher income before income taxes and the ~~U.S. Virgin Islands (see Note 8).~~impacts of tax settlements in the first quarter of 2019. The increase in our effective tax rate was primarily due to the impacts of tax settlements.

COMMUNICATIONS SEGMENT	First Quarter
					Percent
	2020		2019		Change
Segment Operating Revenues
Mobility	$	17,402	$	17,363	0.2	%
Entertainment Group		10,515		11,328	(7.2)
Business Wireline		6,332		6,478	(2.3)
Total Segment Operating Revenues		34,249		35,169	(2.6)

Segment Operating Contribution
Mobility		5,788		5,309	9.0
Entertainment Group		1,335		1,478	(9.7)
Business Wireline		1,080		1,224	(11.8)
Total Segment Operating Contribution	$	8,203	$	8,011	2.4	%

Selected Subscribers and Connections
	March 31,
(000s)	2020	2019
Mobility Subscribers	169,198	154,670
Total domestic broadband connections	15,315	15,737
Network access lines in service	8,160	9,587
U-verse VoIP connections	4,213	4,935

Operating revenues decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019. The decrease in the quarter was~~2020, driven by declines in each of our business units, Entertainment Group, Business Wireline and Mobility. Revenues reflect continued declines in legacy voice and data products, the shift to over-the-top (OTT) video offerings and decreased wireless equipment revenues, partially offset by growth in strategic and managed business services, wireless service and IP broadband.

~~The decrease for the first nine months was primarily due to~~ declines in our Entertainment Group and Business Wireline business units, partially offset by increases in our Mobility business unit. The decrease reflects the continued shift away from ~~legacy communications and~~ linear video ~~offerings,~~and legacy services and lower wireless equipment ~~revenues, largely offset by~~sales attributable to store closures. Largely offsetting these declines were higher wireless service ~~and advanced data revenues.~~

~~Operating contribution~~ ~~decreased in the third quarter and increased for the first nine months of 2019. The decrease in the quarter reflects declines~~revenues from growth in our ~~Business Wireline~~prepaid subscriber base and ~~Entertainment Group business units, largely offset by improvement~~growth in our ~~Mobility business unit. The increase for the first nine months includes improvements in our Mobility~~postpaid phone subscribers and Entertainment Group business units, partially offset by declines in our Business Wireline business unit. Our Communications segment operating income margin in the third quarter increased from 22.6% in 2018 to 22.7% in 2019 and for the first nine months increased from 23.0% in 2018 to 23.4% in 2019.

average revenue per subscriber (ARPU).

4233

AT&T INC.

~~SEPTEMBER 30, 2019~~

~~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~~

Communications Business Unit Discussion
Mobility Results

Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Service
$
13,930

$
13,828
0.7
%

$
41,383

$
40,594
1.9
%
Equipment

3,771

3,907
(3.5)

10,973

11,371
(3.5)

Total Operating Revenues

17,701

17,735
(0.2)

52,356

51,965
0.8

Operating expenses

Operations and support

9,948

10,104
(1.5)

29,511

29,603
(0.3)

Depreciation and amortization

2,011

2,057
(2.2)

6,027

6,218
(3.1)

Total Operating Expenses

11,959

12,161
(1.7)

35,538

35,821
(0.8)

Operating Income

5,742

5,574
3.0

16,818

16,144
4.2

Equity in Net Income (Loss)
of Affiliates

-

1
-

(1)

-
-

Operating Contribution
$
5,742

$
5,575
3.0
%

$
16,817

$
16,144
4.2
%

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

September 30,
Percent
(in 000s)

2019

2018
Change
Mobility Subscribers

Postpaid smartphones

60,306

59,829
0.8
%
Postpaid feature phones and
data-centric devices

14,846

16,344
(9.2)

Postpaid

75,152

76,173
(1.3)

Prepaid

17,740

16,721
6.1

Reseller

7,120

8,079
(11.9)

Connected devices¹

62,288

48,177
29.3

Total Mobility Subscribers

162,300

149,150
8.8

Postpaid Phone Subscribers

62,812

62,850
(0.1)

Total Phone Subscribers

79,462

78,639
1.0
%
¹
Includes data-centric devices such as wholesale automobile systems, monitoring devices, fleet management, and session-based tablets.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

Third Quarter

Nine-Month Period

Percent

Percent
(in 000s)
2019

2018
Change

2019

2018
Change
Mobility Net Additions²

Postpaid
(217)

(231)
6.1
%

(570)

(105)
-
%
Prepaid
227

570
(60.2)

669

1,275
(47.5)

Reseller
(231)

(366)
36.9

(677)

(1,175)
42.4

Connected devices¹
3,900

3,459
12.7

10,947

9,171
19.4

Mobility Net Subscriber Additions
3,679

3,432
7.2

10,369

9,166
13.1

Postpaid Phone Net Additions
101

67
50.7

254

63
-

Total Phone Net Additions
255

547
(53.4)
%

780

1,104
(29.3)
%

Postpaid Churn³
1.19

1.16
3
BP

1.14

1.08
6
BP
Postpaid Phone-Only Churn³
0.95

0.93
2
BP

0.91

0.86
5
BP
¹
Includes data-centric devices such as wholesale automobile systems, monitoring devices, fleet management, and session-based tablets.
²
Excludes acquisition-related additions during the period.
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.

~~Service~~ ~~revenue increased in the third quarter and for the first nine months of 2019 largely due~~ ~~higher postpaid phone average revenue per subscriber (ARPU) and gains in prepaid subscribers.~~

~~ARPU~~

~~Postpaid ARPU increased in the third quarter and for the first nine months primarily due to price actions that were not in effect in the comparative periods of the prior year.~~

~~Churn~~

~~The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn was~~ ~~higher due to tablet and involuntary churn.~~ ~~Postpaid phone-only churn was higher due to involuntary churn.~~ ~~Also contributing to higher churn for the first nine months~~ ~~was continued competitive pricing in the industry.~~

~~Equipment~~ ~~revenue decreased in the third quarter and for the first nine months of 2019 driven by lower postpaid smartphone sales, resulting~~ ~~from the continuing trend of customers choosing to upgrade devices less frequently or bring their own~~.

~~Operations and support~~ ~~expenses decreased in the third quarter and for the first nine months of 2019. The decreases were primarily due to~~ lower postpaid smartphone volumes and increased operational efficiencies, partially offset by higher bad debt expense, commission deferral amortization and handset insurance costs. In the second quarter of 2019, we extended the estimated economic life of our customers, which will result in a decline of commission deferral amortization in the second half of 2019.

~~Depreciation~~ ~~expense decreased in the third quarter and for the first nine months of 2019 primarily due to fully depreciated assets, partially offset by ongoing capital spending for network upgrades and expansion.~~

~~Operating income~~ increased in the third quarter and for the first nine months of 2019. Our Mobility operating income margin in the third quarter increased from 31.4% in 2018 to 32.4% in 2019, and for the first nine months increased from 31.1% in 2018 to 32.1% in 2019. Our Mobility EBITDA margin in the third quarter increased from 43.0% in 2018 to 43.8%

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~MARCH 31, 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

Operating contribution increased in the first quarter of 2020, reflecting improvement in our Mobility business unit, partially offset by declines in our Entertainment Group and Business Wireline business units. Our Communications segment operating income margin in the first quarter increased from 22.8% in 2019 to 24.0% in 2020.

Communications Business Unit Discussion
Mobility Results
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Service	$	13,968	$	13,629	2.5	%
Equipment		3,434		3,734	(8.0)
Total Operating Revenues		17,402		17,363	0.2

Operating expenses
Operations and support		9,569		10,041	(4.7)
Depreciation and amortization		2,045		2,013	1.6
Total Operating Expenses		11,614		12,054	(3.7)
Operating Income		5,788		5,309	9.0
Equity in Net Income (Loss) of Affiliates		-		-	-
Operating Contribution	$	5,788	$	5,309	9.0	%

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

Subscribers
		March 31,		Percent
(in 000s)		2020	2019	Change
Postpaid		75,148	75,737	(0.8)
Prepaid		17,808	17,012	4.7
Reseller		6,736	7,495	(10.1)
Connected devices¹		69,506	54,426	27.7
Total Mobility Subscribers²		169,198	154,670	9.4	%
¹	Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes
	postpaid tablets.
²	Excludes 55 customers who we have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge,” which was
	implemented March 13, 2020.

AT&T INC.

MARCH 31, 2020

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

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

Net Additions
		First Quarter
						Percent
(in 000s)		2020		2019		Change
Postpaid Phone Net Additions		163		79		-	%
Total Phone Net Additions		120		168		(28.6)

Postpaid^{2, 5}		27		(207)		-
Prepaid		(45)		101		-
Reseller		(190)		(242)		21.5
Connected devices³		3,518		3,088		13.9
Mobility Net Subscriber Additions^{1, 5}		3,310		2,740		20.8	%

Postpaid Churn^{4, 5}		1.08	%	1.16	%	(8)	BP
Postpaid Phone-Only Churn^{4, 5}		0.86	%	0.92	%	(6)	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 (267) and (410) for the three
	months ended March 31, 2020 and 2019, respectively. Wearables and other net adds were 24 and (17) for the three months ended
	March 31, 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	Excludes 55 customers who we have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge.”

Service revenue increased in the first ~~nine months~~quarter of 2020 largely due to higher average revenue per subscriber (ARPU) and growth in Cricket subscribers.

ARPU

ARPU increased in the first quarter primarily due to a continued shift by subscribers to our unlimited plans.

Churn

The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn and postpaid phone-only churn were lower in the first quarter due to pricing changes, competitive offers and industry-wide store closures from COVID-19.

Equipment revenue decreased in the first quarter of 2020 driven by lower postpaid smartphone sales reflecting store closures from COVID-19.

Operations and support expenses decreased in the first quarter of 2020 primarily due to lower cost of equipment sales from lower volumes and advertising expense and continued improvements in cost efficiencies, partially offset by higher bad debt expense.

Depreciation expense increased in the first quarter of 2020 primarily due to ongoing capital spending for network upgrades and expansion partially offset by fully depreciated assets.

Operating income increased in the first quarter of 2020. Our Mobility operating income margin in the first quarter increased from ~~43.0%~~30.6% in ~~2018~~2019 to ~~43.6%~~33.3% in ~~2019.~~2020. Our Mobility EBITDA margin in the first quarter increased from 42.2% in 2019 to

AT&T INC.

MARCH 31, 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

45.0% in 2020. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization.

Subscriber Relationships

As the wireless industry has matured, we believe future wireless growth will ~~increasingly~~ depend on our ability to offer innovative services, plans and devices that take advantage of our premier 5G wireless network, and to provide these services in bundled product ~~offerings with our video and broadband services.~~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 ~~video and~~ 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 mature and highly competitive market, we have launched a wide variety of plans, including our FirstNet and prepaid products, and arrangements that bundle our video services. 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. ~~Such~~We offer unlimited data plans and such subscribers also tend to have higher retention and lower churn rates. Our offerings are intended to encourage existing subscribers to upgrade their current services and/or add devices, attract subscribers from other providers and/or minimize subscriber churn.

Connected Devices

Connected devices include data-centric devices such as wholesale automobile systems, monitoring devices, fleet management and session-based tablets. ~~Connected~~The number of connected device ~~subscribers~~subscriber relationships increased ~~in 2019, and~~ during the ~~third~~first quarter ~~and for~~of 2020, driven by the ~~first nine months~~addition of ~~2019, we added~~ approximately ~~2.1 million and 6.2~~2.5 million wholesale connected cars through agreements with various carmakers and ~~experienced~~ strong growth in other 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.

Entertainment Group Results
	Third Quarter						Nine-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating revenues
Video entertainment	$	7,933	$	8,283	(4.2)	%	$	24,042	$	24,681	(2.6)	%	$	7,395	$	8,074	(8.4)	%
High-speed internet		2,117		2,045	3.5			6,296		5,904	6.6			2,109		2,070	1.9
Legacy voice and data services		628		739	(15.0)			1,969		2,317	(15.0)			581		683	(14.9)
Other service and equipment		519		522	(0.6)			1,586		1,596	(0.6)			430		501	(14.2)
Total Operating Revenues		11,197		11,589	(3.4)			33,893		34,498	(1.8)			10,515		11,328	(7.2)

Operating expenses
Operations and support		8,797		9,155	(3.9)			25,839		26,623	(2.9)			7,891		8,527	(7.5)
Depreciation and amortization		1,316		1,331	(1.1)			3,978		3,986	(0.2)			1,289		1,323	(2.6)
Total Operating Expenses		10,113		10,486	(3.6)			29,817		30,609	(2.6)			9,180		9,850	(6.8)
Operating Income		1,084		1,103	(1.7)			4,076		3,889	4.8			1,335		1,478	(9.7)
Equity in Net Income (Loss) of Affiliates		1		1	-			1		(1)	-			-		-	-
Operating Contribution	$	1,085	$	1,104	(1.7)	%	$	4,077	$	3,888	4.9	%	$	1,335	$	1,478	(9.7)	%

4536

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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 the Entertainment ~~Group:~~Group business unit:

September 30,
Percent

2019

2018
Change
Video Connections

Premium TV

20,418

23,294
(12.3)
%
AT&T Now¹

1,145

1,858
(38.4)

Total Video Connections

21,563

25,152
(14.3)

Broadband Connections

IP

13,739

13,723
0.1

DSL

562

718
(21.7)

Total Broadband Connections

14,301

14,441
(1.0)

Retail Consumer Switched Access Lines

3,467

4,144
(16.3)

U-verse Consumer VoIP Connections

3,973

4,757
(16.5)

Total Retail Consumer Voice
Connections

7,440

8,901
(16.4)

Fiber Broadband Connections
(included in IP)

3,696

2,504
47.6
%
¹
Consistent with industry practice, connections that are on a free-trial are included.

Third Quarter

Nine-Month Period

Percent

Percent
(in 000s)
2019

2018
Change

2019

2018
Change
Video Net Additions

Premium TV²
(1,163)

(346)
-
%

(2,485)

(795)
-
%
AT&T Now¹
(195)

49
-

(446)

703
-

Net Video Additions
(1,358)

(297)
-

(2,931)

(92)
-

Broadband Net Additions

IP
(83)

31
-

10

261
(96.2)

DSL
(36)

(45)
20.0

(118)

(170)
30.6

Net Broadband Additions
(119)

(14)
-

(108)

91
-

Fiber Broadband Net Additions
(included in IP)
318

300
6.0
%

933

775
20.4
%
¹
Consistent with industry practice, connections that are on a free-trial are included.
²
Includes disconnections for customers that migrated to AT&T Now.

Connections
		March 31,		Percent
(in 000s)		2020	2019	Change
Video Connections
Premium TV¹		18,576	22,359	(16.9)	%
AT&T TV Now		788	1,508	(47.7)
Total Video Connections¹		19,364	23,867	(18.9)

Total Broadband Connections¹		14,046	14,454	(2.8)
Fiber Broadband Connections		4,096	3,060	33.9	%

Retail Consumer Switched Access Lines		3,196	3,787	(15.6)
U-verse Consumer VoIP Connections		3,630	4,393	(17.4)
Total Retail Consumer Voice Connections		6,826	8,180	(16.6)

Net Additions
		First Quarter
				Percent
(in 000s)		2020	2019	Change
Video Net Additions
Premium TV¹		(897)	(544)	(64.9)	%
AT&T TV Now		(138)	(83)	(66.3)
Net Video Additions¹		(1,035)	(627)	(65.1)

Net Broadband Additions¹		(73)	45	-
Fiber Broadband Net Additions		209	297	(29.6)	%
¹	Excludes 66 premium TV and 35 broadband connections who we have agreed not to terminate service under the FCC's "Keep Americans
	Connected Pledge."

Video entertainment revenues are comprised of subscription and advertising revenues. Revenues decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019,~~2020, largely driven by ~~an 12.3%~~a decline in premium TV subscribers, as we continue to focus on high-value ~~customers. Our~~ customers, ~~continue to shift, consistent~~partially offset by subscription-based advertising growth. Consistent with the rest of the industry, our customers continue to shift from a premium linear service to our more economically priced OTT video ~~service, or to competitors,~~services, which has pressured our video revenues. ~~Churn rose for subscribers with premium TV-only service, partially reflecting price increases. We also experienced~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

~~increased churn in video (including customers who bundled broadband service) due to carriage disputes during the third quarter of 2019.~~

Revenue declines in our premium TV products were partially offset by growth in revenues from our OTT service, AT&T Now, which were primarily attributable to pricing actions. AT&T Now subscriber net additions declined in the third quarter and for the first nine months due to price increases and fewer promotions.

High-speed internet revenues increased in the ~~third~~first quarter of 2020, reflecting higher ARPU resulting from pricing actions and ~~for the first nine months of 2019 reflecting the continued shift of subscribers to our higher-speed~~an increase in high-speed fiber ~~services.~~connections. Our bundling strategy is helping to lower churn with subscribers who bundle broadband with another AT&T service.

Legacy voice and data service revenues decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019,~~2020, reflecting the continued migration of customers to our more advanced IP-based offerings or to competitors.

Operations and support expenses decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019. Contributing to the decreases were lower content and selling costs largely~~2020, primarily due to lower content costs from fewer subscribers and ~~our~~ ongoing ~~focus on~~ cost ~~initiatives. Partially offsetting the decreases were increased costs associated with NFL SUNDAY TICKET and~~initiatives, partially offset by higher amortization of fulfillment cost deferrals ~~including the impact of second-quarter 2019 updates to decrease the estimated economic life for our Entertainment Group customers.~~

~~Depreciation~~ ~~expense decreased in the third quarter~~ and ~~for the first nine months of 2019. The decreases were due to fully depreciated assets, largely offset by ongoing capital spending for network upgrades and expansion.~~

~~Operating income~~ decreased in the third quarter and increased for the first nine months of 2019. Our Entertainment Group operating income margin in the third quarter increased from 9.5% in 2018 to 9.7% in 2019, and for the first nine months increased from 11.3% in 2018 to 12.0% in 2019. Our Entertainment Group EBITDA margin in the third quarter increased from 21.0% in 2018 to 21.4% in 2019, and for the first nine months increased from 22.8% in 2018 to 23.8% in 2019.

Business Wireline Results

Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Strategic and managed services
$
3,900

$
3,677
6.1
%

$
11,513

$
10,849
6.1
%
Legacy voice and data services

2,252

2,602
(13.5)

6,973

8,176
(14.7)

Other service and equipment

351

404
(13.1)

1,102

1,010
9.1

Total Operating Revenues

6,503

6,683
(2.7)

19,588

20,035
(2.2)

Operating expenses

Operations and support

4,022

4,022
-

12,029

12,047
(0.1)

Depreciation and amortization

1,271

1,187
7.1

3,735

3,520
6.1

Total Operating Expenses

5,293

5,209
1.6

15,764

15,567
1.3

Operating Income

1,210

1,474
(17.9)

3,824

4,468
(14.4)

Equity in Net Income (Loss)
of Affiliates

(1)

(3)
66.7

-

(2)
-

Operating Contribution
$
1,209

$
1,471
(17.8)
%

$
3,824

$
4,466
(14.4)
%

~~Strategic and managed services~~revenues increased in the third quarter and for the first nine months of 2019. 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 andhigher annual content rate increases.

4737

AT&T INC.

~~SEPTEMBER 30, 2019~~

~~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~~

~~outsourcing services. Revenue increases were primarily attributable to growth in our security and cloud solutions, dedicated internet and managed services.~~

~~Legacy voice and dataservicerevenues decreased in the third quarter and for the first nine months of 2019, primarily due to lower demand as customers continue to shift to our more advanced IP-based offerings or our competitors.~~

~~Other service and equipment~~revenues decreased in the third quarter and increased for the first nine months of 2019. Revenue trends are impacted by the licensing of intellectual property assets, which vary from period-to-period. In the third quarter, intellectual property revenues in 2018 exceeded 2019, which contributed to the revenue decline. During the first nine months, intellectual property revenues driven by second-quarter 2019 license sales, exceeded revenues recorded for the comparable 2018 period, which contributed to the revenue increase. Other service revenues include project-based revenue, which is nonrecurring in nature, as well as revenues from customer premises equipment.

~~Operations and support~~ expenses were flat in the third quarter and decreased for the first nine months of 2019, primarily due to our continued efforts to shift to a software-based network and automate and digitize our customer support activities, partially offset by higher fulfillment deferral amortization.

~~Depreciation~~ ~~expense increased in the third quarter and for the first nine months of 2019, primarily due to increases in capital spending for network upgrades and expansion.~~

~~Operating income~~ decreased in the third quarter and for the first nine months of 2019. Our Business Wireline operating income margin in the third quarter decreased from 22.1% in 2018 to 18.6% in 2019, and for the first nine months decreased from 22.3% in 2018 to 19.5% in 2019. Our Business Wireline EBITDA margin in the third quarter decreased from 39.8% in 2018 to 38.2% in 2019, and for the first nine months decreased from 39.9% in 2018 to 38.6% in 2019.

WARNERMEDIA SEGMENT
Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Segment Operating Revenues

Turner
$
3,007

$
2,988
0.6
%

$
9,860

$
3,767
-
%
Home Box Office

1,819

1,644
10.6

5,045

1,925
-

Warner Bros.

3,333

3,720
(10.4)

10,240

4,227
-

Eliminations & Other

(313)

(148)
-

(570)

(210)
-

Total Segment Operating Revenues

7,846

8,204
(4.4)

24,575

9,709
-

Segment Operating Contribution

Turner

1,489

1,449
2.8

3,926

1,802
-

Home Box Office

724

630
14.9

1,894

734
-

Warner Bros.

563

553
1.8

1,556

642
-

Eliminations & Other

(232)

(104)
-

(497)

(186)
-

Total Segment Operating Contribution
$
2,544

$
2,528
0.6
%

$
6,879

$
2,992
-
%

Our WarnerMedia segment consists of our Turner, Home Box Office 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. WarnerMedia also includes our financial results for RSNs.

The WarnerMedia segment does not include results from Time Warner operations for the periods prior to our June 14, 2018 acquisition. Otter Media is included as an equity method investment for periods prior to our August 7, 2018 acquisition of the remaining interest and is in the segment operating results following the acquisition. Consistent with our past practice, many of the impacts of the fair value adjustments from the application of purchase accounting required under GAAP have not been allocated to the segment, instead they are reported as acquisition-related items in the reconciliation to consolidated results.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~MARCH 31, 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

~~Segment and business unit results for the first nine months are not comparable to the prior period and therefore not discussed. Comparative results for the third quarter are discussed below.~~Depreciation

~~Operating revenues~~expense decreased in the ~~third~~first quarter of ~~2019, primarily~~2020, due to ~~lower Warner Bros. revenues, partially offset by increased revenues from Home Box Office~~network assets becoming fully depreciated. Partially offsetting the decreases was ongoing capital spending for network upgrades and ~~Turner.~~

~~Operating contribution~~ ~~increased in the third quarter of 2019. The WarnerMedia segment operating income margin in the third quarter increased from 31.3% in 2018 to 32.2% in 2019.~~

WarnerMedia Business Unit Discussion
Turner Results

Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Subscription
$
1,927

$
1,855
3.9
%

$
5,835

$
2,363
-
%
Advertising

913

944
(3.3)

3,440

1,181
-

Content and other

167

189
(11.6)

585

223
-

Total Operating Revenues

3,007

2,988
0.6

9,860

3,767
-

Operating expenses

Operations and support

1,460

1,487
(1.8)

5,813

1,933
-

Depreciation and amortization

68

59
15.3

167

71
-

Total Operating Expenses

1,528

1,546
(1.2)

5,980

2,004
-

Operating Income

1,479

1,442
2.6

3,880

1,763
-

Equity in Net Income of Affiliates

10

7
42.9

46

39
17.9

Operating Contribution
$
1,489

$
1,449
2.8
%

$
3,926

$
1,802
-
%

~~Turner includes the WarnerMedia businesses managed by Turner as well as our RSNs.~~

~~Operating revenues~~ increased in the third quarter of 2019, reflecting higher subscription revenues driven by higher domestic affiliate rates and growth at Turner’s international networks. These increases were partially offset by lower advertising revenues, resulting from lower audience delivery in the domestic entertainment networks, reduced content revenue and foreign exchange pressure.

~~Operations and support~~ ~~expenses decreased in the third quarter of 2019 due to lower programming, marketing and direct operating costs.~~expansion.

Operating income ~~increased~~decreased in the ~~third~~first quarter of ~~2019.~~2020. Our ~~Turner~~Entertainment Group operating income margin in the ~~third~~first quarter decreased from 13.0% in 2019 to 12.7% in 2020. Our Entertainment Group EBITDA margin in the first quarter increased from ~~48.3%~~24.7% in ~~2018~~2019 to ~~49.2%~~25.0% in ~~2019.~~2020.

Business Wireline Results
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Strategic and managed services	$	3,879	$	3,779	2.6	%
Legacy voice and data services		2,129		2,397	(11.2)
Other service and equipment		324		302	7.3
Total Operating Revenues		6,332		6,478	(2.3)

Operating expenses
Operations and support		3,951		4,032	(2.0)
Depreciation and amortization		1,301		1,222	6.5
Total Operating Expenses		5,252		5,254	-
Operating Income		1,080		1,224	(11.8)
Equity in Net Income (Loss) of Affiliates		-		-	-
Operating Contribution	$	1,080	$	1,224	(11.8)	%

Strategic and managed servicesrevenues increased in the first quarter of 2020. Our ~~Turner~~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 dedicated internet, business internet and security services.

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

Other service and equipmentrevenues increased in the first quarter of 2020, driven by revenues from customer premises equipment. Revenues from the licensing of intellectual property assets vary from period-to-period and can impact revenue trends. 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 first quarter 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.

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

Operating income decreased in the first quarter of 2020. Our Business Wireline operating income margin in the first quarter decreased from 18.9% in 2019 to 17.1% in 2020. Our Business Wireline EBITDA margin ~~increased~~in the first quarter decreased from ~~50.2%~~37.8% in ~~2018~~2019 to ~~51.4%~~37.6% in ~~2019.~~2020.

4938

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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

Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Subscription
$
1,533

$
1,517
1.1
%

$
4,383

$
1,787
-
%
Content and other

286

127
-

662

138
-

Total Operating Revenues

1,819

1,644
10.6

5,045

1,925
-

Operating expenses

Operations and support

1,072

991
8.2

3,124

1,162
-

Depreciation and amortization

33

25
32.0

67

30
-

Total Operating Expenses

1,105

1,016
8.8

3,191

1,192
-

Operating Income

714

628
13.7

1,854

733
-

Equity in Net Income of Affiliates

10

2
-

40

1
-

Operating Contribution
$
724

$
630
14.9
%

$
1,894

$
734
-
%

WARNERMEDIA SEGMENT	First Quarter
					Percent
	2020		2019		Change
Segment Operating Revenues
Turner	$	3,162	$	3,443	(8.2)	%
Home Box Office		1,497		1,510	(0.9)
Warner Bros.		3,240		3,518	(7.9)
Eliminations & Other		(540)		(92)	-
Total Segment Operating Revenues		7,359		8,379	(12.2)

Cost of revenues
Turner		1,320		1,680	(21.4)
Home Box Office		816		670	21.8
Warner Bros.		2,346		2,430	(3.5)
Selling, general and administrative		1,354		1,284	5.5
Eliminations & Other		(319)		(71)	-
Depreciation and amortization		143		143	-
Total Operating Expenses		5,660		6,136	(7.8)
Operating Income		1,699		2,243	(24.3)
Equity in Net Income (Loss) of Affiliates		15		67	(77.6)
Total Segment Operating Contribution	$	1,714	$	2,310	(25.8)	%

Our WarnerMedia segment consists of 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 first quarter of 2020, primarily due to lower advertising revenues from the cancellation of televised sporting events at Turner; lower theatrical product revenues, reflecting unfavorable programming comparisons, including strong carryover revenues in the first quarter of 2019 at Warner Bros.; and lower content licensing revenue at HBO.

Operating contribution decreased in the first quarter of 2020. Our WarnerMedia segment operating income margin in the first quarter decreased from 26.8% in 2019 to 23.1% in 2020.

AT&T INC.

MARCH 31, 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
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Subscription	$	2,049	$	1,965	4.3	%
Advertising		957		1,261	(24.1)
Content and other		156		217	(28.1)
Total Operating Revenues		3,162		3,443	(8.2)

Operating expenses
Cost of revenues		1,320		1,680	(21.4)
Selling, general and administrative		390		456	(14.5)
Depreciation and amortization		69		60	15.0
Total Operating Expenses		1,779		2,196	(19.0)
Operating Income		1,383		1,247	10.9
Equity in Net Income (Loss) of Affiliates		6		25	(76.0)
Operating Contribution	$	1,389	$	1,272	9.2	%

Operating revenues decreased in the first quarter of 2020, primarily due to decreases in advertising revenue largely due to the cancellation of the NCAA Division I Men’s Basketball Tournament. Partially offsetting the decrease were higher subscription revenues that benefitted from higher domestic affiliate rates, partly offset by unfavorable exchange rates.

Cost of revenues decreased in the first quarter of 2020, primarily due to lower programming costs, including NCAA sports licensing costs resulting from cancellation of the NCAA tournament.

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

Operating incomeincreased in the ~~third~~first quarter of 2020. Our Turner operating income margin in the first quarter increased from 36.2% in 2019 ~~driven by higher content~~to 43.7% in 2020.

AT&T INC.

MARCH 31, 2020

Item 2. Management’s Discussion and ~~other~~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
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Subscription	$	1,338	$	1,334	0.3	%
Content and other		159		176	(9.7)
Total Operating Revenues		1,497		1,510	(0.9)

Operating expenses
Cost of revenues		816		670	21.8
Selling, general and administrative		237		251	(5.6)
Depreciation and amortization		21		22	(4.5)
Total Operating Expenses		1,074		943	13.9
Operating Income		423		567	(25.4)
Equity in Net Income (Loss) of Affiliates		20		15	33.3
Operating Contribution	$	443	$	582	(23.9)	%

Operating revenuesdecreased in the first quarter of 2020, primarily due to ~~an increase in international~~lower content licensing. Subscription ~~revenues also increased as a result of growth in~~revenue was flat, including digital and international ~~subscriptions,~~growth that was partially offset by lower domestic linear subscribers.

~~Operations and support~~Cost of revenues ~~expenses~~ increased in the ~~third~~first quarter of ~~2019~~2020, primarily due to higher programming ~~distribution~~costs and expenses related to the launch of HBO Max, scheduled for second quarter.

Selling, general and administrative decreased in the first quarter of 2020, primarily due to lower marketing expenses.

Operating income ~~increased~~decreased in the ~~third~~first quarter of ~~2019.~~2020. Our ~~Home Box Office~~HBO operating income margin in the ~~third~~first quarter ~~increased~~decreased from ~~38.2%~~37.5% in ~~2018~~2019 to ~~39.3%~~28.3% in ~~2019. Our Home Box Office EBITDA margin increased from 39.7% in 2018 to 41.1% in 2019.~~2020.

Warner Bros. Results
	Third Quarter						Nine-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating revenues
Theatrical product	$	1,375	$	1,694	(18.8)	%	$	4,408	$	1,917	-	%	$	1,106	$	1,506	(26.6)	%
Television product		1,461		1,591	(8.2)			4,384		1,794	-			1,769		1,613	9.7
Games and other		497		435	14.3			1,448		516	-			365		399	(8.5)
Total Operating Revenues		3,333		3,720	(10.4)			10,240		4,227	-			3,240		3,518	(7.9)

Operating expenses
Operations and support		2,706		3,104	(12.8)			8,543		3,507	-
Cost of revenues														2,346		2,430	(3.5)
Selling, general and administrative														604		489	23.5
Depreciation and amortization		39		40	(2.5)			122		54	-			41		52	(21.2)
Total Operating Expenses		2,745		3,144	(12.7)			8,665		3,561	-			2,991		2,971	0.7
Operating Income		588		576	2.1			1,575		666	-			249		547	(54.5)
Equity in Net Income (Loss) of Affiliates		(25)		(23)	(8.7)			(19)		(24)	20.8			(8)		6	-
Operating Contribution	$	563	$	553	1.8	%	$	1,556	$	642	-	%	$	241	$	553	(56.4)	%

5041

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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

Operating revenuesdecreased in the ~~third~~first quarter of ~~2019,~~2020, primarily due to lower theatrical product ~~resulting~~driven by unfavorable comparisons to the prior comparable period, which included, in 2019, carryover revenues from the theatrical release of Aquaman in addition to a more favorable mix of ~~box office releases in~~home entertainment releases. Partially offsetting the ~~prior-year quarter, and lower~~theatrical declines were higher television product revenues, driven by licensing, ~~revenues. These decreases were partially~~partly offset by ~~increases in games and~~lower initial telecast ~~revenues.~~revenues driven by television production delays.

~~Operations and support~~Cost of revenues ~~expenses~~ decreased in the ~~third~~first quarter of ~~2019~~2020, primarily due to lower ~~film~~marketing of theatrical product, partially offset by incremental costs incurred due to the production hiatus.

Selling, general and ~~television production costs.~~administrative increased in the first quarter of 2020, primarily due to higher bad debt expense and other charges.

Operating income ~~increased~~decreased in the ~~third~~first quarter of ~~2019.~~2020. Our Warner Bros. operating income margin in the ~~third~~first quarter ~~increased~~decreased from 15.5% in ~~2018~~2019 to ~~17.6%~~7.7% in ~~2019.~~ ~~Our Warner Bros. EBITDA margin~~ ~~increased from 16.6% in 2018 to 18.8% in 2019~~.2020.

LATIN AMERICA SEGMENT	Third Quarter						Nine-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Segment Operating Revenues
Vrio	$	1,013	$	1,102	(8.1)	%	$	3,112	$	3,710	(16.1)	%	$	887	$	1,067	(16.9)	%
Mexico		717		731	(1.9)			2,093		2,099	(0.3)			703		651	8.0
Total Segment Operating Revenues		1,730		1,833	(5.6)			5,205		5,809	(10.4)			1,590		1,718	(7.5)

Segment Operating Contribution
Vrio		13		66	(80.3)			43		281	(84.7)			(39)		32	-
Mexico		(179)		(267)	33.0			(591)		(743)	20.5			(145)		(205)	29.3
Total Segment Operating Contribution	$	(166)	$	(201)	17.4	%	$	(548)	$	(462)	(18.6)	%	$	(184)	$	(173)	(6.4)	%

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.

Operating revenues decreased in the ~~third~~first quarter ~~and for the nine months~~ of ~~2019~~2020 driven by lower revenues for Vrio, primarily resulting from foreign exchange ~~pressures related to Argentina’s hyperinflationary economy.~~pressure, that more than offset growth in Mexico.

Operating contribution ~~increased~~decreased in the ~~third~~first quarter ~~and decreased for the first nine months~~ of ~~2019,~~2020, reflecting foreign exchange pressure. Our Latin America segment operating income margin in the ~~third~~first quarter ~~increased from (11.5)~~was (11.8)% in ~~2018 to (10.3)% in 2019,~~2020 and ~~for the first nine months decreased from (8.4)% in 2018 to (11.0)~~(10.1)% in 2019.

5142

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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 Business Unit Discussion	Latin America Business Unit Discussion												Latin America Business Unit Discussion
Mexico Results
Vrio Results													Vrio Results
													First Quarter
	Third Quarter						Nine-Month Period										Percent
	2019		2018		Percent Change		2019		2018		Percent Change		2020		2019		Change
Operating revenues													$	887	$	1,067	(16.9)	%
Service	$	455	$	440	3.4	%	$	1,376	$	1,261	9.1	%
Equipment		262		291	(10.0)			717		838	(14.4)
Total Operating Revenues		717		731	(1.9)			2,093		2,099	(0.3)

Operating expenses
Operations and support		774		869	(10.9)			2,312		2,459	(6.0)			783		866	(9.6)
Depreciation and amortization		122		129	(5.4)			372		383	(2.9)			147		169	(13.0)
Total Operating Expenses		896		998	(10.2)			2,684		2,842	(5.6)			930		1,035	(10.1)
Operating Income (Loss)		(179)		(267)	33.0			(591)		(743)	20.5
Equity in Net Income of Affiliates		-		-	-			-		-	-
Operating Income														(43)		32	-
Equity in Net Income (Loss) of Affiliates														4		-	-
Operating Contribution	$	(179)	$	(267)	33.0	%	$	(591)	$	(743)	20.5	%	$	(39)	$	32	-	%

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

	March 31,				Percent
(in 000s)	2020		2019		Change
Vrio Video Subscribers		13,217		13,584	(2.7)	%

	First Quarter
					Percent
(in 000s)	2020		2019		Change
Vrio Video Net Subscriber Additions		(114)		(32)	-	%

Operating revenues decreased in the first quarter of 2020, primarily due to foreign exchange pressures.

Operations and support expenses decreased in the first quarter of 2020, primarily due to changes in foreign currency exchange rates. Approximately 20% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation expense decreased in the first quarter of 2020, primarily due to changes in foreign currency exchange rates in most of the region.

Operating income decreased in the first quarter of 2020. Our Vrio operating income margin in the first quarter decreased from 3.0% in 2019 to (4.8)% in 2020. Our Vrio EBITDA margin in the first quarter decreased from 18.8% in 2019 to 11.7% in 2020.

AT&T INC.

MARCH 31, 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

Mexico Results
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Service	$	467	$	442	5.7	%
Equipment		236		209	12.9
Total Operating Revenues		703		651	8.0

Operating expenses
Operations and support		714		725	(1.5)
Depreciation and amortization		134		131	2.3
Total Operating Expenses		848		856	(0.9)
Operating Income (Loss)		(145)		(205)	29.3
Equity in Net Income (Loss) of Affiliates		-		-	-
Operating Contribution	$	(145)	$	(205)	29.3	%

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

							September 30,		Percent			March 31,				Percent
(in 000s)	(in 000s)						2019	2018	Change		(in 000s)	2020		2019		Change
Mexico Wireless Subscribers¹
Mexico Wireless Subscribers											Mexico Wireless Subscribers
Postpaid	Postpaid						5,352	5,822	(8.1)	%	Postpaid		4,962		5,642	(12.1)	%
Prepaid	Prepaid						12,848	11,270	14.0		Prepaid		13,692		11,779	16.2
Reseller	Reseller						419	213	96.7		Reseller		504		301	67.4
Total Mexico Wireless Subscribers	Total Mexico Wireless Subscribers						18,619	17,305	7.6	%	Total Mexico Wireless Subscribers		19,158		17,722	8.1	%


		Third Quarter					Nine-Month Period					First Quarter
					Percent				Percent							Percent
(in 000s)	(in 000s)		2019	2018	Change		2019	2018	Change		(in 000s)	2020		2019		Change
Mexico Wireless Net Additions	Mexico Wireless Net Additions										Mexico Wireless Net Additions
Postpaid	Postpaid		(137)	73	-	%	(359)	324	-	%	Postpaid		(141)		(69)	-	%
Prepaid	Prepaid		668	802	(16.7)		1,183	1,873	(36.8)		Prepaid		108		114	(5.3)
Reseller	Reseller		67	32	-		166	9	-		Reseller		32		48	(33.3)
Mexico Wireless Net Subscriber Additions	Mexico Wireless Net Subscriber Additions		598	907	(34.1)	%	990	2,206	(55.1)	%	Mexico Wireless Net Subscriber Additions		(1)		93	-	%
¹	2019 excludes the impact of 692 subscriber disconnections resulting from the churn of customers related to sales by certain third-party
	distributors and the sunset of 2G services in Mexico, which are reflected in beginning of period subscribers.

Service revenues increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019,~~2020, primarily due to growth in our prepaid subscriber base.

Equipment revenues ~~decreased~~increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019, reflecting~~2020, primarily due to higher demand ~~in the prior year for our initial offering of equipment installment programs.~~due to higher gross subscriber adds and sales.

Operations and support expenses decreased in the first quarter of 2020, primarily driven by lower maintenance expenses, employee costs and changes in foreign currency rates. These decreases were partially offset by higher equipment sales. Approximately 7% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortization expense increased in the first quarter of 2020, primarily due to the amortization of spectrum licenses and higher in-service assets. These increases were partially offset by changes in foreign exchange rates.

5244

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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

~~Operations and support~~ expenses decreased in the third quarter and for the first nine months of 2019, primarily due to lower equipment sales, partially offset by higher bad debt expenses. Approximately 6% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

~~Depreciation and amortization~~ expense decreased in the third quarter and for the first nine months of 2019, primarily due to changes in the useful lives of certain assets, partially offset by the amortization of spectrum licenses and higher in-service assets.

Operating income increased in the ~~third~~first quarter ~~and first nine months~~ of ~~2019.~~2020. Our Mexico operating income margin in the ~~third~~first quarter increased from ~~(36.5)% in 2018 to (25.0)~~(31.5)% in 2019 ~~and for the first nine months increased from (35.4)~~to (20.6)% in ~~2018 to (28.2)% in 2019.~~2020. Our Mexico EBITDA margin in the ~~third~~first quarter increased from ~~(18.9)% in 2018 to (7.9)~~(11.4)% in 2019 ~~and for the first nine months increased from (17.2)~~to (1.6)% in ~~2018 to (10.5)% in 2019.~~2020.

Vrio Results

Third Quarter

Nine-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues
$
1,013

$
1,102
(8.1)
%

$
3,112

$
3,710
(16.1)
%

Operating expenses

Operations and support

851

877
(3.0)

2,598

2,894
(10.2)

Depreciation and amortization

162

168
(3.6)

496

559
(11.3)

Total Operating Expenses

1,013

1,045
(3.1)

3,094

3,453
(10.4)

Operating Income

-

57
-

18

257
(93.0)

Equity in Net Income of Affiliates

13

9
44.4

25

24
4.2

Operating Contribution
$
13

$
66
(80.3)
%

$
43

$
281
(84.7)
%

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

September 30,
Percent
(in 000s)

2019

2018
Change
Vrio Video Subscribers^1,2

13,306

13,640
(2.4)
%

Third Quarter

Nine -Month Period

Percent

Percent
(in 000s)

2019

2018
Change

2019

2018
Change
Vrio Video Net Subscriber Additions³

(167)

(73)
-
%

(310)

52
-
%
¹
Excludes subscribers of our equity investment in SKY Mexico, in which we own a 41.3% stake. SKY Mexico had 7.4 million

subscribers at June 30, 2019 and 7.8 million subscribers at September 30, 2018.
²
2019 excludes the impact of 222 subscriber disconnections resulting from conforming our video credit policy across the region, which is

reflected in beginning of period subscribers.
³
Excludes SKY Mexico net subscriber additions of 7 and losses of 126 for the quarter ended June 30, 2019 and September 30, 2018,

respectively.

~~Operating revenues~~ ~~decreased in the third quarter and for the first nine months of 2019, primarily due to foreign exchange pressures.~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

~~Operations and support~~ expenses decreased in the third quarter and for the first nine months of 2019, primarily due to changes in foreign currency exchange rates. Approximately 19% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

~~Depreciation~~ ~~expense decreased in the third quarter and for the first nine months of 2019, primarily due to changes in foreign currency exchange rates.~~

~~Operating income~~ decreased in the third quarter and for the first nine months of 2019. Our Vrio operating income was $0, compared to an operating income of $57, or an operating income margin of 5.2%, in the year-earlier quarter. For the first nine months our operating income margin decreased from 6.9% in 2018 to 0.6% in 2019. Our Vrio EBITDA margin in the third quarter decreased from 20.4% in 2018 to 16.0% in 2019, and for the first nine months decreased from 22.0% in 2018 to 16.5% in 2019.

XANDR SEGMENT	Third Quarter						Nine-Month Period						XANDR SEGMENT
													First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating revenues	$	504	$	445	13.3	%	$	1,415	$	1,174	20.5	%	$	489	$	426	14.8	%

Operating expenses
Operations and support		162		109	48.6			469		218	-			170		160	6.3
Depreciation and amortization		15		3	-			41		4	-			20		13	53.8
Total Operating Expenses		177		112	58.0			510		222	-			190		173	9.8
Operating Income		327		333	(1.8)			905		952	(4.9)			299		253	18.2
Equity in Net Income of Affiliates		-		-	-			-		-	-
Equity in Net Income (Loss) of Affiliates														-		-	-
Operating Contribution	$	327	$	333	(1.8)	%	$	905	$	952	(4.9)	%	$	299	$	253	18.2	%

Operating revenues increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019 primarily~~2020 due to ~~our acquisition of AppNexus in August 2018.~~strong demand for addressable advertising, including political advertising.

Operations and support expenses increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019, primarily due to our acquisition of AppNexus and our~~2020 driven by ongoing development ofand growth in the ~~platform supporting Xandr’s~~ business.

Operating income ~~decreased~~increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2019.~~2020. Our Xandr segment operating income margin in the ~~third~~first quarter ~~decreased~~increased from ~~74.8% in 2018 to 64.9%~~59.4% in 2019 ~~and for the first nine months decreased from 81.1%~~to 61.1% in ~~2018 to 64.0% in 2019.~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~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 to our Xandr segment operating results, we are providing a view of total advertising revenues generated by AT&T. This combined view presents the entire portfolio of advertising revenues reported across all operating segments and represents a significant strategic initiative and growth opportunity for AT&T. See revenue categories tables in Note 5 for a reconciliation.

Total Advertising Revenues
	Third Quarter						Nine-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating Revenues
WarnerMedia	$	945	$	983	(3.9)	%	$	3,509	$	1,222	-	%	$	979	$	1,279	(23.5)	%
Communications		495		478	3.6			1,382		1,284	7.6			489		417	17.3
Xandr		504		445	13.3			1,415		1,174	20.5			489		426	14.8
Eliminations		(421)		(401)	(5.0)			(1,170)		(1,122)	(4.3)			(413)		(350)	(18.0)
Total Advertising Revenues	$	1,523	$	1,505	1.2	%	$	5,136	$	2,558	-	%	$	1,544	$	1,772	(12.9)	%

AT&T INC.

MARCH 31, 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 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
	Third Quarter						Nine-Month Period						First Quarter
	2019		2018		Percent Change		2019		2018		Percent Change		2020		2019		Percent Change
	2019		2018		Percent Change		2019		2018		Percent Change		2020		2019		Percent Change
Operating revenues
Wireless service	$	2,009	$	1,857	8.2	%	$	5,901	$	5,440	8.5	%	$	1,949	$	1,777	9.7	%
Strategic and managed services		3,900		3,677	6.1			11,513		10,849	6.1			3,879		3,779	2.6
Legacy voice and data services		2,252		2,602	(13.5)			6,973		8,176	(14.7)			2,129		2,397	(11.2)
Other service and equipment		351		404	(13.1)			1,102		1,010	9.1			324		302	7.3
Wireless equipment		694		586	18.4			1,902		1,737	9.5			710		590	20.3
Total Operating Revenues		9,206		9,126	0.9			27,391		27,212	0.7			8,991		8,845	1.7

Operating expenses
Operations and support		5,643		5,575	1.2			16,770		16,724	0.3			5,710		5,614	1.7
Depreciation and amortization		1,573		1,485	5.9			4,643		4,408	5.3			1,625		1,525	6.6
Total Operating Expenses		7,216		7,060	2.2			21,413		21,132	1.3			7,335		7,139	2.7
Operating Income		1,990		2,066	(3.7)			5,978		6,080	(1.7)			1,656		1,706	(2.9)
Equity in Net Income (Loss) of Affiliates		(1)		(3)	66.7			-		(2)	-			-		-
Operating Contribution	$	1,989	$	2,063	(3.6)	%	$	5,978	$	6,078	(1.6)	%	$	1,656	$	1,706	(2.9)	%

OTHER BUSINESS MATTERS

Spectrum Auction 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 previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids. These vouchers yielded a value of $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. We expect the FCC will grant the licenses in mid-2020.

Labor Contracts As of March 31, 2020, we employed approximately 244,000 persons. Approximately 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 contract 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 expired in April 2020. In March 2020, a tentative agreement was reached on a new 4-year contract. The tentative agreement is subject to ratification by employees.

5546

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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~~

~~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 posts, internet browsing and many other applications are typically unaffected. Contrary to the FTC’s allegations, our MBR program is permitted by our customer contracts, was fully disclosed in advance to our Unlimited Data Plan customers, and was implemented to protect the network for the benefit of all customers. We ~~reached a tentative agreement with the FTC staff in August 2019, pending FTC approval. We~~ do not expect the resolution of the matter to have a material adverse impact on our financial results. We are not admitting culpability in the tentative agreement. In addition to the FTC case, several class actions were filed challenging our MBR program. We secured dismissals in each of these cases except Roberts v. AT&T Mobility LLC, which is ongoing.

~~Labor Contracts~~ As of September 30, 2019, we employed approximately 252,000 persons. Approximately 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 agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached.

A contract covering approximately 8,000 traditional wireline employees in our Midwest region expired in April 2018. In August 2019, a new four-year contract was ratified by employees and will expire in April 2022.

A contract covering approximately 3,000 traditional wireline employees in our legacy AT&T Corp. business expired in April 2018. In August 2019, a new four-year contract was ratified by employees and will expire in April 2022.

A contract covering approximately 20,000 traditional wireline employees in our Southeast region expired in August 2019. In October 2019, a new five-year contract was ratified by employees and will expire in August 2024.

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. ~~The leadership at~~More recently, the FCC ~~is charting~~has pursued a more ~~predictable~~deregulatory agenda, eliminating a variety of antiquated and ~~balanced regulatory course that will encourage long-term investment and benefit consumers. Based on its public statements, we expect the FCC to continue to eliminate antiquated,~~ unnecessary regulations and ~~streamline processes.~~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.

~~We have organized the following discussion by reportable segment.~~

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

Communications Segment

Internet ~~In February 2015, the~~The FCC released an order classifying both fixed and mobile consumer broadband internet access services as telecommunications services, subject to Title II of the Communications Act. The Order, which represented a departure from longstanding bipartisan precedent, significantly expanded the FCC’s authority to regulate broadband internet access services, as well as internet interconnection arrangements. In December 2017, the FCC reversed its 2015 decision by reclassifyingcurrently classifies fixed and mobile consumer broadband services as information services, ~~and repealing most of the rules that were adopted in 2015. In lieu of broad conduct prohibitions, the order requires internet service providers~~subject to disclose information about their network practices and terms of service, including whether they block or throttle internet traffic or offer paid prioritization. Several parties appealed the FCC’s December 2017 decision andlight-touch regulation. Although the D.C. Circuit ~~heard oral argument on the appeals on February 1, 2019. On October 1, 2019, the court issued a unanimous opinion upholding~~upheld the FCC’s ~~reclassification of broadband as an information service, and its reliance on transparency requirements and competitive marketplace dynamics~~current classification, challenges to ~~safeguard net neutrality. While the court vacated the FCC’s express preemption of any state regulation of net neutrality, it nevertheless stressed~~ that its ruling does not prevent the FCC or ISPs from relying on conflict preemption to invalidate particular state laws that are inconsistent with the FCC’s regulatory objectives and framework. The court also concluded that the FCC failed to satisfy its obligation under the Administrative Procedure Act (APA) to consider the impact of its 2017 order in three discrete areas—public safety, the Lifeline program, and pole attachment regulation—and thus remanded it to the FCC for further proceedings on those issues, but without disturbing the operative effect of that order. decision remain pending.

A number of states have adopted legislation or issued executive orders that would reimpose ~~the very~~net neutrality rules repealed by the FCC, ~~repealed,~~ and in some cases, established additional ~~requirements that go beyond the FCC’s February 2015 order. Additionally, some state governors have issued executive orders that effectively reimpose the repealed~~ requirements. Suits have ~~recently~~ been filed concerning laws in ~~California and Vermont, and other lawsuits are possible. The California and Vermont suits~~certain states, but have been stayed pursuant to agreements by those states not to enforce their laws pending final resolution of all appeals of the FCC’s December 2017 order. If no one seeks rehearing or Supreme Court review of the D.C. Circuit’s decision, the foregoing litigation will recommence. We expect that additional states may seek to regulate net neutrality based on the D.C. Circuit’s decision.FCC order restoring broadband’s status as an information service. We will continue to support congressional action to codify a set of standard consumer rules for the internet.

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” providers such as Google and Facebook. In April 2017, the president signed a resolution passed by Congress repealing the new rules under the Congressional Review Act.

Privacy-related legislation has been considered or adopted in a number of states. Legislative and regulatory action could result in increased costs of compliance, claims against broadband internet access service providers and others, and increased uncertainty in the value and availability of data. ~~On June 28, 2018, the state of California enacted comprehensive privacy legislation that, effective~~Effective as of January 1, 2020, a California state law gives ~~California~~ consumers the right to know what personal information is being collected about them, and whether and to whom it is sold or disclosed, and to access and request deletion of this information. Subject to certain exceptions, it also gives California consumers the right to ~~opt-out~~opt out of the sale of personal ~~information. The law applies the same rules to all companies that collect consumer~~ information.

Wireless The 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” equipment and therefore increase the need for local permitting processes that allow for the placement of 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, including small cell equipment. In March, August and September 2018, the FCC adopted orders to streamline ~~the~~federal and local wireless infrastructure review ~~process~~processes in order to facilitate deployment of next-generation wireless facilities. ~~Those orders have been~~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 ~~various appeals remain pending in the DC Circuit and 9th~~D.C. Circuit Court of ~~Appeals. In addition, to date, 28 states and Puerto Rico have adopted legislation to facilitate~~Appeals vacated the FCC’s finding that most small cell ~~deployment.~~

~~In December~~facilities are excluded from review, but otherwise upheld the FCC’s Order. The FCC’s August and September 2018 ~~we introduced~~Orders simplified the ~~nation’s first commercial mobile 5G service. We currently have mobile 5G in parts of 21 U.S. cities~~regulations for attaching telecommunications equipment to utility poles and ~~we plan to roll out mobile 5G service in parts of at least 29 cities by the end of the year. We expect to have mobile 5G service nationwide to more than 200 million people by the first half of 2020.~~clarified when local government right-of-way access and use

5747

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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

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 5G service. We now expect nationwide 5G coverage this summer; we anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in equipment upgrades.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first quarter of 2020 despite lower business collections late in the quarter as customers extended their payment cycles, presumably in response to the economic challenges of the pandemic. We will continue to monitor impacts on the COVID-19 pandemic on our liquidity and capital resources. For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company's liquidity and capital resources, see "Part II-Item 1A-Risk Factors."

We had ~~$6,588~~$9,955 in ~~cash~~“Cash and cash ~~equivalents~~equivalents” available at ~~September 30, 2019. Cash~~March 31, 2020. “Cash and cash ~~equivalents~~equivalents” included cash of ~~$3,765~~$3,287 and money market funds and other cash equivalents of ~~$2,823.~~$6,668. Approximately ~~$2,200~~$2,485 of our ~~cash~~“Cash and cash ~~equivalents~~equivalents” were held by our foreign entities in accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation.

“Cash and cash ~~equivalents increased $1,384~~equivalents” decreased $2,175 since December 31, ~~2018.~~2019. In the first ~~nine~~three months of ~~2019,~~2020, cash inflows were primarily provided by the cash receipts from operations, including cash from our sale and transfer of ~~certain wireless equipment installment and WarnerMedia~~our receivables to third parties, ~~sale~~issuance of ~~investments,~~long-term debt, issuance of commercial paper and ~~long-term debt, collateral received from banks and other participants in our derivative arrangements and issuance~~issuances of ~~perpetual nonconvertible~~cumulative preferred ~~interests in a subsidiary.~~stock. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, debt repayments, funding capital expenditures and vendor financing payments, ~~spectrum deposits~~collateral posted to banks and other participants in derivative arrangements, share repurchase, and dividends to stockholders.

Cash Provided by or Used in Operating Activities

During the first ~~nine~~three months of ~~2019,~~2020, cash provided by operating activities was ~~$36,725,~~$8,866, compared to ~~$31,522~~$11,052 for the first ~~nine~~three months of ~~2018. Higher~~2019. Lower operating cash flows in ~~2019~~2020 were primarily ~~due to contributions from~~driven by WarnerMedia profits, including increased HBO Max investments and higher ~~cash flows from~~production spend; lower incremental receivable securitization; and working capital ~~initiatives, including sales of receivables (see Note 9), partly offset by higher spend on film and television production and net tax payments~~pressures, specifically lower business collections late in ~~2019 compared to net tax refunds in 2018.~~the quarter.

We actively manage the timing of our supplier payments for non-capital items to optimize the use of our cash. Among other things, we seek to ~~make~~have payments made 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 operating activities was to ~~reduce~~decrease working capital ~~$345~~$1,075 and $904 for the ~~first nine~~three months ofended March 31, 2020 and 2019, ~~and to improve working capital $284 for the first nine months of 2018.~~respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities

For the first ~~nine~~three months of ~~2019,~~2020, cash used in investing activities totaled ~~$13,002,~~$5,022, and consisted primarily of ~~$15,843~~$4,966 (including interest during construction) for capital expenditures ($~~1,256~~216 lower than the prior-year comparable period), ~~offset by proceeds from~~and $99 of wireless spectrum deposits. Subsequent to the ~~sales~~first quarter of 2020, in April we made our ~~ownership interests~~final payment of approximately $950 for wireless spectrum licenses won in ~~Hulu~~Auction 103, and ~~WarnerMedia’s headquarters (Hudson Yards) under a sale-leaseback arrangement (see Note 8).~~on May 4, we acquired our remaining interest HBO Latin America Group (HBO LAG) for $230.

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 first ~~nine~~three months of ~~2019, these~~2020, vendor financing payments were ~~$2,601, and when combined with $15,843 of capital expenditures, total capital investment was $18,444 ($998 higher than the prior-year comparable period). In~~$791, compared to $819 for the first ~~nine~~three months of ~~2019, we placed $1,917 of equipment in service under vendor financing arrangements.~~

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first nine months, approximately $850 of assets related to the FirstNet build were placed into service. Total reimbursements from the government for FirstNet during the first nine months were $134 for 2019 and $336 for 2018, predominantly for capital expenditures.

The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements. In July 2019, we completed our DIRECTV merger commitment, marketing fiber-to-the-premises network to nearly 14 million customer locations.

~~Cash Provided by or Used in Financing Activities~~

~~For the first nine months of 2019, cash used in financing activities totaled $22,341 and included net proceeds of $15,034, which consisted primarily of the following issuances:~~

2019.

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AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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

~~Issued~~Capital expenditures in the first three months of 2020 were $4,966, and ~~redeemed~~when including $791 cash paid for vendor financing, capital investment was $5,757 ($244 lower than the prior-year comparable period).

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first three month of 2020, we placed $449 of equipment in ~~2019~~service under vendor financing arrangements (compared to $733 in the prior-year comparable period) and $338 of assets related to the FirstNet build (compared to $304 in the prior-year comparable period).

The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Cash Provided by or Used in Financing Activities

For the first three months of 2020, cash used in financing activities totaled $6,099 and was comprised of debt issuances and repayments, issuances of preferred stock, share repurchase, payments of dividends and required collateral deposits.

During the first three months of 2020, debt issuances included proceeds of $3,132 in net short-term borrowings and $4,357 of net proceeds from long-term debt, which consisted primarily of the following issuances:

~~January draw~~February issuance of ~~$2,850 on an 11-month syndicated term loan agreement (repaid in the third quarter).~~$2,995 of 4.000% global notes due 2049.

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

~~August~~March borrowings of ~~$400 under a private financing agreement (repaid in the third quarter).~~

~~Issued and outstanding at September 30, 2019~~

~~February issuance~~$665 from loan programs with export agencies of ~~$3,000 of 4.350% global notes due 2029.~~

~~February issuance of $2,000 of 4.850% global notes due 2039.~~

~~Borrowings of $725 in January and $525 in June that are supported by government agencies~~foreign governments to support network equipment ~~purchases.~~

~~June draw of $300 on U.S. Bank credit agreement.~~

~~September issuance of €1,000 of 0.25% global notes due 2026, €1,250 of 0.80% global notes due 2030 and €750 of 1.80% global notes due 2039 (when combined, $3,308 at issuance).~~

~~September draw of $1,300 on a Bank of America term loan credit agreement.~~purchases in those countries.

During the first ~~nine~~three months of ~~2019,~~2020, repayment of long-term debt totaled ~~$24,368.~~$4,422. Repayments primarily consisted of the following:

~~Notes redeemed at maturity:~~

$~~1,850 of 2.300% AT&T global notes in the first quarter.~~

~~$400~~800 of AT&T floating-rate notes ~~in the first quarter.~~

~~€1,500 of AT&T floating-rate notes in the second quarter ($1,882~~redeemed at ~~maturity).~~maturity.

$~~650~~2,619 of ~~2.100% WarnerMedia, LLC notes in the second quarter.~~

~~Notes redeemed prior to maturity:~~

~~$2,010 of~~4.600% AT&T global notes with ~~interest rates ranging from 4.750% to 5.200% and~~ original maturities in ~~2020 and 2021, in the first quarter.~~

~~$2,000 of Warner Media, LLC notes with interest rates ranging from 4.700% to 5.200% and original maturities in 2021, in the first quarter.~~

$590 of Warner Media, LLC and/or Historic TW Inc. notes that were tendered for cash in our May 2019 obligor debt exchange. The notes had interest rates ranging between 6.500% and 9.150% and original maturities ranging from 2023 to 2036.

~~$243 of open market redemptions of AT&T notes, with interest rates ranging from 7.125% to 8.750% and original maturities in 2031, in the second quarter.~~

$154 of open market redemptions of WarnerMedia, LLC, Historic TW Inc., BellSouth LLC and AT&T Mobility LLC notes, with interest rates ranging from 2.95% to 7.625% and original maturities ranging from 2022 to 2097, in the third quarter.

~~Credit facilities and other redemptions:~~

~~$2,625 of final amounts outstanding under our Acquisition Term Loan (defined below) in the first quarter.~~

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

~~$1,500 of four-year and five-year borrowings under the Nova Scotia Credit Agreement (defined below) in the second quarter and $750 of three-year borrowings in the third quarter.~~

~~$600 of borrowings under our credit agreement with Canadian Imperial Bank of Commerce in the second quarter.~~

~~$500 of advances under our November 2018 Term Loan (defined below) in the second quarter, with payment of the remaining $3,050 of advances in the third quarter.~~

~~$250 of borrowings under a U.S. Bank credit agreement in the second quarter.~~2045.

$750 of borrowings under a private ~~credit agreement in the third quarter.~~

~~$400 of borrowings under a private~~ financing ~~agreement in the third quarter.~~

~~$2,850 of borrowings under an 11-month syndicated term loan agreement from January 2019 in the third quarter.~~agreement.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

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 30, 2019~~March 31, 2020 and 4.4% as of December 31, ~~2018.~~2019. We had ~~$160,758~~$159,386 of total notes and debentures outstanding at ~~September 30, 2019,~~March 31, 2020, which included Euro, British pound sterling, Canadian dollar, Swiss franc, Australian dollar, Brazilian real and Mexican peso ~~Canadian dollar and Australian dollar~~ denominated debt that totaled approximately ~~$41,399.~~$40,712.

At ~~September 30, 2019,~~March 31, 2020, we had ~~$11,608~~$17,067 of debt maturing within one year, ~~consisting of $2,443~~including $3,144 of commercial paper ~~and other short-term~~ borrowings and ~~$9,165~~$13,923 of long-term debt issuances. Debt maturing within one year includes the following notes that may be put back to us by the holders:

$1,000 of annual put reset securities issued by BellSouth that may be put back to us each April until maturity in 2021. These securities were redeemed on April 27, 2020.

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 ~~nine~~three months of ~~2019,~~2020, we paid ~~$2,601~~$791 of cash under our vendor financing program, compared to ~~$347~~$819 in the first ~~nine~~three months of ~~2018.~~2019. Total vendor financing payables included in our ~~September 30, 2019~~March 31, 2020 consolidated balance sheet were approximately ~~$1,800,~~$1,361, with ~~$1,350~~$997 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

~~In September 2019, we contributed certain tower assets to a wireless subsidiary and then generated $1,500~~Financing activities in the first three months of ~~capital from~~2020 also included $3,869 for the February issuance of ~~nonconvertible~~Series B and Series C preferred ~~interests, which we reported as financing activities (see~~stock. (See Note ~~11).~~10)

During the first three months of 2020, we repurchased approximately 142 million shares of common stock and completed the share repurchase authorization approved by the Board of Directors in 2013. At ~~September 30, 2019,~~March 31, 2020, we had approximately ~~371~~178 million shares remaining from share repurchase authorizations approved by the Board of Directors in ~~2013~~2014. On March 19,

AT&T INC.

MARCH 31, 2020

Item 2. Management’s Discussion and ~~2014.~~Analysis of Financial Condition and Results of Operations - Continued

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

2020, we announced the cancellation of an accelerated share repurchase agreement that was planned for the second quarter and all 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.

We paid dividends on common and preferred shares of ~~$11,162~~$3,737 during the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$9,775~~$3,714 for the first ~~nine~~three months of ~~2018,~~2019. Dividends were higher in 2020, primarily ~~reflecting~~due to dividend payments to preferred stockholders and the ~~increase in the number of shares outstanding related to our June 2018 acquisition of Time Warner as well as an~~ increase in our quarterly dividend on common stock approved by our Board of Directors in December ~~2018.~~2019, partially offset by fewer shares outstanding. Dividends on common stock declared by our Board of Directors totaled ~~$1.53~~$0.52 per share in the first ~~nine~~three months of ~~2019~~2020 and ~~$1.50~~$0.51 per share for the first ~~nine~~three months of ~~2018.~~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.

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 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 ~~September 30, 2019.~~

In September 2017, we entered into a $2,250 syndicated term loan credit agreement (the “Nova Scotia Credit Agreement”) containing (i) a three-year $750 term loan facility (the “2021 facility”), (ii) a four-year $750 term loan facility (the “2022 facility”) and (iii) a five-year $750 term loan facility (the “2023 facility”), with certain investment and commercial banks and The Bank of Nova Scotia, as administrative agent. We drew on all three facilities during the first quarter of 2018, paid the 2022 and 2023 facilities during the second quarter of 2019 and paid the 2021 facility during the third quarter of 2019. No amounts were outstanding under the Nova Scotia Credit Agreement as of September 30, 2019.

On November 20, 2018, we entered into and drew on a 4.5 year $3,550 term loan credit agreement (the “November 2018 Term Loan”) with Bank of America, N.A., as agent. We used the proceeds to finance the repayment, in part, of loans

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~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~~

outstanding under the Acquisition Term Loan. We paid $500 of these borrowings in the second quarter of 2019, and paid the remaining $3,050 in the third quarter. No amounts were outstanding under this agreement as of September 30, 2019.

~~On January~~March 31, 2019, we entered into and drew on an 11-month $2,850 syndicated term loan credit agreement (the “Citibank Term Loan”), with certain investment and commercial banks and Citibank, N.A., as administrative agent. We paid the borrowings under the Citibank Term Loan during the third quarter. As of September 30, 2019, no amounts were outstanding under this agreement.2020.

In September 2019, we entered into and drew on a $1,300 term loan credit agreement containing (i) a 1.25 year $400 facility due in 2020 (BAML Tranche A Facility), (ii) a 2.25 year $400 facility due in 2021 (BAML Tranche B Facility), and (iii) a 3.25 year $500 facility due in 2022 (BAML Tranche C Facility), with Bank of America, N.A., as agent. No ~~payment~~repayment had been made under these facilities as of ~~September 30, 2019.~~March 31, 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 Bank of America, N.A., as lead agent. The Term Loan is not subject to amortization and the entire principal amount of the Term Loan will be due and payable on December 31, 2020.

We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases, as well as a 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 30, 2019,~~March 31, 2020, we were in compliance with the covenants for our credit facilities.

Collateral Arrangements

During ~~the year,~~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~~three months of ~~2019,~~2020, we ~~received $1,204~~deposited approximately $2,650 of cash collateral, on a net basis ~~primarily driven by~~as we exceeded the ~~amended arrangements.~~market value thresholds with some of the counterparties. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7)

Other

Our total capital consists of debt (long-term debt and debt maturing within one year) and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At ~~September 30, 2019,~~March 31, 2020, our debt ratio was ~~45.9%~~45.7%, compared to ~~49.8%~~47.4% at ~~September 30, 2018~~March 31, 2019 and ~~47.7%~~44.7% at December 31, ~~2018.~~2019. Our net debt ratio was ~~44.1%~~42.9% at ~~September 30, 2019,~~ March 31, 2020,

AT&T INC.

MARCH 31, 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

compared to ~~47.4%~~45.6% at ~~September 30, 2018~~March 31, 2019 and ~~46.2%~~41.4% at December 31, ~~2018.~~2019. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and ~~repayments.~~debt acquired in business combinations.

During the first ~~nine~~three months of ~~2019,~~2020, we ~~have~~ received ~~$3,775~~$118 from the disposition of assets, and when combined with ~~capital received from the external investors in a wireless tower subsidiary, an amendment of collateral arrangements, and~~ working capital monetization initiatives, which include the sale of receivables, total cash received from monetization efforts, net of spectrum acquisitions, was approximately ~~$10,800.~~$1,000. We plan to continue to explore similar opportunities. In October 2019, we entered into an agreement to sell our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands for approximately $1,950, which we expect to close in the first half of 2020 (Note 8). Also in October, we entered into a sale-leaseback of certain domestic company-owned wireless towers for approximately $680, with a substantial number of the towers expected to close by year-end 2019, and an agreement to sell our stake in Central European Media Enterprises Ltd. for approximately $1,100, which we expect to close in the second quarter ofopportunities throughout 2020.

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~~SEPTEMBER 30, 2019~~MARCH 31, 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

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.

Business Solutions Reconciliation

We provide a supplemental discussion of our Business Solutions operations that is calculated by combining our Mobility and Business Wireline business units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results. Results have been recast to conform to the current period's classification of consumer and business wireless subscribers.

		Three Months Ended																First Quarter
		September 30, 2019								September 30, 2018								March 31, 2020								March 31, 2019
		Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions
Operating Revenues
Wireless service	$	13,930	$	-	$	(11,921)	$	2,009	$	13,828	$	-	$	(11,971)	$	1,857	$	13,968	$	-	$	(12,019)	$	1,949	$	13,629	$	-	$	(11,852)	$	1,777
Strategic and managed services		-		3,900		-		3,900		-		3,677		-		3,677		-		3,879		-		3,879		-		3,779		-		3,779
Legacy voice and data services		-		2,252		-		2,252		-		2,602		-		2,602		-		2,129		-		2,129		-		2,397		-		2,397
Other service and equipment		-		351		-		351		-		404		-		404		-		324		-		324		-		302		-		302
Wireless equipment		3,771		-		(3,077)		694		3,907		-		(3,321)		586		3,434		-		(2,724)		710		3,734		-		(3,144)		590
Total Operating Revenues		17,701		6,503		(14,998)		9,206		17,735		6,683		(15,292)		9,126		17,402		6,332		(14,743)		8,991		17,363		6,478		(14,996)		8,845

Operating Expenses
Operations and support		9,948		4,022		(8,327)		5,643		10,104		4,022		(8,551)		5,575		9,569		3,951		(7,810)		5,710		10,041		4,032		(8,459)		5,614
EBITDA		7,753		2,481		(6,671)		3,563		7,631		2,661		(6,741)		3,551		7,833		2,381		(6,933)		3,281		7,322		2,446		(6,537)		3,231
Depreciation and amortization		2,011		1,271		(1,709)		1,573		2,057		1,187		(1,759)		1,485		2,045		1,301		(1,721)		1,625		2,013		1,222		(1,710)		1,525
Total Operating Expense		11,959		5,293		(10,036)		7,216		12,161		5,209		(10,310)		7,060		11,614		5,252		(9,531)		7,335		12,054		5,254		(10,169)		7,139
Operating Income		5,742		1,210		(4,962)		1,990		5,574		1,474		(4,982)		2,066		5,788		1,080		(5,212)		1,656		5,309		1,224		(4,827)		1,706
Equity in net income (loss) of affiliates		-		(1)		-		(1)		1		(3)		(1)		(3)		-		-		-		-		-		-		-		-
Operating Contribution	$	5,742	$	1,209	$	(4,962)	$	1,989	$	5,575	$	1,471	$	(4,983)	$	2,063	$	5,788	$	1,080	$	(5,212)	$	1,656	$	5,309	$	1,224	$	(4,827)	$	1,706
¹Non-business wireless reported in the Communications segment under the Mobility business unit.	¹Non-business wireless reported in the Communications segment under the Mobility business unit.																¹Non-business wireless reported in the Communications segment under the Mobility business unit.

6252

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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~~

Nine Months Ended

September 30, 2019

September 30, 2018

Mobility

Business Wireline

Adjustments¹

Business Solutions

Mobility

Business Wireline

Adjustments¹

Business Solutions
Operating Revenues

Wireless service
$
41,383
$
-
$
(35,482)
$
5,901

$
40,594
$
-
$
(35,154)
$
5,440
Strategic and managed services

-

11,513

-

11,513

-

10,849

-

10,849
Legacy voice and data services

-

6,973

-

6,973

-

8,176

-

8,176
Other service and equipment

-

1,102

-

1,102

-

1,010

-

1,010
Wireless equipment

10,973

-

(9,071)

1,902

11,371

-

(9,634)

1,737
Total Operating Revenues

52,356

19,588

(44,553)

27,391

51,965

20,035

(44,788)

27,212

Operating Expenses

Operations and support

29,511

12,029

(24,770)

16,770

29,603

12,047

(24,926)

16,724
EBITDA

22,845

7,559

(19,783)

10,621

22,362

7,988

(19,862)

10,488
Depreciation and amortization

6,027

3,735

(5,119)

4,643

6,218

3,520

(5,330)

4,408
Total Operating Expense

35,538

15,764

(29,889)

21,413

35,821

15,567

(30,256)

21,132
Operating Income

16,818

3,824

(14,664)

5,978

16,144

4,468

(14,532)

6,080
Equity in net income (loss)
of affiliates

(1)

-

1

-

-

(2)

-

(2)
Operating Contribution
$
16,817
$
3,824
$
(14,663)
$
5,978

$
16,144
$
4,466
$
(14,532)
$
6,078
¹Non-business wireless reported in the Communications segment under the Mobility business unit.

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At ~~September 30, 2019,~~March 31, 2020, we had interest rate swaps with a notional value of $853 and a fair value of ~~$2.~~$14.

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 ~~$42,792~~$42,325 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of ~~$(4,483)~~$(8,283) at ~~September 30, 2019.~~March 31, 2020. We have rate locks with a notional value of $3,500 and a fair value of ~~$(225)~~$(720) at ~~September 30, 2019.~~March 31, 2020.

We have foreign exchange contracts with a U.S. dollar notional value of ~~$473~~$106 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 ~~$79~~$66 at ~~September 30, 2019.~~March 31, 2020.

We have designated ~~€1,450~~€1,364 million aggregate principal amount of debt as a hedge of the variability of ~~some of the~~certain 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 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 disclosure controls and procedures as of ~~September 30, 2019.~~March 31, 2020. Based on that evaluation, the chief executive officer and chief financial officer concluded that the registrant’s disclosure controls and procedures were effective as of ~~September 30, 2019.~~March 31, 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.

6453

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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” 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, ~~special access and business data services;~~ 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;~~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 ~~impact~~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.

The continued development and delivery of attractive and profitable wireless, video and broadband offerings and ~~devices;~~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.~~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.

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

AT&T INC.

MARCH 31, 2020

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

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

~~AT&T INC.~~

~~SEPTEMBER 30, 2019~~

~~CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS~~

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.

~~Our ability to take advantage of the desire of advertisers to change traditional video advertising models.~~

~~Our increased exposure to 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.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.

6655

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 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 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~~

We depend on various suppliers to provide equipment to operate our business and satisfy customer demand and interruption or delay in supply can adversely impact our operating results.

We depend on suppliers to provide us, directly or through other suppliers, with items such as network equipment, customer premises equipment, video equipment and wireless-related equipment such as mobile hotspots, handsets, wirelessly enabled computers, wireless data cards and other connected devices for our customers. These suppliers could fail to provide equipment on a timely basis, or fail to meet our performance expectations, 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 such as the ~~third quarter~~COVID-19 pandemic. The COVID-19 pandemic has caused, and may continue to cause, delays in the development, manufacturing (including the sourcing of ~~2019, there~~key components) and shipment of products. In certain limited circumstances, suppliers have been unable to supply products in a timely fashion. In such limited circumstances, we have been unable to provide products and services precisely as and when requested by our customers. It is possible that, in some circumstances, we could be forced to switch to a different key supplier. Because of the cost and time lag that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were norequired to, or chose to, replace the products of one or more key suppliers with products from another source, especially if the replacement became necessary on short notice. Any such ~~material developments.~~disruption could increase our costs, decrease our operating efficiencies and have a negative effect on our operating results.

Our business is subject to risks arising from the recent outbreak of the COVID-19 virus.

The COVID-19 pandemic and resulting mitigation measures have caused, and may continue to cause, a negative effect on our operating results. To date, mitigation measures have caused sports leagues to suspend operations as well as the cancellation of many sporting events, including the NCAA tournament, which has adversely affected our advertising revenues, may result in contract disputes concerning carriage rights and will also cause us to incur expenses relating to these sporting events notwithstanding their cancellation. The closure, or the avoidance, of theaters, and the interruptions in movie production and other programming caused by COVID-19, are expected to impact the timing of revenues and may cause a loss of revenue to our Warner Media business over the long term. If the mitigating measures or the associated effects are prolonged, we expect business customers in industries most significantly impacted will reduce or terminate services, having a negative effect on the performance of our Business Wireline business unit. Further, concerns over the COVID-19 pandemic could result in the prolonged closure of many of our retail stores and deter customers from accessing our stores even as the mitigation measures subside. These pandemic concerns may also result in continued impact to our customers’ ability to pay for our products and services. We may also continue to see significant impact on roaming revenues due to a downturn in international travel. The COVID-19 pandemic has reduced staffing levels at our call centers and field operations resulting in delays in service. Further reductions in staffing levels could further limit our ability to provide services, adversely impacting our competitive position. We may also incur significantly higher expenses attributable to infrastructure investments required to meet higher network utilization from more customers consuming bandwidth from changes in work from home trends; extended cancellation periods; and increased labor costs if the COVID-19 pandemic continues for an extended period.

The COVID-19 pandemic and mitigation measures have caused, and may continue to cause, adverse impacts on global economic conditions and consumer confidence and spending, which affect demand for our products and services. The extent to which the COVID-19 pandemic impacts our business results of operations, cash flows and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the situation is developing, we are not able at this time to estimate the impact of COVID-19 on our financial or operational results, but the impact could be material.

6756

AT&T INC.

~~SEPTEMBER 30, 2019~~MARCH 31, 2020

PART II – OTHER INFORMATION - CONTINUED

Dollars in millions except per share amounts

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases by the Company during the quarter ended March 31, 2020
of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act. Subject to applicable
law, share purchases may be made from time to time in open market transactions, privately negotiated transactions, including
accelerated share repurchase agreements, or pursuant to instruments and plans complying with Rule 10b5-1.
(c) A summary of our repurchases of common stock during the ~~third~~first quarter of ~~2019~~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~~January 1, ~~2019~~2020 -
~~July~~January 31, ~~2019~~2020
~~220,880~~85,491,992

$
~~33.45~~39.06
84,811,852
234,687,593
February 1, 2020 -
February 29, 2020
2,485,427
37.74

-

~~375,662,000~~234,687,593
~~August~~March 1, ~~2019~~2020 -
~~August~~March 31, ~~2019~~2020
~~4,784,883~~59,221,415

~~33.73~~35.32

~~4,764,343~~56,745,363

~~370,897,657~~
~~September 1, 2019 -~~
~~September 30, 2019~~
~~447,419~~
~~37.32~~
-
~~370,897,657~~177,942,230
Total
~~5,453,182~~147,198,834

$
~~34.01~~37.53

~~4,764,343~~141,557,215

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 300 million shares of our common stock. In
December 2019, we entered into an accelerated share repurchase agreement with a third-party financial institution to
repurchase $4.0 billion of the Company's common stock in the first quarter of 2020. Under this agreement, we
repurchased approximately 104.8 million shares, which completed the March 2013 authorization. In March 2014, our
Board of Directors authorized the repurchase of an additional 300 million shares of our common stock. The March

~~The authorizations have~~2014 authorization has no expiration date.
²
Of the shares repurchased, ~~258,198~~5,045,525 shares were acquired through the withholding of taxes on the vesting of ~~restricted stock~~

restricted stock and performance shares or on the exercise price of options.
³
Of the shares repurchased, ~~430,641~~596,094 shares were acquired through reimbursements from AT&T maintained ~~Voluntary Employee Benefit~~

Voluntary Employee Benefit Association (VEBA) trusts.

68
57
AT&T INC.
~~SEPTEMBER 30, 2019~~MARCH 31, 2020
Item 6. Exhibits

The following exhibits are filed or incorporated by reference as a part of this report:

~~Exhibit~~
~~Number~~
~~Exhibit Description~~
~~10-a~~
~~AT&T Health Plan~~
~~10-b~~
~~Stock Purchase and Deferral Plan~~
~~10-c~~
~~Agreement and Release of Waiver of Claims between AT&T Services, Inc. and John Donovan (Exhibit 10.1 to Form 8-K filed on September 6, 2019)~~
31
~~Rule 13a-14(a)/15d-14(a) Certifications~~
~~31.1 Certification of Principal Executive Officer~~
~~31.2 Certification of Principal Financial Officer~~
32
~~Section 1350 Certifications~~
~~101~~
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, 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 September 30, 2019, (formatted as Inline XBRL and contained in Exhibit 101).~~

69
Exhibit
Number
Exhibit Description
3.1
Restated Certificate of Incorporation, filed with the Secretary of State of Delaware on December 13, 2013 (Exhibit 3.1 to form 8-K filed on December 16, 2013)
3.2
Certificate of Designations with respect to the Preferred Stock (Exhibit 3.1 to Form 8-K filed on December 12, 2019)
3.3
Certificate of Designations with respect to the Series B. (Exhibit 3.1 to Form 8-K filed on February 18, 2020)
3.4
Certificate of Designations with respect to the Series C (Exhibit 3.2 to Form 8-K filed on February 18, 2020)
4.1
Deposit Agreement dated February 18, 2020, among the Company, Computershare Inc. and Computershare Trust Company, N.A., collectively, as depositary, and the holders from time to time of the depositary receipts described therein. (Exhibit 4.3 to Form 8-K filed on February 18, 2020)
4.2
Form of 4.000% Global Notes due 2049 (Exhibit 4.1 to Form 8-K filed on February 27, 2020)
31
Rule 13a-14(a)/15d-14(a) Certifications
31.1 Certification of Principal Executive Officer
31.2 Certification of Principal Financial Officer
32
Section 1350 Certifications
101
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 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 March 31, 2020, (formatted as Inline XBRL and contained in Exhibit 101).
58

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.

~~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.~~May 6, 2020
AT&T Inc.

~~November 4, 2019~~
~~AT&T Inc.~~
~~/s/ John J. Stephens~~
~~John J. Stephens~~
~~Senior Executive Vice President~~
~~and Chief Financial Officer~~

70/s/ John J. Stephens
John J. Stephens
Senior Executive Vice President
and Chief Financial Officer
59

Assets acquired
Cash	$	1,889
Accounts receivable		9,020
All other current assets		2,913
Noncurrent inventory and theatrical film and television production costs		5,591
Property, plant and equipment		4,693
Intangible assets subject to amortization
Distribution network		18,040
Released television and film content		10,806
Trademarks and trade names		18,081
Other		10,300
Investments and other assets		9,438
Goodwill		38,801
Total assets acquired		129,572

Liabilities assumed
Current liabilities, excluding current portion of long-term debt		8,294
Debt maturing within one year		4,471
Long-term debt		18,394
Other noncurrent liabilities		19,054
Total liabilities assumed		50,213
Net assets acquired		79,359
Noncontrolling interest		(1)
Aggregate value of consideration paid	$	79,358