~~0000732717 us-gaap:OperatingSegmentsMember t:CommunicationsMember t:MobilityMember t:MediaContentServiceRevenueMember 2018-01-01 2018-06-30~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 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 ~~1-8610~~001-8610

AT&T INC.

Incorporated under the laws of the State of Delaware

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

208 S. Akard St., Dallas, Texas 75202

Telephone Number: (210) 821-4105

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

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
Common Shares (Par Value $1.00 Per Share)	T	New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 5.000% Perpetual Preferred Stock, Series A	T PRA	New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 4.750% Perpetual Preferred Stock, Series C	T PRC	New York Stock Exchange
AT&T Inc. Floating Rate Global Notes due August 3, 2020	T 20C	New York Stock Exchange

AT&T Inc. 1.875% Global Notes due December 4, 2020	T 20	New York Stock Exchange

AT&T Inc. ~~2.65%~~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. 1.050% Global Notes due September 5, 2023	T 23E	New York Stock Exchange
AT&T Inc. 1.300% Global Notes due September 5, 2023	T 23A	New York Stock Exchange
AT&T Inc. 1.950% Global Notes due September 15, 2023	T 23F	New York Stock Exchange
AT&T Inc. 2.400% Global Notes due March 15, 2024	T 24A	New York Stock Exchange
AT&T Inc. 3.500% Global Notes due December 17, 2025	T 25	New York Stock Exchange
AT&T Inc. 0.250% Global Notes due March 4, 2026	T 26E	New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026	T 26D	New York Stock Exchange

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
AT&T Inc. ~~Floating Rate Global Notes due September 5, 2023~~	~~T 23D~~	~~New York Stock Exchange~~

~~AT&T Inc. 1.05% Global Notes due September 5, 2023~~	~~T 23E~~	~~New York Stock Exchange~~

~~AT&T Inc. 1.30% Global Notes due September 5, 2023~~	~~T 23A~~	~~New York Stock Exchange~~

~~AT&T Inc. 1.95% Global Notes due September 15, 2023~~	~~T 23F~~	~~New York Stock Exchange~~

~~AT&T Inc. 2.40% Global Notes due March 15, 2024~~	~~T 24A~~	~~New York Stock Exchange~~

~~AT&T Inc. 3.50% Global Notes due December 17, 2025~~	~~T 25~~	~~New York Stock Exchange~~

~~AT&T Inc. 1.80% Global Notes due September 5, 2026~~	~~T 26D~~	~~New York Stock Exchange~~

~~AT&T Inc. 2.90%~~2.900% Global Notes due December 4, 2026	T 26A	New York Stock Exchange

AT&T Inc. ~~2.35%~~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

		~~Name of each exchange~~
~~Title of each class~~	~~Trading Symbol(s)~~	~~on which registered~~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. 4.000% Global Notes due June 1, 2049
~~AT&T Inc. 5.35% Global Notes due November 1, 2066~~	~~TBB~~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 ~~July 31, 2019,~~April 30, 2020, there were ~~7,307~~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				Six months ended				Three months ended
		June 30,				June 30,				March 31,
		2019		2018		2019		2018		2020		2019
Operating Revenues
Service	$	41,023	$	34,906	$	81,707	$	68,552	$	38,883	$	40,684
Equipment		3,934		4,080		8,077		8,472		3,896		4,143
Total operating revenues		44,957		38,986		89,784		77,024		42,779		44,827

Operating Expenses
Cost of revenues
Equipment		4,061		4,377		8,563		9,225		4,092		4,502
Broadcast, programming and operations		7,730		5,449		15,382		10,615		6,847		7,652
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		8,721		7,632		17,306		15,564		8,342		8,585
Selling, general and administrative		9,844		8,684		19,493		16,581		8,790		9,649
Depreciation and amortization		7,101		6,378		14,307		12,372		7,222		7,206
Total operating expenses		37,457		32,520		75,051		64,357		35,293		37,594
Operating Income		7,500		6,466		14,733		12,667		7,486		7,233
Other Income (Expense)
Interest expense		(2,149)		(2,023)		(4,290)		(3,794)		(2,018)		(2,141)
Equity in net income (loss) of affiliates		40		(16)		33		(7)		(6)		(7)
Other income (expense) – net		(318)		2,353		(32)		4,055		803		286
Total other income (expense)		(2,427)		314		(4,289)		254		(1,221)		(1,862)
Income Before Income Taxes		5,073		6,780		10,444		12,921		6,265		5,371
Income tax expense		1,099		1,532		2,122		2,914		1,302		1,023
Net Income		3,974		5,248		8,322		10,007		4,963		4,348
Less: Net Income Attributable to Noncontrolling Interest		(261)		(116)		(513)		(213)		(353)		(252)
Net Income Attributable to AT&T	$	3,713	$	5,132	$	7,809	$	9,794	$	4,610	$	4,096
Basic Earnings Per Share Attributable to AT&T	$	0.51	$	0.81	$	1.06	$	1.56
Diluted Earnings Per Share Attributable to AT&T	$	0.51	$	0.81	$	1.06	$	1.56
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)		7,323		6,351		7,318		6,257		7,187		7,313
Weighted Average Number of Common Shares Outstanding – with Dilution (in millions)		7,353		6,374		7,347		6,277		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
	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.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Dollars in millions

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

2019

2018

2019

2018
Net income
$
3,974

$
5,248

$
8,322

$
10,007
Other comprehensive income (loss), net of tax:

Foreign currency:

Translation adjustment (includes $2, $(32), $2 and $(30) attributable to noncontrolling interest), net of taxes of $(1), $(318), $48 and $(143)

(127)

(918)

161

(810)
Securities:

Net unrealized gains (losses), net of taxes of $10, $0, $15and $(4)

26

-

42

(12)
Derivative instruments:

Net unrealized gains (losses), net of taxes of $(165), $(112), $(131) and $68

(617)

(421)

(490)

253
Reclassification adjustment included in net income, net of taxes of $3, $3, $5 and $6

6

11

17

23
Defined benefit postretirement plans:

Net prior service (cost) credit arising during period, net of taxes of $0, $(12), $0 and $173

-

(37)

-

530
Amortization of net prior service credit included in net income, net of taxes of $(107), $(109), $(220) and $(214)

(342)

(334)

(688)

(657)
Other comprehensive income (loss)

(1,054)

(1,699)

(958)

(673)
Total comprehensive income

2,920

3,549

7,364

9,334
Less: Total comprehensive income attributable to
noncontrolling interest

(263)

(84)

(515)

(183)
Total Comprehensive Income Attributable to AT&T
$
2,657

$
3,465

$
6,849

$
9,151
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	March 31,		December 31,
	2020		2019
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	9,955	$	12,130
Accounts receivable - net of allowances for doubtful accounts of $1,651 and $1,235		19,908		22,636
Prepaid expenses		1,600		1,631
Other current assets		21,241		18,364
Total current assets		52,704		54,761
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		(200,266)		(203,410)
Property, Plant and Equipment – Net		128,921		130,128
Goodwill		145,546		146,241
Licenses – Net		96,662		97,907
Trademarks and Trade Names – Net		23,293		23,567
Distribution Networks – Net		14,886		15,345
Other Intangible Assets – Net		19,623		20,798
Investments in and Advances to Equity Affiliates		3,606		3,695
Operating lease right-of-use assets		24,008		24,039
Other Assets		22,829		22,754
Total Assets	$	545,354	$	551,669
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	17,067	$	11,838
Accounts payable and accrued liabilities		40,771		45,956
Advanced billings and customer deposits		5,960		6,124
Accrued taxes		2,169		1,212
Dividends payable		3,737		3,781
Total current liabilities		69,704		68,911
Long-Term Debt		147,202		151,309
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		58,491		59,502
Postemployment benefit obligation		18,324		18,788
Operating lease liabilities		21,584		21,804
Other noncurrent liabilities		34,600		29,421
Total deferred credits and other noncurrent liabilities		132,999		129,515
Stockholders’ Equity
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		129,966		126,279
Retained earnings		58,534		57,936
Treasury stock (495,533,462 at March 31, 2020 and 366,193,458 at December 31, 2019,
at cost)		(17,957)		(13,085)
Accumulated other comprehensive income		(385)		5,470
Noncontrolling interest		17,670		17,713
Total stockholders’ equity		195,449		201,934
Total Liabilities and Stockholders’ Equity	$	545,354	$	551,669
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts

June 30,

December 31,

2019

2018
Assets
(Unaudited)

Current Assets

Cash and cash equivalents
$
8,423

$
5,204
Accounts receivable - net of allowances for doubtful accounts of $1,086 and $907

22,381

26,472
Prepaid expenses

1,441

2,047
Other current assets

14,973

17,704
Total current assets

47,218

51,427
Noncurrent Inventories and Theatrical Film and Television Production Costs

10,685

7,713
Property, plant and equipment

334,916

330,690
Less: accumulated depreciation and amortization

(202,842)

(199,217)
Property, Plant and Equipment – Net

132,074

131,473
Goodwill

146,662

146,370
Licenses – Net

97,125

96,144
Trademarks and Trade Names – Net

24,088

24,345
Distribution Networks – Net

16,262

17,069
Other Intangible Assets – Net

23,284

26,269
Investments in and Advances to Equity Affiliates

4,133

6,245
Operating lease right-of-use assets

22,650

-
Other Assets

22,733

24,809
Total Assets
$
546,914

$
531,864

Liabilities and Stockholders’ Equity

Current Liabilities

Debt maturing within one year
$
12,772

$
10,255
Accounts payable and accrued liabilities

42,082

43,184
Advanced billings and customer deposits

5,734

5,948
Accrued taxes

2,062

1,179
Dividends payable

3,726

3,854
Total current liabilities

66,376

64,420
Long-Term Debt

157,790

166,250
Deferred Credits and Other Noncurrent Liabilities

Deferred income taxes

58,713

57,859
Postemployment benefit obligation

21,210

19,218
Operating lease liabilities

20,568

-
Other noncurrent liabilities

28,176

30,233
Total deferred credits and other noncurrent liabilities

128,667

107,310

Stockholders’ Equity

Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2019 and
December 31, 2018: issued 7,620,748,598 at June 30, 2019 and December 31, 2018)

7,621

7,621
Additional paid-in capital

125,109

125,525
Retained earnings

59,389

58,753
Treasury stock (315,719,351 at June 30, 2019 and 339,120,073 at December 31, 2018,
at cost)

(11,151)

(12,059)
Accumulated other comprehensive income

3,289

4,249
Noncontrolling interest

9,824

9,795
Total stockholders’ equity

194,081

193,884
Total Liabilities and Stockholders’ Equity
$
546,914

$
531,864
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)
	Three months ended
	March 31,
	2020		2019
Operating Activities
Net income	$	4,963	$	4,348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,222		7,206
Amortization of television and film costs		2,269		2,497
Undistributed earnings from investments in equity affiliates		39		112
Provision for uncollectible accounts		780		592
Deferred income tax expense		259		753
Net (gain) loss on assets, net of impairments		(646)		(175)
Pension and postretirement benefit expense (credit)		(748)		(369)
Actuarial (gain) loss on pension and postretirement benefits		-		432
Changes in operating assets and liabilities:
Receivables		1,695		2,125
Other current assets, inventories and theatrical film and television production costs		(3,267)		(2,510)
Accounts payable and other accrued liabilities		(3,884)		(3,686)
Equipment installment receivables and related sales		535		652
Deferred customer contract acquisition and fulfillment costs		105		(375)
Postretirement claims and contributions		(111)		(193)
Other - net		(345)		(357)
Total adjustments		3,903		6,704
Net Cash Provided by Operating Activities		8,866		11,052
Investing Activities
Capital expenditures:
Purchase of property and equipment		(4,938)		(5,121)
Interest during construction		(28)		(61)
Acquisitions, net of cash acquired		(100)		(117)
Dispositions		118		10
(Purchases), sales and settlement of securities and investments, net		(6)		(1)
Advances to and investments in equity affiliates, net		(68)		(111)
Net Cash Used in Investing Activities		(5,022)		(5,401)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less		1,742		(256)
Issuance of other short-term borrowings		1,390		296
Repayment of other short-term borrowings		-		(176)
Issuance of long-term debt		4,357		9,182
Repayment of long-term debt		(4,422)		(9,840)
Payment of vendor financing		(791)		(819)
Issuance of preferred stock		3,869		-
Purchase of treasury stock		(5,463)		(189)
Issuance of treasury stock		58		167
Dividends paid		(3,737)		(3,714)
Other		(3,102)		928
Net Cash Used in Financing Activities		(6,099)		(4,421)
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		12,295		5,400
Cash and Cash Equivalents and Restricted Cash End of Period	$	10,040	$	6,630
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)

Six months ended

June 30,

2019

2018

Operating Activities

Net income
$
8,322

$
10,007
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

14,307

12,372
Amortization of television and film costs

5,199

168
Undistributed earnings from investments in equity affiliates

76

235
Provision for uncollectible accounts

1,216

808
Deferred income tax expense

1,080

2,285
Net (gain) loss from investments, net of impairments

(905)

(29)
Actuarial (gain) loss on pension and postretirement benefits

2,131

(2,726)
Changes in operating assets and liabilities:

Accounts receivable

3,540

233
Other current assets, inventories and theatrical film and television production costs

(5,422)

1,039
Accounts payable and other accrued liabilities

(3,056)

(3,890)
Equipment installment receivables and related sales

1,144

490
Deferred customer contract acquisition and fulfillment costs

(614)

(1,725)
Employee retirement benefits

(1,232)

(933)
Other - net

(450)

842
Total adjustments

17,014

9,169
Net Cash Provided by Operating Activities

25,336

19,176

Investing Activities

Capital expenditures:

Purchase of property and equipment

(10,542)

(10,959)
Interest during construction

(112)

(267)
Acquisitions, net of cash acquired

(320)

(40,715)
Dispositions

3,593

59
(Purchases), sales and settlements of securities and investments, net

396

(218)
Advances to and investments in equity affiliates, net

(314)

(1,035)
Cash collections of deferred purchase price

-

500
Net Cash Used in Investing Activities

(7,299)

(52,635)

Financing Activities

Net change in short-term borrowings with original maturities of three months or less

119

2,227
Issuance of other short-term borrowings

3,067

4,839
Repayment of other short-term borrowings

(3,148)

-
Issuance of long-term debt

10,030

26,478
Repayment of long-term debt

(16,124)

(29,447)
Purchase of treasury stock

(240)

(564)
Issuance of treasury stock

455

12
Dividends paid

(7,436)

(6,144)
Other

(1,506)

(1,121)
Net Cash Used in Financing Activities

(14,783)

(3,720)
Net increase (decrease) in cash and cash equivalents and restricted cash

3,254

(37,179)
Cash and cash equivalents and restricted cash beginning of year

5,400

50,932
Cash and Cash Equivalents and Restricted Cash End of Period
$
8,654

$
13,753
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	March 31, 2020			March 31, 2019
	Shares	Amount		Shares	Amount
Preferred Stock - Series A
Balance at beginning of year	-	$	-	-	$	-
Issuance of stock	-		-	-		-
Balance at end of period	-	$	-	-	$	-
Preferred Stock - Series B
Balance at beginning of year	-	$	-	-	$	-
Issuance of stock	-		-	-		-
Balance at end of period	-	$	-	-	$	-
Preferred Stock - Series C
Balance at beginning of year	-	$	-	-	$	-
Issuance of stock	-		-	-		-
Balance at end of period	-	$	-	-	$	-
Common Stock
Balance at beginning of 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 year		$	126,279		$	125,525
Repurchase and acquisition of common stock			67			-
Issuance of preferred stock			3,869			-
Issuance of treasury stock			(47)			(77)
Share-based payments			(202)			(274)
Balance at end of period		$	129,966		$	125,174
Retained Earnings
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
and other adjustments			(293)			316
Balance at end of period		$	58,534		$	59,424
See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)

Three months ended

June 30, 2019

June 30, 2018

Shares

Amount

Shares

Amount
Common Stock

Balance at beginning of quarter
7,621

$
7,621

6,495

$
6,495
Issuance of stock
-

-

1,126

1,126
Balance at end of period
7,621

$
7,621

7,621

$
7,621

Additional Paid-In Capital

Balance at beginning of quarter

$
125,174

$
89,404
Issuance of common stock

-

35,473
Issuance of treasury stock

(50)

-
Share-based payments

(15)

1,083
Balance at end of period

$
125,109

$
125,960

Retained Earnings

Balance at beginning of quarter

$
59,424

$
55,067
Net income attributable to AT&T ($0.51 and $0.81 per
diluted share)

3,713

5,132
Dividends to stockholders ($0.51 and $0.50 per share)

(3,748)

(3,647)
Cumulative effect of accounting changes

-

3
Balance at end of period

$
59,389

$
56,555

Treasury Stock

Balance at beginning of quarter
(324)

$
(11,452)

(348)

$
(12,432)
Repurchase and acquisition of common stock
(2)

(72)

(14)

(443)
Issuance of treasury stock
10

373

1

3
Balance at end of period
(316)

$
(11,151)

(361)

$
(12,872)

Accumulated Other Comprehensive Income
Attributable to AT&T, net of tax

Balance at beginning of quarter

$
4,345

$
7,386
Other comprehensive income attributable to AT&T

(1,056)

(1,667)
Amounts reclassified to retained earnings

-

(3)
Balance at end of period

$
3,289

$
5,716

Noncontrolling Interest

Balance at beginning of quarter

$
9,839

$
1,156
Net income attributable to noncontrolling interest

261

116
Interest acquired by noncontrolling owners

1

8
Acquisition of noncontrolling interest

-

1
Distributions

(279)

(99)
Translation adjustments attributable to noncontrolling
interest, net of taxes

2

(32)
Cumulative effect of accounting changes

-

-
Balance at end of period

$
9,824

$
1,150

Total Stockholders’ Equity at beginning of quarter

$
194,951

$
147,076
Total Stockholders’ Equity at end of period

$
194,081

$
184,130
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.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)

Six months ended

June 30, 2019

June 30, 2018

Shares

Amount

Shares

Amount
Common Stock

Balance at beginning of year
7,621

$
7,621

6,495

$
6,495
Issuance of stock
-

-

1,126

1,126
Balance at end of period
7,621

$
7,621

7,621

$
7,621

Additional Paid-In Capital

Balance at beginning of year

$
125,525

$
89,563
Issuance of common stock

-

35,473
Issuance of treasury stock

(127)

(4)
Share-based payments

(289)

928
Balance at end of period

$
125,109

$
125,960

Retained Earnings

Balance at beginning of year

$
58,753

$
50,500
Net income attributable to AT&T ($1.06 and $1.56 per
diluted share)

7,809

9,794
Dividends to stockholders ($1.02 and $1.00 per share)

(7,489)

(6,739)
Cumulative effect of accounting changes

316

3,000
Balance at end of period

$
59,389

$
56,555

Treasury Stock

Balance at beginning of year
(339)

$
(12,059)

(356)

$
(12,714)
Repurchase and acquisition of common stock
(9)

(280)

(18)

(607)
Issuance of treasury stock
32

1,188

13

449
Balance at end of period
(316)

$
(11,151)

(361)

$
(12,872)

Accumulated Other Comprehensive Income
Attributable to AT&T, net of tax

Balance at beginning of year

$
4,249

$
7,017
Other comprehensive income attributable to AT&T

(960)

(643)
Amounts reclassified to retained earnings

-

(658)
Balance at end of period

$
3,289

$
5,716

Noncontrolling Interest

Balance at beginning of year

$
9,795

$
1,146
Net income attributable to noncontrolling interest

513

213
Interest acquired by noncontrolling owners

10

8
Acquisition on noncontrolling interest

-

1
Distributions

(525)

(223)
Translation adjustments attributable to noncontrolling
interest, net of taxes

2

(30)
Cumulative effect of accounting changes

29

35
Balance at end of period

$
9,824

$
1,150

Total Stockholders’ Equity at beginning of year

$
193,884

$
142,007
Total Stockholders’ Equity at end of period

$
194,081

$
184,130
See Notes to Consolidated Financial Statements.

AT&T INC.

~~JUNE 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 all the 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. We do not believe the standard will materially impact our future income statements or have a notable impact on our liquidity. The standard will have no impact on our debt-covenant compliance under our current agreements.

~~AT&T INC.~~

~~JUNE 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.

AT&T INC.

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 ~~six months ended June 30,~~ 2019, ~~and 2018,~~ is shown in the table below:

	Three months ended				Six months ended				Three months ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
Numerators
Numerator for basic earnings per share:
Net Income	$	3,974	$	5,248	$	8,322	$	10,007
Net income									$	4,963	$	4,348
Less: Net income attributable to noncontrolling interest		(261)		(116)		(513)		(213)		(353)		(252)
Net Income attributable to AT&T		3,713		5,132		7,809		9,794
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		4		4		10		9		6		6
Numerator for diluted earnings per share	$	3,717	$	5,136	$	7,819	$	9,803	$	4,584	$	4,102
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding		7,323		6,351		7,318		6,257		7,187		7,313
Dilutive potential common shares:
Share-based payment (in shares)		30		23		29		20		27		29
Denominator for diluted earnings per share		7,353		6,374		7,347		6,277		7,214		7,342
Basic earnings per share attributable to AT&T	$	0.51	$	0.81	$	1.06	$	1.56
Diluted earnings per share attributable to AT&T	$	0.51	$	0.81	$	1.06	$	1.56
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.

~~JUNE 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

159

42

(490)

-

(289)
Amounts reclassified
from accumulated OCI

-

-

17
¹

(688)
²

(671)
Net other comprehensive
income (loss)

159

42

(473)

(688)

(960)
Balance as of June 30, 2019
$
(2,925)

$
40

$
345

$
5,829

$
3,289

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

(780)

(12)

253

530

(9)
Amounts reclassified
from accumulated OCI

-

-

23
¹

(657)
²

(634)
Net other comprehensive
income (loss)

(780)

(12)

276

(127)

(643)
Amounts reclassified to
retained earnings

-

(658)
³

-

-

(658)
Balance as of June 30, 2018
$
(2,834)

$
(10)

$
1,678

$
6,882

$
5,716
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, the unrealized (gains) losses on our equity investments are reclassified to retained earnings.

		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 ~~four~~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

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

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.

The Communications segment provides wireless and wireline telecom, video and broadband services to consumers located in the U.S. ~~or in U.S. territories~~ and businesses globally. 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 ~~is comprised of the historic Turner division as well as the financial results of our RSNs. This business unit~~ 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~~

.consolidation.

~~AT&T INC.~~

~~JUNE 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 $112 in the second quarter and $262 for the first six months of 2019. – 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 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.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended March 31, 2020
												Equity in Net
				Operations				Depreciation		Operating		Income
				and Support				and		Income		(Loss)		Segment
		Revenues		Expenses		EBITDA		Amortization		(Loss)		Affiliates		Contribution
Communications
Mobility	$	17,402	$	9,569	$	7,833	$	2,045	$	5,788	$	-	$	5,788
Entertainment Group		10,515		7,891		2,624		1,289		1,335		-		1,335
Business Wireline		6,332		3,951		2,381		1,301		1,080		-		1,080
Total Communications		34,249		21,411		12,838		4,635		8,203		-		8,203
WarnerMedia
Turner		3,162		1,710		1,452		69		1,383		6		1,389
Home Box Office		1,497		1,053		444		21		423		20		443
Warner Bros.		3,240		2,950		290		41		249		(8)		241
Other		(540)		(196)		(344)		12		(356)		(3)		(359)
Total WarnerMedia		7,359		5,517		1,842		143		1,699		15		1,714
Latin America
Vrio		887		783		104		147		(43)		4		(39)
Mexico		703		714		(11)		134		(145)		-		(145)
Total Latin America		1,590		1,497		93		281		(188)		4		(184)
Xandr		489		170		319		20		299		-		299
Segment Total		43,687		28,595		15,092		5,079		10,013	$	19	$	10,032
Corporate and Other
Corporate		388		874		(486)		87		(573)
Acquisition-related items		-		182		(182)		2,056		(2,238)
Certain significant items		-		(658)		658		-		658
Eliminations and consolidations		(1,296)		(922)		(374)		-		(374)
AT&T Inc.	$	42,779	$	28,071	$	14,708	$	7,222	$	7,486

1513

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2019
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	$	17,512	$	9,654	$	7,858	$	2,025	$	5,833	$	-	$	5,833	$	17,363	$	10,041	$	7,322	$	2,013	$	5,309	$	-	$	5,309
Entertainment Group		11,368		8,515		2,853		1,339		1,514		-		1,514		11,328		8,527		2,801		1,323		1,478		-		1,478
Business Wireline		6,628		3,982		2,646		1,256		1,390		-		1,390		6,478		4,032		2,446		1,222		1,224		-		1,224
Total Communications		35,508		22,151		13,357		4,620		8,737		-		8,737		35,169		22,600		12,569		4,558		8,011		-		8,011
WarnerMedia
Turner		3,410		2,217		1,193		39		1,154		11		1,165		3,443		2,136		1,307		60		1,247		25		1,272
Home Box Office		1,716		1,131		585		12		573		15		588		1,510		921		589		22		567		15		582
Warner Bros.		3,389		2,918		471		31		440		-		440		3,518		2,919		599		52		547		6		553
Other		(165)		23		(188)		9		(197)		29		(168)		(92)		17		(109)		9		(118)		21		(97)
Total WarnerMedia		8,350		6,289		2,061		91		1,970		55		2,025		8,379		5,993		2,386		143		2,243		67		2,310
Latin America
Vrio		1,032		881		151		165		(14)		12		(2)		1,067		866		201		169		32		-		32
Mexico		725		813		(88)		119		(207)		-		(207)		651		725		(74)		131		(205)		-		(205)
Total Latin America		1,757		1,694		63		284		(221)		12		(209)		1,718		1,591		127		300		(173)		-		(173)
Xandr		485		147		338		13		325		-		325		426		160		266		13		253		-		253
Segment Total		46,100		30,281		15,819		5,008		10,811	$	67	$	10,878		45,692		30,344		15,348		5,014		10,334	$	67	$	10,401
Corporate and Other
Corporate		209		626		(417)		134		(551)						433		661		(228)		204		(432)
Acquisition-related items		(30)		316		(346)		1,960		(2,306)						(42)		73		(115)		1,988		(2,103)
Certain significant items		-		94		(94)		-		(94)						-		248		(248)		-		(248)
Eliminations and consolidations		(1,322)		(961)		(361)		(1)		(360)						(1,256)		(938)		(318)		-		(318)
AT&T Inc.	$	44,957	$	30,356	$	14,601	$	7,101	$	7,500					$	44,827	$	30,388	$	14,439	$	7,206	$	7,233

For the three months ended June 30, 2018

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

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

~~Dollars in millions except per share amounts~~

Revenues

Operations and Support Expenses

EBITDA

Depreciation and Amortization

Operating Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment Contribution
Communications

Mobility
$
17,282

$
9,663

$
7,619

$
2,113

$
5,506

$
-

$
5,506
Entertainment Group

11,478

8,657

2,821

1,345

1,476

(1)

1,475
Business Wireline

6,650

4,038

2,612

1,180

1,432

1

1,433
Total Communications

35,410

22,358

13,052

4,638

8,414

-

8,414
WarnerMedia

Turner

667

372

295

11

284

5

289
Home Box Office

281

171

110

5

105

(1)

104
Warner Bros.

507

403

104

14

90

(1)

89
Other

(62)

(35)

(27)

1

(28)

(29)

(57)
Total WarnerMedia

1,393

911

482

31

451

(26)

425
Latin America

Vrio

1,254

1,016

238

186

52

15

67
Mexico

697

787

(90)

127

(217)

-

(217)
Total Latin America

1,951

1,803

148

313

(165)

15

(150)
Xandr

392

59

333

-

333

-

333
Segment Total

39,146

25,131

14,015

4,982

9,033

$
(11)

$
9,022
Corporate and Other

Corporate

320

661

(341)

118

(459)

Acquisition-related items

-

321

(321)

1,278

(1,599)

Certain significant items

-

152

(152)

-

(152)

Eliminations and consolidations

(480)

(123)

(357)

-

(357)

AT&T Inc.
$
38,986

$
26,142

$
12,844

$
6,378

$
6,466

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

For the six months ended June 30, 2019

Revenues

Operations
and Support
Expenses

EBITDA

Depreciation
and
Amortization

Operating
Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment
Contribution
Communications

Mobility
$
35,079

$
19,835

$
15,244

$
4,060

$
11,184

$
-

$
11,184
Entertainment Group

22,696

17,042

5,654

2,662

2,992

-

2,992
Business Wireline

13,126

8,022

5,104

2,491

2,613

-

2,613
Total Communications

70,901

44,899

26,002

9,213

16,789

-

16,789
WarnerMedia

Turner

6,853

4,353

2,500

99

2,401

36

2,437
Home Box Office

3,226

2,052

1,174

34

1,140

30

1,170
Warner Bros.

6,907

5,837

1,070

83

987

6

993
Other

(257)

40

(297)

18

(315)

50

(265)
Total WarnerMedia

16,729

12,282

4,447

234

4,213

122

4,335
Latin America

Vrio

2,099

1,747

352

334

18

12

30
Mexico

1,376

1,538

(162)

250

(412)

-

(412)
Total Latin America

3,475

3,285

190

584

(394)

12

(382)
Xandr

911

307

604

26

578

-

578
Segment Total

92,016

60,773

31,243

10,057

21,186

$
134

$
21,320
Corporate and Other

Corporate

418

1,139

(721)

303

(1,024)

Acquisition-related items

(72)

389

(461)

3,948

(4,409)

Certain significant items

-

342

(342)

-

(342)

Eliminations and consolidations

(2,578)

(1,899)

(679)

(1)

(678)

AT&T Inc.
$
89,784

$
60,744

$
29,040

$
14,307

$
14,733

For the six months ended June 30, 2018

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

Revenues

Operations and Support Expenses

EBITDA

Depreciation and Amortization

Operating Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment Contribution
Communications

Mobility
$
34,637

$
19,765

$
14,872

$
4,208

$
10,664

$
-

$
10,664
Entertainment Group

22,909

17,468

5,441

2,655

2,786

(2)

2,784
Business Wireline

13,397

8,054

5,343

2,350

2,993

-

2,993
Total Communications

70,943

45,287

25,656

9,213

16,443

(2)

16,441
WarnerMedia

Turner

779

446

333

12

321

32

353
Home Box Office

281

171

110

5

105

(1)

104
Warner Bros.

507

403

104

14

90

(1)

89
Other

(62)

(27)

(35)

1

(36)

(46)

(82)
Total WarnerMedia

1,505

993

512

32

480

(16)

464
Latin America

Vrio

2,608

2,017

591

391

200

15

215
Mexico

1,368

1,590

(222)

254

(476)

-

(476)
Total Latin America

3,976

3,607

369

645

(276)

15

(261)
Xandr

729

109

620

1

619

-

619
Segment Total

77,153

49,996

27,157

9,891

17,266

$
(3)

$
17,263
Corporate and Other

Corporate

653

1,396

(743)

141

(884)

Acquisition-related items

-

388

(388)

2,340

(2,728)

Certain significant items

-

332

(332)

-

(332)

Eliminations and consolidations

(782)

(127)

(655)

-

(655)

AT&T Inc.
$
77,024

$
51,985

$
25,039

$
12,372

$
12,667

~~AT&T INC.~~

~~JUNE 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 June 30,				Six months ended June 30,				March 31,
		2019		2018		2019		2018		2020		2019
Communications	$	8,737	$	8,414	$	16,789	$	16,441	Communications	$	8,203	$	8,011
WarnerMedia		2,025		425		4,335		464	WarnerMedia		1,714		2,310
Latin America		(209)		(150)		(382)		(261)	Latin America		(184)		(173)
Xandr		325		333		578		619	Xandr		299		253
Segment Contribution		10,878		9,022		21,320		17,263	Segment Contribution		10,032		10,401
Reconciling Items:									Reconciling Items:
Corporate and Other		(551)		(459)		(1,024)		(884)	Corporate and Other		(573)		(432)
Merger and integration items		(346)		(340)		(461)		(432)	Merger and integration items		(182)		(115)
Amortization of intangibles acquired		(1,960)		(1,278)		(3,948)		(2,340)	Amortization of intangibles acquired		(2,056)		(1,988)
Employee separation charges		(94)		(133)		(342)		(184)
Natural disaster items		-		-		-		(104)
Segment equity in net income of affiliates		(67)		11		(134)		3
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		(360)		(357)		(678)		(655)	Eliminations and consolidations		(374)		(318)
AT&T Operating Income		7,500		6,466		14,733		12,667	AT&T Operating Income		7,486		7,233
Interest Expense		(2,149)		(2,023)		(4,290)		(3,794)	Interest Expense		2,018		2,141
Equity in net income (loss) of affiliates		40		(16)		33		(7)	Equity in net income (loss) of affiliates		(6)		(7)
Other income (expense) - net		(318)		2,353		(32)		4,055	Other income (expense) - net		803		286
Income Before Income Taxes	$	5,073	$	6,780	$	10,444	$	12,921	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 Reconciliation
									Three months ended
	Three months ended June 30,				Six months ended June 30,				March 31,
	2019		2018		2019			2018	2020		2019
Intersegment revenues
Communications	$	8	$	2	$	8	$	2	$	2	$	-
WarnerMedia		861		174		1,719		209		816		858
Latin America		-		-		-		-		-		-
Xandr		-		-		-		-		1		-
Total Intersegment Revenues		869		176		1,727		211		819		858
Consolidations		453		304		851		571		477		398
Eliminations and consolidations	$	1,322	$	480	$	2,578	$	782	$	1,296	$	1,256

AT&T INC.

~~JUNE 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

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

For the three months ended June 30, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
13,935

$
-

$
-

$
-

$
-

$
71

$
-

$
3,506

$
17,512
Entertainment Group

-

2,109

658

7,636

-

399

562

4

11,368
Business Wireline

-

3,221

2,331

-

-

-

898

178

6,628
WarnerMedia

Turner

-

-

-

1,943

111

1,266

90

-

3,410
Home Box Office

-

-

-

1,516

198

-

2

-

1,716
Warner Bros.

-

-

-

23

3,175

10

181

-

3,389
Eliminations and Other

-

-

-

54

(237)

9

9

-

(165)
Latin America

Vrio

-

-

-

1,032

-

-

-

-

1,032
Mexico

479

-

-

-

-

-

-

246

725
Xandr

-

-

-

-

-

485

-

-

485
Corporate and Other

(32)

-

-

-

-

-

211

-

179
Eliminations and
consolidations

-

-

-

-

(840)

(399)

(83)

-

(1,322)
Total Operating Revenues
$
14,382

$
5,330

$
2,989

$
12,204

$
2,407

$
1,841

$
1,870

$
3,934

$
44,957

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

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

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

~~Dollars in millions except per share amounts~~

For the six months ended June 30, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
27,660

$
-

$
-

$
-

$
-

$
138

$
-

$
7,281

$
35,079
Entertainment Group

-

4,179

1,341

15,360

-

749

1,063

4

22,696
Business Wireline

-

6,407

4,735

-

-

-

1,647

337

13,126
WarnerMedia

Turner

-

-

-

3,908

246

2,527

172

-

6,853
Home Box Office

-

-

-

2,850

371

-

5

-

3,226
Warner Bros.

-

-

-

44

6,507

20

336

-

6,907
Eliminations and Other

-

-

-

103

(389)

17

12

-

(257)
Latin America

Vrio

-

-

-

2,099

-

-

-

-

2,099
Mexico

921

-

-

-

-

-

-

455

1,376
Xandr

-

-

-

-

-

911

-

-

911
Corporate and Other

(32)

-

-

-

-

-

378

-

346
Eliminations and
consolidations

-

-

-

-

(1,677)

(749)

(152)

-

(2,578)
Total Operating Revenues
$
28,549

$
10,586

$
6,076

$
24,364

$
5,058

$
3,613

$
3,461

$
8,077

$
89,784

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

For the six months ended June 30, 2018

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
27,000

$
-

$
-

$
-

$
-

$
85

$
-

$
7,552

$
34,637
Entertainment Group

-

3,859

1,578

15,677

-

721

1,070

4

22,909
Business Wireline

-

6,074

5,595

-

-

-

1,359

369

13,397
WarnerMedia

Turner

-

-

-

508

21

237

13

-

779
Home Box Office

-

-

-

270

11

-

-

-

281
Warner Bros.

-

-

-

7

455

8

37

-

507
Eliminations and Other

-

-

-

-

(56)

(6)

-

-

(62)
Latin America

Vrio

-

-

-

2,608

-

-

-

-

2,608
Mexico

821

-

-

-

-

-

-

547

1,368
Xandr

-

-

-

-

-

729

-

-

729
Corporate and Other

-

-

-

-

-

-

653

-

653
Eliminations and
consolidations

-

-

-

-

(209)

(721)

148

-

(782)
Total Operating Revenues
$
27,821

$
9,933

$
7,173

$
19,070

$
222

$
1,053

$
3,280

$
8,472

$
77,024

~~AT&T INC.~~

~~JUNE 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:

		June 30,		December 31,		March 31,		December 31,
Consolidated Balance Sheets		2019		2018		2020		2019
Deferred Acquisition Costs
Other current assets	$	1,952	$	1,901	$	2,592	$	2,462
Other Assets		2,760		2,073		2,997		2,991
Total deferred customer contract acquisition costs		4,712		3,974		5,589		5,453

Deferred Fulfillment Costs
Other current assets		4,620		4,090		4,438		4,519
Other Assets		6,796		7,450		6,279		6,439
Total deferred customer contract fulfillment costs	$	11,416	$	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 ~~six~~three months ended:

		June 30,		June 30,		March 31,		March 31,
Consolidated Statements of Income		2019		2018		2020		2019
Deferred acquisition cost amortization	$	1,026	$	595	$	636	$	547
Deferred fulfillment cost amortization		2,381		1,889		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:

June 30,

December 31,
Consolidated Balance Sheets

2019

2018

Contract asset

$
2,188

$
1,896
Contract liability

6,653

6,856

		March 31,		December 31,
		2020		2019

Contract asset	$	2,598	$	2,472
Contract liability		6,757		6,999

Our ~~January 1, 2019~~beginning of period contract liability recorded as customer contract revenue during ~~2019~~2020 was ~~$4,974.~~$4,519.

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Our consolidated balance sheets at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 included approximately ~~$1,463~~$1,700 and ~~$1,244,~~$1,611, respectively, for the current portion of our contract asset in “Other current assets” and ~~$5,533~~$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 ~~June 30, 2019,~~March 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$40,646,~~$36,486, of which we expect to recognize approximately ~~80%~~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. For the quarter ended March 31, 2019, we recorded special termination benefits of $93 associated with this offer in “Other income (expense) – net.” We also committed to a plan to offer 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 anticipate total distributions from the pension plan will exceed the threshold of service and interest costs for 2019, requiring us to follow settlement accounting and remeasure our pension benefit obligation each quarter-end of 2019. These remeasurements resulted in the recognition of actuarial losses of $432 and $1,699 in the first and second quarters of 2019, respectively.

AT&T INC.

MARCH 31, 2020

As part of our 2019 remeasurements, we decreased the weighted-average discount rate used to measure our pension benefit obligation from 4.50% at December 31, 2018 to 4.10% at March 31, 2019, and to 3.70% at June 30, 2019. The discount rateNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in effect for determining pension service and interest costs after remeasurement is 3.90% and 3.25%, respectively. Our remeasurements also reflect actual returns on plan assets of 10.0% (six-month rate). Our expected long-term rate of return on pension plan assets is an annualized 7.00% for the remainder of 2019.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.”

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

AT&T INC.

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:

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

AT&T INC.

~~JUNE 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 ~~six~~three months ended ~~June 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 six months ended June 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 ~~$63~~$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 ~~€700~~€1,364 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of ~~WarnerMedia.~~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 for 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 ~~June 30, 2019,~~March 31, 2020, we had posted collateral of ~~$242~~$2,809 (a deposit asset) and held ~~collateral of $86 (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 June,~~ end of March, we would not have been required to post any additional collateral ~~of $137.~~. 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 ~~$2,668.~~$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

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

collateral of ~~$262.~~$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:

		June 30,		December 31,		March 31,		December 31,
		2019		2018		2020		2019
Interest rate swaps¹		$	1,633	$	3,483
Interest rate swaps						$	853	$	853
Cross-currency swaps	Cross-currency swaps		40,311		42,192		42,325		42,325
Interest rate locks	Interest rate locks		2,000		-		3,500		3,500
Foreign exchange contracts	Foreign exchange contracts		669		2,094		106		269
Total	Total	$	44,613	$	47,769	$	46,784	$	46,947
¹	In July 2019 we settled interest rate swaps with a notional value of $780.

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				Six months ended				Three months ended
	June 30,				June 30,				March 31,
Fair Value Hedging Relationships	2019		2018		2019		2018		2020		2019
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	$	35	$	(9)	$	59	$	(62)
Gain (Loss) on long-term debt		(35)		9		(59)		62
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 ~~June 30~~March 31, 2020 and 2019 were offset against interest expense.

Three months ended

Six months ended

June 30,

June 30,
Cash Flow Hedging Relationships
2019

2018

2019

2018
Cross-currency swaps:

Gain (Loss) recognized in accumulated OCI
$
(763)

$
(533)

$
(595)

$
321
Foreign exchange contracts:

Gain (Loss) recognized in accumulated OCI

4

-

(3)

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

7

-

10

-
Interest rate locks:

Gain (Loss) recognized in accumulated OCI

(23)

-

(23)

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

(16)

(14)

(32)

(29)

~~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~~

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~$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.

~~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~~

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

~~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 $102 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~~.

	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 ~~sale~~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:

		June 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:	$	4,519	$	2,769	$	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		2,599		-		3,457		-	Notes receivable		1,979		-		2,467		-
Trade receivables	Trade receivables		449		2,286		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		1,471		483		2,099		-	Noncurrent notes and trade receivables		1,195		324		1,632		515

Outstanding portfolio of receivables derecognized from our consolidated balance sheets			9,528		3,725		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		7,073		3,725		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

~~AT&T INC.~~

~~JUNE 30, 2019~~

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

~~Dollars in millions except per share amounts~~

any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred.

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

		Three months ended				Six months ended
		June 30,				June 30,					Three months ended March 31,
		2019		2018		2019		2018				2020		2019
Gross receivables sold	Gross receivables sold	$	2,244	$	1,906	$	4,945	$	4,916	Gross receivables sold	$	2,367	$	2,701
Net receivables sold¹	Net receivables sold¹		2,133		1,811		4,679		4,606	Net receivables sold¹		2,273		2,546
Cash proceeds received	Cash proceeds received		1,920		1,532		4,195		3,927	Cash proceeds received		1,950		2,275
Deferred purchase price recorded	Deferred purchase price recorded		261		307		570		826	Deferred purchase price recorded		353		309
Guarantee obligation recorded	Guarantee obligation recorded		93		72		194		195	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 six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Three months ended

Six months ended

June 30,

June 30,

2019

2018

2019

2018
Fair value of repurchased receivables
$
235

$
1,481

$
658

$
1,481
Carrying value of deferred purchase price

225

1,393

632

1,393
Gain (loss) on repurchases¹
$
10

$
88

$
26

$
88
¹
These gains (losses) are included in “Selling, general and administrative” in the consolidated statements of income.

		Three months ended March 31,
			2020		2019
Fair value of repurchased receivables		$	288	$	423
Carrying value of deferred purchase price			277		407
Gain on repurchases¹		$	11	$	16
¹	These gains are included in “Selling, general and administrative” in the consolidated statements of income.

At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, our deferred purchase price receivable was ~~$2,242~~$2,378 and ~~$2,370,~~$2,336, respectively, of which $~~1,531~~$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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 was $~~454~~$351 and ~~$439,~~$384, respectively, of which ~~$91~~$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. In June 2019, we expanded the program another $2,600 for a total maximum outstanding amount of $4,000, of which approximately $3,725 is outstanding at June 30, 2019.~~impacts (e.g., collect and reinvest). The transferred receivables are fully guaranteed by our ~~subsidiary,~~bankruptcy-remote subsidiaries, which ~~holds~~hold additional receivables in the amount of ~~$2,769~~$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.~~

~~JUNE 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 six months ended June 30, 2019 and 2018:~~sold:

		Three months ended				Six months ended						Three months ended March 31,
		June 30,				June 30,						2020		2019
Gross receivables sold/cash proceeds received¹										Gross receivables sold/cash proceeds received¹	$	4,222	$	1,400
Collections reinvested under revolving agreement										Collections reinvested under revolving agreement		3,222		-
Net cash proceeds received (remitted)										Net cash proceeds received (remitted)	$	1,000	$	1,400
		2019		2018		2019		2018
Initial sale of receivables		$	2,325	$	-	$	3,725	$	-
Collections reinvested under revolving agreement			2,127		-		2,127		-
Gross receivables sold/cash proceeds received			4,452		-		5,852		-
Net receivables sold¹			4,134		-		5,497		-
Net receivables sold²										Net receivables sold²	$	4,138	$	1,363
Obligations recorded	Obligations recorded		384		-		436		-	Obligations recorded		126		52
¹	Receivables net of allowance, return and incentive reserves and imputed interest									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.

NOTE ~~10.~~9. LEASES

We have operating and finance leases for certain facilities and equipment used in operations. ~~As of June 30, 2019, our~~Our leases generally have remaining lease terms of 1up 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~~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		Six months ended		Three months ended March 31,
	June 30, 2019		June 30, 2019		2020		2019
Operating lease cost	$	1,610	$	2,852	$	1,377	$	1,242

Finance lease cost:
Amortization of right-of-use assets	$	70	$	136	$	67	$	66
Interest on lease obligation		42		84		41		42
Total finance lease cost	$	112	$	220	$	108	$	108

~~Supplemental~~The following tables set forth supplemental balance sheet information related to ~~leases is as follows:~~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	%

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

At June 30, 2019

Operating Leases

Operating lease right-of-use assets
$
22,650

Accounts payable and accrued liabilities
$
3,344

Operating lease obligation

20,568

Total operating lease obligation
$
23,912

Finance Leases

Property, plant and equipment, at cost
$
3,362

Accumulated depreciation and amortization

(1,178)

Property, plant and equipment, net
$
2,184

Current portion of long-term debt
$
137

Long-term debt

1,809

Total finance lease obligation
$
1,946

Weighted-Average Remaining Lease Term

Operating leases

8.4
yrs
Finance leases

10.7
yrs

Weighted-Average Discount Rate

Operating leases

4.7
%
Finance leases

8.5
%

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

At June 30, 2019	Operating		Finance
At March 31, 2020					Operating		Finance
	Leases		Leases		Leases		Leases
Remainder of 2019	$	2,250	$	169
2020		4,276		296
Remainder of 2020					$	3,519	$	275
2021		3,841		274		4,391		275
2022		3,561		264		4,068		258
2023		3,228		253		3,663		232
2024						3,140		214
Thereafter		12,502		1,814		11,788		1,509
Total lease payments		29,658		3,070		30,569		2,763
Less imputed interest		(5,746)		(1,124)		(5,542)		(1,024)
Total	$	23,912	$	1,946	$	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:~~

	March 31,				December 31,
Cash and Cash Equivalents and Restricted Cash		2020		2019		2019		2018
Cash and cash equivalents	$	9,955	$	6,516	$	12,130	$	5,204
Restricted cash in Other current assets		8		20		69		61
Restricted cash in Other Assets		77		94		96		135
Cash and cash equivalents and restricted cash	$	10,040	$	6,630	$	12,295	$	5,400

AT&T INC.

~~JUNE 30, 2019~~MARCH 31, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

June 30,

December 31,

2019

2018

2018

2017
Cash and cash equivalents

$
8,423

$
13,523

$
5,204

$
50,498
Restricted cash in Other current assets

15

12

61

6
Restricted cash in Other Assets

216

218

135

428
Cash and cash equivalents and restricted cash

$
8,654

$
13,753

$
5,400

$
50,932

	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)

	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

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

Term Loan

Six months ended

June 30,

2019

2018
Cash Flows from Operating Activities

Cash paid for amounts included in lease obligations

Operating cash flows from operating leases

$
2,464

$
2,458

Supplemental Lease Cash Flow Disclosures

Operating lease right-of-use assets obtained
in exchange for new operating lease obligations

3,899

-

~~Cash paid (received) from interest~~On April 6, 2020, we entered into and ~~income taxes during~~drew on a $5,500 Term Loan Credit Agreement (Term Loan), with certain commercial banks and Bank of America, N.A., as lead agent. The Term Loan is not subject to amortization, and the ~~period are as follows:~~

Six months ended

June 30,

2019

2018
Interest
$
4,410

$
4,045
Income taxes, net of refunds

(32)

(757)

~~Other Noncash Investing~~entire principal amount will be due and ~~Financing Activities~~ In 2019, we recorded approximately $1,265 of new vendor financing commitments related to capital investments, and we have repaid $1,836 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.payable on December 31, 2020.

AT&T INC.

~~JUNE 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.

	Second Quarter						Six-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating Revenues
Communications	$	35,508	$	35,410	0.3	%	$	70,901	$	70,943	(0.1)	%	$	34,249	$	35,169	(2.6)	%
WarnerMedia		8,350		1,393	-			16,729		1,505	-			7,359		8,379	(12.2)
Latin America		1,757		1,951	(9.9)	��		3,475		3,976	(12.6)			1,590		1,718	(7.5)
Xandr		485		392	23.7			911		729	25.0			489		426	14.8
Corporate and other		179		320	(44.1)			346		653	(47.0)			388		391	(0.8)
Eliminations and consolidation		(1,322)		(480)	-			(2,578)		(782)	-			(1,296)		(1,256)	(3.2)
AT&T Operating Revenues		44,957		38,986	15.3			89,784		77,024	16.6			42,779		44,827	(4.6)

Operating Contribution
Communications		8,737		8,414	3.8			16,789		16,441	2.1			8,203		8,011	2.4
WarnerMedia		2,025		425	-			4,335		464	-			1,714		2,310	(25.8)
Latin America		(209)		(150)	(39.3)			(382)		(261)	(46.4)			(184)		(173)	(6.4)
Xandr		325		333	(2.4)			578		619	(6.6)			299		253	18.2
Segment Operating Contribution	$	10,878	$	9,022	20.6	%	$	21,320	$	17,263	23.5	%	$	10,032	$	10,401	(3.5)	%

The Communications segment provides services to businesses and consumers located in the U.S. ~~or in U.S. territories~~ 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.

AT&T INC.

~~JUNE 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:

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.

	Second Quarter						Six-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating Revenues
Service	$	41,023	$	34,906	17.5	%	$	81,707	$	68,552	19.2	%	$	38,883	$	40,684	(4.4)	%
Equipment		3,934		4,080	(3.6)			8,077		8,472	(4.7)			3,896		4,143	(6.0)
Total Operating Revenues		44,957		38,986	15.3			89,784		77,024	16.6			42,779		44,827	(4.6)

Operating expenses
Operations and support		30,356		26,142	16.1			60,744		51,985	16.8			28,071		30,388	(7.6)
Depreciation and amortization		7,101		6,378	11.3			14,307		12,372	15.6			7,222		7,206	0.2
Total Operating Expenses		37,457		32,520	15.2			75,051		64,357	16.6			35,293		37,594	(6.1)
Operating Income		7,500		6,466	16.0			14,733		12,667	16.3			7,486		7,233	3.5
Interest expense		2,149		2,023	6.2			4,290		3,794	13.1			2,018		2,141	(5.7)
Equity in net income (loss) of affiliates		40		(16)	-			33		(7)	-			(6)		(7)	14.3
Other income (expense) – net		(318)		2,353	-			(32)		4,055	-			803		286	-
Income Before Income Taxes		5,073		6,780	(25.2)			10,444		12,921	(19.2)			6,265		5,371	16.6
Net Income		3,974		5,248	(24.3)			8,322		10,007	(16.8)			4,963		4,348	14.1
Net Income Attributable to AT&T	$	3,713	$	5,132	(27.7)	%	$	7,809	$	9,794	(20.3)	%		4,610		4,096	12.5
Net Income Attributable to Common Stock													$	4,578	$	4,096	11.8	%

Operating revenues decreased in the first quarter of 2020. The decrease was driven by declines in our WarnerMedia, Communications 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 revenue declines were driven by continued declines in video and legacy services and lower wireless equipment sales resulting from store closures. Latin America segment revenue declines were primarily due to foreign exchange pressure. Partially offsetting these decreases were revenue increases in wireless service and strategic and managed business service in our Communications segment.

Operations and supportexpenses decreased in the first quarter of 2020. The decrease was driven by a noncash gain of $900 on a spectrum transaction, lower broadcast and programming costs in our Communications and WarnerMedia segments, reduced wireless equipment costs resulting from lower device sales and lower 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 increased in the ~~second~~first quarter ~~and the first six months~~ of ~~2019. The increase was~~2020.

Depreciation expense increased $29, or 0.6%, primarily due to ~~our 2018 acquisition of Time Warner. Partially offsetting these increases in revenues were declines in our Latin America segment, which were negatively impacted by foreign exchange pressure. Revenues~~ongoing capital spend for network upgrades and expansion in our Communications ~~segment were~~segment.

Amortization expense decreased $13, or 0.6%, primarily due to the decreased amortization of intangibles associated with WarnerMedia, largely offset by commencement of amortization for orbital slot licenses, beginning in the first quarter of 2020 (see Note 1).

AT&T INC.

~~JUNE 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

~~stable with growth in wireless service, strategic and managed business services and IP broadband revenues offsetting lower legacy services, video and wireless equipment revenues.~~

~~Operations and supportexpenses~~ increased in the second quarter and the first six months of 2019. The increase was primarily due to our 2018 acquisition of Time Warner. This increase was partially offset by lower costs in our Communications segment, including lower wireless equipment costs and lower content and other costs related to lower video volumes, foreign exchange rate impacts in our Latin America segment, and lower expenses due to our continued focus on cost management.

~~Depreciation and amortization~~ expense increased in the second quarter and for the first six months of 2019. Depreciation expense increased $27, or 0.5% in the second quarter and $163, or 1.6% for the first six months of 2019 primarily due to the Time Warner acquisition.

~~Amortization expense increased $696, or 50.6% in the second quarter and $1,772, or 72.7% for the first six months of 2019 primarily due to the amortization of intangibles associated with WarnerMedia.~~

Operating income increased in the ~~second~~first quarter ~~and the first six months~~ of ~~2019.~~2020. Our operating income margin ~~for~~in the ~~second~~first quarter increased from ~~16.6% in 2018 to 16.7%~~16.1% in 2019 ~~and maintained at 16.4% for the first six months of 2018 and 2019.~~to 17.5% in 2020.

Interest expense ~~increased~~decreased in the ~~second~~first quarter ~~and first six months~~ of ~~2019. The increase was~~2020, primarily due to lower ~~capitalized interest associated with putting spectrum into network service and higher~~ debt ~~balances related to our acquisition of Time Warner. The increase also reflects higher interest rates.~~

balances.

Equity in net income (loss) of affiliates ~~increased~~was essentially flat in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019, primarily due to~~2020, reflecting changes in our investment portfolio, ~~resulting from acquisition-related activity.~~including the second-quarter 2019 sale of Hulu.

Other income (expense) – net ~~decreased earnings~~increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019. The decreases were~~2020 primarily due to an increase in net benefit credit resulting from lower interest costs on the benefit obligation and 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 ~~of $1,699~~on investments in equity securities resulting from market declines in the ~~second~~first quarter ~~and $2,131 for the first six months~~ of 2019, compared to actuarial gains of $1,796 and $2,726 in the comparable prior year. Offsetting the decline from the remeasurement of our benefit plans was a $740 gain on the second-quarter 2019 sale of our investment in Hulu and lower premiums on debt redemptions.2020.

Income taxes ~~decreased~~increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019.~~2020. Our effective tax rate was ~~21.7% for the second quarter and 20.3%~~20.8% for the first ~~six months~~quarter of ~~2019,~~2020, versus ~~22.6%~~19.0% for the ~~second quarter and for the first six months of 2018.~~comparable year prior. The ~~decrease~~increase in income tax expense was primarily due to higher income before income taxes and the impacts of tax settlements in the first quarter of 2019. The increase in our effective tax rate was primarily due to ~~lower income before income taxes, including~~the impacts of ~~actuarial losses of $1,699 in the second quarter and $2,131 for the first six months of 2019, compared to actuarial gains of $1,796 and $2,726 in 2018.~~tax settlements.

~~AT&T INC.~~

~~JUNE 30, 2019~~

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	%

~~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
Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change

Segment Operating Revenues

Mobility
$
17,512

$
17,282
1.3
%

$
35,079

$
34,637
1.3
%
Entertainment Group

11,368

11,478
(1.0)

22,696

22,909
(0.9)

Business Wireline

6,628

6,650
(0.3)

13,126

13,397
(2.0)

Total Segment Operating Revenues

35,508

35,410
0.3

70,901

70,943
(0.1)

Segment Operating Contribution

Mobility

5,833

5,506
5.9

11,184

10,664
4.9

Entertainment Group

1,514

1,475
2.6

2,992

2,784
7.5

Business Wireline

1,390

1,433
(3.0)

2,613

2,993
(12.7)

Total Segment Operating Contribution
$
8,737

$
8,414
3.8
%

$
16,789

$
16,441
2.1
%

Selected Subscribers and Connections
	June 30,		March 31,
(000s)	2019	2018	2020	2019
Mobility Subscribers			169,198	154,670
Total domestic broadband connections	15,698	15,772	15,315	15,737
Network access lines in service	9,207	10,832	8,160	9,587
U-verse VoIP connections	4,766	5,449	4,213	4,935

Operating revenues ~~increased~~decreased in the ~~second~~first quarter ~~and decreased for the first six months~~ of ~~2019. The increase in the quarter was~~2020, driven ~~by increases in our Mobility business unit, partially offset~~ by declines in our Entertainment Group and Business Wireline business ~~units. Revenues reflect higher wireless service, growth in strategic and managed business services and IP broadband, and licensing of intellectual property assets, which were~~units, partially ~~offset by continued declines in legacy voice and data products, the shift to over-the-top (OTT) video offerings and decreased equipment revenues.~~

~~The decrease for the first six months was primarily due to the declines in our Business Wireline and Entertainment Group business units,~~ 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~~ ~~increased in the second quarter and for the first six months of 2019, reflecting improvement~~revenues from growth in our ~~Mobility~~prepaid subscriber base and ~~Entertainment Group business units, partially offset by declines~~growth in our ~~Business Wireline business unit. Our Communications segment operating income margin in the second quarter increased from 23.8% in 2018 to 24.6% in 2019~~postpaid phone subscribers and ~~for the first six months increased from 23.2% in 2018 to 23.7% in 2019.~~

average revenue per subscriber (ARPU).

AT&T INC.

~~JUNE 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

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Service
$
14,006

$
13,682
2.4
%

$
27,798

$
27,085
2.6
%
Equipment

3,506

3,600
(2.6)

7,281

7,552
(3.6)

Total Operating Revenues

17,512

17,282
1.3

35,079

34,637
1.3

Operating expenses

Operations and support

9,654

9,663
(0.1)

19,835

19,765
0.4

Depreciation and amortization

2,025

2,113
(4.2)

4,060

4,208
(3.5)

Total Operating Expenses

11,679

11,776
(0.8)

23,895

23,973
(0.3)

Operating Income

5,833

5,506
5.9

11,184

10,664
4.9

Equity in Net Income of Affiliates

-

-
-

-

-
-

Operating Contribution
$
5,833

$
5,506
5.9
%

$
11,184

$
10,664
4.9
%

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

~~AT&T INC.~~

~~JUNE 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~~

June 30,
Percent
(in 000s)

2019

2018
Change
Wireless Subscribers

Postpaid smartphones

60,737

60,183
0.9
%
Postpaid feature phones and
data-centric devices

15,545

17,189
(9.6)

Postpaid

76,282

77,372
(1.4)

Prepaid

17,602

16,217
8.5

Reseller

7,392

8,582
(13.9)

Connected devices¹

58,389

44,718
30.6

Total Wireless Subscribers

159,665

146,889
8.7

Postpaid Phone Subscribers

63,415

63,543
(0.2)

Total Phone Subscribers

80,003

78,919
1.4
%
¹
Includes data-centric devices such as wholesale automobile systems, monitoring devices, fleet management, and session-based tablets.

Second Quarter

Six-Month Period

Percent

Percent
(in 000s)
2019

2018
Change

2019

2018
Change
Wireless Net Additions²

Postpaid
(154)

73
-
%

(358)

122
-
%
Prepaid
341

453
(24.7)

437

694
(37.0)

Reseller
(214)

(444)
51.8

(467)

(832)
43.9

Connected devices¹
3,959

2,982
32.8

7,047

5,710
23.4

Wireless Net Subscriber Additions
3,932

3,064
28.3

6,659

5,694
16.9

Postpaid Phone Net Additions
72

51
41.2

152

(9)
-

Total Phone Net Additions
355

407
(12.8)
%

520

539
(3.5)
%

Postpaid Churn³
1.08

1.02
6
BP

1.12

1.04
8
BP
Postpaid Phone-Only Churn³
0.86

0.82
4
BP

0.89

0.83
6
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 second quarter and for the first six months of 2019 largely due to~~ ~~growth in Cricket and AT&T PREPAID~~^SM ~~subscribers~~ ~~and~~ ~~higher postpaid average revenue per subscriber (ARPU).~~

~~ARPU~~

~~ARPU increased in the second quarter and for the first six months primarily due to postpaid price actions that were not in effect in the comparative prior year.~~

~~Churn~~

~~AT&T INC.~~

~~JUNE 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 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 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 ~~higher~~ lower in the first quarter due to ~~tablet~~pricing changes, competitive offers and ~~involuntary churn. Also contributing to higher churn for the first six months~~ ~~was continued competitive pricing in the industry.~~industry-wide store closures from COVID-19.

Equipment revenue decreased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019~~2020 driven by lower postpaid smartphone sales ~~resulting~~ reflecting store closures from ~~the continuing trend of customers choosing to upgrade devices less frequently or bring their own~~COVID-19.

Operations and support expenses decreased in the ~~second~~first quarter ~~and increased for the first six months~~ of ~~2019. The decrease in the quarter was~~2020 primarily due to lower ~~postpaid smartphone~~cost of equipment sales from lower volumes and ~~increased operational~~advertising expense and continued improvements in cost efficiencies, partially offset by higher bad debt expense and commission deferral amortization. In the second quarter of 2019, we extended the estimated economic life of our customers, which resulted in a decline of commission deferral amortization on a sequential basis.

~~The increase for the first six months was primarily due to increased bad debt expense and higher commission deferral amortization in the six-month period,~~ ~~partially offset by~~ ~~lower postpaid smartphone volumes and increased operational efficiencies~~.expense.

Depreciation expense ~~decreased~~increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019~~2020 primarily due to ~~fully depreciated assets, partially offset by~~ ongoing capital spending for network upgrades and ~~expansion.~~expansion partially offset by fully depreciated assets.

Operating income increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019.~~2020. Our Mobility operating income margin in the ~~second~~first quarter increased from ~~31.9%~~30.6% in ~~2018~~2019 to 33.3% in ~~2019, and for the first six months increased from 30.8% in 2018 to 31.9% in 2019.~~2020. Our Mobility EBITDA margin in the ~~second~~first quarter increased from ~~44.1% in 2018 to 44.9%~~42.2% in 2019 to

AT&T INC.

MARCH 31, 2020

Item 2. Management’s Discussion and ~~for the first six months increased from 42.9%~~Analysis of Financial Condition and Results of Operations - Continued

Dollars, subscribers and connections in ~~2018 to 43.5%~~millions, except per share and per subscriber amounts

45.0% in ~~2019.~~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 ~~system,~~systems, monitoring devices, fleet management and session-based tablets. ~~Connected~~The number of connected device ~~subscribers~~subscriber relationships increased ~~in 2019, and~~ during the ~~second~~first quarter ~~and for~~of 2020, driven by the ~~first six months~~addition of ~~2019, we added~~ approximately ~~2.1 million and 4.0~~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
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Video entertainment	$	7,395	$	8,074	(8.4)	%
High-speed internet		2,109		2,070	1.9
Legacy voice and data services		581		683	(14.9)
Other service and equipment		430		501	(14.2)
Total Operating Revenues		10,515		11,328	(7.2)

Operating expenses
Operations and support		7,891		8,527	(7.5)
Depreciation and amortization		1,289		1,323	(2.6)
Total Operating Expenses		9,180		9,850	(6.8)
Operating Income		1,335		1,478	(9.7)
Equity in Net Income (Loss) of Affiliates		-		-	-
Operating Contribution	$	1,335	$	1,478	(9.7)	%

AT&T INC.

~~JUNE 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

Entertainment Group Results

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Video entertainment
$
8,035

$
8,173
(1.7)
%

$
16,109

$
16,398
(1.8)
%
High-speed internet

2,109

1,981
6.5

4,179

3,859
8.3

Legacy voice and data services

658

772
(14.8)

1,341

1,578
(15.0)

Other service and equipment

566

552
2.5

1,067

1,074
(0.7)

Total Operating Revenues

11,368

11,478
(1.0)

22,696

22,909
(0.9)

Operating expenses

Operations and support

8,515

8,657
(1.6)

17,042

17,468
(2.4)

Depreciation and amortization

1,339

1,345
(0.4)

2,662

2,655
0.3

Total Operating Expenses

9,854

10,002
(1.5)

19,704

20,123
(2.1)

Operating Income

1,514

1,476
2.6

2,992

2,786
7.4

Equity in Net Income (Loss)
of Affiliates

-

(1)
-

-

(2)
-

Operating Contribution
$
1,514

$
1,475
2.6
%

$
2,992

$
2,784
7.5
%

The following tables highlight other key measures of performance for the Entertainment ~~Group:~~Group business unit:

~~AT&T INC.~~

~~JUNE 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~~

June 30,
Percent

2019

2018
Change
Video Connections

Premium TV

21,581

23,640
(8.7)
%
DIRECTV NOW¹

1,340

1,809
(25.9)

Total Video Connections

22,921

25,449
(9.9)

Broadband Connections

IP

13,822

13,692
0.9

DSL

598

763
(21.6)

Total Broadband Connections

14,420

14,455
(0.2)

Retail Consumer Switched Access Lines

3,630

4,333
(16.2)

U-verse Consumer VoIP Connections

4,211

4,950
(14.9)

Total Retail Consumer Voice Connections

7,841

9,283
(15.5)

Fiber Broadband Connections
(included in IP)

3,378

2,204
53.3
%
¹
Consistent with industry practice, DIRECTV NOW includes connections that are on a free-trial.

Second Quarter

Six-Month Period

Percent

Percent
(in 000s)
2019

2018
Change

2019

2018
Change
Video Net Additions

Premium TV²
(778)

(262)
-
%

(1,322)

(449)
-
%
DIRECTV NOW¹
(168)

342
-

(251)

654
-

Net Video Additions
(946)

80
-

(1,573)

205
-

Broadband Net Additions

IP
-

76
-

93

230
(59.6)

DSL
(34)

(53)
35.8

(82)

(125)
34.4

Net Broadband Additions
(34)

23
-

11

105
(89.5)

Fiber Broadband Net Additions
(included in IP)
318

249
27.7
%

615

475
29.5
%
¹
Consistent with industry practice, DIRECTV NOW includes connections that are on a free-trial.
²
Includes disconnections for customers that migrated to DIRECTV 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 ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~2020, largely driven by ~~an 8.7%~~a decline in premium TV ~~subscribers. Our customers~~subscribers, as we continue to ~~shift, consistent~~focus on high-value customers, 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. ~~OTT net additions declined~~

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

Legacy voice and data servicerevenues decreased in the first ~~six months~~quarter of 2020, reflecting the continued migration of customers to our more advanced IP-based offerings or to competitors.

Operations and support expenses decreased in the first quarter of 2020, primarily due to ~~price changes~~lower content costs from fewer subscribers and ~~fewer promotions. Churn rose for subscribers with premium TV-only service,~~ongoing cost initiatives, partially ~~reflecting price increases~~.offset by higher amortization of fulfillment cost deferrals and higher annual content rate increases.

AT&T INC.

~~JUNE 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

~~High-speed internet~~ revenues increased in the second quarter and for the first six months of 2019 reflecting the shift of subscribers to our higher-speed fiber services. Our bundling strategy is helping to lower churn with subscribers who bundle broadband with another AT&T service.

~~Legacy voice and data servicerevenues decreased in the second quarter and for the first six months of 2019, reflecting the continued migration of customers to our more advanced IP-based offerings or to competitors.~~

~~Operations and support~~ expenses decreased in the second quarter and for the first six months of 2019. Contributing to the decreases were lower content costs largely due to lower subscribers, lower volumes and our ongoing focus on cost initiatives. Partially offsetting the decreases was higher amortization of fulfillment cost deferrals, including the impact of updates to the estimated economic life for our Entertainment Group customers.

Depreciation expense decreased in the ~~second~~first quarter ~~and increased for the first six months~~ of ~~2019. The decrease in the quarter was primarily~~2020, due to network assets becoming fully ~~depreciated assets, largely offset by ongoing capital spending for network upgrades and expansion. The increase for~~depreciated. Partially offsetting the ~~first six months~~decreases was ~~primarily due to our~~ ongoing capital spending for network upgrades and expansion.

Operating income ~~increased~~decreased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019.~~2020. Our Entertainment Group operating income margin in the ~~second~~first quarter ~~increased~~decreased from ~~12.9% in 2018 to 13.3%~~13.0% in 2019 ~~and for the first six months increased from 12.2%~~to 12.7% in ~~2018 to 13.2% in 2019.~~2020. Our Entertainment Group EBITDA margin in the ~~second~~first quarter increased from ~~24.6% in 2018 to 25.1%~~24.7% in 2019 ~~and for the first six months increased from 23.8%~~to 25.0% in ~~2018 to 24.9% in 2019.~~2020.

Business Wireline Results					��
	Second Quarter						Six-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating revenues
Strategic and managed services	$	3,848	$	3,603	6.8	%	$	7,640	$	7,198	6.1	%	$	3,879	$	3,779	2.6	%
Legacy voice and data services		2,331		2,730	(14.6)			4,735		5,595	(15.4)			2,129		2,397	(11.2)
Other service and equipment		449		317	41.6			751		604	24.3			324		302	7.3
Total Operating Revenues		6,628		6,650	(0.3)			13,126		13,397	(2.0)			6,332		6,478	(2.3)

Operating expenses
Operations and support		3,982		4,038	(1.4)			8,022		8,054	(0.4)			3,951		4,032	(2.0)
Depreciation and amortization		1,256		1,180	6.4			2,491		2,350	6.0			1,301		1,222	6.5
Total Operating Expenses		5,238		5,218	0.4			10,513		10,404	1.0			5,252		5,254	-
Operating Income		1,390		1,432	(2.9)			2,613		2,993	(12.7)			1,080		1,224	(11.8)
Equity in Net Income of Affiliates		-		1	-			-		-	-
Equity in Net Income (Loss) of Affiliates														-		-	-
Operating Contribution	$	1,390	$	1,433	(3.0)	%	$	2,613	$	2,993	(12.7)	%	$	1,080	$	1,224	(11.8)	%

Strategic and managed services revenues increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019.~~2020. Our strategic services are made up of (1) data services, including our VPN, dedicated internet ethernet and broadband, (2) voice service, including VoIP and cloud-based voice solutions, (3) security and cloud solutions, and (4) managed, professional and outsourcing services. Revenue increases were primarily attributable to growth in our ~~security~~dedicated internet, business internet and ~~cloud solutions and managed~~security services.

Legacy voice and data service revenues decreased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~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 in the first quarter decreased from 37.8% in 2019 to 37.6% in 2020.

AT&T INC.

~~JUNE 30,~~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 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 income increased in the first quarter of 2020. Our Turner operating income margin in the first quarter increased from 36.2% in 2019 to 43.7% 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

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 revenues decreased in the first quarter of 2020, primarily due to lower content licensing. Subscription revenue was flat, including digital and international growth that was partially offset by lower domestic linear subscribers.

Cost of revenues increased in the first quarter of 2020, primarily due to higher programming 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 decreased in the first quarter of 2020. Our HBO operating income margin in the first quarter decreased from 37.5% in 2019 to 28.3% in 2020.

Warner Bros. Results
	First Quarter
					Percent
	2020		2019		Change
Operating revenues
Theatrical product	$	1,106	$	1,506	(26.6)	%
Television product		1,769		1,613	9.7
Games and other		365		399	(8.5)
Total Operating Revenues		3,240		3,518	(7.9)

Operating expenses
Cost of revenues		2,346		2,430	(3.5)
Selling, general and administrative		604		489	23.5
Depreciation and amortization		41		52	(21.2)
Total Operating Expenses		2,991		2,971	0.7
Operating Income		249		547	(54.5)
Equity in Net Income (Loss) of Affiliates		(8)		6	-
Operating Contribution	$	241	$	553	(56.4)	%

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

~~Other service and equipment~~Operating revenues ~~revenues increased~~decreased in the ~~second~~first quarter ~~and for~~of 2020, primarily due to lower theatrical product driven by unfavorable comparisons to the ~~first six months~~prior comparable period, which included, in 2019, carryover revenues from the theatrical release of ~~2019,~~Aquaman in addition to a more favorable mix of home entertainment releases. Partially offsetting the theatrical declines were higher television product revenues, driven by licensing, ~~of intellectual property assets. Other service~~partly offset by lower initial telecast revenues ~~include project-based revenue, which is nonrecurring in nature, as well as revenues from customer premises equipment.~~driven by television production delays.

~~Operations and support~~ Cost of revenues~~expenses~~ decreased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~2020, primarily due to ~~our continued efforts to shift to a software-based network and automate and digitize our customer support activities,~~lower marketing of theatrical product, partially offset by ~~higher fulfillment deferral amortization.~~incremental costs incurred due to the production hiatus.

~~Depreciation~~ Selling, general and administrative~~expense~~ increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~2020, primarily due to ~~increases in capital spending for network upgrades~~higher bad debt expense and ~~expansion.~~other charges.

Operating income decreased in the ~~second~~first quarter ~~and for the first six months~~ of 2019. Our Business Wireline operating income margin in the second quarter decreased from 21.5% in 2018 to 21.0% in 2019, and for the first six months decreased from 22.3% in 2018 to 19.9% in 2019. Our Business Wireline EBITDA margin in the second quarter increased from 39.3% in 2018 to 39.9% in 2019, and for the first six months decreased from 39.9% in 2018 to 38.9% in 2019.

WARNERMEDIA SEGMENT
Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Segment Operating Revenues

Turner
$
3,410

$
667
-
%

$
6,853

$
779
-
%
Home Box Office

1,716

281
-

3,226

281
-

Warner Bros.

3,389

507
-

6,907

507
-

Eliminations & Other

(165)

(62)
-

(257)

(62)
-

Total Segment Operating Revenues

8,350

1,393
-

16,729

1,505
-

Segment Operating Contribution

Turner

1,165

289
-

2,437

353
-

Home Box Office

588

104
-

1,170

104
-

Warner Bros.

440

89
-

993

89
-

Eliminations & Other

(168)

(57)
-

(265)

(82)
-

Total Segment Operating Contribution
$
2,025

$
425
-
%

$
4,335

$
464
-
%

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.

Segment and business unit results in the second quarter and for the first six months are not comparable to prior periods and therefore not discussed. Comparative results will be discussed beginning with our third-quarter 2019 results.

~~AT&T INC.~~

~~JUNE 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~~

WarnerMedia Business Unit Discussion
Turner Results

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Subscription
$
1,943

$
410
-
%

$
3,908

$
508
-
%
Advertising

1,266

223
-

2,527

237
-

Content and other

201

34
-

418

34
-

Total Operating Revenues

3,410

667
-

6,853

779
-

Operating expenses

Operations and support

2,217

372
-

4,353

446
-

Depreciation and amortization

39

11
-

99

12
-

Total Operating Expenses

2,256

383
-

4,452

458
-

Operating Income

1,154

284
-

2,401

321
-

Equity in Net Income of Affiliates

11

5
-

36

32
12.5

Operating Contribution
$
1,165

$
289
-
%

$
2,437

$
353
-
%

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

~~Operating revenues~~for Turner are generated primarily from licensing programming to distribution affiliates and from selling advertising on its networks and digital properties. Our Turner operating income margin was 33.8% in the second quarter and 35.0% for the first six months of 2019. Our Turner EBITDA margin was 35.0% in the second quarter and 36.5% for the first six months of 2019.

Home Box Office Results

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Subscription
$
1,516

$
270
-
%

$
2,850

$
270
-
%
Content and other

200

11
-

376

11
-

Total Operating Revenues

1,716

281
-

3,226

281
-

Operating expenses

Operations and support

1,131

171
-

2,052

171
-

Depreciation and amortization

12

5
-

34

5
-

Total Operating Expenses

1,143

176
-

2,086

176
-

Operating Income

573

105
-

1,140

105
-

Equity in Net Income (Loss)
of Affiliates

15

(1)
-

30

(1)
-

Operating Contribution
$
588

$
104
-
%

$
1,170

$
104
-
%

Operating revenues for Home Box Office are generated from the exploitation of original and licensed programming through distribution outlets. Our Home Box Office operating income margin was 33.4% in the second quarter and 35.3% for the first six months of 2019. Our Home Box Office EBITDA margin was 34.1% in the second quarter and 36.4% for the first six months of 2019.

~~AT&T INC.~~

~~JUNE 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~~

Warner Bros. Results

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues

Theatrical product
$
1,527

$
223
-
%

$
3,033

$
223
-
%
Television product

1,310

203
-

2,923

203
-

Games and other

552

81
-

951

81
-

Total Operating Revenues

3,389

507
-

6,907

507
-

Operating expenses

Operations and support

2,918

403
-

5,837

403
-

Depreciation and amortization

31

14
-

83

14
-

Total Operating Expenses

2,949

417
-

5,920

417
-

Operating Income

440

90
-

987

90
-

Equity in Net Income (Loss)
of Affiliates

-

(1)
-

6

(1)
-

Operating Contribution
$
440

$
89
-
%

$
993

$
89
-
%

Operating revenues for Warner Bros. primarily relate to theatrical product (which is content made available for initial exhibition in theaters) and television product (which is content made available for initial airing on television or OTT services).2020. Our Warner Bros. operating income margin ~~was 13.0%~~ in the ~~second~~first quarter ~~and 14.3% for the first six months of 2019. Our Warner Bros. EBITDA margin was 13.9%~~decreased from 15.5% in ~~the second quarter and 15.5% for the first six months of 2019.~~2019 to 7.7% in 2020.

LATIN AMERICA SEGMENT	Second Quarter						Six-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Segment Operating Revenues
Vrio	$	1,032	$	1,254	(17.7)	%	$	2,099	$	2,608	(19.5)	%	$	887	$	1,067	(16.9)	%
Mexico		725		697	4.0			1,376		1,368	0.6			703		651	8.0
Total Segment Operating Revenues		1,757		1,951	(9.9)			3,475		3,976	(12.6)			1,590		1,718	(7.5)

Segment Operating Contribution
Vrio		(2)		67	-			30		215	(86.0)			(39)		32	-
Mexico		(207)		(217)	4.6			(412)		(476)	13.4			(145)		(205)	29.3
Total Segment Operating Contribution	$	(209)	$	(150)	(39.3)	%	$	(382)	$	(261)	(46.4)	%	$	(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 ~~second~~first quarter ~~and for the six 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 decreased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~2020, reflecting foreign exchange pressure. Our Latin America segment operating income margin in the ~~second~~first quarter ~~decreased from (8.5)~~was (11.8)% in ~~2018 to (12.6)% in 2019,~~2020 and ~~for the first six months decreased from (6.9)% in 2018 to (11.3)~~(10.1)% in 2019.

AT&T INC.

~~JUNE 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

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:

							June 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						5,489	5,749	(4.5)	%	Postpaid		4,962		5,642	(12.1)	%
Prepaid	Prepaid						12,180	10,468	16.4		Prepaid		13,692		11,779	16.2
Reseller	Reseller						352	181	94.5		Reseller		504		301	67.4
Total Mexico Wireless Subscribers	Total Mexico Wireless Subscribers						18,021	16,398	9.9	%	Total Mexico Wireless Subscribers		19,158		17,722	8.1	%

												First Quarter
		Second Quarter					Six-Month Period									Percent
					Percent				Percent
			2019	2018	Change		2019	2018	Change
(in 000s)											(in 000s)	2020		2019		Change
Mexico Wireless Net Additions	Mexico Wireless Net Additions										Mexico Wireless Net Additions
Postpaid	Postpaid		(153)	142	-	%	(222)	251	-	%	Postpaid		(141)		(69)	-	%
Prepaid	Prepaid		401	611	(34.4)		515	1,070	(51.9)		Prepaid		108		114	(5.3)
Reseller	Reseller		51	3	-		99	(22)	-		Reseller		32		48	(33.3)
Mexico Wireless Net Subscriber Additions	Mexico Wireless Net Subscriber Additions		299	756	(60.4)	%	392	1,299	(69.8)	%	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 ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~2020, primarily due to growth in our prepaid subscriber base.

Equipment revenues ~~decreased~~increased in the ~~second~~first quarter ~~and for the first six months~~ of ~~2019,~~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.

AT&T INC.

~~JUNE 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 increased in the second quarter and decreased for the first six months of 2019. The increases in the second quarter were primarily driven by higher bad debt expenses. The decreases for the first six months were primarily driven by lower equipment sales, partially offset by higher bad debt expenses. Approximately 7% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

~~Depreciation and amortization~~ expense decreased in the second quarter and for the first six months of 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 ~~second~~first quarter ~~and first six months~~ of ~~2019.~~2020. Our Mexico operating income margin in the ~~second~~first quarter increased from ~~(31.1)% in 2018 to (28.6)~~(31.5)% in 2019 ~~and for the first six months increased from (34.8)~~to (20.6)% in ~~2018 to (29.9)% in 2019.~~2020. Our Mexico EBITDA margin in the ~~second~~first quarter increased from ~~(12.9)% in 2018 to (12.1)~~(11.4)% in 2019 ~~and for the first six months increased from (16.2)~~to (1.6)% in ~~2018 to (11.8)% in 2019.~~2020.

Vrio Results

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating revenues
$
1,032

$
1,254
(17.7)
%

$
2,099

$
2,608
(19.5)
%

Operating expenses

Operations and support

881

1,016
(13.3)

1,747

2,017
(13.4)

Depreciation and amortization

165

186
(11.3)

334

391
(14.6)

Total Operating Expenses

1,046

1,202
(13.0)

2,081

2,408
(13.6)

Operating Income

(14)

52
-

18

200
(91.0)

Equity in Net Income of Affiliates

12

15
(20.0)

12

15
(20.0)

Operating Contribution
$
(2)

$
67
-
%

$
30

$
215
(86.0)
%

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

June 30,
Percent
(in 000s)

2019

2018
Change
Vrio Video Subscribers^1,2

13,473

13,713
(1.8)
%

Second Quarter

Six -Month Period

Percent

Percent
(in 000s)

2019

2018
Change

2019

2018
Change
Vrio Video Net Subscriber Additions³

(111)

140
-
%

(143)

125
-
%
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 March 31, 2019 and 8.0 million subscribers at June 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 losses of 251 and 41 for the period end March 31, 2019 and June 30, 2018, respectively.

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

~~AT&T INC.~~

~~JUNE 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 second quarter and for the first six months of 2019, primarily due to changes in foreign currency exchange rates. Approximately 18% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

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

~~Operating income~~ decreased in the second quarter and for the first six months of 2019. Our Vrio operating income margin in the second quarter decreased from 4.1% in 2018 to (1.4)% in 2019, and for the first six months decreased from 7.7% in 2018 to 0.9% in 2019. Our Vrio EBITDA margin in the second quarter decreased from 19.0% in 2018 to 14.6% in 2019, and for the first six months decreased from 22.7% in 2018 to 16.8% in 2019.

XANDR SEGMENT	XANDR SEGMENT												XANDR SEGMENT
	Second Quarter						Six-Month Period						First Quarter
					Percent						Percent						Percent
	2019		2018		Change		2019		2018		Change		2020		2019		Change
Operating revenues	$	485	$	392	23.7	%	$	911	$	729	25.0	%	$	489	$	426	14.8	%

Operating expenses
Operations and support		147		59	-			307		109	-			170		160	6.3
Depreciation and amortization		13		-	-			26		1	-			20		13	53.8
Total Operating Expenses		160		59	-			333		110	-			190		173	9.8
Operating Income		325		333	(2.4)			578		619	(6.6)			299		253	18.2
Equity in Net Income of Affiliates		-		-	-			-		-	-
Equity in Net Income (Loss) of Affiliates														-		-	-
Operating Contribution	$	325	$	333	(2.4)	%	$	578	$	619	(6.6)	%	$	299	$	253	18.2	%

Operating revenues increased in the ~~second~~first quarter ~~and for the first six 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 ~~second~~first quarter ~~and for the first six 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 ~~second~~first quarter ~~and for the first six months~~ of ~~2019.~~2020. Our Xandr segment operating income margin in the ~~second~~first quarter ~~decreased~~increased from ~~84.9% in 2018 to 67.0%~~59.4% in 2019 ~~and for the first six months decreased from 84.9%~~to 61.1% in ~~2018 to 63.4% in 2019.~~2020.

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
	First Quarter
					Percent
	2020		2019		Change
Operating Revenues
WarnerMedia	$	979	$	1,279	(23.5)	%
Communications		489		417	17.3
Xandr		489		426	14.8
Eliminations		(413)		(350)	(18.0)
Total Advertising Revenues	$	1,544	$	1,772	(12.9)	%

AT&T INC.

~~JUNE 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

Total Advertising Revenues

Second Quarter

Six-Month Period

Percent

Percent

2019

2018
Change

2019

2018
Change
Operating Revenues

WarnerMedia
$
1,285

$
225
-
%

$
2,564

$
239
-
%
Communications

470

431
9.0

887

806
10.0

Xandr

485

392
23.7

911

729
25.0

Eliminations

(399)

(387)
(3.1)

(749)

(721)
(3.9)

Total Advertising Revenues
$
1,841

$
661
-
%

$
3,613

$
1,053
-
%

SUPPLEMENTAL COMMUNICATIONS OPERATING INFORMATION

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and wireline operations. This combined view presents a complete profile of the entire business customer relationship, and underscores the importance of mobile solutions to serving our business customers. Results have been recast to conform to the current period's classification of consumer and business wireless subscribers. See “Discussion and Reconciliation of Non-GAAP Measure” for a reconciliation of these supplemental measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Business Solutions Results
	Second Quarter						Six-Month Period						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	$	2,022	$	1,829	10.6	%	$	3,935	$	3,620	8.7	%	$	1,949	$	1,777	9.7	%
Strategic and managed services		3,848		3,603	6.8			7,640		7,198	6.1			3,879		3,779	2.6
Legacy voice and data services		2,331		2,730	(14.6)			4,735		5,595	(15.4)			2,129		2,397	(11.2)
Other service and equipment		449		317	41.6			751		604	24.3			324		302	7.3
Wireless equipment		622		584	6.5			1,218		1,162	4.8			710		590	20.3
Total Operating Revenues		9,272		9,063	2.3			18,279		18,179	0.6			8,991		8,845	1.7

Operating expenses
Operations and support		5,539		5,616	(1.4)			11,179		11,210	(0.3)			5,710		5,614	1.7
Depreciation and amortization		1,561		1,487	5.0			3,102		2,945	5.3			1,625		1,525	6.6
Total Operating Expenses		7,100		7,103	-			14,281		14,155	0.9			7,335		7,139	2.7
Operating Income		2,172		1,960	10.8			3,998		4,024	(0.6)			1,656		1,706	(2.9)
Equity in Net Income of Affiliates		-		1	-			-		-	-
Equity in Net Income (Loss) of Affiliates														-		-
Operating Contribution	$	2,172	$	1,961	10.8	%	$	3,998	$	4,024	(0.6)	%	$	1,656	$	1,706	(2.9)	%

OTHER BUSINESS MATTERS

~~Time Warner~~ Spectrum Auction~~In June 2018, we completed our acquisition~~ We were the winning bidder of ~~Time Warner, a leader~~high-frequency 37/39 GHz licenses in ~~media and entertainment whose major businesses encompass~~FCC Auction 103 covering an ~~array~~average of some of the most respected media brands. In July 2018, the U.S. Department of Justice (DOJ) appealed the U.S. District Court’s decision permitting the merger. On February 26, 2019, the D.C. Circuit unanimously affirmed our win. The DOJ did not appeal786 MHz nationwide for approximately $2,400. Prior to the ~~United States Supreme Court, thereby ending~~auction, we exchanged the ~~litigation.~~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 ContractsAs of ~~June 30, 2019,~~March 31, 2020, we employed approximately ~~258,000~~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.

AT&T INC.

~~JUNE 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

(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 July 2019, we reached a tentative agreement on a new four-year contract that will expire in April 2022, if ratified. In addition, a contract covering approximately 3,000 traditional wireline employees in our legacy AT&T Corp. business also expired in April 2018. In July 2019, we reached a tentative agreement on a new four-year contract that will expire in April 2022, if ratified.

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 new 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.~~

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~~upheld the ~~appeals on February 1, 2019. Although the FCC order expressly preempted inconsistent state or local measures, a~~FCC’s current classification, challenges to that decision remain pending.

A number of states ~~are considering or~~ have adopted legislation or issued executive orders that would reimpose ~~the very~~net neutrality rules repealed by the FCC, ~~repealed,~~ and in some cases, ~~establish~~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.~~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

~~AT&T INC.~~

~~JUNE 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~~

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. Specifically, the FCC’s March 2018 Order streamlined historical, tribal, and environmental review requirements for wireless infrastructure, including by excluding most small cell facilities from such review. The Order was appealed and in August 2019, the D.C. Circuit Court of Appeals vacated the FCC’s finding that most small cell facilities are excluded from review, but otherwise upheld the FCC’s Order. The FCC’s August and September 2018 Orders simplified the regulations for attaching telecommunications equipment to utility poles and clarified when local government right-of-way access and use

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

restrictions can be preempted because they unlawfully prohibit the provision of telecommunications services. Those orders ~~have been~~were appealed ~~and~~to the ~~various appeals remain pending in the DC Circuit and~~ 9th Circuit Court of ~~Appeals.~~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 ~~currently have mobile~~now expect nationwide 5G coverage this summer; we anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in parts of 20 U.S. cities 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.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 ~~$8,423~~$9,955 in ~~cash~~“Cash and cash ~~equivalents~~equivalents” available at ~~June 30, 2019. Cash~~March 31, 2020. “Cash and cash ~~equivalents~~equivalents” included cash of ~~$3,512~~$3,287 and money market funds and other cash equivalents of ~~$4,911.~~$6,668. Approximately ~~$1,700~~$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 $3,219~~equivalents” decreased $2,175 since December 31, ~~2018.~~2019. In the first ~~six~~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 and collateral received from banks and other participants in our derivative arrangements.~~issuances of cumulative preferred stock. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, debt repayments, funding capital expenditures and vendor financing payments, 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 ~~six~~three months of ~~2019,~~2020, cash provided by operating activities was ~~$25,336,~~$8,866, compared to ~~$19,176~~$11,052 for the first ~~six~~three months of ~~2018. Higher~~2019. Lower operating cash flows in ~~2019~~2020 were primarily ~~due to contributions from~~driven by WarnerMedia profits, including ~~our new receivables securitization program (see Note 9), cash from our sale and transfer of certain wireless equipment installment receivables to third parties~~increased HBO Max investments and higher ~~cash flows from~~production spend; lower incremental receivable securitization; and working capital ~~initiatives, partly offset by~~pressures, specifically lower ~~net tax refunds.~~business collections late in 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 ~~$496~~$1,075 and $904 for the ~~first six~~three months ofended March 31, 2020 and 2019, ~~and to improve working capital $584 for the first six months of 2018.~~respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities

For the first ~~six~~three months of ~~2019,~~2020, cash used in investing activities totaled ~~$7,299,~~$5,022, and consisted primarily of ~~$10,654~~$4,966 (including interest during construction) for capital expenditures ($~~572~~216 lower than the prior-year comparable period), and ~~proceeds from~~$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.

~~AT&T INC.~~

~~JUNE 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~~

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 ~~six~~three months of ~~2019, these~~2020, vendor financing payments were ~~$1,836, and when combined with $10,654 of capital expenditures, total capital investment was $12,490 ($1,007 higher than the prior-year comparable period). In~~$791, compared to $819 for the first ~~six~~three months of ~~2019, we placed $1,265 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 six months, approximately $600 of assets related to the FirstNet build were placed into service. Total reimbursements from the government for FirstNet during the first six 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 six months of 2019, cash used in financing activities totaled $14,783 and included net proceeds of $10,030, which consisted primarily of the following issuances:~~

~~January draw of $2,850 on an 11-month syndicated term loan agreement.~~

~~January draw of $750 on a private financing agreement.~~

~~February issuance 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 to support network equipment purchases.~~

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

~~During the first six months of 2019, repayment of long-term debt totaled $16,124. Repayments primarily consisted of the following:~~

~~Notes redeemed at maturity:~~

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

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

~~€1,500 of AT&T floating-rate notes in the second quarter.~~

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

~~Notes redeemed prior to maturity:~~

~~$2,010 of 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.~~

~~Credit facilities and other borrowings:~~

~~$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.~~

~~$600 of borrowings under our credit agreement with Canadian Imperial Bank of Commerce in the second quarter.~~2019.

AT&T INC.

~~JUNE 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

C~~$500~~apital expenditures in the first three months of ~~advances~~2020 were $4,966, and 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 service under ~~our November 2018 Term Loan (defined below)~~vendor financing arrangements (compared to $733 in the ~~second quarter.~~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:

February issuance of $2,995 of 4.000% global notes due 2049.

March draw of $750 on a private financing agreement.

March borrowings of $665 from loan programs with export agencies of foreign governments to support network equipment purchases in those countries.

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

$~~250~~800 of AT&T floating-rate notes redeemed at maturity.

$2,619 of 4.600% AT&T global notes with original maturities in 2045.

$750 of borrowings under a ~~U.S. Bank credit agreement in the second quarter.~~private financing agreement.

Our weighted average interest rate of our entire long-term debt portfolio, including the impact of derivatives, was approximately 4.3% as of March 31, 2020 and 4.4% as of ~~both June 30, 2019 and~~ December 31, ~~2018.~~2019. We had ~~$165,443~~$159,386 of total notes and debentures outstanding at ~~June 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 ~~$39,588.~~$40,712.

At ~~June 30, 2019,~~March 31, 2020, we had ~~$12,772~~$17,067 of debt maturing within one year, including ~~$3,164~~$3,144 of commercial paper borrowings and ~~$9,467~~$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 ~~six~~three months of ~~2019,~~2020, we paid ~~$1,836~~$791 of cash under our vendor financing program, compared to ~~$257~~$819 in the first ~~six~~three months of ~~2018.~~2019. Total vendor financing payables included in our ~~June 30, 2019~~March 31, 2020 consolidated balance sheet were ~~$1,930,~~approximately $1,361, with ~~$1,455~~$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”).

Financing activities in the first three months of 2020 also included $3,869 for the February issuance of Series B and Series C preferred stock. (See Note 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 ~~June 30, 2019,~~March 31, 2020, we had approximately ~~376~~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 ~~$7,436~~$3,737 during the first ~~six~~three months of ~~2019,~~2020, compared with ~~$6,144~~$3,714 for the first ~~six~~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 ~~$1.02~~$0.52 per share in the first ~~six~~three months of ~~2019~~2020 and ~~$1.00~~$0.51 per share for the first ~~six~~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 ~~June 30, 2019.~~March 31, 2020.

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, and paid the 2022 and 2023 facilities during the second quarter of 2019. The 2021 facility was outstanding as of June 30, 2019.

~~On November 20, 2018,~~2019, we entered into and drew on a ~~4.5 year $3,550~~$1,300 term loan credit agreement ~~(the “November 2018 Term Loan”)~~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. ~~We used the proceeds to finance the~~No repayment ~~in part, of loans outstanding~~had been made under ~~the Acquisition Term Loan. We paid $500 of~~ these ~~borrowings in the second quarter of 2019, and $3,050 was outstanding under this agreement~~facilities as of ~~June 30, 2019.~~

~~AT&T INC.~~

~~JUNE 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~~

On ~~January 31, 2019,~~April 6, 2020, we entered into and drew on ~~an 11-month $2,850 syndicated term loan credit agreement (the “Citibank~~a $5,500 Term ~~Loan”)~~Loan Credit Agreement (Term Loan), with ~~certain investment and~~11 commercial banks and ~~Citibank,~~Bank of America, N.A., as ~~administrative~~lead agent. ~~As of June 30, 2019, $2,850 was outstanding under this agreement.~~

~~In anticipation~~The Term Loan is not subject to amortization and the entire principal amount of the ~~Time Warner acquisition, we entered into a $16,175 term loan agreement (“Acquisition~~ Term ~~Loan”) containing (i) a 2.5 year $8,087.5 facility (the “Tranche A Facility”)~~Loan will be due and ~~(ii) a 4.5 year $8,087.5 facility (the “Tranche B Facility”) with a commitment termination date of~~payable on December 31, ~~2018, for which we paid the remaining $2,625 of the Tranche A advances on February 20, 2019, and terminated the facility.~~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 ~~June 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 ~~six~~three months of ~~2019,~~2020, we ~~received $1,417~~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 ~~June 30, 2019,~~March 31, 2020, our debt ratio was ~~46.8%~~45.7%, compared to ~~50.8%~~47.4% at ~~June 30, 2018~~March 31, 2019 and ~~47.7%~~44.7% at December 31, ~~2018.~~2019. Our net debt ratio was ~~44.5%~~42.9% at ~~June 30, 2019, compared to 47.2% at June 30, 2018 and 46.2% at December~~March 31, ~~2018. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and repayments.~~

During the first six months of 2019, we have received approximately $3,600 from the disposition of assets, and when combined with cash proceeds from the sale of equipment installment and WarnerMedia receivables, excluding repurchases, total cash received from asset monetizations was approximately $14,000. We plan to continue to explore similar opportunities.

2020,

AT&T INC.

~~JUNE 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

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

During the first three months of 2020, we received $118 from the disposition of assets, and when combined with working capital monetization initiatives, which include the sale of receivables, total cash received from monetization efforts, net of spectrum acquisitions, was approximately $1,000. We plan to continue to explore similar opportunities throughout 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

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
		June 30, 2019								June 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	$	14,006	$	-	$	(11,984)	$	2,022	$	13,682	$	-	$	(11,853)	$	1,829	$	13,968	$	-	$	(12,019)	$	1,949	$	13,629	$	-	$	(11,852)	$	1,777
Strategic and managed services		-		3,848		-		3,848		-		3,603		-		3,603		-		3,879		-		3,879		-		3,779		-		3,779
Legacy voice and data services		-		2,331		-		2,331		-		2,730		-		2,730		-		2,129		-		2,129		-		2,397		-		2,397
Other service and equipment		-		449		-		449		-		317		-		317		-		324		-		324		-		302		-		302
Wireless equipment		3,506		-		(2,884)		622		3,600		-		(3,016)		584		3,434		-		(2,724)		710		3,734		-		(3,144)		590
Total Operating Revenues		17,512		6,628		(14,868)		9,272		17,282		6,650		(14,869)		9,063		17,402		6,332		(14,743)		8,991		17,363		6,478		(14,996)		8,845

Operating Expenses
Operations and support		9,654		3,982		(8,097)		5,539		9,663		4,038		(8,085)		5,616		9,569		3,951		(7,810)		5,710		10,041		4,032		(8,459)		5,614
EBITDA		7,858		2,646		(6,771)		3,733		7,619		2,612		(6,784)		3,447		7,833		2,381		(6,933)		3,281		7,322		2,446		(6,537)		3,231
Depreciation and amortization		2,025		1,256		(1,720)		1,561		2,113		1,180		(1,806)		1,487		2,045		1,301		(1,721)		1,625		2,013		1,222		(1,710)		1,525
Total Operating Expense		11,679		5,238		(9,817)		7,100		11,776		5,218		(9,891)		7,103		11,614		5,252		(9,531)		7,335		12,054		5,254		(10,169)		7,139
Operating Income		5,833		1,390		(5,051)		2,172		5,506		1,432		(4,978)		1,960		5,788		1,080		(5,212)		1,656		5,309		1,224		(4,827)		1,706
Equity in net income of affiliates		-		-		-		-		-		1		-		1
Equity in net income (loss) of affiliates																		-		-		-		-		-		-		-		-
Operating Contribution	$	5,833	$	1,390	$	(5,051)	$	2,172	$	5,506	$	1,433	$	(4,978)	$	1,961	$	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.

AT&T INC.

~~JUNE 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~~

Six Months Ended

June 30, 2019

June 30, 2018

Mobility

Business Wireline

Adjustments¹

Business Solutions

Mobility

Business Wireline

Adjustments¹

Business Solutions
Operating Revenues

Wireless service
$
27,798
$
-
$
(23,863)
$
3,935

$
27,085
$
-
$
(23,465)
$
3,620
Strategic and managed services

-

7,640

-

7,640

-

7,198

-

7,198
Legacy voice and data services

-

4,735

-

4,735

-

5,595

-

5,595
Other service and equipment

-

751

-

751

-

604

-

604
Wireless equipment

7,281

-

(6,063)

1,218

7,552

-

(6,390)

1,162
Total Operating Revenues

35,079

13,126

(29,926)

18,279

34,637

13,397

(29,855)

18,179

Operating Expenses

Operations and support

19,835

8,022

(16,678)

11,179

19,765

8,054

(16,609)

11,210
EBITDA

15,244

5,104

(13,248)

7,100

14,872

5,343

(13,246)

6,969
Depreciation and amortization

4,060

2,491

(3,449)

3,102

4,208

2,350

(3,613)

2,945
Total Operating Expense

23,895

10,513

(20,127)

14,281

23,973

10,404

(20,222)

14,155
Operating Income

11,184

2,613

(9,799)

3,998

10,664

2,993

(9,633)

4,024
Equity in net income of affiliates

-

-

-

-

-

-

-

-
Operating Contribution
$
11,184
$
2,613
$
(9,799)
$
3,998

$
10,664
$
2,993
$
(9,633)
$
4,024
¹Non-business wireless reported in the Communications segment under the Mobility business unit.

~~AT&T INC.~~

~~JUNE 30, 2019~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At ~~June 30, 2019,~~March 31, 2020, we had interest rate swaps with a notional value of ~~$1,633~~$853 and a fair value of ~~$26.~~$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 ~~$40,311~~$42,325 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of ~~$(2,622)~~$(8,283) at ~~June 30, 2019.~~March 31, 2020. We have rate locks with a notional value of ~~$2,000~~$3,500 and a fair value of ~~$(23)~~$(720) at ~~June 30, 2019.~~March 31, 2020.

We have foreign exchange contracts with a U.S. dollar notional value of ~~$669~~$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 ~~$65~~$66 at ~~June 30, 2019.~~March 31, 2020.

We have designated ~~€700~~€1,364 million aggregate principal amount of debt as a hedge of the variability of ~~some of the~~certain Euro-denominated net investments of ~~WarnerMedia.~~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 ~~June 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 ~~June 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.

AT&T INC.

~~JUNE 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.

~~Our ability to respond to revenue and margin pressures from increasing competition, including services that use alternative technologies and/or government-owned or subsidized networks.~~

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.~~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.~~

~~JUNE 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.

AT&T INC.

~~JUNE 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 ~~second 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.

56
AT&T INC.
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 ~~second~~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

~~April~~January 1, ~~2019~~2020 -
~~April 30, 2019~~January 31, 2020
~~1,182,997~~85,491,992

$
~~31.92~~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
~~May~~March 1, ~~2019~~2020 -
~~May~~March 31, ~~2019~~2020
~~96,857~~59,221,415

~~31.66~~35.32

-56,745,363

~~375,662,000~~
~~June 1, 2019 -~~
~~June 30, 2019~~
~~954,818~~
~~32.42~~
-
~~375,662,000~~177,942,230
Total
~~2,234,672~~147,198,834

$
~~32.12~~37.53

-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, ~~1,593,271~~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, ~~641,401~~596,094 shares were acquired through reimbursements from AT&T maintained ~~Voluntary Employee Benefit~~

Voluntary Employee Benefit Association (VEBA) trusts.

65
57
AT&T INC.
~~JUNE 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~~
~~3-b~~
~~Bylaws (exhibit 3 to Form 8-K on July 3, 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 June 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 June 30, 2019, formatted in Inline XBRL.~~

66
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.

~~August 5, 2019~~
~~AT&T Inc.~~
~~/s/ John J. Stephens~~
~~John J. Stephens~~
~~Senior Executive Vice President~~
~~and Chief Financial Officer~~

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

AT&T INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	Three months ended
	June 30, 2019			June 30, 2018
	Shares	Amount		Shares	Amount
Common Stock
Balance at beginning of quarter	7,621	$	7,621	6,495	$	6,495
Issuance of stock	-		-	1,126		1,126
Balance at end of period	7,621	$	7,621	7,621	$	7,621

Additional Paid-In Capital
Balance at beginning of quarter		$	125,174		$	89,404
Issuance of common stock			-			35,473
Issuance of treasury stock			(50)			-
Share-based payments			(15)			1,083
Balance at end of period		$	125,109		$	125,960

Retained Earnings
Balance at beginning of quarter		$	59,424		$	55,067
Net income attributable to AT&T ($0.51 and $0.81 per diluted share)			3,713			5,132
Dividends to stockholders ($0.51 and $0.50 per share)			(3,748)			(3,647)
Cumulative effect of accounting changes			-			3
Balance at end of period		$	59,389		$	56,555

Treasury Stock
Balance at beginning of quarter	(324)	$	(11,452)	(348)	$	(12,432)
Repurchase and acquisition of common stock	(2)		(72)	(14)		(443)
Issuance of treasury stock	10		373	1		3
Balance at end of period	(316)	$	(11,151)	(361)	$	(12,872)

Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
Balance at beginning of quarter		$	4,345		$	7,386
Other comprehensive income attributable to AT&T			(1,056)			(1,667)
Amounts reclassified to retained earnings			-			(3)
Balance at end of period		$	3,289		$	5,716

Noncontrolling Interest
Balance at beginning of quarter		$	9,839		$	1,156
Net income attributable to noncontrolling interest			261			116
Interest acquired by noncontrolling owners			1			8
Acquisition of noncontrolling interest			-			1
Distributions			(279)			(99)
Translation adjustments attributable to noncontrolling interest, net of taxes			2			(32)
Cumulative effect of accounting changes			-			-
Balance at end of period		$	9,824		$	1,150

Total Stockholders’ Equity at beginning of quarter		$	194,951		$	147,076
Total Stockholders’ Equity at end of period		$	194,081		$	184,130
See Notes to Consolidated Financial Statements.

		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,282	$	9,663	$	7,619	$	2,113	$	5,506	$	-	$	5,506
Entertainment Group		11,478		8,657		2,821		1,345		1,476		(1)		1,475
Business Wireline		6,650		4,038		2,612		1,180		1,432		1		1,433
Total Communications		35,410		22,358		13,052		4,638		8,414		-		8,414
WarnerMedia
Turner		667		372		295		11		284		5		289
Home Box Office		281		171		110		5		105		(1)		104
Warner Bros.		507		403		104		14		90		(1)		89
Other		(62)		(35)		(27)		1		(28)		(29)		(57)
Total WarnerMedia		1,393		911		482		31		451		(26)		425
Latin America
Vrio		1,254		1,016		238		186		52		15		67
Mexico		697		787		(90)		127		(217)		-		(217)
Total Latin America		1,951		1,803		148		313		(165)		15		(150)
Xandr		392		59		333		-		333		-		333
Segment Total		39,146		25,131		14,015		4,982		9,033	$	(11)	$	9,022
Corporate and Other
Corporate		320		661		(341)		118		(459)
Acquisition-related items		-		321		(321)		1,278		(1,599)
Certain significant items		-		152		(152)		-		(152)
Eliminations and consolidations		(480)		(123)		(357)		-		(357)
AT&T Inc.	$	38,986	$	26,142	$	12,844	$	6,378	$	6,466

For the six months ended June 30, 2019
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	35,079	$	19,835	$	15,244	$	4,060	$	11,184	$	-	$	11,184
Entertainment Group		22,696		17,042		5,654		2,662		2,992		-		2,992
Business Wireline		13,126		8,022		5,104		2,491		2,613		-		2,613
Total Communications		70,901		44,899		26,002		9,213		16,789		-		16,789
WarnerMedia
Turner		6,853		4,353		2,500		99		2,401		36		2,437
Home Box Office		3,226		2,052		1,174		34		1,140		30		1,170
Warner Bros.		6,907		5,837		1,070		83		987		6		993
Other		(257)		40		(297)		18		(315)		50		(265)
Total WarnerMedia		16,729		12,282		4,447		234		4,213		122		4,335
Latin America
Vrio		2,099		1,747		352		334		18		12		30
Mexico		1,376		1,538		(162)		250		(412)		-		(412)
Total Latin America		3,475		3,285		190		584		(394)		12		(382)
Xandr		911		307		604		26		578		-		578
Segment Total		92,016		60,773		31,243		10,057		21,186	$	134	$	21,320
Corporate and Other
Corporate		418		1,139		(721)		303		(1,024)
Acquisition-related items		(72)		389		(461)		3,948		(4,409)
Certain significant items		-		342		(342)		-		(342)
Eliminations and consolidations		(2,578)		(1,899)		(679)		(1)		(678)
AT&T Inc.	$	89,784	$	60,744	$	29,040	$	14,307	$	14,733

For the six months ended June 30, 2018

		June 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	$	1,016	$	-	$	-	$	1,016	Domestic equities	$	674	$	-	$	-	$	674
International equities	International equities		235		-		-		235	International equities		143		-		-		143
Fixed income equities	Fixed income equities		209		-		-		209	Fixed income equities		233		-		-		233
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities		-		1,031		-		1,031	Available-for-Sale Debt Securities		-		1,514		-		1,514
Asset Derivatives	Asset Derivatives									Asset Derivatives
Interest rate swaps	Interest rate swaps		-		26		-		26	Interest rate swaps		-		14		-		14
Cross-currency swaps			-		307		-		307
Foreign exchange contracts	Foreign exchange contracts		-		68		-		68	Foreign exchange contracts		-		77		-		77
Liability Derivatives	Liability Derivatives									Liability Derivatives
Cross-currency swaps	Cross-currency swaps		-		(2,929)		-		(2,929)	Cross-currency swaps		-		(8,283)		-		(8,283)
Interest rate locks	Interest rate locks		-		(23)		-		(23)	Interest rate locks		-		(720)		-		(720)
Foreign exchange contracts	Foreign exchange contracts		-		(3)		-		(3)	Foreign exchange contracts		-		(11)		-		(11)

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

Latin America Business Unit Discussion	Latin America Business Unit Discussion												Latin America Business Unit Discussion
Mexico Results
Vrio Results													Vrio Results
													First Quarter
	Second Quarter						Six-Month Period										Percent
	2019		2018		Percent Change		2019		2018		Percent Change		2020		2019		Change
Operating revenues													$	887	$	1,067	(16.9)	%
Service	$	479	$	417	14.9	%	$	921	$	821	12.2	%
Equipment		246		280	(12.1)			455		547	(16.8)
Total Operating Revenues		725		697	4.0			1,376		1,368	0.6

Operating expenses
Operations and support		813		787	3.3			1,538		1,590	(3.3)			783		866	(9.6)
Depreciation and amortization		119		127	(6.3)			250		254	(1.6)			147		169	(13.0)
Total Operating Expenses		932		914	2.0			1,788		1,844	(3.0)			930		1,035	(10.1)
Operating Income (Loss)		(207)		(217)	4.6			(412)		(476)	13.4
Equity in Net Income of Affiliates		-		-	-			-		-	-
Operating Income														(43)		32	-
Equity in Net Income (Loss) of Affiliates														4		-	-
Operating Contribution	$	(207)	$	(217)	4.6	%	$	(412)	$	(476)	13.4	%	$	(39)	$	32	-	%