SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended March 31, 2020~~


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

~~Large accelerated filer~~

~~[X]~~

~~Accelerated filer~~

~~[ ]~~

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated filer

~~[ ]~~☐

Smaller reporting company

~~[ ]~~☐

Emerging growth company

~~[ ]~~☐

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)

Three months ended

March 31,

2020

2019
Operating Revenues

Service
$
38,883

$
40,684
Equipment

3,896

4,143
Total operating revenues

42,779

44,827

Operating Expenses

Cost of revenues

Equipment

4,092

4,502
Broadcast, programming and operations

6,847

7,652
Other cost of revenues (exclusive of depreciation and amortization shown separately below)

8,342

8,585
Selling, general and administrative

8,790

9,649
Depreciation and amortization

7,222

7,206
Total operating expenses

35,293

37,594
Operating Income

7,486

7,233
Other Income (Expense)

Interest expense

(2,018)

(2,141)
Equity in net income (loss) of affiliates

(6)

(7)
Other income (expense) – net

803

286
Total other income (expense)

(1,221)

(1,862)
Income Before Income Taxes

6,265

5,371
Income tax expense

1,302

1,023
Net Income

4,963

4,348
Less: Net Income Attributable to Noncontrolling Interest

(353)

(252)
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
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)

7,187

7,313
Weighted Average Number of Common Shares Outstanding – with Dilution (in millions)

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 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 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 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 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 STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
	Three months ended
	March 31,
		2021		2020
Operating Revenues
Service		$	38,504	$	38,883
Equipment		5,435		3,896
Total operating revenues		43,939		42,779

Operating Expenses
Cost of revenues
Equipment		5,556		4,092
Broadcast, programming and operations		7,538		6,754
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		7,993		8,342
Selling, general and administrative		9,382		8,760
Asset impairments and abandonments		0		123
Depreciation and amortization		5,809		7,222
Total operating expenses		36,278		35,293
Operating Income		7,661		7,486
Other Income (Expense)
Interest expense		(1,870)		(2,018)
Equity in net income (loss) of affiliates		52		(6)
Other income (expense) — net		4,221		803
Total other income (expense)		2,403		(1,221)
Income Before Income Taxes		10,064		6,265
Income tax expense		2,122		1,302
Net Income		7,942		4,963
Less: Net Income Attributable to Noncontrolling Interest		(392)		(353)
Net Income Attributable to AT&T		$	7,550	$	4,610
Less: Preferred Stock Dividends		(50)		(32)
Net Income Attributable to Common Stock		$	7,500	$	4,578
Basic Earnings Per Share Attributable to Common Stock		$	1.04	$	0.63
Diluted Earnings Per Share Attributable to Common Stock		$	1.04	$	0.63
Weighted Average Number of Common Shares Outstanding — Basic (in millions)		7,161		7,187
Weighted Average Number of Common Shares Outstanding — with Dilution (in millions)		7,188		7,214


AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
	Three months ended
	March 31,
		2021		2020
Net income		$	7,942	$	4,963
Other comprehensive income (loss), net of tax:
Foreign currency:
Translation adjustment (includes $(4) and $(51) attributable to noncontrolling interest), net of taxes of $(37) and $(62)		(109)		(1,854)
Securities:
Net unrealized gains (losses), net of taxes of $(18) and $22		(55)		66
Reclassification adjustment included in net income, net of taxes of $(1) and $0		(2)		0
Derivative instruments:
Net unrealized gains (losses), net of taxes of $136 and $(971)		511		(3,657)
Reclassification adjustment included in net income, net of taxes of $6 and $0		24		0
Defined benefit postretirement plans:
Amortization of net prior service credit included in net income, net of taxes of $(165) and $(151)		(504)		(461)
Other comprehensive income (loss)		(135)		(5,906)
Total comprehensive income (loss)		7,807		(943)
Less: Total comprehensive income attributable to noncontrolling interest		(388)		(302)
Total Comprehensive Income (Loss) Attributable to AT&T		$	7,419	$	(1,245)


AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	March 31, 2021		December 31, 2020
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	11,342	$	9,740
Accounts receivable – net of related allowances for credit loss of $954 and $1,221	16,971		20,215
Inventories	3,347		3,695
Prepaid and other current assets	31,094		18,358
Total current assets	62,754		52,008
Noncurrent Inventories and Theatrical Film and Television Production Costs	15,626		14,752
Property, plant and equipment	322,534		327,751
Less: accumulated depreciation and amortization	(197,927)		(200,436)
Property, Plant and Equipment – Net	124,607		127,315
Goodwill	135,168		135,259
Licenses – Net	87,947		93,840
Trademarks and Trade Names – Net	23,043		23,297
Distribution Networks – Net	13,334		13,793
Other Intangible Assets – Net	13,384		15,386
Investments in and Advances to Equity Affiliates	1,805		1,780
Operating Lease Right-Of-Use Assets	24,415		24,714
Deposits on Wireless Licenses	23,406		0
Other Assets	21,496		23,617
Total Assets	$	546,985	$	525,761
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	19,505	$	3,470
Accounts payable and accrued liabilities	48,245		50,051
Advanced billings and customer deposits	5,029		6,176
Dividends payable	3,829		3,741
Total current liabilities	76,608		63,438
Long-Term Debt	160,694		153,775
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes	61,886		60,472
Postemployment benefit obligation	14,723		18,276
Operating lease liabilities	21,766		22,202
Other noncurrent liabilities	28,229		28,358
Total deferred credits and other noncurrent liabilities	126,604		129,308
Stockholders’ Equity
Preferred stock ($1 par value, 10,000,000 authorized):
Series A (48,000 issued and outstanding at March 31, 2021 and December 31, 2020)	0		0
Series B (20,000 issued and outstanding at March 31, 2021 and December 31, 2020)	0		0
Series C (70,000 issued and outstanding at March 31, 2021 and December 31, 2020)	0		0
Common stock ($1 par value, 14,000,000,000 authorized at March 31, 2021 and December 31, 2020: issued 7,620,748,598 at March 31, 2021 and December 31, 2020)	7,621		7,621
Additional paid-in capital	129,856		130,175
Retained earnings	41,154		37,457
Treasury stock (480,892,174 at March 31, 2021 and 494,826,583 at December 31, 2020, at cost)	(17,342)		(17,910)
Accumulated other comprehensive income	4,199		4,330
Noncontrolling interest	17,591		17,567
Total stockholders’ equity	183,079		179,240
Total Liabilities and Stockholders’ Equity	$	546,985	$	525,761


AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions
(Unaudited)
	Three months ended
	March 31,
	2021		2020
Operating Activities
Net income	$	7,942	$	4,963
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,809		7,222
Amortization of film and television costs	2,886		2,269
Undistributed earnings from investments in equity affiliates	(47)		39
Provision for uncollectible accounts	321		780
Deferred income tax expense	1,848		259
Net (gain) loss on investments, net of impairments	(119)		(646)
Pension and postretirement benefit expense (credit)	(974)		(748)
Actuarial (gain) loss on pension and postretirement benefits	(2,844)		0
Asset impairments and abandonments	0		123
Changes in operating assets and liabilities:
Receivables	751		1,695
Other current assets, inventories and theatrical film and television production costs	(3,518)		(3,267)
Accounts payable and other accrued liabilities	(3,060)		(3,884)
Equipment installment receivables and related sales	1,190		535
Deferred customer contract acquisition and fulfillment costs	244		105
Postretirement claims and contributions	(343)		(111)
Other - net	(159)		(468)
Total adjustments	1,985		3,903
Net Cash Provided by Operating Activities	9,927		8,866
Investing Activities
Capital expenditures, including $(61) and $(28) of interest during construction	(4,033)		(4,966)
Acquisitions, net of cash acquired	(22,884)		(100)
Dispositions	51		118
(Purchases), sales and settlements of securities and investments, net	(4)		(6)
Advances to and investments in equity affiliates, net	18		(68)
Net Cash Used in Investing Activities	(26,852)		(5,022)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less	687		1,742
Issuance of other short-term borrowings	15,485		1,390
Issuance of long-term debt	9,097		4,357
Repayment of long-term debt	(902)		(4,422)
Payment of vendor financing	(1,690)		(791)
Issuance of preferred stock	0		3,869
Purchase of treasury stock	(176)		(5,463)
Issuance of treasury stock	63		58
Dividends paid	(3,741)		(3,737)
Other - net	(340)		(3,102)
Net Cash Provided by (Used in) Financing Activities	18,483		(6,099)
Net increase (decrease) in cash and cash equivalents and restricted cash	1,558		(2,255)
Cash and cash equivalents and restricted cash beginning of year	9,870		12,295
Cash and Cash Equivalents and Restricted Cash End of Period	$	11,428	$	10,040


AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts
(Unaudited)
	Three months ended
		March 31, 2021	March 31, 2020
			Shares	Amount		Shares	Amount
Preferred Stock - Series A
Balance at beginning of period			0	$	0	0	$	0
Issuance of stock			0	0		0	0
Balance at end of period			0	$	0	0	$	0
Preferred Stock - Series B
Balance at beginning of period			0	$	0	0	$	0
Issuance of stock			0	0		0	0
Balance at end of period			0	$	0	0	$	0
Preferred Stock - Series C
Balance at beginning of period			0	$	0	0	$	0
Issuance of stock			0	0		0	0
Balance at end of period			0	$	0	0	$	0
Common Stock
Balance at beginning of period			7,621	$	7,621	7,621	$	7,621
Issuance of stock			0	0		0	0
Balance at end of period			7,621	$	7,621	7,621	$	7,621
Additional Paid-In Capital
Balance at beginning of period				$	130,175		$	126,279
Repurchase and acquisition of common stock				0			67
Issuance of preferred stock				0			3,869
Issuance of treasury stock				(70)			(47)
Share-based payments				(249)			(202)

Balance at end of period				$	129,856		$	129,966
Retained Earnings
Balance at beginning of period				$	37,457		$	57,936
Cumulative effect of accounting change and other adjustments				0			(293)
Adjusted beginning balance				37,457			57,643
Net income attributable to AT&T				7,550			4,610
Preferred stock dividends				(117)			(32)
Common stock dividends ($0.52 and $0.52 per share)				(3,736)			(3,687)
Balance at end of period				$	41,154		$	58,534


AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued
Dollars and shares in millions except per share amounts
(Unaudited)
	Three months ended
		March 31, 2021	March 31, 2020
			Shares	Amount		Shares	Amount
Treasury Stock
Balance at beginning of period			(495)	$	(17,910)	(366)	$	(13,085)
Repurchase and acquisition of common stock			(6)	(176)		(148)	(5,547)
Reissuance of treasury stock			20	744		18	675
Balance at end of period			(481)	$	(17,342)	(496)	$	(17,957)
Accumulated Other Comprehensive Income Attributable to AT&T, net of tax
Balance at beginning of period				$	4,330		$	5,470
Other comprehensive income attributable to AT&T				(131)			(5,855)
Balance at end of period				$	4,199		$	(385)
Noncontrolling Interest
Balance at beginning of period				$	17,567		$	17,713
Cumulative effect of accounting change and other adjustments				0			(7)
Adjusted beginning balance				17,567			17,706
Net income attributable to noncontrolling interest				392			353
Issuance and acquisition by noncontrolling owners				0			1
Distributions				(364)			(339)
Translation adjustments attributable to noncontrolling interest, net of taxes				(4)			(51)
Balance at end of period				$	17,591		$	17,670
Total Stockholders' Equity at beginning of period				$	179,240		$	201,934
Total Stockholders' Equity at end of period				$	183,079		$	195,449

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Dollars in millions except per share amounts

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of PresentationThroughout this document, AT&T Inc. is referred to as “we,” “AT&T” or the “Company.” The consolidated financial statements include the accounts of the Company and subsidiaries and affiliates which we control. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. 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.

~~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

Three months ended
March 31,
2021 2020
Numerators
Numerator for basic earnings per share:
Net Income Attributable to Common Stock $ 7,500 $ 4,578
Dilutive potential common shares:
Share-based payment 6 6
Numerator for diluted earnings per share $ 7,506 $ 4,584
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding 7,161 7,187
Dilutive potential common shares:
Share-based payment (in shares) 27 27
Denominator for diluted earnings per share 7,188 7,214

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 3. OTHER COMPREHENSIVE INCOME


	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 (Loss)
Balance as of December 31, 2020	$	(3,926)		$	111		$	(779)		$	8,924		$	4,330
Other comprehensive income (loss) before reclassifications	(105)			(55)			511			0			351
Amounts reclassified from accumulated OCI	0		1	(2)		1	24		2	(504)		3	(482)
Net other comprehensive income (loss)	(105)			(57)			535			(504)			(131)
Balance as of March 31, 2021	$	(4,031)		$	54		$	(244)		$	8,420		$	4,199

	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 (Loss)
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)			0			(5,394)
Amounts reclassified from accumulated OCI	0		1	0		1	0		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)

(Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income.

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).

2(Gains) losses are primarily included in “Interest expense” in the consolidated statements of income (see Note 7).

3The 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

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

~~Dollars in millions except per share amounts~~

give effect to depreciation and amortization expenses incurred in operating contribution nor is it burdened by 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.

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Communications segment results were recast to remove the Video and Government Solutions held-for-sale businesses, instead reporting those results in Corporate and Other, consistent with our historical practice. Additionally, we refined the allocation of shared infrastructure and deferred customer acquisition costs between Consumer Wireline and Video.

WarnerMedia segment results reflect our operation of WarnerMedia as one integrated organization.

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

•Mobility provides nationwide wireless service and equipment.

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

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

•Consumer Wireline provides internet, including broadband fiber, and legacy telephony voice communication services to residential customers.

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. ~~This segment contains~~WarnerMedia content is distributed through Basic Networks, Direct-to-Consumer (DTC) or Theatrical, TV Content and Games Licensing. Segment results also include Xandr advertising, Otter Media Holdings and eliminations of intercompany transactions within WarnerMedia.

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

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

•Mexicoprovides wireless service and equipment to customers in Mexico.

~~The~~ ~~Xandr segment~~ provides advertising 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.

Corporate and Other reconciles our segment results to consolidated operating income and income before income taxes, and 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 income (expense) – net.”

•Video, whichconsists of our held-for-sale video operations, which provides video, including over-the-top (OTT) services and also sells multiplatform advertising services.

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

•Certain significant items, which includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) ~~losses resulting from abandonment or impairment of assets~~asset impairments and abandonments, 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~~channel distribution between WarnerMedia and ~~Communications,~~Video, and (2) includes adjustments for our reporting of the advertising business.

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

AT&T INC.

MARCH 31, ~~2020~~2021

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


For the three months ended March 31, 2021
	Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	19,034	$	11,018	$	8,016	$	2,014	$	6,002	$	0	$	6,002
Business Wireline	6,046		3,710		2,336		1,278		1,058		0		1,058
Consumer Wireline	3,098		2,031		1,067		762		305		0		305
Total Communications	28,178		16,759		11,419		4,054		7,365		0		7,365





WarnerMedia	8,526		6,403		2,123		163		1,960		70		2,030
Latin America
Vrio	743		661		82		117		(35)		(4)		(39)
Mexico	631		620		11		145		(134)		0		(134)
Total Latin America	1,374		1,281		93		262		(169)		(4)		(173)
Segment Total	38,078		24,443		13,635		4,479		9,156		$	66	$	9,222
Corporate and Other
Corporate1	426		1,213		(787)		35		(822)
Video	6,725		5,660		1,065		164		901
Acquisition-related items	0		37		(37)		1,131		(1,168)
Certain significant items	0		57		(57)		0		(57)
Eliminations and consolidations	(1,290)		(941)		(349)		0		(349)
AT&T Inc.	$	43,939	$	30,469	$	13,470	$	5,809	$	7,661
1Operations and Support Expenses include $669 for the reclassification of prior service credit amortization.

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended March 31, 2019

Equity in Net

Operations

Depreciation

Operating

Income

and Support

and

Income

(Loss)

Segment

Revenues

Expenses

EBITDA

Amortization

(Loss)

Affiliates

Contribution
Communications

Mobility
$
17,363

$
10,041

$
7,322

$
2,013

$
5,309

$
-

$
5,309
Entertainment Group

11,328

8,527

2,801

1,323

1,478

-

1,478
Business Wireline

6,478

4,032

2,446

1,222

1,224

-

1,224
Total Communications

35,169

22,600

12,569

4,558

8,011

-

8,011
WarnerMedia

Turner

3,443

2,136

1,307

60

1,247

25

1,272
Home Box Office

1,510

921

589

22

567

15

582
Warner Bros.

3,518

2,919

599

52

547

6

553
Other

(92)

17

(109)

9

(118)

21

(97)
Total WarnerMedia

8,379

5,993

2,386

143

2,243

67

2,310
Latin America

Vrio

1,067

866

201

169

32

-

32
Mexico

651

725

(74)

131

(205)

-

(205)
Total Latin America

1,718

1,591

127

300

(173)

-

(173)
Xandr

426

160

266

13

253

-

253
Segment Total

45,692

30,344

15,348

5,014

10,334

$
67

$
10,401
Corporate and Other

Corporate

433

661

(228)

204

(432)

Acquisition-related items

(42)

73

(115)

1,988

(2,103)

Certain significant items

-

248

(248)

-

(248)

Eliminations and consolidations

(1,256)

(938)

(318)

-

(318)

AT&T Inc.
$
44,827

$
30,388

$
14,439

$
7,206

$
7,233

For the three months ended March 31, 2020
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net
Income (Loss) of
Affiliates Segment Contribution
Communications
Mobility $ 17,402 $ 9,569 $ 7,833 $ 2,045 $ 5,788 $ 0 $ 5,788
Business Wireline 6,266 3,887 2,379 1,286 1,093 0 1,093
Consumer Wireline 3,111 1,879 1,232 712 520 0 520
Total Communications 26,779 15,335 11,444 4,043 7,401 0 7,401
WarnerMedia 7,765 5,605 2,160 161 1,999 15 2,014
Latin America
Vrio 887 783 104 147 (43) 4 (39)
Mexico 703 714 (11) 134 (145) 0 (145)
Total Latin America 1,590 1,497 93 281 (188) 4 (184)
Segment Total 36,134 22,437 13,697 4,485 9,212 $ 19 $ 9,231
Corporate and Other
Corporate1
534 1,012 (478) 90 (568)
Video 7,407 6,020 1,387 591 796
Acquisition-related items 0 182 (182) 2,056 (2,238)
Certain significant items 0 (658) 658 0 658
Eliminations and consolidations (1,296) (922) (374) 0 (374)
AT&T Inc. $ 42,779 $ 28,071 $ 14,708 $ 7,222 $ 7,486
1Operations and Support Expenses include $612 for the reclassification of prior service credit amortization.

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	Three months ended March 31,
		2021		2020
Communications		$	7,365	$	7,401
WarnerMedia		2,030		2,014
Latin America		(173)		(184)
Segment Contribution		9,222		9,231
Reconciling Items:
Corporate and Other		(822)		(568)
Video		901		796
Merger costs		(37)		(182)
Amortization of intangibles acquired		(1,131)		(2,056)
Asset impairments and abandonments		0		(123)
Gain on spectrum transaction1		0		900
Employee separation costs and benefit-related losses		(57)		(119)
Segment equity in net income of affiliates		(66)		(19)
Eliminations and consolidations		(349)		(374)
AT&T Operating Income		7,661		7,486
Interest Expense		1,870		2,018
Equity in net income (loss) of affiliates		52		(6)
Other income (expense) - net		4,221		803
Income Before Income Taxes		$	10,064	$	6,265

1Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income.

Three months ended

March 31,

2020

2019
Communications
$
8,203

$
8,011
WarnerMedia

1,714

2,310
Latin America

(184)

(173)
Xandr

299

253
Segment Contribution

10,032

10,401
Reconciling Items:

Corporate and Other

(573)

(432)
Merger and integration items

(182)

(115)
Amortization of intangibles acquired

(2,056)

(1,988)
Impairments

(123)

-
Gain on spectrum transaction¹

900

-
Employee separation costs and benefit-related losses

(119)

(248)
Segment equity in net income (loss) of affiliates

(19)

(67)
Eliminations and consolidations

(374)

(318)
AT&T Operating Income

7,486

7,233
Interest Expense

2,018

2,141
Equity in net income (loss) of affiliates

(6)

(7)
Other income (expense) - net

803

286
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.

Intersegment Reconciliation
Three months ended
March 31,
2021 2020
Intersegment Revenues
Communications $ 3 $ 2
WarnerMedia 838 817
Latin America 0 0
Total Intersegment Revenues 841 819
Consolidations 449 477
Eliminations and consolidations $ 1,290 $ 1,296

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	March 31, 2021		December 31, 2020
Assets
Communications1	$	506,168	$	506,102
WarnerMedia	148,588		148,037
Latin America	15,522		15,811
Corporate and eliminations1	(123,293)		(144,189)
Total	$	546,985	$	525,761
1Amounts above, including December 31, 2020, have been updated to reflect the classification of our Video business as held-for-sale, which included the recast of historical results to remove Video from our Communications segment and instead report in Corporate and Other (see Note 8).

NOTE 5. REVENUE RECOGNITION

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

unit, prior period amounts have been recast to conform to the current period presentation with our segment updates (see Note 4).


For the three months ended March 31, 2021
	Communications
	Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	$	13,965	$	0	$	0	$	0	$	439	$	10	$	0	$	14,414
Video service	0		0		0		0		743		6,295		0		7,038
Business service	0		5,872		0		0		0		70		0		5,942
IP Broadband	0		0		2,205		0		0		0		0		2,205
Subscription	0		0		0		3,830		0		0		0		3,010
DTC (HBO Max)1	0		0		0		0		0		0		(235)
Other2	0		0		0		0		0		0		(585)
Content	0		0		0		3,420		0		0		0		2,777
DTC (HBO Max)3	0		0		0		(331)		0		0		0
Other3	0		0		0		(312)		0		0		0
Advertising	83		0		0		1,750		0		388		(388)		1,833
Legacy voice and data	0		0		519		0		0		123		0		642
Other	0		0		332		169		0		224		(82)		643
Total Service	$	14,048	$	5,872	$	3,056	$	8,526	$	1,182	$	7,110	$	(1,290)	$	38,504
Equipment	4,986		174		42		0		192		41		0		5,435
Total	$	19,034	$	6,046	$	3,098	$	8,526	$	1,374	$	7,151	$	(1,290)	$	43,939
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($145 with Mobility and $90 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-Verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended March 31, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
13,562

$
-

$
-

$
-

$
-

$
67

$
-

$
3,734

$
17,363
Entertainment Group

-

2,070

683

7,724

-

350

501

-

11,328
Business Wireline

-

3,172

2,397

-

-

-

750

159

6,478
WarnerMedia

Turner

-

-

-

1,965

135

1,261

82

-

3,443
Home Box Office

-

-

-

1,334

173

-

3

-

1,510
Warner Bros.

-

-

-

21

3,332

10

155

-

3,518
Eliminations and Other

-

-

-

49

(152)

8

3

-

(92)
Latin America

Vrio

-

-

-

1,067

-

-

-

-

1,067
Mexico

442

-

-

-

-

-

-

209

651
Xandr

-

-

-

-

-

426

-

-

426
Corporate and Other

163

13

7

-

-

-

167

41

391
Eliminations and

consolidations

-

-

-

-

(837)

(350)

(69)

-

(1,256)
Total Operating Revenues
$
14,167

$
5,255

$
3,087

$
12,160

$
2,651

$
1,772

$
1,592

$
4,143

$
44,827

For the three months ended March 31, 2020
Communications
Mobility Business Wireline Consumer Wireline WarnerMedia Latin America Corporate & Other Elim. Total
Wireless service $ 13,892 $ 0 $ 0 $ 0 $ 467 $ 116 $ 0 $ 14,475
Video service 0 0 0 0 887 6,984 0 7,871
Business service 0 6,091 0 0 0 77 0 6,168
IP Broadband 0 0 2,109 0 0 0 0 2,109
Subscription 0 0 0 3,401 0 0 0 2,607
   DTC (HBO Max) 0 0 0 0 0 0 0
   Other1
0 0 0 0 0 0 (794)
Content 0 0 0 3,303 0 0 0 2,633
   DTC (HBO Max)2
0 0 0 (401) 0 0 0
   Other2
0 0 0 (269) 0 0 0
Advertising 76 0 0 1,477 0 413 (413) 1,553
Legacy voice and data 0 0 581 0 0 134 0 715
Other 0 0 419 254 0 168 (89) 752
Total Service $ 13,968 $ 6,091 $ 3,109 $ 7,765 $ 1,354 $ 7,892 $ (1,296) $ 38,883
Equipment 3,434 175 2 0 236 49 0 3,896
Total $ 17,402 $ 6,266 $ 3,111 $ 7,765 $ 1,590 $ 7,941 $ (1,296) $ 42,779
1Represents intercompany video distribution arrangements primarily to DIRECTV/U-Verse from WarnerMedia.
2Represents intercompany transactions in the WarnerMedia segment.

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

~~Dollars in millions except per share amounts~~

Deferred Customer Contract Acquisition and Fulfillment Costs


	March 31,		December 31,
Consolidated Balance Sheets	2021		2020
Deferred Acquisition Costs
Prepaid and other current assets	$	3,788	$	3,087
Other Assets	2,693		3,198
Total deferred customer contract acquisition costs	$	6,481	$	6,285
Deferred Fulfillment Costs
Prepaid and other current assets	$	4,945	$	4,118
Other Assets	4,367		5,634
Total deferred customer contract fulfillment costs	$	9,312	$	9,752

AT&T INC.

MARCH 31, 2021

March 31,

December 31,
Consolidated Balance Sheets

2020

2019
Deferred Acquisition Costs

Other current assets
$
2,592

$
2,462
Other Assets

2,997

2,991
Total deferred customer contract acquisition costs

5,589

5,453

Deferred Fulfillment Costs

Other current assets

4,438

4,519
Other Assets

6,279

6,439
Total deferred customer contract fulfillment costs
$
10,717

$
10,958

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	March 31,		March 31,
Consolidated Statements of Income	2021		2020
Deferred acquisition cost amortization	$	764	$	636
Deferred fulfillment cost amortization	1,290		1,305

March 31,

March 31,
Consolidated Statements of Income

2020

2019
Deferred acquisition cost amortization
$
636

$
547
Deferred fulfillment cost amortization

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.

March 31, December 31,
Consolidated Balance Sheets 2021 2020
Contract asset $ 3,554 $ 3,501
Contract liability 5,517 6,879

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

~~Dollars in millions except per share amounts~~

Remaining Performance Obligations

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 6. PENSION AND POSTRETIREMENT BENEFITS


	Three months ended
	March 31,
		2021		2020
Pension cost:
Service cost - benefits earned during the period		$	254	$	257
Interest cost on projected benefit obligation		291		422
Expected return on assets		(877)		(889)
Amortization of prior service credit		(36)		(28)
Actuarial (gain) loss		(2,844)		0
Net pension (credit) cost		$	(3,212)	$	(238)

Postretirement cost:
Service cost – benefits earned during the period		$	11	$	13
Interest cost on accumulated postretirement benefit obligation		53		104
Expected return on assets		(38)		(44)
Amortization of prior service credit		(634)		(582)
Net postretirement (credit) cost		$	(608)	$	(509)
Combined net pension and postretirement (credit) cost		$	(3,820)	$	(747)

Three months ended

March 31,

2020

2019
Pension cost:

Service cost – benefits earned during the period
$
257

$
240
Interest cost on projected benefit obligation

422

549
Expected return on assets

(889)

(851)
Amortization of prior service credit

(28)

(33)
Actuarial (gain) loss

-

432
Net pension (credit) cost
$
(238)

$
337

Postretirement cost:

Service cost – benefits earned during the period
$
13

$
18
Interest cost on accumulated postretirement benefit obligation

104

186
Expected return on assets

(44)

(56)
Amortization of prior service credit

(582)

(426)
Net postretirement (credit) cost
$
(509)

$
(278)

Combined net pension and postretirement (credit) cost
$
(747)

$
59

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE

~~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


	March 31, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures1	$	171,194	$	192,420	$	155,209	$	187,224
Commercial paper	7,078		7,078		0		0

Investment securities2	3,208		3,208		3,249		3,249
1Includes credit agreement borrowings. Amounts at March 31, 2021 exclude $205 associated with Video business that was classified as held-for-sale (see Note 8).
2Excludes investments accounted for under the equity method.

March 31, 2020

December 31, 2019

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value
Notes and debentures¹
$
159,386

$
175,902

$
161,109

$
182,124
Commercial paper

3,144

3,144

-

-
Bank borrowings

-

-

4

4
Investment securities²

3,591

3,591

3,723

3,723
¹
Includes credit agreement borrowings.
²
Excludes investments accounted for under the equity method.

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

March 31, 2021
Level 1 Level 2 Level 3 Total
Equity Securities
Domestic equities $ 1,060 $ 0 $ 0 $ 1,060
International equities 198 0 0 198
Fixed income equities 227 0 0 227
Available-for-Sale Debt Securities 0 1,404 0 1,404
Asset Derivatives
Cross-currency swaps 0 1,461 0 1,461
Foreign exchange contracts 0 8 0 8
Liability Derivatives
Cross-currency swaps 0 (2,038) 0 (2,038)
Foreign exchange contracts 0 (7) 0 (7)


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Equity Securities
Domestic equities	$	1,010	$	0	$	0	$	1,010
International equities	180		0		0		180
Fixed income equities	236		0		0		236
Available-for-Sale Debt Securities	0		1,479		0		1,479
Asset Derivatives

Cross-currency swaps	0		1,721		0		1,721

Foreign exchange contracts	0		6		0		6
Liability Derivatives

Cross-currency swaps	0		(1,814)		0		(1,814)

Foreign exchange contracts	0		(9)		0		(9)

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

~~Dollars in millions except per share amounts~~

December 31, 2019

Level 1

Level 2

Level 3

Total
Equity Securities

Domestic equities
$
844

$
-

$
-

$
844
International equities

183

-

-

183
Fixed income equities

229

-

-

229
Available-for-Sale Debt Securities

-

1,444

-

1,444
Asset Derivatives

Interest rate swaps

-

2

-

2
Cross-currency swaps

-

172

-

172
Interest rate locks

-

11

-

11
Foreign exchange contracts

-

89

-

89
Liability Derivatives

Cross-currency swaps

-

(3,187)

-

(3,187)
Interest rate locks

-

(95)

-

(95)

Investment Securities

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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


	Three months ended
	March 31,
		2021		2020
Total gains (losses) recognized on equity securities		$	55	$	(203)
Gains (Losses) recognized on equity securities sold		0		(33)
Unrealized gains (losses) recognized on equity securities held at end of period		$	55	$	(170)

Three months ended

March 31,

2020

2019
Total gains (losses) recognized on equity securities
$
(203)

$
160
Gains (losses) recognized on equity securities sold

(33)

18
Unrealized gains (losses) recognized on equity securities held at end of period

(170)

142

Derivative Financial Instruments

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

~~Dollars in millions except per share amounts~~

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

Cash Flow Hedging We designate most of 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.

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Net Investment Hedging We have designated ~~€1,364~~€1,433 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated OCI, net on the consolidated balance ~~sheet.~~sheets. Net gains on net investment hedges recognized in accumulated OCI ~~for 2020~~in the first quarter were ~~$25.~~$70.

Collateral and Credit-RiskContingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At March 31, ~~2020,~~2021, we had posted collateral of ~~$2,809~~$47 (a deposit asset) and held ~~0 collateral.~~collateral of $781 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded ~~one rating level~~two ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s before the ~~end of~~final collateral exchange in March, we would ~~not~~ have been required to post ~~any~~ additional collateral. of $48. If AT&T’s credit rating had been downgraded ~~four rating~~three ratings levels by Fitch Ratings, two levels by S&P, and two levels by Moody’s, we would have been required to post additional collateral of $~~6,149.~~$1,160. If DIRECTV Holdings LLC’s credit rating had been downgraded below BBB- ~~(S&P),~~by S&P, we would have been required to post additional collateral of ~~$200.~~$36. At December 31, ~~2019,~~2020, we had posted collateral of ~~$204~~$53 (a deposit asset) and held collateral of ~~$44~~$694 (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~~


	March 31,		December 31,
	2021		2020

Cross-currency swaps	$	42,186	$	40,745

Foreign exchange contracts	228		90
Total	$	42,414	$	40,835

March 31,

December 31,
2020

2019
Interest rate swaps
$
853

$
853
Cross-currency swaps

42,325

42,325
Interest rate locks

3,500

3,500
Foreign exchange contracts

106

269
Total
$
46,784

$
46,947


Effect of Derivatives on the Consolidated Statements of Income
	Three months ended
	March 31,
Fair Value Hedging Relationships		2021		2020
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps		$	(1)	$	10
Gain (Loss) on long-term debt		1		(10)
Cross-currency swaps:
Gain (Loss) on cross-currency swaps		(48)		0
Gain (Loss) on long-term debt		48		0
Gain (Loss) recognized in accumulated OCI		(1)		0

Effect of Derivatives on the Consolidated Statements of Income

Three months ended

March 31,
Fair Value Hedging Relationships
2020

2019
Interest rate swaps (Interest expense):

Gain (loss) on interest rate swaps
$
10

$
24
Gain (loss) on long-term debt

(10)

(24)

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	Three months ended
	March 31,
Cash Flow Hedging Relationships		2021		2020
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI		$	644	$	(3,979)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI		4		(13)
Other income (expense) - net reclassified from accumulated OCI into income		(5)		16
Interest rate locks:
Gain (Loss) recognized in accumulated OCI		0		(636)
Interest income (expense) reclassified from accumulated OCI into income		(25)		(16)

NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS

Spectrum Auction On February 24, 2021, the Federal Communications Commission (FCC) announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of a total of 80 MHz nationwide, including 40 MHz in Phase I. We provided to the FCC an upfront deposit of $550 in 2020 and cash payments totaling $22,856 in the first quarter of 2021, for a total of $23,406 to date. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum and $2,112 upon clearing of Phase II spectrum. Additionally, we will be responsible for approximately $1,000 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators. Cash paid, including deposits and refunds, for spectrum is included in “Acquisitions, net of cash acquired” on our consolidated statements of cash flows. Funding for the purchase price of the spectrum included a combination of cash on hand and short-term investments, as well as short- and long-term debt.

We expect the FCC to begin granting the licenses in the second half of 2021 through 2023. The amounts deposited toward the acquisition of the licenses are reported as “Deposits on Wireless Licenses” on our consolidated balance sheet as of March 31, 2021. Interest incurred to finance this spectrum acquisition is capitalized until the licenses are granted and the activities required to ready the spectrum for use are complete.

Video Business On February 25, 2021, we signed an agreement with TPG Capital (TPG) to form a new company named DIRECTV (New DTV), which will be jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain decisions. Under the agreement, we will contribute our Video business unit to New DTV for $4,250 of junior preferred units, an additional distribution preference of $4,200 and a 70% economic interest ~~expense.~~in common units. We expect to receive $7,800 from New DTV at closing ($7,600 in cash and approximately $200 of transferred DIRECTV debt). TPG will contribute approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. The remaining $5,800 will be funded by debt issued by New DTV. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,500 over the remaining period of the contract.

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)

The transaction is expected to close in the second half of 2021, pending customary closing conditions. The total of $7,600 of proceeds from the transaction are expected to reduce our total and net debt positions.

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

In the first quarter of 2021, we applied held-for-sale accounting treatment to the assets and liabilities of the U.S. video business, and, accordingly, include the assets in “Prepaid and other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet. The held-for-sale classification also resulted in ceasing depreciation and amortization on the designated assets.

Assets and liabilities of the Video operations included the following as of March 31, 2021:


Assets held-for-sale:
Current assets	$	3,776
Property, plant and equipment - net	2,410
Licenses, net	5,798
Other intangible assets, net	1,633
Other assets	1,948
Total assets	$	15,565

Liabilities related to assets held-for-sale:
Current liabilities	$	4,022
Long-term debt	205
Other noncurrent liabilities	351
Total liabilities	$	4,578

NOTE 8.9. SALES OF RECEIVABLES

~~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.

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	March 31, 2021				December 31, 2020
	Equipment				Equipment
	Installment		Revolving		Installment		Revolving
Gross receivables:	$	3,857	$	3,718	$	5,565	$	3,909
Balance sheet classification
Accounts receivable
Notes receivable	1,846		0		2,716		0
Trade receivables	452		3,543		554		3,715
Other Assets
Noncurrent notes and trade receivables	1,559		175		2,295		194

Outstanding portfolio of receivables derecognized from our consolidated balance sheets	9,448		5,755		7,827		5,300
Cash proceeds received, net of remittances1	7,176		5,755		5,646		5,300
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

March 31, 2020

December 31, 2019

Equipment

Equipment

Installment

Revolving

Installment

Revolving
Gross receivables:
$
3,640

$
4,057

$
4,576

$
3,324
Balance sheet classification

Accounts receivable

Notes receivable

1,979

-

2,467

-
Trade receivables

466

3,733

477

2,809
Other Assets

Noncurrent notes and trade receivables

1,195

324

1,632

515

Outstanding portfolio of receivables derecognized from

our consolidated balance sheets

9,690

5,300

9,713

4,300
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.

Equipment Installment Receivables Program


	Three months ended
	March 31,
		2021		2020
Gross receivables sold		$	3,935	$	2,367
Net receivables sold1		3,826		2,273
Cash proceeds received		3,519		1,950
Deferred purchase price recorded		414		353
Guarantee obligation recorded		146		44
1Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

Three months ended March 31,

2020

2019
Gross receivables sold
$
2,367

$
2,701
Net receivables sold¹

2,273

2,546
Cash proceeds received

1,950

2,275
Deferred purchase price recorded

353

309
Guarantee obligation recorded

44

101
¹
Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

~~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).

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	Three months ended
	March 31,
		2021		2020
Fair value of repurchased receivables		$	273	$	288
Carrying value of deferred purchase price		253		277
Gain on repurchases1		$	20	$	11
1These gains 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.

Revolving Receivables Program

~~In 2019, we entered into~~


	Three months ended
	March 31,
		2021		2020
Gross receivables sold/cash proceeds received1		$	5,204	$	4,222
Collections reinvested under revolving agreement		4,504		3,222
Collections not reinvested		245		0
Net cash proceeds received (remitted)		$	455	$	1,000

Net receivables sold2		$	5,125	$	4,138
Obligations recorded (reversed)		142		126
1Includes initial sales of receivables of $700 and $1,000 for the three months ended March 31, 2021 and 2020, respectively.
2Receivables net of allowance, return and incentive reserves and imputed interest.

AT&T INC.

MARCH 31, 2021

Three months ended March 31,

2020

2019
Gross receivables sold/cash proceeds received¹
$
4,222

$
1,400
Collections reinvested under revolving agreement

3,222

-
Net cash proceeds received (remitted)
$
1,000

$
1,400

Net receivables sold²
$
4,138

$
1,363
Obligations recorded

126

52
¹
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.

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~~


	Three months ended
	March 31,
	2021		2020
Operating lease cost	$	1,458	$	1,377

Finance lease cost:
Amortization of right-of-use assets	$	69	$	67
Interest on lease obligation	39		41
Total finance lease cost	$	108	$	108

Three months ended March 31,

2020

2019
Operating lease cost
$
1,377

$
1,242

Finance lease cost:

Amortization of right-of-use assets
$
67

$
66
Interest on lease obligation

41

42
Total finance lease cost
$
108

$
108


	Three months ended
	March 31,
	2021		2020
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations:
Operating cash flows for operating leases	$	1,254	$	1,217
Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease obligations	1,050		1,013

AT&T INC.

MARCH 31, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


	March 31, 2021			December 31, 2020
Operating Leases
Operating lease right-of-use assets	$	24,415		$	24,714

Accounts payable and accrued liabilities	$	3,564		$	3,537
Operating lease obligation	21,766			22,202
Total operating lease obligation	$	25,330		$	25,739
Finance Leases
Property, plant and equipment, at cost	$	3,414		$	3,586
Accumulated depreciation and amortization	(1,308)			(1,361)
Property, plant and equipment, net	$	2,106		$	2,225

Current portion of long-term debt	$	180		$	189
Long-term debt	1,747			1,847
Total finance lease obligation	$	1,927		$	2,036

	March 31,
	2021			2020
Weighted-Average Remaining Lease Term (years)
Operating leases	8.4			8.4
Finance leases	9.8			10.7

Weighted-Average Discount Rate
Operating leases	4.0		%	4.2		%
Finance leases	8.0		%	8.4		%


At March 31, 2021	Operating		Finance
	Leases		Leases
Remainder of 2021	$	3,631	$	242
2022	4,647		314
2023	4,212		291
2024	3,671		272
2025	3,015		269
Thereafter	11,668		1,587
Total lease payments	30,844		2,975
Less: imputed interest	(5,514)		(1,048)
Total	$	25,330	$	1,927

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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

At March 31, 2020
Operating

Finance

Leases

Leases
Remainder of 2020
$
3,519

$
275
2021

4,391

275
2022

4,068

258
2023

3,663

232
2024

3,140

214
Thereafter

11,788

1,509
Total lease payments

30,569

2,763
Less imputed interest

(5,542)

(1,024)
Total
$
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


	March 31,				December 31,
	2021		2020		2020		2019
Cash and cash equivalents	$	11,342	$	9,955	$	9,740	$	12,130
Restricted cash in Prepaid and other current assets	2		8		9		69
Restricted cash in Other Assets	84		77		121		96
Cash and Cash Equivalents and Restricted Cash	$	11,428	$	10,040	$	9,870	$	12,295


Consolidated Statements of Cash Flows	Three months ended
	March 31,
Cash paid (received) during the period for:	2021		2020
Interest	$	2,134	$	2,376
Income taxes, net of refunds	5		(354)
Spectrum acquisitions	22,876		97

Noncash Investing and Financing Activities In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid. For the three months ended March 31, 2021 and 2020, we recorded vendor financing commitments related to capital investments of approximately $998 and $449.

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

Total vendor financing payables included in our March 31, 2021 consolidated balance sheet were approximately $3,552, with $2,883 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

AT&T INC.

MARCH 31, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Debt Transactions At March 31, 2021, our debt obligations totaled $180,199. Our debt activity during the three months ended March 31, 2021 primarily consisted of the following:

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


Net commercial paper borrowings	$	7,072
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes	$	6,000
Initial average rate of 1.27%
Euro denominated global notes	1,461
Rate of 0.00%
2021 Syndicated Term Loan	7,350
BAML Bilateral Term Loan	2,000
Private financing	750
Other	636
Debt Issuances	$	18,197

Repayments:
Private financing	$	(649)
Other	(253)
Repayments of long-term debt	$	(902)

~~Financing Activities~~Includes credit agreement borrowings.

AT&T INC.

MARCH 31, ~~2020~~2021

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

First Quarter

Percent

2020

2019
Change

Operating Revenues

Communications
$
34,249

$
35,169
(2.6)
%
WarnerMedia

7,359

8,379
(12.2)

Latin America

1,590

1,718
(7.5)

Xandr

489

426
14.8

Corporate and other

388

391
(0.8)

Eliminations and consolidation

(1,296)

(1,256)
(3.2)

AT&T Operating Revenues

42,779

44,827
(4.6)

Operating Contribution

Communications

8,203

8,011
2.4

WarnerMedia

1,714

2,310
(25.8)

Latin America

(184)

(173)
(6.4)

Xandr

299

253
18.2

Segment Operating Contribution
$
10,032

$
10,401
(3.5)
%

WarnerMedia segment results reflect our operation of WarnerMedia as one integrated organization.


	First Quarter
						Percent
		2021		2020		Change
Operating Revenues
Communications		$	28,178	$	26,779	5.2	%
WarnerMedia		8,526		7,765		9.8
Latin America		1,374		1,590		(13.6)
Corporate		426		534		(20.2)
Video		6,725		7,407		(9.2)
Eliminations and consolidation		(1,290)		(1,296)		0.5
AT&T Operating Revenues		43,939		42,779		2.7

Operating Contribution
Communications		7,365		7,401		(0.5)
WarnerMedia		2,030		2,014		0.8
Latin America		(173)		(184)		6.0
Segment Operating Contribution		$	9,222	$	9,231	(0.1)	%

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

•Mobility provides nationwide wireless service and equipment.

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

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

•Consumer Wireline provides internet, including broadband fiber, and legacy telephony voice communications services to residential customers.

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. WarnerMedia content is distributed through Basic Networks, Direct-to-Consumer (DTC) or Theatrical, TV Content and Games Licensing. Segment results also include Xandr advertising, Otter Media Holdings and eliminations of intercompany transactions within WarnerMedia.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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

~~The~~ ~~WarnerMedia segment~~ ~~develops, produces and distributes feature films, television, gaming and other content over various physical and digital formats. This segment contains the following business units:~~

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

~~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:

•Vrioprovides 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~~ ~~Xandrsegment~~ ~~provides advertising 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 ResultsOur financial results are summarized in the ~~following discussions.~~discussions that follow. Additional analysis is discussed in our “Segment Results” section. Certain prior period amounts have been reclassified to conform to the current period’s presentation.


	First Quarter
						Percent
		2021		2020		Change
Operating Revenues
Service		$	38,504	$	38,883	(1.0)	%
Equipment		5,435		3,896		39.5
Total Operating Revenues		43,939		42,779		2.7

Operating expenses
Operations and support		30,469		28,071		8.5
Depreciation and amortization		5,809		7,222		(19.6)
Total Operating Expenses		36,278		35,293		2.8
Operating Income		7,661		7,486		2.3
Interest expense		1,870		2,018		(7.3)
Equity in net income (loss) of affiliates		52		(6)		—
Other income (expense) - net		4,221		803		—
Income Before Income Taxes		10,064		6,265		60.6
Net Income		7,942		4,963		60.0
Net Income Attributable to AT&T		7,550		4,610		63.8
Net Income Attributable to Common Stock		$	7,500	$	4,578	63.8	%

First Quarter

Percent

2020

2019
Change

Operating Revenues

Service
$
38,883

$
40,684
(4.4)
%
Equipment

3,896

4,143
(6.0)

Total Operating Revenues

42,779

44,827
(4.6)

Operating expenses

Operations and support

28,071

30,388
(7.6)

Depreciation and amortization

7,222

7,206
0.2

Total Operating Expenses

35,293

37,594
(6.1)

Operating Income

7,486

7,233
3.5

Interest expense

2,018

2,141
(5.7)

Equity in net income (loss) of affiliates

(6)

(7)
14.3

Other income (expense) – net

803

286
-

Income Before Income Taxes

6,265

5,371
16.6

Net Income

4,963

4,348
14.1

Net Income Attributable to AT&T

4,610

4,096
12.5

Net Income Attributable to Common Stock
$
4,578

$
4,096
11.8
%

Operating revenues increased in the first quarter of 2021. The revenue increase was driven by higher Mobility revenues in our Communications segment, primarily from equipment sales, and growth in DTC subscription and advertising revenues in our WarnerMedia segment. This increase was partially offset by declines in Video, lower Business Wireline services in our Communications segment and foreign exchange pressure in our Latin America segment. Operating revenues were also impacted by the fourth-quarter 2020 sale of our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands.

Operations and support expenses increased in the first quarter of 2021. The expense increase was primarily due to increased domestic wireless equipment expense, additional DTC programming and marketing and higher sports costs. Also contributing to the higher comparative expenses was the first-quarter 2020 gain on spectrum transaction, which did not recur in 2021.

Depreciation and amortization expense decreased in the first quarter of ~~2020. The decrease was driven by declines~~2021.

Amortization expense decreased $925, or 45.0% in ~~our WarnerMedia, Communications~~the first quarter primarily due to the lower cost basis of long-lived assets resulting from Video impairments taken in the fourth quarter of 2020 and ~~Latin America segments. Lower WarnerMedia segment revenues reflect unfavorable programming comparisons, including strong carryover theatrical revenues~~ceasing amortization on held-for-sale Video assets in the first quarter of ~~2019, and lower advertising revenues from~~2021.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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

Operating income ~~income~~ increased in the first quarter of ~~2020.~~2021. Our operating income margin infor the first quarter ~~increased~~decreased from ~~16.1% in 2019 to~~ 17.5% in ~~2020.~~2020 to 17.4% in 2021.

Interest expensedecreased in the first quarter of ~~2020,~~2021, primarily due to lower ~~debt balances.~~interest rates. For the remainder of 2021, we expect higher capitalized interest associated with putting spectrum into network service.

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

~~Other income (expense) – net~~ increased in the first quarter of ~~2020~~2021, primarily due to improved performance from certain investments.

Other income (expense) – net increased in the first quarter of 2021. The increase was primarily due to the recognition of an actuarial gain of $2,844, with no comparable interim remeasurement in 2020, and 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 on investments in equity securities resulting from market declines in the first quarter of 2020.~~

Income taxesincreased in the first quarter of ~~2020. Our effective tax rate was 20.8% for the first quarter of 2020, versus 19.0% for the comparable year prior.~~2021. The 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~~2021. Our effective tax rate was ~~primarily due to~~21.1% for the ~~impacts~~first quarter of 2021, versus 20.8% for the comparable period in the prior year, and includes the impact of tax settlements.

COMMUNICATIONS SEGMENT
First Quarter

Percent

2020

2019
Change

Segment Operating Revenues

Mobility
$
17,402

$
17,363
0.2
%
Entertainment Group

10,515

11,328
(7.2)

Business Wireline

6,332

6,478
(2.3)

Total Segment Operating Revenues

34,249

35,169
(2.6)

Segment Operating Contribution

Mobility

5,788

5,309
9.0

Entertainment Group

1,335

1,478
(9.7)

Business Wireline

1,080

1,224
(11.8)

Total Segment Operating Contribution
$
8,203

$
8,011
2.4
%


COMMUNICATIONS SEGMENT	First Quarter
						Percent
		2021		2020		Change
Segment Operating Revenues
Mobility		$	19,034	$	17,402	9.4	%
Business Wireline		6,046		6,266		(3.5)
Consumer Wireline		3,098		3,111		(0.4)
Total Segment Operating Revenues		28,178		26,779		5.2

Segment Operating Contribution
Mobility		6,002		5,788		3.7
Business Wireline		1,058		1,093		(3.2)
Consumer Wireline		305		520		(41.3)
Total Segment Operating Contribution		$	7,365	$	7,401	(0.5)	%

Selected Subscribers and Connections

March 31,
(000s)
2020

2019
Mobility Subscribers
169,198

154,670
Total domestic broadband connections
15,315

15,737
Network access lines in service
8,160

9,587
U-verse VoIP connections
4,213

4,935


Selected Subscribers and Connections
	March 31,
(000s)	2021	2020
Mobility Subscribers	186,108	169,198
Total domestic broadband connections	15,435	15,315
Network access lines in service	6,988	8,160
U-verse VoIP connections	3,684	4,213

Operating revenues increased in the first quarter of 2021, driven by increases in our Mobility business unit, partially offset by decreases in our Business Wireline and Consumer Wireline business units. The increase is primarily driven by equipment revenue growth and service revenue improvements with subscriber gains offsetting declines in international roaming services.

Operating contribution decreased in the first quarter ~~of 2020, driven by declines~~2021. The decline in the first quarter reflects lower contribution from our ~~Entertainment Group~~Business Wireline and ~~Business~~Consumer Wireline business units, ~~partially~~largely offset by increases in our Mobility business unit. ~~The decrease reflects~~Our Communications segment operating income margin in the ~~continued shift away~~first quarter decreased from ~~linear video and legacy services and lower wireless equipment sales attributable~~27.6% in 2020 to ~~store closures. Largely offsetting these declines were higher wireless service revenues from growth~~26.1% in ~~our prepaid subscriber base and growth in our postpaid phone subscribers and average revenue per subscriber (ARPU).~~2021.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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

Communications Business Unit Discussion
Mobility Results
First Quarter
Percent
2021 2020 Change
Operating revenues
Service $ 14,048 $ 13,968 0.6 %
Equipment 4,986 3,434 45.2
Total Operating Revenues 19,034 17,402 9.4
Operating expenses
Operations and support 11,018 9,569 15.1
Depreciation and amortization 2,014 2,045 (1.5)
Total Operating Expenses 13,032 11,614 12.2
Operating Income 6,002 5,788 3.7
Equity in Net Income (Loss) of Affiliates — — —
Operating Contribution $ 6,002 $ 5,788 3.7 %

~~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.

Subscribers
March 31, Percent
(in 000s) 2021 2020 Change
Postpaid 77,934 75,148 3.7 %
Postpaid phone 64,752 63,105 2.6
Prepaid
18,387 17,808 3.3
Reseller 6,501 6,736 (3.5)
Connected devices1
83,286 69,506 19.8
Total Mobility Subscribers 186,108 169,198 10.0 %

1Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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


Net Additions
	First Quarter
						Percent
(in 000s)		2021		2020		Change
Postpaid Phone Net Additions		595		163		—	%
Total Phone Net Additions		802		120		—

Postpaid2		823		27		—
Prepaid		279		(45)		—
Reseller		(68)		(190)		64.2
Connected devices3		2,517		3,518		(28.5)
Mobility Net Subscriber Additions1		3,551		3,310		7.3	%

Postpaid Churn4		0.93	%	1.08	%	(15)	BP
Postpaid Phone-Only Churn4		0.76	%	0.86	%	(10)	BP
1Excludes migrations and acquisition-related activities during the period.
2In addition to postpaid phones, includes tablets and wearables and other. Tablet net (losses) were (63) and (267) for the quarter ended March 31, 2021 and 2020. Wearables and other net adds were 291 and 131 for the quarter ended March 31, 2021 and 2020.
3Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes postpaid tablets and other postpaid data devices. Wholesale connected car net adds were 1.2 million for the quarter ended March 31, 2021.
4Calculated 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

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~~2021. The first quarter increase is largely due to growth in subscribers, partially offset by declines in international roaming revenue due to reduced travel during the pandemic.~~higher average~~

ARPU

Average revenue per subscriber (ARPU) ~~and growth in Cricket subscribers.~~

~~ARPU~~

~~ARPU increased~~decreased in the first ~~quarter primarily due to~~quarter. ARPU during 2021 reflects the impact of higher promotional discount amortization and a ~~continued shift by subscribers to our unlimited plans.~~

decline in international roaming revenues and waived fees.

Churn

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

continued network improvements.

Equipmentrevenue increased in the first quarter of 2021. The increase in the first quarter is primarily driven by increased postpaid smartphone volumes, higher-priced smartphones and growth in data devices.

Operations and support ~~revenue~~expenses increased in the first quarter of 2021 largely driven by growth in equipment sales and associated expenses and higher content costs associated with bundling HBO Max. The expense increase was offset by lower sales costs and bad debt expense. Commission deferral amortization was up slightly versus the prior year, including the impact of first-quarter 2021 updates to extend the estimated economic life for our subscribers.

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

~~Operations and support~~ ~~expenses decreased in the first quarter of 2020~~2021 primarily due to ~~lower cost of equipment sales from lower volumes and advertising expense and continued improvements in cost efficiencies, partially offset by higher bad debt expense.~~

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

Operating income increased in the first quarter of ~~2020.~~2021. Our Mobility operating income margin in the first quarter ~~increased~~decreased from ~~30.6% in 2019 to~~ 33.3% in ~~2020.~~2020 to 31.5% in 2021. Our Mobility EBITDA margin in the first quarter ~~increased~~decreased from ~~42.2% in 2019 to~~

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

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

45.0% in ~~2020.~~2020 to 42.1% in 2021. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization.

AT&T INC.

MARCH 31, 2021

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

Dollars in millions except per share amounts

Subscriber Relationships

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

To attract and retain subscribers in a 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~~. services. Virtually all of our postpaid smartphone subscribers are on plans that provide for service on multiple devices at reduced rates, and subscribers to such ~~subscribers~~plans tend to have higher retention and lower churn rates. We offer unlimited data plans and subscribers to such ~~subscribers~~plans also tend to have higher retention and lower churn rates. Our offerings are intended to encourage existing subscribers to upgrade their current services and/or add devices, attract subscribers from other providers and/or minimize subscriber churn.

~~Connected Devices~~

~~Connected devices include data-centric devices such as wholesale automobile systems, monitoring devices, fleet management and session-based tablets.~~ The number of connected device subscriber relationships increased during the first quarter of 2020, driven by the addition of approximately 2.5 million wholesale connected cars through agreements with various carmakers and 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.~~

~~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~~


Business Wireline Results
	First Quarter
						Percent
		2021		2020		Change
Operating revenues
Service		$	5,872	$	6,091	(3.6)	%
Equipment		174		175		(0.6)
Total Operating Revenues		6,046		6,266		(3.5)

Operating expenses
Operations and support		3,710		3,887		(4.6)
Depreciation and amortization		1,278		1,286		(0.6)
Total Operating Expenses		4,988		5,173		(3.6)
Operating Income		1,058		1,093		(3.2)
Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution		$	1,058	$	1,093	(3.2)	%

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

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~~Service revenues are comprised of subscription and advertising revenues. Revenues decreased in the first quarter of 2020, largely driven by a decline in premium TV subscribers, as we continue to 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 services, which has pressured our video revenues.

~~High-speed internet~~ revenues increased in the first quarter of 2020, reflecting higher ARPU resulting from pricing actions and 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 service~~revenues decreased in the first quarter of ~~2020, reflecting the continued migration of~~2021, driven by lower demand for legacy voice and data services as customers continue to ~~our~~shift to more advanced IP-based ~~offerings or to competitors.~~offerings.

Equipment revenues remained consistent in the first quarter of 2021.

Operations and supportexpenses decreased in the first quarter of 2020, primarily due to lower content costs from fewer subscribers and ongoing cost initiatives, partially offset by higher amortization of fulfillment cost deferrals and higher annual content rate increases.

~~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~~

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

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

Business Wireline Results

First Quarter

Percent

2020

2019
Change
Operating revenues

Strategic and managed services
$
3,879

$
3,779
2.6
%
Legacy voice and data services

2,129

2,397
(11.2)

Other service and equipment

324

302
7.3

Total Operating Revenues

6,332

6,478
(2.3)

Operating expenses

Operations and support

3,951

4,032
(2.0)

Depreciation and amortization

1,301

1,222
6.5

Total Operating Expenses

5,252

5,254
-

Operating Income

1,080

1,224
(11.8)

Equity in Net Income (Loss) of Affiliates

-

-
-

Operating Contribution
$
1,080

$
1,224
(11.8)
%

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

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

~~Other service and equipment~~revenues 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,~~2021, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization.

Depreciation

~~Depreciation~~ expense ~~increased~~decreased in the first quarter of 2021, primarily due to ~~increases in capital spending for~~ network ~~upgrades and expansion.~~assets becoming fully depreciated.

Operating income decreased in the first quarter of ~~2020.~~2021. Our Business Wireline operating income margin in the first quarter ~~decreased~~increased from ~~18.9%~~17.4% in ~~2019 to 17.1%~~2020 and 17.5% in ~~2020.~~2021. Our Business Wireline EBITDA margin in the first quarter ~~decreased~~increased from ~~37.8%~~38.0% in ~~2019~~2020 to ~~37.6%~~38.6% in ~~2020.~~2021.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

Dollars ~~subscribers and connections~~ in millions except per share amounts


Consumer Wireline Results
	First Quarter
						Percent
		2021		2020		Change
Operating revenues
IP Broadband		$	2,205	$	2,109	4.6	%
Legacy voice and data services		519		581		(10.7)
Other service and equipment		374		421		(11.2)
Total Operating Revenues		3,098		3,111		(0.4)

Operating expenses
Operations and support		2,031		1,879		8.1
Depreciation and amortization		762		712		7.0
Total Operating Expenses		2,793		2,591		7.8
Operating Income		305		520		(41.3)
Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution		$	305	$	520	(41.3)	%

The following tables highlight other key measures of performance for Consumer Wireline:


Connections
	March 31,		Percent
(in 000s)	2021	2020	Change
Broadband Connections
Total Broadband Connections	14,146	14,046	0.7	%
Fiber Broadband Connections	5,186	4,096	26.6

Voice Connections
Retail Consumer Switched Access Lines	2,740	3,196	(14.3)
U-verse Consumer VoIP Connections	3,096	3,630	(14.7)
Total Retail Consumer Voice Connections	5,836	6,826	(14.5)	%


Net Additions
	First Quarter
				Percent
(in 000s)		2021	2020	Change
Broadband Net Additions
Total Broadband Net Additions		46	(73)	—	%
Fiber Broadband Net Additions		235	209	12.4	%

IP Broadband (high-speed internet) revenues increased in the first quarter of 2021, driven by higher ARPU resulting from an increase in fiber customers and ~~per subscriber amounts~~pricing.

Legacy voice and data service

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~~2021, reflecting the ~~cancellation of televised sporting events at Turner; lower theatrical product revenues, reflecting unfavorable programming comparisons, including strong carryover revenues~~continued decline in the ~~first quarter~~number of ~~2019 at Warner Bros.;~~customers.

Other service and ~~lower content licensing revenue at HBO.~~

~~Operating contribution~~equipment revenues decreased in 2021, reflecting the ~~first quarter of 2020. Our WarnerMedia segment operating income margin~~continued decline in the ~~first quarter decreased from 26.8% in 2019 to 23.1% in 2020.~~number of VoIP customers.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

Dollars ~~subscribers and connections~~ in millions except per share amounts

Operations 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~~support ~~decreased~~expenses increased in the first quarter of ~~2020,~~2021, primarily driven by content costs associated with plans bundling HBO Max and higher customer support costs. Partially offsetting these increases was lower cost deferral amortization, including the impact of the first-quarter 2021 updates to extend the economic life for our subscribers.

Depreciation expense increased in the first quarter of 2021, 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.ongoing capital spending for network upgrades and expansion.

~~Cost of revenues~~Operating income 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~~2021. Our Consumer Wireline operating income margin in the first quarter ofdecreased from 16.7% in 2020 ~~primarily due~~ to ~~lower marketing costs.~~9.8% in 2021. Our Consumer Wireline EBITDA margin in the first quarter decreased from 39.6% in 2020 to 34.4% in 2021.


WARNERMEDIA SEGMENT	First Quarter
						Percent
		2021		2020		Change
Segment Operating Revenues
Subscription		$	3,830	$	3,401	12.6	%
Content		3,420		3,303		3.5
Advertising		1,750		1,477		18.5
Other		169		254		(33.5)
Eliminations		(643)		(670)		4.0
Total Segment Operating Revenues		8,526		7,765		9.8

Segment Operating Expenses
Direct Costs
Programming		4,383		3,513		24.8
Marketing		849		526		61.4
Other		722		669		7.9
General and administrative		967		1,222		(20.9)
Eliminations and other		(518)		(325)		(59.4)
Depreciation and amortization		163		161		1.2
Total Operating Expenses		6,566		5,766		13.9
Operating Income		1,960		1,999		(2.0)
Equity in Net Income (Loss) of Affiliates		70		15		—
Total Segment Operating Contribution		$	2,030	$	2,014	0.8	%

Our WarnerMedia segment is operated as a content organization that distributes across various platforms, including Basic Networks, Direct-to-Consumer (DTC) and Theatrical, TV Content and Games Licensing.

Operating ~~income~~revenues increased in the first quarter of ~~2020. Our Turner operating income margin~~2021, primarily due to higher subscription, advertising and content revenues, reflecting the partial recovery from prior-year impacts of COVID-19. Subscription revenues increased reflecting growth of DTC domestic HBO Max and HBO subscribers, and, to a lesser extent, the May 2020 acquisition of the remaining interest in HBO Latin America Group. DTC subscription revenues were $1,810 versus $1,338 in the year-ago quarter and include growth from intercompany relationships with the Communications segment. Advertising revenues improved when compared to the prior year resulting from the return in 2021 of the NCAA Division I Men's Championship Basketball Tournament. Content revenues increased due to higher sales to HBO Max for theatrical product and increases in Basic Networks licensing, partly offset by lower television product licensing from prior-year licensing to HBO Max.

Direct costs increased in the first quarter ~~increased from 36.2%~~of 2021, driven by higher programming and marketing costs for HBO Max and higher sports programming, including NCAA. Direct costs supporting DTC revenues were $1,685 in ~~2019 to 43.7%~~the first quarter of 2021, versus $911 in ~~2020.~~the year-ago quarter.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

Dollars ~~subscribers and connections~~ in millions except per share amounts

General and ~~per subscriber amounts~~administrative

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~~ expenses decreased in the first quarter of ~~2020,~~2021, primarily due to lower ~~content licensing. Subscription revenue was flat, including digital~~bad debt expense and ~~international growth that was partially offset by lower domestic linear subscribers.~~

~~Cost~~integration of ~~revenues~~support functions.

Operating contribution 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~~2021. The WarnerMedia segment operating income margin ~~in the first quarter~~ decreased from ~~37.5%~~25.7% in ~~2019~~2020 to ~~28.3%~~23.0% in ~~2020.~~2021.

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~~


LATIN AMERICA SEGMENT	First Quarter
						Percent
		2021		2020		Change
Segment Operating Revenues
Vrio		$	743	$	887	(16.2)	%
Mexico		631		703		(10.2)
Total Segment Operating Revenues		1,374		1,590		(13.6)

Segment Operating Contribution
Vrio		(39)		(39)		—
Mexico		(134)		(145)		7.6
Total Segment Operating Contribution		$	(173)	$	(184)	6.0	%

~~Operating revenues~~
decreased in the first quarter of 2020, primarily due to lower theatrical product driven by unfavorable comparisons to the prior comparable period, which included, in 2019, carryover revenues from the theatrical release of ~~Aquaman~~ in addition to a more favorable mix of home entertainment releases. Partially offsetting the theatrical declines were higher television product revenues, driven by licensing, partly offset by lower initial telecast revenues driven by television production delays.

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

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

~~Operating income~~ ~~decreased in the first quarter of 2020. Our Warner Bros. operating income margin in the first quarter decreased from 15.5% in 2019 to 7.7% in 2020.~~

LATIN AMERICA SEGMENT
First Quarter

Percent

2020

2019
Change
Segment Operating Revenues

Vrio
$
887

$
1,067
(16.9)
%
Mexico

703

651
8.0

Total Segment Operating Revenues

1,590

1,718
(7.5)

Segment Operating Contribution

Vrio

(39)

32
-

Mexico

(145)

(205)
29.3

Total Segment Operating Contribution
$
(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 revenuesdecreased in the first quarter of ~~2020~~2021, primarily driven by ~~lower revenues for Vrio, primarily resulting from~~ foreign exchange ~~pressure, that more than offset growth in Mexico.~~and COVID-19 impacts.

Operating contribution~~decreased~~ improved in the first quarter of ~~2020,~~2021, reflecting foreign exchange ~~pressure.~~rates and the impact of COVID-19. Our Latin America segment operating income margin in the first quarter ~~was~~decreased from (11.8)% in 2020 ~~and (10.1)~~to (12.3)% in ~~2019.~~2021.


Latin America Business Unit Discussion
Vrio Results
	First Quarter
						Percent
		2021		2020		Change
Operating revenues		$	743	$	887	(16.2)	%

Operating expenses
Operations and support		661		783		(15.6)
Depreciation and amortization		117		147		(20.4)
Total Operating Expenses		778		930		(16.3)
Operating Income (Loss)		(35)		(43)		18.6
Equity in Net Income (Loss) of Affiliates		(4)		4		—
Operating Contribution		$	(39)	$	(39)	—	%

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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

Latin America Business Unit Discussion

Vrio Results

First Quarter

Percent

2020

2019
Change
Operating revenues
$
887

$
1,067
(16.9)
%

Operating expenses

Operations and support

783

866
(9.6)

Depreciation and amortization

147

169
(13.0)

Total Operating Expenses

930

1,035
(10.1)

Operating Income

(43)

32
-

Equity in Net Income (Loss) of Affiliates

4

-
-

Operating Contribution
$
(39)

$
32
-
%

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

March 31,
Percent
(in 000s)
2020

2019
Change
Vrio Video Subscribers

13,217

13,584
(2.7)
%

First Quarter

Percent
(in 000s)
2020

2019
Change
Vrio Video Net Subscriber Additions

(114)

(32)
-
%


		March 31,		Percent
(in 000s)		2021	2020	Change
Vrio Video Subscribers		10,559	13,217	(20.1)	%

	First Quarter
				Percent
(in 000s)		2021	2020	Change
Vrio Video Net Additions		(383)	(114)	—	%

Operating revenuesdecreased in the first quarter of ~~2020,~~2021, primarily ~~due to~~driven by foreign exchange ~~pressures.~~impacts.

Operations and support expenses decreased in the first quarter of ~~2020,~~2021, primarily ~~due to changes~~driven by economic pressures, the restructuring of sales channels in ~~foreign currency exchange rates.~~Brazil, and COVID-19 impacts. Approximately ~~20%~~23% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation

~~Depreciation~~ expense decreased in the first quarter of ~~2020,~~2021, primarily due to ~~changes in~~lower in-service assets and foreign ~~currency~~ exchange ~~rates in most of the region.~~impacts.

Operating ~~income~~loss ~~decreased~~improved in the first quarter of ~~2020.~~2021. Our Vrio operating income margin infor the first quarter ~~decreased~~increased from ~~3.0% in 2019 to~~ (4.8)% in ~~2020.~~2020 to (4.7)% in 2021. Our Vrio EBITDA margin in the first quarter decreased from ~~18.8% in 2019 to~~ 11.7% in ~~2020.~~2020 to 11.0% in 2021.

~~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
%


Mexico Results
	First Quarter
		2021		2020		Percent Change
Operating revenues
Service		$	439	$	467	(6.0)	%
Equipment		192		236		(18.6)
Total Operating Revenues		631		703		(10.2)

Operating expenses
Operations and support		620		714		(13.2)
Depreciation and amortization		145		134		8.2
Total Operating Expenses		765		848		(9.8)
Operating Income (Loss)		(134)		(145)		7.6
Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution		$	(134)	$	(145)	7.6	%

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


		March 31,		Percent
(in 000s)		2021	2020	Change
Mexico Wireless Subscribers
Postpaid		4,725	4,962	(4.8)	%
Prepaid		13,756	13,692	0.5
Reseller		500	504	(0.8)
Total Mexico Wireless Subscribers		18,981	19,158	(0.9)	%

	First Quarter
				Percent
(in 000s)		2021	2020	Change
Mexico Wireless Net Additions
Postpaid		29	(141)	—	%
Prepaid		(2)	108	—
Reseller		11	32	(65.6)
Total Mexico Wireless Net Additions		38	(1)	—	%

Service

March 31,
Percent
(in 000s)
2020

2019
Change
Mexico Wireless Subscribers

Postpaid

4,962

5,642
(12.1)
%
Prepaid

13,692

11,779
16.2

Reseller

504

301
67.4

Total Mexico Wireless Subscribers

19,158

17,722
8.1
%

First Quarter

Percent
(in 000s)
2020

2019
Change
Mexico Wireless Net Additions

Postpaid

(141)

(69)
-
%
Prepaid

108

114
(5.3)

Reseller

32

48
(33.3)

Mexico Wireless Net Subscriber Additions

(1)

93
-
%

~~Service~~ revenues ~~increased~~decreased in the first quarter of ~~2020,~~2021, primarily due to ~~growth in our prepaid subscriber base.~~lower ARPU and foreign exchange impacts.

Equipment revenues ~~increased~~decreased in the first quarter of ~~2020,~~2021, primarily due to ~~higher demand due to higher gross subscriber adds~~lower equipment sales volumes and ~~sales~~foreign exchange impacts.

Operations and support expenses decreased in the first quarter of ~~2020,~~2021, primarily ~~driven by~~due to a decline in customer growth, lower ~~maintenance expenses, employee costs~~sales volumes and ~~changes in~~ foreign ~~currency rates. These decreases were partially offset by higher equipment sales.~~exchange impacts. Approximately 7% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortizationexpense increased in the first quarter of ~~2020,~~2021, primarily due to ~~the amortization of spectrum licenses and~~ higher in-service assets. These increases were partially offset by changes in foreign exchange rates.

Operating loss improved in the first quarter of 2021. Our Mexico operating income margin in the first quarter decreased from (20.6)% in 2020 to (21.2)% in 2021. Our Mexico EBITDA margin in the first quarter increased from (1.6)% in 2020 to 1.7% in 2021.

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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

~~Operating income~~ increased in the first quarter of 2020. Our Mexico operating income margin in the first quarter increased from (31.5)% in 2019 to (20.6)% in 2020. Our Mexico EBITDA margin in the first quarter increased from (11.4)% in 2019 to (1.6)% in 2020.

XANDR SEGMENT

First Quarter

Percent

2020

2019
Change
Operating revenues
$
489

$
426
14.8
%

Operating expenses

Operations and support

170

160
6.3

Depreciation and amortization

20

13
53.8

Total Operating Expenses

190

173
9.8

Operating Income

299

253
18.2

Equity in Net Income (Loss) of Affiliates

-

-
-

Operating Contribution
$
299

$
253
18.2
%

~~Operating revenues~~ ~~increased in the first quarter of 2020 due to strong demand for addressable advertising, including political advertising.~~

~~Operations and support~~ ~~expenses increased in the first quarter of 2020 driven by ongoing development and growth in the business.~~

~~Operating income~~ ~~increased in the first quarter of 2020. Our Xandr segment operating income margin in the first quarter increased from 59.4% in 2019 to 61.1% in 2020.~~

SUPPLEMENTAL ~~TOTAL ADVERTISING REVENUE~~VIDEO INFORMATION

As a supplemental presentation, ~~to our Xandr segment operating results,~~ we are providing a view of ~~total~~our Video business that is accounted for as held-for-sale and included in Corporate and Other. Our Video business provides video, including over-the-top (OTT) services and also sells advertising ~~revenues generated by AT&T. This combined view presents the entire portfolio~~on video distribution platforms.



Video Results
	First Quarter
						Percent
		2021		2020		Change
Operating revenues
Service		$	6,684	$	7,397	(9.6)	%
Equipment		41		10		—
Total Operating Revenues		6,725		7,407		(9.2)

Operating expenses
Operations and support		5,660		6,020		(6.0)
Depreciation and amortization1		164		591		(72.3)
Total Operating Expenses		5,824		6,611		(11.9)
Operating Income		901		796		13.2
Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution		$	901	$	796	13.2	%
1Includes depreciation on assets that support AT&T U-verse products that provide both video and broadband services to customers over a shared network infrastructure.

The following tables highlight other key measures of ~~advertising revenues reported across all operating segments and represents a significant strategic initiative and growth opportunity~~performance 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)
%

Video:

Connections
March 31, Percent
(in 000s) 2021 2020 Change
Premium TV Connections 15,885 18,599 (14.6) %


Net Additions
	First Quarter
				Percent
(in 000s)		2021	2020	Change
Premium TV Net Additions		(620)	(897)	30.9	%

AT&T INC.

MARCH 31, ~~2020~~

2021

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

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

~~SUPPLEMENTAL COMMUNICATIONS OPERATING INFORMATION~~

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

Business Solutions Results

First Quarter

2020

2019
Percent Change

Operating revenues

Wireless service
$
1,949

$
1,777
9.7
%
Strategic and managed services

3,879

3,779
2.6

Legacy voice and data services

2,129

2,397
(11.2)

Other service and equipment

324

302
7.3

Wireless equipment

710

590
20.3

Total Operating Revenues

8,991

8,845
1.7

Operating expenses

Operations and support

5,710

5,614
1.7

Depreciation and amortization

1,625

1,525
6.6

Total Operating Expenses

7,335

7,139
2.7

Operating Income

1,656

1,706
(2.9)

Equity in Net Income (Loss) of Affiliates

-

-
-

Operating Contribution
$
1,656

$
1,706
(2.9)
%

OTHER BUSINESS MATTERS

Video Business On February 25, 2021, we signed an agreement with TPG Capital (TPG) to form a new company named DIRECTV (New DTV), which will be jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions. Under the agreement, we will contribute our Video business unit to New DTV for $4,250 of junior preferred units, an additional distribution preference of $4,200 and a 70% economic interest in common units. We expect to receive 7,800 from New DTV at closing ($7,600 in cash and approximately $200 of transferred DIRECTV debt). TPG will contribute approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. The remaining $5,800 will be funded by debt issued by New DTV. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,500 over the remaining period of the contract.

Spectrum Auction ~~We were~~On February 24, 2021, the Federal Communications Commission (FCC) announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of ~~high-frequency 37/39 GHz licenses in FCC Auction 103 covering an average~~a total of ~~786~~80 MHz nationwide, including 40 MHz in Phase I. We provided to the FCC an upfront deposit of $550 in 2020 and cash payments totaling $22,856 in the first quarter of 2021, for a total of $23,406 to date. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum and $2,112 upon clearing of Phase II spectrum. Additionally, we will be responsible for approximately ~~$2,400. Prior to~~$1,000 of compensable relocation costs over the ~~auction, we exchanged~~next several years as the 39 GHz licenses previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids. These vouchers yielded a value of $1,200 which was applied toward our $2,400 gross bids. We made our final payment of approximately $950 for the Auction 103 payment in April 2020. ~~We expect the FCC will grant the~~ ~~licenses in mid-2020.~~

~~Labor Contracts~~ ~~As of March 31, 2020, we employed approximately 244,000 persons. Approximately 40% of our employees are represented~~spectrum is being cleared 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.satellite operators. (See Note 8)

~~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.~~

~~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~~

COMPETITIVE AND REGULATORY ENVIRONMENT

OverviewAT&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. Nonetheless, over the ensuing two decades, the 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. More recently, the FCC has pursued a more deregulatory agenda, eliminating a variety of antiquated and unnecessary regulations and streamlining its processes in a number of areas. ~~In addition, we are pursuing,~~We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, ~~additional legislative and regulatory measures~~ to reduce inappropriate regulatory burdens ~~that are no longer appropriate in a competitive telecommunications market and~~ that inhibit our ability to compete ~~more~~ effectively and offer needed services ~~wanted and needed by~~to 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.

Communications Segment

InternetThe FCC currently classifies fixed and mobile consumer broadband services as information services, subject to light-touch regulation. ~~Although the~~The D.C. Circuit upheld the FCC’s current classification, ~~challenges~~although it remanded three discrete issues to the FCC for further consideration. These issues related to the effect of the FCC’s decision to classify broadband services as information services on public safety, the regulation of pole attachments, and universal service support for low-income consumers through the Lifeline program. Because no party sought Supreme Court review of the D.C. Circuit’s decision to uphold the FCC’s classification of broadband as an information service, that decision ~~remain~~is final.

In October 2020, the FCC adopted an order addressing the three issues remanded by the D.C. Circuit for further consideration. After considering those issues, the FCC concluded they provided no grounds to depart from its determination that fixed and mobile consumer broadband services should be classified as information services. An appeal of the FCC’s remand order is pending.

~~A number~~

AT&T INC.

MARCH 31, 2021

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

Dollars in millions except per share amounts

Some states have adopted legislation or issued executive orders that would reimpose net neutrality rules repealed by the ~~FCC, and in some cases, established additional requirements.~~FCC. Suits have been filed concerning such laws in 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 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, 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.

two states.

Privacy-related legislation ~~has been~~continues to be adopted or considered ~~or adopted~~ in a number of ~~states.~~jurisdictions. Legislative, regulatory and ~~regulatory action~~litigation actions could result in increased costs of compliance, further regulation or claims against broadband internet access service providers and others, and increased uncertainty in the value and availability of data. Effective as of January 1, 2020, a California state law gives consumers the right to 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 of the sale of personal 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~~Between 2018 and 2019, the FCC streamlined multiple federal wireless structure review processes with the potential to delay and impede ~~the~~ deployment of infrastructure used to provide telecommunications and broadband services, including small cell equipment. ~~In March, August~~Recognizing that state and ~~September 2018,~~local regulations have the same potential, in November 2020 the FCC adopted ~~orders to streamline federal~~an order tightening the limits on state and local ~~wireless infrastructure review processes in order~~authority to ~~facilitate deployment of next-generation~~deny requests to use existing structures for 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~~These orders were appealed to the ~~9th~~9th Circuit Court of Appeals, where ~~they~~the appeals remain pending. ~~In addition to the FCC’s actions, to date, 28 states and Puerto Rico have adopted legislation to facilitate small cell deployment.~~

In December 2018, we introduced the nation’s first commercial mobile 5G service. We now expect nationwide 5G coverage this summer; we anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in equipment upgrades.

LIQUIDITY AND CAPITAL RESOURCES

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

We had ~~$9,955~~$11,342 in ~~“Cash~~cash and cash ~~equivalents”~~equivalents available at March 31, ~~2020. “Cash~~2021. Cash and cash ~~equivalents”~~equivalents included cash of ~~$3,287~~$2,465 and money market funds and other cash equivalents of ~~$6,668.~~$8,877. Approximately ~~$2,485~~$2,433 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” decreased $2,175~~equivalents increased $1,602 since December 31, ~~2019.~~2020. In the first three months of ~~2020,~~2021, cash inflows were primarily provided by ~~the~~ cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, and issuance of long-term debt ~~issuance of~~and commercial ~~paper and issuances of cumulative preferred stock.~~paper. 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,~~spectrum acquisitions, 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 three months of ~~2020,~~2021, cash provided by operating activities was ~~$8,866,~~$9,927, compared to ~~$11,052~~$8,866 for the first three months of ~~2019. Lower~~2020. Higher operating cash flows in ~~2020~~2021 were primarily driven by ~~WarnerMedia profits, including increased HBO Max investments and~~ higher ~~production spend; lower incremental receivable securitization; and~~sales of receivables (see Note 9), working capital ~~pressures, specifically~~improvements and lower ~~business collections late~~interest partially offset by cash taxes. Total cash paid for WarnerMedia’s content investment was $4,508 in the ~~quarter.~~first quarter of 2021 ($186 higher than the prior-year comparable period).

We actively manage the timing of our supplier payments for ~~non-capital~~operating items to optimize the use of our cash. Among other things, we seek to ~~have~~make 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, as part of our working capital initiatives, 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 onwas to decrease cash from operating activities ~~was to decrease working capital~~$1,071 and $1,075 ~~and $904~~ for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities

For the first three months of ~~2020,~~2021, cash used in investing activities totaled ~~$5,022,~~$26,852, and consisted primarily of ~~$4,966~~$4,033 (including interest during construction) for capital expenditures, ~~($216 lower than the prior-year comparable period),~~ and ~~$99 of wireless spectrum deposits. Subsequent to the first quarter of 2020, in April we made our final~~ payment of ~~approximately $950~~$22,876, primarily for ~~wireless~~C-Band spectrum licenses won in Auction ~~103, and on May 4, we acquired our remaining interest HBO Latin America Group (HBO LAG) for $230.~~

107.

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 three months of ~~2020,~~2021, vendor financing payments were ~~$791,~~$1,690, compared to ~~$819~~$791 for the first three months of ~~2019.~~

~~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~~

C~~apital~~2020. Capital expenditures in the first three months of ~~2020~~ 2021 were ~~$4,966,~~$4,033, and when including ~~$791~~$1,690 cash paid for vendor financing, gross capital investment was ~~$5,757~~$5,723 ($~~244~~41 lower than the prior-year comparable ~~period~~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~~months of ~~2020,~~2021, we placed ~~$449~~$998 of equipment in service under vendor financing arrangements (compared to ~~$733~~$449 in the prior-year comparable period) and ~~$338~~approximately $240 of assets related to the FirstNet build (compared to ~~$304~~$338 in the prior-year comparable period).

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

AT&T INC.

MARCH 31, 2021

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

Dollars in millions except per share amounts

Cash Provided by or Used in Financing Activities

For the first three months of ~~2020,~~2021, cash ~~used in~~provided by financing activities totaled ~~$6,099~~$18,483 and was comprised of ~~debt issuances and repayments,~~ issuances of ~~preferred stock, share repurchase,~~debt, offset by payments of dividends, and ~~required collateral deposits.~~vendor financing payments.

~~During~~

A tabular summary or our debt activity for 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.~~

ended March ~~draw of $750 on a private financing agreement.~~31, 2021 is as follows:


Net commercial paper borrowings	$	7,072
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes	$	6,000
Initial average rate of 1.27%
Euro denominated global notes (converted to USD at issuance)	1,461
Rate of 0.00%
2021 Syndicated Term Loan	7,350
BAML Bilateral Term Loan	2,000
Private financing	750
Other	636
Debt Issuances	$	18,197

Repayments:
Private financing	$	(649)
Other	(253)
Repayments of long-term debt	$	(902)
1Includes credit agreement borrowings.


~~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:~~

~~$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 private financing agreement.~~

~~Our~~

The weighted average interest rate of our entire long-term debt portfolio, including term loans and the impact of derivatives, was approximately ~~4.3%~~3.8% as of March 31, ~~2020~~2021 and ~~4.4%~~4.1% as of December 31, ~~2019.~~2020. We had ~~$159,386~~$171,194 of total notes and debentures outstanding at March 31, ~~2020,~~2021, which included Euro, British pound sterling, Canadian dollar, Mexican peso, Australian dollar, Swiss franc ~~Australian dollar,~~and Brazilian real ~~and Mexican peso~~ denominated debt that totaled approximately ~~$40,712.~~$43,525.

At March 31, ~~2020,~~2021, we had ~~$17,067~~$19,505 of debt maturing within one year, ~~including $3,144~~consisting of $7,078 of commercial paper borrowings, $9,100 of bank borrowings, and ~~$13,923~~$3,327 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.~~

Anan 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 three months of ~~2020,~~2021, we paid ~~$791~~$1,690 of cash under our vendor financing program, compared to ~~$819~~$791 in the first three months of ~~2019.~~2020. Total vendor financing payables included in our March 31, ~~2020~~2021 consolidated balance sheet were ~~approximately $1,361,~~$3,552, with ~~$997~~$2,883 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 March 31, ~~2020,~~2021, we had approximately 178 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014. ~~On March 19,~~

~~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~~

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 ~~$3,737~~$3,741 during the first three months of ~~2020,~~2021, compared with ~~$3,714~~$3,737 for the first three months of 2019. Dividends were higher in 2020, primarily due to dividend payments to preferred stockholders and the increase in our quarterly dividend on common stock approved by our Board of Directors in December 2019, partially offset by fewer shares outstanding. 2020.

Dividends on common stock declared by our Board of Directors totaled $0.52 per share in the first three months of ~~2020~~2021 and ~~$0.51~~$0.52 per share for the first three months of ~~2019.~~2020. 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~~

AT&T INC.

MARCH 31, 2021

Item 2. Management’s Discussion and Analysis of ~~Directors to consider dividend growth~~Financial Condition and ~~to recommend an increase~~Results of Operations- Continued

Dollars in ~~dividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.~~

millions except per share amounts

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,~~November 2020, we amended one of our ~~five-year~~$7,500 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~~agreements by extending the termination date. In total, we ~~now~~ have two $7,500 revolving credit agreements, totaling ~~$15,000. The Amended and Restated Credit Agreement terminates~~$15,000, with one terminating on December 11, ~~2021~~2023 and the ~~Five Year Credit Agreement terminates~~other terminating on ~~December 11, 2023.~~November 17, 2025. No amounts were outstanding under either agreement as of March 31, ~~2020.~~2021.

On January 29, 2021, we entered into a $14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with Bank of America, N.A., as agent. On March 23, 2021, we borrowed $7,350 under the 2021 Syndicated Term Loan and the remaining $7,350 of lenders’ commitments were terminated. As of March 31, 2021, $7,350 was outstanding and is due on March 22, 2022.

In ~~September 2019,~~March 2021, we entered into and drew on a ~~$1,300~~$2,000 term loan credit agreement ~~containing~~(BAML Bilateral Term Loan) consisting of (i) a ~~1.25~~0.75 year ~~$400~~$1,000 facility due ~~in 2020~~December 31 2021 (BAML Tranche A Facility), and (ii) a ~~2.25~~1.75 year ~~$400~~$1,000 facility due ~~in 2021~~December 31, 2022 (BAML Tranche B ~~Facility), and (iii) a 3.25 year $500 facility due in 2022 (BAML Tranche C~~ Facility), with Bank of America, N.A., as agent. ~~No repayment had been made~~At March 31, 2021, $2,000 was outstanding under these ~~facilities as of March 31, 2020.~~facilities.

On April 6, 2020, we entered into and drew on a $5,500 Term Loan Credit Agreement (Term Loan), with 11 commercial banks and Bank of America, N.A., as lead agent. The Term Loan is not subject to amortization and the entire principal amount of the Term Loan will be due and payable on December 31, 2020.

We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases as well as a commercial paper program.

Each of our credit and loan agreements contains covenants that are customary for an issuer with an investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than ~~3.5-to-1.~~4.0-to-1 in the case of the BAML Bilateral Term Loan and not more than 3.5-to-1 for all other credit agreements. As of March 31, ~~2020,~~2021, we were in compliance with the covenants for our credit facilities.

Collateral Arrangements

~~During 2019 and 2020, we amended~~

Most of our counterparty collateral arrangements ~~with certain counterparties to~~ require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover over 95% of our approximate $42,000 derivative portfolio, counterparties are still required to post collateral. During the first three months of ~~2020,~~2021, we ~~deposited~~received approximately ~~$2,650~~$90 of cash collateral, on a net ~~basis as we exceeded the market value thresholds with some of the counterparties.~~basis. 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 March 31, ~~2020,~~2021, our debt ratio was ~~45.7%~~49.6%, compared to ~~47.4%~~45.7% at March 31, ~~2019~~2020 and ~~44.7%~~46.7% at December 31, ~~2019.~~2020. Our net debt ratio was 46.5% at March 31, 2021, compared to 42.9% at March 31, 2020

~~AT&T INC.~~

~~MARCH 31, 2020~~

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

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

~~compared to 45.6% at March 31, 2019 and 41.4%~~43.8% at December 31, ~~2019.~~2020. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and repayments and debt acquired in business combinations.

~~During~~

On February 25, 2021, we signed an agreement to form a new company named DIRECTV (New DTV) with a subsidiary of TPG Capital, which will be jointly governed by a board with representation from both AT&T and TPG. The transaction is expected to close in the ~~first three months~~second half of ~~2020, we received $118~~2021, pending customary closing conditions. We expect to receive $7,600 in cash 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.

transaction at closing. (See Note 8)

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~~

2021

~~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.

First Quarter

March 31, 2020

March 31, 2019

Mobility

Business Wireline

Adjustments¹

Business Solutions

Mobility

Business Wireline

Adjustments¹

Business Solutions
Operating Revenues

Wireless service
$
13,968
$
-
$
(12,019)
$
1,949

$
13,629
$
-
$
(11,852)
$
1,777
Strategic and managed services

-

3,879

-

3,879

-

3,779

-

3,779
Legacy voice and data services

-

2,129

-

2,129

-

2,397

-

2,397
Other service and equipment

-

324

-

324

-

302

-

302
Wireless equipment

3,434

-

(2,724)

710

3,734

-

(3,144)

590
Total Operating Revenues

17,402

6,332

(14,743)

8,991

17,363

6,478

(14,996)

8,845

Operating Expenses

Operations and support

9,569

3,951

(7,810)

5,710

10,041

4,032

(8,459)

5,614
EBITDA

7,833

2,381

(6,933)

3,281

7,322

2,446

(6,537)

3,231
Depreciation and amortization

2,045

1,301

(1,721)

1,625

2,013

1,222

(1,710)

1,525
Total Operating Expense

11,614

5,252

(9,531)

7,335

12,054

5,254

(10,169)

7,139
Operating Income

5,788

1,080

(5,212)

1,656

5,309

1,224

(4,827)

1,706
Equity in net income (loss)
of affiliates

-

-

-

-

-

-

-

-
Operating Contribution
$
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.

~~AT&T INC.~~

~~MARCH 31, 2020~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At March 31, ~~2020,~~2021, we had no interest rate ~~swaps with a notional value of $853 and a fair value of $14.~~

swaps.

We have fixed-to-fixed and floating-to-fixed cross-currency swaps on foreign currency-denominated debt instruments with a U.S. dollar notional value of ~~$42,325~~$42,186 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow or fair value hedges with a net fair value of ~~$(8,283)~~$(577) at March 31, ~~2020.~~2021. We ~~have~~had no rate locks ~~with a notional value of $3,500 and a fair value of $(720)~~ at March 31, ~~2020.~~

2021.

We have foreign exchange contracts with a U.S. dollar notional value of ~~$106~~$228 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 ~~$66~~$1 at March 31, ~~2020.~~

2021.

We have designated ~~€1,364~~€1,433 million aggregate principal amount of debt as a hedge of the variability of ~~certain~~some of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated other comprehensive income, net on the consolidated balance sheet.

Item 4. Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the Securities and Exchange Commission’s 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 March 31, ~~2020.~~2021. 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 March 31, ~~2020.~~

2021.

There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Due to the COVID-19 pandemic, most of our corporate employees are working remotely. We continue to monitor and assess the COVID-19 situation on our internal control over financial reporting to address any potential impact on their design and operating effectiveness.

AT&T INC.

MARCH 31, ~~2020~~2021

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, pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations and, in particular, siting for 5G service; E911 services; competition policy; privacy; net neutrality; multichannel video programming distributor services and equipment; content licensing and copyright protection; availability of new spectrum on fair and balanced terms; and wireless and satellite license awards and renewals.

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

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

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

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

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

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

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

•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.~~parties or claims based on alleged misconduct by employees.

AT&T INC.

MARCH 31, ~~2020~~2021

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

- continued

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

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

•Our ability to successfully integrate our WarnerMedia operations, including the ability to manage various businesses in widely dispersed business locations and with decentralized management.

•Changes in our corporate strategies ~~such as changing network-related requirements or acquisitions and dispositions, which may require significant amounts of cash or stock,~~ to respond to competition and regulatory, legislative and technological developments.

•~~The uncertainty surrounding further congressional action~~Our ability to ~~address spending reductions,~~realize or sustain the expected benefits of our business transformation initiatives, which ~~may result in a significant decrease in government spending~~are designed to reduce costs, streamline distribution, remove redundancies and ~~reluctance of businesses~~simplify and ~~consumers to spend in general.~~improve processes and support functions.

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

AT&T INC.

MARCH 31, ~~2020~~

2021

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.

~~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~~ For the first quarter 2021, there were no 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 COVID-19 pandemic. The COVID-19 pandemic has caused, and may continue to cause, delays in the development, manufacturing (including the sourcing of 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 required 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 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.

material developments.

~~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 first quarter of ~~2020~~2021 is as follows:
(a) (b) (c) (d)
Period
Total Number of Shares (or Units) Purchased1, 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
January 1, 2021 - January 31, 2021 246,890 $ 29.62 13,563 177,916,645
February 1, 2021 - February 28, 2021 3,540,401 29.09 13,724 177,902,921
March 1, 2021 - March 31, 2021 2,219,810 29.60 — 177,902,921
Total 6,007,101 $ 29.30 27,287
1
~~(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 Programs~~¹
~~Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs~~
~~January 1, 2020 -~~
~~January 31, 2020~~
~~85,491,992~~
$
~~39.06~~
~~84,811,852~~
~~234,687,593~~
~~February 1, 2020 -~~
~~February 29, 2020~~
~~2,485,427~~
~~37.74~~
-
~~234,687,593~~
~~March 1, 2020 -~~
~~March 31, 2020~~
~~59,221,415~~
~~35.32~~
~~56,745,363~~
~~177,942,230~~
~~Total~~
~~147,198,834~~
$
~~37.53~~
~~141,557,215~~
¹
In March ~~2013,~~2014, our Board of Directors ~~authorized the~~approved an authorization to 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~~
~~2014~~ authorization has no expiration date.
²
Of the shares repurchased, ~~5,045,525~~5,979,814 shares were acquired through the withholding of taxes on the vesting of
restricted stock and performance shares or onin respect of the exercise price of options.
³
Of the shares repurchased, ~~596,094~~no shares were acquired through reimbursements from AT&T maintained
Voluntary Employee Benefit Association (VEBA) ~~trusts.~~trusts during the period.

~~AT&T INC.~~

~~MARCH 31, 2020~~

Item 6. Exhibits

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


Exhibit
Number						Exhibit Description
10.1						Consulting Services Agreement dated March 30, 2021 (Exhibit 10.1 to Form 8-K filed on March 30, 2021)
10.2						Agreement of Contribution and Subscriptions dated February 25, 2021, among Services, HoldCo, New DTV and Investor (Exhibit 10.1 to Form 8-K filed on February 25, 2021)
10.3						U.S. $14,700,000,000 Term Loan Credit Agreement, dated as of January 29, 2021, among AT&T Inc., the lenders named therein and Bank of America, N.A., as agent. (Exhibit 10.1 to Form 8-K filed on January 29, 2021)
10.4						Consulting Services Agreement dated January 20, 2021 (Exhibit 10.1 to Form 8-K filed on January 25, 2021)
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, 2021, 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, 2021, (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURE

~~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~~

Pursuant 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~~requirements of the ~~depositary receipts described therein. (Exhibit 4.3~~Securities Exchange Act of 1934, the registrant has duly caused this report to ~~Form 8-K filed~~be signed on ~~February 18, 2020)~~its behalf by the undersigned thereunto duly authorized.


			AT&T Inc.

May 6, 2021			/s/ Pascal Desroches
			Pascal Desroches
			Senior Executive Vice President
			and Chief Financial Officer

~~4.2~~

~~Form of 4.000% Global Notes due 2049 (Exhibit 4.1 to Form 8-K filed on February 27, 2020)~~

~~Rule 13a-14(a)/15d-14(a) Certifications~~

~~31.1 Certification of Principal Executive Officer~~

~~31.2 Certification of Principal Financial Officer~~

~~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).~~

~~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.~~

~~May 6, 2020~~

~~AT&T Inc.~~

~~/s/ John J. Stephens~~

~~John J. Stephens~~

~~Senior Executive Vice President~~

~~and Chief Financial Officer~~


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

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


For the three months ended March 31, 2020
	Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,402	$	9,569	$	7,833	$	2,045	$	5,788	$	0	$	5,788
Business Wireline	6,266		3,887		2,379		1,286		1,093		0		1,093
Consumer Wireline	3,111		1,879		1,232		712		520		0		520
Total Communications	26,779		15,335		11,444		4,043		7,401		0		7,401





WarnerMedia	7,765		5,605		2,160		161		1,999		15		2,014
Latin America
Vrio	887		783		104		147		(43)		4		(39)
Mexico	703		714		(11)		134		(145)		0		(145)
Total Latin America	1,590		1,497		93		281		(188)		4		(184)
Segment Total	36,134		22,437		13,697		4,485		9,212		$	19	$	9,231
Corporate and Other
Corporate1	534		1,012		(478)		90		(568)
Video	7,407		6,020		1,387		591		796
Acquisition-related items	0		182		(182)		2,056		(2,238)
Certain significant items	0		(658)		658		0		658
Eliminations and consolidations	(1,296)		(922)		(374)		0		(374)
AT&T Inc.	$	42,779	$	28,071	$	14,708	$	7,222	$	7,486
1Operations and Support Expenses include $612 for the reclassification of prior service credit amortization.

Intersegment Reconciliation
	Three months ended
	March 31,
	2020		2019
Intersegment revenues
Communications	$	2	$	-
WarnerMedia		816		858
Latin America		-		-
Xandr		1		-
Total Intersegment Revenues		819		858
Consolidations		477		398
Eliminations and consolidations	$	1,296	$	1,256

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

		March 31, 2020				December 31, 2019
		Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value
Notes and debentures¹		$	159,386	$	175,902	$	161,109	$	182,124
Commercial paper			3,144		3,144		-		-
Bank borrowings			-		-		4		4
Investment securities²			3,591		3,591		3,723		3,723
¹	Includes credit agreement borrowings.
²	Excludes investments accounted for under the equity method.

		Three months ended March 31,
			2020		2019
Gross receivables sold		$	2,367	$	2,701
Net receivables sold¹			2,273		2,546
Cash proceeds received			1,950		2,275
Deferred purchase price recorded			353		309
Guarantee obligation recorded			44		101
¹	Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

At March 31, 2020	Operating		Finance
	Leases		Leases
Remainder of 2020	$	3,519	$	275
2021		4,391		275
2022		4,068		258
2023		3,663		232
2024		3,140		214
Thereafter		11,788		1,509
Total lease payments		30,569		2,763
Less imputed interest		(5,542)		(1,024)
Total	$	25,027	$	1,739


Communications Business Unit Discussion
Mobility Results
	First Quarter
						Percent
		2021		2020		Change
Operating revenues
Service		$	14,048	$	13,968	0.6	%
Equipment		4,986		3,434		45.2
Total Operating Revenues		19,034		17,402		9.4

Operating expenses
Operations and support		11,018		9,569		15.1
Depreciation and amortization		2,014		2,045		(1.5)
Total Operating Expenses		13,032		11,614		12.2
Operating Income		6,002		5,788		3.7
Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution		$	6,002	$	5,788	3.7	%

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.

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)	%

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	%

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)	%

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)	%

XANDR SEGMENT
	First Quarter
					Percent
	2020		2019		Change
Operating revenues	$	489	$	426	14.8	%

Operating expenses
Operations and support		170		160	6.3
Depreciation and amortization		20		13	53.8
Total Operating Expenses		190		173	9.8
Operating Income		299		253	18.2
Equity in Net Income (Loss) of Affiliates		-		-	-
Operating Contribution	$	299	$	253	18.2	%

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)	%

Business Solutions Results
	First Quarter
	2020		2019		Percent Change
	2020		2019		Percent Change
Operating revenues
Wireless service	$	1,949	$	1,777	9.7	%
Strategic and managed services		3,879		3,779	2.6
Legacy voice and data services		2,129		2,397	(11.2)
Other service and equipment		324		302	7.3
Wireless equipment		710		590	20.3
Total Operating Revenues		8,991		8,845	1.7

Operating expenses
Operations and support		5,710		5,614	1.7
Depreciation and amortization		1,625		1,525	6.6
Total Operating Expenses		7,335		7,139	2.7
Operating Income		1,656		1,706	(2.9)
Equity in Net Income (Loss) of Affiliates		-		-	-
Operating Contribution	$	1,656	$	1,706	(2.9)	%

		First Quarter
		March 31, 2020								March 31, 2019
		Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions
Operating Revenues
Wireless service	$	13,968	$	-	$	(12,019)	$	1,949	$	13,629	$	-	$	(11,852)	$	1,777
Strategic and managed services		-		3,879		-		3,879		-		3,779		-		3,779
Legacy voice and data services		-		2,129		-		2,129		-		2,397		-		2,397
Other service and equipment		-		324		-		324		-		302		-		302
Wireless equipment		3,434		-		(2,724)		710		3,734		-		(3,144)		590
Total Operating Revenues		17,402		6,332		(14,743)		8,991		17,363		6,478		(14,996)		8,845

Operating Expenses
Operations and support		9,569		3,951		(7,810)		5,710		10,041		4,032		(8,459)		5,614
EBITDA		7,833		2,381		(6,933)		3,281		7,322		2,446		(6,537)		3,231
Depreciation and amortization		2,045		1,301		(1,721)		1,625		2,013		1,222		(1,710)		1,525
Total Operating Expense		11,614		5,252		(9,531)		7,335		12,054		5,254		(10,169)		7,139
Operating Income		5,788		1,080		(5,212)		1,656		5,309		1,224		(4,827)		1,706
Equity in net income (loss) of affiliates		-		-		-		-		-		-		-		-
Operating Contribution	$	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.