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

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

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

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, is shown in the table ~~below.~~

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Numerators

Numerator for basic earnings per share:

Net Income
$
1,563

$
3,974

$
6,526

$
8,322
Less: Net income attributable to noncontrolling interest

(282)

(261)

(635)

(513)
Net Income attributable to AT&T

1,281

3,713

5,891

7,809
Less: Preferred stock dividends

(52)

-

(84)

-
Net income attributable to common stock

1,229

3,713

5,807

7,809
Dilutive potential common shares:

Share-based payment

5

4

11

10
Numerator for diluted earnings per share
$
1,234

$
3,717

$
5,818

$
7,819
Denominators (000,000)

Denominator for basic earnings per share:

Weighted average number of common shares outstanding

7,145

7,323

7,166

7,318
Dilutive potential common shares:

Share-based payment (in shares)

25

30

26

29
Denominator for diluted earnings per share

7,170

7,353

7,192

7,347
Basic earnings per share attributable to Common Stock
$
0.17

$
0.51

$
0.81

$
1.06
Diluted earnings per share attributable to Common Stock
$
0.17

$
0.51

$
0.81

$
1.06

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

below:

Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Numerators
Numerator for basic earnings per share:
Net Income Attributable to Common Stock $ 1,514 $ 1,229 $ 9,014 $ 5,807
Dilutive potential common shares:
Share-based payment 5 5 11 11
Numerator for diluted earnings per share $ 1,519 $ 1,234 $ 9,025 $ 5,818
Denominators (000,000)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding 7,168 7,145 7,165 7,166
Dilutive potential common shares:
Share-based payment (in shares) 32 25 29 26
Denominator for diluted earnings per share 7,200 7,170 7,194 7,192

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 3. OTHER COMPREHENSIVE INCOME

Changes in the balances of each component included in accumulated OCI are presented below. All amounts are net of tax and exclude noncontrolling interest.

Foreign Currency Translation Adjustment

Net Unrealized Gains (Losses) on Securities

Net Unrealized Gains (Losses) on Derivative Instruments

Defined Benefit Postretirement Plans

Accumulated Other Comprehensive Income
Balance as of December 31, 2019
$
(3,056)

$
48

$
(37)

$
8,515

$
5,470
Other comprehensive income

(loss) before reclassifications

(1,490)

80

(3,026)

-

(4,436)
Amounts reclassified

from accumulated OCI

-
¹

-
¹

17
²

(922)
³

(905)
Net other comprehensive

income (loss)

(1,490)

80

(3,009)

(922)

(5,341)
Balance as of June 30, 2020
$
(4,546)

$
128

$
(3,046)

$
7,593

$
129

Foreign Currency Translation Adjustment

Net Unrealized Gains (Losses) on Securities

Net Unrealized Gains (Losses) on Derivative Instruments

Defined Benefit Postretirement Plans

Accumulated Other Comprehensive Income
Balance as of December 31, 2018
$
(3,084)

$
(2)

$
818

$
6,517

$
4,249
Other comprehensive income

(loss) before reclassifications

159

42

(490)

-

(289)
Amounts reclassified

from accumulated OCI

-
¹

-
¹

17
²

(688)
³

(671)
Net other comprehensive

income (loss)

159

42

(473)

(688)

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

$
40

$
345

$
5,829

$
3,289
¹
(Gains) losses are included in "Other income (expense) - net" in the consolidated statements of income.
²
(Gains) losses are included in "Interest expense" in the consolidated statements of income (see Note 7).
³
The amortization of prior service credits associated with postretirement benefits are included in "Other income (expense) - net" in the

consolidated statements of income (see Note 6).

Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on 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
190 (35) (398) 0 (243)
Amounts reclassified from
accumulated OCI
0 1 (3) 1 46 2 (1,011) 3 (968)
Net other comprehensive
income (loss)
190 (38) (352) (1,011) (1,211)
Balance as of June 30, 2021 $ (3,736) $ 73 $ (1,131) $ 7,913 $ 3,119
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
(1,490) 80 (3,026) 0 (4,436)
Amounts reclassified from
accumulated OCI
0 1 0 1 17 2 (922) 3 (905)
Net other comprehensive
income (loss)
(1,490) 80 (3,009) (922) (5,341)
Balance as of June 30, 2020 $ (4,546) $ 128 $ (3,046) $ 7,593 $ 129

11
1

~~AT&T INC.~~(Gains) losses are included in

~~JUNE 30, 2020~~“

Other income (expense) - net

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~” in the consolidated statements of income.

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~~Continued~~”

~~Dollars~~ in ~~millions except per share amounts~~the consolidated statements of income (see Note 6).

NOTE 4. SEGMENT INFORMATION

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

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

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

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

In the first quarter of 2021, we recast our segment results for all prior periods to reflect the following:

•Communications segment results were recast to remove the held-for-sale businesses, principally Video, instead reporting those results in Corporate and Other. 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. ~~Historical financial~~WarnerMedia content is distributed through basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing. Segment results ~~from~~also include Xandr ~~previously a separate reportable segment, have been combined with the~~advertising and Otter Media Holdings.

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, ~~within Eliminations~~subject to certain exceptions, with a subsidiary of Discovery Inc. (See Note 8)

Effective January 1, 2021, we updated our reporting units to reflect recent changes in how WarnerMedia, an integrated content organization that distributes across various platforms, is managed and ~~other. This segment contains~~evaluated. With this operational change, the ~~following business units:~~

~~Turner~~ ~~primarily operates multichannel basic television networks and digital properties.~~reporting unit is deemed to be the operating segment. The previous reporting units, Turner, ~~also sells advertising on its networks and digital properties.~~

Home Box Office, ~~consists of premium pay television~~ Warner Bros., 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~~Xandr, and the ~~production and distribution of games.~~

new WarnerMedia reporting unit were tested for goodwill impairment on January 1, 2021, for which there was none.

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.

On July 21, 2021, we entered into an agreement to sell our Vrio business to Grupo Werthein (see Note 8). The transaction is expected to close within one year. We applied held-for-sale accounting to Vrio as of June 30, 2021, and continue to present the Vrio results within the Latin America segment consistent with how performance was assessed and resource allocation decisions were made through June 30, 2021.

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 U.S. 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.

12
•

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

Certain significant items, which includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) ~~losses resulting from abandonment of network assets~~asset impairments and ~~impairments~~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.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2020

Revenues

Operations
and Support
Expenses

EBITDA

Depreciation
and
Amortization

Operating
Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment
Contribution
Communications

Mobility
$
17,149

$
9,332

$
7,817

$
2,012

$
5,805

$
-

$
5,805
Entertainment Group

10,069

7,730

2,339

1,309

1,030

-

1,030
Business Wireline

6,374

3,779

2,595

1,318

1,277

-

1,277
Total Communications

33,592

20,841

12,751

4,639

8,112

-

8,112
WarnerMedia

Turner

2,988

1,347

1,641

69

1,572

-

1,572
Home Box Office

1,627

1,489

138

25

113

(5)

108
Warner Bros.

3,256

2,583

673

40

633

(19)

614
Eliminations and other

(1,057)

(685)

(372)

33

(405)

28

(377)
Total WarnerMedia

6,814

4,734

2,080

167

1,913

4

1,917
Latin America

Vrio

752

661

91

127

(36)

8

(28)
Mexico

480

538

(58)

115

(173)

-

(173)
Total Latin America

1,232

1,199

33

242

(209)

8

(201)
Segment Total

41,638

26,774

14,864

5,048

9,816

$
12

$
9,828
Corporate and Other

Corporate

437

933

(496)

93

(589)

Acquisition-related items

-

211

(211)

2,145

(2,356)

Certain significant items

-

3,084

(3,084)

-

(3,084)

Eliminations and consolidations

(1,125)

(869)

(256)

(1)

(255)

AT&T Inc.
$
40,950

$
30,133

$
10,817

$
7,285

$
3,532

For the three months ended June 30, 2021
Revenues Operations
and Support
Expenses EBITDA Depreciation
and
Amortization Operating
Income (Loss) Equity in Net
Income (Loss) of
Affiliates Segment
Contribution
Communications
Mobility $ 18,936 $ 10,911 $ 8,025 $ 2,023 $ 6,002 $ 0 $ 6,002
Business Wireline 6,052 3,709 2,343 1,293 1,050 0 1,050
Consumer Wireline 3,140 2,083 1,057 769 288 0 288
Total Communications 28,128 16,703 11,425 4,085 7,340 0 7,340
WarnerMedia 8,791 6,934 1,857 165 1,692 47 1,739
Latin America
Vrio 749 660 89 114 (25) 2 (23)
Mexico 688 667 21 150 (129) 0 (129)
Total Latin America 1,437 1,327 110 264 (154) 2 (152)
Segment Total 38,356 24,964 13,392 4,514 8,878 $ 49 $ 8,927
Corporate and Other
Corporate1
361 1,160 (799) 30 (829)
Video 6,639 5,275 1,364 148 1,216
Acquisition-related items 0 0 0 1,069 (1,069)
Certain significant items 0 4,555 (4,555) 0 (4,555)
Eliminations and consolidations (1,311) (939) (372) 0 (372)
AT&T Inc. $ 44,045 $ 35,015 $ 9,030 $ 5,761 $ 3,269
1Operations and Support Expenses include $672 for the reclassification of prior service credit amortization.

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2019

Revenues

Operations and Support Expenses

EBITDA

Depreciation and Amortization

Operating Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment Contribution
Communications

Mobility
$
17,292

$
9,522

$
7,770

$
2,003

$
5,767

$
-

$
5,767
Entertainment Group

11,368

8,515

2,853

1,339

1,514

-

1,514
Business Wireline

6,607

3,975

2,632

1,242

1,390

-

1,390
Total Communications

35,267

22,012

13,255

4,584

8,671

-

8,671
WarnerMedia

Turner

3,410

2,217

1,193

39

1,154

11

1,165
Home Box Office

1,716

1,131

585

12

573

15

588
Warner Bros.

3,389

2,918

471

31

440

-

440
Eliminations and other

320

170

150

22

128

29

157
Total WarnerMedia

8,835

6,436

2,399

104

2,295

55

2,350
Latin America

Vrio

1,032

881

151

165

(14)

12

(2)
Mexico

725

813

(88)

119

(207)

-

(207)
Total Latin America

1,757

1,694

63

284

(221)

12

(209)
Segment Total

45,859

30,142

15,717

4,972

10,745

$
67

$
10,812
Corporate and Other

Corporate

450

765

(315)

170

(485)

Acquisition-related items

(30)

316

(346)

1,960

(2,306)

Certain significant items

-

94

(94)

-

(94)

Eliminations and consolidations

(1,322)

(961)

(361)

(1)

(360)

AT&T Inc.
$
44,957

$
30,356

$
14,601

$
7,101

$
7,500


For the three months ended June 30, 2020
	Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,149	$	9,332	$	7,817	$	2,012	$	5,805	$	0	$	5,805
Business Wireline	6,305		3,714		2,591		1,301		1,290		0		1,290
Consumer Wireline	3,051		1,928		1,123		730		393		0		393
Total Communications	26,505		14,974		11,531		4,043		7,488		0		7,488





WarnerMedia	6,728		4,656		2,072		164		1,908		4		1,912
Latin America
Vrio	752		661		91		127		(36)		8		(28)
Mexico	480		538		(58)		115		(173)		0		(173)
Total Latin America	1,232		1,199		33		242		(209)		8		(201)
Segment Total	34,465		20,829		13,636		4,449		9,187		$	12	$	9,199
Corporate and Other
Corporate1	589		1,069		(480)		99		(579)
Video	7,021		5,809		1,212		593		619
Acquisition-related items	0		211		(211)		2,145		(2,356)
Certain significant items	0		3,084		(3,084)		0		(3,084)
Eliminations and consolidations	(1,125)		(869)		(256)		(1)		(255)
AT&T Inc.	$	40,950	$	30,133	$	10,817	$	7,285	$	3,532
1Operations and Support Expenses include $611 for the reclassification of prior service credit amortization.

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2020

Revenues

Operations
and Support
Expenses

EBITDA

Depreciation
and
Amortization

Operating
Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment
Contribution
Communications

Mobility
$
34,551

$
18,901

$
15,650

$
4,057

$
11,593

$
-

$
11,593
Entertainment Group

20,584

15,621

4,963

2,598

2,365

-

2,365
Business Wireline

12,706

7,730

4,976

2,619

2,357

-

2,357
Total Communications

67,841

42,252

25,589

9,274

16,315

-

16,315
WarnerMedia

Turner

6,150

3,057

3,093

138

2,955

6

2,961
Home Box Office

3,124

2,542

582

46

536

15

551
Warner Bros.

6,496

5,533

963

81

882

(27)

855
Eliminations and other

(1,108)

(711)

(397)

65

(462)

25

(437)
Total WarnerMedia

14,662

10,421

4,241

330

3,911

19

3,930
Latin America

Vrio

1,639

1,444

195

274

(79)

12

(67)
Mexico

1,183

1,252

(69)

249

(318)

-

(318)
Total Latin America

2,822

2,696

126

523

(397)

12

(385)
Segment Total

85,325

55,369

29,956

10,127

19,829

$
31

$
19,860
Corporate and Other

Corporate

825

1,807

(982)

180

(1,162)

Acquisition-related items

-

393

(393)

4,201

(4,594)

Certain significant items

-

2,426

(2,426)

-

(2,426)

Eliminations and consolidations

(2,421)

(1,791)

(630)

(1)

(629)

AT&T Inc.
$
83,729

$
58,204

$
25,525

$
14,507

$
11,018


For the six months ended June 30, 2021
	Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	37,970	$	21,929	$	16,041	$	4,037	$	12,004	$	0	$	12,004
Business Wireline	12,098		7,419		4,679		2,571		2,108		0		2,108
Consumer Wireline	6,238		4,114		2,124		1,531		593		0		593
Total Communications	56,306		33,462		22,844		8,139		14,705		0		14,705





WarnerMedia	17,317		13,337		3,980		328		3,652		117		3,769
Latin America
Vrio	1,492		1,321		171		231		(60)		(2)		(62)
Mexico	1,319		1,287		32		295		(263)		0		(263)
Total Latin America	2,811		2,608		203		526		(323)		(2)		(325)
Segment Total	76,434		49,407		27,027		8,993		18,034		$	115	$	18,149
Corporate and Other
Corporate1	787		2,373		(1,586)		65		(1,651)
Video	13,364		10,935		2,429		312		2,117
Acquisition-related items	0		37		(37)		2,200		(2,237)
Certain significant items	0		4,612		(4,612)		0		(4,612)
Eliminations and consolidations	(2,601)		(1,880)		(721)		0		(721)
AT&T Inc.	$	87,984	$	65,484	$	22,500	$	11,570	$	10,930
1Operations and Support Expenses include $1,341 for the reclassification of prior service credit amortization.

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2019

Revenues

Operations and Support Expenses

EBITDA

Depreciation and Amortization

Operating Income (Loss)

Equity in Net
Income (Loss) of
Affiliates

Segment Contribution
Communications

Mobility
$
34,655

$
19,563

$
15,092

$
4,016

$
11,076

$
-

$
11,076
Entertainment Group

22,696

17,042

5,654

2,662

2,992

-

2,992
Business Wireline

13,085

8,007

5,078

2,464

2,614

-

2,614
Total Communications

70,436

44,612

25,824

9,142

16,682

-

16,682
WarnerMedia

Turner

6,853

4,353

2,500

99

2,401

36

2,437
Home Box Office

3,226

2,052

1,174

34

1,140

30

1,170
Warner Bros.

6,907

5,837

1,070

83

987

6

993
Eliminations and other

654

347

307

44

263

50

313
Total WarnerMedia

17,640

12,589

5,051

260

4,791

122

4,913
Latin America

Vrio

2,099

1,747

352

334

18

12

30
Mexico

1,376

1,538

(162)

250

(412)

-

(412)
Total Latin America

3,475

3,285

190

584

(394)

12

(382)
Segment Total

91,551

60,486

31,065

9,986

21,079

$
134

$
21,213
Corporate and Other

Corporate

883

1,426

(543)

374

(917)

Acquisition-related items

(72)

389

(461)

3,948

(4,409)

Certain significant items

-

342

(342)

-

(342)

Eliminations and consolidations

(2,578)

(1,899)

(679)

(1)

(678)

AT&T Inc.
$
89,784

$
60,744

$
29,040

$
14,307

$
14,733

For the six months ended June 30, 2020
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net
Income (Loss) of
Affiliates Segment Contribution
Communications
Mobility $ 34,551 $ 18,901 $ 15,650 $ 4,057 $ 11,593 $ 0 $ 11,593
Business Wireline 12,571 7,601 4,970 2,587 2,383 0 2,383
Consumer Wireline 6,162 3,807 2,355 1,442 913 0 913
Total Communications 53,284 30,309 22,975 8,086 14,889 0 14,889
WarnerMedia 14,493 10,261 4,232 325 3,907 19 3,926
Latin America
Vrio 1,639 1,444 195 274 (79) 12 (67)
Mexico 1,183 1,252 (69) 249 (318) 0 (318)
Total Latin America 2,822 2,696 126 523 (397) 12 (385)
Segment Total 70,599 43,266 27,333 8,934 18,399 $ 31 $ 18,430
Corporate and Other
Corporate1
1,123 2,081 (958) 189 (1,147)
Video 14,428 11,829 2,599 1,184 1,415
Acquisition-related items 0 393 (393) 4,201 (4,594)
Certain significant items 0 2,426 (2,426) 0 (2,426)
Eliminations and consolidations (2,421) (1,791) (630) (1) (629)
AT&T Inc. $ 83,729 $ 58,204 $ 25,525 $ 14,507 $ 11,018
1Operations and Support Expenses include $1,223 for the reclassification of prior service credit amortization.

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Communications	$	7,340	$	7,488	$	14,705	$	14,889
WarnerMedia	1,739		1,912		3,769		3,926
Latin America	(152)		(201)		(325)		(385)
Segment Contribution	8,927		9,199		18,149		18,430
Reconciling Items:
Corporate and Other	(829)		(579)		(1,651)		(1,147)
Video	1,216		619		2,117		1,415
Merger costs	0		(211)		(37)		(393)
Amortization of intangibles acquired	(1,069)		(2,145)		(2,200)		(4,201)
Asset impairments and abandonments	(4,555)		(2,319)		(4,555)		(2,442)
Gain on spectrum transaction1	0		0		0		900
Employee separation costs and benefit-related losses	0		(765)		(57)		(884)
Segment equity in net income of affiliates	(49)		(12)		(115)		(31)
Eliminations and consolidations	(372)		(255)		(721)		(629)
AT&T Operating Income	3,269		3,532		10,930		11,018
Interest Expense	1,684		2,041		3,554		4,059
Equity in net income (loss) of affiliates	41		(10)		93		(16)
Other income (expense) - net	999		1,017		5,220		1,820
Income Before Income Taxes	$	2,625	$	2,498	$	12,689	$	8,763

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

Three months ended
June 30,

Six months ended
June 30,

2020

2019

2020

2019
Communications
$
8,112

$
8,671

$
16,315

$
16,682
WarnerMedia

1,917

2,350

3,930

4,913
Latin America

(201)

(209)

(385)

(382)
Segment Contribution

9,828

10,812

19,860

21,213
Reconciling Items:

Corporate and Other

(589)

(485)

(1,162)

(917)
Merger and integration items

(211)

(346)

(393)

(461)
Amortization of intangibles acquired

(2,145)

(1,960)

(4,201)

(3,948)
Impairments

(2,319)

-

(2,442)

-
Gain on spectrum transaction¹

-

-

900

-
Employee separation costs and benefit-related losses

(765)

(94)

(884)

(342)
Segment equity in net income of affiliates

(12)

(67)

(31)

(134)
Eliminations and consolidations

(255)

(360)

(629)

(678)
AT&T Operating Income

3,532

7,500

11,018

14,733
Interest Expense

2,041

2,149

4,059

4,290
Equity in net income (loss) of affiliates

(10)

40

(16)

33
Other income (expense) - net

1,017

(318)

1,820

(32)
Income Before Income Taxes
$
2,498

$
5,073

$
8,763

$
10,444
¹
Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income.

The following ~~table~~tables presents intersegment revenues and assets by segment:

Intersegment Reconciliation

Three months ended
June 30,
Six months ended
June 30,

2020

2019
2020

2019
Intersegment Revenues

Communications
$
2

$
8
$
4

$
8
WarnerMedia

774

861

1,591

1,719
Latin America

-

-

-

-
Total Intersegment Revenues

776

869

1,595

1,727
Consolidations

349

453

826

851
Eliminations and consolidations
$
1,125

$
1,322
$
2,421

$
2,578

Intersegment Reconciliation
Three months ended
June 30, Six months ended
June 30,
2021 2020 2021 2020
Intersegment Revenues
Communications $ 3 $ 2 $ 6 $ 4
WarnerMedia 840 774 1,678 1,591
Latin America 0 0 0 0
Total Intersegment Revenues 843 776 1,684 1,595
Consolidations 468 349 917 826
Eliminations and consolidations $ 1,311 $ 1,125 $ 2,601 $ 2,421

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 5. REVENUE RECOGNITION

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

For the three months ended June 30, 2020

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
13,611

$
-

$
-

$
-

$
-

$
58

$
-

$
3,480

$
17,149
Entertainment Group

-

2,092

560

6,682

-

294

397

44

10,069
Business Wireline

-

3,320

2,067

-

-

-

782

205

6,374
WarnerMedia

Turner

-

-

-

1,804

334

796

54

-

2,988
Home Box Office

-

-

-

1,441

181

-

5

-

1,627
Warner Bros.

-

-

-

16

3,179

1

60

-

3,256
Eliminations and other

-

-

-

71

(1,516)

378

10

-

(1,057)
Latin America

Vrio

-

-

-

752

-

-

-

-

752
Mexico

345

-

-

-

-

-

-

135

480
Corporate and Other

178

10

152

-

-

-

62

35

437
Eliminations and

consolidations

-

-

-

-

(765)

(294)

(66)

-

(1,125)
Total Operating Revenues
$
14,134

$
5,422

$
2,779

$
10,766

$
1,413

$
1,233

$
1,304

$
3,899

$
40,950

Revenue Categories

The following tables set forth reported revenue by category and by business unit, prior period amounts have been recast to conform to the current period presentation with our first quarter 2021 segment updates (see Note 4).


For the three months ended June 30, 2021
	Communications
	Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	$	14,252	$	0	$	0	$	0	$	447	$	27	$	0	$	14,726
Video service	0		0		0		0		749		6,197		0		6,946
Business service	0		5,860		0		0		0		0		0		5,860
Broadband	0		0		2,266		0		0		0		0		2,266
Subscription	0		0		0		3,961		0		0		0		3,138
DTC (HBO Max)1	0		0		0		0		0		0		(253)
Other2	0		0		0		0		0		0		(570)
Content	0		0		0		3,492		0		0		0		2,876
DTC (HBO Max)3	0		0		0		(392)		0		0		0
Other3	0		0		0		(224)		0		0		0
Advertising	94		0		0		1,739		0		410		(410)		1,833
Legacy voice and data	0		0		504		0		0		113		0		617
Other	0		0		336		215		0		221		(78)		694
Total Service	14,346		5,860		3,106		8,791		1,196		6,968		(1,311)		38,956
Equipment	4,590		192		34		0		241		32		0		5,089
Total	$	18,936	$	6,052	$	3,140	$	8,791	$	1,437	$	7,000	$	(1,311)	$	44,045
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($162 with Mobility and $91 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.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
13,753

$
-

$
-

$
-

$
-

$
71

$
-

$
3,468

$
17,292
Entertainment Group

-

2,109

658

7,636

-

399

563

3

11,368
Business Wireline

-

3,208

2,324

-

-

-

897

178

6,607
WarnerMedia

Turner

-

-

-

1,943

111

1,266

90

-

3,410
Home Box Office

-

-

-

1,516

198

-

2

-

1,716
Warner Bros.

-

-

-

23

3,175

10

181

-

3,389
Eliminations and other

-

-

-

54

(237)

494

9

-

320
Latin America

Vrio

-

-

-

1,032

-

-

-

-

1,032
Mexico

479

-

-

-

-

-

-

246

725
Corporate and Other

150

14

7

-

-

-

210

39

420
Eliminations and

consolidations

-

-

-

-

(840)

(399)

(83)

-

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

$
5,331

$
2,989

$
12,204

$
2,407

$
1,841

$
1,869

$
3,934

$
44,957


For the three months ended June 30, 2020
	Communications
	Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	$	13,611	$	0	$	0	$	0	$	345	$	179	$	0	$	14,135
Video service	0		0		0		0		752		6,685		0		7,437
Business service	0		6,101		0		0		0		78		0		6,179
Broadband	0		0		2,092		0		0		0		0		2,092
Subscription	0		0		0		3,265		0		0		0		2,500
DTC (HBO Max)	0		0		0		0		0		0		(61)
Other1	0		0		0		0		0		0		(704)
Content	0		0		0		3,694		0		0		0		2,208
DTC (HBO Max)2	0		0		0		(1,248)		0		0		0
Other3	0		0		0		(238)		0		0		0
Advertising	58		0		0		1,171		0		294		(294)		1,229
Legacy voice and data	0		0		560		0		0		153		0		713
Other	0		0		398		84		0		142		(66)		558
Total Service	13,669		6,101		3,050		6,728		1,097		7,531		(1,125)		37,051
Equipment	3,480		204		1		0		135		79		0		3,899
Total	$	17,149	$	6,305	$	3,051	$	6,728	$	1,232	$	7,610	$	(1,125)	$	40,950
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($37 with Mobility and $24 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.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2020

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
27,503

$
-

$
-

$
-

$
-

$
134

$
-

$
6,914

$
34,551
Entertainment Group

-

4,201

1,141

13,664

-

707

816

55

20,584
Business Wireline

-

6,595

4,196

-

-

-

1,535

380

12,706
WarnerMedia

Turner

-

-

-

3,853

420

1,753

124

-

6,150
Home Box Office

-

-

-

2,779

338

-

7

-

3,124
Warner Bros.

-

-

-

26

6,239

3

228

-

6,496
Eliminations and other

-

-

-

134

(2,162)

887

33

-

(1,108)
Latin America

Vrio

-

-

-

1,639

-

-

-

-

1,639
Mexico

812

-

-

-

-

-

-

371

1,183
Corporate and Other

295

24

286

-

-

-

145

75

825
Eliminations and

consolidations

-

-

-

-

(1,559)

(707)

(155)

-

(2,421)
Total Operating Revenues
$
28,610

$
10,820

$
5,623

$
22,095

$
3,276

$
2,777

$
2,733

$
7,795

$
83,729


For the six months ended June 30, 2021
	Communications
	Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	$	28,217	$	0	$	0	$	0	$	886	$	37	$	0	$	29,140
Video service	0		0		0		0		1,492		12,493		0		13,985
Business service	0		11,732		0		0		0		70		0		11,802
Broadband	0		0		4,471		0		0		0		0		4,471
Subscription	0		0		0		7,791		0		0		0		6,148
DTC (HBO Max)1	0		0		0		0		0		0		(488)
Other2	0		0		0		0		0		0		(1,155)
Content	0		0		0		6,912		0		0		0		5,653
DTC (HBO Max)3	0		0		0		(723)		0		0		0
Other3	0		0		0		(536)		0		0		0
Advertising	177		0		0		3,476		0		798		(798)		3,653
Legacy voice and data	0		0		1,023		0		0		237		0		1,260
Other	0		0		668		397		0		443		(160)		1,348
Total Service	28,394		11,732		6,162		17,317		2,378		14,078		(2,601)		77,460
Equipment	9,576		366		76		0		433		73		0		10,524
Total	$	37,970	$	12,098	$	6,238	$	17,317	$	2,811	$	14,151	$	(2,601)	$	87,984
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($307 with Mobility and $181 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.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2019

Service Revenues

Wireless

Advanced Data

Legacy Voice & Data

Subscription

Content

Advertising

Other

Equipment

Total
Communications

Mobility
$
27,315

$
-

$
-

$
-

$
-

$
138

$
-

$
7,202

$
34,655
Entertainment Group

-

4,179

1,341

15,360

-

749

1,063

4

22,696
Business Wireline

-

6,380

4,721

-

-

-

1,647

337

13,085
WarnerMedia

Turner

-

-

-

3,908

246

2,527

172

-

6,853
Home Box Office

-

-

-

2,850

371

-

5

-

3,226
Warner Bros.

-

-

-

44

6,507

20

336

-

6,907
Eliminations and other

-

-

-

103

(389)

928

12

-

654
Latin America

Vrio

-

-

-

2,099

-

-

-

-

2,099
Mexico

921

-

-

-

-

-

-

455

1,376
Corporate and Other

272

27

14

-

-

-

419

79

811
Eliminations and

consolidations

-

-

-

-

(1,677)

(749)

(152)

-

(2,578)
Total Operating Revenues
$
28,508

$
10,586

$
6,076

$
24,364

$
5,058

$
3,613

$
3,502

$
8,077

$
89,784

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~


For the six months ended June 30, 2020
	Communications
	Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	$	27,503	$	0	$	0	$	0	$	812	$	295	$	0	$	28,610
Video service	0		0		0		0		1,639		13,669		0		15,308
Business service	0		12,192		0		0		0		155		0		12,347
Broadband	0		0		4,201		0		0		0		0		4,201
Subscription	0		0		0		6,665		0		0		0		5,106
DTC (HBO Max)1	0		0		0		0		0		0		(61)
Other2	0		0		0		0		0		0		(1,498)
Content	0		0		0		6,997		0		0		0		4,880
DTC (HBO Max)3	0		0		0		(1,649)		0		0		0
Other3	0		0		0		(468)		0		0		0
Advertising	134		0		0		2,636		0		707		(707)		2,770
Legacy voice and data	0		0		1,141		0		0		287		0		1,428
Other	0		0		817		312		0		310		(155)		1,284
Total Service	27,637		12,192		6,159		14,493		2,451		15,423		(2,421)		75,934
Equipment	6,914		379		3		0		371		128		0		7,795
Total	$	34,551	$	12,571	$	6,162	$	14,493	$	2,822	$	15,551	$	(2,421)	$	83,729
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($37 with Mobility and $24 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.

Deferred Customer Contract Acquisition and Fulfillment Costs

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

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


	June 30,		December 31,
Consolidated Balance Sheets	2021		2020
Deferred Acquisition Costs
Prepaid and other current assets	$	3,750	$	3,087
Other Assets	2,901		3,198
Total deferred customer contract acquisition costs	$	6,651	$	6,285
Deferred Fulfillment Costs
Prepaid and other current assets	$	4,720	$	4,118
Other Assets	4,256		5,634
Total deferred customer contract fulfillment costs	$	8,976	$	9,752

AT&T INC.

JUNE 30, 2021

June 30,

December 31,
Consolidated Balance Sheets

2020

2019
Deferred Acquisition Costs

Other current assets
$
2,630

$
2,462
Other Assets

3,117

2,991
Total deferred customer contract acquisition costs
$
5,747

$
5,453

Deferred Fulfillment Costs

Other current assets
$
4,362

$
4,519
Other Assets

5,980

6,439
Total deferred customer contract fulfillment costs
$
10,342

$
10,958

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Deferred customer contract acquisition and fulfillment costs included in “Prepaid and other current assets” at June 30, 2021, include $1,465 of deferred acquisition costs ($414 of which were reclassified from “Other Assets”) and $2,116 of deferred fulfillment costs ($916 of which were reclassified from “Other Assets”) principally for our Video business, reflecting the held-for-sale treatment (see Note 8).

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


	June 30,		June 30,
Consolidated Statements of Income	2021		2020
Deferred acquisition cost amortization	$	1,623	$	1,278
Deferred fulfillment cost amortization	2,422		2,636

June 30,

June 30,
Consolidated Statements of Income

2020

2019
Deferred acquisition cost amortization
$
1,278

$
1,026
Deferred fulfillment cost amortization

2,636

2,381

Contract Assets and Liabilities

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

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

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


	June 30,		December 31,
Consolidated Balance Sheets	2021		2020
Contract asset	$	4,072	$	3,501
Current portion in “Prepaid and other current assets”	2,642		2,054
Contract liability	6,431		6,879
Current portion in “Advanced billings and customer deposits”	4,735		6,071
Current portion in “Accounts payable and accrued liabilities”	1,100		0

June 30,

December 31,
Consolidated Balance Sheets

2020

2019

Contract asset

$
2,546

$
2,472
Contract liability

6,533

6,999

Our beginning of period contract liability recorded as customer contract revenue during ~~2020~~2021 was ~~$5,004.~~

$5,023.

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

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

Remaining Performance Obligations

Remaining performance obligations primarily relate to our Communications segment and represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In our WarnerMedia segment, the most significant remaining performance obligations relate to the licensing of theatrical and television content which will be made available to customers at some point in the future. In determining the transaction price allocated, we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless, video and residential internet agreements.

Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of June 30, ~~2020,~~2021, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$36,362,~~$42,528, of which we expect to recognize approximately 82% by the end of ~~2021,~~2022, with the balance recognized thereafter. Approximately $2,027 of the $42,528 remaining performance obligation relates to the Video business.

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 6. PENSION AND POSTRETIREMENT BENEFITS

Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement. We do not have significant funding requirements in ~~2020.~~

2021.

We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required. We anticipate total distributions from the pension plan will exceed the threshold of service and interest costs for 2021, requiring us to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter-end in 2021, as we expect settlements to occur during each quarter. These remeasurements resulted in the recognition of an actuarial gain of $2,844 for the first quarter and an actuarial loss of $197 for the second quarter, totaling $2,647 gain for the six months ended June 30, 2021.

As part of our 2021 remeasurements, we updated the weighted-average discount rate used to measure our pension benefit obligation from 2.70% at December 31, 2020 to 3.30% at March 31, 2021, and to 3.00% at June 30, 2021. The discount rate in effect for determining pension service and interest costs after our June 30 remeasurement is 3.30% and 2.30% respectively. The remeasurements also reflect actual returns on pension plan assets of 4.29% (six-month rate) relative to our expected long-term rate of 6.75% (annual rate).

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

Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Pension cost:
Service cost – benefits earned during the period $ 228 $ 258 $ 482 $ 515
Interest cost on projected benefit obligation 339 422 630 844
Expected return on assets (850) (890) (1,727) (1,779)
Amortization of prior service credit (36) (29) (72) (57)
Actuarial (gain) loss 197 0 (2,647) 0
Net pension (credit) cost $ (122) $ (239) $ (3,334) $ (477)
Postretirement cost:
Service cost – benefits earned during the period $ 12 $ 13 $ 23 $ 26
Interest cost on accumulated postretirement benefit obligation 52 104 105 208
Expected return on assets (38) (45) (76) (89)
Amortization of prior service credit (635) (582) (1,269) (1,164)
Net postretirement (credit) cost $ (609) $ (510) $ (1,217) $ (1,019)
Combined net pension and postretirement (credit) cost $ (731) $ (749) $ (4,551) $ (1,496)

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Pension cost:

Service cost – benefits earned during the period
$
258

$
243

$
515

$
483
Interest cost on projected benefit obligation

422

508

844

1,057
Expected return on assets

(890)

(880)

(1,779)

(1,731)
Amortization of prior service credit

(29)

(24)

(57)

(57)
Actuarial (gain) loss

-

1,699

-

2,131
Net pension (credit) cost
$
(239)

$
1,546

$
(477)

$
1,883

Postretirement cost:

Service cost – benefits earned during the period
$
13

$
18

$
26

$
36
Interest cost on accumulated postretirement benefit obligation

104

186

208

372
Expected return on assets

(45)

(56)

(89)

(112)
Amortization of prior service credit

(582)

(426)

(1,164)

(852)
Net postretirement (credit) cost
$
(510)

$
(278)

$
(1,019)

$
(556)

Combined net pension and postretirement (credit) cost
$
(749)

$
1,268

$
(1,496)

$
1,327

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental pension benefits costs not included in the table above were ~~$19~~$11 and ~~$25~~$19 in the second quarter and ~~$38~~$23 and ~~$50~~$38 for the first six months of 2021 and 2020, ~~and 2019,~~ respectively.

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE

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

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

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

2020.

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

Long-Term Debt and Other Financial Instruments

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


	June 30, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures1	$	171,445	$	199,544	$	155,209	$	187,224
Commercial paper	6,571		6,571		0		0

Investment securities2	3,300		3,300		3,249		3,249
1Includes credit agreement borrowings. Amounts at June 30, 2021 exclude $200 associated with Video business and $35 associated with Vrio, which were classified as held-for-sale (see Note 8).
2Excludes investments accounted for under the equity method.

June 30, 2020

December 31, 2019

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value
Notes and debentures¹
$
164,099

$
190,284

$
161,109

$
182,124
Commercial paper

3,001

3,001

-

-
Bank borrowings

-

-

4

4
Investment securities²

3,632

3,632

3,723

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

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

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities,” ~~“Other~~“Prepaid and other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.

June 30, 2020

Level 1

Level 2

Level 3

Total
Equity Securities

Domestic equities
$
832

$
-

$
-

$
832
International equities

141

-

-

141
Fixed income equities

230

-

-

230
Available-for-Sale Debt Securities

-

1,522

-

1,522
Asset Derivatives

Cross-currency swaps

-

67

-

67
Foreign exchange contracts

-

14

-

14
Liability Derivatives

Interest rate swaps

-

(3)

-

(3)
Cross-currency swaps

-

(6,767)

-

(6,767)
Foreign exchange contracts

-

(10)

-

(10)

June 30, 2021
Level 1 Level 2 Level 3 Total
Equity Securities
Domestic equities $ 1,142 $ 0 $ 0 $ 1,142
International equities 213 0 0 213
Fixed income equities 231 0 0 231
Available-for-Sale Debt Securities 0 1,420 0 1,420
Asset Derivatives
Cross-currency swaps 0 856 0 856
Foreign exchange contracts 0 7 0 7
Liability Derivatives
Cross-currency swaps 0 (2,207) 0 (2,207)
Foreign exchange contracts 0 (17) 0 (17)


	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.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

December 31, 2019

Level 1

Level 2

Level 3

Total
Equity Securities

Domestic equities
$
844

$
-

$
-

$
844
International equities

183

-

-

183
Fixed income equities

229

-

-

229
Available-for-Sale Debt Securities

-

1,444

-

1,444
Asset Derivatives

Interest rate swaps

-

2

-

2
Cross-currency swaps

-

172

-

172
Interest rate locks

-

11

-

11
Foreign exchange contracts

-

89

-

89
Liability Derivatives

Cross-currency swaps

-

(3,187)

-

(3,187)
Interest rate locks

-

(95)

-

(95)

Investment Securities

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

AT&T INC.

JUNE 30, 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				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Total gains (losses) recognized on equity securities	$	87	$	161	$	142	$	(42)
Gains (Losses) recognized on equity securities sold	0		9		0		(24)
Unrealized gains (losses) recognized on equity securities held at end of period	$	87	$	152	$	142	$	(18)

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Total gains (losses) recognized on equity securities
$
161

$
50

$
(42)

$
210
Gains (Losses) recognized on equity securities sold

9

9

(24)

27
Unrealized gains (losses) recognized on equity securities

held at end of period

152

41

(18)

183

At June 30, ~~2020,~~2021, available-for-sale debt securities totaling ~~$1,522~~$1,420 have maturities as follows - less than one year: ~~$64;~~$51; one to three years: ~~$175;~~$195; three to five years: ~~$156;~~$186; five or more years: ~~$1,127.~~

$988.

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

Derivative Financial Instruments

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

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

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

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

~~Accrued~~changes in spot rates on foreign denominated debt. The changes in fair values of cross-currency swaps attributable to the cross-currency basis spread are considered excluded components.

Unrealized and realized gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged. In instances where we have designated excluded components related to fair value hedges, unrealized gains or losses on such excluded components are recorded as a component of accumulated OCI and recognized into earnings through the swap accrual. Unrealized gains on derivatives designated as fair value hedges are recorded at fair market value as assets, and unrealized losses are recorded at fair market value as liabilities. ~~Changes~~Except for excluded components, changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, no ineffectiveness was measured on fair value ~~hedges~~.

hedges.

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.

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

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of accumulated OCI and are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt. Over the next 12 months, we expect to reclassify ~~$98~~$81 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.

We settled all interest rate locks in May 2020 in conjunction with issuance of fixed rate debt obligations that the interest rate locks were hedging. We paid $731 that was largely offset by the return of collateral at the time of settlement. Cash flows from the interest rate lock settlements and return of collateral were reported as Financing Activities in our Statement of Cash Flows, consistent with our accounting policy for these instruments.

Net Investment Hedging We have designated €1,450 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or 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 losses on net investment hedges recognized in accumulated OCI in the second quarter were ~~$30~~$19 and net gains for the first six months of ~~2020~~2021 were ~~$5.~~$51.

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 June 30, ~~2020,~~2021, we had posted collateral of ~~$694~~$68 (a deposit asset) and held collateral of ~~$16~~$398 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one ~~rating~~ level by ~~Fitch Ratings,~~S&P and one level by Moody’s before the final collateral exchange in June, we would have been required to post additional collateral of ~~$76.~~$57. If AT&T’s credit rating had been downgraded ~~four~~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 ~~$5,487.~~$1,550. If DIRECTV

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

Holdings LLC’s credit rating had been downgraded below BBB- by S&P, we would have been required to post additional collateral of ~~$321.~~$3. 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.

Following are the notional amounts of our outstanding derivative positions:


	June 30,		December 31,
	2021		2020

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

Foreign exchange contracts	516		90
Total	$	42,702	$	40,835

June 30,

December 31,

2020

2019
Interest rate swaps
$
21

$
853
Cross-currency swaps

45,606

42,325
Interest rate locks

-

3,500
Foreign exchange contracts

298

269
Total
$
45,925

$
46,947

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


Effect of Derivatives on the Consolidated Statements of Income
	Three months ended				Six months ended
	June 30,				June 30,
Fair Value Hedging Relationships	2021		2020		2021		2020
Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	$	(1)	$	(14)	$	(2)	$	(4)
Gain (Loss) on long-term debt	1		14		2		4
Cross-currency swaps:
Gain (Loss) on cross-currency swaps	16		0		(32)		0
Gain (Loss) on long-term debt	(16)		0		32		0
Gain (Loss) recognized in accumulated OCI	2		0		1		0

Effect of Derivatives on the Consolidated Statements of Income

Three months ended

Six months ended

June 30,

June 30,
Fair Value Hedging Relationships
2020

2019

2020

2019
Interest rate swaps (Interest expense):

Gain (Loss) on interest rate swaps
$
(14)

$
35

$
(4)

$
59
Gain (Loss) on long-term debt

14

(35)

4

(59)

In addition, the net swap settlements that accrued and settled in the ~~quarters ended June 30, 2020 and 2019~~periods above were offset against ~~interest~~“Interest expense.”

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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

Three months ended

Six months ended

June 30,

June 30,
Cash Flow Hedging Relationships
2020

2019

2020

2019
Cross-currency swaps:

Gain (Loss) recognized in accumulated OCI
$
809

$
(763)

$
(3,170)

$
(595)
Foreign exchange contracts:

Gain (Loss) recognized in accumulated OCI

2

4

(11)

(3)
Other income (expense) - net reclassified from

accumulated OCI into income

(3)

7

13

10
Interest rate locks:

Gain (Loss) recognized in accumulated OCI

(12)

(23)

(648)

(23)
Interest income (expense) reclassified from

accumulated OCI into income

(18)

(16)

(34)

(32)

Three months ended Six months ended
June 30, June 30,
Cash Flow Hedging Relationships 2021 2020 2021 2020
Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI $ (1,149) $ 809 $ (505) $ (3,170)
Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI (4) 2 0 (11)
Other income (expense) - net reclassified from
accumulated OCI into income
(5) (3) (10) 13
Interest rate locks:
Gain (Loss) recognized in accumulated OCI 0 (12) 0 (648)
Interest income (expense) reclassified from
accumulated OCI into income
(23) (18) (48) (34)

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS

Acquisitions

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

Spectrum ~~Auctions~~Auction In ~~June 2020, we completed~~On February 24, 2021, the ~~acquisition of $2,379 of 37/39 GHz spectrum in a~~ Federal Communications Commission (FCC) ~~auction.~~ ~~Prior~~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 ~~auction, we exchanged the 39 GHz licenses with a book value~~FCC an upfront deposit of ~~approximately $300 that were previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids~~$550 in 2020 and ~~recorded a $900 gain~~cash payments totaling $22,856 in the first quarter of ~~2020. These vouchers yielded~~2021, for a ~~value~~total of $23,406 to date. The licenses were granted by the FCC in July 2021 and remain subject to clearing. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum, expected by the end of 2021, and $2,112 upon clearing of Phase II spectrum, expected by the end of 2023. Additionally, we will be responsible for approximately ~~$1,200,~~$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 and capitalized interest 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.

The amounts deposited toward the acquisition of the licenses and capitalized interest were reported as “Deposits on Wireless Licenses” on our consolidated balance sheet as of June 30, 2021, and were reclassified to “Licenses - Net” upon receipt in July 2021. Interest is capitalized until the spectrum is ready for its intended use.

Dispositions

Video Business On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV (New DTV), which is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions. We began accounting for our investment in New DTV under the equity method, effective August 1, 2021. After the close of the transaction, New DTV issued $6,200 of long-term debt on August 2, 2021.

In connection with the transaction, we contributed our U.S. 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 (collectively “equity considerations”). Upon close, we received approximately $7,130 in cash from New DTV ($7,600, net of $470 cash on hand) and transferred $195 of DIRECTV debt. TPG contributed approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,100 over the remaining period of the contract.

Due to the timing of the transaction, the separation of shared operations, and finalization of commercial and transition service arrangements, our assessment of the third-quarter 2021 financial impacts of the sale is ongoing.

Under separate transition services agreements, we will provide New DTV certain operational support for up to three years. We also have entered into commercial arrangements, for up to five years, to provide network transport for U-verse products and sales services.

AT&T INC.

JUNE 30, 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.

The historical characteristics of the assets and liabilities of the Video operations, using June 30, 2021 balances, is as follows:


Assets held-for-sale:
Current assets	$	3,616
Property, plant and equipment - net	2,572
Licenses, net	5,798
Other intangible assets, net	1,634
Other assets	1,846
Total Video assets (included in “Prepaid and other current assets” beginning first quarter 2021)	$	15,466

Liabilities related to assets held-for-sale:
Current liabilities	$	3,592
Long-term debt	206
Other noncurrent liabilities	351
Total Video liabilities (included in “Accounts payable and accrued liabilities” beginning first quarter 2021)	$	4,149

Pending Dispositions

WarnerMedia On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery, Inc. (Discovery). The agreement is structured as a Reverse Morris Trust transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata dividend, an exchange offer, or a combination of both, followed by its combination with Discovery. The transaction is expected to be tax-free to AT&T and AT&T’s shareholders. AT&T will receive approximately $43,000 (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt; and AT&T’s shareholders will receive stock representing approximately 71% of the new company; Discovery shareholders will own approximately 29% of the new company. The transaction is expected to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. No vote is required by AT&T shareholders.

The merger agreement contains certain customary termination rights for AT&T and Discovery, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will require Discovery to pay AT&T a termination fee of $720 or AT&T to pay Discovery a termination fee of $1,770.

Magallanes, Inc. (Spinco), a subsidiary of AT&T, entered into a $41,500 commitment letter (Bridge Loan) on May 17, 2021. On June 4, 2021, Spinco entered into a $10,000 term loan credit agreement (Spinco Term Loan) and reduced the aggregate commitment amount under the Bridge Loan to $31,500. There have been no draws on the Bridge Loan or the Spinco Term Loan. In the event advances are made under the Bridge Loan or Spinco Term Loan, those advances will be used by Spinco to finance a portion of the cash distribution to AT&T in connection with the transaction.

Also, on June 23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic Ltd. (Playdemic), to Electronic Arts (EA) for approximately $1,400 in cash. Playdemic was ~~applied toward our gross bids.~~excluded from the pending WarnerMedia/Discovery transaction. In the second quarter of ~~2020,~~2021, we ~~made~~classified Playdemic as held-for-sale and included $564 of goodwill in “Prepaid and other current assets,” on our consolidated balance sheet at June 30, 2021. This transaction is subject to customary regulatory approvals and is expected to close by the ~~final cash payment~~end of ~~$949, bringing~~2021.

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Vrio On July 21, 2021, we entered into an agreement to sell our Latin America video operations, Vrio, to Grupo Werthein. In the ~~total cash payment~~second quarter of 2021, we classified the Vrio disposal group as held-for-sale and reported the disposal group at fair value less cost to ~~$1,186.~~sell, which resulted in a noncash, pre-tax impairment charge of $4,555, including approximately $2,100 related to accumulated foreign currency translation adjustments and $2,500 related to property, plant and equipment and intangible assets. Approximately $80 of the impairment was attributable to noncontrolling interest. At June 30, 2021, our consolidated balance sheet included $883 of Vrio held-for-sale assets reported in “Prepaid and other current assets,” primarily related to deferred customer contract acquisition and fulfillment costs, prepaids and other deferred charges, and $2,849 of related liabilities reported in “Accounts payable and accrued liabilities,” primarily for reserves associated with accumulated foreign currency translation adjustments, which will reverse against accumulated other comprehensive income upon close of the transaction.

The transaction is expected to close in early 2022, pending customary closing conditions. We will retain our 41.3% interest in SKY Mexico, a leading pay-TV provider in Mexico.

NOTE 9. SALES OF RECEIVABLES

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

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

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

June 30, 2020

December 31, 2019

Equipment

Equipment

Installment

Revolving

Installment

Revolving
Gross receivables:
$
3,931

$
3,745

$
4,576

$
3,324
Balance sheet classification

Accounts receivable

Notes receivable

2,056

-

2,467

-
Trade receivables

496

3,547

477

2,809
Other Assets

Noncurrent notes and trade receivables

1,379

198

1,632

515

Outstanding portfolio of receivables derecognized from

our consolidated balance sheets

8,917

5,300

9,713

4,300
Cash proceeds received, net of remittances¹

6,429

5,300

7,211

4,300
¹
Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

June 30, 2021 December 31, 2020
Equipment Equipment
Installment Revolving Installment Revolving
Gross receivables: $ 3,775 $ 3,714 $ 5,565 $ 3,909
Balance sheet classification
   Accounts receivable
     Notes receivable 1,933 0 2,716 0
     Trade receivables 435 3,518 554 3,715
   Other Assets
     Noncurrent notes and trade receivables 1,407 196 2,295 194
Outstanding portfolio of receivables derecognized from
our consolidated balance sheets
9,454 5,891 7,827 5,300
Cash proceeds received, net of remittances1
6,735 5,891 5,646 5,300
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

Equipment Installment Receivables Program

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

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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

The following table sets forth a summary of equipment installment receivables sold under this program during the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Gross receivables sold	$	2,009	$	1,506	$	5,944	$	3,873
Net receivables sold1	1,963		1,449		5,789		3,722
Cash proceeds received	1,731		1,225		5,250		3,175
Deferred purchase price recorded	292		232		706		585
Guarantee obligation recorded	81		27		227		71
1Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Gross receivables sold
$
1,506

$
2,244

$
3,873

$
4,945
Net receivables sold¹

1,449

2,133

3,722

4,679
Cash proceeds received

1,225

1,920

3,175

4,195
Deferred purchase price recorded

232

261

585

570
Guarantee obligation recorded

27

93

71

194
¹
Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

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

The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated deferred purchase price during the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Fair value of repurchased receivables	$	350	$	285	$	623	$	573
Carrying value of deferred purchase price	326		281		579		558
Gain on repurchases1	$	24	$	4	$	44	$	15
1These gains are included in "Selling, general and administrative" in the consolidated statements of income.

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Fair value of repurchased receivables
$
285

$
235

$
573

$
658
Carrying value of deferred purchase price

281

225

558

632
Gain on repurchases¹
$
4

$
10

$
15

$
26
¹
These gains are included in “Selling, general and administrative” in the consolidated statements of income.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our deferred purchase price receivable was ~~$2,319~~$2,631 and ~~$2,336,~~$1,991, respectively, of which ~~$1,591~~$1,639 and ~~$1,569~~$1,476 are included in ~~“Other~~“Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$315~~$289 and ~~$384,~~$228, respectively, of which ~~$213~~$92 and ~~$148~~$161 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our deferred purchase price and guarantee obligation.

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

Revolving Receivables Program

~~In 2019, we entered into~~

We have a ~~one-year~~ revolving agreement to transfer up to ~~$4,300~~$6,000 of certain receivables through our bankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. InThis agreement is subject to renewal on an annual basis and the ~~first quarter of 2020, we~~transfer limit may be expanded ~~the program limit~~from time to ~~$5,300. In the second quarter of 2020, we extended the agreement by one year.~~time. As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). The transferred receivables are fully guaranteed by our bankruptcy-remote subsidiaries, which hold additional receivables in the amount of ~~$3,745~~$3,714 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. The obligation is

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding.

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

The following table sets forth a summary of receivables sold:


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Gross receivables sold/cash proceeds received1	$	5,137	$	3,805	$	10,341	$	8,027
Total collections under revolving agreement2	5,001		3,805		9,750		7,027

Net cash proceeds received	$	136	$	0	$	591	$	1,000

Net receivables sold3	$	5,132	$	3,819	$	10,257	$	7,957
Obligations recorded (reversed)	(131)		(12)		11		114
1Includes initial sales of receivables of $0 for each of the three months and $700 and $1,000 for the six months ended June 30, 2021 and 2020, respectively.
2Includes collections of $0 for each of the three months and $109 and $0 for the six months ended June 30, 2021 and 2020, respectively, that were not reinvested under the revolving agreement.
3Receivables net of allowance, return and incentive reserves and imputed interest.

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Gross receivables sold/cash proceeds received¹
$
3,805

$
4,452

$
8,027

$
5,852
Collections reinvested under revolving agreement

3,805

2,127

7,027

2,127
Net cash proceeds received (remitted)
$
-

$
2,325

$
1,000

$
3,725

Net receivables sold²
$
3,819

$
4,134

$
7,957

$
5,497
Obligations recorded (reversed)

(12)

384

114

436
¹
Includes initial sale of receivables of $0 and $2,325 for the three months and $1,000 and $3,725 for the six months ended

June 30, 2020 and 2019, respectively.

²
Receivables net of allowance, return and incentive reserves and imputed interest

NOTE 10. LEASES

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

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

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

~~Dollars in millions except per share amounts~~

The components of lease expense were as follows:

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019
Operating lease cost
$
1,449

$
1,610

$
2,826

$
2,852

Finance lease cost:

Amortization of right-of-use assets
$
73

$
70

$
140

$
136
Interest on lease obligation

36

42

77

84
Total finance lease cost
$
109

$
112

$
217

$
220

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

June 30,
December 31,

2020
2019

Operating Leases

Operating lease right-of-use assets
$
24,692
$
24,039

Accounts payable and accrued liabilities
$
3,474
$
3,451

Operating lease obligation

22,230

21,804

Total operating lease obligation
$
25,704
$
25,255

Finance Leases

Property, plant and equipment, at cost
$
3,468
$
3,534

Accumulated depreciation and amortization

(1,347)

(1,296)

Property, plant and equipment, net
$
2,121
$
2,238

Current portion of long-term debt
$
180
$
162

Long-term debt

1,683

1,872

Total finance lease obligation
$
1,863
$
2,034

Weighted-Average Remaining Lease Term (years)

Operating leases

8.5

8.4

Finance leases

10.2

10.7

Weighted-Average Discount Rate

Operating leases

4.2
%
4.7
%
Finance leases

8.2
%
8.5
%

Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Operating lease cost $ 1,431 $ 1,449 $ 2,889 $ 2,826
Finance lease cost:
Amortization of right-of-use assets $ 70 $ 73 $ 139 $ 140
Interest on lease obligation 41 36 80 77
Total finance lease cost $ 111 $ 109 $ 219 $ 217

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

~~Future~~

The following table provides supplemental cash flows information related to leases:


	Six months ended
	June 30,
	2021		2020
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations:
Operating cash flows for operating leases	$	2,509	$	2,424
Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease obligations	2,349		2,895

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


	June 30, 2021			December 31, 2020
Operating Leases
Operating lease right-of-use assets	$	24,390		$	24,714

Accounts payable and accrued liabilities	$	3,651		$	3,537
Operating lease obligation	21,637			22,202
Total operating lease obligation	$	25,288		$	25,739
Finance Leases
Property, plant and equipment, at cost	$	2,755		$	3,586
Accumulated depreciation and amortization	(1,106)			(1,361)
Property, plant and equipment, net	$	1,649		$	2,225

Current portion of long-term debt	$	161		$	189
Long-term debt	1,606			1,847
Total finance lease obligation	$	1,767		$	2,036

	June 30,
	2021			2020
Weighted-Average Remaining Lease Term (years)
Operating leases	8.3			8.5
Finance leases	8.8			10.2

Weighted-Average Discount Rate
Operating leases	3.9		%	4.2		%
Finance leases	8.0		%	8.2		%

AT&T INC.

JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table provides the expected future minimum maturities of lease ~~obligations are as follows:~~obligations:


At June 30, 2021	Operating		Finance
	Leases		Leases
Remainder of 2021	$	2,484	$	143
2022	4,829		290
2023	4,400		277
2024	3,864		257
2025	3,127		251
Thereafter	12,203		1,344
Total lease payments	30,907		2,562
Less: imputed interest	(5,619)		(795)
Total	$	25,288	$	1,767

At June 30, 2020
Operating

Finance

Leases

Leases
Remainder of 2020
$
2,447

$
190
2021

4,582

309
2022

4,277

291
2023

3,889

262
2024

3,357

242
Thereafter

13,031

1,632
Total lease payments

31,583

2,926
Less imputed interest

(5,879)

(1,063)
Total
$
25,704

$
1,863

~~NOTE 11. PREFERRED SHARES~~

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

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

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

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

So long as the preferred dividends are declared and paid on a timely basis on each series of preferred shares, there are no 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 ~~12.~~11. ADDITIONAL FINANCIAL INFORMATION

Cash and Cash Flows

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

June 30,

December 31,

2020

2019

2019

2018
Cash and cash equivalents

$
16,941

$
8,423

$
12,130

$
5,204
Restricted cash in Other current assets

3

15

69

61
Restricted cash in Other Assets

87

216

96

135
Cash and Cash Equivalents and Restricted Cash

$
17,031

$
8,654

$
12,295

$
5,400

payments.

The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets:


	June 30,				December 31,
	2021		2020		2020		2019
Cash and cash equivalents	$	11,869	$	16,941	$	9,740	$	12,130
Restricted cash in Prepaid and other current assets	6		3		9		69
Restricted cash in Other Assets	101		87		121		96
Cash and Cash Equivalents and Restricted Cash	$	11,976	$	17,031	$	9,870	$	12,295

The following table summarizes cash paid during the periods for interest, income taxes and spectrum:


Consolidated Statements of Cash Flows	Six months ended
	June 30,
Cash paid (received) during the period for:	2021		2020
Interest	$	3,861	$	4,202
Income taxes, net of refunds	418		(214)
Spectrum acquisitions1	22,886		1,046
1 Included as cash paid for “Acquisitions, net of cash acquired” on our consolidated statement of cash flows. Excludes interest during construction.

The following table summarizes interest capitalized during construction:
	Six months ended
	June 30,
Interest during construction:	2021		2020
Capital expenditures	$	(94)	$	(60)
Spectrum1	(257)		0
Interest During Construction	$	(351)	$	(60)
1 Included in “Acquisitions, net of cash acquired” on our consolidated statement of cash flows.

AT&T INC.

JUNE 30, ~~2020~~2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Consolidated Statements of Cash Flows
Six months ended

June 30,
Cash paid (received) during the period for:

2020

2019
Interest
$
4,202

$
4,410
Income taxes, net of refunds

(214)

(32)

Six months ended

June 30,

2020

2019
Cash Flows from Operating Activities

Cash paid for amounts included in lease obligations

Operating cash flows from operating leases

$
2,424

$
2,464

Supplemental Lease Cash Flow Disclosures

Operating lease right-of-use assets obtained

in exchange for new operating lease obligations

2,895

3,899

~~Other~~ Noncash Investing and Financing ActivitiesIn 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 ~~first~~ six months ended June 30, 2021 and 2020, we recorded vendor financing commitments related to capital investments of approximately ~~$1,680~~$1,778 and $1,680.

Total vendor financing payables included in ~~2020~~our June 30, 2021 consolidated balance sheet were approximately $2,948, with $2,149 due within one year (in “Accounts payable and ~~$1,265 in 2019.~~accrued liabilities”) and the remainder predominantly due within two

to three years (in “Other noncurrent liabilities”).

~~Financing Activities~~

Debt TransactionsAt June 30, ~~2020,~~2021, our ~~total long-term~~ debt obligations totaled ~~$168,964.~~$179,783. Our debt activity during the six months ended June 30, 2021 primarily consisted of the following:


	First Quarter		Second Quarter		Six months ended June 30, 2021
Net commercial paper borrowings	$	7,072	$	(513)	$	6,559
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes	$	6,000	$	0	$	6,000
Initial average rate of 1.27%
Euro denominated global notes	1,461		0		1,461
Rate of 0.00%
2021 Syndicated Term Loan	7,350		0		7,350
BAML Bilateral Term Loan	2,000		0		2,000
Private financing	750		0		750
Other	636		0		636
Debt Issuances	$	18,197	$	0	$	18,197

Repayments:
Private financing	$	(649)	$	0	$	(649)
Other	(253)		(253)		(506)
Repayments of long-term debt	$	(902)	$	(253)	$	(1,155)

1 ~~Net borrowings of approximately $2,960 of debt under our commercial paper program.~~Includes credit agreement borrowings.



~~In April 2020, entry~~

Credit Facilities

On January 29, 2021, we entered into ~~and draw on~~ a $~~5,500~~$14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with ~~certain commercial banks and~~ Bank of America, N.A., as ~~lead agent, which~~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 June 30, 2021, $7,350 was ~~redeemed in May 2020 (originally~~outstanding and is due on ~~December 31, 2020).~~March 22, 2022.

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

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

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

~~Redemptions of $1,800 under~~

In March 2021, we entered into and drew on a $2,000 term loan credit ~~agreements with certain banks.~~

~~Redemptions~~agreement (BAML Bilateral Term Loan) consisting of (i) a 0.75 year $1,000 ~~annual put reset securities issued by BellSouth.~~

~~Our long-term debt issuances carried a weighted average interest rate of 3.5%~~facility due December 31, 2021 (BAML Tranche A Facility), and ~~our long-term debt redemptions had~~(ii) a ~~weighted average interest rate~~1.75 year $1,000 facility due December 31, 2022 (BAML Tranche B Facility), with Bank of ~~3.4%.~~

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

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

as agent. At June 30, 2021, $2,000 was outstanding under these facilities.

AT&T INC.

JUNE 30, ~~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

OVERVIEW

AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document, and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes).

We have three reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America. Our segment results presented in Note 4 and discussed below follow our internal management reporting. We analyze our segments based on segment operating contribution, which consists of operating income, excluding acquisition-related costs and other significant items and equity in net income (loss) of affiliates for investments managed within each segment. Percentage increases and decreases that are not considered meaningful are denoted with a dash.

~~We have~~

In the first quarter of 2021, we recast our segment results for all prior periods to ~~include~~reflect the following:

•WarnerMedia segment results reflect our ~~prior Xandr segment within our~~operation of WarnerMedia ~~segment.~~as one integrated organization.


	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating Revenues
Communications	$	28,128	$	26,505	6.1	%	$	56,306	$	53,284	5.7	%
WarnerMedia	8,791		6,728		30.7		17,317		14,493		19.5
Latin America	1,437		1,232		16.6		2,811		2,822		(0.4)
Corporate	361		589		(38.7)		787		1,123		(29.9)
Video	6,639		7,021		(5.4)		13,364		14,428		(7.4)
Eliminations and consolidation	(1,311)		(1,125)		(16.5)		(2,601)		(2,421)		(7.4)
AT&T Operating Revenues	44,045		40,950		7.6		87,984		83,729		5.1

Operating Contribution
Communications	7,340		7,488		(2.0)		14,705		14,889		(1.2)
WarnerMedia	1,739		1,912		(9.0)		3,769		3,926		(4.0)
Latin America	(152)		(201)		24.4		(325)		(385)		15.6
Segment Operating Contribution	$	8,927	$	9,199	(3.0)	%	$	18,149	$	18,430	(1.5)	%

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change

Operating Revenues

Communications
$
33,592

$
35,267
(4.7)
%

$
67,841

$
70,436
(3.7)
%
WarnerMedia

6,814

8,835
(22.9)

14,662

17,640
(16.9)

Latin America

1,232

1,757
(29.9)

2,822

3,475
(18.8)

Corporate and other

437

420
4.0

825

811
1.7

Eliminations and consolidation

(1,125)

(1,322)
14.9

(2,421)

(2,578)
6.1

AT&T Operating Revenues

40,950

44,957
(8.9)

83,729

89,784
(6.7)

Operating Contribution

Communications

8,112

8,671
(6.4)

16,315

16,682
(2.2)

WarnerMedia

1,917

2,350
(18.4)

3,930

4,913
(20.0)

Latin America

(201)

(209)
3.8

(385)

(382)
(0.8)

Segment Operating Contribution
$
9,828

$
10,812
(9.1)
%

$
19,860

$
21,213
(6.4)
%

The Communications segment provides services to 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.

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 and Otter Media Holdings.

AT&T INC.

JUNE 30, ~~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 in various physical and digital formats globally. Historical financial results from Xandr, previously a separate reportable segment, have been combined with the WarnerMedia segment within Eliminations and other. This segment contains the following business units:

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

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

~~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. We recorded approximately $320, or $0.03 per diluted share, in the second quarter and $750, or $0.08 per diluted share, for the first six months of 2020, of incremental costs associated with voluntary corporate actions taken primarily to protect and compensate front-line employees and contractors, and WarnerMedia production disruption costs.

In addition to these incremental costs, we estimate that our operations and comparability were impacted by approximately $510, or $0.06 per diluted share, in the second quarter and $470, or $0.05 per diluted share, for the first six months of 2020, for the following COVID-19 related pressures: (1) the cancellation and postponement of televised sporting events, resulting in lower advertising revenues and associated expenses, (2) the closure of movie theaters and postponement of theatrical releases, leading to lower content revenues and associated expenses, (3) the imposition of travel restrictions, driving significantly lower international wireless roaming services that do not have a directly correlated expense reduction and most significantly impact profitability and (4) closures of retail stores, contributing to lower wireless equipment sales, with a corresponding reduction in equipment expense.

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

~~Postpaid subscribers totaling 466,0000 (including 338,000 postpaid phone) in the second quarter and 521,000 (including 382,000 postpaid phone) for the first six months;~~

~~Premium TV connections totaling 91,000 in the second quarter and 157,000 for the first six months; and~~

~~Broadband connections totaling 159,000 (including 48,000 fiber) in the second quarter and 194,000 (including 58,000 fiber) for the first six months.~~

~~The economic effects of the pandemic and resulting societal changes are currently not predictable. 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. ~~We expect operating results and~~ ~~cash flows~~ ~~to continue to be adversely impacted by COVID-19 for at least the duration of the pandemic. We expect our third-quarter results to be impacted by the following:~~

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

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

~~Lower revenues from the closure of movie theaters and postponement of theatrical releases, partially offset by lower production and marketing costs, and other programming expenses;~~

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

~~Higher expenses to protect front-line employees, contractors and customers; and~~

~~The continued transition of customers to our fiber broadband services and the acceleration of the disconnection of linear TV services due to the pandemic.~~

RESULTS OF OPERATIONS

Consolidated ResultsOur financial results are summarized in the 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.


	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating Revenues
Service	$	38,956	$	37,051	5.1	%	$	77,460	$	75,934	2.0	%
Equipment	5,089		3,899		30.5		10,524		7,795		35.0
Total Operating Revenues	44,045		40,950		7.6		87,984		83,729		5.1

Operating expenses
Operations and support	35,015		30,133		16.2		65,484		58,204		12.5
Depreciation and amortization	5,761		7,285		(20.9)		11,570		14,507		(20.2)
Total Operating Expenses	40,776		37,418		9.0		77,054		72,711		6.0
Operating Income	3,269		3,532		(7.4)		10,930		11,018		(0.8)
Interest expense	1,684		2,041		(17.5)		3,554		4,059		(12.4)
Equity in net income (loss) of affiliates	41		(10)		—		93		(16)		—
Other income (expense) - net	999		1,017		(1.8)		5,220		1,820		—
Income Before Income Taxes	2,625		2,498		5.1		12,689		8,763		44.8
Net Income	1,874		1,563		19.9		9,816		6,526		50.4
Net Income Attributable to AT&T	1,570		1,281		22.6		9,120		5,891		54.8
Net Income Attributable to Common Stock	$	1,514	$	1,229	23.2	%	$	9,014	$	5,807	55.2	%

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change

Operating Revenues

Service
$
37,051

$
41,023
(9.7)
%

$
75,934

$
81,707
(7.1)
%
Equipment

3,899

3,934
(0.9)

7,795

8,077
(3.5)

Total Operating Revenues

40,950

44,957
(8.9)

83,729

89,784
(6.7)

Operating expenses

Operations and support

30,133

30,356
(0.7)

58,204

60,744
(4.2)

Depreciation and amortization

7,285

7,101
2.6

14,507

14,307
1.4

Total Operating Expenses

37,418

37,457
(0.1)

72,711

75,051
(3.1)

Operating Income

3,532

7,500
(52.9)

11,018

14,733
(25.2)

Interest expense

2,041

2,149
(5.0)

4,059

4,290
(5.4)

Equity in net income (loss)

of affiliates

(10)

40
-

(16)

33
-

Other income (expense) – net

1,017

(318)
-

1,820

(32)
-

Income Before Income Taxes

2,498

5,073
(50.8)

8,763

10,444
(16.1)

Net Income

1,563

3,974
(60.7)

6,526

8,322
(21.6)

Net Income Attributable to AT&T

1,281

3,713
(65.5)

5,891

7,809
(24.6)

Net Income Attributable to

Common Stock
$
1,229

$
3,713
(66.9)
%

$
5,807

$
7,809
(25.6)
%

Operating revenues~~decreased~~ increased in the second quarter and in the first six months of ~~2020,~~2021. The revenue increase was driven by higher content, Direct-to-Consumer (DTC) subscription and advertising revenues in our WarnerMedia segment; Mobility equipment and service revenue growth and gains in broadband service in our Communications segment; and growth in Mexico wireless operations and favorable foreign exchange impacts. This increase was partially offset by declines in our ~~WarnerMedia, Communications~~Video business and ~~Latin America segments. Lower WarnerMedia segment~~lower Business Wireline revenues ~~reflect lower advertising~~resulting from higher demand for pandemic-related connectivity in the prior-year. Operating revenues in 2021 were also impacted by the absence of revenue from ~~cancelled~~our wireless and ~~postponed live sports programming~~wireline operations in Puerto Rico and ~~lower revenue due to postponed theatrical releases. Communications segment revenue declines~~the U.S. Virgin Islands which were ~~driven by continued declines~~sold in ~~video~~the fourth quarter of 2020.

Operations and ~~legacy services,~~support expenses increased in the second quarter and ~~lower wireless revenues from~~in the ~~imposition~~first six months of ~~international travel restrictions and closure of retail stores. Latin America segment revenue declines were~~2021. The expense increase was primarily due to ~~foreign exchange rate pressure~~a noncash impairment charge of $4,555 resulting from our assessment of the recoverability of the net assets of Vrio, including approximately $2,100 of historical currency translation adjustments (see Note 8). The expense increase was also driven in part by increased domestic wireless equipment expense from higher smartphone sales, higher sports-related programming costs, and ~~store closures related~~additional DTC programming and marketing costs. Also contributing to ~~COVID-19.~~ the higher comparative expenses was the first-quarter 2020 gain on spectrum transaction, which did not recur in 2021. Partially offsetting ~~these decreases~~the expense increases were ~~revenue increases~~severance charges in ~~strategic~~the prior-year quarter and ~~managed business service~~lower Video costs in ~~our Communications segment.~~the current year.

~~Operations~~Depreciation and ~~support~~amortization expense decreased in the second quarter and for the first six months of 2021.

AT&T INC.

JUNE 30, 2021

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

Dollars in millions except per share amounts

Amortization~~expenses~~ expense decreased $1,076, or 50.2% in the second quarter and $2,001, or 47.6% for the first six months of 2021 primarily due to the lower cost basis of long-lived assets resulting from Video impairments taken in the fourth quarter of 2020 and ceasing amortization on held-for-sale Video assets in 2021.

Depreciation expense decreased $448, or 8.7% in the second quarter and $936, or 9.1% for the first six months of 2021 primarily due to the lower cost basis of property, plant and equipment resulting from Video impairments taken in the fourth quarter of 2020 and ceasing depreciation on held-for-sale Video assets in 2021.

Operating income decreased in the second quarter and in the first six months of ~~2020. The decreases were driven by lower broadcast~~2021. Our operating income margin for the second quarter decreased from 8.6% in 2020 to 7.4% in 2021 and ~~programming costs in our Communications and WarnerMedia segments. Expense declines~~ in the first six months ~~were also driven by a noncash gain~~decreased from 13.2% in 2020 to 12.4% in 2021.

Interest expense decreased in the second quarter and first six months of ~~$900 on a~~2021, primarily due to lower interest rates and capitalized interest associated with the spectrum ~~transaction, reduced wireless equipment costs~~acquisitions.

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

resulting from lower device sales and our continued focus on cost management. Partially offsetting expense declines were charges for a goodwill impairment at our Vrio business unit, employee separation charges and incremental costs related to COVID-19, including increased first-quarter 2020 bad debt expense. As part of our cost and efficiency initiatives, we expect operations and support expense improvements to continue as we size our operations to reflect the new economic activity level.

~~Depreciation and amortization~~affiliates ~~expense~~ increased in the second quarter and for the first six months of ~~2020.~~

~~Depreciation~~ ~~expense increased $36, or 0.7% in the second quarter and $65, or 0.6% for the first six months of 2020,~~2021, primarily due to ~~ongoing capital spend for network upgrades and expansion in our Communications segment.~~

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

~~Operatingincome~~ ~~decreased in the second quarter and the first six months of 2020. Our operating income margin for the second quarter decreased~~improved performance from ~~16.7% in 2019 to 8.6% in 2020 and for the first six months decreased from 16.4% in 2019 to 13.2% in 2020.~~certain WarnerMedia investments.

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

~~Equity in net income of affiliates~~ decreased in the second quarter and for the first six months of 2020, reflecting changes in our investment portfolio, including our second-quarter 2020 acquisition of the remaining interest in HBO Latin America Group (HBO LAG).

Other income (expense) – netincreased in the second quarter and for the first six months of 2020. The increases were primarily due to the recognition of actuarial losses in 2019, with no comparable interim remeasurement in 2020, totaling $1,699 and $2,131 in the second quarter and for the first six months of 2019, respectively, and higher prior service credit amortization in 2020 (see Note 6). The increase was partially offset by the write-off of certain investments in 2020 and the second-quarter 2019 gain on sale of our interest in Hulu.

~~Income taxes~~ decreased in the second quarter and increased for the first six months of ~~2020.~~2021. The decrease in ~~income tax expense~~the second quarter was driven by the recognition of an actuarial loss of $197, with no comparable interim remeasurement in 2020, greater returns on benefit-related investments and gains on assets sales in 2020, and fewer impairments taken on investments in 2021. Partially offsetting these decreases were higher net pension and postretirement benefit credits resulting from lower interest costs on the benefit obligation and higher prior service credit amortization (see Note 6).

The increase for the first six months was primarily due to the recognition of an actuarial gain of $2,647, with no comparable interim remeasurement in 2020, and an increase in net pension and postretirement benefit credits resulting from lower interest costs on the benefit obligation and higher prior service credit amortization. The increase also includes higher returns on benefit-related investments for the six-month comparable period and fewer impairments taken in 2021.

Income taxes decreased in the second quarter and increased for the first six months of 2021. The decrease in the second quarter was primarily ~~attributable to lower~~driven by the tax benefit resulting from the Vrio held-for-sale classification and tax planning initiatives, including state apportionment analysis and filing methodology offset by higher income before income tax.

Our effective tax rate was ~~37.5% for~~28.6% in the second quarter of 2021, versus 37.5% in the comparable period in the prior year. The effective tax rate in 2020 was higher primarily due to our prior-year impairment of Vrio goodwill, which was not deductible for tax purpose.

The increase for the first six months was primarily due to higher income before income tax, offset by tax benefit resulting from the Vrio held-for-sale classification, tax initiatives and ~~25.5%~~audit settlements. Our effective tax rate was 22.6% for the first six months of ~~2020,~~2021, versus ~~21.7% and 20.3%~~25.5% for the comparable ~~year-prior periods, respectively. The increases~~period in ~~our effective tax rates were primarily due to~~ the ~~Vrio goodwill impairment, which is not deductible for tax purposes.~~

prior year.


COMMUNICATIONS SEGMENT	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Segment Operating Revenues
Mobility	$	18,936	$	17,149	10.4	%	$	37,970	$	34,551	9.9	%
Business Wireline	6,052		6,305		(4.0)		12,098		12,571		(3.8)
Consumer Wireline	3,140		3,051		2.9		6,238		6,162		1.2
Total Segment Operating Revenues	28,128		26,505		6.1		56,306		53,284		5.7

Segment Operating Contribution
Mobility	6,002		5,805		3.4		12,004		11,593		3.5
Business Wireline	1,050		1,290		(18.6)		2,108		2,383		(11.5)
Consumer Wireline	288		393		(26.7)		593		913		(35.0)
Total Segment Operating Contribution	$	7,340	$	7,488	(2.0)	%	$	14,705	$	14,889	(1.2)	%

AT&T INC.

JUNE 30, ~~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 SEGMENT
Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change

Segment Operating Revenues

Mobility
$
17,149

$
17,292
(0.8)
%

$
34,551

$
34,655
(0.3)
%
Entertainment Group

10,069

11,368
(11.4)

20,584

22,696
(9.3)

Business Wireline

6,374

6,607
(3.5)

12,706

13,085
(2.9)

Total Segment Operating Revenues

33,592

35,267
(4.7)

67,841

70,436
(3.7)

Segment Operating Contribution

Mobility

5,805

5,767
0.7

11,593

11,076
4.7

Entertainment Group

1,030

1,514
(32.0)

2,365

2,992
(21.0)

Business Wireline

1,277

1,390
(8.1)

2,357

2,614
(9.8)

Total Segment Operating Contribution
$
8,112

$
8,671
(6.4)
%

$
16,315

$
16,682
(2.2)
%

Selected Subscribers and Connections

June 30,
(000s)
2020

2019
Mobility Subscribers¹
171,407

158,622
Total domestic broadband connections¹
15,201

15,698
Network access lines in service
7,878

9,207
U-verse VoIP connections
4,058

4,766
¹
Excludes 521 wireless and 194 broadband customers who we have agreed not to terminate service under the FCC's "Keep Americans

Connected Pledge," which was implemented March 13, 2020.


Selected Subscribers and Connections
	June 30,
(000s)	2021	2020
Mobility Subscribers	191,646	171,407
Total domestic broadband connections	15,481	15,201
Network access lines in service	6,691	7,878
U-verse VoIP connections	3,559	4,058

Operating revenues~~decreased~~ increased in the second quarter and for the first six months of ~~2020,~~2021, driven by ~~declines~~increases in ~~each of~~ our Mobility and Consumer Wireline business units, ~~Entertainment Group,~~partially offset by decreases in our Business Wireline ~~and Mobility.~~business unit. The ~~decreases reflect the continued shift away from linear video~~increases are primarily driven by wireless equipment revenue growth and ~~legacy services, lower~~ wireless service ~~revenues from a decline~~revenue improvements and gains in international travel and waived fees, and suppressed equipment sales in the first quarter of 2020 attributable to store closures. Partially offsetting these declines was growth in our prepaid subscriber base.broadband service.

Operating contribution decreased in the second quarter and for the first six months of ~~2020,~~2021, reflecting ~~declines in~~lower operating contribution from our Business Wireline and ~~Entertainment Group~~Consumer Wireline business units, largely offset by ~~improvement~~increases in our Mobility business unit. Our Communications segment operating income margin in the second quarter decreased from ~~24.6%~~28.3% in ~~2019~~2020 to ~~24.1%~~26.1% in ~~2020~~2021 and for the first six months decreased from 27.9% in 2020 to 26.1% in 2021, reflecting, in part, increased ~~from 23.7% in 2019 to 24.0% in 2020.~~equipment sales with no margins.


Communications Business Unit Discussion
Mobility Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating revenues
Service	$	14,346	$	13,669	5.0	%	$	28,394	$	27,637	2.7	%
Equipment	4,590		3,480		31.9		9,576		6,914		38.5
Total Operating Revenues	18,936		17,149		10.4		37,970		34,551		9.9

Operating expenses
Operations and support	10,911		9,332		16.9		21,929		18,901		16.0
Depreciation and amortization	2,023		2,012		0.5		4,037		4,057		(0.5)
Total Operating Expenses	12,934		11,344		14.0		25,966		22,958		13.1
Operating Income	6,002		5,805		3.4		12,004		11,593		3.5
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—
Operating Contribution	$	6,002	$	5,805	3.4	%	$	12,004	$	11,593	3.5	%

AT&T INC.

JUNE 30, ~~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

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues

Service
$
13,669

$
13,824
(1.1)
%

$
27,637

$
27,453
0.7
%
Equipment

3,480

3,468
0.3

6,914

7,202
(4.0)

Total Operating Revenues

17,149

17,292
(0.8)

34,551

34,655
(0.3)

Operating expenses

Operations and support

9,332

9,522
(2.0)

18,901

19,563
(3.4)

Depreciation and amortization

2,012

2,003
0.4

4,057

4,016
1.0

Total Operating Expenses

11,344

11,525
(1.6)

22,958

23,579
(2.6)

Operating Income

5,805

5,767
0.7

11,593

11,076
4.7

Equity in Net Income (Loss)

of Affiliates

-

-
-

-

-
-

Operating Contribution
$
5,805

$
5,767
0.7
%

$
11,593

$
11,076
4.7
%

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


Subscribers
	June 30,		Percent
(in 000s)	2021	2020	Change
Postpaid	79,059	74,919	5.5	%
Postpaid phone	65,503	62,882	4.2
Prepaid	18,681	18,008	3.7
Reseller	6,406	6,718	(4.6)
Connected devices1	87,500	71,762	21.9
Total Mobility Subscribers	191,646	171,407	11.8	%
1Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.


Net Additions
	Second Quarter						Six-Month Period
					Percent						Percent
(in 000s)	2021		2020		Change		2021		2020		Change
Postpaid Phone Net Additions	789		(151)		—	%	1,384		12		—	%
Total Phone Net Additions	963		(16)		—		1,765		104		—

Postpaid2	1,156		(154)		—		1,979		(127)		—
Prepaid	297		165		80.0		576		120		—
Reseller	(125)		(58)		—		(193)		(248)		22.2
Connected devices3	4,209		2,255		86.7		6,726		5,773		16.5
Mobility Net Subscriber Additions1	5,537		2,208		—	%	9,088		5,518		64.7	%

Postpaid Churn4	0.87	%	1.05	%	(18)	BP	0.90	%	1.06	%	(16)	BP
Postpaid Phone-Only Churn4	0.69	%	0.84	%	(15)	BP	0.73	%	0.85	%	(12)	BP
1Excludes migrations and acquisition-related activities during the period.
2In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were 13 and (159) for the three months ended June 30, 2021 and 2020 and (50) and (426) for the six months ended June 30, 2021 and 2020. Wearables and other net adds were 352 and 155 for the quarter ended June 30, 2021 and 2020 and 643 and 287 for the six months June 30, 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 2.5 million for the quarter ended June 30, 2021 and 3.7 million for the six months ended June 30, 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

Subscribers

June 30,
Percent
(in 000s)

2020

2019
Change
Postpaid

74,919

75,478
(0.7)
%
Prepaid

18,008

17,434
3.3

Reseller

6,718

7,323
(8.3)

Connected devices¹

71,762

58,387
22.9

Total Mobility Subscribers²

171,407

158,622
8.1
%
¹
Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
²
Excludes 521 customers who we have agreed not to terminate service under the FCC's "Keep Americans Connected Pledge."

~~AT&T INC.~~

~~JUNE 30, 2020~~

~~Item 2. Management’s Discussion~~revenue increased in the second quarter and ~~Analysis~~for the first six months of ~~Financial Condition and Results of Operations - Continued~~

~~Dollars,~~2021. The increases are largely due to growth in our subscribers and ~~connections~~slight improvements in ~~millions, except per share and~~second-quarter 2021 international roaming revenues.

ARPU

Average revenue per subscriber ~~amounts~~

Net Additions

Second Quarter

Six-Month Period

Percent

Percent
(in 000s)
2020

2019
Change

2020

2019
Change
Postpaid Phone Net Additions
(151)

74
-
%

12

153
(92.2)
%
Total Phone Net Additions
(16)

357
-

104

525
(80.2)

Postpaid^{2, 5}
(154)

(146)
(5.5)

(127)

(353)
64.0

Prepaid
165

341
(51.6)

120

442
(72.9)

Reseller
(58)

(204)
71.6

(248)

(446)
44.4

Connected devices³
2,255

3,959
(43.0)

5,773

7,047
(18.1)

Mobility Net Subscriber Additions^{1, 5}
2,208

3,950
(44.1)
%

5,518

6,690
(17.5)
%

Postpaid Churn^{4, 5}
1.05

1.07
(2)
BP

1.06

1.12
(6)
BP
Postpaid Phone-Only Churn^{4, 5}
0.84

0.86
(2)
BP

0.85

0.89
(4)
BP
¹
Excludes acquisition-related additions during the period.
²
In addition to postpaid phones, includes tablets and wearables and other. Tablet net (losses) were (159) and (357) for the three months

and (426) and (767) for the six months ended June 30, 2020 and 2019, respectively. Wearables and other net adds were 155 and 137 for

the three months and 287 and 264 for the six months ended June 30, 2020 and 2019, respectively.
³
Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes

postpaid tablets.
⁴
Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number

of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for

each month of that period.
⁵
The second quarter and six-month period ended June 30, 2020, exclude 466 (338 phone) and 521 (382 phone), respectively, who we

have agreed not to terminate service under the FCC’s “Keep Americans Connected Pledge.” The second quarter and six-month

period ended June 30, 2020, postpaid churn includes 21 bps (18 bps phone) and 22 bps (19 bps phone) pressure for these customers.

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

~~ARPU~~

~~Postpaid ARPU decreased in the second quarter and increased for the first six months.~~2021. ARPU during ~~2020 has been pressured by~~2021 reflects the ~~decline in international roaming revenues and waived fees.~~

impact of higher promotional discount amortization.

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 six months due to retention offers, migrations to unlimited plans and continued network ~~improvements~~performance.

AT&T INC.

JUNE 30, 2021

Item 2. Management’s Discussion and ~~industry-wide store closures from COVID-19, partially~~Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

Equipment revenue increased in the second quarter and for the first six months of 2021, primarily driven by the sale of higher-priced smartphones and a mix of higher-priced postpaid smartphones and higher sales of postpaid data devices.

Operations and support expenses increased in the second quarter and for the first six months of 2021 largely driven by growth in equipment sales and associated expenses, higher network and technology costs, increased commissions and cost deferral amortization and content costs associated with bundling HBO Max. Also contributing to higher comparative expenses were larger second-quarter 2020 gains on tower sales. The expense increase was offset by ~~higher accrual~~lower sales costs and, for ~~subscriber disconnections under~~ the ~~“Keep Americans Connected Pledge.”~~six-month period, lower bad debt expense.

~~Equipment~~Depreciation ~~revenue was stable~~expense increased in the second quarter and decreased for the first six months of ~~2020 driven by lower postpaid smartphone sales reflecting store closures.~~2021.

~~Operations and support~~ ~~expenses decreased in the second quarter and for the first six months of 2020. The decreases were primarily due to~~ higher bad debt expense in 2019 resulting from prior-year charges in response to credit easing policies, cost initiatives and asset optimization, and lower marketing and sales costs, partially offset by higher commission deferral

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

~~amortization, including the impacts of second-quarter 2020 updates to extend the expected economic life of our Mobility customers.~~

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

Operating income increased in the second quarter and for the first six months of ~~2020.~~2021. Our Mobility operating income margin in the second quarter ~~increased~~decreased from ~~33.4% in 2019 to~~ 33.9% in 2020 to 31.7% in 2021, and for the first six months ~~increased~~decreased from ~~32.0% in 2019 to~~ 33.6% in ~~2020.~~2020 to 31.6% in 2021. Our Mobility EBITDA margin in the second quarter ~~increased~~decreased from ~~44.9% in 2019 to~~ 45.6% in 2020 to 42.4% in 2021, and for the first six months ~~increased~~decreased from ~~43.5% in 2019 to~~ 45.3% in ~~2020.~~2020 to 42.2% in 2021. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization.

Subscriber Relationships

As the wireless industry has matured, 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 ~~recently~~ went nationwide ~~(in~~in July ~~2020),~~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. 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 subscribers increased in 2020, and~~ ~~during the second quarter and for the first six months of 2020, we added approximately~~ ~~1.3 million and 3.6 million wholesale connected cars through agreements with various carmakers, and experienced strong growth in other Internet of Things (IoT) connections.~~ ~~We believe that these connected car agreements give us the opportunity to create future retail relationships with the car owners.~~

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

Entertainment Group Results

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues

Video entertainment
$
6,976

$
8,035
(13.2)
%

$
14,371

$
16,109
(10.8)
%
High-speed internet

2,092

2,109
(0.8)

4,201

4,179
0.5

Legacy voice and data services

560

658
(14.9)

1,141

1,341
(14.9)

Other service and equipment

441

566
(22.1)

871

1,067
(18.4)

Total Operating Revenues

10,069

11,368
(11.4)

20,584

22,696
(9.3)

Operating expenses

Operations and support

7,730

8,515
(9.2)

15,621

17,042
(8.3)

Depreciation and amortization

1,309

1,339
(2.2)

2,598

2,662
(2.4)

Total Operating Expenses

9,039

9,854
(8.3)

18,219

19,704
(7.5)

Operating Income

1,030

1,514
(32.0)

2,365

2,992
(21.0)

Equity in Net Income (Loss)

of Affiliates

-

-
-

-

-
-

Operating Contribution
$
1,030

$
1,514
(32.0)
%

$
2,365

$
2,992
(21.0)
%

Business Wireline Results
Second Quarter Six-Month Period
Percent Percent
2021 2020 Change 2021 2020 Change
Operating revenues
Service $ 5,860 $ 6,101 (4.0) % $ 11,732 $ 12,192 (3.8) %
Equipment 192 204 (5.9) 366 379 (3.4)
Total Operating Revenues 6,052 6,305 (4.0) 12,098 12,571 (3.8)
Operating expenses
Operations and support 3,709 3,714 (0.1) 7,419 7,601 (2.4)
Depreciation and amortization 1,293 1,301 (0.6) 2,571 2,587 (0.6)
Total Operating Expenses 5,002 5,015 (0.3) 9,990 10,188 (1.9)
Operating Income 1,050 1,290 (18.6) 2,108 2,383 (11.5)
Equity in Net Income (Loss) of Affiliates — — — — — —
Operating Contribution $ 1,050 $ 1,290 (18.6) % $ 2,108 $ 2,383 (11.5) %

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

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

Connections

June 30,
Percent
(in 000s)

2020

2019
Change
Video Connections

Premium TV¹

17,690

21,581
(18.0)
%
AT&T TV Now

720

1,340
(46.3)

Total Video Connections

18,410

22,921
(19.7)

Total Broadband Connections

13,944

14,420
(3.3)

Fiber Broadband Connections

4,321

3,378
27.9

Retail Consumer Switched Access Lines

3,096

3,630
(14.7)

U-verse Consumer VoIP Connections

3,480

4,211
(17.4)

Total Retail Consumer Voice Connections

6,576

7,841
(16.1)
%
¹
Excludes 157 premium TV and 194 broadband connections who we have agreed not to terminate service under the FCC's "Keep

Americans Connected Pledge."

Net Additions

Second Quarter

Six-Month Period

Percent

Percent
(in 000s)
2020

2019
Change

2020

2019
Change
Video Net Additions

Premium TV¹
(886)

(778)
(13.9)
%

(1,783)

(1,322)
(34.9)
%
AT&T TV Now
(68)

(168)
59.5

(206)

(251)
17.9

Net Video Additions¹
(954)

(946)
(0.8)

(1,989)

(1,573)
(26.4)

Net Broadband Additions¹
(102)

(34)
-

(175)

11
-

Fiber Broadband Net Additions
225

318
(29.2)
%

434

615
(29.4)
%
¹
The second quarter and six-month period ended June 30, 2020, exclude 91 and 157 premium TV and 159 and 194 broadband (48 and 58

fiber) connections, respectively, who we have agreed not to terminate service under the FCC's "Keep Americans Connected Pledge."

~~Video entertainment~~Service revenues are comprised of subscription and advertising revenues. Revenues decreased in the second quarter and for the first six months of 2020, largely driven by a decline in premium TV and OTT subscribers as we continue to focus on retention of existing subscribers with a particular focus on our high-value subscribers, and lower subscription-based advertising revenues driven by impacts of the pandemic. Consistent with the rest of the industry, our customers continue to shift from a premium linear service to more economically priced OTT and subscription video on demand services, which has pressured our video revenues.

~~High-speed internet~~ revenues decreased in the second quarter and increased for the first six months of 2020. The decrease in the second quarter was driven by a decline in the average subscriber base, partially offset by higher ARPU. The increase for the six months reflects higher ARPU resulting from an increase in high-speed fiber and pricing.

~~Legacy voice and data service~~revenues decreased in the second quarter and for the first six months of ~~2020, reflecting the continued decline~~2021, driven by lower demand for legacy voice and data services in the ~~number~~current year and higher demand for pandemic-related connectivity in the prior-year. We expect this trend to continue for the remainder of ~~customers.~~the year.

AT&T INC.

JUNE 30, ~~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

Equipment revenues decreased in the second quarter and ~~per subscriber amounts~~for the first six months of 2021, driven by declines in legacy and non-core services.

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

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

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

Business Wireline Results

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues

Strategic and managed services
$
3,943

$
3,834
2.8
%

$
7,822

$
7,613
2.7
%
Legacy voice and data services

2,067

2,324
(11.1)

4,196

4,721
(11.1)

Other service and equipment

364

449
(18.9)

688

751
(8.4)

Total Operating Revenues

6,374

6,607
(3.5)

12,706

13,085
(2.9)

Operating expenses

Operations and support

3,779

3,975
(4.9)

7,730

8,007
(3.5)

Depreciation and amortization

1,318

1,242
6.1

2,619

2,464
6.3

Total Operating Expenses

5,097

5,217
(2.3)

10,349

10,471
(1.2)

Operating Income

1,277

1,390
(8.1)

2,357

2,614
(9.8)

Equity in Net Income (Loss)

of Affiliates

-

-
-

-

-
-

Operating Contribution
$
1,277

$
1,390
(8.1)
%

$
2,357

$
2,614
(9.8)
%

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

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

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

~~Operations and support~~ ~~expenses decreased in the second quarter and for the first six months of 2020,~~2021, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization.

~~AT&T INC.~~Depreciation

~~JUNE 30, 2020~~

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

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

~~Depreciation~~ expense ~~increased~~decreased in the second quarter and for the first six months of ~~2020,~~2021, primarily due to ~~increases in capital spending for~~certain network ~~upgrades and expansion.~~assets becoming fully depreciated.

Operating income decreased in the second quarter and for the first six months of ~~2020.~~2021. Our Business Wireline operating income margin in the second quarter decreased from ~~21.0%~~20.5% in ~~2019~~2020 to ~~20.0%~~17.3% in ~~2020,~~2021, and for the first six months decreased from ~~20.0%~~19.0% in ~~2019~~2020 to ~~18.6%~~17.4% in ~~2020.~~2021. Our Business Wireline EBITDA margin in the second quarter ~~increased~~decreased from ~~39.8% in 2019 to 40.7%~~41.1% in 2020 to 38.7% in 2021, and decreased from 39.5% in 2020 to 38.7% in 2021.


Consumer Wireline Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating revenues
Broadband	$	2,266	$	2,092	8.3	%	$	4,471	$	4,201	6.4	%
Legacy voice and data services	504		560		(10.0)		1,023		1,141		(10.3)
Other service and equipment	370		399		(7.3)		744		820		(9.3)
Total Operating Revenues	3,140		3,051		2.9		6,238		6,162		1.2

Operating expenses
Operations and support	2,083		1,928		8.0		4,114		3,807		8.1
Depreciation and amortization	769		730		5.3		1,531		1,442		6.2
Total Operating Expenses	2,852		2,658		7.3		5,645		5,249		7.5
Operating Income	288		393		(26.7)		593		913		(35.0)
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—
Operating Contribution	$	288	$	393	(26.7)	%	$	593	$	913	(35.0)	%

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


Connections
	June 30,		Percent
(in 000s)	2021	2020	Change
Broadband Connections
Total Broadband and DSL Connections	14,174	13,944	1.6	%
Fiber Broadband Connections	5,432	4,321	25.7

Voice Connections
Retail Consumer Switched Access Lines	2,631	3,096	(15.0)
U-verse Consumer VoIP Connections	2,965	3,480	(14.8)
Total Retail Consumer Voice Connections	5,596	6,576	(14.9)	%

AT&T INC.

JUNE 30, 2021

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

Dollars in millions except per share amounts


Net Additions
	Second Quarter				Six-Month Period
			Percent				Percent
(in 000s)	2021	2020	Change		2021	2020	Change
Broadband Net Additions
Total Broadband and DSL Net Additions	28	(102)	—	%	74	(175)	—	%
Fiber Broadband Net Additions	246	225	9.3	%	481	434	10.8	%

Broadband (high-speed internet) revenues increased in the second quarter and for the first six months ~~increased from 38.8%~~of 2021, driven by an increase in ~~2019~~fiber customers and pricing, which we expect to ~~39.2% in 2020.~~continue during the remainder of the year.

Legacy voice and data service

WARNERMEDIA SEGMENT
Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Segment Operating Revenues

Turner
$
2,988

$
3,410
(12.4)
%

$
6,150

$
6,853
(10.3)
%
Home Box Office

1,627

1,716
(5.2)

3,124

3,226
(3.2)

Warner Bros.

3,256

3,389
(3.9)

6,496

6,907
(6.0)

Eliminations and other

(1,057)

320
-

(1,108)

654
-

Total Segment Operating Revenues

6,814

8,835
(22.9)

14,662

17,640
(16.9)

Cost of revenues

Turner

965

1,796
(46.3)

2,285

3,476
(34.3)

Home Box Office

1,095

839
30.5

1,911

1,509
26.6

Warner Bros.

2,233

2,492
(10.4)

4,579

4,922
(7.0)

Selling, general and administrative

1,324

1,344
(1.5)

2,788

2,716
2.7

Eliminations and other

(883)

(35)
-

(1,142)

(34)
-

Depreciation and amortization

167

104
60.6

330

260
26.9

Total Operating Expenses

4,901

6,540
(25.1)

10,751

12,849
(16.3)

Operating Income

1,913

2,295
(16.6)

3,911

4,791
(18.4)

Equity in Net Income (Loss) of Affiliates

4

55
(92.7)

19

122
(84.4)

Total Segment Operating Contribution
$
1,917

$
2,350
(18.4)
%

$
3,930

$
4,913
(20.0)
%

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

~~Operating~~ revenues decreased in the second quarter and for the first six months of ~~2020, primarily due to lower advertising revenues from~~2021, reflecting the ~~postponement or cancellation of televised sporting events at Turner; lower theatrical product revenues, reflecting~~ ~~the pandemic-related closure of movie theaters and postponement of theatrical releases, and~~ ~~unfavorable programming comparisons, including strong carryover revenues~~continued decline in the ~~first quarter~~number of ~~2019 at Warner Bros.;~~customers.

Other service and ~~lower linear subscription revenue at HBO.~~

equipment

~~Operating contribution~~revenues decreased in the second quarter and for the first six months of ~~2020. The WarnerMedia segment operating income margin~~2021, reflecting the continued decline in the ~~second quarter increased from 26.0% in 2019~~number of VoIP customers, which we expect to ~~28.1% in 2020~~continue.

Operations and ~~for the first six months decreased from 27.2% in 2019 to 26.7% in 2020.~~

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

WarnerMedia Business Unit Discussion
Turner Results

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues

Subscription
$
1,804

$
1,943
(7.2)
%

$
3,853

$
3,908
(1.4)
%
Advertising

796

1,266
(37.1)

1,753

2,527
(30.6)

Content and other

388

201
93.0

544

418
30.1

Total Operating Revenues

2,988

3,410
(12.4)

6,150

6,853
(10.3)

Operating expenses

Cost of revenues

965

1,796
(46.3)

2,285

3,476
(34.3)

Selling, general and administrative

382

421
(9.3)

772

877
(12.0)

Depreciation and amortization

69

39
76.9

138

99
39.4

Total Operating Expenses

1,416

2,256
(37.2)

3,195

4,452
(28.2)

Operating Income

1,572

1,154
36.2

2,955

2,401
23.1

Equity in Net Income (Loss) of Affiliates

-

11
-

6

36
(83.3)

Operating Contribution
$
1,572

$
1,165
34.9
%

$
2,961

$
2,437
21.5
%

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

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

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

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

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

Home Box Office Results

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues

Subscription
$
1,441

$
1,516
(4.9)
%

$
2,779

$
2,850
(2.5)
%
Content and other

186

200
(7.0)

345

376
(8.2)

Total Operating Revenues

1,627

1,716
(5.2)

3,124

3,226
(3.2)

Operating expenses

Cost of revenues

1,095

839
30.5

1,911

1,509
26.6

Selling, general and administrative

394

292
34.9

631

543
16.2

Depreciation and amortization

25

12
-

46

34
35.3

Total Operating Expenses

1,514

1,143
32.5

2,588

2,086
24.1

Operating Income

113

573
(80.3)

536

1,140
(53.0)

Equity in Net Income (Loss) of Affiliates

(5)

15
-

15

30
(50.0)

Operating Contribution
$
108

$
588
(81.6)
%

$
551

$
1,170
(52.9)
%

~~Operating revenues~~ ~~decreased in the second quarter and for the first six months of 2020,~~2021, primarily ~~due to decreases in subscription revenue resulting from domestic linear subscriber decline, including Cinemax depackaging, partially offset~~driven by growth in digital and international, including HBO Latin America Group, following our May 2020 acquisition of the remaining interest in this entity. At June 30, 2020, we had 36.3 million U.S. subscribers fromcontent costs associated with plans bundling HBO Max and ~~HBO, up from 34.6 million at December 31, 2019.~~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

~~Cost of revenues~~expense increased in the second quarter and for the first six months of ~~2020,~~2021, primarily due to ~~higher programming costs~~ongoing capital spending for network upgrades and ~~expenses related to HBO Max.~~expansion.

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

Operating income decreased in the second quarter and for the first six months of ~~2020.~~2021. Our ~~HBO~~Consumer Wireline operating income margin in the second quarter decreased from ~~33.4%~~12.9% in ~~2019~~2020 to ~~6.9%~~9.2% in ~~2020,~~2021, and for the first six months decreased from ~~35.3%~~14.8% in ~~2019~~2020 to ~~17.2%~~9.5% in ~~2020.~~2021. Our Consumer Wireline EBITDA margin in the second quarter decreased from 36.8% in 2020 to 33.7% in 2021, and for the first six months decreased from 38.2% in 2020 to 34.0% in 2021.

AT&T INC.

JUNE 30, ~~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


WARNERMEDIA SEGMENT	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Segment Operating Revenues
Subscription	$	3,961	$	3,265	21.3	%	$	7,791	$	6,665	16.9	%
Content and other	3,091		2,292		34.9		6,050		5,192		16.5
Advertising	1,739		1,171		48.5		3,476		2,636		31.9


Total Segment Operating Revenues	8,791		6,728		30.7		17,317		14,493		19.5

Segment Operating Expenses
Direct Costs
Programming	4,154		2,375		74.9		7,928		5,457		45.3
Marketing	983		545		80.4		1,833		1,095		67.4
Other	854		820		4.1		1,667		1,595		4.5
General and administrative	943		916		2.9		1,909		2,114		(9.7)

Depreciation and amortization	165		164		0.6		328		325		0.9
Total Operating Expenses	7,099		4,820		47.3		13,665		10,586		29.1
Operating Income	1,692		1,908		(11.3)		3,652		3,907		(6.5)
Equity in Net Income (Loss) of Affiliates	47		4		—		117		19		—
Total Segment Operating Contribution	$	1,739	$	1,912	(9.0)	%	$	3,769	$	3,926	(4.0)	%

Our WarnerMedia segment is operated as a content organization that distributes across various platforms, including basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and ~~per subscriber amounts~~

games licensing.

Warner Bros. Results

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues

Theatrical product
$
1,029

$
1,527
(32.6)
%

$
2,135

$
3,033
(29.6)
%
Television product

1,876

1,310
43.2

3,645

2,923
24.7

Games and other

351

552
(36.4)

716

951
(24.7)

Total Operating Revenues

3,256

3,389
(3.9)

6,496

6,907
(6.0)

Operating expenses

Cost of revenues

2,233

2,492
(10.4)

4,579

4,922
(7.0)

Selling, general and administrative

350

426
(17.8)

954

915
4.3

Depreciation and amortization

40

31
29.0

81

83
(2.4)

Total Operating Expenses

2,623

2,949
(11.1)

5,614

5,920
(5.2)

Operating Income

633

440
43.9

882

987
(10.6)

Equity in Net Income (Loss) of Affiliates

(19)

-
-

(27)

6
-

Operating Contribution
$
614

$
440
39.5
%

$
855

$
993
(13.9)
%

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions with a subsidiary of Discovery Inc. (See Note 8)

Operating revenues ~~decreased~~increased in the second quarter and for the first six months of ~~2020,~~2021, primarily due to ~~lower theatrical product~~higher subscription, advertising and content revenues, reflecting the partial recovery from prior-year impacts of the pandemic.

Subscription revenues increased reflecting growth of DTC domestic HBO Max and HBO subscribers after the launch of HBO Max in the year-ago quarter, and, for the six-month period, the May 2020 acquisition of the remaining interest in HBO Latin America Group. DTC subscription revenues were $1,996 and $3,806, for the three- and six-month periods of 2021, versus $1,441 and $2,779 in the year-ago periods and include growth from intercompany relationships with the Communications segment.

Advertising revenues improved when compared to the prior year resulting from the ~~absence~~return in 2021 of ~~theatrical releases~~major sporting events, such as the NBA in the second quarter ~~of 2020~~ and the NCAA Division I Men's Championship Basketball Tournament for the first six ~~months, unfavorable comparisons to the prior year, which included,~~months. Revenue growth also was driven by strength in ~~2019, carryover revenues from the theatrical release of~~ news.

~~Aquaman~~

~~. Games~~Content and other ~~revenue declines were primarily~~revenues increased due to ~~unfavorable games comparison to the prior year, which included the release of~~ higher third-party TV production and theatrical.

~~Mortal Kombat 11,~~

Direct costs and other revenue decreased due to reduced studio operations. Partially offsetting these decreases were higher television product revenues, driven by licensing, including internal sales to HBO Max, partially offset by lower initial telecast revenues resulting from pandemic-related television production delays.

~~Cost of revenues~~ ~~decreased~~increased in the second quarter and for the first six months of ~~2020, primarily due to lower~~2021, driven by higher programming and marketing costs for HBO Max and higher film and programming, including sports costs, and marketing resulting from the return of ~~theatrical product, partially offset~~major sporting events versus last year’s second quarter that was impacted by ~~incremental~~sports cancellations resulting from the pandemic. Direct costs ~~incurred due to~~supporting DTC revenues were $1,894 and $3,579 for the ~~production hiatus.~~three- and sixth-month periods of 2021, versus $1,361 and $2,272 in the year-ago periods.

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

~~Operating income~~expenses increased in the second quarter and decreased for the first six months of ~~2020. Our Warner Bros. operating income margin~~2021. The increase for the quarter was primarily due to lower bad debt expense in the second of quarter ~~increased~~2020, which resulted from ~~13.0% in 2019 to 19.4% in 2020, and for the first six months decreased from 14.3% in 2019 to 13.6% in 2020.~~

AT&T INC.

JUNE 30, ~~2020~~

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

favorable collection experience that allowed us to reduce our pandemic-related bad debt estimates. The decrease for the first six months was primarily due to lower bad debt expense, and ~~per subscriber amounts~~

integration of support functions.

LATIN AMERICA SEGMENT
Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Segment Operating Revenues

Vrio
$
752

$
1,032
(27.1)
%

$
1,639

$
2,099
(21.9)
%
Mexico

480

725
(33.8)

1,183

1,376
(14.0)

Total Segment Operating Revenues

1,232

1,757
(29.9)

2,822

3,475
(18.8)

Segment Operating Contribution

Vrio

(28)

(2)
-

(67)

30
-

Mexico

(173)

(207)
16.4

(318)

(412)
22.8

Total Segment Operating Contribution
$
(201)

$
(209)
3.8
%

$
(385)

$
(382)
(0.8)
%

Operating contribution decreased in the second quarter and for the first six months of 2021. The WarnerMedia segment operating income margin in the second quarter decreased from 28.4% in 2020 to 19.2% in 2021 and for the first six months decreased from 27.0% in 2020 to 21.1% in 2021.


LATIN AMERICA SEGMENT	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Segment Operating Revenues
Vrio	$	749	$	752	(0.4)	%	$	1,492	$	1,639	(9.0)	%
Mexico	688		480		43.3		1,319		1,183		11.5
Total Segment Operating Revenues	1,437		1,232		16.6		2,811		2,822		(0.4)

Segment Operating Contribution
Vrio	(23)		(28)		17.9		(62)		(67)		7.5
Mexico	(129)		(173)		25.4		(263)		(318)		17.3
Total Segment Operating Contribution	$	(152)	$	(201)	24.4	%	$	(325)	$	(385)	15.6	%

Operating Results

Our Latin America operations conduct business in their local currency and operating results are converted to U.S. dollars using ~~official~~average exchange rates during the period, subjecting results to foreign currency fluctuations. ~~In May 2020,~~

On July 21, 2021, we ~~found it necessary~~entered into an agreement to ~~close~~sell our ~~DIRECTV operations in Venezuela due~~Vrio business to Grupo Werthein (see Note 8). We applied held-for-sale accounting to Vrio as of June 30, 2021 and continue to present the Vrio results within the Latin America segment.

Operating revenues ~~to political instability~~increased in the ~~country~~second quarter and slightly decreased for the first six months of 2021. The increase in the second quarter reflects growth in the Mexico wireless operations and favorable foreign exchange impacts, with improvements for Mexico more than offsetting pressure in Vrio. The decrease for the first six months is primarily driven by foreign exchange impacts in Argentina for Vrio, partially offset by growth in our Mexico wireless operations and improvements in Mexico’s foreign exchange impacts.

Operating contribution improved in the second quarter and for the first six months of 2021, reflecting foreign exchange rates. Our Latin America segment operating income margin in the second quarter increased from (17.0)% in 2020 to ~~comply with sanctions~~(10.7)% in 2021, and for the first six months increased from (14.1)% in 2020 to (11.5)% in 2021.

AT&T INC.

JUNE 30, 2021

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

Dollars in millions except per share amounts


Latin America Business Unit Discussion
Vrio Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating revenues	$	749	$	752	(0.4)	%	$	1,492	$	1,639	(9.0)	%

Operating expenses
Operations and support	660		661		(0.2)		1,321		1,444		(8.5)
Depreciation and amortization	114		127		(10.2)		231		274		(15.7)
Total Operating Expenses	774		788		(1.8)		1,552		1,718		(9.7)
Operating Income (Loss)	(25)		(36)		30.6		(60)		(79)		24.1
Equity in Net Income (Loss) of Affiliates	2		8		(75.0)		(2)		12		—
Operating Contribution	$	(23)	$	(28)	17.9	%	$	(62)	$	(67)	7.5	%

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


					June 30,		Percent
(in 000s)					2021	2020	Change
Vrio Video Subscribers					10,320	10,664	(3.2)	%

	Second Quarter				Six-Month Period
			Percent				Percent
(in 000s)	2021	2020	Change		2021	2020	Change
Vrio Video Net Additions	(239)	(312)	23.4	%	(622)	(426)	(46.0)	%

Operating revenues decreased in the second quarter and for the first six months of ~~2020~~2021, primarily driven by foreign exchange ~~pressures and the impact of COVID-19.~~impacts.

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

Latin America Business Unit Discussion

Vrio Results

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating revenues
$
752

$
1,032
(27.1)
%

$
1,639

$
2,099
(21.9)
%

Operating expenses

Operations and support

661

881
(25.0)

1,444

1,747
(17.3)

Depreciation and amortization

127

165
(23.0)

274

334
(18.0)

Total Operating Expenses

788

1,046
(24.7)

1,718

2,081
(17.4)

Operating Income

(36)

(14)
-

(79)

18
-

Equity in Net Income (Loss)

of Affiliates

8

12
(33.3)

12

12
-

Operating Contribution
$
(28)

$
(2)
-
%

$
(67)

$
30
-
%

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

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

June 30,
Percent
(in 000s)

2020

2019
Change
Vrio Video Subscribers

10,664

13,473
(20.8)
%

Second Quarter

Six -Month Period

Percent

Percent
(in 000s)

2020

2019
Change

2020

2019
Change
Vrio Video Net Additions¹

(312)

(111)
-
%

(426)

(143)
-
%
¹
The second-quarter and six-month period ended June 30, 2020, exclude the impact of 2.2 million subscriber disconnections resulting

from the closure of our DIRECTV operations in Venezuela.

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

Operations and support expenses decreased in the second quarter and for the first six months of ~~2020,~~2021, primarily driven by foreign exchange ~~and COVID-19 pressures.~~impacts. Approximately ~~21%~~23% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation

~~Depreciation~~ expense decreased in the second quarter and for the first six months of ~~2020,~~2021, primarily due to ~~changes in~~lower in-service assets and foreign exchange ~~rates.~~impacts.

As a result of the held-for-sale accounting treatment, depreciation will no longer be recorded on Vrio assets beginning July 1, 2021 (see Note 8).

Operating ~~income~~loss ~~decreased~~improved in the second quarter and for the first six months of ~~2020. Our~~2021. Vrio operating income margin infor the second quarter ~~decreased~~increased from ~~(1.4)% in 2019 to~~ (4.8)% in 2020 to (3.3)% in 2021, and for the first six months ~~decreased~~increased from ~~0.9% in 2019 to~~ (4.8)% in ~~2020. Our~~2020 to (4.0)% in 2021. Vrio EBITDA margin in the second quarter decreased from ~~14.6% in 2019 to~~ 12.1% in 2020 to 11.9% in 2021, and for the first six months decreased from ~~16.8% in 2019 to~~ 11.9% in ~~2020.~~2020 to 11.5% in 2021.

Mexico Results

Second Quarter

Six-Month Period

2020

2019
Percent Change

2020

2019
Percent Change
Operating revenues

Service
$
345

$
479
(28.0)
%

$
812

$
921
(11.8)
%
Equipment

135

246
(45.1)

371

455
(18.5)

Total Operating Revenues

480

725
(33.8)

1,183

1,376
(14.0)

Operating expenses

Operations and support

538

813
(33.8)

1,252

1,538
(18.6)

Depreciation and amortization

115

119
(3.4)

249

250
(0.4)

Total Operating Expenses

653

932
(29.9)

1,501

1,788
(16.1)

Operating Income (Loss)

(173)

(207)
16.4

(318)

(412)
22.8

Equity in Net Income (Loss)

of Affiliates

-

-
-

-

-
-

Operating Contribution
$
(173)

$
(207)
16.4
%

$
(318)

$
(412)
22.8
%

AT&T INC.

JUNE 30, ~~2020~~

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


Mexico Results
	Second Quarter						Six-Month Period
	2021		2020		Percent Change		2021		2020		Percent Change
Operating revenues
Service	$	447	$	345	29.6	%	$	886	$	812	9.1	%
Equipment	241		135		78.5		433		371		16.7
Total Operating Revenues	688		480		43.3		1,319		1,183		11.5

Operating expenses
Operations and support	667		538		24.0		1,287		1,252		2.8
Depreciation and amortization	150		115		30.4		295		249		18.5
Total Operating Expenses	817		653		25.1		1,582		1,501		5.4
Operating Income (Loss)	(129)		(173)		25.4		(263)		(318)		17.3
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—
Operating Contribution	$	(129)	$	(173)	25.4	%	$	(263)	$	(318)	17.3	%

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


					June 30,		Percent
(in 000s)					2021	2020	Change
Mexico Wireless Subscribers
Postpaid					4,745	4,771	(0.5)	%
Prepaid					13,810	12,777	8.1
Reseller					491	425	15.5
Total Mexico Wireless Subscribers					19,046	17,973	6.0	%

	Second Quarter				Six-Month Period
			Percent				Percent
(in 000s)	2021	2020	Change		2021	2020	Change
Mexico Wireless Net Additions
Postpaid	20	(191)	—	%	49	(332)	—	%
Prepaid	54	(915)	—		52	(807)	—
Reseller	(9)	21	—		2	53	(96.2)
Total Mexico Wireless Net Additions	65	(1,085)	—	%	103	(1,086)	—	%

Service

June 30,
Percent
(in 000s)

2020

2019
Change
Mexico Wireless Subscribers

Postpaid

4,771

5,489
(13.1)
%
Prepaid

12,777

12,180
4.9

Reseller

425

352
20.7

Total Mexico Wireless Subscribers

17,973

18,021
(0.3)
%

Second Quarter

Six-Month Period

Percent

Percent
(in 000s)

2020

2019
Change

2020

2019
Change
Mexico Wireless Net Additions¹

Postpaid

(191)

(153)
(24.8)
%

(332)

(222)
(49.5)
%
Prepaid

(915)

401
-

(807)

515
-

Reseller

21

51
(58.8)

53

99
(46.5)

Mexico Wireless Net Additions

(1,085)

299
-
%

(1,086)

392
-
%
¹
The second-quarter and six-month period ended June 30, 2020, exclude the impact of 101 subscriber disconnections resulting from

conforming our policy on reporting of fixed wireless resellers.

~~Service~~ revenues ~~decreased~~increased in the second quarter and for the first six months of ~~2020, primarily due to~~2021, reflecting improvements in foreign exchange ~~pressures, as well as lower volumes~~ and COVID-19 related store ~~traffic related to COVID-19.~~closures in the prior year.

Equipment revenues ~~decreased~~increased in the second quarter and for the first six months of ~~2020, primarily due to lower~~2021, driven by higher equipment sales volumes ~~related to COVID-19~~ and improvements in foreign ~~exchange rates.~~exchange.

Operations and support expenses ~~decreased~~increased in the second quarter and for the first six months of ~~2020,~~2021, primarily due to ~~changes~~an increase in customer growth, higher sales volumes and foreign exchange ~~rates and lower equipment sales.~~impacts. Approximately 8%6% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

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

~~Operating income~~ ~~increased in~~2021, reflecting higher in-service assets and, for the second quarter, and first six months of 2020. Our Mexico operating income margin in the second quarter decreased from (28.6)% in 2019 to (36.0)% in 2020, and for the first six months increased from (29.9)% in 2019 to (26.9)% in 2020. Our Mexico EBITDA margin in the second quarter was stable at (12.1)% in 2019 and 2020, and for the first six months increased from (11.8)% in 2019 to (5.8)% in 2020.foreign exchange impacts.

AT&T INC.

JUNE 30, ~~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

Operating loss improved in the second quarter and ~~per subscriber amounts~~for the first six months of 2021. Our Mexico operating income margin in the second quarter increased from (36.0)% in 2020 to (18.8)% in 2021, and for the first six months increased from (26.9)% in 2020 to (19.9)% in 2021. Our Mexico EBITDA margin in the second quarter increased from (12.1)% in 2020 to 3.1% in 2021, and for the first six months increased from (5.8)% in 2020 to 2.4% in 2021.

SUPPLEMENTAL ~~TOTAL ADVERTISING REVENUE~~VIDEO INFORMATION

As a supplemental presentation, we are providing a view of ~~total~~our Video business that was accounted for as held-for-sale and included in Corporate and Other. On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV (New DTV). We began accounting for our investment in New DTV under the equity method, effective August 1, 2021. The Video business provides U.S. video operations, including over-the-top (OTT) services, and also sells advertising ~~revenues generated by AT&T. See revenue categories~~on video distribution platforms.



Video Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating revenues
Service	$	6,607	6,979		(5.3)	%	$	13,291	$	14,376	(7.5)	%
Equipment	32		42		(23.8)		73		52		40.4
Total Operating Revenues	6,639		7,021		(5.4)		13,364		14,428		(7.4)

Operating expenses
Operations and support	5,275		5,809		(9.2)		10,935		11,829		(7.6)
Depreciation and amortization1	148		593		(75.0)		312		1,184		(73.6)
Total Operating Expenses	5,423		6,402		(15.3)		11,247		13,013		(13.6)
Operating Income	1,216		619		96.4		2,117		1,415		49.6
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—
Operating Contribution	$	1,216	$	619	96.4	%	$	2,117	$	1,415	49.6	%
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 ~~in Note 5~~highlight other key measures of performance for ~~a reconciliation.~~

Total Advertising Revenues

Second Quarter

Six-Month Period

Percent

Percent

2020

2019
Change

2020

2019
Change
Operating Revenues

Turner
$
796

$
1,266
(37.1)
%

$
1,753

$
2,527
(30.6)
%
Entertainment Group

294

399
(26.3)

707

749
(5.6)

Xandr

362

485
(25.4)

851

911
(6.6)

Other

75

90
(16.7)

173

175
(1.1)

Eliminations

(294)

(399)
26.3

(707)

(749)
5.6

Total Advertising Revenues
$
1,233

$
1,841
(33.0)
%

$
2,777

$
3,613
(23.1)
%

~~SUPPLEMENTAL COMMUNICATIONS OPERATING INFORMATION~~

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

Business Solutions Results

Second Quarter

Six-Month Period

2020

2019
Percent Change

2020

2019
Percent Change

Operating revenues

Wireless service
$
1,884

$
1,881
0.2
%

$
3,833

$
3,658
4.8
%
Strategic and managed services

3,943

3,834
2.8

7,822

7,613
2.7

Legacy voice and data services

2,067

2,324
(11.1)

4,196

4,721
(11.1)

Other service and equipment

364

449
(18.9)

688

751
(8.4)

Wireless equipment

585

617
(5.2)

1,295

1,207
7.3

Total Operating Revenues

8,843

9,105
(2.9)

17,834

17,950
(0.6)

Operating expenses

Operations and support

5,424

5,512
(1.6)

11,134

11,126
0.1

Depreciation and amortization

1,637

1,545
6.0

3,262

3,070
6.3

Total Operating Expenses

7,061

7,057
0.1

14,396

14,196
1.4

Operating Income

1,782

2,048
(13.0)

3,438

3,754
(8.4)

Equity in Net Income (Loss)

of Affiliates

-

-
-

-

-
-

Operating Contribution
$
1,782

$
2,048
(13.0)
%

$
3,438

$
3,754
(8.4)
%
Video:

Connections
June 30, Percent
(in 000s) 2021 2020 Change
Premium TV Connections 15,412 17,712 (13.0) %


Net Additions
	Second Quarter				Six-Month Period
			Percent				Percent
(in 000s)	2021	2020	Change		2021	2020	Change
Premium TV Net Additions	(473)	(887)	46.7	%	(1,093)	(1,784)	38.7	%

AT&T INC.

JUNE 30, ~~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

OTHER BUSINESS MATTERS

Spectrum Auction ~~In March 2020, 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, ~~for approximately $2,400. Prior~~including 40 MHz in Phase I. We provided to the ~~auction, we exchanged the 39 GHz licenses with a book value~~FCC an upfront deposit of ~~approximately $300 that were previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids~~$550 in 2020 and ~~recorded a $900 gain~~cash payments totaling $22,856 in the first quarter of ~~2020. These vouchers yielded~~2021, for a ~~value~~total of $23,406 to date. The licenses were granted by the FCC in July 2021 and remain subject to clearing. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum, expected by the end of 2021 and $2,112 upon clearing of Phase II spectrum, expected by the end of 2023. Additionally, we will be responsible for approximately ~~$1,200~~$1,000 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators. (See Note 8)

Video Business On July 31, 2021, we closed our transaction with TPG to form a new company named DIRECTV (New DTV), which ~~was applied toward~~is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions. We began accounting for our ~~$2,400 gross bids.~~investment in New DTV under the equity method, effective August 1, 2021. After the close of the transaction, New DTV issued $6,200 of long-term debt on August 2, 2021.

Under separate transition services agreements, we will provide New DTV certain operational support for up to three years. We ~~made~~also have entered into commercial arrangements, for up to five years, to provide network transport for U-verse products and sales services.

WarnerMedia On May 17, 2021, we entered into an agreement to combine our ~~final payment~~WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery, Inc. (Discovery). The agreement is structured as a Reverse Morris Trust transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata dividend, an exchange offer, or a combination of both, followed by its combination with Discovery. The transaction is expected to be tax-free to AT&T and AT&T’s shareholders. AT&T will receive approximately ~~$950 for~~$43,000 (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt; and AT&T’s shareholders will receive stock representing approximately 71% of the ~~Auction 103 payment~~new company; Discovery shareholders will own approximately 29% of the new company. The transaction is expected to close in ~~April 2020.~~ mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. No vote is required by AT&T shareholders.

The ~~FCC granted~~merger agreement contains certain customary termination rights for AT&T and Discovery, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will require ~~licenses~~Discovery to pay AT&T a termination fee of $720 or AT&T to pay Discovery a termination fee of $1,770.

Also, on June ~~2020.~~

~~Labor Contracts~~ As23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic Ltd. (Playdemic), to Electronic Arts (EA) for approximately $1,400 in cash. Playdemic was excluded from the pending WarnerMedia/Discovery transaction. In the second quarter of 2021, we classified Playdemic as held-for-sale and included $564 of goodwill in “Prepaid and other current assets” on our consolidated balance sheet at June 30, 2020, we employed approximately 243,000 persons. Approximately 40% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the collective bargaining agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached.

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

~~A contract covering approximately 13,000 wireline employees in our West region expired in April 2020. In March 2020, a tentative agreement was reached on a new 4-year contract. The tentative agreement~~2021. This transaction is subject to ~~ratification~~customary regulatory approvals and is expected to close by ~~employees.~~the end of 2021.

AT&T INC.

JUNE 30, 2021

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

Dollars in millions except per share amounts



AVrio On July 21, 2021, we entered into an agreement to sell our Latin America video operations, Vrio, to Grupo Werthein. In the second quarter of 2021, we classified the Vrio disposal group as held-for-sale and reported the disposal group at fair value less cost to sell, which resulted in a noncash, pre-tax impairment charge of $4,555, including approximately $2,100 related to accumulated foreign currency translation adjustments and $2,500 related to property, plant and equipment and intangible assets. Approximately $80 of the impairment was attributable to noncontrolling interest. At June 30, 2021, our consolidated balance sheet included $883 of Vrio held-for-sale assets reported in “Prepaid and other current assets,” primarily related to deferred customer contract ~~covering approximately 14,000 employees~~acquisition and fulfillment costs, prepaids and other deferred charges, and $2,849 of related liabilities reported in “Accounts payable and accrued liabilities,” primarily for reserves associated with accumulated foreign currency translation adjustments, which will reverse against accumulated other comprehensive income upon close of the ~~Southwest region scheduled~~transaction.

The transaction is expected to ~~expire~~close in ~~April 2021 was extended 4 years and~~early 2022, pending customary closing conditions. We will ~~now expire~~retain our 41.3% interest in ~~April 2025.~~SKY Mexico, a leading pay-TV provider in Mexico.

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,~~Over the past several years, 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. The D.C. Circuit upheld the FCC’s current classification, although it remanded three discrete issues to the FCC for further consideration. NoThese 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 soto uphold the FCC’s classification of broadband as an information service, that decision is ~~final, although~~final.

In October 2020, the ~~FCC’s consideration of~~FCC adopted an order addressing the three issues ~~remains~~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.

Some states have adopted legislation or issued executive orders that would reimpose net neutrality rules repealed by the FCC. Suits have been filed concerning such laws in two states. 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

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

~~Facebook. In April 2017, the President signed a resolution passed by Congress repealing the new rules under the Congressional Review Act.~~

Privacy-related legislation ~~has been~~continues to be adopted or considered ~~or adopted~~ in a number of ~~states.~~jurisdictions. Legislative, regulatory and ~~regulatory action and ballot initiatives~~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 2020, the FCC adopted multiple Orders streamlining federal wireless structure review processes and limiting state and local review processes, each 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 and September 2018, the FCC adopted orders to streamline federal and local wireless infrastructure review processes in order to facilitate deployment of next-generation wireless facilities. Specifically, the FCC’s March 2018 Order streamlined historical, tribal, and environmental review requirements for wireless infrastructure, including by excluding most small cell facilities from such review. The Order was appealed and in August 2019, the D.C. Circuit Court of Appeals vacated the FCC’s finding that most small cell facilities are excluded from review, but otherwise upheld the FCC’s Order. The FCC’s August and September 2018 Orders simplified the regulations for attaching telecommunications equipment to utility poles and clarified when local government right-of-way access and use restrictions can be preempted because they unlawfully prohibit the provision of telecommunications services. Those orders were appealed to the 9th Circuit Court of Appeals, where they remain pending. In addition to the FCC’s actions, to date, 28 states and Puerto Rico have adopted legislation to facilitate small cell deployment.

In December 2018, we introduced the nation’s first commercial mobile 5G service. In July 2020, we announced nationwide 5G coverage. We anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in equipment upgrades.

AT&T INC.

JUNE 30, ~~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

broadband services, including small cell equipment. The key elements of these orders have been affirmed on judicial review, although two Orders limiting state and ~~per subscriber amounts~~local review are pending judicial review and/or FCC reconsideration.

LIQUIDITY AND CAPITAL RESOURCES

We had ~~$16,941~~$11,869 in ~~“Cash~~cash and cash ~~equivalents”~~equivalents available at June 30, ~~2020. “Cash~~2021. Cash and cash ~~equivalents”~~equivalents included cash of ~~$3,781~~$3,867 and money market funds and other cash equivalents of ~~$13,160.~~$8,002. Approximately ~~$2,529~~$2,559 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.

The Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first six months of 2020. We will continue to monitor impacts on the COVID-19 pandemic on our liquidity and capital resources.

“

Cash and cash ~~equivalents”~~equivalents increased ~~$4,811~~$2,129 since December 31, ~~2019.~~2020. In the first six 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 ~~the issuances~~issuance of ~~commercial paper,~~ long-term debt and ~~cumulative preferred stock.~~commercial paper. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, spectrum acquisitions, ~~debt repayments,~~ funding capital expenditures and vendor financing payments, ~~collateral posted to banks and other participants in derivative arrangements, share repurchase~~ and dividends to stockholders.

Our cash and debt management over the remainder of the year will be impacted by the WarnerMedia/Discovery transaction, including the IRS private letter ruling process. During this time, it is likely that our cash and cash equivalent balances will increase above historical thresholds, including cash received from our recently completed U.S. video business transaction.

Cash Provided by or Used in Operating Activities

During the first six months of ~~2020,~~2021, cash provided by operating activities was ~~$20,925,~~$20,837, compared to ~~$25,336~~$20,925 for the first six months of ~~2019. Lower operating~~2020, impacted by content investment and the timing of working capital payments. Total cash ~~flows~~paid for WarnerMedia’s content investment was $9,769 in ~~2020 were primarily driven by lower incremental receivable securitization (see Note 9)~~the first six months of 2021 ($2,550 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 make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost. In addition, for payments to a key supplier, 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~~$1,256 and $1,452 ~~and $496~~ for the six months ended June 30, ~~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 six months of ~~2020,~~2021, cash used in investing activities totaled ~~$10,278,~~$30,631, and consisted primarily of ~~$9,432 (including interest during construction)~~$7,992 for capital expenditures, ~~final payment~~and acquisitions of ~~approximately $950 for wireless~~$23,169, which include C-Band spectrum licenses won in Auction ~~103,~~107 and ~~$141 for acquiring the remaining interest in HBO LAG.~~

associated capitalized interest.

For capital improvements, we have negotiated favorable vendor payment terms of 120 days or more (referred to as vendor financing) with some of our vendors, which are excluded from capital expenditures and reported as financing activities. For the first six months of ~~2020,~~2021, vendor financing payments were ~~$1,354,~~$2,994, compared to ~~$1,836~~$1,354 for the first six months of ~~2019.~~2020. Capital expenditures in the first six months of ~~2020~~2021 were ~~$9,432,~~$7,992, and when including ~~$1,354~~$2,994 cash paid for vendor financing, ~~and excluding $79 of FirstNet reimbursements,~~ gross capital investment was ~~$10,865~~$10,986 ($~~1,728 lower~~121 higher than the prior-year comparable period).

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first six months of 2021, we placed ~~$1,681~~$1,778 of equipment in service under vendor financing arrangements (compared to ~~$1,265~~$1,680 in the prior-year comparable period) and ~~approximately $640~~$450 of assets related to the FirstNet build (compared to ~~$600~~$640 in the prior-year comparable period). The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Cash Provided by or Used in Financing Activities

For the first six months of ~~2020,~~2021, cash ~~used in~~provided by financing activities totaled ~~$5,911~~$11,900 and was comprised of debt issuances and repayments, ~~issuances of preferred stock, share repurchase,~~ payments of dividends, and ~~required collateral deposits.~~

vendor financing payments.

AT&T INC.

JUNE 30, ~~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

~~During~~

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

~~Issued and redeemed in 2020:~~

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

~~April draw of $5,500 on a term loan credit agreement with certain commercial banks and Bank of America, N.A.,~~ended June 30, 2021 is as ~~lead agent (repaid in the second quarter).~~follows:


	First Quarter		Second Quarter		Six months ended June 30, 2021
Net commercial paper borrowings	$	7,072	$	(513)	$	6,559
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes	$	6,000	$	—	$	6,000
Initial average rate of 1.27%
Euro denominated global notes (converted to USD at issuance)	1,461		—		1,461
Rate of 0.00%
2021 Syndicated Term Loan	7,350		—		7,350
BAML Bilateral Term Loan	2,000		—		2,000
Private financing	750		—		750
Other	636		—		636
Debt Issuances	$	18,197	$	—	$	18,197

Repayments:
Private financing	$	(649)	$	—	$	(649)
Other	(253)		(253)		(506)
Repayments of long-term debt	$	(902)	$	(253)	$	(1,155)
1 Includes credit agreement borrowings.

~~Issued and outstanding in 2020:~~

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

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

May issuances totaling $12,500 in global notes, comprised of $2,500 of 2.300% global notes due 2027, $3,000 of 2.750% global notes due 2031, $2,500 of 3.500% global notes due 2041, $3,000 of 3.650% global notes due 2051 and $1,500 of 3.850% global notes due 2060.

May issuances totaling €3,000 million in global notes (approximately $3,281 at issuance), comprised of €1,750 million of 1.600% global notes due 2028, €750 million of 2.050% global notes due 2032 and €500 million of 2.600% global notes due 2038.

~~June issuance of $1,050 of 3.750% global notes due 2050.~~

~~During the first six months of 2020, repayments of debt included $5,975 of short-term borrowings and $17,284 of long-term debt. Repayments were comprised of $475 in commercial paper and the following:~~

~~Notes redeemed at maturity:~~

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

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

~~Notes redeemed prior to maturity:~~

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

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

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

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

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

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

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

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

~~Credit facilities repaid and other borrowings:~~

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

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

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

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

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

~~Our~~

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 June 30, ~~2020~~2021 and ~~4.4%~~4.1% as of December 31, ~~2019.~~2020. We had ~~$164,099~~$171,445 of total notes and debentures outstanding at June 30, ~~2020,~~2021, which included Euro, British pound sterling, Canadian dollar, ~~Swiss franc,~~Mexican peso, Australian dollar, ~~Brazilian real,~~ and ~~Mexican peso~~Swiss franc denominated debt that totaled approximately ~~$44,798.~~

$43,932.

~~AT&T INC.~~

~~JUNE 30, 2020~~

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

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

At June 30, ~~2020,~~2021, we had ~~$15,576~~$24,016 of debt maturing within one year, consisting of ~~$3,001~~$6,571 of commercial paper borrowings, $9,100 of bank borrowings, and ~~$12,575~~$8,345 of long-term debt issuances. Debt maturing within one year includes ~~the following notes that may be put back to us by the holders:~~

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 six months of ~~2020,~~2021, we paid ~~$1,354~~$2,994 of cash under our vendor financing program, compared to ~~$1,836~~$1,354 in the first six months of ~~2019.~~2020. Total vendor financing payables included in our June 30, ~~2020~~2021 consolidated balance sheet were ~~approximately $1,556,~~$2,948, with ~~$718~~$2,149 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

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

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

At June 30, ~~2020,~~2021, we had approximately 178 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014.

We paid dividends on common and preferred shares of ~~$7,474~~$7,571 during the first six months of ~~2020,~~2021, compared with ~~$7,436~~$7,474 for the first six months of 2019. Dividends were higher in 2020, primarily due to dividend payments to preferred stockholders and the increase in our quarterly dividend on common stock approved by our Board of Directors in December 2019, partially offset by fewer shares outstanding.

2020.

Dividends on common stock declared by our Board of Directors totaled $1.04 per share in the first six months of ~~2020~~2021 and ~~$1.02 per share for the first six 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. ItWe do not expect changes to our dividend policy prior to the close of the pending WarnerMedia and Discovery transaction, which is ~~our intent~~expected to ~~provide the financial flexibility to allow our Board of Directors to consider dividend growth~~close in mid-2022. After close and ~~to recommend an increase in dividends to be paid in future periods. All dividends remain~~ subject to ~~declaration by our~~AT&T Board approval, we anticipate an annual dividend level of ~~Directors.~~

~~Financing Activities Subsequent~~approximately $8,000 to ~~the Second Quarter~~

~~Taking advantage of attractive rates, we completed the following financing activities subsequent to the second quarter of 2020.~~

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

~~$1,457 of 3.000% global notes due 2022 issued by AT&T.~~

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

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

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

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

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

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

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

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

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

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

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

$9,000 per year.

AT&T INC.

JUNE 30, ~~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

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 June 30, ~~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 June 30, 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. ~~These facilities were repaid and terminated in the second quarter of 2020.~~At June 30, 2021, $2,000 was outstanding under these 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. We repaid and terminated the Term Loan in May 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 for the 2021 Syndicated Term Loan, BAML Bilateral Term Loan, and revolving credit agreements and 3.5-to-1 for all other credit agreements. As of June 30, ~~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 $43,000 derivative portfolio, counterparties are still required to post collateral. During the first six months of ~~2020,~~2021, we deposited approximately ~~$518~~$300 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 June 30, ~~2020,~~2021, our debt ratio was ~~46.6%~~50.0%, compared to ~~46.8%~~46.6% at June 30, ~~2019~~2020 and ~~44.7%~~46.7% at December 31, ~~2019.~~2020. Our net debt ratio was 46.7% at June 30, 2021, compared to 41.9% at June 30, 2020 ~~compared to 44.5% at June 30, 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 the first six months of 2020,~~

On July 31, 2021, we ~~have~~closed our transaction with TPG to form a new company named DIRECTV, which is jointly governed by a board with representation from both AT&T and TPG. Upon close, we received ~~$347~~approximately $7,130 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,~~New DTV ($7,600, net of ~~$1,046~~$470 cash on hand) and transferred $195 of ~~spectrum acquisitions,~~DIRECTV debt. (See Note 8)

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment with a subsidiary of Discovery. The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. We expect to receive $43,000 (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. (See Note 8)

On May 17, 2021, in anticipation of the separation of WarnerMedia business from us, Spinco, a wholly owned subsidiary, entered into a $41,500 commitment letter (Bridge Loan). On June 4, 2021, Spinco entered into a $10,000 term loan credit agreement (Spinco Term Loan) consisting of (i) an 18 month $3,000 tranche (Tranche 1 Facility), and (ii) a 3 year $7,000 tranche (Tranche 2 Facility), with JPMorgan Chase Bank, N.A., as agent. In connection with the execution of the Spinco Term Loan, the aggregate commitment amount under the Bridge Loan was ~~approximately $300. We plan~~reduced to ~~continue to explore similar opportunities throughout 2020.~~

$31,500. No amounts were outstanding as of June 30, 2021.

AT&T INC.

JUNE 30, ~~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

~~DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURE~~

On June 23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic to EA. The transaction is expected to close by the end of 2021, pending customary regulatory approvals. We ~~believe~~expect to receive approximately $1,400 in cash from 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.

Three Months Ended

June 30, 2020

June 30, 2019

Mobility

Business Wireline

Adjustments¹

Business Solutions

Mobility

Business Wireline

Adjustments¹

Business Solutions
Operating Revenues

Wireless service
$
13,669
$
-
$
(11,785)
$
1,884

$
13,824
$
-
$
(11,943)
$
1,881
Strategic and managed services

-

3,943

-

3,943

-

3,834

-

3,834
Legacy voice and data services

-

2,067

-

2,067

-

2,324

-

2,324
Other service and equipment

-

364

-

364

-

449

-

449
Wireless equipment

3,480

-

(2,895)

585

3,468

-

(2,851)

617
Total Operating Revenues

17,149

6,374

(14,680)

8,843

17,292

6,607

(14,794)

9,105

Operating Expenses

Operations and support

9,332

3,779

(7,687)

5,424

9,522

3,975

(7,985)

5,512
EBITDA

7,817

2,595

(6,993)

3,419

7,770

2,632

(6,809)

3,593
Depreciation and amortization

2,012

1,318

(1,693)

1,637

2,003

1,242

(1,700)

1,545
Total Operating Expense

11,344

5,097

(9,380)

7,061

11,525

5,217

(9,685)

7,057
Operating Income

5,805

1,277

(5,300)

1,782

5,767

1,390

(5,109)

2,048
Equity in net income (loss)
of affiliates

-

-

-

-

-

-

-

-
Operating Contribution
$
5,805
$
1,277
$
(5,300)
$
1,782

$
5,767
$
1,390
$
(5,109)
$
2,048
¹Non-business wireless reported in the Communications segment under the Mobility business unit.

transaction at closing. (See Note 8)

AT&T INC.

JUNE 30, ~~2020~~

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

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

2021

Six Months Ended

June 30, 2020

June 30, 2019

Mobility

Business Wireline

Adjustments¹

Business Solutions

Mobility

Business Wireline

Adjustments¹

Business Solutions
Operating Revenues

Wireless service
$
27,637
$
-
$
(23,804)
$
3,833

$
27,453
$
-
$
(23,795)
$
3,658
Strategic and managed services

-

7,822

-

7,822

-

7,613

-

7,613
Legacy voice and data services

-

4,196

-

4,196

-

4,721

-

4,721
Other service and equipment

-

688

-

688

-

751

-

751
Wireless equipment

6,914

-

(5,619)

1,295

7,202

-

(5,995)

1,207
Total Operating Revenues

34,551

12,706

(29,423)

17,834

34,655

13,085

(29,790)

17,950

Operating Expenses

Operations and support

18,901

7,730

(15,497)

11,134

19,563

8,007

(16,444)

11,126
EBITDA

15,650

4,976

(13,926)

6,700

15,092

5,078

(13,346)

6,824
Depreciation and amortization

4,057

2,619

(3,414)

3,262

4,016

2,464

(3,410)

3,070
Total Operating Expense

22,958

10,349

(18,911)

14,396

23,579

10,471

(19,854)

14,196
Operating Income

11,593

2,357

(10,512)

3,438

11,076

2,614

(9,936)

3,754
Equity in net income (loss)
of affiliates

-

-

-

-

-

-

-

-
Operating Contribution
$
11,593
$
2,357
$
(10,512)
$
3,438

$
11,076
$
2,614
$
(9,936)
$
3,754
¹Non-business wireless reported in the Communications segment under the Mobility business unit.

~~AT&T INC.~~

~~JUNE 30, 2020~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At June 30, ~~2020,~~2021, we had no interest rate ~~swaps with a notional value of $21 and a fair value of $(3).~~

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 ~~$45,606~~$42,186 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow or fair value hedges with a net fair value of ~~$(6,700)~~$(1,351) at June 30, ~~2020.~~2021. We ~~have~~had no rate locks at June 30, ~~2020.~~

2021.

We have foreign exchange contracts with a U.S. dollar notional value of ~~$298~~$516 to provide currency at a fixed rate to hedge a portion of the exchange risk involved in foreign currency-denominated transactions. These foreign exchange contracts include fair value hedges, cash flow hedges and economic (nonqualifying) hedges with a total net fair value of $4$(10) at June 30, ~~2020.~~

2021.

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

Item 4. Controls and Procedures

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

AT&T INC.

JUNE 30, ~~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, workforce shortage, 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.

~~AT&T INC.~~

~~JUNE 30, 2020~~

~~CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS~~

•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.

JUNE 30, 2021

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS - continued

•The impact from major equipment or software failures on our ~~networks, including satellites operated by DIRECTV;~~networks; 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~~simplify and improve processes and support functions.

•Our ability to successfully complete divestitures, including the separation of ~~businesses and consumers to spend in general.~~the WarnerMedia business, as well as achieve our expectations regarding the financial impact of the completed and/or pending transactions.

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

AT&T INC.

JUNE 30, ~~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 ~~for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020~~ various risks that may materially affect our business. We use this section to update this discussion to reflect material ~~developments. F~~developments since our Form 10-K was filed.

The proposed separation and combination of our WarnerMedia business with Discovery may not be completed on the currently contemplated timeline or at all.

On May 17, 2021, we announced a definitive agreement with Discovery, Inc. (Discovery) to combine our WarnerMedia business with Discovery (the “WarnerMedia/Discovery Transaction”), which, if consummated, would result in our stockholders owning 71% of the combined company’s Discovery’s outstanding common stock on a fully-diluted basis (computed using the treasury stock method). The WarnerMedia/Discovery Transaction is expected to close in mid-2022, subject to certain customary closing conditions including, among others, the approval of Discovery’s stockholders, the receipt of certain regulatory approvals and the receipt of a private letter ruling from the Internal Revenue Service to the effect that the separation of the WarnerMedia business and certain related transactions will qualify for tax-free treatment under the Internal Revenue Code (the “Private Letter Ruling”).

There can be no assurance that such closing conditions will be satisfied or waived, or that the WarnerMedia/Discovery Transaction will be consummated. Required regulatory approvals and the Private Letter Ruling may not be received in a timely manner or at all. Further, while we have entered into voting agreements with certain stockholders of Discovery representing, in the aggregate, approximately 43% of the voting power of the issued and outstanding shares of Discovery capital stock as of May 14, 2021, pursuant to which they have agreed to vote in favor of certain aspects of the WarnerMedia/Discovery Transaction, we cannot assure you that the approval of Discovery’s stockholders will be obtained. We and Discovery may be subject to shareholder lawsuits, or other actions filed in connection with or in opposition to the WarnerMedia/Discovery Transaction, which could prevent or delay the consummation of the WarnerMedia/Discovery Transaction.

If the distribution of WarnerMedia, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then we could be subject to significant tax liability.

The Private Letter Ruling, if obtained, would rely on certain facts, representations and undertakings made by us, WarnerMedia and Discovery. Accordingly, the Internal Revenue Service or another applicable tax authority could determine on audit that the distribution by us of WarnerMedia to our stockholders and certain related transactions should be treated as taxable transactions if it determines that any of these facts, representations or undertakings are incorrect or have been violated. We may be entitled to indemnification from Discovery in the case of certain breaches of representations or undertakings by Discovery under the tax matters agreement related to the WarnerMedia/Discovery Transaction. However, we could potentially be required to pay such tax prior to reimbursement from Discovery, and such indemnification is subject to Discovery’s credit risk. If the Internal Revenue Service or another tax authority were to so conclude, there could be a material adverse impact on our business, financial condition, results of operations and cash flows.

In addition, in the event that we are unable to effectuate a Spinco Debt Exchange, we could incur significant incremental tax liability associated with the WarnerMedia/Discovery Transaction. If certain conditions are met, Discovery generally will be responsible for 50% of such incremental tax liability that does not exceed $4 billion. For more information regarding the Spinco Debt Exchange, refer to the risk factor titled “Even if the WarnerMedia/Discovery Transaction is completed, we may not realize some or all of the expected benefits of the transaction.” below.

The announcement and pendency of the WarnerMedia/Discovery Transaction could cause disruptions in our business.

The WarnerMedia/Discovery Transaction will require significant amounts of time and effort which could divert management’s attention from operating, growing our business and other strategic endeavors. Further, our employees may be distracted due to uncertainty regarding their future roles with us or the ~~second quarter~~WarnerMedia business pending the consummation of ~~2020, there were no such material developments.~~

the WarnerMedia/Discovery Transaction. In the event that the WarnerMedia/Discovery Transaction does not close, we will be required to bear a number of non-recurring costs in connection with the transaction, including financial, legal, accounting, consulting and other advisory fees and expenses, reorganization and restructuring costs, severance/employee benefit-related expenses, regulatory and SEC filing fees and expenses, printing expenses and other related charges. Until the consummation or termination of the WarnerMedia/Discovery Transaction, we are also required to operate the WarnerMedia business in the ordinary course and we are restricted from taking certain specified actions with respect to our WarnerMedia business without Discovery’s consent. Any of the foregoing could adversely affect our operating results.

AT&T INC.

JUNE 30, ~~2020~~2021

Even if the WarnerMedia/Discovery Transaction is completed, we may not realize some or all of the expected benefits of the transaction.

Even if the WarnerMedia/Discovery Transaction is completed, the anticipated operational, financial, strategic and other benefits of such transaction to the Company and our stockholders may not be achieved. There are many factors that could impact the anticipated benefits from the WarnerMedia/Discovery Transaction, including, among others, strategic adjustments required to reflect the nature of our business following the WarnerMedia/Discovery Transaction and any negative reaction to the WarnerMedia/Discovery Transaction by our customers and business partners. In addition, we have agreed to provide certain transition services to the combined company, which may result in additional expenses and may divert our focus and resources that would otherwise be invested into maintaining or growing our businesses.

In connection with the WarnerMedia/Discovery Transaction, we will receive approximately $43 billion, subject to certain adjustments, in the form of a combination of (i) the assumption by the WarnerMedia business of certain existing debt, (ii) a cash dividend distributed to us from the WarnerMedia business (the “Spinco Special Cash Payment”), and (iii) debt instruments of the WarnerMedia business (the “Spinco Debt Distribution”). We expect to deliver such debt instruments of WarnerMedia in exchange for certain of our outstanding debt obligations (the “Spinco Debt Exchange”), and to use the proceeds of the Spinco Special Cash Payment to repay certain of our other outstanding debt obligations. This process will be complex and may require significant time and resources. Depending on various variables (such as interest rates and timing) at the time of the Spinco Debt Exchange, AT&T’s transaction costs relating to the Spinco Debt Exchange may be significantly higher than expected. Additionally, if market conditions change in advance of the Spinco Debt Exchange such that it is no longer feasible for the WarnerMedia business to issue debt securities with a fair market value at least equal to their face value, we may be required to take an additional distribution of cash from the WarnerMedia business in lieu of effecting the Spinco Debt Exchange, which could result in potentially significant incremental tax liability. If certain conditions are met, Discovery generally will be responsible for 50% of such incremental tax liability that does not exceed $4 billion.

An inability to realize the full extent of the anticipated benefits of the WarnerMedia/Discovery Transaction, as well as any delays encountered in the process, could have an adverse effect on our revenues, level of expenses and operating results.

In connection with the separation of the WarnerMedia business and the recently completed transaction involving our Video business unit, certain liabilities will be or were allocated to or retained by us and we will be subject to indemnification obligations in respect of those liabilities.

In connection with the separation of the WarnerMedia business and the recently completed transaction involving our Video business unit (the “DTV Transaction”), we have agreed to assume or retain, and indemnify the WarnerMedia business and the Video business unit for, certain liabilities. Payments pursuant to these indemnities may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution of the WarnerMedia business. Third parties could also seek to hold us responsible for any liabilities allocated to the WarnerMedia business and the Video business unit and such third parties could seek damages, other monetary penalties (whether civil or criminal) and other remedies.

The separation of the WarnerMedia business and the Video business unit may result in an increase in our costs and expenses.

Following the consummation of the WarnerMedia/Discovery Transaction and the DTV Transaction, we will no longer benefit from economies of scale and synergies we currently have or expected to realize between our WarnerMedia business, our Video business unit and our remaining businesses, including through intercompany arrangements and combined agreements with third parties. There can be no assurance that we will be able to continue any of these arrangements, or that any such continuing arrangements will be on the same or more favorable terms, following the separation of the WarnerMedia business and the Video business unit. As a result, our costs and expenses may increase following the consummation of the WarnerMedia/Discovery Transaction and the DTV Transaction.

AT&T INC.

JUNE 30, 2021

PART II – OTHER INFORMATION - CONTINUED

Dollars in millions except per share amounts

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

(c) A summary of our repurchases of common stock during the second 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
April 1, 2021 - April 30, 2021 40,460 $ 29.92 — 177,902,921
May 1, 2021 - May 31, 2021 36,612 30.36 — 177,902,921
June 1, 2021 - June 30, 2021 1,253,318 28.82 — 177,902,921
Total 1,330,390 $ 28.89 —
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~~
~~April 1, 2020 -~~
~~April 30, 2020~~
~~48,894~~
$
~~33.41~~
-
~~177,942,230~~
~~May 1, 2020 -~~
~~May 31, 2020~~
~~145,630~~
~~33.33~~
-
~~177,942,230~~
~~June 1, 2020 -~~
~~June 30, 2020~~
~~937,490~~
~~29.85~~
-
~~177,942,230~~
~~Total~~
~~1,132,014~~
$
~~30.45~~
-
¹
In March 2014, our Board of Directors approved an authorization to repurchase up to 300 million shares of our common
stock. The authorization has no expiration date.
²
Of the shares repurchased, ~~556,889~~296,103 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, ~~575,125~~1,034,287 shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit
Association (VEBA) ~~trusts.~~trusts during the period.

AT&T INC.

JUNE 30, 2020

Item 6. Exhibits

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


Exhibit
Number						Exhibit Description
2.1						Agreement and Plan or Merger, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc., Discovery, Inc. and Drake Subsidiary, Inc.* (Exhibit 2.1 to Form 8-K filed on May 20, 2021)
2.2						Separation and Distribution Agreement, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc. and Discovery, Inc. * (Exhibit 2.2 to Form 8-K filed on May 20, 2021)
10.1						Voting Agreement, dated May 17, 2021, by and among AT&T Inc., John C. Malone and the stockholders parties thereto (Exhibit 10.1 to Form 8-K filed on May 20, 2021)
10.2						Voting Agreement, dated May 17, 2021, by and among AT&T Inc., Advance/Newhouse Programming Partnership and Advance/Newhouse Partnership (Exhibit 10.2 to Form 8-K filed on May 20, 2021)
10.3						Employee Matters Agreement, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc., and Discovery, Inc. (Exhibit 10.3 to Form 8-K filed on May 20, 2021)
10.4						Tax Matters Agreement, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc., and Discovery, Inc. (Exhibit 10.4 to Form 8-K filed on May 20, 2021)
10.5						$10,000,000,000 Term Loan Credit Agreement, dated as of June 4, 2021, among Magallanes, Inc., the lenders named therein and JPMorgan Chase Bank, N.A., as agent (Exhibit 10.1 to Form 8-K filed on June 10, 2021)
10.6						Amendment No. 1, dated as of June 4, 2021, to the 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 10.2 to Form 8-K filed on June 10, 2021)
10.7						Amendment No. 1, dated as of June 4, 2021, to the $7,500,000,000 Amended and Restated Credit Agreement, dated November 17, 2020, among AT&T, certain lenders named therein and Citibank, N.A., as agent (Exhibit 10.3 to Form 8-K filed on June 10, 2021)
10.8						Amendment No. 2, dated as of June 4, 2021, to the $7,500,000,000 Five Year Credit Agreement, dated December 11, 2018, among AT&T, certain lenders named therein and Citibank, N.A., as agent (Exhibit 10.4 to Form 8-K filed on June 10, 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 June 30, 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 June 30, 2021, (formatted as Inline XBRL and contained in Exhibit 101).
*						Certain schedules (or similar attachments) have been omitted pursuant to Item 601(a)(5) or Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish copies of such schedules (or similar attachments) to the U.S. Securities and Exchange Commission upon request.

SIGNATURE

~~Exhibit~~

~~Number~~

~~Exhibit Description~~

~~3.1~~

~~Bylaws (Exhibit 3.1~~

Pursuant to ~~Form 8-K filed on June 26, 2020)~~

~~4.1~~

~~Description of AT&T's Securities Registered Under Section 12~~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.


			AT&T Inc.

August 5, 2021			/s/ Pascal Desroches
			Pascal Desroches
			Senior Executive Vice President
			and Chief Financial Officer

~~10.1~~

~~Supplemental Life Insurance Plan (Exhibit 10.1 to Form 8-K filed on June 26, 2020)~~

~~10.2~~

~~Agreement between Jason Kilar and WarnerMedia LLC~~

~~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 June 30, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

~~104~~

~~The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, (formatted as Inline XBRL 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.~~

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

		~~Name of each exchange~~
~~Title of each class~~			~~Trading Symbol(s)~~	~~on which registered~~
AT&T Inc. 0.250% Global Notes due March 4, 2026	T 26E			New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026			T 26D		New York Stock Exchange
AT&T Inc. 2.900% Global Notes due December 4, 2026			T 26A		New York Stock Exchange
AT&T Inc. 1.600% Global Notes due May 19, 2028			T 28C		New York Stock Exchange


		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
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

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

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

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

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

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

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

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

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

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

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

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

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

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


Business Wireline Results
	Second Quarter						Six-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating revenues
Service	$	5,860	$	6,101	(4.0)	%	$	11,732	$	12,192	(3.8)	%
Equipment	192		204		(5.9)		366		379		(3.4)
Total Operating Revenues	6,052		6,305		(4.0)		12,098		12,571		(3.8)

Operating expenses
Operations and support	3,709		3,714		(0.1)		7,419		7,601		(2.4)
Depreciation and amortization	1,293		1,301		(0.6)		2,571		2,587		(0.6)
Total Operating Expenses	5,002		5,015		(0.3)		9,990		10,188		(1.9)
Operating Income	1,050		1,290		(18.6)		2,108		2,383		(11.5)
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—
Operating Contribution	$	1,050	$	1,290	(18.6)	%	$	2,108	$	2,383	(11.5)	%

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

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

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

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

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

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

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

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

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