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 AT&T Reports First-Quarter Results
   Tuesday, April 25, 2017 4:01:00 PM ET

--Consolidated revenues of $39.4 billion

--Operating income of $6.9 billion

--Net income attributable to AT&T of $3.5 billion

--Diluted EPS of $0.56 as reported and $0.74 as adjusted, compared to $0.61 and $0.72 in the year-ago quarter

--Cash from operations of $9.2 billion

--Free cash flow of $3.2 billion

--2.7 million wireless net adds 2.1 million U.S., driven by prepaid and connected devices

--633,000 Mexico

--U.S. wireless first-quarter results: Best-ever first-quarter postpaid phone churn of 0.90%

--Wireless postpaid churn of 1.12%, including pressure from tablets

--Strong operating margin of 30.1%; best-ever EBITDA margin of 41.8%; EBITDA wireless service margin of 49.3%

--Entertainment Group first-quarter results: Strong broadband gains with 242,000 IP broadband net adds; 115,000 total broadband net adds

--4.6 million AT&T Fiber customer locations with plans to add 2 million in 2017

--DIRECTV NOW gains help offset linear TV subscriber decline

--Note: AT&T’s first-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, April 25, 2017. The webcast and related materials will be available on AT&T’s Investor Relations website at www.att.com/investor.relations.

AT&T Inc. (T ) today announced continued adjusted margin expansion and solid adjusted earnings growth for the first quarter. The quarter also was marked by several decisive strategic moves that helped broaden the company’s spectrum portfolio.

"In a very competitive quarter, we continued to execute on our goals of driving efficiencies in our business while growing adjusted earnings per share. But just as important, the strategic moves we’ve made over the last few months to expand our wireless capacity and fortify our 5G leadership will be felt for years to come," said Randall Stephenson, AT&T Chairman and CEO. "FirstNet gives us access to 20 megahertz of valuable, low-band spectrum and allows us to deploy our spectrum assets more efficiently as we build a high-quality, mobile broadband network for our first responders. And our planned acquisitions of Fiber Tower and Straight Path will add valuable millimeter wave spectrum assets to our 5G tool kit as we lead the way to the next generation of wireless technology."

Consolidated Financial Results

AT&T’s consolidated revenues for the first quarter totaled $39.4 billion versus $40.5 billion in the year-ago quarter, primarily due to record-low equipment sales in wireless. Compared with results for the first quarter of 2016, operating expenses were $32.5 billion versus $33.4 billion; operating income was $6.9 billion versus $7.1 billion; and operating income margin was 17.4% versus 17.6%. When adjusting for amortization, merger- and integration-related and other items, operating income was $8.2 billion versus $8.1 billion; and operating income margin was 20.7%, up 80 basis points versus the year-ago quarter.

First-quarter net income attributable to AT&T totaled $3.5 billion, or $0.56 per diluted share, compared to $3.8 billion, or $0.61 per diluted share, in the year-ago quarter. Adjusting for $0.18 of costs for amortization, merger- and integration-related and other items, earnings per diluted share was $0.74 compared to an adjusted $0.72 in the year-ago quarter.

Cash from operating activities was $9.2 billion in the first quarter, and capital expenditures were $6.0 billion. Free cash flow -- cash from operating activities minus capital expenditures -- was $3.2 billion for the quarter.

Updated 2017 Outlook

The company is updating its 2017 guidance. On a business as usual basis without the impact of Time Warner, AT&T expects:

-- Adjusted EPS growth in the mid-single digit range

-- Adjusted operating margin expansion

-- Capital expenditures in the $22 billion range

-- Free cash flow in the $18 billion range

The company is no longer providing consolidated revenue guidance primarily due to the unpredictability of wireless handset sales.

Adjustments include non-cash mark-to-market benefit plan gain/loss, merger integration and amortization costs and other adjustments. Traditionally, the mark-to-market adjustment is the largest item, which is driven by interest rates and investment returns that are not reasonably estimable at this time. We expect amortization to be lower in 2017 compared to 2016.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

About AT&T

AT&T Inc. (T ) helps millions around the globe connect with leading entertainment, business, mobile and high speed internet services. We offer the nation’s best data network* and the best global coverage of any U.S. wireless provider.** We’re one of the world’s largest providers of pay TV. We have TV customers in the U.S. and 11 Latin American countries. Nearly 3.5 million companies, from small to large businesses around the globe, turn to AT&T for our highly secure smart solutions.

Additional information about AT&T products and services is available at about.att.com. Follow our news on Twitter at @ATT, on Facebook at facebook.com/att and YouTube at youtube.com/att.

(C) 2017 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

*Claim based on the Nielsen Certified Data Network Score. Score includes data reported by wireless consumers in the Nielsen Mobile Insights survey, network measurements from Nielsen Mobile Performance and Nielsen Drive Test Benchmarks for Q3+Q4 2016 across 121 markets.

**Global coverage claim based on offering discounted voice and data roaming; LTE roaming; and voice roaming in more countries than any other U.S. based carrier. International service required. Coverage not available in all areas. Coverage may vary per country and be limited/restricted in some countries.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this communication, including financial estimates and statements as to the expected timing, completion and effects of the proposed merger between AT&T Inc. and Straight Path Communications, Inc., constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These estimates and statements are subject to risks and uncertainties, and actual results might differ materially. Such estimates and statements include, but are not limited to, statements about the benefits of the merger, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of AT&T Inc. and Straight Path Communications, Inc. and are subject to significant risks and uncertainties outside of our control. This presentation may contain certain non-GAAP financial measures. Reconciliations between the non- GAAP financial measures and the GAAP financial measures are available on the company’s website at www.att.com/investor.relations. Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (2) the risk that Straight Path Communications, Inc. stockholders may not adopt the merger agreement, (3) the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated, and (4) risks that any of the closing conditions to the proposed merger may not be satisfied in a timely manner. Discussions of additional risks and uncertainties are contained in AT&T Inc.’s and Straight Path Communications, Inc.’s filings with the Securities and Exchange Commission. Neither AT&T Inc. nor Straight Path Communications, Inc. is under any obligation, and each expressly disclaims any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this announcement are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.

The "quiet period" for FCC Spectrum Auction 1000 (also known as the 600 MHz incentive auction) is now in effect. During the quiet period, auction applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants.

Additional Information and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed merger between AT&T Inc. and Straight Path Communications, Inc. In connection with the proposed merger, AT&T Inc. intends to file a registration statement on Form S-4, containing a proxy statement/prospectus with the Securities and Exchange Commission ("SEC"). STOCKHOLDERS OF STRAIGHT PATH COMMUNICATIONS, INC. ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders will be able to obtain copies of the proxy statement/prospectus as well as other filings containing information about AT&T Inc. and Straight Path Communications, Inc., without charge, at the SEC’s website at http://www.sec.gov . Copies of documents filed with the SEC by AT&T Inc. will be made available free of charge on AT&T Inc.’s investor relations website at http://www.att.com . Copies of documents filed with the SEC by Straight Path Communications, Inc. will be made available free of charge on Straight Path Communications, Inc.’s investor relations website at http://spathinc.com/investors/ .

Participants in Solicitation

AT&T Inc. and its directors and executive officers, and Straight Path Communications, Inc. and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Straight Path Communications, Inc. common stock in respect of the proposed merger. Information about the directors and executive officers of AT&T Inc. is set forth in the proxy statement for AT&T Inc.’s 2017 Annual Meeting of Stockholders, which was filed with the SEC on March 10, 2017. Information about the directors and executive officers of Straight Path Communications, Inc. is set forth in the proxy statement for Straight Path Communications, Inc.’s 2017 Annual Meeting of Stockholders, which was filed with the SEC on November 22, 2016. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement/prospectus regarding the proposed merger when it becomes available.

Discussion and Reconciliation of Non-GAAP Measures

We believe the following measures are relevant and useful information to investors as they are part of AT&T’s internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors.

Free Cash Flow

Free cash flow is defined as cash from operations minus Capital expenditures. Free cash flow after dividends is defined as cash from operations minus Capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the percentage of dividends paid to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including Capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

 
                                                                                       Free Cash Flow and Free Cash Flow Dividend Payout Ratio
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                          Three Months Ended
                                                                                                                                                        March 31,
                                                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
                                                 2017                                                   2016
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- -----------------------------------------------------
Net cash provided by operating activities                                                              $  9,218                                             $      7,900
Less: Capital expenditures                      (6,015 )                              (4,669 )
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
Free Cash Flow                                   3,203              3,231  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     
Less: Dividends paid                            (3,009 )                              (2,947 )
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
Free Cash Flow after Dividends                                   $    194                          $        284  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
Free Cash Flow Dividend Payout Ratio              93.9 %                                91.2 %
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) - net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. generally accepted accounting principles (GAAP).

EBITDA service margin is calculated as EBITDA divided by service revenues.

When discussing our segment results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from segment contribution. For our supplemental presentation of our combined domestic wireless operations (AT&T Mobility) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International segment, EBITDA excludes depreciation and amortization from operating income.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T’s ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing segment performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance. Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in 2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in evaluating the ability of our Latin America operations to generate cash to finance its own operations.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Consumer Mobility segment operating margin and our supplemental AT&T Mobility operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

 
                                                                                            EBITDA, EBITDA Margin and EBITDA Service Margin
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                             Three Months Ended
                                                                                                                                                           March 31,
                                                                                       ------------------------------------------------------------------------------------------------------------------------------------------------
                                                    2017                                                   2016
-------------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- -----------------------------------------------------
Net Income                                                                                                $  3,574                                             $      3,885
Additions:
   Income Tax Expense                                                                                        1,804                                                                                          2,122
   Interest Expense                                                                                          1,293                                                                                          1,207
   Equity in Net (Income) Loss of Affiliates                                                                   173                                                                                            (13 )
   Other (Income) Expense - Net                                                                                 20                                                                                            (70 )
   Depreciation and amortization                    6,127              6,563  
-------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                             12,991             13,694  
-------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                        
Total Operating Revenues                                                                                    39,365                                                                                         40,535
Service Revenues                                                                                            36,456                                                                                         37,101
                                                                                                                                                                                                        
EBITDA Margin                                                                                                 33.0 %                                                                                         33.8 %
EBITDA Service Margin                                35.6 %                                36.9 %
-------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                        
 
                                                                                         Segment EBITDA, EBITDA Margin and EBITDA Service Margin
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                            Three Months Ended
                                                                                                                                                          March 31,
                                                                                    ----------------------------------------------------------------------------------------------------------------------------------------------------
                                                   2017                                                     2016
----------------------------------------- -------------------- -------------------- ------------------------------------------------------------------------- -------------------- -----------------------------------------------------
Business Solutions Segment                                          
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Segment Contribution                                                                                   $      4,360                                             $      4,299
Additions:
Depreciation and amortization                        2,312              2,508  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                               6,672              6,807  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                         
Total Segment Operating Revenues                                                                             16,848                                                                                         17,609
                                                                                                                                                                                                         
Segment Operating Income Margin                                                                                25.9 %                                                                                         24.4 %
EBITDA Margin                                                                                                  39.6 %                                                                                         38.7 %
                                                 
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Entertainment Group Segment                                         
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Segment Contribution                                                                                   $      1,597                                                                                   $      1,595
Additions:
Equity in Net (Income) Loss of Affiliates                                                                         6                                                                                             (3 )
Depreciation and amortization                        1,419              1,488  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                               3,022              3,080  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                         
Total Segment Operating Revenues                                                                             12,623                                                                                         12,658
                                                                                                                                                                                                         
Segment Operating Income Margin                                                                                12.7 %                                                                                         12.6 %
EBITDA Margin                                                                                                  23.9 %                                                                                         24.3 %
                                                 
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Consumer Mobility Segment                                           
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Segment Contribution                                                                                   $      2,339                                                                                   $      2,494
Additions:
Depreciation and amortization                          873                922  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                               3,212              3,416  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                         
Total Segment Operating Revenues                                                                              7,740                                                                                          8,328
Service Revenues                                                                                              6,609                                                                                          6,943
                                                                                                                                                                                                         
Segment Operating Income Margin                                                                                30.2 %                                                                                         29.9 %
EBITDA Margin                                                                                                  41.5 %                                                                                         41.0 %
EBITDA Service Margin                                                                                          48.6 %                                                                                         49.2 %
                                                 
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
International Segment                                               
----------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Segment Contribution                                                                                   $       (100 )                                                                                 $       (184 )
Additions:
Equity in Net (Income) of Affiliates                                                                            (20 )                                                                                          (14 )
Depreciation and amortization                          290                277  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                                 170                 79  
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                         
Total Segment Operating Revenues                                                                              1,929                                                                                          1,667
                                                                                                                                                                                                         
Segment Operating Income Margin                                                                                -6.2 %                                                                                        -11.9 %
EBITDA Margin                                          8.8 %                                 4.7 %
----------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                         
 
                                                                                     Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA
                                                                                                           Service Margin
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                        Three Months Ended
                                                                                                                                                      March 31,
                                                                                ----------------------------------------------------------------------------------------------------------------------------------------------------
                                               2017                                                     2016
------------------------------------- -------------------- -------------------- ------------------------------------------------------------------------- -------------------- -----------------------------------------------------
AT&T Mobility                                                   
------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Operating Income                                                                                   $      5,172                                             $      5,274
   Add: Depreciation and amortization            1,997              2,056  
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                           7,169              7,330  
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     
Total Operating Revenues                                                                                 17,167                                                                                         17,954
Service Revenues                                                                                         14,538                                                                                         14,798
                                                                                                                                                                                                     
Operating Income Margin                                                                                    30.1 %                                                                                         29.4 %
EBITDA Margin                                                                                              41.8 %                                                                                         40.8 %
EBITDA Service Margin                             49.3 %                                49.5 %
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                                
 
                                                                                         Supplemental Latin America EBITDA and EBITDA Margin
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                        Three Months Ended
                                                                                                                                                      March 31,
                                                                                ----------------------------------------------------------------------------------------------------------------------------------------------------
                                               2017                                                     2016
------------------------------------- -------------------- -------------------- ------------------------------------------------------------------------- -------------------- -----------------------------------------------------
International - Latin America                                   
------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Operating Income                                                                                   $         77                                             $         53
   Add: Depreciation and amortization              214                196  
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                             291                249  
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     
Total Operating Revenues                                                                                  1,341                                                                                          1,130
                                                                                                                                                                                                     
Operating Income Margin                                                                                     5.7 %                                                                                          4.7 %
EBITDA Margin                                     21.7 %                                22.0 %
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     
 
                                                                                            Supplemental Mexico EBITDA and EBITDA Margin
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                        Three Months Ended
                                                                                                                                                      March 31,
                                                                                ----------------------------------------------------------------------------------------------------------------------------------------------------
                                               2017                                                     2016
------------------------------------- -------------------- -------------------- ------------------------------------------------------------------------- -------------------- -----------------------------------------------------
International - Mexico                                          
------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
Operating Income                                                                                   $       (197 )                                           $       (251 )
   Add: Depreciation and amortization               76                 81  
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
EBITDA                                            (121 )                                (170 )
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     
Total Operating Revenues                                                                                    588                                                                                            537
                                                                                                                                                                                                     
Operating Income Margin                                                                                   -33.5 %                                                                                        -46.7 %
EBITDA Margin                                    -20.6 %                               -31.7 %
------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                     

Adjusting Items

Adjusting items include revenues and costs we consider nonoperational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often significant impact on our fourth-quarter results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses.) Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38%. For years prior to 2017, adjustments related to Mexico operations were taxed at the 30% marginal rate for Mexico.

 
                                                                                                Adjusting Items
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                            Three Months Ended
                                                                                                                                                          March 31,
                                                                                                              ------------------------------------------------------------------------------------------------
                                                                2017                           2016
------------------------------------------------------------------- -------------------- -------------------- ----------------------------------------------- -------------------- ---------------------------
Operating Expenses                                                                                                                          
   DIRECTV and other video merger integration costs                                                                              $   127                                                              $   173
   Mexico merger integration costs                                                                                                    39                                                                   81
   Time Warner merger costs                                                                                                           41                                                                    -
   Wireless merger integration costs                                                                                                   -                                                                   42
   Employee separation costs                                                                                                           -                                                                   25
   (Gain) loss on transfer of wireless spectrum                           (118)       (736)
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
Adjustments to Operations and Support Expenses                               89       (415)
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
   Amortization of intangible assets                                      1,202       1,351
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
Adjustments to Operating Expenses                                         1,291         936
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
Other
   Merger related interest expense and exchange fees (1)                                                                             109                                                                   16
   (Gain) loss on sale of assets, impairments and other adjustments         257           4
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
Adjustments to Income Before Income Taxes                                 1,657         956
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
   Tax impact of adjustments                                                556         331
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
Adjustments to Net Income                                                                  $ 1,101                        $   625
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -----
(1)Includes interest expense incurred on the debt issued
prior to the close of merger transactions and fees associated with
the exchange of DIRECTV notes for AT&T notes.
 

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T’s calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

 
                                                                                        Adjusted Operating Income, Adjusted Operating Income Margin,
                                                                                                                  Adjusted
                                                                                      EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                                                                                 Three Months Ended
                                                                                                                                                               March 31,
                                                                                         ----------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                2017                                                     2016
---------------------------------------------- -------------------- -------------------- ------------------------------------------------------------------------- -------------------- -----------------------------------------------------
Operating Income                                                                                            $      6,864                                             $      7,131
Adjustments to Operating Expenses                         1,291                936  
---------------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
Adjusted Operating Income                                 8,155              8,067  
---------------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                      
---------------------------------------------- -------------------- -------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- --------------------------------
EBITDA                                                                                                            12,991                                                                                         13,694
Adjustments to Operations and Support Expenses               89               (415 )
---------------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
Adjusted EBITDA                                          13,080             13,279  
---------------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                              
Total Operating Revenues                                                                                          39,365                                                                                         40,535
Service Revenues                                                                                                  36,456                                                                                         37,101
                                                                                                                                                                                                              
Operating Income Margin                                                                                             17.4 %                                                                                         17.6 %
Adjusted Operating Income Margin                                                                                    20.7 %                                                                                         19.9 %
Adjusted EBITDA Margin                                                                                              33.2 %                                                                                         32.8 %
Adjusted EBITDA Service Margin                             35.9 %                                35.8 %
---------------------------------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                              
                                                                                                                                                                                                                                      
                                                                                                         Adjusted Diluted EPS                                                                                                           
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                Three Months Ended
                                                                                                                                                                           March 31,
                                                                                                   ---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                2017                                                       2016
-------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------------- -------------------- ---------------------------------------------------------------
Diluted Earnings Per Share (EPS)                                                                                      $  0.56                                             $                 0.61
   Amortization of intangible assets                                                                                     0.13                                                                                                     0.14
   Merger integration and other items(1)                                                                                 0.03                                                                                                     0.03
   Asset abandonments, impairments and other adjustments                                                                 0.03                                                                                                     0.02
   (Gain) loss on transfer of wireless spectrum                (0.01 )                                         (0.08 )
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted EPS                                                                    $  0.74                          $                 0.72  
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Year-over-year growth - Adjusted                                 2.8 %                             
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Weighted Average Common Shares Outstanding                     6,186                        6,190  
with Dilution (000,000)
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                        
(1)Includes combined merger integration items,
merger-related interest expense and DIRECTV exchange fees.
 

Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by annualized Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt. Annualized Adjusted EBITDA is calculated by annualizing the year-to-date Adjusted EBITDA.

 
                                                                                             Net Debt to Adjusted EBITDA
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions                                             Three Months                  
                                                                                                          Ended
                                                                                       ----------------------------------------
                                                                                                        Mar. 31,                                                                               YTD
                                                 2017                                          2017
-------------------------------------------- -------------------- -------------------- -------------------------------------------------------------- -------------------- ------------------------------------------
Adjusted EBITDA                                                                                           $               13,080                                                              $               13,080
Annualized Adjusted EBITDA                                                                                                                                                                                    52,320
   End-of-period current debt                                                                                                                                                                                 12,681
   End-of-period long-term debt                                                                                                                                                                              120,568
Total End-of-Period Debt                                                                                                                                                                                     133,249
   Less: Cash and Cash Equivalents                                                                                                                                                                            14,884
Net Debt Balance                                                        118,365
-------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Annualized Net Debt to Adjusted EBITDA Ratio                               2.26
-------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                 

Supplemental Operational Measures

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

 
                                                                                                                                                                                                                                Supplemental Operational Measure
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                                          Three Months Ended
                                                                                                                                                 March 31, 2017                                                                                                                                                                                              March 31, 2016
                                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          Consumer                      Business                             Adjustments(1)                                AT&T                                          Consumer                      Business                             Adjustments(1)                                       AT&T
                                                                Mobility                                         Solutions                                                                                                              Mobility                                        Mobility                                         Solutions                                                                                                                     Mobility
--------------------------------- -------------------- -------------------------  -------------------- --------------------------  -------------------- ----------------------------------------------   -------------------- --------------------------                       -------------------------  -------------------- --------------------------  -------------------- ----------------------------------------------   -------------------- ----------------------------------------
Operating Revenues                                                                                                                                                                                                                                                                                                                 
   Wireless service                                                       $ 6,609                                         $  7,929                                         $      -                                                              $ 14,538                                         $ 6,943                                         $  7,855                                         $      -                                                              $               14,798
   Fixed strategic services                                                     -                                            2,974                                           (2,974 )                                                                   -                                               -                                            2,751                                           (2,751 )                                                                                 -
   Legacy voice and data services                                               -                                            3,630                                           (3,630 )                                                                   -                                               -                                            4,373                                           (4,373 )                                                                                 -
   Other service and equipment                                                  -                                              817                                             (817 )                                                                   -                                               -                                              859                                             (859 )                                                                                 -
   Wireless equipment                 1,131      1,498          -        2,629                        1,385      1,771          -                      3,156
--------------------------------- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------                      -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------------------
Total Operating Revenues              7,740     16,848     (7,421 )                        17,167                        8,328     17,609     (7,983 )                                      17,954
--------------------------------- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------                      -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
Operating Expenses
   Operations and support                                                   4,528                                           10,176                                           (4,706 )                                                               9,998                                           4,912                                           10,802                                           (5,090 )                                                                            10,624
EBITDA                                                                      3,212                                            6,672                                           (2,715 )                                                               7,169                                           3,416                                            6,807                                           (2,893 )                                                                             7,330
   Depreciation and amortization        873      2,312     (1,188 )                         1,997                          922      2,508     (1,374 )                                       2,056
--------------------------------- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------                      -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------------------
Total Operating Expense               5,401     12,488     (5,894 )                        11,995                        5,834     13,310     (6,464 )                                      12,680
--------------------------------- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------                      -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------------------
Operating Income                                       $ 2,339                      $  4,360                      $ (1,527 )                                         $  5,172                      $ 2,494                      $  4,299                      $ (1,519 )                                         $                5,274
--------------------------------- -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ----- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- --------------------
(1) Non-wireless (fixed) operations reported in Business
Solutions segment.
 

We provide a supplemental presentation of the Latin America and Mexico Wireless operations within our International segment. The following table presents a reconciliation of our International segment.

 
                                                                                                                                                                                                 Supplemental International
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                              Three Months Ended
                                                                                                                                   March 31, 2017                                                                                                                                                            March 31, 2016
                                                        ---------------------------------------------------------------------------------------------------------------------------------------------------------------------                     --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          Latin America                             Mexico                                         International                                              Latin America                             Mexico                                           International
---------------------------------- -------------------- ------------------------------------------------ ------------------------------------------------------------------- ------------------------------------------------                     ------------------------------------------------ ------------------------------------------------------------------- -----------------------------------------------------
Operating Revenues                                                                                                                                                                                                                                                                        
Video Service                                                              $  1,341                                         $    -                                                              $ 1,341                                                              $  1,130                                         $    -                                                              $      1,130
Wireless Service                                                                  -                                            475                                                                  475                                                                     -                                            455                                                                       455
Wireless Equipment                          -      113         113                               -       82               82  
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- --------------------                      -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
Total Operating Revenues                1,341      588       1,929                           1,130      537            1,667  
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- --------------------                      -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                             
Operating Expenses
   Operations and support                                                     1,050                                            709                                                                1,759                                                                   881                                            707                                                                     1,588
   Depreciation and amortization          214       76         290                             196       81              277  
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- --------------------                      -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
Total Operating Expense                 1,264      785       2,049                           1,077      788            1,865  
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- --------------------                      -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
Operating Income                           77     (197 )                         (120 )                                               53     (251 )                              (198 )
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- --------------------                      -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
Equity in Net Income of Affiliates         20        -          20                              14        -               14  
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- --------------------                      -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
 Segment Contribution                                   $     97                      $ (197 )                                         $  (100 )                                         $     67                      $ (251 )                                         $       (184 )
---------------------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                             

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170425006788r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170425006788/en/

SOURCE: AT&T Inc.

AT&T Global Media Relations 
Fletcher Cook, 214-757-7629 
fletcher.cook@att.com 
or 
AT&T Global Media Relations 
Eric Ryan, 929-273-8434 
eric.ryan.1@att.com


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