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 AT&T Reports Fourth-Quarter and Full-Year Results
   Wednesday, January 31, 2018 4:06:00 PM ET

--Consolidated revenues of $160.5 billion

--Diluted EPS of $4.76 as reported and $3.05 as adjusted, compared to $2.10 and $2.84 in the prior year

--Cash from operations of $39.2 billion

--Free cash flow of $17.6 billion

--Fourth Quarter

--Consolidated revenues of $41.7 billion

--Diluted EPS of $3.08 as reported and $0.78 as adjusted, compared to $0.39 and $0.66 in the year-ago quarter

--Cash from operations of $9.9 billion

--Free cash flow of $4.8 billion

--2018 Outlook(1) (inclusive of tax reform and new accounting standard)

--Adjusted EPS in the $3.50 range

--Free cash flow of about $21 billion

--Capital expenditures approaching $25 billion; $23 billion net of expected FirstNet reimbursements



--With the passage of tax reform: $1 billion 2018 incremental capital investment

--More than $200 million in bonuses paid to frontline employees in fourth quarter

--$800 million in voluntary funding to medical plans in fourth quarter

--Additional impacts include a $20.3 billion increase in reported fourth-quarter net income, including a more than $800 million increase in adjusted net income in the fourth quarter

--4.1 million total wireless net adds for the fourth quarter: 2.7 million in U.S., driven by connected devices, postpaid phones and prepaid

--1.3 million in Mexico

--300,000 total video net adds: 161,000 in U.S. and 139,000 in Latin America

--U.S. wireless results: Operating income margin of 22.1% with EBITDA margin of 32.7% and wireless service margin of 43.8%

--329,000 postpaid phone net adds

--Added nearly 700,000 branded smartphones to base

--Best-ever fourth-quarter postpaid phone churn of 0.89%

--Entertainment Group results: 95,000 IP broadband net adds; 19,000 total broadband net adds; more than 7 million customer locations passed with fiber

--161,000 total video net adds; 368,000 DIRECTV NOW net adds to reach nearly 1.2 million DIRECTV NOW subscribers

--International results: Revenues up 16.0% with strong growth in Mexico wireless and DIRECTV Latin America

--Improved operating income and EBITDA growth driven by improvements in Mexico and strong gains in Latin America

--139,000 DIRECTV Latin America net adds with 13.6 million total subscribers

--Note: AT&T’s fourth-quarter earnings conference call will be webcast at 4:30 p.m. ET on Wednesday, January 31, 2018. The webcast and related materials will be available on AT&T’s Investor Relations website at https://investors.att.com.

AT&T Inc.* (T ) reported solid wireless, business and international results in the fourth quarter. Highlights include strong postpaid phone gains, record-low fourth-quarter postpaid phone churn and DIRECTV NOW surpassing 1 million subscribers.

"The impact of tax reform and regulatory rationalization will be substantial and positive for the U.S. economy and AT&T," said Randall Stephenson, AT&T Chairman and CEO. "Our FirstNet win and the opt-in by 100 percent of all states and territories will enable us to put the industry’s most robust spectrum assets to work in building a best-in-class nationwide network for public safety and first responders. On the Time Warner front, we look forward to presenting our case in court and closing the deal."

Consolidated Financial Results

AT&T’s consolidated revenues for the fourth quarter totaled $41.7 billion versus$41.8 billion in the year-ago quarter, primarily due to declines in legacy wireline services, wireless service revenues and domestic video, which were mostly offset by growth in wireless equipment and International. Compared with results for the fourth quarter of 2016, operating expenses were $41.3 billion versus $37.6 billion primarily due to a write-off of certain network assets and higher wireless equipment costs; operating income was $0.4 billion versus $4.2 billion; and operating income margin was 0.9% versus 10.2%. When adjusting for the write-off of certain network assets, non-cash actuarial loss on benefit plans, amortization, merger- and integration-related expenses and other items, operating income was $6.9 billion versus $7.3 billion in the year-ago quarter and operating income margin was 16.5%, versus 17.5% in the year-ago quarter.

Fourth-quarter net income attributable to AT&T was $19.0 billion, or $3.08 per diluted share, and reflects the impact of the Tax Cuts and Jobs Act, compared to $2.4 billion, or $0.39 per diluted share, in the year-ago quarter. Adjusting for the ($3.16) benefit from the remeasurement of deferred tax liabilities, $0.41 write-off of certain network assets and natural disaster impacts, $0.19 non-cash actuarial loss on benefit plans from the annual remeasurement process and $0.26 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.78 compared to an adjusted $0.66 in the year-ago quarter. (The increase in adjusted diluted earnings per share includes $0.13 impact of the new tax law on the fourth-quarter 2017.)

Cash from operating activities was $9.9 billion in the fourth quarter, and capital expenditures were $5.1 billion. Free cash flow -- cash from operating activities minus capital expenditures -- was $4.8 billion for the quarter.

Full-Year Results For full-year 2017, compared with 2016 results, AT&T’s consolidated revenues totaled $160.5 billion versus $163.8 billion, primarily due to declines in legacy wireline services and wireless service revenues, which were partially offset by growth in International and strategic business services. Operating expenses were $139.6 billion compared with$139.4 billion. Excluding a $2.9 billion write-off of certain network assets, operating expenses decreased due to cost efficiencies. Operating income was $20.9 billion versus $24.3 billion; and operating income margin was 13.0% versus 14.9%. Net income attributable to AT&T reflects the impact of the new tax law and was $29.5 billion versus $13.0 billion; and earnings per diluted share was $4.76, compared with $2.10. With adjustments for both years, operating income was $31.8 billion versus $31.8 billion; operating income margin was 19.8% versus 19.4%; and earnings per diluted share totaled $3.05, compared with $2.84, an increase of 7.4%. (The increase in adjusted diluted earnings per share includes $0.13 impact of the new tax law on the fourth-quarter 2017.)

AT&T’s full-year cash from operating activities was $39.2 billion versus $39.3 billion in 2016. Capital expenditures, including capitalized interest, totaled $21.6 billion versus $22.4 billion in 2016. Full-year free cash flow was $17.6 billion compared to $16.9 billion in 2016. The company’s free cash flow dividend payout ratio for the full year was 68%.(2)

2018 Outlook(1) On a standalone basis, including impacts of tax reform and the new ASC 606 revenue recognition standard, AT&T expects in 2018:

-- Adjusted EPS in the $3.50 range

-- Free cash flow of about $21 billion

-- Capital expenditures approaching $25 billion; $23 billion net of expected FirstNet reimbursements and inclusive of $1 billion incremental tax reform investment

(1)Adjustments include a non-cash mark-to-market benefit plan gain/loss, merger-related interest expense, merger integration and amortization costs and other adjustments. We expect the mark-to-market adjustment which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be the largest of these items. Accordingly, we cannot provide a reconciliation between forecasted adjusted diluted EPS and reported diluted EPS without unreasonable effort.

(2)Free cash flow dividend payout ratio is dividends divided by free cash flow

*About AT&T AT&T Inc. (T ) is a holding company. 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. Additional information about AT&T Inc. is available at about.att.com.

(C) 2018 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.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise.

This news release 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 https://investors.att.com.

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.

 
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                                                                                                                                                                                 Free Cash Flow and Free Cash Flow Dividend Payout Ratio
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Dollars in millions                                                                                        Three Months Ended                                                                                                                               Twelve Months Ended
                                                                                                                                                    December 31,                                                                                                                                                                           December 31,
                                                                                    --------------------------------------------------------------------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------------------------------------------------------------------
                                                 2017                                                 2016                                                  2017                                                  2016
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- ---------------------------------------------------------------------- -------------------- --------------------------------------------------
Net cash provided by operating activities                                                              $  9,877                                             $ 10,142                                                                                   $  39,151                                             $  39,344
Less: Capital expenditures                      (5,076 )                          (6,456 )                          (21,550 )                          (22,408 )
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Free Cash Flow                                   4,801          3,686          17,601          16,936  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                       
Less: Dividends paid                            (3,008 )                          (2,947 )                          (12,038 )                          (11,797 )
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Free Cash Flow after Dividends                                   $  1,793                          $    739                          $   5,563                          $   5,139  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Free Cash Flow Dividend Payout Ratio              62.7 %                            80.0 %                             68.4 %                             69.7 %
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                    

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.

 
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                                                                                                                                                                                       EBITDA, EBITDA Margin and EBITDA Service Margin
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Dollars in millions                                                                                           Three Months Ended                                                                                                                                Twelve Months Ended
                                                                                                                                                       December 31,                                                                                                                                                                            December 31,
                                                                                       ---------------------------------------------------------------------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------------------------------------------------------------------
                                                     2017                                                 2016                                                  2017                                                  2016
-------------------------------------------- -------------------- -------------------- ---------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- ---------------------------------------------------------------------- -------------------- --------------------------------------------------
Net Income                                                                                                $  19,136                                             $  2,515                                                                                   $  29,847                                             $  13,333
Additions:
   Income Tax (Benefit) Expense                                                                             (20,419 )                                                                                      676                                                                                     (14,708 )                                                                                     6,479
   Interest Expense                                                                                           1,926                                                                                      1,221                                                                                       6,300                                                                                       4,910
   Equity in Net (Income) Loss of Affiliates                                                                    (20 )                                                                                      (41 )                                                                                       128                                                                                         (98 )
   Other (Income) Expense - Net                                                                                (264 )                                                                                     (123 )                                                                                      (618 )                                                                                      (277 )
   Depreciation and amortization                     6,071          6,129          24,387          25,847  
-------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
EBITDA                                               6,430         10,377          45,336          50,194  
-------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                           
Total Operating Revenues                                                                                     41,676                                                                                     41,841                                                                                     160,546                                                                                     163,786
Service Revenues                                                                                             36,225                                                                                     37,369                                                                                     145,597                                                                                     148,884
                                                                                                                                                                                                                                                                                                                                                                           
EBITDA Margin                                                                                                  15.4 %                                                                                     24.8 %                                                                                      28.2 %                                                                                      30.6 %
EBITDA Service Margin                                 17.8 %                            27.8 %                             31.1 %                             33.7 %
-------------------------------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                           
 
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                                                                                                                                                                                Segment EBITDA, EBITDA Margin and EBITDA Service Margin
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Dollars in millions                                                                                        Three Months Ended                                                                                                                              Twelve Months Ended
                                                                                                                                                    December 31,                                                                                                                                                                          December 31,
                                                                                    --------------------------------------------------------------------------------------------------------------------------------------------                                          --------------------------------------------------------------------------------------------------------------------------------------------
                                                 2017                                                 2016                                                 2017                                                 2016
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Business Solutions Segment                                                                                                                           
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Segment Contribution                                                                                   $  3,828                                             $  4,023                                                                                   $ 17,150                                             $ 16,826
Additions:
Equity in Net (Income) Loss of Affiliates                                                                     1                                                                                          -                                                                                          1                                                                                          -
Depreciation and amortization                    2,354          2,264          9,326          9,832  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                           6,183          6,287         26,477         26,658  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                      
Total Segment Operating Revenues                                                                         18,390                                                                                     18,033                                                                                     69,406                                                                                     70,988
                                                                                                                                                                                                                                                                                                                                                                      
Segment Operating Income Margin                                                                            20.8 %                                                                                     22.3 %                                                                                     24.7 %                                                                                     23.7 %
EBITDA Margin                                                                                              33.6 %                                                                                     34.9 %                                                                                     38.1 %                                                                                     37.6 %
                                                                                                                                  
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Entertainment Group Segment                                                                                                                          
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Segment Contribution                                                                                   $  1,063                                                                                   $  1,370                                                                                   $  5,625                                                                                   $  6,104
Additions:
Equity in Net (Income) Loss of Affiliates                                                                     7                                                                                         (8 )                                                                                       30                                                                                         (9 )
Depreciation and amortization                    1,367          1,381          5,623          5,862  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                           2,437          2,743         11,278         11,957  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                      
Total Segment Operating Revenues                                                                         12,745                                                                                     13,206                                                                                     50,698                                                                                     51,295
                                                                                                                                                                                                                                                                                                                                                                      
Segment Operating Income Margin                                                                             8.4 %                                                                                     10.3 %                                                                                     11.2 %                                                                                     11.9 %
EBITDA Margin                                                                                              19.1 %                                                                                     20.8 %                                                                                     22.2 %                                                                                     23.3 %
                                                                                                                                  
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Consumer Mobility Segment                                                                                                                            
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Segment Contribution                                                                                   $  2,020                                                                                   $  2,185                                                                                   $  9,079                                                                                   $  9,825
Additions:
Depreciation and amortization                      886            918          3,507          3,716  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                           2,906          3,103         12,586         13,541  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                      
Total Segment Operating Revenues                                                                          8,273                                                                                      8,419                                                                                     31,552                                                                                     33,200
Service Revenues                                                                                          6,409                                                                                      6,731                                                                                     26,053                                                                                     27,536
                                                                                                                                                                                                                                                                                                                                                                      
Segment Operating Income Margin                                                                            24.4 %                                                                                     26.0 %                                                                                     28.8 %                                                                                     29.6 %
EBITDA Margin                                                                                              35.1 %                                                                                     36.9 %                                                                                     39.9 %                                                                                     40.8 %
EBITDA Service Margin                                                                                      45.3 %                                                                                     46.1 %                                                                                     48.3 %                                                                                     49.2 %
                                                                                                                                  
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
International Segment                                                                                                                                
----------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Segment Contribution                                                                                   $     (9 )                                                                                 $   (240 )                                                                                 $   (266 )                                                                                 $   (661 )
Additions:
Equity in Net (Income) of Affiliates                                                                        (25 )                                                                                      (28 )                                                                                      (87 )                                                                                      (52 )
Depreciation and amortization                      313            298          1,218          1,166  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                             279             30            865            453  
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                      
Total Segment Operating Revenues                                                                          2,215                                                                                      1,909                                                                                      8,269                                                                                      7,283
                                                                                                                                                                                                                                                                                                                                                                      
Segment Operating Income Margin                                                                            -1.5 %                                                                                    -14.0 %                                                                                     -4.3 %                                                                                     -9.8 %
EBITDA Margin                                     12.6 %                             1.6 %                            10.5 %                             6.2 %
----------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                  
 
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                                                                                                                                                                            Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA
                                                                                                                                                                                                  Service Margin
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Dollars in millions                                                                                    Three Months Ended                                                                                                                              Twelve Months Ended
                                                                                                                                                December 31,                                                                                                                                                                          December 31,
                                                                                --------------------------------------------------------------------------------------------------------------------------------------------                                          --------------------------------------------------------------------------------------------------------------------------------------------
                                             2017                                                 2016                                                 2017                                                 2016
------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
AT&T Mobility                                                                                                                                    
------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Operating Income                                                                                   $  4,253                                             $  4,638                                                                                   $ 20,067                                             $ 20,643
   Add: Depreciation and amortization        2,028          2,048          8,027          8,292  
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                       6,281          6,686         28,094         28,935  
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                  
Total Operating Revenues                                                                             19,228                                                                                     18,750                                                                                     71,349                                                                                     72,821
Service Revenues                                                                                     14,342                                                                                     14,713                                                                                     57,955                                                                                     59,386
                                                                                                                                                                                                                                                                                                                                                                  
Operating Income Margin                                                                                22.1 %                                                                                     24.7 %                                                                                     28.1 %                                                                                     28.3 %
EBITDA Margin                                                                                          32.7 %                                                                                     35.7 %                                                                                     39.4 %                                                                                     39.7 %
EBITDA Service Margin                         43.8 %                            45.4 %                            48.5 %                            48.7 %
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                              
 
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                                                                                                                                                                                Supplemental Latin America EBITDA and EBITDA Margin
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Dollars in millions                                                                                    Three Months Ended                                                                                                                              Twelve Months Ended
                                                                                                                                                December 31,                                                                                                                                                                          December 31,
                                                                                --------------------------------------------------------------------------------------------------------------------------------------------                                          --------------------------------------------------------------------------------------------------------------------------------------------
                                             2017                                                 2016                                                 2017                                                 2016
------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
International - Latin America                                                                                                                    
------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Operating Income                                                                                   $    135                                             $     49                                                                                   $    435                                             $    228
   Add: Depreciation and amortization          207            215            849            835  
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                         342            264          1,284          1,063  
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                  
Total Operating Revenues                                                                              1,391                                                                                      1,261                                                                                      5,456                                                                                      4,910
                                                                                                                                                                                                                                                                                                                                                                  
Operating Income Margin                                                                                 9.7 %                                                                                      3.9 %                                                                                      8.0 %                                                                                      4.6 %
EBITDA Margin                                 24.6 %                            20.9 %                            23.5 %                            21.6 %
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                  
 
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                                                                                                                                                                                   Supplemental Mexico EBITDA and EBITDA Margin
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Dollars in millions                                                                                    Three Months Ended                                                                                                                              Twelve Months Ended
                                                                                                                                                December 31,                                                                                                                                                                          December 31,
                                                                                --------------------------------------------------------------------------------------------------------------------------------------------                                          --------------------------------------------------------------------------------------------------------------------------------------------
                                             2017                                                 2016                                                 2017                                                 2016
------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
International - Mexico                                                                                                                           
------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------
Operating Income (Loss)                                                                            $   (169 )                                           $   (317 )                                                                                 $   (788 )                                           $   (941 )
   Add: Depreciation and amortization          106             83            369            331  
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
EBITDA                                         (63 )                            (234 )                            (419 )                            (610 )
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                  
Total Operating Revenues                                                                                824                                                                                        648                                                                                      2,813                                                                                      2,373
                                                                                                                                                                                                                                                                                                                                                                  
Operating Income Margin                                                                               -20.5 %                                                                                    -48.9 %                                                                                    -28.0 %                                                                                    -39.7 %
EBITDA Margin                                 -7.6 %                           -36.1 %                           -14.9 %                           -25.7 %
------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                  

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, unless earlier remeasurement is required (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 transactions prior to tax reform and 25% for transactions after tax reform. Certain foreign operations with losses, where such losses are not realizable for tax purposes, are not tax effected, resulting in no tax impact for Venezuelan devaluation. For years prior to 2017, adjustments related to Mexico operations were taxed at the 30% marginal rate for Mexico.

 
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                                                                                                                                                                                                      Adjusting Items
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Dollars in millions                                                                                                      Three Months Ended                                                                                                                    Twelve Months Ended
                                                                                                                                                                  December 31,                                                                                                                                                                December 31,
                                                                                                             -----------------------------------------------------------------------------------------------------------------------                                          --------------------------------------------------------------------------------------------------------------------------------------------
                                                                           2017                                      2016                                       2017                                                 2016
------------------------------------------------------------------ -------------------- -------------------- ---------------------------------------------------------------------- -------------------- ----------------------------------------------- -------------------- ---------------------------------------------------------------------- -------------------- ------------------------------------------------
Operating Revenues                                                                                                                                                                                                                                                                           
  Natural disaster revenue credits                                                        $     154                          $    10                        $     243                          $    23  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Adjustments to Operating Revenues                                            154            10           243            23  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Operating Expenses
   DIRECTV and other video merger integration costs                                                                                    95                                                                                       259                                                                    412                                                                                       754
   Mexico merger integration costs                                                                                                     19                                                                                        78                                                                    172                                                                                       309
   Time Warner and other merger costs                                                                                                  63                                                                                        47                                                                    214                                                                                        47
   Wireless merger integration costs                                                                                                    -                                                                                         1                                                                      -                                                                                        93
   Actuarial (gain) loss                                                                                                            1,517                                                                                     1,024                                                                  1,258                                                                                     1,024
   Asset abandonments and impairments                                                                                               2,914                                                                                       361                                                                  2,914                                                                                       361
   Employee separation costs                                                                                                          177                                                                                        30                                                                    445                                                                                       344
   Tax reform special bonus                                                                                                           220                                                                                         -                                                                    220                                                                                         -
   Natural disaster costs                                                                                                             265                                                                                        27                                                                    384                                                                                        44
   (Gain) loss on transfer of wireless spectrum                                                                                         -                                                                                         -                                                                   (181 )                                                                                    (714 )
    Venezuela devaluation                                                      -             -            98             -  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Adjustments to Operations and Support Expenses                             5,270         1,827         5,936         2,262  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
   Amortization of intangible assets                                                                                                1,100                                                                                     1,228                                                                  4,608                                                                                     5,177
   Impairments                                                                33            29            33            29  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Adjustments to Operating Expenses                                          6,403         3,084        10,577         7,468  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Other
   Merger-related interest and fees(1)                                                                                                432                                                                                         -                                                                  1,104                                                                                        16
                                                                             161            28           382            32  
   Debt exchange costs, (gain) loss on sale of assets, impairments
   and other adjustments
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Adjustments to Income Before Income Taxes                                  7,150         3,122        12,306         7,539  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
   Tax impact of adjustments                                                                                                        1,908                                                                                     1,097                                                                  3,625                                                                                     2,618
   Tax reform                                                                                                                      19,455                                                                                         -                                                                 19,455                                                                                         -
   Tax-related items                                                           -           359          (146 )                            359  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
Adjustments to Net Income                                                                 $ (14,213 )                                           $ 1,666                        $ (10,628 )                                           $ 4,562  
------------------------------------------------------------------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----- --------------------
(1)Includes interest expense incurred on debt issued and
interest income earned on cash held prior to the close of merger
transactions, and fees to exchange DIRECTV 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                                                                                                                               Twelve Months Ended
                                                                                                                                                         December 31,                                                                                                                                                                           December 31,
                                                                                         --------------------------------------------------------------------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2017                                                 2016                                                  2017                                                  2016
---------------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- ---------------------------------------------------------------------- -------------------- --------------------------------------------------
Operating Income                                                                                            $    359                                             $  4,248                                                                                   $  20,949                                             $  24,347
Adjustments to Operating Revenues                                                                                154                                                                                         10                                                                                         243                                                                                          23
Adjustments to Operating Expenses                     6,403          3,084          10,577           7,468  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Adjusted Operating Income(1)                          6,916          7,342          31,769          31,838  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                        
---------------------------------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- ---------------------------------------------------------------------- -------------------- --------------------------------------------------
EBITDA                                                                                                         6,430                                                                                     10,377                                                                                      45,336                                                                                      50,194
Adjustments to Operating Revenues                                                                                154                                                                                         10                                                                                         243                                                                                          23
Adjustments to Operations and Support Expenses        5,270          1,827           5,936           2,262  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Adjusted EBITDA(1)                                   11,854         12,214          51,515          52,479  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                            
Total Operating Revenues                                                                                      41,676                                                                                     41,841                                                                                     160,546                                                                                     163,786
Adjustments to Operating Revenues                       154             10             243              23  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Total Adjusted Operating Revenues                    41,830         41,851         160,789         163,809  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Service Revenues                                                                                              36,225                                                                                     37,369                                                                                     145,597                                                                                     148,884
Adjustments to Service Revenues                         154             10             243              23  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Adjusted Service Revenues                            36,379         37,379         145,840         148,907  
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                                                            
Operating Income Margin                                                                                          0.9 %                                                                                     10.2 %                                                                                      13.0 %                                                                                      14.9 %
Adjusted Operating Income Margin(1)                                                                             16.5 %                                                                                     17.5 %                                                                                      19.8 %                                                                                      19.4 %
Adjusted EBITDA Margin(1)                                                                                       28.3 %                                                                                     29.2 %                                                                                      32.0 %                                                                                      32.0 %
Adjusted EBITDA Service Margin(1)                      32.6 %                            32.7 %                             35.3 %                             35.2 %
---------------------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
(1)Adjusted Operating Income, Adjusted EBITDA and
associated margins exclude all actuarial gains or losses ($1.3
billion loss for the year end 2017) associated with our
postemployment benefit plan, which we immediately recognize in the
income statement, pursuant to our accounting policy for the
recognition of actuarial gains/losses. As a result, Adjusted
Operating Income and Margin reflect an expected return on plan
assets of $3.5 billion (based on an average expected return on plan
assets of 7.75% for our pension trust and 5.75% for our VEBA
trusts), rather than the actual return on plan assets of $6.6
billion (actual pension return of 14.6% and VEBA return of 10.7%),
included in the GAAP measure of income.
 
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                       Adjusted Diluted EPS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Three Months Ended                                                                                                                             Twelve Months Ended
                                                                                                                                                                  December 31,                                                                                                                                                                         December 31,
                                                                                                   -------------------------------------------------------------------------------------------------------------------------------------------                                          -------------------------------------------------------------------------------------------------------------------------------------------
                                                                2017                                                2016                                                 2017                                                2016
-------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------------------------------------------------------- -------------------- -------------------------------------------------
Diluted Earnings Per Share (EPS)                                                                                      $  3.08                                             $   0.39                                                                                   $  4.76                                             $   2.10
   Amortization of intangible assets                                                                                     0.12                                                                                       0.13                                                                                      0.50                                                                                       0.55
   Merger integration items(1)                                                                                           0.07                                                                                       0.04                                                                                      0.21                                                                                       0.13
   Asset abandonments, impairments and natural disasters                                                                 0.41                                                                                       0.05                                                                                      0.45                                                                                       0.05
   Actuarial (gain) loss                                                                                                 0.19                                                                                       0.10                                                                                      0.16                                                                                       0.10
   (Gain) loss on transfer of wireless spectrum                                                                             -                                                                                          -                                                                                     (0.02 )                                                                                    (0.07 )
   Other(2)                                                                                                              0.07                                                                                       0.01                                                                                      0.13                                                                                       0.04
   Tax reform                                                                                                           (3.16 )                                                                                        -                                                                                     (3.16 )                                                                                        -
   Tax-related items                                               -          (0.06 )                           0.02          (0.06 )
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ --------------------
Adjusted EPS                                                                    $  0.78                          $   0.66                          $  3.05                          $   2.84  
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ --------------------
Year-over-year growth - Adjusted                                18.2 %                                                              7.4 %                         
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- --------------------------------------------------------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------------------------------------
Weighted Average Common Shares Outstanding with Dilution       6,182          6,181         6,183          6,189  
(000,000)
-------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ --------------------
(1)Includes combined merger integration items and
merger-related interest income and expense.
(2)Includes employee-related charges, Venezuela
devaluation, debt exchange costs.
 

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,                 Jun. 30,                 Sep. 30,                                                       Dec. 31,                                                                         YTD
                                       2017                     2017                     2017                     2017                                    2017
-------------------------------------------- -------------------- -------------------- ------------------------------------------ -------------------- ----------------------------------------- -------------------- ----------------------------------------- -------------------- ----------------------------------------- -------------------- --------------------------------------------------
Adjusted EBITDA                                                                                 $     13,080                                                $ 13,587                                                       $ 12,994                                                       $ 11,854                                                                     $  51,515
   Add back severance                                                                                      -                                                     (60 )                                                         (208 )                                                         (177 )                                                                        (445 )
Net Debt Adjusted EBITDA                                                                              13,080                                                  13,527                                                         12,786                                                         11,677                                                                        51,070
Annualized Adjusted EBITDA                                                                                                                                                                                                                                                                                                                                                51,070
   End-of-period current debt                                                                                                                                                                                                                                                                                                                                             38,374
   End-of-period long-term debt                                                                                                                                                                                                                                                                                                                                          125,972
Total End-of-Period Debt                                                                                                                                                                                                                                                                                                                                                 164,346
   Less: Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                        50,498
Net Debt Balance                                                            113,848  
-------------------------------------------- -------------------- -------------------- ------------------------------------------ -------------------- ----------------------------------------- -------------------- ----------------------------------------- -------------------- ----------------------------------------- -------------------- -------------------- ------- --------------------
Annualized Net Debt to Adjusted EBITDA Ratio                                   2.23  
-------------------------------------------- -------------------- -------------------- ------------------------------------------ -------------------- ----------------------------------------- -------------------- ----------------------------------------- -------------------- ----------------------------------------- -------------------- -------------------- ------- --------------------
                                                                                                                                                                                                                                                                                                                                                     

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
                                                                                                                                                                                                     December 31, 2017                                                                                                                                                                                                                                                         December 31, 2016
                                                                           ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Consumer                        Business                                Adjustments(1)                              AT&T Mobility                                                           Consumer                        Business                                Adjustments(1)                                AT&T Mobility
                                                                                     Mobility                                                              Solutions                                                                                                                                                                                                                               Mobility                                                              Solutions
-------------------------------- -------------------- -------------------- --------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- -----------------------------------------------                                             --------------------------                                            --------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- -----------------------------------------------                                             ------------------------------
Operating Revenues                                                                                                                                                                                                                                                                                                                                                          
  Wireless service                                                                            $  6,409                                                              $  7,933                                                              $       -                                                                                   $ 14,342                                                              $  6,731                                                              $  7,982                                                              $       -                                                                                   $     14,713
  Fixed strategic services                                                                           -                                                                 3,138                                                                 (3,138 )                                                                                        -                                                                     -                                                                 2,962                                                                 (2,962 )                                                                                            -
  Legacy voice and data services                                                                     -                                                                 3,359                                                                 (3,359 )                                                                                        -                                                                     -                                                                 3,793                                                                 (3,793 )                                                                                            -
  Other services and equipment                                                                       -                                                                   938                                                                   (938 )                                                                                        -                                                                     -                                                                   947                                                                   (947 )                                                                                            -
  Wireless equipment                    1,864        3,022             -                                                4,886                                              1,688        2,349             -                                                    4,037
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
Total Operating Revenues                8,273       18,390        (7,435 )                                                                19,228                                              8,419       18,033        (7,702 )                                                                    18,750
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
Operating Expenses
  Operations and support                                                                         5,367                                                                12,207                                                                 (4,627 )                                                                                   12,947                                                                 5,316                                                                11,746                                                                 (4,998 )                                                                                       12,064
EBITDA                                                                                           2,906                                                                 6,183                                                                 (2,808 )                                                                                    6,281                                                                 3,103                                                                 6,287                                                                 (2,704 )                                                                                        6,686
  Depreciation and amortization           886        2,354        (1,212 )                                                                 2,028                                                918        2,264        (1,134 )                                                                     2,048
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
Total Operating Expense                 6,253       14,561        (5,839 )                                                                14,975                                              6,234       14,010        (6,132 )                                                                    14,112
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
Operating Income                                        $  2,020                        $  3,829                        $  (1,596 )                                           $  4,253                        $  2,185                        $  4,023                        $  (1,570 )                                           $      4,638
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----------
(1) Business wireline operations reported in Business
Solutions segment.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                     Supplemental Operational Measure
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                                                                                                Twelve Months Ended
                                                                                                                                                                                                     December 31, 2017                                                                                                                                                                                                                                                                                               December 31, 2016
                                                                           ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Consumer                        Business                                Adjustments(1)                                                                    AT&T Mobility                                                           Consumer                        Business                                Adjustments(1)                                                                      AT&T Mobility
                                                                                     Mobility                                                              Solutions                                                                                                                                                                                                                               Mobility                                                              Solutions
-------------------------------- -------------------- -------------------- --------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- -----------------------------------------------                                             --------------------------                                            --------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- -----------------------------------------------                                             ------------------------------
Operating Revenues
  Wireless service                                                                            $ 26,053                                                              $ 31,902                                                              $       -                                                                                   $ 57,955                                                              $ 27,536                                                              $ 31,850                                                              $       -                                                                                   $     59,386
  Fixed strategic services                                                                           -                                                                12,227                                                                (12,227 )                                                                                        -                                                                     -                                                                11,431                                                                (11,431 )                                                                                            -
  Legacy voice and data services                                                                     -                                                                13,931                                                                (13,931 )                                                                                        -                                                                     -                                                                16,370                                                                (16,370 )                                                                                            -
  Other services and equipment                                                                       -                                                                 3,451                                                                 (3,451 )                                                                                        -                                                                     -                                                                 3,566                                                                 (3,566 )                                                                                            -
  Wireless equipment                    5,499        7,895             -                                               13,394                                              5,664        7,771             -                                                   13,435
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
Total Operating Revenues               31,552       69,406       (29,609 )                                                                71,349                                             33,200       70,988       (31,367 )                                                                    72,821
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
Operating Expenses
  Operations and support                                                                        18,966                                                                42,929                                                                (18,640 )                                                                                   43,255                                                                19,659                                                                44,330                                                                (20,103 )                                                                                       43,886
EBITDA                                                                                          12,586                                                                26,477                                                                (10,969 )                                                                                   28,094                                                                13,541                                                                26,658                                                                (11,264 )                                                                                       28,935
  Depreciation and amortization         3,507        9,326        (4,806 )                                                                 8,027                                              3,716        9,832        (5,256 )                                                                     8,292
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
Total Operating Expense                22,473       52,255       (23,446 )                                                                51,282                                             23,375       54,162       (25,359 )                                                                    52,178
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------                                           -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ----------
Operating Income                                        $  9,079                        $ 17,151                        $  (6,163 )                                           $ 20,067                        $  9,825                        $ 16,826                        $  (6,008 )                                           $     20,643
-------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------- -------------------- -------------------- -------------------- -------------------- ----------
(1) Business wireline operations reported in Business
Solutions segment.
 

Supplemental International

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
                                                                                                                                                                             December 31, 2017                                                                                                                                                                                                   December 31, 2016
                                                                             ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Latin America                                Mexico                                           International                                                                   Latin America                                Mexico                                           International
---------------------------------- -------------------- -------------------- ------------------------------------------------ -------------------- ------------------------------------------------                                          ------------------------------------------------                                          ------------------------------------------------ -------------------- ------------------------------------------------                                          -------------------------------------------------
Operating Revenues                                                                                                                                                                                                                                                                                                              
   Video service                                                                                $  1,391                                                              $     -                                                                                   $ 1,391                                                                                   $  1,261                                                              $     -                                                                                   $  1,261
   Wireless service                                                                                    -                                                                  501                                                                                       501                                                                                          -                                                                  477                                                                                        477
   Wireless equipment                         -         323                                                 323                                                    -         171                                                  171  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Total Operating Revenues                  1,391         824                                               2,215                                                1,261         648                                                1,909  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Operating Expenses
   Operations and support                                                                          1,049                                                                  887                                                                                     1,936                                                                                        997                                                                  882                                                                                      1,879
   Depreciation and amortization            207         106                                                 313                                                  215          83                                                  298  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Total Operating Expenses                  1,256         993                                               2,249                                                1,212         965                                                2,177  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Operating Income (Loss)                     135        (169 )                                                                  (34 )                                                                    49        (317 )                                                                  (268 )
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Equity in Net Income of Affiliates           25           -                                                  25                                                   28           -                                                   28  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Segment Contribution                                      $    160                        $  (169 )                                           $    (9 )                                           $     77                        $  (317 )                                           $   (240 )
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                     Supplemental International
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                                                                                         Twelve Months Ended
                                                                                                                                                                             December 31, 2017                                                                                                                                                                                                                                         December 31, 2016
                                                                             ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                            Latin America                                Mexico                                                                                 International                                                                   Latin America                                Mexico                                                                                 International
---------------------------------- -------------------- -------------------- ------------------------------------------------ -------------------- ------------------------------------------------                                          ------------------------------------------------                                          ------------------------------------------------ -------------------- ------------------------------------------------                                          -------------------------------------------------
Operating Revenues
   Video service                                                                                $  5,456                                                              $     -                                                                                   $ 5,456                                                                                   $  4,910                                                              $     -                                                                                   $  4,910
   Wireless service                                                                                    -                                                                2,047                                                                                     2,047                                                                                          -                                                                1,905                                                                                      1,905
   Wireless equipment                         -         766                                                 766                                                    -         468                                                  468  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Total Operating Revenues                  5,456       2,813                                               8,269                                                4,910       2,373                                                7,283  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Operating Expenses
   Operations and support                                                                          4,172                                                                3,232                                                                                     7,404                                                                                      3,847                                                                2,983                                                                                      6,830
   Depreciation and amortization            849         369                                               1,218                                                  835         331                                                1,166  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Total Operating Expenses                  5,021       3,601                                               8,622                                                4,682       3,314                                                7,996  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Operating Income (Loss)                     435        (788 )                                                                 (353 )                                                                   228        (941 )                                                                  (713 )
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Equity in Net Income of Affiliates           87           -                                                  87                                                   52           -                                                   52  
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ -------------------- -------------------- -------------------- ----- --------------------                                           -------------------- ------ --------------------
Segment Contribution                                      $    522                        $  (788 )                                           $  (266 )                                           $    280                        $  (941 )                                           $   (661 )
---------------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- -------------------- ------ --------------------

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180131006225r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180131006225/en/

SOURCE: AT&T Inc.

AT&T Inc. 
Erin McGrath, 214-862-0651 
Global Media Relations 
erin.mcgrath@att.com


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