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Investor Briefing

2017 AT&T EARNINGSQ2

No. 297 | JULY 25, 2017

Contents

Investor Briefing

Consolidated Results 3

Business Solutions 5

Entertainment Group 7

Consumer Mobility 9

International 10

AT&T Mobility 12

Highlights 15

2017 AT&T EARNINGSQ2 2017 AT&T EARNINGSQ2

Financial and Operational Information 18

28Discussion and Reconciliation of Non-GAAP Measures

Consolidated Results 3

Business Solutions 5

Entertainment Group 7

Consumer Mobility 9

International 10

AT&T Mobility 12

Highlights 15

CONTENTS


3

Investor Briefing

AT&T Reports Second-Quarter Results

ǋ Consolidated revenues of $39.8 billion

ǋ Operating income of $7.3 billion

ǋ Net income attributable to AT&T of $3.9 billion

ǋ Diluted EPS of $0.63 as reported and $0.79 as adjusted, compared to $0.55 and $0.72 in the year-ago quarter

ǋ Cash from operations of $8.9 billion

ǋ Free cash flow of $3.7 billion

Consolidated Results

HIGHLIGHTS: ǋ U.S. wireless results:

Best-ever postpaid phone churn of 0.79%

Total postpaid churn including tablets of 1.01%

Growing operating income margin of 30.4% with record-high EBITDA margins including best-ever wireless service margin of 50.4%

ǋ 2.8 million wireless net adds

2.3 million U.S., driven by connected devices, prepaid and postpaid

476,000 Mexico net adds

ǋ Entertainment Group results:

112,000 IP broadband net adds; 8,000 total broadband net adds

More than 5.5 million AT&T Fiber customer locations passed

Total video losses of 199,000 with DIRECTV NOW gains helping offset traditional TV subscriber decline; Total video subscribers essentially flat year over year

ǋ International results:

Revenues up 10.8% with favorable operating trends

Continued revenue growth and margin improvement in Mexico

Company Maintains Full-Year Guidance

CONTENTS


Cash from operating activities was $8.9 billion in the second quarter and $18.2 billion year to date. Capital expenditures were $5.2 billion in the quarter and $11.2 billion year to date. Free cash flow — cash from operating activities minus capital expenditures — was $3.7 billion for the quarter and $6.9 billion year to date.

4

Investor BriefingConsolidated Results

CONSOLIDATED FINANCIAL RESULTS

AT&T's consolidated revenues for the second quarter totaled $39.8 billion versus $40.5 billion in the year-ago quarter, primarily due to declines in legacy wireline services and consumer mobility. Compared with results for the second quarter of 2016, operating expenses were $32.5 billion versus $34.0 billion; operating income was $7.3 billion versus $6.6 billion; and operating income margin was 18.4% versus 16.2%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $8.6 billion versus $8.1 billion; and operating income margin was 21.6%, up 150 basis points versus the year-ago quarter.

Second-quarter net income attributable to AT&T totaled $3.9 billion, or $0.63 per diluted share, compared with $3.4 billion, or $0.55 per diluted share, in the year-ago quarter. Adjusting for $0.16 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.79 compared with an adjusted $0.72 in the year-ago quarter, up 9.7%.

v v

Cash from OperationsI N B I L L I O N S

Free Cash Flow Capital Expenditures

$3.2$3.7

$6.0 $5.2

1Q17 2Q17

$9.2 $8.9

$4.8 $5.2 $3.7

$5.5 $5.8 $6.5

2Q16

$10.3

3Q16

$11.0

4Q16

$10.1

Adjusted Earnings Per Share

REPORTED:

1Q17 2Q17

$0.56 $0.63

2Q16

$0.72

3Q16

$0.74

4Q16

$0.66

$0.55 $0.54 $0.39

$0.74$0.79

Consolidated RevenuesI N B I L L I O N S

1Q17 2Q17

$39.4 $39.8$41.8

2Q16

$40.5

3Q16

$40.9

4Q16


BUSINESS WIRELESS FINANCIAL RESULTS

Business wireless revenues were essentially flat year over year at $9.7 billion with service revenue growth largely offsetting lower equipment revenues.

ǋ Wireless service revenues were up 0.5% year over year, reflecting continued migration from consumer plans.

BUSINESS WIRELINE FINANCIAL RESULTS

In business wireline, declines in legacy products were partially offset by continued growth in strategic business services. Continued weakness in business fixed investment along with technology transitions also impacted results. Total business wireline revenues were $7.4 billion, down 5.9% year over year.

ǋ Strategic business services, the advanced wireline capabilities that lead AT&T’s most advanced business solutions — including VPNs, Ethernet, cloud, hosting, IP conferencing, voice over IP, dedicated internet, IP broadband and security services — continued its solid performance. Revenues grew by $223 million, or 8.0%, versus the year-earlier quarter. These services represent 41% of total business wireline revenues and an annualized revenue stream of more than $12 billion. Growth in strategic business services helped offset a decline of more than $600 million in legacy services in the quarter.

The Business Solutions segment provides both wireless and wireline services to business customers and wireless services to individual subscribers who participate through employer-sponsored plans. AT&T's wireless and wired networks provide complete communications solutions to these customers. AT&T’s business customer revenues include results from enterprise, public sector, wholesale and small/midsize customers.

5

FINANCIAL HIGHLIGHTS

Total second-quarter revenues from business customers were $17.1 billion, down 2.7% versus the year-earlier quarter due to declines in legacy wireline services.

ǋ Growth in wireless service revenues and strategic business services helped offset declines in legacy wireline services and wireless equipment sales.

ǋ Second-quarter operating expenses were $12.6 billion, down 5.5% versus the second quarter of 2016. Operating income totaled $4.5 billion, up 6.1% year over year with cost efficiencies and depreciation more than offsetting declines in legacy services.

ǋ Second-quarter operating income margin was 26.1%, up 220 basis points year over year with growth in IP revenues and increased cost efficiencies more than offsetting declines in higher-margin legacy services.

Investor Briefing

CONTENTS

Business Solutions


$16.8 $17.1

Revenues & EBITDA MarginI N B I L L I O N S

Revenues EBITDA EBITDA Margin

$6.7 $6.8

39.6% 39.7%

2Q17

$6.7 $6.8 $6.3

38.2% 38.5%34.9%

2Q16

$17.6

3Q16

$17.8

4Q16 1Q17

$18.0

6

Investor BriefingBusiness Solutions

CONTENTS


SUBSCRIBER METRICS

At the end of the second quarter, AT&T had more than 84 million business wireless subscribers.

ǋ Business Solutions added 36,000 postpaid subscribers and added 2.2 million connected devices in the second quarter. Postpaid business wireless subscriber churn increased to 0.97% versus 0.91% in the year-ago quarter due to tablets.

ǋ During the quarter, the company also added 12,000 high-speed IP broadband business subscribers. Total business broadband had a loss of 17,000 subscribers.

Business Solutions

$2.8

Strategic Business Services RevenuesI N B I L L I O N S

Strategic Services Revenues % of Business Wireline Revenues

40.1% 41.0%

1Q17 2Q17

$3.0 $3.0

2Q16 3Q16 4Q16

35.8%37.1%

$2.9

38.5%

$3.0

Connected Device Subscribers & Net AddsI N M I L L I O N S

SubscribersNet Adds

2.6 2.2

1Q17 2Q17

31.4 33.6

2Q16 3Q16 4Q16

1.2 1.3 1.3

28.1 29.4 30.6



Total revenues were $12.7 billion, generally flat versus the year-earlier quarter, but up sequentially.

ǋ Total video revenues were up 2.1% with satellite gains more than offsetting declines in IPTV.

AdWorks continues to show strong gains with revenues up nearly 15%.

ǋ Broadband revenues were down slightly in the quarter as the company introduced simplified pricing. IP broadband revenues grew by 3.2%.

Second-quarter operating expenses were $11.0 billion, essentially flat from a year ago as cost synergies helped offset annual content-cost increases.

ǋ Operating income totaled $1.7 billion, up slightly from the year-ago quarter.

ǋ Second-quarter operating income margin was 13.1%, up from 13.0% in the year-earlier quarter.

7

ǋ Entertainment Group EBITDA margin was 24.6%, compared to 24.7% in the second quarter of 2016, with video and IP broadband revenue growth and cost efficiencies mostly offsetting TV content-cost pressure, declines in legacy services and start-up costs for DIRECTV NOW.

AT&T’s Entertainment Group provides entertainment, high-speed internet and communications services predominantly to residential customers in the United States.

Investor Briefing

CONTENTS

Entertainment Group


Product RevenuesI N B I L L I O N S

Video OtherHigh-speed Internet

$9.0$9.2

$1.7 $1.6

$1.9 $1.9

1Q17 2Q17

$12.6 $12.7

$9.0 $9.0$9.6

$1.9

$1.9

$1.8

$1.9

$1.7

2Q16

$12.7

3Q16

$12.7

4Q16

$13.2

$1.9 $3.0 $3.1

23.9% 24.6%

$12.6 $12.7

Revenues and EBITDA MarginI N B I L L I O N S

Revenues EBITDA EBITDA Margin

1Q17 2Q17

$3.1 $3.0 $2.7

24.7%23.5%

20.8%

2Q16

$12.7

3Q16

$12.7

4Q16

$13.2

CONTENTS


8

Investor BriefingEntertainment Group

Entertainment Group continued to gain broadband subscribers in the second quarter.

ǋ The Entertainment Group had a net gain of 112,000 IP broadband subscribers in the second quarter with DSL losses of 104,000, for total broadband subscriber growth of 8,000. Only about 1 million DSL subscribers remain in AT&T's broadband subscriber base. IP broadband subscribers benefitted from the expansion of the AT&T fiber network and simplified pricing, and at the end of the quarter totaled 13.2 million.

ǋ Customers continue to move up the broadband speed tiers. About 60% of all broadband customers have broadband speeds between 18 megabits and 1 gigabit. The number of customers with speeds of 18 megabits or faster has increased by 1.6 million in the past year.

ǋ At the same time, the company continues its fiber deployment. The company now markets AT&T Fiber to more than 5.5 million customer locations in 55 markets.

SUBSCRIBER METRICS

Total video subscribers were down 199,000 in the quarter as DIRECTV NOW subscribers helped offset traditional video decreases. The company ended the quarter with 25.2 million total video subscribers, essentially flat from a year ago.

ǋ Traditional video subscribers declined 351,000 in second quarter due to seasonality and elevated competition. Satellite subscribers declined by 156,000 in the quarter and IPTV subscribers declined by 195,000 as the company continued to focus on profitability. About 85% of the traditional video base is now on the satellite platform.

ǋ DIRECTV NOW added 152,000 subscribers to reach nearly a half million customers. During the quarter, the company enhanced the user experience, added streaming devices and increased content choices.

Total Video SubscribersI N M I L L I O N S

DIRECTV DTVNowU-verse

4.0 3.8

21.0 20.9

1Q17 2Q17

25.4 25.2

4.8 4.5 4.3

20.5 20.8 21.0

2Q16

25.3

3Q16

25.3

4Q16

25.5

IP Broadband SubscribersI N M I L L I O N S

1Q17 2Q17

13.1 13.2

2Q16 3Q16 4Q16

12.612.8 12.9

Video Net AddsI N T H O U S A N D S

DIRECTV U-verse DTVNow

(233)

(161)1Q17

(391) (326) (262)(195)

342 323235

267

(156)

152

(49)2Q16

(3)3Q16

240 4Q16

(199)2Q17

72


SUBSCRIBER METRICS

At the end of the second quarter, AT&T had 51.7 million Consumer Mobility subscribers.

ǋ In the quarter, Consumer Mobility added 81,000 total subscribers with 267,000 prepaid, 91,000 postpaid and 86,000 connected device net adds offsetting a loss of 363,000 reseller subscribers.

ǋ Consumer Mobility postpaid churn was 1.09%, the same as the year-ago quarter. Consumer postpaid phone churn was 0.86% versus 0.96% in the year-ago quarter.


Total revenues from Consumer Mobility customers totaled $7.8 billion, down 4.8% versus the year-earlier quarter, reflecting lower postpaid service revenues mostly due to migrations to business plans.

ǋ Second-quarter operating expenses were $5.4 billion, down 3.9% versus the second quarter of 2016, reflecting increased operational efficiencies and fewer upgrades.

ǋ AT&T’s Consumer Mobility operating income totaled $2.4 billion, down 6.8% versus the second quarter of 2016. Second-quarter operating income margin was 30.8%, down 60 basis points from the year-earlier quarter with lower volumes and increased cost efficiencies partially offsetting service-revenue pressure.

ǋ Consumer Mobility EBITDA margin was 42.0%, compared to 42.8% in the second quarter of 2016. (EBITDA margin is operating income before depreciation and amortization, divided by total wireless revenues.) EBITDA service margin was 50.1%, compared to 50.5% in the year-ago quarter. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

Consumer Mobility

The Consumer Mobility segment provides nationwide wireless service to consumer and wholesale subscribers located in the United States and in U.S. territories. The company’s wireless network powers voice and data services, including high-speed internet, video entertainment and home monitoring services.

Investor Briefing

CONTENTS9


EBITDA Service Margin

1Q17 2Q17

48.6% 50.1%

2Q16

50.5%

3Q16

50.9%

4Q16

46.1%

Prepaid Net AddsI N T H O U S A N D S

1Q17 2Q17

282267

2Q16

365

3Q16

304

4Q16

406


10

Total International revenues totaled $2.0 billion, up from $1.8 billion in the year-ago quarter. Second-quarter operating expenses were $2.1 billion. AT&T’s International operating loss totaled $57 million, compared to ($193 million) in the year-ago second quarter and ($120 million) in the first quarter of 2017. Second-quarter operating income margin was (2.8)%.

MEXICO

AT&T owns and operates a wireless network in Mexico. AT&T covered more than 88 million people in Mexico with 4G LTE at the end of the second quarter and expects to cover 100 million POPs by the end of 2018. Second-quarter 4G LTE coverage included adjustments for a new population census in Mexico as well as continued 4G LTE deployment.

ǋ Wireless revenues from Mexico were $665 million, up 9.7% versus the year-earlier quarter, largely due to subscriber growth, which was partially offset by competitive pressures and foreign exchange.

ǋ Second-quarter operating loss was $198 million compared to a loss of $225 million in the year-ago quarter, reflecting continued investment in operations, network and subscriber acquisitions.

ǋ In the quarter, AT&T added 92,000 postpaid subscribers and 402,000 prepaid subscribers to reach 13.1 million total wireless subscribers in Mexico, a 31% increase from a year ago.

The International segment includes wireless services in Mexico and satellite entertainment services in Latin America. AT&T is a leading provider of pay television services in Latin America with satellite operations serving Argentina, Brazil, Chile, Colombia, Ecuador, Peru, Uruguay, Venezuela and parts of the Caribbean. The company also owns 41% of Sky Mexico. Sky Mexico financial results are accounted for as an equity-method investment.

Investor Briefing

CONTENTS

International


RevenuesI N B I L L I O N S

Latin America Mexico Wireless

$1.3 $1.4

$0.6 $0.7

1Q17 2Q17

$1.9 $2.0

$1.2

$0.6

$1.3

$0.6

$1.3

$0.6

2Q16

$1.8

3Q16

$1.9

4Q16

$1.9 Wireless Subscribers - MexicoI N M I L L I O N S

Postpaid Prepaid Other

7.27.6

5.1 5.2

1Q17 2Q17

12.613.1

2Q16 3Q16 4Q16

5.1 5.76.7

4.6 4.7 5.0

10.0

12.00.3

0.2

0.3

10.7

0.30.3


11

Investor Briefing

DIRECTV LATIN AMERICA

DIRECTV Latin America revenues reflect price increases driven by macroeconomic conditions with mixed local currencies. Total revenues from Latin America were $1.4 billion, up 11.4%. Operating income was $141 million with continued positive free cash flow.

ǋ Second-quarter subscriber net losses were 56,000 with losses in Brazil, Argentina and Venezuela offsetting gains in other countries. Total subscribers at the end of the quarter were 13.6 million. Sky Mexico had approximately 8.0 million subscribers as of June 30, 2017.

International

CONTENTS


12


Wireless revenues reflected lower service revenues from the continued adoption of unlimited plans and lower equipment revenues from fewer postpaid gross adds and upgrades than in the year-ago quarter.

ǋ Total wireless revenues were $17.5 billion, down 2.3% year over year, due to decreases in service and equipment revenues. Wireless service revenues of $14.5 billion were down 2.5% year over year but flat sequentially. Wireless equipment revenues decreased 1.0% to $3.0 billion reflecting customers’ decisions to hold onto their devices longer. The upgrade rate was an all-time low for a second quarter.

ǋ Second-quarter wireless operating expenses totaled $12.2 billion, down 3.1% year over year, reflecting operating efficiencies and lower sales volumes. Wireless operating income was $5.3 billion, essentially flat year over year.

ǋ Wireless margins hit record levels and reflect continued success in driving operating costs out of the business and fewer smartphone upgrades. AT&T’s second-quarter wireless operating income margin was 30.4%, a 60 basis point improvement from the year-earlier quarter and the best-ever second-quarter operating income margin.

ǋ Wireless EBITDA margin equaled its best ever at 41.8%, compared to 41.4% in the second quarter of 2016. Wireless EBITDA service margin was a best-ever 50.4%, compared to 49.8% in the year-ago quarter.

ARPU

The migration to non-subsidized plans is reflected in postpaid service ARPU (average revenues per user).

ǋ Phone-only postpaid ARPU decreased 2.5% versus the year-earlier quarter but increased sequentially. Phone-only postpaid ARPU with AT&T Next monthly billings decreased 1.3% year over year but also increased sequentially as customers continue holding onto their devices after completing AT&T Next payments.

AT&T’s U.S. mobility operations are divided between the Business Solutions and Consumer Mobility segments. For comparison purposes, the company is providing supplemental information for its total domestic mobility operations.

Investor Briefing

CONTENTS

AT&T Mobility


Revenues and EBITDA Service Margins

Revenues EBITDA EBITDA Service Margin

$7.2 $7.3

49.3%50.4%

1Q17 2Q17

$17.2 $17.5

$7.4 $7.5 $6.7

49.8% 50.1%45.4%

2Q16

$17.9

3Q16

$18.2

4Q16

$18.8

Phone-only Postpaid + EIP ARPU

Phone-only Postpaid ARPU EIP Billings

1Q17 2Q17

$58.09

$68.81

$10.72

$58.30

$69.04

$10.74

$59.80

$10.17

$59.64

$10.35

$58.84

2Q16

$69.97

3Q16

$69.99

4Q16

$69.54

$10.70

CONTENTS


SMARTPHONES

The company’s branded smartphone base continued to grow in the quarter, and even more customers moved off the subsidy model — either choosing AT&T Next or bringing their own devices.

ǋ The company had 6.3 million branded smartphone gross adds and upgrades in the quarter, including 1.9 million from prepaid. The postpaid upgrade rate in the quarter was a near-record low 4.1%.

ǋ Sales on AT&T Next were 3.6 million, or 83% of all postpaid smartphone gross adds and upgrades. The company also had 421,000 BYOD gross adds. That means about 93% of postpaid smartphone transactions in the quarter were non-subsidy.

More than 50% of the company’s postpaid smartphone base is currently on AT&T Next, with 88% of postpaid smartphone subscribers on no-device-subsidy plans.

SUBSCRIBER METRICS

In the second quarter, AT&T posted a net increase in total wireless subscribers of 2.3 million to reach 136.5 million in service.

ǋ The company had a net gain of 127,000 postpaid subscribers and added 267,000 prepaid phone subscribers with gains in both Cricket and AT&T PREPAID. AT&T also added 2.3 million connected devices in the quarter. The company lost 368,000 reseller subscribers in the quarter. Postpaid tablet and computing device net adds were 156,000 with a loss of 89,000 postpaid voice, almost all feature-phone subscribers, which is a significant improvement both year over year and sequentially.

ǋ The company had 394,000 branded net adds (both postpaid and prepaid) in the quarter, including a gain of 212,000 branded smartphones. More than half a million total branded smartphones were added to the base.

13

Investor BriefingAT&T Mobility

Wireless SubscribersI N M I L L I O N S

Postpaid Prepaid Reseller Connected Devices

32.4 34.7

10.6 10.313.8 14.2

77.3 77.4

1Q17 2Q17

134.2 136.5

77.3

29.0

12.9

30.3

12.6

31.6

11.912.6 13.0

77.4

13.5

77.8

2Q16

131.8

3Q16

133.3

4Q16

134.9

Branded Net AddsI N T H O U S A N D S

Postpaid Prepaid

191

282

1Q17

91

257

365

212 127

304

267520

406

2Q16

622

3Q16 2Q17

516

394

4Q16

926

Branded Phone Subscribers &Postpaid Upgrade Rate

Postpaid Feature Phones & Other

PrepaidPhones

Postpaid Upgrade Rate

Postpaid Smartphones

1Q17 2Q17

59.0 59.2

5.8 5.413.8 14.2

78.6 78.8

3.9%4.1%

58.5 58.7 59.1

7.2

12.6

6.7

13.06.1

13.5

2Q16

78.3

3Q16

78.4

4Q16

78.7

4.6% 5.1%6.3%

CONTENTS


14

Investor Briefing

CHURN

Postpaid churn was 1.01%, compared to 0.97% in the year-ago quarter due to increases in tablet churn. Postpaid phone churn was a record low 0.79%, compared to 0.84% in the year-ago quarter. Branded churn was 1.57%, compared to 1.47% in the year-ago quarter. Total churn was 1.28%, down from 1.35% in the year-ago quarter.

AT&T Mobility

1.12%1.01%

Postpaid Churn

Postpaid Churn Postpaid Phone Churn

0.90%0.79%

1Q17 2Q17

0.84% 0.90%0.98%

2Q16

0.97%

3Q16

1.05%

4Q16

1.16%


15

In recent weeks, AT&T:

WIRELESS

ǋ Launched 5G Evolution in select areas of Austin and Indianapolis, providing a taste of the future of connectivity to customers using the Samsung Galaxy S8 or S8+, or the upcoming Moto Z2 Force EditionTM. AT&T plans to roll out 5G Evolution to more than 20 markets later this year while it prepares to launch standards-based 5G starting as early as 2018.

ǋ Rolled out new unlimited plans for postpaid wireless subscribers. AT&T Unlimited Plus wireless customers get a $25 video credit toward DIRECTV, DIRECTV NOW or U-verse and HBO included.

ǋ Introduced a new unlimited plan for AT&T PREPAIDSM (formerly AT&T GoPhone) customers, as well as a limited-time offer allowing them to receive bill credits for their 3rd and 12th months of service on select prepaid plans.

ǋ Was named to MONEY Magazine’s “The Best Cell Phone Plans of 2017.” Cricket’s Smart plan won “Best Couples Plan,” and the AT&T PREPAID 6GB ($45/mo) plan won “Best Everyday Plan,” both among plans with 4 GB or more of high-speed data, after MONEY evaluated 100 plans from 15 companies. This is the third year in a row the company has made the list of top plans.

ENTERTAINMENT

ǋ Introduced a $25 monthly video credit for AT&T Unlimited Choice customers, letting them enjoy endless entertainment on DIRECTV NOW for as little as $10/month.

ǋ DIRECTV NOW on several Roku® devices with a limited time offer that lets DIRECTV NOW customers receive a free Roku Premiere when they pay in full for two months of service up front.

ǋ Collaborated with Best Buy to offer 30 free days of DIRECTV NOW for any customer who purchases an eligible streaming device.

ǋ Turned on more than 30 new local affiliate stations on DIRECTV NOW, more than doubling DIRECTV NOW’s local offering since the product launched at the end of 2016.

ǋ Expanded the company’s 100% fiber network powered by AT&T Fiber to parts of Monterey, Salinas and Oakland, Calif; South Dallas; and Wilmington, N.C. Ultra-fast speeds are now available in parts of 55 metros with plans to reach at least 20 more metros. AT&T now markets the ultra-fast service to over 5.5 million locations. The company is well on its way to adding a total of 2 million fiber locations in 2017.

ǋ Launched Fixed Wireless Internet to more than 70,000 customer locations across 9 states: Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. This is part of the company’s FCC Connect America Fund commitment to serve more than 400,000 customer locations across 18 states by the end of 2017 and more than 1.1 million locations by 2020.

Investor Briefing

CONTENTS

AT&T helps millions around the globe connect with leading entertainment, mobile, high-speed internet and voice services. The company is one of the world’s largest providers of pay TV with customers in the U.S. and 11 Latin American countries. And it helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.

Highlights



16

Investor Briefing

ǋ Deployed a nationwide Low-Power Wide-Area LTE-M network across the U.S. on AT&T’s 4G LTE network. This LTE-M network will enable a new generation of IoT devices and applications.

ǋ Announced that AT&T NetBond® for Cloud users gained enhanced connectivity to more than 100 additional cloud software and service providers hosted on Amazon Web Services (AWS) as part of the new AWS Direct Connect Bundle. AWS software and solution providers can also join the AT&T NetBond for Cloud Solution Provider program.

ǋ Launched the company’s second fixed wireless 5G trial using millimeter wave technology to deliver an ultra-fast 5G internet connection to residential, small business and enterprise locations in Austin, TX using Ericsson’s 5G RAN and the Intel® 5G Mobile Trial Platform.

ǋ Announced the deployment of an LTE-M network for IoT devices in Mexico. Construction is underway with plans to be complete by December 2017. AT&T has the most reliable voice and data network in Mexico.

ǋ Opened the Enterprise Experience Center for business customers in Mexico City. The center is a one-of-a-kind destination for companies of all kinds to learn, collaborate and innovate. AT&T also launched a portfolio of solutions to help businesses address their needs, grow revenues, lower costs and increase security.

ǋ Continued to expand the company’s accessibility to consumers in Mexico with the opening of more than 250 new wireless points of sale throughout the country.

ǋ Led the industry in employee engagement, moving from #19 to #13 in the “Great Places to Work® en México” ranking.

ǋ Announced the availability of STAYCAST, powered by Google Chromecast, a streaming solution for hotels and institutions that allows hotel guests to stream their own content from their devices onto the TV in their room.

BUSINESS & INTERNATIONAL

ǋ Worked with FirstNet to deliver state plans to U.S. states and territories in June – 3 months ahead of FirstNet’s original goal. This significant milestone in the public-private partnership between AT&T and FirstNet opens the door for states and territories to begin their decision-making process. To date, Arkansas, Iowa, Kentucky, Virginia and Wyoming have opted in.

ǋ Strengthened cooperation with China Telecom to develop more advanced network services for multinational companies in China. In addition to extending the companies’ unique joint venture for another 20 years, AT&T and China Telecom will explore ways to develop new services in Internet of Things (IoT), cloud-based big data, VoLTE roaming and software-defined networks.

ǋ Accelerated global momentum for the AT&T FlexWareSM platform, with new network connectivity options and security applications and increased availability to more than 200 countries and territories1. We have now signed contracts for more than 4,000 FlexWare devices globally across a variety of industries.

ǋ Announced Ericsson as a global AT&T FlexWare customer. Ericsson will use AT&T FlexWare to boost network agility and save costs.

ǋ Announced DXC Technology as the first IT services company to launch a third-party virtual network function (VNF) based on AT&T FlexWare. DXC will use AT&T FlexWare in its own operations.

ǋ Acquired the Vyatta® network operating system and associated assets of Brocade Communications Systems. The deal will expand AT&T’s white box platform capabilities and bolster the company’s ability to deliver cloud or premises-based virtual network functions, starting with our previously announced SD-WAN cloud service with VeloCloud.

Highlights

CONTENTS

1Subject to conditions


17

Investor Briefing

CONTENTS

AT&T INVESTOR BRIEFING

The AT&T Investor Briefing is published by the Investor Relations staff of AT&T Inc. Requests for further information may be directed to one of the Investor Relations managers by phone at 210-351-3327.

Correspondence should be sent to: Investor Relations AT&T Inc. 208 S. Akard Street Dallas, TX 75202

Email address: [email protected]

Senior Vice President-Investor Relations Mike Viola

Investor Relations Staff Jamie Anderson Tim Bever Michael Black Jeston Dumas Kent Evans Matt Gallaher Martin Sheehan Chris Womack

THIRD-QUARTER 2017 EARNINGS DATE: OCTOBER 24, 2017

AT&T will release third-quarter 2017 earnings on October 24, 2017, after the market closes.

The company’s Investor Briefing and related earnings materials will be available on the AT&T website at https://investors.att.com by 4:30 p.m. Eastern time.

AT&T will also host a conference call to discuss the results at 4:30 p.m. Eastern time the same day. Dial-in and replay information will be announced on First Call approximately 8 weeks before the call, which will also be broadcast live and will be available for replay over the internet at https://investors.att.com.

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this Investor Briefing contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may 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 or revise statements contained in this Investor Briefing based on new information or otherwise.

This Investor Briefing may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are included in the exhibits to the Investor Briefing and are available on the company’s website at https://investors.att.com.

Business Solutions

CONTENTS

Investor Briefing

18

2017 AT&T EARNINGSQ2Investor Briefing

CONTENTS

AT&T INC. FINANCIAL DATA

2017 2016 2017 2016

Service $ 36,538 $ 37,142 -1.6 % $ 72,994 $ 74,243 -1.7 % Equipment 3,299 3,378 -2.3 % 6,208 6,812 -8.9 %

39,837 40,520 -1.7 % 79,202 81,055 -2.3 %

4,138 4,260 -2.9 % 7,986 8,635 -7.5 %

4,898 4,701 4.2 % 9,872 9,330 5.8 %

9,218 9,514 -3.1 % 18,283 18,910 -3.3 %

8,113 8,909 -8.9 % 16,600 17,350 -4.3 %

6,147 6,576 -6.5 % 12,274 13,139 -6.6 %

32,514 33,960 -4.3 % 65,015 67,364 -3.5 %

7,323 6,560 11.6 % 14,187 13,691 3.6 %

(1,395) (1,258) 10.9 % (2,688) (2,465) 9.0 %

14 28 -50.0 % (159) 41 - %

128 91 40.7 % 108 161 -32.9 %

6,070 5,421 12.0 % 11,448 11,428 0.2 %

2,056 1,906 7.9 % 3,860 4,028 -4.2 %

4,014 3,515 14.2 % 7,588 7,400 2.5 %

(99) (107) -7.5 % (204) (189) 7.9 %$ 3,915 $ 3,408 14.9 % $ 7,384 $ 7,211 2.4 %

$ 0.63 $ 0.55 14.5 % $ 1.19 $ 1.17 1.7 %

6,165 6,174 -0.1 % 6,166 6,173 -0.1 %

$ 0.63 $ 0.55 14.5 % $ 1.19 $ 1.17 1.7 %

6,184 6,195 -0.2 % 6,185 6,193 -0.1 %

Net Income Attributable to AT&T

Basic Earnings Per Share Attributable to AT&T Weighted Average Common Shares Outstanding (000,000)

Diluted Earnings Per Share Attributable to AT&T Weighted Average Common Shares Outstanding with Dilution (000,000)

Other Income (Expense) - NetIncome Before Income Taxes Income Tax ExpenseNet Income Less: Net Income Attributable to Noncontrolling Interest

Depreciation and amortization Total Operating ExpensesOperating IncomeInterest ExpenseEquity in Net Income (Loss) of Affiliates

Cost of services and sales Equipment Broadcast, programming and operations Other cost of services (exclusive of depreciation and amortization shown separately below) Selling, general and administrative

Change ChangeOperating Revenues

Total Operating Revenues

Operating Expenses

Unaudited June 30, Percent June 30, Percent

Consolidated Statements of IncomeDollars in millions except per share amounts Three Months Ended Six Months Ended

Financial & Operational Information


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CONTENTS


Jun. 30, Dec. 31,

2017 2016

$ 25,617 $ 5,788

14,997 16,794

1,371 1,555

11,562 14,232

53,547 38,369

126,184 124,899

105,546 105,207

95,864 94,176

12,414 14,243

7,980 8,441

1,615 1,674

17,645 16,812 $ 420,795 $ 403,821

$ 10,831 $ 9,832

26,471 31,138

4,371 4,519

3,331 2,079

3,008 3,008

48,012 50,576

132,824 113,681

61,926 60,128

31,422 33,578

20,753 21,748

114,101 115,454

6,495 6,495

89,471 89,604

36,067 34,734

(12,697) (12,659)

5,389 4,961

1,133 975

125,858 124,110 $ 420,795 $ 403,821

Accumulated other comprehensive income

Noncontrolling interest

Total stockholders' equity

Total Liabilities and Stockholders' Equity

Stockholders' Equity

Common stock

Additional paid-in capital

Retained earnings

Treasury stock

Deferred Credits and Other Noncurrent Liabilities

Deferred income taxes

Postemployment benefit obligation

Other noncurrent liabilities

Total deferred credits and other noncurrent liabilities

Advanced billing and customer deposits

Accrued taxes

Dividends payable

Total current liabilities

Long-Term Debt

Total Assets

Liabilities and Stockholders' EquityCurrent Liabilities

Debt maturing within one year

Accounts payable and accrued liabilities

Licenses

Customer Lists and Relationships - Net

Other Intangible Assets - Net

Investments in Equity Affiliates

Other Assets

Prepaid expenses

Other current assets

Total current assets

Property, Plant and Equipment - Net

Goodwill

Unaudited

AssetsCurrent Assets

Cash and cash equivalents

Accounts receivable - net of allowances for doubtful accounts of $732 and $661

Consolidated Balance SheetsDollars in millions


20

Investor Briefing

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CONTENTS

2017 2016

$ 7,588 $ 7,400

Depreciation and amortization 12,274 13,139

Undistributed loss (earnings) from investments in equity affiliates 167 (22)

Provision for uncollectible accounts 795 705

Deferred income tax expense 964 1,767

Net loss (gain) from sale of investments, net of impairments 12 (85)

Actuarial loss (gain) on pension and postretirement benefits (259) -

Accounts receivable 119 (364)

Other current assets 471 2,229

Accounts payable and other accrued liabilities (2,761) (3,032)

Equipment installment receivables and related sales 907 464

Deferred fulfillment costs (796) (1,190)

(280) (280)

(1,041) (2,524)

10,572 10,807

18,160 18,207

Purchase of property and equipment (10,750) (9,702)

Interest during construction (473) (437)

1,224 (485)

51 107

- 500

(9,948) (10,017)

(2) -

24,115 10,140

(6,118) (9,129)

(458) (197)

24 119

(6,021) (5,899)

77 (1,137)

11,617 (6,103)

19,829 2,087

5,788 5,121 $ 25,617 $ 7,208

Net increase in cash and cash equivalents

Cash and cash equivalents beginning of year

Cash and Cash Equivalents End of Period

Purchase of treasury stock

Issuance of treasury stock

Dividends paid

Other

Net Cash Provided by (Used in) Financing Activities

Net Cash Used in Investing Activities

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

Issuance of long-term debt

Repayment of long-term debt

Investing ActivitiesCapital expenditures:

Acquisitions, net of cash acquired

Dispositions

Sales of securities, net

Changes in operating assets and liabilities:

Retirement benefit funding

Other - net

Total adjustments

Net Cash Provided by Operating Activities

Unaudited June 30,

Operating ActivitiesNet income

Adjustments to reconcile net income to net cash provided by operating activities:

Consolidated Statements of Cash FlowsDollars in millions Six Months Ended



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CONTENTS


2017 2016 2017 2016

Purchase of property and equipment $ 4,966 $ 5,251 -5.4 % $ 10,750 $ 9,702 10.8 %

Interest during construction $ 242 $ 219 10.5 % $ 473 $ 437 8.2 %

$ 0.49 $ 0.48 2.1 % $ 0.98 $ 0.96 2.1 %

6,140 6,152 -0.2 %

53.3% 50.5% 280 BP

260,480 277,200 -6.0 %

2017 2016

Domestic 136,500 131,805 3.6 %

Mexico 13,082 9,955 31.4 %

149,582 141,760 5.5 %

104,421 99,557 4.9 %

Domestic 25,200 25,323 -0.5 %

PanAmericana 8,103 7,175 12.9 %

Brazil 5,519 5,348 3.2 %

38,822 37,846 2.6 %

IP 14,234 13,544 5.1 %

DSL 1,452 2,097 -30.8 %

15,686 15,641 0.3 %

Network Access Lines 12,791 15,284 -16.3 %

U-verse VoIP Connections 5,853 5,593 4.6 %

18,644 20,877 -10.7 %

2017 2016 2017 2016

Domestic 2,282 1,361 67.7 % 4,363 3,142 38.9 %

Mexico 476 742 -35.8 % 1,109 1,271 -12.7 %

2,758 2,103 31.1 % 5,472 4,413 24.0 %

888 1,401 -36.6 % 1,626 2,596 -37.4 %

Domestic (199) (49) - % (360) (101) - %

PanAmericana 13 81 -84.0 % 65 109 -40.4 %

Brazil (69) 6 - % (30) (95) 68.4 %

(255) 38 - % (325) (87) - %

IP 124 74 67.6 % 370 276 34.1 %

DSL (133) (197) 32.5 % (289) (413) 30.0 %

(9) (123) 92.7 % 81 (137) - %

Total Branded Wireless Net Additions

Video Net Additions

Total Video Net Additions

Broadband Net Additions

Total Broadband Net Additions

PercentChange Change

Wireless Net Additions

Total Wireless Net Additions

Three Months Ended Six Months EndedJune 30, Percent June 30,

Broadband Connections

Total Broadband Connections

Voice Connections

Total Retail Consumer Voice Connections

Wireless Subscribers

Total Wireless Subscribers

Total Branded Wireless Subscribers

Video Connections

Total Video Connections

Unaudited June 30, Percent

Change

Debt Ratio

Total Employees

Supplementary Operating DataSubscribers and connections in thousands

Change Change

Capital expenditures

Dividends Declared per Share

End of Period Common Shares Outstanding (000,000)


Supplementary Financial DataDollars in millions except per share amounts Three Months Ended Six Months Ended


Investor Briefing

CONTENTS


22CONTENTS

2017 2016 2017 2016

Wireless service $ 8,006 $ 7,963 0.5 % $ 15,935 $ 15,818 0.7 %

Fixed strategic services 3,028 2,805 8.0 % 6,002 5,556 8.0 %

Legacy voice and data services 3,508 4,162 -15.7 % 7,138 8,535 -16.4 %

Other service and equipment 844 874 -3.4 % 1,661 1,733 -4.2 %

Wireless equipment 1,721 1,775 -3.0 % 3,219 3,546 -9.2 %

17,107 17,579 -2.7 % 33,955 35,188 -3.5 %

10,313 10,857 -5.0 % 20,489 21,659 -5.4 %

2,335 2,521 -7.4 % 4,647 5,029 -7.6 %

12,648 13,378 -5.5 % 25,136 26,688 -5.8 %

4,459 4,201 6.1 % 8,819 8,500 3.8 %

- - - % - - - %$ 4,459 $ 4,201 6.1 % $ 8,819 $ 8,500 3.8 %

26.1 % 23.9 % 26.0 % 24.2 %

2017 2016

Postpaid/Branded 51,111 49,433 3.4 %

Reseller 72 51 41.2 %

Connected Devices 33,611 28,061 19.8 %

84,794 77,545 9.3 %

992 948 4.6 %

2017 2016 2017 2016

Postpaid/Branded 36 185 -80.5 % (89) 318 - %

Reseller (5) (13) 61.5 % 1 (35) - %

Connected Devices 2,170 1,199 81.0 % 4,723 2,777 70.1 %

2,201 1,371 60.5 % 4,635 3,060 51.5 %

0.97% 0.91% 6 BP 1.02% 0.97% 5 BP

12 20 -40.0 % 16 37 -56.8 %Business Solutions IP Broadband Net Additions

Change Change

Business Solutions Wireless Net Additions

Total Business Solutions Wireless Net Additions

Business Solutions Wireless Postpaid Churn

Six Months Ended

June 30, Percent June 30, Percent

Business Solutions Wireless Subscribers

Total Business Solutions Wireless Subscribers

Business Solutions IP Broadband Connections

Three Months Ended


Change

Segment Contribution

Segment Operating Income Margin


Operations and support expenses

Depreciation and amortization

Total Segment Operating Expenses

Segment Operating IncomeEquity in Net Income of Affiliates

Change Change

Segment Operating Revenues

Total Segment Operating Revenues

Segment Operating Expenses


Segment ResultsDollars in millions Three Months Ended Six Months Ended


BUSINESS SOLUTIONS

The Business Solutions segment provides services to business customers, including multinational companies; governmental and wholesale customers; and individual subscribers who purchase wireless services through employer-sponsored plans. We provide advanced IP-based services including Virtual Private Networks (VPN); Ethernet-related products and broadband, collectively referred to as strategic business services; as well as traditional data and voice products. We utilize our wireless and wired networks (referred to as “wired” or

“wireline”) to provide a complete communications solution to our business customers.

23

Investor Briefing

CONTENTS


2017 2016 2017 2016

Video entertainment $ 9,153 $ 8,963 2.1 % $ 18,173 $ 17,867 1.7 %

High-speed internet 1,927 1,867 3.2 % 3,868 3,670 5.4 %

Legacy voice and data services 1,005 1,244 -19.2 % 2,061 2,557 -19.4 %

Other service and equipment 597 637 -6.3 % 1,203 1,275 -5.6 %

12,682 12,711 -0.2 % 25,305 25,369 -0.3 %

9,558 9,569 -0.1 % 19,159 19,147 0.1 %

1,458 1,489 -2.1 % 2,877 2,977 -3.4 %

11,016 11,058 -0.4 % 22,036 22,124 -0.4 %

1,666 1,653 0.8 % 3,269 3,245 0.7 %

(11) (2) - % (17) 1 - %$ 1,655 $ 1,651 0.2 % $ 3,252 $ 3,246 0.2 %

13.1 % 13.0 % 12.9 % 12.8 %

2017 2016

Satellite 20,856 20,454 2.0 %

U-verse 3,825 4,841 -21.0 %

DIRECTV NOW 491 - - %

25,172 25,295 -0.5 %

`IP 13,242 12,596 5.1 %

DSL 1,060 1,585 -33.1 %

14,302 14,181 0.9 %

Retail Consumer Switched Access Lines 5,257 6,515 -19.3 %

U-verse Consumer VoIP Connections 5,439 5,300 2.6 %

10,696 11,815 -9.5 %

2017 2016 2017 2016

Satellite (156) 342 - % (156) 670 - %

U-verse (195) (391) 50.1 % (428) (773) 44.6 %

DIRECTV NOW 152 - - % 224 - - %

(199) (49) - % (360) (103) - %

IP 112 54 - % 354 240 47.5 %

DSL (104) (164) 36.6 % (231) (345) 33.0 %

8 (110) - % 123 (105) - %Total Broadband Net Additions

Change Change

Video Net Additions

Total Video Net Additions

Broadband Net Additions

Six Months Ended

June 30, Percent June 30, Percent

Total Broadband Connections

Voice Connections

Total Retail Consumer Voice Connections

Three Months Ended

Change

Video Connections

Total Video Connections

Broadband Connections




Supplementary Operating DataSubscribers and connections in thousands Six Months Ended




Segment Operating IncomeEquity in Net Income (Loss) of Affiliates

Change Change






Investor BriefingFinancial & Operational

Information

ENTERTAINMENT GROUP

The Entertainment Group segment provides video, internet, voice communication, and interactive and targeted advertising services to customers located in the U.S. or in U.S. territories. We utilize our copper and IP-based wired network and/or our satellite technology.

24

Investor Briefing

CONTENTS


2017 2016 2017 2016

Service $ 6,528 $ 6,948 -6.0 % $ 13,137 $ 13,891 -5.4 %Equipment 1,263 1,238 2.0 % 2,394 2,623 -8.7 %

7,791 8,186 -4.8 % 15,531 16,514 -6.0 %

4,520 4,680 -3.4 % 9,048 9,592 -5.7 %871 932 -6.5 % 1,744 1,854 -5.9 %

5,391 5,612 -3.9 % 10,792 11,446 -5.7 %2,400 2,574 -6.8 % 4,739 5,068 -6.5 %

- - - % - - - %$ 2,400 $ 2,574 -6.8 % $ 4,739 $ 5,068 -6.5 %

30.8 % 31.4 % 30.5 % 30.7 %

2017 2016

Postpaid 26,290 27,862 -5.6 %Prepaid 14,187 12,633 12.3 %

40,477 40,495 - %10,182 12,869 -20.9 %1,047 896 16.9 %

51,706 54,260 -4.7 %

2017 2016 2017 2016

Postpaid 91 72 26.4 % 25 68 -63.2 %Prepaid 267 365 -26.8 % 549 865 -36.5 %

358 437 -18.1 % 574 933 -38.5 %(363) (446) 18.6 % (951) (824) -15.4 %

86 (1) - % 105 (27) - %81 (10) - % (272) 82 - %

2.15% 1.96% 19 BP 2.29% 2.04% 25 BP1.09% 1.09% - BP 1.16% 1.16% - BP

Segment ResultsDollars in millions Three Months Ended Six Months EndedUnaudited June 30, Percent June 30, Percent

Change ChangeSegment Operating Revenues


Segment Operating ExpensesOperations and support expensesDepreciation and amortization Total Segment Operating ExpensesSegment Operating IncomeEquity in Net Income of AffiliatesSegment Contribution


Supplementary Operating DataSubscribers and connections in thousandsUnaudited June 30, Percent

ChangeConsumer Mobility Subscribers

BrandedResellerConnected DevicesTotal Consumer Mobility Subscribers

Three Months Ended Six Months EndedJune 30, Percent June 30, Percent

Change ChangeConsumer Mobility Net Additions

BrandedResellerConnected DevicesTotal Consumer Mobility Net Additions

Total ChurnPostpaid Churn

Investor Briefing

CONTENTS


CONSUMER MOBILITY

The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale and resale wireless subscribers located in the U.S. or in U.S. territories. We utilize our U.S. wireless network to provide voice and data services, including high-speed internet, video, and home monitoring services.

25

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CONTENTS


2017 2016 2017 2016

Video entertainment $ 1,361 $ 1,222 11.4 % $ 2,702 $ 2,352 14.9 %

Wireless service 535 489 9.4 % 1,010 944 7.0 %

Wireless equipment 130 117 11.1 % 243 199 22.1 %

2,026 1,828 10.8 % 3,955 3,495 13.2 %

1,772 1,723 2.8 % 3,531 3,311 6.6 %

311 298 4.4 % 601 575 4.5 %

2,083 2,021 3.1 % 4,132 3,886 6.3 %

(57) (193) 70.5 % (177) (391) 54.7 %

25 9 - % 45 23 95.7 %$ (32) $ (184) 82.6 % $ (132) $ (368) 64.1 %

(2.8) % (10.6) % (4.5) % (11.2) %

2017 2016

Postpaid 5,187 4,570 13.5 %

Prepaid 7,646 5,059 51.1 %

12,833 9,629 33.3 %

249 326 -23.6 %

13,082 9,955 31.4 %

PanAmericana 8,103 7,175 12.9 %

SKY Brazil 5,519 5,348 3.2 %

13,622 12,523 8.8 %

2017 2016 2017 2016

Postpaid 92 165 -44.2 % 222 281 -21.0 %

Prepaid 402 614 -34.5 % 919 1,064 -13.6 %

494 779 -36.6 % 1,141 1,345 -15.2 %

(18) (37) 51.4 % (32) (74) 56.8 %

476 742 -35.8 % 1,109 1,271 -12.7 %

PanAmericana 13 81 -84.0 % 65 109 -40.4 %

SKY Brazil (69) 6 - % (30) (95) 68.4 %

(56) 87 - % 35 14 - %

Reseller

Total Mexican Wireless Net Additions

Latin America Satellite Net Additions

Total Latin America Satellite Net Additions

Percent

Change Change

Mexican Wireless Net Additions

Branded

Total Latin America Satellite Subscribers

Three Months Ended Six Months Ended

June 30, Percent June 30,

Mexican Wireless Subscribers

Branded

Reseller

Total Mexican Wireless Subscribers

Latin America Satellite Subscribers


Change







Segment Operating Income (Loss)

Equity in Net Income (Loss) of Affiliates

Change Change







INTERNATIONAL

The International segment provides entertainment services in Latin America and wireless services in Mexico. Video entertainment services are provided to primarily residential customers using satellite technology. We utilize our regional and national wireless networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates.

26

Investor Briefing

CONTENTS


CONTENTS

2017 2016 2017 2016

Service $ 14,534 $ 14,911 -2.5 % $ 29,072 $ 29,709 -2.1 %

Equipment 2,984 3,013 -1.0 % 5,613 6,169 -9.0 %

17,518 17,924 -2.3 % 34,685 35,878 -3.3 %

10,197 10,501 -2.9 % 20,195 21,125 -4.4 %

1,992 2,081 -4.3 % 3,989 4,137 -3.6 %

12,189 12,582 -3.1 % 24,184 25,262 -4.3 %Operating Income $ 5,329 $ 5,342 -0.2 % $ 10,501 $ 10,616 -1.1 %

30.4 % 29.8 % 30.3 % 29.6 %

2017 2016

Postpaid 77,401 77,295 0.1 %

Prepaid 14,187 12,633 12.3 %

91,588 89,928 1.8 %

10,254 12,920 -20.6 %

34,658 28,957 19.7 %

136,500 131,805 3.6 %

326 322 1.2 %

2017 2016 2017 2016

Postpaid 127 257 -50.6 % (64) 386 - %

Prepaid 267 365 -26.8 % 549 865 -36.5 %

394 622 -36.7 % 485 1,251 -61.2 %

(368) (459) 19.8 % (950) (859) -10.6 %

2,256 1,198 88.3 % 4,828 2,750 75.6 %

2,282 1,361 67.7 % 4,363 3,142 38.9 %

- (1) - % (2,723) 23 - %

1.28% 1.35% -7 BP 1.37% 1.38% -1 BP

1.01% 0.97% 4 BP 1.07% 1.04% 3 BP

Connected Devices

Total AT&T Mobility Net Additions

M&A Activity, Partitioned Customers and Other Adjustments

Total Churn

Postpaid Churn

Change Change

AT&T Mobility Net Additions

Branded

Reseller

Six Months EndedJune 30, Percent June 30, Percent

Connected Devices

Total AT&T Mobility Subscribers

Domestic Licensed POPs (000,000)

Three Months Ended

PercentChange

AT&T Mobility Subscribers

Branded

Reseller

Subscribers and connections in thousandsUnaudited June 30,



Total Operating Expenses

Operating Income Margin

Supplementary Operating Data

Change Change

Operating Revenues

Total Operating Revenues

Operating Expenses


Operating ResultsDollars in millions Three Months Ended Six Months Ended


SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY

As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility).

27

Investor Briefing

CONTENTS


CONTENTS

June 30, 2017

Revenues

Operations and Support

Expenses EBITDA

Depreciation and

Amortization

Operating Income (Loss)

Equity in Net Income (Loss)

of Affiliates


Business Solutions $ 17,107 $ 10,313 $ 6,794 $ 2,335 $ 4,459 $ - $ 4,459 Entertainment Group 12,682 9,558 3,124 1,458 1,666 (11) 1,655 Consumer Mobility 7,791 4,520 3,271 871 2,400 - 2,400 International 2,026 1,772 254 311 (57) 25 (32) Segment Total 39,606 26,163 13,443 4,975 8,468 $ 14 $ 8,482 Corporate and Other 231 87 144 2 142 Acquisition-related items - 281 (281) 1,170 (1,451) Certain Significant items - (164) 164 - 164 AT&T Inc. $ 39,837 $ 26,367 $ 13,470 $ 6,147 $ 7,323

June 30, 2016

Revenues


Expenses EBITDA

Depreciation and

Amortization



of Affiliates


Business Solutions $ 17,579 $ 10,857 $ 6,722 $ 2,521 $ 4,201 $ - $ 4,201 Entertainment Group 12,711 9,569 3,142 1,489 1,653 (2) 1,651 Consumer Mobility 8,186 4,680 3,506 932 2,574 - 2,574 International 1,828 1,723 105 298 (193) 9 (184) Segment Total 40,304 26,829 13,475 5,240 8,235 $ 7 $ 8,242 Corporate and Other 216 293 (77) 20 (97) Acquisition-related items - 233 (233) 1,316 (1,549) Certain Significant items - 29 (29) - (29) AT&T Inc. $ 40,520 $ 27,384 $ 13,136 $ 6,576 $ 6,560

June 30, 2017

Revenues


Expenses EBITDA

Depreciation and

Amortization



of Affiliates


Business Solutions $ 33,955 $ 20,489 $ 13,466 $ 4,647 $ 8,819 $ - $ 8,819 Entertainment Group 25,305 19,159 6,146 2,877 3,269 (17) 3,252 Consumer Mobility 15,531 9,048 6,483 1,744 4,739 - 4,739 International 3,955 3,531 424 601 (177) 45 (132) Segment Total 78,746 52,227 26,519 9,869 16,650 $ 28 $ 16,678 Corporate and Other 456 308 148 33 115 Acquisition-related items - 488 (488) 2,372 (2,860) Certain Significant items - (282) 282 - 282 AT&T Inc. $ 79,202 $ 52,741 $ 26,461 $ 12,274 $ 14,187

June 30, 2016

Revenues


Expenses EBITDA

Depreciation and

Amortization



of Affiliates


Business Solutions $ 35,188 $ 21,659 $ 13,529 $ 5,029 $ 8,500 $ - $ 8,500 Entertainment Group 25,369 19,147 6,222 2,977 3,245 1 3,246 Consumer Mobility 16,514 9,592 6,922 1,854 5,068 - 5,068 International 3,495 3,311 184 575 (391) 23 (368) Segment Total 80,566 53,709 26,857 10,435 16,422 $ 24 $ 16,446 Corporate and Other 489 670 (181) 37 (218) Acquisition-related items - 528 (528) 2,667 (3,195) Certain Significant items - (682) 682 - 682 AT&T Inc. $ 81,055 $ 54,225 $ 26,830 $ 13,139 $ 13,691

Dollars in millionsUnaudited

Three Months EndedDollars in millionsUnaudited

Six Months Ended


SUPPLEMENTAL SEGMENT RECONCILIATION

Business Solutions

CONTENTS

Investor Briefing

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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.

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.

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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.



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

Free Cash Flow

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

Free Cash Flow and Free Cash Flow Dividend Payout Ratio Dollars in millions Three Months Ended Six Months Ended

June 30, June 30, 2017 2016 2017 2016

Net cash provided by operating activities $ 8,942 $ 10,307 $ 18,160 $ 18,207 Less: Capital expenditures (5,208) (5,470) (11,223) (10,139) Free Cash Flow 3,734 4,837 6,937 8,068

Less: Dividends paid (3,012) (2,952) (6,021) (5,899) Free Cash Flow after Dividends $ 722 $ 1,885 $ 916 $ 2,169 Free Cash Flow Dividend Payout Ratio 80.7% 61.0% 86.8% 73.1%

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.

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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.

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

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

EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended

June 30, June 30, 2017 2016 2017 2016

Net Income $ 4,014 $ 3,515 $ 7,588 $ 7,400 Additions: Income Tax Expense 2,056 1,906 3,860 4,028 Interest Expense 1,395 1,258 2,688 2,465 Equity in Net (Income) Loss of Affiliates (14) (28) 159 (41) Other (Income) Expense - Net (128) (91) (108) (161) Depreciation and amortization 6,147 6,576 12,274 13,139 EBITDA 13,470 13,136 26,461 26,830

Total Operating Revenues 39,837 40,520 79,202 81,055 Service Revenues 36,538 37,142 72,994 74,243

EBITDA Margin 33.8% 32.4% 33.4% 33.1% EBITDA Service Margin 36.9% 35.4% 36.3% 36.1%

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Segment EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Business Solutions Segment Segment Contribution $ 4,459 $ 4,201 $ 8,819 $ 8,500 Additions: Depreciation and amortization 2,335 2,521 4,647 5,029 EBITDA 6,794 6,722 13,466 13,529 Total Segment Operating Revenues 17,107 17,579 33,955 35,188 Segment Operating Income Margin 26.1% 23.9% 26.0% 24.2% EBITDA Margin 39.7% 38.2% 39.7% 38.4% Entertainment Group Segment Segment Contribution $ 1,655 $ 1,651 $ 3,252 $ 3,246 Additions: Equity in Net (Income) Loss of Affiliates 11 2 17 (1) Depreciation and amortization 1,458 1,489 2,877 2,977 EBITDA 3,124 3,142 6,146 6,222 Total Segment Operating Revenues 12,682 12,711 25,305 25,369 Segment Operating Income Margin 13.1% 13.0% 12.9% 12.8% EBITDA Margin 24.6% 24.7% 24.3% 24.5% Consumer Mobility Segment Segment Contribution $ 2,400 $ 2,574 $ 4,739 $ 5,068 Additions: Depreciation and amortization 871 932 1,744 1,854 EBITDA 3,271 3,506 6,483 6,922 Total Segment Operating Revenues 7,791 8,186 15,531 16,514 Service Revenues 6,528 6,948 13,137 13,891 Segment Operating Income Margin 30.8% 31.4% 30.5% 30.7% EBITDA Margin 42.0% 42.8% 41.7% 41.9% EBITDA Service Margin 50.1% 50.5% 49.3% 49.8% International Segment Segment Contribution $ (32) $ (184) $ (132) $ (368) Additions: Equity in Net (Income) of Affiliates (25) (9) (45) (23) Depreciation and amortization 311 298 601 575 EBITDA 254 105 424 184 Total Segment Operating Revenues 2,026 1,828 3,955 3,495 Segment Operating Income Margin -2.8% -10.6% -4.5% -11.2% EBITDA Margin 12.5% 5.7% 10.7% 5.3%

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ADJUSTING ITEMS

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

Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 AT&T Mobility Operating Income $ 5,329 $ 5,342 $ 10,501 $ 10,616 Add: Depreciation and amortization 1,992 2,081 3,989 4,137 EBITDA 7,321 7,423 14,490 14,753 Total Operating Revenues 17,518 17,924 34,685 35,878 Service Revenues 14,534 14,911 29,072 29,709 Operating Income Margin 30.4% 29.8% 30.3% 29.6% EBITDA Margin 41.8% 41.4% 41.8% 41.1% EBITDA Service Margin 50.4% 49.8% 49.8% 49.7%

Supplemental Latin America EBITDA and EBITDA Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 International - Latin America Operating Income $ 141 $ 32 $ 218 $ 85 Add: Depreciation and amortization 222 212 436 408 EBITDA 363 244 654 493 Tota Operating Revenues 1,361 1,222 2,702 2,352 Operating Income Margin 10.4% 2.6% 8.1% 3.6% EBITDA Margin 26.7% 20.0% 24.2% 21.0%

Supplemental Mexico EBITDA and EBITDA Margin Dollars in millions Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 International - Mexico Operating Income $ (198) $ (225) $ (395) $ (476) Add: Depreciation and amortization 89 86 165 167 EBITDA (109) (139) (230) (309) Total Operating Revenues 665 606 1,253 1,143 Operating Income Margin -29.8% -37.1% -31.5% -41.6% EBITDA Margin -16.4% -22.9% -18.4% -27.0%

Adjusting Items

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

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38%. Certain foreign operations with losses, where such losses are not realizable for tax purposes, are not tax effected, resulting in no tax impact for Venezuela devaluation. For years prior to 2017, adjustments related to Mexico operations were taxed at the 30% marginal rate for Mexico.

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Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

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

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.

Adjusting Items Dollars in millions Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Operating Expenses DIRECTV and other video merger integration costs $ 123 $ 133 $ 250 $ 306 Mexico merger integration costs 80 66 119 147 Time Warner merger costs 78 - 119 - Wireless merger integration costs - 33 - 75 Actuarial (gain) loss (259) - (259) - Employee separation costs 60 29 60 54 (Gain) loss on transfer of wireless spectrum (63) - (181) (736) Venezuela devaluation 98 - 98 - Adjustments to Operations and Support Expenses 117 261 206 (154) Amortization of intangible assets 1,170 1,316 2,372 2,667 Adjustments to Operating Expenses 1,287 1,577 2,578 2,513 Other Merger related interest expense and exchange fees1 158 - 267 16 (Gain) loss on sale of assets, impairments and other adjustments (36) - 221 4 Adjustments to Income Before Income Taxes 1,409 1,577 3,066 2,533 Tax impact of adjustments 445 550 1,001 881 Adjustments to Net Income $ 964 $ 1,027 $ 2,065 $ 1,652 1 Includes interest expense incurred on the debt issued prior to the close of merger transactions.

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 Six Months Ended June 30, June 30, 2017 2016 2017 2016 Operating Income $ 7,323 $ 6,560 $ 14,187 $ 13,691 Adjustments to Operating Expenses 1,287 1,577 2,578 2,513 Adjusted Operating Income1 8,610 8,137 16,765 16,204 EBITDA 13,470 13,136 26,461 26,830 Adjustments to Operations and Support Expenses 117 261 206 (154) Adjusted EBITDA1 13,587 13,397 26,667 26,676 Total Operating Revenues 39,837 40,520 79,202 81,055 Service Revenues 36,538 37,142 72,994 74,243 Operating Income Margin 18.4% 16.2% 17.9% 16.9% Adjusted Operating Income Margin1 21.6% 20.1% 21.2% 20.0% Adjusted EBITDA Margin1 34.1% 33.1% 33.7% 32.9% Adjusted EBITDA Service Margin1 37.2% 36.1% 36.5% 35.9% 1 Adjusted Operating Income, Adjusted EBITDA and associated margins exclude all actuarial gains or losses ($259 million gain in the second quarter of 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 $106 million (based on an average expected return on plan assets of 5.75% for our VEBA trusts), rather than the actual return on plan assets of $234 million (actual annualized VEBA return of 12.2%), as included in the GAAP measure of income.

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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.

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Adjusting Items Dollars in millions Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Operating Expenses DIRECTV and other video merger integration costs $ 123 $ 133 $ 250 $ 306 Mexico merger integration costs 80 66 119 147 Time Warner merger costs 78 - 119 - Wireless merger integration costs - 33 - 75 Actuarial (gain) loss (259) - (259) - Employee separation costs 60 29 60 54 (Gain) loss on transfer of wireless spectrum (63) - (181) (736) Venezuela devaluation 98 - 98 - Adjustments to Operations and Support Expenses 117 261 206 (154) Amortization of intangible assets 1,170 1,316 2,372 2,667 Adjustments to Operating Expenses 1,287 1,577 2,578 2,513 Other Merger related interest expense and exchange fees1 158 - 267 16 (Gain) loss on sale of assets, impairments and other adjustments (36) - 221 4 Adjustments to Income Before Income Taxes 1,409 1,577 3,066 2,533 Tax impact of adjustments 445 550 1,001 881 Adjustments to Net Income $ 964 $ 1,027 $ 2,065 $ 1,652 1 Includes interest expense incurred on the debt issued prior to the close of merger transactions.

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 Six Months Ended June 30, June 30, 2017 2016 2017 2016 Operating Income $ 7,323 $ 6,560 $ 14,187 $ 13,691 Adjustments to Operating Expenses 1,287 1,577 2,578 2,513 Adjusted Operating Income1 8,610 8,137 16,765 16,204 EBITDA 13,470 13,136 26,461 26,830 Adjustments to Operations and Support Expenses 117 261 206 (154) Adjusted EBITDA1 13,587 13,397 26,667 26,676 Total Operating Revenues 39,837 40,520 79,202 81,055 Service Revenues 36,538 37,142 72,994 74,243 Operating Income Margin 18.4% 16.2% 17.9% 16.9% Adjusted Operating Income Margin1 21.6% 20.1% 21.2% 20.0% Adjusted EBITDA Margin1 34.1% 33.1% 33.7% 32.9% Adjusted EBITDA Service Margin1 37.2% 36.1% 36.5% 35.9% 1 Adjusted Operating Income, Adjusted EBITDA and associated margins exclude all actuarial gains or losses ($259 million gain in the second quarter of 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 $106 million (based on an average expected return on plan assets of 5.75% for our VEBA trusts), rather than the actual return on plan assets of $234 million (actual annualized VEBA return of 12.2%), as included in the GAAP measure of income.

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Adjusted Diluted EPS Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Diluted Earnings Per Share (EPS) $ 0.63 $ 0.55 $ 1.19 $ 1.17 Amortization of intangible assets 0.13 0.14 0.26 0.28 Merger integration and other items1 0.05 0.03 0.08 0.06 Asset abandonments, impairments and other adjustments - - 0.03 - Actuarial (gain) loss (0.03) - (0.03) - (Gain) loss on transfer of wireless spectrum (0.01) - (0.02) (0.08) Venezuela devaluation 0.02 - 0.02 - Adjusted EPS $ 0.79 $ 0.72 $ 1.53 $ 1.43 Year-over-year growth - Adjusted 9.7% 7.0% Weighted Average Common Shares Outstanding with Dilution (000,000)

6,184 6,195 6,185 6,193

1Includes combined merger integration items, merger-related interest expense.

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 YTD 2017 2017 2017 Adjusted EBITDA $ 13,080 $ 13,587 $ 26,667 Add back severance - (60) (60) Net Debt Adjusted EBITDA 13,080 13,527 26,607 Annualized Adjusted EBITDA 53,214 End-of-period current debt 10,831 End-of-period long-term debt 132,824 Total End-of-Period Debt 143,655 Less: Cash and Cash Equivalents 25,617 Net Debt Balance 118,038 Annualized Net Debt to Adjusted EBITDA Ratio 2.22

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Adjusted Diluted EPS Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Diluted Earnings Per Share (EPS) $ 0.63 $ 0.55 $ 1.19 $ 1.17 Amortization of intangible assets 0.13 0.14 0.26 0.28 Merger integration and other items1 0.05 0.03 0.08 0.06 Asset abandonments, impairments and other adjustments - - 0.03 - Actuarial (gain) loss (0.03) - (0.03) - (Gain) loss on transfer of wireless spectrum (0.01) - (0.02) (0.08) Venezuela devaluation 0.02 - 0.02 - Adjusted EPS $ 0.79 $ 0.72 $ 1.53 $ 1.43 Year-over-year growth - Adjusted 9.7% 7.0% Weighted Average Common Shares Outstanding with Dilution (000,000)

6,184 6,195 6,185 6,193

1Includes combined merger integration items, merger-related interest expense.

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 YTD 2017 2017 2017 Adjusted EBITDA $ 13,080 $ 13,587 $ 26,667 Add back severance - (60) (60) Net Debt Adjusted EBITDA 13,080 13,527 26,607 Annualized Adjusted EBITDA 53,214 End-of-period current debt 10,831 End-of-period long-term debt 132,824 Total End-of-Period Debt 143,655 Less: Cash and Cash Equivalents 25,617 Net Debt Balance 118,038 Annualized Net Debt to Adjusted EBITDA Ratio 2.22

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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

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.

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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 June 30, 2017 June 30, 2016

Consumer

Mobility Business

Solutions Adjustments1 AT&T

Mobility Consumer

Mobility Business

Solutions Adjustments1 AT&T Mobility Operating Revenues Wireless service $ 6,528 $ 8,006 $ - $ 14,534 $ 6,948 $ 7,963 $ - $ 14,911 Fixed strategic services - 3,028 (3,028) - - 2,805 (2,805) - Legacy voice and data services - 3,508 (3,508) - - 4,162 (4,162) - Other services and equipment - 844 (844) - - 874 (874) - Wireless equipment 1,263 1,721 - 2,984 1,238 1,775 - 3,013 Total Operating Revenues 7,791 17,107 (7,380) 17,518 8,186 17,579 (7,841) 17,924 Operating Expenses Operations and support 4,520 10,313 (4,636) 10,197 4,680 10,857 (5,036) 10,501 EBITDA 3,271 6,794 (2,744) 7,321 3,506 6,722 (2,805) 7,423 Depreciation and amortization 871 2,335 (1,214) 1,992 932 2,521 (1,372) 2,081 Total Operating Expenses 5,391 12,648 (5,850) 12,189 5,612 13,378 (6,408) 12,582 Operating Income $ 2,400 $ 4,459 $ (1,530) $ 5,329 $ 2,574 $ 4,201 $ (1,433) $ 5,342 1 Non-wireless (fixed) operations reported in Business Solutions segment.

Supplemental Operational Measure

Six Months Ended June 30, 2017 June 30, 2016

Consumer

Mobility Business


Mobility Consumer

Mobility Business

Solutions Adjustments1 AT&T Mobility Operating Revenues Wireless service $ 13,137 $ 15,935 $ - $ 29,072 $ 13,891 $ 15,818 $ - $ 29,709 Fixed strategic services - 6,002 (6,002) - - 5,556 (5,556) - Legacy voice and data services - 7,138 (7,138) - - 8,535 (8,535) - Other services and equipment - 1,661 (1,661) - - 1,733 (1,733) - Wireless equipment 2,394 3,219 - 5,613 2,623 3,546 - 6,169 Total Operating Revenues 15,531 33,955 (14,801) 34,685 16,514 35,188 (15,824) 35,878 Operating Expenses Operations and support 9,048 20,489 (9,342) 20,195 9,592 21,659 (10,126) 21,125 EBITDA 6,483 13,466 (5,459) 14,490 6,922 13,529 (5,698) 14,753 Depreciation and amortization 1,744 4,647 (2,402) 3,989 1,854 5,029 (2,746) 4,137 Total Operating Expenses 10,792 25,136 (11,744) 24,184 11,446 26,688 (12,872) 25,262 Operating Income $ 4,739 $ 8,819 $ (3,057) $ 10,501 $ 5,068 $ 8,500 $ (2,952) $ 10,616 1 Non-wireless (fixed) operations reported in Business Solutions segment.

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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 June 30, 2017 June 30, 2016

Consumer

Mobility Business


Mobility Consumer

Mobility Business

Solutions Adjustments1 AT&T Mobility Operating Revenues Wireless service $ 6,528 $ 8,006 $ - $ 14,534 $ 6,948 $ 7,963 $ - $ 14,911 Fixed strategic services - 3,028 (3,028) - - 2,805 (2,805) - Legacy voice and data services - 3,508 (3,508) - - 4,162 (4,162) - Other services and equipment - 844 (844) - - 874 (874) - Wireless equipment 1,263 1,721 - 2,984 1,238 1,775 - 3,013 Total Operating Revenues 7,791 17,107 (7,380) 17,518 8,186 17,579 (7,841) 17,924 Operating Expenses Operations and support 4,520 10,313 (4,636) 10,197 4,680 10,857 (5,036) 10,501 EBITDA 3,271 6,794 (2,744) 7,321 3,506 6,722 (2,805) 7,423 Depreciation and amortization 871 2,335 (1,214) 1,992 932 2,521 (1,372) 2,081 Total Operating Expenses 5,391 12,648 (5,850) 12,189 5,612 13,378 (6,408) 12,582 Operating Income $ 2,400 $ 4,459 $ (1,530) $ 5,329 $ 2,574 $ 4,201 $ (1,433) $ 5,342 1 Non-wireless (fixed) operations reported in Business Solutions segment.

Supplemental Operational Measure

Six Months Ended June 30, 2017 June 30, 2016

Consumer

Mobility Business


Mobility Consumer

Mobility Business

Solutions Adjustments1 AT&T Mobility Operating Revenues Wireless service $ 13,137 $ 15,935 $ - $ 29,072 $ 13,891 $ 15,818 $ - $ 29,709 Fixed strategic services - 6,002 (6,002) - - 5,556 (5,556) - Legacy voice and data services - 7,138 (7,138) - - 8,535 (8,535) - Other services and equipment - 1,661 (1,661) - - 1,733 (1,733) - Wireless equipment 2,394 3,219 - 5,613 2,623 3,546 - 6,169 Total Operating Revenues 15,531 33,955 (14,801) 34,685 16,514 35,188 (15,824) 35,878 Operating Expenses Operations and support 9,048 20,489 (9,342) 20,195 9,592 21,659 (10,126) 21,125 EBITDA 6,483 13,466 (5,459) 14,490 6,922 13,529 (5,698) 14,753 Depreciation and amortization 1,744 4,647 (2,402) 3,989 1,854 5,029 (2,746) 4,137 Total Operating Expenses 10,792 25,136 (11,744) 24,184 11,446 26,688 (12,872) 25,262 Operating Income $ 4,739 $ 8,819 $ (3,057) $ 10,501 $ 5,068 $ 8,500 $ (2,952) $ 10,616 1 Non-wireless (fixed) operations reported in Business Solutions segment.

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35

Investor Briefing

CONTENTS


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

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

Supplemental International Three Months Ended June 30, 2017 June 30, 2016 Latin America Mexico International Latin America Mexico International Operating Revenues Video service $ 1,361 $ - $ 1,361 $ 1,222 $ - $ 1,222 Wireless service - 535 535 - 489 489 Wireless equipment - 130 130 - 117 117 Total Operating Revenues 1,361 665 2,026 1,222 606 1,828 Operating Expenses Operations and support 998 774 1,772 978 745 1,723 Depreciation and amortization 222 89 311 212 86 298 Total Operating Expenses 1,220 863 2,083 1,190 831 2,021 Operating Income 141 (198) (57) 32 (225) (193) Equity in Net Income of Affiliates 25 - 25 9 - 9 Segment Contribution $ 166 $ (198) $ (32) $ 41 $ (225) $ (184)


Six Months Ended June 30, 2017 June 30, 2016 Latin America Mexico International Latin America Mexico International Operating Revenues Video service $ 2,702 $ - $ 2,702 $ 2,352 $ - $ 2,352 Wireless service - 1,010 1,010 - 944 944 Wireless equipment - 243 243 - 199 199 Total Operating Revenues 2,702 1,253 3,955 2,352 1,143 3,495 Operating Expenses Operations and support 2,048 1,483 3,531 1,859 1,452 3,311 Depreciation and amortization 436 165 601 408 167 575 Total Operating Expenses 2,484 1,648 4,132 2,267 1,619 3,886 Operating Income 218 (395) (177) 85 (476) (391) Equity in Net Income of Affiliates 45 - 45 23 - 23 Segment Contribution $ 263 $ (395) $ (132) $ 108 $ (476) $ (368)

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

Supplemental International Three Months Ended June 30, 2017 June 30, 2016 Latin America Mexico International Latin America Mexico International Operating Revenues Video service $ 1,361 $ - $ 1,361 $ 1,222 $ - $ 1,222 Wireless service - 535 535 - 489 489 Wireless equipment - 130 130 - 117 117 Total Operating Revenues 1,361 665 2,026 1,222 606 1,828 Operating Expenses Operations and support 998 774 1,772 978 745 1,723 Depreciation and amortization 222 89 311 212 86 298 Total Operating Expenses 1,220 863 2,083 1,190 831 2,021 Operating Income 141 (198) (57) 32 (225) (193) Equity in Net Income of Affiliates 25 - 25 9 - 9 Segment Contribution $ 166 $ (198) $ (32) $ 41 $ (225) $ (184)


Six Months Ended June 30, 2017 June 30, 2016 Latin America Mexico International Latin America Mexico International Operating Revenues Video service $ 2,702 $ - $ 2,702 $ 2,352 $ - $ 2,352 Wireless service - 1,010 1,010 - 944 944 Wireless equipment - 243 243 - 199 199 Total Operating Revenues 2,702 1,253 3,955 2,352 1,143 3,495 Operating Expenses Operations and support 2,048 1,483 3,531 1,859 1,452 3,311 Depreciation and amortization 436 165 601 408 167 575 Total Operating Expenses 2,484 1,648 4,132 2,267 1,619 3,886 Operating Income 218 (395) (177) 85 (476) (391) Equity in Net Income of Affiliates 45 - 45 23 - 23 Segment Contribution $ 263 $ (395) $ (132) $ 108 $ (476) $ (368)

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