stabilize entertainment group ebitdaexpand targeted advertising, data analytics beginning to...

Q1 2019 AT&T EARNINGS

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companies. All other marks are the property of their respective owners.

1st Quarter Earnings

AT&T Investor Update

April 24, 2019



Information set forth in this presentation 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 presentation based on new information or otherwise.

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

The “quiet period” for FCC Spectrum Auctions 101/102 (28Ghz and 24Ghz) is in effect. During the quiet period, auction applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants.

Important additional Information:

AT&T has filed a Form 8-K reporting the quarterly results for the first quarter of 2019. The 8-K must be read in conjunction with this presentation and contains additional important details on the quarterly results.

Cautionary Language Concerning Forward-Looking Statements

2


companies. All other marks are the property of their respective owners.3

Deliver on merger plan, advance video strategy1Q performance strong, WM organizing for future, SVOD beta in 4Q

Grow wireless service revenuesUp 2.9% in 1Q, with continued postpaid and prepaid phone growth

Expand targeted advertising, data analyticsBeginning to optimize Turner inventory

De-lever through strong free cash flow, non-core asset sales$5.9B 1Q FCF, Hulu, Hudson Yards, working other opportunities

Stabilize Entertainment Group EBITDAUp 6.9% in 1Q, driven by broadband revenue

Lead in network through FirstNet, 5G and fiber investmentsNation’s fastest1 and also the best2 wireless network; 5G ramping

1Q Update:

2019 Initiatives

1 Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for Q1 2019. 2 Based on Global Wireless Solutions (GWS)® “Best Network OneScore” awarded to AT&T for overall national wireless network performance in 2018.






1Q19 Results



$0.85 $0.86

19.7% 21.4%

1Q19 Financial Summary

ADJUSTED EPSAdj. OI Margin

1Q19 Highlights

1Q18 1Q19

Reported EPS $0.75 $0.56

Adjustments:

• Actuarial (gain) loss on benefit plans ($0.12) $0.05

• Amortization of intangibles $0.13 $0.21

• Merger integration items $0.06 $0.01

• Other adjustments1 $0.03 $0.03

Adjusted EPS $0.85 $0.86

1Q191Q18

Adjusted EPS of $0.86, up 1.2%Includes $0.03 impact from WarnerMedia

Includes $(0.04) impact from accounting changes

$44.8 billion in consolidated revenues Up $6.8 billion, or 18%

Includes ~$7.5 billion from WarnerMedia, net of eliminations

Adjusted operating income margin of 21.4%Up 170bps, with strength in Mobility, WarnerMediaand improvement in Entertainment Group

1 1Q19 includes $0.04 of employee separation costs and ($0.02) of tax-related items.

REVENUES

$38.0

$44.8

1Q191Q18

5

$ in billions, except EPS



Cash Flow and Capital Detail$ in billions, except EPS

CapexFree Cash Flow

Cash from Operations Cash from operations of $11.1 billion, up 24%

Reflects addition of WarnerMedia

Free cash flow of $5.9 billion; $25.4 billion trailing 12 months

Capex totaled $5.2 billion

Capital Investment totaled $6.0 billion, which includes cash payments for vendor financing of $0.8 billion

Net Debt reduced by $2.3 billion in the quarter

$5.9 billion Free cash flow

- $0.8 billion Cash payments for vendor financing

+ $0.9 billion Other items, primarily collateral return initiative

- $3.7 billion Net dividend payments

$2.3 billion 1Q de-levering

$8.9

$11.1

1Q18 1Q19

$2.8$5.9

$6.1

$5.2

Annualized Free Cash Flow

$5.1

$6.5

$7.9

$5.9

$25.4

1Q194Q183Q182Q18 TTM

Trailing 12 months (TTM)



$ in billions

Mobility momentum, Entertainment stabilization

Revenues stable; up slightly excluding wireless equipment

Growth in Mobility offset by video and legacy revenues

Entertainment Group revenue trends significantly improved

EBITDA growth in Mobility and Entertainment offsets Business Wireline pressure

EBITDA margin up 20 bps, even with accounting headwinds

$6.7 $6.5

7

1Q19 Communications SegmentEBITDA MARGINREVENUES

EBITDA

Mobility Business Wireline

1Q18 1Q19

$35.5 $35.4

35.5% 35.7%

$12.6 $12.6

1Q18 1Q19

$17.4 $17.6

41.8% 42.0%

$7.3 $7.4

Entertainment Group

1Q18 1Q19

$11.4 $11.3

22.9% 24.7%

$2.6 $2.8

1Q18 1Q19

40.5% 37.8%

$2.7 $2.5



$ in billions

8

1Q19 Communications Segment – Mobility

Continued service revenue and EBITDA growth

Wireless service revenues up 2.9%; equipment revenue impacted by record-low upgrades

EBITDA growth even with accounting headwinds; EBITDA service margin of 53.6%

179,000 postpaid smartphone net adds

80,000 postpaid phone net adds

Solid 0.93% postpaid phone churn

96,000 prepaid net adds; 85,000 phones

Record-low 1Q churn

$13.4 $14.0

-1.7%

2.9%

ServiceEquipment

1Q PostpaidSmartphone Net AddsService Revenue Growth*

1Q18 1Q19

$17.4 $17.6

$4.0 $3.8

$13.7 $13.9 $13.8

1Q18 2Q18 3Q18 4Q18 1Q19

0.2%

2.3%2.9%

* 2018 growth rates presented on a comparable basis, to exclude the impact of ASC 606.

(216)

42

(354)

179

1Q17 1Q18 1Q19

(60)

80

Postpaid Phone Net Adds

Mobility

1Q18 1Q19

41.8% 42.0%

$7.3 $7.4$13.4 $13.8

EBITDA MarginEBITDAREVENUES

Network Leadership

FirstNet deployment > halfway done; 60% is next payment milestone

Nation’s Best Network, per GWS

Nation’s Fastest Network, per Ookla

5G now in parts of 19 cities



Video subscribers:

22.4 million premium TV subs; 544,000 net losses in the quarter

1.5 million OTT subs; 83,000 net losses in the quarter, sequential improvement

Broadband net adds of 45,000 with 297,000 AT&T Fiber net adds

Entertainment Group

Premium Video

-3.0%

-5.2% -4.7%-1.5%

2.2%

-7.1%

-0.8%

3.7%6.2%

8.3%

$ in billions

$(547) $(454)

9

1Q19 Communications Segment – Entertainment Group

$(498) $(370)

$181

1Q18 2Q18 3Q18 4Q18 1Q191 2018 is shown on a comparable basis, to exclude the impact of ASC 606.

$ in millions IPBB

VideoHS Internet

1Q18 1Q19

$11.4 $11.3

$1.9 $2.1

1Q18 1Q19

22.9% 24.7%

$2.6 $2.8

$8.2 $8.1

Legacy/Other

226300249 259

1Q18 2Q18 3Q18 4Q18 1Q19

297

Net Adds

2.0M 2.2M2.5M

2.8M3.1M

Passed 8.1M 9.0M 10.1M 11.2M 12.4M1Q18 2Q18 3Q18 4Q18 1Q19

EBITDA MarginEBITDAREVENUES

EBITDA grew as Entertainment Group focuses on long-term value of customer base

Broadband revenues grow; video revenues continue to improve

Cash operating expenses down 3.2%

YOY EBITDA Change1 ARPU Growth1 AT&T Fiber Subscribers



$ in billions

1Q18 1Q19

REVENUES OI MARGIN

$8.1 $8.4

24.8% 26.8%

TurnerWarner Bros.

* Results reflect the combination of historic Time Warner Inc. adjusted results and AT&T’s RSNs (reported in the Turner division). Otter Media financials included in WarnerMedia results after the 8/7/18 acquisition of the controlling interest. Prior to this date, Otter Media was included as an equity-method investment.

HBO

1Q19* WarnerMedia Segment

10

OP INCOME

$2.0 $2.2

$3.2 $3.5

11.8% 15.5%

1Q18 1Q19+$164M

Op. Income

$1.6 $1.5

33.0%37.5%

1Q18 1Q19

+$32M

Op. Income

$3.5 $3.4

33.7% 36.2%

1Q18 1Q19

+$82M

Op. Income

Strong start to year, with revenue up 3.3% and 11.6% operating income growth on a pro forma basis

Delivering on merger promise of EPS and cash flow accretion; solid expense management

Warner Bros. continues strong performance in theatrical and television

HBO grows operating income despite carriage dispute

Record viewership driven by Game of Thrones’ April premiere

Turner delivers solid operating income growth

Subscription revenues grow; ad revenues decline primarily due to shift of NCAA Final Four games



Latin America revenues impacted by FX

Mexico down 3%

• Service revenue up 9%; equipment down 22%

Vrio down 21%

EBITDA down $94 million

Mexico improved by $58 million YOY

Vrio down $152 million, primarily due to FX

93,000 wireless subscriber net adds in Mexico

Revenues up 26%

Largely driven by AppNexus

EBITDA margin of 62%, reflecting AppNexus acquisition

Includes investment in new product development

Applying Xandr data and analytics to Turner inventory

11

1Q19 Xandr and Latin America Segment Results

Latin America



Leverage update

1 Net debt to Adj. EBITDA ratio; illustrative of approximately $60B Adj. EBITDA.

At Merger Close 1Q19 YE 2019

$180B$169B

~$150B

~75% of $40B TWX acquisition debt on target to be paid off by year-end

2019 Net Debt Reduction Target = ~$20 Billion

2019 Plan

Free Cash Flow ~$26B

Less: Dividends ~($14B)

FCF after Dividends ~$12B

Asset Monetization ~$6 - $8B

Total Cash Generation ~$20B

1Q De-levering ~$2.3B

Subsequent asset sales ~$4B

Cash Generation to date ~$6B

2Q-4Q FCF after dividends ~$10B

Other cash initiatives ~$3 - $5B

Total Cash Generation ~$20B

2019 Results and Forecast

3.0x1

2.8x1

~2.5x1

Hulu (completed)

Hudson Yards

Additional asset sales

Working capital initiatives

Other

NET DEBT




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