ContentsCONTENTS Q1 2017 AT&T EARNINGS 3 Investor Briefing AT&T Reports First-Quarter Results Updates Guidance Following FirstNet Award ǋ Consolidated revenues of $39.4 billion ǋ

Investor Briefing

No. 296 | APRIL 25, 2017

2017 AT&T EARNINGSQ1

Contents

Investor Briefing


Consolidated Results 3

Business Solutions 5

Entertainment Group 7

Consumer Mobility 9

International 10

AT&T Mobility 12

Highlights 15

Financial & Operational Information 18

Discussion and Reconciliation of Non-GAAP Measures 34

CONTENTS


3

Investor Briefing

AT&T Reports First-Quarter ResultsUpdates Guidance Following FirstNet Award

ǋ Consolidated revenues of $39.4 billion

ǋ Operating income of $6.9 billion

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

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

ǋ Cash from operations of $9.2 billion

ǋ Free cash flow of $3.2 billion

Consolidated Results

HIGHLIGHTS: ǋ 2.7 million wireless net adds

2.1 million U.S., driven by prepaid and connected devices

633,000 Mexico

ǋ U.S. wireless first-quarter results:

Best-ever first-quarter postpaid phone churn of 0.90%

Wireless postpaid churn of 1.12%, including pressure from tablets

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

ǋ Entertainment Group first-quarter results:

Strong broadband gains with 242,000 IP broadband net adds; 115,000 total broadband net adds

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

DIRECTV NOW gains help offset linear TV subscriber decline

CONTENTS


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

UPDATED 2017 OUTLOOK

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

ǋ Adjusted EPS growth in the mid-single digit range

ǋ Adjusted operating margin expansion

ǋ Capital expenditures in the $22 billion range

ǋ Free cash flow in the $18 billion range

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

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

4

Investor BriefingConsolidated Results

CONSOLIDATED FINANCIAL RESULTS

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

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

v

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

Free Cash Flow Capital Expenditures

$3.2

$6.0

1Q17

$9.2

$3.2$4.8 $5.2 $3.7

$4.7

$5.5 $5.8 $6.5

1Q16

$7.9

2Q16

$10.3

3Q16

$11.0

4Q16

$10.1

Adjusted Earnings Per Share

REPORTED:

1Q17

$0.56

1Q16

$0.72

2Q16

$0.72

3Q16

$0.74

4Q16

$0.66

$0.61 $0.55 $0.54 $0.39

$0.74

Consolidated RevenuesI N B I L L I O N S

1Q17

$39.4$41.8

1Q16

$40.5

2Q16

$40.5

3Q16

$40.9

4Q16


BUSINESS WIRELESS FINANCIAL RESULTS

Business wireless revenues were down 2.1% year over year to $9.4 billion due to lower equipment revenues from lower sales.

ǋ Wireless service revenues were up 0.9% year over year, reflecting smartphone and tablet gains and 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. Declines in business fixed investment and technology transitions also impacted results. Total business wireline revenues were $7.4 billion, down 7.0% year over year.

ǋ When adjusting for the transition of certain hosting operations and foreign exchange pressures, wireline revenues would have decreased 6.0%.

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 first-quarter revenues from business customers were $16.8 billion, down 4.3% versus the year-earlier quarter due to declines in legacy wireline services and fewer wireless equipment upgrades.

ǋ Growth in wireless service revenues and strategic business services helped offset declines in legacy wireline services and equipment sales and the second-quarter 2016 sale of certain hosting operations.

ǋ First-quarter operating expenses were $12.5 billion, down 6.2% versus the first quarter of 2016. Operating income totaled $4.4 billion, up 1.4% year over year.

ǋ First-quarter operating income margin was 25.9%, up 150 basis points year over year with growth in wireless and IP revenues and cost efficiencies offsetting declines in higher-margin legacy services.

Investor Briefing

CONTENTS

Business Solutions


$16.8

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

Revenues EBITDA EBITDA Margin

$6.7

39.6%

1Q17

$6.8 $6.7 $6.8 $6.3

38.7% 38.2% 38.5%34.9%

1Q16

$17.6

2Q16

$17.6

3Q16

$17.8

4Q16

$18.0

$2.8 $2.8

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

Strategic Services Revenues % of Business Wireline Revenues

40.1%

1Q17

$3.0

1Q16 2Q16 3Q16 4Q16

34.5%

35.8%37.1%

$2.9

38.5%

$3.0

6

Investor BriefingBusiness Solutions

CONTENTS


ǋ Strategic business services, the next-generation 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 strong performance. Revenues grew by $223 million, or 8.1%, versus the year-earlier quarter. These services represent 40% of total business wireline revenues and an annualized revenue stream of nearly $12 billion. Growth in strategic business services helped offset a decline of $743 million in legacy services in the quarter.

SUBSCRIBER METRICS

At the end of the first quarter, AT&T had more than 82 million business wireless subscribers.

ǋ Business Solutions lost 125,000 postpaid subscribers, mostly due to tablet losses, and added 2.6 million connected devices in the first quarter. This was the highest-ever increase in connected devices. Postpaid business wireless subscriber churn was 1.07% versus 1.02% in the year-ago quarter.

ǋ During the quarter, the company also added 4,000 high-speed IP broadband business subscribers. Total business broadband had a loss of 25,000 subscribers.

Business Solutions

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

SubscribersNet Adds

2.6

1Q17

31.4

1Q16 2Q16 3Q16 4Q16

1.6 1.2 1.3 1.3

26.9 28.1 29.4 30.6



Total revenues were $12.6 billion, generally flat versus the year-earlier quarter.

ǋ Total video revenues were up 1.3% with satellite gains more than offsetting declines in IPTV.

AdWorks continues to show strong gains with revenues up 6.3%.

ǋ Broadband revenues were up nearly 3% in the quarter with IP broadband growing by 7.7%.

First-quarter operating expenses were $11.0 billion, down slightly from a year ago as cost synergies partially offset annual content-cost increases and the impact from storms.

ǋ Operating income totaled $1.6 billion, up slightly from the year-ago quarter.

ǋ First-quarter operating income margin was 12.7%, up from 12.6% in the year-earlier quarter.

7

ǋ Entertainment Group EBITDA margin was 23.9%, compared to 24.3% in the first quarter of 2016, with video and IP broadband revenue growth and cost efficiencies mostly offsetting TV content-cost pressure, declines in legacy services and the impact of storms on the West Coast in the first quarter.

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

$1.7

$1.9

1Q17

$12.6

$8.9 $9.0 $9.0 $9.6

$2.0

$1.8

$1.9

$1.9

$1.8

$1.9

$1.7

1Q16

$12.7

2Q16

$12.7

3Q16

$12.7

4Q16

$13.2

$1.9

$3.0

23.9%

$12.6

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

Revenues EBITDA EBITDA Margin

1Q17

$3.1 $3.0 $2.7

24.7%23.5%

20.8%

1Q16

$3.1

24.3%

$12.7

2Q16

$12.7

3Q16

$12.7

4Q16

$13.2

CONTENTS


8

Investor BriefingEntertainment Group

Entertainment Group had its strongest broadband subscriber growth in 4 years.

ǋ The Entertainment Group had a net gain of 242,000 IP broadband subscribers in the first quarter with DSL losses of 127,000, for total broadband subscriber growth of 115,000. IP broadband subscribers at the end of the quarter totaled 13.1 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 broadband speeds of 18 megabits or faster has increased by 1.4 million in the past year.

ǋ At the same time, the company continues its fiber deployment. The company now markets AT&T Fiber to 4.6 million customer locations with expectations to add 2 million customer locations in 2017.

SUBSCRIBER METRICS

Total linear video subscribers were down in the quarter; however, DIRECTV NOW subscribers continued to increase.

ǋ There was no change in the number of satellite subscribers in the first quarter. IPTV subscribers declined by 233,000 as the company continued to focus on profitability. About 84% of the linear video base is now on the satellite platform.

ǋ DIRECTV NOW subscribers continued to increase.

ǋ The Entertainment Group ended the quarter with 25.0 million total linear video subscribers.

Total Video Subscribers*I N M I L L I O N S

DIRECTVU-verse

*Excludes DIRECTV NOW subscribers

4.0

21.0

1Q17

25.0

5.2 4.8 4.5 4.3

20.1 20.5 20.8 21.0

1Q16

25.3

2Q16

25.3

3Q16

25.3

4Q16

25.3

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

1Q17

13.1

1Q16 2Q16 3Q16 4Q16

12.5 12.612.8 12.9

Video Net Adds*I N T H O U S A N D S

DIRECTV U-verse

*Excludes DIRECTV NOW subscribers

233

0

1Q17

382 391 326 262

328 342 323235

1Q16 2Q16 3Q16 4Q16

2017 AT&T EARNINGSQ1 2016 AT&T EARNINGSQ4

48.6%, down from 49.2% in the year-ago quarter. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

SUBSCRIBER METRICS

At the end of the first quarter, AT&T had 51.9 million Consumer Mobility subscribers.

ǋ In the quarter, Consumer Mobility lost 353,000 total subscribers with 282,000 prepaid and 19,000 connected device net adds partially offsetting a loss of 66,000 postpaid and 588,000 reseller subscribers.

ǋ Consumer Mobility postpaid churn was 1.22%, compared to 1.24% in the year-ago quarter.Consumer postpaid phone churn was 0.98% versus 1.11% in the year-ago quarter.


Total revenues from Consumer Mobility customers totaled $7.7 billion, down 7.1% versus the year-earlier quarter, reflecting fewer phone sales and upgrades and lower postpaid service revenues mostly due to migrations to business plans.

ǋ First-quarter operating expenses were $5.4 billion, down 7.4% versus the first quarter of 2016, reflecting lower equipment and commission costs as well as increased operational efficiencies.

ǋ AT&T’s Consumer Mobility operating income totaled $2.3 billion, down 6.2% versus the first quarter of 2016. First-quarter operating income margin was 30.2%, up from the year-earlier quarter with lower volumes, fewer subsidized sales and increased cost efficiencies offsetting service-revenue pressure.

ǋ Consumer Mobility EBITDA margin was 41.5%, compared to 41.0% in the first quarter of 2016. (EBITDA margin is operating income before depreciation and amortization, divided by total wireless revenues.) EBITDA service margin was

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


Service EBITDA Margin

1Q17

48.6%

1Q16

49.2%

2Q16

50.5%

3Q16

50.9%

4Q16

46.1%

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

1Q17

282

1Q16

500

2Q16

365

3Q16

304

4Q16

406


10

Total International revenues totaled $1.9 billion, up from $1.7 billion in the year-ago quarter. First-quarter operating expenses were $2.0 billion. AT&T’s International operating loss totaled $120 million, compared to ($198 million) in the year-ago first quarter and ($268 million) sequentially. First-quarter operating income margin was (6.2)%.

MEXICO

AT&T owns and operates a wireless network in Mexico. AT&T covered about 85 million people in Mexico with 4G LTE at the end of the first quarter and expects to cover 100 million POPs by the end of 2018. First-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 $588 million, up 9.5% versus the year-earlier quarter, largely due to subscriber growth which was partially offset by competitive pressures and foreign exchange.

ǋ First-quarter operating loss was $197 million compared to a loss of $251 million in the year-ago quarter, reflecting continued investment in operations, network and subscriber acquisitions.

ǋ In the quarter, AT&T added 130,000 postpaid subscribers and 517,000 prepaid subscribers to reach 12.6 million total wireless subscribers in Mexico, a 37% 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

$0.6

1Q17

$1.9

$1.1

$0.5

$1.2

$0.6

$1.3

$0.6

$1.3

$0.6

1Q16

$1.7

2Q16

$1.8

3Q16

$1.9

4Q16

$1.9

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

Postpaid Prepaid Other

7.2

5.1

1Q17

12.6

1Q16 2Q16 3Q16 4Q16

4.45.1 5.7

6.7

4.4 4.6 4.7 5.0

9.210.0

12.00.3

0.40.3

10.7

0.30.3

11

Investor Briefing

DIRECTV LATIN AMERICA

DIRECTV Latin America revenues reflect macroeconomic pressure with mixed local currencies. Total revenues from Latin America were $1.3 billion, up 18.7%. In constant currency, total revenues were up 12.4%. Operating income was $77 million with continued positive free cash flow.

ǋ During the quarter, DIRECTV Latin America updated its methodology for counting prepaid subscribers to align with other AT&T prepaid business policies. This change increased the total number of DIRECTV Latin America subscribers by 1.1 million. The change did not impact revenues, expenses or cash flows of the business. First-quarter subscriber net adds were 91,000. Total subscribers at the end of the quarter were 13.7 million. Sky Mexico had approximately 8.0 million subscribers as of December 31, 2016.

International

CONTENTS



12


Wireless revenues reflected lower service revenues from the continued adoption of unlimited and Mobile Share plans and lower equipment revenues from 1 million fewer postpaid gross adds and upgrades than in the year-ago first quarter.

ǋ Total wireless revenues were $17.2 billion, down 4.4% year over year, due to decreases in service and equipment revenues. Wireless service revenues of $14.5 billion were down 1.8% year over year, with pressure from adoption of Mobile Share and unlimited plans, partially offset by continued growth in branded smartphones and tablets. Wireless equipment revenues decreased 16.7% to $2.6 billion reflecting a record-low upgrade rate in the quarter as customers hold onto their devices longer.

ǋ First-quarter wireless operating expenses totaled $12.0 billion, down 5.4% year over year, reflecting operating efficiencies and lower sales volumes. Wireless operating income was $5.2 billion, down 1.9% year over year.

ǋ Wireless margins reflect adoption of AT&T NextSM, fewer smartphone upgrades and continued efforts to drive operating costs out of the business. AT&T’s first-quarter wireless operating income margin was 30.1%, a 70 basis point improvement from the year-earlier quarter and the best-ever first-quarter operating income margin.

ǋ Wireless EBITDA margin was its highest ever at 41.8%, compared to 40.8% in the first quarter of 2016. Wireless EBITDA service margin was 49.3%, compared to 49.5% in the year-ago quarter.

ARPU

The migration to non-subsidized plans and customers choosing to hold onto their devices longer is reflected in postpaid service ARPU (average revenues per user).

ǋ Phone-only postpaid ARPU decreased 2.4% versus the year-earlier quarter and phone-only postpaid ARPU with AT&T Next monthly billings decreased 1.0% year over year as customers continue holding onto their devices after completing 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

49.3%

1Q17

$17.2

$7.3 $7.4 $7.5 $6.7

49.5% 49.8% 50.1%45.4%

1Q16

$18.0

2Q16

$17.9

3Q16

$18.2

4Q16

$18.8

Phone-only Postpaid + EIP ARPU

Phone-only Postpaid ARPU EIP Billings

1Q17

$58.09

$68.81

$10.72

$59.53

$10.01

$59.80

$10.17

$59.64

$10.35

$58.84

1Q16

$69.54

2Q16

$69.97

3Q16

$69.99

4Q16

$69.54

$10.70

CONTENTS


ǋ AT&T shut down its 2G network in early January. At the time of the shutdown, the company had 2.3 million 2G subscribers. This included 1.8 million connected devices, 339,000 reseller, 85,000 postpaid and 66,000 prepaid. These 2G subscribers were removed from the beginning-of-year 2017 subscriber count.

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 2.1 million from prepaid. The postpaid upgrade rate in the quarter was a record low 3.9%.

ǋ Sales on AT&T Next were 3.5 million, or 82% of all postpaid smartphone gross adds and upgrades. The company also had 416,000 BYOD gross adds. That means about 92% 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 more than 85% of postpaid smartphone subscribers on no-device-subsidy plans.

ǋ At the end of the quarter, 91%, or 59.0 million, of AT&T’s postpaid phone subscribers had smartphones. Smartphones accounted for 96% of postpaid phone sales during the quarter.

SUBSCRIBER METRICS

In the first quarter, AT&T posted a net increase in total wireless subscribers of 2.1 million to reach 134.2 million in service.

ǋ The company had a net loss of 191,000 postpaid subscribers and added 282,000 prepaid phone subscribers with gains in Cricket and GoPhone. AT&T also added a record 2.6 million connected devices in the quarter. The company lost 582,000 reseller subscribers in the quarter. Postpaid tablet and computing device net adds were 105,000 with a loss of 348,000 postpaid phone subscribers.

ǋ The company had 91,000 branded net adds (both postpaid and prepaid) in the quarter, including a gain of 86,000 branded smartphones. Nearly 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

10.613.8

77.3

1Q17

134.2

13.4

27.8

77.3

29.0

12.9

30.3

12.6

31.6

11.9

77.1

12.2 12.6 13.0

77.4

13.5

77.8

1Q16

130.4

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

129

500

257

365

212

304520

406

1Q16

629

2Q16

622

3Q16

516

4Q16

926

Branded Phone Subscribers &Postpaid Upgrade Rate

Postpaid Feature Phone & Other

PrepaidPhones

Postpaid Upgrade Rate

Postpaid Smartphone

1Q17

59.0

5.813.8

78.6

3.9%

58.3 58.5 58.7 59.1

7.7

12.2

7.2

12.6

6.7

13.06.1

13.5

1Q16

78.1

2Q16

78.3

3Q16

78.4

4Q16

78.7

5.0% 4.6% 5.1%6.3%

CONTENTS


14

Investor Briefing

CHURN

Improvements in postpaid phone, prepaid and connected device churn offset higher reseller and postpaid churn.

ǋ Postpaid churn was 1.12%, compared to 1.10% in the year-ago quarter. Postpaid phone churn was 0.90%, compared to 0.96% in the year-ago quarter, and was the best-ever for a first quarter. Branded churn was 1.71%, compared to 1.63% in the year-ago quarter. Total churn was 1.46%, up from 1.42% in the year-ago, largely due to pressure from reseller.

DATA PLANS

During the quarter, AT&T announced new Unlimited Plus and Unlimited Choice plans. The company saw a strong customer response to these plans and special unlimited wireless with video bundling offers.

ǋ With the introduction of new unlimited plans, there are now 12.3 million subscribers on those plans compared with 7.9 million postpaid subscribers at the end of the fourth quarter.

ǋ Mobile Share connections were 53.6 million with an average of about 3 devices per account.

AT&T Mobility

1.12%

Postpaid Churn

Postpaid Churn Postpaid Phone Churn

0.90%

1Q17

0.96%0.84% 0.90%

0.98%

1Q16

1.10%

2Q16

0.97%

3Q16

1.05%

4Q16

1.16%


15

In recent weeks, AT&T:

WIRELESS

ǋ Introduced new unlimited plans for AT&T wireless and AT&T GoPhone customers, even those without AT&T video service. Customers on the AT&T Unlimited Plus wireless plan get additional entertainment benefits like a $25 video credit and HBO included.

ǋ Ranked “Highest in Wireless Purchase Experience Among Full-Service Wireless Providers” in the J.D. Power 2017 U.S. Wireless Purchase Experience Performance Study, Volume 1, sweeping all six categories evaluated for the award for the first time. This was the 8th time in a row the company has received this award.¹

ǋ Ranked “Highest in Wireless Customer Service Among Full-Service Wireless Providers” in the J.D. Power 2017 U.S. Wireless Customer Care Performance Study, Volume 1. The company has taken the top honor in 5 of the last 8 studies.¹

ǋ Delivered the company’s 5G Evolution in select areas of Austin, with faster wireless speeds available to customers using the Samsung Galaxy S8 or S8+. AT&T plans to roll out 5G Evolution in Indianapolis this summer, with some other markets coming later this year.

ǋ Launched AT&T International Day Pass allowing AT&T Mobility customers to stay connected for a low daily rate ($10/day per device for any 24-hour period) by taking their domestic plans with them when traveling in over 100 countries.

ENTERTAINMENT

ǋ Strengthened the value of its ‘Go Big’ and ‘Gotta Have It’ DIRECTV NOW packages with a first-quarter promotion that included HBO at no additional cost, while also introducing a Starz add-on for only $8/month for all DIRECTV NOW customers.

ǋ Presented DIRECTV NOW Super Saturday Night with Taylor Swift. Swift brought her stadium-style performance to a crowd of 9,000 in a custom-built venue in Houston.

ǋ Expanded the company’s 100% fiber network powered by AT&T Fiber, which is now in parts of 52 metros with plans to reach at least 23 more metros, across the 21 states where AT&T offers home internet service. AT&T now markets the ultra-fast service to 4.6 million locations. The company expects to add 2 million fiber locations in 2017.

ǋ Launched on AUDIENCE Network the second season of its original comedy series You Me Her and the third season of its critically acclaimed one-on-one interview show Undeniable with Joe Buck.

ǋ Received a Sports Emmy® nomination for The Rich Eisen Show in the Outstanding Studio Show - Daily category, the show’s first nomination.

ǋ Shared a Sports Emmy® nomination with the MLB Network for an award in technical achievement for televising live MLB games in 4K.

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


¹AT&T received the highest number among providers in the J.D. Power 2013 Volume 2, 2014-2016 (V1 & V2), and 2017 Volume 1 U.S. Wireless Purchase Experience Full-Service Performance and 2016 (Vol.

2) and 2017 (Vol. 1) U.S. Wireless Customer Care Full-Service Performance Studies. 2017 Vol 1 studies based on 8,058 (Purchase) and 8,135 (Customer Care) total responses, measuring the perceptions

and experiences of current customers, surveyed July-December 2016. Your experiences may vary. Visit jdpower.com


16

Investor Briefing

connected car leadership to new territories. The new collaboration gives car manufacturers an opportunity to access customers in countries which collectively cover nearly 30% of the world’s population.

ǋ Closed significant business deals with Alro Steel, Baker Botts and Omnicom.

ǋ Announced plans to build 4G LTE and Wi-Fi service throughout the massive Mexico City Metro, which is considered the fourth-largest subway system in the world. AT&T will provide connectivity across 195 stations and along all 12 Metro lines.

ǋ Expanded our distribution to match our network reach, and opened more than 200 new points-of-sale throughout Mexico in first quarter.

ǋ Announced AT&T’s completion of its first wave of Fixed Wireless Internet availability to rural and underserved locations in Georgia. This is part of the company’s FCC Connect America Fund commitment to serve, across 18 states, over 400,000 locations by the end of 2017 and over 1.1 million locations by 2020.

BUSINESS & INTERNATIONAL

ǋ Introduced plans to deliver the AT&T Business Console – a device enrollment and management platform that includes an on-demand marketplace for business customers. The new mobile platform will help take the complexity out of enrolling and managing devices as well as ordering, managing and deploying applications and services.

ǋ Launched an IoT Cybersecurity Alliance alongside IBM, Nokia, Palo Alto Networks, Symantec and Trustonic to help the industry better understand cybersecurity protections for connected devices.

ǋ Announced with Orange and Colt Technology Services that the 3 companies are working with MEF and TM Forum to release the first set of standard software-defined networking application programming interfaces (APIs) for orchestrated Carrier Ethernet services. Service providers will be able to use these standardized APIs to work with each other’s SDN architectures in near-real time. This is a key step toward enabling orchestrated on-demand services over more automated and interconnected networks.

ǋ Struck a deal with Current, powered by GE, to be the exclusive reseller of Current’s intelligent sensor nodes in the United States and Mexico. Together, AT&T and Current will help municipalities become smarter by enhancing their lighting infrastructure and harnessing the power of IoT.

ǋ Teamed up with members of the Bridge Alliance – a leading group of mobile carriers in Asia Pacific, the Middle East and Africa – to extend global

Highlights

CONTENTS


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

SECOND-QUARTER 2017 EARNINGS DATE: JULY 25, 2017

AT&T will release second-quarter 2017 earnings on July 25, 2017, after the market closes.

The company’s Investor Briefing and related earnings materials will be available on the AT&T website at www.att.com/investor.relations 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 www.att.com/investor.relations.

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 available on the company’s website at www.att.com/investor.relations.

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


18

Investor Briefing

CONTENTS

AT&T INC. FINANCIAL DATA

2017 2016

Service $ 36,456 $ 37,101 -1.7 % Equipment 2,909 3,434 -15.3 %

39,365 40,535 -2.9 %

3,848 4,375 -12.0 %4,974 4,629 7.5 %

9,065 9,396 -3.5 %8,487 8,441 0.5 %6,127 6,563 -6.6 %

32,501 33,404 -2.7 %6,864 7,131 -3.7 %

(1,293) (1,207) -7.1 %(173) 13 - %(20) 70 - %

5,378 6,007 -10.5 %1,804 2,122 -15.0 %3,574 3,885 -8.0 %

(105) (82) -28.0 %$ 3,469 $ 3,803 -8.8 %

$ 0.56 $ 0.62 -9.7 %

6,166 6,172 -0.1 %

$ 0.56 $ 0.61 -8.2 %

6,186 6,190 -0.1 %

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

Net Income Less: Net Income Attributable to Noncontrolling InterestNet Income Attributable to AT&T

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

Interest ExpenseEquity in Net Income (Loss) of AffiliatesOther Income (Expense) - NetIncome Before Income Taxes Income Tax Expense

Other cost of services (exclusive of depreciation and amortization shown separately below) Selling, general and administrative Depreciation and amortization Total Operating ExpensesOperating Income

Total Operating Revenues

Operating Expenses Cost of services and sales Equipment Broadcast, programming and operations

Unaudited March 31, PercentChange

Operating Revenues

AT&T Inc.Financial Data

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

Financial & Operational Information


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Investor Briefing

CONTENTS

2017 AT&T EARNINGSQ1 Financial & Operational Information

Mar. 31, Dec. 31,2017 2016

$ 14,884 $ 5,788 15,078 16,794 1,418 1,555

14,347 14,232 45,727 38,369

125,292 124,899 105,593 105,207 94,617 94,176 13,366 14,243 8,295 8,441 1,551 1,674

17,462 16,812 $ 411,903 $ 403,821

$ 12,681 $ 9,832 27,120 31,138 4,493 4,519 3,384 2,079 3,012 3,008

50,690 50,576 120,568 113,681

61,100 60,128 33,404 33,578 21,160 21,748

115,664 115,454

6,495 6,495 89,411 89,604 35,175 34,734

(12,400) (12,659) 5,160 4,961 1,140 975

124,981 124,110 $ 411,903 $ 403,821

Accumulated other comprehensive incomeNoncontrolling interestTotal stockholders' equityTotal Liabilities and Stockholders' Equity

Stockholders' EquityCommon stock Additional paid-in capitalRetained earningsTreasury stock

Deferred Credits and Other Noncurrent LiabilitiesDeferred income taxesPostemployment benefit obligationOther noncurrent liabilitiesTotal deferred credits and other noncurrent liabilities

Advanced billing and customer depositsAccrued taxesDividends payableTotal current liabilitiesLong-Term Debt

Total Assets

Liabilities and Stockholders' EquityCurrent LiabilitiesDebt maturing within one yearAccounts payable and accrued liabilities

LicensesCustomer Lists and Relationships - NetOther Intangible Assets - NetInvestments in Equity AffiliatesOther Assets

Prepaid expensesOther current assetsTotal current assetsProperty, Plant and Equipment - NetGoodwill

Unaudited

AssetsCurrent AssetsCash and cash equivalentsAccounts receivable - net of allowances for doubtful accounts of $699 and $661


Consolidated Balance SheetsDollars in millions


20

Investor Briefing

CONTENTS


2017 2016

$ 3,574 $ 3,885

Depreciation and amortization 6,127 6,563 Undistributed loss (earnings) from investments in equity affiliates 182 (13) Provision for uncollectible accounts 393 374 Deferred income tax expense 480 1,346 Net loss (gain) from sale of investments, net of impairments 61 (44)

Accounts receivable 445 43 Other current assets 228 1,319 Accounts payable and accrued liabilities (1,778) (3,990) Equipment installment receivables and related sales 579 454 Deferred fulfillment costs (436) (542)

(140) (140) (497) (1,355)

5,644 4,015 9,218 7,900

Purchase of property and equipment (5,784) (4,451) Interest during construction (231) (218)

(162) (165) 6 81 - 445

(6,171) (4,308)

(1) - 12,440 5,978 (3,053) (2,296)

(177) - 21 89

(3,009) (2,947) (172) 471

6,049 1,295 9,096 4,887 5,788 5,121

$ 14,884 $ 10,008

Net increase in cash and cash equivalents Cash and cash equivalents beginning of yearCash and Cash Equivalents End of Period

Purchase of treasury stockIssuance of treasury stockDividends paidOtherNet Cash Provided by Financing Activities

Net Cash Used in Investing Activities

Financing ActivitiesNet change in short-term borrowings with original maturities of three months or lessIssuance of long-term debtRepayment of long-term debt

Investing ActivitiesCapital expenditures:

Acquisitions, net of cash acquiredDispositionsSales of securities, net

Changes in operating assets and liabilities:

Retirement benefit fundingOther - netTotal adjustmentsNet Cash Provided by Operating Activities

Unaudited March 31,

Operating ActivitiesNet incomeAdjustments to reconcile net income to net cash provided by operating activities:


Consolidated Statements of Cash FlowsDollars in millions Three Months Ended


21

Investor Briefing

CONTENTS



2017 2016

Purchase of property and equipment $ 5,784 $ 4,451 29.9 %

Interest during construction 231 218 6.0 %

Total Capital Expenditures $ 6,015 $ 4,669 28.8 %

$ 0.49 $ 0.48 2.1 %

6,147 6,156 -0.1 %

51.6% 51.2% 40 BP

264,530 280,870 -5.8 %

2017 2016

Domestic 134,218 130,445 2.9 %

Mexico 12,606 9,213 36.8 %

146,824 139,658 5.1 %

103,532 98,158 5.5 %

Domestic 25,060 25,372 -1.2 %

PanAmericana 8,090 7,094 14.0 %

Brazil 5,588 5,342 4.6 %

38,738 37,808 2.5 %

IP 14,110 13,470 4.8 %

DSL 1,585 2,294 -30.9 %

15,695 15,764 -0.4 %

Network Access Lines 13,363 15,975 -16.4 %

U-verse VoIP Connections 5,858 5,484 6.8 %

19,221 21,459 -10.4 %

2017 2016

Domestic 2,081 1,781 16.8 %Mexico 633 529 19.7 %

2,714 2,310 17.5 %

738 1,195 -38.2 %

Domestic (233) (52) - %PanAmericana 52 28 85.7 %Brazil 39 (101) - %

(142) (125) -13.6 %

IP 246 202 21.8 %DSL (156) (216) 27.8 %

90 (14) - %

Broadband Net Additions

Total Broadband Net Additions

Wireless Net Additions

Total Wireless Net Additions

Total Branded Wireless Net Additions

Video Net Additions

Total Video Net Additions

Three Months EndedMarch 31, Percent

Change

Total Video Connections

Broadband Connections

Total Broadband Connections

Voice Connections

Total Retail Consumer Voice Connections

Change

Wireless Subscribers

Total Wireless Subscribers

Total Branded Wireless Subscribers

Video Connections

Subscribers and connections in thousands

Unaudited March 31, Percent

Dividends Declared per Share

End of Period Common Shares Outstanding (000,000)

Debt Ratio

Total Employees

Supplementary Operating Data


Capital expenditures

AT&T Inc.Consolidated Supplementary Data

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

22

Investor Briefing

CONTENTS


2017 2016

Purchase of property and equipment $ 5,784 $ 4,451 29.9 %

Interest during construction 231 218 6.0 %

Total Capital Expenditures $ 6,015 $ 4,669 28.8 %

$ 0.49 $ 0.48 2.1 %

6,147 6,156 -0.1 %

51.6% 51.2% 40 BP

264,530 280,870 -5.8 %

2017 2016

Domestic 134,218 130,445 2.9 %

Mexico 12,606 9,213 36.8 %

146,824 139,658 5.1 %

103,532 98,158 5.5 %

Domestic 25,060 25,372 -1.2 %

PanAmericana 8,090 7,094 14.0 %

Brazil 5,588 5,342 4.6 %

38,738 37,808 2.5 %

IP 14,110 13,470 4.8 %

DSL 1,585 2,294 -30.9 %

15,695 15,764 -0.4 %

Network Access Lines 13,363 15,975 -16.4 %

U-verse VoIP Connections 5,858 5,484 6.8 %

19,221 21,459 -10.4 %

2017 2016

Domestic 2,081 1,781 16.8 %Mexico 633 529 19.7 %

2,714 2,310 17.5 %

738 1,195 -38.2 %

Domestic (233) (52) - %PanAmericana 52 28 85.7 %Brazil 39 (101) - %

(142) (125) -13.6 %

IP 246 202 21.8 %DSL (156) (216) 27.8 %

90 (14) - %



Wireless Net Additions

Total Wireless Net Additions

Total Branded Wireless Net Additions

Video Net Additions

Total Video Net Additions


Change

Total Video Connections



Voice Connections


Change

Wireless Subscribers

Total Wireless Subscribers

Total Branded Wireless Subscribers

Video Connections



Dividends Declared per Share

End of Period Common Shares Outstanding (000,000)

Debt Ratio

Total Employees



Capital expenditures

AT&T Inc.Consolidated Supplementary Data

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

2017 2016

Wireless service $ 7,929 $ 7,855 0.9 %Fixed strategic services 2,974 2,751 8.1 %Legacy voice and data services 3,630 4,373 -17.0 %Other service and equipment 817 859 -4.9 %Wireless equipment 1,498 1,771 -15.4 %

16,848 17,609 -4.3 %

10,176 10,802 -5.8 %2,312 2,508 -7.8 %

12,488 13,310 -6.2 %4,360 4,299 1.4 %

- - - %$ 4,360 $ 4,299 1.4 %

25.9 % 24.4 % 150 BP

2017 2016

Postpaid/Branded 50,839 48,844 4.1 %Reseller 76 64 18.8 %Connected Devices 31,439 26,863 17.0 %

82,354 75,771 8.7 %

980 928 5.6 %

2017 2016

Postpaid/Branded (125) 133 - %Reseller 6 (22) - %Connected Devices 2,553 1,578 61.8 %

2,434 1,689 44.1 %

1.07% 1.02% 5 BP

4 17 -76.5 %1 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.

Business Solutions Wireless Postpaid Churn1

Business Solutions IP Broadband Net Additions

March 31, PercentChange

Business Solutions Wireless Net Additions1

Total Business Solutions Wireless Net Additions

ChangeBusiness Solutions Wireless Subscribers

Total Business Solutions Wireless Subscribers

Business Solutions IP Broadband Connections

Three Months Ended



Segment Operating IncomeEquity in Net Income of Affiliates

Segment Contribution

Segment Operating Income Margin


Total Segment Operating Revenues

Segment Operating ExpensesOperations and support Depreciation and amortization Total Segment Operating Expenses


Segment Operating Revenues

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.

Segment ResultsDollars in millions Three Months Ended

23

Investor Briefing

CONTENTS


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.

2017 2016

Wireless service $ 7,929 $ 7,855 0.9 %Fixed strategic services 2,974 2,751 8.1 %Legacy voice and data services 3,630 4,373 -17.0 %Other service and equipment 817 859 -4.9 %Wireless equipment 1,498 1,771 -15.4 %

16,848 17,609 -4.3 %

10,176 10,802 -5.8 %2,312 2,508 -7.8 %

12,488 13,310 -6.2 %4,360 4,299 1.4 %

- - - %$ 4,360 $ 4,299 1.4 %

25.9 % 24.4 % 150 BP

2017 2016

Postpaid/Branded 50,839 48,844 4.1 %Reseller 76 64 18.8 %Connected Devices 31,439 26,863 17.0 %

82,354 75,771 8.7 %

980 928 5.6 %

2017 2016

Postpaid/Branded (125) 133 - %Reseller 6 (22) - %Connected Devices 2,553 1,578 61.8 %

2,434 1,689 44.1 %

1.07% 1.02% 5 BP

4 17 -76.5 %1 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.

Business Solutions Wireless Postpaid Churn1

Business Solutions IP Broadband Net Additions

March 31, PercentChange

Business Solutions Wireless Net Additions1

Total Business Solutions Wireless Net Additions

ChangeBusiness Solutions Wireless Subscribers

Total Business Solutions Wireless Subscribers

Business Solutions IP Broadband Connections

Three Months Ended



Segment Operating IncomeEquity in Net Income of Affiliates





Segment Operating ExpensesOperations and support Depreciation and amortization Total Segment Operating Expenses



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.


24

Investor Briefing

CONTENTS


25

Investor Briefing

CONTENTS


2017 2016

Video entertainment $ 9,020 $ 8,904 1.3 %

High-speed internet 1,941 1,803 7.7 %

Legacy voice and data services 1,056 1,313 -19.6 %

Other service and equipment 606 638 -5.0 %

12,623 12,658 -0.3 %

9,601 9,578 0.2 %

1,419 1,488 -4.6 %

11,020 11,066 -0.4 %

1,603 1,592 0.7 %

(6) 3 - %

$ 1,597 $ 1,595 0.1 %

12.7 % 12.6 % 10 BP

2017 2016

Satellite 21,012 20,112 4.5 %

U-verse 4,020 5,232 -23.2 %

25,032 25,344 -1.2 %

IP 13,130 12,542 4.7 %

DSL 1,164 1,749 -33.4 %

14,294 14,291 - %

Retail Consumer Switched Access Lines 5,533 6,888 -19.7 %

U-verse Consumer VoIP Connections 5,470 5,225 4.7 %11,003 12,113 -9.2 %

2017 2016

Satellite - 328 - %

U-verse (233) (382) 39.0 %

(233) (54) - %

IP 242 186 30.1 %

DSL (127) (181) 29.8 %

115 5 - %1 Includes the impact of customers that migrated to DIRECTV NOW.


Percent

Change

Linear Video Net Additions1

Total Linear Video Net Additions


Voice Connections


Three Months Ended

March 31,

Change

Linear Video Connections

Total Linear Video Connections





Segment Operating IncomeEquity in Net Income (Loss) of Affiliates





Segment Operating Expenses

Operations and support

Depreciation and amortization Total Segment Operating Expenses


Change


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.


ENTERTAINMENT GROUP


26

Investor Briefing

CONTENTS


2017 2016


High-speed internet 1,941 1,803 7.7 %

Legacy voice and data services 1,056 1,313 -19.6 %

Other service and equipment 606 638 -5.0 %

12,623 12,658 -0.3 %

9,601 9,578 0.2 %

1,419 1,488 -4.6 %

11,020 11,066 -0.4 %

1,603 1,592 0.7 %

(6) 3 - %

$ 1,597 $ 1,595 0.1 %

12.7 % 12.6 % 10 BP

2017 2016

Satellite 21,012 20,112 4.5 %

U-verse 4,020 5,232 -23.2 %

25,032 25,344 -1.2 %

IP 13,130 12,542 4.7 %

DSL 1,164 1,749 -33.4 %

14,294 14,291 - %

Retail Consumer Switched Access Lines 5,533 6,888 -19.7 %

U-verse Consumer VoIP Connections 5,470 5,225 4.7 %11,003 12,113 -9.2 %

2017 2016

Satellite - 328 - %

U-verse (233) (382) 39.0 %

(233) (54) - %

IP 242 186 30.1 %

DSL (127) (181) 29.8 %

115 5 - %1 Includes the impact of customers that migrated to DIRECTV NOW.


Percent

Change

Linear Video Net Additions1

Total Linear Video Net Additions


Voice Connections


Three Months Ended

March 31,

Change

Linear Video Connections

Total Linear Video Connections





Segment Operating IncomeEquity in Net Income (Loss) of Affiliates









Change


ENTERTAINMENT GROUP



27

Investor Briefing

CONTENTS


2017 2016

Service $ 6,609 $ 6,943 -4.8 %Equipment 1,131 1,385 -18.3 %

7,740 8,328 -7.1 %

4,528 4,912 -7.8 %873 922 -5.3 %

5,401 5,834 -7.4 %2,339 2,494 -6.2 %

- - - %$ 2,339 $ 2,494 -6.2 %

30.2 % 29.9 % 30 BP

2017 2016

Postpaid 26,510 28,294 -6.3 %Prepaid 13,844 12,171 13.7 %

40,354 40,465 -0.3 %10,549 13,313 -20.8 %

961 896 7.3 %51,864 54,674 -5.1 %

2017 2016

Postpaid (66) (4) - %Prepaid 282 500 -43.6 %

216 496 -56.5 %(588) (378) -55.6 %

19 (26) - %(353) 92 - %

2.42% 2.11% 31 BP1.22% 1.24% -2 BP

1 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.

Total Consumer Mobility Net Additions

Total Churn1

Postpaid Churn1

Change

Consumer Mobility Net Additions1

BrandedResellerConnected Devices

Total Consumer Mobility Subscribers


Change

Consumer Mobility Subscribers




Segment Operating IncomeEquity in Net Income of AffiliatesSegment Contribution




Segment Operating ExpensesOperations and supportDepreciation and amortization Total Segment Operating Expenses



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.


CONSUMER MOBILITY


28

Investor Briefing

CONTENTS


2017 2016


7,740 8,328 -7.1 %

4,528 4,912 -7.8 %873 922 -5.3 %

5,401 5,834 -7.4 %2,339 2,494 -6.2 %

- - - %$ 2,339 $ 2,494 -6.2 %

30.2 % 29.9 % 30 BP

2017 2016

Postpaid 26,510 28,294 -6.3 %Prepaid 13,844 12,171 13.7 %

40,354 40,465 -0.3 %10,549 13,313 -20.8 %

961 896 7.3 %51,864 54,674 -5.1 %

2017 2016

Postpaid (66) (4) - %Prepaid 282 500 -43.6 %

216 496 -56.5 %(588) (378) -55.6 %

19 (26) - %(353) 92 - %

2.42% 2.11% 31 BP1.22% 1.24% -2 BP


Total Consumer Mobility Net Additions

Total Churn1

Postpaid Churn1

Change

Consumer Mobility Net Additions1


Total Consumer Mobility Subscribers


Change

Consumer Mobility Subscribers




Segment Operating IncomeEquity in Net Income of AffiliatesSegment Contribution




Segment Operating ExpensesOperations and supportDepreciation and amortization Total Segment Operating Expenses



CONSUMER MOBILITY



29

Investor Briefing

CONTENTS


2017 2016


Wireless service 475 455 4.4 %

Wireless equipment 113 82 37.8 %

1,929 1,667 15.7 %

1,759 1,588 10.8 %

290 277 4.7 %

2,049 1,865 9.9 %

(120) (198) 39.4 %

20 14 42.9 %

$ (100) $ (184) 45.7 %

(6.2) % (11.9) % 570 BP

2017 2016

Postpaid 5,095 4,404 15.7 %

Prepaid 7,244 4,445 63.0 %

12,339 8,850 39.4 %

267 364 -26.6 %

12,606 9,213 36.8 %

PanAmericana 8,090 7,094 14.0 %

SKY Brazil 5,588 5,342 4.6 %

13,678 12,436 10.0 %

2017 2016

Postpaid 130 116 12.1 %

Prepaid 517 450 14.9 %

647 566 14.3 %

(14) (37) 62.2 %

633 529 19.7 %

PanAmericana 52 28 85.7 %

SKY Brazil 39 (101) - %

91 (73) - %

Total Mexican Wireless Net Additions

Latin America Satellite Net Additions1

Total Latin America Satellite Net Additions1 In 2017 we updated the methodology used to account for prepaid video connections. The impact of this change is excluded.

Percent

Change

Mexican Wireless Net Additions

Branded

Reseller

Latin America Satellite Subscribers

Total Latin America Satellite Subscribers

Three Months Ended

March 31,

Change

Mexican Wireless Subscribers

Branded

Reseller

Total Mexican Wireless Subscribers



Segment Operating Income (Loss)Equity in Net Income (Loss) of Affiliates









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.


INTERNATIONAL


30

Investor Briefing

CONTENTS


2017 2016


Wireless service 475 455 4.4 %

Wireless equipment 113 82 37.8 %

1,929 1,667 15.7 %

1,759 1,588 10.8 %

290 277 4.7 %

2,049 1,865 9.9 %

(120) (198) 39.4 %

20 14 42.9 %

$ (100) $ (184) 45.7 %

(6.2) % (11.9) % 570 BP

2017 2016

Postpaid 5,095 4,404 15.7 %

Prepaid 7,244 4,445 63.0 %

12,339 8,850 39.4 %

267 364 -26.6 %

12,606 9,213 36.8 %

PanAmericana 8,090 7,094 14.0 %

SKY Brazil 5,588 5,342 4.6 %

13,678 12,436 10.0 %

2017 2016

Postpaid 130 116 12.1 %

Prepaid 517 450 14.9 %

647 566 14.3 %

(14) (37) 62.2 %

633 529 19.7 %

PanAmericana 52 28 85.7 %

SKY Brazil 39 (101) - %

91 (73) - %

Total Mexican Wireless Net Additions

Latin America Satellite Net Additions1

Total Latin America Satellite Net Additions1 In 2017 we updated the methodology used to account for prepaid video connections. The impact of this change is excluded.

Percent

Change

Mexican Wireless Net Additions

Branded

Reseller

Latin America Satellite Subscribers

Total Latin America Satellite Subscribers

Three Months Ended

March 31,

Change

Mexican Wireless Subscribers

Branded

Reseller

Total Mexican Wireless Subscribers



Segment Operating Income (Loss)Equity in Net Income (Loss) of Affiliates









Change


INTERNATIONAL



31

Investor Briefing

CONTENTS


2017 2016


17,167 17,954 -4.4 %

9,998 10,624 -5.9 %1,997 2,056 -2.9 %

11,995 12,680 -5.4 %Operating Income 5,172 5,274 -1.9 %

30.1 % 29.4 % 70 BP

2017 2016

Postpaid 77,349 77,138 0.3 %Prepaid 13,844 12,171 13.7 %

91,193 89,309 2.1 %10,625 13,378 -20.6 %32,400 27,758 16.7 %

134,218 130,445 2.9 %

325 322 0.9 %

2017 2016

Postpaid (191) 129 - %Prepaid 282 500 -43.6 %

91 629 -85.5 %(582) (400) -45.5 %

2,572 1,552 65.7 %2,081 1,781 16.8 %

(2,723) 24 - %

1.46% 1.42% 4 BPBranded Churn1 1.71% 1.63% 8 BPPostpaid Churn1 1.12% 1.10% 2 BPPostpaid Phone Only Churn1 0.90% 0.96% -6 BP


Connected DevicesTotal AT&T Mobility Net AdditionsM&A Activity, Partitioned Customers and Other Adjustments

Total Churn1

PercentChange

AT&T Mobility Net Additions

BrandedReseller

Total AT&T Mobility Subscribers

Domestic Licensed POPs (000,000)

Three Months EndedMarch 31,

ChangeAT&T Mobility Subscribers


Operating Income Margin

Supplementary Operating DataSubscribers and connections in thousandsUnaudited March 31, Percent


Operating ExpensesOperations and support Depreciation and amortization Total Operating Expenses


Operating Revenues

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).

Operating ResultsDollars in millions Three Months Ended



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2017 2016


17,167 17,954 -4.4 %

9,998 10,624 -5.9 %1,997 2,056 -2.9 %

11,995 12,680 -5.4 %Operating Income 5,172 5,274 -1.9 %

30.1 % 29.4 % 70 BP

2017 2016

Postpaid 77,349 77,138 0.3 %Prepaid 13,844 12,171 13.7 %

91,193 89,309 2.1 %10,625 13,378 -20.6 %32,400 27,758 16.7 %

134,218 130,445 2.9 %

325 322 0.9 %

2017 2016

Postpaid (191) 129 - %Prepaid 282 500 -43.6 %

91 629 -85.5 %(582) (400) -45.5 %

2,572 1,552 65.7 %2,081 1,781 16.8 %

(2,723) 24 - %

1.46% 1.42% 4 BPBranded Churn1 1.71% 1.63% 8 BPPostpaid Churn1 1.12% 1.10% 2 BPPostpaid Phone Only Churn1 0.90% 0.96% -6 BP


Connected DevicesTotal AT&T Mobility Net AdditionsM&A Activity, Partitioned Customers and Other Adjustments

Total Churn1

PercentChange

AT&T Mobility Net Additions

BrandedReseller

Total AT&T Mobility Subscribers

Domestic Licensed POPs (000,000)

Three Months EndedMarch 31,

ChangeAT&T Mobility Subscribers


Operating Income Margin

Supplementary Operating DataSubscribers and connections in thousandsUnaudited March 31, Percent


Operating ExpensesOperations and support Depreciation and amortization Total Operating Expenses


Operating Revenues



Operating ResultsDollars in millions Three Months Ended

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March 31, 2017

Revenues

Operations and Support Expenses EBITDA

Depreciation and

Amortization Operating

Income (Loss)

Equity in Net Income (Loss)

of AffiliatesSegment

ContributionBusiness Solutions $ 16,848 $ 10,176 $ 6,672 $ 2,312 $ 4,360 $ - $ 4,360 Entertainment Group 12,623 9,601 3,022 1,419 1,603 (6) 1,597 Consumer Mobility 7,740 4,528 3,212 873 2,339 - 2,339 International 1,929 1,759 170 290 (120) 20 (100) Segment Total 39,140 26,064 13,076 4,894 8,182 $ 14 $ 8,196 Corporate and Other 225 221 4 31 (27) Acquisition-related items - 207 (207) 1,202 (1,409) Certain Significant items - (118) 118 - 118 AT&T Inc. $ 39,365 $ 26,374 $ 12,991 $ 6,127 $ 6,864

March 31, 2016

Revenues

Operations and Support Expenses EBITDA

Depreciation and

Amortization Operating

Income (Loss)

Equity in Net Income (Loss)

of AffiliatesSegment

ContributionBusiness Solutions $ 17,609 $ 10,802 $ 6,807 $ 2,508 $ 4,299 $ - $ 4,299 Entertainment Group 12,658 9,578 3,080 1,488 1,592 3 1,595 Consumer Mobility 8,328 4,912 3,416 922 2,494 - 2,494 International 1,667 1,588 79 277 (198) 14 (184) Segment Total 40,262 26,880 13,382 5,195 8,187 $ 17 $ 8,204 Corporate and Other 273 377 (104) 17 (121) Acquisition-related items - 295 (295) 1,351 (1,646) Certain Significant items - (711) 711 - 711 AT&T Inc. $ 40,535 $ 26,841 $ 13,694 $ 6,563 $ 7,131

SUPPLEMENTAL SEGMENT RECONCILIATION

Three Months EndedDollars in millionsUnaudited

SUPPLEMENTAL SEGMENT RECONCILIATION


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Discussion and Reconciliation of Non-GAAP Measures


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.

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.

1

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

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

Free Cash Flow and Free Cash Flow Dividend Payout Ratio Dollars in millions Three Months Ended March 31,

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

EBITDA

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

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2017 AT&T EARNINGSQ1 Discussion and Reconcilitation of Non-GAAP Measures

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.

2

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing segment performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance. Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in 2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in evaluating the ability of our Latin America operations to generate cash to finance its own operations. We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Consumer Mobility segment operating margin and our supplemental AT&T Mobility operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well. There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended March 31,

2017 2016 Net Income $ 3,574 $ 3,885 Additions: Income Tax Expense 1,804 2,122 Interest Expense 1,293 1,207 Equity in Net (Income) Loss of Affiliates 173 (13) Other (Income) Expense - Net 20 (70) Depreciation and amortization 6,127 6,563 EBITDA 12,991 13,694 Total Operating Revenues 39,365 40,535 Service Revenues 36,456 37,101 EBITDA Margin 33.0% 33.8% EBITDA Service Margin 35.6% 36.9%

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3

Segment EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended March 31, 2017 2016 Business Solutions Segment Segment Contribution $ 4,360 $ 4,299 Additions: Depreciation and amortization 2,312 2,508 EBITDA 6,672 6,807 Total Segment Operating Revenues 16,848 17,609 Segment Operating Income Margin 25.9% 24.4% EBITDA Margin 39.6% 38.7% Entertainment Group Segment Segment Contribution $ 1,597 $ 1,595 Additions: Equity in Net (Income) Loss of Affiliates 6 (3) Depreciation and amortization 1,419 1,488 EBITDA 3,022 3,080 Total Segment Operating Revenues 12,623 12,658 Segment Operating Income Margin 12.7% 12.6% EBITDA Margin 23.9% 24.3% Consumer Mobility Segment Segment Contribution $ 2,339 $ 2,494 Additions: Depreciation and amortization 873 922 EBITDA 3,212 3,416 Total Segment Operating Revenues 7,740 8,328 Service Revenues 6,609 6,943 Segment Operating Income Margin 30.2% 29.9% EBITDA Margin 41.5% 41.0% EBITDA Service Margin 48.6% 49.2% International Segment Segment Contribution $ (100) $ (184) Additions: Equity in Net (Income) of Affiliates (20) (14) Depreciation and amortization 290 277 EBITDA 170 79 Total Segment Operating Revenues 1,929 1,667 Segment Operating Income Margin -6.2% -11.9% EBITDA Margin 8.8% 4.7%

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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).

4

Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions Three Months Ended March 31, 2017 2016 AT&T Mobility Operating Income $ 5,172 $ 5,274 Add: Depreciation and amortization 1,997 2,056 EBITDA 7,169 7,330 Total Operating Revenues 17,167 17,954 Service Revenues 14,538 14,798 Operating Income Margin 30.1% 29.4% EBITDA Margin 41.8% 40.8% EBITDA Service Margin 49.3% 49.5%

Supplemental Latin America EBITDA and EBITDA Margin Dollars in millions Three Months Ended March 31, 2017 2016 International - Latin America Operating Income $ 77 $ 53 Add: Depreciation and amortization 214 196 EBITDA 291 249 Total Operating Revenues 1,341 1,130 Operating Income Margin 5.7% 4.7% EBITDA Margin 21.7% 22.0%

Supplemental Mexico EBITDA and EBITDA Margin Dollars in millions Three Months Ended March 31, 2017 2016 International - Mexico Operating Income $ (197) $ (251) Add: Depreciation and amortization 76 81 EBITDA (121) (170) Total Operating Revenues 588 537 Operating Income Margin -33.5% -46.7% EBITDA Margin -20.6% -31.7%

Adjusting Items

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

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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.

5


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

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin

Dollars in millions Three Months Ended March 31, 2017 2016 Operating Income $ 6,864 $ 7,131 Adjustments to Operating Expenses 1,291 936 Adjusted Operating Income 8,155 8,067 EBITDA 12,991 13,694 Adjustments to Operations and Support Expenses 89 (415) Adjusted EBITDA 13,080 13,279 Total Operating Revenues 39,365 40,535 Service Revenues 36,456 37,101 Operating Income Margin 17.4% 17.6% Adjusted Operating Income Margin 20.7% 19.9% Adjusted EBITDA Margin 33.2% 32.8% Adjusted EBITDA Service Margin 35.9% 35.8%

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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5


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

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends. Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin

Dollars in millions Three Months Ended March 31, 2017 2016 Operating Income $ 6,864 $ 7,131 Adjustments to Operating Expenses 1,291 936 Adjusted Operating Income 8,155 8,067 EBITDA 12,991 13,694 Adjustments to Operations and Support Expenses 89 (415) Adjusted EBITDA 13,080 13,279 Total Operating Revenues 39,365 40,535 Service Revenues 36,456 37,101 Operating Income Margin 17.4% 17.6% Adjusted Operating Income Margin 20.7% 19.9% Adjusted EBITDA Margin 33.2% 32.8% Adjusted EBITDA Service Margin 35.9% 35.8%

6

Adjusted Diluted EPS Three Months Ended March 31, 2017 2016 Diluted Earnings Per Share (EPS) $ 0.56 $ 0.61 Amortization of intangible assets 0.13 0.14 Merger integration and other items1 0.03 0.03 Asset abandonments, impairments and other adjustments 0.03 0.02 (Gain) loss on transfer of wireless spectrum (0.01) (0.08) Adjusted EPS $ 0.74 $ 0.72 Year-over-year growth - Adjusted 2.8% Weighted Average Common Shares Outstanding with Dilution (000,000) 6,186 6,190

1Includes combined merger integration items, merger-related interest expense and DIRECTV exchange fees.

Net Debt to Adjusted EBITDA


Net Debt to Adjusted EBITDA Dollars in millions

Three

Months Ended

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

6

Adjusted Diluted EPS Three Months Ended March 31, 2017 2016 Diluted Earnings Per Share (EPS) $ 0.56 $ 0.61 Amortization of intangible assets 0.13 0.14 Merger integration and other items1 0.03 0.03 Asset abandonments, impairments and other adjustments 0.03 0.02 (Gain) loss on transfer of wireless spectrum (0.01) (0.08) Adjusted EPS $ 0.74 $ 0.72 Year-over-year growth - Adjusted 2.8% Weighted Average Common Shares Outstanding with Dilution (000,000) 6,186 6,190

1Includes combined merger integration items, merger-related interest expense and DIRECTV exchange fees.

Net Debt to Adjusted EBITDA


Net Debt to Adjusted EBITDA Dollars in millions

Three

Months Ended

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

SUPPLEMENTAL OPERATIONAL MEASURES

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

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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7

Supplemental Operational Measures

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

Supplemental Operational Measure Three Months Ended March 31, 2017 March 31, 2016

Consumer

Mobility Business Solutions Adjustments1 AT&T Mobility

Consumer Mobility

Business Solutions Adjustments1 AT&T Mobility

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

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

Supplemental International Three Months Ended March 31, 2017 March 31, 2016

Latin

America Mexico International Latin

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

7

Supplemental Operational Measures

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

Supplemental Operational Measure Three Months Ended March 31, 2017 March 31, 2016

Consumer

Mobility Business Solutions Adjustments1 AT&T Mobility

Consumer Mobility

Business Solutions Adjustments1 AT&T Mobility

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

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

Supplemental International Three Months Ended March 31, 2017 March 31, 2016

Latin

America Mexico International Latin

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

Documents

ContentsCONTENTS Q1 2017 AT&T EARNINGS 3 Investor Briefing AT&T Reports First-Quarter Results Updates Guidance Following FirstNet Award ǋ Consolidated revenues of $39.4 billion ǋ