UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC FORM 8-K

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) April 25, 2017 AT&T INC. (Exact Name of Registrant as Specified in Charter) Delaware (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) 208 S. Akard St., Dallas, Texas (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (210) (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 Item 2.02 Results of Operations and Financial Condition. The registrant announced on April 25, 2017, its results of operations for the first quarter of The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference. Item 9.01 Financial Statements and Exhibits. The following exhibits are furnished as part of this report: (d) Exhibits 99.1 Press release dated April 25, 2017 reporting financial results for the first quarter ended March 31, AT&T Inc. selected financial statements and operating data Discussion and reconciliation of non-gaap measures.

3 Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AT&T INC. Date: April 25, 2017 By: /s/ Debra L. Dial. Debra L. Dial Senior Vice President and Controller

4 Filed by AT&T Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a 12 of the Securities Exchange Act of 1934 Subject Company: Straight Path Communications Inc. Commission File No.: AT&T Reports First-Quarter Results Updates Guidance Following FirstNet Award Consolidated revenues of $39.4 billion Operating income of $6.9 billion Net income attributable to AT&T of $3.5 billion Diluted EPS of $0.56 as reported and $0.74 as adjusted, compared to $0.61 and $0.72 in the year-ago quarter Cash from operations of $9.2 billion Free cash flow of $3.2 billion 2.7 million wireless net adds o 2.1 million U.S., driven by prepaid and connected devices o 633,000 Mexico U.S. wireless first-quarter results: o Best-ever first-quarter postpaid phone churn of 0.90% o Wireless postpaid churn of 1.12%, including pressure from tablets o Strong operating margin of 30.1%; best-ever EBITDA margin of 41.8%; EBITDA wireless service margin of 49.3% Entertainment Group first-quarter results: o Strong broadband gains with 242,000 IP broadband net adds; 115,000 total broadband net adds o 4.6 million AT&T Fiber customer locations with plans to add 2 million in 2017 o DIRECTV NOW gains help offset linear TV subscriber decline Note: AT&T's first-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, April 25, The webcast and related materials will be available on AT&T's Investor Relations website at

5 DALLAS, April 25, 2017 AT&T Inc. ( NYSE:T ) today announced continued adjusted margin expansion and solid adjusted earnings growth for the first quarter. The quarter also was marked by several decisive strategic moves that helped broaden the company's spectrum portfolio. "In a very competitive quarter, we continued to execute on our goals of driving efficiencies in our business while growing adjusted earnings per share. But just as important, the strategic moves we've made over the last few months to expand our wireless capacity and fortify our 5G leadership will be felt for years to come," said Randall Stephenson, AT&T Chairman and CEO. "FirstNet gives us access to 20 megahertz of valuable, low-band spectrum and allows us to deploy our spectrum assets more efficiently as we build a high-quality, mobile broadband network for our first responders. And our planned acquisitions of Fiber Tower and Straight Path will add valuable millimeter wave spectrum assets to our 5G tool kit as we lead the way to the next generation of wireless technology." Consolidated Financial Results AT&T's consolidated revenues for the first quarter totaled $39.4 billion versus $40.5 billion in the year-ago quarter, primarily due to record-low equipment sales in wireless. Compared with results for the first quarter of 2016, operating expenses were $32.5 billion versus $33.4 billion; operating income was $6.9 billion versus $7.1 billion; and operating income margin was 17.4% versus 17.6%. When adjusting for amortization, merger- and integration-related and other items, operating income was $8.2 billion versus $8.1 billion; and operating income margin was 20.7%, up 80 basis points versus the year-ago quarter. First-quarter net income attributable to AT&T totaled $3.5 billion, or $0.56 per diluted share, compared to $3.8 billion, or $0.61 per diluted share, in the year-ago quarter. Adjusting for $0.18 of costs for amortization, merger- and integration-related and other items, earnings per diluted share was $0.74 compared to an adjusted $0.72 in the year-ago quarter. Cash from operating activities was $9.2 billion in the first quarter, and capital expenditures were $6.0 billion. Free cash flow cash from operating activities minus capital expenditures was $3.2 billion for the quarter. Updated 2017 Outlook The company is updating its 2017 guidance. On a business as usual basis without the impact of Time Warner, AT&T expects: Adjusted EPS growth in the mid-single digit range Adjusted operating margin expansion Capital expenditures in the $22 billion range Free cash flow in the $18 billion range

6 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 AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. About AT&T AT&T Inc. ( NYSE:T ) helps millions around the globe connect with leading entertainment, business, mobile and high speed internet services. We offer the nation's best data network* and the best global coverage of any U.S. wireless provider.** We're one of the world's largest providers of pay TV. We have TV customers in the U.S. and 11 Latin American countries. Nearly 3.5 million companies, from small to large businesses around the globe, turn to AT&T for our highly secure smart solutions. Additional information about AT&T products and services is available at about.att.com. Follow our news on Twitter on Facebook at facebook.com/att and YouTube at youtube.com/att AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners. * Claim based on the Nielsen Certified Data Network Score. Score includes data reported by wireless consumers in the Nielsen Mobile Insights survey, network measurements from Nielsen Mobile Performance and Nielsen Drive Test Benchmarks for Q3+Q across 121 markets. ** Global coverage claim based on offering discounted voice and data roaming; LTE roaming; and voice roaming in more countries than any other U.S. based carrier. International service required. Coverage not available in all areas. Coverage may vary per country and be limited/restricted in some countries.

7 Cautionary Language Concerning Forward-Looking Statements Information set forth in this communication, including financial estimates and statements as to the expected timing, completion and effects of the proposed merger between AT&T Inc. and Straight Path Communications, Inc., constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of These estimates and statements are subject to risks and uncertainties, and actual results might differ materially. Such estimates and statements include, but are not limited to, statements about the benefits of the merger, including future financial and operating results, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of AT&T Inc. and Straight Path Communications, Inc. and are subject to significant risks and uncertainties outside of our control. This presentation may contain certain non-gaap financial measures. Reconciliations between the non- GAAP financial measures and the GAAP financial measures are available on the company's website at Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (2) the risk that Straight Path Communications, Inc. stockholders may not adopt the merger agreement, (3) the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated, and (4) risks that any of the closing conditions to the proposed merger may not be satisfied in a timely manner. Discussions of additional risks and uncertainties are contained in AT&T Inc.'s and Straight Path Communications, Inc.'s filings with the Securities and Exchange Commission. Neither AT&T Inc. nor Straight Path Communications, Inc. is under any obligation, and each expressly disclaims any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this announcement are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The "quiet period" for FCC Spectrum Auction 1000 (also known as the 600 MHz incentive auction) is now in effect. During the quiet period, auction applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants. Additional Information and Where to Find It This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed merger between AT&T Inc. and Straight Path Communications, Inc. In connection with the proposed merger, AT&T Inc. intends to file a registration statement on Form S-4, containing a proxy statement/prospectus with the Securities and Exchange Commission ("SEC"). STOCKHOLDERS OF STRAIGHT PATH COMMUNICATIONS, INC. ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders will be able to obtain copies of the proxy statement/prospectus as well as other filings containing information about AT&T Inc. and Straight Path Communications, Inc., without charge, at the SEC's website at Copies of documents filed with the SEC by AT&T Inc. will be made available free of charge on AT&T Inc.'s investor relations website at Copies of documents filed with the SEC by Straight Path Communications, Inc. will be made available free of charge on Straight Path Communications, Inc.'s investor relations website at

8 Participants in Solicitation AT&T Inc. and its directors and executive officers, and Straight Path Communications, Inc. and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Straight Path Communications, Inc. common stock in respect of the proposed merger. Information about the directors and executive officers of AT&T Inc. is set forth in the proxy statement for AT&T Inc.'s 2017 Annual Meeting of Stockholders, which was filed with the SEC on March 10, Information about the directors and executive officers of Straight Path Communications, Inc. is set forth in the proxy statement for Straight Path Communications, Inc.'s 2017 Annual Meeting of Stockholders, which was filed with the SEC on November 22, Investors may obtain additional information regarding the interest of such participants by reading the proxy statement/prospectus regarding the proposed merger when it becomes available. For more information, contact: Fletcher Cook AT&T Global Media Relations Phone: (214) Eric Ryan AT&T Global Media Relations Phone: (929)

9 AT&T Inc. Financial Data Consolidated Statements of Income Dollars in millions except per share amounts Unaudited March 31, Percent Operating Revenues Service $ 36,456 $ 37, % Equipment 2,909 3, % Total Operating Revenues 39,365 40, % Operating Expenses Cost of services and sales Equipment 3,848 4, % Broadcast, programming and operations 4,974 4, % Other cost of services (exclusive of depreciation and amortization shown separately below) 9,065 9, % Selling, general and administrative 8,487 8, % Depreciation and amortization 6,127 6, % Total Operating Expenses 32,501 33, % Operating Income 6,864 7, % Interest Expense (1,293) (1,207) -7.1% Equity in Net Income (Loss) of Affiliates (173) 13 -% Other Income (Expense) - Net (20) 70 -% Income Before Income Taxes 5,378 6, % Income Tax Expense 1,804 2, % Net Income 3,574 3, % Less: Net Income Attributable to Noncontrolling Interest (105) (82) -28.0% Net Income Attributable to AT&T $ 3,469 $ 3, % Basic Earnings Per Share Attributable to AT&T $ 0.56 $ % Weighted Average Common Shares Outstanding (000,000) 6,166 6, % Diluted Earnings Per Share Attributable to AT&T $ 0.56 $ % Weighted Average Common Shares Outstanding with Dilution (000,000) 6,186 6, %

10 AT&T Inc. Financial Data Consolidated Balance Sheets Dollars in millions Unaudited Mar. 31, Dec. 31, Assets Current Assets Cash and cash equivalents $ 14,884 $ 5,788 Accounts receivable - net of allowances for doubtful accounts of $699 and $661 15,078 16,794 Prepaid expenses 1,418 1,555 Other current assets 14,347 14,232 Total current assets 45,727 38,369 Property, Plant and Equipment - Net 125, ,899 Goodwill 105, ,207 Licenses 94,617 94,176 Customer Lists and Relationships - Net 13,366 14,243 Other Intangible Assets - Net 8,295 8,441 Investments in Equity Affiliates 1,551 1,674 Other Assets 17,462 16,812 Total Assets $ 411,903 $ 403,821 Liabilities and Stockholders' Equity Current Liabilities Debt maturing within one year $ 12,681 $ 9,832 Accounts payable and accrued liabilities 27,120 31,138 Advanced billing and customer deposits 4,493 4,519 Accrued taxes 3,384 2,079 Dividends payable 3,012 3,008 Total current liabilities 50,690 50,576 Long-Term Debt 120, ,681 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 61,100 60,128 Postemployment benefit obligation 33,404 33,578 Other noncurrent liabilities 21,160 21,748 Total deferred credits and other noncurrent liabilities 115, ,454 Stockholders' Equity Common stock 6,495 6,495 Additional paid-in capital 89,411 89,604 Retained earnings 35,175 34,734 Treasury stock (12,400) (12,659) Accumulated other comprehensive income 5,160 4,961 Noncontrolling interest 1, Total stockholders' equity 124, ,110 Total Liabilities and Stockholders' Equity $ 411,903 $ 403,821

11 AT&T Inc. Financial Data Consolidated Statements of Cash Flows Dollars in millions Unaudited March 31, Operating Activities Net income $ 3,574 $ 3,885 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,127 6,563 Undistributed loss (earnings) from investments in equity affiliates 182 (13) Provision for uncollectible accounts Deferred income tax expense 480 1,346 Net loss (gain) from sale of investments, net of impairments 61 (44) Changes in operating assets and liabilities: Accounts receivable Other current assets 228 1,319 Accounts payable and other accrued liabilities (1,778) (3,990) Equipment installment receivables and related sales Deferred fulfillment costs (436) (542) Retirement benefit funding (140) (140) Other - net (497) (1,355) Total adjustments 5,644 4,015 Net Cash Provided by Operating Activities 9,218 7,900 Investing Activities Capital expenditures: Purchase of property and equipment (5,784) (4,451) Interest during construction (231) (218) Acquisitions, net of cash acquired (162) (165) Dispositions 6 81 Sales of securities, net Net Cash Used in Investing Activities (6,171) (4,308) Financing Activities Net change in short-term borrowings with original maturities of three months or less (1) - Issuance of long-term debt 12,440 5,978 Repayment of long-term debt (3,053) (2,296) Purchase of treasury stock (177) - Issuance of treasury stock Dividends paid (3,009) (2,947) Other (172) 471 Net Cash Provided by Financing Activities 6,049 1,295 Net increase in cash and cash equivalents 9,096 4,887 Cash and cash equivalents beginning of year 5,788 5,121 Cash and Cash Equivalents End of Period $ 14,884 $ 10,008

12 AT&T Inc. Consolidated Supplementary Data Supplementary Financial Data Dollars in millions except per share amounts Unaudited March 31, Percent Capital expenditures Purchase of property and equipment $ 5,784 $ 4, % Interest during construction % Total Capital Expenditures $ 6,015 $ 4, % Dividends Declared per Share $ 0.49 $ % End of Period Common Shares Outstanding (000,000) 6,147 6, % Debt Ratio 51.6% 51.2% 40 BP Total Employees 264, , % Supplementary Operating Data Subscribers and connections in thousands Unaudited March 31, Percent Wireless Subscribers Domestic 134, , % Mexico 12,606 9, % Total Wireless Subscribers 146, , % Total Branded Wireless Subscribers 103,532 98, % Video Connections Domestic 25,060 25, % PanAmericana 8,090 7, % Brazil 5,588 5, % Total Video Connections 38,738 37, % Broadband Connections IP 14,110 13, % DSL 1,585 2, % Total Broadband Connections 15,695 15, % Voice Connections Network Access Lines 13,363 15, % U-verse VoIP Connections 5,858 5, % Total Retail Consumer Voice Connections 19,221 21, % March 31, Percent Wireless Net Additions Domestic 2,081 1, % Mexico % Total Wireless Net Additions 2,714 2, % Total Branded Wireless Net Additions 738 1, % Video Net Additions Domestic (233) (52) - % PanAmericana % Brazil 39 (101) - % Total Video Net Additions (142) (125) %

13 Broadband Net Additions IP % DSL (156) (216) 27.8 % Total Broadband Net Additions 90 (14) - %

14 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 Results Dollars in millions Unaudited March 31, Percent Segment Operating Revenues Wireless service $ 7,929 $ 7, % Fixed strategic services 2,974 2, % Legacy voice and data services - 3,630 4, % Other service and equipment % Wireless equipment - 1,498 1, % Total Segment Operating Revenues 16,848 17, % Segment Operating Expenses Operations and support 10,176 10, % Depreciation and amortization 2,312 2, % Total Segment Operating Expenses 12,488 13, % Segment Operating Income 4,360 4, % Equity in Net Income of Affiliates % Segment Contribution $ 4,360 $ 4, % Segment Operating Income Margin 25.9% 24.4% 150 BP Supplementary Operating Data Subscribers and connections in thousands Unaudited March 31, Percent Business Solutions Wireless Subscribers Postpaid/Branded 50,839 48, % Reseller % Connected Devices 31,439 26, % Total Business Solutions Wireless Subscribers 82,354 75, % Business Solutions IP Broadband Connections % March 31, Percent Business Solutions Wireless Net Additions 1 Postpaid/Branded (125) % Reseller 6 (22) - % Connected Devices 2,553 1, % Total Business Solutions Wireless Net Additions 2,434 1, % Business Solutions Wireless Postpaid Churn % 1.02% 5 BP Business Solutions IP Broadband Net Additions excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts %

15 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. Segment Results Dollars in millions Unaudited March 31, Percent Segment Operating Revenues Video entertainment $ 9,020 $ 8, % High-speed internet 1,941 1, % Legacy voice and data services 1,056 1, % Other service and equipment % Total Segment Operating Revenues 12,623 12, % Segment Operating Expenses Operations and support 9,601 9, % Depreciation and amortization 1,419 1, % Total Segment Operating Expenses 11,020 11, % Segment Operating Income 1,603 1, % Equity in Net Income (Loss) of Affiliates (6) 3 - % Segment Contribution $ 1,597 $ 1, % Segment Operating Income Margin 12.7% 12.6% 10 BP Supplementary Operating Data Subscribers and connections in thousands Unaudited March 31, Percent Linear Video Connections Satellite 21,012 20, % U-verse 4,020 5, % Total Linear Video Connections 25,032 25, % Broadband Connections IP 13,130 12, % DSL 1,164 1, % Total Broadband Connections 14,294 14,291 - % Voice Connections Retail Consumer Switched Access Lines 5,533 6, % U-verse Consumer VoIP Connections 5,470 5, % Total Retail Consumer Voice Connections 11,003 12, % March 31, Percent Linear Video Net Additions 1 Satellite % U-verse (233) (382) 39.0 % Total Linear Video Net Additions (233) (54) - % Broadband Net Additions IP % DSL (127) (181) 29.8 % Total Broadband Net Additions % 1 Includes the impact of customers that migrated to DIRECTV NOW.

16 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. Segment Results Dollars in millions Unaudited March 31, Percent Segment Operating Revenues Service $ 6,609 $ 6, % Equipment 1,131 1, % Total Segment Operating Revenues 7,740 8, % Segment Operating Expenses Operations and support 4,528 4, % Depreciation and amortization % Total Segment Operating Expenses 5,401 5, % Segment Operating Income 2,339 2, % Equity in Net Income of Affiliates % Segment Contribution $ 2,339 $ 2, % Segment Operating Income Margin 30.2% 29.9% 30 BP Supplementary Operating Data Subscribers and connections in thousands Unaudited March 31, Percent Consumer Mobility Subscribers Postpaid 26,510 28, % Prepaid 13,844 12, % Branded 40,354 40, % Reseller 10,549 13, % Connected Devices % Total Consumer Mobility Subscribers 51,864 54, % March 31, Percent Consumer Mobility Net Additions 1 Postpaid (66) (4) - % Prepaid % Branded % Reseller (588) (378) % Connected Devices 19 (26) - % Total Consumer Mobility Net Additions (353) 92 - % Total Churn % 2.11% 31 BP Postpaid Churn % 1.24% -2 BP excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.

17 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. Segment Results Dollars in millions Unaudited March 31, Percent Segment Operating Revenues Video entertainment $ 1,341 $ 1, % Wireless service % Wireless equipment % Total Segment Operating Revenues 1,929 1, % Segment Operating Expenses Operations and support 1,759 1, % Depreciation and amortization % Total Segment Operating Expenses 2,049 1, % Segment Operating Income (Loss) (120) (198) 39.4 % Equity in Net Income (Loss) of Affiliates % Segment Contribution $ (100) $ (184) 45.7 % Segment Operating Income Margin (6.2) % (11.9) % 570 BP Supplementary Operating Data Subscribers and connections in thousands Unaudited March 31, Percent Mexican Wireless Subscribers Postpaid 5,095 4, % Prepaid 7,244 4, % Branded 12,339 8, % Reseller % Total Mexican Wireless Subscribers 12,606 9, % Latin America Satellite Subscribers PanAmericana 8,090 7, % SKY Brazil 5,588 5, % Total Latin America Satellite Subscribers 13,678 12, % March 31, Percent Mexican Wireless Net Additions Postpaid % Prepaid % Branded % Reseller (14) (37) 62.2 % Total Mexican Wireless Net Additions % Latin America Satellite Net Additions 1 PanAmericana % SKY Brazil 39 (101) - % Total Latin America Satellite Net Additions 91 (73) - % 1 In 2017 we updated the methodology used to account for prepaid video connections. The impact of this change is excluded.

18 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 Results Dollars in millions Unaudited March 31, Percent Operating Revenues Service $ 14,538 $ 14, % Equipment 2,629 3, % Total Operating Revenues 17,167 17, % Operating Expenses Operations and support 9,998 10, % Depreciation and amortization 1,997 2, % Total Operating Expenses 11,995 12, % Operating Income 5,172 5, % Operating Income Margin 30.1% 29.4% 70 BP Supplementary Operating Data Subscribers and connections in thousands Unaudited March 31, Percent AT&T Mobility Subscribers Postpaid 77,349 77, % Prepaid 13,844 12, % Branded 91,193 89, % Reseller 10,625 13, % Connected Devices 32,400 27, % Total AT&T Mobility Subscribers 134, , % Domestic Licensed POPs (000,000) % March 31, Percent AT&T Mobility Net Additions Postpaid (191) % Prepaid % Branded % Reseller (582) (400) % Connected Devices 2,572 1, % Total AT&T Mobility Net Additions 2,081 1, % M&A Activity, Partitioned Customers and Other Adjustments (2,723) 24 - % Total Churn % 1.42% 4 BP Branded Churn % 1.63% 8 BP Postpaid Churn % 1.10% 2 BP Postpaid Phone Only Churn % 0.96% -6 BP excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.

19 SUPPLEMENTAL SEGMENT RECONCILIATION Dollars in millions Unaudited March 31, 2017 Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Revenues Business 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, ,339-2,339 International 1,929 1, (120) 20 (100) Segment Total 39,140 26,064 13,076 4,894 8,182 $ 14 $ 8,196 Corporate and Other (27) Acquisition-related items (207) 1,202 (1,409) Certain Significant items - (118) AT&T Inc. $ 39,365 $ 26,374 $ 12,991 $ 6,127 $ 6,864 March 31, 2016 Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution Revenues Business Solutions $ 17,609 $ 10,802 $ 6,807 $ 2,508 $ 4,299 $ - $ 4,299 Entertainment Group 12,658 9,578 3,080 1,488 1, ,595 Consumer Mobility 8,328 4,912 3, ,494-2,494 International 1,667 1, (198) 14 (184) Segment Total 40,262 26,880 13,382 5,195 8,187 $ 17 $ 8,204 Corporate and Other (104) 17 (121) Acquisition-related items (295) 1,351 (1,646) Certain Significant items - (711) AT&T Inc. $ 40,535 $ 26,841 $ 13,694 $ 6,563 $ 7,131

20 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 March 31, 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. 1

21 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 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 March 31, 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% 2

22 Segment EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions March 31, 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 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 EBITDA Total Segment Operating Revenues 1,929 1,667 Segment Operating Income Margin -6.2% -11.9% EBITDA Margin 8.8% 4.7% 3

23 Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin Dollars in millions March 31, 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 March 31, International - Latin America Operating Income $ 77 $ 53 Add: Depreciation and amortization EBITDA 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 March 31, International - Mexico Operating Income $ (197) $ (251) Add: Depreciation and amortization EBITDA (121) (170) Total Operating Revenues 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. 4

24 The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38%. For years prior to 2017, adjustments related to Mexico operations were taxed at the 30% marginal rate for Mexico. Adjusting Items Dollars in millions March 31, Operating Expenses DIRECTV and other video merger integration costs $ 127 $ 173 Mexico merger integration costs 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, Other Merger related interest expense and exchange fees (Gain) loss on sale of assets, impairments and other adjustments Adjustments to Income Before Income Taxes 1, Tax impact of adjustments Adjustments to Net Income $ 1,101 $ 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 March 31, Operating Income $ 6,864 $ 7,131 Adjustments to Operating Expenses 1, 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% 5

25 Adjusted Diluted EPS March 31, Diluted Earnings Per Share (EPS) $ 0.56 $ 0.61 Amortization of intangible assets Merger integration and other items Asset abandonments, impairments and other adjustments (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 1 Includes combined merger integration items, merger-related interest expense and DIRECTV exchange fees. Net Debt to Adjusted EBITDA Net Debt to EBITDA ratios are non-gaap financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. The Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by annualized Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt. Annualized Adjusted EBITDA is calculated by annualizing the year-to-date Adjusted EBITDA. Net Debt to Adjusted EBITDA Dollars in millions Three Months Ended Mar. 31, YTD 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

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. Consumer Mobility Business Solutions Supplemental Operational Measure March 31, 2017 March 31, 2016 Adjustments 1 AT&T Mobility Consumer Mobility Business Solutions Adjustments 1 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) (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, ,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 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 Wireless Equipment Total Operating Revenues 1, ,929 1, ,667 Operating Expenses Operations and support 1, , ,588 Depreciation and amortization Total Operating Expense 1, ,049 1, ,865 Operating Income 77 (197) (120) 53 (251) (198) Equity in Net Income of Affiliates Segment Contribution $ 97 $ (197) $ (100) $ 67 $ (251) $ (184) 7