Form 8-K AT&T INC. For: Jul 24

July 24, 2018 4:14 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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) July 24, 2018

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-8610	43-1301883
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

208 S. Akard St., Dallas, Texas	75202
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code (210) 821-4105

__________________________________

(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 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

The registrant announced on July 24, 2018, its results of operations for the second quarter of 2018. 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 July 24, 2018 reporting financial results for the second quarter ended June 30, 2018.

	99.2	AT&T Inc. selected financial statements and operating data.

	99.3	Discussion and reconciliation of non-GAAP measures.

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: July 24, 2018	By: /s/ Debra L. Dial . Debra L. Dial Senior Vice President and Controller

AT&T Completes Time Warner Acquisition;

Agrees to Acquire AppNexus;

Reports Second-Quarter Results

Consolidated results include 16 days

of Time Warner results for the second quarter

·	Diluted EPS of $0.81 as reported compared to $0.63 in the year-ago quarter

·	Adjusted EPS of $0.91 compared to $0.79 in the year-ago quarter

·	Consolidated revenues of $39.0 billion

·	Cash from operations of $10.2 billion, up 17.5%

·	Capital expenditures of $5.1 billion

·	Free cash flow of $5.1 billion, up 46.4%

Company Updates 2018 Guidance ¹

·	Raising adjusted EPS to high end of $3.50 range

·	Raising free cash flow to high end of $21 billion range (inclusive of all deal and integration costs)

·	Capital Investment of approximately $25 billion; $22 billion net of expected FirstNet reimbursements and vendor financing

Note: AT&T's second-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, July 24, 2018. The webcast and related materials will be available on AT&T's Investor Relations website at https://investors.att.com.

DALLAS, July 24, 2018 — "It was an exciting quarter for AT&T as we completed the acquisition of Time Warner on June 14 and created a modern media company built around premium content, 170 million direct-to-customer relationships, advertising technology and high-speed networks," said Randall Stephenson, AT&T chairman and CEO.²

"Time Warner joins us coming off an impressive second-quarter. Turner turned in solid subscription and advertising revenue growth, Warner Bros. is in high gear with a record number of series in production, and HBO delivered strong subscriber revenue growth.

"Since we closed the Time Warner deal, we've also announced an agreement to acquire ad-tech leader AppNexus, which will be an important step to strengthen our leadership in advanced TV advertising.

"Our goal is to reshape the way media and entertainment work for consumers, and you will see us continue to do exactly that."

AT&T Inc. (NYSE:T) reported solid wireless results in the second quarter, including postpaid phone gains, continued strong prepaid phone growth and stable postpaid churn. On a GAAP basis, service revenue declined; however, on a comparable basis service revenue grew. Including the acquisition of Time Warner in mid-June, AT&T reported consolidated revenue growth on a comparable basis, which offset pressure from its entertainment and business segments, and strong earnings and free cash flow growth.

·	Strong subscriber gains:

o	3.8 million total wireless net adds

§	3.1 million in U.S., driven by connected devices and prepaid

§	756,000 in Mexico

o	219,000 total video net adds (U.S. and Latin America)

·	U.S. wireless results:

o	Service revenue growth on a comparable basis

o	46,000 postpaid phone net adds with continued strong year-over-year improvement

o	Continued prepaid growth with 356,000 phone net adds

o	Nearly 400,000 branded smartphones added to base

o	Second-quarter postpaid phone churn of 0.82%

·	Entertainment Group results:

o	342,000 DIRECTV NOW net adds to reach more than 1.8 million subscribers

o	80,000 total video net adds; total video customer base stable with DIRECTV NOW; AT&T WatchTV launched

o	76,000 IP broadband net adds; 23,000 total broadband net adds; more than 9 million customer locations passed with fiber

o	AdWorks continues double-digit revenue growth

·	Time Warner acquisition closed on June 14; full second-quarter results include:

o	HBO and Turner year-over-year subscription revenue growth

o	Turner ad revenues up 3%

o	Record number of series in production at Warner Bros.

o	166 Primetime Emmy Awards nominations

Consolidated Financial Results

AT&T adopted new U.S. accounting standards as required that deal with revenue recognition (ASC 606), post-employment benefit costs and certain cash receipts on installment receivables. These changes impact the company's income statements and cash flows. With the adoption of ASC 606, the company made a policy decision to record Universal Service Fees (USF) and other regulatory fees on a net basis. The company is providing comparable results in addition to GAAP to help investors better understand the impact on financials from ASC 606 and the policy decision. Historical income statements and cash flows have been recast to show only the impact of the adoption of the other two accounting standards.

The company's consolidated results include 16 days of Time Warner results for the second quarter. Time Warner's total second-quarter results on a historical basis are located on AT&T's Investor Relations website. Pro forma schedules are expected to be filed in August.

AT&T's consolidated revenues for the second quarter totaled $39.0 billion versus $39.8 billion in the year-ago quarter, primarily due to the impact of ASC 606 which included netting of approximately $900 million of USF with operating expenses. On a comparative basis, declines in domestic video and legacy wireline services were offset by adding approximately $1.1 billion from Time Warner net of eliminations and growth in wireless, strategic business services and advertising. On a comparative basis, revenues were $39.9 billion, an increase of 0.2% primarily due to the second-quarter close of the Time Warner acquisition.

Operating expenses were $32.5 billion versus $33.3 billion, primarily due to the netting of USF and other regulatory fee revenues and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $34.0 billion, an increase of about $700 million due to inclusion of Time Warner results, content cost pressure and higher wireless equipment costs partially offset by cost efficiencies.

Versus results from the second quarter of 2017, operating income was $6.5 billion, stable versus the year-ago quarter; and operating income margin was 16.6% versus 16.4%. On a comparative basis, operating income was $5.9 billion and operating income margin was 14.8%. When adjusting for a non-cash actuarial gain on benefit plans, amortization, merger- and integration-related expenses and other items, operating income was $8.2 billion, or $7.7 billion on a comparative basis, versus $8.1 billion in the year-ago quarter and operating income margin was 21.1%, or 19.2% on a comparative basis, versus 20.3% in the year-ago quarter.

Second-quarter net income attributable to AT&T was $5.1 billion, or $0.81 per diluted share, versus $3.9 billion, or $0.63 per diluted share, in the year-ago quarter. Adjusting for a $0.21 non-cash actuarial gain on benefit plans and $0.31 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.91 compared to an adjusted $0.79 in the year-ago quarter, a 15.2% increase.

Cash from operating activities was $10.2 billion, and capital expenditures were $5.1 billion. Capital investment included about $275 million in FirstNet capital costs and reflects about $300 million in FirstNet reimbursements. Free cash flow — cash from operating activities minus capital expenditures — was $5.1 billion for the quarter.

2018 Outlook¹

AT&T expects in 2018:

·	Raising adjusted EPS to high end of the $3.50 range

·	Raising free cash flow to high end of the $21 billion range; inclusive of all deal and integration costs

·	Capital Investment of approximately $25 billion; $22 billion net of expected FirstNet reimbursements and vendor financing

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

² Represents cumulative video-capable D2C relationships across the following services: Postpaid, prepaid and reseller wireless; US and LatAm pay-TV, including DIRECTV NOW; Mexico wireless; and US consumer broadband.

*About AT&T

AT&T Inc. (NYSE: T) is a diversified, global leader in telecommunications, media and entertainment, and technology. It executes in the market under four operating units. WarnerMedia's HBO, Turner and Warner Bros. divisions are world leaders in creating premium content, operate the world's largest TV and film studio, and own a world-class library of entertainment. AT&T Communications provides more than 100 million U.S. consumers with entertainment and communications experiences across TV, mobile and broadband services. Plus, it serves more than 3 million business customers with high-speed, highly secure connectivity and smart solutions. AT&T International provides pay-TV services across 11 countries and territories in Latin America and the Caribbean, and is the fastest growing wireless provider in Mexico, serving consumers and businesses. AT&T ad and analytics provides marketers with innovative, targeted, data-driven advertising solutions around premium video content.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2018 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

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

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

For more information, contact:

Name: Erin McGrath

AT&T Corporate Communications

Phone: 214-862-0651

Email: [email protected]

AT&T Inc.
Financial Data


Consolidated Statements of Income
Dollars in millions except per share amounts	Three Months Ended									Six Months Ended
Unaudited	June 30,									June 30,
	2018			2017 As Adjusted			Percent Change			2018			2017 As Adjusted			Percent Change
Operating Revenues
Service	$	33,773		$	36,538			-7.6	%	$	67,419		$	72,994			-7.6	%
Equipment		4,080			3,299			23.7	%		8,472			6,208			36.5	%
Media		1,133			-			-	%		1,133			-			-	%
Total Operating Revenues		38,986			39,837			-2.1	%		77,024			79,202			-2.7	%

Operating Expenses
Cost of revenues
Equipment		4,377			4,138			5.8	%		9,225			7,986			15.5	%
Broadcast, programming and operations		5,449			4,898			11.2	%		10,615			9,872			7.5	%
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		7,632			9,569			-20.2	%		15,564			18,857			-17.5	%
Selling, general and administrative		8,684			8,559			1.5	%		16,581			17,331			-4.3	%
Depreciation and amortization		6,378			6,147			3.8	%		12,372			12,274			0.8	%
Total Operating Expenses		32,520			33,311			-2.4	%		64,357			66,320			-3.0	%
Operating Income		6,466			6,526			-0.9	%		12,667			12,882			-1.7	%
Interest Expense		(2,023	)		(1,395	)		45.0	%		(3,794	)		(2,688	)		41.1	%
Equity in Net Income (Loss) of Affiliates		(16	)		14			-	%		(7	)		(159	)		95.6	%
Other Income (Expense) - Net		2,353			925			-	%		4,055			1,413			-	%
Income Before Income Taxes		6,780			6,070			11.7	%		12,921			11,448			12.9	%
Income Tax Expense		1,532			2,056			-25.5	%		2,914			3,860			-24.5	%
Net Income		5,248			4,014			30.7	%		10,007			7,588			31.9	%
Less: Net Income Attributable to Noncontrolling Interest		(116	)		(99	)		-17.2	%		(213	)		(204	)		-4.4	%
Net Income Attributable to AT&T	$	5,132			3,915			31.1	%		9,794			7,384			32.6	%

Basic Earnings Per Share Attributable to AT&T	$	0.81			0.63			28.6	%		1.56			1.19			31.1	%
Weighted Average Common Shares Outstanding (000,000)		6,351			6,165			3.0	%		6,257			6,166			1.5	%

Diluted Earnings Per Share Attributable to AT&T	$	0.81			0.63			28.6	%		1.56			1.19			31.1	%
Weighted Average Common Shares Outstanding with Dilution (000,000)		6,374			6,184			3.1	%		6,277			6,185			1.5	%

AT&T Inc.
Financial Data


Consolidated Balance Sheets
Dollars in millions
Unaudited	Jun. 30,			Dec. 31,
	2018			2017
Assets
Current Assets
Cash and cash equivalents	$	13,523		$	50,498
Accounts receivable - net of allowances for doubtful accounts of $804 and $663		25,492			16,522
Prepaid expenses		1,966			1,369
Other current assets		14,305			10,757
Total current assets		55,286			79,146
Noncurrent Inventories and Theatrical Film and Television Production Costs		5,849			-
Property, Plant and Equipment - Net		129,556			125,222
Goodwill		143,499			105,449
Licenses		96,802			96,136
Trademarks and Trade Names - Net		24,440			7,021
Distribution Networks		17,403			-
Other Intangible Assets - Net		30,800			11,119
Investments in and Advances to Equity Affiliates		8,007			1,560
Other Assets		23,734			18,444
Total Assets	$	535,376		$	444,097

Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	21,672		$	38,374
Accounts payable and accrued liabilities		35,488			34,470
Advanced billing and customer deposits		5,914			4,213
Accrued taxes		1,889			1,262
Dividends payable		3,630			3,070
Total current liabilities		68,593			81,389
Long-Term Debt		168,495			125,972
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		59,665			43,207
Postemployment benefit obligation		29,476			31,775
Other noncurrent liabilities		25,017			19,747
Total deferred credits and other noncurrent liabilities		114,158			94,729
Stockholders' Equity
Common stock		7,621			6,495
Additional paid-in capital		125,960			89,563
Retained earnings		56,555			50,500
Treasury stock		(12,872	)		(12,714	)
Accumulated other comprehensive income		5,716			7,017
Noncontrolling interest		1,150			1,146
Total stockholders' equity		184,130			142,007
Total Liabilities and Stockholders' Equity	$	535,376		$	444,097

AT&T Inc.
Financial Data


Consolidated Statements of Cash Flows
Dollars in millions	Six Months Ended
Unaudited	June 30,
	2018			2017 As Adjusted
Operating Activities
Net income	$	10,007		$	7,588
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,372			12,274
Amortization of film and television costs		168			-
Undistributed earnings from investments in equity affiliates		235			167
Provision for uncollectible accounts		808			795
Deferred income tax expense		2,032			964
Net (gain) loss from sale of investments, net of impairments		(29	)		12
Actuarial (gain) loss on pension and postretirement benefits		(2,726	)		(259	)
Changes in operating assets and liabilities:
Accounts receivable		233			119
Other current assets, inventories and theatrical file and television production costs		1,039			470
Accounts payable and other accrued liabilities		(3,890	)		(2,761	)
Equipment installment receivables and related sales		490			525
Deferred customer contract acquisition and fulfillment costs		(1,725	)		(796	)
Retirement benefit funding		(280	)		(280	)
Other - net		442			(1,148	)
Total adjustments		9,169			10,082
Net Cash Provided by Operating Activities		19,176			17,670

Investing Activities
Capital expenditures:
Purchase of property and equipment		(10,959	)		(10,750	)
Interest during construction		(267	)		(473	)
Acquisitions, net of cash acquired		(40,715	)		1,224
Dispositions		59			51
(Purchases) sales of securities, net		(218	)		169
Advances to and investments in equity affiliates, net		(1,035	)		-
Cash collections of deferred purchase price		500			382
Net Cash Used in Investing Activities		(52,635	)		(9,397	)

Financing Activities
Net change in short-term borrowings with original maturities of three months or less		2,992			(2	)
Issuance of other short-term borrowings		4,839			-
Issuance of long-term debt		26,478			24,115
Repayment of long-term debt		(30,212	)		(6,118	)
Purchase of treasury stock		(564	)		(458	)
Issuance of treasury stock		12			24
Dividends paid		(6,144	)		(6,021	)
Other		(1,121	)		77
Net Cash (Used in) Provided by Financing Activities		(3,720	)		11,617
Net (decrease) increase in cash and cash equivalents and restricted cash		(37,179	)		19,890
Cash and cash equivalents and restricted cash beginning of year		50,932			5,935
Cash and Cash Equivalents and Restricted Cash End of Period	$	13,753		$	25,825

AT&T Inc.
Consolidated Supplementary Data


Supplementary Financial Data
Dollars in millions except per share amounts	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,							Percent
	2018			2017			Change			2018				2017			Change
Capital expenditures
Purchase of property and equipment	$	5,002		$	4,966			0.7	%	$	10,959			$	10,750			1.9	%
Interest during construction		106			242			-56.2	%		267				473			-43.6	%
Total Capital Expenditures	$	5,108		$	5,208			-1.9	%	$	11,226			$	11,223			-	%

Dividends Declared per Share	$	0.50		$	0.49			2.0	%	$	1.00			$	0.98			2.0	%

End of Period Common Shares Outstanding (000,000)											7,261				6,140			18.3	%
Debt Ratio											50.8		%		53.3	%		-250	BP
Total Employees											273,210				260,480			4.9	%


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited										June 30,							Percent
											2018				2017		Change
Wireless Subscribers
Domestic											146,889				136,102			7.9	%
Mexico											16,398				13,082			25.3	%
Total Wireless Subscribers											163,287				149,184			9.5	%

Total Branded Wireless Subscribers											109,806				104,022			5.6	%

Video Connections
Domestic											25,473				25,200			1.1	%
Latin America											13,713				13,622			0.7	%
Total Video Connections											39,186				38,822			0.9	%

Broadband Connections
IP											14,709				14,234			3.3	%
DSL											1,063				1,452			-26.8	%
Total Broadband Connections											15,772				15,686			0.5	%

Voice Connections
Network Access Lines											10,832				12,791			-15.3	%
U-verse VoIP Connections											5,449				5,853			-6.9	%
Total Retail Voice Connections											16,281				18,644			-12.7	%


	Three Months Ended									Six Months Ended
	June 30,						Percent			June 30,							Percent
		2018			2017		Change				2018				2017		Change
Wireless Net Additions
Domestic		3,064			2,298			33.3	%		5,694				4,376			30.1	%
Mexico		756			476			58.8	%		1,299				1,109			17.1	%
Total Wireless Net Additions		3,820			2,774			37.7	%		6,993				5,485			27.5	%

Total Branded Wireless Net Additions		1,280			904			41.6	%		2,138				1,639			30.4	%

Video Net Additions
Domestic		79			(199	)		-	%		203				(360	)		-	%
Latin America		140			(56	)		-	%		125				35			-	%
Total Video Net Additions		219			(255	)		-	%		328				(325	)		-	%

Broadband Net Additions
IP		72			124			-41.9	%		222				370			-40.0	%
DSL		(75	)		(133	)		43.6	%		(169	)			(289	)		41.5	%
Total Broadband Net Additions		(3	)		(9	)		66.7	%		53				81			-34.6	%

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 provide voice and data services, including high-speed internet, and video services.

Segment Results
Dollars in millions	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,						Percent
	2018			2017			Change			2018			2017			Change
Segment Operating Revenues
Service	$	11,853		$	12,467			-4.9	%	$	23,465		$	24,932			-5.9	%
Equipment		3,016			2,624			14.9	%		6,390			4,965			28.7	%
Total Segment Operating Revenues		14,869			15,091			-1.5	%		29,855			29,897			-0.1	%

Segment Operating Expenses
Operations and support		8,085			8,636			-6.4	%		16,609			17,196			-3.4	%
Depreciation and amortization		1,806			1,716			5.2	%		3,613			3,432			5.3	%
Total Segment Operating Expenses		9,891			10,352			-4.5	%		20,222			20,628			-2.0	%
Segment Operating Income		4,978			4,739			5.0	%		9,633			9,269			3.9	%
Equity in Net Income of Affiliates		-			-			-	%		-			-			-	%
Segment Contribution	$	4,978		$	4,739			5.0	%	$	9,633		$	9,269			3.9	%

Segment Operating Income Margin		33.5	%		31.4	%		210	BP		32.3	%		31.0	%		130	BP


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited										June 30,						Percent
											2018			2017		Change
Consumer Mobility Subscribers
Postpaid											65,326			65,570			-0.4	%
Prepaid											15,376			14,187			8.4	%
Branded											80,702			79,757			1.2	%
Reseller											8,484			10,182			-16.7	%
Total Consumer Mobility Subscribers											89,186			89,939			-0.8	%


	Three Months Ended									Six Months Ended
	June 30,						Percent			June 30,						Percent
		2018			2017		Change				2018			2017		Change
Consumer Mobility Net Additions
Postpaid		(49	)		(28	)		-75.0	%		(113	)		(310	)		63.5	%
Prepaid		356			267			33.3	%		548			549			-0.2	%
Branded		307			239			28.5	%		435			239			82.0	%
Reseller		(451	)		(364	)		-23.9	%		(841	)		(951	)		11.6	%
Total Consumer Mobility Net Additions		(144	)		(125	)		-15.2	%		(406	)		(712	)		43.0	%

BUSINESS SOLUTIONS

The Business Solutions segment provides services to business customers, including multinational companies; governmental and wholesale customers. 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 provide a complete communications solution to our business customers.

Segment Results
Dollars in millions	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,						Percent
	2018			2017			Change			2018			2017			Change
Segment Operating Revenues
Wireless service	$	1,829		$	2,004			-8.7	%	$	3,620		$	4,007			-9.7	%
Strategic services		3,039			2,958			2.7	%		6,109			5,862			4.2	%
Legacy voice and data services		2,723			3,423			-20.4	%		5,561			6,971			-20.2	%
Other service and equipment		888			922			-3.7	%		1,727			1,800			-4.1	%
Wireless equipment		584			360			62.2	%		1,162			648			79.3	%
Total Segment Operating Revenues		9,063			9,667			-6.2	%		18,179			19,288			-5.7	%

Segment Operating Expenses
Operations and support		5,616			6,053			-7.2	%		11,210			12,051			-7.0	%
Depreciation and amortization		1,487			1,483			0.3	%		2,945			2,943			0.1	%
Total Segment Operating Expenses		7,103			7,536			-5.7	%		14,155			14,994			-5.6	%
Segment Operating Income		1,960			2,131			-8.0	%		4,024			4,294			-6.3	%
Equity in Net Income (Loss) of Affiliates		1			-			-	%		-			-			-	%
Segment Contribution	$	1,961		$	2,131			-8.0	%	$	4,024		$	4,294			-6.3	%

Segment Operating Income Margin		21.6	%		22.0	%		-40	BP		22.1	%		22.3	%		-20	BP


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited										June 30,						Percent
											2018			2017		Change
Business Solutions Wireless Subscribers
Postpaid											12,046			11,432			5.4	%
Prepaid											841			-			-	%
Branded											12,887			11,432			12.7	%
Reseller											98			73			34.2	%
Connected Devices											44,718			34,658			29.0	%
Total Business Mobility Subscribers											57,703			46,163			25.0	%

Business Solutions IP Broadband Connections											1,017			992			2.5	%


	Three Months Ended									Six Months Ended
	June 30,						Percent			June 30,						Percent
		2018			2017		Change				2018			2017		Change
Business Solutions Wireless Net Additions
Postpaid		122			171			-28.7	%		235			259			-9.3	%
Prepaid		97			-			-	%		146			-			-	%
Branded		219			171			28.1	%		381			259			47.1	%
Reseller		7			(4	)		-	%		9			1			-	%
Connected Devices		2,982			2,256			32.2	%		5,710			4,828			18.3	%
Total Business Solutions Wireless Net Additions		3,208			2,423			32.4	%		6,100			5,088			19.9	%

Business Solutions IP Broadband Net Additions		(4	)		12			-	%		(8	)		16			-	%

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.

Segment Results
Dollars in millions	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,						Percent
	2018			2017			Change			2018			2017			Change
Segment Operating Revenues
Video entertainment	$	8,331		$	9,153			-9.0	%	$	16,690		$	18,173			-8.2	%
High-speed internet		1,981			1,927			2.8	%		3,859			3,868			-0.2	%
Legacy voice and data services		785			981			-20.0	%		1,604			2,012			-20.3	%
Other service and equipment		553			600			-7.8	%		1,074			1,209			-11.2	%
Total Segment Operating Revenues		11,650			12,661			-8.0	%		23,227			25,262			-8.1	%

Segment Operating Expenses
Operations and support		8,852			9,561			-7.4	%		17,791			19,166			-7.2	%
Depreciation and amortization		1,346			1,458			-7.7	%		2,658			2,878			-7.6	%
Total Segment Operating Expenses		10,198			11,019			-7.5	%		20,449			22,044			-7.2	%
Segment Operating Income		1,452			1,642			-11.6	%		2,778			3,218			-13.7	%
Equity in Net Income (Loss) of Affiliates		(20	)		(12	)		-66.7	%		(11	)		(18	)		38.9	%
Segment Contribution	$	1,432		$	1,630			-12.1	%	$	2,767		$	3,200			-13.5	%

Segment Operating Income Margin		12.5	%		13.0	%		-50	BP		12.0	%		12.7	%		-70	BP


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited										June 30,						Percent
											2018			2017		Change
Video Connections
Satellite											19,984			20,856			-4.2	%
U-verse											3,656			3,825			-4.4	%
DIRECTV NOW											1,809			491			-	%
Total Video Connections											25,449			25,172			1.1	%

Broadband Connections
IP											13,692			13,242			3.4	%
DSL											763			1,060			-28.0	%
Total Broadband Connections											14,455			14,302			1.1	%

Voice Connections
Retail Consumer Switched Access Lines											4,333			5,257			-17.6	%
U-verse Consumer VoIP Connections											4,950			5,439			-9.0	%
Total Retail Consumer Voice Connections											9,283			10,696			-13.2	%


	Three Months Ended									Six Months Ended
	June 30,						Percent			June 30,						Percent
		2018			2017		Change				2018			2017		Change
Video Net Additions¹
Satellite		(286	)		(156	)		-83.3	%		(474	)		(156	)		-	%
U-verse		24			(195	)		-	%		25			(428	)		-	%
DIRECTV NOW		342			152			-	%		654			224			-	%
Total Video Net Additions		80			(199	)		-	%		205			(360	)		-	%

Broadband Net Additions
IP		76			112			-32.1	%		230			354			-35.0	%
DSL		(53	)		(104	)		49.0	%		(125	)		(231	)		45.9	%
Total Broadband Net Additions		23			8			-	%		105			123			-14.6	%
¹ Includes the impact of customers that migrated to DIRECTV NOW.

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	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,							Percent
	2018			2017			Change				2018			2017			Change
Segment Operating Revenues
Video entertainment	$	1,254		$	1,361			-7.9	%		$	2,608		$	2,702			-3.5	%
Wireless service		417			535			-22.1	%			821			1,010			-18.7	%
Wireless equipment		280			130			115.4	%			547			243			125.1	%
Total Segment Operating Revenues		1,951			2,026			-3.7	%			3,976			3,955			0.5	%

Segment Operating Expenses
Operations and support		1,803			1,772			1.7	%			3,607			3,531			2.2	%
Depreciation and amortization		313			311			0.6	%			645			601			7.3	%
Total Segment Operating Expenses		2,116			2,083			1.6	%			4,252			4,132			2.9	%
Segment Operating Income (Loss)		(165	)		(57	)		-	%			(276	)		(177	)		-55.9	%
Equity in Net Income of Affiliates		15			25			-40.0	%			15			45			-66.7	%
Segment Contribution	$	(150	)	$	(32	)		-	%		$	(261	)	$	(132	)		-97.7	%

Segment Operating Income Margin		(8.5	) %		(2.8	) %		-570	BP			(6.9	) %		(4.5	) %		-240	BP


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited										June 30,							Percent
												2018			2017		Change
Mexican Wireless Subscribers
Postpaid												5,749			5,187			10.8	%
Prepaid												10,468			7,646			36.9	%
Branded												16,217			12,833			26.4	%
Reseller												181			249			-27.3	%
Total Mexican Wireless Subscribers												16,398			13,082			25.3	%

Latin America Satellite Subscribers
Total Latin America Satellite Subscribers												13,713			13,622			0.7	%


	Three Months Ended									Six Months Ended
	June 30,						Percent			June 30,							Percent
		2018			2017		Change					2018			2017		Change
Mexican Wireless Net Additions
Postpaid		142			92			54.3	%			251			222			13.1	%
Prepaid		611			402			52.0	%			1,070			919			16.4	%
Branded		753			494			52.4	%			1,321			1,141			15.8	%
Reseller		3			(18	)		-	%			(22	)		(32	)		31.3	%
Total Mexican Wireless Net Additions		756			476			58.8	%			1,299			1,109			17.1	%

Latin America Satellite Net Additions
Total Latin America Satellite Net Additions		140			(56	)		-	%			125			35			-	%

Warner Media

The Warner Media segment consists of the results of Time Warner Inc. after we completed our acquisition June 14, 2018. Our Warner Media segment operating income margin was 35.4% for the 16-day period ended June 30, 2018. Consistent with our past practice, many of the adjustment from the application of purchase accounting rules required under GAAP have not been allocated to the business unit, instead they are reported as acquisition-related items. The Warner Media segment consists of the following businesses: Turner, consisting principally of cable networks and digital media properties; Home Box Office (HBO), consisting principally of premium pay television and OTT services; and Warner Bros., consisting principally of television, feature film, home video and game production and distribution.

Segment Results
Dollars in millions	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,						Percent
	2018			2017			Change			2018			2017			Change
Segment Operating Revenues
Content	$	487		$	-			-	%	$	487		$	-			-	%
Subscription		591			-			-	%		591			-			-	%
Advertising		208									208
Other		51			-			-	%		51			-			-	%
Intrasegment eliminations		(62	)								(62	)
Total Segment Operating Revenues		1,275			-			-	%		1,275			-			-	%

Segment Operating Expenses
Operations and support		794			-			-	%		794			-			-	%
Depreciation and amortization		30			-			-	%		30			-			-	%
Total Segment Operating Expenses		824			-			-	%		824			-			-	%
Segment Operating Income (Loss)		451			-			-	%		451			-			-	%
Equity in Net Income of Affiliates		(6	)		-			-	%		(6	)		-			-	%
Segment Contribution	$	445		$	-			-	%	$	445		$	-			-	%
Segment Operating Income Margin		35.4	%		-	%		-	BP		35.4	%		-	%		-	BP

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	Three Months Ended									Six Months Ended
Unaudited	June 30,						Percent			June 30,							Percent
	2018			2017			Change				2018			2017			Change
Operating Revenues
Service	$	13,682		$	14,471			-5.5	%		$	27,085		$	28,939			-6.4	%
Equipment		3,600			2,984			20.6	%			7,552			5,613			34.5	%
Total Operating Revenues		17,282			17,455			-1.0	%			34,637			34,552			0.2	%

Operating Expenses
Operations and support		9,663			10,091			-4.2	%			19,765			19,976			-1.1	%
Depreciation and amortization		2,113			1,988			6.3	%			4,208			3,980			5.7	%
Total Operating Expenses		11,776			12,079			-2.5	%			23,973			23,956			0.1	%
Operating Income	$	5,506		$	5,376			2.4	%		$	10,664		$	10,596			0.6	%

Operating Income Margin		31.9	%		30.8	%		110	BP			30.8	%		30.7	%		10	BP


Supplementary Operating Data
Subscribers and connections in thousands
Unaudited										June 30,							Percent
												2018			2017		Change
AT&T Mobility Subscribers
Postpaid												77,372			77,002			0.5	%
Prepaid												16,217			14,187			14.3	%
Branded												93,589			91,189			2.6	%
Reseller												8,582			10,255			-16.3	%
Connected Devices												44,718			34,658			29.0	%
Total AT&T Mobility Subscribers												146,889			136,102			7.9	%

Domestic Licensed POPs (000,000)												329			326			0.9	%


	Three Months Ended									Six Months Ended
	June 30,						Percent				June 30,						Percent
		2018			2017		Change					2018			2017		Change
AT&T Mobility Net Additions
Postpaid		73			143			-49.0	%			122			(51	)		-	%
Prepaid		453			267			69.7	%			694			549			26.4	%
Branded		526			410			28.3	%			816			498			63.9	%
Reseller		(444	)		(368	)		-20.7	%			(832	)		(950	)		12.4	%
Connected Devices		2,982			2,256			32.2	%			5,710			4,828			18.3	%
Total AT&T Mobility Net Additions		3,064			2,298			33.3	%			5,694			4,376			30.1	%
M&A Activity, Partitioned Customers and Other Adjustments		(7	)		-			-	%			(6	)		(2,723	)		99.8	%

Branded Churn		1.50	%		1.57	%		-7	BP			1.57	%		1.64	%		-7	BP
Postpaid Churn		1.02	%		1.01	%		1	BP			1.04	%		1.06	%		-2	BP
Postpaid Phone Only Churn		0.82	%		0.79	%		3	BP			0.83	%		0.84	%		-1	BP

SUPPLEMENTAL SEGMENT RECONCILIATION


Three Months Ended
Dollars in millions
Unaudited

June 30, 2018
	Revenues			Operations and Support Expenses			EBITDA			Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates			Segment Contribution
Consumer Mobility	$	14,869		$	8,085		$	6,784		$	1,806	$	4,978		$	-		$	4,978
Business Solutions		9,063			5,616			3,447			1,487		1,960			1			1,961
Entertainment Group		11,650			8,852			2,798			1,346		1,452			(20	)		1,432
International		1,951			1,803			148			313		(165	)		15			(150	)
WarnerMedia		1,275			794			481			30		451			(6	)		445
Segment Total		38,808			25,150			13,658			4,982		8,676		$	(10	)	$	8,666
Corporate and Other		319			660			(341	)		118		(459	)
Acquisition-related items		-			321			(321	)		1,278		(1,599	)
Certain Significant items		-			152			(152	)		-		(152	)
Eliminations		(141	)		(141	)		-			-		-
AT&T Inc.	$	38,986		$	26,142		$	12,844		$	6,378	$	6,466


June 30, 2017
	Revenues			Operations and Support Expenses			EBITDA			Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates			Segment Contribution
Consumer Mobility	$	15,091		$	8,636		$	6,455		$	1,716	$	4,739		$	-		$	4,739
Business Solutions		9,667			6,053			3,614			1,483		2,131			-			2,131
Entertainment Group		12,661			9,561			3,100			1,458		1,642			(12	)		1,630
International		2,026			1,772			254			311		(57	)		25			(32	)
Segment Total		39,445			26,022			13,423			4,968		8,455		$	13		$	8,468
Corporate and Other		392			766			(374	)		9		(383	)
Acquisition-related items		-			281			(281	)		1,170		(1,451	)
Certain Significant items		-			95			(95	)		-		(95	)
AT&T Inc.	$	39,837		$	27,164		$	12,673		$	6,147	$	6,526



Six Months Ended
Dollars in millions
Unaudited

June 30, 2018
	Revenues			Operations and Support Expenses			EBITDA			Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates			Segment Contribution
Consumer Mobility	$	29,855		$	16,609		$	13,246		$	3,613	$	9,633		$	-		$	9,633
Business Solutions		18,179			11,210			6,969			2,945		4,024			-			4,024
Entertainment Group		23,227			17,791			5,436			2,658		2,778			(11	)		2,767
International		3,976			3,607			369			645		(276	)		15			(261	)
WarnerMedia		1,275			794			481			30		451			(6	)		445
Segment Total		76,512			50,011			26,501			9,891		16,610		$	(2	)	$	16,608
Corporate and Other		653			1,395			(742	)		141		(883	)
Acquisition-related items		-			388			(388	)		2,340		(2,728	)
Certain Significant items		-			332			(332	)		-		(332	)
Eliminations		(141	)		(141	)		-			-		-
AT&T Inc.	$	77,024		$	51,985		$	25,039		$	12,372	$	12,667


June 30, 2017
	Revenues			Operations and Support Expenses			EBITDA			Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates			Segment Contribution
Consumer Mobility	$	29,897		$	17,196		$	12,701		$	3,432	$	9,269		$	-		$	9,269
Business Solutions		19,288			12,051			7,237			2,943		4,294			-			4,294
Entertainment Group		25,262			19,166			6,096			2,878		3,218			(18	)		3,200
International		3,955			3,531			424			601		(177	)		45			(132	)
Segment Total		78,402			51,944			26,458			9,854		16,604		$	27		$	16,631
Corporate and Other		800			1,637			(837	)		48		(885	)
Acquisition-related items		-			488			(488	)		2,372		(2,860	)
Certain Significant items		-			(23	)		23			-		23
AT&T Inc.	$	79,202		$	54,046		$	25,156		$	12,274	$	12,882

As a supplemental discussion of our operating results, we are providing results under the comparative historical accounting method prior to our adoption of ASC 606 and other accounting changes.

SUPPLEMENTAL INCOME STATEMENT

Supplemental Consolidated Statements of Income
Dollars in millions except per share amounts	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Operating Revenues
Service	$	33,773		$	(1,390	)	$	35,163		$	36,538			-3.8	%
Equipment		4,080			469			3,611			3,299			9.5	%
Media		1,133			(2	)		1,135			-			-	%
Total Operating Revenues		38,986			(923	)		39,909			39,837			0.2	%

Operating Expenses
Cost of revenues
Equipment		4,377			-			4,377			4,138			5.8	%
Broadcast, programming and operations		5,449			-			5,449			4,898			11.2	%
Other cost of revenues (exclusive of depreciation and amortization shown separately below)		7,632			(903	)		8,535			9,569			-10.8	%
Selling, general and administrative		8,684			(583	)		9,267			8,559			8.3	%
Depreciation and amortization		6,378			-			6,378			6,147			3.8	%
Total Operating Expenses		32,520			(1,486	)		34,006			33,311			2.1	%
Operating Income		6,466			563			5,903			6,526			-9.5	%
Interest Expense		(2,023	)		-			(2,023	)		(1,395	)		45.0	%
Equity in Net Income (Loss) of Affiliates		(16	)		-			(16	)		14			-	%
Other Income (Expense) - Net		2,353			-			2,353			925			-	%
Income Before Income Taxes		6,780			563			6,217			6,070			2.4	%
Income Tax Expense		1,532			138			1,394			2,056			-32.2	%
Net Income		5,248			425			4,823			4,014			20.2	%
Less: Net Income Attributable to Noncontrolling Interest		(116	)		(6	)		(110	)		(99	)		-11.1	%
Net Income Attributable to AT&T	$	5,132		$	419		$	4,713		$	3,915			20.4	%


Basic Earnings Per Share Attributable to AT&T	$	0.81		$	0.07		$	0.74		$	0.63			17.5	%
Weighted Average Common Shares Outstanding (000,000)		6,351			-			6,351			6,165			3.0	%

Diluted Earnings Per Share Attributable to AT&T	$	0.81		$	0.07		$	0.74		$	0.63			17.5	%
Weighted Average Common Shares Outstanding with Dilution (000,000)		6,374			-			6,374			6,184			3.1	%

SUPPLEMENTAL CONSUMER MOBILITY

Supplemental Segment Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Segment Operating Revenues
Service	$	11,853		$	(603	)	$	12,456		$	12,467			-0.1	%
Equipment		3,016			291			2,725			2,624			3.8	%
Total Segment Operating Revenues		14,869			(312	)		15,181			15,091			0.6	%

Segment Operating Expenses
Operations and support		8,085			(571	)		8,656			8,636			0.2	%
EBITDA		6,784			259			6,525			6,455			1.1	%
Depreciation and amortization		1,806			-			1,806			1,716			5.2	%
Total Segment Operating Expenses		9,891			(571	)		10,462			10,352			1.1	%
Segment Operating Income		4,978			259			4,719			4,739			-0.4	%
Equity in Net Income of Affiliates		-			-			-			-			-	%
Segment Contribution	$	4,978		$	259		$	4,719		$	4,739			-0.4	%

Operating Income Margin		33.5	%					31.1	%		31.4	%		-30	BP
EBITDA Margin		45.6	%					43.0	%		42.8	%		20	BP
EBITDA Service Margin		57.2	%					52.4	%		51.8	%		60	BP

SUPPLEMENTAL BUSINESS SOLUTIONS

Supplemental Segment Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Segment Operating Revenues
Wireless service	$	1,829		$	(209	)	$	2,038		$	2,004			1.7	%
Strategic services		3,039			(2	)		3,041			2,958			2.8	%
Legacy voice and data services		2,723			(251	)		2,974			3,423			-13.1	%
Other service and equipment		888			(70	)		958			922			3.9	%
Wireless equipment		584			160			424			360			17.8	%
Total Segment Operating Revenues		9,063			(372	)		9,435			9,667			-2.4	%

Segment Operating Expenses
Operations and support		5,616			(443	)		6,059			6,053			0.1	%
EBITDA		3,447			71			3,376			3,614			-6.6	%
Depreciation and amortization		1,487			-			1,487			1,483			0.3	%
Total Segment Operating Expenses		7,103			(443	)		7,546			7,536			0.1	%
Segment Operating Income		1,960			71			1,889			2,131			-11.4	%
Equity in Net Income of Affiliates		1			-			1			-			-	%
Segment Contribution	$	1,961		$	71		$	1,890		$	2,131			-11.3	%

Operating Income Margin		21.6	%					20.0	%		22.0	%		-200	BP
EBITDA Margin		38.0	%					35.8	%		37.4	%		-160	BP

SUPPLEMENTAL ENTERTAINMENT GROUP

Supplemental Segment Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Segment Operating Revenues
Video entertainment	$	8,331		$	(107	)	$	8,438		$	9,153			-7.8	%
High-speed internet		1,981			-			1,981			1,927			2.8	%
Legacy voice and data services		785			(33	)		818			981			-16.6	%
Other service and equipment		553			(66	)		619			600			3.2	%
Total Segment Operating Revenues		11,650			(206	)		11,856			12,661			-6.4	%

Segment Operating Expenses
Operations and support		8,852			(425	)		9,277			9,561			-3.0	%
EBITDA		2,798			219			2,579			3,100			-16.8	%
Depreciation and amortization		1,346			-			1,346			1,458			-7.7	%
Total Segment Operating Expenses		10,198			(425	)		10,623			11,019			-3.6	%
Segment Operating Income		1,452			219			1,233			1,642			-24.9	%
Equity in Net Income (Loss) of Affiliates		(20	)		-			(20	)		(12	)		-66.7	%
Segment Contribution	$	1,432		$	219		$	1,213		$	1,630			-25.6	%

Operating Income Margin		12.5	%					10.4	%		13.0	%		-260	BP
EBITDA Margin		24.0	%					21.8	%		24.5	%		-270	BP

SUPPLEMENTAL INTERNATIONAL

Supplemental Segment Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Segment Operating Revenues
Video entertainment	$	1,254		$	-		$	1,254		$	1,361			-7.9	%
Wireless service		417			(40	)		457			535			-14.6	%
Wireless equipment		280			18			262			130			-	%
Total Segment Operating Revenues		1,951			(22	)		1,973			2,026			-2.6	%

Segment Operating Expenses
Operations and support		1,803			(41	)		1,844			1,772			4.1	%
EBITDA		148			19			129			254			-49.2	%
Depreciation and amortization		313			-			313			311			0.6	%
Total Segment Operating Expenses		2,116			(41	)		2,157			2,083			3.6	%
Segment Operating Income (Loss)		(165	)		19			(184	)		(57	)		-	%
Equity in Net Income of Affiliates		15			-			15			25			-40.0	%
Segment Contribution	$	(150	)	$	19		$	(169	)	$	(32	)		-	%

Operating Income Margin		-8.5	%					-9.3	%		-2.8	%		-650	BP
EBITDA Margin		7.6	%					6.5	%		12.5	%		-600	BP

SUPPLEMENTAL AT&T MOBILITY

Supplemental Operating Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Operating Revenues
Service	$	13,682		$	(813	)	$	14,495		$	14,471			0.2	%
Equipment		3,600			451			3,149			2,984			5.5	%
Total Operating Revenues		17,282			(362	)		17,644			17,455			1.1	%

Operating Expenses
Operations and support		9,663			(670	)		10,333			10,091			2.4	%
EBITDA		7,619			308			7,311			7,364			-0.7	%
Depreciation and amortization		2,113			-			2,113			1,988			6.3	%
Total Operating Expenses		11,776			(670	)		12,446			12,079			3.0	%
Operating Income	$	5,506		$	308		$	5,198		$	5,376			-3.3	%

Operating Income Margin		31.9	%					29.5	%		30.8	%		-130	BP
EBITDA Margin		44.1	%					41.4	%		42.2	%		-80	BP
EBITDA Service Margin		55.7	%					50.4	%		50.9	%		-50	BP

SUPPLEMENTAL LATIN AMERICA

Supplemental Latin America Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Operating Revenues
Video entertainment	$	1,254		$	-		$	1,254		$	1,361			-7.9	%
Total Operating Revenues		1,254			-			1,254			1,361			-7.9	%

Operating Expenses
Operations and support		1,016			(40	)		1,056			998			5.8	%
EBITDA		238			40			198			363			-45.5	%
Depreciation and amortization		186			-			186			222			-16.2	%
Total Operating Expenses		1,202			(40	)		1,242			1,220			1.8	%
Operating Income (Loss)		52			40			12			141			-91.5	%
Equity in Net Income (Loss) of Affiliates		15			-			15			25			-40.0	%
Operating Contribution	$	67		$	40		$	27		$	166			-83.7	%

Operating Income Margin		4.1	%					1.0	%		10.4	%		-940	BP
EBITDA Margin		19.0	%					15.8	%		26.7	%		-1,090	BP

SUPPLEMENTAL MEXICO

Supplemental Mexico Results
Dollars in millions	Three Months Ended
Unaudited	June 30,
	2018			Accounting Impact			Historical 2018			2017			Percent Change
Operating Revenues
Wireless service	$	417		$	(40	)	$	457		$	535			-14.6	%
Wireless equipment		280			18			262			130			-	%
Total Operating Revenues		697			(22	)		719			665			8.1	%

Operating Expenses
Operations and support		787			(1	)		788			774			1.8	%
EBITDA		(90	)		(21	)		(69	)		(109	)		36.7	%
Depreciation and amortization		127			-			127			89			42.7	%
Total Operating Expenses		914			(1	)		915			863			6.0	%
Operating Income (Loss)		(217	)		(21	)		(196	)		(198	)		1.0	%
Operating Contribution	$	(217	)	$	(21	)	$	(196	)	$	(198	)		1.0	%

Operating Income Margin		-31.1	%					-27.3	%		-29.8	%		250	BP
EBITDA Margin		-12.9	%					-9.6	%		-16.4	%		680	BP

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.

Certain amounts have been conformed to the current period's presentation, including our adoption of new accounting standards; ASU No. 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," and ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash; and our realignment of certain responsibilities and operations within our segments, the most significant of which is to report wireless accounts with employer discounts in our Consumer Mobility segment.

Free Cash Flow

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

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
Net cash provided by operating activities	$	10,229	$	8,705	$	19,176	$	17,670
Less: Capital expenditures		(5,108)		(5,208)		(11,226)		(11,223)
Free Cash Flow		5,121		3,497		7,950		6,447

Less: Dividends paid		(3,074)		(3,012)		(6,144)		(6,021)
Free Cash Flow after Dividends	$	2,047	$	485	$	1,806	$	426
Free Cash Flow Dividend Payout Ratio		60.0%		86.1%		77.3%		93.4%

EBITDA

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

EBITDA service margin is calculated as EBITDA divided by service revenues.

When discussing our segment results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from segment contribution. For our supplemental presentation of our combined domestic wireless operations (AT&T Mobility) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International segment, EBITDA excludes depreciation and amortization from operating income.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing segment performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance. Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in 2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in evaluating the ability of our Latin America operations to generate cash to finance its own operations.

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

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

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
Net Income	$	5,248	$	4,014	$	10,007	$	7,588
Additions:
Income Tax (Benefit) Expense		1,532		2,056		2,914		3,860
Interest Expense		2,023		1,395		3,794		2,688
Equity in Net (Income) Loss of Affiliates		16		(14)		7		159
Other (Income) Expense - Net		(2,353)		(925)		(4,055)		(1,413)
Depreciation and amortization		6,378		6,147		12,372		12,274
EBITDA		12,844		12,673		25,039		25,156

Total Operating Revenues		38,986		39,837		77,024		79,202
Service Revenues		33,773		36,538		67,419		72,994

EBITDA Margin		32.9%		31.8%		32.5%		31.8%
EBITDA Service Margin		38.0%		34.7%		37.1%		34.5%

Supplemental EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions		Three Months Ended
		Three Months Ended
		June 30, 2018
Net Income	$	4,823
Additions:
Income Tax (Benefit) Expense		1,394
Interest Expense		2,023
Equity in Net (Income) Loss of Affiliates		16
Other (Income) Expense - Net		(2,353)
Depreciation and amortization		6,378
EBITDA		12,281

Total Operating Revenues		39,909
Service Revenues		35,163

EBITDA Margin		30.8%
EBITDA Service Margin		34.9%

Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
Consumer Mobility Segment
Segment Contribution	$	4,978	$	4,739	$	9,633	$	9,269
Additions:
Depreciation and amortization		1,806		1,716		3,613		3,432
EBITDA		6,784		6,455		13,246		12,701

Total Segment Operating Revenues		14,869		15,091		29,855		29,897
Service Revenues		11,853		12,467		23,465		24,932

Segment Operating Income Margin		33.5%		31.4%		32.3%		31.0%
EBITDA Margin		45.6%		42.8%		44.4%		42.5%
EBITDA Service Margin		57.2%		51.8%		56.5%		50.9%

Business Solutions Segment
Segment Contribution	$	1,961	$	2,131	$	4,024	$	4,294
Additions:
Equity in Net (Income) Loss of Affiliates		(1)		-		-		-
Depreciation and amortization		1,487		1,483		2,945		2,943
EBITDA		3,447		3,614		6,969		7,237

Total Segment Operating Revenues		9,063		9,667		18,179		19,288

Segment Operating Income Margin		21.6%		22.0%		22.1%		22.3%
EBITDA Margin		38.0%		37.4%		38.3%		37.5%

Entertainment Group Segment
Segment Contribution	$	1,432	$	1,630	$	2,767	$	3,200
Additions:
Equity in Net (Income) Loss of Affiliates		20		12		11		18
Depreciation and amortization		1,346		1,458		2,658		2,878
EBITDA		2,798		3,100		5,436		6,096

Total Segment Operating Revenues		11,650		12,661		23,227		25,262

Segment Operating Income Margin		12.5%		13.0%		12.0%		12.7%
EBITDA Margin		24.0%		24.5%		23.4%		24.1%

International Segment
Segment Contribution	$	(150)	$	(32)	$	(261)	$	(132)
Additions:
Equity in Net (Income) of Affiliates		(15)		(25)		(15)		(45)
Depreciation and amortization		313		311		645		601
EBITDA		148		254		369		424

Total Segment Operating Revenues		1,951		2,026		3,976		3,955

Segment Operating Income Margin		-8.5%		-2.8%		-6.9%		-4.5%
EBITDA Margin		7.6%		12.5%		9.3%		10.7%

Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
AT&T Mobility
Operating Income	$	5,506	$	5,376	$	10,664	$	10,596
Add: Depreciation and amortization		2,113		1,988		4,208		3,980
EBITDA		7,619		7,364		14,872		14,576

Total Operating Revenues		17,282		17,455		34,637		34,552
Service Revenues		13,682		14,471		27,085		28,939

Operating Income Margin		31.9%		30.8%		30.8%		30.7%
EBITDA Margin		44.1%		42.2%		42.9%		42.2%
EBITDA Service Margin		55.7%		50.9%		54.9%		50.4%

Supplemental Latin America EBITDA and EBITDA Margin
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
International - Latin America
Operating Income	$	52	$	141	$	200	$	218
Add: Depreciation and amortization		186		222		391		436
EBITDA		238		363		591		654

Total Operating Revenues		1,254		1,361		2,608		2,702

Operating Income Margin		4.1%		10.4%		7.7%		8.1%
EBITDA Margin		19.0%		26.7%		22.7%		24.2%

Supplemental Mexico EBITDA and EBITDA Margin
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
International - Mexico
Operating Income (Loss)	$	(217)	$	(198)	$	(476)	$	(395)
Add: Depreciation and amortization		127		89		254		165
EBITDA		(90)		(109)		(222)		(230)

Total Operating Revenues		697		665		1,368		1,253

Operating Income Margin		-31.1%		-29.8%		-34.8%		-31.5%
EBITDA Margin		-12.9%		-16.4%		-16.2%		-18.4%

Adjusting Items

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

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38% for transactions prior to tax reform and 25% for transactions after tax reform.

Adjusting Items
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
Operating Expenses
Time Warner and other merger costs		321		78		388		119
Employee separation costs		133		60		184		60
Natural disaster costs		-		-		104		-
DIRECTV merger integration costs		-		123		-		250
Mexico merger integration costs		-		80		-		119
(Gain) loss on transfer of wireless spectrum		-		(63)		-		(181)
Foreign currency devaluation		18		98		43		98
Adjustments to Operations and Support Expenses		472		376		719		465
Amortization of intangible assets		1,278		1,170		2,340		2,372
Adjustments to Operating Expenses		1,750		1,546		3,059		2,837
Other
Merger-related interest and fees¹		636		158		1,029		267
Actuarial (gain) loss		(1,796)		(259)		(2,726)		(259)
(Gain) loss on sale of assets, impairments and other adjustments		48		(36)		48		221
Adjustments to Income Before Income Taxes		638		1,409		1,410		3,066
Tax impact of adjustments		44		445		217		1,001
Tax related items		(96)		-		(96)		-
Adjustments to Net Income	$	690	$	964	$	1,289	$	2,065
¹Includes interest expense incurred on debt issued, redemption premiums and interest income earned on cash held prior to the close of merger transactions.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
Operating Income	$	6,466	$	6,526	$	12,667	$	12,882
Adjustments to Operating Expenses		1,750		1,546		3,059		2,837
Adjusted Operating Income		8,216		8,072		15,726		15,719

EBITDA		12,844		12,673		25,039		25,156
Adjustments to Operations and Support Expenses		472		376		719		465
Adjusted EBITDA		13,316		13,049		25,758		25,621
WarnerMedia Operating Income		1,236				3,047
Pro Forma
Additions:
Depreciation and amortization		168				339
Merger costs		548				694
WarnerMedia Adjusted EBITDA		1,952				4,080
WarnerMedia segment income (post acquisition)		(451)				(451)
WarnerMedia segment depreciation and amortization (post acquisition)		(30)				(30)
WarnerMedia merger costs (post acquisition)		(159)				(159)
Film and television cost amortization (release prior to June 14)		1,324				2,693
Pro Forma Adjusted EBITDA ¹		15,952				31,891

Total Operating Revenues		38,986		39,837		77,024		79,202
Service Revenues		33,773		36,538		67,419		72,994

Operating Income Margin		16.6%		16.4%		16.4%		16.3%
Adjusted Operating Income Margin		21.1%		20.3%		20.4%		19.8%
Adjusted EBITDA Margin		34.2%		32.8%		33.4%		32.3%
Adjusted EBITDA Service Margin		39.4%		35.7%		38.2%		35.1%

Supplemental Results under Historical Accounting Method
Operating Income		5,903
Adjustments to Operating Expenses		1,750
Adjusted Supplemental Operating Income		7,653

EBITDA		12,281
Adjustments to Operations and Support Expenses		472
Adjusted Supplemental EBITDA		12,753

Supplemental Operating Revenues		39,909

Adjusted Supplemental Operating Income Margin		19.2%
Adjusted Supplemental EBITDA margin		32.0%

¹Pro Forma Adjusted EBITDA reflects the combined results operations of the combined company based on the historical financial statements of AT&T and Time Warner, after giving effect to the merger and certain adjustments, and is intended to reflect the impact of the Time Warner acquisition on AT&T. WarnerMedia operating income, depreciation and amortization expense and merger costs are provided on Item 7.01 Form 8-K filed by AT&T on July 24, 2018. Pro Forma adjustments are to (1) remove the duplication of operating results for the 16-period in which AT&T also reported Time Warner results and (2) to recognize the purchase accounting classification of released content as intangible assets and accordingly reclassify associated content amortization from operating expense to amortization expense. Intercompany revenue and expense eliminations net and do not impact EBITDA.

Adjusted Diluted EPS
		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2018		2017		2018		2017
Diluted Earnings Per Share (EPS)	$	0.81	$	0.63	$	1.56	$	1.19
Amortization of intangible assets		0.16		0.13		0.29		0.26
Merger items¹		0.14		0.05		0.20		0.08
(Gain) loss on sale of assets, impairments and other adjustments²		0.01		0.01		0.05		0.03
Actuarial (gain) loss³		(0.21)		(0.03)		(0.33)		(0.03)
Adjusted EPS	$	0.91	$	0.79	$	1.77	$	1.53
Year-over-year growth - Adjusted		15.2%				15.7%
Weighted Average Common Shares Outstanding with Dilution (000,000)		6,374		6,184		6,277		6,185
¹Includes combined merger integration items and merger-related interest income and expense, and redemption premiums.
²Includes natural disaster, employee-related, and other costs.
³Includes adjustments for actuarial gains or losses associated with our postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded an actuarial gain of $930 million in the first quarter of 2018 associated with our postretirement plan and a gain of $1,796 million in the second quarter associated with our pension plan. As a result, adjusted EPS reflects (1) in the first quarter and for the first six months, an expected return on plan assets of $77 million (based on an average expected return on plan assets of 5.75% for our VEBA trusts), rather than the actual return on plan assets of $31 million loss (VEBA return of -3.08%) and (2) in the second quarter and for the first six months, an expected return on plan assets of $754 million (based on an average expected return on plan assets of 7.00% for our Pension trusts), rather than the actual return on plan assets of $186 million loss (Pension return of -0.56%), both of which are included in the GAAP measure of income.

Net Debt to Pro Forma 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. Our Net Debt to Pro Forma Adjusted EBITDA ratio is calculated by dividing the Net Debt by Annualized Pro Forma 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 Pro Forma Adjusted EBITDA is calculated by annualizing the year-to-date Pro Forma Adjusted EBITDA.

Net Debt to Pro Forma Adjusted EBITDA
Dollars in millions
		Three Months Ended
		Mar. 31,		Jun. 30,
		2018		2018		YTD 2018
Pro Forma Adjusted EBITDA	$	15,939	$	15,952	$	31,891
Add back severance		(51)		(133)		(184)
Net Debt Pro Forma Adjusted EBITDA		15,888		15,819		31,707
Annualized Pro Forma Adjusted EBITDA						63,414
End-of-period current debt						21,672
End-of-period long-term debt						168,495
Total End-of-Period Debt						190,167
Less: Cash and Cash Equivalents						13,523
Net Debt Balance						176,644
Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio						2.79

Supplemental Operational Measures

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

Supplemental Operational Measure
		Three Months Ended
		June 30, 2018								June 30, 2017
		Consumer Mobility		Business Solutions		Adjustments¹		AT&T Mobility		Consumer Mobility		Business Solutions		Adjustments¹		AT&T Mobility
Operating Revenues
Wireless service	$	11,853	$	1,829	$	-	$	13,682	$	12,467	$	2,004	$	-	$	14,471
Strategic services		-		3,039		(3,039)		-		-		2,958		(2,958)		-
Legacy voice and data services		-		2,723		(2,723)		-		-		3,423		(3,423)		-
Other services and equipment		-		888		(888)		-		-		922		(922)		-
Wireless equipment		3,016		584		-		3,600		2,624		360		-		2,984
Total Operating Revenues		14,869		9,063		(6,650)		17,282		15,091		9,667		(7,303)		17,455

Operating Expenses
Operations and support		8,085		5,616		(4,038)		9,663		8,636		6,053		(4,598)		10,091
EBITDA		6,784		3,447		(2,612)		7,619		6,455		3,614		(2,705)		7,364
Depreciation and amortization		1,806		1,487		(1,180)		2,113		1,716		1,483		(1,211)		1,988
Total Operating Expenses		9,891		7,103		(5,218)		11,776		10,352		7,536		(5,809)		12,079
Operating Income	$	4,978	$	1,960	$	(1,432)	$	5,506	$	4,739	$	2,131	$	(1,494)	$	5,376
¹Business wireline operations reported in Business Solutions segment.

Supplemental Operational Measure
		Six Months Ended
		June 30, 2018								June 30, 2017
		Consumer Mobility		Business Solutions		Adjustments¹		AT&T Mobility		Consumer Mobility		Business Solutions		Adjustments¹		AT&T Mobility
Operating Revenues
Wireless service	$	23,465	$	3,620	$	-	$	27,085	$	24,932	$	4,007	$	-	$	28,939
Strategic services		-		6,109		(6,109)		-		-		5,862		(5,862)		-
Legacy voice and data services		-		5,561		(5,561)		-		-		6,971		(6,971)		-
Other services and equipment		-		1,727		(1,727)		-		-		1,800		(1,800)		-
Wireless equipment		6,390		1,162		-		7,552		4,965		648		-		5,613
Total Operating Revenues		29,855		18,179		(13,397)		34,637		29,897		19,288		(14,633)		34,552

Operating Expenses
Operations and support		16,609		11,210		(8,054)		19,765		17,196		12,051		(9,271)		19,976
EBITDA		13,246		6,969		(5,343)		14,872		12,701		7,237		(5,362)		14,576
Depreciation and amortization		3,613		2,945		(2,350)		4,208		3,432		2,943		(2,395)		3,980
Total Operating Expenses		20,222		14,155		(10,404)		23,973		20,628		14,994		(11,666)		23,956
Operating Income	$	9,633	$	4,024	$	(2,993)	$	10,664	$	9,269	$	4,294	$	(2,967)	$	10,596
¹Business wireline operations reported in Business Solutions segment.

Supplemental International

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

Supplemental International
		Three Months Ended
		June 30, 2018					June 30, 2017
		Latin America		Mexico		International		Latin America		Mexico		International
Operating Revenues
Video service	$	1,254	$	-	$	1,254	$	1,361	$	-	$	1,361
Wireless service		-		417		417		-		535		535
Wireless equipment		-		280		280		-		130		130
Total Operating Revenues		1,254		697		1,951		1,361		665		2,026

Operating Expenses
Operations and support		1,016		787		1,803		998		774		1,772
Depreciation and amortization		186		127		313		222		89		311
Total Operating Expenses		1,202		914		2,116		1,220		863		2,083
Operating Income (Loss)		52		(217)		(165)		141		(198)		(57)
Equity in Net Income of Affiliates		15		-		15		25		-		25
Segment Contribution	$	67	$	(217)	$	(150)	$	166	$	(198)	$	(32)


Supplemental International
		Six Months Ended
		June 30, 2018					June 30, 2017
		Latin America		Mexico		International		Latin America		Mexico		International
Operating Revenues
Video service	$	2,608	$	-	$	2,608	$	2,702	$	-	$	2,702
Wireless service		-		821		821		-		1,010		1,010
Wireless equipment		-		547		547		-		243		243
Total Operating Revenues		2,608		1,368		3,976		2,702		1,253		3,955

Operating Expenses
Operations and support		2,017		1,590		3,607		2,048		1,483		3,531
Depreciation and amortization		391		254		645		436		165		601
Total Operating Expenses		2,408		1,844		4,252		2,484		1,648		4,132
Operating Income (Loss)		200		(476)		(276)		218		(395)		(177)
Equity in Net Income of Affiliates		15		-		15		45		-		45
Segment Contribution	$	215	$	(476)	$	(261)	$	263	$	(395)	$	(132)

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Form 8-K AT&T INC. For: Jul 24

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