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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20202021

or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission File Number 001-8610

AT&T INC.

Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 43-1301883

208 S. Akard St., Dallas, Texas 75202
Telephone Number: (210) 821-4105

Securities registered pursuant to Section 12(b) of the Act
  Name of each exchange
Title of each classTrading Symbol(s)on which registered
Common Shares (Par Value $1.00 Per Share)TNew York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a
share of 5.000% Perpetual Preferred Stock, Series A
T PRANew York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a
share of 4.750% Perpetual Preferred Stock, Series C
T PRCNew York Stock Exchange
AT&T Inc. 1.875% Global Notes due December 4, 2020T 20New York Stock Exchange
AT&T Inc. 2.650% Global Notes due December 17, 2021T 21BNew York Stock Exchange
AT&T Inc. 1.450% Global Notes due June 1, 2022T 22BNew York Stock Exchange
AT&T Inc. 2.500% Global Notes due March 15, 2023T 23New York Stock Exchange
AT&T Inc. 2.750% Global Notes due May 19, 2023T 23CNew York Stock Exchange
AT&T Inc. Floating Rate Global Notes due September 5, 2023T 23DNew York Stock Exchange
AT&T Inc. 1.050% Global Notes due September 5, 2023T 23ENew York Stock Exchange
AT&T Inc. 1.300% Global Notes due September 5, 2023T 23ANew York Stock Exchange
AT&T Inc. 1.950% Global Notes due September 15, 2023T 23FNew York Stock Exchange
AT&T Inc. 2.400% Global Notes due March 15, 2024T 24ANew York Stock Exchange
AT&T Inc. 3.500% Global Notes due December 17, 2025T 25New York Stock Exchange
AT&T Inc. 0.250% Global Notes due March 4, 2026T 26ENew York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026T 26DNew York Stock Exchange
Name of each exchange
Title of each classTrading Symbol(s)on which registered
AT&T Inc. 2.900% Global Notes due December 4, 2026T 26ANew York Stock Exchange
AT&T Inc. 1.600% Global Notes due May 19, 2028T 28CNew York Stock Exchange
Name of each exchange
Title of each classTrading Symbol(s)on which registered
AT&T Inc. 2.350% Global Notes due September 5, 2029T 29DNew York Stock Exchange
AT&T Inc. 4.375% Global Notes due September 14, 2029T 29BNew York Stock Exchange
AT&T Inc. 2.600% Global Notes due December 17, 2029T 29ANew York Stock Exchange
AT&T Inc. 0.800% Global Notes due March 4, 2030T 30BNew York Stock Exchange
AT&T Inc. 2.050% Global Notes due May 19, 2032T 32ANew York Stock Exchange
AT&T Inc. 3.550% Global Notes due December 17, 2032T 32New York Stock Exchange
AT&T Inc. 5.200% Global Notes due November 18, 2033T 33New York Stock Exchange
AT&T Inc. 3.375% Global Notes due March 15, 2034T 34New York Stock Exchange
AT&T Inc. 2.450% Global Notes due March 15, 2035T 35New York Stock Exchange
AT&T Inc. 3.150% Global Notes due September 4, 2036T 36ANew York Stock Exchange
AT&T Inc. 2.600% Global Notes due May 19, 2038T 38CNew York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 14, 2039T 39BNew York Stock Exchange
AT&T Inc. 7.000% Global Notes due April 30, 2040T 40New York Stock Exchange
AT&T Inc. 4.250% Global Notes due June 1, 2043T 43New York Stock Exchange
AT&T Inc. 4.875% Global Notes due June 1, 2044T 44New York Stock Exchange
AT&T Inc. 4.000% Global Notes due June 1, 2049T 49ANew York Stock Exchange
AT&T Inc. 4.250% Global Notes due March 1, 2050T 50New York Stock Exchange
AT&T Inc. 3.750% Global Notes due September 1, 2050T 50ANew York Stock Exchange
AT&T Inc. 5.350% Global Notes due November 1, 2066TBBNew York Stock Exchange
AT&T Inc. 5.625% Global Notes due August 1, 2067TBCNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated Filer☐
Non-accelerated filer☐Smaller reporting company☐
  Emerging growth company☐
If an emerging growth company, indicate by checkmark 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.
Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒

At October 31, 2020,July 30, 2021, there were 7,1267,140 million common shares outstanding.

AT&T INC.
SEPTEMBER 30, 2020
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

AT&T INC.AT&T INC.AT&T INC.
CONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amountsDollars in millions except per share amountsDollars in millions except per share amounts
(Unaudited)(Unaudited)(Unaudited)
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Operating RevenuesOperating Revenues    Operating Revenues    
ServiceService$37,782 $40,317 $113,716 $122,024 Service$38,956 $37,051 $77,460 $75,934 
EquipmentEquipment4,558 4,271 12,353 12,348 Equipment5,089 3,899 10,524 7,795 
Total operating revenuesTotal operating revenues42,340 44,588 126,069 134,372 Total operating revenues44,045 40,950 87,984 83,729 
Operating ExpensesOperating ExpensesOperating Expenses
Cost of revenuesCost of revenuesCost of revenues
EquipmentEquipment4,552 4,484 12,622 13,047 Equipment5,341 3,978 10,897 8,070 
Broadcast, programming and operationsBroadcast, programming and operations6,912 7,066 19,555 22,448 Broadcast, programming and operations7,603 5,889 15,141 12,643 
Other cost of revenues (exclusive of depreciation and
amortization shown separately below)
Other cost of revenues (exclusive of depreciation and
amortization shown separately below)
8,375 8,604 24,833 25,910 
Other cost of revenues (exclusive of depreciation and
amortization shown separately below)
8,155 8,116 16,148 16,458 
Selling, general and administrativeSelling, general and administrative9,266 9,584 27,857 29,077 Selling, general and administrative9,361 9,831 18,743 18,591 
Asset impairments and abandonmentsAsset impairments and abandonments73 0 2,515 0 Asset impairments and abandonments4,555 2,319 4,555 2,442 
Depreciation and amortizationDepreciation and amortization7,030 6,949 21,537 21,256 Depreciation and amortization5,761 7,285 11,570 14,507 
Total operating expensesTotal operating expenses36,208 36,687 108,919 111,738 Total operating expenses40,776 37,418 77,054 72,711 
Operating IncomeOperating Income6,132 7,901 17,150 22,634 Operating Income3,269 3,532 10,930 11,018 
Other Income (Expense)Other Income (Expense)Other Income (Expense)
Interest expenseInterest expense(1,972)(2,083)(6,031)(6,373)Interest expense(1,684)(2,041)(3,554)(4,059)
Equity in net income (loss) of affiliatesEquity in net income (loss) of affiliates5 3 (11)36 Equity in net income (loss) of affiliates41 (10)93 (16)
Other income (expense) — netOther income (expense) — net(231)(935)1,589 (967)Other income (expense) — net999 1,017 5,220 1,820 
Total other income (expense)Total other income (expense)(2,198)(3,015)(4,453)(7,304)Total other income (expense)(644)(1,034)1,759 (2,255)
Income Before Income TaxesIncome Before Income Taxes3,934 4,886 12,697 15,330 Income Before Income Taxes2,625 2,498 12,689 8,763 
Income tax expenseIncome tax expense766 937 3,003 3,059 Income tax expense751 935 2,873 2,237 
Net IncomeNet Income3,168 3,949 9,694 12,271 Net Income1,874 1,563 9,816 6,526 
Less: Net Income Attributable to Noncontrolling InterestLess: Net Income Attributable to Noncontrolling Interest(352)(249)(987)(762)Less: Net Income Attributable to Noncontrolling Interest(304)(282)(696)(635)
Net Income Attributable to AT&TNet Income Attributable to AT&T$2,816 $3,700 $8,707 $11,509 Net Income Attributable to AT&T$1,570 $1,281 $9,120 $5,891 
Less: Preferred Stock DividendsLess: Preferred Stock Dividends(54)0 (138)0 Less: Preferred Stock Dividends(56)(52)(106)(84)
Net Income Attributable to Common StockNet Income Attributable to Common Stock$2,762 $3,700 $8,569 $11,509 Net Income Attributable to Common Stock$1,514 $1,229 $9,014 $5,807 
Basic Earnings Per Share Attributable to
Common Stock
Basic Earnings Per Share Attributable to
Common Stock
$0.39 $0.50 $1.19 $1.57 
Basic Earnings Per Share Attributable to
Common Stock
$0.21 $0.17 $1.25 $0.81 
Diluted Earnings Per Share Attributable to
Common Stock
Diluted Earnings Per Share Attributable to
Common Stock
$0.39 $0.50 $1.19 $1.57 
Diluted Earnings Per Share Attributable to
Common Stock
$0.21 $0.17 $1.25 $0.81 
Weighted Average Number of Common Shares
Outstanding — Basic (in millions)
Weighted Average Number of Common Shares
Outstanding — Basic (in millions)
7,147 7,327 7,160 7,321 
Weighted Average Number of Common Shares
Outstanding — Basic (in millions)
7,168 7,145 7,165 7,166 
Weighted Average Number of Common Shares
Outstanding — with Dilution (in millions)
Weighted Average Number of Common Shares
Outstanding — with Dilution (in millions)
7,173 7,356 7,186 7,350 
Weighted Average Number of Common Shares
Outstanding — with Dilution (in millions)
7,200 7,170 7,194 7,192 
See Notes to Consolidated Financial Statements.

3

AT&T INC.AT&T INC.    AT&T INC.    
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   
Dollars in millionsDollars in millions    Dollars in millions    
(Unaudited)(Unaudited)    (Unaudited)    
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Net incomeNet income$3,168 $3,949 $9,694 $12,271 Net income$1,874 $1,563 $9,816 $6,526 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Foreign currency:Foreign currency:Foreign currency:
Translation adjustment (includes $(2), $(17), $(61) and
$(15) attributable to noncontrolling interest), net of taxes
of $47, $(69), $(150) and $(21)
90 (342)(1,459)(181)
Translation adjustment (includes $6, $(8), $2 and $(59)
attributable to noncontrolling interest), net of taxes
of $41, $(135), $4 and $(197)
Translation adjustment (includes $6, $(8), $2 and $(59)
attributable to noncontrolling interest), net of taxes
of $41, $(135), $4 and $(197)
301 305 192 (1,549)
Securities:Securities:Securities:
Net unrealized gains (losses), net of taxes of $1, $7, $28
and $22
1 25 81 67 
Net unrealized gains (losses), net of taxes of $6, $5, $(12)
and $27
Net unrealized gains (losses), net of taxes of $6, $5, $(12)
and $27
20 14 (35)80 
Reclassification adjustment included in net income, net of
taxes of $0, $0, $(1) and $0
Reclassification adjustment included in net income, net of
taxes of $0, $0, $(1) and $0
(1)0 (3)0 
Derivative instruments:Derivative instruments:Derivative instruments:
Net unrealized gains (losses), net of taxes of $229, $(168),
$(574) and $(299)
860 (516)(2,166)(1,006)
Reclassification adjustment included in net income,
net of taxes of $7, $2, $11 and $7
27 7 44 24 
Net unrealized gains (losses), net of taxes of $(242), $168,
$(106) and $(803)
Net unrealized gains (losses), net of taxes of $(242), $168,
$(106) and $(803)
(909)631 (398)(3,026)
Reclassification adjustment included in net income, net of
taxes of $6, $4, $12 and $4
Reclassification adjustment included in net income, net of
taxes of $6, $4, $12 and $4
22 17 46 17 
Defined benefit postretirement plans:Defined benefit postretirement plans:Defined benefit postretirement plans:
Amortization of net prior service credit included in net
income, net of taxes of $(150), $(112), $(451) and $(332)
(460)(343)(1,382)(1,031)
Amortization of net prior service credit included in net
income, net of taxes of $(165), $(150), $(330) and $(301)
Amortization of net prior service credit included in net
income, net of taxes of $(165), $(150), $(330) and $(301)
(507)(461)(1,011)(922)
Other comprehensive income (loss)Other comprehensive income (loss)518 (1,169)(4,882)(2,127)Other comprehensive income (loss)(1,074)506 (1,209)(5,400)
Total comprehensive incomeTotal comprehensive income3,686 2,780 4,812 10,144 Total comprehensive income800 2,069 8,607 1,126 
Less: Total comprehensive income attributable to
noncontrolling interest
Less: Total comprehensive income attributable to
noncontrolling interest
(350)(232)(926)(747)
Less: Total comprehensive income attributable to
noncontrolling interest
(310)(274)(698)(576)
Total Comprehensive Income Attributable to AT&TTotal Comprehensive Income Attributable to AT&T$3,336 $2,548 $3,886 $9,397 Total Comprehensive Income Attributable to AT&T$490 $1,795 $7,909 $550 
See Notes to Consolidated Financial Statements.

4

AT&T INC.AT&T INC.AT&T INC.
CONSOLIDATED BALANCE SHEETSCONSOLIDATED BALANCE SHEETSCONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amountsDollars in millions except per share amountsDollars in millions except per share amounts
September 30, 2020December 31, 2019June 30,December 31,
20212020
AssetsAssets(Unaudited) Assets(Unaudited) 
Current AssetsCurrent Assets  Current Assets  
Cash and cash equivalentsCash and cash equivalents$9,758 $12,130 Cash and cash equivalents$11,869 $9,740 
Accounts receivable — net of related allowances for credit loss of $1,386 and $1,23519,379 22,636 
Prepaid expenses1,420 1,631 
Other current assets19,414 18,364 
Accounts receivable – net of related allowances for credit loss of $843 and $1,221Accounts receivable – net of related allowances for credit loss of $843 and $1,22115,771 20,215 
InventoriesInventories2,810 3,695 
Prepaid and other current assetsPrepaid and other current assets32,419 18,358 
Total current assetsTotal current assets49,971 54,761 Total current assets62,869 52,008 
Noncurrent Inventories and Theatrical Film and Television Production CostsNoncurrent Inventories and Theatrical Film and Television Production Costs13,948 12,434 Noncurrent Inventories and Theatrical Film and Television Production Costs16,271 14,752 
Property, plant and equipmentProperty, plant and equipment333,797 333,538 Property, plant and equipment322,259 327,751 
Less: accumulated depreciation and amortizationLess: accumulated depreciation and amortization(205,075)(203,410)Less: accumulated depreciation and amortization(198,668)(200,436)
Property, Plant and Equipment — Net128,722 130,128 
Property, Plant and Equipment – NetProperty, Plant and Equipment – Net123,591 127,315 
GoodwillGoodwill143,688 146,241 Goodwill134,626 135,259 
Licenses — Net98,397 97,907 
Trademarks and Trade Names — Net23,575 23,567 
Distribution Networks — Net14,249 15,345 
Other Intangible Assets — Net17,523 20,798 
Licenses – NetLicenses – Net87,962 93,840 
Trademarks and Trade Names – NetTrademarks and Trade Names – Net22,276 23,297 
Distribution Networks – NetDistribution Networks – Net12,875 13,793 
Other Intangible Assets – NetOther Intangible Assets – Net12,736 15,386 
Investments in and Advances to Equity AffiliatesInvestments in and Advances to Equity Affiliates2,325 3,695 Investments in and Advances to Equity Affiliates1,853 1,780 
Operating Lease Right-Of-Use AssetsOperating Lease Right-Of-Use Assets24,546 24,039 Operating Lease Right-Of-Use Assets24,390 24,714 
Deposits on Wireless LicensesDeposits on Wireless Licenses23,663 0 
Other AssetsOther Assets21,609 22,754 Other Assets21,598 23,617 
Total AssetsTotal Assets$538,553 $551,669 Total Assets$544,710 $525,761 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Current LiabilitiesCurrent LiabilitiesCurrent Liabilities
Debt maturing within one yearDebt maturing within one year$5,898 $11,838 Debt maturing within one year$24,016 $3,470 
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities42,728 45,956 Accounts payable and accrued liabilities49,429 50,051 
Advanced billings and customer depositsAdvanced billings and customer deposits5,862 6,124 Advanced billings and customer deposits4,932 6,176 
Accrued taxes1,336 1,212 
Dividends payableDividends payable3,741 3,781 Dividends payable3,749 3,741 
Total current liabilitiesTotal current liabilities59,565 68,911 Total current liabilities82,126 63,438 
Long-Term DebtLong-Term Debt152,980 151,309 Long-Term Debt155,767 153,775 
Deferred Credits and Other Noncurrent LiabilitiesDeferred Credits and Other Noncurrent LiabilitiesDeferred Credits and Other Noncurrent Liabilities
Deferred income taxesDeferred income taxes60,448 59,502 Deferred income taxes61,732 60,472 
Postemployment benefit obligationPostemployment benefit obligation17,928 18,788 Postemployment benefit obligation14,876 18,276 
Operating lease liabilitiesOperating lease liabilities22,056 21,804 Operating lease liabilities21,637 22,202 
Other noncurrent liabilitiesOther noncurrent liabilities30,520 29,421 Other noncurrent liabilities28,726 28,358 
Total deferred credits and other noncurrent liabilitiesTotal deferred credits and other noncurrent liabilities130,952 129,515 Total deferred credits and other noncurrent liabilities126,971 129,308 
Stockholders’ EquityStockholders’ EquityStockholders’ Equity
Preferred stock ($1 par value, 10,000,000 authorized):
Series A (48,000 issued and outstanding at September 30, 2020 and December 31, 2019)0 0 
Series B (20,000 issued and outstanding at September 30, 2020 and 0 issued and
outstanding at December 31, 2019)
0 0 
Series C (70,000 issued and outstanding at September 30, 2020 and 0 issued and
outstanding at December 31, 2019)
0 0 
Common stock ($1 par value, 14,000,000,000 authorized at September 30, 2020 and
December 31, 2019: issued 7,620,748,598 at September 30, 2020 and December 31, 2019)
7,621 7,621 
Preferred stock ($1 par value, 10,000,000 authorized at June 30, 2021 and December 31, 2020):Preferred stock ($1 par value, 10,000,000 authorized at June 30, 2021 and December 31, 2020):
Series A (48,000 issued and outstanding at June 30, 2021 and December 31, 2020)Series A (48,000 issued and outstanding at June 30, 2021 and December 31, 2020)0 0 
Series B (20,000 issued and outstanding at June 30, 2021 and December 31, 2020)Series B (20,000 issued and outstanding at June 30, 2021 and December 31, 2020)0 0 
Series C (70,000 issued and outstanding at June 30, 2021 and December 31, 2020)Series C (70,000 issued and outstanding at June 30, 2021 and December 31, 2020)0 0 
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2021 and
December 31, 2020: issued 7,620,748,598 at June 30, 2021 and December 31, 2020)
Common stock ($1 par value, 14,000,000,000 authorized at June 30, 2021 and
December 31, 2020: issued 7,620,748,598 at June 30, 2021 and December 31, 2020)
7,621 7,621 
Additional paid-in capitalAdditional paid-in capital130,139 126,279 Additional paid-in capital129,941 130,175 
Retained earningsRetained earnings55,094 57,936 Retained earnings38,947 37,457 
Treasury stock (495,703,331 at September 30, 2020 and 366,193,458 at December 31, 2019,
at cost)
(17,950)(13,085)
Treasury stock (480,891,895 at June 30, 2021 and 494,826,583 at December 31, 2020, at cost)Treasury stock (480,891,895 at June 30, 2021 and 494,826,583 at December 31, 2020, at cost)(17,332)(17,910)
Accumulated other comprehensive incomeAccumulated other comprehensive income649 5,470 Accumulated other comprehensive income3,119 4,330 
Noncontrolling interestNoncontrolling interest19,503 17,713 Noncontrolling interest17,550 17,567 
Total stockholders’ equityTotal stockholders’ equity195,056 201,934 Total stockholders’ equity179,846 179,240 
Total Liabilities and Stockholders’ EquityTotal Liabilities and Stockholders’ Equity$538,553 $551,669 Total Liabilities and Stockholders’ Equity$544,710 $525,761 
See Notes to Consolidated Financial Statements.
5

AT&T INC.AT&T INC.AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSCONSOLIDATED STATEMENTS OF CASH FLOWSCONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millionsDollars in millionsDollars in millions
(Unaudited)(Unaudited)  (Unaudited)  
Nine months ended Six months ended
September 30, June 30,
20202019 20212020
Operating ActivitiesOperating Activities  Operating Activities  
Net incomeNet income$9,694 $12,271 Net income$9,816 $6,526 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization Depreciation and amortization21,537 21,256  Depreciation and amortization11,570 14,507 
Amortization of television and film costs6,448 7,059 
Amortization of film and television costs Amortization of film and television costs6,256 3,985 
Undistributed earnings from investments in equity affiliates Undistributed earnings from investments in equity affiliates108 81  Undistributed earnings from investments in equity affiliates15 64 
Provision for uncollectible accounts Provision for uncollectible accounts1,611 1,855  Provision for uncollectible accounts596 1,199 
Deferred income tax expense Deferred income tax expense2,248 1,039  Deferred income tax expense1,772 653 
Net (gain) loss on investments, net of impairments Net (gain) loss on investments, net of impairments(689)(1,014) Net (gain) loss on investments, net of impairments(237)(705)
Pension and postretirement benefit expense (credit) Pension and postretirement benefit expense (credit)(2,245)(1,297) Pension and postretirement benefit expense (credit)(1,899)(1,495)
Actuarial (gain) loss on pension and postretirement benefitsActuarial (gain) loss on pension and postretirement benefits63 4,048 Actuarial (gain) loss on pension and postretirement benefits(2,647)0 
Asset impairments and abandonmentsAsset impairments and abandonments2,515 0 Asset impairments and abandonments4,555 2,442 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Receivables Receivables2,321 2,503  Receivables1,415 2,522 
Other current assets, inventories and theatrical film and television production costs Other current assets, inventories and theatrical film and television production costs(7,836)(9,337) Other current assets, inventories and theatrical film and television production costs(6,985)(5,592)
Accounts payable and other accrued liabilities Accounts payable and other accrued liabilities(4,905)(936) Accounts payable and other accrued liabilities(4,298)(3,847)
Equipment installment receivables and related sales Equipment installment receivables and related sales(148)848  Equipment installment receivables and related sales811 226 
Deferred customer contract acquisition and fulfillment costs Deferred customer contract acquisition and fulfillment costs453 (796) Deferred customer contract acquisition and fulfillment costs410 322 
Postretirement claims and contributionsPostretirement claims and contributions(409)(635)Postretirement claims and contributions(207)(228)
Other - netOther - net2,282 (220)Other - net(106)346 
Total adjustmentsTotal adjustments23,354 24,454 Total adjustments11,021 14,399 
Net Cash Provided by Operating ActivitiesNet Cash Provided by Operating Activities33,048 36,725 Net Cash Provided by Operating Activities20,837 20,925 
Investing ActivitiesInvesting ActivitiesInvesting Activities
Capital expenditures, including $(92) and $(160) of interest during construction(13,283)(15,843)
Capital expendituresCapital expenditures(7,992)(9,432)
Acquisitions, net of cash acquiredAcquisitions, net of cash acquired(1,215)(1,124)Acquisitions, net of cash acquired(23,169)(1,174)
DispositionsDispositions428 3,775 Dispositions635 347 
(Purchases), sales and settlements of securities and investments, net444 523 
Advances to and investments in equity affiliates, net(100)(333)
Other - netOther - net(105)(19)
Net Cash Used in Investing ActivitiesNet Cash Used in Investing Activities(13,726)(13,002)Net Cash Used in Investing Activities(30,631)(10,278)
Financing ActivitiesFinancing ActivitiesFinancing Activities
Net change in short-term borrowings with original maturities of three months or lessNet change in short-term borrowings with original maturities of three months or less(17)(22)Net change in short-term borrowings with original maturities of three months or less76 498 
Issuance of other short-term borrowingsIssuance of other short-term borrowings9,440 4,012 Issuance of other short-term borrowings16,440 8,440 
Repayment of other short-term borrowingsRepayment of other short-term borrowings(7,710)(4,702)Repayment of other short-term borrowings(857)(5,975)
Issuance of long-term debtIssuance of long-term debt31,987 15,034 Issuance of long-term debt9,097 21,060 
Repayment of long-term debtRepayment of long-term debt(37,583)(24,368)Repayment of long-term debt(1,155)(17,284)
Payment of vendor financingPayment of vendor financing(1,965)(2,601)Payment of vendor financing(2,994)(1,354)
Issuance of preferred stockIssuance of preferred stock3,869 0 Issuance of preferred stock0 3,869 
Purchase of treasury stockPurchase of treasury stock(5,483)(409)Purchase of treasury stock(185)(5,480)
Issuance of treasury stockIssuance of treasury stock88 576 Issuance of treasury stock85 84 
Issuance of preferred interests in subsidiary1,979 1,488 
Dividends paidDividends paid(11,215)(11,162)Dividends paid(7,571)(7,474)
Other - netOther - net(5,158)(187)Other - net(1,036)(2,295)
Net Cash Used in Financing Activities(21,768)(22,341)
Net (decrease) increase in cash and cash equivalents and restricted cash(2,446)1,382 
Net Cash Provided by (Used in) Financing ActivitiesNet Cash Provided by (Used in) Financing Activities11,900 (5,911)
Net increase in cash and cash equivalents and restricted cashNet increase in cash and cash equivalents and restricted cash2,106 4,736 
Cash and cash equivalents and restricted cash beginning of yearCash and cash equivalents and restricted cash beginning of year12,295 5,400 Cash and cash equivalents and restricted cash beginning of year9,870 12,295 
Cash and Cash Equivalents and Restricted Cash End of PeriodCash and Cash Equivalents and Restricted Cash End of Period$9,849 $6,782 Cash and Cash Equivalents and Restricted Cash End of Period$11,976 $17,031 
See Notes to Consolidated Financial Statements.

6

AT&T INC.AT&T INC.    AT&T INC.    
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amountsDollars and shares in millions except per share amounts    Dollars and shares in millions except per share amounts    
(Unaudited)(Unaudited)    (Unaudited)    
Three months endedNine months ended Three months endedSix months ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019 June 30, 2021June 30, 2020June 30, 2021June 30, 2020
SharesAmountSharesAmountSharesAmountSharesAmount SharesAmountSharesAmountSharesAmountSharesAmount
Preferred Stock - Series APreferred Stock - Series A        Preferred Stock - Series A        
Balance at beginning of periodBalance at beginning of period0 $0 0 $0 0 $0 0 $0 Balance at beginning of period0 $0 0 $0 0 $0 0 $0 
Issuance of stockIssuance of stock0 0 0 0 0 0 0 0 Issuance of stock0 0 0 0 0 0 0 0 
Balance at end of periodBalance at end of period0 $0 0 $0 0 $0 0 $0 Balance at end of period0 $0 0 $0 0 $0 0 $0 
Preferred Stock - Series BPreferred Stock - Series BPreferred Stock - Series B
Balance at beginning of periodBalance at beginning of period0 $0 0 $0 0 $0 0 $0 Balance at beginning of period0 $0 0 $0 0 $0 0 $0 
Issuance of stockIssuance of stock0 0 0 0 0 0 0 0 Issuance of stock0 0 0 0 0 0 0 0 
Balance at end of periodBalance at end of period0 $0 0 $0 0 $0 0 $0 Balance at end of period0 $0 0 $0 0 $0 0 $0 
Preferred Stock - Series CPreferred Stock - Series CPreferred Stock - Series C
Balance at beginning of periodBalance at beginning of period0 $0 0 $0 0 $0 0 $0 Balance at beginning of period0 $0 0 $0 0 $0 0 $0 
Issuance of stockIssuance of stock0 0 0 0 0 0 0 0 Issuance of stock0 0 0 0 0 0 0 0 
Balance at end of periodBalance at end of period0 $0 0 $0 0 $0 0 $0 Balance at end of period0 $0 0 $0 0 $0 0 $0 
Common StockCommon StockCommon Stock
Balance at beginning of periodBalance at beginning of period7,621 $7,621 7,621 $7,621 7,621 $7,621 7,621 $7,621 Balance at beginning of period7,621 $7,621 7,621 $7,621 7,621 $7,621 7,621 $7,621 
Issuance of stockIssuance of stock0 0 0 0 0 0 0 0 Issuance of stock0 0 0 0 0 0 0 0 
Balance at end of periodBalance at end of period7,621 $7,621 7,621 $7,621 7,621 $7,621 7,621 $7,621 Balance at end of period7,621 $7,621 7,621 $7,621 7,621 $7,621 7,621 $7,621 
Additional Paid-In CapitalAdditional Paid-In CapitalAdditional Paid-In Capital
Balance at beginning of periodBalance at beginning of period$130,046 $125,109 $126,279 $125,525 Balance at beginning of period$129,856 $129,966 $130,175 $126,279 
Repurchase and acquisition of
common stock
Repurchase and acquisition of
common stock
0 0 67 0 
Repurchase and acquisition of
common stock
0 0 0 67 
Issuance of preferred stockIssuance of preferred stock0 0 3,869 0 Issuance of preferred stock0 0 0 3,869 
Issuance of treasury stockIssuance of treasury stock(2)(1)(56)(128)Issuance of treasury stock(5)(7)(75)(54)
Share-based paymentsShare-based payments91 31 (24)(258)Share-based payments90 87 (159)(115)
Changes related to acquisition of
interests held by noncontrolling
owners
4 0 4 0 
Balance at end of periodBalance at end of period$130,139 $125,139 $130,139 $125,139 Balance at end of period$129,941 $130,046 $129,941 $130,046 
Retained EarningsRetained EarningsRetained Earnings
Balance at beginning of periodBalance at beginning of period$56,045 $59,389 $57,936 $58,753 Balance at beginning of period$41,154 $58,534 $37,457 $57,936 
Cumulative effect of accounting
change and other adjustments
Cumulative effect of accounting
change and other adjustments
0 0 (293)316 
Cumulative effect of accounting
change and other adjustments
0 0 0 (293)
Adjusted beginning balanceAdjusted beginning balance56,045 59,389 57,643 59,069 Adjusted beginning balance41,154 58,534 37,457 57,643 
Net income attributable to AT&TNet income attributable to AT&T2,816 3,700 8,707 11,509 Net income attributable to AT&T1,570 1,281 9,120 5,891 
Preferred stock dividendsPreferred stock dividends(35)0 (103)0 Preferred stock dividends(35)(36)(152)(68)
Common stock dividends ( $0.52,
$0.51, $1.56, and $1.53 per
share)
(3,732)(3,742)(11,153)(11,231)
Common stock dividends ($0.52,
$0.52, $1.04 and $1.04 per share)
Common stock dividends ($0.52,
$0.52, $1.04 and $1.04 per share)
(3,742)(3,734)(7,478)(7,421)
Balance at end of periodBalance at end of period$55,094 $59,347 $55,094 $59,347 Balance at end of period$38,947 $56,045 $38,947 $56,045 
See Notes to Consolidated Financial Statements.
7

AT&T INC.AT&T INC.    AT&T INC.    
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continuedCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continuedCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued
Dollars and shares in millions except per share amountsDollars and shares in millions except per share amounts    Dollars and shares in millions except per share amounts    
(Unaudited)(Unaudited)    (Unaudited)    
Three months endedNine months ended Three months endedSix months ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019 June 30, 2021June 30, 2020June 30, 2021June 30, 2020
SharesAmountSharesAmountSharesAmountSharesAmount SharesAmountSharesAmountSharesAmountSharesAmount
Treasury StockTreasury Stock        Treasury Stock        
Balance at beginning of periodBalance at beginning of period(495)$(17,945)(316)$(11,151)(366)$(13,085)(339)$(12,059)Balance at beginning of period(481)$(17,342)(496)$(17,957)(495)$(17,910)(366)$(13,085)
Repurchase and acquisition of
common stock
Repurchase and acquisition of
common stock
(1)(19)(5)(186)(149)(5,600)(14)(466)
Repurchase and acquisition of
common stock
(1)(39)0 (34)(7)(215)(148)(5,581)
Issuance of treasury stock0 14 4 142 19 735 36 1,330 
Reissuance of treasury stockReissuance of treasury stock1 49 1 46 21 793 19 721 
Balance at end of periodBalance at end of period(496)$(17,950)(317)$(11,195)(496)$(17,950)(317)$(11,195)Balance at end of period(481)$(17,332)(495)$(17,945)(481)$(17,332)(495)$(17,945)
Accumulated Other
Comprehensive Income
Attributable to AT&T,
net of tax
Accumulated Other
Comprehensive Income
Attributable to AT&T,
net of tax
Accumulated Other Comprehensive Income
Attributable to AT&T, net of tax
Balance at beginning of periodBalance at beginning of period$129 $3,289 $5,470 $4,249 Balance at beginning of period$4,199 $(385)$4,330 $5,470 
Other comprehensive income
attributable to AT&T
Other comprehensive income
attributable to AT&T
520 (1,152)(4,821)(2,112)
Other comprehensive income
attributable to AT&T
(1,080)514 (1,211)(5,341)
Balance at end of periodBalance at end of period$649 $2,137 $649 $2,137 Balance at end of period$3,119 $129 $3,119 $129 
Noncontrolling InterestNoncontrolling InterestNoncontrolling Interest
Balance at beginning of periodBalance at beginning of period$17,557 $9,824 $17,713 $9,795 Balance at beginning of period$17,591 $17,670 $17,567 $17,713 
Cumulative effect of accounting
change and other adjustments
Cumulative effect of accounting
change and other adjustments
0 0 (7)29 
Cumulative effect of accounting
change and other adjustments
0 0 0 (7)
Adjusted beginning balanceAdjusted beginning balance17,557 9,824 17,706 9,824 Adjusted beginning balance17,591 17,670 17,567 17,706 
Net income attributable to
noncontrolling interest
Net income attributable to
noncontrolling interest
352 249 987 762 
Net income attributable to
noncontrolling interest
304 282 696 635 
Issuance and acquisition of
noncontrolling owners
1,978 1,488 1,979 1,498 
Issuance and acquisition by
noncontrolling owners
Issuance and acquisition by
noncontrolling owners
0 0 0 1 
DistributionsDistributions(382)(266)(1,108)(791)Distributions(351)(387)(715)(726)
Translation adjustments
attributable to noncontrolling
interest, net of taxes
Translation adjustments
attributable to noncontrolling
interest, net of taxes
(2)(17)(61)(15)
Translation adjustments attributable
to noncontrolling interest, net of
taxes
6 (8)2 (59)
Balance at end of periodBalance at end of period$19,503 $11,278 $19,503 $11,278 Balance at end of period$17,550 $17,557 $17,550 $17,557 
Total Stockholders' Equity at
beginning of period
Total Stockholders' Equity at
beginning of period
$193,453 $194,081 $201,934 $193,884 
Total Stockholders' Equity at
beginning of period
$183,079 $195,449 $179,240 $201,934 
Total Stockholders' Equity at end
of period
Total Stockholders' Equity at end
of period
$195,056 $194,327 $195,056 $194,327 
Total Stockholders' Equity at
end of period
$179,846 $193,453 $179,846 $193,453 
See Notes to Consolidated Financial Statements.

8
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions except per share amounts

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS
 
Basis of Presentation Throughout this document, AT&T Inc. is referred to as “we,” “AT&T” or the “Company.” The consolidated financial statements include the accounts of the Company and subsidiaries and affiliates which we control. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. The results for the interim periods are not necessarily indicative of those for the full year. These consolidated financial statements include all adjustments that are necessary to present fairly the results for the presented interim periods, consisting of normal recurring accruals and other items.
 
All significant intercompany transactions are eliminated in the consolidation process. Investments in subsidiaries and partnerships which we do not control but have significant influence are accounted for under the equity method. Earnings from certain investments accounted for using the equity method are included for periods ended within up toin our results on a one quarter of our period end.lag. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items.
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions including potential impacts arising from the COVID-19 pandemic, that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior period amounts have been conformed to the current period’s presentation including the combination of our prior Xandr segment with the WarnerMedia segment.(see Note 4 and Note 5).

In the tables throughout this document, percentage increases and decreases that are not considered meaningful are denoted with a dash.

Adopted and Pending Accounting Standards and Other Changes
Credit Losses As of January 1, 2020, we adopted, through modified retrospective application, the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13, as amended), which replaces the incurred loss impairment methodology under prior GAAP with an expected credit loss model. ASU 2016-13 affects trade receivables, loans, contract assets, certain beneficial interests, off-balance-sheet credit exposures not accounted for as insurance and other financial assets that are not subject to fair value through net income, as defined by the standard. Under the expected credit loss model, we are required to consider future economic trends to estimate expected credit losses over the lifetime of the asset. Upon adoption, we recorded a $293 reduction to “Retained earnings,” $395 increase to “allowances for doubtful accounts” applicable to our trade and loan receivables, $10 reduction of contract assets, $105 reduction of net deferred income tax liability and $7 reduction of “Noncontrolling interest” as an opening adjustment. Our adoption of ASU 2016-13 did not have a material impact on our financial statements.
Reference Rate Reform In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04), which provides optional expedients, and allows for certain exceptions to existing GAAP, for contract modifications triggered by the expected market transition of certain benchmark interest rates to alternative reference rates. ASU 2020-04 applies to contracts, hedging relationships and other arrangements that reference the London Interbank Offering Rate (LIBOR) or any other rates ending after December 31, 2022. We are evaluating the impact of our adoption of ASU 2020-04, including optional expedients, to our financial statements.
Convertible Instruments In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity” (ASU 2020-06), which eliminated certain separation models regarding cash conversion and beneficial conversion features to simplify reporting for convertible instruments as a single liability or equity, with no separate accounting for embedded conversion features. ASU 2020-06 will be effective for fiscal years beginning after December 31, 2021, under modified retrospective or full retrospective application, subject to early adoption in 2021. We are evaluating the impact of our adoption of ASU 2020-06 on our financial statements.

9
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Intangible Assets In the second quarter, driven by significant and adverse economic and political environments in Latin America, including the impact of the COVID-19 pandemic, we experienced accelerated subscriber losses and revenue decline in the region, as well as closure of our operations in Venezuela. When combining these business trends and higher weighted-average cost of capital resulting from the increase in country-risk premiums in the region, we concluded that it is more likely than not that the fair value of the Vrio reporting unit, estimated using discounted cash flow and market multiple approaches, is less than its carrying amount. We recorded a $2,212 goodwill impairment in the reporting unit in the second quarter, with $105 attributable to noncontrolling interest. The impairment is not deductible for tax purposes and resulted in an increase in our effective tax rate.
During the first quarter of 2020, we reassessed and changed the estimated economic lives of certain trade names in our Latin America business from indefinite to finite-lived and began amortizing them using the straight-line method over their average remaining economic life of 15 years. This change had an insignificant impact on our financial statements.

Also during the first quarter of 2020, in conjunction with the nationwide launch of AT&T TV and our customers’ continued shift from linear to streaming video services, we reassessed the estimated economic lives and renewal assumptions for our orbital slot licenses. As a result, we have changed the estimated lives of these licenses from indefinite to finite-lived, effective January 1, 2020, and began amortizing our orbital slot licenses using the sum-of-months-digits method over their average remaining economic life of 15 years. This change in accounting increased amortization expense $373, or $0.04 per diluted share available to common stock during the third quarter and $1,138, or $0.12, per diluted share available to common stock for the first nine months of 2020.

NOTE 2. EARNINGS PER SHARE
 
A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, is shown in the table below.below:
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
NumeratorsNumerators    Numerators    
Numerator for basic earnings per share:Numerator for basic earnings per share:    Numerator for basic earnings per share:    
Net Income$3,168 $3,949 $9,694 $12,271 
Less: Net income attributable to noncontrolling interest(352)(249)(987)(762)
Net Income attributable to AT&T2,816 3,700 8,707 11,509 
Less: Preferred stock dividends(54)0 (138)0 
Net income attributable to common stock2,762 3,700 8,569 11,509 
Net Income Attributable to Common StockNet Income Attributable to Common Stock$1,514 $1,229 $9,014 $5,807 
Dilutive potential common shares:Dilutive potential common shares:Dilutive potential common shares:
Share-based paymentShare-based payment5 6 16 16 Share-based payment5 5 11 11 
Numerator for diluted earnings per shareNumerator for diluted earnings per share$2,767 $3,706 $8,585 $11,525 Numerator for diluted earnings per share$1,519 $1,234 $9,025 $5,818 
Denominators (000,000)Denominators (000,000)Denominators (000,000)
Denominator for basic earnings per share:Denominator for basic earnings per share:Denominator for basic earnings per share:
Weighted average number of common shares outstandingWeighted average number of common shares outstanding7,147 7,327 7,160 7,321 Weighted average number of common shares outstanding7,168 7,145 7,165 7,166 
Dilutive potential common shares:Dilutive potential common shares:Dilutive potential common shares:
Share-based payment (in shares)Share-based payment (in shares)26 29 26 29 Share-based payment (in shares)32 25 29 26 
Denominator for diluted earnings per shareDenominator for diluted earnings per share7,173 7,356 7,186 7,350 Denominator for diluted earnings per share7,200 7,170 7,194 7,192 
Basic earnings per share attributable to Common Stock$0.39 $0.50 $1.19 $1.57 
Diluted earnings per share attributable to Common Stock$0.39 $0.50 $1.19 $1.57 



109
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

In the first quarter of 2020, we completed an accelerated share repurchase agreement with a third-party financial institution to repurchase AT&T common stock. Under the terms of the agreement, we paid the financial institution $4,000 and received 104.8 million shares.

NOTE 3. OTHER COMPREHENSIVE INCOME
 
Changes in the balances of each component included in accumulated OCI are presented below. All amounts are net of tax and exclude noncontrolling interest.
Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2020Balance as of December 31, 2020$(3,926)$111 $(779)$8,924 $4,330 
Other comprehensive income
(loss) before reclassifications
Other comprehensive income
(loss) before reclassifications
190 (35)(398)0 (243)
Amounts reclassified from
accumulated OCI
Amounts reclassified from
accumulated OCI
0 1(3)146 2(1,011)3(968)
Net other comprehensive
income (loss)
Net other comprehensive
income (loss)
190 (38)(352)(1,011)(1,211)
Balance as of June 30, 2021Balance as of June 30, 2021$(3,736)$73 $(1,131)$7,913 $3,119 
Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2019Balance as of December 31, 2019$(3,056)$48 $(37)$8,515 $5,470 Balance as of December 31, 2019$(3,056)$48 $(37)$8,515 $5,470 
Other comprehensive income
(loss) before reclassifications
Other comprehensive income
(loss) before reclassifications
(1,398)81 (2,166)0 (3,483)
Other comprehensive income
(loss) before reclassifications
(1,490)80 (3,026)0 (4,436)
Amounts reclassified from
accumulated OCI
Amounts reclassified from
accumulated OCI
0 10 144 2(1,382)3(1,338)
Amounts reclassified from
accumulated OCI
0 10 117 2(922)3(905)
Net other comprehensive
income (loss)
Net other comprehensive
income (loss)
(1,398)81 (2,122)(1,382)(4,821)
Net other comprehensive
income (loss)
(1,490)80 (3,009)(922)(5,341)
Balance as of September 30, 2020$(4,454)$129 $(2,159)$7,133 $649 
Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income
Balance as of December 31, 2018$(3,084)$(2)$818 $6,517 $4,249 
Other comprehensive income
(loss) before reclassifications
(166)67 (1,006)0 (1,105)
Amounts reclassified from
accumulated OCI
0 10 124 2(1,031)3(1,007)
Net other comprehensive
income (loss)
(166)67 (982)(1,031)(2,112)
Balance as of September 30, 2019$(3,250)$65 $(164)$5,486 $2,137 
Balance as of June 30, 2020Balance as of June 30, 2020$(4,546)$128 $(3,046)$7,593 $129 
1(Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income.
2(Gains) losses are primarily included in “Interest expense” in the consolidated statements of income (see Note 7).
3The amortization of prior service credits associated with postretirement benefits are included in “Other income (expense) - net” in the consolidated statements of income (see Note 6).

NOTE 4. SEGMENT INFORMATION
 
Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We analyze our segments based on segment operating contribution, which consists of operating income, excluding acquisition-related costs and other significant items (as discussed below), and equity in net income (loss) of affiliates for investments managed within each segment. We have 3 reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America.
We have recast our segment results for all prior periods to include our prior Xandr segment within our WarnerMedia segment.
 
We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization. We believe EBITDA to be a relevant and useful measurement to our investors as it is part of our internal management reporting and planning processes and it is an important metric that management uses to evaluate operating performance. EBITDA does not give effect to depreciation and amortization expenses incurred in operating contribution nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA margin is EBITDA divided by total revenues.

11
10
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

In the first quarter of 2021, we recast our segment results for all prior periods to reflect the following:
•Communications segment results were recast to remove the held-for-sale businesses, principally Video, instead reporting those results in Corporate and Other. Additionally, we refined the allocation of shared infrastructure and deferred customer acquisition costs between Consumer Wireline and Video.
•WarnerMedia segment results reflect our operation of WarnerMedia as one integrated organization.

The Communications segment provides wireless and wireline telecom video and broadband services to consumers located in the U.S. and businesses globally. Our business strategies reflect bundled product offerings that cut across product lines and utilize shared assets. This segment contains the following business units:
•Mobility provides nationwide wireless service and equipment.
•Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers. This segment also records advertising revenue.
•Business Wireline provides advanced IP-based services, as well as traditional voice and data services and related equipment to business customers.
•Consumer Wireline provides internet, including broadband fiber, and legacy telephony voice communication services to residential customers.
 
The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. Historical financialWarnerMedia content is distributed through basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing. Segment results fromalso include Xandr previously a separate reportable segment, have been combined with the WarnerMedia segment within Eliminations and other. This segment contains the following:
•Turner primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties.
•Home Box Office consists of premium pay television and OTT and streaming services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment.
•Warner Bros. primarily consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.
•Eliminations & Other includes the Xandr advertising business and Otter Media Holdings operations,Holdings.

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery Inc. (See Note 8)

Effective January 1, 2021, we updated our reporting units to reflect recent changes in how WarnerMedia, an integrated content organization that distributes across various platforms, is managed and also removes transactions betweenevaluated. With this operational change, the reporting unit is deemed to be the operating segment. The previous reporting units, Turner, Home Box Office, and Warner Bros. business units, including internal sales of content to, and Xandr, and the HBO Max platform that began in the fourth quarter of 2019 (see Note 5).new WarnerMedia reporting unit were tested for goodwill impairment on January 1, 2021, for which there was none.
 
The Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:
•Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.
•Mexico provides wireless service and equipment to customers in Mexico.

On July 21, 2021, we entered into an agreement to sell our Vrio business to Grupo Werthein (see Note 8). The transaction is expected to close within one year. We applied held-for-sale accounting to Vrio as of June 30, 2021, and continue to present the Vrio results within the Latin America segment consistent with how performance was assessed and resource allocation decisions were made through June 30, 2021.
 
Corporate and Other reconciles our segment results to consolidated operating income and income before income taxes, and includes:
•Corporate, which consists of: (1) businesses no longer integral to our operations or which we no longer actively market, (2) corporate support functions, (3) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, and (4) the reclassification of the amortization of prior service credits, which we continue to report with segment operating expenses, to consolidated “Other income (expense) – net.”
•Video, whichconsists of our held-for-sale U.S. video operations, which provides video, including over-the-top (OTT) services and also sells multiplatform advertising services.
•Acquisition-related items, which consists of items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assetsassets.
•Certain significant items, which includes (1) employee separation charges associated with voluntary and/or strategic offers, (2) losses resulting from abandonment of network assetsasset impairments and impairments,abandonments, and (3) other items for which the segments are not being evaluated.
•Eliminations and consolidations, which (1) removes transactions involving dealings between our segments, including channel distribution between WarnerMedia and Communications,Video, and (2) includes adjustments for our reporting of the advertising business.
 
“Interest expense” and “Other income (expense) – net,” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.
1211
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the three months ended September 30, 2020
For the three months ended June 30, 2021For the three months ended June 30, 2021
RevenuesOperations
and Support
Expenses		EBITDADepreciation
and
Amortization		Operating
Income (Loss)		Equity in Net
Income (Loss) of
Affiliates		Segment
Contribution		 RevenuesOperations
and Support
Expenses		EBITDADepreciation
and
Amortization		Operating
Income (Loss)		Equity in Net
Income (Loss) of
Affiliates		Segment
Contribution
CommunicationsCommunications       Communications       
MobilityMobility$17,894 $10,182 $7,712 $2,021 $5,691 $0 $5,691 Mobility$18,936 $10,911 $8,025 $2,023 $6,002 $0 $6,002 
Entertainment Group10,053 7,997 2,056 1,277 779 0 779 
Business WirelineBusiness Wireline6,340 3,833 2,507 1,329 1,178 0 1,178 Business Wireline6,052 3,709 2,343 1,293 1,050 0 1,050 
Consumer WirelineConsumer Wireline3,140 2,083 1,057 769 288 0 288 
Total CommunicationsTotal Communications34,287 22,012 12,275 4,627 7,648 0 7,648 Total Communications28,128 16,703 11,425 4,085 7,340 0 7,340 
WarnerMediaWarnerMediaWarnerMedia8,791 6,934 1,857 165 1,692 47 1,739 
Turner3,176 2,088 1,088 69 1,019 (6)1,013 
Home Box Office1,781 1,694 87 27 60 0 60 
Warner Bros.2,411 1,973 438 43 395 (23)372 
Eliminations and other146 (171)317 32 285 40 325 
Total WarnerMedia7,514 5,584 1,930 171 1,759 11 1,770 
Latin AmericaLatin AmericaLatin America
VrioVrio753 675 78 126 (48)14 (34)Vrio749 660 89 114 (25)2 (23)
MexicoMexico643 662 (19)124 (143)0 (143)Mexico688 667 21 150 (129)0 (129)
Total Latin AmericaTotal Latin America1,396 1,337 59 250 (191)14 (177)Total Latin America1,437 1,327 110 264 (154)2 (152)
Segment TotalSegment Total43,197 28,933 14,264 5,048 9,216 $25 $9,241 Segment Total38,356 24,964 13,392 4,514 8,878 $49 $8,927 
Corporate and OtherCorporate and Other      Corporate and Other
Corporate431 1,012 (581)61 (642)  
Corporate1
Corporate1
361 1,160 (799)30 (829)
VideoVideo6,639 5,275 1,364 148 1,216 
Acquisition-related
items
Acquisition-related
items
0 38 (38)1,921 (1,959)  Acquisition-related items0 0 0 1,069 (1,069)
Certain significant itemsCertain significant items0 113 (113)0 (113)  Certain significant items0 4,555 (4,555)0 (4,555)
Eliminations and
consolidations
Eliminations and
consolidations
(1,288)(918)(370)0 (370)  Eliminations and consolidations(1,311)(939)(372)0 (372)
AT&T Inc.AT&T Inc.$42,340 $29,178 $13,162 $7,030 $6,132   AT&T Inc.$44,045 $35,015 $9,030 $5,761 $3,269 
1Operations and Support Expenses include $672 for the reclassification of prior service credit amortization.
1Operations and Support Expenses include $672 for the reclassification of prior service credit amortization.

1312
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the three months ended September 30, 2019
For the three months ended June 30, 2020For the three months ended June 30, 2020
RevenuesOperations and Support ExpensesEBITDADepreciation and AmortizationOperating Income (Loss)Equity in Net
Income (Loss) of
Affiliates		Segment Contribution RevenuesOperations and Support ExpensesEBITDADepreciation and AmortizationOperating Income (Loss)Equity in Net
Income (Loss) of
Affiliates		Segment Contribution
CommunicationsCommunications       Communications       
MobilityMobility$17,701 $9,948 $7,753 $2,011 $5,742 $0 $5,742 Mobility$17,149 $9,332 $7,817 $2,012 $5,805 $0 $5,805 
Entertainment Group11,197 8,797 2,400 1,316 1,084 0 1,084 
Business WirelineBusiness Wireline6,503 4,022 2,481 1,271 1,210 0 1,210 Business Wireline6,305 3,714 2,591 1,301 1,290 0 1,290 
Consumer WirelineConsumer Wireline3,051 1,928 1,123 730 393 0 393 
Total CommunicationsTotal Communications35,401 22,767 12,634 4,598 8,036 0 8,036 Total Communications26,505 14,974 11,531 4,043 7,488 0 7,488 
WarnerMediaWarnerMediaWarnerMedia6,728 4,656 2,072 164 1,908 4 1,912 
Turner3,007 1,460 1,547 68 1,479 10 1,489 
Home Box Office1,819 1,072 747 33 714 10 724 
Warner Bros.3,333 2,706 627 39 588 (25)563 
Eliminations and other191 91 100 25 75 20 95 
Total WarnerMedia8,350 5,329 3,021 165 2,856 15 2,871 
Latin AmericaLatin AmericaLatin America
VrioVrio1,013 851 162 162 0 13 13 Vrio752 661 91 127 (36)8 (28)
MexicoMexico717 774 (57)122 (179)0 (179)Mexico480 538 (58)115 (173)0 (173)
Total Latin AmericaTotal Latin America1,730 1,625 105 284 (179)13 (166)Total Latin America1,232 1,199 33 242 (209)8 (201)
Segment TotalSegment Total45,481 29,721 15,760 5,047 10,713 $28 $10,741 Segment Total34,465 20,829 13,636 4,449 9,187 $12 $9,199 
Corporate and OtherCorporate and Other       Corporate and Other
Corporate407 703 (296)131 (427)  
Corporate1
Corporate1
589 1,069 (480)99 (579)
VideoVideo7,021 5,809 1,212 593 619 
Acquisition-related
items
Acquisition-related
items
0 190 (190)1,771 (1,961)  Acquisition-related items0 211 (211)2,145 (2,356)
Certain significant
items
Certain significant
items
0 39 (39)0 (39)  Certain significant items0 3,084 (3,084)0 (3,084)
Eliminations and
consolidations
Eliminations and
consolidations
(1,300)(915)(385)0 (385)  Eliminations and consolidations(1,125)(869)(256)(1)(255)
AT&T Inc.AT&T Inc.$44,588 $29,738 $14,850 $6,949 $7,901   AT&T Inc.$40,950 $30,133 $10,817 $7,285 $3,532 
1Operations and Support Expenses include $611 for the reclassification of prior service credit amortization.
1Operations and Support Expenses include $611 for the reclassification of prior service credit amortization.
1413
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the nine months ended September 30, 2020
For the six months ended June 30, 2021For the six months ended June 30, 2021
RevenuesOperations
and Support
Expenses		EBITDADepreciation
and
Amortization		Operating
Income (Loss)		Equity in Net
Income (Loss) of
Affiliates		Segment
Contribution		 RevenuesOperations
and Support
Expenses		EBITDADepreciation
and
Amortization		Operating
Income (Loss)		Equity in Net
Income (Loss) of
Affiliates		Segment
Contribution
CommunicationsCommunications       Communications       
MobilityMobility$52,445 $29,083 $23,362 $6,078 $17,284 $0 $17,284 Mobility$37,970 $21,929 $16,041 $4,037 $12,004 $0 $12,004 
Entertainment Group30,637 23,618 7,019 3,875 3,144 0 3,144 
Business WirelineBusiness Wireline19,046 11,563 7,483 3,948 3,535 0 3,535 Business Wireline12,098 7,419 4,679 2,571 2,108 0 2,108 
Consumer WirelineConsumer Wireline6,238 4,114 2,124 1,531 593 0 593 
Total CommunicationsTotal Communications102,128 64,264 37,864 13,901 23,963 0 23,963 Total Communications56,306 33,462 22,844 8,139 14,705 0 14,705 
WarnerMediaWarnerMediaWarnerMedia17,317 13,337 3,980 328 3,652 117 3,769 
Turner9,326 5,145��4,181 207 3,974 0 3,974 
Home Box Office4,905 4,236 669 73 596 15 611 
Warner Bros.8,907 7,506 1,401 124 1,277 (50)1,227 
Eliminations and other(962)(882)(80)97 (177)65 (112)
Total WarnerMedia22,176 16,005 6,171 501 5,670 30 5,700 
Latin AmericaLatin AmericaLatin America
VrioVrio2,392 2,119 273 400 (127)26 (101)Vrio1,492 1,321 171 231 (60)(2)(62)
MexicoMexico1,826 1,914 (88)373 (461)0 (461)Mexico1,319 1,287 32 295 (263)0 (263)
Total Latin AmericaTotal Latin America4,218 4,033 185 773 (588)26 (562)Total Latin America2,811 2,608 203 526 (323)(2)(325)
Segment TotalSegment Total128,522 84,302 44,220 15,175 29,045 $56 $29,101 Segment Total76,434 49,407 27,027 8,993 18,034 $115 $18,149 
Corporate and OtherCorporate and Other       Corporate and Other       
Corporate1,256 2,819 (1,563)241 (1,804)  
Corporate1
Corporate1
787 2,373 (1,586)65 (1,651)  
VideoVideo13,364 10,935 2,429 312 2,117 
Acquisition-related
items
Acquisition-related
items
0 431 (431)6,122 (6,553)  Acquisition-related items0 37 (37)2,200 (2,237)  
Certain significant
items
Certain significant
items
0 2,539 (2,539)0 (2,539)  Certain significant items0 4,612 (4,612)0 (4,612)  
Eliminations and
consolidations
Eliminations and
consolidations
(3,709)(2,709)(1,000)(1)(999)  Eliminations and consolidations(2,601)(1,880)(721)0 (721)  
AT&T Inc.AT&T Inc.$126,069 $87,382 $38,687 $21,537 $17,150   AT&T Inc.$87,984 $65,484 $22,500 $11,570 $10,930   
1Operations and Support Expenses include $1,341 for the reclassification of prior service credit amortization.
1Operations and Support Expenses include $1,341 for the reclassification of prior service credit amortization.
1514
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the nine months ended September 30, 2019
For the six months ended June 30, 2020For the six months ended June 30, 2020
RevenuesOperations and Support ExpensesEBITDADepreciation and AmortizationOperating Income (Loss)Equity in Net
Income (Loss) of
Affiliates		Segment Contribution RevenuesOperations and Support ExpensesEBITDADepreciation and AmortizationOperating Income (Loss)Equity in Net
Income (Loss) of
Affiliates		Segment Contribution
CommunicationsCommunications       Communications       
MobilityMobility$52,356 $29,511 $22,845 $6,027 $16,818 $0 $16,818 Mobility$34,551 $18,901 $15,650 $4,057 $11,593 $0 $11,593 
Entertainment Group33,893 25,839 8,054 3,978 4,076 0 4,076 
Business WirelineBusiness Wireline19,588 12,029 7,559 3,735 3,824 0 3,824 Business Wireline12,571 7,601 4,970 2,587 2,383 0 2,383 
Consumer WirelineConsumer Wireline6,162 3,807 2,355 1,442 913 0 913 
Total CommunicationsTotal Communications105,837 67,379 38,458 13,740 24,718 0 24,718 Total Communications53,284 30,309 22,975 8,086 14,889 0 14,889 
WarnerMediaWarnerMediaWarnerMedia14,493 10,261 4,232 325 3,907 19 3,926 
Turner9,860 5,813 4,047 167 3,880 46 3,926 
Home Box Office5,045 3,124 1,921 67 1,854 40 1,894 
Warner Bros.10,240 8,543 1,697 122 1,575 (19)1,556 
Eliminations and other845 438 407 69 338 70 408 
Total WarnerMedia25,990 17,918 8,072 425 7,647 137 7,784 
Latin AmericaLatin AmericaLatin America
VrioVrio3,112 2,598 514 496 18 25 43 Vrio1,639 1,444 195 274 (79)12 (67)
MexicoMexico2,093 2,312 (219)372 (591)0 (591)Mexico1,183 1,252 (69)249 (318)0 (318)
Total Latin AmericaTotal Latin America5,205 4,910 295 868 (573)25 (548)Total Latin America2,822 2,696 126 523 (397)12 (385)
Segment TotalSegment Total137,032 90,207 46,825 15,033 31,792 $162 $31,954 Segment Total70,599 43,266 27,333 8,934 18,399 $31 $18,430 
Corporate and OtherCorporate and Other       Corporate and Other       
Corporate1,290 2,129 (839)505 (1,344)  
Corporate1
Corporate1
1,123 2,081 (958)189 (1,147)  
VideoVideo14,428 11,829 2,599 1,184 1,415 
Acquisition-related
items
Acquisition-related
items
(72)579 (651)5,719 (6,370)  Acquisition-related items0 393 (393)4,201 (4,594)  
Certain significant
items
Certain significant
items
0 381 (381)0 (381)  Certain significant items0 2,426 (2,426)0 (2,426)  
Eliminations and
consolidations
Eliminations and
consolidations
(3,878)(2,814)(1,064)(1)(1,063)  Eliminations and consolidations(2,421)(1,791)(630)(1)(629)  
AT&T Inc.AT&T Inc.$134,372 $90,482 $43,890 $21,256 $22,634   AT&T Inc.$83,729 $58,204 $25,525 $14,507 $11,018   
1Operations and Support Expenses include $1,223 for the reclassification of prior service credit amortization.
1Operations and Support Expenses include $1,223 for the reclassification of prior service credit amortization.

1615
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

The following table is a reconciliation of Segment Contributions to “Income Before Income Taxes” reported onin our consolidated statements of income:
Three months ended
September 30,		Nine months ended
September 30,		 Three months ended
June 30,		Six months ended
June 30,
2020201920202019 2021202020212020
CommunicationsCommunications$7,648 $8,036 $23,963 $24,718 Communications$7,340 $7,488 $14,705 $14,889 
WarnerMediaWarnerMedia1,770 2,871 5,700 7,784 WarnerMedia1,739 1,912 3,769 3,926 
Latin AmericaLatin America(177)(166)(562)(548)Latin America(152)(201)(325)(385)
Segment ContributionSegment Contribution9,241 10,741 29,101 31,954 Segment Contribution8,927 9,199 18,149 18,430 
Reconciling Items:Reconciling Items:Reconciling Items:
Corporate and OtherCorporate and Other(642)(427)(1,804)(1,344)Corporate and Other(829)(579)(1,651)(1,147)
Merger and integration items(38)(190)(431)(651)
VideoVideo1,216 619 2,117 1,415 
Merger costsMerger costs0 (211)(37)(393)
Amortization of intangibles acquiredAmortization of intangibles acquired(1,921)(1,771)(6,122)(5,719)Amortization of intangibles acquired(1,069)(2,145)(2,200)(4,201)
Asset impairments and abandonmentsAsset impairments and abandonments(73)0 (2,515)0 Asset impairments and abandonments(4,555)(2,319)(4,555)(2,442)
Gain on spectrum transaction1
Gain on spectrum transaction1
0 0 900 0 
Gain on spectrum transaction1
0 0 0 900 
Employee separation costs and benefit-related lossesEmployee separation costs and benefit-related losses(40)(39)(924)(381)Employee separation costs and benefit-related losses0 (765)(57)(884)
Segment equity in net income of affiliatesSegment equity in net income of affiliates(25)(28)(56)(162)Segment equity in net income of affiliates(49)(12)(115)(31)
Eliminations and consolidationsEliminations and consolidations(370)(385)(999)(1,063)Eliminations and consolidations(372)(255)(721)(629)
AT&T Operating IncomeAT&T Operating Income6,132 7,901 17,150 22,634 AT&T Operating Income3,269 3,532 10,930 11,018 
Interest ExpenseInterest Expense1,972 2,083 6,031 6,373 Interest Expense1,684 2,041 3,554 4,059 
Equity in net income (loss) of affiliatesEquity in net income (loss) of affiliates5 3 (11)36 Equity in net income (loss) of affiliates41 (10)93 (16)
Other income (expense) - netOther income (expense) - net(231)(935)1,589 (967)Other income (expense) - net999 1,017 5,220 1,820 
Income Before Income TaxesIncome Before Income Taxes$3,934 $4,886 $12,697 $15,330 Income Before Income Taxes$2,625 $2,498 $12,689 $8,763 
1Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income.

The following tabletables presents intersegment revenues and assets by segment:
Intersegment ReconciliationIntersegment Reconciliation    Intersegment Reconciliation    
Three months ended
September 30,		Nine months ended
September 30,		 Three months ended
June 30,		Six months ended
June 30,
2020201920202019 2021202020212020
Intersegment RevenuesIntersegment Revenues    Intersegment Revenues    
CommunicationsCommunications$3 $2 $7 $10 Communications$3 $2 $6 $4 
WarnerMediaWarnerMedia812 819 2,402 2,538 WarnerMedia840 774 1,678 1,591 
Latin AmericaLatin America0 0 0 0 Latin America0 0 0 0 
Total Intersegment RevenuesTotal Intersegment Revenues815 821 2,409 2,548 Total Intersegment Revenues843 776 1,684 1,595 
ConsolidationsConsolidations473 479 1,300 1,330 Consolidations468 349 917 826 
Eliminations and consolidationsEliminations and consolidations$1,288 $1,300 $3,709 $3,878 Eliminations and consolidations$1,311 $1,125 $2,601 $2,421 


1716
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 5. REVENUE RECOGNITION

Revenue Categories
The following tables set forth reported revenue by category and by business unit. Intercompany transactions between segments andunit, prior period amounts have been recast to conform to the dual reporting of certain advertising revenues are included in “Eliminations and consolidations.” Intercompany transactions between Turner, Home Box Office and Warner Bros., including internal sales of HBO Max that began in the fourthcurrent period presentation with our first quarter of 2019, are included in “Eliminations and other.”2021 segment updates (see Note 4).
For the three months ended September 30, 2020
 Service Revenues  
 WirelessAdvanced DataLegacy Voice & DataSubscriptionContentAdvertisingOtherEquipmentTotal
Communications         
Mobility$13,811 $0 $0 $0 $0 $72 $0 $4,011 $17,894 
Entertainment
Group
0 2,128 538 6,556 0 408 373 50 10,053 
Business
Wireline
0 3,348 2,031 0 0 0 780 181 6,340 
WarnerMedia
Turner0 0 0 1,840 175 1,077 84 0 3,176 
Home Box
Office
0 0 0 1,624 150 0 7 0 1,781 
Warner Bros.0 0 0 11 2,293 1 106 0 2,411 
Eliminations
and other1
0 0 0 87 (488)529 18 0 146 
Latin America
Vrio0 0 0 753 0 0 0 0 753 
Mexico385 0 0 0 0 0 0 258 643 
Corporate and
Other
169 14 138 0 0 0 52 58 431 
Eliminations and
consolidations2
0 0 0 (790)0 (408)(90)0 (1,288)
Total Operating
Revenues
$14,365 $5,490 $2,707 $10,081 $2,130 $1,679 $1,330 $4,558 $42,340 
1“Eliminations and other” of $488 include Warner Bros. content sales of approximately $200 with HBO Max, $180 with HBO linear and $100 with Turner.
2“Eliminations and consolidations” of $790 include approximately $370 and $250 of Turner and HBO linear channel distribution arrangements with the Entertainment Group, respectively, and $120 of HBO Max customer subscriptions at Mobility.

For the three months ended June 30, 2021
 Communications 
 MobilityBusiness WirelineConsumer WirelineWarnerMediaLatin AmericaCorporate & Other
Elim.
Total
Wireless service$14,252 $0 $0 $0 $447 $27 $0 $14,726 
Video service0 0 0 0 749 6,197 0 6,946 
Business service0 5,860 0 0 0 0 0 5,860 
Broadband0 0 2,266 0 0 0 0 2,266 
Subscription0 0 0 3,961 0 0 0 3,138 
DTC (HBO Max)1
0 0 0 0 0 0 (253)
Other2
0 0 0 0 0 0 (570)
Content0 0 0 3,492 0 0 0 2,876 
DTC (HBO Max)3
0 0 0 (392)0 0 0 
Other3
0 0 0 (224)0 0 0 
Advertising94 0 0 1,739 0 410 (410)1,833 
Legacy voice and data0 0 504 0 0 113 0 617 
Other0 0 336 215 0 221 (78)694 
Total Service14,346 5,860 3,106 8,791 1,196 6,968 (1,311)38,956 
Equipment4,590 192 34 0 241 32 0 5,089 
Total$18,936 $6,052 $3,140 $8,791 $1,437 $7,000 $(1,311)$44,045 
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($162 with Mobility and $91 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.
1817
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the three months ended September 30, 2019
 Service Revenues  
 WirelessAdvanced DataLegacy Voice & DataSubscriptionContentAdvertisingOtherEquipmentTotal
Communications         
Mobility$13,856 $0 $0 $0 $0 $74 $0 $3,771 $17,701 
Entertainment
Group
0 2,117 628 7,512 0 421 517 2 11,197 
Business
Wireline
0 3,269 2,252 0 0 0 783 199 6,503 
WarnerMedia
Turner0 0 0 1,927 89 913 78 0 3,007 
Home Box
Office
0 0 0 1,533 284 0 2 0 1,819 
Warner Bros.0 0 0 23 3,129 13 168 0 3,333 
Eliminations
and other1
0 0 0 57 (387)523 (2)0 191 
Latin America
Vrio0 0 0 1,013 0 0 0 0 1,013 
Mexico455 0 0 0 0 0 0 262 717 
Corporate and
Other
124 13 6 0 0 0 227 37 407 
Eliminations and
consolidations2
0 0 0 (798)0 (421)(81)0 (1,300)
Total Operating
Revenues
$14,435 $5,399 $2,886 $11,267 $3,115 $1,523 $1,692 $4,271 $44,588 
1“Eliminations and other” of $387 include Warner Bros. content sales of approximately $110 with HBO linear and $170 with Turner.
2“Eliminations and consolidations” of $798 include approximately $430 and $330 of Turner and HBO linear channel distribution arrangements with the Entertainment Group, respectively.

For the three months ended June 30, 2020
 Communications 
 MobilityBusiness WirelineConsumer WirelineWarnerMediaLatin AmericaCorporate & OtherElim.Total
Wireless service$13,611 $0 $0 $0 $345 $179 $0 $14,135 
Video service0 0 0 0 752 6,685 0 7,437 
Business service0 6,101 0 0 0 78 0 6,179 
Broadband0 0 2,092 0 0 0 0 2,092 
Subscription0 0 0 3,265 0 0 0 2,500 
   DTC (HBO Max)0 0 0 0 0 0 (61)
   Other1
0 0 0 0 0 0 (704)
Content0 0 0 3,694 0 0 0 2,208 
   DTC (HBO Max)2
0 0 0 (1,248)0 0 0 
   Other3
0 0 0 (238)0 0 0 
Advertising58 0 0 1,171 0 294 (294)1,229 
Legacy voice and data0 0 560 0 0 153 0 713 
Other0 0 398 84 0 142 (66)558 
Total Service13,669 6,101 3,050 6,728 1,097 7,531 (1,125)37,051 
Equipment3,480 204 1 0 135 79 0 3,899 
Total$17,149 $6,305 $3,051 $6,728 $1,232 $7,610 $(1,125)$40,950 
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($37 with Mobility and $24 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.
1918
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the nine months ended September 30, 2020
 Service Revenues  
 WirelessAdvanced DataLegacy Voice & DataSubscriptionContentAdvertisingOtherEquipmentTotal
Communications         
Mobility$41,314 $0 $0 $0 $0 $206 $0 $10,925 $52,445 
Entertainment
Group
0 6,329 1,679 20,220 0 1,115 1,189 105 30,637 
Business
Wireline
0 9,943 6,227 0 0 0 2,315 561 19,046 
WarnerMedia
Turner0 0 0 5,693 595 2,830 208 0 9,326 
Home Box
Office
0 0 0 4,403 488 0 14 0 4,905 
Warner Bros.0 0 0 37 8,532 4 334 0 8,907 
Eliminations
and other1
0 0 0 221 (2,650)1,416 51 0 (962)
Latin America
Vrio0 0 0 2,392 0 0 0 0 2,392 
Mexico1,197 0 0 0 0 0 0 629 1,826 
Corporate and
Other
464 38 424 0 0 0 197 133 1,256 
Eliminations and
consolidations2
0 0 0 (2,349)0 (1,115)(245)0 (3,709)
Total Operating
Revenues
$42,975 $16,310 $8,330 $30,617 $6,965 $4,456 $4,063 $12,353 $126,069 
1“Eliminations and other” of $2,650 include Warner Bros. contents sales of approximately $1,850 with HBO Max, $510 with HBO linear and $220 with Turner.
2“Eliminations and consolidations” of $2,349 include approximately $1,170 and $880 of Turner and HBO linear channel distribution arrangements with the Entertainment Group, respectively, and $150 of HBO Max customer subscriptions at Mobility.

For the six months ended June 30, 2021
 Communications 
 MobilityBusiness WirelineConsumer WirelineWarnerMediaLatin AmericaCorporate & Other
Elim.
Total
Wireless service$28,217 $0 $0 $0 $886 $37 $0 $29,140 
Video service0 0 0 0 1,492 12,493 0 13,985 
Business service0 11,732 0 0 0 70 0 11,802 
Broadband0 0 4,471 0 0 0 0 4,471 
Subscription0 0 0 7,791 0 0 06,148 
DTC (HBO Max)1
0 0 0 0 0 0 (488)
Other2
0 0 0 0 0 0 (1,155)
Content0 0 0 6,912 0 0 0 5,653 
DTC (HBO Max)3
0 0 0 (723)0 0 0 
Other3
0 0 0 (536)0 0 0 
Advertising177 0 0 3,476 0 798 (798)3,653 
Legacy voice and data0 0 1,023 0 0 237 0 1,260 
Other0 0 668 397 0 443 (160)1,348 
Total Service28,394 11,732 6,162 17,317 2,378 14,078 (2,601)77,460 
Equipment9,576 366 76 0 433 73 0 10,524 
Total$37,970 $12,098 $6,238 $17,317 $2,811 $14,151 $(2,601)$87,984 
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($307 with Mobility and $181 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.
2019
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the nine months ended September 30, 2019
 Service Revenues  
 WirelessAdvanced DataLegacy Voice & DataSubscriptionContentAdvertisingOtherEquipmentTotal
Communications         
Mobility$41,171 $0 $0 $0 $0 $212 $0 $10,973 $52,356 
Entertainment
Group
0 6,296 1,969 22,872 0 1,170 1,580 6 33,893 
Business
Wireline
0 9,649 6,973 0 0 0 2,430 536 19,588 
WarnerMedia
Turner0 0 0 5,835 335 3,440 250 0 9,860 
Home Box
Office
0 0 0 4,383 655 0 7 0 5,045 
Warner Bros.0 0 0 67 9,636 33 504 0 10,240 
Eliminations
and other1
0 0 0 160 (776)1,451 10 0 845 
Latin America
Vrio0 0 0 3,112 0 0 0 0 3,112 
Mexico1,376 0 0 0 0 0 0 717 2,093 
Corporate and
Other
437 40 20 0 0 0 605 116 1,218 
Eliminations and
consolidations2
0 0 0 (2,475)0 (1,170)(233)0 (3,878)
Total Operating
Revenues
$42,984 $15,985 $8,962 $33,954 $9,850 $5,136 $5,153 $12,348 $134,372 
1“Eliminations and other” of $776 included Warner Bros. content sales of approximately $310 with HBO linear and $290 with Turner.
2“Eliminations and consolidations” of $2,475 include approximately $1,340 and $1,000 of Turner and HBO linear channel distribution arrangements with the Entertainment Group, respectively.
For the six months ended June 30, 2020
 Communications 
 MobilityBusiness WirelineConsumer WirelineWarnerMediaLatin AmericaCorporate & Other
Elim.
Total
Wireless service$27,503 $0 $0 $0 $812 $295 $0 $28,610 
Video service0 0 0 0 1,639 13,669 0 15,308 
Business service0 12,192 0 0 0 155 0 12,347 
Broadband0 0 4,201 0 0 0 0 4,201 
Subscription0 0 0 6,665 0 0 0 5,106 
DTC (HBO Max)1
0 0 0 0 0 0 (61)
Other2
0 0 0 0 0 0 (1,498)
Content0 0 0 6,997 0 0 0 4,880 
DTC (HBO Max)3
0 0 0 (1,649)0 0 0 
Other3
0 0 0 (468)0 0 0 
Advertising134 0 0 2,636 0 707 (707)2,770 
Legacy voice and data0 0 1,141 0 0 287 0 1,428 
Other0 0 817 312 0 310 (155)1,284 
Total Service27,637 12,192 6,159 14,493 2,451 15,423 (2,421)75,934 
Equipment6,914 379 3 0 371 128 0 7,795 
Total$34,551 $12,571 $6,162 $14,493 $2,822 $15,551 $(2,421)$83,729 
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($37 with Mobility and $24 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.

Deferred Customer Contract Acquisition and Fulfillment Costs
Costs to acquire and fulfill customer contracts, including commissions on service activations, for our wireless, business wireline, consumer wireline and video entertainment services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years. For contracts with an estimated amortization period of less than one year, we expense incremental costs immediately.
 
The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets:
 June 30,December 31,
Consolidated Balance Sheets20212020
Deferred Acquisition Costs  
Prepaid and other current assets$3,750 $3,087 
Other Assets2,901 3,198 
Total deferred customer contract acquisition costs$6,651 $6,285 
Deferred Fulfillment Costs
Prepaid and other current assets$4,720 $4,118 
Other Assets4,256 5,634 
Total deferred customer contract fulfillment costs$8,976 $9,752 

21
20
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

The following table presents the deferredDeferred customer contract acquisition and fulfillment costs included onin “Prepaid and other current assets” at June 30, 2021, include $1,465 of deferred acquisition costs ($414 of which were reclassified from “Other Assets”) and $2,116 of deferred fulfillment costs ($916 of which were reclassified from “Other Assets”) principally for our consolidated balance sheets:
 September 30,December 31,
Consolidated Balance Sheets20202019
Deferred Acquisition Costs  
Other current assets$2,831 $2,462 
Other Assets3,114 2,991 
Total deferred customer contract acquisition costs$5,945 $5,453 
Deferred Fulfillment Costs
Other current assets$4,234 $4,519 
Other Assets5,781 6,439 
Total deferred customer contract fulfillment costs$10,015 $10,958 
Video business, reflecting the held-for-sale treatment (see Note 8).

The following table presents deferred customer contract acquisition and fulfillment cost amortization included in “Other cost of revenue” for the ninesix months ended:
September 30,September 30, June 30,June 30,
Consolidated Statements of IncomeConsolidated Statements of Income20202019Consolidated Statements of Income20212020
Deferred acquisition cost amortizationDeferred acquisition cost amortization$1,969 $1,565 Deferred acquisition cost amortization$1,623 $1,278 
Deferred fulfillment cost amortizationDeferred fulfillment cost amortization3,888 3,656 Deferred fulfillment cost amortization2,422 2,636 

Contract Assets and Liabilities
A contract asset is recorded when revenue is recognized in advance of our right to bill and receive consideration. The contract asset will decrease as services are provided and billed. For example, when installment sales include promotional discounts (e.g., “buy one get one free”) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term.

When consideration is received in advance of the delivery of goods or services, a contract liability is recorded for deferred revenue. Reductions in the contract liability will be recorded as we satisfy the performance obligations.
 
The following table presents contract assets and liabilities on our consolidated balance sheets:
September 30,December 31, June 30,December 31,
Consolidated Balance SheetsConsolidated Balance Sheets20202019Consolidated Balance Sheets20212020
Contract assetContract asset$2,817 $2,472 Contract asset$4,072 $3,501 
Current portion in “Prepaid and other current assets” Current portion in “Prepaid and other current assets”2,642 2,054 
Contract liabilityContract liability6,617 6,999 Contract liability6,431 6,879 
Current portion in “Advanced billings and customer deposits” Current portion in “Advanced billings and customer deposits”4,735 6,071 
Current portion in “Accounts payable and accrued liabilities” Current portion in “Accounts payable and accrued liabilities”1,100 0 

Our beginning of period contract liability recorded as customer contract revenue during 20202021 was $5,340.
Our consolidated balance sheets at September 30, 2020 and December 31, 2019 included $1,729 and $1,611, respectively, for the current portion of our contract asset in “Other current assets” and $5,762 and $5,939, respectively, for the current portion of our contract liability in “Advanced billings and customer deposits.”$5,023.
 
Remaining Performance Obligations
Remaining performance obligations primarily relate to our Communications segment and represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In our WarnerMedia segment, the most significant remaining performance obligations relate to the licensing of theatrical and television content which will be made available to customers at some point in the future. In determining the transaction price allocated, we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless, video and residential internet agreements.
 
22
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of SeptemberJune 30, 2020,2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $39,385,$42,528, of which we expect to recognize approximately 74%82% by the end of 2021,2022, with the balance recognized thereafter. Approximately $2,027 of the $42,528 remaining performance obligation relates to the Video business.

21
AT&T INC.
JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 6. PENSION AND POSTRETIREMENT BENEFITS
 
Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement. We do not have significant funding requirements in 2020.2021.
 
We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required. We anticipate total distributions from the pension plan will exceed the threshold of service and interest costs for 2021, requiring us to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter-end in 2021, as we expect settlements to occur during each quarter. These remeasurements resulted in the recognition of an actuarial gain of $2,844 for the first quarter and an actuarial loss of $197 for the second quarter, totaling $2,647 gain for the six months ended June 30, 2021.

As part of our 2021 remeasurements, we updated the weighted-average discount rate used to measure our pension benefit obligation from 2.70% at December 31, 2020 to 3.30% at March 31, 2021, and to 3.00% at June 30, 2021. The discount rate in effect for determining pension service and interest costs after our June 30 remeasurement is 3.30% and 2.30% respectively. The remeasurements also reflect actual returns on pension plan assets of 4.29% (six-month rate) relative to our expected long-term rate of 6.75% (annual rate).
 
The following table details pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension (credit) cost (benefit) is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.”
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Pension cost:Pension cost:    Pension cost:    
Service cost - benefits earned during the period$257 $260 $772 $743 
Service cost – benefits earned during the periodService cost – benefits earned during the period$228 $258 $482 $515 
Interest cost on projected benefit obligationInterest cost on projected benefit obligation421 463 1,265 1,520 Interest cost on projected benefit obligation339 422 630 844 
Expected return on assetsExpected return on assets(888)(905)(2,667)(2,636)Expected return on assets(850)(890)(1,727)(1,779)
Amortization of prior service creditAmortization of prior service credit(28)(28)(85)(85)Amortization of prior service credit(36)(29)(72)(57)
Actuarial (gain) lossActuarial (gain) loss0 1,888 0 4,019 Actuarial (gain) loss197 0 (2,647)0 
Net pension (credit) costNet pension (credit) cost$(238)$1,678 $(715)$3,561 Net pension (credit) cost$(122)$(239)$(3,334)$(477)
Postretirement cost:Postretirement cost:Postretirement cost:
Service cost – benefits earned during the periodService cost – benefits earned during the period$14 $19 $40 $55 Service cost – benefits earned during the period$12 $13 $23 $26 
Interest cost on accumulated postretirement benefit obligationInterest cost on accumulated postretirement benefit obligation104 185 312 557 Interest cost on accumulated postretirement benefit obligation52 104 105 208 
Expected return on assetsExpected return on assets(44)(57)(133)(169)Expected return on assets(38)(45)(76)(89)
Amortization of prior service creditAmortization of prior service credit(583)(425)(1,747)(1,277)Amortization of prior service credit(635)(582)(1,269)(1,164)
Net postretirement (credit) costNet postretirement (credit) cost$(509)$(278)$(1,528)$(834)Net postretirement (credit) cost$(609)$(510)$(1,217)$(1,019)
Combined net pension and postretirement (credit) costCombined net pension and postretirement (credit) cost$(747)$1,400 $(2,243)$2,727 Combined net pension and postretirement (credit) cost$(731)$(749)$(4,551)$(1,496)

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental pension benefits costs not included in the table above were $19$11 and $24$19 in the thirdsecond quarter and $57$23 and $74$38 for the first ninesix months of 2021 and 2020, and 2019, respectively. During the third quarter of 2020, we recorded an actuarial loss of $63.

2322
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE
 
The Fair Value Measurement and Disclosure framework in ASC 820, “Fair Value Measurement,” provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.
 
The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
 
The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2019.2020.
 
Long-Term Debt and Other Financial Instruments
The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments, are summarized as follows:
September 30, 2020December 31, 2019 June 30, 2021December 31, 2020
CarryingFairCarryingFair CarryingFairCarryingFair
AmountValueAmountValue AmountValueAmountValue
Notes and debentures1
Notes and debentures1
$155,218 $181,872 $161,109 $182,124 
Notes and debentures1
$171,445 $199,544 $155,209 $187,224 
Commercial paperCommercial paper1,754 1,754 0 0 Commercial paper6,571 6,571 0 0 
Bank borrowings0 0 4 4 
Investment securities2
Investment securities2
3,669 3,669 3,723 3,723 
Investment securities2
3,300 3,300 3,249 3,249 
1Includes credit agreement borrowings.
1Includes credit agreement borrowings. Amounts at June 30, 2021 exclude $200 associated with Video business and $35 associated with Vrio, which were classified as held-for-sale (see Note 8).
1Includes credit agreement borrowings. Amounts at June 30, 2021 exclude $200 associated with Video business and $35 associated with Vrio, which were classified as held-for-sale (see Note 8).
2Excludes investments accounted for under the equity method.
2Excludes investments accounted for under the equity method.
2Excludes investments accounted for under the equity method.

The carrying amount of debt with an original maturity of less than one year approximates fair value. The fair value measurements used for notes and debentures are considered Level 2 and are determined using various methods, including quoted prices for identical or similar securities in both active and inactive markets.
 
2423
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of SeptemberJune 30, 20202021 and December 31, 2019.2020. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities,” “Other“Prepaid and other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.
September 30, 2020 June 30, 2021
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
Equity SecuritiesEquity Securities    Equity Securities    
Domestic equitiesDomestic equities$893 $0 $0 $893 Domestic equities$1,142 $0 $0 $1,142 
International equitiesInternational equities148 0 0 148 International equities213 0 0 213 
Fixed income equitiesFixed income equities233 0 0 233 Fixed income equities231 0 0 231 
Available-for-Sale Debt SecuritiesAvailable-for-Sale Debt Securities0 1,524 0 1,524 Available-for-Sale Debt Securities0 1,420 0 1,420 
Asset DerivativesAsset DerivativesAsset Derivatives
Cross-currency swapsCross-currency swaps0 322 0 322 Cross-currency swaps0 856 0 856 
Foreign exchange contractsForeign exchange contracts0 16 0 16 Foreign exchange contracts0 7 0 7 
Liability DerivativesLiability DerivativesLiability Derivatives
Cross-currency swapsCross-currency swaps0 (4,244)0 (4,244)Cross-currency swaps0 (2,207)0 (2,207)
Foreign exchange contractsForeign exchange contracts0 (6)0 (6)Foreign exchange contracts0 (17)0 (17)
December 31, 2019 December 31, 2020
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
Equity SecuritiesEquity Securities    Equity Securities    
Domestic equitiesDomestic equities$844 $0 $0 $844 Domestic equities$1,010 $0 $0 $1,010 
International equitiesInternational equities183 0 0 183 International equities180 0 0 180 
Fixed income equitiesFixed income equities229 0 0 229 Fixed income equities236 0 0 236 
Available-for-Sale Debt SecuritiesAvailable-for-Sale Debt Securities0 1,444 0 1,444 Available-for-Sale Debt Securities0 1,479 0 1,479 
Asset DerivativesAsset DerivativesAsset Derivatives
Interest rate swaps0 2 0 2 
Cross-currency swapsCross-currency swaps0 172 0 172 Cross-currency swaps0 1,721 0 1,721 
Interest rate locks0 11 0 11 
Foreign exchange contractsForeign exchange contracts0 89 0 89 Foreign exchange contracts0 6 0 6 
Liability DerivativesLiability DerivativesLiability Derivatives
Cross-currency swapsCross-currency swaps0 (3,187)0 (3,187)Cross-currency swaps0 (1,814)0 (1,814)
Interest rate locks0 (95)0 (95)
Foreign exchange contractsForeign exchange contracts0 (9)0 (9)

Investment Securities
Our investment securities include both equity and debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our investment securities is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
 
2524
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

The components comprising total gains and losses in the period on equity securities are as follows:
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Total gains (losses) recognized on equity securitiesTotal gains (losses) recognized on equity securities$64 $21 $22 $231 Total gains (losses) recognized on equity securities$87 $161 $142 $(42)
Gains (Losses) recognized on equity securities soldGains (Losses) recognized on equity securities sold0 74 (24)101 Gains (Losses) recognized on equity securities sold0 9 0 (24)
Unrealized gains (losses) recognized on equity securities
held at end of period
Unrealized gains (losses) recognized on equity securities
held at end of period
$64 $(53)$46 $130 
Unrealized gains (losses) recognized on equity securities
held at end of period
$87 $152 $142 $(18)

At SeptemberJune 30, 2020,2021, available-for-sale debt securities totaling $1,524$1,420 have maturities as follows - less than one year: $62;$51; one to three years: $155;$195; three to five years: $163;$186; five or more years: $1,144.$988.
 
Our cash equivalents (money market securities), short-term investments (certificate and time deposits) and nonrefundable customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments and nonrefundable customer deposits are recorded in “Other“Prepaid and other current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets.
 
Derivative Financial Instruments
We enter into derivative transactions to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.
 
Fair Value Hedging Periodically, we enter into and designate fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount.
 
We also designate some of our foreign exchange contractscross-currency swaps as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with foreign-currency-denominated operating assets and liabilities.changes in spot rates on foreign denominated debt. The changes in fair values of cross-currency swaps attributable to the cross-currency basis spread are considered excluded components.
 
Unrealized and realized gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged. In instances where we have designated excluded components related to fair value hedges, unrealized gains or losses on such excluded components are recorded as a component of accumulated OCI and recognized into earnings through the swap accrual. Unrealized gains on derivatives designated as fair value hedges are recorded at fair market value as assets, and unrealized losses are recorded at fair market value as liabilities. ChangesExcept for excluded components, changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, no ineffectiveness was measured on fair value hedges.
 
Cash Flow Hedging We designate most of our cross-currency swaps as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from our foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign currency denominated amounts to fixed U.S. dollar denominated amounts, to be exchanged at a specified rate that is usually determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed or floating foreign currency-denominated interest rate to a fixed U.S. dollar denominated interest rate.
 
We also designate some of our foreign exchange contracts as cash flow hedges. The purpose of these contracts is to hedge certain forecasted film production costs and film tax incentives denominated in foreign currencies.
 
25
AT&T INC.
JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of accumulated OCI and are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings.
26
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt. Over the next 12 months, we expect to reclassify $95$81 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.
We settled all interest rate locks in May 2020 in conjunction with the issuance of fixed rate debt obligations that the interest rate locks were hedging and paid $731 that was largely offset by the return of collateral at the time of settlement. Cash flows from the interest rate lock settlements and return of collateral were reported as Financing Activities in our Statement of Cash Flows, consistent with our accounting policy for these instruments.
  
Net Investment Hedging We have designated €1,450 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated OCI, net on the consolidated balance sheet.sheets. Net losses on net investment hedges recognized in accumulated OCI in the thirdsecond quarter were $70$19 and net gains for the first ninesix months of 20202021 were $75.$51.
 
Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At SeptemberJune 30, 2020,2021, we had posted collateral of $485$68 (a deposit asset) and held collateral of $4$398 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one rating level by Fitch Ratings,S&P and one level by Moody’s before the final collateral exchange in September,June, we would have been required to post additional collateral of $25.$57. If AT&T’s credit rating had been downgraded fourthree ratings levels by Fitch Ratings, two levels by S&P, and two levels by Moody’s, we would have been required to post additional collateral of $3,237.$1,550. If DIRECTV Holdings LLC’s credit rating had been downgraded below BBB- by S&P, we would have been required to post additional collateral of $241.$3. At December 31, 2019,2020, we had posted collateral of $204$53 (a deposit asset) and held collateral of $44$694 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) exists, against the fair value of the derivative instruments.
 
Following are the notional amounts of our outstanding derivative positions:
September 30,December 31, June 30,December 31,
2020201920212020
Interest rate swaps$0 $853 
Cross-currency swapsCross-currency swaps42,969 42,325 Cross-currency swaps$42,186 $40,745 
Interest rate locks0 3,500 
Foreign exchange contractsForeign exchange contracts204 269 Foreign exchange contracts516 90 
TotalTotal$43,173 $46,947 Total$42,702 $40,835 

Following are the related hedged items affecting our financial position and performance:
Effect of Derivatives on the Consolidated Statements of IncomeEffect of Derivatives on the Consolidated Statements of Income   Effect of Derivatives on the Consolidated Statements of Income   
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
Fair Value Hedging RelationshipsFair Value Hedging Relationships2020201920202019Fair Value Hedging Relationships2021202020212020
Interest rate swaps (Interest expense):Interest rate swaps (Interest expense):    Interest rate swaps (Interest expense):    
Gain (Loss) on interest rate swapsGain (Loss) on interest rate swaps$(1)$0 $(5)$59 Gain (Loss) on interest rate swaps$(1)$(14)$(2)$(4)
Gain (Loss) on long-term debtGain (Loss) on long-term debt1 0 5 (59)Gain (Loss) on long-term debt1 14 2 4 
Cross-currency swaps:Cross-currency swaps:
Gain (Loss) on cross-currency swapsGain (Loss) on cross-currency swaps16 0 (32)0 
Gain (Loss) on long-term debtGain (Loss) on long-term debt(16)0 32 0 
Gain (Loss) recognized in accumulated OCIGain (Loss) recognized in accumulated OCI2 0 1 0 

In addition, the net swap settlements that accrued and settled in the quarters ended September 30, 2020 and 2019periods above were offset against interest“Interest expense.
” 
2726
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

The following table presents information for our cash flow hedging relationships:
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
Cash Flow Hedging RelationshipsCash Flow Hedging Relationships2020201920202019Cash Flow Hedging Relationships2021202020212020
Cross-currency swaps:Cross-currency swaps:    Cross-currency swaps:    
Gain (Loss) recognized in accumulated OCIGain (Loss) recognized in accumulated OCI$1,079 $(487)$(2,091)$(1,082)Gain (Loss) recognized in accumulated OCI$(1,149)$809 $(505)$(3,170)
Foreign exchange contracts:Foreign exchange contracts:Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCIGain (Loss) recognized in accumulated OCI10 5 (1)2 Gain (Loss) recognized in accumulated OCI(4)2 0 (11)
Other income (expense) - net reclassified from
accumulated OCI into income
Other income (expense) - net reclassified from
accumulated OCI into income
(9)6 4 16 
Other income (expense) - net reclassified from
accumulated OCI into income
(5)(3)(10)13 
Interest rate locks:Interest rate locks:Interest rate locks:
Gain (Loss) recognized in accumulated OCIGain (Loss) recognized in accumulated OCI0 (202)(648)(225)Gain (Loss) recognized in accumulated OCI0 (12)0 (648)
Interest income (expense) reclassified from
accumulated OCI into income
Interest income (expense) reclassified from
accumulated OCI into income
(25)(15)(59)(47)
Interest income (expense) reclassified from
accumulated OCI into income
(23)(18)(48)(34)

NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS
 
Acquisitions
 
HBO Latin America Group (HBO LAG)Spectrum Auction In May 2020, we acquiredOn February 24, 2021, the remaining interest in HBO LAG for $141, net of cash acquired. At acquisition, we remeasured the fair value of the total business, which exceeded the carrying amount of our equity method investment and resulted in a pre-tax gain of $68. We consolidated that business upon close and recorded those assets at fair value, including $640 of trade names, $271 of distribution networks and $343 of goodwill that is reported in the WarnerMedia segment. These estimates are preliminary in nature and subject to adjustments, which will be finalized within one year from the date of acquisition.
Spectrum Auctions In June 2020, we completed the acquisition of $2,379 of 37/39 GHz spectrum in a Federal Communications Commission (FCC) auction. Priorannounced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of a total of 80 MHz nationwide, including 40 MHz in Phase I. We provided to the auction, we exchanged the 39 GHz licenses with a book valueFCC an upfront deposit of approximately $300 that were previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids$550 in 2020 and recorded a $900 gaincash payments totaling $22,856 in the first quarter of 2020. These vouchers yielded2021, for a valuetotal of $23,406 to date. The licenses were granted by the FCC in July 2021 and remain subject to clearing. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum, expected by the end of 2021, and $2,112 upon clearing of Phase II spectrum, expected by the end of 2023. Additionally, we will be responsible for approximately $1,200, which was applied toward$1,000 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators. Cash paid, including deposits and refunds, for spectrum and capitalized interest is included in “Acquisitions, net of cash acquired” on our gross bids. Inconsolidated statements of cash flows. Funding for the second quarterpurchase price of 2020, we made the finalspectrum included a combination of cash payment of $949, bringing the total cash payment to $1,186.on hand and short-term investments, as well as short- and long-term debt.

Dispositions Subsequent toThe amounts deposited toward the Third Quarter

Central European Media Enterprises Ltd. (CME) On October 13, 2020, we completedacquisition of the sale of our 65.3%licenses and capitalized interest in CME, a European broadcasting company, and received $1,100. Upon close, we received relief from a debt guarantee originally covering approximately $1,100 that was reduced to $600 by September 30, 2020.

Operations in Puerto Rico On October 31, 2020, we completed the sale of wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands for approximately $1,950. These operations were classifiedreported as held-for-sale, and, accordingly, we included the assets in “Other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,”“Deposits on Wireless Licenses” on our consolidated balance sheet at Septemberas of June 30, 2020.2021, and were reclassified to “Licenses - Net” upon receipt in July 2021. Interest is capitalized until the spectrum is ready for its intended use.
Dispositions
Video Business On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV (New DTV), which is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions. We began accounting for our investment in New DTV under the equity method, effective August 1, 2021. After the close of the transaction, New DTV issued $6,200 of long-term debt on August 2, 2021.

The proceeds will be usedIn connection with the transaction, we contributed our U.S. Video business unit to redeem $1,950New DTV for $4,250 of cumulativejunior preferred interestsunits, an additional distribution preference of $4,200 and a 70% economic interest in common units (collectively “equity considerations”). Upon close, we received approximately $7,130 in cash from New DTV ($7,600, net of $470 cash on hand) and transferred $195 of DIRECTV debt. TPG contributed approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a subsidiary that held notes secured by the proceeds30% economic interest in common units. As part of this sale.transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract up to a cap of $2,100 over the remaining period of the contract.

Due to the timing of the transaction, the separation of shared operations, and finalization of commercial and transition service arrangements, our assessment of the third-quarter 2021 financial impacts of the sale is ongoing.

Under separate transition services agreements, we will provide New DTV certain operational support for up to three years. We also have entered into commercial arrangements, for up to five years, to provide network transport for U-verse products and sales services.
28
27
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


In the first quarter of 2021, we applied held-for-sale accounting treatment to the assets and liabilities of the U.S. video business, and, accordingly, include the assets in “Prepaid and other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet. The held-for-sale classification also resulted in ceasing depreciation and amortization on the designated assets.

The historical characteristics of the assets and liabilities of the Video operations, using June 30, 2021 balances, is as follows:
Assets held-for-sale:
   Current assets$3,616
   Property, plant and equipment - net2,572
   Licenses, net5,798
   Other intangible assets, net1,634
   Other assets1,846
Total Video assets (included in “Prepaid and other current
    assets” beginning first quarter 2021)		$15,466
Liabilities related to assets held-for-sale:
   Current liabilities$3,592
   Long-term debt206
   Other noncurrent liabilities351
Total Video liabilities (included in “Accounts payable and
   accrued liabilities” beginning first quarter 2021)		$4,149

Pending Dispositions
WarnerMedia On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery, Inc. (Discovery). The agreement is structured as a Reverse Morris Trust transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata dividend, an exchange offer, or a combination of both, followed by its combination with Discovery. The transaction is expected to be tax-free to AT&T and AT&T’s shareholders. AT&T will receive approximately $43,000 (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt; and AT&T’s shareholders will receive stock representing approximately 71% of the new company; Discovery shareholders will own approximately 29% of the new company. The transaction is expected to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. No vote is required by AT&T shareholders.

The merger agreement contains certain customary termination rights for AT&T and Discovery, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will require Discovery to pay AT&T a termination fee of $720 or AT&T to pay Discovery a termination fee of $1,770.

Magallanes, Inc. (Spinco), a subsidiary of AT&T, entered into a $41,500 commitment letter (Bridge Loan) on May 17, 2021. On June 4, 2021, Spinco entered into a $10,000 term loan credit agreement (Spinco Term Loan) and reduced the aggregate commitment amount under the Bridge Loan to $31,500. There have been no draws on the Bridge Loan or the Spinco Term Loan. In the event advances are made under the Bridge Loan or Spinco Term Loan, those advances will be used by Spinco to finance a portion of the cash distribution to AT&T in connection with the transaction.

Also, on June 23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic Ltd. (Playdemic), to Electronic Arts (EA) for approximately $1,400 in cash. Playdemic was excluded from the pending WarnerMedia/Discovery transaction. In the second quarter of 2021, we classified Playdemic as held-for-sale and included $564 of goodwill in “Prepaid and other current assets,” on our consolidated balance sheet at June 30, 2021. This transaction is subject to customary regulatory approvals and is expected to close by the end of 2021.
28
AT&T INC.
JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Vrio On July 21, 2021, we entered into an agreement to sell our Latin America video operations, Vrio, to Grupo Werthein. In the second quarter of 2021, we classified the Vrio disposal group as held-for-sale and reported the disposal group at fair value less cost to sell, which resulted in a noncash, pre-tax impairment charge of $4,555, including approximately $2,100 related to accumulated foreign currency translation adjustments and $2,500 related to property, plant and equipment and intangible assets. Approximately $80 of the impairment was attributable to noncontrolling interest. At June 30, 2021, our consolidated balance sheet included $883 of Vrio held-for-sale assets reported in “Prepaid and other current assets,” primarily related to deferred customer contract acquisition and fulfillment costs, prepaids and other deferred charges, and $2,849 of related liabilities reported in “Accounts payable and accrued liabilities,” primarily for reserves associated with accumulated foreign currency translation adjustments, which will reverse against accumulated other comprehensive income upon close of the transaction.

The transaction is expected to close in early 2022, pending customary closing conditions. We will retain our 41.3% interest in SKY Mexico, a leading pay-TV provider in Mexico.

NOTE 9. SALES OF RECEIVABLES
 
We have agreements with various third-party financial institutions pertaining to the sales of certain types of our accounts receivable. The most significant of these programs are discussed in detail below and generally consist of (1) receivables arising from equipment installment plans, which are sold for cash and a deferred purchase price, and (2) revolving service and trade receivables. Under these programs, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables, where applicable. Under the terms of our agreements for these programs, we continue to bill and collect the payments from our customers on behalf of the financial institutions.
 
The sales of receivables did not have a material impact on our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheets. We reflect cash receipts on sold receivables as cash flows from operations in our consolidated statements of cash flows. Cash receipts on the deferred purchase price are classified as cash flows from investing activities.
 
Our equipment installment and revolving receivable programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced:
September 30, 2020December 31, 2019 June 30, 2021December 31, 2020
Equipment Equipment  Equipment Equipment 
InstallmentRevolvingInstallmentRevolving InstallmentRevolvingInstallmentRevolving
Gross receivables:Gross receivables:$4,241 $3,516 $4,576 $3,324 Gross receivables:$3,775 $3,714 $5,565 $3,909 
Balance sheet classificationBalance sheet classificationBalance sheet classification
Accounts receivable Accounts receivable Accounts receivable
Notes receivable Notes receivable2,190 0 2,467 0  Notes receivable1,933 0 2,716 0 
Trade receivables Trade receivables481 3,329 477 2,809  Trade receivables435 3,518 554 3,715 
Other Assets Other Assets Other Assets
Noncurrent notes and trade receivables Noncurrent notes and trade receivables1,570 187 1,632 515  Noncurrent notes and trade receivables1,407 196 2,295 194 
Outstanding portfolio of receivables derecognized from
our consolidated balance sheets
Outstanding portfolio of receivables derecognized from
our consolidated balance sheets
8,238 5,100 9,713 4,300 
Outstanding portfolio of receivables derecognized from
our consolidated balance sheets
9,454 5,891 7,827 5,300 
Cash proceeds received, net of remittances1
Cash proceeds received, net of remittances1
5,944 5,100 7,211 4,300 
Cash proceeds received, net of remittances1
6,735 5,891 5,646 5,300 
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

Equipment Installment Receivables Program
We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled.
 
29
AT&T INC.
JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and additional consideration upon settlement of the receivables, referred to as the deferred purchase price. In the event a customer trades in a device prior to the end of the installment contract period, we agree to make a payment to the financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred.
 
29
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

The following table sets forth a summary of equipment installment receivables sold under this program during the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Gross receivables soldGross receivables sold$1,624 $2,098 $5,497 $7,043 Gross receivables sold$2,009 $1,506 $5,944 $3,873 
Net receivables sold1
Net receivables sold1
1,578 2,014 5,300 6,693 
Net receivables sold1
1,963 1,449 5,789 3,722 
Cash proceeds receivedCash proceeds received1,387 1,700 4,562 5,895 Cash proceeds received1,731 1,225 5,250 3,175 
Deferred purchase price recordedDeferred purchase price recorded226 352 811 922 Deferred purchase price recorded292 232 706 585 
Guarantee obligation recordedGuarantee obligation recorded55 67 126 261 Guarantee obligation recorded81 27 227 71 
1Receivables net of allowance, imputed interest and equipment trade-in right guarantees.
1Receivables net of allowance, imputed interest and equipment trade-in right guarantees.
1Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

The deferred purchase price and guarantee obligation are initially recorded at estimated fair value and subsequently adjusted for changes in present value of expected cash flows. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties thatand contemplate changes in value after the launch of a device model. The fair value measurements used for the deferred purchase price and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated deferred purchase price during the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Fair value of repurchased receivablesFair value of repurchased receivables$373 $268 $946 $926 Fair value of repurchased receivables$350 $285 $623 $573 
Carrying value of deferred purchase priceCarrying value of deferred purchase price373 259 931 891 Carrying value of deferred purchase price326 281 579 558 
Gain on repurchases1
Gain on repurchases1
$0 $9 $15 $35 
Gain on repurchases1
$24 $4 $44 $15 
1These gains are included in "Selling, general and administrative" in the consolidated statements of income.
1These gains are included in "Selling, general and administrative" in the consolidated statements of income.
1These gains are included in "Selling, general and administrative" in the consolidated statements of income.

At SeptemberJune 30, 20202021 and December 31, 2019,2020, our deferred purchase price receivable was $2,163$2,631 and $2,336,$1,991, respectively, of which $1,538$1,639 and $1,569$1,476 are included in “Other“Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at SeptemberJune 30, 20202021 and December 31, 20192020 was $319$289 and $384,$228, respectively, of which $234$92 and $148$161 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our deferred purchase price and guarantee obligation.
 
Revolving Receivables Program
In 2019, we entered intoWe have a one-year revolving agreement to transfer up to $4,300$6,000 of certain receivables through our bankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. InThis agreement is subject to renewal on an annual basis and the first quarter of 2020, wetransfer limit may be expanded the program limitfrom time to $5,300. In the second quarter of 2020, we extended the agreement by one year.time. As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). The transferred receivables are fully guaranteed by our bankruptcy-remote subsidiaries, which hold additional receivables in the amount of $3,516$3,714 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. The obligation is
30
AT&T INC.
JUNE 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding.
 
The fair value measurement used for the obligation is considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).
 
30
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

The following table sets forth a summary of receivables sold:
 Three months endedNine months ended
 September 30,September 30,
 2020201920202019
Gross receivables sold/cash proceeds received1
$3,563 $2,873 $11,590 $8,725 
Collections reinvested under revolving agreement3,563 2,873 10,590 5,000 
Collections not reinvested200 269 200 269 
Net cash proceeds received (remitted)$(200)$(269)$800 $3,456 
Net receivables sold2
$3,553 $2,864 $11,510 $8,361 
Obligations recorded (reversed)58 39 172 475 
1There were 0 initial sales of receivables in either of the three-month periods and $1,000 and $3,725 for the nine months ended September 30, 2020 and 2019, respectively.
2Receivables net of allowance, return and incentive reserves and imputed interest.
 Three months endedSix months ended
 June 30,June 30,
 2021202020212020
Gross receivables sold/cash proceeds received1
$5,137 $3,805 $10,341 $8,027 
Total collections under revolving agreement2
5,001 3,805 9,750 7,027 
Net cash proceeds received$136 $0 $591 $1,000 
Net receivables sold3
$5,132 $3,819 $10,257 $7,957 
Obligations recorded (reversed)(131)(12)11 114 
1Includes initial sales of receivables of $0 for each of the three months and $700 and $1,000 for the six months ended June 30, 2021 and 2020, respectively.
2Includes collections of $0 for each of the three months and $109 and $0 for the six months ended June 30, 2021 and 2020, respectively, that were not reinvested under the revolving agreement.
3Receivables net of allowance, return and incentive reserves and imputed interest.

NOTE 10. LEASES
 
We have operating and finance leases for certain facilities and equipment used in operations. Our leases generally have remaining lease terms of up to 15 years. Some of our real estate operating leases contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year.
 
We have recognized a right-of-use asset for both operating and finance leases, and an operating lease liability that represents the present value of our obligation to make payments over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was determined using a portfolio approach based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate in the currency of the lease, which will be updated on a quarterly basis for measurement of new lease liabilities.
 
The components of lease expense were as follows:
Three months endedNine months ended Three months endedSix months ended
September 30,September 30, June 30,June 30,
2020201920202019 2021202020212020
Operating lease costOperating lease cost$1,546 $1,481 $4,372 $4,333 Operating lease cost$1,431 $1,449 $2,889 $2,826 
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets$76 $67 $216 $203 Amortization of right-of-use assets$70 $73 $139 $140 
Interest on lease obligationInterest on lease obligation39 42 116 126 Interest on lease obligation41 36 80 77 
Total finance lease costTotal finance lease cost$115 $109 $332 $329 Total finance lease cost$111 $109 $219 $217 

31
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

SupplementalThe following table provides supplemental cash flowflows information related to leases is as follows:leases:

Nine months ended
September 30,
20202019
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations
Operating cash flows from operating leases$3,651 $3,338 
Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease obligations3,908 7,068 
Six months ended
June 30,
20212020
Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations:
Operating cash flows for operating leases$2,509 $2,424 
Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new
      operating lease obligations		2,349 2,895 


SupplementalThe following tables set forth supplemental balance sheet information related to leases is as follows:leases:
September 30,
2020		December 31,
2019		 June 30,
2021		December 31,
2020
Operating LeasesOperating LeasesOperating Leases
Operating lease right-of-use assetsOperating lease right-of-use assets$24,546 $24,039 Operating lease right-of-use assets$24,390 $24,714 
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities$3,483 $3,451 Accounts payable and accrued liabilities$3,651 $3,537 
Operating lease obligationOperating lease obligation22,056 21,804 Operating lease obligation21,637 22,202 
Total operating lease obligationTotal operating lease obligation$25,539 $25,255 Total operating lease obligation$25,288 $25,739 
Finance LeasesFinance LeasesFinance Leases
Property, plant and equipment, at costProperty, plant and equipment, at cost$3,485 $3,534 Property, plant and equipment, at cost$2,755 $3,586 
Accumulated depreciation and amortizationAccumulated depreciation and amortization(1,363)(1,296)Accumulated depreciation and amortization(1,106)(1,361)
Property, plant and equipment, netProperty, plant and equipment, net$2,122 $2,238 Property, plant and equipment, net$1,649 $2,225 
Current portion of long-term debtCurrent portion of long-term debt$174 $162 Current portion of long-term debt$161 $189 
Long-term debtLong-term debt1,732 1,872 Long-term debt1,606 1,847 
Total finance lease obligationTotal finance lease obligation$1,906 $2,034 Total finance lease obligation$1,767 $2,036 
September 30,June 30,
2020201920212020
Weighted-Average Remaining Lease Term (years)Weighted-Average Remaining Lease Term (years)Weighted-Average Remaining Lease Term (years)
Operating leasesOperating leases8.58.7Operating leases8.38.5
Finance leasesFinance leases10.110.4Finance leases8.810.2
Weighted-Average Discount RateWeighted-Average Discount RateWeighted-Average Discount Rate
Operating leasesOperating leases4.1 %4.3 %Operating leases3.9 %4.2 %
Finance leasesFinance leases8.1 %8.4 %Finance leases8.0 %8.2 %

32
AT&T INC.
SEPTEMBERJUNE 30, 20202021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

FutureThe following table provides the expected future minimum maturities of lease obligations are as follows:obligations:
At September 30, 2020OperatingFinance
At June 30, 2021At June 30, 2021OperatingFinance
LeasesLeasesLeasesLeases
Remainder of 2020$1,226 $99 
20214,679 316 
Remainder of 2021Remainder of 2021$2,484 $143 
202220224,372 298 20224,829 290 
202320233,981 278 20234,400 277 
202420243,449 258 20243,864 257 
202520253,127 251 
ThereafterThereafter13,543 1,720 Thereafter12,203 1,344 
Total lease paymentsTotal lease payments31,250 2,969 Total lease payments30,907 2,562 
Less imputed interest(5,711)(1,063)
Less: imputed interestLess: imputed interest(5,619)(795)
TotalTotal$25,539 $1,906 Total$25,288 $1,767 

NOTE 11. STOCKHOLDERS' EQUITY
We have authorized 10 million preferred shares of AT&T stock, each with a par value of $1.00 per share. Cumulative perpetual preferred shares consist of the following:
•Series A: 48 thousand shares outstanding at September 30, 2020 and December 31, 2019, with a $25,000 per share liquidation preference and a dividend rate of 5.00%.
•Series B: 20 thousand shares outstanding at September 30, 2020 and 0 issued and outstanding at December 31, 2019, with a €100,000 per share liquidation preference, and an initial dividend rate of 2.875%, subject to reset beginning on May 1, 2025.
•Series C: 70 thousand shares outstanding at September 30, 2020 and 0 issued and outstanding at December 31, 2019, with a $25,000 per share liquidation preference and a dividend rate of 4.75%.
So long as the preferred dividends are declared and paid on a timely basis on each series of preferred shares, there are no limitations on our ability to declare a dividend on or repurchase AT&T common shares. The preferred shares are optionally redeemable by AT&T at the liquidation price generally on or after five years from the issuance date, or upon certain other contingent events.

Telco LLC
In September 2020, we issued $2,000 nonconvertible cumulative preferred interests out of a newly created limited liability company (Telco LLC) that was formed to hold telecommunication-related assets. The preferred interests are entitled to cash distributions, subject to declaration and are included in “Noncontrolling interest” on the consolidated balance sheets.

Members’ equity in Telco LLC consist of (1) member’s interests, which are held by a consolidated subsidiary of AT&T, and (2) preferred interests (Telco preferred interests), which pay an initial preferred distribution of 4.25% annually, subject to declaration, and subject to reset every seven years. Failure to pay distributions on the Telco preferred interests would not limit cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. We can call the Telco preferred interests at the issue price beginning seven years from the issuance date.

The Telco preferred interests holders have the option to require redemption upon the occurrence of certain contingent events, such as the failure of Telco LLC to pay the preferred distribution for 2 or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given, all other holders of equal or more subordinate classes of members equity are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes.

33
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 12.11. ADDITIONAL FINANCIAL INFORMATION
 
Cash and Cash Flows
We typically maintain our restricted cash balances for purchases and sales of certain investment securities and funding of certain deferred compensation benefit payments:
 September 30,December 31,
 2020201920192018
Cash and cash equivalents$9,758 $6,588 $12,130 $5,204 
Restricted cash in Other current assets2 15 69 61 
Restricted cash in Other Assets89 179 96 135 
Cash and Cash Equivalents and Restricted Cash$9,849 $6,782 $12,295 $5,400 
payments.

Consolidated Statements of Cash FlowsNine months ended
 September 30,
Cash paid (received) during the period for:20202019
Interest$6,661 $6,938 
Income taxes, net of refunds306 420 
Spectrum acquisitions1,062 1,022 
The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets:
 June 30,December 31,
 2021202020202019
Cash and cash equivalents$11,869 $16,941 $9,740 $12,130 
Restricted cash in Prepaid and other current assets6 3 9 69 
Restricted cash in Other Assets101 87 121 96 
Cash and Cash Equivalents and Restricted Cash$11,976 $17,031 $9,870 $12,295 

The following table summarizes cash paid during the periods for interest, income taxes and spectrum:
Consolidated Statements of Cash FlowsSix months ended
 June 30,
Cash paid (received) during the period for:20212020
Interest$3,861 $4,202 
Income taxes, net of refunds418 (214)
Spectrum acquisitions1
22,886 1,046 
1 Included as cash paid for “Acquisitions, net of cash acquired” on our consolidated statement of cash flows. Excludes interest
    during construction.
The following table summarizes interest capitalized during construction:
Six months ended
June 30,
Interest during construction:20212020
Capital expenditures$(94)$(60)
Spectrum1
(257)0 
Interest During Construction$(351)$(60)
1 Included in “Acquisitions, net of cash acquired” on our consolidated statement of cash flows.
33
AT&T INC.
JUNE 30, 2021
Other
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Noncash Investing and Financing Activities In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid. For the first ninesix months ended June 30, 2021 and 2020, we recorded vendor financing commitments related to capital investments of approximately $3,148 in 2020$1,778 and $1,917 in 2019.$1,680.

Total vendor financing payables included in our SeptemberJune 30, 20202021 consolidated balance sheet were approximately $3,252,$2,948, with $1,474$2,149 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

Financing Activities
Debt Transactions At SeptemberJune 30, 2020,2021, our total long-term debt obligations totaled $158,878.$179,783. Our debt activity during the ninesix months ended SeptemberJune 30, 20202021 primarily consisted of the following:
First
Quarter		Second
Quarter		Six months ended
June 30, 2021
Net commercial paper borrowings$7,072 $(513)$6,559 
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes$6,000$0$6,000 
Initial average rate of 1.27%
Euro denominated global notes1,46101,461 
Rate of 0.00%
2021 Syndicated Term Loan7,35007,350 
BAML Bilateral Term Loan2,00002,000 
Private financing7500750 
Other6360636 
Debt Issuances$18,197$0$18,197 
Repayments:
Private financing$(649)$0$(649)
Other(253)(253)(506)
Repayments of long-term debt$(902)$(253)$(1,155)
•1 Net borrowings of approximately $1,710 of debt under our commercial paper program during the first nine months.Includes credit agreement borrowings.
•
Entry
Credit Facilities
On January 29, 2021, we entered into and draw on a $5,500$14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with certain commercial banks and Bank of America, N.A., as lead agent, in April 2020, whichagent. On March 23, 2021, we borrowed $7,350 under the 2021 Syndicated Term Loan and the remaining $7,350 of lenders’ commitments were terminated. As of June 30, 2021, $7,350 was redeemed in May 2020 (originallyoutstanding and is due on December 31, 2020).March 22, 2022.

•Issuance of $16,545 of AT&T global notes due 2027 to 2060 in the second quarter.
•Issuance of €3,000 million global notes ($3,281 at issuance) due 2028 to 2038 in the second quarter.
•Issuance of $11,000 of global notes due 2028 to 2061 in the third quarter.
•Redemption of $12,689 of AT&T global notes due 2020 to 2047 in the second quarter.
•Redemption of $1,800 underIn March 2021, we entered into and drew on a $2,000 term loan credit agreementsagreement (BAML Bilateral Term Loan) consisting of (i) a 0.75 year $1,000 facility due December 31, 2021 (BAML Tranche A Facility), and (ii) a 1.75 year $1,000 facility due December 31, 2022 (BAML Tranche B Facility), with certain banks in the second quarter.
•RedemptionBank of $1,000 annual put reset securities issued by BellSouth in the second quarter.
•Redemption of $4,264 of AT&T, WarnerMedia and DIRECTV notes due 2022 in the third quarter.
•Redemption of $1,158 of AT&T and WarnerMedia global notes due 2022 to 2023 in the third quarter.
•Redemption of €2,250 of AT&T floating-rate notes due 2020 (approximately $2,637 at maturity) in the third quarter.
•Redemption of R$3,381 of Sky Serviços de Banda Larga Ltda. floating-rate private loan dueAmerica, N.A., as agent. At June 30, 2021, (approximately $1,000 when issued in April 2018 and $638 at redemption due to strengthening of the U.S. dollar against Brazilian real) in the third quarter.
•Repurchases of $11,384 of AT&T global notes and subsidiary notes due 2021 to 2025 tendered for cash in the third quarter.
•Exchange of $17,677 of AT&T and subsidiary notes, due 2031 to 2058, for $1,459 of cash and $21,500 of three new series of AT&T global notes due 2053 to 2059 in the third quarter.

$2,000 was outstanding under these facilities.
34
AT&T INC.
SEPTEMBER 30, 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Our long-term debt issuances carried a weighted average interest rate of 3.2%, and our long-term debt redemptions had a weighted average interest rate of 3.2%.
35
AT&T INC.
SEPTEMBERJUNE 30, 20202021

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Dollars in millions except per share amounts


OVERVIEW
AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document, and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications, media and technology industries. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes).
 
We have three reportable segments: (1) Communications, (2) WarnerMedia and (3) Latin America. Our segment results presented in Note 4 and discussed below follow our internal management reporting. We analyze our segments based on segment operating contribution, which consists of operating income, excluding acquisition-related costs and other significant items and equity in net income (loss) of affiliates for investments managed within each segment. Percentage increases and decreases that are not considered meaningful are denoted with a dash.

We haveIn the first quarter of 2021, we recast our segment results for all prior periods to includereflect the following:
•Communications segment results were recast to remove the held-for-sale businesses, principally Video, instead reporting those results in Corporate and Other. Additionally, we refined the allocation of shared infrastructure and deferred customer acquisition costs between Consumer Wireline and Video.
•WarnerMedia segment results reflect our prior Xandr segment within ouroperation of WarnerMedia segment.as one integrated organization.
Third QuarterNine-Month Period Second QuarterSix-Month Period
  Percent  Percent   Percent  Percent
20202019Change20202019Change 20212020Change20212020Change
Operating RevenuesOperating Revenues      Operating Revenues      
CommunicationsCommunications$34,287 $35,401 (3.1)%$102,128 $105,837 (3.5)%Communications$28,128 $26,505 6.1 %$56,306 $53,284 5.7 %
WarnerMediaWarnerMedia7,514 8,350 (10.0)22,176 25,990 (14.7)WarnerMedia8,791 6,728 30.7 17,317 14,493 19.5 
Latin AmericaLatin America1,396 1,730 (19.3)4,218 5,205 (19.0)Latin America1,437 1,232 16.6 2,811 2,822 (0.4)
Corporate and other431 407 5.9 1,256 1,218 3.1 
CorporateCorporate361 589 (38.7)787 1,123 (29.9)
VideoVideo6,639 7,021 (5.4)13,364 14,428 (7.4)
Eliminations and consolidationEliminations and consolidation(1,288)(1,300)0.9 (3,709)(3,878)4.4 Eliminations and consolidation(1,311)(1,125)(16.5)(2,601)(2,421)(7.4)
AT&T Operating RevenuesAT&T Operating Revenues42,340 44,588 (5.0)126,069 134,372 (6.2)AT&T Operating Revenues44,045 40,950 7.6 87,984 83,729 5.1 
Operating ContributionOperating Contribution    Operating Contribution    
CommunicationsCommunications7,648 8,036 (4.8)23,963 24,718 (3.1)Communications7,340 7,488 (2.0)14,705 14,889 (1.2)
WarnerMediaWarnerMedia1,770 2,871 (38.3)5,700 7,784 (26.8)WarnerMedia1,739 1,912 (9.0)3,769 3,926 (4.0)
Latin AmericaLatin America(177)(166)(6.6)(562)(548)(2.6)Latin America(152)(201)24.4 (325)(385)15.6 
Segment Operating ContributionSegment Operating Contribution$9,241 $10,741 (14.0)%$29,101 $31,954 (8.9)%Segment Operating Contribution$8,927 $9,199 (3.0)%$18,149 $18,430 (1.5)%

The Communications segment provides services to businesses and consumers located in the U.S. and businesses globally. Our business strategies reflect bundled product offerings that cut across product lines and utilize shared assets. This segment contains the following business units:
•Mobility provides nationwide wireless service and equipment.
•Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers. This segment also records advertising revenues.
•Business Wireline provides advanced IP-based services, as well as traditional voice and data services and related equipment to business customers.
•Consumer Wireline provides internet, including broadband fiber, and legacy telephony voice communications services to residential customers.

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. Historical financialWarnerMedia content is distributed through basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing. Segment results fromalso include Xandr previously a separate reportable segment, have been combined with the WarnerMedia segment within Eliminations and other. This segment contains the following:
•Turner primarily operates multichannel basic television networks and digital properties. Turner also sells advertising on its networks and digital properties.
•Home Box Office consists of premium pay television and OTT and streaming services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment.
•Warner Bros. primarily consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.
•Eliminations & Other includes the Xandr advertising business and Otter Media Holdings operations, and also removes transactions between the Turner, Home Box Office and Warner Bros. business units, including internal sales of content to the HBO Max platform that began in the fourth quarter of 2019 (see Note 5).Holdings.

3635
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

The Latin America segment provides entertainment and wireless services outside of the U.S. This segment contains the following business units:
•Vrio provides video services primarily to residential customers using satellite technology in Latin America and the Caribbean.
•Mexico provides wireless service and equipment to customers in Mexico.

COVID-19 Update
Disruptions caused by the coronavirus (COVID-19) and measures taken to prevent its spread or mitigate its effects both domestically and internationally have impacted our results of operations. We recorded approximately $190, or $0.02 per diluted share, in the third quarter and $940, or $0.10 per diluted share, for the first nine months of 2020, of incremental costs associated with voluntary corporate actions taken to protect and compensate front-line employees and contractors or additional WarnerMedia production disruption.
In addition to these incremental costs, we estimate that our operations and comparability were impacted by approximately $1,715, or $0.19 per diluted share, in the third quarter and $2,185, or $0.24 per diluted share, for the first nine months of 2020, for: (1) the resumption of the NBA season, resulting in the shift to third quarter of sports costs historically incurred during the second quarter, and associated advertising revenues, (2) lower television licensing and production revenues due to production hiatus, (3) the partial closure of movie theaters and postponement of theatrical releases, leading to lower content revenues and associated expenses, and (4) the reluctance of consumers to travel at previous levels, driving significantly lower international wireless roaming services that do not have a directly correlated expense reduction.

Subscriber counts at September 30, 2020, exclude customers who we have agreed not to terminate service under the Federal Communications Commission (FCC) "Keep Americans Connected Pledge" or state mandates. For reporting purposes, we excluded 121,000 postpaid (97,000 phone), 13,000 broadband (4,000 fiber) and 7,000 premium TV nonpaying customers even though they are still receiving service.

Third-quarter 2020 subscriber net adds include 233,000 postpaid (151,000 phone), 104,000 broadband (28,000 fiber) and 116,000 premium TV "Keep Americans Connected Pledge" paying accounts.

With partial reopening of the economy and improved collections experience, the economic effects of the pandemic and resulting societal changes remain unpredictable. There are a number of uncertainties that could impact our future results of operations, including the effectiveness of COVID-19 mitigation measures; the duration of the pandemic; global economic conditions; changes to our operations; changes in consumer confidence, behaviors and spending; work from home trends; and the sustainability of supply chains. We expect operating results and cash flows to continue to be adversely impacted by COVID-19 for the duration of the pandemic. We expect our fourth-quarter results to be impacted by the following:
•Lower revenues from the partial closure of movie theaters and postponement of theatrical releases, partially offset by lower production and other programming expenses;
•The decline in revenues from international roaming wireless services due to reduced travel; and
•Higher expenses to protect front-line employees, contractors and customers.
37
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

RESULTS OF OPERATIONS
 
Consolidated Results Our financial results are summarized in the discussions that follow. Additional analysis is discussed in our “Segment Results” section. Certain prior period amounts have been reclassified to conform to the current period’s presentation.
Third QuarterNine-Month Period Second QuarterSix-Month Period
  Percent  Percent   Percent  Percent
20202019Change20202019Change 20212020Change20212020Change
Operating RevenuesOperating Revenues      Operating Revenues      
ServiceService$37,782 $40,317 (6.3)%$113,716 $122,024 (6.8)%Service$38,956 $37,051 5.1 %$77,460 $75,934 2.0 %
EquipmentEquipment4,558 4,271 6.7 12,353 12,348 — Equipment5,089 3,899 30.5 10,524 7,795 35.0 
Total Operating RevenuesTotal Operating Revenues42,340 44,588 (5.0)126,069 134,372 (6.2)Total Operating Revenues44,045 40,950 7.6 87,984 83,729 5.1 
Operating expensesOperating expenses    Operating expenses    
Operations and supportOperations and support29,178 29,738 (1.9)87,382 90,482 (3.4)Operations and support35,015 30,133 16.2 65,484 58,204 12.5 
Depreciation and amortizationDepreciation and amortization7,030 6,949 1.2 21,537 21,256 1.3 Depreciation and amortization5,761 7,285 (20.9)11,570 14,507 (20.2)
Total Operating ExpensesTotal Operating Expenses36,208 36,687 (1.3)108,919 111,738 (2.5)Total Operating Expenses40,776 37,418 9.0 77,054 72,711 6.0 
Operating IncomeOperating Income6,132 7,901 (22.4)17,150 22,634 (24.2)Operating Income3,269 3,532 (7.4)10,930 11,018 (0.8)
Interest expenseInterest expense1,972 2,083 (5.3)6,031 6,373 (5.4)Interest expense1,684 2,041 (17.5)3,554 4,059 (12.4)
Equity in net income (loss) of
affiliates
Equity in net income (loss) of
affiliates
5 3 66.7 (11)36 — 
Equity in net income (loss) of
affiliates
41 (10)— 93 (16)— 
Other income (expense) - netOther income (expense) - net(231)(935)(75.3)1,589 (967)— Other income (expense) - net999 1,017 (1.8)5,220 1,820 — 
Income Before Income TaxesIncome Before Income Taxes3,934 4,886 (19.5)12,697 15,330 (17.2)Income Before Income Taxes2,625 2,498 5.1 12,689 8,763 44.8 
Net IncomeNet Income3,168 3,949 (19.8)9,694 12,271 (21.0)Net Income1,874 1,563 19.9 9,816 6,526 50.4 
Net Income Attributable to AT&TNet Income Attributable to AT&T2,816 3,700 (23.9)8,707 11,509 (24.3)Net Income Attributable to AT&T1,570 1,281 22.6 9,120 5,891 54.8 
Net Income Attributable to Common
Stock
Net Income Attributable to Common
Stock
$2,762 $3,700 (25.4)%$8,569 $11,509 (25.5)%
Net Income Attributable to Common
Stock
$1,514 $1,229 23.2 %$9,014 $5,807 55.2 %

Operating revenues decreasedincreased in the thirdsecond quarter and in the first ninesix months of 2020. Communications segment2021. The revenue declines wereincrease was driven by continued declineshigher content, Direct-to-Consumer (DTC) subscription and advertising revenues in videoour WarnerMedia segment; Mobility equipment and legacy services,service revenue growth and gains in broadband service in our Communications segment; and growth in Mexico wireless operations and favorable foreign exchange impacts. This increase was partially offset by increasesdeclines in strategicour Video business and managed business service and third-quarter growth in wireless equipment revenues. Lower WarnerMedia segmentlower Business Wireline revenues reflect limited and postponed theatrical releases and home entertainment releases as well as lower television licensing and productions revenues, partially offset by increased sports-related advertising revenueresulting from higher demand for pandemic-related connectivity in the thirdprior-year. Operating revenues in 2021 were also impacted by the absence of revenue from our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands which were sold in the fourth quarter that shifted from the second quarter. Latin America segment revenue declines were primarily due to foreign exchange rates.of 2020.
 
Operations and support expenses decreasedincreased in the thirdsecond quarter and in the first ninesix months of 2020.2021. The decreases wereexpense increase was primarily due to a noncash impairment charge of $4,555 resulting from our assessment of the recoverability of the net assets of Vrio, including approximately $2,100 of historical currency translation adjustments (see Note 8). The expense increase was also driven by lower broadcast and programming costs in our Communications segment and, for the first nine months, our WarnerMedia segment. Expense declines in the third quarter were partially offsetpart by increased domestic wireless equipment expense from higher smartphone sales, higher sports-related programming costs, that shifted fromand additional DTC programming and marketing costs. Also contributing to the secondhigher comparative expenses was the first-quarter 2020 gain on spectrum transaction, which did not recur in 2021. Partially offsetting the expense increases were severance charges in the prior-year quarter and increased HBO Max investmentslower Video costs in the WarnerMedia segment. Expense declines for the first nine months were also driven by a noncash gain of $900 on a spectrum transaction in the first quarter and our continued focus on cost management, partially offset by charges for a goodwill impairment at our Vrio business unit in the second quarter, employee separation charges and incremental costs related to COVID-19. As part of our cost and efficiency initiatives, we expect operations and support expense improvements to continue as we size our operations to reflect the current economic activity level.year.
 
Depreciation and amortization expense increaseddecreased in the thirdsecond quarter and for the first ninesix months of 2020.
Amortization expense increased $87, or 4.6% in the third quarter and $222, or 3.6% for the first nine months of 2020 due to the amortization of orbital slot licenses, which began in the first quarter of 2020 (see Note 1).2021.
3836
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Amortization expense decreased $1,076, or 50.2% in the second quarter and $2,001, or 47.6% for the first six months of 2021 primarily due to the lower cost basis of long-lived assets resulting from Video impairments taken in the fourth quarter of 2020 and ceasing amortization on held-for-sale Video assets in 2021.

Depreciation expense decreased $6,$448, or 0.1%8.7% in the thirdsecond quarter and increased $59,$936, or 0.4%9.1% for the first ninesix months of 2020. The increase for the nine months period was2021 primarily due to ongoing capital spend for network upgradesthe lower cost basis of property, plant and expansion partially offset by fully depreciatedequipment resulting from Video impairments taken in the fourth quarter of 2020 and ceasing depreciation on held-for-sale Video assets in our Communications segment.

2021.
Operating income decreased in the thirdsecond quarter and forin the first ninesix months of 2020.2021. Our operating income margin for the thirdsecond quarter decreased from 17.7% in 2019 to 14.5%8.6% in 2020 to 7.4% in 2021 and forin the first ninesix months decreased from 16.8%13.2% in 20192020 to 13.6%12.4% in 2020.2021.
 
Interest expense decreased in the thirdsecond quarter and first ninesix months of 2020,2021, primarily due to lower interest rates and debt balances.capitalized interest associated with the spectrum acquisitions.
 
Equity in net income of affiliates increased in the thirdsecond quarter and decreased for the first ninesix months of 2020, reflecting changes in our investment portfolio, including our second-quarter 2020 acquisition of the remaining interest in HBO Latin America Group (HBO LAG).2021, primarily due to improved performance from certain WarnerMedia investments.
 
Other income (expense) – net increaseddecreased in the thirdsecond quarter and increased for the first ninesix months of 2020.2021. The increasesdecrease in the second quarter was driven by the recognition of an actuarial loss of $197, with no comparable interim remeasurement in 2020, greater returns on benefit-related investments and gains on assets sales in 2020, and fewer impairments taken on investments in 2021. Partially offsetting these decreases were higher net pension and postretirement benefit credits resulting from lower interest costs on the benefit obligation and higher prior service credit amortization (see Note 6).

The increase for the first six months was primarily due to the recognition of an actuarial lossgain of $63$2,647, with no comparable interim remeasurement in 2020, and an increase in net pension and postretirement benefit credits resulting from lower interest costs on the third quarter and for the first nine months of 2020, compared to actuarial losses totaling $1,917 and $4,048 in the third quarter and for the first nine months of 2019, respectively,benefit obligation and higher prior service credit amortizationamortization. The increase also includes higher returns on benefit-related investments for the six-month comparable period and fewer impairments taken in 2020 (see Note 6). Partially offsetting the increases were $1,224 of debt redemption costs in the third quarter, the write-off of certain investments in 2020 and the second-quarter 2019 gain on sale of our interest in Hulu.2021.
 
Income taxes decreased in the thirdsecond quarter and increased for the first ninesix months of 2020.2021. The decrease in income tax expense in the thirdsecond quarter was primarily attributable to lowerdriven by the tax benefit resulting from the Vrio held-for-sale classification and tax planning initiatives, including state apportionment analysis and filing methodology offset by higher income before income tax. Our effective tax rate was 28.6% in the second quarter of 2021, versus 37.5% in the comparable period in the prior year. The decreaseeffective tax rate in income2020 was higher primarily due to our prior-year impairment of Vrio goodwill, which was not deductible for tax expensepurpose.

The increase for the first ninesix months of 2020 was primarily attributabledue to lowerhigher income before income tax, offset by tax benefit resulting from the second quarter Vrio goodwill impairment, which is not deductible forheld-for-sale classification, tax purposes.
initiatives and audit settlements. Our effective tax rate was 19.5% for the third quarter and 23.7%22.6% for the first ninesix months of 2020,2021, versus 19.2% and 20.0%25.5% for the comparable year-prior periods, respectively. The increaseperiod in our effective tax rate for the first nine months was primarily due to the second quarter Vrio goodwill impairment, which is not deductible for tax purposes.prior year.

COMMUNICATIONS SEGMENTThird QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Segment Operating Revenues      
Mobility$17,894 $17,701 1.1 %$52,445 $52,356 0.2 %
Entertainment Group10,053 11,197 (10.2)30,637 33,893 (9.6)
Business Wireline6,340 6,503 (2.5)19,046 19,588 (2.8)
Total Segment Operating Revenues34,287 35,401 (3.1)102,128 105,837 (3.5)
Segment Operating Contribution    
Mobility5,691 5,742 (0.9)17,284 16,818 2.8 
Entertainment Group779 1,084 (28.1)3,144 4,076 (22.9)
Business Wireline1,178 1,210 (2.6)3,535 3,824 (7.6)
Total Segment Operating Contribution$7,648 $8,036 (4.8)%$23,963 $24,718 (3.1)%

COMMUNICATIONS SEGMENTSecond QuarterSix-Month Period
   Percent  Percent
 20212020Change20212020Change
Segment Operating Revenues      
Mobility$18,936 $17,149 10.4 %$37,970 $34,551 9.9 %
Business Wireline6,052 6,305 (4.0)12,098 12,571 (3.8)
Consumer Wireline3,140 3,051 2.9 6,238 6,162 1.2 
Total Segment Operating Revenues28,128 26,505 6.1 56,306 53,284 5.7 
Segment Operating Contribution    
Mobility6,002 5,805 3.4 12,004 11,593 3.5 
Business Wireline1,050 1,290 (18.6)2,108 2,383 (11.5)
Consumer Wireline288 393 (26.7)593 913 (35.0)
Total Segment Operating Contribution$7,340 $7,488 (2.0)%$14,705 $14,889 (1.2)%
3937
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Selected Subscribers and Connections  
 September 30,
(000s)20202019
Mobility Subscribers1
176,744 162,300 
Total domestic broadband connections1
15,375 15,575 
Network access lines in service7,562 8,831 
U-verse VoIP connections3,942 4,539 
1Excludes 121 wireless and 13 broadband customers who we have agreed not to terminate service under the "Keep Americans Connected Pledge," which was implemented March 13, 2020, or state mandates.

Selected Subscribers and Connections  
 June 30,
(000s)20212020
Mobility Subscribers191,646 171,407 
Total domestic broadband connections15,481 15,201 
Network access lines in service6,691 7,878 
U-verse VoIP connections3,559 4,058 

Operating revenues decreasedincreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, driven by declinesincreases in our Entertainment GroupMobility and BusinessConsumer Wireline business units, partially offset by increasesdecreases in our MobilityBusiness Wireline business unit. The decreases reflect the continued shift away from linear videoincreases are primarily driven by wireless equipment revenue growth and legacy services and lower wireless service revenues from a declinerevenue improvements and gains in international travel. Equipment sales increased in the third quarter but were down for the first nine months due to lower equipment sales in the first quarter of 2020 resulting from pandemic-related store closures. Partially offsetting these declines was growth in our prepaid subscriber base.broadband service.
 
Operating contribution decreased in the thirdsecond quarter and for the first ninesix months of 2020. The decline in the third quarter reflects2021, reflecting lower operating contribution from all business units. Lower contribution for the first nine months was due to declines in our Business Wireline and Entertainment GroupConsumer Wireline business units, largely offset by improvementincreases in our Mobility business unit. Our Communications segment operating income margin in the thirdsecond quarter decreased from 22.7%28.3% in 20192020 to 22.3%26.1% in 20202021 and for the first ninesix months decreased from 27.9% in 2020 to 26.1% in 2021, reflecting, in part, increased from 23.4% in 2019 to 23.5% in 2020.equipment sales with no margins.

Communications Business Unit DiscussionCommunications Business Unit DiscussionCommunications Business Unit Discussion
Mobility ResultsMobility Results      Mobility Results      
Third QuarterNine-Month Period Second QuarterSix-Month Period
  Percent  Percent   Percent  Percent
20202019Change20202019Change 20212020Change20212020Change
Operating revenuesOperating revenues      Operating revenues      
ServiceService$13,883 $13,930 (0.3)%$41,520 $41,383 0.3 %Service$14,346 $13,669 5.0 %$28,394 $27,637 2.7 %
EquipmentEquipment4,011 3,771 6.4 10,925 10,973 (0.4)Equipment4,590 3,480 31.9 9,576 6,914 38.5 
Total Operating RevenuesTotal Operating Revenues17,894 17,701 1.1 52,445 52,356 0.2 Total Operating Revenues18,936 17,149 10.4 37,970 34,551 9.9 
Operating expensesOperating expenses    Operating expenses    
Operations and supportOperations and support10,182 9,948 2.4 29,083 29,511 (1.5)Operations and support10,911 9,332 16.9 21,929 18,901 16.0 
Depreciation and amortizationDepreciation and amortization2,021 2,011 0.5 6,078 6,027 0.8 Depreciation and amortization2,023 2,012 0.5 4,037 4,057 (0.5)
Total Operating ExpensesTotal Operating Expenses12,203 11,959 2.0 35,161 35,538 (1.1)Total Operating Expenses12,934 11,344 14.0 25,966 22,958 13.1 
Operating IncomeOperating Income5,691 5,742 (0.9)17,284 16,818 2.8 Operating Income6,002 5,805 3.4 12,004 11,593 3.5 
Equity in Net Income (Loss) of
Affiliates
Equity in Net Income (Loss) of
Affiliates
— — — — — — Equity in Net Income (Loss) of Affiliates— — — — — — 
Operating ContributionOperating Contribution$5,691 $5,742 (0.9)%$17,284 $16,818 2.8 %Operating Contribution$6,002 $5,805 3.4 %$12,004 $11,593 3.5 %

4038
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

The following tables highlight other key measures of performance for Mobility:
SubscribersSubscribers   Subscribers   
September 30,Percent June 30,Percent
(in 000s)(in 000s)20202019Change(in 000s)20212020Change
Postpaid2
75,969 75,152 1.1 %
PostpaidPostpaid79,059 74,919 5.5 %
Postpaid phonePostpaid phone65,503 62,882 4.2 
Prepaid
Prepaid
18,100 17,740 2.0 
Prepaid
18,681 18,008 3.7 
ResellerReseller6,708 7,120 (5.8)Reseller6,406 6,718 (4.6)
Connected devices1
Connected devices1
75,967 62,288 22.0 
Connected devices1
87,500 71,762 21.9 
Total Mobility SubscribersTotal Mobility Subscribers176,744 162,300 8.9 %Total Mobility Subscribers191,646 171,407 11.8 %
1Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
1Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
1Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.
2Excludes 121 customers who we have agreed not to terminate service under the "Keep Americans Connected Pledge" or state mandates.
Net Additions      
 Third QuarterNine-Month Period
   Percent  Percent
(in 000s)20202019Change20202019Change
Postpaid Phone Net Additions5
645 101 — %657 254 — %
Total Phone Net Additions5
776 255 — 880 780 12.8 
Postpaid2, 5, 6
1,081 (217)— 954 (570)— 
Prepaid6, 7
245 227 7.9 365 669 (45.4)
Reseller6
(4)(231)98.3 (252)(677)62.8 
Connected devices3
4,203 3,900 7.8 9,976 10,947 (8.9)
Mobility Net Subscriber Additions1
5,525 3,679 50.2 %11,043 10,369 6.5 %
Postpaid Churn4, 5
0.85 %1.19 %(34)BP0.99 %1.14 %(15)BP
Postpaid Phone-Only Churn4, 5
0.69 %0.95 %(26)BP0.80 %0.91 %(11)BP
1Excludes acquisition-related additions during the period.
2In addition to postpaid phones, includes tablets and wearables and other. Tablet net (losses) were (44) and (397) for the three months and (470) and (1,164) for the nine months ended September 30, 2020 and 2019, respectively. Wearables and other net adds were 481 and 78 for the three months and 768 and 342 for the nine months ended September 30, 2020 and 2019, respectively.
3Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes postpaid tablets and other postpaid data devices.
4Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period.
5The third quarter includes 233 (151 phone) "Keep Americans Connected Pledge" paying accounts. The third quarter and nine-month periods ended September 30, 2020, exclude 121 (97 phone) customers who we have agreed not to terminate service under the "Keep Americans Connected Pledge" or state mandates. The third quarter and nine-month period ended September 30, 2020, churn excluding "Keep Americans Connected Pledge" paying accounts was 0.95% postpaid (0.77% phone) and 1.02% postpaid (0.82% phone), respectively.
6The third quarter and nine-month period ended September 30, 2020, exclude subscribers transferred in connection with business dispositions.
7The third quarter and nine-month period ended September 30, 2020, exclude 188 subscriber disconnections resulting from updating our prepaid activation policy.
Net Additions      
 Second QuarterSix-Month Period
   Percent  Percent
(in 000s)20212020Change20212020Change
Postpaid Phone Net Additions789 (151)— %1,384 12 — %
Total Phone Net Additions963 (16)— 1,765 104 — 
Postpaid2
1,156 (154)— 1,979 (127)— 
Prepaid297 165 80.0 576 120 — 
Reseller(125)(58)— (193)(248)22.2 
Connected devices3
4,209 2,255 86.7 6,726 5,773 16.5 
Mobility Net Subscriber Additions1
5,537 2,208 — %9,088 5,518 64.7 %
Postpaid Churn4
0.87 %1.05 %(18)BP0.90 %1.06 %(16)BP
Postpaid Phone-Only Churn4
0.69 %0.84 %(15)BP0.73 %0.85 %(12)BP
1Excludes migrations and acquisition-related activities during the period.
2In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were 13 and (159) for the three months ended June 30, 2021 and 2020 and (50) and (426) for the six months ended June 30, 2021 and 2020. Wearables and other net adds were 352 and 155 for the quarter ended June 30, 2021 and 2020 and 643 and 287 for the six months June 30, 2021 and 2020.
3Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems. Excludes postpaid tablets and other postpaid data devices. Wholesale connected car net adds were 2.5 million for the quarter ended June 30, 2021 and 3.7 million for the six months ended June 30, 2021.
4Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month divided by the total number of wireless subscribers at the beginning of that month. The churn rate for the period is equal to the average of the churn rate for each month of that period.

Service revenue decreasedincreased in the thirdsecond quarter and increased for the first ninesix months of 2020.2021. The third quarter decrease is due to lower roaming revenue from continued declines in international travel. The increase for the first nine months wasincreases are largely due to growth in prepaidour subscribers and connected devices, offset by impacts of the pandemic.slight improvements in second-quarter 2021 international roaming revenues.
41
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

ARPU
Postpaid ARPUAverage revenue per subscriber (ARPU) decreased in the thirdsecond quarter and for the first nine months.six months of 2021. ARPU during 20202021 reflects the decline in international roaming revenues and waived fees.impact of higher promotional discount amortization.
 
Churn
The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins. Postpaid churn and postpaid phone-only churn were lower in the first ninesix months due to retention offers, migrations to unlimited plans and continued network improvementsperformance.
39
AT&T INC.
JUNE 30, 2021
Item 2. Management’s Discussion and lower overall involuntary disconnects partly related to the "Keep Americans Connected Pledge."Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Equipment revenue increased in the thirdsecond quarter and decreased for the first ninesix months of 2020. The increase in the third quarter is2021, primarily driven by the sale of higher-priced smartphones and a mix of higher-priced postpaid smartphones and higher sales of higher-priced postpaid smartphone sales and data devices, such as wireless modems and hotspots. The decrease for the first nine months is due to suppressed equipment sales in the first quarter resulting from pandemic-related store closures.devices.
 
Operations and support expenses increased in the thirdsecond quarter and decreased for the first ninesix months of 2020. The increase in the third quarter is2021 largely driven by growth in equipment sales and associated expenses, higher commissionnetwork and technology costs, increased commissions and cost deferral amortization and content costs associated with plans offeringbundling HBO Max andMax. Also contributing to higher sales costs, partiallycomparative expenses were larger second-quarter 2020 gains on tower sales. The expense increase was offset by lower sales costs and, for the six-month period, lower bad debt expense. The increase in commission deferral amortization is partly offset by the impacts of the second-quarter 2020 updates to extend the expected economic life of our Mobility customers.

The decrease for the first nine months was driven by lower equipment sales and marketing expense, cost initiatives, asset optimization and higher bad debt expense in 2019 resulting from prior-year charges in response to credit easing policies. Partially offsetting the decrease were costs associated with plans offering HBO Max and higher commission deferral amortization.
 
Depreciation expense increased in the thirdsecond quarter and decreased for the first ninesix months of 2020 primarily due to ongoing capital spending for network upgrades and expansion partially offset by fully depreciated assets.2021.
 
Operating income decreasedincreased in the thirdsecond quarter and increased for the first ninesix months of 2020.2021. Our Mobility operating income margin in the thirdsecond quarter decreased from 32.4%33.9% in 20192020 to 31.8%31.7% in 2020,2021, and for the first ninesix months increaseddecreased from 32.1%33.6% in 20192020 to 33.0%31.6% in 2020.2021. Our Mobility EBITDA margin in the thirdsecond quarter decreased from 43.8%45.6% in 20192020 to 43.1%42.4% in 2020,2021, and for the first ninesix months increaseddecreased from 43.6%45.3% in 20192020 to 44.5%42.2% in 2020.2021. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization.
Subscriber Relationships
As the wireless industry has matured, future wireless growth will depend on our ability to offer innovative services, plans and devices that take advantage of our premier 5G wireless network, which went nationwide in July 2020, and to provide these services in bundled product offerings. Subscribers that purchase two or more services from us have significantly lower churn than subscribers that purchase only one service. To support higher mobile data usage, our priority is to best utilize a wireless network that has sufficient spectrum and capacity to support these innovations on as broad a geographic basis as possible.
 
To attract and retain subscribers in a mature and highly competitive market, we have launched a wide variety of plans, including our FirstNet and prepaid products, and arrangements that bundle our video services. Virtually all of our postpaid smartphone subscribers are on plans that provide for service on multiple devices at reduced rates, and subscribers to such subscribersplans tend to have higher retention and lower churn rates. We offer unlimited data plans and subscribers to such subscribersplans also tend to have higher retention and lower churn rates. Our offerings are intended to encourage existing subscribers to upgrade their current services and/or add devices, attract subscribers from other providers and/or minimize subscriber churn.

Connected Devices
Connected devices include data-centric devices such as wholesale automobile systems, monitoring devices, fleet management and session-based tablets. The number of connected device subscribers increased
Business Wireline Results      
 Second QuarterSix-Month Period
   Percent  Percent
 20212020Change20212020Change
Operating revenues      
Service$5,860 $6,101 (4.0)%$11,732 $12,192 (3.8)%
Equipment192 204 (5.9)366 379 (3.4)
Total Operating Revenues6,052 6,305 (4.0)12,098 12,571 (3.8)
Operating expenses    
Operations and support3,709 3,714 (0.1)7,419 7,601 (2.4)
Depreciation and amortization1,293 1,301 (0.6)2,571 2,587 (0.6)
Total Operating Expenses5,002 5,015 (0.3)9,990 10,188 (1.9)
Operating Income1,050 1,290 (18.6)2,108 2,383 (11.5)
Equity in Net Income (Loss) of Affiliates— — — — — — 
Operating Contribution$1,050 $1,290 (18.6)%$2,108 $2,383 (11.5)%

Service revenues decreased in 2020, and during the thirdsecond quarter and for the first ninesix months of 2020, we added approximately 3.0 million2021, driven by lower demand for legacy voice and 6.7 million wholesale connected cars, respectively, through agreements with various carmakersdata services in the current year and experienced strong growthhigher demand for pandemic-related connectivity in other Internetthe prior-year. We expect this trend to continue for the remainder of Things (IoT) connections. We believe that these connected car agreements give us the opportunity to create future retail relationships with the car owners.year.
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AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Entertainment Group Results      
 Third QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Operating revenues      
Video entertainment$6,964 $7,933 (12.2)%$21,335 $24,042 (11.3)%
High-speed internet2,128 2,117 0.5 6,329 6,296 0.5 
Legacy voice and data services538 628 (14.3)1,679 1,969 (14.7)
Other service and equipment423 519 (18.5)1,294 1,586 (18.4)
Total Operating Revenues10,053 11,197 (10.2)30,637 33,893 (9.6)
Operating expenses    
Operations and support7,997 8,797 (9.1)23,618 25,839 (8.6)
Depreciation and amortization1,277 1,316 (3.0)3,875 3,978 (2.6)
Total Operating Expenses9,274 10,113 (8.3)27,493 29,817 (7.8)
Operating Income779 1,084 (28.1)3,144 4,076 (22.9)
Equity in Net Income (Loss) of
Affiliates
— — — — — — 
Operating Contribution$779 $1,084 (28.1)%$3,144 $4,076 (22.9)%

The following tables highlight other key measures of performance for Entertainment Group:
Connections      
    September 30,Percent
(in 000s)   20202019Change
Video Connections      
Premium TV1
   17,100 20,418 (16.3)%
AT&T TV Now   683 1,145 (40.3)
Total Video Connections1
   17,783 21,563 (17.5)
Total Broadband Connections1
  14,102 14,301 (1.4)
Fiber Broadband Connections   4,678 3,696 26.6 
Retail Consumer Switched Access Lines  2,977 3,467 (14.1)
U-verse Consumer VoIP Connections  3,361 3,973 (15.4)
Total Retail Consumer Voice Connections 6,338 7,440 (14.8)%
1Excludes 7 premium TV and 13 broadband connections who we have agreed not to terminate service under the "Keep Americans Connected Pledge" or state mandates.
 

43
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Net Additions
Third QuarterNine-Month Period
PercentPercent
(in 000s)20202019Change20202019Change
Video Net Additions
Premium TV1
(590)(1,163)49.3 %(2,373)(2,485)4.5 %
AT&T TV Now(37)(195)81.0 (243)(446)45.5 
Net Video Additions1
(627)(1,358)53.8 (2,616)(2,931)10.7 
Net Broadband Additions1
158 (119)— (17)(108)84.3 
Fiber Broadband Net
Additions
357 318 12.3 %791 933 (15.2)%
1The third quarter includes 116 video and 104 broadband (28 fiber) "Keep Americans Connected Pledge" paying accounts. The third quarter and nine-month period ended September 30, 2020, exclude 7 premium TV and 13 broadband (4 fiber) connections who we have agreed not to terminate service under the "Keep Americans Connected Pledge."

Video entertainmentEquipment revenues are comprised of subscription and advertising revenues. Revenues decreased in the thirdsecond quarter and for the first ninesix months of 2020, largely2021, driven by a declinedeclines in premium TVlegacy and OTT subscribers as we continue to focus on retention of existing subscribers with a particular focus on our high-value subscribers, and lower subscription-based advertising revenues driven by impacts of the pandemic. Consistent with the rest of the industry, our customers continue to shift from a premium linear service to more economically priced OTT and subscription video on demand offerings, which has impacted our video revenues.
High-speed internet revenues increased in the third quarter and for the first nine months of 2020, driven by higher ARPU resulting from an increase in high-speed fiber net additions and pricing, partially offset by a decline in the average subscriber base.
Legacy voice and data service revenues decreased in the third quarter and for the first nine months of 2020, reflecting the continued decline in the number of customers.

Operations and support expenses decreased in the third quarter and for the first nine months of 2020. Contributing to the decreases were lower content and selling costs largely due to fewer subscribers, the impact of one less week of NFL games compared to the prior year, and our ongoing focus on cost initiatives. Partially offsetting the decreases were annual content rate increases, higher commission and fulfillment cost deferral amortization, including the impact of the second-quarter 2020 updates to decrease the estimated economic life for our Entertainment Group customers, and pandemic-related compassion payments made in the first half of 2020.
Depreciation expense decreased in the third quarter and for the first nine months of 2020 due to network assets becoming fully depreciated, partially offset by ongoing capital spending for network upgrades and expansion.
Operating income decreased in the third quarter and for the first nine months of 2020. Our Entertainment Group operating income margin in the third quarter decreased from 9.7% in 2019 to 7.7% in 2020, and for the first nine months decreased from 12.0% in 2019 to 10.3% in 2020. Our Entertainment Group EBITDA margin in the third quarter decreased from 21.4% in 2019 to 20.5% in 2020, and for the first nine months decreased from 23.8% in 2019 to 22.9% in 2020.
44
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Business Wireline Results      
 Third QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Operating revenues      
Strategic and managed services$3,967 $3,900 1.7 %$11,789 $11,513 2.4 %
Legacy voice and data services2,031 2,252 (9.8)6,227 6,973 (10.7)
Other service and equipment342 351 (2.6)1,030 1,102 (6.5)
Total Operating Revenues6,340 6,503 (2.5)19,046 19,588 (2.8)
Operating expenses    
Operations and support3,833 4,022 (4.7)11,563 12,029 (3.9)
Depreciation and amortization1,329 1,271 4.6 3,948 3,735 5.7 
Total Operating Expenses5,162 5,293 (2.5)15,511 15,764 (1.6)
Operating Income1,178 1,210 (2.6)3,535 3,824 (7.6)
Equity in Net Income (Loss) of
Affiliates
— — — — — — 
Operating Contribution$1,178 $1,210 (2.6)%$3,535 $3,824 (7.6)%

Strategic and managed services revenues increased in the third quarter and for the first nine months of 2020. Our strategic services are made up of (1) data services, including our VPN, dedicated internet ethernet and broadband, (2) voice service, including VoIP and cloud-based voice solutions, (3) security and cloud solutions, and (4) managed, professional and outsourcingnon-core services. Revenue increases were primarily attributable to growth in our security and cloud solutions, dedicated internet and voice services and also includes the impact of higher demand for connectivity due to the pandemic.
Legacy voice and data service revenues decreased in the third quarter and for the first nine months of 2020, primarily due to lower demand as customers continue to shift to our more advanced IP-based offerings or our competitors.
Other service and equipment revenues decreased in the third quarter and for the first nine months of 2020, reflecting prior-year licensing of intellectual property assets. Revenue trends are impacted by the licensing of intellectual property assets, which vary from period-to-period. Other service revenues include project-based revenue, which is nonrecurring in nature, as well as revenues from customer premises equipment.
 
Operations and support expenses decreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization.

Depreciation expense increaseddecreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, primarily due to increases in capital spending forcertain network upgrades and expansion.assets becoming fully depreciated.
 
Operating income decreased in the thirdsecond quarter and for the first ninesix months of 2020.2021. Our Business Wireline operating income margin in the thirdsecond quarter remained consistent at 18.6%decreased from 20.5% in 2019 and 18.6%2020 to 17.3% in 2020,2021, and for the first ninesix months decreased from 19.5%19.0% in 20192020 to 18.6%17.4% in 2020.2021. Our Business Wireline EBITDA margin in the thirdsecond quarter increaseddecreased from 38.2%41.1% in 20192020 to 38.7% in 2021, and decreased from 39.5% in 2020 andto 38.7% in 2021.

Consumer Wireline Results      
 Second QuarterSix-Month Period
   Percent  Percent
 20212020Change20212020Change
Operating revenues      
Broadband$2,266 $2,092 8.3 %$4,471 $4,201 6.4 %
Legacy voice and data services504 560 (10.0)1,023 1,141 (10.3)
Other service and equipment370 399 (7.3)744 820 (9.3)
Total Operating Revenues3,140 3,051 2.9 6,238 6,162 1.2 
Operating expenses    
Operations and support2,083 1,928 8.0 4,114 3,807 8.1 
Depreciation and amortization769 730 5.3 1,531 1,442 6.2 
Total Operating Expenses2,852 2,658 7.3 5,645 5,249 7.5 
Operating Income288 393 (26.7)593 913 (35.0)
Equity in Net Income (Loss) of Affiliates— — — — — — 
Operating Contribution$288 $393 (26.7)%$593 $913 (35.0)%

The following tables highlight other key measures of performance for the first nine months increased from 38.6% in 2019 to 39.3% in 2020.Consumer Wireline:
Connections      
    June 30,Percent
(in 000s)   20212020Change
Broadband Connections    
Total Broadband and DSL Connections  14,174 13,944 1.6 %
Fiber Broadband Connections5,432 4,321 25.7 
Voice Connections
Retail Consumer Switched Access Lines  2,631 3,096 (15.0)
U-verse Consumer VoIP Connections  2,965 3,480 (14.8)
Total Retail Consumer Voice Connections 5,596 6,576 (14.9)%

4541
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
WARNERMEDIA SEGMENTThird QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Segment Operating Revenues      
     Turner$3,176 $3,007 5.6 %$9,326 $9,860 (5.4)%
     Home Box Office1,781 1,819 (2.1)4,905 5,045 (2.8)
     Warner Bros.2,411 3,333 (27.7)8,907 10,240 (13.0)
     Eliminations and other146 191 (23.6)(962)845 — 
Total Segment Operating Revenues7,514 8,350 (10.0)22,176 25,990 (14.7)
Cost of revenues     
     Turner1,689 1,036 63.0 3,974 4,512 (11.9)
     Home Box Office1,244 847 46.9 3,155 2,356 33.9 
     Warner Bros.1,600 2,261 (29.2)6,179 7,183 (14.0)
Selling, general and administrative1,364 1,278 6.7 4,152 3,994 4.0 
Eliminations and other(313)(93)— (1,455)(127)— 
Depreciation and amortization171 165 3.6 501 425 17.9 
Total Operating Expenses5,755 5,494 4.8 16,506 18,343 (10.0)
Operating Income1,759 2,856 (38.4)5,670 7,647 (25.9)
Equity in Net Income (Loss) of Affiliates11 15 (26.7)30 137 (78.1)
Total Segment Operating Contribution$1,770 $2,871 (38.3)%$5,700 $7,784 (26.8)%

Our WarnerMedia segment includes our Turner, Home Box Office (HBO) and Warner Bros. business units. The order of presentation reflects the consistency of revenue streams, rather than overall magnitude as that is subject to timing and frequency of studio releases.
Net Additions
Second QuarterSix-Month Period
PercentPercent
(in 000s)20212020Change20212020Change
Broadband Net Additions
Total Broadband and DSL Net
Additions
28 (102)— %74 (175)— %
Fiber Broadband Net Additions246 225 9.3 %481 434 10.8 %
OperatingBroadband (high-speed internet) revenues decreased increased in the thirdsecond quarter and for the first ninesix months of 2020, primarily due to lower theatrical and television product revenues, reflecting the pandemic-related postponement of theatrical releases and television production delays at Warner Bros. HBO revenues also declined,2021, driven by lower licensing revenues that were partially offset by growthan increase in international revenuesfiber customers and domestic direct-to-consumer subscribers. Turner revenues were higher inpricing, which we expect to continue during the third quarter as a result of increased advertising revenues that shifted from the second quarter to the third quarter as a resultremainder of the restart of the NBA season, but lower for the nine months due to advertising revenues lost as a result of pandemic-related cancellation of other televised sporting events.year.

Operating contributionLegacy voice and data service revenues decreased in the thirdsecond quarter and for the first ninesix months of 2020. The WarnerMedia segment2021, reflecting the continued decline in the number of customers.

Other service and equipment revenues decreased in the second quarter and for the first six months of 2021, reflecting the continued decline in the number of VoIP customers, which we expect to continue.

Operations and support expenses increased in the second quarter and for the first six months of 2021, primarily driven by content costs associated with plans bundling HBO Max and higher customer support costs. Partially offsetting these increases was lower cost deferral amortization, including the impact of the first-quarter 2021 updates to extend the economic life for our subscribers.
Depreciation expense increased in the second quarter and for the first six months of 2021, primarily due to ongoing capital spending for network upgrades and expansion.
Operating income decreased in the second quarter and for the first six months of 2021. Our Consumer Wireline operating income margin in the thirdsecond quarter decreased from 34.2%12.9% in 20192020 to 23.4%9.2% in 20202021, and for the first ninesix months decreased from 29.4%14.8% in 20192020 to 25.6%9.5% in 2020.2021. Our Consumer Wireline EBITDA margin in the second quarter decreased from 36.8% in 2020 to 33.7% in 2021, and for the first six months decreased from 38.2% in 2020 to 34.0% in 2021.

4642
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

WarnerMedia Business Unit Discussion
Turner Results      
 Third QuarterNine-Month Period
  Percent  Percent
 20202019Change20202019Change
Operating revenues      
     Subscription$1,840 $1,927 (4.5)%$5,693 $5,835 (2.4)%
     Advertising1,077 913 18.0 2,830 3,440 (17.7)
     Content and other259 167 55.1 803 585 37.3 
Total Operating Revenues3,176 3,007 5.6 9,326 9,860 (5.4)
Operating expenses    
     Cost of revenues1,689 1,036 63.0 3,974 4,512 (11.9)
     Selling, general and administrative399 424 (5.9)1,171 1,301 (10.0)
     Depreciation and amortization69 68 1.5 207 167 24.0 
Total Operating Expenses2,157 1,528 41.2 5,352 5,980 (10.5)
Operating Income1,019 1,479 (31.1)3,974 3,880 2.4 
Equity in Net Income (Loss) of
Affiliates
(6)10 — — 46 — 
Operating Contribution$1,013 $1,489 (32.0)%$3,974 $3,926 1.2 %
WARNERMEDIA SEGMENTSecond QuarterSix-Month Period
   Percent  Percent
 20212020Change20212020Change
Segment Operating Revenues      
     Subscription$3,961 $3,265 21.3 %$7,791 $6,665 16.9 %
     Content and other3,091 2,292 34.9 6,050 5,192 16.5 
     Advertising1,739 1,171 48.5 3,476 2,636 31.9 
Total Segment Operating Revenues8,791 6,728 30.7 17,317 14,493 19.5 
Segment Operating Expenses
Direct Costs     
     Programming4,154 2,375 74.9 7,928 5,457 45.3 
     Marketing983 545 80.4 1,833 1,095 67.4 
     Other854 820 4.1 1,667 1,595 4.5 
General and administrative943 916 2.9 1,909 2,114 (9.7)
Depreciation and amortization165 164 0.6 328 325 0.9 
Total Operating Expenses7,099 4,820 47.3 13,665 10,586 29.1 
Operating Income1,692 1,908 (11.3)3,652 3,907 (6.5)
Equity in Net Income (Loss) of Affiliates47 4 — 117 19 — 
Total Segment Operating Contribution$1,739 $1,912 (9.0)%$3,769 $3,926 (4.0)%

Our WarnerMedia segment is operated as a content organization that distributes across various platforms, including basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing.

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions with a subsidiary of Discovery Inc. (See Note 8)

Operating revenues increased in the thirdsecond quarter and for the first six months of 2021, primarily due to higher subscription, advertising and content revenues, reflecting the partial recovery from prior-year impacts of the pandemic.

Subscription revenues increased reflecting growth of DTC domestic HBO Max and HBO subscribers after the launch of HBO Max in the year-ago quarter, and, for the six-month period, the May 2020 acquisition of the remaining interest in HBO Latin America Group. DTC subscription revenues were $1,996 and $3,806, for the three- and six-month periods of 2021, versus $1,441 and $2,779 in the year-ago periods and include growth from intercompany relationships with the Communications segment.

Advertising revenues improved when compared to the prior year resulting from the return in 2021 of major sporting events, such as the NBA in the second quarter and the NCAA Division I Men's Championship Basketball Tournament for the first six months. Revenue growth also was driven by strength in news.

Content and other revenues increased due to higher third-party TV production and theatrical.

Direct costs increased in the second quarter and for the first six months of 2021, driven by higher programming and marketing costs for HBO Max and higher film and programming, including sports costs, and marketing resulting from the return of major sporting events versus last year’s second quarter that was impacted by sports cancellations resulting from the pandemic. Direct costs supporting DTC revenues were $1,894 and $3,579 for the three- and sixth-month periods of 2021, versus $1,361 and $2,272 in the year-ago periods.

General and administrative expenses increased in the second quarter and decreased for the first ninesix months of 2020.2021. The increase infor the quarter was primarily due to increases in advertising revenue resulting from shifting the remainder of the NBA season into the third quarter and higher content and other revenues from sales to HBO Max, which are eliminated in consolidation within the WarnerMedia segment. Partially offsetting the increases were unfavorable foreign exchange rates and lower subscription revenues at regional sports networks.

The decrease for the nine months was primarily due to lower advertising revenues resulting from the cancellation of the NCAA Division I Men’s Basketball Tournamentbad debt expense in the firstsecond of quarter of 2020; lower subscription revenues at regional sports networks; and unfavorable exchange rates. These decreases were partially offset by higher content and other revenue, including internal sales to HBO Max.
Cost of revenues increased in the third quarter and decreased for the first nine months of 2020. The increase in the third quarter was primarily due to higher programming costs, including sports costs of approximately $600 resulting2020, which resulted from the shift of the remainder of the NBA season from the second to the third quarter. The decrease for the first nine months was primarily due to lower sports programming costs. We expect continued impacts from shifting sporting event schedules and/or compressed seasons, for example the delay of the NBA season that historically has started in the fourth quarter.
Selling, general and administrative decreased in the third quarter and for the first nine months of 2020.
Operating income decreased in the third quarter and increased for the first nine months of 2020. Our Turner operating income margin in the third quarter decreased from 49.2% in 2019 to 32.1% in 2020, and for the first nine months increased from 39.4% in 2019 to 42.6% in 2020.
4743
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Home Box Office Results      
 Third QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Operating revenues      
     Subscription$1,624 $1,533 5.9 %$4,403 $4,383 0.5 %
     Content and other157 286 (45.1)502 662 (24.2)
Total Operating Revenues1,781 1,819 (2.1)4,905 5,045 (2.8)
Operating expenses    
     Cost of revenues1,244 847 46.9 3,155 2,356 33.9 
     Selling, general and administrative450 225 — 1,081 768 40.8 
     Depreciation and amortization27 33 (18.2)73 67 9.0 
Total Operating Expenses1,721 1,105 55.7 4,309 3,191 35.0 
Operating Income60 714 (91.6)596 1,854 (67.9)
Equity in Net Income (Loss) of
Affiliates
— 10 — 15 40 (62.5)
Operating Contribution$60 $724 (91.7)%$611 $1,894 (67.7)%
favorable collection experience that allowed us to reduce our pandemic-related bad debt estimates. The decrease for the first six months was primarily due to lower bad debt expense, and integration of support functions.

Operating revenuescontribution decreased in the thirdsecond quarter and for the first ninesix months of 2020, primarily due to decreases in content and other revenue resulting from lower content licensing. Partially offsetting these decreases was growth in international subscription revenue primarily due to the May 2020 acquisition of HBO LAG and higher domestic direct-to-consumer subscribers. At September 30, 2020, we had 38.0 million U.S. subscribers from HBO Max and HBO, up from 34.6 million at December 31, 2019.
Cost of revenues increased in the third quarter and for the first nine months of 2020, primarily due to approximately $560 of programming investment related to HBO Max.
Selling, general and administrative increased in the third quarter and for the first nine months of 2020, primarily due to higher marketing costs associated with HBO Max.
Operating income decreased in the third quarter and for the first nine months of 2020. Our HBO2021. The WarnerMedia segment operating income margin in the thirdsecond quarter decreased from 39.3%28.4% in 20192020 to 3.4%19.2% in 2020,2021 and for the first ninesix months decreased from 36.7%27.0% in 20192020 to 12.2%21.1% in 2020.
48
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Warner Bros. Results      
 Third QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Operating revenues      
     Theatrical product$1,068 $1,375 (22.3)%$3,203 $4,408 (27.3)%
     Television product960 1,461 (34.3)4,605 4,384 5.0 
     Games and other383 497 (22.9)1,099 1,448 (24.1)
Total Operating Revenues2,411 3,333 (27.7)8,907 10,240 (13.0)
Operating expenses    
     Cost of revenues1,600 2,261 (29.2)6,179 7,183 (14.0)
     Selling, general and administrative373 445 (16.2)1,327 1,360 (2.4)
     Depreciation and amortization43 39 10.3 124 122 1.6 
Total Operating Expenses2,016 2,745 (26.6)7,630 8,665 (11.9)
Operating Income395 588 (32.8)1,277 1,575 (18.9)
Equity in Net Income (Loss) of
Affiliates
(23)(25)8.0 (50)(19)— 
Operating Contribution$372 $563 (33.9)%$1,227 $1,556 (21.1)%

Operating revenues decreased in the third quarter and for the first nine months of 2020, primarily due to pandemic-related movie theater closures and television and theatrical production delays.2021.

Theatrical product revenues in the third quarter and for the first nine months were lower due to partial reopening of theaters, postponement of theatrical releases and unfavorable comparisons to the prior year, which included, in first-quarter 2019, carryover revenues from the theatrical release of Aquaman.

Television product revenues decreased in the third quarter, primarily due to lower initial telecast revenues resulting from television production delays and also lower licensing. For the first nine months, television product revenues increased from licensing, including internal sales to HBO Max, which are eliminated in consolidation within the WarnerMedia segment.

Games and other revenue declines in the third quarter and for the first nine months were primarily due to reduced studio operations and unfavorable games comparison to the prior year, which included the second-quarter 2019 release of Mortal Kombat 11.
Cost of revenues decreased in the third quarter and for the first nine months of 2020, primarily due to the production hiatus and lower marketing of theatrical product, partially offset by incremental production shutdown costs.
Selling, general and administrative decreased in the third quarter and for the first nine months of 2020, primarily due to lower print and advertising expenses and lower distribution fees. Favorable collection experience in the third quarter allowed us to reduce our first quarter bad debt estimates.
Operating income decreased in the third quarter and for the first nine months of 2020. Our Warner Bros. operating income margin in the third quarter decreased from 17.6% in 2019 to 16.4% in 2020, and for the first nine months decreased from 15.4% in 2019 to 14.3% in 2020.
49
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
LATIN AMERICA SEGMENTLATIN AMERICA SEGMENTThird QuarterNine-Month PeriodLATIN AMERICA SEGMENTSecond QuarterSix-Month Period
  Percent  Percent   Percent  Percent
20202019Change20202019Change 20212020Change20212020Change
Segment Operating RevenuesSegment Operating Revenues      Segment Operating Revenues      
VrioVrio$753 $1,013 (25.7)%$2,392 $3,112 (23.1)%Vrio$749 $752 (0.4)%$1,492 $1,639 (9.0)%
MexicoMexico643 717 (10.3)1,826 2,093 (12.8)Mexico688 480 43.3 1,319 1,183 11.5 
Total Segment Operating RevenuesTotal Segment Operating Revenues1,396 1,730 (19.3)4,218 5,205 (19.0)Total Segment Operating Revenues1,437 1,232 16.6 2,811 2,822 (0.4)
Segment Operating ContributionSegment Operating Contribution    Segment Operating Contribution    
VrioVrio(34)13 — (101)43 — Vrio(23)(28)17.9 (62)(67)7.5 
MexicoMexico(143)(179)20.1 (461)(591)22.0 Mexico(129)(173)25.4 (263)(318)17.3 
Total Segment Operating ContributionTotal Segment Operating Contribution$(177)$(166)(6.6)%$(562)$(548)(2.6)%Total Segment Operating Contribution$(152)$(201)24.4 %$(325)$(385)15.6 %

Operating Results
Our Latin America operations conduct business in their local currency and operating results are converted to U.S. dollars using officialaverage exchange rates during the period, subjecting results to foreign currency fluctuations. In May 2020,

On July 21, 2021, we found it necessaryentered into an agreement to closesell our DIRECTV operations in Venezuela dueVrio business to political instability inGrupo Werthein (see Note 8). We applied held-for-sale accounting to Vrio as of June 30, 2021 and continue to present the country and to comply with sanctions ofVrio results within the U.S. government.Latin America segment.

Operating revenues decreasedincreased in the thirdsecond quarter and slightly decreased for the first ninesix months of 20202021. The increase in the second quarter reflects growth in the Mexico wireless operations and favorable foreign exchange impacts, with improvements for Mexico more than offsetting pressure in Vrio. The decrease for the first six months is primarily driven by foreign exchange ratesimpacts in Argentina for Vrio, partially offset by growth in our Mexico wireless operations and the impact of COVID-19.improvements in Mexico’s foreign exchange impacts.
 
Operating contribution decreasedimproved in the thirdsecond quarter and for the first ninesix months of 2020,2021, reflecting foreign exchange rates and the impact of COVID-19.rates. Our Latin America segment operating income margin in the thirdsecond quarter decreasedincreased from (10.3)% in 2019 to (13.7)(17.0)% in 2020 to (10.7)% in 2021, and for the first ninesix months decreasedincreased from (11.0)(14.1)% in 20192020 to (13.9)(11.5)% in 2020.2021.

44
Latin America Business Unit Discussion     
Vrio Results     
 Third QuarterNine-Month Period
   Percent  Percent
 20202019Change20202019Change
Operating revenues$753 $1,013 (25.7)%$2,392 $3,112 (23.1)%
Operating expenses    
Operations and support675 851 (20.7)2,119 2,598 (18.4)
Depreciation and amortization126 162 (22.2)400 496 (19.4)
Total Operating Expenses801 1,013 (20.9)2,519 3,094 (18.6)
Operating Income (Loss)(48)— — (127)18 — 
Equity in Net Income (Loss) of
Affiliates
14 13 7.7 26 25 4.0 
Operating Contribution$(34)$13 — %$(101)$43 — %
50
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Latin America Business Unit Discussion     
Vrio Results     
 Second QuarterSix-Month Period
   Percent  Percent
 20212020Change20212020Change
Operating revenues$749 $752 (0.4)%$1,492 $1,639 (9.0)%
Operating expenses    
Operations and support660 661 (0.2)1,321 1,444 (8.5)
Depreciation and amortization114 127 (10.2)231 274 (15.7)
Total Operating Expenses774 788 (1.8)1,552 1,718 (9.7)
Operating Income (Loss)(25)(36)30.6 (60)(79)24.1 
Equity in Net Income (Loss) of Affiliates2 8 (75.0)(2)12 — 
Operating Contribution$(23)$(28)17.9 %$(62)$(67)7.5 %

The following tables highlight other key measures of performance for Vrio:
    September 30,Percent
(in 000s)   20202019Change
Vrio Video Subscribers   10,893 13,306 (18.1)%
 Third QuarterNine -Month Period
   Percent  Percent
(in 000s)20202019Change20202019Change
Vrio Video Net Additions1
229 (167)— %(197)(310)36.5 %
1The nine-month period ended September 30, 2020, excludes the impact of 2.2 million subscriber disconnections resulting from the closure of our DIRECTV operations in Venezuela.

    June 30,Percent
(in 000s)   20212020Change
Vrio Video Subscribers   10,320 10,664 (3.2)%
 Second QuarterSix-Month Period
   Percent  Percent
(in 000s)20212020Change20212020Change
Vrio Video Net Additions(239)(312)23.4 %(622)(426)(46.0)%

Operating revenues decreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, primarily driven by foreign exchange and COVID-19 impacts.
 
Operations and support expenses decreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, primarily driven by foreign exchange and COVID-19 impacts. Approximately 21%23% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.
 
Depreciation expense decreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, primarily due to changes inlower in-service assets and foreign exchange rates.impacts.As a result of the held-for-sale accounting treatment, depreciation will no longer be recorded on Vrio assets beginning July 1, 2021 (see Note 8).
 
Operating incomeloss decreasedimproved in the thirdsecond quarter and for the first ninesix months of 2020. Our Vrio operating income was $(48), or an operating income margin of (6.4)%, compared to an operating income of $0 in the year-earlier quarter. Our2021. Vrio operating income margin for the first nine months decreasedsecond quarter increased from 0.6% in 2019 to (5.3)(4.8)% in 2020. Our2020 to (3.3)% in 2021, and for the first six months increased from (4.8)% in 2020 to (4.0)% in 2021. Vrio EBITDA margin in the thirdsecond quarter decreased from 16.0%12.1% in 20192020 to 10.4%11.9% in 2020,2021, and for the first ninesix months decreased from 16.5%11.9% in 20192020 to 11.4%11.5% in 2020.2021.

45
Mexico Results      
 Third QuarterNine-Month Period
 20202019Percent Change20202019Percent Change
Operating revenues      
Service$385 $455 (15.4)$1,197 $1,376 (13.0)%
Equipment258 262 (1.5)629 717 (12.3)
Total Operating Revenues643 717 (10.3)1,826 2,093 (12.8)
Operating expenses    
Operations and support662 774 (14.5)1,914 2,312 (17.2)
Depreciation and amortization124 122 1.6 373 372 0.3 
Total Operating Expenses786 896 (12.3)2,287 2,684 (14.8)
Operating Income (Loss)(143)(179)20.1 (461)(591)22.0 
Equity in Net Income (Loss) of
Affiliates
— — — — — — 
Operating Contribution$(143)$(179)20.1 %$(461)$(591)22.0 %
AT&T INC.
JUNE 30, 2021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Mexico Results      
 Second QuarterSix-Month Period
 20212020Percent Change20212020Percent Change
Operating revenues      
Service$447 $345 29.6 %$886 $812 9.1 %
Equipment241 135 78.5 433 371 16.7 
Total Operating Revenues688 480 43.3 1,319 1,183 11.5 
Operating expenses    
Operations and support667 538 24.0 1,287 1,252 2.8 
Depreciation and amortization150 115 30.4 295 249 18.5 
Total Operating Expenses817 653 25.1 1,582 1,501 5.4 
Operating Income (Loss)(129)(173)25.4 (263)(318)17.3 
Equity in Net Income (Loss) of Affiliates— — — — — — 
Operating Contribution$(129)$(173)25.4 %$(263)$(318)17.3 %

The following tables highlight other key measures of performance for Mexico:
   September 30,Percent    June 30,Percent
(in 000s)(in 000s)   20202019Change(in 000s)   20212020Change
Mexico Wireless SubscribersMexico Wireless Subscribers      Mexico Wireless Subscribers      
PostpaidPostpaid   4,710 5,352 (12.0)%Postpaid   4,745 4,771 (0.5)%
PrepaidPrepaid   13,249 12,848 3.1 Prepaid   13,810 12,777 8.1 
ResellerReseller   455 419 8.6 Reseller   491 425 15.5 
Total Mexico Wireless
Subscribers
Total Mexico Wireless
Subscribers
   18,414 18,619 (1.1)%Total Mexico Wireless Subscribers   19,046 17,973 6.0 %
Third QuarterNine-Month Period Second QuarterSix-Month Period
  Percent  Percent   Percent  Percent
(in 000s)(in 000s)20202019Change20202019Change(in 000s)20212020Change20212020Change
Mexico Wireless Net Additions1
     
Mexico Wireless Net AdditionsMexico Wireless Net Additions     
PostpaidPostpaid(61)(137)55.5 %(393)(359)(9.5)%Postpaid20 (191)— %49 (332)— %
PrepaidPrepaid472 668 (29.3)(335)1,183 — Prepaid54 (915)— 52 (807)— 
ResellerReseller30 67 (55.2)83 166 (50.0)Reseller(9)21 — 2 53 (96.2)
Mexico Wireless Net
Additions
441 598 (26.3)%(645)990 — %
1The nine-month period ended September 30, 2020, excludes the impact of 101 subscriber disconnections resulting from conforming our policy on reporting of fixed wireless resellers.
Total Mexico Wireless Net AdditionsTotal Mexico Wireless Net Additions65 (1,085)— %103 (1,086)— %

Service revenues decreasedincreased in the thirdsecond quarter and for the first ninesix months of 2020, primarily due to2021, reflecting improvements in foreign exchange rates, as well as lower volumes and COVID-19 related store traffic related to COVID-19.closures in the prior year.

Equipment revenues decreasedincreased in the thirdsecond quarter and for the first ninesix months of 2020, primarily due to changes in foreign exchange rates. The decrease for the first nine months also includes lower2021, driven by higher equipment sales volumes related to COVID-19.and improvements in foreign exchange.

Operations and support expenses decreasedincreased in the thirdsecond quarter and for the first ninesix months of 2020,2021, primarily due to changesan increase in customer growth, higher sales volumes and foreign exchange rates. The decrease for the first nine months also includes lower equipment sales.impacts. Approximately 7%6% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortization expense increased in the thirdsecond quarter and for the first ninesix months of 2020, primarily due to the amortization of spectrum licenses and2021, reflecting higher in-service assets. These increases were partially offset by changes in foreign exchange rates.

Operating income increased in the third quarter and first nine months of 2020. Our Mexico operating income margin in the third quarter increased from (25.0)% in 2019 to (22.2)% in 2020,assets and, for the first nine months increased from (28.2)% in 2019 to (25.2)% in 2020. Our Mexico EBITDA margin in the thirdsecond quarter, increased from (7.9)% in 2019 to (3.0)% in 2020, and for the first nine months increased from (10.5)% in 2019 to (4.8)% in 2020.

foreign exchange impacts.
5146
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts


Operating loss improved in the second quarter and for the first six months of 2021. Our Mexico operating income margin in the second quarter increased from (36.0)% in 2020 to (18.8)% in 2021, and for the first six months increased from (26.9)% in 2020 to (19.9)% in 2021. Our Mexico EBITDA margin in the second quarter increased from (12.1)% in 2020 to 3.1% in 2021, and for the first six months increased from (5.8)% in 2020 to 2.4% in 2021.

SUPPLEMENTAL TOTAL ADVERTISING REVENUEVIDEO INFORMATION
As a supplemental presentation, we are providing a view of totalour Video business that was accounted for as held-for-sale and included in Corporate and Other. On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV (New DTV). We began accounting for our investment in New DTV under the equity method, effective August 1, 2021. The Video business provides U.S. video operations, including over-the-top (OTT) services, and also sells advertising revenues generated by AT&T. See revenue categories tables in Note 5 for a reconciliation.on video distribution platforms.
Total Advertising Revenues      
 Third QuarterNine-Month Period
 20202019Percent
Change		20202019Percent
Change
Operating Revenues      
Turner$1,077 $913 18.0 %$2,830 $3,440 (17.7)%
Xandr497 504 (1.4)1,348 1,415 (4.7)
Entertainment Group408 421 (3.1)1,115 1,170 (4.7)
Other105 106 (0.9)278 281 (1.1)
Eliminations(408)(421)3.1 (1,115)(1,170)4.7 
Total Advertising Revenues$1,679 $1,523 10.2 %$4,456 $5,136 (13.2)%
Video Results
Second QuarterSix-Month Period
PercentPercent
20212020Change20212020Change
Operating revenues
Service$6,607 6,979 (5.3)%$13,291 $14,376 (7.5)%
Equipment32 42 (23.8)73 52 40.4 
Total Operating Revenues6,639 7,021 (5.4)13,364 14,428 (7.4)
Operating expenses
Operations and support5,275 5,809 (9.2)10,935 11,829 (7.6)
Depreciation and amortization1
148 593 (75.0)312 1,184 (73.6)
Total Operating Expenses5,423 6,402 (15.3)11,247 13,013 (13.6)
Operating Income1,216 619 96.4 2,117 1,415 49.6 
Equity in Net Income (Loss) of Affiliates— — — — — — 
Operating Contribution$1,216 $619 96.4 %$2,117 $1,415 49.6 %
1Includes depreciation on assets that support AT&T U-verse products that provide both video and broadband services to customers over a shared network infrastructure.

The following tables highlight other key measures of performance for Video:
SUPPLEMENTAL COMMUNICATIONS OPERATING INFORMATION
Connections
June 30,Percent
(in 000s)20212020Change
Premium TV Connections15,412 17,712 (13.0)%

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and wireline operations. This combined view presents a complete profile of the entire business customer relationship and underscores the importance of mobile solutions to serving our business customers. Results have been recast to conform to the current period's classification of consumer and business wireless subscribers. See “Discussion and Reconciliation of Non-GAAP Measure” for a reconciliation of these supplemental measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Net Additions
Second QuarterSix-Month Period
PercentPercent
(in 000s)20212020Change20212020Change
Premium TV Net Additions(473)(887)46.7 %(1,093)(1,784)38.7 %
Business Solutions Results      
 Third QuarterNine-Month Period
 20202019Percent Change20202019Percent Change
 
Operating revenues      
Wireless service$1,951 $1,888 3.3 %$5,784 $5,546 4.3 %
Strategic and managed services3,967 3,900 1.7 11,789 11,513 2.4 
Legacy voice and data services2,031 2,252 (9.8)6,227 6,973 (10.7)
Other service and equipment342 351 (2.6)1,030 1,102 (6.5)
Wireless equipment662 692 (4.3)1,957 1,899 3.1 
Total Operating Revenues8,953 9,083 (1.4)26,787 27,033 (0.9)
     
Operating expenses    
Operations and support5,508 5,645 (2.4)16,642 16,771 (0.8)
Depreciation and amortization1,650 1,573 4.9 4,912 4,643 5.8 
Total Operating Expenses7,158 7,218 (0.8)21,554 21,414 0.7 
Operating Income1,795 1,865 (3.8)5,233 5,619 (6.9)
Equity in Net Income (Loss) of
Affiliates
— — — — — — 
Operating Contribution$1,795 $1,865 (3.8)%$5,233 $5,619 (6.9)%



5247
AT&T INC.
SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

OTHER BUSINESS MATTERS

Spectrum Auction In March 2020, we wereOn February 24, 2021, the Federal Communications Commission (FCC) announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of high-frequency 37/39 GHz licenses in FCC Auction 103 covering an averagea total of 78680 MHz nationwide, for approximately $2,400. Priorincluding 40 MHz in Phase I. We provided to the auction, we exchanged the 39 GHz licenses with a book valueFCC an upfront deposit of approximately $300 that were previously acquired through FiberTower Corporation for vouchers to be applied against the winning bids$550 in 2020 and recorded a $900 gaincash payments totaling $22,856 in the first quarter of 2020. These vouchers yielded2021, for a valuetotal of $23,406 to date. The licenses were granted by the FCC in July 2021 and remain subject to clearing. We estimate that we will be responsible for $955 of Incentive Payments upon clearing of Phase I spectrum, expected by the end of 2021 and $2,112 upon clearing of Phase II spectrum, expected by the end of 2023. Additionally, we will be responsible for approximately $1,200 which was applied toward our $2,400 gross bids. We made our final payment$1,000 of approximately $950 forcompensable relocation costs over the Auction 103 payment in April 2020.The FCC grantednext several years as the licenses in June 2020.spectrum is being cleared by satellite operators. (See Note 8)

Labor ContractsVideo Business As of September 30, 2020,On July 31, 2021, we employed approximately 235,000 persons. Approximately 40% ofclosed our employees are representedtransaction with TPG to form a new company named DIRECTV (New DTV), which is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions. We began accounting for our investment in New DTV under the Communications Workers of America (CWA),equity method, effective August 1, 2021. After the International Brotherhood of Electrical Workers (IBEW) or other unions. After expirationclose of the collective bargaining agreements, work stoppages or labor disruptions may occur in the absencetransaction, New DTV issued $6,200 of new contracts or other agreements being reached.long-term debt on August 2, 2021.
•
A
In connection with the transaction, we contributed our U.S. Video business unit to New DTV for $4,250 of junior preferred units, an additional distribution preference of $4,200 and a 70% economic interest in common units (collectively “equity considerations”). Upon close, we received approximately $7,130 in cash from New DTV ($7,600, net of $470 cash on hand) and transferred $195 of DIRECTV debt. TPG contributed approximately $1,800 in cash to New DTV for $1,800 of senior preferred units and a 30% economic interest in common units. As part of this transaction, we agreed to pay net losses under the NFL SUNDAY TICKET contract covering approximately 7,000 Mobility employees expired in February 2020. In March 2020,up to a new 4-year contract was ratified by employeescap of $2,100 over the remaining period of the contract. (See Note 8)

Due to the timing of the transaction, the separation of shared operations, and finalization of commercial and transition service arrangements, our assessment of the third-quarter 2021 financial impacts of the sale is ongoing.

Under separate transition services agreements, we will expire in February 2024.provide New DTV certain operational support for up to three years. We also have entered into commercial arrangements, for up to five years, to provide network transport for U-verse products and sales services.

•WarnerMediaA contract covering On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, subject to certain exceptions, with a subsidiary of Discovery, Inc. (Discovery). The agreement is structured as a Reverse Morris Trust transaction, under which WarnerMedia will be distributed to AT&T’s shareholders via a pro rata dividend, an exchange offer, or a combination of both, followed by its combination with Discovery. The transaction is expected to be tax-free to AT&T and AT&T’s shareholders. AT&T will receive approximately 13,000 wireline employees$43,000 (subject to adjustment) in our West region expireda combination of cash, debt securities, and WarnerMedia’s retention of certain debt; and AT&T’s shareholders will receive stock representing approximately 71% of the new company; Discovery shareholders will own approximately 29% of the new company. The transaction is expected to close in April 2020. In May 2020, a new 4-year contract was ratifiedmid-2022, subject to approval by employeesDiscovery shareholders and will expire in April 2024.
•A contract covering approximately 14,000 employees in the Southwest region scheduled to expire in April 2021 was extended four years and will now expire in April 2025.customary closing conditions, including receipt of regulatory approvals. No vote is required by AT&T shareholders.

Pension Diversification The merger agreement contains certain customary termination rights for AT&T and Discovery, including, without limitation, a right for either party to terminate if the transaction is not completed on or before July 15, 2023. Termination under specified circumstances will requireIn 2013, we made a voluntary contribution of 320 million Series A Cumulative Perpetual Preferred Membership Interests in Mobility II (Mobility preferred interests), the primary holding company for our wireless business, to the trust usedDiscovery to pay pension benefits under certainAT&T a termination fee of our qualified pension plans. Since their contribution,$720 or AT&T to pay Discovery a termination fee of $1,770.

Magallanes, Inc. (Spinco), a subsidiary of AT&T, entered into a $41,500 commitment letter (Bridge Loan) on May 17, 2021. On June 4, 2021, Spinco entered into a $10,000 term loan credit agreement (Spinco Term Loan) and reduced the Mobility preferred interests are plan assetsaggregate commitment amount under the Employee Retirement Income Security Act of 1974, as amended (ERISA) andBridge Loan to $31,500. There have been recognizedno draws on the Bridge Loan or the Spinco Term Loan. In the event advances are made under the Bridge Loan or Spinco Term Loan, those advances will be used by Spinco to finance a portion of the cash distribution to AT&T in connection with the transaction.

Also, on June 23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic Ltd. (Playdemic), to Electronic Arts (EA) for approximately $1,400 in cash. Playdemic was excluded from the pending WarnerMedia/Discovery transaction. In the second quarter of 2021, we classified Playdemic as suchheld-for-sale and included $564 of goodwill in “Prepaid and other current assets” on our consolidated balance sheet at June 30, 2021. This transaction is subject to customary regulatory approvals and is expected to close by the plan’s separate financial statements. end of 2021.

48
AT&T INC.
JUNE 30, 2021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Vrio On September 28, 2020,July 21, 2021, we entered into an agreement to sell our Latin America video operations, Vrio, to Grupo Werthein. In the trust, throughsecond quarter of 2021, we classified the independent investment manager/fiduciary, sold 106.7 millionVrio disposal group as held-for-sale and reported the disposal group at fair value less cost to sell, which resulted in a noncash, pre-tax impairment charge of these interests$4,555, including approximately $2,100 related to unrelated third parties. accumulated foreign currency translation adjustments and $2,500 related to property, plant and equipment and intangible assets. Approximately $80 of the impairment was attributable to noncontrolling interest. At June 30, 2021, our consolidated balance sheet included $883 of Vrio held-for-sale assets reported in “Prepaid and other current assets,” primarily related to deferred customer contract acquisition and fulfillment costs, prepaids and other deferred charges, and $2,849 of related liabilities reported in “Accounts payable and accrued liabilities,” primarily for reserves associated with accumulated foreign currency translation adjustments, which will reverse against accumulated other comprehensive income upon close of the transaction.

The aggregate purchase price was $2,885, which includes accrued distributions through the date of sale.transaction is expected to close in early 2022, pending customary closing conditions. We will retain our 41.3% interest in SKY Mexico, a leading pay-TV provider in Mexico.

COMPETITIVE AND REGULATORY ENVIRONMENT
 
Overview AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided.

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. Nonetheless, over the ensuing two decades, the FCC and some state regulatory commissions have maintained or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. More recently,Over the past several years, the FCC has pursued a more deregulatory agenda, eliminating a variety of antiquated and unnecessary regulations and streamlining its processes in a number of areas. In addition, we are pursuing,We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, additional legislative and regulatory measures to reduce inappropriate regulatory burdens that are no longer appropriate in a competitive telecommunications market and that inhibit our ability to compete more effectively and offer needed services wanted and needed byto our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not further extended to broadband or wireless services, which are subject to vigorous competition.

Communications Segment
Internet The FCC currently classifies fixed and mobile consumer broadband services as information services, subject to light-touch regulation. The D.C. Circuit upheld the FCC’s current classification, although it remanded three discrete issues to the FCC for further consideration. NoThese issues related to the effect of the FCC’s decision to classify broadband services as information services on public safety, the regulation of pole attachments, and universal service support for low-income consumers through the Lifeline program. Because no party sought Supreme Court review of the D.C. Circuit’s decision soto uphold the FCC’s classification of broadband as an information service, that decision is final.

53
AT&T INC.In October 2020, the FCC adopted an order addressing the three issues remanded by the D.C. Circuit for further consideration. After considering those issues, the FCC concluded they provided no grounds to depart from its determination that fixed and mobile consumer broadband services should be classified as information services. An appeal of the FCC’s remand order is pending.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Some states have adopted legislation or issued executive orders that would reimpose net neutrality rules repealed by the FCC. Suits have been filed concerning such laws in two states. In October 2016, the FCC adopted new rules governing the use of customer information by providers of broadband internet access service. Those rules were more restrictive in certain respects than those governing other participants in the internet economy, including so-called “edge” providers such as Google and Facebook. In April 2017, the President signed a resolution passed by Congress repealing the new rules under the Congressional Review Act.

Privacy-related legislation has beencontinues to be adopted or considered or adopted in a number of states.jurisdictions. Legislative, regulatory and regulatory action and ballot initiativeslitigation actions could result in increased costs of compliance, further regulation or claims against broadband internet access service providers and others, and increased uncertainty in the value and availability of data. Effective as of January 1, 2020, a California state law gives consumers the right to know what personal information is being collected about them, and whether and to whom it is sold or disclosed, and to access and request deletion of this information. Subject to certain exceptions, it also gives California consumers the right to opt out of the sale of personal information.

Wireless The industry-wide deployment of 5G technology, which is needed to satisfy extensive demand for video and internet access, will involve significant deployment of “small cell” equipment and therefore increase the need for local permitting processes that allow for the placement of small cell equipment on reasonable timelines and terms. Federal regulations also canBetween 2018 and 2020, the FCC adopted multiple Orders streamlining federal wireless structure review processes and limiting state and local review processes, each with the potential to delay and impede the deployment of infrastructure used to provide telecommunications and
49
AT&T INC.
JUNE 30, 2021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

broadband services, including small cell equipment. In March, August and September 2018, the FCC adoptedThe key elements of these orders to streamline federalhave been affirmed on judicial review, although two Orders limiting state and local wireless infrastructure review processes in order to facilitate deployment of next-generation wireless facilities. Specifically, the FCC’s March 2018 Order streamlined historical, tribal, and environmentalare pending judicial review requirements for wireless infrastructure, including the exclusion of most small cell facilities from such review. The Order was appealed and in August 2019, the D.C. Circuit Court of Appeals vacated the FCC’s finding that most small cell facilities are excluded from review, but otherwise upheld the FCC’s Order. The FCC’s August and September 2018 Orders simplified the regulations for attaching telecommunications equipment to utility poles and clarified when local government right-of-way access and use restrictions can be preempted because they unlawfully prohibit the provision of telecommunications services. Those orders were appealed to the 9th Circuit Court of Appeals, which in August 2020 largely upheld theand/or FCC Orders. In addition to the FCC’s actions, to date, 28 states and Puerto Rico have adopted legislation to facilitate small cell deployment.reconsideration.

In December 2018, we introduced the nation’s first commercial mobile 5G service. In July 2020, we announced nationwide 5G coverage. We anticipate the introduction of 5G handsets and devices will contribute to a renewed interest in equipment upgrades.

LIQUIDITY AND CAPITAL RESOURCES
 
We had $9,758$11,869 in “Cashcash and cash equivalents”equivalents available at SeptemberJune 30, 2020. “Cash2021. Cash and cash equivalents”equivalents included cash of $2,222$3,867 and money market funds and other cash equivalents of $7,536.$8,002. Approximately $2,031$2,559 of our “Cashcash and cash equivalents”equivalents were held by our foreign entities in accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation.

The Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first nine months of 2020. We will continue to monitor impacts on the COVID-19 pandemic on our liquidity and capital resources.
“Cash and cash equivalents” decreased $2,372equivalents increased $2,129 since December 31, 2019.2020. In the first ninesix months of 2020,2021, cash inflows were primarily provided by the cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, the issuancesand issuance of commercial paper and long-term debt and the issuances of cumulative preferred stock and cumulative preferred interests in a subsidiary.commercial paper. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, debt repayments,spectrum acquisitions, funding capital expenditures and vendor financing payments, and dividends to stockholders, share repurchases,stockholders.

Our cash and spectrum acquisitions.debt management over the remainder of the year will be impacted by the WarnerMedia/Discovery transaction, including the IRS private letter ruling process. During this time, it is likely that our cash and cash equivalent balances will increase above historical thresholds, including cash received from our recently completed U.S. video business transaction.

Cash Provided by or Used in Operating Activities
During the first ninesix months of 2020,2021, cash provided by operating activities was $33,048,$20,837, compared to $36,725$20,925 for the first ninesix months of 2019,2020, impacted by content investment and the timing of working capital payments. Total cash paid for WarnerMedia’s content investment was $9,769 in the first six months of 2021 ($2,550 higher than the prior-year comparable period).

54
AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
We actively manage the timing of our supplier payments for operating items to optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost. In addition, for payments to a key supplier, as part of our working capital initiatives, we have arrangements that allow us to extend payment terms up to 90 days at an additional cost to us (referred to as supplier financing). The net impact of supplier financing was to decrease cash from operating activities $1,051$1,256 and $345$1,452 for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities
For the first ninesix months of 2020,2021, cash used in investing activities totaled $13,726,$30,631, and consisted primarily of $13,283 (including interest during construction)$7,992 for capital expenditures, final paymentand acquisitions of approximately $950 for wireless$23,169, which include C-Band spectrum licenses won in Auction 103,107 and $141 for acquiring the remaining interest in HBO LAG. During the third quarter, we also received approximately $400 from corporate owned life insurance investments.associated capitalized interest.
 
For capital improvements, we have negotiated favorable vendor payment terms of 120 days or more (referred to as vendor financing) with some of our vendors, which are excluded from capital expenditures and reported as financing activities. For the first ninesix months of 2020,2021, vendor financing payments were $1,965,$2,994, compared to $2,601$1,354 for the first ninesix months of 2019.2020. Capital expenditures in the first ninesix months of 20202021 were $13,283,$7,992, and when including $1,965$2,994 cash paid for vendor financing, and excluding $143 of FirstNet reimbursements, gross capital investment was $15,391$10,986 ($3,156 lower121 higher than the prior-year comparable period).

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first ninesix months of 2021, we placed $3,148$1,778 of equipment in service under vendor financing arrangements (compared to $1,917$1,680 in the prior-year comparable period) and approximately $940$450 of assets related to the FirstNet build (compared to $850$640 in the prior-year comparable period). We expect to receive approximately $1,400 in reimbursement from the government by year-end for the completion of certain task orders. The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Cash Provided by or Used in Financing Activities
For the first ninesix months of 2020,2021, cash used inprovided by financing activities totaled $21,768$11,900 and was comprised of debt issuances and repayments, issuances of preferred stock and preferred interests in a subsidiary, payments of dividends, and share repurchases.

During the first nine months of 2020, debt issuances included proceeds of $9,440 in short-term borrowings (including approximately $3,950 of commercial paper) and $31,987 of net proceeds from long-term debt. Borrowing activity included the following issuances:

Issued and redeemed in 2020:
•March draw of $750 on a privatevendor financing agreement (repaid in the second quarter).
•April draw of $5,500 on a term loan credit agreement with certain commercial banks and Bank of America, N.A., as lead agent (repaid in the second quarter).

Issued and outstanding in 2020:
•February issuance of $2,995 of 4.000% global notes due 2049.
•March borrowings of $665 from loan programs with export agencies of foreign governments to support network equipment purchases in those countries.
•May issuances totaling $12,500 in global notes, comprised of $2,500 of 2.300% global notes due 2027, $3,000 of 2.750% global notes due 2031, $2,500 of 3.500% global notes due 2041, $3,000 of 3.650% global notes due 2051 and $1,500 of 3.850% global notes due 2060.
•May issuances totaling €3,000 million in global notes (approximately $3,281 at issuance), comprised of €1,750 million of 1.600% global notes due 2028, €750 million of 2.050% global notes due 2032 and €500 million of 2.600% global notes due 2038.
•June issuance of $1,050 of 3.750% global notes due 2050.
•August issuances totaling $11,000 in global notes, comprised of $2,250 of 1.650% global notes due 2028, $2,500 of 2.250% global notes due 2032, $2,500 of 3.100% global notes due 2043, $2,250 of 3.300% global notes due 2052 and $1,500 of 3.500% global notes due 2061.payments.

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SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

DuringA tabular summary of our debt activity for the first ninesix months of 2020, repayments of debt included $7,710 of short-term borrowings (including $2,210 of commercial paper) and $37,583 of long-term debt. Repayments included:ended June 30, 2021 is as follows:
First
Quarter		Second
Quarter		Six months ended
June 30, 2021
Net commercial paper borrowings$7,072 $(513)$6,559 
Issuance of Notes and Debentures1:
U.S. dollar denominated global notes$6,000 $— $6,000 
Initial average rate of 1.27%
Euro denominated global notes (converted to USD at issuance)1,461 — 1,461 
Rate of 0.00%
2021 Syndicated Term Loan7,350 — 7,350 
BAML Bilateral Term Loan2,000 — 2,000 
Private financing750 — 750 
Other636 — 636 
Debt Issuances$18,197 $— $18,197 
Repayments:
Private financing$(649)$— $(649)
Other(253)(253)(506)
Repayments of long-term debt$(902)$(253)$(1,155)
1 Includes credit agreement borrowings.

Notes redeemed at maturity:
•$800 of AT&T floating-rate notes in the first quarter.
•$687 of AT&T floating-rate notes in the second quarter.
•€2,250 of AT&T floating-rate notes in the third quarter (approximately $2,637 at maturity).

Notes redeemed or repurchased prior to maturity:
•$2,619 of 4.600% AT&T global notes with original maturity in 2045, in the first quarter.
•$2,750 of 2.450% AT&T global notes with original maturity in 2020, in the second quarter
•$1,000 of annual put reset securities issued by BellSouth, in the second quarter.
•$683 of 4.600% AT&T global notes with original maturity in 2021, in the second quarter.
•$1,695 of 2.800% AT&T global notes with original maturity in 2021, in the second quarter.
•$853 of 4.450% AT&T global notes with original maturity in 2021, in the second quarter.
•$1,172 of 3.875% AT&T global notes with original maturity in 2021, in the second quarter.
•$1,430 of 5.500% AT&T global notes with original maturity in 2047, in the second quarter.
•$1,457 of 3.000% AT&T global notes with original maturity in 2022, in the third quarter.
•$1,250 of 3.200% AT&T global notes with original maturity in 2022, in the third quarter.
•$1,012 of 3.800% AT&T global notes with original maturity in 2022, in the third quarter.
•$422 of 4.000% AT&T global notes with original maturity in 2022, in the third quarter.
•$60 of 3.800% DIRECTV senior notes with original maturity in 2022, in the third quarter.
•$63 of 4.00% Warner Media, LLC notes with original maturity in 2022, in the third quarter.
•$11,384 of AT&T global notes and subsidiary notes that were tendered for cash in the third quarter. The notes had floating and fixed interest rates. The fixed rates ranged from 3.400% to 7.850% and original maturities ranging from 2021 to 2025.
•$53 of 3.400% Warner Media, LLC notes with original maturity in 2022, in the third quarter.
•$177 of 3.400% AT&T global notes with original maturity in 2022, in the third quarter.
•$928 of 3.600% AT&T global notes with original maturity in 2023, in the third quarter.

Credit facilities repaid and other borrowings:
•$750 of borrowings under a private financing agreement, in the first quarter.
•$750 of borrowings under a private financing agreement, in the second quarter.
•$5,500 under our April 2020 term loan credit agreement with certain commercial banks and Bank of America, in the second quarter.
•$1,300 under our term loan credit agreement with Bank of America, in the second quarter.
•$500 under our term loan credit agreement with Bank of Communications Co., in the second quarter.
•R$3,381 of Sky Serviços de Banda Larga Ltda. floating-rate loan in the third quarter (approximately $1,000 when issued in April 2018 and $638 at redemption due to strengthening of the U.S. dollar against Brazilian real).

During the third quarter of 2020, we also exchanged $17,677 of AT&T and subsidiary notes, with interest rates ranging from 4.35% to 8.75% and original maturities ranging from 2031 to 2058 for $1,459 of cash and $21,500 of three new series of AT&T global notes, with interest rates ranging from 3.50% to 3.65% and maturities ranging from 2053 to 2059.

Our weighted average interest rate of our entire long-term debt portfolio, including term loans and the impact of derivatives, was approximately 4.1%3.8% as of SeptemberJune 30, 20202021 and 4.4%4.1% as of December 31, 2019.2020. We had $155,218$171,445 of total notes and debentures outstanding at SeptemberJune 30, 2020,2021, which included Euro, British pound sterling, Canadian dollar, Swiss franc,Mexican peso, Australian dollar, Brazilian real, and Mexican pesoSwiss franc denominated debt that totaled approximately $43,347.$43,932.

At SeptemberJune 30, 2020,2021, we had $5,898$24,016 of debt maturing within one year, consisting of $1,754$6,571 of commercial paper borrowings, $9,100 of bank borrowings, and $4,144$8,345 of long-term debt issuances. Debt maturing within one year includes the following notes that may be put back to us by the holders:
•Anan accreting zero-coupon note that may be redeemed each May until maturity in 2022. If the remainder of the zero-coupon note (issued for principal of $500 in 2007 and partially exchanged in the 2017 debt exchange offers) is held to maturity, the redemption amount will be $592.

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AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
For the first ninesix months of 2020,2021, we paid $1,965$2,994 of cash under our vendor financing program, compared to $2,601$1,354 in the first ninesix months of 2019.2020. Total vendor financing payables included in our SeptemberJune 30, 20202021 consolidated balance sheet were approximately $3,252,$2,948, with $1,474$2,149 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within two to three years (in “Other noncurrent liabilities”).

Financing activities in the first nine months of 2020 also included $1,979 from the September issuance of preferred interests in a subsidiary and $3,869 for the February issuance of Series B and Series C preferred stock (see Note 11).
We repurchased approximately 142 million shares of common stock, predominantly in the first quarter, and completed the share repurchase authorization approved by the Board of Directors in 2013. In March 2020, we cancelled an accelerated share repurchase agreement that was planned for the second quarter and other repurchases to maintain flexibility and focus on continued investment in serving our customers, taking care of our employees and enhancing our network, including 5G. At SeptemberJune 30, 2020,2021, we had approximately 178 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014.
 
We paid dividends on common and preferred shares of $11,215$7,571 during the first ninesix months of 2020,2021, compared with $11,162$7,474 for the first ninesix months of 2019. Dividends were higher in 2020, primarily due to dividend payments to preferred stockholders and the increase in our quarterly dividend on common stock approved by our Board of Directors in December 2019, partially offset by fewer shares outstanding.2020.
 
Dividends on common stock declared by our Board of Directors totaled $1.56$1.04 per share in the first ninesix months of 20202021 and $1.53 per share for the first nine months of 2019.2020. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. ItWe do not expect changes to our dividend policy prior to the close of the pending WarnerMedia and Discovery transaction, which is our intentexpected to provide the financial flexibility to allow our Board of Directors to consider dividend growthclose in mid-2022. After close and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to declaration by ourAT&T Board approval, we anticipate an annual dividend level of Directors.approximately $8,000 to $9,000 per year.

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AT&T INC.
JUNE 30, 2021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

Credit Facilities
The following summary of our various credit and loan agreements does not purport to be complete and is qualified in its entirety by reference to each agreement filed as exhibits to our Annual Report on Form 10-K.
 
We use credit facilities as a tool in managing our liquidity status. In December 2018,November 2020, we amended one of our five-year$7,500 revolving credit agreement (the “Amended and Restated Credit Agreement”) and concurrently entered into a new five-year agreement (the “Five Year Credit Agreement”) such thatagreements by extending the termination date. In total, we now have two $7,500 revolving credit agreements, totaling $15,000. The Amended and Restated Credit Agreement terminates$15,000, with one terminating on December 11, 20212023 and the Five Year Credit Agreement terminatesother terminating on December 11, 2023.November 17, 2025. No amounts were outstanding under either agreement as of SeptemberJune 30, 2020.2021.

On January 29, 2021, we entered into a $14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with Bank of America, N.A., as agent. On March 23, 2021, we borrowed $7,350 under the 2021 Syndicated Term Loan and the remaining $7,350 of lenders’ commitments were terminated. As of June 30, 2021, $7,350 was outstanding and is due on March 22, 2022.

In September 2019,March 2021, we entered into and drew on a $1,300$2,000 term loan credit agreement containing(BAML Bilateral Term Loan) consisting of (i) a 1.250.75 year $400$1,000 facility due in 2020December 31, 2021 (BAML Tranche A Facility), and (ii) a 2.251.75 year $400$1,000 facility due in 2021December 31, 2022 (BAML Tranche B Facility), and (iii) a 3.25 year $500 facility due in 2022 (BAML Tranche C Facility), with Bank of America, N.A., as agent. These facilities were repaid and terminated in the second quarter of 2020.At June 30, 2021, $2,000 was outstanding under these facilities.
On April 6, 2020, we entered into and drew on a $5,500 Term Loan Credit Agreement (Term Loan) with 11 commercial banks and Bank of America, N.A. as lead agent. We repaid and terminated the Term Loan in May 2020.

We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases as well as a commercial paper program.
 
Each of our credit and loan agreements contains covenants that are customary for an issuer with an investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.5-to-1.4.0-to-1 for the 2021 Syndicated Term Loan, BAML Bilateral Term Loan, and revolving credit agreements and 3.5-to-1 for all other credit agreements. As of SeptemberJune 30, 2020,2021, we were in compliance with the covenants for our credit facilities.

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AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
Collateral Arrangements
During 2019 and 2020, we amendedMost of our counterparty collateral arrangements with counterparties to require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover over 90%95% of our approximate $43,000 derivative portfolio, counterparties are still required to post collateral. During the first ninesix months of 2020,2021, we deposited approximately $320$300 of cash collateral, on a net basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7)

Other
Our total capital consists of debt (long-term debt and debt maturing within one year) and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At SeptemberJune 30, 2020,2021, our debt ratio was 44.9%50.0%, compared to 45.9%46.6% at SeptemberJune 30, 20192020 and 44.7%46.7% at December 31, 2019.2020. Our net debt ratio was 42.1%46.7% at SeptemberJune 30, 2021, compared to 41.9% at June 30, 2020 compared to 44.1% at September 30, 2019 and 41.4%43.8% at December 31, 2019.2020. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and repayments and debt acquired in business combinations.
On July 31, 2021, we closed our transaction with TPG to form a new company named DIRECTV, which is jointly governed by a board with representation from both AT&T and TPG. Upon close, we received approximately $7,130 in cash from New DTV ($7,600, net of $470 cash on hand) and transferred $195 of DIRECTV debt. (See Note 8)

On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment with a subsidiary of Discovery. The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals. We expect to receive $43,000 (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. (See Note 8)

On May 17, 2021, in anticipation of the separation of WarnerMedia business from us, Spinco, a wholly owned subsidiary, entered into a $41,500 commitment letter (Bridge Loan). On June 4, 2021, Spinco entered into a $10,000 term loan credit agreement (Spinco Term Loan) consisting of (i) an 18 month $3,000 tranche (Tranche 1 Facility), and (ii) a 3 year $7,000 tranche (Tranche 2 Facility), with JPMorgan Chase Bank, N.A., as agent. In October 2020,connection with the saleexecution of our stake in Central European Media Enterprises Ltd. (CME), we received relief from a debt guarantee originally covering approximately $1,100 thatthe Spinco Term Loan, the aggregate commitment amount under the Bridge Loan was reduced to $600 by September$31,500. No amounts were outstanding as of June 30, 2020.
During the first nine months of 2020, we have received $428 from the disposition of assets, and when combined with working capital monetization initiatives, which include the sale of receivables, total cash received from monetization efforts, net of $1,062 of spectrum acquisitions, was approximately $400. In October 2020, we completed the sale of our stake in CME for approximately $1,100 (see Note 8). We plan to continue to explore similar opportunities in the remainder of 2020.

2021.
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SEPTEMBERJUNE 30, 20202021
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts

DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURE

On June 23, 2021, we entered into an agreement to sell WarnerMedia’s mobile games app studio, Playdemic to EA. The transaction is expected to close by the end of 2021, pending customary regulatory approvals. We believeexpect to receive approximately $1,400 in cash from the following measure is relevant and useful information to investors as it is used by management as a method of comparing performance with that of many of our competitors. This supplemental measure should be considered in addition to, but not as a substitute of, our consolidated and segment financial information.

Business Solutions Reconciliation
We provide a supplemental discussion of our Business Solutions operations that is calculated by combining our Mobility and Business Wireline business units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results. Results have been recast to conform to the current period's classification.
 Three Months Ended
 September 30, 2020September 30, 2019
 MobilityBusiness Wireline
Adjustments1
Business SolutionsMobilityBusiness Wireline
Adjustments1
Business Solutions
Operating Revenues        
Wireless service$13,883 $— $(11,932)$1,951 $13,930 $— $(12,042)$1,888 
Strategic and managed
services
— 3,967 — 3,967 — 3,900 — 3,900 
Legacy voice and data
services
— 2,031 — 2,031 — 2,252 — 2,252 
Other service and
equipment
— 342 — 342 — 351 — 351 
Wireless equipment4,011 — (3,349)662 3,771 — (3,079)692 
Total Operating Revenues17,894 6,340 (15,281)8,953 17,701 6,503 (15,121)9,083 
Operating Expenses
Operations and support10,182 3,833 (8,507)5,508 9,948 4,022 (8,325)5,645 
EBITDA7,712 2,507 (6,774)3,445 7,753 2,481 (6,796)3,438 
Depreciation and
amortization
2,021 1,329 (1,700)1,650 2,011 1,271 (1,709)1,573 
Total Operating Expenses12,203 5,162 (10,207)7,158 11,959 5,293 (10,034)7,218 
Operating Income5,691 1,178 (5,074)1,795 5,742 1,210 (5,087)1,865 
Equity in net income
(loss) of affiliates
— — — — — — — — 
Operating Contribution$5,691 $1,178 $(5,074)$1,795 $5,742 $1,210 $(5,087)$1,865 
1Non-business wireless reported in the Communications segment under the Mobility business unit.
transaction at closing. (See Note 8)

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AT&T INC.
SEPTEMBER 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued
Dollars in millions except per share amounts
 Nine- Months Ended
 September 30, 2020September 30, 2019
 MobilityBusiness Wireline
Adjustments1
Business SolutionsMobilityBusiness Wireline
Adjustments1
Business Solutions
Operating Revenues        
Wireless service$41,520 $— $(35,736)$5,784 $41,383 $— $(35,837)$5,546 
Strategic and managed services— 11,789 — 11,789 — 11,513 — 11,513 
Legacy voice and data services— 6,227 — 6,227 — 6,973 — 6,973 
Other service and equipment— 1,030 — 1,030 — 1,102 — 1,102 
Wireless equipment10,925 — (8,968)1,957 10,973 — (9,074)1,899 
Total Operating Revenues52,445 19,046 (44,704)26,787 52,356 19,588 (44,911)27,033 
Operating Expenses
Operations and support29,083 11,563 (24,004)16,642 29,511 12,029 (24,769)16,771 
EBITDA23,362 7,483 (20,700)10,145 22,845 7,559 (20,142)10,262 
Depreciation and amortization6,078 3,948 (5,114)4,912 6,027 3,735 (5,119)4,643 
Total Operating Expenses35,161 15,511 (29,118)21,554 35,538 15,764 (29,888)21,414 
Operating Income17,284 3,535 (15,586)5,233 16,818 3,824 (15,023)5,619 
Equity in net income (loss)
of affiliates		— — — — — — — — 
Operating Contribution$17,284 $3,535 $(15,586)$5,233 $16,818 $3,824 $(15,023)$5,619 
1Non-business wireless reported in the Communications segment under the Mobility business unit.

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SEPTEMBERJUNE 30, 20202021
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Dollars in millions except per share amounts

At SeptemberJune 30, 2020,2021, we had no interest rate swaps.
 
We have fixed-to-fixed and floating-to-fixed cross-currency swaps on foreign currency-denominated debt instruments with a U.S. dollar notional value of $42,969$42,186 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow or fair value hedges with a net fair value of $(3,922)$(1,351) at SeptemberJune 30, 2020.2021. We had no rate locks at SeptemberJune 30, 2020.2021.
 
We have foreign exchange contracts with a U.S. dollar notional value of $204$516 to provide currency at a fixed rate to hedge a portion of the exchange risk involved in foreign currency-denominated transactions. These foreign exchange contracts include fair value hedges, cash flow hedges and economic (nonqualifying) hedges with a total net fair value of $10$(10) at SeptemberJune 30, 2020.2021.
 
We have designated €1,450 million aggregate principal amount of debt as a hedge of the variability of some of the Euro-denominated net investments of our subsidiaries. The gain or loss on the debt that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation is recorded as a currency translation adjustment within accumulated other comprehensive income, net on the consolidated balance sheet.

Item 4. Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The chief executive officer and chief financial officer have performed an evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of SeptemberJune 30, 2020.2021. Based on that evaluation, the chief executive officer and chief financial officer concluded that the registrant’s disclosure controls and procedures were effective as of SeptemberJune 30, 2020.2021.
 
There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Due to the COVID-19 pandemic, most of our corporate employees are working remotely. We continue to monitor and assess the COVID-19 situation on our internal control over financial reporting to address any potential impact on their design and operating effectiveness.

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CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the “Risk Factors” section. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.
 
The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:
•The severity, magnitude and duration of the COVID-19 pandemic and containment, mitigation and other measures taken in response, including the potential impacts of these matters on our business and operations.
•Our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to impact our business operations, financial performance and results of operations.
•Adverse economic, political and/or capital access changes in the markets served by us or in countries in which we have significant investments and/or operations, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates and terms.
•Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates; adverse changes in mortality assumptions; adverse medical cost trends; and unfavorable or delayed implementation or repeal of healthcare legislation, regulations or related court decisions.
•The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) and legislative efforts involving issues that are important to our business, including, without limitation, pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations and, in particular, siting for 5G service; E911 services; competition policy; privacy; net neutrality; multichannel video programming distributor services and equipment; content licensing and copyright protection; availability of new spectrum on fair and balanced terms; and wireless and satellite license awards and renewals.
•Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.
•Potential changes to the electromagnetic spectrum currently used for broadcast television and satellite distribution being considered by the FCC could negatively impact WarnerMedia’s ability to deliver linear network feeds of its domestic cable networks to its affiliates, and in some cases, WarnerMedia’s ability to produce high-value news and entertainment programming on location.
•U.S. and foreign laws and regulations regarding intellectual property rights protection and privacy, personal data protection and user consent are complex and rapidly evolving and could result in adverse impacts to our business plans, increased costs, or claims against us that may harm our reputation.
•The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including non-regulation of comparable alternative technologies and/or government-owned or subsidized networks.
•Disruption in our supply chain for a number of reasons, including, difficulties in obtaining export licenses for certain technology, inability to secure component parts, general business disruption, workforce shortage, natural disasters, safety issues, economic and political instability and public health emergencies.
•The continued development and delivery of attractive and profitable wireless, video and broadband offerings and devices, and, in particular, the success of our new HBO Max platform; the extent to which regulatory and build-out requirements apply to our offerings; our ability to match speeds offered by our competitors and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.
•Our ability to generate subscription and advertising revenue from attractive video content, especially from WarnerMedia, in the face of unpredictable and rapidly evolving public viewing habits and legal restrictions on the use ofusing personal data.data for advertising.
•The availability and cost and our ability to adequately fund additional wireless spectrum and network upgrades; and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.
•Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.
•The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties.parties or claims based on alleged misconduct by employees.
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CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS - continued
•The impact from major equipment or software failures on our networks, including satellites operated by DIRECTV;networks; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; and in the case of satellites launched, timely provisioning of services from vendors; or severe weather conditions including flooding and hurricanes, natural disasters including earthquakes and forest fires, pandemics, energy shortages, wars or terrorist attacks.
•The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.
•Our ability to successfully integrate our WarnerMedia operations, including the ability to manage various businesses in widely dispersed business locations and with decentralized management.
•Changes in our corporate strategies such as changing network-related requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments.
•The uncertainty surrounding further congressional actionOur ability to address spending reductions,realize or sustain the expected benefits of our business transformation initiatives, which may result in a significant decrease in government spendingare designed to reduce costs, streamline distribution, remove redundancies and reluctancesimplify and improve processes and support functions.
•Our ability to successfully complete divestitures, including the separation of businesses and consumers to spend in general.the WarnerMedia business, as well as achieve our expectations regarding the financial impact of the completed and/or pending transactions.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.
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PART II – OTHER INFORMATION
Dollars in millions except per share amounts

Item 1A. Risk Factors

We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed.

OurThe proposed separation and combination of our WarnerMedia business is subjectwith Discovery may not be completed on the currently contemplated timeline or at all.

On May 17, 2021, we announced a definitive agreement with Discovery, Inc. (Discovery) to risks arising from the recent outbreakcombine our WarnerMedia business with Discovery (the “WarnerMedia/Discovery Transaction”), which, if consummated, would result in our stockholders owning 71% of the COVID-19 virus.
combined company’s Discovery’s outstanding common stock on a fully-diluted basis (computed using the treasury stock method). The COVID-19 pandemic and resulting mitigation measures have caused, and may continue to cause, a negative effect on our operating results. To date, mitigation measures have caused sports leagues to suspend certain operations as the cancellation of many sporting events, including the NCAA tournament, which has adversely affected our advertising revenues, may result in contract disputes concerning carriage rights and has caused us to incur expenses relating to certain of these sporting events notwithstanding their cancellation. The closure, or the avoidance, of theaters, and the interruptions in movie production and other programming caused by COVID-19, are expected to impact the timing of revenues and may cause a loss of revenue to our Warner Media business over the long term. The number of subscribers to traditional linear programming in the U.S. has been declining in recent years, a trend that the current pandemic has accelerated, which has negatively affected subscription revenues, and this trendWarnerMedia/Discovery Transaction is expected to continue. close in mid-2022, subject to certain customary closing conditions including, among others, the approval of Discovery’s stockholders, the receipt of certain regulatory approvals and the receipt of a private letter ruling from the Internal Revenue Service to the effect that the separation of the WarnerMedia business and certain related transactions will qualify for tax-free treatment under the Internal Revenue Code (the “Private Letter Ruling”).

There can be no assurance that such closing conditions will be satisfied or waived, or that the WarnerMedia/Discovery Transaction will be consummated. Required regulatory approvals and the Private Letter Ruling may not be received in a timely manner or at all. Further, while we have entered into voting agreements with certain stockholders of Discovery representing, in the aggregate, approximately 43% of the voting power of the issued and outstanding shares of Discovery capital stock as of May 14, 2021, pursuant to which they have agreed to vote in favor of certain aspects of the WarnerMedia/Discovery Transaction, we cannot assure you that the approval of Discovery’s stockholders will be obtained. We and Discovery may be subject to shareholder lawsuits, or other actions filed in connection with or in opposition to the WarnerMedia/Discovery Transaction, which could prevent or delay the consummation of the WarnerMedia/Discovery Transaction.

If the mitigating measures or the associated effects are prolonged,distribution of WarnerMedia, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then we expect business customers in industries most significantly impacted will continuecould be subject to reduce or terminate services, having a negative effect on the performance of our Business Wireline business unit. Further, concerns over the COVID-19 pandemic could again result in the prolonged closure of many of our retail stores and deter customers from accessing our stores even as the mitigation measures subside. These pandemic concerns may also result in continued impact to our customers’ ability to pay for our products and services. We may also continue to see significant impact on roaming revenues due to a downturn in international travel. The COVID-19 pandemic has caused and could further cause reduced staffing levels at our call centers and field operations resulting in delays in service. Further reductions in staffing levels could further limit our ability to provide services, adversely impacting our competitive position. We may also incur significantly higher expenses attributable to infrastructure investments required to meet higher network utilization from more customers consuming bandwidth from changes in work from home trends; extended cancellation periods; and increased labor costs if the COVID-19 pandemic continues for an extended period.tax liability.

The COVID-19 pandemicPrivate Letter Ruling, if obtained, would rely on certain facts, representations and mitigation measuresundertakings made by us, WarnerMedia and Discovery. Accordingly, the Internal Revenue Service or another applicable tax authority could determine on audit that the distribution by us of WarnerMedia to our stockholders and certain related transactions should be treated as taxable transactions if it determines that any of these facts, representations or undertakings are incorrect or have caused,been violated. We may be entitled to indemnification from Discovery in the case of certain breaches of representations or undertakings by Discovery under the tax matters agreement related to the WarnerMedia/Discovery Transaction. However, we could potentially be required to pay such tax prior to reimbursement from Discovery, and may continuesuch indemnification is subject to cause,Discovery’s credit risk. If the Internal Revenue Service or another tax authority were to so conclude, there could be a material adverse impactsimpact on global economic conditions and consumer confidence and spending, which affect demand for our products and services. The extent to which the COVID-19 pandemic impacts our business, financial condition, results of operations and cash flows and financial conditionflows.

In addition, in the event that we are unable to effectuate a Spinco Debt Exchange, we could incur significant incremental tax liability associated with the WarnerMedia/Discovery Transaction. If certain conditions are met, Discovery generally will depend on future developmentsbe responsible for 50% of such incremental tax liability that are highly uncertain and cannot be predicted, including newdoes not exceed $4 billion. For more information thatregarding the Spinco Debt Exchange, refer to the risk factor titled “Even if the WarnerMedia/Discovery Transaction is completed, we may emerge concerning the severitynot realize some or all of the virusexpected benefits of the transaction.” below.

The announcement and pendency of the WarnerMedia/Discovery Transaction could cause disruptions in our business.

The WarnerMedia/Discovery Transaction will require significant amounts of time and effort which could divert management’s attention from operating, growing our business and other strategic endeavors. Further, our employees may be distracted due to uncertainty regarding their future roles with us or the WarnerMedia business pending the consummation of the WarnerMedia/Discovery Transaction. In the event that the WarnerMedia/Discovery Transaction does not close, we will be required to bear a number of non-recurring costs in connection with the transaction, including financial, legal, accounting, consulting and other advisory fees and expenses, reorganization and restructuring costs, severance/employee benefit-related expenses, regulatory and SEC filing fees and expenses, printing expenses and other related charges. Until the consummation or termination of the WarnerMedia/Discovery Transaction, we are also required to operate the WarnerMedia business in the ordinary course and we are restricted from taking certain specified actions with respect to our WarnerMedia business without Discovery’s consent. Any of the foregoing could adversely affect our operating results.

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Even if the WarnerMedia/Discovery Transaction is completed, we may not realize some or all of the expected benefits of the transaction.

Even if the WarnerMedia/Discovery Transaction is completed, the anticipated operational, financial, strategic and other benefits of such transaction to the Company and our stockholders may not be achieved. There are many factors that could impact the anticipated benefits from the WarnerMedia/Discovery Transaction, including, among others, strategic adjustments required to reflect the nature of our business following the WarnerMedia/Discovery Transaction and any negative reaction to the WarnerMedia/Discovery Transaction by our customers and business partners. In addition, we have agreed to provide certain transition services to the combined company, which may result in additional expenses and may divert our focus and resources that would otherwise be invested into maintaining or growing our businesses.

In connection with the WarnerMedia/Discovery Transaction, we will receive approximately $43 billion, subject to certain adjustments, in the form of a combination of (i) the assumption by the WarnerMedia business of certain existing debt, (ii) a cash dividend distributed to us from the WarnerMedia business (the “Spinco Special Cash Payment”), and (iii) debt instruments of the WarnerMedia business (the “Spinco Debt Distribution”). We expect to deliver such debt instruments of WarnerMedia in exchange for certain of our outstanding debt obligations (the “Spinco Debt Exchange”), and to use the proceeds of the Spinco Special Cash Payment to repay certain of our other outstanding debt obligations. This process will be complex and may require significant time and resources. Depending on various variables (such as interest rates and timing) at the time of the Spinco Debt Exchange, AT&T’s transaction costs relating to the Spinco Debt Exchange may be significantly higher than expected. Additionally, if market conditions change in advance of the Spinco Debt Exchange such that it is no longer feasible for the WarnerMedia business to issue debt securities with a fair market value at least equal to their face value, we may be required to take an additional distribution of cash from the WarnerMedia business in lieu of effecting the Spinco Debt Exchange, which could result in potentially significant incremental tax liability. If certain conditions are met, Discovery generally will be responsible for 50% of such incremental tax liability that does not exceed $4 billion.

An inability to realize the full extent of the anticipated benefits of the WarnerMedia/Discovery Transaction, as well as any delays encountered in the process, could have an adverse effect on our revenues, level of expenses and operating results.

In connection with the separation of the WarnerMedia business and the recently completed transaction involving our Video business unit, certain liabilities will be or were allocated to or retained by us and we will be subject to indemnification obligations in respect of those liabilities.

In connection with the separation of the WarnerMedia business and the recently completed transaction involving our Video business unit (the “DTV Transaction”), we have agreed to assume or retain, and indemnify the WarnerMedia business and the Video business unit for, certain liabilities. Payments pursuant to these indemnities may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution of the WarnerMedia business. Third parties could also seek to contain its impact. Duehold us responsible for any liabilities allocated to the speedWarnerMedia business and the Video business unit and such third parties could seek damages, other monetary penalties (whether civil or criminal) and other remedies.

The separation of the WarnerMedia business and the Video business unit may result in an increase in our costs and expenses.

Following the consummation of the WarnerMedia/Discovery Transaction and the DTV Transaction, we will no longer benefit from economies of scale and synergies we currently have or expected to realize between our WarnerMedia business, our Video business unit and our remaining businesses, including through intercompany arrangements and combined agreements with whichthird parties. There can be no assurance that we will be able to continue any of these arrangements, or that any such continuing arrangements will be on the situation is developing, we are not able at this time to estimatesame or more favorable terms, following the impactseparation of COVID-19 onthe WarnerMedia business and the Video business unit. As a result, our financial or operational results, butcosts and expenses may increase following the impact could be material.consummation of the WarnerMedia/Discovery Transaction and the DTV Transaction.

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AT&T INC.
SEPTEMBERJUNE 30, 20202021

PART II – OTHER INFORMATION - CONTINUED
Dollars in millions except per share amounts

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) A summary of our repurchases of common stock during the thirdsecond quarter of 20202021 is as follows:
 (a)(b)(c)(d)
Period
Total Number of Shares (or Units) Purchased1, 2, 3
Average Price Paid Per Share (or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs1
Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs
July 1, 2020 - July 31, 202047,279 $29.99 — 177,942,230
August 1, 2020 - August 31, 202024,431 29.90 — 177,942,230
September 1, 2020 - September 30, 2020581,107 28.42 — 177,942,230
Total652,817 $28.59 —  
 (a)(b)(c)(d)
Period
Total Number of Shares (or Units) Purchased1, 2, 3
Average Price Paid Per Share (or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs1
Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs
April 1, 2021 - April 30, 202140,460 $29.92 — 177,902,921
May 1, 2021 - May 31, 202136,612 30.36 — 177,902,921
June 1, 2021 - June 30, 20211,253,318 28.82 — 177,902,921
Total1,330,390 $28.89 —  
1In March 2014, our Board of Directors approved an authorization to repurchase up to 300 million shares of our common stock. The authorization has no expiration date.
2Of the shares repurchased, 93,333296,103 shares were acquired through the withholding of taxes on the vesting of restricted stock and performance shares or in respect of the exercise price of options.
3Of the shares repurchased, 559,4841,034,287 shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit Association (VEBA) trusts.trusts during the period.

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JUNE 30, 2020
Item 6. Exhibits

The following exhibits are filed or incorporated by reference as a part of this report:
Exhibit 
NumberExhibit Description
2.1
Agreement and Plan or Merger, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc., Discovery, Inc. and Drake Subsidiary, Inc.* (Exhibit 2.1 to Form 8-K filed on May 20, 2021)
2.2
Separation and Distribution Agreement, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc. and Discovery, Inc. * (Exhibit 2.2 to Form 8-K filed on May 20, 2021)
10.1
10.2
10.3
10.4
Tax Matters Agreement, dated May 17, 2021, by and among AT&T Inc., Magallanes, Inc., and Discovery, Inc.
10.5
$10,000,000,000 Term Loan Credit Agreement, dated as of June 4, 2021, among Magallanes, Inc., the lenders named therein and JPMorgan Chase Bank, N.A., as agent (Exhibit 10.1 to Form 8-K filed on June 10, 2021)
10.6
Amendment No. 1, dated as of June 4, 2021, to the Term Loan Credit Agreement, dated as of January 29, 2021, among AT&T Inc., the lenders named therein and Bank of America, N.A., as agent (Exhibit 10.2 to Form 8-K filed on June 10, 2021)
10.7
Amendment No. 1, dated as of June 4, 2021, to the $7,500,000,000 Amended and Restated Credit Agreement, dated November 17, 2020, among AT&T, certain lenders named therein and Citibank, N.A., as agent (Exhibit 10.3 to Form 8-K filed on June 10, 2021)
10.8
Amendment No. 2, dated as of June 4, 2021, to the $7,500,000,000 Five Year Credit Agreement, dated December 11, 2018, among AT&T, certain lenders named therein and Citibank, N.A., as agent (Exhibit 10.4 to Form 8-K filed on June 10, 2021)
31Rule 13a-14(a)/15d-14(a) Certifications
 
 
32
101
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2020,2021, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2020,2021, (formatted as Inline XBRL and contained in Exhibit 101).
*Certain schedules (or similar attachments) have been omitted pursuant to Item 601(a)(5) or Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish copies of such schedules (or similar attachments) to the U.S. Securities and Exchange Commission upon request.

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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 thereunto duly authorized.
AT&T Inc.
NovemberAugust 5, 20202021/s/ John J. StephensPascal Desroches
John J. StephensPascal Desroches
Senior Executive Vice President
   and Chief Financial Officer

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