~~0000732717us-gaap:FixedIncomeInvestmentsMemberus-gaap:FairValueInputsLevel2Member2020-12-31~~

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 ~~September 30, 2021~~March 31, 2022


☐			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 class	Trading Symbol(s)	on which registered
Common Shares (Par Value $1.00 Per Share)	T	New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 5.000% Perpetual Preferred Stock, Series A	T PRA	New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 4.750% Perpetual Preferred Stock, Series C	T PRC	~~New York Stock Exchange~~
~~AT&T Inc. 2.650% Global Notes due December 17, 2021~~	~~T 21B~~	New York Stock Exchange
AT&T Inc. 1.450% Global Notes due June 1, 2022	T 22B	New York Stock Exchange
AT&T Inc. 2.500% Global Notes due March 15, 2023	T 23	New York Stock Exchange
AT&T Inc. 2.750% Global Notes due May 19, 2023	T 23C	New York Stock Exchange
AT&T Inc. Floating Rate Global Notes due September 5, 2023	T 23D	New York Stock Exchange
AT&T Inc. 1.050% Global Notes due September 5, 2023	T 23E	New York Stock Exchange
AT&T Inc. 1.300% Global Notes due September 5, 2023	T 23A	New York Stock Exchange
AT&T Inc. 1.950% Global Notes due September 15, 2023	T 23F	New York Stock Exchange
AT&T Inc. 2.400% Global Notes due March 15, 2024	T 24A	New York Stock Exchange
AT&T Inc. 3.500% Global Notes due December 17, 2025	T 25	New York Stock Exchange
AT&T Inc. 0.250% Global Notes due March 4, 2026	T 26E	New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026	T 26D	New York Stock Exchange
AT&T Inc. 2.900% Global Notes due December 4, 2026	T 26A	New York Stock Exchange
AT&T Inc. 1.600% Global Notes due May 19, 2028	T 28C	New York Stock Exchange


		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
AT&T Inc. 2.350% Global Notes due September 5, 2029	T 29D	New York Stock Exchange
AT&T Inc. 4.375% Global Notes due September 14, 2029	T 29B	New York Stock Exchange
AT&T Inc. 2.600% Global Notes due December 17, 2029	T 29A	New York Stock Exchange
AT&T Inc. 0.800% Global Notes due March 4, 2030	T 30B	New York Stock Exchange
AT&T Inc. 2.050% Global Notes due May 19, 2032	T 32A	New York Stock Exchange
AT&T Inc. 3.550% Global Notes due December 17, 2032	T 32	New York Stock Exchange
AT&T Inc. 5.200% Global Notes due November 18, 2033	T 33	New York Stock Exchange
AT&T Inc. 3.375% Global Notes due March 15, 2034	T 34	New York Stock Exchange
AT&T Inc. 2.450% Global Notes due March 15, 2035	T 35	New York Stock Exchange
AT&T Inc. 3.150% Global Notes due September 4, 2036	T 36A	New York Stock Exchange
AT&T Inc. 2.600% Global Notes due May 19, 2038	T 38C	New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 14, 2039	T 39B	New York Stock Exchange
AT&T Inc. 7.000% Global Notes due April 30, 2040	T 40	New York Stock Exchange
AT&T Inc. 4.250% Global Notes due June 1, 2043	T 43	New York Stock Exchange
AT&T Inc. 4.875% Global Notes due June 1, 2044	T 44	New York Stock Exchange
AT&T Inc. 4.000% Global Notes due June 1, 2049	T 49A	New York Stock Exchange
AT&T Inc. 4.250% Global Notes due March 1, 2050	T 50	New York Stock Exchange
AT&T Inc. 3.750% Global Notes due September 1, 2050	T 50A	New York Stock Exchange
AT&T Inc. 5.350% Global Notes due November 1, 2066	TBB	New York Stock Exchange
AT&T Inc. 5.625% Global Notes due August 1, 2067	TBC	New 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 29, 2021,~~April 27, 2022, there were ~~7,141~~7,159 million common shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


AT&T INC.	AT&T INC.									AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME	CONSOLIDATED STATEMENTS OF INCOME									CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts	Dollars in millions except per share amounts									Dollars in millions except per share amounts
(Unaudited)	(Unaudited)									(Unaudited)
		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Operating Revenues	Operating Revenues									Operating Revenues
Service	Service	$	34,843	$	37,782	$	112,303	$	113,716	Service		$	32,392	$	38,504
Equipment	Equipment	5,079		4,558		15,603		12,353		Equipment		5,713		5,435
Total operating revenues	Total operating revenues	39,922		42,340		127,906		126,069		Total operating revenues		38,105		43,939

Operating Expenses	Operating Expenses									Operating Expenses
Cost of revenues	Cost of revenues									Cost of revenues
Equipment	Equipment	5,427		4,552		16,324		12,622		Equipment		6,038		5,556
Broadcast, programming and operations	Broadcast, programming and operations	4,750		6,912		19,891		19,555		Broadcast, programming and operations		4,313		7,538
Other cost of revenues (exclusive of depreciation and amortization shown separately below)	Other cost of revenues (exclusive of depreciation and amortization shown separately below)	7,649		8,375		23,797		24,833		Other cost of revenues (exclusive of depreciation and amortization shown separately below)		7,206		7,993
Selling, general and administrative	Selling, general and administrative	9,207		9,266		27,950		27,857		Selling, general and administrative		9,368		9,382
Asset impairments and abandonments		161		73		4,716		2,515

Depreciation and amortization	Depreciation and amortization	5,619		7,030		17,189		21,537		Depreciation and amortization		5,539		5,809
Total operating expenses	Total operating expenses	32,813		36,208		109,867		108,919		Total operating expenses		32,464		36,278
Operating Income	Operating Income	7,109		6,132		18,039		17,150		Operating Income		5,641		7,661
Other Income (Expense)	Other Income (Expense)									Other Income (Expense)
Interest expense	Interest expense	(1,667)		(1,972)		(5,221)		(6,031)		Interest expense		(1,722)		(1,870)
Equity in net income (loss) of affiliates	Equity in net income (loss) of affiliates	91		5		184		(11)		Equity in net income (loss) of affiliates		501		52
Other income (expense) — net	Other income (expense) — net	2,279		(231)		7,499		1,589		Other income (expense) — net		2,187		4,221
Total other income (expense)	Total other income (expense)	703		(2,198)		2,462		(4,453)		Total other income (expense)		966		2,403
Income Before Income Taxes	Income Before Income Taxes	7,812		3,934		20,501		12,697		Income Before Income Taxes		6,607		10,064
Income tax expense	Income tax expense	1,539		766		4,412		3,003		Income tax expense		1,443		2,122
Net Income	Net Income	6,273		3,168		16,089		9,694		Net Income		5,164		7,942
Less: Net Income Attributable to Noncontrolling Interest	Less: Net Income Attributable to Noncontrolling Interest	(355)		(352)		(1,051)		(987)		Less: Net Income Attributable to Noncontrolling Interest		(354)		(392)
Net Income Attributable to AT&T	Net Income Attributable to AT&T	$	5,918	$	2,816	$	15,038	$	8,707	Net Income Attributable to AT&T		$	4,810	$	7,550
Less: Preferred Stock Dividends	Less: Preferred Stock Dividends	(50)		(54)		(156)		(138)		Less: Preferred Stock Dividends		(48)		(50)
Net Income Attributable to Common Stock	Net Income Attributable to Common Stock	$	5,868	$	2,762	$	14,882	$	8,569	Net Income Attributable to Common Stock		$	4,762	$	7,500
Basic Earnings Per Share Attributable to Common Stock	Basic Earnings Per Share Attributable to Common Stock	$	0.82	$	0.39	$	2.07	$	1.19	Basic Earnings Per Share Attributable to Common Stock		$	0.66	$	1.04
Diluted Earnings Per Share Attributable to Common Stock	Diluted Earnings Per Share Attributable to Common Stock	$	0.82	$	0.39	$	2.07	$	1.19	Diluted Earnings Per Share Attributable to Common Stock		$	0.65	$	1.02
Weighted Average Number of Common Shares Outstanding — Basic (in millions)	Weighted Average Number of Common Shares Outstanding — Basic (in millions)	7,171		7,147		7,167		7,160		Weighted Average Number of Common Shares Outstanding — Basic (in millions)		7,184		7,161
Weighted Average Number of Common Shares Outstanding — with Dilution (in millions)	Weighted Average Number of Common Shares Outstanding — with Dilution (in millions)	7,202		7,173		7,197		7,186		Weighted Average Number of Common Shares Outstanding — with Dilution (in millions)		7,556		7,482

See Notes to Consolidated Financial Statements.


AT&T INC.	AT&T INC.									AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME									CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions	Dollars in millions									Dollars in millions
(Unaudited)	(Unaudited)									(Unaudited)
		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Net income	Net income	$	6,273	$	3,168	$	16,089	$	9,694	Net income		$	5,164	$	7,942
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 $(4), $(2), $(2) and $(61) attributable to noncontrolling interest), net of taxes of $(17), $47, $(13) and $(150)		(86)		90		106		(1,459)
Translation adjustment (includes $0 and $(4) attributable to noncontrolling interest), net of taxes of $5 and $(37)										Translation adjustment (includes $0 and $(4) attributable to noncontrolling interest), net of taxes of $5 and $(37)		19		(109)
Securities:	Securities:									Securities:
Net unrealized gains (losses), net of taxes of $(1), $1, $(13) and $28		(4)		1		(39)		81
Reclassification adjustment included in net income, net of taxes of $0, $0, $(1) and $0		(1)		—		(4)		—
Net unrealized gains (losses), net of taxes of $(23) and $(18)										Net unrealized gains (losses), net of taxes of $(23) and $(18)		(69)		(55)
Reclassification adjustment included in net income, net of taxes of $1 and $(1)										Reclassification adjustment included in net income, net of taxes of $1 and $(1)		3		(2)
Derivative instruments:	Derivative instruments:									Derivative instruments:
Net unrealized gains (losses), net of taxes of $(54), $229, $(160) and $(574)		(195)		860		(593)		(2,166)
Reclassification adjustment included in net income, net of taxes of $4, $7, $16 and $11		11		27		57		44
Net unrealized gains (losses), net of taxes of $69 and $136										Net unrealized gains (losses), net of taxes of $69 and $136		258		511
Reclassification adjustment included in net income, net of taxes of $4 and $6										Reclassification adjustment included in net income, net of taxes of $4 and $6		15		24
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 $(165), $(150), $(495) and $(451)		(505)		(460)		(1,516)		(1,382)
Amortization of net prior service credit included in net income, net of taxes of $(152) and $(165)										Amortization of net prior service credit included in net income, net of taxes of $(152) and $(165)		(465)		(504)
Other comprehensive income (loss)	Other comprehensive income (loss)	(780)		518		(1,989)		(4,882)		Other comprehensive income (loss)		(239)		(135)
Total comprehensive income	Total comprehensive income	5,493		3,686		14,100		4,812		Total comprehensive income		4,925		7,807
Less: Total comprehensive income attributable to noncontrolling interest	Less: Total comprehensive income attributable to noncontrolling interest	(351)		(350)		(1,049)		(926)		Less: Total comprehensive income attributable to noncontrolling interest		(354)		(388)
Total Comprehensive Income Attributable to AT&T	Total Comprehensive Income Attributable to AT&T	$	5,142	$	3,336	$	13,051	$	3,886	Total Comprehensive Income Attributable to AT&T		$	4,571	$	7,419

See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
September 30, December 31,
2021 2020
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 21,270 $ 9,740
Accounts receivable – net of related allowances for credit loss of $806 and $1,221 16,304 20,215
Inventories 3,088 3,695
Prepaid and other current assets 16,568 18,358
Total current assets 57,230 52,008
Noncurrent Inventories and Theatrical Film and Television Production Costs 17,811 14,752
Property, plant and equipment 325,866 327,751
Less: accumulated depreciation and amortization (201,447) (200,436)
Property, Plant and Equipment – Net 124,419 127,315
Goodwill 133,663 135,259
Licenses – Net 112,423 93,840
Trademarks and Trade Names – Net 22,097 23,297
Distribution Networks – Net 12,408 13,793
Other Intangible Assets – Net 12,338 15,386
Investments in and Advances to Equity Affiliates 8,629 1,780
Operating Lease Right-Of-Use Assets 24,341 24,714
Other Assets 21,748 23,617
Total Assets $ 547,107 $ 525,761
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year $ 23,755 $ 3,470
Note payable to DIRECTV 1,180 —
Accounts payable and accrued liabilities 47,926 50,051
Advanced billings and customer deposits 4,991 6,176
Dividends payable 3,749 3,741
Total current liabilities 81,601 63,438
Long-Term Debt 155,406 153,775
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 63,405 60,472
Postemployment benefit obligation 14,158 18,276
Operating lease liabilities 21,510 22,202
Other noncurrent liabilities 29,466 28,358
Noncurrent portion of note payable to DIRECTV 258 —
Total deferred credits and other noncurrent liabilities 128,797 129,308
Stockholders’ Equity
Preferred stock ($1 par value, 10,000,000 authorized at September 30, 2021 and December 31, 2020):
Series A (48,000 issued and outstanding at September 30, 2021 and December 31, 2020) — —
Series B (20,000 issued and outstanding at September 30, 2021 and December 31, 2020) — —
Series C (70,000 issued and outstanding at September 30, 2021 and December 31, 2020) — —
Common stock ($1 par value, 14,000,000,000 authorized at September 30, 2021 and
December 31, 2020: issued 7,620,748,598 at September 30, 2021 and December 31, 2020)
7,621 7,621
Additional paid-in capital 130,035 130,175
Retained earnings 41,091 37,457
Treasury stock (480,656,332 at September 30, 2021 and 494,826,583 at December 31, 2020, at cost) (17,319) (17,910)
Accumulated other comprehensive income 2,343 4,330
Noncontrolling interest 17,532 17,567
Total stockholders’ equity 181,303 179,240
Total Liabilities and Stockholders’ Equity $ 547,107 $ 525,761

~~See Notes to Consolidated Financial Statements.~~


AT&T INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
	March 31,		December 31,
	2022		2021
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	38,565	$	21,169
Accounts receivable – net of related allowances for credit loss of $788 and $771	17,218		17,571
Inventories	3,153		3,464
Prepaid and other current assets	17,920		17,793
Total current assets	76,856		59,997
Noncurrent Inventories and Theatrical Film and Television Production Costs	19,803		18,983
Property, plant and equipment	323,434		329,488
Less: accumulated depreciation and amortization	(196,275)		(203,584)
Property, Plant and Equipment – Net	127,159		125,904
Goodwill	133,247		133,223
Licenses – Net	114,107		113,830
Trademarks and Trade Names – Net	21,781		21,938
Distribution Networks – Net	11,486		11,942
Other Intangible Assets – Net	11,452		11,783
Investments in and Advances to Equity Affiliates	5,943		7,274
Operating Lease Right-Of-Use Assets	23,941		24,180
Deposits on Wireless Licenses	9,129		—
Other Assets	22,291		22,568
Total Assets	$	577,195	$	551,622
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	27,333	$	24,630
Note payable to DIRECTV	1,047		1,245
Accounts payable and accrued liabilities	46,845		50,661
Advanced billings and customer deposits	5,183		5,303
Dividends payable	2,086		3,749
Total current liabilities	82,494		85,588
Long-Term Debt	180,225		152,724
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes	65,963		65,226
Postemployment benefit obligation	11,294		12,649
Operating lease liabilities	20,917		21,261
Other noncurrent liabilities	29,746		30,223
Noncurrent portion of note payable to DIRECTV	—		96
Total deferred credits and other noncurrent liabilities	127,920		129,455
Stockholders’ Equity
Preferred stock ($1 par value, 10,000,000 authorized at March 31, 2022 and December 31, 2021):
Series A (48,000 issued and outstanding at March 31, 2022 and December 31, 2021)	—		—
Series B (20,000 issued and outstanding at March 31, 2022 and December 31, 2021)	—		—
Series C (70,000 issued and outstanding at March 31, 2022 and December 31, 2021)	—		—
Common stock ($1 par value, 14,000,000,000 authorized at March 31, 2022 and December 31, 2021: issued 7,620,748,598 at March 31, 2022 and December 31, 2021)	7,621		7,621
Additional paid-in capital	129,637		130,112
Retained earnings	45,041		42,350
Treasury stock (461,896,657 at March 31, 2022 and 479,684,705 at December 31, 2021, at cost)	(16,553)		(17,280)
Accumulated other comprehensive income	3,290		3,529
Noncontrolling interest	17,520		17,523
Total stockholders’ equity	186,556		183,855
Total Liabilities and Stockholders’ Equity	$	577,195	$	551,622
See Notes to Consolidated Financial Statements.


AT&T INC.	AT&T INC.					AT&T INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS					CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions	Dollars in millions					Dollars in millions
(Unaudited)	(Unaudited)					(Unaudited)
		Nine months ended					Three months ended
		September 30,					March 31,
		2021		2020			2022		2021
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	16,089	$	9,694	Net income	$	5,164	$	7,942
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 amortization	17,189		21,537		Depreciation and amortization	5,539		5,809
Amortization of film and television costs	Amortization of film and television costs	8,421		6,448		Amortization of film and television costs	3,009		2,886
Distributed (undistributed) earnings from investments in equity affiliates	Distributed (undistributed) earnings from investments in equity affiliates	102		108		Distributed (undistributed) earnings from investments in equity affiliates	26		(47)
Provision for uncollectible accounts	Provision for uncollectible accounts	858		1,611		Provision for uncollectible accounts	460		321
Deferred income tax expense	Deferred income tax expense	3,187		2,248		Deferred income tax expense	932		1,848
Net (gain) loss on investments, net of impairments	Net (gain) loss on investments, net of impairments	(965)		(689)		Net (gain) loss on investments, net of impairments	93		(119)
Pension and postretirement benefit expense (credit)	Pension and postretirement benefit expense (credit)	(2,870)		(2,245)		Pension and postretirement benefit expense (credit)	(937)		(974)
Actuarial (gain) loss on pension and postretirement benefits	Actuarial (gain) loss on pension and postretirement benefits	(3,021)		63		Actuarial (gain) loss on pension and postretirement benefits	(1,053)		(2,844)
Asset impairments and abandonments		4,716		2,515

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	57		2,321		Receivables	(228)		751
Other current assets, inventories and theatrical film and television production costs	Other current assets, inventories and theatrical film and television production costs	(11,928)		(7,836)		Other current assets, inventories and theatrical film and television production costs	(3,261)		(3,518)
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	(2,254)		(4,905)		Accounts payable and other accrued liabilities	(4,031)		(3,060)
Equipment installment receivables and related sales	Equipment installment receivables and related sales	715		(148)		Equipment installment receivables and related sales	541		1,190
Deferred customer contract acquisition and fulfillment costs	Deferred customer contract acquisition and fulfillment costs	316		453		Deferred customer contract acquisition and fulfillment costs	(259)		244
Postretirement claims and contributions	Postretirement claims and contributions	(425)		(409)		Postretirement claims and contributions	(97)		(343)
Other - net	Other - net	516		2,282		Other - net	(166)		(159)
Total adjustments	Total adjustments	14,614		23,354		Total adjustments	568		1,985
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	30,703		33,048		Net Cash Provided by Operating Activities	5,732		9,927
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(12,696)		(13,283)		Capital expenditures	(4,748)		(4,033)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(23,533)		(1,215)		Acquisitions, net of cash acquired	(9,244)		(22,884)
Dispositions	Dispositions	9,086		428		Dispositions	11		51
Distributions from DIRECTV in excess of cumulative equity in earnings						Distributions from DIRECTV in excess of cumulative equity in earnings	1,315		—
Other - net	Other - net	(190)		344		Other - net	15		14

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(27,333)		(13,726)		Net Cash Used in Investing Activities	(12,651)		(26,852)
Financing Activities	Financing Activities					Financing Activities
Net change in short-term borrowings with original maturities of three months or less	Net change in short-term borrowings with original maturities of three months or less	630		(17)		Net change in short-term borrowings with original maturities of three months or less	2,285		687
Issuance of other short-term borrowings	Issuance of other short-term borrowings	17,476		9,440		Issuance of other short-term borrowings	2,593		15,485
Repayment of other short-term borrowings	Repayment of other short-term borrowings	(2,448)		(7,710)		Repayment of other short-term borrowings	(3,407)		—
Issuance of long-term debt	Issuance of long-term debt	9,931		31,987		Issuance of long-term debt	30,296		9,097
Repayment of long-term debt	Repayment of long-term debt	(1,653)		(37,583)		Repayment of long-term debt	(802)		(902)
Note payable to DIRECTV, net of payments of $361		1,439		—
Repayment of note payable to DIRECTV						Repayment of note payable to DIRECTV	(294)		—
Payment of vendor financing	Payment of vendor financing	(4,013)		(1,965)		Payment of vendor financing	(1,566)		(1,690)
Issuance of preferred stock		—		3,869

Purchase of treasury stock	Purchase of treasury stock	(191)		(5,483)		Purchase of treasury stock	(197)		(176)
Issuance of treasury stock	Issuance of treasury stock	89		88		Issuance of treasury stock	26		63
Issuance of preferred interests in subsidiaries		—		1,979

Dividends paid	Dividends paid	(11,319)		(11,215)		Dividends paid	(3,749)		(3,741)
Other - net	Other - net	(1,776)		(5,158)		Other - net	(934)		(340)
Net Cash Provided by (Used in) Financing Activities		8,165		(21,768)
Net increase (decrease) in cash and cash equivalents and restricted cash		11,535		(2,446)
Net Cash Provided by Financing Activities						Net Cash Provided by Financing Activities	24,251		18,483
Net increase in cash and cash equivalents and restricted cash						Net increase in cash and cash equivalents and restricted cash	17,332		1,558
Cash and cash equivalents and restricted cash beginning of year	Cash and cash equivalents and restricted cash beginning of year	9,870		12,295		Cash and cash equivalents and restricted cash beginning of year	21,316		9,870
Cash and Cash Equivalents and Restricted Cash End of Period	Cash and Cash Equivalents and Restricted Cash End of Period	$	21,405	$	9,849	Cash and Cash Equivalents and Restricted Cash End of Period	$	38,648	$	11,428

See Notes to Consolidated Financial Statements.


AT&T INC.	AT&T INC.													AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY													CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Dollars and shares in millions except per share amounts	Dollars and shares in millions except per share amounts													Dollars and shares in millions except per share amounts
(Unaudited)	(Unaudited)													(Unaudited)
		Three months ended						Nine months ended							Three months ended
		September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020					March 31, 2022	March 31, 2021
		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount					Shares	Amount		Shares	Amount
Preferred Stock - Series A	Preferred Stock - Series A													Preferred Stock - Series A
Balance at beginning of period	Balance at beginning of period	—	$	—	—	$	—	—	$	—	—	$	—	Balance at beginning of period			—	$	—	—	$	—
Issuance of stock		—	—		—	—		—	—		—	—

Balance at end of period	Balance at end of period	—	$	—	—	$	—	—	$	—	—	$	—	Balance at end of period			—	$	—	—	$	—
Preferred Stock - Series B	Preferred Stock - Series B													Preferred Stock - Series B
Balance at beginning of period	Balance at beginning of period	—	$	—	—	$	—	—	$	—	—	$	—	Balance at beginning of period			—	$	—	—	$	—
Issuance of stock		—	—		—	—		—	—		—	—

Balance at end of period	Balance at end of period	—	$	—	—	$	—	—	$	—	—	$	—	Balance at end of period			—	$	—	—	$	—
Preferred Stock - Series C	Preferred Stock - Series C													Preferred Stock - Series C
Balance at beginning of period	Balance at beginning of period	—	$	—	—	$	—	—	$	—	—	$	—	Balance at beginning of period			—	$	—	—	$	—
Issuance of stock		—	—		—	—		—	—		—	—

Balance at end of period	Balance at end of period	—	$	—	—	$	—	—	$	—	—	$	—	Balance at end of period			—	$	—	—	$	—
Common Stock	Common Stock													Common Stock
Balance at beginning of period	Balance at beginning of period	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	Balance at beginning of period			7,621	$	7,621	7,621	$	7,621
Issuance of stock		—	—		—	—		—	—		—	—

Balance at end of period	Balance at end of period	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	7,621	$	7,621	Balance at end of period			7,621	$	7,621	7,621	$	7,621
Additional Paid-In Capital	Additional Paid-In Capital													Additional Paid-In Capital
Balance at beginning of period	Balance at beginning of period		$	129,941		$	130,046		$	130,175		$	126,279	Balance at beginning of period				$	130,112		$	130,175
Repurchase and acquisition of common stock			—			—			—			67
Issuance of preferred stock			—			—			—			3,869

Issuance of treasury stock	Issuance of treasury stock		(2)			(2)			(77)			(56)		Issuance of treasury stock				(126)			(70)
Share-based payments	Share-based payments		96			91			(63)			(24)		Share-based payments				(349)			(249)
Changes related to acquisition of interests held by noncontrolling owners			—			4			—			4

Balance at end of period	Balance at end of period		$	130,035		$	130,139		$	130,035		$	130,139	Balance at end of period				$	129,637		$	129,856
Retained Earnings	Retained Earnings													Retained Earnings
Balance at beginning of period	Balance at beginning of period		$	38,947		$	56,045		$	37,457		$	57,936	Balance at beginning of period				$	42,350		$	37,457
Cumulative effect of accounting change and other adjustments			—			—			—			(293)
Adjusted beginning balance			38,947			56,045			37,457			57,643

Net income attributable to AT&T	Net income attributable to AT&T		5,918			2,816			15,038			8,707		Net income attributable to AT&T				4,810			7,550
Preferred stock dividends	Preferred stock dividends		(36)			(35)			(188)			(103)		Preferred stock dividends				(99)			(117)
Common stock dividends ($0.52, $0.52, $1.56 and $1.56 per share)			(3,738)			(3,732)			(11,216)			(11,153)
Common stock dividends ($0.2775 and $0.52 per share)														Common stock dividends ($0.2775 and $0.52 per share)				(2,020)			(3,736)
Balance at end of period	Balance at end of period		$	41,091		$	55,094		$	41,091		$	55,094	Balance at end of period				$	45,041		$	41,154

See Notes to Consolidated Financial Statements.


AT&T INC.	AT&T INC.													AT&T INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued													CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - continued
Dollars and shares in millions except per share amounts	Dollars and shares in millions except per share amounts													Dollars and shares in millions except per share amounts
(Unaudited)	(Unaudited)													(Unaudited)
		Three months ended						Nine months ended							Three months ended
		September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020					March 31, 2022	March 31, 2021
		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount					Shares	Amount		Shares	Amount
Treasury Stock	Treasury Stock													Treasury Stock
Balance at beginning of period	Balance at beginning of period	(481)	$	(17,332)	(495)	$	(17,945)	(495)	$	(17,910)	(366)	$	(13,085)	Balance at beginning of period			(480)	$	(17,280)	(495)	$	(17,910)
Repurchase and acquisition of common stock	Repurchase and acquisition of common stock	(1)	(10)		(1)	(19)		(8)	(225)		(149)	(5,600)		Repurchase and acquisition of common stock			(8)	(197)		(6)	(176)
Reissuance of treasury stock	Reissuance of treasury stock	1	23		—	14		22	816		19	735		Reissuance of treasury stock			26	924		20	744
Balance at end of period	Balance at end of period	(481)	$	(17,319)	(496)	$	(17,950)	(481)	$	(17,319)	(496)	$	(17,950)	Balance at end of period			(462)	$	(16,553)	(481)	$	(17,342)
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 period	Balance at beginning of period		$	3,119		$	129		$	4,330		$	5,470	Balance at beginning of period				$	3,529		$	4,330
Other comprehensive income attributable to AT&T	Other comprehensive income attributable to AT&T		(776)			520			(1,987)			(4,821)		Other comprehensive income attributable to AT&T				(239)			(131)
Balance at end of period	Balance at end of period		$	2,343		$	649		$	2,343		$	649	Balance at end of period				$	3,290		$	4,199
Noncontrolling Interest	Noncontrolling Interest													Noncontrolling Interest
Balance at beginning of period	Balance at beginning of period		$	17,550		$	17,557		$	17,567		$	17,713	Balance at beginning of period				$	17,523		$	17,567
Cumulative effect of accounting change and other adjustments			—			—			—			(7)
Adjusted beginning balance			17,550			17,557			17,567			17,706

Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest		355			352			1,051			987		Net income attributable to noncontrolling interest				354			392
Issuance and acquisition by noncontrolling owners			—			1,978			—			1,979

Acquisition of interest held by noncontrolling owners														Acquisition of interest held by noncontrolling owners				(16)			—
Distributions	Distributions		(369)			(382)			(1,084)			(1,108)		Distributions				(341)			(364)
Translation adjustments attributable to noncontrolling interest, net of taxes	Translation adjustments attributable to noncontrolling interest, net of taxes		(4)			(2)			(2)			(61)		Translation adjustments attributable to noncontrolling interest, net of taxes				—			(4)
Balance at end of period	Balance at end of period		$	17,532		$	19,503		$	17,532		$	19,503	Balance at end of period				$	17,520		$	17,591
Total Stockholders' Equity at beginning of period	Total Stockholders' Equity at beginning of period		$	179,846		$	193,453		$	179,240		$	201,934	Total Stockholders' Equity at beginning of period				$	183,855		$	179,240
Total Stockholders' Equity at end of period	Total Stockholders' Equity at end of period		$	181,303		$	195,056		$	181,303		$	195,056	Total Stockholders' Equity at end of period				$	186,556		$	183,079

See Notes to Consolidated Financial Statements.

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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, ~~2020.~~2021. 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.

On ~~July~~April 8, 2022, we completed the previously announced separation of our WarnerMedia business, which represented substantially all of our WarnerMedia segment except for certain retained assets such as Xandr, in a Reverse Morris Trust transaction, under which Magallanes, Inc. (Spinco), a wholly-owned subsidiary of AT&T that held the WarnerMedia business, was distributed to AT&T stockholders via a pro rata dividend, followed by the combination of Spinco with a subsidiary of Discovery, Inc. (Discovery), which was renamed Warner Bros. Discovery, Inc. (WBD). Each AT&T shareholder was entitled to receive 0.241917 shares of WBD common stock for each share of AT&T common stock held as of the record date, which represented approximately 71% of WBD. (See Notes 8 and 13)

As of March 31, ~~2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV Entertainment Holdings, LLC (DIRECTV).~~2022, the results of the WarnerMedia business are included in the continuing operations of AT&T for all periods presented herein. With the ~~close~~separation and distribution, the WarnerMedia business will meet the criteria for discontinued operations beginning with our second-quarter 2022 reporting. For discontinued operations, we evaluated transactions completed during 2021 that were components of AT&T’s single plan of a strategic shift, including dispositions that may not have individually met the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic Ltd. (Playdemic). These businesses will be reflected in our historical financial statements as discontinued operations, including for periods prior to the consummation of the ~~transaction, we separated our Video business, comprised of our U.S. video operations, and began accounting for our investment in DIRECTV under the equity method. (See Note 8)~~WarnerMedia/Discovery transaction.

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 in our results on a one quarter lag. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) ~~items.~~items, including translation adjustments.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions, including estimates of probable losses and expenses, 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 (see Note ~~4 and Note 5)~~4).

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

Accounting Policies, Adopted and Pending Accounting Standards and Other Changes

Customer Acquisition and Fulfillment Costs During the first quarter of 2022, we updated our analysis of expected economic lives of customer relationships. As of January 1, 2022, we extended the amortization period for deferred acquisition and fulfillment contract costs within Mobility and broadband/fiber in Consumer Wireline and Business Wireline to better reflect the estimated economic lives of the relationships. These changes in accounting estimate decreased other cost of revenues approximately $135, or $0.01 per diluted share, in the first quarter of 2022.

AT&T INC.

MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Fiber Network Assets During the first quarter of 2022, we updated our analysis of economic lives of AT&T owned fiber network assets. As of January 1, 2022, we extended the estimated economic life and depreciation period of such costs to better reflect the physical life of the assets that we had been experiencing and absence of technological changes that would replace fiber as the best broadband technology in the industry. The change in accounting estimate decreased depreciation expense $70, or $0.01 per diluted share, in the first quarter of 2022.

Convertible Instruments As of January 1, 2022, we adopted, through retrospective application, Accounting Standards Update (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). ASU 2020-06 requires that instruments which may be settled in cash or stock are presumed settled in stock in calculating diluted earnings per share. While our intent is to settle the Mobility II preferred interests in cash, the ability to settle this instrument in AT&T shares will result in additional dilutive impact, the magnitude of which is influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period.


The following table presents the impact of the adoption of ASU 2020-06 on our diluted earnings per share:
	Historical Accounting Method	Effect of Adoption of ASU 2020-061		Under ASU 2020-06


Diluted earnings per share:
Three months ended March 31, 2022		$	0.66	$	(0.01)	$	0.65
Three months ended March 31, 2021		$	1.04	$	(0.02)	$	1.02
1See Note 2 for a discussion of the numerator and denominator adjustments.

Government Assistance The Financial Accounting Standards Board (FASB) issued ASU No, 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (ASU 2021-10), which requires annual disclosures, beginning with the 2022 Annual Report on Form 10-K, in the notes to the financial statements, about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other guidance. The annual disclosures include terms and conditions, accounting treatment and impacted financial statement lines reflecting the impact of the transactions. ASU 2021-10 will be effective for annual reporting periods beginning after December 15, 2021, which we plan to adopt under prospective application for all in scope government transactions in the financial statements as of our adoption date or thereafter.

AT&T INC.

MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 2. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~and 2020,~~ is shown in the table below:


		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Numerators	Numerators									Numerators
Numerator for basic earnings per share:	Numerator for basic earnings per share:									Numerator for basic earnings per share:
Net Income Attributable to Common Stock	Net Income Attributable to Common Stock	$	5,868	$	2,762	$	14,882	$	8,569	Net Income Attributable to Common Stock		$	4,762	$	7,500
Dilutive potential common shares:	Dilutive potential common shares:									Dilutive potential common shares:
Mobility II preferred interests										Mobility II preferred interests		140		140
Share-based payment	Share-based payment	6		5		17		16		Share-based payment		6		6
Numerator for diluted earnings per share	Numerator for diluted earnings per share	$	5,874	$	2,767	$	14,899	$	8,585	Numerator for diluted earnings per share		$	4,908	$	7,646
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 outstanding	Weighted average number of common shares outstanding	7,171		7,147		7,167		7,160		Weighted average number of common shares outstanding		7,184		7,161
Dilutive potential common shares:	Dilutive potential common shares:									Dilutive potential common shares:
Mobility II preferred interests (in shares)										Mobility II preferred interests (in shares)		337		294
Share-based payment (in shares)	Share-based payment (in shares)	31		26		30		26		Share-based payment (in shares)		35		27
Denominator for diluted earnings per share	Denominator for diluted earnings per share	7,202		7,173		7,197		7,186		Denominator for diluted earnings per share		7,556		7,482

Upon the adoption of ASU 2020-06 in the first quarter of 2022, the ability to settle our Mobility II preferred interests in stock is reflected in our diluted earnings per share calculation. While our intent is to settle the Mobility II preferred interests in cash, the ability to settle this instrument in AT&T shares will result in additional dilutive impact, the magnitude of which is influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period. The numerator includes an adjustment to add back to income the earned distributions on the Mobility II preferred interests, included in net income attributable to noncontrolling interest, and the denominator includes the potential issuance of AT&T common stock to settle the Mobility II preferred interests outstanding. (See Note 1)

911

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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, 2021																Balance as of December 31, 2021	$	(1,964)		$	45		$	(1,422)		$	6,870		$	3,529
Other comprehensive income (loss) before reclassifications																Other comprehensive income (loss) before reclassifications	19			(69)			258			—			208
Amounts reclassified from accumulated OCI																Amounts reclassified from accumulated OCI	—		1	3		1	15		2	(465)		3	(447)
Net other comprehensive income (loss)																Net other comprehensive income (loss)	19			(66)			273			(465)			(239)
Balance as of March 31, 2022																Balance as of March 31, 2022	$	(1,945)		$	(21)		$	(1,149)		$	6,405		$	3,290

		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)			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, 2020	Balance as of December 31, 2020	$	(3,926)		$	111		$	(779)		$	8,924		$	4,330	Balance 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	108			(39)			(593)			—			(524)		Other comprehensive income (loss) before reclassifications	(105)			(55)			511			—			351
Amounts reclassified from accumulated OCI	Amounts reclassified from accumulated OCI	—		1	(4)		1	57		2	(1,516)		3	(1,463)		Amounts reclassified from accumulated OCI	—		1	(2)		1	24		2	(504)		3	(482)
Net other comprehensive income (loss)	Net other comprehensive income (loss)	108			(43)			(536)			(1,516)			(1,987)		Net other comprehensive income (loss)	(105)			(57)			535			(504)			(131)
Balance as of September 30, 2021		$	(3,818)		$	68		$	(1,315)		$	7,408		$	2,343

		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, 2019		$	(3,056)		$	48		$	(37)		$	8,515		$	5,470
Other comprehensive income (loss) before reclassifications		(1,398)			81			(2,166)			—			(3,483)
Amounts reclassified from accumulated OCI		—		1	—		1	44		2	(1,382)		3	(1,338)
Net other comprehensive income (loss)		(1,398)			81			(2,122)			(1,382)			(4,821)
Balance as of September 30, 2020		$	(4,454)		$	129		$	(2,159)		$	7,133		$	649
Balance as of March 31, 2021																Balance as of March 31, 2021	$	(4,031)		$	54		$	(244)		$	8,420		$	4,199
1(Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income.																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).																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).																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).

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).~~

3~~The 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 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.

1012

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

In the first quarter of 2022, we reclassified into "Corporate" certain administrative costs borne by AT&T where the business units do not influence decision making to conform with the current period presentation. This recast increased Corporate operations and support expenses by approximately $100 in the first quarter of 2021, wewith a total of $270 for full-year 2021. Correspondingly, this recast ~~our segment results for all prior periods to reflect the following:~~

•lowered administrative expenses at AT&T’s Communications ~~segment~~ ~~results were recast to remove the held-for-sale businesses, principally~~operations, 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.~~with no change on a consolidated basis.

The Communications segment provides wireless and wireline telecom 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.

•Business Wireline provides advanced ~~IP-based~~ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers.

•Consumer Wireline provides ~~internet,~~broadband services, including ~~broadband~~ fiber ~~and~~connections that now provide our multi-gig services to residential customers. Consumer Wireline also provides legacy telephony voice communication ~~services to residential customers.~~services.

~~On May 17, 2021, we entered into an agreement to combine~~ our WarnerMedia ~~segment, subject to~~business, which excluded certain ~~exceptions,~~retained assets, such as Xandr, with a subsidiary of Discovery ~~Inc. (See Note 8)~~

~~Effective January 1, 2021, we updated our reporting units~~by distribution to reflect recent changes in how WarnerMedia, an integrated content organization that distributes across various platforms, is managed and evaluated. With this operational change, the reporting unit is deemed to be the operating segment. The previous reporting units, Turner, Home Box Office, Warner Bros., and Xandr, and the 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.~~

AT&T stockholders via a pro rata dividend. On ~~July~~December 21, 2021, we entered into an agreement to sell ~~our Vrio business~~the marketplace component of Xandr to ~~Grupo Werthein (see Note 8)~~Microsoft Corporation (Microsoft). (See Notes 8 and 13)

The ~~transaction is expected to close during the fourth quarter of 2021. 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~~ provides wireless services and ~~resource allocation decisions were made through September 30, 2021.~~equipment in Mexico, and prior to the November 2021 disposition of Vrio, video services in Latin America and the Caribbean.

Corporate and Other reconciles our segment results to consolidated operating income and income before income ~~taxes, and includes:~~taxes.

Corporate includes:

•~~Corporate~~DTV stranded costs, 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.” Costscosts previously allocated to the Video business that were retained after the transaction, net of reimbursements from DIRECTV Entertainment Holdings, LLC (DIRECTV) under transition service ~~agreements,~~agreements.

•Parent administration support, which includes costs borne by AT&T where the business units do not influence decision making.

•Securitization fees associated with our sales of installment receivables (see Note 9).

•Value portfolio, which are ~~reported in Corporate for the remainder~~businesses no longer integral to our operations or which we no longer actively market.

Other items consist of ~~2021, to maintain comparability of our operating segment results, and while operational plans and continued cost reduction initiatives are implemented.~~:

•Video, which~~consisted of~~ includes our former U.S. video operations that were contributed to DIRECTV on July 31, ~~2021.~~2021, and our share of DIRECTV’s earnings as equity in net income of affiliates (see Note 11).

•~~Acquisition-related items~~Held-for-sale and other reclassifications, whichincludes our former Crunchyroll and Government Solutions operations, WarnerMedia film amortization recharacterization, WarnerMedia receivable securitization, and reclassification of parent administrative costs in connection with the separation of Video and WarnerMedia.

•Reclassification of prior service credits, which includes the reclassification of prior service credit amortization, where we present the impact of benefit plan amendments in our business unit results.

•Merger & Significant Items, which ~~consists of~~includes items associated with the merger and integration of acquired or divested businesses, including amortization of intangible ~~assets.~~

•~~Certain significant items, which includes (1)~~assets, employee separation charges associated with voluntary and/or strategic offers, ~~(2)~~ asset impairments and 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 Video and Vrio prior to ~~its~~ separation, Communications company bundling HBO MAX and, ~~(2)~~prior to the separation of DIRECTV, includes adjustments for our reporting of the advertising business.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued~~

~~Dollars in millions except per share amounts~~

“Interest expense” and “Other income (expense) – net,” are managed only on a total company basis and are, accordingly, reflected only in consolidated results.

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts


For the three months ended September 30, 2021
For the three months ended March 31, 2022																For the three months ended March 31, 2022
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution			Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Operating Contribution
Communications	Communications															Communications
Mobility	Mobility	$	19,138	$	11,148	$	7,990	$	2,035	$	5,955	$	—	$	5,955	Mobility	$	20,075	$	12,163	$	7,912	$	2,059	$	5,853	$	—	$	5,853
Business Wireline	Business Wireline	5,938		3,649		2,289		1,304		985		—		985		Business Wireline	5,640		3,482		2,158		1,299		859		—		859
Consumer Wireline	Consumer Wireline	3,142		2,184		958		775		183		—		183		Consumer Wireline	3,161		2,078		1,083		766		317		—		317
Total Communications	Total Communications	28,218		16,981		11,237		4,114		7,123		—		7,123		Total Communications	28,876		17,723		11,153		4,124		7,029		—		7,029
WarnerMedia																WarnerMedia	8,741		7,295		1,446		127		1,319		(13)		1,306

Latin America - Mexico																Latin America - Mexico	690		631		59		161		(102)		—		(102)
Segment Total																Segment Total	38,307		25,649		12,658		4,412		8,246		$	(13)	$	8,233
Corporate and Other																Corporate and Other
Corporate:																Corporate:
DTV stranded costs																DTV stranded costs	8		128		(120)		134		(254)		—		(254)
Parent administration support																Parent administration support	(12)		312		(324)		4		(328)		(8)		(336)
Securitization fees																Securitization fees	16		82		(66)		—		(66)		—		(66)
Value portfolio																Value portfolio	118		24		94		9		85		—		85
Total Corporate																Total Corporate	130		546		(416)		147		(563)		(8)		(571)
Video																Video	—		—		—		—		—		522		522

WarnerMedia		8,442		6,271		2,171		163		2,008		(73)		1,935
Latin America
Vrio		756		660		96		—		96		9		105
Mexico		724		697		27		157		(130)		—		(130)
Total Latin America		1,480		1,357		123		157		(34)		9		(25)
Segment Total		38,140		24,609		13,531		4,434		9,097		$	(64)	$	9,033
Corporate and Other
Corporate1		278		1,109		(831)		129		(960)
Video		2,149		1,731		418		44		374
Acquisition-related items		—		130		(130)		1,012		(1,142)
Certain significant items		—		161		(161)		—		(161)

Held-for-sale and other reclassifications																Held-for-sale and other reclassifications	29		16		13		9		4		—		4
Reclassification of prior service credits																Reclassification of prior service credits	—		617		(617)		—		(617)		—		(617)
Merger & Significant Items																Merger & Significant Items	—		458		(458)		971		(1,429)		—		(1,429)
Eliminations and consolidations	Eliminations and consolidations	(645)		(546)		(99)		—		(99)						Eliminations and consolidations	(361)		(361)		—		—		—		—		—
Total Corporate and Other																Total Corporate and Other	(202)		1,276		(1,478)		1,127		(2,605)		514		(2,091)
AT&T Inc.	AT&T Inc.	$	39,922	$	27,194	$	12,728	$	5,619	$	7,109					AT&T Inc.	$	38,105	$	26,925	$	11,180	$	5,539	$	5,641	$	501	$	6,142
1Operations and Support Expenses include $670 for the reclassification of prior service credit amortization.

1314

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 March 31, 2021																For the three months ended March 31, 2021
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution			Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Operating Contribution
Communications	Communications															Communications
Mobility	Mobility	$	17,894	$	10,182	$	7,712	$	2,021	$	5,691	$	—	$	5,691	Mobility	$	19,034	$	10,976	$	8,058	$	2,014	$	6,044	$	—	$	6,044
Business Wireline	Business Wireline	6,261		3,764		2,497		1,313		1,184		—		1,184		Business Wireline	6,046		3,688		2,358		1,278		1,080		—		1,080
Consumer Wireline	Consumer Wireline	3,040		2,117		923		734		189		—		189		Consumer Wireline	3,098		2,029		1,069		762		307		—		307
Total Communications	Total Communications	27,195		16,063		11,132		4,068		7,064		—		7,064		Total Communications	28,178		16,693		11,485		4,054		7,431		—		7,431
WarnerMedia																WarnerMedia	8,526		6,403		2,123		163		1,960		70		2,030
Latin America																Latin America
Mexico																Mexico	631		620		11		145		(134)		—		(134)
Vrio																Vrio	743		661		82		117		(35)		(4)		(39)
Total Latin America																Total Latin America	1,374		1,281		93		262		(169)		(4)		(173)
Segment Total																Segment Total	38,078		24,377		13,701		4,479		9,222		$	66	$	9,288
Corporate and Other																Corporate and Other
Corporate:																Corporate:
DTV stranded cost																DTV stranded cost	—		—		—		—		—		—		—
Parent administration support																Parent administration support	(12)		334		(346)		6		(352)		(9)		(361)
Securitization fees																Securitization fees	13		40		(27)		—		(27)		—		(27)
Value portfolio																Value portfolio	163		41		122		9		113		—		113
Total Corporate																Total Corporate	164		415		(251)		15		(266)		(9)		(275)
Video																Video	6,725		5,660		1,065		164		901		—		901

Held-for-sale and other reclassifications																Held-for-sale and other reclassifications	262		228		34		20		14		(5)		9
Reclassification of prior service credits																Reclassification of prior service credits	—		669		(669)		—		(669)		—		(669)
Merger & Significant Items																Merger & Significant Items	—		61		(61)		1,131		(1,192)		—		(1,192)
Eliminations and consolidations																Eliminations and consolidations	(1,290)		(941)		(349)		—		(349)		—		(349)
Total Corporate and Other																Total Corporate and Other	5,861		6,092		(231)		1,330		(1,561)		(14)		(1,575)
AT&T Inc.																AT&T Inc.	$	43,939	$	30,469	$	13,470	$	5,809	$	7,661	$	52	$	7,713

WarnerMedia		7,395		5,483		1,912		169		1,743		12		1,755
Latin America
Vrio		753		675		78		126		(48)		14		(34)
Mexico		643		662		(19)		124		(143)		—		(143)
Total Latin America		1,396		1,337		59		250		(191)		14		(177)
Segment Total		35,986		22,883		13,103		4,487		8,616		$	26	$	8,642
Corporate and Other
Corporate1		628		1,175		(547)		65		(612)
Video		7,014		5,887		1,127		557		570
Acquisition-related items		—		38		(38)		1,921		(1,959)
Certain significant items		—		113		(113)		—		(113)
Eliminations and consolidations		(1,288)		(918)		(370)		—		(370)
AT&T Inc.		$	42,340	$	29,178	$	13,162	$	7,030	$	6,132
1Operations and Support Expenses include $610 for the reclassification of prior service credit amortization.

1415

AT&T INC.

~~SEPTEMBER 30, 2021~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued~~

~~Dollars in millions except per share amounts~~

For the nine months ended September 30, 2021
Revenues Operations
and Support
Expenses EBITDA Depreciation
and
Amortization Operating
Income (Loss) Equity in Net
Income (Loss) of
Affiliates Segment
Contribution
Communications
Mobility $ 57,108 $ 33,077 $ 24,031 $ 6,072 $ 17,959 $ — $ 17,959
Business Wireline 18,036 11,068 6,968 3,875 3,093 — 3,093
Consumer Wireline 9,380 6,298 3,082 2,306 776 — 776
Total Communications 84,524 50,443 34,081 12,253 21,828 — 21,828
WarnerMedia 25,759 19,608 6,151 491 5,660 44 5,704
Latin America
Vrio 2,248 1,981 267 231 36 7 43
Mexico 2,043 1,984 59 452 (393) — (393)
Total Latin America 4,291 3,965 326 683 (357) 7 (350)
Segment Total 114,574 74,016 40,558 13,427 27,131 $ 51 $ 27,182
Corporate and Other
Corporate1
1,065 3,482 (2,417) 194 (2,611)
Video 15,513 12,666 2,847 356 2,491
Acquisition-related items — 167 (167) 3,212 (3,379)
Certain significant items — 4,773 (4,773) — (4,773)
Eliminations and consolidations (3,246) (2,426) (820) — (820)
AT&T Inc. $ 127,906 $ 92,678 $ 35,228 $ 17,189 $ 18,039
1Operations and Support Expenses include $2,011 for the reclassification of prior service credit amortization.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued~~

~~Dollars in millions except per share amounts~~

For the nine months ended September 30, 2020
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net
Income (Loss) of
Affiliates Segment Contribution
Communications
Mobility $ 52,445 $ 29,083 $ 23,362 $ 6,078 $ 17,284 $ — $ 17,284
Business Wireline 18,832 11,365 7,467 3,900 3,567 — 3,567
Consumer Wireline 9,202 5,924 3,278 2,176 1,102 — 1,102
Total Communications 80,479 46,372 34,107 12,154 21,953 — 21,953
WarnerMedia 21,888 15,744 6,144 494 5,650 31 5,681
Latin America
Vrio 2,392 2,119 273 400 (127) 26 (101)
Mexico 1,826 1,914 (88) 373 (461) — (461)
Total Latin America 4,218 4,033 185 773 (588) 26 (562)
Segment Total 106,585 66,149 40,436 13,421 27,015 $ 57 $ 27,072
Corporate and Other
Corporate1
1,751 3,256 (1,505) 254 (1,759)
Video 21,442 17,716 3,726 1,741 1,985
Acquisition-related items — 431 (431) 6,122 (6,553)
Certain significant items — 2,539 (2,539) — (2,539)
Eliminations and consolidations (3,709) (2,709) (1,000) (1) (999)
AT&T Inc. $ 126,069 $ 87,382 $ 38,687 $ 21,537 $ 17,150
1Operations and Support Expenses include $1,833 for the reclassification of prior service credit amortization.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 in our consolidated statements of income:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2021		2020		2021		2020				2022		2021
Communications	Communications	$	7,123	$	7,064	$	21,828	$	21,953	Communications		$	7,029	$	7,431
WarnerMedia	WarnerMedia	1,935		1,755		5,704		5,681		WarnerMedia		1,306		2,030
Latin America	Latin America	(25)		(177)		(350)		(562)		Latin America		(102)		(173)
Segment Contribution	Segment Contribution	9,033		8,642		27,182		27,072		Segment Contribution		8,233		9,288
Reconciling Items:	Reconciling Items:									Reconciling Items:
Corporate and Other		(960)		(612)		(2,611)		(1,759)
Corporate										Corporate		(563)		(266)
Video	Video	374		570		2,491		1,985		Video		—		901
Merger costs		(130)		(38)		(167)		(431)
Held-for-sale and other reclassifications										Held-for-sale and other reclassifications		4		14
Merger, transaction and other costs										Merger, transaction and other costs		(364)		(37)
Amortization of intangibles acquired	Amortization of intangibles acquired	(1,012)		(1,921)		(3,212)		(6,122)		Amortization of intangibles acquired		(971)		(1,131)
Asset impairments and abandonments		(161)		(73)		(4,716)		(2,515)
Gain on spectrum transaction1		—		—		—		900
Employee separation costs and benefit-related losses		—		(40)		(57)		(924)

Employee separation costs and benefit-related gains (losses)										Employee separation costs and benefit-related gains (losses)		(94)		(24)

Reclassification of prior service credits										Reclassification of prior service credits		(617)		(669)
Segment equity in net income of affiliates	Segment equity in net income of affiliates	64		(26)		(51)		(57)		Segment equity in net income of affiliates		13		(66)
Eliminations and consolidations	Eliminations and consolidations	(99)		(370)		(820)		(999)		Eliminations and consolidations		—		(349)
AT&T Operating Income	AT&T Operating Income	7,109		6,132		18,039		17,150		AT&T Operating Income		5,641		7,661
Interest Expense	Interest Expense	1,667		1,972		5,221		6,031		Interest Expense		1,722		1,870
Equity in net income (loss) of affiliates	Equity in net income (loss) of affiliates	91		5		184		(11)		Equity in net income (loss) of affiliates		501		52
Other income (expense) - net		2,279		(231)		7,499		1,589
Other income (expense) — net										Other income (expense) — net		2,187		4,221
Income Before Income Taxes	Income Before Income Taxes	$	7,812	$	3,934	$	20,501	$	12,697	Income Before Income Taxes		$	6,607	$	10,064

1~~Included as a reduction of "Selling, general and administrative expenses" in the consolidated statement of income.~~

The following ~~tables~~table presents intersegment revenues ~~and assets~~ by segment:

Intersegment Reconciliation
Three months ended
September 30, Nine months ended
September 30,
2021 2020 2021 2020
Intersegment Revenues
Communications $ 2 $ 3 $ 8 $ 7
WarnerMedia 515 812 2,193 2,402
Latin America — — — —
Total Intersegment Revenues 517 815 2,201 2,409
Consolidations 128 473 1,045 1,300
Eliminations and consolidations $ 645 $ 1,288 $ 3,246 $ 3,709


Intersegment Reconciliation
	Three months ended March 31,
		2022		2021
Intersegment Revenues
Communications		$	3	$	3
WarnerMedia1		358		838
Latin America		—		—
Total Intersegment Revenues		361		841
Consolidations		—		449
Eliminations and consolidations		$	361	$	1,290
1Includes sales to the Communications segment for HBO MAX, and through July and November 2021, sales to the former Video and Vrio businesses, respectively.

1716

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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, prior period amounts have been recast to conform to the current period presentation with our first quarter 2021 segment updates (see Note 4).~~unit:


For the three months ended September 30, 2021
For the three months ended March 31, 2022																		For the three months ended March 31, 2022
		Communications																	Communications
		Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total			Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	Wireless service	$	14,450	$	—	$	—	$	—	$	463	$	28	$	—	$	14,941	Wireless service	$	14,648	$	—	$	—	$	—	$	490	$	17	$	—	$	15,155
Video service		—		—		—		—		756		2,041		—		2,797

Business service	Business service	—		5,765		—		—		—		—		—		5,765		Business service	—		5,478		—		—		—		—		—		5,478
Broadband	Broadband	—		—		2,290		—		—		—		—		2,290		Broadband	—		—		2,355		—		—		—		—		2,355
Subscription	Subscription	—		—		—		3,988		—		—		—		3,501		Subscription	—		—		—		3,997		—		—		0		3,687
DTC (HBO Max)1	DTC (HBO Max)1	—		—		—		—		—		—		(261)				DTC (HBO Max)1	—		—		—		—		—		—		(310)
Content																		Content	—		—		—		3,742		—		—		—		2,820
DTC (HBO Max)2																		DTC (HBO Max)2	—		—		—		(735)		—		—		—
Other2	Other2	—		—		—		—		—		—		(226)				Other2	—		—		—		(187)		—		—		—
Content		—		—		—		3,495		—		—		—		2,783
DTC (HBO Max)3		—		—		—		(413)		—		—		—
Other3		—		—		—		(299)		—		—		—
Advertising	Advertising	77		—		—		1,401		—		111		(111)		1,478		Advertising	76		—		—		1,685		—		—		—		1,761
Legacy voice and data	Legacy voice and data	—		—		484		—		—		97		—		581		Legacy voice and data	—		—		460		—		—		89		—		549
Other	Other	—		—		351		270		—		133		(47)		707		Other	—		—		346		239		—		53		(51)		587
Total Service	Total Service	14,527		5,765		3,125		8,442		1,219		2,410		(645)		34,843		Total Service	14,724		5,478		3,161		8,741		490		159		(361)		32,392
Equipment	Equipment	4,611		173		17		—		261		17		—		5,079		Equipment	5,351		162		—		—		200		—		0		5,713
Total	Total	$	19,138	$	5,938	$	3,142	$	8,442	$	1,480	$	2,427	$	(645)	$	39,922	Total	$	20,075	$	5,640	$	3,161	$	8,741	$	690	$	159	$	(361)	$	38,105
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($174 with Mobility and $87 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia prior to August 1, 2021 (see Note 11).
3Represents intercompany transactions in the WarnerMedia segment.
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($224 with Mobility and $86 with Consumer Wireline).																		1Represents DTC (HBO Max) intercompany sales to the Communications segment ($224 with Mobility and $86 with Consumer Wireline).
2Represents intercompany transactions in the WarnerMedia segment.																		2Represents intercompany transactions in the WarnerMedia segment.

1817

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2020
Communications
Mobility Business Wireline Consumer Wireline WarnerMedia Latin America Corporate & Other Elim. Total
Wireless service $ 13,811 $ — $ — $ — $ 385 $ 169 $ — $ 14,365
Video service — — — — 753 6,557 — 7,310
Business service — 6,079 — — — 88 — 6,167
Broadband — — 2,128 — — — — 2,128
Subscription — — — 3,477 — — — 2,687
   DTC (HBO Max)1
— — — — — — (190)
   Other2
— — — — — — (600)
Content — — — 2,618 — — — 2,108
   DTC (HBO Max)3
— — — (199) — — —
   Other3
— — — (311) — — —
Advertising 72 — — 1,600 — 408 (408) 1,672
Legacy voice and data — — 538 — — 137 — 675
Other — — 372 210 — 178 (90) 670
Total Service 13,883 6,079 3,038 7,395 1,138 7,537 (1,288) 37,782
Equipment 4,011 182 2 — 258 105 — 4,558
Total $ 17,894 $ 6,261 $ 3,040 $ 7,395 $ 1,396 $ 7,642 $ (1,288) $ 42,340
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($116 with Mobility and $74 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~


For the three months ended March 31, 2021
	Communications
	Mobility		Business Wireline		Consumer Wireline		WarnerMedia		Latin America		Corporate & Other		Elim.		Total
Wireless service	$	13,965	$	—	$	—	$	—	$	439	$	10	$	—	$	14,414
Video service	—		—		—		—		743		6,295		—		7,038
Business service	—		5,872		—		—		—		70		—		5,942
Broadband	—		—		2,205		—		—		—		—		2,205
Subscription	—		—		—		3,830		—		—		—		3,010
DTC (HBO Max)1	—		—		—		—		—		—		(235)
Other2	—		—		—		—		—		—		(585)
Content	—		—		—		3,420		—		—		—		2,802
DTC (HBO Max)3	—		—		—		(331)		—		—		—
Other3	—		—		—		(287)		—		—		—
Advertising	83		—		—		1,737		—		388		(388)		1,820
Legacy voice and data	—		—		519		—		—		123		—		642
Other	—		—		332		157		—		224		(82)		631
Total Service	14,048		5,872		3,056		8,526		1,182		7,110		(1,290)		38,504
Equipment	4,986		174		42		—		192		41		—		5,435
Total	$	19,034	$	6,046	$	3,098	$	8,526	$	1,374	$	7,151	$	(1,290)	$	43,939
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($145 with Mobility and $90 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia.
3Represents intercompany transactions in the WarnerMedia segment.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued~~

~~Dollars in millions except per share amounts~~

For the nine months ended September 30, 2021
Communications
Mobility Business Wireline Consumer Wireline WarnerMedia Latin America Corporate & Other
Elim.
Total
Wireless service $ 42,667 $ — $ — $ — $ 1,349 $ 65 $ — $ 44,081
Video service — — — — 2,248 14,534 — 16,782
Business service — 17,497 — — — 70 — 17,567
Broadband — — 6,761 — — — — 6,761
Subscription — — — 11,779 — — — 9,649
DTC (HBO Max)1
— — — — — — (749)
Other2
— — — — — — (1,381)
Content — — — 10,411 — — — 8,440
DTC (HBO Max)3
— — — (1,136) — — —
Other3
— — — (835) — — —
Advertising 254 — — 4,877 — 909 (909) 5,131
Legacy voice and data — — 1,507 — — 334 — 1,841
Other — — 1,019 663 — 576 (207) 2,051
Total Service 42,921 17,497 9,287 25,759 3,597 16,488 (3,246) 112,303
Equipment 14,187 539 93 — 694 90 — 15,603
Total $ 57,108 $ 18,036 $ 9,380 $ 25,759 $ 4,291 $ 16,578 $ (3,246) $ 127,906
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($481 with Mobility and $268 with Consumer Wireline).
2Represents intercompany video distribution arrangements primarily to DIRECTV/U-verse from WarnerMedia prior to August 1, 2021 (see Note 11).
3Represents intercompany transactions in the WarnerMedia segment.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued~~

~~Dollars in millions except per share amounts~~

For the nine months ended September 30, 2020
Communications
Mobility Business Wireline Consumer Wireline WarnerMedia Latin America Corporate & Other
Elim.
Total
Wireless service $ 41,314 $ — $ — $ — $ 1,197 $ 464 $ — $ 42,975
Video service — — — — 2,392 20,226 — 22,618
Business service — 18,271 — — — 243 — 18,514
Broadband — — 6,329 — — — — 6,329
Subscription — — — 10,142 — — — 7,793
DTC (HBO Max)1
— — — — — — (251)
Other2
— — — — — — (2,098)
Content — — — 9,615 — — — 6,988
DTC (HBO Max)3
— — — (1,848) — — —
Other3
— — — (779) — — —
Advertising 206 — — 4,236 — 1,115 (1,115) 4,442
Legacy voice and data — — 1,679 — — 424 — 2,103
Other — — 1,189 522 — 488 (245) 1,954
Total Service 41,520 18,271 9,197 21,888 3,589 22,960 (3,709) 113,716
Equipment 10,925 561 5 — 629 233 — 12,353
Total $ 52,445 $ 18,832 $ 9,202 $ 21,888 $ 4,218 $ 23,193 $ (3,709) $ 126,069
1Represents DTC (HBO Max) intercompany sales to the Communications segment ($153 with Mobility and $98 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, and consumer wireline ~~and video~~ 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:


		September 30,		December 31,			March 31,		December 31,
Consolidated Balance Sheets	Consolidated Balance Sheets	2021		2020		Consolidated Balance Sheets	2022		2021
Deferred Acquisition Costs	Deferred Acquisition Costs					Deferred Acquisition Costs
Prepaid and other current assets	Prepaid and other current assets	$	2,615	$	3,087	Prepaid and other current assets	$	2,522	$	2,551
Other Assets	Other Assets	3,056		3,198		Other Assets	3,541		3,247
Total deferred customer contract acquisition costs	Total deferred customer contract acquisition costs	$	5,671	$	6,285	Total deferred customer contract acquisition costs	$	6,063	$	5,798
Deferred Fulfillment Costs	Deferred Fulfillment Costs					Deferred Fulfillment Costs
Prepaid and other current assets	Prepaid and other current assets	$	2,611	$	4,118	Prepaid and other current assets	$	2,436	$	2,600
Other Assets	Other Assets	4,196		5,634		Other Assets	4,306		4,148
Total deferred customer contract fulfillment costs	Total deferred customer contract fulfillment costs	$	6,807	$	9,752	Total deferred customer contract fulfillment costs	$	6,742	$	6,748

2118

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The decline in deferred acquisition and fulfillment costs from December 31, 2020 reflects the July 2021 separation of the U.S. Video business. At separation, we removed $1,218 of deferred acquisitions costs ($693 originally classified as “Prepaid and other current assets” and $525 originally classified as “Other assets”) and $2,025 of deferred fulfillment costs ($1,134 originally classified as “Prepaid and other current assets” and $891 originally classified as “Other assets”). (See Note 8)

~~The~~ following table presents deferred customer contract acquisition and fulfillment cost amortization included in “Other cost of revenue” for the ~~nine~~three months ended:


		September 30,		September 30,			March 31,		March 31,
Consolidated Statements of Income	Consolidated Statements of Income	2021		2020		Consolidated Statements of Income	2022		20211
Deferred acquisition cost amortization	Deferred acquisition cost amortization	$	2,358	$	1,969	Deferred acquisition cost amortization	$	663	$	764
Deferred fulfillment cost amortization	Deferred fulfillment cost amortization	3,290		3,888		Deferred fulfillment cost amortization	664		1,290
1Includes deferred acquisition amortization of $171 and deferred fulfillment cost amortization of $595 from our separated Video business for the quarter ended March 31, 2021.						1Includes deferred acquisition amortization of $171 and deferred fulfillment cost amortization of $595 from our separated Video business for the quarter ended March 31, 2021.

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.

Our contract assets primarily relate to our wireless businesses. Promotional equipment sales where we offer handset credits, which are allocated between equipment and service in proportion to their standalone selling prices, when customers commit to a specified service period result in additional contract assets recognized. These contract assets will amortize over the service contract period, resulting in lower future service revenue.

When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. 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,			March 31,		December 31,
Consolidated Balance Sheets	Consolidated Balance Sheets	2021		2020		Consolidated Balance Sheets	2022		2021
Contract asset	Contract asset	$	3,889	$	3,501	Contract asset	$	4,708	$	4,518
Current portion in “Prepaid and other current assets”	Current portion in “Prepaid and other current assets”	2,329		2,054		Current portion in “Prepaid and other current assets”	2,740		2,685
Contract liability	Contract liability	5,385		6,879		Contract liability	5,586		5,645
Current portion in “Advanced billings and customer deposits”	Current portion in “Advanced billings and customer deposits”	4,779		6,071		Current portion in “Advanced billings and customer deposits”	5,079		5,112
Current portion in “Accounts payable and accrued liabilities”		74		—

Our contract asset balances for the quarter ended March 31, 2022 and December 31, 2021 reflect increased promotional equipment sales in our wireless business. We expect the amortization of these promotional costs to increase throughout 2022 and the contract asset to flatten in 2023.

Our beginning of period contract liability recorded as customer contract revenue during ~~2021~~2022 was ~~$5,150.~~

Changes in our contract asset and contract liability from December 31, 2020 include the impact of the July 2021 separation of the U.S. Video business. At separation, the contract asset was reduced $303 and the contract liability was reduced $1,098, both of which were predominantly the current portion. (See Note 8)$3,697.

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.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~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 ~~September 30, 2021,~~March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$42,106,~~$42,300, of which we expect to recognize approximately ~~74%~~80% by the end of ~~2022,~~2023, with the balance recognized thereafter.

AT&T INC.

MARCH 31, 2022

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 ~~2021.~~2022.

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. ~~Total~~We anticipate total distributions from the pension plan ~~exceeded~~will exceed the threshold of service and interest costs for ~~2021,~~2022, requiring us to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter-end in ~~2021,~~2022, as we ~~expected~~expect settlements to occur during each quarter. ~~These remeasurements resulted in the recognition of actuarial gains of $374 in the third quarter and $3,021 for the nine months ended September 30, 2021.~~

As part of our ~~2021 remeasurements,~~first-quarter 2022 remeasurement, the weighted-average discount rate used to measure our pension benefit obligation ~~remained consistent~~increased to 3.70% at ~~3.00% at September 30, 2021~~March 31, 2022, as compared to ~~June 30, 2021, increasing from 2.70%~~3.00% at December 31, ~~2020.~~2021. The discount rate in effect for determining pension service and interest costs after ~~our September 30~~ remeasurement is ~~3.30%~~3.80% and ~~2.30%~~3.40% respectively. The ~~remeasurements also reflect~~remeasurement reflects an actual ~~returns~~return on pension plan assets of ~~6.30% (nine-month~~(5.20)% (three-month rate) relative to our expected long-term rate of 6.75% (annual rate). Similar to 2022, in 2021 we were required to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each quarter end.

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 is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.”


		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021
Pension cost:	Pension cost:									Pension cost:
Service cost – benefits earned during the period	Service cost – benefits earned during the period	$	241	$	257	$	723	$	772	Service cost – benefits earned during the period	$	183	$	254
Interest cost on projected benefit obligation	Interest cost on projected benefit obligation	321		421		951		1,265		Interest cost on projected benefit obligation	320		291
Expected return on assets	Expected return on assets	(890)		(888)		(2,617)		(2,667)		Expected return on assets	(868)		(877)
Amortization of prior service credit	Amortization of prior service credit	(36)		(28)		(108)		(85)		Amortization of prior service credit	(33)		(36)
Net pension (credit) cost before remeasurement										Net pension (credit) cost before remeasurement	(398)		(368)
Actuarial (gain) loss	Actuarial (gain) loss	(374)		—		(3,021)		—		Actuarial (gain) loss	(1,012)		(2,844)
Net pension (credit) cost	Net pension (credit) cost	$	(738)	$	(238)	$	(4,072)	$	(715)	Net pension (credit) cost	$	(1,410)	$	(3,212)

Postretirement cost:	Postretirement cost:									Postretirement cost:
Service cost – benefits earned during the period	Service cost – benefits earned during the period	$	11	$	14	$	34	$	40	Service cost – benefits earned during the period	$	9	$	11
Interest cost on accumulated postretirement benefit obligation	Interest cost on accumulated postretirement benefit obligation	53		104		158		312		Interest cost on accumulated postretirement benefit obligation	63		53
Expected return on assets	Expected return on assets	(38)		(44)		(114)		(133)		Expected return on assets	(32)		(38)
Amortization of prior service credit	Amortization of prior service credit	(634)		(583)		(1,903)		(1,747)		Amortization of prior service credit	(582)		(634)
Net postretirement (credit) cost	Net postretirement (credit) cost	$	(608)	$	(509)	$	(1,825)	$	(1,528)	Net postretirement (credit) cost	$	(542)	$	(608)
Combined net pension and postretirement (credit) cost	Combined net pension and postretirement (credit) cost	$	(1,346)	$	(747)	$	(5,897)	$	(2,243)	Combined net pension and postretirement (credit) cost	$	(1,952)	$	(3,820)

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. For the first quarter ended 2022 and 2021, net supplemental pension benefits costs not included in the table above were $12, respectively. During the first quarter of 2022, we also recorded an actuarial gain of $41.

2320

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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 $12 and $19 in the third quarter and $35 and $57 for the first nine months of 2021 and 2020, respectively.

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, ~~2020.~~2021.

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, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Carrying		Fair		Carrying		Fair			Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value			Amount		Value		Amount		Value
Notes and debentures1	Notes and debentures1	$	170,841	$	197,467	$	155,209	$	187,224	Notes and debentures1	$	197,829	$	209,516	$	169,147	$	194,891
Commercial paper	Commercial paper	6,576		6,576		—		—		Commercial paper	8,069		8,069		6,586		6,586

Investment securities2	Investment securities2	3,282		3,282		3,249		3,249		Investment securities2	3,201		3,201		3,374		3,374
1Includes credit agreement borrowings. Excludes note payable to DIRECTV. Amounts at September 30, 2021 exclude $32 associated with Vrio, which were classified as held-for-sale (see Note 8).
1Includes credit agreement borrowings. Excludes note payable to DIRECTV.										1Includes credit agreement borrowings. Excludes note payable to DIRECTV.
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.

2421

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities,” “Prepaid and other current assets” and “Accounts payable and accrued liabilities” on our consolidated balance sheets.


		September 30, 2021									March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Equity Securities	Equity Securities									Equity Securities
Domestic equities	Domestic equities	$	1,137	$	—	$	—	$	1,137	Domestic equities	$	1,198	$	—	$	—	$	1,198
International equities	International equities	212		—		—		212		International equities	218		—		—		218
Fixed income equities	Fixed income equities	231		—		—		231		Fixed income equities	216		—		—		216
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities	—		1,426		—		1,426		Available-for-Sale Debt Securities	—		1,285		—		1,285
Asset Derivatives	Asset Derivatives									Asset Derivatives

Cross-currency swaps	Cross-currency swaps	—		430		—		430		Cross-currency swaps	—		162		—		162

Foreign exchange contracts	Foreign exchange contracts	—		2		—		2		Foreign exchange contracts	—		2		—		2
Liability Derivatives	Liability Derivatives									Liability Derivatives

Cross-currency swaps	Cross-currency swaps	—		(3,000)		—		(3,000)		Cross-currency swaps	—		(3,680)		—		(3,680)

Foreign exchange contracts	Foreign exchange contracts	—		(36)		—		(36)		Foreign exchange contracts	—		(25)		—		(25)


		December 31, 2020									December 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Equity Securities	Equity Securities									Equity Securities
Domestic equities	Domestic equities	$	1,010	$	—	$	—	$	1,010	Domestic equities	$	1,256	$	—	$	—	$	1,256
International equities	International equities	180		—		—		180		International equities	227		—		—		227
Fixed income equities	Fixed income equities	236		—		—		236		Fixed income equities	230		—		—		230
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities	—		1,479		—		1,479		Available-for-Sale Debt Securities	—		1,384		—		1,384
Asset Derivatives	Asset Derivatives									Asset Derivatives

Cross-currency swaps	Cross-currency swaps	—		1,721		—		1,721		Cross-currency swaps	—		211		—		211

Foreign exchange contracts	Foreign exchange contracts	—		6		—		6		Foreign exchange contracts	—		8		—		8
Liability Derivatives	Liability Derivatives									Liability Derivatives

Cross-currency swaps	Cross-currency swaps	—		(1,814)		—		(1,814)		Cross-currency swaps	—		(3,170)		—		(3,170)

Foreign exchange contracts	Foreign exchange contracts	—		(9)		—		(9)		Foreign exchange contracts	—		(41)		—		(41)

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.

2522

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Total gains (losses) recognized on equity securities	Total gains (losses) recognized on equity securities	$	9	$	64	$	151	$	22	Total gains (losses) recognized on equity securities		$	(95)	$	55
Gains (Losses) recognized on equity securities sold	Gains (Losses) recognized on equity securities sold	(2)		—		(2)		(24)		Gains (Losses) recognized on equity securities sold		(7)		—
Unrealized gains (losses) recognized on equity securities held at end of period	Unrealized gains (losses) recognized on equity securities held at end of period	$	11	$	64	$	153	$	46	Unrealized gains (losses) recognized on equity securities held at end of period		$	(88)	$	55

At ~~September 30, 2021,~~March 31, 2022, available-for-sale debt securities totaling ~~$1,426~~$1,285 have maturities as follows - less than one year: ~~$65;~~$61; one to three years: ~~$209;~~$161; three to five years: ~~$185;~~$201; five or more years: ~~$967.~~$862.

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 “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 cross-currency swaps as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt. For these hedges we have elected to exclude the change in fair value of the cross-currency swap related to both time value and cross-currency basis spread from the assessment of hedge effectiveness.

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, including the earnings impact of excluded components. In instances where we have elected to exclude components from the assessment of hedge effectiveness 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 over the life of the hedging instrument. 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. Except 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 ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 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.

2623

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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.

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 ~~$77~~$70 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.

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 sheets. Net gains on net investment hedges recognized in accumulated OCI in the ~~third~~first quarter of 2022 were ~~$40 and net gains for the first nine months of 2021 were $91.~~$44.

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 ~~September 30, 2021,~~March 31, 2022, we had posted collateral of ~~$116~~$606 (a deposit asset) and held collateral of ~~$189~~$23 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s before the final collateral exchange in ~~September,~~March, we would have been required to post additional collateral of ~~$54.~~$62. If AT&T’s credit rating had been downgraded three 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 ~~$2,536.~~$3,373. At December 31, ~~2020,~~2021, we had posted collateral of ~~$53~~$135 (a deposit asset) and held collateral of ~~$694~~$7 (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,			March 31,		December 31,
		2021		2020			2022		2021

Cross-currency swaps	Cross-currency swaps	$	42,085	$	40,745	Cross-currency swaps	$	40,737	$	40,737

Foreign exchange contracts	Foreign exchange contracts	191		90		Foreign exchange contracts	213		30
Total	Total	$	42,276	$	40,835	Total	$	40,950	$	40,767

Following are the related hedged items affecting our financial position and performance:


Effect of Derivatives on the Consolidated Statements of Income	Effect of Derivatives on the Consolidated Statements of Income									Effect of Derivatives on the Consolidated Statements of Income
		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
Fair Value Hedging Relationships	Fair Value Hedging Relationships	2021		2020		2021		2020		Fair Value Hedging Relationships		2022		2021
Interest rate swaps (Interest expense):	Interest rate swaps (Interest expense):									Interest rate swaps (Interest expense):
Gain (Loss) on interest rate swaps	Gain (Loss) on interest rate swaps	$	(1)	$	(1)	$	(3)	$	(5)	Gain (Loss) on interest rate swaps		$	(1)	$	(1)
Gain (Loss) on long-term debt	Gain (Loss) on long-term debt	1		1		3		5		Gain (Loss) on long-term debt		1		1
Cross-currency swaps:	Cross-currency swaps:									Cross-currency swaps:
Gain (Loss) on cross-currency swaps	Gain (Loss) on cross-currency swaps	(34)		—		(66)		—		Gain (Loss) on cross-currency swaps		(37)		(48)
Gain (Loss) on long-term debt	Gain (Loss) on long-term debt	34		—		66		—		Gain (Loss) on long-term debt		37		48
Gain (Loss) recognized in accumulated OCI	Gain (Loss) recognized in accumulated OCI	2		—		3		—		Gain (Loss) recognized in accumulated OCI		9		(1)

In addition, the net swap settlements that accrued and settled in the periods above were offset against “Interest expense.”

2724

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
Cash Flow Hedging Relationships	Cash Flow Hedging Relationships	2021		2020		2021		2020		Cash Flow Hedging Relationships		2022		2021
Cross-currency swaps:	Cross-currency swaps:									Cross-currency swaps:
Gain (Loss) recognized in accumulated OCI	Gain (Loss) recognized in accumulated OCI	$	(237)	$	1,079	$	(742)	$	(2,091)	Gain (Loss) recognized in accumulated OCI		$	315	$	644
Foreign exchange contracts:	Foreign exchange contracts:									Foreign exchange contracts:
Gain (Loss) recognized in accumulated OCI	Gain (Loss) recognized in accumulated OCI	(14)		10		(14)		(1)		Gain (Loss) recognized in accumulated OCI		3		4
Other income (expense) - net reclassified from accumulated OCI into income	Other income (expense) - net reclassified from accumulated OCI into income	7		(9)		(3)		4		Other income (expense) - net reclassified from accumulated OCI into income		1		(5)
Interest rate locks:	Interest rate locks:									Interest rate locks:
Gain (Loss) recognized in accumulated OCI	Gain (Loss) recognized in accumulated OCI	—		—		—		(648)		Gain (Loss) recognized in accumulated OCI		—		—
Interest income (expense) reclassified from accumulated OCI into income	Interest income (expense) reclassified from accumulated OCI into income	(22)		(25)		(70)		(59)		Interest income (expense) reclassified from accumulated OCI into income		(20)		(25)

NOTE 8. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS

Acquisitions

Spectrum Auction On ~~February 24, 2021,~~January 14, 2022, the Federal Communications Commission (FCC) announced that ~~AT&T was~~we were the winning bidder for 1,624 3.45 GHz licenses in Auction 110. We provided the FCC with an upfront deposit of $123 in the third quarter of 2021 and paid the remaining $8,956 in the first quarter of 2022, for a total of $9,079. We funded the purchase price using cash and short-term investments. The amounts deposited toward the acquisition of the licenses and capitalized interest were reported as “Deposits on Wireless Licenses” on our consolidated balance sheet as of March 31, 2022. We expect to receive the licenses in the second quarter of 2022.

In February 2021, the FCC announced that we were the winning bidder for 1,621 C-Band ~~licenses, comprised of a total of 80 MHz nationwide, including 40 MHz in Phase I.~~licenses. We provided to the FCC an upfront deposit of $550 in 2020 and cash payments totaling $22,856 in the first quarter of 2021, for a total of ~~$23,406. We~~$23,406 as of March 31, 2022. The licenses were received ~~the licenses~~ in July 2021 and classified the auction deposits, related capitalized interest and billed relocation costs as “Licenses - Net” on our September 30, 2021 consolidated balance sheet. 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 are responsible for approximately $1,000 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators, of which $650 was billed in the third quarter and paid in the fourth quarter of 2021.

Cash paid, including spectrum deposits (net of refunds), capitalized interest, and any payments for incentive and relocation costs are included in “Acquisitions, net of cash acquired” on our consolidated statements of cash flows. Interest is capitalized until the spectrum is ready for its intended use. ~~Funding for the purchase price of the spectrum included a combination of cash on hand and short-term investments, as well as short- and long-term debt.~~

~~Dispositions~~

~~Video Business~~ 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, with TPG having tie-breaking authority on certain key decisions.

In the third quarter, we received approximately $7,170 in cash from DIRECTV ($7,600, net of $430 cash on hand) and transferred $195 of DIRECTV debt. Approximately $1,800 of the cash received is reported as cash received from financing activities in our consolidated statement of cash flows, as it relates to a note payable to DIRECTV, for which payment is tied to our agreement to cover net losses under the remaining term of the NFL SUNDAY TICKET contract up to a cap of $2,100 over the remaining period of the contract. The remainder of the net proceeds is reported as cash from investing activities. This transaction did not result in a material gain or loss.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~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, included the assets in “Prepaid and other current assets,” and the related liabilities in “Accounts payable and accrued liabilities,” on our consolidated balance sheet, up until the close of the transaction. The held-for-sale classification also resulted in ceasing depreciation and amortization on the designated assets.

~~The assets and liabilities of the Video operations, transferred to DIRECTV upon close of the transaction, were as follows:~~

~~Current assets~~

~~4,893~~

~~Property, plant and equipment - net~~

~~2,673~~

~~Licenses, net~~

~~5,798~~

~~Other intangible assets, net~~

~~1,634~~

~~Other assets~~

~~1,787~~

~~Total Video assets~~

~~16,785~~

~~Current liabilities~~

~~4,267~~

~~Long-term debt~~

~~206~~

~~Other noncurrent liabilities~~

~~343~~

~~Total Video liabilities~~

~~4,816~~

~~Otter Media~~ During the third quarter of 2021, we disposed of substantially all of the assets of Otter Media. We received approximately $1,540 in cash and removed approximately $1,200 of goodwill associated with these assets. The dispositions did not result in a material gain or loss.

~~Playdemic Ltd.~~ On September 20, 2021, we sold WarnerMedia’s mobile games app studio, Playdemic Ltd. (Playdemic) for approximately $1,400 in cash and recognized a pre-tax gain of $766 in “Other income (expense) - net,” on our consolidated statement of income. Approximately $600 of goodwill was removed related to this business. Playdemic was excluded from the pending WarnerMedia/Discovery transaction.

Pending Dispositions

WarnerMedia On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, ~~subject to~~except for certain ~~exceptions,~~retained assets such as Xandr, with a subsidiary of Discovery ~~Inc. (Discovery). The agreement is structured as~~in a Reverse Morris Trust ~~transaction, under~~transaction. On April 8, 2022, we completed the separation and distribution of our WarnerMedia business, and merger of Spinco, an AT&T subsidiary formed to hold the WarnerMedia business, with a subsidiary of Discovery, Inc., which ~~WarnerMedia will be distributed~~was renamed Warner Bros. Discovery, Inc. Each AT&T shareholder was entitled to ~~AT&T’s shareholders via a pro rata dividend, an exchange offer, or a combination~~receive 0.241917 shares of ~~both, followed by its combination with Discovery. The transaction is expected to be tax-free to~~WBD common stock for each share of AT&T ~~and AT&T’s shareholders. AT&T will receive approximately $43,000 (subject to adjustment) in a combination~~common stock held as of ~~cash, debt securities, and WarnerMedia’s retention of certain debt. AT&T’s shareholders will receive stock representing~~the record date, which represented approximately 71% of WBD. In connection with and in accordance with the ~~new company; Discovery shareholders will own approximately 29%~~terms of the ~~new company. The~~ transaction, ~~is expected~~prior to ~~close in mid-2022, subject to approval by Discovery shareholders~~the distribution and ~~customary closing conditions, including receipt of regulatory approvals. No vote is required by~~merger, AT&T ~~shareholders.~~received approximately $40,400, which includes $38,800 of cash and $1,600 of debt retained by WarnerMedia. At March 31, 2022, the WarnerMedia business did not meet the criteria for held-for-sale and, accordingly, its financial results are included in continuing operations for all periods presented herein.

~~The merger agreement contains certain customary termination rights~~In preparation for the close of the WarnerMedia/Discovery transaction, in March 2022, Spinco issued $30,000 of Spinco senior notes with a weighted-average interest rate of 4.5% and maturities ranging from 2024 to 2062. These notes conveyed to WBD upon close of the transaction. Our cash balance at March 31, 2022, includes the proceeds of this issuance that were retained by AT&T ~~and Discovery, including, without limitation, a right for either party to terminate if~~in connection with the ~~transaction is not completed on or before July 15, 2023. Termination fees under specified circumstances will require Discovery to pay AT&T $720 or AT&T to pay Discovery $1,770.~~

~~Magallanes, Inc. (Spinco), a subsidiary~~close 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 transaction. In connection with the debt issuances, the aggregate commitment amount under the ~~Bridge Loan~~existing Spinco commitment letter (Bridge Loan) was reduced from $31,500 to ~~$31,500. There have been~~$1,687, with 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~~amounts outstanding as of ~~the cash distribution to AT&T in connection with the transaction.~~March 31, 2022.

2925

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

See Note 13 for additional information on the WarnerMedia/Discovery transaction.

~~Vrio~~ XandrOn ~~July~~December 21, 2021, we entered into an agreement to sell the marketplace component of Xandr, primarily representing the AppNexus business, to Microsoft, which is expected to close in 2022, subject to customary regulatory approvals. This advertising business is included in our ~~Latin America video operations, Vrio,~~WarnerMedia segment and is excluded from the WarnerMedia/Discovery transaction. We applied held-for-sale accounting treatment to ~~Grupo Werthein. In~~the related assets and liabilities of this businessat December 31, 2021 and March 31, 2022, resulting in approximately $550 of goodwill and other intangible assets and $405 of accounts receivable being reclassified to “Prepaid and other current assets” as of March 31, 2022. Beginning with the second quarter of ~~2021, we classified the Vrio disposal group~~2022, Xandr will be reflected in our financial statements 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 September 30, 2021, our consolidated balance sheet included $853 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 $2,819 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.discontinued operations.

~~The transaction is expected to close during the fourth quarter of 2021, 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.~~receivables, which convey to WBD following the WarnerMedia/Discovery transaction. 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, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Equipment				Equipment					Equipment				Equipment
		Installment		Revolving		Installment		Revolving			Installment		Revolving		Installment		Revolving
Gross receivables:	Gross receivables:	$	3,671	$	3,371	$	5,565	$	3,909	Gross receivables:	$	3,616	$	3,359	$	4,361	$	3,527
Balance sheet classification	Balance sheet classification									Balance sheet classification
Accounts receivable	Accounts receivable									Accounts receivable
Notes receivable	Notes receivable	1,746		—		2,716		—		Notes receivable	1,689		—		1,846		—
Trade receivables	Trade receivables	438		3,163		554		3,715		Trade receivables	465		3,157		606		3,337
Other Assets	Other Assets									Other Assets
Noncurrent notes and trade receivables	Noncurrent notes and trade receivables	1,487		208		2,295		194		Noncurrent notes and trade receivables	1,462		202		1,909		190

Outstanding portfolio of receivables derecognized from our consolidated balance sheets	Outstanding portfolio of receivables derecognized from our consolidated balance sheets	9,380		5,562		7,827		5,300		Outstanding portfolio of receivables derecognized from our consolidated balance sheets	10,645		6,172		9,767		6,280
Cash proceeds received, net of remittances1	Cash proceeds received, net of remittances1	6,588		5,562		5,646		5,300		Cash proceeds received, net of remittances1	7,670		6,172		6,644		6,280
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.

3026

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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.

The following table sets forth a summary of equipment installment receivables sold under this program during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Gross receivables sold	Gross receivables sold	$	2,123	$	1,624	$	8,067	$	5,497	Gross receivables sold		$	3,601	$	3,935
Net receivables sold1	Net receivables sold1	2,069		1,578		7,858		5,300		Net receivables sold1		3,478		3,826
Cash proceeds received	Cash proceeds received	1,981		1,387		7,231		4,562		Cash proceeds received		3,316		3,519
Deferred purchase price recorded	Deferred purchase price recorded	158		226		864		811		Deferred purchase price recorded		245		414
Guarantee obligation recorded	Guarantee obligation recorded	94		55		321		126		Guarantee obligation recorded		152		146
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 and 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Fair value of repurchased receivables	Fair value of repurchased receivables	$	471	$	373	$	1,094	$	946	Fair value of repurchased receivables		$	905	$	273
Carrying value of deferred purchase price	Carrying value of deferred purchase price	440		373		1,019		931		Carrying value of deferred purchase price		902		253
Gain on repurchases1	Gain on repurchases1	$	31	$	—	$	75	$	15	Gain on repurchases1		$	3	$	20
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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our deferred purchase price receivable was ~~$2,797~~$3,066 and ~~$1,991,~~$3,177, respectively, of which ~~$1,757~~$1,984 and ~~$1,476~~$2,123 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$352~~$432 and ~~$228,~~$371, respectively, of which ~~$124~~$140 and ~~$161~~$101 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

We have a revolving agreement to transfer up to ~~$6,000~~$6,680 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. This agreement is subject to renewal on an annual basis and the transfer limit may be expanded or reduced from time to 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 ~~$3,371~~$3,359 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 subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to

3127

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

~~obligation is 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 revolving credit agreement conveyed to WBD upon close of the WarnerMedia/Discovery transaction.

The fair value measurement used for the obligation is considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

The following table sets forth a summary of receivables sold:


		Three months ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020				2022		2021
Gross receivables sold/cash proceeds received1	Gross receivables sold/cash proceeds received1	$	4,472	$	3,563	$	14,813	$	11,590	Gross receivables sold/cash proceeds received1		$	4,178	$	5,204
Total collections under revolving agreement2	Total collections under revolving agreement2	4,631		3,763		14,381		10,790		Total collections under revolving agreement2		3,856		4,749
Receivables repurchased	Receivables repurchased	170		—		170		—		Receivables repurchased		430		—

Net cash proceeds received (paid)		$	(329)	$	(200)	$	262	$	800
Net cash proceeds (paid) received										Net cash proceeds (paid) received		$	(108)	$	455

Net receivables sold3	Net receivables sold3	$	4,301	$	3,553	$	14,558	$	11,510	Net receivables sold3		$	3,728	$	5,125
Obligations recorded (reversed)		(60)		58		(49)		172
1Includes initial sales of receivables of $0 for each of the three months and $700 and $1,000 for the nine months ended September 30, 2021 and 2020, respectively.
2Includes collections of $159 and $200 for the three months and $268 and $200 for the nine months ended September 30, 2021 and 2020, respectively, that were not reinvested under the revolving agreement.
Obligations recorded										Obligations recorded		66		142
1Includes initial sales of receivables of $0 and $700 for the three months ended March 31, 2022 and 2021, respectively.										1Includes initial sales of receivables of $0 and $700 for the three months ended March 31, 2022 and 2021, respectively.
2Includes collections of $108 and $245 for the three months ended March 31, 2022 and 2021, respectively, that were not reinvested under the revolving agreement.										2Includes collections of $108 and $245 for the three months ended March 31, 2022 and 2021, respectively, that were not reinvested under the revolving agreement.
3Receivables net of allowance, return and incentive reserves and imputed interest.	3Receivables net of allowance, return and incentive reserves and imputed interest.									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 ended				Nine months ended					Three months ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021
Operating lease cost	Operating lease cost	$	1,454	$	1,546	$	4,343	$	4,372	Operating lease cost	$	1,448	$	1,458

Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	$	59	$	76	$	198	$	216	Amortization of right-of-use assets	$	47	$	69
Interest on lease obligation	Interest on lease obligation	43		39		123		116		Interest on lease obligation	38		39
Total finance lease cost	Total finance lease cost	$	102	$	115	$	321	$	332	Total finance lease cost	$	85	$	108

3228

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table provides supplemental cash flows information related to leases:


		Nine months ended					Three months ended
		September 30,					March 31,
		2021		2020			2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Cash paid for amounts included in lease obligations:	Cash paid for amounts included in lease obligations:					Cash paid for amounts included in lease obligations:
Operating cash flows for operating leases	Operating cash flows for operating leases	$	3,754	$	3,651	Operating cash flows for operating leases	$	1,289	$	1,254
Supplemental Lease Cash Flow Disclosures	Supplemental Lease Cash Flow Disclosures					Supplemental Lease Cash Flow Disclosures
Operating lease right-of-use assets obtained in exchange for new operating lease obligations	Operating lease right-of-use assets obtained in exchange for new operating lease obligations	3,543		3,908		Operating lease right-of-use assets obtained in exchange for new operating lease obligations	897		1,050

The following tables set forth supplemental balance sheet information related to leases:


		September 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
Operating Leases	Operating Leases							Operating Leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	24,341		$	24,714		Operating lease right-of-use assets	$	23,941		$	24,180

Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	3,675		$	3,537		Accounts payable and accrued liabilities	$	3,694		$	3,706
Operating lease obligation	Operating lease obligation	21,510			22,202			Operating lease obligation	20,917			21,261
Total operating lease obligation	Total operating lease obligation	$	25,185		$	25,739		Total operating lease obligation	$	24,611		$	24,967
Finance Leases	Finance Leases							Finance Leases
Property, plant and equipment, at cost	Property, plant and equipment, at cost	$	2,774		$	3,586		Property, plant and equipment, at cost	$	2,666		$	2,609
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(1,166)			(1,361)			Accumulated depreciation and amortization	(1,158)			(1,120)
Property, plant and equipment, net	Property, plant and equipment, net	$	1,608		$	2,225		Property, plant and equipment, net	$	1,508		$	1,489

Current portion of long-term debt	Current portion of long-term debt	$	169		$	189		Current portion of long-term debt	$	148		$	137
Long-term debt	Long-term debt	1,574			1,847			Long-term debt	1,509			1,484
Total finance lease obligation	Total finance lease obligation	$	1,743		$	2,036		Total finance lease obligation	$	1,657		$	1,621

		September 30,							March 31,
		2021			2020				2022			2021
Weighted-Average Remaining Lease Term (years)	Weighted-Average Remaining Lease Term (years)							Weighted-Average Remaining Lease Term (years)
Operating leases	Operating leases	8.4			8.5			Operating leases	8.2			8.4
Finance leases	Finance leases	8.5			10.1			Finance leases	8.0			9.8

Weighted-Average Discount Rate	Weighted-Average Discount Rate							Weighted-Average Discount Rate
Operating leases	Operating leases	3.8		%	4.1		%	Operating leases	3.7		%	4.0		%
Finance leases	Finance leases	8.0		%	8.1		%	Finance leases	7.8		%	8.0		%

3329

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table provides the expected future minimum maturities of lease obligations:


At September 30, 2021		Operating		Finance
At March 31, 2022						At March 31, 2022	Operating		Finance
		Leases		Leases			Leases		Leases
Remainder of 2021		$	1,252	$	84
2022		4,897		340
Remainder of 2022						Remainder of 2022	$	3,703	$	232
2023	2023	4,467		315		2023	4,584		295
2024	2024	3,931		290		2024	4,059		268
2025	2025	3,211		281		2025	3,317		256
2026						2026	2,628		254
Thereafter	Thereafter	12,734		1,466		Thereafter	11,121		1,060
Total lease payments	Total lease payments	30,492		2,776		Total lease payments	29,412		2,365
Less: imputed interest	Less: imputed interest	(5,307)		(1,033)		Less: imputed interest	(4,801)		(708)
Total	Total	$	25,185	$	1,743	Total	$	24,611	$	1,657

NOTE 11. ~~INVESTMENT IN AND~~ TRANSACTIONS WITH DIRECTV

On July 31, 2021, we closed our transaction with TPG to form a new company named ~~DIRECTV (see Note 8).~~DIRECTV. The transaction resulted in our deconsolidation of the Video ~~Business, with DIRECTV being considered a variable interest entity for accounting purposes.~~business. As DIRECTV is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions, most significantly the appointment and removal of the CEO, we have concluded that we are not the primary beneficiary of DIRECTV. ~~As a result, effective~~Effective August 1, 2021, we ~~accounted~~began accounting for our ~~investments~~investment in DIRECTV under the equity method and recorded our share of DIRECTV earnings as equity in net income of affiliates, aswith DIRECTV is considered a related party upon deconsolidation. Our share of net income or loss may differ from the stated ownership percentage interest of DIRECTV as the terms of the arrangement prescribe substantive non-proportionate cash distributions, both from operations and in liquidation, that are based on classes of interests held by investorsparty.. ~~In the event that DIRECTV records a loss, that loss will be allocated to ownership interests based on their seniority, beginning with the most subordinated interests.~~

Our investment in DIRECTV at September 30, 2021 was $6,883, based upon the initial fair value of the equity considerations on July 31, 2021 of $6,852 which was determined using a discounted cash flow model reflecting distribution rights and preference of the individual instruments. For the ~~two~~three months ended ~~September 30, 2021,~~ March 31, 2022, our share of DIRECTV’s earnings included in equity in net income of affiliates was ~~$157.~~$522. Cash distributions from DIRECTV in the ~~third~~first quarter totaled ~~$130 and were~~$1,837, with $522 classified as operating activities and $1,315 classified as investing activities in our consolidated statement of cash flows. Our investment in DIRECTV at March 31, 2022 was $4,228.

In addition to the assets and liabilities contributed to DIRECTV, ~~(see Note 8),~~at close we recorded total obligations of $2,100 to cover certain net losses under the NFL SUNDAY TICKET contract, of which $1,800 is in the form of a note payable to ~~DIRECTV (see Note 8).~~DIRECTV. During the ~~third~~first quarter of ~~2021,~~2022, cash payments to DIRECTV on the note totaled ~~$361~~$294 and were classified as financing activities in our consolidated statement of cash flows. Amounts due under the DIRECTV note were ~~$1,438~~$1,047 at ~~September 30, 2021.~~March 31, 2022.

~~Through our~~ WarnerMedia ~~properties, we license~~licenses content and programming and ~~provide~~provides advertising services to DIRECTV. Revenue recognized from DIRECTV, which was previously eliminated prior to the transaction with TPG, totaled approximately ~~$280~~$400 for the ~~two~~three months ended ~~September 30, 2021. We also provide DIRECTV with network transport for U-verse products and sales services under commercial arrangements for up to five years.~~

March 31, 2022

. Pursuant to a commercial agreement, WarnerMedia continues to sell DIRECTV’s advertising inventory under a revenue sharing agreement. WarnerMedia records amounts billed as advertising revenue and recognizes expense for DIRECTV’s revenue share, which was approximately ~~$200~~$280 for the ~~two~~three months ended ~~September 30, 2021.~~ March 31, 2022. These transactions are no longer related party transactions for AT&T following the close of the WarnerMedia/Discovery transaction (see Note 13).

We also provide DIRECTV with network transport for U-verse products and sales services under commercial arrangements for up to five years. Under separate transition services agreements, we provide DIRECTV certain operational support, including servicing of certain of their customer receivables for up to three years. For the ~~two~~three months ended ~~September 30, 2021,~~March 31, 2022, we billed DIRECTV approximately ~~$240~~$300 for these costs, which were recorded as a reduction to the operations and support expenses incurred and resulted in net retained costs to AT&T of approximately ~~$50~~$128 in the ~~third~~first quarter.

At ~~September 30, 2021,~~March 31, 2022, we had accounts receivable from DIRECTV of ~~$433~~$478 and accounts payable to DIRECTV of ~~$659.~~$335.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued~~

~~Dollars in millions except per share amounts~~

We are not committed, implicitly or explicitly to provide financial or other support, other than noted above, as our involvement with DIRECTV is limited to the carrying amount of the assets and liabilities recognized on our balance sheet.

AT&T INC.

MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

NOTE 12. 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.

The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets:


		September 30,				December 31,					March 31,				December 31,
		2021		2020		2020		2019			2022		2021		2021		2020
Cash and cash equivalents		$	21,270	$	9,758	$	9,740	$	12,130
Cash and cash equivalents1										Cash and cash equivalents1	$	38,565	$	11,342	$	21,169	$	9,740
Restricted cash in Prepaid and other current assets	Restricted cash in Prepaid and other current assets	2		2		9		69		Restricted cash in Prepaid and other current assets	2		2		3		9
Restricted cash in Other Assets	Restricted cash in Other Assets	133		89		121		96		Restricted cash in Other Assets	81		84		144		121
Cash and Cash Equivalents and Restricted Cash	Cash and Cash Equivalents and Restricted Cash	$	21,405	$	9,849	$	9,870	$	12,295	Cash and Cash Equivalents and Restricted Cash	$	38,648	$	11,428	$	21,316	$	9,870
1 Includes $29,813 of proceeds from the issuance of debt associated with the WarnerMedia/Discovery transaction (see Note 13).										1 Includes $29,813 of proceeds from the issuance of debt associated with the WarnerMedia/Discovery transaction (see Note 13).

The following table summarizes cash paid during the periods for interest and income ~~taxes and spectrum:~~taxes:

Consolidated Statements of Cash Flows Nine months ended
September 30,
Cash paid (received) during the period for: 2021 2020
Interest $ 6,079 $ 6,661
Income taxes, net of refunds 538 306
Spectrum acquisitions1
23,017 1,062
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:
Nine months ended
September 30,
Interest during construction: 2021 2020
Capital expenditures $ (132) $ (92)
Spectrum1
(516) —
Interest During Construction $ (648) $ (92)
1 Included in “Acquisitions, net of cash acquired” on our consolidated statement of cash flows.


	Three months ended
	March 31,
Cash paid (received) during the period for:	2022		2021
Interest	$	2,380	$	2,134
Income taxes, net of refunds	167		5


The following table summarizes capital expenditures:
	Three months ended
	March 31,
	2022		2021
Purchase of property and equipment	$	4,712	$	3,972
Interest during construction - capital expenditures1	36		61
Total Capital Expenditures	$	4,748	$	4,033

The following table summarizes acquisitions, net of cash acquired:
	Three months ended
	March 31,
	2022		2021
Business acquisitions	$	—	$	8
Spectrum acquisitions	8,956		22,876
Interest during construction - spectrum1	288		—
Total Acquisitions	$	9,244	$	22,884
1 Total capitalized interest was $324 and $61 for the three months ended March 31, 2022 and 2021, respectively.

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 ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recorded vendor financing commitments related to capital investments of approximately ~~$3,624~~$954 and ~~$3,148.~~

Total vendor financing payables included in our September 30, 2021 consolidated balance sheet were approximately $3,752, with $2,866 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within ~~two~~ ~~to three years (in “Other noncurrent liabilities”).~~$998, respectively.

3531

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

~~Debt Transactions~~ ~~At September 30, 2021,~~Total vendor financing payables included in our ~~debt obligations totaled $179,161. Our debt activity during~~March 31, 2022 consolidated balance sheet were approximately $4,374, with $3,303 due within one year (in “Accounts payable and accrued liabilities”) and the ~~nine months ended September 30, 2021 primarily consisted of the following:~~remainder predominantly due within two

First
Quarter Second
Quarter Third
Quarter Nine months ended
September 30, 2021
Net commercial paper borrowings $ 7,072 $ (513) $ (2) $ 6,557
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 1,461 — — 1,461
Rate of 0.00%
2021 Syndicated Term Loan 7,350 — — 7,350
BAML Bilateral Term Loan 2,000 — — 2,000
Private financing 750 — — 750
Other 636 — 835 1,471
Debt Issuances $ 18,197 $ — $ 835 $ 19,032
Repayments:
Private financing $ (649) $ — $ — $ (649)
Other (253) (253) (498) (1,004)
Repayments of long-term debt $ (902) $ (253) $ (498) $ (1,653)

1 ~~Includes credit agreement borrowings.~~ to five years (in “Other noncurrent liabilities”).

~~Credit Facilities~~

NOTE 13. SUBSEQUENT EVENTS

On ~~January 29,~~April 8, 2022, we completed the separation of the WarnerMedia business in a Reverse Morris Trust transaction, under which the WarnerMedia business was distributed to AT&T stockholders via a pro rata dividend, followed by the combination with a subsidiary of Discovery. In connection with and in accordance with the terms of the transaction, prior to the distribution and merger, AT&T received approximately $40,400, which includes $38,800 of cash and $1,600 of debt retained by WarnerMedia. The cash portion is subject to potential post close adjustments for certain items.

The WarnerMedia business, including amortization of intangible assets and other transactions costs, represents approximately 23% of AT&T operating revenues and 2% of AT&T operating income for the three months ended March 31, 2022. Beginning with our second quarterly report on Form 10-Q for the period ended June 30, 2022, the WarnerMedia business will be reflected in our historical financial statements as discontinued operations, including for periods up to the consummation of the WarnerMedia/Discovery transaction. For discontinued operations, we evaluated transactions completed during 2021 ~~we entered into~~that were components of AT&T’s single plan of a ~~$14,700~~strategic shift, including dispositions that may not have individually met the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic. These businesses will be reflected in our historical financial statements as discontinued operations, including for periods prior to the consummation of the WarnerMedia/Discovery transaction.

Financing Activities Related to Spinco

In preparation for close, on April 7, 2022, Spinco drew $10,000 on the Spinco Term Loan, ~~Credit Agreement (2021 Syndicated~~which conveyed to WBD. Total debt conveyed was approximately $41,600, which includes $1,600 of existing WarnerMedia debt, $30,000 of Spinco senior notes issued in March 2022 and the $10,000 Spinco Term ~~Loan), with Bank of America, N.A., as agent.~~ Loan.

Financing Activities Impacting Continuing Operations

On March ~~23, 2021,~~31, 2022, we ~~borrowed~~issued a notice for the redemption in full of all of the outstanding $1,962 aggregate principal amount of 3.000% Global Notes due June 30, 2022. We redeemed the notes on April 30, 2022 at 100% of the principal amount.

On April 11, 2022, we made an optional repayment of the full $750 outstanding pursuant to a private financing arrangement.

On April 11, 2022, we also issued a notice for the redemption in full of all of outstanding approximately $9,042 aggregate principal amount of various global notes due 2022 to 2026 with coupon rates ranging from 2.625% to 4.450% (Make-Whole Notes). The Make-Whole Notes will be redeemed on the redemption dates set forth in the notices of redemption, at “make whole” redemption prices to be calculated as set forth in the respective redemption notices.

On April 13, 2022, we paid off $7,350 outstanding under the 2021 Syndicated Term Loan and $2,000 outstanding under the ~~remaining $7,350 of lenders’ commitments were terminated. As of September 30, 2021, $7,350 was outstanding and is due on March 22, 2022.~~

~~In March 2021, we entered into and drew on a $2,000 term loan credit agreement (BAML~~BAML Bilateral Term ~~Loan) consisting of (i) a 0.75 year $1,000 facility due December 31, 2021 (BAML Tranche A Facility),~~Loan and ~~(ii) a 1.75 year $1,000 facility due December 31, 2022 (BAML Tranche B Facility), with Bank of America, N.A., as agent. At September 30, 2021, $2,000 was outstanding under these~~terminated the facilities.

3632

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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. Our comparative results are impacted by the July 2021 separation of our Video business and the November 2021 separation of Vrio. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes).

On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV Entertainment Holdings, LLC (DIRECTV). With the close of the transaction, we separated our Video business, comprised of our U.S. video operations, and began accounting for our investment in DIRECTV under the equity method. (See Note 8)

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.

InOn April 8, 2022, we closed on our transaction to combine our WarnerMedia segment, except for certain retained assets such as Xandr, (WarnerMedia business) with a subsidiary of Discovery, Inc (Discovery). With 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~~separation 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~~distribution of WarnerMedia, the WarnerMedia business will meet the criteria for discontinued operations for our second-quarter 2022 reporting. For discontinued operations, we evaluated transactions completed during 2021 that were components of AT&T’s single plan of a strategic shift, including dispositions that may not have individually met the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic Ltd. These businesses will be reflected in our historical financial statements as ~~one integrated organization.~~discontinued operations, including for periods prior to the consummation of the WarnerMedia/Discovery transaction.

Third Quarter Nine-Month Period
Percent Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Communications $ 28,218 $ 27,195 3.8 % $ 84,524 $ 80,479 5.0 %
WarnerMedia 8,442 7,395 14.2 25,759 21,888 17.7
Latin America 1,480 1,396 6.0 4,291 4,218 1.7
Corporate 278 628 (55.7) 1,065 1,751 (39.2)
Video 2,149 7,014 (69.4) 15,513 21,442 (27.7)
Eliminations and consolidation (645) (1,288) 49.9 (3,246) (3,709) 12.5
AT&T Operating Revenues 39,922 42,340 (5.7) 127,906 126,069 1.5
Operating Contribution
Communications 7,123 7,064 0.8 21,828 21,953 (0.6)
WarnerMedia 1,935 1,755 10.3 5,704 5,681 0.4
Latin America (25) (177) 85.9 (350) (562) 37.7
Segment Operating Contribution $ 9,033 $ 8,642 4.5 % $ 27,182 $ 27,072 0.4 %

~~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.~~

•~~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.~~


	First Quarter
						Percent
		2022		2021		Change
Operating Revenues
Communications		$	28,876	$	28,178	2.5	%
WarnerMedia		8,741		8,526		2.5
Latin America		690		1,374		(49.8)
Corporate and Other:
Corporate		130		164		(20.7)
Video		—		6,725		—


Held-for-sale and other reclassifications		29		262		(88.9)
Eliminations and consolidation		(361)		(1,290)		72.0
AT&T Operating Revenues		38,105		43,939		(13.3)

Operating Contribution
Communications		7,029		7,431		(5.4)
WarnerMedia		1,306		2,030		(35.7)
Latin America		(102)		(173)		41.0
Segment Operating Contribution		8,233		9,288		(11.4)
Corporate		(571)		(275)		—
Video		522		901		(42.1)



Held-for-sale and other reclassifications		4		9		(55.6)
Reclassification of prior service credits		(617)		(669)		7.8
Merger and Significant Items		(1,429)		(1,192)		(19.9)
Eliminations and consolidations		—		(349)		—
AT&T Operating Contribution		$	6,142	$	7,713	(20.4)	%

3733

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

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.

•Business Wireline provides advanced ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers.

•Consumer Wireline provides broadband services, including fiber connections that now provide our multi-gig services to residential customers. Consumer Wireline also provides legacy telephony voice communication services.

The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. WarnerMedia content is distributed through basic networks, Direct-to-Consumer (DTC) or theatrical, TV content and games licensing. Segment results also include Xandr ~~advertising~~advertising. On April 8, 2022, we completed the separation of our WarnerMedia business, which excluded certain retained assets such as Xandr, with a subsidiary of Discovery by distribution of AT&T stockholders via a pro rata dividend. On December 21, 2021, we entered into an agreement to sell the marketplace component of Xandr to Microsoft Corporation (Microsoft). (See Notes 8 and ~~Otter Media Holdings (Otter Media). We disposed of substantially all of the Otter Media assets in the third quarter of 2021 (see Note 8).~~13)

The Latin America segment provides ~~entertainment and~~ wireless services ~~outside~~and equipment in Mexico, and prior to the November 2021 disposition 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~~

In the first quarter of 2022, we reclassified into "Corporate" certain administrative costs borne by AT&T where the business units do not influence decision making to conform with the current period presentation. This recast increased Corporate operations and ~~equipment to customers~~support expenses by approximately $100 in ~~Mexico.~~the first quarter of 2021, with a total of $270 for full-year 2021. Correspondingly, this recast lowered administrative expenses at AT&T’s Communications operations, Video and WarnerMedia, with no change on a consolidated basis.

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 Quarter Nine-Month Period
Percent Percent
2021 2020 Change 2021 2020 Change
Operating Revenues
Service $ 34,843 $ 37,782 (7.8) % $ 112,303 $ 113,716 (1.2) %
Equipment 5,079 4,558 11.4 15,603 12,353 26.3
Total Operating Revenues 39,922 42,340 (5.7) 127,906 126,069 1.5
Operating expenses
Operations and support 27,194 29,178 (6.8) 92,678 87,382 6.1
Depreciation and amortization 5,619 7,030 (20.1) 17,189 21,537 (20.2)
Total Operating Expenses 32,813 36,208 (9.4) 109,867 108,919 0.9
Operating Income 7,109 6,132 15.9 18,039 17,150 5.2
Interest expense 1,667 1,972 (15.5) 5,221 6,031 (13.4)
Equity in net income (loss) of affiliates 91 5 — 184 (11) —
Other income (expense) - net 2,279 (231) — 7,499 1,589 —
Income Before Income Taxes 7,812 3,934 98.6 20,501 12,697 61.5
Net Income 6,273 3,168 98.0 16,089 9,694 66.0
Net Income Attributable to AT&T 5,918 2,816 — 15,038 8,707 72.7
Net Income Attributable to Common
Stock
$ 5,868 $ 2,762 — % $ 14,882 $ 8,569 73.7 %

~~Operating revenues~~ decreased in the third quarter and increased in the first nine months of 2021. The revenue decrease in the third quarter reflects our July 31, 2021 separation of the U.S. video business and lower Business Wireline revenues due in part to higher demand for pandemic-related connectivity in the prior-year. Partially offsetting these declines were Mobility service and equipment revenue growth and gains in broadband service in our Communications segment and higher content and Direct-to-Consumer (DTC) subscription revenues in our WarnerMedia segment.

The increase for the first nine months was driven by higher Mobility equipment and service revenues and gains in broadband service in our Communications segment; higher DTC subscription, and content revenues in our WarnerMedia segment; and growth in Mexico wireless operations from favorable foreign exchange impacts. Partially offsetting the increases was the loss of revenue resulting from the separation of our U.S. video business in July and the sale of our wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands, which were sold in the fourth quarter of 2020.


	First Quarter
						Percent
		2022		2021		Change
Operating Revenues
Service		$	32,392	$	38,504	(15.9)	%
Equipment		5,713		5,435		5.1
Total Operating Revenues		38,105		43,939		(13.3)

Operating expenses
Operations and support		26,925		30,469		(11.6)
Depreciation and amortization		5,539		5,809		(4.6)
Total Operating Expenses		32,464		36,278		(10.5)
Operating Income		5,641		7,661		(26.4)
Interest expense		1,722		1,870		(7.9)
Equity in net income (loss) of affiliates		501		52		—
Other income (expense) - net		2,187		4,221		(48.2)
Income Before Income Taxes		6,607		10,064		(34.4)
Net Income		5,164		7,942		(35.0)
Net Income Attributable to AT&T		4,810		7,550		(36.3)
Net Income Attributable to Common Stock		$	4,762	$	7,500	(36.5)	%

3834

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

~~Operations and support expenses~~Operating revenues decreased in the ~~third~~first quarter ~~and increased in~~of 2022, reflecting the ~~first nine months of 2021. The expense decrease in the third quarter reflects our~~ July 31, 2021 separation of the U.S. video business, the sale of our Vrio business unit in November 2021, and lower Business Wireline revenues driven by lower demand for legacy services and a strategic decision to deemphasize non-core services. Partially offsetting declines were higher Mobility service and equipment revenues and gains in broadband service in our Communications segment; higher subscription and content revenues in our WarnerMedia segment; and growth in Mexico wireless operations.

Operations and support expenses decreased in the ~~timing~~first quarter of 2022. The expense decrease reflects our aforementioned business divestitures. Expenses in the ~~NBA season in 2020,~~quarter also reflect updates to the expected economic lives of customer relationships, which extended the amortization period of deferred acquisition and fulfillment costs and reduced expenses approximately $135, with $60 recorded to Mobility, $35 to Business Wireline and $40 to Consumer Wireline. Declines were partially offset by increased domestic wireless equipment expense ~~including~~from subscriber growth and the sale of higher-priced smartphones, 3G network shutdown costs, and higher WarnerMedia ~~non-sports~~ programming, marketing ~~activities,~~ and ~~incremental~~ selling costs associated with a DIRECTV advertising revenue sharing arrangement with WarnerMedia. Also contributing to expense declines were lower personnel costs associated with our ongoing transformation initiatives.costs.

The increase for the first nine months included a noncash impairment charge of $4,555 in the second quarter of 2021, 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). Also contributing to the expense increase was higher WarnerMedia non-sports programming and marketing activities and increased domestic wireless equipment expense. Partially offsetting these increases was the impact of the separation of the U.S. video business, lower bad debt expense and lower personnel costs associated with our ongoing transformation initiatives.

Depreciation and amortization expense decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021.~~2022.

Amortization expense decreased ~~$909,~~$160, or ~~47.3%~~14.1% in the ~~third~~first quarter ~~and $2,910, or 47.5% for the first nine months~~ of ~~2021~~2022 primarily due to ~~ceasing amortization on~~the sale of the Vrio ~~held-for-sale assets~~business unit in November 2021.

Depreciation expense decreased ~~$502,~~$110, or ~~9.8%~~2.4% in the ~~third~~first quarter ~~and $1,438, or 9.3% for the first nine months~~ of ~~2021~~2022 primarily due to the ~~lower cost basis~~sale of ~~property, plant~~the Vrio business unit and ~~equipment resulting from Video impairments taken in~~our first-quarter 2022 update to extend the ~~fourth quarter~~estimated economic lives and depreciation period of ~~2020 and ceasing depreciation on Video and Vrio held-for-sale~~AT&T owned fiber assets ~~in 2021.~~(see Note 1).

Operating income ~~increased in the third quarter and~~decreased in the first ~~nine months~~quarter of ~~2021.~~2022. Our operating income margin for the ~~third~~first quarter ~~increased~~decreased from ~~14.5% in 2020 to 17.8%~~17.4% in 2021 ~~and~~to 14.8% in ~~the first nine months increased from 13.6% in 2020 to 14.1% in 2021.~~2022.

Interest expense decreased in the ~~third~~first quarter ~~and first nine months~~ of ~~2021,~~2022, primarily due to ~~lower interest rates and~~higher capitalized interest associated with ~~the~~ spectrum ~~acquisitions.~~acquisitions, partially offset by higher debt balances.

Equity in net income of affiliates increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021. The third quarter increase was~~2022, primarily due to the close of our transaction with TPG and our accounting for our investment in DIRECTV Entertainment Holdings, LLC (DIRECTV) under the equity method of accounting beginning August 1, 2021 (see Note ~~8 and Note~~ 11), partially offset by decreases from certain WarnerMedia investments. ~~The increase for the first nine months was also due to the DIRECTV investment, combined with improved performance from WarnerMedia investments for the nine-month period.~~

Other income (expense) – net ~~increased~~decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021. The increases were~~2022 primarily due to lower actuarial gains of ~~$374~~$1,053 compared to $2,844 in 2021, and ~~$3,021 in the third quarter and first nine months~~lower amortization of 2021, respectively, a $766 gain on sale of our interest in Playdemic Ltd. (Playdemic), and 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~~decrease also includes ~~higher~~lower returns on benefit-related investments for the ~~nine-month~~three-month comparable ~~period and fewer impairments taken in 2021.~~period.

Income ~~taxes~~tax expense ~~increased~~decreased in the ~~third~~first quarter ~~and the first nine months~~ of ~~2021.~~2022. The ~~increase~~decrease in the ~~third~~first quarter was primarily driven by ~~higher~~lower income before income tax. Our effective tax rate was ~~19.7% in~~21.8% for the ~~third~~first quarter of ~~2021,~~2022, versus ~~19.5%~~21.1% in the comparable period in the prior year.

The increase for the first nine months was primarily due to higher income before income tax, offset by Vrio tax benefit, tax initiatives and audit settlements in the current year. Our effective tax rate was 21.5% for the first nine months of 2021, versus 23.7% for the comparable period in the prior year. The effective tax rate in 2020 was higher primarily due to our prior-year impairment of Vrio goodwill, which was not deductible for tax purposes.

3935

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts


COMMUNICATIONS SEGMENT	COMMUNICATIONS SEGMENT	Third Quarter						Nine-Month Period						COMMUNICATIONS SEGMENT	First Quarter
						Percent						Percent								Percent
		2021		2020		Change		2021		2020		Change				2022		2021		Change
Segment Operating Revenues	Segment Operating Revenues													Segment Operating Revenues
Mobility	Mobility	$	19,138	$	17,894	7.0	%	$	57,108	$	52,445	8.9	%	Mobility		$	20,075	$	19,034	5.5	%
Business Wireline	Business Wireline	5,938		6,261		(5.2)		18,036		18,832		(4.2)		Business Wireline		5,640		6,046		(6.7)
Consumer Wireline	Consumer Wireline	3,142		3,040		3.4		9,380		9,202		1.9		Consumer Wireline		3,161		3,098		2.0
Total Segment Operating Revenues	Total Segment Operating Revenues	28,218		27,195		3.8		84,524		80,479		5.0		Total Segment Operating Revenues		28,876		28,178		2.5

Segment Operating Contribution	Segment Operating Contribution													Segment Operating Contribution
Mobility	Mobility	5,955		5,691		4.6		17,959		17,284		3.9		Mobility		5,853		6,044		(3.2)
Business Wireline	Business Wireline	985		1,184		(16.8)		3,093		3,567		(13.3)		Business Wireline		859		1,080		(20.5)
Consumer Wireline	Consumer Wireline	183		189		(3.2)		776		1,102		(29.6)		Consumer Wireline		317		307		3.3
Total Segment Operating Contribution	Total Segment Operating Contribution	$	7,123	$	7,064	0.8	%	$	21,828	$	21,953	(0.6)	%	Total Segment Operating Contribution		$	7,029	$	7,431	(5.4)	%


Selected Subscribers and Connections	Selected Subscribers and Connections			Selected Subscribers and Connections
		September 30,			March 31,
(000s)	(000s)	2021	2020	(000s)	2022	2021
Mobility Subscribers	Mobility Subscribers	196,519	176,744	Mobility Subscribers	196,616	186,108
Total domestic broadband connections	Total domestic broadband connections	15,510	15,375	Total domestic broadband connections	15,533	15,435
Network access lines in service	Network access lines in service	6,404	7,562	Network access lines in service	5,956	6,988
U-verse VoIP connections	U-verse VoIP connections	3,440	3,942	U-verse VoIP connections	3,227	3,684

Operating revenues increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, driven by increases in our Mobility and Consumer Wireline business units, partially offset by decreases in our Business Wireline business unit. The increases are primarily driven by wireless service and equipment revenue growth and gains in broadband service.

Operating contribution ~~increased~~decreased in the ~~third~~first quarter ~~and decreased for the first nine months~~ of ~~2021,~~2022, reflecting lower operating contribution from our ~~Business Wireline~~Mobility and ~~Consumer~~Business Wireline business units, offset by increases in our ~~Mobility~~Consumer Wireline business unit. Our Communications segment operating income margin in the ~~third~~first quarter decreased from ~~26.0% in 2020 to 25.2%~~26.4% in 2021 ~~and for the first nine months decreased from 27.3%~~to 24.3% in ~~2020 to 25.8% in 2021,~~2022, reflecting, in part, increased equipment sales with nonegative margins.

4036

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts


Communications Business Unit Discussion	Communications Business Unit Discussion													Communications Business Unit Discussion
Mobility Results	Mobility Results													Mobility Results
		Third Quarter						Nine-Month Period							First Quarter
						Percent						Percent								Percent
		2021		2020		Change		2021		2020		Change				2022		2021		Change
Operating revenues	Operating revenues													Operating revenues
Service	Service	$	14,527	$	13,883	4.6	%	$	42,921	$	41,520	3.4	%	Service		$	14,724	$	14,048	4.8	%
Equipment	Equipment	4,611		4,011		15.0		14,187		10,925		29.9		Equipment		5,351		4,986		7.3
Total Operating Revenues	Total Operating Revenues	19,138		17,894		7.0		57,108		52,445		8.9		Total Operating Revenues		20,075		19,034		5.5

Operating expenses	Operating expenses													Operating expenses
Operations and support	Operations and support	11,148		10,182		9.5		33,077		29,083		13.7		Operations and support		12,163		10,976		10.8
Depreciation and amortization	Depreciation and amortization	2,035		2,021		0.7		6,072		6,078		(0.1)		Depreciation and amortization		2,059		2,014		2.2
Total Operating Expenses	Total Operating Expenses	13,183		12,203		8.0		39,149		35,161		11.3		Total Operating Expenses		14,222		12,990		9.5
Operating Income	Operating Income	5,955		5,691		4.6		17,959		17,284		3.9		Operating Income		5,853		6,044		(3.2)
Equity in Net Income (Loss) of Affiliates	Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—		Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution	Operating Contribution	$	5,955	$	5,691	4.6	%	$	17,959	$	17,284	3.9	%	Operating Contribution		$	5,853	$	6,044	(3.2)	%

The following tables highlight other key measures of performance for Mobility:


Subscribers	Subscribers					Subscribers
		September 30,		Percent			March 31,		Percent
(in 000s)	(in 000s)	2021	2020	Change		(in 000s)	2022	2021	Change
Postpaid	Postpaid	80,249	75,969	5.6	%	Postpaid	81,639	77,934	4.8	%
Postpaid phone	Postpaid phone	66,396	63,485	4.6		Postpaid phone	67,518	64,752	4.3
Prepaid	Prepaid	19,028	18,100	5.1		Prepaid	18,859	18,387	2.6
Reseller	Reseller	6,263	6,708	(6.6)		Reseller	5,383	6,501	(17.2)
Connected devices1	Connected devices1	90,979	75,967	19.8		Connected devices1	90,735	83,286	8.9
Total Mobility Subscribers		196,519	176,744	11.2	%
Total Mobility Subscribers2						Total Mobility Subscribers2	196,616	186,108	5.6	%
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.
2The quarter ended March 31, 2022 excludes the impact of 10,707 subscriber and connected device disconnections resulting from our 3G network shutdown in February 2022. Postpaid disconnections were 899, including 438 phone, 234 prepaid, 749 reseller subscribers, and 8,825 connected devices.						2The quarter ended March 31, 2022 excludes the impact of 10,707 subscriber and connected device disconnections resulting from our 3G network shutdown in February 2022. Postpaid disconnections were 899, including 438 phone, 234 prepaid, 749 reseller subscribers, and 8,825 connected devices.

4137

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts


Net Additions	Net Additions													Net Additions
		Third Quarter						Nine-Month Period							First Quarter
						Percent						Percent								Percent
(in 000s)	(in 000s)	2021		2020		Change		2021		2020		Change		(in 000s)		2022		2021		Change
Postpaid Phone Net Additions	Postpaid Phone Net Additions	928		645		43.9	%	2,312		657		—	%	Postpaid Phone Net Additions		691		595		16.1	%
Total Phone Net Additions	Total Phone Net Additions	1,177		776		51.7		2,942		880		—		Total Phone Net Additions		804		802		0.2

Postpaid2	Postpaid2	1,218		1,081		12.7		3,197		954		—		Postpaid2		965		823		17.3
Prepaid	Prepaid	351		245		43.3		927		365		—		Prepaid		116		279		(58.4)
Reseller	Reseller	(164)		(4)		—		(357)		(252)		(41.7)		Reseller		(17)		(68)		75.0
Connected devices3	Connected devices3	3,468		4,203		(17.5)		10,194		9,976		2.2		Connected devices3		4,468		2,517		77.5
Mobility Net Subscriber Additions1	Mobility Net Subscriber Additions1	4,873		5,525		(11.8)	%	13,961		11,043		26.4	%	Mobility Net Subscriber Additions1		5,532		3,551		55.8	%

Postpaid Churn4	Postpaid Churn4	0.92	%	0.85	%	7	BP	0.91	%	0.99	%	(8)	BP	Postpaid Churn4		0.94	%	0.93	%	1	BP
Postpaid Phone-Only Churn4	Postpaid Phone-Only Churn4	0.72	%	0.69	%	3	BP	0.72	%	0.80	%	(8)	BP	Postpaid Phone-Only Churn4		0.79	%	0.76	%	3	BP
1Excludes migrations and acquisition-related activities during the period.	1Excludes migrations and acquisition-related activities during the period.													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 34 and (44) for the three months ended September 30, 2021 and 2020 and (16) and (470) for the nine months ended September 30, 2021 and 2020. Wearables and other net adds were 256 and 480 for the quarter ended September 30, 2021 and 2020 and 899 and 767 for the nine months September 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 1.8 million for the quarter ended September 30, 2021 and 5.5 million for the nine months ended September 30, 2021.
2In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were 31 and (63) for the three months ended March 31, 2022 and 2021. Wearables and other net adds were 243 and 291 for the quarter ended March 31, 2022 and 2021.														2In addition to postpaid phones, includes tablets and wearables and other. Tablet net adds (losses) were 31 and (63) for the three months ended March 31, 2022 and 2021. Wearables and other net adds were 243 and 291 for the quarter ended March 31, 2022 and 2021.
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 1.5 million for the quarter ended March 31, 2022.														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 1.5 million for the quarter ended March 31, 2022.
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.	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.													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 increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021.~~2022. The increases are largely due to growth from subscriber gains.

ARPU

Average revenue per subscriber (ARPU) decreased in the ~~third~~first quarter ~~and for the first nine months of 2021.~~2022. ARPU during ~~2021~~2022 reflects the impact of higher promotional discount amortization (see Note 5).

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~~slightly higher in the first ~~nine~~three months due to involuntary disconnects. Churn remains consistently low reflecting the impacts of retention offers, migrations to unlimited plans, and continued network ~~performance and lower involuntary disconnects.~~performance.

Equipment revenue increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, primarily driven by customer growth and the sale of higher-priced smartphones and a mix of higher-priced postpaid smartphones, including the quarterly shift in product launch timing versus the prior year, and higher sales of postpaid data devices for the nine-month period.smartphones.

Operations and support expenses increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021~~2022 largely driven by growth in equipment sales and associated expenses, ~~including~~ 3G network shutdown costs, higher bad debt, increased ~~amortization of deferred contract acquisition costs, and~~ content costs associated with bundling HBO Max, the elimination of Connect America Fund Phase II (CAF II) government credits, and ~~for~~higher FirstNet costs. In the ~~nine-month~~first quarter of 2022, we updated our analysis of economic lives of customer relationships and extended the amortization period ~~higher network and technology costs. The~~of Mobility deferred customer contract costs, which decreased expense ~~increase was offset by lower sales costs and lower bad debt expense.~~approximately $60 in the first quarter.

Depreciation expense increased in the ~~third~~first quarter ~~and decreased for the~~of 2022. The first ~~nine months of 2021. The third~~ quarter increase is due to ongoing capital spending for network upgrades and ~~expansion partially offset by fully depreciated assets. For the nine months the decrease is primarily due to network assets becoming fully depreciated.~~expansion.

Operating income decreased in the first quarter of 2022. Our Mobility operating income margin in the first quarter decreased from 31.8% in 2021 to 29.2% in 2022. Our Mobility EBITDA margin in the first quarter decreased from 42.3% in 2021 to 39.4% in 2022. EBITDA is defined as operating contribution excluding equity in net income (loss) of affiliates and depreciation and amortization.

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

~~Operating income~~ increased in the third quarter and for the first nine months of 2021. Our Mobility operating income margin in the third quarter decreased from 31.8% in 2020 to 31.1% in 2021, and for the first nine months decreased from 33.0% in 2020 to 31.4% in 2021. Our Mobility EBITDA margin in the third quarter decreased from 43.1% in 2020 to 41.7% in 2021, and for the first nine months decreased from 44.5% in 2020 to 42.1% in 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, with nearly full penetration of smartphones in the U.S. population, future wireless growth will depend on our ability to offer innovative services, plans and devices that bundle product offerings and take advantage of our 5G wireless ~~network, which went nationwide in July 2020,~~network. We believe 5G opens up vast possibilities of connecting sensors, devices, and autonomous things, commonly referred to ~~provide~~as the Internet of Things (IoT). More and more, these ~~services in bundled product offerings. Subscribers~~devices are performing use cases that ~~purchase two or more services from us have significantly lower churn than subscribers~~require high bandwidth, ultra-reliability and low latency that ~~purchase~~ only ~~one service.~~5G and edge computing can bring. 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 plans tend to have higher retention and lower churn rates. We offer unlimited data plans and subscribers to such plans 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. Subscribers that purchase two or more services from us have significantly lower churn than subscribers that purchase only one service.


Business Wireline Results	Business Wireline Results													Business Wireline Results
		Third Quarter						Nine-Month Period							First Quarter
						Percent						Percent								Percent
		2021		2020		Change		2021		2020		Change				2022		2021		Change
Operating revenues	Operating revenues													Operating revenues
Service	Service	$	5,765	$	6,079	(5.2)	%	$	17,497	$	18,271	(4.2)	%	Service		$	5,478	$	5,872	(6.7)	%
Equipment	Equipment	173		182		(4.9)		539		561		(3.9)		Equipment		162		174		(6.9)
Total Operating Revenues	Total Operating Revenues	5,938		6,261		(5.2)		18,036		18,832		(4.2)		Total Operating Revenues		5,640		6,046		(6.7)

Operating expenses	Operating expenses													Operating expenses
Operations and support	Operations and support	3,649		3,764		(3.1)		11,068		11,365		(2.6)		Operations and support		3,482		3,688		(5.6)
Depreciation and amortization	Depreciation and amortization	1,304		1,313		(0.7)		3,875		3,900		(0.6)		Depreciation and amortization		1,299		1,278		1.6
Total Operating Expenses	Total Operating Expenses	4,953		5,077		(2.4)		14,943		15,265		(2.1)		Total Operating Expenses		4,781		4,966		(3.7)
Operating Income	Operating Income	985		1,184		(16.8)		3,093		3,567		(13.3)		Operating Income		859		1,080		(20.5)
Equity in Net Income (Loss) of Affiliates	Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—		Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution	Operating Contribution	$	985	$	1,184	(16.8)	%	$	3,093	$	3,567	(13.3)	%	Operating Contribution		$	859	$	1,080	(20.5)	%

Service revenues decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, driven by lower demand for legacy voice and data services ~~in the current year, proactive rationalization of low profit margin products~~ and ~~higher demand for pandemic-related connectivity in the prior-year.~~a strategic decision to deemphasize non-core services. We expect this trend to continue for the remainder of the year.

Equipment revenues decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, driven by declines in legacy and non-core services.

Operations and support expenses decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization and proactive rationalization of low profit margin products. Expense declines were also driven by lower amortization of deferred fulfillment costs, including our first-quarter 2022 updates to the estimated economic lives of subscribers, which decreased expense approximately $35 in the first quarter.

Depreciation expense increased in the first quarter of 2022, primarily due to ongoing capital spending for network upgrades and expansion, partially offset by updates to extend the estimated lives of our fiber assets.

Operating incomedecreased in the ~~third~~first quarter ~~and for~~of 2022. Our Business Wireline operating income margin in the first ~~nine months of~~quarter decreased from 17.9% in 2021 ~~primarily due~~ to ~~certain network assets becoming fully depreciated.~~15.2% in 2022. Our Business Wireline EBITDA margin in the first quarter decreased from 39.0% in 2021 to 38.3% in 2022.

4339

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

~~Operating income~~ decreased in the third quarter and for the first nine months of 2021. Our Business Wireline operating income margin in the third quarter decreased from 18.9% in 2020 to 16.6% in 2021, and for the first nine months decreased from 18.9% in 2020 to 17.1% in 2021. Our Business Wireline EBITDA margin in the third quarter decreased from 39.9% in 2020 to 38.5% in 2021, and for the first nine months decreased from 39.7% in 2020 to 38.6% in 2021.


Consumer Wireline Results	Consumer Wireline Results													Consumer Wireline Results
		Third Quarter						Nine-Month Period							First Quarter
						Percent						Percent								Percent
		2021		2020		Change		2021		2020		Change				2022		2021		Change
Operating revenues	Operating revenues													Operating revenues
Broadband	Broadband	$	2,290	$	2,128	7.6	%	$	6,761	$	6,329	6.8	%	Broadband		$	2,355	$	2,205	6.8	%
Legacy voice and data services	Legacy voice and data services	484		538		(10.0)		1,507		1,679		(10.2)		Legacy voice and data services		460		519		(11.4)
Other service and equipment	Other service and equipment	368		374		(1.6)		1,112		1,194		(6.9)		Other service and equipment		346		374		(7.5)
Total Operating Revenues	Total Operating Revenues	3,142		3,040		3.4		9,380		9,202		1.9		Total Operating Revenues		3,161		3,098		2.0

Operating expenses	Operating expenses													Operating expenses
Operations and support	Operations and support	2,184		2,117		3.2		6,298		5,924		6.3		Operations and support		2,078		2,029		2.4
Depreciation and amortization	Depreciation and amortization	775		734		5.6		2,306		2,176		6.0		Depreciation and amortization		766		762		0.5
Total Operating Expenses	Total Operating Expenses	2,959		2,851		3.8		8,604		8,100		6.2		Total Operating Expenses		2,844		2,791		1.9
Operating Income	Operating Income	183		189		(3.2)		776		1,102		(29.6)		Operating Income		317		307		3.3
Equity in Net Income (Loss) of Affiliates	Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—		Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution	Operating Contribution	$	183	$	189	(3.2)	%	$	776	$	1,102	(29.6)	%	Operating Contribution		$	317	$	307	3.3	%

The following tables highlight other key measures of performance for Consumer Wireline:


Connections	Connections					Connections
		September 30,		Percent			March 31,		Percent
(in 000s)	(in 000s)	2021	2020	Change		(in 000s)	2022	2021	Change
Broadband Connections	Broadband Connections					Broadband Connections
Total Broadband and DSL Connections	Total Broadband and DSL Connections	14,180	14,102	0.6	%	Total Broadband and DSL Connections	14,148	14,146	—	%
Broadband						Broadband	13,850	13,767	0.6
Fiber Broadband Connections	Fiber Broadband Connections	5,721	4,678	22.3		Fiber Broadband Connections	6,281	5,186	21.1

Voice Connections	Voice Connections					Voice Connections
Retail Consumer Switched Access Lines	Retail Consumer Switched Access Lines	2,527	2,977	(15.1)		Retail Consumer Switched Access Lines	2,324	2,740	(15.2)
U-verse Consumer VoIP Connections	U-verse Consumer VoIP Connections	2,843	3,361	(15.4)		U-verse Consumer VoIP Connections	2,628	3,096	(15.1)
Total Retail Consumer Voice Connections	Total Retail Consumer Voice Connections	5,370	6,338	(15.3)	%	Total Retail Consumer Voice Connections	4,952	5,836	(15.1)	%


Net Additions	Net Additions									Net Additions
		Third Quarter				Nine-Month Period					First Quarter
				Percent				Percent						Percent
(in 000s)	(in 000s)	2021	2020	Change		2021	2020	Change		(in 000s)		2022	2021	Change
Broadband Net Additions	Broadband Net Additions									Broadband Net Additions
Total Broadband and DSL Net Additions	Total Broadband and DSL Net Additions	6	158	(96.2)	%	80	(17)	—	%	Total Broadband and DSL Net Additions		(12)	46	—	%
Broadband Net Additions										Broadband Net Additions		5	74	(93.2)
Fiber Broadband Net Additions	Fiber Broadband Net Additions	289	357	(19.0)	%	770	791	(2.7)	%	Fiber Broadband Net Additions		289	235	23.0	%

Broadband ~~(high-speed internet)~~ revenues increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, driven by an increase in fiber customers, ~~and pricing,~~ which we expect to continue for the foreseeable future.

Legacy voice and data service revenues decreased in the first quarter of 2022, reflecting the continued decline in the number of customers, which we expect to continue.

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

~~Legacy voice and data service~~ ~~revenues decreased in the third quarter and for the first nine months of 2021, reflecting the continued decline in the number of customers, which we expect to continue.~~

Other service and equipment revenues decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, reflecting the continued decline in the number of VoIP customers, which we expect to continue.

Operations and support expenses increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, primarily driven by higher ~~technology and customer support~~advertising costs and ~~for~~ the ~~nine-month period, content costs associated with plans bundling HBO Max.~~elimination of CAF II government credits. Partially offsetting these increases was ~~lower amortization of deferred fulfillment costs, including the impact of the~~our first-quarter ~~2021~~2022 updates to ~~extend~~ the estimated economic ~~life for our subscribers.~~lives of broadband/fiber subscribers, which decreased expense approximately $40 in the first quarter.

Depreciation expense increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, primarily due to ongoing capital spending for network upgrades and ~~expansion.~~expansion, partially offset by updates to extend the estimated lives of our fiber assets.

Operating income ~~decreased~~increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021.~~2022. Our Consumer Wireline operating income margin in the ~~third~~first quarter ~~decreased~~increased from ~~6.2% in 2020 to 5.8%~~9.9% in 2021 ~~and for the first nine months decreased from 12.0%~~to 10.0% in ~~2020 to 8.3% in 2021.~~2022. Our Consumer Wireline EBITDA margin in the ~~third~~first quarter ~~increased~~decreased from ~~30.4% in 2020 to 30.5%~~34.5% in 2021 ~~and for the first nine months decreased from 35.6%~~to 34.3% in ~~2020 to 32.9% in 2021.~~2022.


WARNERMEDIA SEGMENT	WARNERMEDIA SEGMENT	Third Quarter						Nine-Month Period						WARNERMEDIA SEGMENT	First Quarter
						Percent						Percent								Percent
		2021		2020		Change		2021		2020		Change				2022		2021		Change
Segment Operating Revenues	Segment Operating Revenues													Segment Operating Revenues
Subscription	Subscription	$	3,988	$	3,477	14.7	%	$	11,779	$	10,142	16.1	%	Subscription		$	3,997	$	3,830	4.4	%
Content and other	Content and other	3,053		2,318		31.7		9,103		7,510		21.2		Content and other		3,059		2,959		3.4
Advertising	Advertising	1,401		1,600		(12.4)		4,877		4,236		15.1		Advertising		1,685		1,737		(3.0)

Total Segment Operating Revenues	Total Segment Operating Revenues	8,442		7,395		14.2		25,759		21,888		17.7		Total Segment Operating Revenues		8,741		8,526		2.5

Segment Operating Expenses	Segment Operating Expenses													Segment Operating Expenses
Direct Costs	Direct Costs													Direct Costs
Programming	Programming	3,068		3,181		(3.6)		10,996		8,638		27.3		Programming		3,976		3,774		5.4
Marketing	Marketing	1,096		655		67.3		2,929		1,750		67.4		Marketing		1,096		850		28.9
Other	Other	932		734		27.0		2,599		2,329		11.6		Other		869		813		6.9
Selling, general and administrative	Selling, general and administrative	1,175		913		28.7		3,084		3,027		1.9		Selling, general and administrative		1,354		966		40.2

Depreciation and amortization	Depreciation and amortization	163		169		(3.6)		491		494		(0.6)		Depreciation and amortization		127		163		(22.1)
Total Operating Expenses	Total Operating Expenses	6,434		5,652		13.8		20,099		16,238		23.8		Total Operating Expenses		7,422		6,566		13.0
Operating Income	Operating Income	2,008		1,743		15.2		5,660		5,650		0.2		Operating Income		1,319		1,960		(32.7)
Equity in Net Income (Loss) of Affiliates	Equity in Net Income (Loss) of Affiliates	(73)		12		—		44		31		41.9		Equity in Net Income (Loss) of Affiliates		(13)		70		—
Total Segment Operating Contribution	Total Segment Operating Contribution	$	1,935	$	1,755	10.3	%	$	5,704	$	5,681	0.4	%	Total Segment Operating Contribution		$	1,306	$	2,030	(35.7)	%

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,~~April 8, 2022, we closed our transaction to combine our WarnerMedia segment, except for certain retained assets such as Xandr, with a subsidiary of Discovery Inc. On December 21, 2021, we entered into an agreement to ~~combine our WarnerMedia segment, subject~~sell the marketplace component of Xandr to ~~certain exceptions with a subsidiary of Discovery Inc.~~Microsoft. (See ~~Note 8)~~Notes 8 and 13)

Operating revenues increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, primarily due to ~~increases in~~increased subscription revenues and higher content and other revenues, ~~reflecting the partial recovery from prior-year impacts of the pandemic. These increases were~~ partially offset by ~~decreased~~lower advertising revenues.

Subscription revenues ~~during~~ increased in the ~~third~~first quarter of 2022, primarily due to growth of HBO Max subscribers, including growth from intercompany relationships with the ~~timing~~Communications segment.

Content and other revenues increased in the first quarter of 2022 due to stronger theatrical revenues compared to the ~~NBA season in 2020.~~year-ago quarter and also higher HBO Max licensing, partially offset by lower TV licensing.

4541

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

~~Subscription revenues~~ increased in the third quarter and for the first nine months of 2021, reflecting growth of DTC domestic HBO Max and HBO subscribers, and, for the nine-month period, the May 2020 acquisition of the remaining interest in HBO Latin America Group. DTC subscription revenues were $2,036 and $5,842, for the three- and nine-month periods of 2021, versus $1,624 and $4,403 in the year-ago periods and include growth from intercompany relationships with the Communications segment.

~~Content and other revenues~~ increased in the third quarter and for the first nine months of 2021 due to higher TV production and licensing, as well as higher theatrical, with the prior-year quarter including only one worldwide theatrical release compared to five in the third quarter of 2021.

Advertising revenues decreased in the ~~third~~first quarter ~~and increased for the first nine months~~ of ~~2021. The decrease for the quarter resulted from the timing of the NBA season in 2020~~2022 due to lower linear audiences and ~~was affected by~~ lower political ~~advertising~~ad spending, ~~in 2021. The increase for the first nine months resulted from the return in 2021 of major sporting events, including the NCAA Division I Men's Championship Basketball Tournament.~~partially offset by higher sports advertising.

Direct costs increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, driven by higher ~~film~~marketing and programming costs and increased costs for HBO Max. Third quarter increases were partially offset by lower sports costs resulting from the shift in timing of the NBA season in the prior year. Direct costs supporting DTC revenues were $2,041 and $5,620 for the three- and nine-month periods of 2021, versus $1,551 and $3,823 in the year-ago periods.costs.

Selling, general and administrative expenses increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021. The increase for the quarter was~~2022 primarily due to incremental selling costs associated with a DIRECTV advertising revenue sharing ~~arrangement. For the nine months, these increases were largely offset by lower bad debt expense and integration of support functions.~~arrangements.

Operating contribution ~~increased~~decreased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021.~~2022. The WarnerMedia segment operating income margin in the ~~third~~first quarter ~~increased~~decreased from ~~23.6% in 2020 to 23.8%~~23.0% in 2021 ~~and for the first nine months decreased from 25.8%~~to 15.1% in ~~2020 to 22.0% in 2021.~~2022.


LATIN AMERICA SEGMENT	LATIN AMERICA SEGMENT	Third Quarter						Nine-Month Period						LATIN AMERICA SEGMENT	First Quarter
						Percent						Percent								Percent
		2021		2020		Change		2021		2020		Change				2022		2021		Change
Segment Operating Revenues	Segment Operating Revenues													Segment Operating Revenues
Mexico														Mexico		$	690	$	631	9.4	%
Vrio	Vrio	$	756	$	753	0.4	%	$	2,248	$	2,392	(6.0)	%	Vrio		—		743		—
Mexico		724		643		12.6		2,043		1,826		11.9
Total Segment Operating Revenues	Total Segment Operating Revenues	1,480		1,396		6.0		4,291		4,218		1.7		Total Segment Operating Revenues		690		1,374		(49.8)

Segment Operating Contribution	Segment Operating Contribution													Segment Operating Contribution
Mexico														Mexico		(102)		(134)		23.9
Vrio	Vrio	105		(34)		—		43		(101)		—		Vrio		—		(39)		—
Mexico		(130)		(143)		9.1		(393)		(461)		14.8
Total Segment Operating Contribution	Total Segment Operating Contribution	$	(25)	$	(177)	85.9	%	$	(350)	$	(562)	37.7	%	Total Segment Operating Contribution		$	(102)	$	(173)	41.0	%

Operating Results

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

~~On July 21,~~In November 2021, we ~~entered into an agreement to sell~~completed the sale of our Latin America video operations, Vrio, ~~business~~ to Grupo ~~Werthein (see Note 8). 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.~~Werthein.

Operating revenues ~~increased~~decreased in the ~~third~~first quarter ~~and for~~of 2022, primarily reflecting the ~~first nine months~~sale of ~~2021, reflecting~~Vrio partially offset by growth ~~at Vrio and~~ in the Mexico wireless operations. ~~Foreign exchange impacts were neutral~~

Operating contribution improved in the ~~third~~first quarter of 2022, reflecting the sale of Vrio and ~~for~~growth in Mexico wireless operations. Our Latin America segment operating income margin in the ~~nine-month period, pressure~~first quarter decreased from (12.3)% in ~~Vrio was partially offset by improvements~~2021 to (14.8)% in ~~Mexico.~~2022.

4642

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

~~Operating contribution~~ improved in the third quarter and for the first nine months of 2021, reflecting foreign exchange rates. Our Latin America segment operating income margin in the third quarter increased from (13.7)% in 2020 to (2.3)% in 2021, and for the first nine months increased from (13.9)% in 2020 to (8.3)% in 2021.

Latin America Business Unit Discussion
Vrio Results
Third Quarter Nine-Month Period
Percent Percent
2021 2020 Change 2021 2020 Change
Operating revenues $ 756 $ 753 0.4 % $ 2,248 $ 2,392 (6.0) %
Operating expenses
Operations and support 660 675 (2.2) 1,981 2,119 (6.5)
Depreciation and amortization — 126 — 231 400 (42.3)
Total Operating Expenses 660 801 (17.6) 2,212 2,519 (12.2)
Operating Income (Loss) 96 (48) — 36 (127) —
Equity in Net Income (Loss) of Affiliates 9 14 (35.7) 7 26 (73.1)
Operating Contribution $ 105 $ (34) — % $ 43 $ (101) — %

~~The following tables highlight other key measures of performance for Vrio:~~

September 30, Percent
(in 000s) 2021 2020 Change
Vrio Video Subscribers 10,142 10,893 (6.9) %
Third Quarter Nine-Month Period
Percent Percent
(in 000s) 2021 2020 Change 2021 2020 Change
Vrio Video Net Additions (178) 229 — % (800) (197) — %

~~Operating revenues~~ ~~slightly~~increased in the third quarter and decreased for the first nine months of 2021. The increase in the third quarter is primarily driven by higher ARPU. The decrease in the first nine months is primarily driven by foreign exchange impacts.

~~Operations and support~~ expenses decreased in the third quarter and for the first nine months of 2021, primarily driven by foreign exchange impacts. Approximately 23% of Vrio expenses are U.S. dollar based, with the remainder in the local currency.

~~Depreciation~~ expense decreased in the third quarter and for the first nine months of 2021 due to ceasing depreciation on held-for-sale Vrio assets. We applied held-for-sale accounting to Vrio on June 30, 2021 and ceased depreciation beginning July 1, 2021.

~~Operating income~~ improved in the third quarter and for the first nine months of 2021. Vrio operating income margin for the third quarter increased from (6.4)% in 2020 to 12.7% in 2021, and for the first nine months increased from (5.3)% in 2020 to 1.6% in 2021. Vrio EBITDA margin in the third quarter increased from 10.4% in 2020 to 12.7% in 2021, and for the first nine months increased from 11.4% in 2020 to 11.9% in 2021.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~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														Latin America Business Unit Discussion
Mexico Results	Mexico Results													Mexico Results
		Third Quarter						Nine-Month Period							First Quarter
		2021		2020		Percent Change		2021		2020		Percent Change				2022		2021		Percent Change
Operating revenues	Operating revenues													Operating revenues
Service	Service	$	463	$	385	20.3	%	$	1,349	$	1,197	12.7	%	Service		$	490	$	439	11.6	%
Equipment	Equipment	261		258		1.2		694		629		10.3		Equipment		200		192		4.2
Total Operating Revenues	Total Operating Revenues	724		643		12.6		2,043		1,826		11.9		Total Operating Revenues		690		631		9.4

Operating expenses	Operating expenses													Operating expenses
Operations and support	Operations and support	697		662		5.3		1,984		1,914		3.7		Operations and support		631		620		1.8
Depreciation and amortization	Depreciation and amortization	157		124		26.6		452		373		21.2		Depreciation and amortization		161		145		11.0
Total Operating Expenses	Total Operating Expenses	854		786		8.7		2,436		2,287		6.5		Total Operating Expenses		792		765		3.5
Operating Income (Loss)	Operating Income (Loss)	(130)		(143)		9.1		(393)		(461)		14.8		Operating Income (Loss)		(102)		(134)		23.9
Equity in Net Income (Loss) of Affiliates	Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—		Equity in Net Income (Loss) of Affiliates		—		—		—
Operating Contribution	Operating Contribution	$	(130)	$	(143)	9.1	%	$	(393)	$	(461)	14.8	%	Operating Contribution		$	(102)	$	(134)	23.9	%

The following tables highlight other key measures of performance for Mexico:


						September 30,		Percent				March 31,		Percent
(in 000s)	(in 000s)					2021	2020	Change		(in 000s)		2022	2021	Change
Mexico Wireless Subscribers	Mexico Wireless Subscribers									Mexico Wireless Subscribers
Postpaid	Postpaid					4,781	4,710	1.5	%	Postpaid		4,810	4,725	1.8	%
Prepaid	Prepaid					14,199	13,249	7.2		Prepaid		15,235	13,756	10.8
Reseller	Reseller					493	455	8.4		Reseller		458	500	(8.4)
Total Mexico Wireless Subscribers	Total Mexico Wireless Subscribers					19,473	18,414	5.8	%	Total Mexico Wireless Subscribers		20,503	18,981	8.0	%

		Third Quarter				Nine-Month Period					First Quarter
				Percent				Percent						Percent
(in 000s)	(in 000s)	2021	2020	Change		2021	2020	Change		(in 000s)		2022	2021	Change
Mexico Wireless Net Additions	Mexico Wireless Net Additions									Mexico Wireless Net Additions
Postpaid	Postpaid	36	(61)	—	%	85	(393)	—	%	Postpaid		3	29	(89.7)	%
Prepaid	Prepaid	389	472	(17.6)		441	(335)	—		Prepaid		178	(2)	—
Reseller	Reseller	2	30	(93.3)		4	83	(95.2)		Reseller		(40)	11	—
Total Mexico Wireless Net Additions	Total Mexico Wireless Net Additions	427	441	(3.2)	%	530	(645)	—	%	Total Mexico Wireless Net Additions		141	38	—	%

Service revenues increased in the ~~third~~first quarter of 2022 reflecting improvements in ~~foreign exchange,~~ subscriber growth ~~and growth in other services, and for the first nine months of 2021, driven by improvements in foreign exchange~~ and growth in other services.

Equipment revenues increased in the ~~third~~first quarter of 2022 driven by ~~improvements in foreign exchange partially offset by lower equipment sales volumes, and for the first nine months of 2021, driven by improvements in foreign exchange and~~ higher equipment sales ~~volumes.~~volume.

Operations and support expenses increased in the ~~third~~first quarter ~~primarily due to foreign exchange impact~~of 2022 driven by equipment costs from customer growth, partially offset by ~~lower customer costs, and for the first nine months of 2021, due to~~ foreign exchange ~~impact and an increase in customer growth.~~impact. Approximately 7% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortization expense increased in the ~~third~~first quarter ~~and for the first nine months~~ of ~~2021,~~2022, reflecting higher in-service assets and ~~foreign exchange impacts.~~spectrum amortization.

4843

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 ~~third~~first quarter ~~and for the first nine months~~ of ~~2021.~~2022. Our Mexico operating income margin in the ~~third~~first quarter increased from ~~(22.2)% in 2020 to (18.0)~~(21.2)% in 2021 ~~and for the first nine months increased from (25.2)~~to (14.8)% in ~~2020 to (19.2)% in 2021.~~2022. Our Mexico EBITDA margin in the ~~third~~first quarter increased from ~~(3.0)% in 2020 to 3.7%~~1.7% in 2021 ~~and for the first nine months increased from (4.8)%~~to 8.6% in ~~2020 to 2.9% in 2021.~~2022.

OTHER BUSINESS MATTERS

Spectrum Auction On ~~February 24, 2021,~~January 14, 2022, the Federal Communications Commission (FCC) announced that ~~AT&T was~~we were the winning bidder for ~~1,621 C-Band~~1,624 3.45 GHz licenses ~~comprised of a total of 80 MHz nationwide, including 40 MHz~~ in ~~Phase I.~~Auction 110. We provided to the FCC with an upfront deposit of $550 in 2020 and cash payments totaling $22,856 in the first quarter of 2021, for a total of $23,406. We received the licenses in July 2021 and classified the auction deposits, related capitalized interest and billed relocation costs as “Licenses - Net” on our September 30, 2021 consolidated balance sheet. 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 are responsible for approximately $1,000 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators, of which $650 was billed$123 in the third quarter of 2021 and ~~will be~~ paid the remaining $8,956 in the ~~fourth~~first quarter of ~~2021.~~2022, for a total of $9,079. We funded the purchase price using cash and short-term investments. The amounts deposited toward the acquisition of the licenses and capitalized interest were reported as “Deposits on Wireless Licenses” on our consolidated balance sheet as of March 31, 2022. We expect to receive the licenses in the second quarter of 2022. (See Note 8)

In connection with the transaction, we contributed our U.S. Video business unit to DIRECTV 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 $7,170 in cash from DIRECTV ($7,600, net of $430 cash on hand) and transferred $195 of DIRECTV debt. TPG contributed approximately $1,800 in cash to DIRECTV for $1,800 of senior preferred units and a 30% economic interest in common units. As part of this transaction, we agreed to cover net losses under the NFL SUNDAY TICKET contract up to a cap of $2,100 over the remaining period of the contract, of which $1,800 was a note payable to DIRECTV. (See Note 8)

Under separate transition services agreements, we will provide DIRECTV 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.

WarnerMedia On May 17, 2021, we entered into an agreement to combine our WarnerMedia segment, ~~subject to~~except for certain ~~exceptions,~~retained assets such as Xandr, with a subsidiary of Discovery ~~Inc. (Discovery). The agreement is structured as~~in a Reverse Morris Trust ~~transaction, under which~~transaction. On April 8, 2022, we completed the separation and distribution of our WarnerMedia ~~will be distributed to AT&T’s shareholders via a pro rata dividend,~~business, and merger of Spinco, 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.~~subsidiary formed to hold the WarnerMedia business, with a subsidiary of Discovery, Inc., which was renamed Warner Bros. Discovery Inc. (WBD). Each AT&T ~~will~~shareholder was entitled to receive 0.241917 shares of WBD common stock for each share of AT&T common stock held as of the record date. In connection with and in accordance with the terms of the transaction, prior to the distribution and merger, AT&T received approximately ~~$43,000 (subject to adjustment) in a combination~~$40,400, which includes $38,800 of cash and $1,600 of debt ~~securities,~~retained by WarnerMedia. At March 31, 2022, the WarnerMedia business did not meet the criteria for held-for-sale and, WarnerMedia’s retention of certain debt. 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 closeaccordingly, its financial results are included 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.~~continuing operations for all periods presented herein.

~~The merger agreement contains certain customary termination rights~~In preparation for the close of the WarnerMedia/Discovery transaction, in March 2022, Spinco issued $30,000 of Spinco senior notes with a weighted-average interest rate of 4.5% and maturities ranging from 2024 to 2062. These notes conveyed to WBD upon close of the transaction. Our cash balance at March 31, 2022, includes the proceeds of this issuance that were retained by AT&T ~~and Discovery, including, without limitation, a right for either party to terminate if~~in connection with the ~~transaction is not completed on or before July 15, 2023. Termination fees under specified circumstances will requireDiscovery to pay AT&T $720 or AT&T to pay Discovery $1,770.~~

~~On September 20, 2021, we sold WarnerMedia’s mobile games app studio, Playdemic Ltd.~~See Note 13 and “Liquidity and Capital Resources” for ~~approximately $1,400 in cash and recognized a pre-tax gain of $766. Playdemic was excluded from the pending WarnerMedia/Discovery transaction.~~

~~AT&T INC.~~

~~SEPTEMBER 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 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 September 30, 2021, our consolidated balance sheet included $853 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 $2,819 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 during the fourth quarter of 2021, pending customary closing conditions. We will retain our 41.3% interest in SKY Mexico, a leading pay-TV provider in Mexico.~~more information.

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. ~~Over the past several years,~~More recently, 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. We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, to reduce inappropriate regulatory burdens that inhibit our ability to compete effectively and offer needed services to 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.

AT&T INC.

MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

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. These 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 to uphold the FCC’s classification of broadband as an information service, that decision is final.

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~~decision is pending.

Some states have adopted legislation or issued executive orders, including California, that would reimpose net neutrality rules repealed by the FCC. ~~Suits have been filed concerning such~~The California statute is now in effect, and challenges regarding other states’ net neutrality laws are pending. We expect that going forward additional states may seek to impose net neutrality requirements.

On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law. The legislation appropriates $65,000 to support broadband deployment and adoption. The National Telecommunications and Information Agency (NTIA) is responsible for distributing more than $48,000 of this funding, including $42,500 in ~~two states.~~state grants for broadband deployment projects in unserved and underserved areas. NTIA will establish rules for this program in the first half of 2022. The IIJA also appropriated $14,200 for establishment of the Affordable Connectivity Program (ACP), an FCC-administered monthly, low-income broadband benefit program, replacing the Emergency Broadband Benefit program (established in December 2020 by the Consolidated Appropriations Act 2021). Qualifying customers can receive up to thirty dollars per month (or seventy-five dollars per month for those on Tribal lands) to assist with their internet bill. AT&T is a participating provider in the ACP program and will consider participating in the deployment program where appropriate. The IIJA includes various provisions that will result in FCC proceedings regarding ACP program administration and consumer protection, reform of the existing universal support program, and broadband labeling and equal access.

Privacy-related legislation continues to be adopted or considered in a number of jurisdictions. Legislative, regulatory and litigation 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.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued~~

~~Dollars in millions except per share amounts~~

Wireless Industry-wide network densification and 5G technology expansion efforts, which are needed to satisfy extensive demand for video and internet access, will involve significant deployment of “small cell” equipment. This increases the importance of local permitting processes that allow for the placement of small cell equipment in the public right-of-way on reasonable timelines and terms. Between 2018 and 2020, the FCC adopted multiple Orders streamlining federal, state, and local wireless structure review processes that had the tendency to delay and impede deployment of small cell and related infrastructure used to provide telecommunications and broadband services. The key elements of these orders have been affirmed on judicial review. During 2020-2021, we have also deployed 5G nationwide on “low band” spectrum on macro towers. Executing on the recent spectrum purchase, we announced on-going construction and continuing deployment of 5G on C-band spectrum in 2022 and beyond.

AT&T INC.

MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

LIQUIDITY AND CAPITAL RESOURCES


For three months ended March 31,	2022		2021
Cash provided by operating activities	$	5,732	$	9,927
Cash used in investing activities	(12,651)		(26,852)
Cash provided by financing activities	24,251		18,483


	March 31,		December 31,
	2022			2021
Cash and cash equivalents1	$	38,565		$	21,169
Spinco and WarnerMedia debt1	31,529			1,724
AT&T Inc. and other subsidiary debt	176,029			175,630
Total debt	207,558			177,354
1AT&T cash balance at March 31, 2022, includes the proceeds of the issuance of Spinco senior notes in preparation for the close of the WarnerMedia/Discovery transaction. The Spinco senior notes conveyed to WBD upon close on April 8, 2022. The cash was retained by AT&T in connection with the close of the transaction. (See Note 8)

We had ~~$21,270~~$38,565 in cash and cash equivalents available at ~~September 30, 2021.~~March 31, 2022. Cash and cash equivalents included cash of ~~$4,552~~$2,911 and money market funds and other cash equivalents of ~~$16,718.~~$35,654. Approximately ~~$3,417~~$2,402 of our cash and cash equivalents were held by our foreign entities in accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation. Approximately $29,800 of cash and cash equivalents was raised in anticipation of the close of the transaction on April 8, 2022.

Cash and cash equivalents increased ~~$11,530~~$17,396 since December 31, ~~2020.~~2021. In the first ~~nine~~three months of ~~2021,~~2022, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, ~~the disposition of businesses, including our recently completed U.S. video business transaction, and~~ issuance of long-term debt and commercial ~~paper.~~paper and distributions from DIRECTV. These inflows were offset by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, spectrum acquisitions, funding capital expenditures and vendor financing payments, investment in WarnerMedia content and dividends to stockholders.

~~Our cash~~ We maintain availability under our credit facilities and ~~debt management will be impacted by the WarnerMedia/Discovery transaction, including the IRS private letter ruling process. During this time, we plan~~our commercial paper program to ~~maintain cash and cash equivalent balances above historical thresholds.~~meet our short-term liquidity requirements.

Cash Provided by or Used in Operating Activities

During the first ~~nine~~three months of ~~2021,~~2022, cash provided by operating activities was ~~$30,703,~~$5,732, compared to ~~$33,048~~$9,927 for the first ~~nine~~three months of ~~2020, impacted by~~2021, reflecting lower receivable securitization, increased cash spend for content ~~investment~~ and ~~the separation of the U.S. video business.~~higher bonus payouts. Total cash paid for WarnerMedia’s content investment was ~~$14,562~~$5,149 in the first ~~nine~~three months of ~~2021~~2022 ($~~4,281~~614 higher than the prior-year comparable period).

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 ~~$1,803~~$95 and ~~$1,051~~$1,071 for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities

For the first ~~nine~~three months of ~~2021,~~2022, cash used in investing activities totaled ~~$27,333,~~$12,651, and consisted primarily of ~~$12,696~~$4,748 (including interest during construction) for capital expenditures and $9,244 for acquisitions of ~~$23,533, which include C-Band~~ spectrum licenses won in Auction ~~107~~110 and associated capitalized interest. During the ~~third quarter, investing activities also included cash receipts~~first three months of ~~approximately $5,370 (excluding cash on hand and $1,800~~2022, we received a return of ~~financing activities)~~investment of $1,315 from ~~the sale~~DIRECTV representing distributions in excess of ~~our Video business and $2,940~~cumulative equity in earnings from ~~the sale of Otter Media assets and Playdemic~~DIRECTV (see Note 8)11). ~~In the fourth quarter of 2021, we paid $650 of compensable relocation costs to clear C-Band spectrum licenses won in Auction 107.~~

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 ~~nine~~three months of ~~2021,~~2022, vendor financing payments were ~~$4,013,~~$1,566, compared to ~~$1,965~~$1,690 for the first ~~nine~~three months of ~~2020.~~2021. Capital expenditures in the first ~~nine~~three months of ~~2021~~2022 were ~~$12,696,~~$4,748, and when including ~~$4,013~~$1,566 cash paid for vendor financing, gross capital investment was ~~$16,709~~$6,314 ($~~1,318~~591 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 nine months of 2021, we placed $3,624 of equipment in service under vendor financing arrangements (compared to $3,148 in the prior-year comparable period) and $610 of assets related to the FirstNet build (compared to $940 in

5146

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first three months of 2022, we placed $954 of equipment in service under vendor financing arrangements (compared to $998 in the prior-year comparable period) and $80 of assets related to the FirstNet build (compared to $240 in the prior-year comparable period). 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 ~~nine~~three months of ~~2021,~~2022, cash provided by financing activities totaled ~~$8,165~~$24,251 and was comprised of debt issuances and repayments, payments of dividends, and vendor financing payments. During the ~~third~~first quarter of ~~2021,~~2022, we also paid approximately ~~$361~~$294 in cash on the ~~$1,800~~ note payable to DIRECTV, ~~(see Note 11).~~with $1,047 remaining due as of March 31, 2022. In preparation for the close of the WarnerMedia/Discovery transaction, in March 2022, Spinco issued $30,000 of Spinco senior notes with a weighted-average interest rate of 4.5% and maturities ranging from 2024 to 2062.

~~A tabular summary~~In April 2022, subsequent to the first quarter of ~~our debt activity for~~2022, Spinco drew $10,000 on the ~~nine months ended September 30, 2021 is as follows:~~

First
Quarter Second
Quarter Third
Quarter Nine months ended
September 30, 2021
Net commercial paper borrowings $ 7,072 $ (513) $ (2) $ 6,557
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 Loan 7,350 — — 7,350
BAML Bilateral Term Loan 2,000 — — 2,000
Private financing 750 — — 750
Other 636 — 835 1,471
Debt Issuances $ 18,197 $ — $ 835 $ 19,032
Repayments:
Private financing $ (649) $ — $ — $ (649)
Other (253) (253) (498) (1,004)
Repayments of long-term debt $ (902) $ (253) $ (498) $ (1,653)
1 Includes credit agreement borrowing.
Spinco Term Loan and AT&T paid off $10,100 of credit agreement borrowings. The Spinco senior notes and Spinco Term Loan conveyed to WBD upon close of the WarnerMedia/Discovery transaction on April 8, 2022.

The weighted average interest rate of our entire long-term debt portfolio, including, ~~term loans~~credit agreement borrowings and the impact of derivatives but excluding Spinco debt, was approximately 3.8% as of ~~September 30, 2021~~March 31, 2022 and ~~4.1% as of~~ December 31, ~~2020.~~2021. We had ~~$170,841~~$197,829 of total notes and debentures outstanding at ~~September 30, 2021, which~~March 31, 2022, including Spinco notes. This also included Euro, British pound sterling, Canadian dollar, Mexican peso, Australian dollar, and Swiss franc denominated debt that totaled approximately ~~$42,897.~~$40,361.

At ~~September 30, 2021,~~March 31, 2022, we had ~~$23,755~~$27,333 of debt maturing within one year, consisting of ~~$6,576~~$8,069 of commercial paper borrowings, ~~$9,100~~$10,100 of ~~bank~~credit agreement borrowings, and ~~$8,079~~$9,164 of long-term debt issuances. Debt maturing within one year includes an accreting zero-coupon note that may be redeemed each May until maturity in November 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.

For the first ~~nine~~three months of ~~2021,~~2022, we paid ~~$4,013~~$1,566 of cash under our vendor financing program, compared to ~~$1,965~~$1,690 in the ~~first nine months of 2020.~~prior-year comparable period. Total vendor financing payables included in our ~~September 30, 2021~~March 31, 2022 consolidated balance sheet were ~~$3,752,~~$4,374, with ~~$2,866~~$3,303 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within ~~two to three~~five years (in “Other noncurrent liabilities”).

At ~~September 30, 2021,~~March 31, 2022, 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 ~~$11,319~~$3,749 during the first ~~nine~~three months of ~~2021,~~2022, compared with ~~$11,215~~$3,741 for the first ~~nine~~three months of ~~2020.~~2021.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued~~

~~Dollars in millions except per share amounts~~

Dividends on common stock declared by our Board of Directors totaled ~~$1.56~~$0.2775 per share in the first ~~nine~~three months of ~~2021~~2022 and ~~2020.~~$0.52 per share in the first three months of 2021. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. ~~We do not expect changes to~~On February 1, 2022, we announced that our Board of Directors approved an expected annual dividend ~~policy prior to~~level of $1.11 per common share, or approximately $8,000 per year, following the close of the ~~pending~~ WarnerMedia/Discovery ~~transaction, which is expected to close in mid-2022. After close and subject to AT&T Board approval, we anticipate an annual dividend level of approximately $8,000 to $9,000 per year.~~transaction.

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 November 2020, we amended one of our $7,500 revolving credit agreements by extending the termination date. In total, we have two $7,500 revolving credit agreements, totaling $15,000, with one terminating on December 11, 2023 and the other terminating on November 17, 2025. No amounts were outstanding under either agreement as of ~~September 30, 2021.~~March 31, 2022.

AT&T INC.

MARCH 31, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

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. In the first quarter of 2022, the maturity date of the 2021 Syndicated Term Loan was extended to December 31, 2022. As of ~~September 30, 2021,~~March 31, 2022, $7,350 was outstanding under the agreement. On April 13, 2022, the 2021 Syndicated Term Loan was paid off and ~~is due on March 22, 2022.~~terminated.

In March 2021, we entered into and drew on a $2,000 term loan credit agreement (BAML Bilateral Term Loan) consisting of (i) a ~~0.75 year~~ $1,000 facility originally due December 31, 2021 (BAML Tranche A Facility), and subsequently extended to December 31, 2022 in the fourth quarter of 2021, and (ii) a ~~1.75 year~~ $1,000 facility due December 31, 2022 (BAML Tranche B Facility), with Bank of America, N.A., as agent. At ~~September 30, 2021,~~March 31, 2022, $2,000 was outstanding under these facilities. On April 13, 2022, the BAML Bilateral Term Loan was paid off and terminated.

In May 2021, in anticipation of the separation of the WarnerMedia business, 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 connection with the execution of the Spinco Term Loan, the aggregate commitment amount under the Bridge Loan was reduced to $31,500 in 2021. In connection with Spinco debt issuances in the first quarter of 2022, the aggregate commitment amount under the Bridge Loan was reduced to $1,687 in March 2022. No amounts were outstanding as of March 31, 2022. In April 2022, the Bridge Loan was terminated and Spinco drew on the Spinco Term Loan.

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 through June 30, 2023, a ratio of not more than 4.0-to-1, and a ratio of not more than 3.5-to-1 for any fiscal quarter thereafter. As of ~~September 30, 2021,~~March 31, 2022, we were in compliance with the covenants for our credit facilities.

Collateral Arrangements

Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover over ~~96%~~97% of our approximate ~~$42,000~~$41,000 derivative portfolio, counterparties are still required to post collateral. During the first ~~nine~~three months of ~~2021,~~2022, we posted approximately ~~$570~~$450 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 ~~September 30, 2021,~~March 31, 2022, our debt ratio was ~~49.7%~~52.7%, compared to ~~44.9%~~49.6% at ~~September 30, 2020~~March 31, 2021 and ~~46.7%~~49.1% at December 31, ~~2020. Our net debt ratio was 43.8% at September 30, 2021, compared to 42.1% at September 30, 2020 and 43.8% at December 31, 2020.~~2021. 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.~~repayments.

On ~~May 17, 2021,~~March 31, 2022, we ~~entered into an agreement to combine our WarnerMedia segment with~~issued a ~~subsidiary~~notice for the redemption in full of ~~Discovery. The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt~~all of ~~regulatory approvals.~~the outstanding $1,962 aggregate principal amount of 3.000% Global Notes due June 30, 2022. We ~~expect to receive $43,000 (subject to adjustment) in a combination~~redeemed the notes on April 30, 2022 at 100% of ~~cash, debt securities, and WarnerMedia’s retention of certain debt. (See Note 8)~~the principal amount.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~Item 2. Management’s Discussion and Analysis~~On April 11, 2022, we made an optional repayment of ~~Financial Condition and Results of Operations- Continued~~

~~Dollars in millions except per share amounts~~the full $750 outstanding pursuant to a private financing arrangement.

On ~~May 17, 2021,~~April 11, 2022, we issued a notice for the redemption in ~~anticipation~~full of all of outstanding approximately $9,042 aggregate principal amount of various global notes due 2022 to 2026 with coupon rates ranging from 2.625% to 4.450% (“Make Whole Notes”). The Make-Whole Notes will be redeemed on the ~~separation~~redemption dates set forth in the notices 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.,redemption, at “make whole” redemption prices to be calculated as ~~agent. In connection with~~set forth in the ~~execution of the Spinco Term Loan, the aggregate commitment amount under the Bridge Loan was reduced to $31,500. No amounts were outstanding as of September 30, 2021.~~respective redemption notices.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Dollars in millions except per share amounts

At ~~September 30, 2021,~~March 31, 2022, we had no interest rate swaps.

AT&T INC.

MARCH 31, 2022

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 ~~$42,085~~$40,737 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow or fair value hedges with a net fair value of ~~$(2,570)~~$(3,518) at ~~September 30, 2021.~~March 31, 2022. We had no rate locks at ~~September 30, 2021.~~March 31, 2022.

We have foreign exchange contracts with a U.S. dollar notional value of ~~$191~~$213 to provide currency at a fixed rate to hedge a portion of the exchange risk involved in foreign currency-denominated transactions. These foreign exchange contracts include cash flow hedges and economic (nonqualifying) hedges with a total net fair value of ~~$(34)~~$(23) at ~~September 30, 2021.~~March 31, 2022.

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~~SEC’s rules and forms. The ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer~~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 ~~September 30, 2021.~~March 31, 2022. Based on that evaluation, the ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer~~Chief Financial Officer concluded that the registrant’s disclosure controls and procedures were effective as of ~~September 30, 2021.~~March 31, 2022.

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.

5449

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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.~~section herein and in our most recent Form 10-K. 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 or war or other hostilities 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, including the outbreak of war or other hostilities, and public health emergencies.

•The continued development and delivery of attractive and profitable wireless ~~video content~~ and broadband offerings and ~~devices, and, in particular, the success of our new HBO Max platform;~~devices; 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 using personal 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 or claims based on alleged misconduct by employees.

~~AT&T INC.~~

~~SEPTEMBER 30, 2021~~

~~CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS - continued~~

•The impact from major equipment or software failures on our 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; or severe weather conditions or other climate-related events including flooding and hurricanes, natural disasters including earthquakes and forest fires, pandemics, energy shortages, wars or terrorist attacks.

AT&T INC.

MARCH 31, 2022

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS - continued

•The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.

•~~Changes in our corporate strategies to respond~~Our response to competition and regulatory, legislative and technological developments.

•The uncertainty surrounding further congressional action regarding spending and taxation, which may result in changes in government spending and affect the ability and willingness of businesses and consumers to spend in general.

•Our ability to realize or sustain the expected benefits of our business transformation initiatives, which are designed to reduce costs, streamline distribution, remove redundancies and simplify and improve processes and support functions.

•Our ability to successfully complete divestitures, ~~including the separation of 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.

5651

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

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 for the year ended December 31, ~~2020 and in our Quarterly Report on Form 10-Q for the quarter ended June 30,~~ 2021 various risks that may materially affect our business. We use this section to update this discussion to reflect material developments. For the ~~third~~first quarter of ~~2021,~~2022, there were no such material developments.

PART II – OTHER INFORMATION - CONTINUED

Dollars in millions except per share amounts

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

(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, 2021 - July 31, 2021 100,782 $ 29.10 — 177,902,921
August 1, 2021 - August 31, 2021 99,720 28.09 — 177,902,921
September 1, 2021 - September 30, 2021 200,899 27.28 — 177,902,921
Total 401,401 $ 27.94 —


	(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
January 1, 2022 - January 31, 2022	441,806	$	25.24	—	177,902,921
February 1, 2022 - February 28, 2022	5,333,062	24.25		—	177,902,921
March 1, 2022 - March 31, 2022	2,446,867	23.26		—	177,902,921
Total	8,221,735	$	24.01	—

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, ~~220,908~~8,221,735 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, ~~180,493~~no shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit Association (VEBA) trusts during the period.

5752

AT&T INC.

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Item 6. Exhibits

The following exhibits are filed or incorporated by reference as a part of this report:


Exhibit
Number						Exhibit Description
10.1						U.S. $7,350,000,000 Amended and Restated ~~Limited Liability Company~~Term Loan Credit Agreement, dated as of ~~DIRECTV Entertainment Holdings LLC, dated July 31, 2021,~~March 2, 2022, among AT&T ~~MVPD Holdings LLC, TPG VIII Merlin Investment Holdings, L.P.~~Inc., the lenders named therein and ~~DIRECTV Entertainment Holdings LLC~~ Bank of America, N.A., as agent ((Exhibit 10.1 to Form 8-K filed on ~~August~~March 2, ~~2021)~~2022)
10.2						AT&T ~~Management Relocation Plan~~
~~10.3~~						~~Amendment to AT&T Executive Physical Program, Officer Disability Plan~~Inc. Equity Retention and ~~Supplemental Life Insurance Plan~~
~~10.4~~						~~AT&T Inc. Health Plan effective January 1, 2022~~
~~10.5~~						~~AT&T Cash Deferral Plan~~Hedging Policy as amended ~~July 29, 2021~~
~~10.6~~						~~AT&T Stock Purchase and Deferral Plan as amended July 29, 2021~~March 24, 2022
31						Rule 13a-14(a)/15d-14(a) Certifications
						31.1 Certification of Principal Executive Officer
						31.2 Certification of Principal Financial Officer
32						Section 1350 Certifications
101						The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, 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.
104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, (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.

5853

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.

~~November 4, 2021~~May 3, 2022			/s/ Pascal Desroches
			Pascal Desroches
			Senior Executive Vice President
			and Chief Financial Officer

5954


	First Quarter		Second Quarter		Third Quarter		Nine months ended September 30, 2021
Net commercial paper borrowings	$	7,072	$	(513)	$	(2)	$	6,557
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	1,461		—		—		1,461
Rate of 0.00%
2021 Syndicated Term Loan	7,350		—		—		7,350
BAML Bilateral Term Loan	2,000		—		—		2,000
Private financing	750		—		—		750
Other	636		—		835		1,471
Debt Issuances	$	18,197	$	—	$	835	$	19,032

Repayments:
Private financing	$	(649)	$	—	$	—	$	(649)
Other	(253)		(253)		(498)		(1,004)
Repayments of long-term debt	$	(902)	$	(253)	$	(498)	$	(1,653)


Latin America Business Unit Discussion
Vrio Results
	Third Quarter						Nine-Month Period
					Percent						Percent
	2021		2020		Change		2021		2020		Change
Operating revenues	$	756	$	753	0.4	%	$	2,248	$	2,392	(6.0)	%

Operating expenses
Operations and support	660		675		(2.2)		1,981		2,119		(6.5)
Depreciation and amortization	—		126		—		231		400		(42.3)
Total Operating Expenses	660		801		(17.6)		2,212		2,519		(12.2)
Operating Income (Loss)	96		(48)		—		36		(127)		—
Equity in Net Income (Loss) of Affiliates	9		14		(35.7)		7		26		(73.1)
Operating Contribution	$	105	$	(34)	—	%	$	43	$	(101)	—	%