What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-07-27 · 248 added, 224 removed, 1119 unchanged (30% of the section changed)

2 unchanged sentences

Dollars in millions except per share amounts

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

11 unchanged sentences

Asset impairments and abandonments and restructuring

604 114 604 745

Depreciation and amortization 4,705 4,514 14,011 13,426

32 unchanged sentences

Dollars in millions

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

20 unchanged sentences

$ 0 and $( 12 )

— ( 24 ) — ( 24 )

Defined benefit postretirement plans:

Net prior service credit arising during the period, net of

taxes of $ 0 , $ 583 , $ 0 and $ 583

— 1,787 — 1,787

Amortization of net prior service credit included in

11 unchanged sentences

Dollars in millions except per share amounts

June 30, December 31,

September 30, December 31,

Current Assets

31 unchanged sentences

Stockholders’ Equity

Preferred stock ($ 1 par value, 10,000,000 authorized at June 30, 2023 and December 31, 2022):

Series A ( 48,000 issued and outstanding at June 30, 2023 and December 31, 2022)

Series B ( 20,000 issued and outstanding at June 30, 2023 and December 31, 2022)

Series C ( 70,000 issued and outstanding at June 30, 2023 and December 31, 2022)

Common stock ($ 1 par value, 14,000,000,000 authorized at June 30, 2023 and

Preferred stock ($ 1 par value, 10,000,000 authorized at September 30, 2023 and December 31, 2022):

Series A ( 48,000 issued and outstanding at September 30, 2023 and December 31, 2022)

Series B ( 20,000 issued and outstanding at September 30, 2023 and December 31, 2022)

Series C ( 70,000 issued and outstanding at September 30, 2023 and December 31, 2022)

Common stock ($ 1 par value, 14,000,000,000 authorized at September 30, 2023 and

December 31, 2022:

issued 7,620,748,598 at June 30, 2023 and December 31, 2022)

issued 7,620,748,598 at September 30, 2023 and December 31, 2022)

Additional paid-in capital 116,890 123,610

Retained (deficit) earnings ( 7,203 ) ( 19,415 )

Treasury stock ( 471,323,301 at June 30, 2023 and 493,156,816 at December 31, 2022, at cost)

Treasury stock ( 471,150,008 at September 30, 2023 and 493,156,816 at December 31, 2022, at cost)

( 16,150 ) ( 17,082 )

6 unchanged sentences

Dollars in millions

Six months ended

Nine months ended

September 30,

Operating Activities

53 unchanged sentences

Dollars and shares in millions except per share amounts

Three months ended Six months ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three months ended Nine months ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Shares Amount Shares Amount Shares Amount Shares Amount

32 unchanged sentences

Dollars and shares in millions except per share amounts

Three months ended Six months ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three months ended Nine months ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Shares Amount Shares Amount Shares Amount Shares Amount

9 unchanged sentences

Other comprehensive income

attributable to AT&T

(loss) attributable to AT&T

240 566 ( 221 ) ( 656 )

5 unchanged sentences

295 373 787 1,107

Issuance and acquisition by

noncontrolling owners

Issuance and acquisition

(disposition) by noncontrolling

( 1 ) — 5,180 —

Redemption of noncontrolling

— ( 18 ) — ( 34 )

Distributions ( 314 ) ( 344 ) ( 772 ) ( 1,024 )

6 unchanged sentences

$ 117,855 $ 139,978 $ 117,855 $ 139,978

1 Excludes redeemable noncontrolling interest

See Notes to Consolidated Financial Statements.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

23 unchanged sentences

In the year of adoption, the disclosure of payment and other key terms under the programs and outstanding balances under the obligations also applies to interim reporting dates.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

1 unchanged sentence

EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and six months ended June 30, 2023 and 2022, is shown in the table below:

Three months ended Six months ended

June 30, June 30,

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months and nine months ended September 30, 2023 and 2022, is shown in the table below:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

25 unchanged sentences

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06), the ability to settle the Mobility preferred interests in stock was reflected in our diluted earnings per share calculation.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

14 unchanged sentences

367 ( 18 ) 902 ( 1,472 ) ( 221 )

Balance as of June 30, 2023 $ ( 1,343 ) $ ( 73 ) $ ( 1,951 ) $ 5,672 $ 2,305

Balance as of September 30, 2023 $ ( 1,433 ) $ ( 108 ) $ ( 1,096 ) $ 5,182 $ 2,545

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)

10 unchanged sentences

( 22 ) ( 145 ) ( 824 ) 335 ( 656 )

Balance as of June 30, 2022 $ ( 1,886 ) $ ( 58 ) $ ( 1,718 ) $ 5,969 $ 2,307

Balance as of September 30, 2022 $ ( 1,986 ) $ ( 100 ) $ ( 2,246 ) $ 7,205 $ 2,873

1 (Gains) losses are included in “Other income (expense) - net” in the consolidated statements of income.

9 unchanged sentences

EBITDA margin is EBITDA divided by total revenue.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

22 unchanged sentences

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

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Revenues Operations

19 unchanged sentences

$ 30,350 $ 19,863 $ 10,487 $ 4,705 $ 5,782

For the three months ended June 30, 2022

For the three months ended September 30, 2022

Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss)

16 unchanged sentences

$ 30,043 $ 19,517 $ 10,526 $ 4,514 $ 6,012

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Revenues Operations

18 unchanged sentences

$ 90,406 $ 58,205 $ 32,201 $ 14,011 $ 18,190

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss)

15 unchanged sentences

$ 89,398 $ 59,467 $ 29,931 $ 13,426 $ 16,505

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

2 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

17 unchanged sentences

The following tables set forth reported revenue by category and by business unit:

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Communications

8 unchanged sentences

Total $ 20,692 $ 5,221 $ 3,331 $ 992 $ 114 $ 30,350

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended June 30, 2022

For the three months ended September 30, 2022

Communications

8 unchanged sentences

Total $ 20,278 $ 5,668 $ 3,185 $ 785 $ 127 $ 30,043

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Communications

8 unchanged sentences

Total $ 61,589 $ 15,831 $ 9,821 $ 2,842 $ 323 $ 90,406

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Communications

10 unchanged sentences

Costs to acquire and fulfill customer contracts, including commissions on service activations, for our Mobility, Business Wireline, and Consumer Wireline services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years .

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

1 unchanged sentence

The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets:

June 30, December 31,

September 30, December 31,

Consolidated Balance Sheets 2023 2022

7 unchanged sentences

Total deferred customer contract fulfillment costs $ 6,315 $ 6,687

The following table presents deferred customer contract acquisition and fulfillment cost amortization included in “Cost of revenues” for the six months ended:

June 30, June 30,

The following table presents deferred customer contract acquisition and fulfillment cost amortization (primarily included in “Selling, general and administrative” and “Other cost of revenues,” respectively) for the nine months ended:

September 30, September 30,

Consolidated Statements of Income 2023 2022

11 unchanged sentences

The following table presents contract assets and liabilities on our consolidated balance sheets:

June 30, December 31,

September 30, December 31,

Consolidated Balance Sheets 2023 2022

3 unchanged sentences

Current portion in “Advanced billings and customer deposits” 3,598 3,816

Our contract asset balances at June 30, 2023 and December 31, 2022 reflect increased promotional equipment sales in our wireless business.

Our contract asset balances at September 30, 2023 and December 31, 2022 reflect increased promotional equipment sales in our wireless business.

Our beginning of period contract liability recorded as customer contract revenue during 2023 was $ 3,576 .

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

5 unchanged sentences

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 June 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 36,156 , of which we expect to recognize approximately 70 % by the end of 2024, with the balance recognized thereafter.

As of September 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 36,686 , of which we expect to recognize approximately 63 % by the end of 2024, with the balance recognized thereafter.

PENSION AND POSTRETIREMENT BENEFITS

7 unchanged sentences

The purchase of the group annuity contracts closed on May 3, 2023, covering approximately 96,000 AT&T participants and beneficiaries (Transferred Participants).

Under the group annuity contracts, Athene, through its wholly-owned subsidiaries Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York, made an irrevocable commitment, and will be solely responsible, to pay the pension benefits of each Transferred Participant beginning with their August 2023 pension payments.

Under the group annuity contracts, Athene, through its wholly-owned subsidiaries Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York, made an irrevocable commitment, and is solely responsible, to pay the pension benefits of each Transferred Participant beginning with their August 2023 pension payments.

The transaction does not change the amount of pension benefits payable to the Transferred Participants.

3 unchanged sentences

This transaction with Athene is considered a settlement for accounting purposes and requires us to remeasure our pension plan assets and obligations at each remaining quarter-end in 2023.

The second quarter 2023 remeasurement resulted in the recognition of an actuarial loss of $ 289 in the second quarter and for the first six months of 2023.

As part of our remeasurement, the weighted-average discount rate used to measure our pension benefit obligation was approximately 5.20 % at June 30, 2023, a decrease of 5 basis points.

The discount rates in effect for determining pension service and interest costs after our June 30 remeasurement are 5.20 %.

The remeasurement also reflects actual returns on pension plan assets of 4.10 % (six-month rate) relative to our expected long-term rate of 7.50 % (annual rate).

The third quarter 2023 remeasurement resulted in the recognition of an actuarial gain of $ 71 in the third quarter and an actuarial loss of $ 218 for the first nine months of 2023.

As part of our remeasurement, the weighted-average discount rate used to measure our pension benefit obligation was approximately 5.90 % at September 30, 2023 compared to 5.20 % at June 30, 2023, an increase of 70 basis points.

The discount rates in effect for determining pension service and interest costs after our September 30 remeasurement are 5.90 % and 5.70 %, respectively.

The remeasurement also reflects actual returns on pension plan assets of ( 1.10 )% (nine-month rate) relative to our expected long-term rate of 7.50 % (annual rate).

Similar to 2023, in 2022 we were required to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each remaining quarter end.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

2 unchanged sentences

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 Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

14 unchanged sentences

Amortization of prior service credit ( 618 ) ( 697 ) ( 1,854 ) ( 1,861 )

Net postretirement (credit) cost before remeasurement ( 560 ) ( 638 ) ( 1,680 ) ( 1,723 )

Actuarial (gain) loss — ( 1,084 ) — ( 1,084 )

Net postretirement (credit) cost $ ( 560 ) $ ( 1,722 ) $ ( 1,680 ) $ ( 2,807 )

1 unchanged sentence

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 $ 18 and $ 12 in the second quarter and $ 37 and $ 24 for the first six months of 2023 and 2022, respectively, predominantly due to higher interest costs.

Net supplemental pension benefits costs not included in the table above were $ 19 and $ 13 in the third quarter and $ 56 and $ 37 for the first nine months of 2023 and 2022, respectively, predominantly due to higher interest costs.

FAIR VALUE MEASUREMENTS AND DISCLOSURE

8 unchanged sentences

There have been no changes in the methodologies used since December 31, 2022.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

2 unchanged sentences

The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments are summarized as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Carrying Fair Carrying Fair

9 unchanged sentences

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.

Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of June 30, 2023 and December 31, 2022.

Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of September 30, 2023 and December 31, 2022.

Derivatives designated as hedging instruments are reflected as “Prepaid and other current assets,” “Other Assets,” “Accounts payable and accrued liabilities,” and “Other noncurrent liabilities” on our consolidated balance sheets.

June 30, 2023

September 30, 2023

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Cross-currency swaps — ( 4,785 ) — ( 4,785 )

Foreign exchange contracts — ( 19 ) — ( 19 )

December 31, 2022

10 unchanged sentences

Foreign exchange contracts — ( 23 ) — ( 23 )

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

6 unchanged sentences

The components comprising total gains and losses in the period on equity securities are as follows:

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

2 unchanged sentences

Unrealized gains (losses) recognized on equity securities held at end of period $ ( 56 ) $ ( 71 ) $ 108 $ ( 355 )

At June 30, 2023, available-for-sale debt securities totaling $ 1,214 have maturities as follows - less than one year:

At September 30, 2023, available-for-sale debt securities totaling $ 1,176 have maturities as follows - less than one year:

one to three years:

20 unchanged sentences

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 six months ended June 30, 2023 and 2022, no ineffectiveness was measured on fair value hedges.

JUNE 30, 2023

In the nine months ended September 30, 2023 and 2022, no ineffectiveness was measured on fair value hedges.

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

16 unchanged sentences

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 June 30, 2023, we had posted collateral of $ 709 (a deposit asset) and held collateral of $ 0 (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 June, we would have been required to post additional collateral of $ 52 .

At September 30, 2023, we had posted collateral of $ 689 (a deposit asset) and held collateral of $ 1 (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, we would have been required to post additional collateral of $ 53 .

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 $ 4,642 .

2 unchanged sentences

Following are the notional amounts of our outstanding derivative positions:

June 30, December 31,

September 30, December 31,

Interest rate swaps $ 1,750 $ —

2 unchanged sentences

Total $ 39,367 $ 38,830

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

2 unchanged sentences

Effect of Derivatives on the Consolidated Statements of Income

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

Fair Value Hedging Relationships 2023 2022 2023 2022

12 unchanged sentences

The following table presents information for our cash flow hedging relationships:

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

Cash Flow Hedging Relationships 2023 2022 2023 2022

16 unchanged sentences

Under the terms of our agreement for this program, we continue to service the transferred receivables on behalf of the financial institutions.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table sets forth a summary of cash proceeds received, net of remittances paid, from sales of receivables during the three and six months ended June 30, 2023 and 2022:

Three months ended Six months ended

June 30, June 30,

The following table sets forth a summary of cash proceeds received, net of remittances paid, from sales of receivables during the three and nine months ended September 30, 2023 and 2022:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

5 unchanged sentences

Total net cash impact to cash flows from operating activities $ 396 $ 757 $ 1,080 $ 2,179

1 Cash from initial sales of $ 2,656 and $ 2,618 for the three months and $ 5,185 and $ 5,934 for the six months ended June 30, 2023 and 2022, respectively.

1 Cash from initial sales of $ 2,937 and $ 2,664 for the three months and $ 8,122 and $ 8,598 for the nine months ended September 30, 2023 and 2022, respectively.

2 Certain transferred receivables are guaranteed by a subsidiary that holds additional receivables in the amount of $ 823 , which are pledged as collateral and represent our maximum exposure to loss.

3 unchanged sentences

The following table sets forth a summary of the equipment installment receivables and accounts being serviced:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Gross receivables:

14 unchanged sentences

Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table sets forth a summary of equipment installment receivables sold under this program during the three and six months ended June 30, 2023 and 2022:

Three months ended Six months ended

June 30, June 30,

The following table sets forth a summary of equipment installment receivables sold under this program during the three and nine months ended September 30, 2023 and 2022:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

12 unchanged sentences

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 six months ended June 30, 2023 and 2022:

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

4 unchanged sentences

1 These gains (losses) are included in “Selling, general and administrative” expense in the consolidated statements of income.

At June 30, 2023 and December 31, 2022, our deferred purchase price receivable was $ 2,425 and $ 2,318 , respectively, of which $ 1,329 and $ 1,278 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at June 30, 2023 and December 31, 2022 was $ 441 and $ 419 , respectively, of which $ 150 and $ 73 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.

At September 30, 2023 and December 31, 2022, our deferred purchase price receivable was $ 2,459 and $ 2,318 , respectively, of which $ 1,538 and $ 1,278 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, 2023 and December 31, 2022 was $ 349 and $ 419 , respectively, of which $ 116 and $ 73 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.

We have operating and finance leases for certain facilities and equipment used in operations.

4 unchanged sentences

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.

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

1 unchanged sentence

The components of lease expense were as follows:

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

6 unchanged sentences

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

Six months ended

Nine months ended

September 30,

Cash Flows from Operating Activities

5 unchanged sentences

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

September 30,

2023 December 31,

11 unchanged sentences

Total finance lease obligation $ 1,841 $ 1,817

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

September 30,

Weighted-Average Remaining Lease Term (years)

5 unchanged sentences

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

At June 30, 2023 Operating Finance

At September 30, 2023 Operating Finance

Leases Leases

10 unchanged sentences

We account for our investment in DIRECTV under the equity method and record our share of DIRECTV earnings as equity in net income of affiliates, with DIRECTV considered a related party.

Our share of DIRECTV’s earnings included in equity in net income of affiliates was $ 911 and $ 1,037 for the six months ended June 30, 2023 and 2022, respectively.

Cash distributions from DIRECTV for the first six months of 2023 totaled $ 1,885 , with $ 911 classified as operating activities and $ 974 classified as investing activities in our consolidated statement of cash flows versus total cash distributions of $ 2,675 ($ 1,037 operating and $ 1,638 investing) in the comparable prior period.

Our investment in DIRECTV at June 30, 2023 was $ 1,946 .

Our share of DIRECTV’s earnings included in equity in net income of affiliates was $ 1,334 and $ 1,429 for the nine months ended September 30, 2023 and 2022, respectively.

Cash distributions from DIRECTV for the first nine months of 2023 totaled $ 2,781 , with $ 1,334 classified as operating activities and $ 1,447 classified as investing activities in our consolidated statement of cash flows versus total cash distributions of $ 3,634 ($ 1,429 operating and $ 2,205 investing) in the comparable prior period.

Our investment in DIRECTV at September 30, 2023 was $ 1,476 .

In February 2023, we repaid all outstanding notes payable to DIRECTV.

We 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 three and six months ended June 30, 2023, we billed DIRECTV approximately $ 180 and $ 420 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 $ 178 in the second quarter and $ 347 for the first six months of 2023.

At June 30, 2023 , we had accounts receivable from DIRECTV of $ 252 and accounts payable to DIRECTV of $ 60 .

Under separate transition services agreements, we provide DIRECTV certain operational support, including servicing of certain of their customer receivables.

For the three and nine months ended September 30, 2023, we billed DIRECTV approximately $ 160 and $ 580 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 $ 167 in the third quarter and $ 514 for the first nine months of 2023.

At September 30, 2023 , we had accounts receivable from DIRECTV of $ 245 and accounts payable to DIRECTV of $ 40 .

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

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

4 unchanged sentences

Our supplier financing program does not result in changes to our normal, contracted payment cycles or cash from operations.

At the supplier’s election, they can receive payment of AT&T obligations prior to the scheduled due dates, at a discounted price to the third-party financial institution.

At the supplier’s election, they can receive payment of AT&T obligations prior to the scheduled due dates, at a discounted price from the third-party financial institution.

The discounted price paid by participating suppliers is based on a variable rate that is indexed to the overnight borrowing rate.

1 unchanged sentence

We do not have pledged assets or other guarantees under our supplier financing program.

Suppliers had elected to sell to the third-party financial institutions $ 3,007 and $ 2,869 of our outstanding payment obligations as of June 30, 2023 and December 31, 2022, respectively.

Suppliers had elected to sell to the third-party financial institutions $ 2,394 and $ 2,869 of our outstanding payment obligations as of September 30, 2023 and December 31, 2022, respectively.

These amounts are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets.

2 unchanged sentences

We also have arrangements with suppliers of handset inventory that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (variable rate extension fee).

We had $ 3,539 of direct supplier financing outstanding at June 30, 2023 and $ 5,486 as of December 31, 2022, which are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets.

We had $ 2,645 of direct supplier financing outstanding at September 30, 2023 and $ 5,486 as of December 31, 2022, which are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets.

Our direct supplier financing is reported as operating activities in our statements of cash flows when paid.

1 unchanged sentence

In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms of 120 days or more (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid.

For the six months ended June 30, 2023 and 2022, we recorded vendor financing commitments related to capital investments of approximately $ 1,341 and $ 2,012 , respectively.

We had $ 3,587 vendor financing payables at June 30, 2023, with $ 2,177 included in “Accounts payable and accrued liabilities” and $ 6,147 vendor financing payables at December 31, 2022, with $ 4,592 included in “Accounts payable and accrued liabilities.”

For the nine months ended September 30, 2023 and 2022, we recorded vendor financing commitments related to capital investments of approximately $ 2,128 and $ 3,916 , respectively.

We had $ 3,336 vendor financing payables at September 30, 2023, with $ 2,092 included in “Accounts payable and accrued liabilities” and $ 6,147 vendor financing payables at December 31, 2022, with $ 4,592 included in “Accounts payable and accrued liabilities.”

ADDITIONAL FINANCIAL INFORMATION

2 unchanged sentences

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

June 30, December 31,

September 30, December 31,

2023 2022 2022 2021

4 unchanged sentences

Cash and Cash Equivalents and Restricted Cash $ 7,659 $ 2,494 $ 3,793 $ 21,316

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

1 unchanged sentence

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

Six months ended

Nine months ended

September 30,

Cash paid (received) during the period for:

2 unchanged sentences

The following table summarizes capital expenditures:

Six months ended

Nine months ended

September 30,

Purchase of property and equipment $ 13,116 $ 15,273

2 unchanged sentences

The following table summarizes acquisitions, net of cash acquired:

Six months ended

Nine months ended

September 30,

Business acquisitions $ — $ —

2 unchanged sentences

Total Acquisitions $ 923 $ 9,959

1 Total capitalized interest was $ 537 and $ 682 for the six months ended June 30, 2023 and 2022, respectively.

1 Total capitalized interest was $ 750 and $ 1,007 for the nine months ended September 30, 2023 and 2022, respectively.

Preferred Interests Issued by Subsidiary

6 unchanged sentences

Mobility II Preferred Interests In April 2023, we accepted the December 2022 put option notice from the AT&T pension trust and repurchased the remaining 213 million Series A Cumulative Perpetual Preferred Membership Interests in AT&T Mobility II LLC (Mobility preferred interests) for a purchase price, including accrued and unpaid distributions, of $ 5,414 .

The Mobility preferred interests had a redemption value of $ 5,320 , with approximately $ 2,650 removed from “Accounts payable and accrued liabilities” and $ 2,670 removed from “Other noncurrent liabilities.” The repurchase was funded with proceeds from the April preferreds.

Mobility II Redeemable Noncontrolling Interests In June 2023, we issued two million Series B Cumulative Perpetual Preferred Membership Interests in Mobility II LLC (Mobility noncontrolling interests), which pay cash distributions of 6.8 % per annum, subject to declaration.

So long as the distributions are declared and paid, the terms of the Mobility noncontrolling

JUNE 30, 2023

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

6 unchanged sentences

The Mobility noncontrolling interests are required to be initially recorded at fair value less issuance costs and will accrete to redemption value of $ 2,000 through “Net Income Attributable to Noncontrolling Interest.” The Mobility noncontrolling interests are considered Level 3 under the Fair Value Measurement and Disclosures framework (see Note 7) and included in “Redeemable Noncontrolling Interest” on the consolidated balance sheets.

JUNE 30, 2023

SEPTEMBER 30, 2023

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10 unchanged sentences

Percentage increases and decreases that are not considered meaningful are denoted with a dash.

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

27 unchanged sentences

Correspondingly, this recast lowered administrative expenses within Corporate and Other, with no change on a consolidated basis.

JUNE 30, 2023

SEPTEMBER 30, 2023

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

3 unchanged sentences

Additional analysis is discussed in our “Segment Results” section.

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

12 unchanged sentences

Other income (expense) — net

440 2,270 (80.6) 2,362 6,729 (64.9)

Income from Continuing Operations

2 unchanged sentences

Income from Continuing Operations $ 3,826 $ 6,346 (39.7) % $ 13,041 $ 16,246 (19.7) %

Operating revenues increased in the second quarter and for the first six months of 2023, reflecting growth in Mobility, Mexico and Consumer Wireline revenues, partially offset by continued declines in Business Wireline revenues.

Operations and support expenses decreased in the second quarter and for the first six months of 2023, reflecting prior year noncash impairment charges of approximately $600 million and benefits of our continued transformation efforts, partially offset by inflationary increases.

In particular, operating expense declines were driven by lower domestic wireless equipment and associated selling costs from lower sales volumes, lower personnel costs and higher returns on benefit-related assets, partially offset by higher amortization of deferred customer acquisition costs.

Expense decrease for the first six months was also driven by the absence of first-quarter 2022 3G network shutdown costs, partially offset by higher network and bad debt expenses in 2023.

Depreciation and amortization expense increased in the second quarter and for the first six months of 2023.

Depreciation expense increased $215, or 4.9%, in the second quarter and $376, or 4.3%, for the first six months of 2023 primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades.

Amortization expense increased $10, or 28.6%, in the second quarter and $18, or 25.7%, for the first six months of 2023 primarily due to the amortization of wireless licenses in Mexico offset by lower amortization of intangible assets from previous acquisitions.

Operating income increased in the second quarter and for the first six months of 2023.

Our operating income margin in the second quarter increased from 16.7% in 2022 to 21.4% in 2023, and for the first six months increased from 17.7% in 2022 to 20.7% in 2023, reflecting lower equipment revenues which have lower margins as well as cost savings from our continued transformation efforts.

Interest expense increased in the second quarter and for the first six months of 2023, primarily due to lower capitalized interest associated with spectrum acquisitions and higher interest rates, partially offset by lower average debt balances.

Interest expense for the first six months of 2023 also includes the reclassification of Mobility preferred interests distributions, which were

JUNE 30, 2023

Operating revenues increased in the third quarter and for the first nine months of 2023, reflecting growth in Mobility and Consumer Wireline revenues, partially offset by continued declines in Business Wireline revenues.

Revenue increases also reflect favorable impacts of foreign exchange rates in Mexico.

Operations and support expenses increased in the third quarter and decreased for the first nine months of 2023.

The increase for the third quarter reflects higher severance and restructuring charges and continued inflationary cost increases, partially offset by our continued transformation efforts.

Operating expense increases also include increased network expense, unfavorable impact of foreign exchange rates, and higher amortization of deferred customer acquisition costs, partially offset by lower Mobility equipment and associated selling costs from lower wireless sales volumes and lower personnel costs.

Expense decreases for the first nine months reflect lower Mobility equipment and associated selling costs, lower personnel costs and higher returns on benefit-related assets, partially offset by higher amortization of deferred customer acquisition costs.

The decrease was also driven by the absence of first-quarter 2022 3G network shutdown costs and higher noncash impairment and restructuring charges in 2022, partially offset by higher network and bad debt expenses in 2023.

Depreciation and amortization expense increased in the third quarter and for the first nine months of 2023.

Depreciation expense increased $175, or 3.9%, in the third quarter and $551, or 4.1%, for the first nine months of 2023 primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades.

Amortization expense increased $16, or 45.7%, in the third quarter and $34, or 32.4%, for the first nine months of 2023 primarily due to the amortization of wireless licenses in Mexico.

Operating income decreased in the third quarter and increased for the first nine months of 2023.

Our operating income margin in the third quarter decreased from 20.0% in 2022 to 19.1% in 2023, reflecting higher severance and restructuring charges, and for the first nine months increased from 18.5% in 2022 to 20.1% in 2023, reflecting lower equipment revenues which have lower margins as well as cost savings from our continued transformation efforts.

SEPTEMBER 30, 2023

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

Dollars in millions except per share amounts

repurchased on April 5, 2023 (see Note 12).

Interest expense increased in the third quarter and for the first nine months of 2023, primarily due to lower capitalized interest associated with spectrum acquisitions and higher interest rates.

Interest expense for the first nine months of 2023 also includes the reclassification of Mobility preferred interests distributions, which were repurchased on April 5, 2023 (see Note 12).

Mobility preferred interest distributions were recorded as noncontrolling interest in 2022.

Equity in net income of affiliates decreased in the second quarter and for the first six months of 2023, primarily due to the performance of our investment in DIRECTV (see Note 10).

The decrease for the first six months was partially offset by our share of a gain on a sale-leaseback transaction by DIRECTV of approximately $100 in the first quarter of 2023.

Other income (expense) – net decreased in the second quarter and for the first six months of 2023.

The decreases were primarily driven by actuarial remeasurement of pension plan assets and obligations, with a $74 net actuarial and settlement gain in the second quarter and for the first six months of 2023, compared to a $1,345 gain in the second quarter and $2,398 for the first six months of 2022 (see Note 6).

Also contributing to the decrease were lower pension and postretirement benefit credits in 2023, primarily driven by higher interest costs from discount rate increases (see Note 6).

Partially offsetting the decreases were higher returns on other benefit-related investments.

Income tax expense decreased in the second quarter and for the first six months of 2023.

The decrease in the second quarter was primarily driven by lower income before income tax and lower state income tax expense.

Our effective tax rate was 22.8% in the second quarter of 2023, versus 24.1% in the comparable period in the prior year.

The decrease for the first six months of 2023 was primarily due to lower income before income tax.

Our effective tax rate was 22.8% for the first six months of 2023, versus 23.0% for the comparable period in the prior year.

COMMUNICATIONS SEGMENT Second Quarter Six-Month Period

Late in the third quarter of 2023, we received the majority of our C-band licenses from the Federal Communications Commission (FCC) auction in 2021, and we have ceased capitalization of interest for licenses that have been placed into service.

Equity in net income of affiliates increased in the third quarter and decreased for the first nine months of 2023, primarily due to the performance of our investment in DIRECTV (see Note 10).

The decrease for the first nine months was partially offset by our share of a gain on a sale-leaseback transaction by DIRECTV of approximately $100 in the first quarter of 2023.

Other income (expense) – net decreased in the third quarter and for the first nine months of 2023.

The decreases were primarily driven by actuarial remeasurement of pension plan assets and obligations, with net actuarial and settlement gains of $71 in the third quarter and $145 for the first nine months of 2023, compared to gains of $1,440 in the third quarter and $3,838 for the first nine months of 2022 (see Note 6).

Also contributing to the decrease was a $450 impairment of an equity investment in a Latin America satellite business and lower pension and postretirement benefit credits in 2023, which were primarily driven by higher interest costs from discount rate increases (see Note 6).

Partially offsetting the decreases were higher returns on other benefit-related investments for the first nine months.

Income tax expense increased in the third quarter and for the first nine months of 2023.

The increases were primarily driven by lower expense in 2022 resulting from one-time benefits due to a tax election that generated incremental tax benefit on the sale of Vrio and audit settlements, partially offset by lower income before income tax in 2023.

Our effective tax rate was 23.2% in the third quarter of 2023 and 22.9% for the first nine months of 2023, versus 12.5% and 19.2% in the comparable periods in the prior year.

The effective tax rates in 2022 were lower primarily due to the previously mentioned third-quarter 2022 tax benefits.

COMMUNICATIONS SEGMENT Third Quarter Nine-Month Period

Percent Percent

10 unchanged sentences

Total Segment Operating Income $ 7,273 $ 6,989 4.1 % $ 21,193 $ 20,159 5.1 %

SEPTEMBER 30, 2023

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

Dollars in millions except per share amounts

Selected Subscribers and Connections

September 30,

(000s) 2023 2022

2 unchanged sentences

Network access lines in service 4,421 5,466

U-verse VoIP connections 2,749 3,124

Operating revenues increased in the second quarter and for the first six months of 2023, driven by increases in our Mobility and Consumer Wireline business units, partially offset by decreases in our Business Wireline business unit.

VoIP connections

Operating revenues increased in the third quarter and for the first nine months of 2023, 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 revenue growth and gains in broadband service.

Business Wireline continues to reflect lower demand for legacy services and product simplification.

JUNE 30, 2023

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 second quarter and for the first six months of 2023, reflecting increases in our Mobility and Consumer Wireline business units, offset by lower operating income from our Business Wireline business unit in the second quarter.

Operating income for the first six months reflects an increase in our Mobility business unit, offset by lower operating income from our Business Wireline and Consumer Wireline business units.

Our Communications segment operating income margin in the second quarter increased from 23.3% in 2022 to 24.9% in 2023 and for the first six months increased from 22.9% in 2022 to 24.0% in 2023.

Operating income increased in the third quarter and for the first nine months of 2023, reflecting increases in our Mobility and Consumer Wireline business units, offset by lower operating income from our Business Wireline business unit in the third quarter.

Operating income for the first nine months reflects an increase in our Mobility business unit, offset by lower operating income from our Business Wireline and Consumer Wireline business units.

Our Communications segment operating income margin in the third quarter increased from 24.0% in 2022 to 24.9% in 2023 and for the first nine months increased from 23.3% in 2022 to 24.3% in 2023.

Communications Business Unit Discussion

Mobility Results

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

9 unchanged sentences

Operating Income $ 6,763 $ 6,226 8.6 % $ 19,647 $ 17,963 9.4 %

SEPTEMBER 30, 2023

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

Dollars in millions except per share amounts

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

June 30, Percent

September 30, Percent

(in 000s) 2023 2022 Change

8 unchanged sentences

1 Includes data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.

2 Wireless subscribers at June 30, 2023 includes an increase of 295 subscribers and connections (206 postpaid, including 74 phone, and 89 connected devices) resulting from our 3G network shutdown.

JUNE 30, 2023

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

Dollars in millions except per share amounts

2 Wireless subscribers at September 30, 2023 includes an increase of 295 subscribers and connections (206 postpaid, including 74 phone, and 89 connected devices) resulting from our 3G network shutdown.

Mobility Net Additions

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

15 unchanged sentences

2 In addition to postpaid phones, includes tablets and wearables and other.

Tablet net adds (losses) were (31) and 54 for the quarter ended June 30, 2023 and 2022 and (49) and 85 for the first six months of June 30, 2023 and 2022.

Wearables and other net adds were 169 and 191 for the quarter ended June 30, 2023 and 2022 and 305 and 434 for the first six months ended June 30, 2023 and 2022.

Tablet net adds (losses) were (36) and 33 for the quarters ended September 30, 2023 and 2022 and (85) and 118 for the first nine months of September 30, 2023 and 2022.

Wearables and other net adds were 118 and 223 for the quarters ended September 30, 2023 and 2022 and 423 and 657 for the first nine months ended September 30, 2023 and 2022.

3 Includes 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 approximately 2,900 and 2,800 for the quarter ended June 30, 2023 and June 30, 2022 and 5,600 and 4,700 for the first six months ended June 30, 2023 and June 30, 2022.

Wholesale connected car net adds were approximately 2,800 and 2,600 for the quarters ended September 30, 2023 and 2022 and 8,400 and 7,400 for the first nine months ended September 30, 2023 and 2022.

4 Calculated by dividing the aggregate number of wireless subscribers who canceled service during a month 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 second quarter and for the first six months of 2023.

The increases are largely due to growth from subscriber gains and postpaid average revenue per subscriber (ARPU) growth.

ARPU increased in the second quarter and for the first six months of 2023.

Service revenue increased in the third quarter and for the first nine months of 2023.

The increases are largely due to growth from subscriber gains and postpaid phone average revenue per subscriber (ARPU) growth.

ARPU increased in the third quarter and for the first nine months of 2023.

ARPU during 2023 reflects pricing actions, improved international roaming and customers shifting to higher priced unlimited plans, partially offset by the impact of higher promotional discount amortization (see Note 5).

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 higher in the second quarter and for the first six months due to a return to pre-pandemic consumer behavior as well as pricing actions and the resulting increase in voluntary disconnects.

Equipment revenue decreased in the second quarter and for the first six months of 2023, primarily driven by a lower volume of devices sold.

Operations and support expenses decreased in the second quarter and for the first six months of 2023 largely due to lower equipment costs driven by lower device sales and lower HBO Max licensing fees.

These decreases were offset by higher amortization of deferred customer acquisition costs and increased network and customer support expenses.

Expense decrease for the first six months was also driven by the absence of first-quarter 2022 3G network shutdown costs, partially offset by higher marketing and bad debt expenses.

Depreciation expense increased in the second quarter and for the first six months of 2023, primarily due to ongoing capital spending for network upgrades and expansion.

JUNE 30, 2023

SEPTEMBER 30, 2023

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 second quarter and for the first six months of 2023.

Our Mobility operating income margin in the second quarter increased from 30.4% in 2022 to 32.6% in 2023 and for the first six months increased from 29.3% in 2022 to 31.5% in 2023.

Our Mobility EBITDA margin in the second quarter increased from 40.5% in 2022 to 43.0% in 2023 and for the six months increased from 39.5% in 2022 to 41.8% in 2023.

The effective management of subscriber churn is critical to our ability to maximize revenue growth and to maintain and improve margins.

Postpaid churn and postpaid phone-only churn were lower in the third quarter and slightly higher for the first nine months of 2023.

Equipment revenue decreased in the third quarter and for the first nine months of 2023, primarily driven by a lower volume of devices sold.

Operations and support expenses decreased in the third quarter and for the first nine months of 2023 largely due to lower equipment costs and associated selling costs driven by lower device sales.

These decreases were offset by increased network and customer support expenses and higher amortization of deferred customer acquisition costs.

Expense decrease for the first nine months was also driven by the absence of first-quarter 2022 3G network shutdown costs, partially offset by higher marketing and bad debt expenses.

Depreciation expense increased in the third quarter and for the first nine months of 2023, primarily due to ongoing capital spending for network upgrades and expansion.

Operating income increased in the third quarter and for the first nine months of 2023.

Our Mobility operating income margin in the third quarter increased from 30.7% in 2022 to 32.7% in 2023 and for the first nine months increased from 29.8% in 2022 to 31.9% in 2023.

Our Mobility EBITDA margin in the third quarter increased from 40.8% in 2022 to 43.0% in 2023 and for the nine months increased from 39.9% in 2022 to 42.2% in 2023.

EBITDA is defined as operating income excluding depreciation and amortization.

Business Wireline Results

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

9 unchanged sentences

Operating Income $ 350 $ 621 (43.6) % $ 1,124 $ 1,750 (35.8) %

Service revenues decreased in the second quarter and for the first six months of 2023, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in connectivity services.

Service revenues decreased in the third quarter and for the first nine months of 2023, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in connectivity services.

We expect these trends to continue.

Equipment revenues decreased in the second quarter and for the first six months of 2023, driven by declines in legacy and non-core services which we expect to continue.

Operations and support expenses decreased in the second quarter and for the first six months of 2023, primarily due to our continued efforts to drive efficiencies in our network operations through automation, reductions in customer support expenses through digitization and proactive rationalization of low profit margin products.

Expense declines were also driven by lower personnel costs associated with ongoing transformation initiatives, lower network access costs, which contained approximately $75 of benefit related to settlement of a dispute, and lower marketing expenses.

The declines for the first six months were partially offset by favorable compensation true-ups in the first quarter of 2022.

As part of our transformation activities, we expect operations and support expense improvements through the remainder of 2023 as we further right size our operations in alignment with the strategic direction of the business.

Depreciation expense increased in the second quarter and for the first six months of 2023, primarily due to ongoing capital investment for strategic initiatives such as fiber.

Operating income decreased in the second quarter and for the first six months of 2023.

Our Business Wireline operating income margin in the second quarter decreased from 8.8% in 2022 to 7.5% in 2023 and for the first six months decreased from 10.0% in 2022 to 7.3% in 2023.

Our Business Wireline EBITDA margin in the second quarter increased from 32.2% in 2022 to 32.8% in 2023 and for the first six months decreased from 33.3% in 2022 to 32.4% in 2023.

JUNE 30, 2023

Equipment revenues decreased in the third quarter and for the first nine months of 2023, driven by declines in legacy and non-core services, which we expect to continue.

Operations and support expenses decreased in the third quarter and for the first nine months of 2023, primarily due to our continued efforts to drive efficiencies in our network operations through automation, reductions in customer support expenses through digitization and proactive rationalization of low profit margin products.

Expense declines were also driven by lower personnel costs associated with ongoing transformation initiatives, lower network access, customer support and marketing expenses.

The decrease for the first nine months also included approximately $75 of benefit related to settlement of a dispute in the second quarter of 2023, partially offset by favorable compensation true-ups in the first quarter of 2022.

As part of our

SEPTEMBER 30, 2023

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

Dollars in millions except per share amounts

transformation activities, we expect operations and support expense improvements through the remainder of 2023, as we further right size our operations in alignment with the strategic direction of the business.

Depreciation expense increased in the third quarter and for the first nine months of 2023, primarily due to ongoing capital investment for strategic initiatives such as fiber.

Operating income decreased in the third quarter and for the first nine months of 2023.

Our Business Wireline operating income margin in the third quarter decreased from 11.0% in 2022 to 6.7% in 2023 and for the first nine months decreased from 10.4% in 2022 to 7.1% in 2023.

Our Business Wireline EBITDA margin in the third quarter decreased from 34.6% in 2022 to 32.5% in 2023 and for the first nine months decreased from 33.7% in 2022 to 32.4% in 2023.

Consumer Wireline Results

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

11 unchanged sentences

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

June 30, Percent

September 30, Percent

(in 000s) 2023 2022 Change

1 unchanged sentence

Total Broadband and DSL Connections 13,887 14,055 (1.2) %

Broadband 13,695 13,825 (0.9)

13,710 13,796 (0.6)

Fiber Broadband Connections 8,034 6,935 15.8

1 unchanged sentence

Retail Consumer Switched Access Lines 1,737 2,123 (18.2)

U-verse Consumer VoIP Connections 2,126 2,521 (15.7)

Consumer VoIP Connections

2,035 2,409 (15.5)

Total Retail Consumer Voice Connections 3,772 4,532 (16.8) %

1 Includes AT&T Internet Air.

SEPTEMBER 30, 2023

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

Dollars in millions except per share amounts

Broadband Net Additions

Second Quarter Six-Month Period

Third Quarter Nine-Month Period

Percent Percent

2 unchanged sentences

Broadband Net Additions 1

15 (29) — (43) (49) 12.2

Fiber Broadband Net Additions 296 338 (12.4) % 819 943 (13.1) %

Broadband revenues increased in the second quarter and for the first six months of 2023, driven by an increase in fiber customers, which we expect to continue as we invest further in building our fiber footprint, partially offset by declines in copper-based broadband services.

Legacy voice and data service revenues decreased in the second quarter and for the first six months of 2023, reflecting the continued decline in the number of customers.

Other service and equipment revenues decreased in the second quarter and for the first six months of 2023, reflecting the continued decline in the number of VoIP customers.

JUNE 30, 2023

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

Dollars in millions except per share amounts

Operations and support expenses decreased in the second quarter and increased for the first six months of 2023.

Expense decreases in the second quarter were primarily due to lower customer support costs, including approximately $35 of benefit from a vendor dispute resolution, and lower HBO Max licensing fees, partially offset by higher network and maintenance costs and higher amortization of deferred acquisition costs.

Expense increases for the first six months reflect higher network and maintenance costs and higher amortization of deferred acquisition costs, partially offset by lower sales and advertising costs, lower HBO Max licensing fees and favorable compensation true-ups in the first quarter of 2022.

Depreciation expense increased in the second quarter and for the first six months of 2023, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion.

Operating income increased in the second quarter and decreased for the first six months of 2023.

Our Consumer Wireline operating income margin in the second quarter increased from 4.6% in 2022 to 5.2% in 2023 and for the first six months decreased from 4.8% in 2022 to 4.0% in 2023.

Our Consumer Wireline EBITDA margin in the second quarter increased from 29.3% in 2022 to 31.5% in 2023 and for the first six months increased from 29.3% in 2022 to 30.5% in 2023.

LATIN AMERICA SEGMENT Second Quarter

Six-Month Period

1 Includes AT&T Internet Air.

Broadband revenues increased in the third quarter and for the first nine months of 2023, driven by an increase in fiber customers, which we expect to continue as we invest further in building our fiber footprint, and higher ARPU due to prior-year promotional pricing, partially offset by declines in copper-based broadband services.

Legacy voice and data service revenues decreased in the third quarter and for the first nine months of 2023, reflecting the continued decline in the number of customers.

Other service and equipment revenues decreased in the third quarter and for the first nine months of 2023, reflecting the continued decline in the number of VoIP customers.

Operations and support expenses increased in the third quarter and for the first nine months of 2023.

Expense increases were primarily due to higher network-related costs as our fiber build scales, partially offset by lower customer support costs.

The increase for the first nine months was also partially offset by lower Max licensing fees in the first half of 2023, approximately $35 of benefit from a vendor dispute resolution in the second quarter of 2023 and favorable compensation true-ups in the first quarter of 2022.

Depreciation expense increased in the third quarter and for the first nine months of 2023, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion.

Operating income increased in the third quarter and decreased for the first nine months of 2023.

Our Consumer Wireline operating income margin in the third quarter increased from 4.5% in 2022 to 4.8% in 2023 and for the first nine months decreased from 4.7% in 2022 to 4.3% in 2023.

Our Consumer Wireline EBITDA margin in the third quarter increased from 29.6% in 2022 to 31.0% in 2023 and for the first nine months increased from 29.4% in 2022 to 30.7% in 2023.

LATIN AMERICA SEGMENT Third Quarter

Nine-Month Period

2023 2022 Percent Change 2023 2022 Percent Change

8 unchanged sentences

Operating Income (Loss) $ (29) $ (63) 54.0 % $ (98) $ (247) 60.3 %

JUNE 30, 2023

SEPTEMBER 30, 2023

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

1 unchanged sentence

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

June 30, Percent

September 30, Percent

(in 000s) 2023 2022 Change

5 unchanged sentences

Mexico Wireless Net Additions

Second Quarter

Six-Month Period

Third Quarter

Nine-Month Period

Percent Percent

5 unchanged sentences

Total Mexico Wireless Net Additions 65 298 (78.2) % 151 636 (76.3) %

Service revenues increased in the second quarter and for the first six months of 2023 reflecting favorable foreign exchange impacts, higher wholesale revenues and growth in subscribers.

Equipment revenues increased in the second quarter and for the first six months of 2023 driven by favorable foreign exchange impacts and higher equipment sales.

Operations and support expenses increased in the second quarter and for the first six months of 2023 driven by unfavorable impact of foreign exchange and increased equipment costs resulting from higher sales.

Service revenues increased in the third quarter and for the first nine months of 2023 reflecting favorable foreign exchange impacts and growth in subscribers.

The increase for the first nine months of 2023 also reflects higher wholesale revenues.

Equipment revenues increased in the third quarter and for the first nine months of 2023 driven by favorable foreign exchange impacts and higher equipment sales.

Operations and support expenses increased in the third quarter and for the first nine months of 2023 driven by unfavorable impact of foreign exchange and increased equipment costs resulting from higher sales.

Approximately 5% of Mexico expenses are U.S.

dollar based, with the remainder in the local currency.

Depreciation and amortization expense increased in the second quarter and for the first six months of 2023, driven by unfavorable impact of foreign exchange.

Operating income improved in the second quarter and for the first six months of 2023.

Our Mexico operating income margin in the second quarter increased from (10.1)% in 2022 to (4.0)% in 2023 and for the first six months increased from (12.3)% in 2022 to (3.7)% in 2023.

Our Mexico EBITDA margin in the second quarter increased from 10.8% in 2022 to 15.1% in 2023 and for the first six months increased from 9.7% in 2022 to 15.7% in 2023.

Depreciation and amortization expense increased in the third quarter and for the first nine months of 2023, driven by unfavorable impact of foreign exchange partially offset by lower in-service assets.

Operating income improved in the third quarter and for the first nine months of 2023.

Our Mexico operating income margin in the third quarter increased from (8.0)% in 2022 to (2.9)% in 2023 and for the first nine months increased from (10.8)% in 2022 to (3.4)% in 2023.

Our Mexico EBITDA margin in the third quarter increased from 12.9% in 2022 to 15.6% in 2023 and for the first nine months increased from 10.8% in 2022 to 15.7% in 2023.

OTHER BUSINESS MATTERS

4 unchanged sentences

We deconsolidated Gigapower’s operations in the second quarter of 2023.

JUNE 30, 2023

SEPTEMBER 30, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements