What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-10-31 · 276 added, 608 removed, 759 unchanged (54% of the section changed)

2 unchanged sentences

Dollars in millions except per share amounts

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

Three months ended

Operating Revenues

7 unchanged sentences

amortization shown separately below)

6,835 6,761 20,279 20,267

Selling, general and administrative 7,021 7,175

Asset impairments and abandonments and restructuring

604 114 604 745

Depreciation and amortization 5,047 4,631

5 unchanged sentences

Other income (expense) — net

440 2,270 2,362 6,729

Total other income (expense) ( 978 ) ( 235 )

Income from Continuing Operations Before Income Taxes 4,980 7,254 16,912 20,103

Income tax expense on continuing operations 1,154 908 3,871 3,857

Income from Continuing Operations 3,826 6,346 13,041 16,246

Income (loss) from discontinued operations, net of tax

— 53 — ( 146 )

Income Before Income Taxes 4,869 5,767

Income tax expense 1,118 1,314

Net Income 3,751 4,453

3 unchanged sentences

Net Income Attributable to Common Stock $ 3,395 $ 4,176

Basic Earnings Per Share from continuing operations $ 0.48 $ 0.82 $ 1.67 $ 2.08

Basic Earnings (Loss) Per Share from discontinued operations $ — $ 0.01 $ — $ ( 0.02 )

Basic Earnings Per Share Attributable to Common Stock $ 0.47 $ 0.58

Diluted Earnings Per Share from continuing operations $ 0.48 $ 0.79 $ 1.67 $ 2.03

Diluted Earnings (Loss) Per Share from discontinued operations $ — $ 0.01 $ — $ ( 0.02 )

Diluted Earnings Per Share Attributable to Common Stock $ 0.47 $ 0.57

1 unchanged sentence

Outstanding — Basic (in millions)

7,185 7,153 7,178 7,169

Weighted Average Number of Common Shares

Outstanding — with Dilution (in millions)

7,185 7,647 7,280 7,605

See Notes to Consolidated Financial Statements.

1 unchanged sentence

Dollars in millions

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

Three months ended

Net income $ 3,751 $ 4,453

1 unchanged sentence

Foreign currency:

Translation adjustment, net of taxes of $( 29 ), $( 38 ), $ 111

( 90 ) ( 88 ) 367 160

Distribution of WarnerMedia, net of taxes of $ 0 , $ 0 ,

$ 0 and $( 38 )

— ( 12 ) — ( 182 )

Net unrealized gains (losses), net of taxes of $( 12 ), $( 15 ),

$( 8 ) and $( 52 )

( 37 ) ( 43 ) ( 25 ) ( 152 )

Reclassification adjustment included in net income,

net of taxes of $ 1 , $ 1 , $ 3 and $ 3

Translation adjustment, net of taxes of $ 8 and $ 52

Net unrealized gains (losses), net of taxes of $( 2 ) and $ 8

Reclassification adjustment included in net income, net of taxes of $ 2 and $ 1

Derivative instruments:

Net unrealized gains (losses), net of taxes of $ 211 , $( 143 ),

$ 213 and $( 246 )

843 ( 540 ) 867 ( 885 )

Reclassification adjustment included in net income,

net of taxes of $ 3 , $ 3 , $ 9 and $ 22

Distribution of WarnerMedia, net of taxes of $ 0 , $ 0 ,

$ 0 and $( 12 )

Net unrealized gains (losses), net of taxes of $ 49 and $( 43 )

Reclassification adjustment included in net income, net of taxes of $ 3 and $ 3

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

net income, net of taxes of $( 160 ), $( 180 ), $( 481 )

Amortization of net prior service credit included in net income, net of taxes of

$( 123 ) and $( 160 )

( 381 ) ( 491 )

Distribution of WarnerMedia, net of taxes of $ 0 , $ 0 , $ 0

Other comprehensive income (loss) ( 133 ) ( 412 )

Total comprehensive income 3,618 4,041

Total comprehensive income attributable to

noncontrolling interest

Total comprehensive income attributable to noncontrolling interest

( 306 ) ( 225 )

3 unchanged sentences

Dollars in millions except per share amounts

September 30, December 31,

March 31, December 31,

Assets (Unaudited)

Current Assets

17 unchanged sentences

Debt maturing within one year $ 7,060 $ 9,477

Note payable to DIRECTV — 130

Accounts payable and accrued liabilities 31,973 35,852

11 unchanged sentences

Stockholders’ Equity

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

Preferred stock ($ 1 par value, 10,000,000 authorized at March 31, 2024 and December 31, 2023):

Series A ( 48,000 issued and outstanding at March 31, 2024 and December 31, 2023)

Series B ( 20,000 issued and outstanding at March 31, 2024 and December 31, 2023)

Series C ( 70,000 issued and outstanding at March 31, 2024 and December 31, 2023)

Common stock ($ 1 par value, 14,000,000,000 authorized at March 31, 2024 and

December 31, 2023:

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

issued 7,620,748,598 at March 31, 2024 and December 31, 2023)

Additional paid-in capital 111,599 114,519

Retained (deficit) earnings ( 1,570 ) ( 5,015 )

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

Treasury stock ( 450,713,156 at March 31, 2024 and 470,685,237 at December 31, 2023, at cost)

( 15,277 ) ( 16,128 )

6 unchanged sentences

Dollars in millions

Nine months ended

September 30,

Three months ended

Operating Activities

Income from continuing operations $ 13,041 $ 16,246

Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations:

Net Income $ 3,751 $ 4,453

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 5,047 4,631

3 unchanged sentences

Pension and postretirement benefit expense (credit) ( 471 ) ( 670 )

Actuarial and settlement (gain) loss on pension and postretirement benefits - net ( 145 ) ( 3,838 )

Asset impairments and abandonments and restructuring 159 —

8 unchanged sentences

Total adjustments 3,796 2,225

Net Cash Provided by Operating Activities from Continuing Operations 26,936 25,464

Net Cash Provided by Operating Activities 7,547 6,678

Investing Activities

5 unchanged sentences

Other - net ( 273 ) —

Net Cash Used in Investing Activities from Continuing Operations ( 13,786 ) ( 23,011 )

Net Cash Used in Investing Activities ( 2,961 ) ( 3,818 )

Financing Activities

8 unchanged sentences

Issuance of treasury stock — 3

Issuance of preferred interests in subsidiary 7,151 —

Redemption of preferred interests in subsidiary ( 5,333 ) —

Dividends paid ( 2,034 ) ( 2,014 )

Other - net ( 526 ) 219

Net Cash Used in Financing Activities from Continuing Operations ( 9,284 ) ( 54,403 )

Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations 3,866 ( 51,950 )

Cash flows from Discontinued Operations:

Cash (used in) provided by operating activities — ( 3,754 )

Cash provided by (used in) investing activities — 1,029

Cash provided by (used in) financing activities — 35,853

Net increase (decrease) in cash and cash equivalents and restricted cash from discontinued operations — 33,128

Net Cash Used in Financing Activities ( 7,815 ) ( 3,711 )

Net increase (decrease) in cash and cash equivalents and restricted cash $ ( 3,229 ) $ ( 851 )

4 unchanged sentences

Dollars and shares in millions except per share amounts

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

Three months ended

March 31, 2024 March 31, 2023

Shares Amount Shares Amount

Preferred Stock - Series A

11 unchanged sentences

Balance at beginning of period $ 114,519 $ 123,610

Distribution of WarnerMedia — — — ( 6,832 )

Preferred stock dividends ( 98 ) ( 98 )

Common stock dividends

($ 0.2775 and $ 0.8325 per share

Common stock dividends ($ 0.2775 and $ 0.2775 per share)

( 2,003 ) ( 2,002 )

1 unchanged sentence

Share-based payments ( 266 ) ( 371 )

Redemption or reclassification of interest held by noncontrolling owners

Balance at end of period $ 111,599 $ 120,774

2 unchanged sentences

Net income attributable to AT&T 3,445 4,228

Distribution of WarnerMedia — — — ( 45,041 )

Preferred stock dividends — ( 36 ) — ( 171 )

Common stock dividends

($ 0.2775 and $ 0.8325 per share

— ( 1,991 ) — ( 6,004 )

Balance at end of period $ ( 1,570 ) $ ( 15,187 )

2 unchanged sentences

Dollars and shares in millions except per share amounts

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

Three months ended

March 31, 2024 March 31, 2023

Shares Amount Shares Amount

Treasury Stock

Balance at beginning of period ( 471 ) $ ( 16,128 ) ( 493 ) $ ( 17,082 )

Repurchase and acquisition of

— ( 1 ) — ( 3 ) ( 10 ) ( 190 ) ( 43 ) ( 875 )

Repurchase and acquisition of common stock ( 9 ) ( 157 ) ( 10 ) ( 188 )

Reissuance of treasury stock 29 1,008 31 1,104

3 unchanged sentences

Balance at beginning of period $ 2,300 $ 2,766

Other comprehensive income

(loss) attributable to AT&T

240 566 ( 221 ) ( 656 )

Other comprehensive income (loss) attributable to AT&T ( 133 ) ( 412 )

Balance at end of period $ 2,167 $ 2,354

1 unchanged sentence

Balance at beginning of period $ 14,145 $ 8,957

Net income attributable to

noncontrolling interest

295 373 787 1,107

Issuance and acquisition

(disposition) by noncontrolling

( 1 ) — 5,180 —

Redemption of noncontrolling

— ( 18 ) — ( 34 )

Net income attributable to noncontrolling interest 270 225

Redemption of noncontrolling interest ( 17 ) —

Distributions ( 318 ) ( 232 )

Balance at end of period $ 14,080 $ 8,950

Total Stockholders' Equity

at beginning of period

$ 116,075 $ 135,307 $ 106,457 $ 183,855

Total Stockholders' Equity

at end of period

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

Total Stockholders' Equity at beginning of period $ 117,442 $ 106,457

Total Stockholders' Equity at end of period $ 118,620 $ 108,346

1 Excludes redeemable noncontrolling interest

See Notes to Consolidated Financial Statements.

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

14 unchanged sentences

Actual results could differ from those estimates.

Certain prior period amounts have been conformed to the current period’s presentation.

Unless otherwise noted, the information in Notes 1 through 12 refer only to our continuing operations and do not include discussion of balances or activity of WarnerMedia, Vrio, Xandr and Playdemic Ltd., which were part of discontinued operations.

Accounting Policies, Adopted and Pending Accounting Standards and Other Changes

Supplier Finance Obligations As of January 1, 2023, we adopted, with retrospective application, the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) No.

2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations” (ASU 2022-04), which establishes interim and annual reporting disclosure requirements about a company’s supplier finance programs for its purchase of goods and services.

Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a rollforward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs.

The annual rollforward requirement becomes effective for annual periods beginning after December 15, 2023, with prospective application.

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.

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

EARNINGS PER SHARE

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

A reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023, is shown in the table below:

Three months ended

Numerator for basic earnings per share:

Income from continuing operations, net of tax $ 3,826 $ 6,346 $ 13,041 $ 16,246

Net income from continuing operations attributable to

noncontrolling interests

( 331 ) ( 373 ) ( 829 ) ( 1,107 )

Preferred Stock Dividends ( 51 ) ( 49 ) ( 155 ) ( 149 )

Income from continuing operations attributable to

3,444 5,924 12,057 14,990

Income (loss) from discontinued operations attributable to

— 53 — ( 146 )

Net Income Attributable to Common Stock $ 3,395 $ 4,176

10 unchanged sentences

Denominator for diluted earnings per share 7,193 7,474

On April 5, 2023, we repurchased all our Series A Cumulative Perpetual Preferred Membership Interests in AT&T Mobility II LLC (Mobility preferred interests) (see Note 12).

For periods prior to repurchase, under ASU No.

On April 5, 2023, we repurchased all our Series A Cumulative Perpetual Preferred Membership Interests in AT&T Mobility II LLC (Mobility preferred interests).

For periods prior to repurchase, under 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), the ability to settle the Mobility preferred interests in stock was reflected in our diluted earnings per share calculation.

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

14 unchanged sentences

29 ( 4 ) 223 ( 381 ) ( 133 )

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

Balance as of March 31, 2024 $ ( 1,308 ) $ ( 61 ) $ ( 806 ) $ 4,342 $ 2,167

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)

6 unchanged sentences

— 1 3 1 12 2 ( 491 ) 3 ( 476 )

Distribution of WarnerMedia ( 182 ) — ( 24 ) 25 ( 181 )

Net other comprehensive

1 unchanged sentence

193 26 ( 140 ) ( 491 ) ( 412 )

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

Balance as of March 31, 2023 $ ( 1,607 ) $ ( 64 ) $ ( 2,138 ) $ 6,163 $ 2,354

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.

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Effective for the first quarter of 2023, we stopped recording prior service credits to our individual business units or the corresponding charge to Corporate and Other, and segment operating expenses were recast to remove prior service credits from our historical reporting.

Prior service credits are, and will continue to be, recorded as other income in our consolidated income statement in accordance with GAAP.

This recast increased Communications segment operations and support expenses by approximately $ 2,400 for full-year 2022.

Correspondingly, this recast lowered administrative expenses within Corporate and Other, 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.

Our business strategies reflect integrated product offerings that cut across product lines and utilize shared assets.

This segment contains the following business units:

1 unchanged sentence

• 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 provide our multi-gig services to residential customers in select locations.

In the first quarter of 2024, we began offering our fixed wireless access product that provides internet services delivered over our 5G wireless network where available.

• Consumer Wireline provides broadband services, including fiber connections that provide multi-gig services to residential customers in select locations and our fixed wireless access product that provides home internet services delivered over our 5G wireless network where available.

Consumer Wireline also provides legacy telephony voice communication services.

2 unchanged sentences

Corporate includes :

• DTV-related retained costs , which are costs previously allocated to the Video business that were retained after the transaction, net of reimbursements from DIRECTV under transition service agreements.

• DTV-related retained costs , which are costs 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.

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

1 unchanged sentence

• Value portfolio , which are businesses no longer integral to our operations or which we no longer actively market.

Other items consist of :

• Certain significant items , which includes items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assets, employee separation charges associated with voluntary and/or strategic offers, asset impairments and abandonments, and other items for which the segments are not being evaluated.

Other items consists of :

• Certain significant items , which includes items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assets, employee separation charges associated with voluntary and/or strategic offers, asset impairments and abandonments and restructuring, and other items for which the segments are not being evaluated.

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

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2023

Revenues Operations

Expenses EBITDA Depreciation

Amortization Operating

Income (Loss)

Communications

Mobility $ 20,692 $ 11,795 $ 8,897 $ 2,134 $ 6,763

Business Wireline 5,221 3,526 1,695 1,345 350

Consumer Wireline 3,331 2,300 1,031 871 160

Total Communications 29,244 17,621 11,623 4,350 7,273

Latin America - Mexico 992 837 155 184 ( 29 )

Segment Total 30,236 18,458 11,778 4,534 7,244

Corporate and Other

DTV-related retained costs — 167 ( 167 ) 144 ( 311 )

Parent administration support ( 1 ) 333 ( 334 ) 1 ( 335 )

Securitization fees

25 164 ( 139 ) — ( 139 )

Value portfolio 90 25 65 5 60

Total Corporate 114 689 ( 575 ) 150 ( 725 )

Certain significant items — 716 ( 716 ) 21 ( 737 )

Total Corporate and Other 114 1,405 ( 1,291 ) 171 ( 1,462 )

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

For the three months ended September 30, 2022

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

Communications

Mobility $ 20,278 $ 12,010 $ 8,268 $ 2,042 $ 6,226

Business Wireline 5,668 3,705 1,963 1,342 621

Consumer Wireline 3,185 2,243 942 800 142

Total Communications 29,131 17,958 11,173 4,184 6,989

Latin America - Mexico 785 684 101 164 ( 63 )

Segment Total 29,916 18,642 11,274 4,348 6,926

Corporate and Other

DTV-related retained costs — 235 ( 235 ) 139 ( 374 )

Parent administration support ( 6 ) 317 ( 323 ) 2 ( 325 )

Securitization fees

15 103 ( 88 ) — ( 88 )

Value portfolio 118 32 86 9 77

Total Corporate 127 687 ( 560 ) 150 ( 710 )

Certain significant items — 188 ( 188 ) 16 ( 204 )

Total Corporate and Other 127 875 ( 748 ) 166 ( 914 )

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

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the nine months ended September 30, 2023

For the three months ended March 31, 2024

Revenues Operations

18 unchanged sentences

$ 30,028 $ 19,134 $ 10,894 $ 5,047 $ 5,847

For the nine months ended September 30, 2022

For the three months ended March 31, 2023

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

15 unchanged sentences

$ 30,139 $ 19,506 $ 10,633 $ 4,631 $ 6,002

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The following table is a reconciliation of Segment Operating Income to “Income from Continuing Operations Before Income Taxes” reported in our consolidated statements of income:

The following table is a reconciliation of Segment Operating Income to “Income Before Income Taxes” reported in our consolidated statements of income:

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Communications $ 6,745 $ 6,743

11 unchanged sentences

Other income (expense) — net

440 2,270 2,362 6,729

Income from Continuing Operations Before Income Taxes $ 4,980 $ 7,254 $ 16,912 $ 20,103

Income Before Income Taxes $ 4,869 $ 5,767

REVENUE RECOGNITION

1 unchanged sentence

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

For the three months ended September 30, 2023

For the three months ended March 31, 2024

Communications

8 unchanged sentences

Total $ 20,594 $ 4,913 $ 3,350 $ 1,063 $ 108 $ 30,028

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

For the three months ended September 30, 2022

Communications

Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total

Wireless service $ 15,337 $ — $ — $ 559 $ 3 $ 15,899

Business service — 5,524 — — — 5,524

Broadband — — 2,429 — — 2,429

Legacy voice and data — — 427 — 88 515

Other — — 329 — 35 364

Total Service 15,337 5,524 3,185 559 126 24,731

Equipment 4,941 144 — 226 1 5,312

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

For the nine months ended September 30, 2023

Communications

Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Total

Wireless service $ 47,136 $ — $ — $ 1,898 $ — $ 49,034

Business service — 15,401 — — — 15,401

Broadband — — 7,755 — — 7,755

Legacy voice and data — — 1,147 — 232 1,379

Other — — 919 — 91 1,010

Total Service 47,136 15,401 9,821 1,898 323 74,579

Equipment 14,453 430 — 944 — 15,827

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

For the nine months ended September 30, 2022

For the three months ended March 31, 2023

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 .

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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 2024 2023

7 unchanged sentences

Total deferred customer contract fulfillment costs $ 5,914 $ 6,183

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,

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

March 31, March 31,

Consolidated Statements of Income 2024 2023

6 unchanged sentences

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.

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

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

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.

2 unchanged sentences

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

September 30, December 31,

March 31, December 31,

Consolidated Balance Sheets 2024 2023

3 unchanged sentences

Current portion in “Advanced billings and customer deposits” 3,594 3,666

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 2024 was $ 2,675 .

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

Remaining Performance Obligations

3 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 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.

As of March 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 38,866 , of which we expect to recognize approximately 80 % by the end of 2025, with the balance recognized thereafter.

PENSION AND POSTRETIREMENT BENEFITS

4 unchanged sentences

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.

On April 26, 2023, AT&T and State Street Global Advisors Trust Company, as independent fiduciary of the AT&T Pension Benefit Plan (Plan), entered into a commitment agreement with subsidiaries of Athene Holding Ltd.

(Athene) under which AT&T agreed to purchase nonparticipating single premium group annuity contracts that would transfer to Athene approximately $ 8,050 of the Plan’s defined benefit pension obligations related to certain retirees, participants and beneficiaries under the Plan.

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 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.

The purchase of the group annuity contracts was funded directly by assets of the Plan via the pension trust underlying the Plan and required no cash or asset contributions by AT&T.

We transferred approximately $ 8,050 of pension benefit obligation and related plan assets upon close of the transaction and recognized a pre-tax pension settlement gain of $ 363 .

The funded status of the Plan did not materially change due to this transaction.

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 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.

SEPTEMBER 30, 2023

MARCH 31, 2024

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 Nine months ended

September 30, September 30,

2023 2022 2023 2022

Three months ended

Pension cost:

3 unchanged sentences

Amortization of prior service credit ( 22 ) ( 33 )

Net pension (credit) cost before remeasurement ( 65 ) ( 151 ) ( 286 ) ( 806 )

Actuarial (gain) loss ( 71 ) ( 216 ) 218 ( 2,573 )

Settlement (gain) loss — — ( 363 ) —

Net pension (credit) cost $ ( 57 ) $ ( 110 )

1 unchanged sentence

Service cost – benefits earned during the period $ 5 $ 6

Interest cost on accumulated postretirement benefit

85 75 255 201

Interest cost on accumulated postretirement benefit obligation

Expected return on assets ( 14 ) ( 33 )

Amortization of prior service credit ( 482 ) ( 618 )

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

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

Net postretirement (credit) cost $ ( 414 ) $ ( 560 )

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 $ 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.

Net supplemental pension benefits costs not included in the table above were $ 17 and $ 19 in the first quarter ended 2024 and 2023, respectively.

FAIR VALUE MEASUREMENTS AND DISCLOSURE

8 unchanged sentences

There have been no changes in the methodologies used since December 31, 2023.

SEPTEMBER 30, 2023

MARCH 31, 2024

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:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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 September 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 March 31, 2024 and December 31, 2023.

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.

September 30, 2023

March 31, 2024

Level 1 Level 2 Level 3 Total

19 unchanged sentences

Liability Derivatives

Interest rate swaps — ( 2 ) — ( 2 )

Cross-currency swaps — ( 3,601 ) — ( 3,601 )

Foreign exchange contracts — ( 23 ) — ( 23 )

SEPTEMBER 30, 2023

MARCH 31, 2024

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 Nine months ended

September 30, September 30,

2023 2022 2023 2022

Three months ended

Total gains (losses) recognized on equity securities $ 97 $ 83

1 unchanged sentence

Unrealized gains (losses) recognized on equity securities held at end of period $ 100 $ 79

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

At March 31, 2024, available-for-sale debt securities totaling $ 1,188 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 nine months ended September 30, 2023 and 2022, no ineffectiveness was measured on fair value hedges.

SEPTEMBER 30, 2023

In the three months ended March 31, 2024 and 2023, no ineffectiveness was measured on fair value hedges.

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

5 unchanged sentences

dollar denominated interest rate.

On September 30, 2022, we de-designated most of our cross-currency swaps from cash flow hedges and re-designated these swaps as fair value hedges.

The amount remaining in accumulated other comprehensive loss related to cash flow hedges on the de-designation date was $ 1,857 .

The amount will be reclassified to earnings when the hedged item is recognized in earnings or when it becomes probable that the forecasted transactions will not occur.

The election of fair value hedge designation for cross-currency swaps does not have an impact on our financial results.

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.

5 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 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 .

At March 31, 2024, we had posted collateral of $ 524 (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 March, we would have been required to post additional collateral of $ 52 .

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 $ 3,121 .

2 unchanged sentences

Following are the notional amounts of our outstanding derivative positions:

September 30, December 31,

March 31, December 31,

Interest rate swaps $ 1,750 $ 1,750

Cross-currency swaps 35,825 38,006

Foreign exchange contracts — 617

Total $ 37,575 $ 39,756

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

2 unchanged sentences

Effect of Derivatives on the Consolidated Statements of Income

Three months ended Nine months ended

September 30, September 30,

Three months ended

Fair Value Hedging Relationships 2024 2023

12 unchanged sentences

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

Three months ended Nine months ended

September 30, September 30,

Three months ended

Cash Flow Hedging Relationships 2024 2023

1 unchanged sentence

Gain (loss) recognized in accumulated OCI $ 5 $ ( 10 )

Foreign exchange contracts:

Gain (loss) recognized in accumulated OCI — — — 3

Other income (expense) - net reclassified from

accumulated OCI into income

Interest rate locks:

2 unchanged sentences

( 15 ) ( 15 )

Other income (expense) reclassified from accumulated OCI into income — — — ( 45 )

Distribution of WarnerMedia — — — ( 12 )

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 consists of receivables arising from equipment installment plans, which are sold for cash and a deferred purchase price.

Under this program, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables.

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

SEPTEMBER 30, 2023

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 beneficial interests, such as deferred purchase price, when applicable, and (2) revolving trade receivables, which are sold for cash.

Under the terms of our agreements for these programs, we continue to service the transferred receivables on behalf of the financial institutions.

MARCH 31, 2024

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 nine months ended September 30, 2023 and 2022:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

Net cash (paid) received from equipment installment

receivables 1

$ 293 $ 450 $ 233 $ 1,543

Net cash received from other programs 2

103 307 847 636

The following table sets forth a summary of cash proceeds received, net of remittances paid, from sales of receivables during the three months ended March 31, 2024 and 2023:

Three months ended

Net cash received from equipment installment receivables program 1

Net cash received from revolving receivables program

Net cash received (paid) from other programs

Total net cash impact to cash flows from operating activities 2

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.

$ 397 $ ( 104 )

1 Cash from initial sales of $ 2,874 and $ 2,529 for the three months ended March 31, 2024 and 2023, respectively.

2 Net of facility fees.

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, when applicable.

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

September 30, 2023 December 31, 2022

In the event cash is received on the beneficial interests, those receipts are classified as cash flows from investing activities, when applicable.

Our equipment installment and revolving receivables programs are discussed in detail below.

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

March 31, 2024 December 31, 2023

Equipment Equipment

Installment Revolving Installment Revolving

Gross receivables:

9 unchanged sentences

Cash proceeds received, net of remittances 1

1 Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

9,539 1,800 9,361 1,500

1 Represents amounts to which financial institutions remain entitled, excluding the beneficial interests.

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.

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.

We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and beneficial interests.

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.

SEPTEMBER 30, 2023

MARCH 31, 2024

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 nine months ended September 30, 2023 and 2022:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

The following table sets forth a summary of equipment installment receivables sold under this program during the three months ended March 31, 2024 and 2023:

Three months ended

Gross receivables sold 1

1 unchanged sentence

Net receivables sold 2

2,842 2,590 7,834 8,623

Cash proceeds received 2,874 2,529

Deferred purchase price recorded — — — 245

Guarantee obligation recorded 266 206

1 Receivables net of promotion credits.

2 Receivables 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.

2 Receivables net of allowance and other reserves.

Beneficial interests, when applicable, and guarantee obligations 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, 2023 and 2022:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

The estimated value of the device trade-ins considers prices offered to us by independent third parties and contemplates changes in value after the launch of a device model.

The fair value measurements used for the beneficial interests 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 beneficial interests during the three months ended March 31, 2024 and 2023:

Three months ended

Fair value of repurchased receivables $ 718 $ 541

Carrying value of deferred purchase price 740 1,395 2,051 3,335

Carrying value of beneficial interests 721 542

Gain (loss) on repurchases 1

1 unchanged sentence

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

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.

Our leases generally have remaining lease terms of up to 15 years.

Some of our operating leases (e.g., for towers and real estate) contain renewal options that may be exercised, and some of our leases include options to terminate the lease 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.

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

The components of lease expense were as follows:

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

Operating lease cost $ 1,412 $ 1,368 $ 4,169 $ 4,072

Finance lease cost:

Amortization of leased assets in

property, plant and equipment $ 59 $ 55 $ 178 $ 149

Interest on lease obligation 47 39 140 120

Total finance lease cost $ 106 $ 94 $ 318 $ 269

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

Nine months ended

September 30,

Cash Flows from Operating Activities

Cash paid for amounts included in lease obligations:

Operating cash flows for operating leases $ 3,496 $ 3,507

Supplemental Lease Cash Flow Disclosures

Operating lease right-of-use assets obtained in exchange for new

operating lease obligations

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

September 30,

2023 December 31,

Operating Leases

Operating lease right-of-use assets $ 21,001 $ 21,814

Accounts payable and accrued liabilities $ 3,538 $ 3,547

Operating lease obligation 17,730 18,659

Total operating lease obligation $ 21,268 $ 22,206

Finance Leases

Property, plant and equipment, at cost $ 2,962 $ 2,770

Accumulated depreciation and amortization ( 1,424 ) ( 1,224 )

Property, plant and equipment, net $ 1,538 $ 1,546

Current portion of long-term debt $ 178 $ 170

Long-term debt 1,663 1,647

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

SEPTEMBER 30, 2023

At March 31, 2024 and December 31, 2023, our beneficial interests were $ 2,483 and $ 2,270 , respectively, of which $ 1,449 and $ 1,296 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at March 31, 2024 and December 31, 2023 was $ 335 and $ 385 , respectively, of which $ 120 and $ 111 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 beneficial interests and guarantee obligation.

Revolving Receivables Program

During the first quarter of 2024, we expanded our revolving agreement to transfer up to $ 1,800 of certain receivables through our bankruptcy-remote subsidiary 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 subsidiary, which holds additional receivables in the amount of $ 698 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.

Our maximum exposure to loss related to these receivables transferred is limited to the derecognized amount outstanding.

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

September 30,

Weighted-Average Remaining Lease Term (years)

Operating leases 7.8 8.1

Finance leases 7.3 7.9

Weighted-Average Discount Rate

Operating leases 4.0 % 3.6 %

Finance leases 8.2 % 7.9 %

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

At September 30, 2023 Operating Finance

Leases Leases

Remainder of 2023 $ 1,182 $ 82

2024 4,544 326

2025 3,943 332

2026 3,290 325

2027 2,662 323

Thereafter 9,866 1,147

Total lease payments 25,487 2,535

imputed interest ( 4,219 ) ( 694 )

Total $ 21,268 $ 1,841

The following table sets forth a summary of the revolving receivables sold during the three months ended March 31, 2024 and 2023:

Three months ended

Gross receivables sold/cash proceeds received 1

Total collections under revolving agreement

Net cash proceeds received

Net receivables sold 2

1 Includes initial sales of receivables of $ 300 and $ 0 for the three months ended March 31, 2024 and 2023, respectively.

2 Receivables net of allowance and other reserves.

TRANSACTIONS WITH DIRECTV

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 $ 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 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.

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

At March 31, 2024, our investment in DIRECTV was $ 685 .

The following table sets forth our share of DIRECTV’s earnings included in equity in net income of affiliates and cash distributions received from DIRECTV as of March 31:

DIRECTV’s earnings included in equity in net income of affiliates

Distributions classified as operating activities

Distributions classified as investing activities

Cash distributions received from DIRECTV

$ 518 $ 1,308

For the three months ended March 31, 2024 and 2023, we billed DIRECTV approximately $ 145 and $ 240 under commercial arrangements and transition service agreements, which were recorded as a reduction to the operations and support expenses incurred.

At March 31, 2024 , we had accounts receivable from DIRECTV of $ 255 and accounts payable to DIRECTV of $ 41 .

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 consolidated balance sheet.

SUPPLIER AND VENDOR FINANCING PROGRAMS

3 unchanged sentences

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.

The discounted price paid by participating suppliers is based on a variable rate that is

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

indexed to the overnight borrowing rate.

We agree to pay the financial institution the stated amount generally within 90 days of receipt of the invoice.

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 $ 2,394 and $ 2,869 of our outstanding payment obligations as of September 30, 2023 and December 31, 2022, respectively.

Suppliers had elected to sell to the third-party financial institutions $ 3,203 and $ 2,844 of our outstanding payment obligations as of March 31, 2024 and December 31, 2023, 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 $ 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.

We had $ 3,917 of direct supplier financing outstanding at March 31, 2024 and $ 5,442 as of December 31, 2023, 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 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.”

For the three months ended March 31, 2024 and 2023, we recorded vendor financing commitments related to capital investments of $ 99 and $ 1,021 , respectively.

We had $ 2,021 vendor financing payables at March 31, 2024, with $ 1,215 included in “Accounts payable and accrued liabilities” and $ 2,833 vendor financing payables at December 31, 2023, with $ 1,975 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:

September 30, December 31,

March 31, December 31,

2024 2023 2023 2022

Cash and cash equivalents from continuing operations $ 7,540 $ 2,423 $ 3,701 $ 19,223

Cash and cash equivalents from discontinued operations — — — 1,946

Cash and cash equivalents

$ 3,520 $ 2,821 $ 6,722 $ 3,701

Restricted cash in Prepaid and other current assets 1 1 2 1

1 unchanged sentence

Cash and Cash Equivalents and Restricted Cash $ 3,604 $ 2,942 $ 6,833 $ 3,793

SEPTEMBER 30, 2023

MARCH 31, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

1 unchanged sentence

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

Nine months ended

September 30,

Three months ended

Cash paid (received) during the period for:

2 unchanged sentences

The following table summarizes capital expenditures:

Nine months ended

September 30,

Three months ended

Purchase of property and equipment $ 3,721 $ 4,291

2 unchanged sentences

The following table summarizes acquisitions, net of cash acquired:

Nine months ended

September 30,

Three months ended

Business acquisitions $ — $ —

2 unchanged sentences

Total Acquisitions $ 211 $ 291

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

Telco LLC Preferred Interests In April 2023, we expanded our September 2020 sale of Telco LLC cumulative preferred interests and issued an additional $ 5,250 of nonconvertible cumulative preferred interests (Class A-2 and A-3, collectively the “April preferreds”).

Cumulative preferred interests in our Telco LLC total $ 7,250 , collectively the “Telco preferred interests,” and are included in “Noncontrolling interest” on the consolidated balance sheets (see Note 16 to AT&T’s 2022 Annual Report on Form 10-K).

The April preferreds pay an initial preferred distribution of 6.85 % annually, subject to declaration and subject to reset on November 1, 2027, and every seven years thereafter.

We can call the Telco preferred interests at the issue price beginning September 29, 2027.

The holders of the Telco preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of Telco LLC to pay the preferred distribution for two or more periods or to meet certain other requirements, including a minimum credit rating.

If notice is given, all other holders of equal or more subordinate classes of members’ equity are entitled to receive the same form of consideration payable to the holders of the Telco preferred interests, resulting in a deemed liquidation for accounting purposes.

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 primarily 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

SEPTEMBER 30, 2023

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Dollars in millions except per share amounts

interests will not impose any limitations on cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares.

A holder of the Mobility noncontrolling interests may put the interests to Mobility II on or after the earliest of certain events or each June 15 and December 15, beginning on June 15, 2028.

Mobility II may redeem the interests on each March 15 and September 15, beginning on March 15, 2028.

The price at which a put option or a redemption option can be exercised is the sum of (a) $ 1,000 per Mobility noncontrolling interest plus (b) any accrued and unpaid distributions.

The redemption price must be paid in cash.

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.

SEPTEMBER 30, 2023

1 Total capitalized interest was $ 103 and $ 272 for the three months ended March 31, 2024 and 2023, respectively.

MARCH 31, 2024

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

4 unchanged sentences

AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries.

Unless otherwise noted, this discussion refers only to our continuing operations and does not include discussion of balances or activity of WarnerMedia, Vrio, Xandr and Playdemic Ltd., which were part of discontinued operations.

You should read this discussion in conjunction with the consolidated financial statements and accompanying notes (Notes).

3 unchanged sentences

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

Third Quarter Nine-Month Period

Percent Percent

2023 2022 Change 2023 2022 Change

First Quarter

2024 2023 Change

Operating Revenues

1 unchanged sentence

Latin America - Mexico 1,063 883 20.4

Corporate and Other:

Corporate 108 104 3.8

9 unchanged sentences

and businesses globally.

Our business strategies reflect bundled product offerings that cut across product lines and utilize shared assets.

Our business strategies reflect integrated product offerings that cut across product lines and utilize shared assets.

This segment contains the following business units:

1 unchanged sentence

• Consumer Wireline provides broadband services, including fiber connections that provide our multi-gig services to residential customers in select locations.

In the first quarter of 2024, we began offering our fixed wireless access product that provides internet services delivered over our 5G wireless network where available.

Consumer Wireline also provides legacy telephony voice communication services.

The Latin America segment provides wireless services and equipment in Mexico.

Prior service credits are, and will continue to be, recorded as other income in our consolidated income statement in accordance with U.S.

generally accepted accounting principles.

This recast increased Communications segment operations and support expenses by approximately $2,400 for full-year 2022.

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

SEPTEMBER 30, 2023

MARCH 31, 2024

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

1 unchanged sentence

RESULTS OF OPERATIONS

Consolidated Results Our financial results from continuing operations are summarized in the discussions that follow.

Consolidated Results Our financial results are summarized in the discussions that follow.

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

Third Quarter Nine-Month Period

Percent Percent

2023 2022 Change 2023 2022 Change

First Quarter

2024 2023 Change

Operating Revenues

11 unchanged sentences

451 935 (51.8)

Income from Continuing Operations

Before Income Taxes

4,980 7,254 (31.3) 16,912 20,103 (15.9)

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

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

Income Before Income Taxes 4,869 5,767 (15.6)

Net Income 3,751 4,453 (15.8)

Net Income Attributable to AT&T 3,445 4,228 (18.5)

Net Income Attributable to Common Stock $ 3,395 $ 4,176 (18.7) %

Operating revenues decreased in the first quarter of 2024, reflecting declines in Mobility equipment revenue and Business Wireline service revenues, partially offset by Mobility service, Consumer Wireline and Mexico revenues .

Operations and support expenses decreased in the first quarter of 2024, reflecting lower Mobility equipment costs resulting from lower wireless sales volumes.

Also contributing to expense declines are our continued transformation efforts that were offset by higher restructuring charges associated with our deployment of Open RAN, our collaboration with Ericsson for commercial scale open radio access network deployment.

Depreciation and amortization expense increased in the first quarter of 2024, primarily due to higher depreciation expense related to ongoing capital spending for strategic initiatives such as fiber and network upgrades.

Also contributing to higher depreciation expense was the impact of shortening of estimated economic lives of wireless network equipment that will be replaced earlier than originally anticipated with our deployment of Open RAN.

Operating income decreased in the first quarter of 2024.

Our operating income margin in the first quarter decreased from 19.9% in 2023 to 19.5% in 2024.

Interest expense increased in the first quarter of 2024, primarily due to lower capitalized interest associated with spectrum acquisitions, partially offset by lower debt balances.

Interest expense in 2023 also included distributions on Mobility preferred interests, which were repurchased on April 5, 2023.

Equity in net income of affiliates decreased in the first quarter of 2024, primarily due to the performance of our investment in DIRECTV, which included our share of a gain on a sale-leaseback transaction by DIRECTV of approximately $100 in the first quarter of 2023 (see Note 9).

MARCH 31, 2024

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

Dollars in millions except per share amounts

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.

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

2023 2022 Change 2023 2022 Change

Other income (expense) – net decreased in the first quarter of 2024.

The decrease was primarily driven by lower pension and postretirement benefit credits in 2024 (see Note 6), and noncash impairments recognized on a held-for-sale business and an equity investment in a Latin America satellite business.

Income tax expense decreased in the first quarter of 2024.

The decrease was primarily driven by lower income before income tax.

Our effective tax rate was 23.0% in the first quarter of 2024, versus 22.8% in the comparable period in the prior year.

COMMUNICATIONS SEGMENT First Quarter

2024 2023 Change

Segment Operating Revenues

8 unchanged sentences

Total Segment Operating Income $ 6,745 $ 6,743 — %

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

Mobility Subscribers 114,513 110,813

2 unchanged sentences

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.

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.

Operating revenues decreased in the first quarter of 2024, driven by decreases in our Mobility equipment revenue and Business Wireline business unit, which continues to reflect lower demand for legacy services and product simplification.

These decreases were partially offset by increases in our Mobility and Consumer Wireline business units, driven by gains in wireless and broadband services.

Operating income remains consistent in the first quarter of 2024.

Our Communications segment operating income margin in the first quarter increased from 23.1% in 2023 to 23.4% in 2024.

MARCH 31, 2024

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

Dollars in millions except per share amounts

Communications Business Unit Discussion

Mobility Results

Third Quarter Nine-Month Period

Percent Percent

2023 2022 Change 2023 2022 Change

First Quarter

2024 2023 Change

Operating revenues

7 unchanged sentences

Operating Income $ 6,468 $ 6,271 3.1 %

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:

September 30, Percent

March 31, Percent

(in 000s) 2024 2023 Change

3 unchanged sentences

Reseller 7,852 6,192 26.8

Connected devices 1

122,728 101,995 20.3

Total Mobility Subscribers 1

114,513 110,813 3.3 %

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

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.

1 Effective with our first-quarter 2024 reporting, we have removed connected devices from our total Mobility subscribers, consistent with industry standards and our key performance metrics.

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

MARCH 31, 2024

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

Dollars in millions except per share amounts

Mobility Net Additions

Third Quarter Nine-Month Period

Percent Percent

(in 000s) 2023 2022 Change 2023 2022 Change

First Quarter

(in 000s) 2024 2023 Change

Postpaid Phone Net Additions 349 424 (17.7) %

3 unchanged sentences

Reseller 351 108 —

Connected devices 3

5,547 5,716 (3.0) 15,133 15,476 (2.2)

Mobility Net Subscriber Additions 1

1 unchanged sentence

Postpaid Churn 3

0.95 % 1.01 % (6) BP 0.97 % 0.96 % 1 BP

0.89 % 0.99 % (10) BP

Postpaid Phone-Only Churn 3

0.79 % 0.84 % (5) BP 0.80 % 0.79 % 1 BP

1 Excludes migrations and acquisition-related activities during the period.

0.72 % 0.81 % (9) BP

1 Excludes migrations between wireless subscriber categories, including connected devices, and acquisition-related activity during the period.

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

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 2,800 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.

Tablet net adds (losses) were (12) and (18) for the quarters ended March 31, 2024 and 2023.

Wearables and other net adds were 52 and 136 for the quarters ended March 31, 2024 and 2023.

3 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 third quarter and for the first nine months of 2023.

Service revenue increased in the first quarter of 2024.

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).

SEPTEMBER 30, 2023

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

Dollars in millions except per share amounts

ARPU increased in the first quarter of 2024, reflecting pricing actions taken in the third quarter of 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.

Postpaid churn and postpaid phone-only churn were lower in the first quarter of 2024.

Equipment revenue decreased in the first quarter of 2024, primarily driven by a lower wireless sales volumes.

Operations and support expenses decreased in the first quarter of 2024 largely due to lower equipment costs.

Depreciation expense increased in the first quarter of 2024, primarily due to shortening of estimated economic lives of wireless equipment that will be replaced earlier than originally anticipated with our Open RAN deployment and network transformation, and ongoing capital spending for network upgrades and expansion, which we expect to continue through the remainder of 2024.

Operating income increased in the first quarter of 2024.

Our Mobility operating income margin in the first quarter increased from 30.5% in 2023 to 31.4% in 2024.

Our Mobility EBITDA margin in the first quarter increased from 40.7% in 2023 to 43.5% in 2024.

EBITDA is defined as operating income excluding depreciation and amortization.

MARCH 31, 2024

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

Dollars in millions except per share amounts

Business Wireline Results

Third Quarter Nine-Month Period

Percent Percent

2023 2022 Change 2023 2022 Change

First Quarter

2024 2023 Change

Operating revenues

7 unchanged sentences

Operating Income $ 64 $ 378 (83.1) %

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.

Service revenues decreased in the first quarter of 2024, 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 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.

Equipment revenues increased in the first quarter of 2024, driven by higher customer premises equipment sales, which are nonrecurring in nature.

Operations and support expenses decreased in the first quarter of 2024, primarily driven by lower personnel costs associated with ongoing transformation initiatives, lower marketing and customer support expenses, partially offset by higher equipment costs.

As part of our transformation activities, we expect operations and support expense improvements through the remainder of 2024 as we further right size our operations in alignment with the strategic direction of the business.

Depreciation expense increased in the first quarter of 2024, primarily due to ongoing capital investment for strategic initiatives such as fiber, which we expect to continue through the remainder of 2024.

Operating income decreased in the first quarter of 2024.

Our Business Wireline operating income margin in the first quarter decreased from 7.1% in 2023 to 1.3% in 2024.

Our Business Wireline EBITDA margin in the first quarter decreased from 32.0% in 2023 to 29.0% in 2024.

Consumer Wireline Results

Third Quarter Nine-Month Period

Percent Percent

2023 2022 Change 2023 2022 Change

First Quarter

2024 2023 Change

Operating revenues

8 unchanged sentences

Operating Income $ 213 $ 94 — %

MARCH 31, 2024

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 Consumer Wireline:

September 30, Percent

March 31, Percent

(in 000s) 2024 2023 Change

9 unchanged sentences

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

Third Quarter Nine-Month Period

Percent Percent

(in 000s) 2023 2022 Change 2023 2022 Change

First Quarter

(in 000s) 2024 2023 Change

Total Broadband and DSL Net Additions 40 (42) — %

Broadband Net Additions 1

15 (29) — (43) (49) 12.2

Fiber Broadband Net Additions 252 272 (7.4) %

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

Broadband revenues increased in the first quarter of 2024, 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 first quarter of 2024, reflecting the continued decline in demand for these services in favor of other technologies, such as wireless and fiber services.

Other service and equipment revenues decreased in the first quarter of 2024, reflecting the continued decline in the number of VoIP customers.

Operations and support expenses decreased in the first quarter of 2024.

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

Depreciation expense increased in the first quarter of 2024, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion, which we expect to continue through the remainder of 2024.

Operating income increased in the first quarter of 2024.

Our Consumer Wireline operating income margin in the first quarter increased from 2.9% in 2023 to 6.4% in 2024.

Our Consumer Wireline EBITDA margin in the first quarter increased from 29.5% in 2023 to 32.7% in 2024.

MARCH 31, 2024

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

Dollars in millions except per share amounts

LATIN AMERICA SEGMENT First Quarter

2024 2023 Percent Change

Segment Operating Revenues

7 unchanged sentences

Operating Income (Loss) $ 3 $ (30) — %

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 Mexico:

September 30, Percent

March 31, Percent

(in 000s) 2024 2023 Change

5 unchanged sentences

Mexico Wireless Net Additions

Third Quarter

Nine-Month Period

Percent Percent

(in 000s) 2023 2022 Change 2023 2022 Change

First Quarter

(in 000s) 2024 2023 Change

Mexico Wireless Net Additions

3 unchanged sentences

Total Mexico Wireless Net Additions 143 10 — %

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.

Service revenues increased in the first quarter of 2024 reflecting favorable foreign exchange impacts and growth in subscribers.

Equipment revenues increased in the first quarter of 2024 driven by higher equipment sales and favorable foreign exchange impacts.

Operations and support expenses increased in the first quarter of 2024 driven by unfavorable impact of foreign exchange and increased equipment costs resulting from higher sales.

Approximately 4% of Mexico expenses are U.S.

dollar based, with the remainder in the local currency.

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

Gigapower, LLC On May 11, 2023, we closed the transaction with BlackRock, through a fund managed by its Diversified Infrastructure business, related to Gigapower, LLC (Gigapower).

The joint venture will provide a fiber network to Internet service providers and other businesses across the U.S.

that serve customers outside of our traditional wireline service area.

We have agreed to contribute incremental funding of up to approximately $700, which will be funded as the network is constructed.

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

SEPTEMBER 30, 2023

Depreciation and amortization expense increased in the first quarter of 2024 driven by unfavorable impact of foreign exchange partially offset by lower in-service assets.

MARCH 31, 2024

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