What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-12 compared with 2024-02-23 · 202 added, 254 removed, 423 unchanged (52% of the section changed)

5 unchanged sentences

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

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.

(Playdemic), which are part of discontinued operations.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.

Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10 ‑ K for the fiscal year ended December 31, 2023.

Dollars in millions except per share amounts

On April 8, 2022, we closed our transaction to combine substantially all of our previous WarnerMedia segment (WarnerMedia) with a subsidiary of Discovery, Inc (Discovery).

Upon the separation and distribution of WarnerMedia, the WarnerMedia business met the criteria for discontinued operations.

For discontinued operations, we also evaluated transactions that were components of AT&T’s single plan of a strategic shift, including dispositions that did not individually meet the criteria due to materiality, and determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic.

These businesses are reflected in the accompanying financial statements as discontinued operations, including for periods prior to the consummation of the WarnerMedia/Discovery Transaction.

(See Notes 6 and 24)

On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV Entertainment Holdings, LLC (DIRECTV).

With the close of the transaction, we separated our Video business, comprised of our U.S.

video operations, and began accounting for our investment in DIRECTV under the equity method.

Dollars in millions except per share amounts

We have two reportable segments:

2 unchanged sentences

Each segment’s percentage calculation of total segment operating revenue is derived from our segment results table in Note 4.

Segment operating income is attributable to our Communications segment due to operating losses in Latin America.

Segment operating income is primarily attributable to our Communications segment due to prior-years operating losses in Latin America.

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

Percent Change

Operating Revenues 2023 2022 2021 2023 vs.

2024 2023 2022 2024 vs.

Operating Revenues

Communications $ 117,652 $ 118,038 $ 117,067 (0.3) % 0.8 %

Latin America

Corporate and Other:

4,232 3,932 3,144 7.6 25.1

Corporate 452 458 530 (1.3) (13.6)

Video — — 15,513 — —

Held-for-sale and other reclassifications — — 453 — —

Eliminations and consolidations — — (136) — —

AT&T Operating Revenues $ 122,336 $ 122,428 $ 120,741 (0.1) % 1.4 %

2 unchanged sentences

Latin America

40 (141) (326) — 56.7

Segment Operating Income 27,135 27,660 26,410 (1.9) 4.7

Corporate (2,902) (2,961) (2,890) 2.0 (2.5)

Video — — 2,257 — —

Held-for-sale and other reclassifications — — 143 — —

Certain significant items (5,184) (1,238) (28,107) — 95.6

AT&T Operating Income (Loss) $ 19,049 $ 23,461 $ (4,587) (18.8) % — %

The Communications segment accounted for approximately 97% of our 2023 and 2022 total segment operating revenues and accounted for all segment operating income in 2023 and 2022.

This segment provides services to businesses and consumers located in the U.S.

and businesses globally.

The Communications segment accounted for approximately 97% of our 2024 and 2023 total segment operating revenues and accounted for substantially all segment operating income in 2024 and 2023.

This segment provides services to businesses and consumers located in the United States and businesses globally.

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

1 unchanged sentence

• Mobility provides nationwide wireless service and equipment.

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

• Consumer Wireline provides broadband services, including fiber connections that 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.

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

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

Consumer Wireline also provides legacy telephony voice communication services.

The Latin America segment accounted for approximately 3% of our 2023 and 2022 total segment operating revenues.

This segment provides wireless services and equipment in Mexico.

The Latin America segment accounted for approximately 3% of our 2024 and 2023 total segment operating revenues and less than 1% of segment operating income in 2024.

This segment provides wireless service and equipment in Mexico.

Dollars in millions except per share amounts

22 unchanged sentences

Income (Loss) from Continuing Operations $ 12,253 $ 15,623 $ (6,874) (21.6) % — %

Operating revenues increased in 2023.

The increase reflects growth in Mobility and Consumer Wireline revenues, partially offset by continued declines in Business Wireline revenues.

Revenue increases also reflect higher revenues in our Mexico business unit, including favorable impacts from foreign exchange.

Operations and support expenses decreased in 2023, reflecting benefits of our continued transformation efforts, including lower personnel costs, partially offset by inflationary increases.

The decrease also reflects lower Mobility equipment and associated selling costs, driven by lower device sales in 2023 and 3G network shutdown costs in the first quarter of 2022, higher returns on benefit-related assets and lower customer support costs.

Partially offsetting the decreases were higher amortization of deferred customer acquisition costs and unfavorable impact of foreign exchange.

Asset impairments and abandonments and restructuring decreased in 2023, with higher impairments in 2022.

Noncash charges in 2023 primarily relate to severance and restructuring charges, as well as the abandonment of non-deployed wireless equipment associated with our recently announced plans to collaborate with Ericsson to deploy commercial scale open radio access network (Open RAN), which will further the telecommunications industry efforts and align with the federal government’s goal to build a more robust ecosystem of network infrastructure providers and suppliers.

This network transformation is expected to result in additional cash charges in 2024.

Noncash charges in 2022 were primarily due to the impairment of $24,812 of goodwill associated with our Business Wireline, Consumer Wireline and Mexico reporting units, and were driven by higher interest rates consistent with the macroeconomic environment, with secular declines also impacting Business Wireline growth rates (see Note 9).

The charges in 2022 also included $1,413 of wireline conduit asset abandonments and $1,273 of restructuring and other impairment charges due to updated network build plans stemming from spectrum acquired in recent auctions, severance charges associated with transformation initiatives and impairment of personal protective equipment inventory.

Operating revenues decreased in 2024, reflecting declines in Business Wireline service, primarily due to continued declines in legacy services, and Mobility equipment revenues, offset by higher Mobility service, Consumer Wireline and Mexico revenues .

Operations and support expenses decreased in 2024, reflecting lower Mobility equipment costs resulting from lower wireless sales volumes and expense declines from our continued transformation efforts, including lower personnel charges.

Asset impairments and abandonments and restructuring increased in 2024.

The increase in 2024 was primarily due to a third-quarter noncash goodwill impairment charge of $4,422 associated with our Business Wireline reporting unit.

We performed an interim goodwill impairment test of the Business Wireline reporting unit and concluded that the calculated fair value was lower than the book value, which was driven by a faster-than-previously anticipated industry-wide secular decline of legacy services (see Note 9).

Noncash charges in 2024 also included restructuring charges, including termination fees associated with our network modernization program to deploy commercial scale open radio access network (Open RAN).

Noncash charges in 2023 primarily relate to severance and restructuring charges, as well as the abandonment of non-deployed wireless equipment associated with our Open RAN network modernization program.

Depreciation and amortization expense increased in 2024, primarily due to the shortening of estimated economic lives of wireless network equipment that will be replaced earlier than originally anticipated with our Open RAN network modernization efforts.

Also contributing to higher depreciation expense was the impact of ongoing capital spending for strategic initiatives such as fiber and network upgrades.

Operating income decreased in 2024 and increased in 2023.

Our operating margin was 15.6% in 2024, compared to 19.2% in 2023, and (3.8)% in 2022, which included noncash goodwill impairment charges of $24,812.

Interest expense increased in 2024, primarily due to lower capitalized interest associated with spectrum acquisitions, mostly offset by lower debt balances.

Interest expense in 2023 also includes distributions on Mobility preferred interests, which were repurchased on April 5, 2023 (see Note 16).

Dollars in millions except per share amounts

Depreciation and amortization expense increased in 2023, primarily due to higher depreciation expense related to ongoing capital spending for strategic initiatives such as fiber and network upgrades.

We expect depreciation expense to increase due to continued fiber and 5G investment and approximately $850 in 2024 due to the expected shortening of estimated economic lives of wireless equipment that will be replaced earlier than originally anticipated with our deployment of Open RAN.

Operating income increased in 2023 and decreased in 2022.

Our operating margin was 19.2% in 2023, compared to (3.8)% in 2022, which included noncash impairment charges, and 19.3% in 2021.

Interest expense increased in 2023, primarily due to lower capitalized interest associated with spectrum acquisitions and higher interest rates.

Interest expense in 2023 also includes the reclassification of Mobility preferred interests distributions, which were repurchased on April 5, 2023 (see Note 16).

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

Late in the third quarter of 2023, C-band incumbents completed their transition out of the spectrum band, allowing us to use all C-band licenses awarded to us in the Federal Communications Commission (FCC) auction in 2021, and we have ceased capitalization of interest for licenses that have been placed into service.

We expect interest expense to increase approximately $400 in 2024 as a result.

Equity in net income of affiliates decreased in 2023.

The decrease was 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 2023 (see Notes 6, 10 and 19).

Other income (expense) – net decreased in 2023.

The decrease was primarily driven by actuarial remeasurement of pension plan assets and obligations, with net actuarial and settlement losses of $1,594 in 2023, compared to gains of $1,999 in 2022 (see Note 14).

Also contributing to the decrease was a $450 impairment of an equity investment in a Latin America satellite business and lower net pension and postretirement benefit credits in 2023 (see Note 14).

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

Income tax expense increased in 2023, primarily driven by higher income before income tax in 2023, partially offset by deferred tax benefits related to updated estimates.

Equity in net income of affiliates increased in 2024.

The increase reflects cash distributions received by AT&T in excess of the carrying amount of our investment in DIRECTV, partially offset by the performance of our investment in DIRECTV (see Notes 10 and 19).

Other income (expense) – net increased in 2024.

The increase was primarily driven by actuarial remeasurement of benefit plan assets and obligations, with an actuarial loss of $56 in 2024, compared to net actuarial and settlement losses of $1,594 in 2023 (see Note 14).

Also contributing to the increase was the prior-year write-down of our SKY Mexico equity investment.

These increases were partially offset by lower pension and postretirement benefit credits and lower returns on other benefit-related investments.

Income tax expense increased in 2024.

While our income before income taxes decreased in 2024, it includes a goodwill impairment associated with our Business Wireline reporting unit, which is not deductible for tax purposes and results in a higher effective tax rate.

Our effective tax rate was 26.6% in 2024, 21.3% in 2023, and (122.2)% in 2022.

The effective tax rate in 2022 was lower primarily due to our goodwill impairments associated with our Business Wireline, Consumer Wireline and Mexico reporting units, which are not deductible for tax purposes.

Dollars in millions except per share amounts

The effective tax rate in 2022 was also impacted by goodwill impairments, which are not deductible for tax purposes.

Segment Results Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly.

We evaluate segment performance based on operating income as well as EBITDA and/or EBITDA margin, which is defined as operating income excluding depreciation and amortization.

EBITDA is used as part of our management reporting and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units.

EBITDA does not give effect to depreciation and amortization expenses incurred in operating income nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses.

EBITDA margin is EBITDA divided by total revenues.

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 U.S.

generally accepted accounting principles (see Note 14).

This recast increased Communications segment operations and support expenses by approximately $2,400 in 2022 and $2,100 in 2021.

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

We evaluate segment performance based on operating income as well as EBITDA and/or EBITDA margin.

See “Discussion and Reconciliation of Non-GAAP Measures” for a reconciliation of EBITDA and EBITDA margin to the most comparable financial measures calculated and presented in accordance with U.S.

generally accepted accounting principles.

COMMUNICATIONS SEGMENT

6 unchanged sentences

Total Segment Operating Revenues $ 117,652 $ 118,038 $ 117,067 (0.3) % 0.8 %

Segment Operating Income

Segment Operating Income (Loss)

Mobility $ 26,314 $ 25,861 $ 23,812 1.8 % 8.6 %

2 unchanged sentences

Total Segment Operating Income $ 27,095 $ 27,801 $ 26,736 (2.5) % 4.0 %

Selected Subscribers and Connections

2023 2022 2021

Mobility subscribers 241,532 217,397 201,791

Total domestic broadband connections 15,288 15,386 15,504

Network access lines in service 4,185 5,213 6,177

VoIP connections

2,558 2,930 3,333

Operating revenues increased in 2023, driven by increases in our Mobility and Consumer Wireline business units, partially offset by a decrease in our Business Wireline business unit.

The increases are primarily driven by gains in wireless service and broadband service.

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

Operating income increased in 2023 and 2022.

The 2023 operating income reflects an increase in operating income from our Mobility and Consumer Wireline business units, partially offset by declines in our Business Wireline business unit.

Operating revenues decreased in 2024, driven by declines in our Business Wireline business unit, which reflects lower demand for legacy services and product simplification, as well as the absence of revenues from our cybersecurity business that was contributed to a new cybersecurity joint venture, LevelBlue, in the second quarter of 2024.

Revenue declines were also driven by lower Mobility equipment revenue.

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

Operating income decreased in 2024 and increased in 2023.

The 2024 operating income reflects a decrease in operating income from our Business Wireline business unit, partially offset by increases in our Mobility and Consumer Wireline business units.

Our Communications segment operating income margin was 23.0% in 2024, 23.6% in 2023 and 22.8% in 2022.

Our Communications segment EBITDA margin was 39.5% in 2024, 38.3% in 2023 and 37.1% in 2022.

Dollars in millions except per share amounts

19 unchanged sentences

Reseller 9,628 7,468 6,043 28.9 23.6

Connected devices 1

127,724 107,478 95,116 18.8 13.0

Total Mobility Subscribers 1

117,851 113,808 109,919 3.6 % 3.5 %

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

2 Wireless subscribers at December 31, 2023 includes an increase of 295 subscribers and connections (206 postpaid, including 74 phone, and 89 connected devices) resulting from our 3G network shutdown in February 2022.

Wireless subscribers at December 31, 2022 excludes the impact of 10,176 subscriber and connected device disconnections resulting from our 3G network shutdown.

Postpaid disconnections were 897, including 437 phone, 234 prepaid, 749 reseller subscribers, and 8,296 connected devices.

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.

Mobility Net Additions

6 unchanged sentences

Reseller 2,020 1,279 462 57.9 —

Connected devices 3

20,118 20,594 14,328 (2.3) 43.7

Mobility Net Subscriber Additions 1

4 unchanged sentences

0.76 % 0.81 % 0.81 % (5) BP — BP

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

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.

1 unchanged sentence

Wearables and other net adds were 430, 639 and 1,020 for the years ended December 31, 2024, 2023 and 2022, respectively.

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 11,570, 9,980 and 7,875 for the years ended December 31, 2023, 2022 and 2021, respectively.

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.

2 unchanged sentences

Service revenue increased during 2024, largely due to growth from subscriber gains and higher postpaid average revenue per subscriber (ARPU).

ARPU increased in 2023 and 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).

ARPU increased in 2024 and reflects pricing actions.

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 consistent with 2022.

Equipment revenue decreased in 2023, primarily driven by a lower volume of devices sold.

Operations and support expenses decreased in 2023, largely due to lower equipment costs, driven by lower device sales and associated selling costs, and 3G network shutdown costs in the first quarter of 2022.

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

Depreciation expense increased in 2023, primarily due to ongoing capital spending for network upgrades and expansion.

We expect increased depreciation expense in 2024 due to the expected shortening of estimated economic lives of wireless equipment that will be replaced earlier than originally anticipated with our Open RAN deployment and our network transformation and continued 5G investment.

Postpaid churn and postpaid phone-only churn were lower in 2024.

Equipment revenue decreased in 2024, primarily driven by lower wireless device sales volumes.

The decrease was partially offset by sales of higher-priced phones in 2024.

Operations and support expenses decreased in 2024, largely due to lower equipment and selling costs driven by lower wireless sales volumes, partially offset by higher network costs.

Depreciation expense increased in 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 2025.

Operating income increased in 2024 and 2023.

12 unchanged sentences

Total Operating Expenses 18,907 19,594 20,248 (3.5) (3.2)

Operating Income $ 1,289 $ 2,290 $ 3,092 (43.7) % (25.9) %

Service revenues decreased in 2023, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in connectivity services.

Operating Income (Loss)

$ (88) $ 1,289 $ 2,290 — % (43.7) %

Service revenues decreased in 2024, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in fiber and connectivity services.

We expect these trends to continue.

Equipment revenues decreased in 2023, driven by declines in legacy and non-core services, which we expect to continue.

Operations and support expenses decreased in 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, lower network access, customer support and marketing costs.

The decrease in network access costs also included approximately $75 of benefit related to settlement of a dispute in the second quarter of 2023.

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

Revenue declines also were impacted by the absence of revenues from our cybersecurity business that was contributed to LevelBlue and higher intellectual property sales in the prior year.

Equipment revenues increased in 2024, driven by higher customer premises equipment sales, which can vary from year to year based on the nature of services purchased.

Operations and support expenses decreased in 2024, primarily driven by lower personnel costs associated with ongoing transformation initiatives, lower network access and customer support expenses and the contribution of our cybersecurity business.

Partially offsetting the decreases were higher vendor credits in 2023 and higher equipment costs in 2024.

As part of our transformation activities, we expect operations and support expense improvements to continue in 2025 as we further right size our operations in alignment with the strategic direction of the business.

Depreciation expense increased in 2024, primarily due to ongoing capital investment for strategic initiatives such as fiber, which we expect to further increase in 2025.

28 unchanged sentences

Total Retail Consumer Voice Connections 2,963 3,604 4,339 (17.8) % (16.9) %

1 Includes AT&T Internet Air.

1 Includes AIA.

Broadband Net Additions

5 unchanged sentences

Fiber Broadband Net Additions 1,024 1,092 1,223 (6.2) % (10.7) %

1 Includes AT&T Internet Air.

Broadband revenues increased in 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 2023, reflecting the continued decline in the number of customers.

1 Includes AIA.

Broadband revenues increased in 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, partially offset by declines in copper-based broadband services.

Legacy voice and data service revenues decreased in 2024, reflecting the continued decline in demand for these services in favor of other technologies, such as wireless and fiber.

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

Operations and support expenses increased in 2023, primarily due to higher network-related costs as our fiber build scales, partially offset by lower customer support costs, lower Max licensing fees in the first half of 2023, and approximately $35 of benefit from a vendor dispute resolution in the second quarter of 2023.

Operations and support expenses decreased in 2024, driven by lower customer support costs, lower marketing expense and savings from cost initiatives, offset by higher network-related costs as our fiber build scales.

Dollars in millions except per share amounts

31 unchanged sentences

Mexico Wireless Net Additions 1,260 713 1,241 76.7 % (42.5) %

Service revenues increased in 2023, reflecting favorable foreign exchange impacts, growth in subscribers and higher wholesale revenues.

Equipment revenues increased in 2023, driven by higher equipment sales and favorable foreign exchange impacts.

Operations and support expenses increased in 2023, driven by unfavorable impact of foreign exchange and increased equipment costs resulting from higher sales.

Approximately 5% of Mexico expenses are U.S.

dollar-based, with the remainder in the local currency.

Depreciation expense increased in 2023, driven by unfavorable impact of foreign exchange partially offset by lower in-service assets.

Service revenues increased in 2024, reflecting growth in subscribers and ARPU, partially offset by unfavorable foreign exchange impacts.

Equipment revenues increased in 2024, driven by higher equipment sales, partially offset by unfavorable foreign exchange impacts.

Operations and support expenses increased in 2024, driven by increased equipment and selling costs resulting from higher sales, partially offset by favorable impact of foreign exchange.

Depreciation expense decreased in 2024, driven by lower in-service assets and favorable impact of foreign exchange.

Operating income improved in 2024 and 2023.

4 unchanged sentences

2025 Revenue Trends We expect revenue growth in our wireless and broadband businesses as customers demand instant connectivity and higher speeds made possible by wireless network enhancements through 5G deployment and our fiber network expansion.

We believe that our simplified go-to-market strategy for 5G in underpenetrated markets will continue to contribute to wireless subscriber and service revenue growth and that expansion of our fiber footprint and our multi-gig offerings will drive greater demand for broadband services on our fast-growing fiber network.

As we expand our fiber reach, we will be orienting our business portfolio to leverage this opportunity to offset continuing declines in legacy Business Wireline products by growing connectivity with small to mid-sized businesses.

We plan to use our strong fiber and wireless assets, broad distribution and integrated product offers to strengthen our overall market position.

We plan to use our strong fiber and wireless assets, broad distribution and integrated product offerings to strengthen our overall market position.

We will continue to rationalize our product portfolio with a longer-term shift of the business to fiber and mobile connectivity, and growth in value-added services.

2024 Expense Trends During 2024, we will continue to focus on efficiency, led by our cost transformation initiative.

We expect the spending required to support growth and efficiency initiatives, primarily our continued deployment of fiber and 5G, including our deployment of Open RAN, and associated accelerated depreciation, to pressure expense trends in 2024.

These investments will help prepare us to meet increased customer demand for enhanced wireless and broadband services, including video streaming, augmented reality and “smart” technologies.

As customers are demanding faster and more reliable services, we are decommissioning our legacy copper network and enhancing our offerings to include services that provide better experiences over new technologies, such as AT&T Internet Air.

2025 Expense Trends During 2025, we expect expense trends consistent with the prior year, and that we will continue to focus on efficiency, led by our cost transformation initiative.

We expect the spending required to support growth and efficiency initiatives, primarily our continued deployment of fiber and 5G, to pressure expense trends in 2025.

These investments will help prepare us to meet increased customer demand for enhanced wireless and broadband services, including video streaming, augmented reality, “smart” technologies, user generated content and artificial intelligence (AI).

The software benefits of our 5G wireless technology should result in a more efficient use of capital and lower network-related expenses in the coming years.

1 unchanged sentence

We continue to transform our operations to be more efficient and effective.

We are restructuring businesses, sunsetting legacy networks, improving customer service and ordering functions through digital transformation, sizing our support costs and staffing with current activity levels, and reassessing overall benefit costs.

We also expect cost savings through AI-driven efficiencies in our network design, software development and customer support services.

Market Conditions During 2023, uncertainty surrounding global growth rates, inflation, and an increasing interest rate environment continued to produce volatility in the credit, currency and equity markets.

Additionally, several factors, including changes in workplace behavior that have continued since the COVID-19 pandemic, have resulted in changes in demand in business communication services.

The global pandemic caused, and future public health emergencies could again cause, delays in the development, manufacturing (including the sourcing of key components) and shipment of products, as well as continued tight labor market and inflationary impacts.

Most of our products and services are not directly affected by the imposition of tariffs on Chinese goods.

However, we expect ongoing pressure on pricing during 2024 as we respond to the geopolitical and macroeconomic environment and our competitive marketplace, especially in wireless services.

We are restructuring businesses, working with regulators and customers to sunset legacy networks, improving customer service and ordering functions through digital transformation, sizing our support costs and staffing with current activity levels, and reassessing overall benefit costs.

We also expect cost savings through AI-driven efficiencies in our network design and operations, software development, sales, marketing, customer support services and general and administrative costs.

Market Conditions In recent years, uncertainty surrounding global growth rates, inflation and an increasing interest rate environment continued to produce volatility in the credit, currency and equity markets.

We expect ongoing pressure on pricing during 2025 as we respond to the geopolitical and macroeconomic environment and our competitive marketplace, especially in wireless services.

Included on our consolidated balance sheets are assets held by benefit plans for the payment of future benefits.

8 unchanged sentences

In 2025, our key initiatives include:

• Continuing our wireless subscriber momentum and 5G deployment, with expansion of 5G service, including to underpenetrated markets.

• Continuing our fiber deployment, improving fiber penetration, accelerating subscriber growth and increasing broadband revenues.

• Continuing our wireless subscriber momentum and 5G deployment, with expansion of wireless subscribers in underpenetrated markets and converged customers.

• Continuing our fiber deployment, improving fiber penetration, growing AT&T Internet Air services, accelerating subscriber growth and increasing broadband revenues.

• Deploying Open RAN to build a more robust ecosystem of network infrastructure providers and suppliers, fostering lower network costs, improved operational efficiencies and allowing for continued investment in our fast-growing broadband network.

13 unchanged sentences

Integration of Wireless and Fiber Services The communications industry has evolved into internet-based technologies capable of converging the offering of wireline and wireless services.

As the owner and operator of scaled wireless and fiber networks, we plan to focus on expanding our wireless network capabilities and providing broadband offerings that allow customers to integrate their home or business fixed services with their mobile service.

As the owner and operator of scaled wireless and fiber networks, we plan to continue to focus on expanding our wireless network capabilities and providing broadband offerings that allow customers to integrate their home or business fixed services with their mobile service.

In January 2022, we launched our multi-gig rollout, which brings the fastest internet to AT&T Fiber customers in select locations with symmetrical 2 gig and 5 gig tiers.

4 unchanged sentences

The following discussions are intended as a condensed summary of the issues rather than as a comprehensive legal analysis and description of all of these specific issues.

International Regulation Our subsidiaries operating outside the United States are subject to the jurisdiction of regulatory authorities in the territories in which the subsidiaries operate.

International Regulation

Our subsidiaries operating outside the United States are subject to the jurisdiction of regulatory authorities in the territories in which the subsidiaries operate.

Our licensing, compliance and advocacy initiatives in foreign countries primarily enable the provision of enterprise (i.e., large business) services globally and wireless services in Mexico.

2 unchanged sentences

AT&T processes and handles personal data of its customers and subscribers, employees of its enterprise customers and its employees.

Federal Regulation

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare.

Nonetheless, over the ensuing two decades, the FCC and some state regulatory commissions have maintained or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies.

More recently, the FCC has pursued a more deregulatory agenda, eliminating a variety of antiquated and unnecessary regulations and streamlining its processes in a number of areas.

Nonetheless, since then, the FCC and some state regulatory commissions have maintained, re-imposed or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies.

Recently, the FCC’s regulatory approach has depended on control of the executive branch, eliminating a variety of antiquated and unnecessary regulations in a number of areas, while imposing or re-imposing regulations in other areas.

We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, to reduce inappropriate regulatory burdens that inhibit our ability to compete effectively and offer needed services to our customers, including initiatives to transition services from traditional networks to all IP-based networks.

1 unchanged sentence

We have organized the following discussion by service impacted.

Internet The FCC currently classifies fixed and mobile consumer broadband services as information services, subject to light-touch regulation.

In response to a challenge to the FCC’s classification, in 2019, the D.C.

Circuit upheld the FCC’s current classification, although it remanded three discrete issues related to the effect of the classification on public safety, the regulation of pole attachments, and universal service support for low-income consumers through the Lifeline program to the FCC for further consideration.

Since no party sought Supreme Court review of the D.C.

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

In October 2020, the FCC adopted an order addressing the three issues remanded by the D.C.

Circuit for further consideration.

After considering those issues, the FCC concluded there were no grounds to depart from its determination that fixed and mobile consumer broadband services should be classified as information services.

An appeal of the FCC’s remand decision is pending.

Internet Until 2015, the FCC classified fixed and mobile consumer broadband internet access services as information services subject to minimal regulation.

In 2015, the FCC reclassified such services as telecommunications services subject to broader regulation by the FCC and imposed “net neutrality rules.” Since then, the FCC has twice reversed course, most recently again reclassifying such services as telecommunications services subject to broader regulation by the FCC in an order adopted on April 25, 2024.

Multiple trade associations and other parties challenged the FCC’s reclassification decision in appeals consolidated in the U.S.

Court of Appeals for the Sixth Circuit.

The trade associations petitioned the Sixth Circuit to stay the FCC’s order.

On August 1, 2024, the Sixth Circuit issued a stay of the FCC order pending review of the appeals, holding that broadband providers are likely to succeed on the merits.

On January 2, 2025, the Sixth Circuit issued an order granting the petition for review and setting aside the FCC net neutrality order, holding that broadband internet access service is an information service.

Dollars in millions except per share amounts

On September 28, 2023, the FCC released a draft Notice of Proposed Rulemaking (NPRM) that was adopted at the FCC’s open meeting on October 19, 2023.

The NPRM proposes to again reclassify broadband internet access service as a telecommunications service under Title II of the Communications Act of 1934 and reestablish conduct rules for internet service providers.

In the interim, some states have adopted legislation or issued executive orders that would reimpose net neutrality rules repealed by the FCC.

Suits were filed concerning such laws in California and Vermont.

The California statute is now in effect.

The litigation challenging the Vermont statute has been stayed pending the Second Circuit’s disposition of an appeal by the State of New York of an order enjoining enforcement of a New York statute regulating broadband rates on the ground that such statute is preempted by federal law.

At least one state has adopted legislation regulating the rates of fixed broadband service.

In 2021, New York enacted the Affordable Broadband Act (ABA), requiring ISPs offering “fixed” mass-market broadband service, including fixed wireless, to offer discounted plans to low-income customers.

In June 2021, the ABA was enjoined by a federal district court, which found the ABA preempted by federal law.

In April 2024, the Second Circuit overruled and vacated the district court order.

In August 2024, trade associations asked the Supreme Court to review the Second Circuit’s decision.

On December 16, the Supreme Court issued an order denying the request.

Those associations have since requested rehearing of that Supreme Court decision.

Under an agreement with the New York Attorney General, the law began to be enforced on January 15, 2025.

In response, AT&T announced that it would no longer offer its AT&T Internet Air fixed wireless service in New York.

Other states could consider similar legislation.

Since 2018, some states have adopted legislation or issued executive orders that established state net neutrality rules, including California and Vermont.

We expect additional states may seek to impose net neutrality requirements in the future.

On November 15, 2023, the FCC adopted rules to “facilitate” equal access to broadband and prevent digital discrimination in broadband access.

The rules, which will become effective March 22, 2024, prohibit covered entities from implementing policies or practices not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on prohibited characteristics (including income level, race, and ethnicity) or that have such differential impact, whether intentional or not.

The rules, which became effective March 22, 2024, prohibit covered entities from implementing policies or practices not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on prohibited characteristics (including income level, race, and ethnicity) or that have such differential impact, whether intentional or not.

The rules broadly apply prospectively to all aspects of an ISP’s service that could impact a consumer’s ability to access broadband, including deployment, marketing, and credit checks, among other things.

1 unchanged sentence

It is currently uncertain how the FCC will implement and enforce these new rules.

Several business associations have filed appeals challenging the rules and several of those appeals have been consolidated in the Eighth Circuit.

Several business associations have filed appeals challenging the rules and several of those appeals have been consolidated in the Eighth Circuit, which held oral argument on September 25, 2024.

Privacy-related legislation continues to be adopted or considered in a number of jurisdictions.

2 unchanged sentences

The legislation appropriates $65,000 to support broadband deployment and adoption.

The National Telecommunications and Information Agency (NTIA) is responsible for distributing more than $48,000 of this funding, including $42,500 in state grants for broadband deployment projects in unserved and underserved areas.

The IIJA also appropriated $14,200 for establishment of the Affordable Connectivity Program (ACP), an FCC-administered monthly, low-income broadband benefit program, replacing the Emergency Broadband Benefit program (established in December 2020 by the Consolidated Appropriations Act, 2021).

Qualifying customers can receive up to thirty dollars per month (or seventy-five dollars per month for those on Tribal lands) to assist with their internet bill.

AT&T is a participating provider in the ACP program and will consider participating in the deployment program where appropriate.

The IIJA includes various provisions that have resulted in FCC proceedings regarding ACP program administration and consumer protection, reform of the existing universal support program, and broadband labeling and equal access.

Absent additional funding, on January 11, 2024 the FCC announced that it currently projects April 2024 to be the last month providers will be fully reimbursed for the ACP benefit provided to enrolled households and established February 7, 2024 as the last date for new enrollments into the program.

NTIA and states are in the process of administering these grants.

Where appropriate, AT&T has applied for, and in some cases has been awarded, and may continue to apply for grants under this or other government infrastructure programs.

Wireless Industry-wide network densification and 5G technology expansion efforts, which are needed to satisfy extensive demand for video and internet access, will involve significant deployment of “small cell” equipment.

1 unchanged sentence

The FCC has adopted multiple Orders streamlining federal, state, and local wireless structure review processes that had the tendency to delay and impede deployment of small cell and related infrastructure used to provide telecommunications and broadband services.

During 2020-2021, we deployed 5G nationwide on “low band” spectrum on macro towers.

Executing on the recent spectrum purchase, we announced ongoing construction and continuing deployment of 5G on C-band spectrum in 2022 and beyond.

Additional spectrum will be needed industrywide for 5G and future services.

In 2023, the federal government released a national spectrum strategy that focused on spectrum sharing and did not include specific timelines to make additional spectrum bands available for 5G and future generations of service.

As a result, the federal government’s ability and intent to make sufficient spectrum available to the industry in needed timeframes remains uncertain.

In June and November 2020, the FCC issued a Declaratory Ruling clarifying the limits on state and local authority to deny applications to modify existing structures to accommodate wireless facilities.

Appeals of the November 2020 order remain pending in the Ninth Circuit Court of Appeals.

If sustained on appeal, these FCC decisions will remove state and local regulatory barriers and reduce the costs of the infrastructure needed for 5G and FirstNet deployments, which will enhance our ability to place small cell facilities on utility poles, expand existing facilities to accommodate public safety services, and replace legacy facilities and services with advanced broadband infrastructure and services.

In 2022, we began deploying 5G nationwide on “low band” spectrum on macro towers.

Dollars in millions except per share amounts

In March 2020, the FCC released its order setting rules for certain spectrum bands (C-band) for 5G operations.

In that order, the FCC concluded that C-band 5G services that met the agency’s technical limits on power and emissions would not cause harmful interference with aircraft operations.

In reliance on that order, AT&T bid a total of $23,406 and was awarded 1,621 C-band licenses, including 40 MHz available for deployment in December 2021, with the remainder available for deployment no later than December 2023.

In late 2021, the Federal Aviation Administration (FAA) questioned whether the C-band launch could impact radio altimeter equipment on airplanes, which operate on spectrum bands over 400 MHz away from the spectrum AT&T launched in 2022 and 220 MHz away from spectrum AT&T launched in 2023.

In response, to allow the FAA more time to evaluate, AT&T and Verizon delayed their planned December 2021 5G C-band launch by six weeks and voluntarily committed to a series of temporary, precautionary measures, in addition to deferring turning on a limited number of towers around certain airports.

In 2023, we and all other C-band licensees entered into a voluntarily commitment to extend precautionary measures near certain airports through January 1, 2028, which may have limited impacts to deployments and services.

In 2023, the FCC’s statutory authority to conduct spectrum auctions lapsed and it is uncertain when Congress will reauthorize it.

Also in 2023, the federal government released a national spectrum strategy that focused on spectrum sharing but did not include terms of future spectrum sharing model(s) or specific timelines to make additional spectrum bands available for 5G and future generations of service.

As a result, the federal government’s ability and intent to make sufficient spectrum available to the industry in needed timeframes and on terms suitable for mobile broadband network deployments remains uncertain.

In June and November 2020, the FCC issued Declaratory Rulings clarifying the limits on state and local authority to deny applications to modify existing structures to accommodate wireless facilities.

In September 2024, the Ninth Circuit Court of Appeals resolved challenges to those Declaratory Rulings, largely sustaining the FCC’s rulings.

The decision ensures that the FCC retains the ability to remove state and local regulations that could delay or impede spectrum and technology upgrades on existing cell site facilities.

In recent years, the FCC took several actions to make spectrum available for 5G services, including the auction of 280 MHz of mid-band spectrum previously used for satellite service (the “C-Band” auction) and 39 GHz band spectrum.

2 unchanged sentences

In addition, in 2022, the FCC completed Auction 110, in which AT&T won 40 MHz of 3.45 GHz spectrum nationwide at a cost of $9,079.

Dollars in millions except per share amounts

ACCOUNTING POLICIES AND STANDARDS

1 unchanged sentence

Pension and Postretirement Benefits Our actuarial estimates of retiree benefit expense and the associated significant weighted-average assumptions are discussed in Note 14.

Our assumed weighted-average discount rates for both pension and postretirement benefits of 5.00%, at December 31, 2023, reflect the hypothetical rate at which the projected benefit obligations could be effectively settled or paid out to participants.

Our assumed weighted-average discount rates for pension and postretirement benefits of 5.70% and 5.60%, respectively, at December 31, 2024, reflect the hypothetical rate at which the projected benefit obligations could be effectively settled or paid out to participants.

We determined our discount rate based on a range of factors, including a yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at the measurement date and corresponding to the related expected durations of future cash outflows for the obligations.

1 unchanged sentence

dollars, and generally not callable, convertible or index linked.

For the year ended December 31, 2023, when compared to the year ended December 31, 2022, we decreased our pension and postretirement discount rates each by 0.20%, resulting in an increase in our pension plan benefit obligation of $916 and an increase in our postretirement benefit obligation of $110.

Our expected long-term rate of return was 7.50% on pension plan assets and 6.50% on postretirement plan assets for 2023.

For 2024, we have increased our expected return on pension plan assets to 7.75%, reflecting higher yields for bonds and changes in the asset mix, and decreased our expected return on postretirement plan assets to 4.00%, reflecting reallocation of assets to cash for benefit payment.

For the year ended December 31, 2024, when compared to the year ended December 31, 2023, we increased our pension discount rate by 0.70%, resulting in a decrease in our pension plan benefit obligation of $1,994, and increased our postretirement discount rate by 0.60%, resulting in a decrease in our postretirement benefit obligation of $317.

Our expected long-term rate of return is 7.75% on pension plan assets and 4.00% on postretirement plan assets for 2024 and 2025.

Our expected return on plan assets is calculated using the actual fair value of plan assets.

12 unchanged sentences

If the fair value exceeds the book value, then no impairment is measured.

We estimate fair values using an income approach (also

Dollars in millions except per share amounts

known as a discounted cash flow model) and market multiple approaches.

We estimate fair values using an income approach (also known as a discounted cash flow model) and market multiple approaches.

The income approach utilizes our future cash flow projections with a perpetuity value discounted at an appropriate weighted average cost of capital.

The market multiple approach uses the multiples of publicly traded companies whose services are comparable to those offered by the reporting units.

As of October 1, 2023, the calculated fair values of the reporting units exceeded their book values in all circumstances.

However, the Consumer Wireline fair value exceeded its book value by less than 10%, with interest rates negatively impacting fair value offset by higher long-term cash flow projections driven by our fiber investment.

For our Mobility and Business Wireline reporting units where fair values were in excess of 10%, if either the projected long-term growth rates declined by 0.5%, if the projected long-term EBITDA margin declined by 0.5%, or if the weighted average cost of capital increased by 0.5%, the fair values would still be higher than the book value of the reporting units.

In the event of a 10% drop in the fair value of these reporting units, the fair value still would have exceeded the book value of the reporting units.

For the Consumer Wireline reporting unit, as of October 1, 2023, if the projected rate of long-term growth declined by 0.75%, if the projected long-term EBITDA margin declined by 4.0%, or if the weighted average cost of capital increased by 0.25%, it would result in impairment of the goodwill.

The fair values of our reporting units continue to be impacted by changes in the macroeconomic environment, namely increased weighted-average cost of capital.

Also, inflation pressure and lower projected cash flows driven by secular declines, predominantly at Business Wireline, impacted the fair values.

Future sustained declines in macroeconomic or business conditions, or higher discount rates or declines in the value of AT&T stock could result in goodwill impairment charges in future periods.

During the third quarter of 2024, we updated the long-term strategic plan of our Business Wireline reporting unit.

The updated plans reflected lower long-term projected future cash flows associated with the industry-wide secular decline, including a faster-than-previously anticipated decline of legacy services.

We identified this as an impairment indicator and performed an interim quantitative goodwill impairment test of our Business Wireline reporting unit.

The interim impairment test methodology was consistent with our approach for annual impairment testing (see Note 1), using similar models updated with our current view of key inputs and assumptions.

We concluded that the calculated fair value of the Business Wireline reporting unit was lower than the book value, resulting in a noncash goodwill impairment charge of $4,422 for the entirety of our Business Wireline reporting unit goodwill.

As of October 1, 2024, the calculated fair values of the reporting units with remaining goodwill exceeded their book values in all circumstances in excess of 10%.

If either the projected long-term growth rates declined by 0.5%, if the projected long-term

Dollars in millions except per share amounts

EBITDA margin declined by 0.5%, or if the weighted average cost of capital increased by 0.5%, the fair values would still be higher than the book value of the reporting units.

The fair values of our remaining reporting units could be negatively impacted by future sustained declines in macroeconomic or business conditions, higher discount rates or declines in the value of AT&T stock and could result in goodwill impairment charges in future periods.

Wireless Licenses

17 unchanged sentences

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 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.

Dollars in millions except per share amounts

Labor Contracts As of January 31, 2024, we employed approximately 149,900 persons.

Approximately 42% of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions.

After expiration of the collective bargaining agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached.

The main contracts set to expire in 2024 include the following:

• A contract covering approximately 5,000 Mobility employees in Arkansas, Kansas, Missouri, Oklahoma and Texas is set to expire in February.

• A wireline contract covering approximately 8,500 employees in California and Nevada is set to expire in April.

• Three wireline contracts covering approximately 15,000 employees in the southeastern United States are set to expire in August.

Inflation Reduction Act The Inflation Reduction Act of 2022 (Inflation Reduction Act) was enacted on August 16, 2022.

The Inflation Reduction Act imposes a new 15% corporate alternative minimum tax (CAMT) on “applicable corporations” for taxable years beginning after December 31, 2022.

The CAMT is imposed to the extent the alternative minimum tax exceeds a company’s regular tax liability.

A corporation that pays alternative minimum tax is eligible for a credit against income tax in future years.

Subject to future regulatory guidance, we currently do not believe the CAMT will have a material impact on our 2024 tax liability.

OECD On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy.

On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%.

The OECD has continued to release additional guidance on the two-pillar framework throughout 2022 and 2023.

Several jurisdictions, including the European Union, have enacted Pillar Two legislation with varying dates into force, including January 1, 2024 for certain components.

There can be no assurance that these new rules will not increase our taxes in these countries and have an adverse impact on our provision for income taxes, when enacted or enforced by participating countries in which we do business.

Environmental We are subject from time to time to judicial and administrative proceedings brought by various governmental authorities under federal, state or local environmental laws.

8 unchanged sentences

(17,490) (19,660) (26,899)

Cash (used in) provided by financing activities

Cash used in financing activities

(24,708) (15,614) (59,564)

3 unchanged sentences

123,532 137,331

We had $6,722 in cash and cash equivalents available at December 31, 2023, increasing $3,021 since December 31, 2022.

We had $3,298 in cash and cash equivalents available at December 31, 2024, decreasing $3,424 since December 31, 2023.

Cash and cash equivalents included cash of $2,149 and money market funds and other cash equivalents of $1,149.

Approximately $1,381 of our cash and cash equivalents were held by our foreign entities in accounts predominantly outside of the U.S.

Approximately $1,268 of our cash and cash equivalents were held in accounts outside of the U.S.

and may be subject to restrictions on repatriation.

In 2023, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, issuance of commercial paper, long-term debt and cumulative preferred interests in subsidiaries and distributions from DIRECTV.

These inflows exceeded cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, funding capital expenditures and vendor financing payments, repayment of short-term borrowings and long-term debt, dividend payments to stockholders, and repurchase of the Series A Cumulative Perpetual Preferred Membership Interests in AT&T Mobility II LLC (Mobility preferred interests).

Dollars in millions except per share amounts

In 2024, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, distributions from DIRECTV and sales of idle Rabbi Trust assets and other investments.

These inflows were exceeded by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses.

The cash generated from operating activities was used to fund capital expenditures and vendor financing payments, repay short-term borrowings and long-term debt, and dividend payments to stockholders.

We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.

Refer to “Contractual Obligations” discussion below for additional information regarding our cash requirements.

Dollars in millions except per share amounts

Cash Provided by Operating Activities from Continuing Operations

During 2023, cash provided by operating activities was $38,314 compared to $35,812 in 2022, reflecting operational growth and a focus to lower working capital programs, which resulted in lower device payments partially offset by lower receivable sales, net of remittances (see Note 17), and higher cash income tax payments.

Cash from operating activities in 2022 also included higher voluntary benefit plan contributions.

During 2024, cash provided by operating activities was $38,771, compared to $38,314 in 2023, reflecting the timing of working capital associated with device payments, as well as the expansion of committed, cost-efficient receivable sales programs, and operational growth, partially offset by higher cash tax payments.

We actively manage the timing of our supplier payments for operating items to optimize the use of our cash.

1 unchanged sentence

In addition, for payments to suppliers of handset inventory, as part of our working capital initiatives, we have arrangements that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (referred to as direct supplier financing).

The net impact of direct supplier financing, including principal and interest payments, was to decrease cash from operating activities $299 in 2023 and improve cash from operating activities $851 in 2022.

The net impact of direct supplier financing, including principal and interest payments, was to improve cash from operating activities $661 in 2024 and decrease cash from operating activities $299 in 2023.

All supplier financing payments are due within one year.

2 unchanged sentences

During 2024, cash used in investing activities totaled $17,490, consisting primarily of $20,263 (including interest during construction) for capital expenditures.

In 2023, we received a return of investment of $2,049 from DIRECTV representing distributions in excess of cumulative equity in earnings from DIRECTV (see Note 10).

We paid $2,221 of spectrum relocation and clearing costs in 2023, which we report as “Acquisitions, net of cash acquired” on our consolidated statements of cash flows.

During 2024, net FirstNet sustainability payments were $237.

In 2024, we received a return of investment of $928 from DIRECTV representing distributions in excess of cumulative equity in earnings from DIRECTV (see Note 10) and sold Rabbi Trust and other investments totaling $2,575.

For capital improvements, we have negotiated favorable vendor payment terms of 120 days or more (referred to as vendor financing) with some of our vendors, which are excluded from capital expenditures and reported as financing activities.

2 unchanged sentences

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems.

In 2023, we placed $2,651 of equipment in service under vendor financing arrangements (compared to $5,817 in 2022).

In 2024, we placed $700 of productive assets (primarily software) in service under vendor financing arrangements (compared to $2,651 in 2023).

The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Our capital expenditures and vendor financing payments were slightly elevated in 2023, reflecting strategic investments.

In 2024, we expect that our capital investment, which includes capital expenditures and cash paid for vendor financing, will be in the $21,000 to $22,000 range.

In 2025, we expect that our capital investment, which includes capital expenditures and cash paid for vendor financing, will be in the $22,000 range.

Cash Provided by or Used in Financing Activities from Continuing Operations

In 2023, cash used in financing activities totaled $15,614 and was comprised of debt issuances and repayments, payments of dividends, issuances and repurchase of preferred interests in subsidiaries and vendor financing payments.

Dollars in millions except per share amounts

In 2024, cash used in financing activities totaled $24,708 and was comprised of debt repayments, payments of dividends and vendor financing payments.

A tabular summary of our debt activity during 2024 is as follows:

4 unchanged sentences

Net commercial paper borrowings $ 428 $ 262 $ (2,686) $ — $ (1,996)

Issuance of notes and debentures:

$ (2,300) $ (1,615) $ — $ (2,575) $ (6,490)

(2,181) (32) — — (2,213)

Other 1,050 — — 371 1,421

Debt issuances

$ 4,116 $ 6,267 $ — $ 371 $ 10,754

Private financing $ — $ (750) $ — $ — $ (750)

Repayments of other short-term borrowings $ — $ (750) $ — $ — $ (750)

$ (376) $ (750) $ — $ — $ (1,126)

(1,626) (473) (3,503) — (5,602)

— — (450) — (450)

2025 Term Loan

CAD notes — (442) — — (442)

— — — (467) (467)

1 unchanged sentence

Repayments of long-term debt $ (4,685) $ (2,225) $ (203) $ (3,184) $ (10,297)

Dollars in millions except per share amounts

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of December 31, 2024 and as of December 31, 2023.

1 unchanged sentence

This also included Euro, British pound sterling, Canadian dollar, Swiss franc and Australian dollar denominated debt that totaled approximately $30,685.

At December 31, 2023, we had $9,477 of debt maturing within one year, consisting of $2,091 of commercial paper borrowings and $7,386 of long-term debt issuances.

The weighted average interest rate on our outstanding short-term borrowings was approximately 6.0% as of December 31, 2023 and 4.8% as of December 31, 2022.

At December 31, 2024, we had $5,089 of long-term debt maturing within one year.

We had no outstanding commercial paper borrowings or other short-term borrowings on December 31, 2024.

The weighted average interest rate on our outstanding short-term borrowings was approximately 6.0% as of December 31, 2023.

During 2024, we paid $1,792 of cash under our vendor financing program, compared to $5,742 in 2023.

Total vendor financing payables included in our December 31, 2024 consolidated balance sheet were $1,448, with $749 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

At December 31, 2023, we had approximately 144 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014.

We paid dividends on common shares and preferred shares of $8,136 in 2023, compared with $9,859 in 2022.

In December 2024, our Board of Directors approved a $10,000 share repurchase authorization and terminated the March 2014 authorization, under which approximately 144 million shares were available for repurchase.

At December 31, 2024, we had $10,000 remaining from our common stock repurchase authorization approved by the Board of Directors in December 2024.

We paid dividends on common and preferred shares of $8,208 in 2024, compared with $8,136 in 2023.

Dividends on common stock declared by our Board of Directors totaled $1.11 per share in 2024 and in 2023.

Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities.

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 (April preferreds).

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.

(See Note 16)

In April 2023, we also accepted the December 2022 put option notice from the AT&T pension trust and repurchased the remaining 213 million 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 2023 issuances of Telco LLC preferred interests.

(See Note 16)

In June 2023, we issued $2,000 of 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.

The Mobility noncontrolling interests are included in “Redeemable Noncontrolling Interest” on the consolidated balance sheets.

(See Note 16)

Dollars in millions except per share amounts

Our 2024 financing activities will focus on managing our debt level and paying dividends, subject to approval by our Board of Directors.

Our 2025 financing activities will focus on managing our debt level and paying dividends, subject to approval by our Board of Directors, and repurchasing common stock when deemed appropriate.

We plan to fund our financing uses of cash through a combination of cash from operations, issuance of debt and asset sales.

3 unchanged sentences

We use credit facilities as a tool in managing our liquidity status.

We currently have one $12,000 revolving credit agreement that terminates on November 18, 2028 (Revolving Credit Agreement).

We currently have a $12,000 revolving credit agreement that terminates on November 18, 2029 (Revolving Credit Agreement).

No amount was outstanding under the Revolving Credit Agreement as of December 31, 2024.

In November 2022, we entered into and drew on a $2,500 term loan agreement due February 16, 2025 (2025 Term Loan), with Mizuho Bank, Ltd., as agent.

On March 30, 2023, the 2025 Term Loan was paid off and terminated.

We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases as well as a commercial paper program.

Our Revolving Credit Agreement contains covenants that are customary for an issuer with investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75-to-1.

Our Revolving Credit Agreement contains covenants that are customary for an issuer with an investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75-to-1.

As of December 31, 2024, we were in compliance with the covenants for our credit facilities.

1 unchanged sentence

Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds.

Under these arrangements, which cover the majority of our approximately $39,800 derivative portfolio, counterparties are still required to post collateral.

During 2023, we received approximately $220 of cash collateral, on a net basis.

Under these arrangements, which cover the majority of our $34,884 derivative portfolio, counterparties are still required to post collateral.

During 2024, we received $477 of cash collateral, on a net basis.

Cash postings under these arrangements vary with changes in credit ratings and netting agreements.

4 unchanged sentences

The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and reclassifications related to redemption of noncontrolling interests.

Dollars in millions except per share amounts

A significant amount of our cash outflows for continuing operations is related to tax items, acquisition of spectrum through FCC auctions and benefits paid for current and former employees:

4 unchanged sentences

Of those benefits, approximately $2,290 related to medical and prescription drug benefits in 2024, compared to $2,730 in 2023.

In addition, in 2023, we prefunded $135 for future benefit payments versus $500 in 2022.

We paid $2,447 of pension benefits out of plan assets in 2024, compared to $4,863 in 2023.

Dollars in millions except per share amounts

Contractual Obligations

34 unchanged sentences

and other noncurrent liabilities of $8,292.

Dollars in millions except per share amounts

DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURES

We also evaluate segment and business unit performance based on EBITDA, which is defined as operating income excluding depreciation and amortization, and/or EBITDA margin, which is defined as EBITDA divided by total revenue.

EBITDA is used as part of our management reporting, and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units.

There are material limitations to using these non-GAAP financial measures.

EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.

2024 2023 2022

Communications Segment

Operating income

$ 27,095 $ 27,801 $ 26,736

Depreciation and amortization expense

19,433 17,363 16,681

$ 46,528 $ 45,164 $ 43,417

Operating income margin

23.0 % 23.6 % 22.8 %

EBITDA margin

39.5 % 38.3 % 37.1 %

Operating income $ 26,314 $ 25,861 $ 23,812

Depreciation and amortization expense 10,217 8,517 8,198

EBITDA $ 36,531 $ 34,378 $ 32,010

Operating income margin 30.9 % 30.8 % 29.1 %

EBITDA margin 42.8 % 40.9 % 39.1 %

Business Wireline

Operating income $ (88) $ 1,289 $ 2,290

Depreciation and amortization expense 5,555 5,377 5,314

EBITDA $ 5,467 $ 6,666 $ 7,604

Operating income margin (0.5) % 6.2 % 10.2 %

EBITDA margin 29.1 % 31.9 % 33.7 %

Consumer Wireline

Operating income $ 869 $ 651 $ 634

Depreciation and amortization expense 3,661 3,469 3,169

EBITDA $ 4,530 $ 4,120 $ 3,803

Operating income margin 6.4 % 4.9 % 5.0 %

EBITDA margin 33.4 % 31.3 % 29.8 %

Latin America Segment

Operating income $ 40 $ (141) $ (326)

Depreciation and amortization expense 657 724 658

EBITDA $ 697 $ 583 $ 332

Operating income margin 0.9 % (3.6) % (10.4) %

EBITDA margin 16.5 % 14.8 % 10.6 %

Dollars in millions except per share amounts

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-K

Item 7. Management’s Discussion and Analysis