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Q2 2018 AT&T EARNINGS

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2nd Quarter Earnings

AT&T Investor Update

July 24, 2018


companies. All other marks are the property of their respective owners.2

AT&T Investor Update

John StephensSenior Executive Vice President and Chief Financial Officer

Randall StephensonChairman and Chief Executive Officer

Results and Outlook

Business Update

Business Unit Key Initiatives

Q&A

John StankeyCEO, WarnerMedia

Brian LesserCEO, AT&T Advertising and Analytics

John DonovanCEO, AT&T Communications

Lori LeeCEO, AT&T Latin America



Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise.

This presentation may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at https://investors.att.com.

The “quiet period” for FCC Spectrum Auction 903 (also known as the CAF II auction) is now in effect. During the quiet period, auction applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants.

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Cautionary Language Concerning Forward-Looking Statements






Results and OutlookJohn Stephens



$39.8 $39.9 $39.0

2Q182Q17

$8.7$10.2

$5.2$5.1

$3.5 $5.1

$0.79

$0.91

20.3% 21.1%

2Q18 Financial Summary

ADJUSTED EPS CASH FROM OPS2

Adj. OI Margin2 CapexFree Cash Flow

$ in billions, except EPS

2Q18 Highlights

2Q17 2Q18

Reported EPS $0.63 $0.81

Adjustments:

• Actuarial gain on benefit plans ($0.03) ($0.21)

• Merger-related items and amortization3 $0.18 $0.30

• Other adjustments4 $0.01 0.01

Adjusted EPS $0.79 $0.91

2Q182Q17

Adjusted EPS of $0.91, up 15.2%Includes ~$0.02 of Time Warner partial quarter

Year-to-date adjusted EPS of $1.77

$39.0 billion in consolidated revenue $1.1 billion from Time Warner partial quarter, net of eliminations

~$900 million reduction from USF netting

Adjusted operating income margin of 21.1%19.2% on a comparable basis – decline primarily from video

Cash from operations of $10.2 billion; year-to-date $19.2 billion, up $1.5 billionFree cash flow of $5.1 billion

Year-to-date free cash flow of $8.0 billion, up $1.5 billion

1 “Historical accounting method” removes the impact of the adoption of revenue recognition accounting including a USF policy election and are comparable to 2Q17. 2 2Q17 is recast for ASU No. 2017-07 (post employment benefit plans) and ASU No. 2016-15 (cash flows).3 2Q18 includes $0.08 of merger-related interest expense (net) and debt exchange costs, $0.02 tax item, and $0.16 of intangible amortization.4 2Q18 includes severance and other.

2Q17 2Q18 Historical Accounting

Method1

REVENUES

2Q18

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$ in billions

AT&T Mobility

$17.5 $17.6

42.2% 41.4%44.1%

2Q17 2Q18

$17.3

2Q18 Financial Results

REVENUES EBITDA MARGIN

2Q18 Historical Accounting

Method

24.5% 21.8%

$11.9$12.7

2Q17 2Q18

$11.7

24.0%

Entertainment Group



Method

$9.7 $9.4

37.4% 35.8% 38.0%

2Q17 2Q18

$9.1

$254M$129M

$2.0$2.0

2Q17 2Q18

$2.0

$148M

Business Solutions

International


REVENUES EBITDA


Method


Method

50.4% service margin on comparable basis

Solid customer growth

Comparable service revenue up slightly year over year; up 2% sequentially

Video transition impacts revenues and margins

Tailored video offerings for each segment

Adworks continues double-digit growth

Wireless growth helps offset legacy service pressure

Cost structure initiatives sustain margins

Wireline EBITDA margin up slightly year-over-year

Strong revenue growth in Mexico

Solid wireless and video customer metrics

Strong constant currency revenue growth, with FX pressure in LatAM

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$ in billions

WarnerMedia

Turner

2Q18 Results – WarnerMedia

$1.8 $1.8

2Q17 2Q18

$7.3 $7.8

HBO Warner Bros.

Revenues Adj. Op Income

2Q17 2Q18

$3.1 $3.2

2Q17 2Q18

$1.5 $1.7

2Q17 2Q18

$3.0$3.3

Reporting Considerations

Sixteen days of WarnerMedia results included in AT&T consolidated results

Pro forma data to be filed with the SEC in August

Trending schedules are available on the IR website

Future quarters comparison items:

• Results will continue to be reported on an operational basis

• Subscriber revenue eliminations (e.g. content) in the $3 billion range annually

• Purchase accounting impacts will be captured in Corporate and Other

16 Days

$1.3

$1.0 $1.0 $0.5 $0.6 $0.3 $0.3

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$0.5



Raising adjusted EPS to the high-end of the $3.50 rangeIncludes estimated impacts of tax reform and new accounting standard

Raising Free Cash Flow to the high-end of the $21 billion rangeDividend payout of Free Cash Flow in the low 60s%

Inclusive of 2018 deal and integration costs

Capital Investment of approximately $25 billion; $22 billion net of expected FirstNet reimbursements and vendor financingIncludes fiber build commitment

Focused on de-leveraging2Q18 net debt to EBITDA of 2.9x

Expect year-end 2019 leverage in the 2.5x range

Return to historical levels by year-end 2022

Outlook








Business UpdateRandall Stephenson





Customer

“A fresh approach to how media and entertainment works for consumers, creators, distributors and advertisers.”

AT&T: A Modern Media Company

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Organized for Speed, Efficiency and Value Creation

AT&T Inc.

John Donovan Lori Lee Brian Lesser John Stankey

Communications

Consumers, Business, Network & Technology

Latin America

Mexico Wireless, Vrio

Advertising & Analytics

Data insights for relevant advertising

WarnerMedia

Turner, HBO, Warner Bros.






WarnerMediaJohn Stankey



2Q18 WarnerMedia

Turner: Revenue up 4% on gains in subscription and advertising revenuesConsistent subscriber trends drive subscription revenues up 6%

Advertising revenues up 3% due to strength from sports properties

3 of the Top 5 ad-supported cable networks in primetime among adults 18-49

Home Box Office: Revenue up 13% on strong gains in subscription revenuesStrong U.S. digital subscription revenue growth

Warner Bros.: Producing record number of seriesMore than 75 series underway for the 2018-19 television season

166 Primetime Emmy NominationsHBO received 108 nominations, including 22 for Game of Thrones – the most of any show

HBO Subscription Revenue

Turner Subscription Revenue

Primetime Emmy Nominations1

13

($ in billions)

21

111

50

160

33

108

46

166

Turner HBO WB WarnerMedia

2017 2018

$1.30 $1.36 $1.42 $1.46 $1.43 $1.53

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

$1.67 $1.67 $1.67 $1.69 $1.79 $1.77

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

1 Westworld is produced by Warner Bros. for HBO, and each includes the series’ nominations.





Merger closed, with integration well underwayApply data to Turner ad inventory

Positioned WarnerMedia content on AT&T distribution platforms

Deliver on merger synergies of $2.5 billion run-rate by end of 2021$1.5 billion cost savings; $1.0 billion revenue related synergies

Integrating corporate staff functions, eliminating duplication and implementing supply chain policies

Plan to step-up investment in premium content and direct-to-consumer relationshipsEnhance the HBO experience, while maintaining/strengthening the brand reputationExploring international distribution opportunities

WarnerMedia

Key Initiatives

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AT&T CommunicationsJohn Donovan



Postpaid Phone Momentum

2Q18 AT&T Communications Operating Results

Strong year-over-year improvement in all major products

Wireless

Postpaid phone net adds of 46,000, an improvement of 135,000 from last year

• Solid smartphone gains and postpaid phone churn of 0.82%

Prepaid net adds of 453,000, up 186,000 from last year

EG Video & Broadband

Video net adds of 80,000, an improvement of 279,000 from last year

• Traditional video net losses of 262,000, an improvement of 89,000 from last year

• Another strong quarter of DTV NOW net adds at 342,000, up 190,000 from last year

Broadband net adds of 23,000, up 15,000 from last year and the 7th consecutive quarter of positive net adds

• 246,000 subscribers added to the fiber networkTV and Broadband Subscribers2 (millions)

-400

-200

0

200

400

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

2016 2017 2018Net Adds (k)

Wireless Service Revenue Growth1

-3.0%

-1.0%

1.0%

3.0%

2Q17 3Q17 4Q17 1Q18 2Q18 3Q18e 4Q18e

2Q16 2Q17 2Q18 2Q16 2Q17 2Q18

Traditional Streaming DSL IPBB

25.3 25.2 25.5

15.6 15.7 15.8 Wireless service revenue growth1, first time since first quarter 2014

Expect continued improvement in second half, with growth for the full year 2018

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1 On a comparable basis, excluding the impact of ASC 606.2 Subscriber counts include subs in Entertainment Group and Business Solutions.





AT&T Communications

Key Initiatives

Video Portfolio EvolutionLaunched a $15 offering called WatchTV, leading with Turner content

Expanding line-up of video product offerings to all market segments

Launched Open Video platform with early strong engagement metrics

Continue driving industry leading cost structurePlatform transformation in video and legacy

Distribution enhancements

Strong momentum in digital sales

Investing in the futureFirstNet Network build accelerating

5G Evolution covers ~100 million people and is available in more than 140 markets

Mobile 5G launch plans on track

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Advertising & AnalyticsBrian Lesser



$687 $759 $853

1H16 1H17 1H18

AT&T Advertising and Analytics has a distinct competitive advantage

Large scale portfolio of ad inventory with Turner contentTNT, TBS, CNN, Adult Swim, Bleacher Report, Cartoon Network, truTV, NBA on TNT

Supplemented with AT&T inventoryContent

Scale in TV, Mobile and Wired Broadband170 million direct-to-consumer relationships

Turner reach: ~90% of all U.S. pay-TV households

Vast data, targeting and measurement capabilitiesData insights from subscriber relationships

Mobile location and web-browsing enables targeting and attribution

Premium MarketplaceAnnounced acquisition of AppNexus

Advanced ad formats

AdWorks Revenue

Turner Advertising Revenue

$2,580 $2,478 $2,627

1H16 1H17 1H18

(In millions)

(In millions)

+12%+10%

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Distribution

Data

Technology






Latin AmericaLori Lee



Mexico Subscriber Growth

Vrio TV Subs (millions)

(millions)

Mexico Wireless Network Build

50

75

100

2Q16 2Q17 2Q18

2Q18 AT&T LatAm Operating Results and Key Initiatives

2Q17 2Q182Q16

10.0

13.1

16.4

Strong subscriber and revenue growth in Mexico756,000 wireless net adds in 2Q

Added more than 3 million subscribers over the last year

Initial investment cycle nearly completeLTE build, stores and distribution in place

Systems conversions nearly complete

Consistent pay-TV performance in Latin AmericaStable subscribers and profitability

World Cup helps drive strong video subscriber gains, but provides seasonal expense pressure in second quarter

13.7 13.6 13.5 13.6 13.6 13.7

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

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Covered POPsTarget POPs (m)




Q&A

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