Segment Information

9 Months Ended

Sep. 30, 2015

Segment Information

Segment Information

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly.Due to recent organizational changes and our July 24, 2015 acquisition of DIRECTV, effective for the quarter ended September 30, 2015, we are revising our operating segments to align with our new management structure and organizational responsibilities. We analyze our operating segments based on segment contribution, which consists of operating income, excluding acquisition-related costs and other significant items (as discussed below), and equity in net income of affiliates for investments managed within each operating segment. We have four reportable segments: (1) Business Solutions, (2) Entertainment and Internet Services, (3) Consumer Mobility and (4) International. We have revised our prior-period presentation to conform to our current reporting.

We also evaluate segment performance based on segment operating income before depreciation and amortization, which we refer to as EBITDA and/or EBITDA margin. For AT&T, EBITDA is defined as operating income before depreciation and amortization. We believe EBITDA to be a relevant and useful measurement to our investors as it is part of our internal management reporting and planning processes and it is an important metric that management uses to evaluate segment operating performance. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses.

The Business Solutions segment provides both wireless and wireline services to business customers and individual subscribers who purchase wireless services through employer-sponsored plans.We provide advanced IP-based services including Virtual Private Networks (VPN), Ethernet-related products and broadband (strategic business services) as well as traditional data and voice products. Services in this segment utilize our wireless and wired network and are marketed to provide a complete communications solution to our business customers.

The Entertainment and Internet Services segment provides video, Internet and voice communication services to residential customers located in the U.S.or in U.S. territories. Services utilize our copper and IP-based wired network and/or our satellite technology to provide video, high speed Internet and voice services.

The Consumer Mobility segment provides nationwide wireless service to consumers, wholesale and resale subscribers located in the U.S. or in U.S. territories. Services utilize our U.S. wireless network to provide voice and data services, including high-speed Internet, video entertainment and home monitoring services.

The International segment providesentertainment services in Latin America and wireless servicesin Mexico. Video entertainment services are provided primarily to residential customers using satellite technology. Wireless services utilize our regional and national networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries transact in their local currency and operating results are converted to U.S. dollars using official exchange rates. The exchange rate used to report net monetary assets and operating results of our Venezuelan subsidiary is the Sistema Marginal de Divisas (SIMADI), which was 199.65and 199.42 Venezuelan bolivars per U.S. dollar at July 24, 2015 and September 30, 2015, respectively. Our International segment is subject to foreign currency fluctuations.

In reconciling items to consolidated operating income, Corporate and Other includes: (1) operations that are not considered reportable segments and that are no longer integral to our operations or which we no longer actively market, and (2) impacts of corporate-wide decisions for which the individual operating segments are not being evaluated, including interest costs and expected return on plan assets for our pension and postretirement benefit plans.

Certain operating items are not allocated to our business segments:

• Acquisition-related items include (1) operations and support items associated with the merger and integration of newly acquired businesses, and (2) the noncash amortization of intangible assets acquired in acquisitions.
• Certain significant items include (1) noncash actuarial gains and losses from pension and other postretirement benefits, (2) employee separation charges associated with voluntary and/or strategic offers, (3) abandonment or impairments of assets and (4) 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. Therefore, these items are also not included in each segment's reportable results.

Our operating assets are shared by multiple segments and consist of our wireless and wired networks as well as an international satellite fleet. We manage our assets on a total company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented. Depreciationis allocated based on network usage or asset utilization by segment.

For the three months ended September 30, 2015
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	17,692	$	10,921	$	6,771	$	2,474	$	4,297		$	-	$	4,297
Entertainment and Internet Services		10,858		8,450		2,408		1,389		1,019			2		1,021
Consumer Mobility		8,784		5,065		3,719		976		2,743			-		2,743
International		1,526		1,384		142		225		(83)			(4)		(87)
Segment Total		38,860		25,820		13,040		5,064		7,976			(2)		7,974
Corporate and Other		316		315		1		3		(2)
Acquisition-related items		(85)		611		(696)		1,198		(1,894)
Certain significant items		-		157		(157)		-		(157)
AT&T Inc.	$	39,091	$	26,903	$	12,188	$	6,265	$	5,923
For the nine months ended September 30, 2015
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	52,913	$	32,966	$	19,947	$	7,276	$	12,671		$	-	$	12,671
Entertainment and Internet Services		22,300		18,222		4,078		3,519		559			(16)		543
Consumer Mobility		26,317		15,808		10,509		2,912		7,597			-		7,597
International		2,253		2,131		122		346		(224)			(4)		(228)
Segment Total		103,783		69,127		34,656		14,053		20,603			(20)		20,583
Corporate and Other		984		785		199		47		152
Acquisition-related items		(85)		1,604		(1,689)		1,439		(3,128)
Certain significant items		-		374		(374)		-		(374)
AT&T Inc.	$	104,682	$	71,890	$	32,792	$	15,539	$	17,253
For the three months ended September 30, 2014
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	17,487	$	11,295	$	6,192	$	2,331	$	3,861		$	-	$	3,861
Entertainment and Internet Services		5,553		4,781		772		1,109		(337)			-		(337)
Consumer Mobility		9,208		5,731		3,477		950		2,527			(1)		2,526
International		-		-		-		-		-			-		-
Segment Total		32,248		21,807		10,441		4,390		6,051			(1)		6,050
Corporate and Other		709		791		(82)		24		(106)
Acquisition-related items		-		213		(213)		125		(338)
Certain significant items		-		-		-		-		-
AT&T Inc.	$	32,957	$	22,811	$	10,146	$	4,539	$	5,607
For the nine months ended September 30, 2014
		Revenue		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)			Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	51,877	$	32,836	$	19,041	$	7,009	$	12,032		$	-	$	12,032
Entertainment and Internet Services		16,640		14,182		2,458		3,396		(938)			-		(938)
Consumer Mobility		27,247		17,173		10,074		2,846		7,228			(1)		7,227
International		-		-		-		-		-			153		153
Segment Total		95,764		64,191		31,573		13,251		18,322			152		18,474
Corporate and Other		2,244		2,027		217		77		140	-
Acquisition-related items		-		403		(403)		378		(781)	-
Certain significant items		-		-		-		-		-	-
AT&T Inc.	$	98,008	$	66,621	$	31,387	$	13,706	$	17,681	-

The following table is a reconciliation of operating income (loss) to “Income Before Income Taxes” reported on our consolidated statements of income.
	Third Quarter					Nine-Month Period
		2015		2014		2015		2014
Business Solutions	$	4,297	$	3,861	$	12,671	$	12,032
Entertainment and Internet Services		1,021		(337)		543		(938)
Consumer Mobility		2,743		2,526		7,597		7,227
International		(87)		-		(228)		153
Segment Contribution		7,974		6,050		20,583		18,474
Reconciling Items:
Corporate and Other		(2)		(106)		152		140
Merger and integration charges		(696)		(213)		(1,689)		(403)
Amortization of intangibles acquired		(1,198)		(125)		(1,439)		(378)
Employee separation charges		(122)		-		(339)		-
Other (expenses) credits		(35)		-		(35)		-
Less: segment equity in net (income) loss of affiliates		2		1		20		(152)
AT&T Operating Income		5,923		5,607		17,253		17,681
Interest Expense		1,146		1,016		2,977		2,757
Equity in net income (loss) of affiliates		15		(2)		48		188
Other income (expense) - Net		(57)		42		61		1,456
Income Before Income Taxes	$	4,735	$	4,631	$	14,385	$	16,568