Segment Information

12 Months Ended

Dec. 31, 2017

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. We analyze our 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 (loss) of affiliates for investments managed within each segment. We have four reportable segments: (1) Business Solutions, (2) Entertainment Group, (3) Consumer Mobility and (4) International.

We also evaluate segment performance based on EBITDA and/or EBITDA margin, which is defined as Segment Contribution excluding equity in net income (loss) of affiliates and 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. EBITDA margin is EBITDA divided by total revenues.

The Business Solutions segment provides services to business customers, including multinational companies; governmental and wholesale 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; Flexware, a service that relies on Software Defined Networking (SDN) and Network Functions Virtualization (NFV) to provide application-based routing, and broadband, collectively referred to as fixed strategic services; as well as traditional data and voice products. We utilize our wireless and wired networks to provide a complete communications solution to our business customers.

The Entertainment Group segment provides video, internet, voice communication, and interactive and targeted advertising services to customers located in the United States or in U.S. territories. We utilize our IP-based and copper wired network and our satellite technology.

The Consumer Mobility segment provides nationwide wireless service to consumers, wholesale and resale wireless subscribers located in the United States or in U.S. territories. We utilize our network to provide voice and data services, including high-speed internet and home monitoring services over wireless devices.

The International segment provides entertainment services in Latin America and wireless services in Mexico. Video entertainment services are provided to primarily residential customers using satellite technology. We utilize our regional and national networks in Mexico to provide consumer and business customers with wireless data and voice communication services. Our international subsidiaries conduct business in their local currency, and operating results are converted to U.S. dollars using official exchange rates (operations in countries with highly inflationary economies consider the U.S. dollar as the functional currency).

In reconciling items to consolidated operating income and income before income taxes, 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 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, and those include:

Acquisition-related items which consists of (1) items associated with the merger and integration of acquired businesses and (2) the noncash amortization of intangible assets acquired in acquisitions.
Certain significant items which consists of (1) noncash actuarial gains and losses from pension and other postretirement benefits, (2) employee separation charges associated with voluntary and/or strategic offers, (3) losses resulting from abandonment or impairment 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.

Our operating assets are utilized by multiple segments and consist of our wireless and wired networks as well as our satellite fleet. Our domestic communications business strategies reflect bundled product offerings that increasingly cut across product lines and utilize our asset base. Therefore, asset information and capital expenditures by segment are not presented. Depreciation is allocated based on asset utilization by segment.

For the year ended December 31, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	69,406	$	42,929	$	26,477	$	9,326	$	17,151	$	(1)	$	17,150
Entertainment Group		50,698		39,420		11,278		5,623		5,655		(30)		5,625
Consumer Mobility		31,552		18,966		12,586		3,507		9,079		-		9,079
International		8,269		7,404		865		1,218		(353)		87		(266)
Segment Total		159,925		108,719		51,206		19,674		31,532	$	56	$	31,588
Corporate and Other		864		554		310		72		238
Acquisition-related items		-		798		(798)		4,608		(5,406)
Certain significant items		(243)		5,139		(5,382)		33		(5,415)
AT&T Inc.	$	160,546	$	115,210	$	45,336	$	24,387	$	20,949

For the year ended December 31, 2016
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	70,988	$	44,330	$	26,658	$	9,832	$	16,826	$	-	$	16,826
Entertainment Group		51,295		39,338		11,957		5,862		6,095		9		6,104
Consumer Mobility		33,200		19,659		13,541		3,716		9,825		-		9,825
International		7,283		6,830		453		1,166		(713)		52		(661)
Segment Total		162,766		110,157		52,609		20,576		32,033	$	61	$	32,094
Corporate and Other		1,043		1,173		(130)		65		(195)
Acquisition-related items		-		1,203		(1,203)		5,177		(6,380)
Certain significant items		(23)		1,059		(1,082)		29		(1,111)
AT&T Inc.	$	163,786	$	113,592	$	50,194	$	25,847	$	24,347


For the year ended December 31, 2015
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Business Solutions	$	71,127	$	44,946	$	26,181	$	9,789	$	16,392	$	-	$	16,392
Entertainment Group		35,294		28,345		6,949		4,945		2,004		(4)		2,000
Consumer Mobility		35,066		21,477		13,589		3,851		9,738		-		9,738
International		4,102		3,930		172		655		(483)		(5)		(488)
Segment Total		145,589		98,698		46,891		19,240		27,651	$	(9)	$	27,642
Corporate and Other		1,297		1,057		240		64		176
Acquisition-related items		(85)		1,987		(2,072)		2,712		(4,784)
Certain significant items		-		(1,742)		1,742		-		1,742
AT&T Inc.	$	146,801	$	100,000	$	46,801	$	22,016	$	24,785

The following table is a reconciliation of operating income (loss) to "Income Before Income Taxes" reported in our consolidated statements of income:

		2017		2016		2015
Business Solutions	$	17,150	$	16,826	$	16,392
Entertainment Group		5,625		6,104		2,000
Consumer Mobility		9,079		9,825		9,738
International		(266)		(661)		(488)
Segment Contribution		31,588		32,094		27,642
Reconciling Items:
Corporate and Other		238		(195)		176
Merger and integration charges		(798)		(1,203)		(2,072)
Amortization of intangibles acquired		(4,608)		(5,177)		(2,712)
Actuarial gain (loss)		(1,258)		(1,024)		2,152
Employee separation costs		(445)		(344)		(375)
Tax reform special bonus		(220)		-		-
Gain on wireless spectrum transactions		181		714		-
Natural disaster costs and revenue credits		(627)		(67)		-
Asset abandonments and impairments		(3,046)		(390)		(35)
Segment equity in net income (loss) of affiliates		(56)		(61)		9
AT&T Operating Income		20,949		24,347		24,785
Interest expense		6,300		4,910		4,120
Equity in net income (loss) of affiliates		(128)		98		79
Other income (expense) - net		618		277		(52)
Income Before Income Taxes	$	15,139	$	19,812	$	20,692

The following table sets forth revenues earned from customers, and property, plant and equipment located in different geographic areas.

		2017				2016				2015
		Revenues		Net Property, Plant & Equipment		Revenues		Net Property, Plant & Equipment		Revenues		Net Property, Plant & Equipment
United States	$	149,841	$	118,200	$	154,039	$	118,664	$	140,234	$	118,515
Latin America
Brazil		2,948		1,447		2,797		1,265		1,224		1,384
Other		2,743		1,294		2,348		1,828		1,157		1,530
Mexico		2,913		3,619		2,472		2,520		2,046		2,369
Other		2,101		662		2,130		622		2,140		652
Total	$	160,546	$	125,222	$	163,786	$	124,899	$	146,801	$	124,450