8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) October 24, 2018

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-8610	43-1301883
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

208 S. Akard St., Dallas, Texas	75202
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code (210) 821-4105

__________________________________

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02 Results of Operations and Financial Condition.

The registrant announced on October 24, 2018, its results of operations for the third quarter of 2018. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

(d)          Exhibits

99.1	Press release dated October 24, 2018 reporting financial results for the third quarter ended September 30, 2018.
99.2	AT&T Inc. selected financial statements and operating data.
99.3	Discussion and reconciliation of non-GAAP measures.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	AT&T INC.
Date: October 24, 2018	By: /s/ Debra L. Dial                                  .        Debra L. Dial Senior Vice President and Controller

EX-99.1

AT&T Reports Third-Quarter Results

Consolidated Results

● Diluted EPS of $0.65 as reported compared to $0.49 in the year-ago quarter

● Adjusted EPS of $0.90 compared to $0.74 in the year-ago quarter

● Consolidated revenues of $45.7 billion

● Cash from operations of $12.3 billion, up 14.3%

● Capital expenditures of $5.9 billion

● Free cash flow of $6.5 billion, up 16.6%

Company reaffirms 2018 guidance of adjusted EPS at the high end of $3.50 range¹,

free cash flow at the high end of the $21 billion range and

 net capital expenditures at $22 billion range

Note: AT&T's third-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, October 24, 2018. The webcast and related materials will be available on AT&T’s Investor Relations website at https://investors.att.com.

DALLAS, October 24, 2018— AT&T Inc. (NYSE:T) reported solid revenue, earnings and free cash flow growth in the third quarter led by gains in Mobility and WarnerMedia. Wireless results in the third quarter included positive postpaid phone net adds, strong prepaid phone gains and growing service revenues. (On a GAAP basis, service revenues declined 3.4%; however, on a comparable basis, service revenues grew 2.3%.)

“I’m pleased with the progress we made on a number of fronts in the third quarter,” said Randall Stephenson, AT&T chairman and CEO. “Our U.S. wireless business is growing and it’s the single biggest contributor to our earnings and cash flow. WarnerMedia was immediately accretive in its first full quarter, contributing 5 cents to EPS, and our free cash flow grew by double digits.

“We’ve accomplished all this while staying focused on managing our debt portfolio. We’re on track to get to the 2.5x debt-to-EBITDA range by year-end 2019. And as we’re nearing completion of our fiber build and making pricing moves on video, we’re laying the foundation for stabilizing our Entertainment Group profitability in 2019. Across the business, I like our momentum and feel confident that we’re on track to deliver on our plans.”

North America wireless:

● 4.3 million total wireless net adds:

o 3.4 million in U.S., driven by connected devices and prepaid

o 907,000 in Mexico

Communications Highlights

● Mobility:

o Service revenues up 2.3% on a comparable basis

o 550,000 phone net adds in the U.S.

● 69,000 postpaid phone net adds

● 481,000 prepaid phone net adds

o  Nearly 750,000 branded smartphones added to the base

o Third-quarter postpaid phone churn of 0.93%

● Entertainment Group:

o 49,000 DIRECTV NOW net adds with 346,000 net losses in traditional video as company focuses on improving profitability and begins beta test of new streaming video device

o More than 10 million customer locations passed with fiber

WarnerMedia Highlights

● Revenues up with gains in all business units

o Turner and Home Box Office year-over-year subscription revenue growth

o Strong Warner Bros. television licensing revenue growth; box office releases included the hit films Crazy Rich Asians, The Meg and The Nun

o 37 Primetime Emmy Awards; 12 News and Documentary Emmy Awards

Xandr Highlights

● Advertising revenues grew 34%; up 22% excluding the AppNexus acquisition

● AppNexus enhances addressable advertising technology

Consolidated Financial Results²

AT&T's consolidated revenues for the third quarter totaled $45.7 billion versus $39.7 billion in the year-ago quarter, up 15.3%, primarily due to the Time Warner acquisition partially offset by the impact of ASC 606 and the netting of approximately $920 million of USF revenues with operating expenses.  Without the accounting change, revenues were $46.6 billion, an increase of 17.5% primarily due to the Time Warner acquisition. Declines in domestic video, legacy wireline services and Vrio were offset by growth in wireless equipment and services, WarnerMedia and Xandr.

Operating expenses were $38.5 billion versus $33.9 billion in the year-ago quarter, primarily due to the Time Warner acquisition partially offset by the netting of USF and other regulatory fee revenues and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $39.9 billion, an increase of about $6.1 billion due to the Time Warner acquisition, higher wireless equipment costs and Entertainment Group content cost pressure, partially offset by cost efficiencies.

Versus results from the third quarter of 2017, operating income was $7.3 billion, up 25.2% primarily due to the Time Warner acquisition; and operating income margin was 15.9% versus 14.6%. On a comparative basis, operating income was $6.7 billion and operating income margin was 14.3%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $10.0 billion, or $9.4 billion on a comparative basis, versus $7.5 billion in the year-ago quarter, and operating income margin was 21.9%, or 20.3% on a comparative basis, versus 18.8% in the year-ago quarter.

Third-quarter net income attributable to AT&T was $4.7 billion, or $0.65 per diluted share, versus $3.0 billion, or $0.49 per diluted share, in the year-ago quarter. Adjusting for $0.25 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.90 compared to an adjusted $0.74 in the year-ago quarter, a 21.6% increase.

Cash from operating activities was $12.3 billion, and capital expenditures were $5.9 billion. Capital investment included about $560 million in FirstNet capital costs and reflects no FirstNet reimbursements. Free cash flow — cash from operating activities minus capital expenditures — was $6.5 billion for the quarter. The company is successfully managing near-term maturities and refinancing risk and expects to have retired or refinanced about $28 billion of near-to-intermediate term maturities by the end of 2018.

¹Adjustments include a non-cash mark-to-market benefit plan gain/loss, merger-related interest expense, merger integration and amortization costs and other adjustments. We expect the mark-to-market adjustment which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be the largest of these items. Accordingly, we cannot provide a reconciliation between forecasted adjusted diluted EPS and reported diluted EPS without unreasonable effort.

²AT&T adopted new U.S. accounting standards that deal with revenue recognition (ASC 606), post-employment benefit costs and certain cash receipts on installment receivables. These changes impact the company’s income statements and cash flows. With the adoption of ASC 606, the company made a policy decision to record Universal Service Fees (USF) and other regulatory fees on a net basis. The company is providing comparable results in addition to GAAP to help investors better understand the impact on financials from ASC 606 and the policy decision. Historical income statements and cash flows have been recast to show only the impact of the adoption of the other two accounting standards.

*About AT&T

AT&T Inc. (NYSE:T) is a diversified, global leader in telecommunications, media and entertainment, and technology. It executes in the market under four operating units. WarnerMedia’s HBO, Turner and Warner Bros. divisions are world leaders in creating premium content, operate one of the world’s largest TV and film studios, and own a world-class library of entertainment. AT&T Communications provides more than 100 million U.S. consumers with entertainment and communications experiences across TV, mobile and broadband services. Plus, it serves more than 3 million business customers with high-speed, highly secure connectivity and smart solutions. AT&T Latin America provides pay-TV services across 11 countries and territories in Latin America and the Caribbean, and is the fastest growing wireless provider in Mexico, serving consumers and businesses. Xandr provides marketers with innovative and relevant advertising solutions for consumers around premium video content and digital advertising through its AppNexus platform.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2018 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release 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 news release based on new information or otherwise.

This news release 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.

For more information, contact:

Erin McGrath

AT&T Inc.

Phone: 214-862-0651

Email: Erin.McGrath@att.com

EX-99.2

AT&T Inc.
Financial Data
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Third Quarter						Nine-Month Period
		2018		2017 As Adjusted	Percent Change			2018		2017 As Adjusted	Percent Change
Operating Revenues
Service	$	41,297	$	36,378	13.5	%	$	109,849	$	109,372	0.4	%
Equipment		4,442		3,290	35.0	%		12,914		9,498	36.0	%
Total Operating Revenues		45,739		39,668	15.3	%		122,763		118,870	3.3	%
Operating Expenses
Cost of revenues
Equipment		4,828		4,191	15.2	%		14,053		12,177	15.4	%
Broadcast, programming and operations		7,227		5,284	36.8	%		17,842		15,156	17.7	%
Other cost of revenues (exclusive of depreciation   and amortization shown separately below)		8,651		9,694	(10.8)	%		24,215		28,551	(15.2)	%
Selling, general and administrative		9,598		8,650	11.0	%		26,179		25,981	0.8	%
Depreciation and amortization		8,166		6,042	35.2	%		20,538		18,316	12.1	%
Total Operating Expenses		38,470		33,861	13.6	%		102,827		100,181	2.6	%
Operating Income		7,269		5,807	25.2	%		19,936		18,689	6.7	%
Interest Expense		(2,051)		(1,686)	21.6	%		(5,845)		(4,374)	33.6	%
Equity in Net Income (Loss) of Affiliates		(64)		11	-	%		(71)		(148)	52.0	%
Other Income (Expense) - Net		1,053		842	25.1	%		5,108		2,255	-	%
Income Before Income Taxes		6,207		4,974	24.8	%		19,128		16,422	16.5	%
Income Tax Expense		1,391		1,851	(24.9)	%		4,305		5,711	(24.6)	%
Net Income		4,816		3,123	54.2	%		14,823		10,711	38.4	%
Less: Net Income Attributable to     Noncontrolling Interest		(98)		(94)	(4.3)	%		(311)		(298)	(4.4)	%
Net Income Attributable to AT&T	$	4,718	$	3,029	55.8	%	$	14,512	$	10,413	39.4	%
Basic Earnings Per Share Attributable to AT&T	$	0.65	$	0.49	32.7	%	$	2.19	$	1.69	29.6	%
Weighted Average Common        Shares Outstanding (000,000)		7,284		6,162	18.2	%		6,603		6,164	7.1	%
Diluted Earnings Per Share Attributable to AT&T	$	0.65	$	0.49	32.7	%	$	2.19	$	1.69	29.6	%
Weighted Average Common         Shares Outstanding with Dilution (000,000)		7,320		6,182	18.4	%		6,630		6,184	7.2	%

1

AT&T Inc.
Financial Data
Consolidated Balance Sheets
Dollars in millions
Unaudited		Sep. 30,		Dec. 31,
		2018		2017
Assets
Current Assets
Cash and cash equivalents	$	8,657	$	50,498
Accounts receivable - net of allowances for doubtful accounts of $845 and $663		26,312		16,522
Prepaid expenses		1,860		1,369
Other current assets		16,278		10,757
Total current assets		53,107		79,146
Noncurrent Inventories and Theatrical Film and Television Production Costs		7,221		-
Property, Plant and Equipment - Net		130,348		125,222
Goodwill		146,475		105,449
Licenses		96,077		96,136
Trademarks and Trade Names - Net		24,389		7,021
Distribution Networks		16,962		-
Other Intangible Assets - Net		28,673		11,119
Investments in and Advances to Equity Affiliates		6,128		1,560
Other Assets		25,490		18,444
Total Assets	$	534,870	$	444,097
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	14,905	$	38,374
Accounts payable and accrued liabilities		39,375		34,470
Advanced billing and customer deposits		6,045		4,213
Accrued taxes		1,460		1,262
Dividends payable		3,635		3,070
Total current liabilities		65,420		81,389
Long-Term Debt		168,513		125,972
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		60,495		43,207
Postemployment benefit obligation		28,981		31,775
Other noncurrent liabilities		26,490		19,747
Total deferred credits and other noncurrent liabilities		115,966		94,729
Stockholders' Equity
Common stock		7,621		6,495
Additional paid-in capital		125,706		89,563
Retained earnings		57,624		50,500
Treasury stock		(12,486)		(12,714)
Accumulated other comprehensive income		5,383		7,017
Noncontrolling interest		1,123		1,146
Total stockholders' equity		184,971		142,007
Total Liabilities and Stockholders' Equity	$	534,870	$	444,097

2

AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
Dollars in millions
Unaudited		Nine-Month Period
			2018		2017 As Adjusted
Operating Activities
Net income		$	14,823	$	10,711
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		20,538		18,316
	Amortization of film and television costs		1,608		-
	Undistributed earnings from investments in equity affiliates		312		171
	Provision for uncollectible accounts		1,240		1,216
	Deferred income tax expense		2,934		3,254
	Net (gain) loss from sale of investments, net of impairments		(501)		(114)
	Actuarial (gain) loss on pension and postretirement benefits		(2,726)		(259)
Changes in operating assets and liabilities:
	Accounts receivable		(1,018)		(652)
	Other current assets, inventories and theatrical film and television production costs		(2,729)		(106)
	Accounts payable and other accrued liabilities		(1,385)		(1,437)
	Equipment installment receivables and related sales		220		451
	Deferred customer contract acquisition and fulfillment costs		(2,657)		(1,102)
Retirement benefit funding			(420)		(420)
Other - net			1,283		(1,556)
Total adjustments			16,699		17,762
Net Cash Provided by Operating Activities			31,522		28,473
Investing Activities
Capital expenditures:
	Purchase of property and equipment		(16,695)		(15,756)
	Interest during construction		(404)		(718)
Acquisitions, net of cash acquired			(43,116)		1,154
Dispositions			983		56
(Purchases) sales of securities, net			(234)		235
Advances to and investments in equity affiliates, net			(1,021)		-
Cash collections of deferred purchase price			500		665
Net Cash Used in Investing Activities			(59,987)		(14,364)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less			1		(2)
Issuance of other short-term borrowings			4,852		-
Repayment of other short-term borrowings			(2,147)		-
Issuance of long-term debt			38,325		46,761
Repayment of long-term debt			(43,579)		(10,309)
Purchase of treasury stock			(577)		(460)
Issuance of treasury stock			359		26
Dividends paid			(9,775)		(9,030)
Other			(1,138)		1,716
Net Cash (Used in) Provided by Financing Activities			(13,679)		28,702
Net (decrease) increase in cash and cash equivalents and restricted cash			(42,144)		42,811
Cash and cash equivalents and restricted cash beginning of year			50,932		5,935
Cash and Cash Equivalents and Restricted Cash End of Period		$	8,788	$	48,746

3

AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
Dollars in millions except per share amounts
Unaudited		Third Quarter				Percent		Nine-Month Period					Percent
			2018		2017	Change			2018		2017		Change
Capital expenditures
	Purchase of property and equipment	$	5,736	$	5,006	14.6	%	$	16,695	$	15,756		6.0	%
	Interest during construction		137		245	(44.1)	%		404		718		(43.7)	%
Total Capital Expenditures		$	5,873	$	5,251	11.8	%	$	17,099	$	16,474		3.8	%
Dividends Declared per Share		$	0.50	$	0.49	2.0	%	$	1.50	$	1.47		2.0	%
End of Period Common Shares Outstanding (000,000)									7,270		6,139		18.4	%
Debt Ratio									49.8	%	56.4	%	(660)	BP
Total Employees									269,280		256,800		4.9	%
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								Nine-Month Period					Percent
									2018		2017		Change
Wireless Subscribers
	Domestic								150,252		138,445		8.5	%
	Mexico								17,305		13,779		25.6	%
Total Wireless Subscribers									167,557		152,224		10.1	%
Total Branded Wireless Subscribers									110,982		105,717		5.0	%
Video Connections
	Domestic								25,176		25,110		0.3	%
	Latin America								13,640		13,490		1.1	%
Total Video Connections									38,816		38,600		0.6	%
Broadband Connections
	IP								14,744		14,384		2.5	%
	DSL								1,002		1,331		(24.7)	%
Total Broadband Connections									15,746		15,715		0.2	%
Voice Connections
	Network Access Lines								10,399		12,249		(15.1)	%
	U-verse  VoIP Connections								5,274		5,774		(8.7)	%
Total Retail Voice Connections									15,673		18,023		(13.0)	%
		Third Quarter				Percent		Nine-Month Period					Percent
			2018		2017	Change			2018		2017		Change
Wireless Net Additions
	Domestic		3,363		2,341	43.7	%		9,057		6,717		34.8	%
	Mexico		907		697	30.1	%		2,206		1,806		22.1	%
Total Wireless Net Additions			4,270		3,038	40.6	%		11,263		8,523		32.1	%
Total Branded Wireless Net Additions			1,213		1,173	3.4	%		3,351		2,812		19.2	%
Video Net Additions
	Domestic		(296)		(90)	-	%		(93)		(450)		79.3	%
	Latin America		(73)		(132)	44.7	%		52		(97)		-	%
Total Video Net Additions			(369)		(222)	(66.2)	%		(41)		(547)		92.5	%
Broadband Net Additions
	IP		35		150	(76.7)	%		257		520		(50.6)	%
	DSL		(60)		(121)	50.4	%		(230)		(410)		43.9	%
Total Broadband Net Additions			(25)		29	-	%		27		110		(75.5)	%

4

COMMUNICATIONS SEGMENT
The Communications segment provides wireless and wireline telecom, video and broadband services to consumers located in the U.S. or in U.S. territories and businesses globally. The Communications segment contains three reporting units: Mobility, Entertainment Group, and Business Wireline.
Segment Results
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Mobility	$	17,938	$	17,370	3.3	%	$	52,575	$	51,922	1.3	%
	Entertainment Group		11,589		12,467	(7.0)	%		34,498		37,435	(7.8)	%
	Business Wireline		6,703		7,278	(7.9)	%		20,100		21,911	(8.3)	%
Total Segment Operating Revenues			36,230		37,115	(2.4)	%		107,173		111,268	(3.7)	%
Segment Operating Contribution
	Mobility		5,603		5,333	5.1	%		16,267		15,929	2.1	%
	Entertainment Group		1,104		1,283	(14.0)	%		3,888		4,470	(13.0)	%
	Business Wireline		1,475		1,455	1.4	%		4,468		4,422	1.0	%
Total Segment Operating Contribution		$	8,182	$	8,071	1.4	%	$	24,623	$	24,821	(0.8)	%

Mobility
Mobility provides nationwide wireless service and equipment.
Mobility Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Service	$	13,989	$	14,475		(3.4)	%	$	41,074	$	43,414		(5.4)	%
	Equipment		3,949		2,895		36.4	%		11,501		8,508		35.2	%
Total Operating Revenues			17,938		17,370		3.3	%		52,575		51,922		1.3	%
Operating Expenses
Operations and support			10,255		10,029		2.3	%		30,020		30,005		-	%
Depreciation and amortization			2,079		2,008		3.5	%		6,287		5,988		5.0	%
Total Operating Expenses			12,334		12,037		2.5	%		36,307		35,993		0.9	%
Operating Income			5,604		5,333		5.1	%		16,268		15,929		2.1	%
Equity in Net Income (Loss) of Affiliates			(1)		-		-	%		(1)		-		-	%
Operating  Contribution		$	5,603	$	5,333		5.1	%	$	16,267	$	15,929		2.1	%
Operating Income Margin			31.2	%	30.7	%	50	BP		30.9	%	30.7	%	20	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Nine-Month Period					Percent
										2018		2017		Change
Mobility Subscribers
	Postpaid									76,996		77,034		-	%
	Prepaid									16,894		15,136		11.6	%
Branded										93,890		92,170		1.9	%
Reseller										8,183		9,877		(17.2)	%
Connected Devices										48,179		36,398		32.4	%
Total Mobility Subscribers										150,252		138,445		8.5	%
		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Mobility Net Additions
	Postpaid		(232)		134		-	%		(110)		83		-	%
	Prepaid		570		324		75.9	%		1,264		873		44.8	%
Branded			338		458		(26.2)	%		1,154		956		20.7	%
Reseller			(434)		(391)		(11.0)	%		(1,266)		(1,341)		5.6	%
Connected Devices			3,459		2,274		52.1	%		9,169		7,102		29.1	%
Total Mobility Net Additions			3,363		2,341		43.7	%		9,057		6,717		34.8	%
Branded Churn			1.70	%	1.70	%	-	BP		1.62	%	1.66	%	(4)	BP
Postpaid Churn			1.17	%	1.06	%	11	BP		1.08	%	1.06	%	2	BP
Postpaid Phone-Only Churn			0.93	%	0.84	%	9	BP		0.87	%	0.84	%	3	BP

5

Entertainment Group
Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communication services primarily to residential customers. This business unit also sells advertising on DIRECTV and U-verse distribution platforms.
Entertainment Group Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Video entertainment	$	8,283	$	9,052		(8.5)	%	$	24,681	$	26,967		(8.5)	%
	High-speed internet		2,045		1,916		6.7	%		5,904		5,784		2.1	%
	Legacy voice and data services		740		913		(18.9)	%		2,317		2,889		(19.8)	%
	Other service and equipment		521		586		(11.1)	%		1,596		1,795		(11.1)	%
Total Operating Revenues			11,589		12,467		(7.0)	%		34,498		37,435		(7.8)	%
Operating Expenses
Operations and support			9,155		9,804		(6.6)	%		26,623		28,711		(7.3)	%
Depreciation and amortization			1,331		1,379		(3.5)	%		3,986		4,254		(6.3)	%
Total Operating Expenses			10,486		11,183		(6.2)	%		30,609		32,965		(7.1)	%
Operating Income			1,103		1,284		(14.1)	%		3,889		4,470		(13.0)	%
Equity in Net Income (Loss) of Affiliates			1		(1)		-	%		(1)		-		-	%
Operating Contribution		$	1,104	$	1,283		(14.0)	%	$	3,888	$	4,470		(13.0)	%
Operating Income Margin			9.5	%	10.3	%	(80)	BP		11.3	%	11.9	%	(60)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Nine-Month Period					Percent
										2018		2017		Change
Video Connections
	Satellite									19,625		20,605		(4.8)	%
	U-verse									3,669		3,691		(0.6)	%
	DIRECTV NOW									1,858		787		-	%
Total Video Connections										25,152		25,083		0.3	%
Broadband Connections
	IP									13,723		13,367		2.7	%
	DSL									718		964		(25.5)	%
Total Broadband Connections										14,441		14,331		0.8	%
Voice Connections
	Retail Consumer Switched Access Lines									4,144		4,996		(17.1)	%
	U-verse Consumer VoIP Connections									4,757		5,337		(10.9)	%
Total Retail Consumer Voice Connections										8,901		10,333		(13.9)	%
		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Video Net Additions1
	Satellite		(359)		(251)		(43.0)	%		(833)		(407)		-	%
	U-verse		13		(134)		-	%		38		(562)		-	%
	DIRECTV NOW		49		296		(83.4)	%		703		520		35.2	%
Total Video Net Additions			(297)		(89)		-	%		(92)		(449)		79.5	%
Broadband Net Additions
	IP		31		125		(75.2)	%		261		479		(45.5)	%
	DSL		(45)		(96)		53.1	%		(170)		(327)		48.0	%
Total Broadband Net Additions			(14)		29		-	%		91		152		(40.1)	%
	1 Includes the impact of customers that migrated to DIRECTV NOW.

6

Business Wireline
Business Wireline unit provides advanced IP-based services, as well as traditional data services to business customers.
Business Wireline Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Strategic services	$	3,059	$	3,018		1.4	%	$	9,168	$	8,880		3.2	%
	Legacy voice and data services		2,615		3,343		(21.8)	%		8,176		10,314		(20.7)	%
	Other service and equipment		1,029		917		12.2	%		2,756		2,717		1.4	%
Total Operating Revenues			6,703		7,278		(7.9)	%		20,100		21,911		(8.3)	%
Operating Expenses
Operations and support			4,030		4,635		(13.1)	%		12,084		13,906		(13.1)	%
Depreciation and amortization			1,197		1,189		0.7	%		3,547		3,583		(1.0)	%
Total Operating Expenses			5,227		5,824		(10.3)	%		15,631		17,489		(10.6)	%
Operating Income			1,476		1,454		1.5	%		4,469		4,422		1.1	%
Equity in Net Income (Loss) of Affiliates			(1)		1		-	%		(1)		-		-	%
Operating Contribution		$	1,475	$	1,455		1.4	%	$	4,468	$	4,422		1.0	%
Operating Income Margin			22.0	%	20.0	%	200	BP		22.2	%	20.2	%	200	BP

Business Solutions
As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship, and underscores the importance of mobile solutions to serving our business customers.
Business Solutions Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Wireless service	$	1,877	$	2,023		(7.2)	%	$	5,497	$	6,030		(8.8)	%
	Strategic services		3,059		3,018		1.4	%		9,168		8,880		3.2	%
	Legacy voice and data services		2,615		3,343		(21.8)	%		8,176		10,314		(20.7)	%
	Other service and equipment		1,029		917		12.2	%		2,756		2,717		1.4	%
	Wireless equipment		590		340		73.5	%		1,752		988		77.3	%
Total Operating Revenues			9,170		9,641		(4.9)	%		27,349		28,929		(5.5)	%
Operating Expenses
Operations and support			5,598		6,096		(8.2)	%		16,808		18,147		(7.4)	%
Depreciation and amortization			1,499		1,466		2.3	%		4,444		4,409		0.8	%
Total Operating Expenses			7,097		7,562		(6.1)	%		21,252		22,556		(5.8)	%
Operating Income			2,073		2,079		(0.3)	%		6,097		6,373		(4.3)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		-	%		(1)		-		-	%
Operating Contribution		$	2,072	$	2,079		(0.3)	%	$	6,096	$	6,373		(4.3)	%
Operating Income Margin			22.6	%	21.6	%	100	BP		22.3	%	22.0	%	30	BP

7

WARNERMEDIA  SEGMENT
The WarnerMedia segment develops, produces and distributes feature films, television, gaming and other content in various physical and digital formats globally. Results from AT&T's Regional Sports Network (RSN) and Otter Media Holdings are also included in the WarnerMedia segment. The WarnerMedia segment contains three business units: Turner, Home Box Office, and Warner Bros.
Segment Results
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Turner	$	2,988	$	107	-	%	$	3,767	$	323	-	%
	Home Box Office		1,644		-	-	%		1,925		-	-	%
	Warner Bros.		3,720		-	-	%		4,227		-	-	%
	Eliminations and other		(148)		-	-	%		(210)		-	-	%
Total Segment Operating Revenues			8,204		107	-	%		9,709		323	-	%
Segment Operating Contribution
	Turner		1,449		22	-	%		1,802		79	-	%
	Home Box Office		630		-	-	%		734		-	-	%
	Warner Bros.		553		-	-	%		642		-	-	%
	Eliminations and other		(104)		(20)	-	%		(186)		(58)	-	%
Total Segment Operating Contribution		$	2,528	$	2	-	%	$	2,992	$	21	-	%

Turner
Turner is comprised of the WarnerMedia businesses managed by Turner as well as our RSN. This business unit creates and programs branded news, entertainment, sports and kids multi-platform content that is sold to various distribution affiliates. Turner also sells advertising on its networks and digital properties.
Turner Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Subscription	$	1,855	$	90		-	%	$	2,363	$	271		-	%
	Advertising		944		17		-	%		1,181		52		-	%
	Content and other		189		-		-	%		223		-		-	%
Total Operating Revenues			2,988		107		-	%		3,767		323		-	%
Operating Expenses
Operations and support			1,487		97		-	%		1,933		273		-	%
Depreciation and amortization			59		1		-	%		71		3		-	%
Total Operating Expenses			1,546		98		-	%		2,004		276		-	%
Operating Income			1,442		9		-	%		1,763		47		-	%
Equity in Net Income of Affiliates			7		13		(46.2)	%		39		32		21.9	%
Operating Contribution		$	1,449	$	22		-	%	$	1,802	$	79		-	%
Operating Income Margin			48.3	%	8.4	%	-	BP		46.8	%	14.6	%	-	BP

8

Home Box Office
Home Box Office consists of premium pay television and OTT services domestically and premium pay, basic tier television and OTT services internationally, as well as content licensing and home entertainment.
Home Box Office Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Subscription	$	1,517	$	-		-	%	$	1,787	$	-		-	%
	Content and other		127		-		-	%		138		-		-	%
Total Operating Revenues			1,644		-		-	%		1,925		-		-	%
Operating Expenses
Operations and support			991		-		-	%		1,162		-		-	%
Depreciation and amortization			25		-		-	%		30		-		-	%
Total Operating Expenses			1,016		-		-	%		1,192		-		-	%
Operating Income			628		-		-	%		733		-		-	%
Equity in Net Income of Affiliates			2		-		-	%		1		-		-	%
Operating Contribution		$	630	$	-		-	%	$	734	$	-		-	%
Operating Income Margin			38.2	%	-	%	-	BP		38.1	%	-	%	-	BP

Warner Bros.
Warner Bros. consists of the production, distribution and licensing of television programming and feature films, the distribution of home entertainment products and the production and distribution of games.
Warner Bros. Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Theatrical product	$	1,694	$	-		-	%	$	1,917	$	-		-	%
	Television product		1,591		-		-	%		1,794		-		-	%
	Games and other		435		-		-	%		516		-		-	%
Total Operating Revenues			3,720		-		-	%		4,227		-		-	%
Operating Expenses
Operations and support			3,104		-		-	%		3,507		-		-	%
Depreciation and amortization			40		-		-	%		54		-		-	%
Total Operating Expenses			3,144		-		-	%		3,561		-		-	%
Operating Income			576		-		-	%		666		-		-	%
Equity in Net Income (Loss) of Affiliates			(23)		-		-	%		(24)		-		-	%
Operating Contribution		$	553	$	-		-	%	$	642	$	-		-	%
Operating Income Margin			15.5	%	-	%	-	BP		15.8	%	-	%	-	BP

9

LATIN AMERICA SEGMENT
The Latin America segment provides entertainment and wireless service outside of the U.S. Our international subsidiaries conduct business in their local currency and operating results are converted to U.S. dollars using official exchange rates. The Latin America segment contains two business units: Vrio and Mexico.
Segment Results
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Segment Operating Revenues
	Vrio	$	1,102	$	1,363	(19.1)	%	$	3,710	$	4,065	(8.7)	%
	Mexico		731		736	(0.7)	%		2,099		1,989	5.5	%
Total Segment Operating Revenues			1,833		2,099	(12.7)	%		5,809		6,054	(4.0)	%
Segment Operating Contribution
	Vrio		66		99	(33.3)	%		281		362	(22.4)	%
	Mexico		(267)		(224)	(19.2)	%		(743)		(619)	(20.0)	%
Total Segment Operating Contribution		$	(201)	$	(125)	(60.8)	%	$	(462)	$	(257)	(79.8)	%

Vrio
Vrio provides entertainment services to customers utilizing satellite technology in Latin America and the Caribbean.
Vrio Results
Dollars in millions
Unaudited	Third Quarter					Percent		Nine-Month Period					Percent
		2018		2017		Change			2018		2017		Change
Operating Revenues	$	1,102	$	1,363		(19.1)	%	$	3,710	$	4,065		(8.7)	%
Operating Expenses
Operations and support		877		1,075		(18.4)	%		2,894		3,123		(7.3)	%
Depreciation and amortization		168		206		(18.4)	%		559		642		(12.9)	%
Total Operating Expenses		1,045		1,281		(18.4)	%		3,453		3,765		(8.3)	%
Operating Income		57		82		(30.5)	%		257		300		(14.3)	%
Equity in Net Income of Affiliates		9		17		(47.1)	%		24		62		(61.3)	%
Operating Contribution	$	66	$	99		(33.3)	%	$	281	$	362		(22.4)	%
Operating Income Margin		5.2	%	6.0	%	(80)	BP		6.9	%	7.4	%	(50)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited								Nine-Month Period					Percent
									2018		2017		Change
Vrio Satellite Subscribers									13,640		13,490		1.1	%
		Third Quarter							Nine-Month Period
		2018		2017					2,018		2,017
Vrio Satellite Net Subscriber Additions		(73)		(132)		44.7	%		52		(97)		-	%

10

Mexico
Mexico provides wireless services and equipment to customers in Mexico.
Mexico Results
Dollars in millions
Unaudited		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Operating Revenues
	Wireless service	$	440	$	536		(17.9)	%	$	1,261	$	1,546		(18.4)	%
	Wireless equipment		291		200		45.5	%		838		443		89.2	%
Total Operating Revenues			731		736		(0.7)	%		2,099		1,989		5.5	%
Operating Expenses
Operations and support			869		862		0.8	%		2,459		2,345		4.9	%
Depreciation and amortization			129		98		31.6	%		383		263		45.6	%
Total Operating Expenses			998		960		4.0	%		2,842		2,608		9.0	%
Operating Income (Loss)			(267)		(224)		(19.2)	%		(743)		(619)		(20.0)	%
Operating Contribution		$	(267)	$	(224)		(19.2)	%	$	(743)	$	(619)		(20.0)	%
Operating Income Margin			(36.5)	%	(30.4)	%	(610)	BP		(35.4)	%	(31.1)	%	(430)	BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited									Nine-Month Period					Percent
										2018		2017		Change
Mexico Wireless Subscribers
	Postpaid									5,822		5,316		9.5	%
	Prepaid									11,270		8,231		36.9	%
Branded										17,092		13,547		26.2	%
Reseller										213		232		(8.2)	%
Total Mexico Wireless Subscribers										17,305		13,779		25.6	%
		Third Quarter					Percent		Nine-Month Period					Percent
			2018		2017		Change			2018		2017		Change
Mexico Wireless Net Additions
	Postpaid		73		129		(43.4)	%		324		351		(7.7)	%
	Prepaid		802		585		37.1	%		1,873		1,504		24.5	%
Branded			875		714		22.5	%		2,197		1,855		18.4	%
Reseller			32		(17)		-	%		9		(49)		-	%
Total Mexico Wireless Net Subscriber Additions			907		697		30.1	%		2,206		1,806		22.1	%

11

XANDR SEGMENT
The Xandr segment provides advertising services. These services utilize data insights to develop higher value targeted advertising. Certain revenues in this segment are also reported by the Communications segment and are eliminated upon consolidation.
Segment Operating Results
Dollars in millions
Unaudited	Third Quarter					Percent		Nine-Month Period					Percent
		2018		2017		Change			2018		2017		Change
Segment Operating Revenues	$	445	$	333		33.6	%	$	1,174	$	992		18.3	%
Segment Operating Expenses
Operations and support		109		39		-	%		218		118		84.7	%
Depreciation and amortization		3		-		-	%		4		1		-	%
Total Segment Operating Expenses		112		39		-	%		222		119		86.6	%
Operating Income		333		294		13.3	%		952		873		9.0	%
Segment Operating Contribution	$	333	$	294		13.3	%	$	952	$	873		9.0	%
Segment Operating Income Margin		74.8	%	88.3	%	(1,350)	BP		81.1	%	88.0	%	(690)	BP

Supplemental AT&T Advertising Revenues
As a supplemental presentation to our Xandr segment operating results, we are providing a view of total advertising revenues generated by AT&T, which combines the advertising revenues recorded across all operating segments. This combined view presents the entire portfolio of revenues generated from AT&T assets and represents a significant strategic initiative and growth opportunity for AT&T.
Advertising Revenues
Dollars in millions
Unaudited		Third Quarter				Percent		Nine-Month Period				Percent
			2018		2017	Change			2018		2017	Change
Operating Revenues
	WarnerMedia	$	983	$	17	-	%	$	1,222	$	52	-	%
	Communications		478		368	29.9	%		1,284		1,093	17.5	%
	Xandr		445		333	33.6	%		1,174		992	18.3	%
	Eliminations		(401)		(329)	(21.9)	%		(1,122)		(980)	(14.5)	%
Total Advertising Revenues		$	1,505	$	389	-	%	$	2,558	$	1,157	-	%

12

SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
September 30, 2018
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,938	$	10,255	$	7,683	$	2,079	$	5,604	$	(1)	$	5,603
Entertainment Group		11,589		9,155		2,434		1,331		1,103		1		1,104
Business Wireline		6,703		4,030		2,673		1,197		1,476		(1)		1,475
Total Communications		36,230		23,440		12,790		4,607		8,183		(1)		8,182
WarnerMedia
Turner		2,988		1,487		1,501		59		1,442		7		1,449
Home Box Office		1,644		991		653		25		628		2		630
Warner Bros.		3,720		3,104		616		40		576		(23)		553
Other		(148)		(79)		(69)		10		(79)		(25)		(104)
Total WarnerMedia		8,204		5,503		2,701		134		2,567		(39)		2,528
Latin America
Vrio		1,102		877		225		168		57		9		66
Mexico		731		869		(138)		129		(267)		-		(267)
Total Latin America		1,833		1,746		87		297		(210)		9		(201)
Xandr		445		109		336		3		333		-		333
Segment Total		46,712		30,798		15,914		5,041		10,873		(31)		10,842
Corporate and Other
Corporate		308		(18)		326		797		(471)
Acquisition-related items		-		362		(362)		2,329		(2,691)
Certain significant items		-		75		(75)		-		(75)
Eliminations and consolidations		(1,281)		(913)		(368)		(1)		(367)
AT&T Inc.	$	45,739	$	30,304	$	15,435	$	8,166	$	7,269
September 30, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	17,370	$	10,029	$	7,341	$	2,008	$	5,333	$	-	$	5,333
Entertainment Group		12,467		9,804		2,663		1,379		1,284		(1)		1,283
Business Wireline		7,278		4,635		2,643		1,189		1,454		1		1,455
Total Communications		37,115		24,468		12,647		4,576		8,071		-		8,071
WarnerMedia
Turner		107		97		10		1		9		13		22
Home Box Office		-		-		-		-		-		-		-
Warner Bros.		-		-		-		-		-		-		-
Other		-		1		(1)		-		(1)		(19)		(20)
Total WarnerMedia		107		98		9		1		8		(6)		2
Latin America
Vrio		1,363		1,075		288		206		82		17		99
Mexico		736		862		(126)		98		(224)		-		(224)
Total Latin America		2,099		1,937		162		304		(142)		17		(125)
Xandr		333		39		294		-		294		-		294
Segment Total		39,654		26,542		13,112		4,881		8,231		11		8,242
Corporate and Other
Corporate		382		801		(419)		24		(443)
Acquisition-related items		-		134		(134)		1,136		(1,270)
Certain significant items		(89)		325		(414)		1		(415)
Eliminations and consolidations		(279)		17		(296)		-		(296)
AT&T Inc.	$	39,668	$	27,819	$	11,849	$	6,042	$	5,807

13

SUPPLEMENTAL SEGMENT RECONCILIATION
Nine Months Ended
Dollars in millions
Unaudited
September 30, 2018
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	52,575	$	30,020	$	22,555	$	6,287	$	16,268	$	(1)	$	16,267
Entertainment Group		34,498		26,623		7,875		3,986		3,889		(1)		3,888
Business Wireline		20,100		12,084		8,016		3,547		4,469		(1)		4,468
Total Communications		107,173		68,727		38,446		13,820		24,626		(3)		24,623
WarnerMedia
Turner		3,767		1,933		1,834		71		1,763		39		1,802
Home Box Office		1,925		1,162		763		30		733		1		734
Warner Bros.		4,227		3,507		720		54		666		(24)		642
Other		(210)		(106)		(104)		11		(115)		(71)		(186)
Total WarnerMedia		9,709		6,496		3,213		166		3,047		(55)		2,992
Latin America
Vrio		3,710		2,894		816		559		257		24		281
Mexico		2,099		2,459		(360)		383		(743)		-		(743)
Total Latin America		5,809		5,353		456		942		(486)		24		(462)
Xandr		1,174		218		956		4		952		-		952
Segment Total		123,865		80,794		43,071		14,932		28,139		(34)		28,105
Corporate and Other
Corporate		961		1,378		(417)		938		(1,355)
Acquisition-related items		-		750		(750)		4,669		(5,419)
Certain significant items		-		407		(407)		-		(407)
Eliminations and consolidations		(2,063)		(1,040)		(1,023)		(1)		(1,022)
AT&T Inc.	$	122,763	$	82,289	$	40,474	$	20,538	$	19,936
September 30, 2017
		Revenues		Operations and Support Expenses		EBITDA		Depreciation and Amortization		Operating Income (Loss)		Equity in Net Income (Loss) of Affiliates		Segment Contribution
Communications
Mobility	$	51,922	$	30,005	$	21,917	$	5,988	$	15,929	$	-	$	15,929
Entertainment Group		37,435		28,711		8,724		4,254		4,470		-		4,470
Business Wireline		21,911		13,906		8,005		3,583		4,422		-		4,422
Total Communications		111,268		72,622		38,646		13,825		24,821		-		24,821
WarnerMedia
Turner		323		273		50		3		47		32		79
Home Box Office		-		-		-		-		-		-		-
Warner Bros.		-		-		-		-		-		-		-
Other		-		3		(3)		-		(3)		(55)		(58)
Total WarnerMedia		323		276		47		3		44		(23)		21
Latin America
Vrio		4,065		3,123		942		642		300		62		362
Mexico		1,989		2,345		(356)		263		(619)		-		(619)
Total Latin America		6,054		5,468		586		905		(319)		62		(257)
Xandr		992		118		874		1		873		-		873
Segment Total		118,637		78,484		40,153		14,734		25,419		39		25,458
Corporate and Other
Corporate		1,182		2,440		(1,258)		73		(1,331)
Acquisition-related items		-		622		(622)		3,508		(4,130)
Certain significant items		(89)		302		(391)		1		(392)
Eliminations and consolidations		(860)		17		(877)		-		(877)
AT&T Inc.	$	118,870	$	81,865	$	37,005	$	18,316	$	18,689

14

As a supplemental discussion of our operating results, we are providing results under the comparative historical accounting method prior to our adoption of ASC 606 and other accounting changes.
SUPPLEMENTAL INCOME STATEMENT
Supplemental Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited		Third Quarter
		2018		Accounting Impact		Historical 2018		2017	Percent Change
Operating Revenues
Service	$	41,297	$	(1,384)	$	42,681	$	36,378	17.3	%
Equipment		4,442		516		3,926		3,290	19.3	%
Total Operating Revenues		45,739		(868)		46,607		39,668	17.5	%
Operating Expenses
Cost of revenues
Equipment		4,828		-		4,828		4,191	15.2	%
Broadcast, programming and operations		7,227		-		7,227		5,284	36.8	%
Other cost of revenues (exclusive of depreciation           and amortization shown separately below)		8,651		(917)		9,568		9,694	(1.3)	%
Selling, general and administrative		9,598		(547)		10,145		8,650	17.3	%
Depreciation and amortization		8,166		-		8,166		6,042	35.2	%
Total Operating Expenses		38,470		(1,464)		39,934		33,861	17.9	%
Operating Income		7,269		596		6,673		5,807	14.9	%
Interest Expense		(2,051)		-		(2,051)		(1,686)	21.6	%
Equity in Net Income (Loss) of Affiliates		(64)		-		(64)		11	-	%
Other Income (Expense) - Net		1,053		-		1,053		842	25.1	%
Income Before Income Taxes		6,207		596		5,611		4,974	12.8	%
Income Tax Expense		1,391		146		1,245		1,851	(32.7)	%
Net Income		4,816		450		4,366		3,123	39.8	%
Less: Net Income Attributable to     Noncontrolling Interest		(98)		(5)		(93)		(94)	1.1	%
Net Income Attributable to AT&T	$	4,718	$	445	$	4,273	$	3,029	41.1	%
Basic Earnings Per Share Attributable to AT&T	$	0.65	$	0.06	$	0.59	$	0.49	20.4	%
Weighted Average Common        Shares Outstanding (000,000)		7,284		-		7,284		6,162	18.2	%
Diluted Earnings Per Share Attributable to AT&T	$	0.65	$	0.06	$	0.59	$	0.49	20.4	%
Weighted Average Common        Shares Outstanding with Dilution (000,000)		7,320		-		7,320		6,182	18.4	%

15

Supplemental Mobility
Supplemental Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Service	$	13,989	$	(821)	$	14,810	$	14,475		2.3	%
	Equipment		3,949		505		3,444		2,895		19.0	%
Total Operating Revenues			17,938		(316)		18,254		17,370		5.1	%
Operating Expenses
Operations and support			10,255		(650)		10,905		10,029		8.7	%
EBITDA			7,683		334		7,349		7,341		0.1	%
Depreciation and amortization			2,079		-		2,079		2,008		3.5	%
Total Operating Expenses			12,334		(650)		12,984		12,037		7.9	%
Operating Income			5,604		334		5,270		5,333		(1.2)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		(1)		-		-	%
Operating Contribution		$	5,603	$	334	$	5,269	$	5,333		(1.2)	%
Operating Income Margin			31.2	%			28.9	%	30.7	%	(180)	BP
EBITDA Margin			42.8	%			40.3	%	42.3	%	(200)	BP
EBITDA Service Margin			54.9	%			49.6	%	50.7	%	(110)	BP

Supplemental Entertainment Group
Supplemental Entertainment Group Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Video entertainment	$	8,283	$	(113)	$	8,396	$	9,052		(7.2)	%
	High-speed internet		2,045		-		2,045		1,916		6.7	%
	Legacy voice and data services		740		(29)		769		913		(15.8)	%
	Other service and equipment		521		(64)		585		586		(0.2)	%
Total Operating Revenues			11,589		(206)		11,795		12,467		(5.4)	%
Operating Expenses
Operations and support			9,155		(431)		9,586		9,804		(2.2)	%
EBITDA			2,434		225		2,209		2,663		(17.0)	%
Depreciation and amortization			1,331		-		1,331		1,379		(3.5)	%
Total Operating Expenses			10,486		(431)		10,917		11,183		(2.4)	%
Operating Income			1,103		225		878		1,284		(31.6)	%
Equity in Net Income (Loss) of Affiliates			1		-		1		(1)		-	%
Contribution		$	1,104	$	225	$	879	$	1,283		(31.5)	%
Operating Income Margin			9.5	%			7.4	%	10.3	%	(290)	BP
EBITDA Margin			21.0	%			18.7	%	21.4	%	(270)	BP

16

Supplemental Business Wireline
Supplemental Business Wireline Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Operating Revenues
	Strategic services	$	3,059	$	(3)	$	3,062	$	3,018		1.5	%
	Legacy voice and data services		2,615		(242)		2,857		3,343		(14.5)	%
	Other service and equipment		1,029		(69)		1,098		917		19.7	%
Total Operating Revenues			6,703		(314)		7,017		7,278		(3.6)	%
Operating Expenses
Operations and support			4,030		(339)		4,369		4,635		(5.7)	%
EBITDA			2,673		25		2,648		2,643		0.2	%
Depreciation and amortization			1,197		-		1,197		1,189		0.7	%
Total Operating Expenses			5,227		(339)		5,566		5,824		(4.4)	%
Operating Income			1,476		25		1,451		1,454		(0.2)	%
Equity in Net Income (Loss) of Affiliates			(1)		-		(1)		1		-	%
Operating Contribution		$	1,475	$	25	$	1,450	$	1,455		(0.3)	%
Operating Income Margin			22.0	%			20.7	%	20.0	%	70	BP
EBITDA Margin			39.9	%			37.7	%	36.3	%	140	BP

Supplemental Latin America
Supplemental Segment Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact		Historical 2018		2017		Percent Change
Segment Operating Revenues
	Vrio	$	1,102	$	-	$	1,102	$	1,363		(19.1)	%
	Mexico		731		(24)		755		736		2.6	%
Total Segment Operating Revenues			1,833		(24)		1,857		2,099		(11.5)	%
Segment Operating Expenses
Operations and support			1,746		(38)		1,784		1,937		(7.9)	%
EBITDA			87		14		73		162		(54.9)	%
Depreciation and amortization			297		-		297		304		(2.3)	%
Total Segment Operating Expenses			2,043		(38)		2,081		2,241		(7.1)	%
Segment Operating Income (Loss)			(210)		14		(224)		(142)		(57.7)	%
Equity in Net Income of Affiliates			9		-		9		17		(47.1)	%
Segment Contribution		$	(201)	$	14	$	(215)	$	(125)		(72.0)	%
Operating Income Margin			(11.5)	%			(12.1)	%	(6.8)	%	(530)	BP
EBITDA Margin			4.7	%			3.9	%	7.7	%	(380)	BP

17

Supplemental Business Solutions
As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship, and underscores the importance of mobile solutions to serving our business customers.
Supplemental Operating Results
Dollars in millions
Unaudited			Third Quarter
			2018		Accounting Impact			Historical 2018		2017		Percent Change
Operating Revenues
	Wireless service	$	1,877	$	(206)		$	2,083	$	2,023		3.0	%
	Strategic services		3,059		(3)			3,062		3,018		1.5	%
	Legacy voice and data services		2,615		(242)			2,857		3,343		(14.5)	%
	Other service and equipment		1,029		(69)			1,098		917		19.7	%
	Wireless equipment		590		167			423		340		24.4	%
Total Operating Revenues			9,170		(353)			9,523		9,641		(1.2)	%
Operating Expenses
Operations and support			5,598		(404)			6,002		6,096		(1.5)	%
EBITDA			3,572		51			3,521		3,545		(0.7)	%
Depreciation and amortization			1,499		-			1,499		1,466		2.3	%
Total Operating Expenses			7,097		(404)			7,501		7,562		(0.8)	%
Operating Income			2,073		51			2,022		2,079		(2.7)	%
Equity in Net Income (Loss) of Affiliates			(1)		-			(1)		-		-	%
Operating Contribution		$	2,072	$	51	$		2,021	$	2,079		(2.8)	%
Operating Income Margin			22.6	%				21.2	%	21.6	%	(40)	BP
EBITDA Margin			39.0	%				37.0	%	36.8	%	20	BP

18

EX-99.3

Discussion and Reconciliation of Non-GAAP Measures

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors.

Certain amounts have been conformed to the current period's presentation, including our adoption of new accounting standards; ASU No. 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," and ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash; and our revised operating segments.

Free Cash Flow

Free cash flow is defined as cash from operations minus Capital expenditures. Free cash flow after dividends is defined as cash from operations minus Capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the percentage of dividends paid to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including Capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Net cash provided by operating activities	$	12,346	$	10,803	$	31,522	$	28,473
Less: Capital expenditures		(5,873)		(5,251)		(17,099)		(16,474)
Free Cash Flow		6,473		5,552		14,423		11,999
Less: Dividends paid		(3,631)		(3,009)		(9,775)		(9,030)
Free Cash Flow after Dividends	$	2,842	$	2,543	$	4,648	$	2,969
Free Cash Flow Dividend Payout Ratio		56.1%		54.2%		67.8%		75.3%

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. 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 is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. generally accepted accounting principles (GAAP).

1

EBITDA service margin is calculated as EBITDA divided by service revenues.

When discussing our segment, business unit and supplemental results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from operating contribution.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing operating performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

2

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Net Income	$	4,816	$	3,123	$	14,823	$	10,711
Additions:
Income Tax (Benefit) Expense		1,391		1,851		4,305		5,711
Interest Expense		2,051		1,686		5,845		4,374
Equity in Net (Income) Loss of Affiliates		64		(11)		71		148
Other (Income) Expense - Net		(1,053)		(842)		(5,108)		(2,255)
Depreciation and amortization		8,166		6,042		20,538		18,316
EBITDA		15,435		11,849		40,474		37,005
Total Operating Revenues		45,739		39,668		122,763		118,870
Service Revenues		41,297		36,378		109,849		109,372
EBITDA Margin		33.7%		29.9%		33.0%		31.1%
EBITDA Service Margin		37.4%		32.6%		36.8%		33.8%

Supplemental Historical EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions		Third Quarter
		2018
Net Income	$	4,366
Additions:
Income Tax (Benefit) Expense		1,245
Interest Expense		2,051
Equity in Net (Income) Loss of Affiliates		64
Other (Income) Expense - Net		(1,053)
Depreciation and amortization		8,166
EBITDA		14,839
Total Operating Revenues		46,607
Service Revenues		42,681
EBITDA Margin		31.8%
EBITDA Service Margin		34.8%

3

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Communications Segment
Operating Contribution	$	8,182	$	8,071	$	24,623	$	24,821
Additions:
Equity in Net (Income) Loss of Affiliates		1		-		3		-
Depreciation and amortization		4,607		4,576		13,820		13,825
EBITDA		12,790		12,647		38,446		38,646
Total Operating Revenues		36,230		37,115		107,173		111,268
Operating Income Margin		22.6%		21.7%		23.0%		22.3%
EBITDA Margin		35.3%		34.1%		35.9%		34.7%
Mobility
Operating Contribution	$	5,603	$	5,333	$	16,267	$	15,929
Additions:
Equity in Net (Income) of Affiliates		1		-		1		-
Depreciation and amortization		2,079		2,008		6,287		5,988
EBITDA		7,683		7,341		22,555		21,917
Total Operating Revenues		17,938		17,370		52,575		51,922
Service Revenues		13,989		14,475		41,074		43,414
Operating Income Margin		31.2%		30.7%		30.9%		30.7%
EBITDA Margin		42.8%		42.3%		42.9%		42.2%
EBITDA Service Margin		54.9%		50.7%		54.9%		50.5%
Entertainment Group
Operating Contribution	$	1,104	$	1,283	$	3,888	$	4,470
Additions:
Equity in Net (Income) Loss of Affiliates		(1)		1		1		-
Depreciation and amortization		1,331		1,379		3,986		4,254
EBITDA		2,434		2,663		7,875		8,724
Total Operating Revenues		11,589		12,467		34,498		37,435
Operating Income Margin		9.5%		10.3%		11.3%		11.9%
EBITDA Margin		21.0%		21.4%		22.8%		23.3%
Business Wireline
Operating Contribution	$	1,475	$	1,455	$	4,468	$	4,422
Additions:
Equity in Net (Income) Loss of Affiliates		1		(1)		1		-
Depreciation and amortization		1,197		1,189		3,547		3,583
EBITDA		2,673		2,643		8,016		8,005
Total Operating Revenues		6,703		7,278		20,100		21,911
Operating Income Margin		22.0%		20.0%		22.2%		20.2%
EBITDA Margin		39.9%		36.3%		39.9%		36.5%

4

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
WarnerMedia Segment
Operating Contribution	$	2,528	$	2	$	2,992	$	21
Additions:
Equity in Net (Income) of Affiliates		39		6		55		23
Depreciation and amortization		134		1		166		3
EBITDA		2,701		9		3,213		47
Total Operating Revenues		8,204		107		9,709		323
Operating Income Margin		31.3%		7.5%		31.4%		13.6%
EBITDA Margin		32.9%		8.4%		33.1%		14.6%
Turner
Operating Contribution	$	1,449	$	22	$	1,802	$	79
Additions:
Equity in Net (Income) of Affiliates		(7)		(13)		(39)		(32)
Depreciation and amortization		59		1		71		3
EBITDA		1,501		10		1,834		50
Total Operating Revenues		2,988		107		3,767		323
Operating Income Margin		48.3%		8.4%		46.8%		14.6%
EBITDA Margin		50.2%		9.3%		48.7%		15.5%
Home Box Office
Operating Contribution	$	630	$	-	$	734	$	-
Additions:
Equity in Net (Income) Loss of Affiliates		(2)		-		(1)		-
Depreciation and amortization		25		-		30		-
EBITDA		653		-		763		-
Total Operating Revenues		1,644		-		1,925		-
Operating Income Margin		38.2%		-		38.1%		-
EBITDA Margin		39.7%		-		39.6%		-
Warner Bros.
Operating Contribution	$	553	$	-	$	642	$	-
Additions:
Equity in Net (Income) Loss of Affiliates		23		-		24		-
Depreciation and amortization		40		-		54		-
EBITDA		616		-		720		-
Total Operating Revenues		3,720		-		4,227		-
Operating Income Margin		15.5%		-		15.8%		-
EBITDA Margin		16.6%		-		17.0%		-

5

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Latin America Segment
Operating Contribution	$	(201)	$	(125)	$	(462)	$	(257)
Additions:
Equity in Net (Income) of Affiliates		(9)		(17)		(24)		(62)
Depreciation and amortization		297		304		942		905
EBITDA		87		162		456		586
Total Operating Revenues		1,833		2,099		5,809		6,054
Operating Income Margin		-11.5%		-6.8%		-8.4%		-5.3%
EBITDA Margin		4.7%		7.7%		7.8%		9.7%
Vrio
Operating Contribution	$	66	$	99	$	281	$	362
Additions:
Equity in Net (Income) of Affiliates		(9)		(17)		(24)		(62)
Depreciation and amortization		168		206		559		642
EBITDA		225		288		816		942
Total Operating Revenues		1,102		1,363		3,710		4,065
Operating Income Margin		5.2%		6.0%		6.9%		7.4%
EBITDA Margin		20.4%		21.1%		22.0%		23.2%
Mexico
Operating Contribution	$	(267)	$	(224)	$	(743)	$	(619)
Additions:
Depreciation and amortization		129		98		383		263
EBITDA		(138)		(126)		(360)		(356)
Total Operating Revenues		731		736		2,099		1,989
Operating Income Margin		-36.5%		-30.4%		-35.4%		-31.1%
EBITDA Margin		-18.9%		-17.1%		-17.2%		-17.9%

Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Xandr
Operating Contribution	$	333	$	294	$	952	$	873
Additions:
Depreciation and amortization		3		-		4		1
EBITDA		336		294		956		874
Total Operating Revenues		445		333		1,174		992
Operating Income Margin		74.8%		88.3%		81.1%		88.0%
EBITDA Margin		75.5%		88.3%		81.4%		88.1%

6

Adjusting Items

Adjusting items include revenues and costs we consider nonoperational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often significant impact on our fourth-quarter results, unless earlier remeasurement is required (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses.) Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38% for transactions prior to tax reform and 25% for transactions after tax reform.

Adjusting Items
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Operating Revenues
Natural disaster reveneue credits	$	-	$	89	$	-	$	89
Adjustments to Operating Revenues		-		89		-		89
Operating Expenses
Time Warner and other merger costs		361		33		749		152
Employee separation costs		76		208		260		268
Natural disaster costs		-		118		104		118
DIRECTV merger integration costs		-		67		-		317
Mexico merger integration costs		-		34		-		153
(Gain) loss on transfer of wireless spectrum		-		-		-		(181)
Foreign currency exchange		-		-		43		98
Adjustments to Operations and Support Expenses		437		460		1,156		925
Amortization of intangible assets		2,329		1,136		4,669		3,508
Adjustments to Operating Expenses		2,766		1,596		5,825		4,433
Other
Merger-related interest and fees1		-		485		1,029		752
Actuarial (gain) loss		-		-		(2,726)		(259)
(Gain) loss on sale of assets,     impairments and other adjustments		(327)		(81)		(279)		140
Adjustments to Income Before Income Taxes		2,439		2,089		3,849		5,155
Tax impact of adjustments		548		716		765		1,717
Tax Related Items		-		(146)		(96)		(146)
Adjustments to Net Income	$	1,891	$	1,519	$	3,180	$	3,584
1 Includes interest expense incurred on debt issued, redemption premiums and interest income earned on cash held prior to the close of merger transactions.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

7

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Operating Income	$	7,269	$	5,807	$	19,936	$	18,689
Adjustments to Operating Revenues		-		89		-		89
Adjustments to Operating Expenses		2,766		1,596		5,825		4,433
Adjusted Operating Income		10,035		7,492		25,761		23,211
EBITDA		15,435		11,849		40,474		37,005
Adjustments to Operating Revenues		-		89		-		89
Adjustments to Operations and Support Expenses		437		460		1,156		925
Adjusted EBITDA		15,872		12,398		41,630		38,019
Pro forma as of June 30, 2018
WarnerMedia Operating Income		-				3,047
Additions:
Depreciation and amortization		-				339
Merger costs		-				694
WarnerMedia Adjusted EBITDA		-				4,080
WarnerMedia segment income (post acquisition)		-				(451)
WarnerMedia segment depreciation and    amortization (post acquisition)		-				(30)
WarnerMedia merger costs (post acquisition)		-				(159)
Film and television cost amortization (release prior to June 14)		-				1,103
Pro Forma Adjusted EBITDA1		15,872				46,173
Total Operating Revenues		45,739		39,668		122,763		118,870
Adjustments to Operating Revenues		-		89		-		89
Total Adusted Operating Revenue		45,739		39,757		122,763		118,959
Service Revenues		41,297		36,378		109,849		109,372
Adjustments to Service Revenues		-		89		-		89
Adusted Service Revenue		41,297		36,467		109,849		109,461
Operating Income Margin		15.9%		14.6%		16.2%		15.7%
Adjusted Operating Income Margin		21.9%		18.8%		21.0%		19.5%
Adjusted EBITDA Margin		34.7%		31.2%		33.9%		32.0%
Adjusted EBITDA Service Margin		38.4%		34.0%		37.9%		34.7%
Supplemental Results under Historical Accouning Method
Operating Income		6,673
Adjustments to Operating Expenses		2,766
Adjusted Supplemental Operating Income		9,439
EBITDA		14,839
Adjustments to Operations and Support Expenses		437
Adjusted Supplemental EBITDA		15,276
Supplemental Operating Revenues		46,607
Adjusted Supplemental Operating Income Margin		20.3%
Adjusted Supplemental EBITDA margin		32.8%
1 Pro Forma Adjusted EBITDA reflects the combined results of operations of the combined company based on the historical financial statements of AT&T and Time Warner, after giving effect to the merger and certain adjustments, and is intended to reflect the impact of the Time Warner acquisition on AT&T. WarnerMedia operating income, depreciation and amortization expense and merger costs are provided on Item 7.01 Form 8-K filed by AT&T on July 24, 2018. Pro Forma adjustments are to (1) remove the duplication of operating results for the 16-period in which AT&T also reported Time Warner results and (2) to recognize the purchase accounting classification of released content as intangible assets and accordingly reclassify associated content amortization from operating expense to amortization expense. Intercompany revenue and expense eliminations net and do not impact EBITDA.

8

Adjusted Diluted EPS
		Third Quarter				Nine-Month Period
		2018		2017		2018		2017
Diluted Earnings Per Share (EPS)	$	0.65	$	0.49	$	2.19	$	1.69
Amortization of intangible assets		0.25		0.12		0.55		0.38
Merger integration items1		0.04		0.06		0.22		0.14
(Gain) loss on sale of assets, impairments       and other adjustments2		(0.04)		0.05		0.02		0.06
Actuarial (gain) loss3		-		-		(0.31)		(0.03)
Tax-related items		-		0.02		-		0.02
Adjusted EPS	$	0.90	$	0.74	$	2.67	$	2.26
Year-over-year growth - Adjusted		21.6%				18.1%
Weighted Average Common Shares Outstanding      with Dilution (000,000)		7,320		6,182		6,630		6,184
1Includes combined merger integration items and merger-related interest income and expense, and redemption premiums.
2Includes gains on transactions, natural disaster adjustments and charges, and employee-related and other costs.
3Includes adjustments for actuarial gains or losses associated with our postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded an actuarial gain of $930 million in the first quarter of 2018 associated with our postretirement plan and a gain of $1,796 million in the second quarter associated with our pension plan.  As a result, adjusted EPS reflects (1) in the first quarter and for the first nine months, an expected return on plan assets of $77 million (based on an average expected return on plan assets of 5.75% for our VEBA trusts), rather than the actual return on plan assets of $31 million loss (VEBA return of -3.08%) and (2) in the second quarter and for the first nine months, an expected return on plan assets of $754 million (based on an average expected return on plan assets of 7.00% for our Pension trusts), rather than the actual return on plan assets of $186 million loss (Pension return of -0.56%), both of which are included in the GAAP measure of income.

Pro Forma Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Pro Forma Adjusted EBITDA ratio is calculated by dividing the Net Debt by Annualized Pro Forma Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt. Annualized Pro Forma Adjusted EBITDA is calculated by annualizing the year-to-date Pro Forma Adjusted EBITDA.

Net Debt to Pro Forma Adjusted EBITDA
Dollars in millions
		Three Months Ended
		Mar. 31,		Jun. 30,		Sep. 30,		YTD 2018
		2018		2018		2018
Pro Forma Adjusted EBITDA1	$	15,182	$	15,119	$	15,872	$	46,173
Add back severance		(51)		(133)		(76)		(260)
Net Debt  Pro Forma Adjusted EBITDA		15,131		14,986		15,796		45,913
Annualized Pro Forma Adjusted  EBITDA								61,217
End-of-period current debt								14,905
End-of-period long-term debt								168,513
Total End-of-Period Debt								183,418
Less: Cash and Cash Equivalents								8,657
Net Debt Balance								174,761
Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio								2.85
1Includes the purchase accounting reclassification of released content amortization of $612 million pro forma in the first quarter, $491 million pro forma and $98 million reported by AT&T in the second quarter and $772 million reported by AT&T in the third quarter of 2018.

9

Supplemental Operational Measures

We provide a supplemental discussion of our business solutions operations that is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
		Three Months Ended
		September 30, 2018								September 30, 2017
		Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	13,989	$	-	$	(12,112)	$	1,877	$	14,475	$	-	$	(12,452)	$	2,023
Strategic services		-		3,059		-		3,059		-		3,018		-		3,018
Legacy voice and data services		-		2,615		-		2,615		-		3,343		-		3,343
Other services and equipment		-		1,029		-		1,029		-		917		-		917
Wireless equipment		3,949		-		(3,359)		590		2,895		-		(2,555)		340
Total Operating Revenues		17,938		6,703		(15,471)		9,170		17,370		7,278		(15,007)		9,641
Operations and support		10,255		4,030		(8,687)		5,598		10,029		4,635		(8,568)		6,096
EBITDA		7,683		2,673		(6,784)		3,572		7,341		2,643		(6,439)		3,545
Depreciation and amortization		2,079		1,197		(1,777)		1,499		2,008		1,189		(1,731)		1,466
Total Operating Expenses		12,334		5,227		(10,464)		7,097		12,037		5,824		(10,299)		7,562
Operating Income	$	5,604	$	1,476	$	(5,007)	$	2,073	$	5,333	$	1,454	$	(4,708)	$	2,079
Equity in net Income of Affiliates		(1)		(1)		1		(1)		-		1		(1)		-
Contribution		5,603		1,475		(5,006)		2,072		5,333		1,455		(4,709)		2,079
1 Non-business wireless reported in the Communication segment under the Mobility business unit.
Supplemental Operational Measure
		Nine Months Ended
		September 30, 2018								September 30, 2017
		Mobility		Business Wireline		Adjustments1		Business Solutions		Mobility		Business Wireline		Adjustments1		Business Solutions
Operating Revenues
Wireless service	$	41,074	$	-	$	(35,577)	$	5,497	$	43,414	$	-	$	(37,384)	$	6,030
Strategic services		-		9,168		-		9,168		-		8,880		-		8,880
Legacy voice and data services		-		8,176		-		8,176		-		10,314		-		10,314
Other services and equipment		-		2,756		-		2,756		-		2,717		-		2,717
Wireless equipment		11,501		-		(9,749)		1,752		8,508		-		(7,520)		988
Total Operating Revenues		52,575		20,100		(45,326)		27,349		51,922		21,911		(44,904)		28,929
Operating Expenses
Operations and support		30,020		12,084		(25,296)		16,808		30,005		13,906		(25,764)		18,147
EBITDA		22,555		8,016		(20,030)		10,541		21,917		8,005		(19,140)		10,782
Depreciation and amortization		6,287		3,547		(5,390)		4,444		5,988		3,583		(5,162)		4,409
Total Operating Expenses		36,307		15,631		(30,686)		21,252		35,993		17,489		(30,926)		22,556
Operating Income	$	16,268	$	4,469	$	(14,640)	$	6,097	$	15,929	$	4,422	$	(13,978)	$	6,373
Equity in net Income of Affiliates		(1)		(1)		1		(1)		-		-		-		-
Contribution		16,267		4,468		(14,639)		6,096		15,929		4,422		(13,978)		6,373
1 Non-business wireless reported in the Communication segment under the Mobility business unit.

10