Strong Growth in Wireless and U-verse Drives Revenue and Adjusted Earnings Per Share Growth in AT&T’s Fourth-Quarter Results

  Strong Growth in Wireless and U-verse Drives Revenue and Adjusted Earnings
  Per Share Growth in AT&T’s Fourth-Quarter Results

 Full-Year 2012: Strong Earnings, Record Cash Flows, $23 Billion Returned to
                                 Shareowners

  2013 Outlook: Solid Revenue Gains, EPS Growth in Upper-Single Digits with
                      Continuing Free Cash Flow Strength

  *$(0.68) diluted EPS in the fourth quarter compared to $(1.12) diluted EPS
    in the year-ago period. Excluding significant items and adjusting for the
    sale of Advertising Solutions, EPS was $0.44 versus $0.40, up 10 percent
    year over year
  *For full-year 2012, excluding significant items and adjusting for the sale
    of Advertising Solutions, EPS was up 8.5 percent year over year
  *Consolidated revenues of $32.6billion, up 0.2 percent versus reported
    results for the year-earlier period, and up 2.8percent excluding
    Advertising Solutions and Superstorm Sandy impact
  *Record cash from operations of $39.2 billion and record free cash flow for
    full-year 2012
  *$4.4billion in stock buybacks in the fourth quarter with 126.6million
    shares repurchased; for the full year, the company repurchased 371million
    shares, or about 6 percent of shares outstanding, for $12.8billion
  *$23 billion returned to shareowners in 2012 through dividends and share
    repurchases

Record Smartphone Sales and Strong Wireless Postpaid Net Adds

  *Wireless revenues up 5.7percent versus the year-ago quarter; wireless
    service revenues up 4.2percent
  *780,000 wireless postpaid net adds, largest increase in three years; 1.1
    million increase in total net wireless subscribers
  *Record smartphone sales of 10.2million, the most ever sold by any U.S.
    carrier; postpaid smartphone customer base now 47.1 million, up 2.5
    million from third-quarter 2012
  *Smartphones 89 percent of postpaid phone sales
  *Postpaid wireless subscriber ARPU (average monthly revenues per
    subscriber) up 1.9 percent to $64.98

Wireline Consumer Revenue Growth Accelerates

  *Wireline consumer revenue growth continues to accelerate, with revenues up
    3.0percent versus the year-earlier period, their strongest growth in more
    than four years
  *36.3percent growth in U-verse^® revenues
  *8.0million total U-verse subscribers (TV and high speed Internet) in
    service; a net gain of 192,000 U-verse TV subscribers and 609,000 high
    speed Internet subscribers
  *Total wireline broadband data ARPU up more than 10percent year over year

Note: AT&T's fourth-quarter earnings conference call will be broadcast live
via the Internet at 4:30 p.m. ET on Thursday, January 24, 2013, at
www.att.com/investor.relations.

Business Wire

DALLAS -- January 24, 2013

AT&T Inc. (NYSE:T) today reported fourth-quarter results highlighted by strong
wireless revenue growth, record smartphone sales, the highest postpaid net
adds in three years and accelerating consumer wireline revenue growth thanks
to U-verse services.

“We had an excellent 2012,” said Randall Stephenson, AT&T chairman and chief
executive officer. “We grew revenues, increased adjusted earnings per share by
8.5 percent and generated cash from operations at record levels. We used this
cash to invest aggressively in the future of our business and returned $23
billion to shareowners through dividends and share repurchases.

“Looking ahead, our key growth platforms — mobile data, U-verse and strategic
business services — all have good momentum with a lot of headroom,” Stephenson
said. “We’re off to a strong start executing Project VIP, our plan to expand
our high-growth platforms to millions more customers, and our 4G LTE network
deployment is ahead of schedule, delivering outstanding performance.”

Fourth-Quarter Financial Results

For the quarter ended December 31, 2012, AT&T's consolidated revenues totaled
$32.6billion, up 0.2 percent versus the year-earlier quarter and up an even
stronger 2.8 percent when excluding revenues primarily from the divested
Advertising Solutions business unit as well as the impact of Superstorm Sandy.

Compared with results for the fourth quarter of 2011, operating expenses were
$38.5billion versus $41.5billion; operating loss was $6.0billion, compared
to a loss of $9.0 billion; and AT&T’s operating income margin was (18.3)
percent, compared to (27.7)percent. Excluding previously noted adjustments,
operating expenses were $28.4 billion, compared to an adjusted $27.5 billion
in the year-ago quarter, up 3.3 percent; operating income was $4.2 billion,
flat versus a year ago; and operating income margin was 12.9 percent.

Fourth-quarter 2012 net income attributable to AT&T totaled $(3.9)billion, or
$(0.68) per diluted share, compared to $(6.7)billion, or $(1.12) per diluted
share, in the year-earlier quarter. Excluding adjustments of $(1.10) from the
non-cash actuarial loss on benefit plans, $(0.02) from storm impacts and
adjusted for Advertising Solutions, earnings per share was up 10 percent,
$0.44 compared to an adjusted $0.40 in the year-ago quarter.

(The actuarial loss on benefit plans was driven by a reduction in the discount
rate from 5.3percent to 4.3percent. While our investment returns were better
than assumptions, they were not enough to offset the lower discount rate.)

Fourth-quarter 2012 cash from operating activities totaled $10.5billion, and
capital expenditures totaled $5.9billion. Free cash flow — cash from
operating activities minus capital expenditures — totaled $4.6billion.

Full-Year Results

For full year 2012, compared with 2011 results, AT&T's consolidated revenues
totaled $127.4billion versus $126.7billion; when excluding the divested
Advertising Solutions business unit, revenues were up 2.4 percent for the
year. Operating expenses were $114.4billion, compared with $117.5billion,
down 2.6 percent; net income attributable to AT&T was $7.3billion versus
$3.9billion; and earnings per diluted share was $1.25 compared with $0.66.
Excluding adjustments for both years, earnings per share totaled $2.31,
compared with $2.13, an increase of 8.5 percent.

AT&T's full-year cash from operating activities was a record $39.2billion, up
from $34.7billion in 2011. Capital expenditures, including capitalized
interest, totaled $19.7billion versus $20.3billion, including a 10.6percent
increase in wireless-related capital investment versus 2011, as AT&T
aggressively deployed next-generation mobile broadband networks. Full-year
free cash flow also was a record at $19.4billion.

Share Repurchases

During the quarter, the company repurchased 126.6million of its shares for
$4.4billion. AT&T has completed its initial 300million share repurchase
authorization and began buying back shares on its second 300million share
repurchase authorization. At the end of the quarter, about 229 million shares
remained on the second authorization. In 2012, the company repurchased
371million shares, or about 6 percent of outstanding shares, for
$12.8billion.

Outlook

AT&T is well positioned to deliver solid revenue and earnings per share growth
with stable margins while returning substantial value to shareowners in 2013.
At the same time, AT&T is investing in future growth with Project Velocity IP
(Project VIP). In 2013, AT&T expects:

  *Consolidated revenue growth exceeding 2 percent with continuing strength
    in wireless service and wireline consumer revenues;
  *Earnings per share growth to be upper-single digits or higher;
  *Consolidated margins to be stable, with expanding wireless margins
    offsetting Project VIP investments;
  *Led by investments in Project VIP growth initiatives, capital spending to
    be in the $21 billion range with increased spending in wireless and stable
    wireline investments;
  *LTE build to cover 250 million or more of the U.S. population by yearend;
  *Free cash flow exceeding $14 billion: and
  *Completion of the company’s 300 million share repurchase authorization as
    early as mid-year, depending upon market conditions.

2013 outlook assumes little improvement in the economy and is adjusted for
impacts from the 2012 sale of Advertising Solutions and other adjustments
including non-cash mark-to-market benefit-plan adjustments.

WIRELESS OPERATIONAL HIGHLIGHTS

AT&T delivered strong revenue growth, solid postpaid gains and record
smartphone sales in the fourth quarter. Highlights included:

Wireless Revenues Continue Solid Growth. Total wireless revenues, which
include equipment sales, were up 5.7percent year over year to $17.6billion.
Wireless service revenues increased 4.2percent in the fourth quarter, to
$14.9billion. Wireless data revenues — driven by mobile Internet access,
access to applications, messaging and related services — increased by
14.7percent from the year-earlier quarter to $6.8billion. Data revenue
growth was slowed somewhat by the growth of Mobile Share plans. Fourth-quarter
wireless operating expenses totaled $15.1billion, up 6.9percent versus the
year-earlier quarter, driven by record smartphone volumes, and wireless
operating income was $2.6billion, down 1.2percent year over year.

Strongest Postpaid Net Adds in Three Years. AT&T posted a net increase in
total wireless subscribers of 1.1 million in the fourth quarter to reach
107.0million in service. Subscriber additions for the quarter included
postpaid net adds of 780,000, the best gain in 12 quarters. Connected device
net adds were 246,000, and reseller net adds were 234,000. Prepaid had a net
loss of 166,000 subscribers primarily due to declines in GoPhone and
session-based tablets. Fourth-quarter postpaid net adds reflect accelerated
adoption of smartphones, sales of tablets and growth in Mobile Premise
services.

Branded computing subscribers, which are included in the previous categories,
reached a total of 6.4 million, up 26 percent from a year ago. Branded
computing devices includes tablets, tethering plans and other data-only
devices. Branded computing sales also have been slowed by the introduction of
Mobile Share plans, which include tethering. AT&T added almost 400,000
postpaid tablets in the quarter, with new subscribers and prepaid tablet
subscribers migrating to postpaid plans.

Postpaid ARPU Increases. Postpaid subscriber ARPU increased 1.9percent versus
the year-earlier quarter to $64.98. When adjusted for the Superstorm Sandy
impact, postpaid ARPU grew 2.1 percent. This marked the 16^th consecutive
quarter AT&T has posted a year-over-year increase in postpaid ARPU.

Smartphones Represent 89 Percent of Postpaid Phone Sales. AT&T sold a record
10.2million smartphones in the fourth quarter. Smartphones represented
86percent of postpaid device sales and 89 percent of postpaid phone sales in
the quarter. At the end of the quarter, 69.6percent, or 47.1million, of
AT&T's postpaid phone subscribers had smartphones, up from 58.5percent, or
39.4million, a year earlier. AT&T’s ARPU for smartphones is twice that of
non-smartphone subscribers, and about 90percent of smartphone subscribers are
on FamilyTalk^®, Mobile Share or business plans. Churn levels for these
subscribers are significantly lower than for other postpaid subscribers. About
55percent of AT&T’s postpaid smartphone customers now use a 4G-capable
device.

In the quarter, the company activated a record 8.6million iPhones, with
16percent new to AT&T.  The company also had its best-ever sales quarter for
Android smartphones.

More than 6.6 Million Postpaid Subscribers on Mobile Share Plans. The number
of subscribers on usage-based data plans (tiered data and Mobile Share plans)
continues to increase. More than two-thirds, or 31.7million, of all
smartphone subscribers, are on usage-based data plans. This compares to 56
percent, or 22.1 million, a year ago and 31 percent two years ago. More than
three-quarters of customers on tiered data plans have chosen the higher-priced
plans.

Mobile Share plans continue to be popular. More than 6.6 million customers, or
9 percent of postpaid subscribers, have already signed up for Mobile Share
plans. The number of Mobile Share accounts reached 2.2 million in the fourth
quarter for an average of about three devices per account. Take rates on the
higher-data plans continue to be much stronger than expected with more than a
quarter of Mobile Share accounts 10 gigabytes or higher.

Postpaid Churn Down. For the fourth quarter, postpaid churn was 1.19percent,
down when compared to 1.21percent in the year-ago fourth quarter. Total churn
was 1.42percent versus 1.39percent in the fourth quarter of 2011.

Record Smartphone Sales Impact Margins. In the fourth quarter, wireless
margins reflected record-setting smartphone sales (800,000 more than
fourth-quarter 2011), strong customer upgrade levels and the impact of
Superstorm Sandy. This was offset in part by further revenue gains from the
company’s high-value smartphone subscribers and improved operating
efficiencies. AT&T’s fourth-quarter wireless operating income margin was
14.5percent versus 15.5percent in the year-earlier quarter, primarily driven
by depreciation and amortization. AT&T’s wireless EBITDA service margin was
29.1percent, or about the same as 29.2 percent in the fourth quarter of 2011.
Without the Superstorm Sandy impact, EBITDA service margin would have been
nearly 30 percent. (EBITDA service margin is operating income before
depreciation and amortization, divided by total service revenues.)

WIRELINE OPERATIONAL HIGHLIGHTS

AT&T's fourth-quarter wireline results were led by strong U-verse TV and high
speed Internet gains and accelerating wireline consumer revenue growth.
Highlights included:

Wireline Revenues Increase Sequentially. Total fourth-quarter wireline
revenues were $14.9billion, down 0.5percent versus the year-earlier quarter
but up 0.7 percent sequentially. Fourth-quarter wireline operating expenses
were $13.1billion, down 0.9 percent versus the fourth quarter of 2011. AT&T’s
wireline operating income totaled $1.8billion, up 1.8 percent from the fourth
quarter of 2011. Positive consumer revenue trends helped to partially offset
declines in revenues from business customers. Fourth-quarter wireline
operating income margin was 12.0percent, compared to 11.7percent in the
year-earlier quarter.

Consumer Revenue Growth Accelerating. Revenues from residential customers
totaled $5.5billion, an increase of 3.0percent versus the fourth quarter a
year ago and the strongest growth in more than four years. Continued strong
growth in consumer IP data services in the fourth quarter more than offset
lower revenues from voice and legacy products. The fourth quarter marked the
tenth consecutive quarter of year-over-year growth in wireline consumer
revenues. For full-year 2012, consumer revenues were up 1.9 percent versus
2011.

U-verse continues to transform wireline consumer. IP revenues now represent 61
percent of wireline consumer revenues, up from 53percent in the year-earlier
quarter and 45 percent two years ago. Increased AT&T U-verse penetration and a
significant number of subscribers purchasing multiple services drove
17.7percent year-over-year growth in IP revenues from residential customers
(broadband, U-verse TV and U-verse Voice) and 4.0percent sequential growth.
Total U-verse revenues grew 36.3percent compared with the year-ago fourth
quarter and were up 7.2percent versus the third quarter of 2012.

Total U-verse Subscribers Reach 8 Million. Total U-verse subscribers (TV and
high speed Internet) reached 8.0million in the fourth quarter. U-verse TV
added 192,000 subscribers to reach 4.5million in service. U-verse High Speed
Internet delivered a fourth-quarter net gain of 609,000 subscribers to reach a
total of 7.7million, helping offset losses from DSL, and for the first time,
the company has more consumer U-verse High Speed Internet subscribers than DSL
subscribers. Overall, AT&T wireline broadband subscribers were flat; however,
total broadband ARPU was up more than 10percent year over year.

Fifty-five percent of U-verse broadband subscribers have a plan delivering
speeds up to 12Mbps or higher — up from 46percent in the year-ago quarter.
About 90percent of new U-verse TV customers also signed up for U-verse High
Speed Internet in the fourth quarter. About 70 percent of AT&T U-verse TV
subscribers take three or four services from AT&T. ARPU for U-verse
triple-play customers was more than $170, up year over year. U-verse TV
penetration of customer locations continues to grow and was at 18.7percent at
the end of the fourth quarter.

Strategic Business Services Lead Wireline Business. Total business revenues
were $9.1billion, down 2.1percent versus the year-earlier quarter and up 0.6
percent from the third quarter of 2012. Business service revenues declined
2.3percent year over year and were up slightly sequentially. Business
revenues were impacted by a slow economy and weak government and business
spending. Overall, declines in legacy products were partially offset by
continued growth in strategic business services. Revenues from strategic
business services, the next-generation capabilities that lead AT&T's most
advanced business solutions — including Ethernet, VPN, hosting, IP
conferencing and application services — grew 10.6percent versus the
year-earlier quarter, continuing trends in this area. Total business IP data
revenues grew 2.4 percent year over year, continuing the transition from
legacy data products to next-generation data services.

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.

About AT&T

AT&T Inc. (NYSE:T) is a premier communications holding company and one of the
most honored companies in the world. Its subsidiaries and affiliates – AT&T
operating companies – are the providers of AT&T services in the United States
and internationally. With a powerful array of network resources that includes
the nation’s largest 4G network, AT&T is a leading provider of wireless,
Wi-Fi, high speed Internet, voice and cloud-based services. A leader in mobile
Internet, AT&T also offers the best wireless coverage worldwide of any U.S.
carrier, offering the most wireless phones that work in the most countries. It
also offers advanced TV services under the AT&T U-verse^® and AT&T │DIRECTV
brands. The company’s suite of IP-based business communications services is
one of the most advanced in the world.

Additional information about AT&T Inc. and the products and services provided
by AT&T subsidiaries and affiliates is available at http://www.att.com/aboutus
or follow our news on Twitter at @ATT, on Facebook at
http://www.facebook.com/att and YouTube at http://www.youtube.com/att.

© 2013 AT&T Intellectual Property. All rights reserved. 4G not available
everywhere. AT&T, the AT&T logo and all other marks contained herein are
trademarks 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 may 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 or 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
www.att.com/investor.relations. Accompanying financial statements follow.

NOTE: EBITDA is defined as operating income before depreciation and
amortization. EBITDA differs from Segment Operating Income (loss), as
calculated in accordance with U.S. generally accepted accounting principles
(GAAP), in that it excludes depreciation and amortization. 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 GAAP. Our
calculation of EBITDA, as presented, may differ from similarly titled measures
reported by other companies.

NOTE: Free cash flow is defined as cash from operations minus capital
expenditures. We believe this metric provides useful information to our
investors because management regularly reviews free cash flow as an important
indicator of how much cash is generated by normal business operations,
including capital expenditures, and makes decisions based on it. Management
also views it as a measure of cash available to pay debt and return cash to
shareowners.

NOTE: Adjusted Operating Income, Adjusted Operating Expenses, Adjusted
Operating Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS
are non-GAAP financial measures calculated by excluding from operating
revenues, operating expenses and equity in net income of affiliates certain
significant items that are non-operational or non-recurring in nature,
including dispositions. 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 Income, Adjusted Operating Expenses, Adjusted
Operating Revenues, Adjusted Operating Income 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. Our
calculations of Adjusted Operating Income and Adjusted diluted EPS, as
presented, may differ from similarly titled measures reported by other
companies.

                                                                        
Financial Data                                                                   
                                                                                         
AT&T Inc.                                                                
Consolidated
Statements of
Income
Dollars in
millions                                                                 
except per
share amounts
Unaudited        Three Months Ended                      Twelve Months Ended
                12/31/2012   12/31/2011  % Chg        12/31/2012   12/31/2011  % Chg
Operating
Revenues
Wireless         $ 14,949       $ 14,347       4.2   %     $ 59,186       $ 56,726       4.3   %
service
Data               8,103          7,581        6.9   %       31,798         29,560       7.6   %
Voice              5,464          5,994        -8.8  %       22,619         25,126       -10.0 %
Directory          -              781          -             1,049          3,293        -68.1 %
Other            4,062       3,800      6.9   %      12,782      12,018     6.4   %
Total
Operating        32,578      32,503     0.2   %      127,434     126,723    0.6   %
Revenues
                                                                                         
Operating
Expenses
Cost of
services and
sales
(exclusive of
depreciation       17,552         16,865       4.1   %       55,215         54,836       0.7   %
and
amortization
shown
separately
below)
Selling,
general and        16,412         17,145       -4.3  %       41,079         41,382       -0.7  %
administrative
Impairment of
intangible         -              2,910        -             -              2,910        -
assets
Depreciation
and              4,572       4,573      -           18,143      18,377     -1.3  %
amortization
Total
Operating        38,536      41,493     -7.1  %      114,437     117,505    -2.6  %
Expenses
Operating        (5,958  )    (8,990  )   33.7  %      12,997      9,218      41.0  %
Income (Loss)
Interest           820            952          -13.9 %       3,444          3,535        -2.6  %
Expense
Equity in Net
Income of          215            135          59.3  %       752            784          -4.1  %
Affiliates
Other Income
(Expense) -      12          117        -89.7 %      134         249        -46.2 %
Net
Income (Loss)
Before Income      (6,551  )      (9,690  )    32.4  %       10,439         6,716        55.4  %
Taxes
Income Tax
(Benefit)        (2,772  )    (3,062  )   9.5   %      2,900       2,532      14.5  %
Expense
Net Income       (3,779  )    (6,628  )   43.0  %      7,539       4,184      80.2  %
(Loss)
Less: Net
Income
Attributable     (78     )    (50     )   -56.0 %      (275     )   (240     )  -14.6 %
to
Noncontrolling
Interest
Net Income
(Loss)          $ (3,857  )   $ (6,678  )   42.2  %     $ 7,264      $ 3,944      84.2  %
Attributable
to AT&T
                                                                                         
                                                                                         
Basic Earnings
(Loss) Per
Share            $ (0.68   )    $ (1.12   )    39.3  %     $ 1.25         $ 0.66         89.4  %
Attributable
to AT&T
Weighted
Average Common
Shares             5,661          5,933        -4.6  %       5,801          5,928        -2.1  %
Outstanding
(000,000)
                                                                                         
Diluted
Earnings
(Loss) Per       $ (0.68   )    $ (1.12   )    39.3  %     $ 1.25         $ 0.66         89.4  %
Share
Attributable
to AT&T
Weighted
Average Common
Shares             5,680          5,955        -4.6  %       5,821          5,950        -2.2  %
Outstanding
with Dilution
(000,000)
                                                                        

                                                                        
Financial                                                                        
Data
                                                                                               
AT&T Inc.                                                                
Statements
of Segment
Income
Dollars in                                                               
millions
Unaudited
               Three Months Ended                          Twelve Months Ended
                                                                                               
Wireless       12/31/2012   12/31/2011   % Chg        12/31/2012   12/31/2011  % Chg
Segment
Operating
Revenues
Service        $ 14,949       $ 14,347         4.2   %     $ 59,186      $ 56,726       4.3   %
Equipment      2,693      2,349       14.6  %      7,577      6,489     16.8  %
Total
Segment        17,642     16,696      5.7   %      66,763     63,215    5.6   %
Operating
Revenues
                                                                                               
Segment
Operating
Expenses
Operations       13,296         12,513         6.3   %       43,296         41,282       4.9   %
and support
Depreciation
and            1,781      1,588       12.2  %      6,873      6,329     8.6   %
amortization
Total
Segment        15,077     14,101      6.9   %      50,169     47,611    5.4   %
Operating
Expenses
Segment
Operating        2,565          2,595          -1.2  %       16,594         15,604       6.3   %
Income
Equity in
Net Income     (17    )    (10     )    -70.0 %      (62    )    (29    )   -     
(Loss) of
Affiliates
Segment       $ 2,548     $ 2,585       -1.4  %     $ 16,532    $ 15,575    6.1   %
Income
                                                                                               
Segment
Operating        14.5     %    15.5       %                 24.9     %     24.7     %
Income
Margin
                                                                                               
Wireline                                                                   
Segment
Operating
Revenues
Data           $ 8,103        $ 7,581          6.9   %     $ 31,798      $ 29,560       7.6   %
Voice            5,464          5,994          -8.8  %       22,619         25,126       -10.0 %
Other          1,355      1,429       -5.2  %      5,150      5,454     -5.6  %
Total
Segment        14,922     15,004      -0.5  %      59,567     60,140    -1.0  %
Operating
Revenues
                                                                                               
Segment
Operating
Expenses
Operations       10,354         10,354         -             41,207         41,360       -0.4  %
and support
Depreciation
and            2,775      2,889       -3.9  %      11,123     11,615    -4.2  %
amortization
Total
Segment        13,129     13,243      -0.9  %      52,330     52,975    -1.2  %
Operating
Expenses
Segment
Operating        1,793          1,761          1.8   %       7,237          7,165        1.0   %
Income
Equity in
Net Income     (1     )    -           -           (2     )    -         -     
(Loss) of
Affiliates
Segment       $ 1,792     $ 1,761       1.8   %     $ 7,235     $ 7,165     1.0   %
Income
                                                                                               
Segment
Operating        12.0     %    11.7       %                 12.1     %     11.9     %
Income
Margin
                                                                                               
Advertising                                                                
Solutions
Segment
Operating     $ -         $ 781         -          $ 1,049     $ 3,293     -68.1 %
Revenues
                                                                                               
Segment
Operating
Expenses
Operations       -              558            -             773            2,265        -65.9 %
and support
Impairment
of               -              2,910          -             -              2,910        -
Intangible
Assets
Depreciation
and            -          85          -           106        386       -72.5 %
amortization
Total
Segment        -          3,553       -           879        5,561     -84.2 %
Operating
Expenses
Segment
Income        $ -         $ (2,772  )    -          $ 170       $ (2,268 )   -     
(Loss)
                                                                                               
Segment
Income           -              -                            16.2     %     (68.9  ) %
Margin
                                                                                               
Other                                                                      
Segment
Operating      $ 14           $ 22             -36.4 %     $ 55          $ 75           -26.7 %
Revenues
Segment
Operating      336        4,316       -92.2 %      1,065      5,078     -79.0 %
Expenses
Segment
Operating        (322   )       (4,294  )      92.5  %       (1,010 )       (5,003 )     79.8  %
Income
(Loss)
Equity in
Net Income     233        145         60.7  %      816        813       0.4   %
of
Affiliates
Segment
Income        $ (89    )   $ (4,149  )    97.9  %     $ (194   )   $ (4,190 )   95.4  %
(Loss)
                                                                                               

                                                               
Financial Data                                                  
                                                                     
AT&T Inc.                                                       
Consolidated Balance Sheets
Dollars in millions except per share amounts                    
Unaudited                                            December 31,
                                                    2012        2011
                                                                     
Assets
Current Assets
Cash and cash equivalents                            $ 4,868       $ 3,045
Accounts receivable - net of allowances for            12,657        13,231
doubtful accounts of $547 and $878
Prepaid expenses                                       1,035         1,102
Deferred income taxes                                  1,036         1,470
Other current assets                                 3,110      4,137   
Total current assets                                 22,706     22,985  
Property, Plant and Equipment - Net                    109,767       107,087
Goodwill                                               69,773        70,842
Licenses                                               52,352        51,374
Customer Lists and Relationships - Net                 1,391         2,757
Other Intangible Assets - Net                          5,032         5,212
Investments in and Advances to Equity Affiliates       4,581         3,718
Other Assets                                         6,713      6,467   
Total Assets                                        $ 272,315   $ 270,442 
                                                                     
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year                        $ 3,486       $ 3,453
Accounts payable and accrued liabilities               20,911        19,956
Advanced billing and customer deposits                 3,808         3,872
Accrued taxes                                          1,026         1,003
Dividends payable                                    2,556      2,608   
Total current liabilities                            31,787     30,892  
Long-Term Debt                                       66,358     61,300  
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes                                  28,491        25,748
Postemployment benefit obligation                      41,392        34,011
Other noncurrent liabilities                         11,592     12,694  
Total deferred credits and other noncurrent          81,475     72,453  
liabilities
Stockholders' Equity
Common stock                                           6,495         6,495
Additional paid-in capital                             91,038        91,156
Retained earnings                                      22,481        25,453
Treasury stock                                         (32,888 )     (20,750 )
Accumulated other comprehensive income                 5,236         3,180
Noncontrolling interest                              333        263     
Total stockholders' equity                           92,695     105,797 
Total Liabilities and Stockholders' Equity          $ 272,315   $ 270,442 
                                                                             

                                                            
Financial Data                                                 
                                                                     
AT&T Inc.                                                    
Consolidated Statements of Cash
Flows
Dollars in millions                                          
Unaudited
                                      2012        2011        2010
                                                                     
Operating Activities
Net income                             $ 7,539       $ 4,184       $ 20,179
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization            18,143        18,377        19,379
Undistributed earnings from              (615    )     (623    )     (603    )
investments in equity affiliates
Provision for uncollectible accounts     1,117         1,136         1,334
Deferred income tax expense and          1,285         2,937         (3,280  )
noncurrent unrecognized tax benefits
Net (gain) loss from sale of             (19     )     (89     )     (802    )
investments, net of impairments
Impairment of intangible assets          -             2,910         85
Remeasurement of pension and             9,994         6,280         2,521
postretirement benefits
Income from discontinued operations      -             -             (779    )
Changes in operating assets and
liabilities:
Accounts receivable                      (1,365  )     (1,164  )     (101    )
Other current assets                     1,017         (397    )     (185    )
Accounts payable and accrued             1,798         (341    )     (1,230  )
liabilities
Retirement benefit funding               -             (1,000  )     -
Other - net                            282        2,533      (1,296  )
Total adjustments                      31,637     30,559     15,043  
Net Cash Provided by Operating         39,176     34,743     35,222  
Activities
                                                                     
Investing Activities
Construction and capital
expenditures:
Capital expenditures                     (19,465 )     (20,110 )     (19,530 )
Interest during construction             (263    )     (162    )     (772    )
Acquisitions, net of cash acquired       (828    )     (2,368  )     (2,906  )
Dispositions                             812           1,301         1,830
Sales (purchases) of securities, net     65            62            (100    )
Other                                  (1      )   27         29      
Net Cash Used in Investing             (19,680 )   (21,250 )   (21,449 )
Activities
                                                                     
Financing Activities
Net change in short-term borrowings
with original maturities of three        1             (1,625  )     1,592
months or less
Issuance of long-term debt               13,486        7,936         2,235
Repayment of long-term debt              (8,733  )     (7,574  )     (9,294  )
Purchase of treasury stock               (12,752 )     -             -
Issuance of treasury stock               477           237           50
Dividends paid                           (10,241 )     (10,172 )     (9,916  )
Other                                  89         (451    )   (516    )
Net Cash Used in Financing             (17,673 )   (11,649 )   (15,849 )
Activities
Net increase (decrease) in cash and      1,823         1,844         (2,076  )
cash equivalents
Cash and cash equivalents beginning    3,045      1,201      3,277   
of year
Cash and Cash Equivalents End of      $ 4,868     $ 3,045     $ 1,201   
Year
                                                                     

                                                                      
Financial Data                                                             
                                                                                   
AT&T Inc.                                                              
Supplementary Operating and
Financial Data
Dollars in millions except per share amounts, subscribers and connections in      
(000s)
Unaudited          Three Months Ended                    Twelve Months Ended
                12/31/2012  12/31/2011  % Chg       12/31/2012  12/31/2011  % Chg
                                                                                   
Wireless
Volumes                                                         
   Total                                             106,957    103,247     3.6   %
   Postpaid                                              70,497       69,309       1.7   %
   Prepaid                                               7,328        7,225        1.4   %
   Reseller                                              14,875       13,644       9.0   %
   Connected                                             14,257       13,069       9.1   %
   Devices
                                                                                   
Wireless Net                                                    
Adds
   Total          1,094      2,497       -56.2 %     3,764      7,699       -51.1 %
   Postpaid        780          717          8.8   %     1,438        1,429        0.6   %
   Prepaid         (166     )   159          -           128          674          -81.0 %
   Reseller        234          592          -60.5 %     1,027        1,874        -45.2 %
   Connected       246          1,029        -76.1 %     1,171        3,722        -68.5 %
   Devices
   M&A Activity,
   Partitioned     (8       )   12           -           (54      )   12           -
   Customers and
   Other Adjs.
                                                                                   
Wireless Churn
   Postpaid        1.19     %   1.21     %   -2 BP       1.09     %   1.18     %   -9 BP
   Churn
   Total Churn     1.42     %   1.39     %   3 BP        1.35     %   1.37     %   -2 BP
                                                                                   
Other
   Branded
   Computing                                             6,429        5,105        25.9  %
   Subscribers^1
   Licensed POPs                                         313          313          -
   (000,000)
                                                                                   
Wireline
Voice                                                           
   Total
   Wireline                                          34,792     39,012      -10.8 %
   Voice
   Connections
   Net Change      (1,029   )   (1,086   )   5.2   %     (4,220   )   (4,551   )   7.3   %
                                                                                   
Broadband                                                       
   Total
   Wireline                                          16,390     16,427      -0.2  %
   Broadband
   Connections
   Net Change^2    (2       )   (49      )   95.9  %     (37      )   118          -
                                                                                   
Video                                                           
   U-verse                                               4,536        3,791        19.7  %
   Satellite                                         1,600      1,765       -9.3  %
   Total Video                                       6,136      5,556       10.4  %
   Connections
   Net Change      159          164          -3.0  %     580          639          -9.2  %
                                                                                   
Consumer Revenue                                                
Connections
   Broadband^3                                           14,531       14,492       0.3   %
   Video                                                 6,114        5,542        10.3  %
   Connections^4
   Voice^5                                           18,614     21,232      -12.3 %
Total Consumer
Revenue                                              39,259     41,266      -4.9  %
Connections
   Net Change      (418     )   (586     )   28.7  %     (2,007   )   (2,161   )   7.1   %
                                                                                   
AT&T Inc.
   Construction
   and capital
   expenditures
   Capital         $ 5,846      $ 5,485      6.6   %     $ 19,465     $ 20,110     -3.2  %
   expenditures
   Interest
   during          $ 66         $ 43         53.5  %     $ 263        $ 162        62.3  %
   construction
   Dividends
   Declared per    $ 0.45       $ 0.44       2.3   %     $ 1.77       $ 1.73       2.3   %
   Share
   End of Period Common
   Shares Outstanding                                    5,581        5,927        -5.8  %
   (000,000)
   Debt Ratio^6                                          43.0     %   38.0     %   500 BP
   Total                                                 241,810      256,420      -5.7  %
   Employees
                                                                     
^1 Branded Computing Subscribers includes tablets, tethering plans, aircards, mobile Wi-Fi
   hot spots and other data-only devices.
^2 Prior year amounts restated to conform to current period reporting methodology.
^3 Consumer wireline broadband connections include DSL lines, U-verse High Speed Internet
   access and satellite broadband.
^4 Video connections include sales under agency agreements with EchoStar and DirecTV
   customers and U-verse connections.
^5 Includes consumer U-verse Voice over Internet Protocol connections of 2,905 as of
   December 31, 2012.
^6 Total long-term debt plus debt maturing within one year divided by total debt plus
   total stockholders' equity.
   Note: For the end of 4Q12, total switched access lines were 31,887, retail business
   switched access lines totaled 14,274, and wholesale and coin switched access lines
   totaled 1,904.
   

                                                                                  
Financial Data                                                                          
                                                                                                 
AT&T Inc.
Non-GAAP
Wireless                                                                           
Reconciliation
Wireless Segment EBITDA
Dollars in
millions
Unaudited
                 Three Months Ended                                                Twelve Months Ended
                 12/31/11    3/31/12     6/30/12     9/30/12     12/31/12     12/31/11    12/31/12
                                                                                                 
Segment
Operating
Revenues
Service          $ 14,347     $ 14,566     $ 14,765     $ 14,906     $ 14,949       $ 56,726     $ 59,186
Equipment        2,349     1,570     1,588     1,726     2,693      6,489     7,577  
Total Segment
Operating        16,696    16,136    16,353    16,632    17,642     63,215    66,763 
Revenues
                                                                                                 
Segment
Operating
Expenses
Operations and     12,513       9,978        9,590        10,432       13,296         41,282       43,296
support
Depreciation
and              1,588     1,666     1,696     1,730     1,781      6,329     6,873  
amortization
Total Segment
Operating        14,101    11,644    11,286    12,162    15,077     47,611    50,169 
Expenses
                                                                                                 
Segment
Operating        2,595     4,492     5,067     4,470     2,565      15,604    16,594 
Income
Segment
Operating          15.5   %     27.8   %     31.0   %     26.9   %     14.5   %       24.7   %     24.9   %
Income Margin
                                                                                                 
Plus:
Depreciation     1,588     1,666     1,696     1,730     1,781      6,329     6,873  
and
amortization
EBITDA           4,183     6,158     6,763     6,200     4,346      21,933    23,467 
EBITDA as a %
of Service         29.2   %     42.3   %     45.8   %     41.6   %     29.1   %       38.7   %     39.6   %
Revenue
                                                                                                 
EBITDA is defined as Operating Income Before Depreciation and Amortization. Annual Service EBITDA Margin is
calculated as the sum of quarterly EBITDA divided by the sum of quarterly Service Revenues.


                                                        
Financial Data                                       
                                                               
AT&T Inc.
Non-GAAP Wireless                                        
Reconciliation
Wireless Segment
Adjusted EBITDA
Dollars in millions
Unaudited
                             Three Months Ended         Twelve Months Ended
                                       12/31/12              12/31/12
                                                               
Reported Service                       $    14,949             $     59,186
Revenues
Adjustments:
Storm Impacts                           22                    22
Total Adjusted Service              $    14,971           $     59,208
Revenues
                                                               
EBITDA                                 $    4,346              $     23,467
Adjustments:
Storm Impacts                           128                   128
Adjusted EBITDA                     $    4,474            $     23,595
Adjusted EBITDA as a %
of Adjusted Service                         29.9%                    39.9%
Revenues
                                                               
EBITDA is defined as Operating Income Before Depreciation and Amortization.
Annual Service EBITDA Margin is calculated as the sum of quarterly EBITDA
divided by the sum of quarterly Service Revenues.

Adjusted EBITDA is a non-GAAP financial measure calculated by excluding from
operating revenues and operating expenses significant items that are
non-operational or non-recurring in nature. Management believes that this
measure provides 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 EBITDA should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance with GAAP.
Our calculation of EBITDA, as presented, may differ from similarly titled
measures reported by other companies.


                                                           
Financial Data                                                
                                                                   
AT&T Inc.
Non-GAAP
Financial                                                   
Reconciliation
Free Cash Flow
Dollars in
Millions
Unaudited
                   Three Months Ended                Twelve Months Ended
                   December 31,                      December 31,
                 2011            2012            2011         2012
                                                                   
Net cash
provided by        $  7,489         $  10,520        $ 34,743      $ 39,176
operating
activities
                                                                   
Less:
Construction          (5,528  )        (5,912  )       (20,272 )     (19,728 )
and capital
expenditures
                                                           
Free Cash Flow    $  1,961       $  4,608       $ 14,471    $ 19,448  
                                                                   
                                                                   
                                                                   
                                                           
Free Cash Flow
after Dividends
Dollars in
Millions
Unaudited
                   Three Months Ended                Twelve Months Ended
                   December 31,                      December 31,
                 2011            2012            2011         2012
                                                                   
Net cash
provided by        $  7,489         $  10,520        $ 34,743      $ 39,176
operating
activities
                                                                   
Less:
Construction          (5,528  )        (5,912  )       (20,272 )     (19,728 )
and capital
expenditures
                                                           
Free Cash Flow      1,961         4,608        14,471     19,448  
                                                                   
Less: Dividends       (2,545  )        (2,503  )       (10,172 )     (10,241 )
paid
                                                           
Free Cash Flow    $  (584    )    $  2,105       $ 4,299     $ 9,207   
After Dividends
                                                                   
Free cash flow includes reimbursements of certain postretirement benefits
paid.

Free cash flow is defined as cash from operations minus construction and
capital expenditures. Free cash flow after dividends is defined as cash from
operations minus construction, capital expenditures and dividends. We believe
these metrics provide useful information to our investors because management
regularly reviews free cash flow as an important indicator of how much cash is
generated by normal 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.


                                                           
Financial Data                                                 
                                                                     
AT&T Inc.
Non-GAAP
Consolidated                                                
Reconciliation
Net-Debt-to-Adjusted
EBITDA Ratio
Dollars in millions
Unaudited
                       Three Months Ended
                     3/31/12   6/30/12   9/30/12   12/31/12    2012
                                                                     
Operating Revenues     $ 31,822   $ 31,575   $ 31,459   $ 32,578     $ 127,434
Operating Expenses       25,721     24,758     25,422     38,536       114,437
Total Operating          6,101      6,817      6,037      (5,958 )     12,997
Income
Add Back
Depreciation and         4,560      4,499      4,512      4,572        18,143
Amortization
Consolidated             10,661     11,316     10,549     (1,386 )     31,140
Reported EBITDA
Add Back:
Actuarial Loss on                                         9,994        9,994
Benefit Plan
Consolidated             10,661     11,316     10,549     8,608        41,134
Adjusted EBITDA*
End-of-period                                                          3,486
current debt
End-of-period                                                          66,358
long-term debt
Total End-of-Period                                                    69,844
Debt
Less Cash and Cash                                                     4,868
Equivalents
Net Debt Balance                                                       64,976
                                                           
Net-Debt-to-Adjusted                                                   1.58
EBITDA Ratio
                                                           
                                                                     
*Adjusted EBITDA excludes the impact of the benefit plan actuarial loss in
order to better represent AT&T's operational performance.

Adjusted EBITDA excludes all actuarial losses ($10 billion loss in 2012)
associated with our pension and postemployment benefit plans, which we
immediately recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. As a result, the
Adjusted EBITDA reflects an expected return on plan assets of $4.3 billion
(based on an average expected return on plan assets of 8.25%), rather than the
actual return on plan assets of $6.3 billion (actual return of 12.1%), as
included in the GAAP measure of income.

Our calculation of Adjusted EBITDA, as presented, may differ from similarly
titled measures reported by other companies.


                                                           
Financial Data                                                
                                                                   
AT&T Inc.
Non-GAAP
Financial                                                   
Reconciliation
Adjusted
Operating
Revenues
Dollars in
Millions
Unaudited
                   Three Months Ended                Twelve Months Ended
                   December 31,                      December 31,
                 2011            2012            2011         2012
Reported
Operating          $  32,503        $  32,578        $ 126,723     $ 127,434
Revenues
Adjustments:
Removal of
Advertising           (781    )        -               (3,293  )     (1,049  )
Solutions
Storm Impacts       -             27           -          27      
Adjusted
Operating         $  31,722      $  32,605      $ 123,430   $ 126,412 
Revenues
Year-over-year
growth -                               2.8     %                     2.4     %
Adjusted
                                                           
                                                                   
Adjusted Operating Revenues is a non-GAAP financial measure calculated by
excluding from operating revenues significant items that are non-operational
or non-recurring in nature, including dispositions. 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 should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance
with GAAP. Our calculations of Adjusted Operating Revenues may differ from
similarly titled measures reported by other companies.
                                                                   
                                                                   
                                                           
Adjusted
Operating
Income
Dollars in
Millions
Unaudited
                   Three Months Ended                Twelve Months Ended
                   December 31,                      December 31,
                 2011            2012            2011         2012
Reported
Operating          $  (8,990  )     $  (5,958  )     $ 9,218       $ 12,997
Income
Adjustments:
Removal of
Advertising           2,772            -               2,268         (170    )
Solutions
Storm Impacts         -                176             -             176
Actuarial Loss        6,280            9,994           6,280         9,994
on Benefit Plan
Termination of
T-Mobile              4,181            -               4,181         -
Acquisition
                                                           
Adjusted
Operating         $  4,243       $  4,212       $ 21,947    $ 22,997  
Income
Year-over-year
growth -                               -0.7    %                     4.8     %
Adjusted
                                                           
                                                                   
Adjusted Operating Income is a non-GAAP financial measures calculated by
excluding from operating revenues and operating expenses significant items
that are non-operational or non-recurring in nature. Management believes that
this measure 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 Income excludes all actuarial losses ($10 billion loss in
2012) associated with our pension and postemployment benefit plans, which we
immediately recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. As a result, the
Adjusted Operating Income reflects an expected return on plan assets of $4.3
billion (based on an average expected return on plan assets of 8.25%), rather
than the actual return on plan assets of $6.3 billion (actual return of
12.1%), as included in the GAAP measure of income.

Adjusted Operating Income should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance
with GAAP. Our calculation of Adjusted Operating Income, as presented, may
differ from similarly titled measures reported by other companies.


                                                      
Financial Data                                       
                                                              
AT&T Inc.
Non-GAAP Financial                                     
Reconciliation
Adjusted Operating
Expenses
Dollars in Millions
Unaudited
                                         Three Months Ended
                                         December 31,
                                   2011                2012
Reported Operating                       $   41,493           $   38,536
Expenses
Adjustments:
Removal of
Advertising                                  (3,553   )           -
Solutions
Storm Impacts                                -                    (149     )
Actuarial Loss on                            (6,280   )           (9,994   )
Benefit Plan
Termination of                               (4,181   )           -
T-Mobile Acquisition
                                                      
Adjusted Operating                  $   27,479         $   28,393   
Expenses
Year-over-year                                                    3.3      %
growth - Adjusted
                                                      
                                                              
Adjusted Operating Expenses is a non-GAAP financial measures calculated by
excluding from operating expenses significant items that are non-operational
or non-recurring in nature. Management believes that this measure 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 Expenses excludes all actuarial losses ($10 billion loss in
2012) associated with our pension and postemployment benefit plans, which we
immediately recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. As a result, the
Adjusted Operating Expenses reflects an expected return on plan assets of $4.3
billion (based on an average expected return on plan assets of 8.25%), rather
than the actual return on plan assets of $6.3 billion (actual return of
12.1%), as included in the GAAP measure of income.

Adjusted Operating Expenses should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance
with GAAP. Our calculation of Adjusted Operating Expenses, as presented, may
differ from similarly titled measures reported by other companies.


                                                           
Financial Data                                               
                                                                   
AT&T Inc.
Non-GAAP
Financial                                                   
Reconciliation
Adjusted
Diluted EPS
Unaudited
                   Three Months Ended              Twelve Months Ended
                   December 31,                    December 31,
                 2011           2012           2011           2012
Reported           $  (1.12  )     $  (0.68  )     $  0.66         $  1.25
Diluted EPS
Significant
Items:
Removal of
Advertising           0.46            -               0.41            (0.03  )
Solutions
Storm Impacts         -               0.02            -               0.02
Actuarial Loss        0.65            1.10            0.65            1.07
on Benefit Plan
Termination of
T-Mobile              0.44            -               0.44            -
Acquisition
Tax Adjustments     (0.03  )      -            (0.03  )      -      
Adjusted          $  0.40       $  0.44       $  2.13       $  2.31   
Diluted EPS
Year-over-year
growth -                          10.0   %                    8.5    %
Adjusted
Weighted
Average Common
Shares              5,955        5,680        5,950        5,821  
Outstanding
with Dilution
(000,000)
                                                                   
Adjusted diluted EPS is a non-GAAP financial measure calculated by excluding
from operating revenues, operating expenses and equity in net income of
affiliates certain significant items that are non-operational or non-recurring
in nature, including dispositions. Management believes that this measure
provides 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 diluted EPS excludes all actuarial losses ($10 billion loss in 2012)
associated with our pension and postemployment benefit plans, which we
immediately recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. As a result, the
Adjusted diluted EPS reflects an expected return on plan assets of $4.3
billion (based on an average expected return on plan assets of 8.25%), rather
than the actual return on plan assets of $6.3 billion (actual return of
12.1%), as included in the GAAP measure of income.

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. Our calculation of Adjusted diluted EPS, as presented, may differ
from similarly titled measures reported by other companies.


EBITDA DISCUSSION

For AT&T, EBITDA is defined as operating income before depreciation and
amortization. EBITDA service margin is calculated as EBITDA divided by service
revenues. EBITDA differs from Segment Operating Income (Loss), as calculated
in accordance with GAAP, in that it excludes depreciation and amortization.
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 generally accepted accounting principles. Our calculation of EBITDA, as
presented, may differ from similarly titled measures reported by other
companies.

We believe these measures are relevant and useful information to our investors
as they are part of AT&T Mobility’s internal management reporting and planning
processes and are important metrics that AT&T Mobility’s management uses to
evaluate the operating performance of its regional operations. These measures
are used by management as a gauge of AT&T Mobility’s success in acquiring,
retaining and servicing subscribers because we believe these measures reflect
AT&T Mobility’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 AT&T Mobility’s
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 AT&T Mobility’s operating managers are responsible and upon which we
evaluate their 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 excludes other income (expense) – net, net income
attributable to noncontrolling interest and equity in net income (loss) of
affiliates, as these do not reflect the operating results of AT&T Mobility’s
subscriber base and its national footprint that AT&T Mobility utilizes to
obtain and service its customers. Equity in net income (loss) of affiliates
represents AT&T Mobility’s proportionate share of the net income (loss) of
affiliates in which it exercises significant influence, but does not control.
As AT&T Mobility does not control these entities, our management excludes
these results when evaluating the performance of our primary operations.
EBITDA excludes interest expense and the provision for income taxes. Excluding
these items eliminates the expenses associated with its capitalization and tax
structures. Finally, EBITDA excludes depreciation and amortization, in order
to eliminate the impact of capital investments.

We believe EBITDA as a percentage of service revenues to be a more relevant
measure of AT&T Mobility’s operating margin than EBITDA as a percentage of
total revenue. AT&T Mobility generally subsidizes a portion of its handset
sales, all of which are recognized in the period in which AT&T Mobility sells
the handset. This results in a disproportionate impact on its margin in that
period. Management views this equipment subsidy as a cost to acquire or retain
a subscriber, which is recovered through the ongoing service revenue that is
generated by the subscriber. AT&T Mobility also uses service revenues to
calculate margin to facilitate comparison, both internally and externally with
its competitors, as they calculate their margins using service revenues as
well.

There are material limitations to using these non-GAAP financial measures.
EBITDA 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, which directly
affect AT&T Mobility’s net income. 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 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.

FREE CASH FLOW DISCUSSION

Free cash flow is defined as cash from operations minus construction and
capital expenditures. Free cash flow after dividends is defined as cash from
operations minus construction, capital expenditures and dividends. Free cash
flow yield is defined as cash from continuing operations less construction and
capital expenditures as a percentage of market capitalization computed on the
last trading day of the quarter. Market capitalization is computed by
multiplying the end of period stock price by the end of period shares
outstanding. We believe these metrics provide useful information to our
investors because management monthly reviews free cash flow as an important
indicator of how much cash is generated by normal business operations,
including capital expenditures, and makes decisions based on it. Management
also views it as a measure of cash available to pay debt and return cash to
shareowners.

ADJUSTING ITEMS DISCUSSION

Adjusted Operating Income, Adjusted Operating Expenses, Adjusted Operating
Revenues, Adjusted Operating Income Margin and Adjusted diluted EPS are
non-GAAP financial measures calculated by excluding from operating revenues,
operating expenses and equity in net income of affiliates certain significant
items that are non-operational or non-recurring in nature, including
dispositions. 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 Income, Adjusted Operating Expenses, Adjusted Operating
Revenues, Adjusted Operating Income 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. Our calculations of
Adjusted Operating Income and Adjusted diluted EPS, as presented, may differ
from similarly titled measures reported by other companies.

Contact:

AT&T Inc.
McCall Butler, 917-209-5792
mb8191@att.com
 
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