TIDM58KN
RNS Number : 5102P
AT & T Inc.
17 November 2016
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 22,
2016
AT&T INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8610 43-1301883
----------------------------- ---------------- ----------------------------
(State or Other Jurisdiction (Commission File (IRS Employer Identification
of Incorporation) Number) No.)
208 S. Akard St., Dallas, Texas 75202
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(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))
Item 2.02 Results of Operations and Financial Condition.
The registrant announced on October 22, 2016, its results of
operations for the third quarter of 2016. 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 and Investor Briefing dated October
22, 2016 reporting financial results for the third
quarter ended September 30, 2016.
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 22, 2016 By: /s/ Debra L. Dial
Debra L. Dial
Senior Vice President and Controller
Filed by AT&T Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Time Warner Inc.
Commission File No.: 1-15062
AT&T Reports Third-Quarter Results
Increases Quarterly Dividend by 2.1%,
33rd Consecutive Annual Increase
-- Consolidated revenues of $40.9 billion,
up 4.6% with DIRECTV acquisition
-- Operating income up
8.2%
-- Net income attributable to
AT&T up 11.2%
-- Cash from operations of
$11.0 billion
-- Free cash flow of $5.2
billion
-- Diluted EPS of $0.54 as reported
and $0.74 as adjusted, compared
to $0.50 and $0.74 in the
year-ago quarter
-- 2.3 million wireless net adds driven by
connected devices, Mexico and Cricket
-- U.S. wireless postpaid churn of 1.05%,
down 11 basis points year over year
-- Strong U.S. wireless operating margin of 29.6%;
best-ever U.S. wireless service EBITDA margin of
50.1%
-- 700,000 branded smartphones added to
U.S. subscriber base
-- 323,000 U.S. DIRECTV net adds with TV
subscriber base stable
-- 171,000 IP broadband net adds
-- Full-year guidance on track to meet
or exceed expectations
DALLAS, October 22, 2016 - AT&T Inc. (NYSE:T) today reported
growing revenues and net income with solid margins and earnings for
the third quarter. Detailed results, including financial tables,
are included in the accompanying Investor Briefing and SEC Form
8-K. These materials and associated slide presentation of
third-quarter results are available on the AT&T Investor
Relations website .
AT&T also announced that its board of directors has approved
a 2.1% increase in the company's quarterly dividend. AT&T's
quarterly dividend will increase from $0.48 to $0.49 per share. The
annual dividend will increase from $1.92 to $1.96 per share. The
dividend will be payable on Feb. 1, 2017 to common stockholders of
record on Jan. 10, 2017.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
AT&T will host a webcast presentation on Monday, October 24,
2016, at 8:30 a.m. ET to discuss the Time Warner transaction and
third-quarter results. Links to the webcast and accompanying
documents will be available on the AT&T Investor Relations
website . The third-quarter earnings conference call previously
scheduled for Tuesday, October 25, 2016, at 4:30 p.m. ET is
cancelled.
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) helps millions around the globe connect
with leading entertainment, mobile, high speed internet and voice
services. We're the world's largest provider of pay TV. We have TV
customers in the U.S. and 11 Latin American countries. We offer the
best global coverage of any U.S. wireless provider.* And we help
businesses worldwide serve their customers better with our mobility
and highly secure cloud solutions.
Additional information about AT&T products and services is
available at http://about.att.com. Follow our news on Twitter at
@ATT, on Facebook at http://www.facebook.com/att and YouTube at
http://www.youtube.com/att.
(c) 2016 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.
*Global coverage claim based on offering discounted voice and
data roaming; LTE roaming; voice roaming; and world-capable
smartphone and tablets in more countries than any other U.S. based
carrier. International service required. Coverage not available in
all areas. Coverage may vary per country and be limited/restricted
in some countries.
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 www.att.com/investor.relations .
The "quiet period" for FCC Spectrum Auction 1000 (also known as
the 600 MHz incentive auction) is now in effect. During the quiet
period, auction applicants are required to avoid discussions of
bids, bidding strategy and post-auction market structure with other
auction applicants.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 2
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication may be deemed to be
solicitation material in respect of the proposed merger between
AT&T Inc. and Time Warner Inc. In connection with the proposed
merger, AT&T Inc. intends to file a registration statement on
Form S-4, containing a proxy statement/prospectus with the
Securities and Exchange Commission ("SEC"). STOCKHOLDERS OF TIME
WARNER INC. ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE
SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors
and security holders will be able to obtain copies of the proxy
statement/prospectus as well as other filings containing
information about AT&T Inc. and Time Warner Inc., without
charge, at the SEC's website, http://www.sec.gov . Copies of
documents filed with the SEC by AT&T Inc. will be made
available free of charge on AT&T's Investor Relations website,
www.att.com/investor.relations . Copies of documents filed with the
SEC by Time Warner Inc. will be made available free of charge on
Time Warner's Investor Relations website, ir.timewarner.com
Participants in Solicitatio
AT&T Inc. and its directors and executive officers, and Time
Warner Inc. and its directors and executive officers, may be deemed
to be participants in the solicitation of proxies from the holders
of Time Warner common stock in respect of the proposed merger.
Information about the directors and executive officers of AT&T
is set forth in the proxy statement for AT&T's 2016 Annual
Meeting of Stockholders, which was filed with the SEC on March 11,
2016. Information about the directors and executive officers of
Time Warner is set forth in the proxy statement for Time Warner's
2016 Annual Meeting of Stockholders, which was filed with the SEC
on April 29, 2016. Investors may obtain additional information
regarding the interest of such participants by reading the proxy
statement/prospectus regarding the proposed merger when it becomes
available.
For more information, contact:
Name: Fletcher Cook
AT&T Corporate Communications
Phone: (214) 757-7629
Email: fletcher.cook@att.com
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 3
AT&T Reports Third-Quarter Results
Increases Quarterly Dividend by 2.1%, 33rd Consecutive Annual
Increase
-- Consolidated revenues of $40.9 billion,
up 4.6% with DIRECTV acquisition
-- Operating income up 8.2%
-- Net income attributable to AT&T
up 11.2%
-- Cash from operations of $11.0
billion
-- Free cash flow of $5.2 billion
-- Diluted EPS of $0.54 as reported and $0.74
as adjusted, compared to $0.50 and $0.74 in
the year-ago quarter
HIGHLIGHTS:
-- 2.3 million wireless net adds driven by
connected devices, Mexico and Cricket
-- U.S. wireless postpaid churn of 1.05%,
down 11 basis points year over year
-- U.S. wireless operating margin of 29.6%;
best-ever U.S. wireless service EBITDA margin
of 50.1%
-- 700,000 branded smartphones added
to U.S. subscriber base
-- 323,000 U.S. DIRECTV net adds with TV
subscriber base stable
o More than 1.2 million U.S. DIRECTV
net adds since acquisition
-- 171,000 IP broadband net
adds
-- More than 390 million North American
4G LTE POPs
-- Year-to-date cash from operations of $29.2
billion; free cash flow $13.3 billion year
to date
-- Full-year guidance on track to meet
or exceed expectations
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 4
CONSOLIDATED FINANCIAL RESULTS
AT&T's consolidated revenues for the third quarter totaled
$40.9 billion, up 4.6% versus the year-earlier period due to the
July 24, 2015 acquisition of DIRECTV. Excluding the impact of the
DIRECTV acquisition and foreign exchange, revenues were essentially
flat, as growth in video and IP-based services mostly offset
pressures from declines in wireless and legacy services. Compared
with results for the third quarter of 2015, operating expenses were
$34.5 billion versus $33.2 billion; operating income was $6.4
billion versus $5.9 billion; and operating income margin was 15.7%
versus 15.2%. When adjusting for $0.14 of amortization, $0.03 in
merger- and integration-related costs and $0.03 of
employee-separation costs, operating income was $8.3 billion versus
$7.9 billion; and operating income margin was 20.3%, consistent
with the year-ago quarter.
Third-quarter net income attributable to AT&T totaled $3.3
billion, or $0.54 per diluted share, compared to $3.0 billion, or
$0.50 per diluted share, in the year-ago quarter. Adjusting for
$0.20 of amortization, merger- and integration-related costs and
other expenses, earnings per diluted share was $0.74 compared to an
adjusted $0.74 in the year-ago quarter.
Cash from operating activities was $11.0 billion in the third
quarter, up 1.8%, and capital investment(1) totaled $5.9 billion.
Free cash flow - cash from operating activities minus capital
expenditures - was $5.2 billion for the quarter, down 6.5%, and
$13.3 billion year to date, up 3.7%.
AT&T also announced that its board of directors has approved
a 2.1% increase in the company's quarterly dividend. AT&T's
quarterly dividend will increase from $0.48 to $0.49 per share. The
annual dividend will increase from $1.92 to $1.96 per share. The
dividend will be payable on Feb. 1, 2017 to common stockholders of
record on Jan. 10, 2017.
(1) 3Q16 includes $87 million in capital purchases in Mexico
with favorable vendor payment terms.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 5
Business Solutions
The Business Solutions segment provides both wireless and
wireline services to business customers and to individual
subscribers who purchase wireless services through
employer-sponsored plans. AT&T's wireless and wired networks
provide complete communications solutions to these customers.
AT&T's business customer revenues include results from
enterprise, public sector, wholesale and small/midsize
customers.
FINANCIAL HIGHLIGHTS
Total third-quarter revenues from business customers were $17.8
billion, up 0.4% versus the year-earlier quarter. Growth in
mobility and strategic business services offset declines in legacy
services and a continuing low-growth economy. When adjusting for
the transition of certain hosting operations, total revenues would
have been even higher. Business Solutions service revenues were
$15.6 billion, essentially stable year over year.
Third-quarter operating expenses were $13.5 billion, up 0.5%
versus the third quarter of 2015. Operating income totaled $4.3
billion, up 0.1% year over year. Third-quarter operating income
margin was 24.2%, stable year over year with declines in
higher-margin legacy services offsetting growth in wireless and IP
revenue and cost efficiencies.
BUSINESS WIRELESS FINANCIAL RESULTS
Business wireless revenues were up 4.0% year over year to $9.9
billion driven by wireless service revenue growth and higher
equipment revenues. Wireless service revenues were up 4.1% year
over year, reflecting smartphone and tablet gains and continued
migration from consumer plans.
BUSINESS WIRELINE FINANCIAL RESULTS
In business wireline, declines in legacy products were partially
offset by continued growth in strategic business services. Total
business wireline revenues were $7.8 billion, down 3.7% year over
year. When adjusting for the impact of the transition of certain
hosting operations and foreign exchange pressures, wireline
revenues would have decreased 2.5%. When adjusting for these same
items, data revenues were stable. Data revenues make up nearly 60%
of Business Solutions wireline revenues.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 6
Revenues from strategic business services, the next-generation
wireline capabilities that lead AT&T's most advanced business
solutions - including VPNs, Ethernet, cloud, hosting, IP
conferencing, voice over IP, dedicated internet, U-verse and
security services - grew by $242 million, or 9.1%, versus the
year-earlier quarter. These services represent an annualized
revenue stream of more than $11 billion.
SUBSCRIBER METRICS
At the end of the third quarter, AT&T had 79.4 million
business wireless subscribers. The company added 191,000 postpaid
subscribers and 1.3 million connected devices in the third quarter.
Postpaid business wireless subscriber churn was 0.97% versus 1.05%
in the year-ago quarter.
During the quarter, the company also added nearly 15,000
high-speed IP broadband business subscribers. Total business
broadband had a loss of 18,000 subscribers in the quarter.
BUSINESS INNOVATION
Through its powerful global networks, AT&T provides
integrated solutions to business customers and offers a wide
variety of wired and wireless products and services to increase
businesses' productivity. AT&T serves millions of business
customers, from the largest multinational corporations to small
businesses, in all major industries. AT&T continually develops
products and services to ensure that its business customers have
access to the latest technology solutions. In recent business news,
AT&T:
-- Announced a multiyear agreement between AT&T
and Amazon Web Services (AWS) to deliver integrated
solutions that combine the companies' leading
cloud and networking capabilities. The collaboration
will help customers migrate to and use the
AWS Cloud with the AT&T network. The solutions
are intended to span cloud networking, mobility,
IoT, security and analytics.
-- Teamed up with IBM to help businesses manage
their networking services. IBM will take advantage
of AT&T FlexWare, which makes it easy to set
up and manage virtual network functions on
a single device. AT&T will also be able to
run applications on IBM's cloud, cognitive,
analytics and security infrastructure. In
addition to making AT&T FlexWare available
to clients, IBM is rolling out the solution
in many of its own sites.
-- Introduced a trial with Qualcomm Technologies
Inc. to test how drones can connect more safely
and securely on commercial 4G LTE. The research
will look at coverage, signal strength and
how drones function in flight.
-- Collaborated with VeloCloud to deliver AT&T
Software-defined Wide Area Network (AT&T SD-WAN),
a key step in helping businesses evolve their
networks from hardware to software. The AT&T
SD-WAN portfolio will include a network-based
solution combining hybrid networking with
multiple types of network access. The network-based
solution will be available in 2017. The AT&T
SD-WAN premises-based, over-the-top solution
will be available later this year.
-- Closed significant business deals with Live
Nation, State of Wisconsin and Waste Management.
October 23, 2016
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AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 7
Entertainment Group
AT&T's Entertainment Group provides entertainment,
high-speed internet and communications services predominantly to
residential customers in the United States.
FINANCIAL HIGHLIGHTS
Total revenues were $12.7 billion, up 17.1% versus the
year-earlier quarter mostly due to the acquisition of DIRECTV. Also
contributing to the gain was continued growth in consumer IP
services.
Broadband revenues were up 5% in the quarter with IP broadband
growing by 12%. AdWorks has grown to a $1.5 billion annualized
revenue stream with double-digit revenue growth year to date and
strong margins.
Third-quarter operating expenses were $11.2 billion, up 14.2%
from a year ago due to the acquisition of DIRECTV and higher
content costs. Operating income totaled $1.5 billion, up from the
year-ago $1.0 billion. Third-quarter operating income margin was
11.7%, up from 9.4% in the year-earlier quarter with satellite and
IP revenue growth and cost efficiencies offsetting TV content cost
pressure and declines in legacy services. In the fourth quarter, on
a sequential basis, margins will be pressured by a full quarter of
NFL Sunday Ticket costs, annual content cost increases and start-up
costs for DIRECTV NOW.
SUBSCRIBER METRICS
Total video subscribers were essentially flat in the quarter as
competition increases. The company added 323,000 satellite
subscribers in the third quarter. U-verse TV subscribers declined
326,000 as the company continued to focus on profitability and
increasingly emphasized satellite sales. For the second straight
quarter, gross additions increased on a year-over-year basis even
when excluding IPTV customers transitioning to DIRECTV.
The Entertainment Group ended the quarter with 25.3 million
video subscribers. While the company expects positive video net
adds in the fourth quarter, it expects total video net adds for the
year to decline slightly. At the end of the third quarter, about
100,000 pending video customers had the capability to watch TV on
their mobile devices; however, these customers were not included in
third-quarter subscriber numbers since the video service had not
yet been installed at their homes.
The Entertainment Group had a net gain of 156,000 IP broadband
subscribers in the third quarter. Total Entertainment Group
broadband subscribers decreased 5,000 in the quarter. IP broadband
subscribers at the end of the quarter totaled 12.8 million.
October 23, 2016
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AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 8
ENTERTAINMENT GROUP INNOVATION
In recent news, the company:
-- Launched an updated DIRECTV App that allows
customers to watch live and recorded programs
virtually anywhere.
-- Premiered a new "Data Free TV" feature that
lets AT&T wireless customers stream AT&T
DIRECTV and U-verse (SM) content without
counting it against their data allowance.
-- Entered into 10 key DIRECTV NOW content agreements
with program providers whose premium brands
will be part of the company's new streaming
platform, planned to launch in the fourth
quarter of 2016. As publicly announced HBO,
, Disney, Turner, Discovery Networks, NBCU,
Scripps Networks, STARZ, AMCN (AMC Networks),
AETN (A+E Networks) and Viacom will be among
the more than 100 channels included on DIRECTV
NOW.
-- Since the end of the second quarter, announced
the launch of our 100% fiber network under
the AT&T Fiber brand in 14 additional metro
areas - Augusta, Ga.; Bakersfield, Calif.;
Cleveland; Columbus, Ohio; Detroit; Greater
New Orleans; Huntsville, Ala.; Indianapolis;
Louisville, Ky.; Lubbock, Texas; Memphis,
Tenn.; Mobile, Ala.; Sacramento, Calif. and
St. Louis - bringing the total to 39 major
metros where AT&T's gigabit connection is
available.
-- Expanded live 4K broadcast offerings with
premier content from the Olympics, MLB, UFC,
PGA, College Football and the World Series
of Beach Volleyball.
-- Received top honors in several
J.D. Power studies:
o AT&T outscored all other full-service
wireless providers for the top overall
ranking in the J.D. Power 2016 Full-Service
Wireless Purchase Experience Study
(SM) Volume 2.
o AT&T also earned the top ranking
among full-service wireless providers
in the J.D. Power 2016 Full Service
Wireless Customer Performance Care
Study (SM) Volume 2. AT&T scored
significantly higher than the industry
average - by 16 points - and increased
its overall score by 20 points over
the prior 6-month period.
o AT&T ranked "Highest In Customer
Satisfaction with Small/Medium Business
Wireline Service, 2 Years in a Row"
in the J.D. Power 2016 Business Wireline
Satisfaction Study.
October 23, 2016
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AT&T Intellectual Property. Page 9
Consumer Mobility
The Consumer Mobility segment provides nationwide wireless
service to consumer and wholesale subscribers located in the United
States or in U.S. territories. The company's wireless network
powers voice and data services, including high-speed internet,
video entertainment and home monitoring services.
FINANCIAL HIGHLIGHTS
Total revenues from Consumer Mobility customers totaled $8.3
billion, down 5.9% versus the year-earlier quarter, reflecting
declines in equipment revenues from lower handset sales and in
postpaid service revenues due to the success of Mobile Share plans
and migrations to business plans. Third-quarter operating expenses
were $5.7 billion, down 5.7% versus the third quarter of 2015,
reflecting lower equipment and commission costs as well as
increased operational efficiencies.
AT&T's Consumer Mobility operating income totaled $2.6
billion, down 6.2% versus the third quarter of 2015. Third-quarter
operating income margin was 31.1%, down slightly from the
year-earlier quarter with lower volumes, fewer subsidized sales and
cost efficiencies mostly offsetting service-revenue pressure from
customers choosing Mobile Share plans. Consumer Mobility EBITDA
margin was 42.5%, compared to 42.3% in the third quarter of 2015.
(EBITDA margin is operating income before depreciation and
amortization, divided by total wireless revenues.) EBITDA service
margin was 50.9%, up from 50.5% in the year-ago quarter. (EBITDA
service margin is operating income before depreciation and
amortization, divided by total service revenues.)
SUBSCRIBER METRICS
At the end of the third quarter, AT&T had 53.9 million
Consumer Mobility subscribers. In the quarter, Consumer Mobility
gained 50,000 total subscribers with 21,000 postpaid, 304,000
prepaid and 41,000 connected device net adds offsetting a loss of
316,000 reseller subscribers. Consumer Mobility postpaid churn was
1.19%, compared to 1.33% in the year-ago quarter.
October 23, 2016
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CONSUMER MOBILITY INNOVATION
AT&T is a leader in mobile internet, delivering expanded
choice in devices, services and applications. In recent weeks,
AT&T:
-- Introduced Mobile Share Advantage (MSA) plans,
which offer more data at a lower cost per
megabyte than some of the plans previously
offered by AT&T. With the new MSA plans, customers
get unlimited talk and text, rollover data
and shareable data with no overage charges.
In place of overage charges, once a customer
uses the data in a plan, data speeds are reduced
for the remainder of the billing cycle.
-- Reached agreements with Empresa De Telecomunicaciones
De Cuba to allow AT&T wireless customers to
roam in Cuba and to enable direct interconnection
between the U.S. and Cuba. The deal continues
to enhance AT&T's global coverage for customers.
-- Enhanced the AT&T THANKS program by adding
priority presale ticket access to popular
Live Nation concerts. The first two presales
gave customers early access to tickets to
see Panic! At the Disco and Thomas Rhett.
The company also introduced new tiers with
benefits and offers to complement customers'
needs.
-- Launched a new smartphone plan for Cricket
customers starting at $30/month that includes
unlimited talk and text, plus 1GB of high-speed
data.
October 23, 2016
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AT&T Intellectual Property. Page 11
International
The International segment includes wireless services in Mexico
and satellite entertainment services in Latin America.
Total International revenues totaled $1.9 billion. Third-quarter
operating expenses were $1.9 billion. AT&T's International
operating loss totaled $54 million. Third-quarter operating income
margin was (2.9)%.
MEXICO
AT&T owns and operates a wireless network in Mexico.
AT&T covered about 74 million people in Mexico with 4G LTE at
the end of the third quarter and expects to cover 100 million POPs
by the end of 2018.
Total wireless revenues from Mexico totaled $582 million, up
0.2% versus the year-earlier quarter, largely due to subscriber
growth offset by foreign exchange and competitive pressures.
Third-quarter operating loss was $148 million compared to a loss of
$134 million in the year-ago quarter, reflecting continued
investment in operations, network and subscriber acquisition.
Third-quarter operating expenses benefitted from a few one-time
items. Margins in the fourth quarter are expected to be consistent
with prior quarters.
In the quarter, AT&T added 163,000 postpaid subscribers and
606,000 prepaid subscribers to reach 10.7 million total wireless
subscribers in Mexico, a 32% increase from a year ago.
DIRECTV LATIN AMERICA
AT&T is a leading provider of pay television services in
Latin America with satellite operations serving Argentina, Brazil,
Chile, Colombia, Ecuador, Peru, Uruguay, Venezuela and parts of the
Caribbean. It also owns 41% of Sky Mexico. Sky Mexico financial
results are accounted for as an equity method investment.
DIRECTV Latin America revenues reflect macroeconomic pressure
with weakening local currencies. Total revenues from Latin America
were $1.3 billion. Operating income was $94 million.
Third-quarter subscriber net losses were 48,000, driven by
declines in Colombia, Argentina and Brazil. Total subscribers at
the end of the quarter were 12.5 million. Sky Mexico had
approximately 7.8 million subscribers as of June 30, 2016.
October 23, 2016
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AT&T Intellectual Property. Page 12
INTERNATIONAL HIGHLIGHTS
In recent weeks AT&T:
-- Continued to make significant progress in
building the company's customer base and deploying
a 4G LTE network in Mexico, while expanding
distribution to match this expanded network
reach.
-- Opened additional points of sale throughout
the country. The company also completed the
rebrand of nearly 2,900 Nextel and Iusacell
points of sale to AT&T.
October 23, 2016
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AT&T Intellectual Property. Page 13
AT&T Mobility
AT&T's U.S. mobility operations are divided between the
Business Solutions and Consumer Mobility segments. For comparison
purposes, the company is providing supplemental information for its
total domestic mobility operations.
FINANCIAL HIGHLIGHTS
Wireless revenues reflected lower service revenues from the
continued adoption of Mobile Share plans and lower equipment
revenues primarily from fewer handset upgrades and higher
bring-your-own-device subscribers.
-- Total wireless revenues were $18.2 billion,
down 0.7% year over year, due to decreases
in service and equipment revenues. Wireless
service revenues of $15.0 billion were down
0.9% year over year but were up sequentially.
Continued growth of smartphones and tablets
partially offset adoption of Mobile Share
plans. Wireless equipment revenues decreased
0.2% to $3.2 billion.
-- Third-quarter wireless operating expenses
totaled $12.8 billion, down 0.8% year over
year, reflecting operating efficiencies and
lower sales volumes, which offset higher promotional
costs. Wireless operating income was $5.4
billion, down 0.5% year over year, reflecting
continued adoption of Mobile Share plans and
increased promotional activity.
-- Wireless margins reflect adoption of AT&T
Next(SM) , increases in BYOD customers, lower
smartphone upgrade volumes and continued efforts
to drive operating costs out of the business.
AT&T's reported third-quarter wireless operating
income margin was 29.6%, consistent with the
year-earlier quarter.
-- Wireless EBITDA margin was 41.2%, compared
to 40.7% in the third quarter of 2015. Wireless
EBITDA service margin was a best-ever 50.1%,
up from 49.4% in the year-ago quarter.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 14
ARPU
The continued adoption of AT&T Next is reflected in postpaid
service ARPU (average revenues per user).
-- Phone-only postpaid ARPU decreased 1.9% versus
the year-earlier quarter; however, phone-only
postpaid ARPU with AT&T Next monthly billings
increased 1.7% year over year. This growth
comes even with lower upgrade volumes, promotional
offers and an increasing number of customers
holding onto their devices after completing
Next payments.
SUBSCRIBER METRICS
In the third quarter, AT&T posted a net increase in total
wireless subscribers of 1.5 million to reach more than 133 million
in service, up 6.9 million over the past year.
-- The company added 212,000 postpaid subscribers
and 304,000 prepaid subscribers with gains
in both Cricket and GoPhone.
-- AT&T also added 1.3 million connected devices.
It lost 315,000 reseller subscribers in the
quarter, largely due to disconnects from the
company's 2G network. The company added 299,000
postpaid tablet and computing devices in the
quarter and lost 268,000 postpaid phone subscribers
with the majority of the losses in lower-ARPU
feature phones.
-- The company had 516,000 branded net adds (both
postpaid and prepaid) in the quarter, including
165,000 branded smartphone net adds. About
700,000 total branded smartphones were added
to the base.
-- The company expects to shut down its 2G
network on or around Jan. 1, 2017. At
the end of the third quarter, the company
had about 4 million 2G subscribers. This
includes 2.8 million connected devices,
673,000 reseller, 335,000 postpaid and
210,000 prepaid. This compares to more
than 6 million 2G subscribers at the end
of the second quarter. The company has
had success migrating these subscribers
and will continue those efforts in the
fourth quarter; however, the 2G shutdown
is expected to impact net adds and churn
in the fourth quarter.
CHURN
Improvements in postpaid and prepaid churn helped offset higher
connected device and reseller churn.
-- Postpaid churn was 1.05%, compared to 1.16%
in the year-ago quarter, an 11 basis point
improvement. That includes about 2 basis points
of pressure from the 2G network shutdown.
Postpaid phone churn was 0.90%, a 14 basis
point improvement from the year-ago quarter.
Branded churn was 1.63%, compared to 1.68%
in the year-ago quarter. Total churn was 1.45%,
up from 1.33% in the year-ago quarter driven
by churn from the shutdown of the 2G network.
The planned shutdown of the 2G network contributed
more than 20 basis points of pressure to total
churn.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 15
SMARTPHONES
The company's branded smartphone base continued to grow in the
quarter, and even more customers moved off the subsidy model -
either choosing AT&T Next or bringing their own devices.
-- The company had 7.0 million branded smartphone
gross adds and upgrades in the quarter, including
1.9 million from prepaid. The postpaid upgrade
rate in the quarter was 5.1%.
-- Sales on AT&T Next were 4.3 million, or 83%
of all postpaid smartphone gross adds and
upgrades. The company also had 595,000 BYOD
gross adds, the second most ever. That means
about 94% of postpaid smartphone transactions
in the quarter were non-subsidy.
o About 50% of the company's postpaid
smartphone base is currently on AT&T
Next, with almost 80% of postpaid smartphone
subscribers on no-device-subsidy plans.
-- At the end of the quarter, 90%, or 58.7 million,
of AT&T's postpaid phone subscribers had smartphones.
Smartphones accounted for 96% of postpaid
phone sales during the quarter.
DATA PLANS
Customers continue to choose Mobile Share and unlimited wireless
with TV plans.
-- The total number of Mobile Share connections
was 57.1 million with an average of about
3 devices per account. Nearly 40% of Mobile
Share accounts are on 15 gigabyte or larger
data plans.
-- About 6.7 million postpaid subscribers are
on unlimited wireless with TV plans.
October 23, 2016
(c) 2016 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of
AT&T Intellectual Property. Page 16
AT&T Inc.
Financial Data
Consolidated Statements of Income
--------------------------------------------------------------------------------------
Dollars in millions Three Months Nine Months
except per share Ended Ended
amounts
Unaudited September 30, Percent September 30, Percent
----------------- -------------------
2016 2015 Change 2016 2015 Change
------------------- ------- ------- --------- -------- -------- ---------
Operating Revenues
Service $37,272 $35,539 4.9% $111,515 $ 94,042 18.6%
Equipment 3,618 3,552 1.9% 10,430 10,640 -2.0%
-------------------- ------ ------ ------- -------
Total Operating
Revenues 40,890 39,091 4.6% 121,945 104,682 16.5%
-------------------- ------ ------ ------- -------
Operating Expenses
Cost of services
and
sales
Equipment 4,455 4,501 -1.0% 13,090 13,400 -2.3%
Broadcast,
programming
and operations 4,909 4,081 20.3% 14,239 6,351 -%
Other cost of
services
(exclusive of
depreciation
and
amortization
shown
separately
below) 9,526 9,214 3.4% 28,436 27,604 3.0%
Selling, general
and
administrative 9,013 9,107 -1.0% 26,363 24,535 7.5%
Depreciation and
amortization 6,579 6,265 5.0% 19,718 15,539 26.9%
Total Operating
Expenses 34,482 33,168 4.0% 101,846 87,429 16.5%
-------------------- ------ ------ ------- -------
Operating Income 6,408 5,923 8.2% 20,099 17,253 16.5%
-------------------- ------ ------ ------- -------
Interest Expense 1,224 1,146 6.8% 3,689 2,977 23.9%
Equity in Net Income
of Affiliates 16 15 6.7% 57 48 18.8%
Other Income
(Expense)
- Net (7) (57) 87.7% 154 61 -%
-------------------- ------ ------ ------- -------
Income Before Income
Taxes 5,193 4,735 9.7% 16,621 14,385 15.5%
Income Tax Expense 1,775 1,657 7.1% 5,803 4,784 21.3%
-------------------- ------ ------ ------- -------
Net Income 3,418 3,078 11.0% 10,818 9,601 12.7%
-------------------- ------ ------ ------- -------
Less: Net Income
Attributable
to
Noncontrolling
Interest (90) (84) -7.1% (279) (262) -6.5%
-------------------- ------ ------ ------- -------
Net Income
Attributable
to AT&T $ 3,328 $ 2,994 11.2% $ 10,539 $ 9,339 12.8%
==================== ====== ====== ======= =======
Basic Earnings Per
Share Attributable
to AT&T $ 0.54 $ 0.50 8.0% $ 1.70 $ 1.71 -0.6%
Weighted Average
Common
Shares
Outstanding
(000,000) 6,168 5,924 4.1% 6,171 5,447 13.3%
Diluted Earnings Per
Share Attributable
to AT&T $ 0.54 $ 0.50 8.0% $ 1.70 $ 1.71 -0.6%
Weighted Average
Common
Shares
Outstanding
with Dilution
(000,000) 6,189 5,943 4.1% 6,191 5,463 13.3%
-------------------- ------ ------ ----- ------- ------- -----
AT&T Inc.
Financial Data
Consolidated Balance Sheets
---------------------------------------------------------------------------
Dollars in millions
Unaudited Sep. Dec.
30, 31,
2016 2015
-------------------------------------------------- -------- --------
Assets
Current Assets
Cash and cash equivalents $ 5,895 $ 5,121
Accounts receivable - net of allowances for
doubtful accounts of $650 and $704 16,855 16,532
Prepaid expenses 1,333 1,072
Other current assets 13,291 13,267
--------------------------------------------------- ------- -------
Total current assets 37,374 35,992
--------------------------------------------------- ------- -------
Property, Plant and Equipment - Net 123,922 124,450
Goodwill 105,271 104,568
Licenses 94,241 93,093
Customer Lists and Relationships - Net 15,227 18,208
Other Intangible Assets - Net 8,734 9,409
Investments in Equity Affiliates 1,679 1,606
Other Assets 16,527 15,346
--------------------------------------------------- ------- -------
Total Assets $402,975 $402,672
=================================================== ======= =======
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $ 7,982 $ 7,636
Accounts payable and accrued liabilities 28,849 30,372
Advanced billing and customer deposits 4,637 4,682
Accrued taxes 2,686 2,176
Dividends payable 2,948 2,950
--------------------------------------------------- ------- -------
Total current liabilities 47,102 47,816
--------------------------------------------------- ------- -------
Long-Term Debt 117,239 118,515
--------------------------------------------------- ------- -------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 59,649 56,181
Postemployment benefit obligation 33,483 34,262
Other noncurrent liabilities 20,899 22,258
--------------------------------------------------- ------- -------
Total deferred credits and other noncurrent
liabilities 114,031 112,701
--------------------------------------------------- ------- -------
Stockholders' Equity
Common stock 6,495 6,495
Additional paid-in capital 89,536 89,763
Retained earnings 35,319 33,671
Treasury stock (12,589) (12,592)
Accumulated other comprehensive income 4,850 5,334
Noncontrolling interest 992 969
--------------------------------------------------- ------- -------
Total stockholders' equity 124,603 123,640
--------------------------------------------------- ------- -------
Total Liabilities and Stockholders' Equity $402,975 $402,672
=================================================== ======= =======
AT&T Inc.
Financial Data
Consolidated Statements of Cash Flows
------------------------------------------------------------------------------
Dollars in millions Nine Months
Ended
Unaudited September 30,
----------------------
2016 2015
----------------------------------------------------- --------- -----------
Operating Activities
Net income $ 10,818 $ 9,601
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,718 15,539
Undistributed earnings from investments in
equity affiliates (22) (36)
Provision for uncollectible accounts 1,036 895
Deferred income tax expense 3,011 1,539
Net gain from sale of investments, net of
impairments (88) (46)
Changes in operating assets and liabilities:
Accounts receivable (1,108) 737
Other current assets 1,805 546
Accounts payable and accrued liabilities (1,173) 1,332
Equipment installment plan receivables and
securitizations 207 (1,682)
Deferred fulfillment costs (1,883) (884)
Retirement benefit funding (770) (595)
Other - net (2,349) (251)
------------------------------------------------------ ------- -------
Total adjustments 18,384 17,094
------------------------------------------------------ ------- -------
Net Cash Provided by Operating Activities 29,202 26,695
------------------------------------------------------ ------- -------
Investing Activities
Capital expenditures:
Purchase of property and equipment (15,283) (13,356)
Interest during construction (669) (566)
Acquisitions, net of cash acquired (2,922) (30,694)
Dispositions 184 79
Sales of securities, net 501 1,490
------------------------------------------------------ ------- -------
Net Cash Used in Investing Activities (18,189) (43,047)
------------------------------------------------------ ------- -------
Financing Activities
Net change in short-term borrowings with original
maturities of three months or less - (1)
Issuance of long-term debt 10,140 33,967
Repayment of long-term debt (10,688) (9,962)
Purchase of treasury stock (444) -
Issuance of treasury stock (excluding acquisition
of DIRECTV) 137 133
Dividends paid (8,850) (7,311)
Other (534) (2,875)
------------------------------------------------------ ------- -------
Net Cash (Used in) Provided by Financing Activities (10,239) 13,951
------------------------------------------------------ ------- -------
Net increase (decrease) in cash and cash equivalents 774 (2,401)
Cash and cash equivalents beginning of year 5,121 8,603
------------------------------------------------------ ------- -------
Cash and Cash Equivalents End of Period $ 5,895 $ 6,202
====================================================== ======= =======
AT&T Inc.
Consolidated Supplementary Data
Supplementary Financial Data
----------------------------------------------------------------------------------------------
Dollars in millions Three Months Nine Months
except per share Ended Ended
amounts
Unaudited September Percent September 30, Percent
30,
---------------- --------------------------
2016 2015 Change 2016 2015 Change
--------------------- ------ ------ ------- -------- -------- ---------
Capital expenditures
Purchase of
property
and equipment $5,581 $5,028 11.0% $ 15,283 $ 13,356 14.4%
Interest during
construction $ 232 $ 227 2.2% $ 669 $ 566 18.2%
Dividends Declared
per Share $ 0.48 $ 0.47 2.1% $ 1.44 $ 1.41 2.1%
End of Period Common
Shares Outstanding
(000,000) 6,141 6,152 -0.2%
Debt Ratio 50.1% 50.8% -70 BP
Total Employees 273,140 281,240 -2.9%
---------------------- ----- ----- ------- ------- ------- -----
Supplementary Operating Data
----------------------------------------------------------------------------------------------
Subscribers and
connections
in thousands
Unaudited September 30, Percent
--------------------------
2016 2015 Change
--------------------- ----- ----- ------- ------- ------- ---------
Wireless Subscribers
Domestic 133,338 126,406 5.5%
Mexico 10,698 8,091 32.2%
---------------------- ----- ----- ------- ------- -------
Total Wireless
Subscribers 144,036 134,497 7.1%
---------------------- ----- ----- ------- ------- -------
Total Branded Wireless
Subscribers 100,821 95,305 5.8%
Video Connections
Domestic 25,321 25,450 -0.5%
PanAmericana 7,139 7,006 1.9%
Brazil 5,337 5,538 -3.6%
---------------------- ----- ----- ------- ------- -------
Total Video
Connections 37,797 37,994 -0.5%
---------------------- ----- ----- ------- ------- -------
Broadband Connections
IP 13,715 13,076 4.9%
DSL 1,903 2,756 -31.0%
---------------------- ----- ----- ------- ------- -------
Total Broadband
Connections 15,618 15,832 -1.4%
---------------------- ----- ----- ------- ------- -------
Voice Connections
Network Access
Lines 14,603 17,352 -15.8%
U-verse VoIP
Connections 5,707 5,443 4.9%
---------------------- ----- ----- ------- ------- -------
Total Retail Consumer
Voice Connections 20,310 22,795 -10.9%
====================== ===== ===== ======= ======= ======= =====
Three Months Nine Months
Ended Ended
September Percent September 30, Percent
30,
---------------- --------------------------
2016 2015 Change 2016 2015 Change
--------------------- ----- ----- ------- ------- ------- ---------
Wireless Net
Additions
Domestic 1,532 2,513 -39.0% 4,674 5,825 -19.8%
Mexico 743 (231) -% 2,014 (689) -%
Total Wireless Net
Additions 2,275 2,282 -0.3% 6,688 5,136 30.2%
---------------------- ----- ----- ------- -------
Total Branded Wireless
Net Additions 1,285 125 -% 3,881 1,405 -%
Video Net Additions
Domestic (2) (65) 96.9% (103) (37) -%
PanAmericana (36) 16 -% 73 16 -%
Brazil (12) (129) 90.7% (107) (129) 17.1%
---------------------- ----- ----- ------- -------
Total Video Net
Additions (50) (178) 71.9% (137) (150) 8.7%
---------------------- ----- ----- ------- -------
Broadband Net
Additions
IP 171 192 -10.9% 447 871 -48.7%
DSL (194) (321) 39.6% (607) (1,067) 43.1%
---------------------- ----- ----- ------- -------
Total Broadband Net
Additions (23) (129) 82.2% (160) (196) 18.4%
---------------------- ----- ----- ------- ------- ------- -----
BUSINESS SOLUTIONS
The Business Solutions segment provides services to business
customers, including multinational companies; governmental
and wholesale customers; and individual subscribers who
purchase wireless services through employer-sponsored
plans. We provide advanced IP-based services including
Virtual Private Networks (VPN); Ethernet-related products
and broadband, collectively referred to as strategic business
services; as well as traditional data and voice products.
We utilize our wireless and wired networks (referred to
as "wired" or "wireline") to provide a complete communications
solution to our business customers.
Segment Results
--------------------------------------------------------------------------------------------------
Dollars in millions Three Months Nine Months Ended
Ended
Unaudited September 30, Percent September 30, Percent
------------------------ ------------------------
2016 2015 Change 2016 2015 Change
--------------------- ---------- ---------- --------- ---------- ---------- ---------
Segment Operating
Revenues
Wireless service $ 8,049 $ 7,732 4.1% $23,867 $23,003 3.8%
Fixed strategic
services 2,888 2,646 9.1% 8,447 7,745 9.1%
Legacy voice and
data services 4,046 4,616 -12.3% 12,567 14,081 -10.8%
Other service and
equipment 908 885 2.6% 2,652 2,585 2.6%
Wireless equipment 1,876 1,813 3.5% 5,422 5,499 -1.4%
---------------------- ------ ------ ------ ------
Total Segment
Operating
Revenues 17,767 17,692 0.4% 52,955 52,913 0.1%
---------------------- ------ ------ ------ ------
Segment Operating
Expenses
Operations and
support expenses 10,925 10,921 -% 32,584 32,966 -1.2%
Depreciation and
amortization 2,539 2,474 2.6% 7,568 7,276 4.0%
---------------------- ------ ------ ------ ------
Total Segment
Operating
Expenses 13,464 13,395 0.5% 40,152 40,242 -0.2%
---------------------- ------ ------ ------ ------
Segment Operating
Income 4,303 4,297 0.1% 12,803 12,671 1.0%
Equity in Net Income
of Affiliates - - -% - - -%
--------------------- ------ ------ ------ ------
Segment Contribution $ 4,303 $ 4,297 0.1% $12,803 $12,671 1.0%
====================== ====== ====== ====== ======
Segment Operating
Income Margin 24.2% 24.3% 24.2% 23.9%
---------------------- ------ ------ ----- ------ ------ -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers and
connections in
thousands
Unaudited September 30, Percent
------------------------
2016 2015 Change
--------------------- ------ ------ ----- ------ ------ ---------
Business Solutions
Wireless Subscribers
Postpaid/Branded 50,014 47,414 5.5%
Reseller 58 83 -30.1%
Connected Devices 29,355 24,064 22.0%
---------------------- ------ ------ ----- ------ ------
Total Business
Solutions Wireless
Subscribers 79,427 71,561 11.0%
---------------------- ------ ------ ----- ------ ------
Business Solutions IP Broadband
Connections 963 891 8.1%
============================================ ===== ====== ====== =====
Three Months Nine Months Ended
Ended
September 30, Percent September 30, Percent
------------------------ ------------------------
2016 2015 Change 2016 2015 Change
--------------------- ---------- ---------- --------- ---------- ---------- ---------
Business Solutions
Wireless Net
Additions
Postpaid/Branded 191 265 -27.9% 509 850 -40.1%
Reseller 1 8 -87.5% (34) 14 -%
Connected Devices 1,290 1,602 -19.5% 4,067 4,104 -0.9%
---------------------- ------ ------ ------ ------
Total Business
Solutions Wireless
Net Additions 1,482 1,875 -21.0% 4,542 4,968 -8.6%
---------------------- ------ ------ ------ ------
Business Solutions
Wireless Postpaid
Churn 0.97% 1.05% -8 BP 0.97% 0.95% 2 BP
---------------------- ------ ------ ------ ------
Business Solutions
IP Broadband
Net Additions 15 20 -25.0% 52 70 -25.7%
---------------------- ------ ------ ----- ------ ------ -----
ENTERTAINMENT GROUP
The Entertainment Group segment provides video, internet,
voice communication, and interactive and targeted advertising
services to customers located in the U.S. or in U.S. territories.
We utilize our copper and IP-based wired network and/or
our satellite technology.
Segment Results
--------------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended Nine Months
Ended
Unaudited September 30, Percent September Percent
30,
------------------------ ------------------------
2016 2015 Change 2016 2015 Change
--------------------- ----------- ----------- --------- ----------- ----------- ---------
Segment Operating
Revenues
Video entertainment $ 9,026 $ 7,162 26.0% $26,893 $11,024 -%
High-speed internet 1,892 1,685 12.3% 5,562 4,861 14.4%
Legacy voice and
data services 1,168 1,419 -17.7% 3,725 4,547 -18.1%
Other service and
equipment 634 592 7.1% 1,909 1,868 2.2%
---------------------- ------ ------ ------ ------
Total Segment
Operating
Revenues 12,720 10,858 17.1% 38,089 22,300 70.8%
---------------------- ------ ------ ------ ------
Segment Operating
Expenses
Operations and
support expenses 9,728 8,450 15.1% 28,875 18,222 58.5%
Depreciation and
amortization 1,504 1,389 8.3% 4,481 3,519 27.3%
---------------------- ------ ------ ------ ------
Total Segment
Operating
Expenses 11,232 9,839 14.2% 33,356 21,741 53.4%
---------------------- ------ ------ ------ ------
Segment Operating
Income 1,488 1,019 46.0% 4,733 559 -%
Equity in Net Income
(Loss) of Affiliates - 2 -% 1 (16) -%
---------------------- ------ ------ ------ ------
Segment Contribution $ 1,488 $ 1,021 45.7% $ 4,734 $ 543 -%
====================== ====== ====== ====== ======
Segment Operating
Income Margin 11.7% 9.4% 12.4% 2.5%
---------------------- ------ ------ ----- ------ ------ -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers and
connections in
thousands
Unaudited September Percent
30,
------------------------
2016 2015 Change
--------------------- ------ ------ ----- ---------- ---------- ---------
Video Connections
Satellite 20,777 19,570 6.2%
U-verse 4,515 5,854 -22.9%
---------------------- ------ ------ ----- ------ ------
Total Video
Connections 25,292 25,424 -0.5%
---------------------- ------ ------ ----- ------ ------
Broadband Connections
IP 12,752 12,185 4.7%
DSL 1,424 2,137 -33.4%
---------------------- ------ ------ ----- ------ ------
Total Broadband
Connections 14,176 14,322 -1.0%
---------------------- ------ ------ ----- ------ ------
Voice Connections
Retail Consumer
Switched Access
Lines 6,155 7,675 -19.8%
U-verse Consumer
VoIP Connections 5,378 5,216 3.1%
---------------------- ------ ------ ----- ------ ------
Total Retail Consumer
Voice Connections 11,533 12,891 -10.5%
====================== ====== ====== ===== ====== ====== =====
Three Months Ended Nine Months
Ended
September 30, Percent September Percent
30,
------------------------ ------------------------
2016 2015 Change 2016 2015 Change
--------------------- ---------- ---------- --------- ---------- ---------- ---------
Video Net Additions
Satellite 323 26 -% 993 26 -%
U-verse (326) (92) -% (1,099) (66) -%
---------------------- ------ ------ ------ ------
Total Video Net
Additions (3) (66) 95.5% (106) (40) -%
---------------------- ------ ------ ------ ------
Broadband Net
Additions
IP 156 172 -9.3% 396 802 -50.6%
DSL (161) (278) 42.1% (506) (922) 45.1%
---------------------- ------ ------ ------ ------
Total Broadband
Net Additions (5) (106) 95.3% (110) (120) 8.3%
---------------------- ------ ------ ----- ------ ------ -----
CONSUMER MOBILITY
The Consumer Mobility segment provides nationwide wireless
service to consumers and wholesale and resale wireless
subscribers located in the U.S. or in U.S. territories.
We utilize our U.S. wireless network to provide voice
and data services, including high-speed internet, video,
and home monitoring services.
Segment Results
--------------------------------------------------------------------------------------------------
Dollars in millions Three Months Nine Months
Ended Ended
Unaudited September 30, Percent September 30, Percent
----------------------- -------------------------
2016 2015 Change 2016 2015 Change
-------------------- ----------- ---------- ---------- ------------ ----------- ---------
Segment Operating
Revenues
Service $6,914 $7,363 -6.1% $20,805 $22,019 -5.5%
Equipment 1,353 1,421 -4.8 % 3,976 4,298 -7.5%
--------------------- ----- --- ----- ------ --- ------
Total Segment
Operating
Revenues 8,267 8,784 -5.9 % 24,781 26,317 -5.8%
--------------------- ----- --- ----- ------ --- ------
Segment Operating
Expenses
Operations and
support
expenses 4,751 5,065 -6.2 % 14,343 15,808 -9.3%
Depreciation and
amortization 944 976 -3.3 % 2,798 2,912 -3.9%
--------------------- ----- --- ----- ------ --- ------
Total Segment
Operating
Expenses 5,695 6,041 -5.7 % 17,141 18,720 -8.4%
--------------------- ----- --- ----- ------ --- ------
Segment Operating
Income 2,572 2,743 -6.2 % 7,640 7,597 0.6%
Equity in Net Income
of Affiliates - - - % - - -%
-------------------- ----- --- ----- ------ --- ------
Segment Contribution $2,572 $2,743 -6.2 % $ 7,640 $ 7,597 0.6%
===================== ===== === ===== ====== === ======
Segment Operating
Income Margin 31.1 % 31.2% 30.8 % 28.9%
--------------------- ----- --- ----- ----- --- ------ --- ------ -----
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers and
connections
in thousands
Unaudited September 30, Percent
-------------------------
2016 2015 Change
-------------------- ----- --- ----- ----- --- ----------- ---------- ---------
Consumer Mobility
Subscribers
Postpaid 27,374 29,257 -6.4%
Prepaid 13,035 10,988 18.6%
--------------------- ----- --- ----- ----- --- ------ --- ------
Branded 40,409 40,245 0.4%
Reseller 12,566 13,647 -7.9%
Connected Devices 936 953 -1.8%
--------------------- ----- --- ----- ----- --- ------ --- ------
Total Consumer
Mobility
Subscribers 53,911 54,845 -1.7%
===================== ===== === ===== ===== === ====== === ====== =====
Three Months Nine Months
Ended Ended
September 30, Percent September 30, Percent
----------------------- -------------------------
2016 2015 Change 2016 2015 Change
-------------------- ---------- --------- ---------- ----------- ---------- ---------
Consumer Mobility
Net Additions
Postpaid 21 23 -8.7% 89 289 -69.2%
Prepaid 304 466 -34.8% 1,169 895 30.6%
--------------------- ----- --- ----- ----- ------ --- ------ -----
Branded 325 489 -33.5% 1,258 1,184 6.3%
Reseller (316) 149 -% (1,140) (218) -%
Connected Devices 41 - -% 14 (109) -%
--------------------- ----- --- ----- ----- ------ --- ------ -----
Total Consumer
Mobility
Net Additions 50 638 -92.2% 132 857 -84.6%
--------------------- ----- --- ----- ----- ------ --- ------ -----
Total Churn 2.11% 1.90% 21 BP 2.06% 1.93% 13 BP
Postpaid Churn 1.19% 1.33% -14 BP 1.17% 1.23% -6 BP
--------------------- ----- ----- ----- --- ------ ------ -----
INTERNATIONAL
The International segment provides entertainment services
in Latin America and wireless services in Mexico. Video
entertainment services are provided to primarily residential
customers using satellite technology. We utilize our
regional and national wireless networks in Mexico to
provide consumer and business customers with wireless
data and voice communication services. Our international
subsidiaries conduct business in their local currency
and operating results are converted to U.S. dollars
using official exchange rates.
Segment Results
-------------------------------------------------------------------------------------------- ----
Dollars in Three Months Nine Months Ended
millions Ended
Unaudited September 30, Percent September 30, Percent
------------------------ --------------------------
2016 2015 Change 2016 2015 Change
----------------- ----------- ----------- ------- ------------ ------------ -----------
Segment Operating
Revenues
Video
entertainment $1,297 $ 945 37.2% $ 3,649 $ 945 -%
Wireless
service 484 494 -2.0% 1,428 1,153 23.9%
Wireless
equipment 98 87 12.6% 297 155 91.6%
Total Segment
Operating
Revenues 1,879 1,526 23.1% 5,374 2,253 -%
Segment Operating
Expenses
Operations and
support expenses 1,640 1,384 18.5% 4,951 2,131 -%
Depreciation and
amortization 293 225 30.2% 868 346 -%
Total Segment
Operating
Expenses 1,933 1,609 20.1% 5,819 2,477 -%
Segment Operating
Income (Loss) (54) (83) 34.9% (445) (224) -98.7%
Equity in Net
Income (Loss) of
Affiliates 1 (4) -% 24 (4) -%
Segment
Contribution $ (53) $ (87) 39.1% $ (421) $ (228) -84.6%
Segment Operating
Income Margin (2.9) % (5.4) % (8.3) % (9.9) %
Supplementary Operating Data
-------------------------------------------------------------------------------------------- ----
Subscribers and
connections in
thousands
Unaudited September 30, Percent
2016 2015 Change
----------------- -----------
Mexican Wireless
Subscribers
Postpaid 4,733 4,159 13.8%
Prepaid 5,665 3,487 62.5%
Branded 10,398 7,646 36.0%
Reseller 300 445 -32.6%
Total Mexican
Wireless
Subscribers 10,698 8,091 32.2%
Latin America
Satellite
Subscribers
PanAmericana 7,139 7,006 1.9%
SKY Brazil 5,337 5,538 -3.6%
Total Latin
America Satellite
Subscribers 12,476 12,544 -0.5%
Three Months Ended Nine Months Ended
September 30, Percent September 30, Percent
------------------------ --------------------------
2016 2015 Change 2016 2015 Change
Mexican Wireless
Net Additions
Postpaid 163 15 -% 444 47 -%
Prepaid 606 (210) -% 1,670 (677) -%
Branded 769 (195) -% 2,114 (630) -%
Reseller (26) (36) 27.8% (100) (59) -69.5%
Total Mexican
Wireless Net
Additions 743 (231) -% 2,014 (689) -%
Latin America
Satellite Net
Additions
PanAmericana (36) 16 -% 73 16 -%
SKY Brazil (12) (129) 90.7% (107) (129) 17.1%
Total Latin
America Satellite
Net Additions (48) (113) 57.5% (34) (113) 69.9%
SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY
As a supplemental discussion of our operating results, for comparison purposes, we are providing
a view of our combined domestic wireless operations (AT&T Mobility).
Operating Results
--------------------------------------------------------------------------------------------------
Dollars in Nine Months Ended
millions Three Months Ended
Unaudited September 30, Percent September 30, Percent
2016 2015 Change 2016 2015 Change
Operating
Revenues
Service $ 14,963 $15,095 -0.9% $ 44,673 $ 45,022 -0.8%
Equipment 3,229 3,234 -0.2% 9,398 9,797 -4.1%
------- ------
Total
Operating
Revenues 18,192 18,329 -0.7% 54,071 54,819 -1.4%
------- ------
Operating
Expenses
Operations and
support
expenses 10,696 10,865 -1.6% 31,822 33,310 -4.5%
Depreciation and
amortization 2,107 2,046 3.0% 6,244 6,082 2.7%
------- ------
Total
Operating
Expenses 12,803 12,911 -0.8% 38,066 39,392 -3.4%
------- ------
Operating Income 5,389 5,418 -0.5% 16,005 15,427 3.7%
Equity in Net
Income of
Affiliates - - -% - - -%
------- ------
Operating
Contribution $ 5,389 $ 5,418 -0.5% $ 16,005 $ 15,427 3.7%
======= ======
Operating Income
Margin 29.6% 29.6% 29.6% 28.1%
======= ======
Supplementary Operating Data
--------------------------------------------------------------------------------------------------
Subscribers and
connections in
thousands
Unaudited September 30, Percent
2016 2015 Change
------- ------
AT&T Mobility
Subscribers
Postpaid 77,388 76,671 0.9%
Prepaid 13,035 10,988 18.6%
------- ------
Branded 90,423 87,659 3.2%
Reseller 12,624 13,729 -8.0%
Connected
Devices 30,291 25,018 21.1%
------- ------
Total AT&T
Mobility
Subscribers 133,338 126,406 5.5%
------- ------
Domestic
Licensed POPs
(000,000) 323 321 0.6%
Three Months Ended Nine Months Ended
September 30, Percent September 30, Percent
2016 2015 Change 2016 2015 Change
------- ------
AT&T Mobility
Net Additions
Postpaid 212 289 -26.6% 598 1,140 -47.5%
Prepaid 304 466 -34.8% 1,169 895 30.6%
------- ------
Branded 516 755 -31.7% 1,767 2,035 -13.2%
Reseller (315) 156 -% (1,174) (205) -%
Connected
Devices 1,331 1,602 -16.9% 4,081 3,995 2.2%
------- ------
Total AT&T
Mobility Net
Additions 1,532 2,513 -39.0% 4,674 5,825 -19.8%
------- ------
M&A Activity,
Partitioned
Customers and
Other
Adjustments 1 (9) -% 24 27 -11.1%
Total Churn 1.45% 1.33% 12 BP 1.41% 1.35% 6 BP
Postpaid Churn 1.05% 1.16% -11 BP 1.04% 1.06% -2 BP
------- ------
SUPPLEMENTAL SEGMENT RECONCILIATION
Dollars in millions
Unaudited
September 30, 2016
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Business Solutions $ 17,767 $ 10,925 $ 6,842 $ 2,539 $ 4,303 $ - $ 4,303
Entertainment Group 12,720 9,728 2,992 1,504 1,488 - 1,488
Consumer Mobility 8,267 4,751 3,516 944 2,572 - 2,572
International 1,879 1,640 239 293 (54) 1 (53 )
Segment Total 40,633 27,044 13,589 5,280 8,309 $ 1 $ 8,310
Corporate and Other 270 270 - 17 (17)
Acquisition-related
items - 290 (290) 1,282 (1,572)
Certain Significant
items (13) 299 (312) - (312)
AT&T Inc. $ 40,890 $ 27,903 $12,987 $ 6,579 $ 6,408
September 30, 2015
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Business Solutions $ 17,692 $ 10,921 $ 6,771 $ 2,474 $ 4,297 $ - $ 4,297
Entertainment Group 10,858 8,450 2,408 1,389 1,019 2 1,021
Consumer Mobility 8,784 5,065 3,719 976 2,743 - 2,743
International 1,526 1,384 142 225 (83) (4) (87 )
Segment Total 38,860 25,820 13,040 5,064 7,976 $ (2) $ 7,974
Corporate and Other 316 315 1 3 (2)
Acquisition-related
items (85) 611 (696) 1,198 (1,894)
Certain Significant
items - 157 (157) - (157)
AT&T Inc. $ 39,091 $ 26,903 $12,188 $ 6,265 $ 5,923
Nine Months Ended
Dollars in millions
Unaudited
September 30, 2016
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Business Solutions $ 52,955 $ 32,584 $20,371 $ 7,568 $ 12,803 $ - $ 12,803
Entertainment Group 38,089 28,875 9,214 4,481 4,733 1 4,734
Consumer Mobility 24,781 14,343 10,438 2,798 7,640 - 7,640
International 5,374 4,951 423 868 (445) 24 (421 )
Segment Total 121,199 80,753 40,446 15,715 24,731 $ 25 $ 24,756
Corporate and Other 759 940 (181) 54 (235)
Acquisition-related
items - 818 (818) 3,949 (4,767)
Certain Significant
items (13) (383) 370 - 370
AT&T Inc. $121,945 $ 82,128 $39,817 $ 19,718 $ 20,099
September 30, 2015
Equity in
Operations Depreciation Operating Net Income
and Support and Income (Loss) of Segment
Revenues Expenses EBITDA Amortization (Loss) Affiliates Contribution
Business Solutions $ 52,913 $ 32,966 $19,947 $ 7,276 $ 12,671 $ - $ 12,671
Entertainment Group 22,300 18,222 4,078 3,519 559 (16) 543
Consumer Mobility 26,317 15,808 10,509 2,912 7,597 - 7,597
International 2,253 2,131 122 346 (224) (4) (228 )
Segment Total 103,783 69,127 34,656 14,053 20,603 $ (20) $ 20,583
Corporate and Other 984 785 199 47 152
Acquisition-related
items (85) 1,604 (1,689) 1,439 (3,128)
Certain Significant
items - 374 (374) - (374)
AT&T Inc. $104,682 $ 71,890 $32,792 $ 15,539 $ 17,253
Exhibit 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.
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 Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net cash provided by operating activities $ 10,995 $ 10,797 $ 29,202 $ 26,695
Less: Capital expenditures (5,813) (5,255) (15,952) (13,922)
Free Cash Flow 5,182 5,542 13,250 12,773
Less: Dividends paid (2,951) (2,438) (8,850) (7,311)
Free Cash Flow after Dividends $ 2,231 $ 3,104 $ 4,400 $ 5,462
Free Cash Flow Dividend Payout Ratio 56.9% 44.0% 66.8% 57.2%
Capital Investment
Capital Investment is a non-GAAP financial measure that adds to
Capital expenditures the amount of vendor financing arrangements
for capital improvements to our wireless network in Mexico. These
favorable payment terms are considered vendor financing
arrangements and are reported as repayments of debt instead of
Capital expenditures. Management believes that Capital Investment
provides relevant and useful information to investors and other
users of our financial data in evaluating long-term investment in
our business.
Capital Investment
---------------------------------------------------------------------
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Capital Expenditures $ 5,813 $ 5,255 $ 15,952 $ 13,922
Vendor Financing 87 - 225 -
Capital Investment $ 5,900 $ 5,255 $ 16,177 $ 13,922
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).
EBITDA service margin is calculated as EBITDA divided by service
revenues.
When discussing our segment results, EBITDA excludes equity in
net income (loss) of affiliates, and depreciation and amortization
from segment contribution. For our supplemental presentation of our
combined domestic wireless operations (AT&T Mobility), EBITDA
excludes depreciation and amortization from Operating Income.
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 segment 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
segment managers are responsible and upon which we evaluate their
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 Consumer Mobility
segment operating margin and our supplemental AT&T Mobility
operating margin. For the periods covered by this report, we
subsidized a portion of some of our wireless handset sales, which
are recognized in the period in which we sell the handset.
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. 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.
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net Income $ 3,418 $ 3,078 $ 10,818 $ 9,601
Additions:
Income Tax Expense 1,775 1,657 5,803 4,784
Interest Expense 1,224 1,146 3,689 2,977
Equity in Net (Income) of Affiliates (16) (15) (57) (48)
Other (Income) Expense - Net 7 57 (154) (61)
Depreciation and amortization 6,579 6,265 19,718 15,539
EBITDA 12,987 12,188 39,817 32,792
Total Operating Revenues 40,890 39,091 121,945 104,682
Service Revenues 37,272 35,539 111,515 94,042
EBITDA Margin 31.8% 31.2% 32.7% 31.3%
EBITDA Service Margin 34.8% 34.3% 35.7% 34.9%
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Business Solutions Segment
Segment Contribution $ 4,303 $ 4,297 $ 12,803 $ 12,671
Additions:
Depreciation and amortization 2,539 2,474 7,568 7,276
EBITDA 6,842 6,771 20,371 19,947
Total Segment Operating Revenues 17,767 17,692 52,955 52,913
Segment Operating Income Margin 24.2% 24.3% 24.2% 23.9%
EBITDA Margin 38.5% 38.3% 38.5% 37.7%
Entertainment Group Segment
Segment Contribution $ 1,488 $ 1,021 $ 4,734 $ 543
Additions:
Equity in Net (Income) of Affiliates - (2) (1) 16
Depreciation and amortization 1,504 1,389 4,481 3,519
EBITDA 2,992 2,408 9,214 4,078
Total Segment Operating Revenues 12,720 10,858 38,089 22,300
Segment Operating Income Margin 11.7% 9.4% 12.4% 2.5%
EBITDA Margin 23.5% 22.2% 24.2% 18.3%
Consumer Mobility Segment
Segment Contribution $ 2,572 $ 2,743 $ 7,640 $ 7,597
Additions:
Depreciation and amortization 944 976 2,798 2,912
EBITDA 3,516 3,719 10,438 10,509
Total Segment Operating Revenues 8,267 8,784 24,781 26,317
Service Revenues 6,914 7,363 20,805 22,019
Segment Operating Income Margin 31.1% 31.2% 30.8% 28.9%
EBITDA Margin 42.5% 42.3% 42.1% 39.9%
EBITDA Service Margin 50.9% 50.5% 50.2% 47.7%
International Segment
Segment Contribution $ (53) $ (87) $ (421) $ (228)
Additions:
Equity in Net (Income) of Affiliates (1) 4 (24) 4
Depreciation and amortization 293 225 868 346
EBITDA 239 142 423 122
Total Segment Operating Revenues 1,879 1,526 5,374 2,253
Segment Operating Income Margin -2.9% -5.4% -8.3% -9.9%
EBITDA Margin 12.7% 9.3% 7.9% 5.4%
Supplemental AT&T Mobility EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
AT&T Mobility
Operating Contribution $ 5,389 $ 5,418 $ 16,005 $ 15,427
Add: Depreciation and amortization 2,107 2,046 6,244 6,082
EBITDA 7,496 7,464 22,249 21,509
Total Segment Operating Revenues 18,192 18,329 54,071 54,819
Service Revenues 14,963 15,095 44,673 45,022
Segment Operating Income Margin 29.6% 29.6% 29.6% 28.1%
EBITDA Margin 41.2% 40.7% 41.1% 39.2%
EBITDA Service Margin 50.1% 49.4% 49.8% 47.8%
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 (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 (1) adjustments
related to Mexico operations, which are taxed at the 30% marginal
rate for Mexico and (2) 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%.
Adjusting Items
--------------------------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Operating Revenues
Merger related deferred revenue $ - $ 85 $ - $ 85
Storm revenue credits 13 - 13 -
Adjustments to Operating Revenues 13 85 13 85
Operating Expenses
DIRECTV and other video merger integration costs 189 173 495 337
Mexico merger integration costs 84 42 231 83
Wireless merger integration costs 17 146 92 570
Leap network decommissioning - 250 - 614
New cell site abandonment - 35 - 35
Storm costs 17 - 17 -
Employee separation costs 260 122 314 339
(Gain) loss on transfer of wireless spectrum 22 - (714) -
Adjustments to Operations and Support Expenses 589 768 435 1,978
Amortization of intangible assets 1,282 1,171 3,949 1,284
Adjustments to Operating Expenses 1,871 1,939 4,384 3,262
Other
DIRECTV-related interest expense and exchange fees (1) - 38 16 142
(Gain) loss on sale of investments (2) - - 4 -
Adjustments to Income Before Income Taxes 1,884 2,062 4,417 3,489
Tax impact of adjustments 640 705 1,521 1,202
Tax-related items - (34) - 228
Adjustments to Net Income $ 1,244 $ 1,391 $ 2,896 $ 2,059
(1) Includes interest expense incurred on the debt issued prior to the close of the DIRECTV
transaction and fees
associated with the exchange of DIRECTV notes for AT&T notes.
(2) Residual effect of previously adjusted item.
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.
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Operating Income $ 6,408 $ 5,923 $ 20,099 $ 17,253
Adjustments to Operating Revenues 13 85 13 85
Adjustments to Operating Expenses 1,871 1,939 4,384 3,262
Adjusted Operating Income 8,292 7,947 24,496 20,600
EBITDA 12,987 12,188 39,817 32,792
Adjustments to Operating Revenues 13 85 13 85
Adjustments to Operations and Support Expenses 589 768 435 1,978
Adjusted EBITDA 13,589 13,041 40,265 34,855
Total Operating Revenues 40,890 39,091 121,945 104,682
Adjustments to Operating Revenues 13 85 13 85
Total Adjusted Operating Revenues 40,903 39,176 121,958 104,767
Service Revenues 37,272 35,539 111,515 94,042
Adjustments to Operating Revenues 13 85 13 85
Adjusted Service Revenues 37,285 35,624 111,528 94,127
Operating Income Margin 15.7% 15.2% 16.5% 16.5%
Adjusted Operating Income Margin 20.3% 20.3% 20.1% 19.7%
Adjusted EBITDA Margin 33.2% 33.3% 33.0% 33.3%
Adjusted EBITDA Service Margin 36.4% 36.6% 36.1% 37.0%
Adjusted Diluted EPS
------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Diluted Earnings Per Share (EPS) $ 0.54 $ 0.50 $ 1.70 $ 1.71
Amortization of intangible assets 0.14 0.13 0.42 0.16
Merger integration and other costs(1) 0.03 0.09 0.09 0.22
Employee separations 0.03 0.01 0.03 0.04
Gain (loss) on transfer of wireless spectrum - - (0.07) -
Tax-related items - 0.01 - (0.04)
Adjusted EPS $ 0.74 $ 0.74 $ 2.17 $ 2.09
Year-over-year growth - Adjusted 0.0% 3.8%
Weighted Average Common Shares Outstanding
with Dilution (000,000) 6,189 5,943 6,191 5,463
(1) Includes combined merger integration costs, Leap network decommissioning, DIRECTV-related
interest
expense and exchange fees, abandonments and other costs.
Entertainment Group Segment
Adjusted Operating Revenues includes the external operating
revenues from DIRECTV U.S. as reported in the DIRECTV Form 10-Q/A
dated June 30, 2015 adjusted to (1) include operations reported in
other DIRECTV operating segments that AT&T has chosen to manage
in our Entertainment Group segment, (2) conform DIRECTV's practice
of recognizing revenue to be received under contractual commitments
on a straight line basis over the minimum contract period to
AT&T's method of limiting the revenue recognized to the monthly
amounts billed and (3) eliminate intercompany transactions from
DIRECTV U.S. and the Entertainment Group segment. Adjusting
Entertainment Group segment operating revenues provides for
comparability between periods.
Entertainment Group Adjusted Operating Revenues
------------------------------------------------------------------------------------------------
Dollars in millions Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Segment Operating Revenues $ 12,720 $ 10,858 $ 38,089 $ 22,300
DIRECTV Operating Revenues(1) 1,700 14,864
Adjustments:
Other DIRECTV operations - 182
Revenue recognition 35 229
Intercompany eliminations (6) (40)
Adjusted Segment Operating Revenues $ 12,720 $ 12,587 $ 38,089 $ 37,535
Year-over-year growth - Adjusted 1.1% 1.5%
(1) Includes results from July 1, 2015 through July 24, 2015 acquisition date.
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. The
Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net
Debt by annualized Net Debt Adjusted EBITDA. Annualized Net Debt
Adjusted EBITDA excludes severance-related adjustments as described
in our credit agreements. 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 Adjusted
EBITDA is calculated by annualizing the year-to-date Net Debt
Adjusted EBITDA.
Net Debt to Adjusted EBITDA
Dollars in millions
Three Months Ended
Mar. 31, Jun. 30 Sep. 30 YTD 2016
2016 2016 2016
Adjusted EBITDA $ 13,279 $ 13,397 $ 13,589 $ 40,265
Add back severance (25) (29) (260) (314)
Net Debt Adjusted EBITDA 13,254 13,368 13,329 39,951
Annualized Net Debt Adjusted EBITDA 53,268
End-of-period current debt 7,982
End-of-period long-term debt 117,239
Total End-of-Period Debt 125,221
Less: Cash and Cash Equivalents 5,895
Net Debt Balance 119,326
Annualized Net Debt Adjusted EBITDA Ratio 2.24
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRTMMMMMNNDGVZM
(END) Dow Jones Newswires
November 17, 2016 12:33 ET (17:33 GMT)
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