AT&T 10-Q 2022-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-8610

AT&T INC.

Incorporated under the laws of the State of Delaware

I.R.S. Employer Identification Number 43-1301883

208 S. Akard St., Dallas, Texas 75202

Telephone Number: (210) 821-4105

Securities registered pursuant to Section 12(b) of the Act

						Name of each exchange
Title of each class			Trading Symbol(s)			on which registered
Common Shares (Par Value $1.00 Per Share)			T			New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 5.000% Perpetual Preferred Stock, Series A			T PRA			New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 4.750% Perpetual Preferred Stock, Series C			T PRC			New York Stock Exchange
AT&T Inc. 1.450% Global Notes due June 1, 2022			T 22B			New York Stock Exchange
AT&T Inc. 2.500% Global Notes due March 15, 2023			T 23			New York Stock Exchange
AT&T Inc. 2.750% Global Notes due May 19, 2023			T 23C			New York Stock Exchange
AT&T Inc. Floating Rate Global Notes due September 5, 2023			T 23D			New York Stock Exchange
AT&T Inc. 1.050% Global Notes due September 5, 2023			T 23E			New York Stock Exchange
AT&T Inc. 1.300% Global Notes due September 5, 2023			T 23A			New York Stock Exchange
AT&T Inc. 1.950% Global Notes due September 15, 2023			T 23F			New York Stock Exchange
AT&T Inc. 2.400% Global Notes due March 15, 2024			T 24A			New York Stock Exchange
AT&T Inc. 3.500% Global Notes due December 17, 2025			T 25			New York Stock Exchange
AT&T Inc. 0.250% Global Notes due March 4, 2026			T 26E			New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 5, 2026			T 26D			New York Stock Exchange
AT&T Inc. 2.900% Global Notes due December 4, 2026			T 26A			New York Stock Exchange
AT&T Inc. 1.600% Global Notes due May 19, 2028			T 28C			New York Stock Exchange

						Name of each exchange
Title of each class			Trading Symbol(s)			on which registered
AT&T Inc. 2.350% Global Notes due September 5, 2029			T 29D			New York Stock Exchange
AT&T Inc. 4.375% Global Notes due September 14, 2029			T 29B			New York Stock Exchange
AT&T Inc. 2.600% Global Notes due December 17, 2029			T 29A			New York Stock Exchange
AT&T Inc. 0.800% Global Notes due March 4, 2030			T 30B			New York Stock Exchange
AT&T Inc. 2.050% Global Notes due May 19, 2032			T 32A			New York Stock Exchange
AT&T Inc. 3.550% Global Notes due December 17, 2032			T 32			New York Stock Exchange
AT&T Inc. 5.200% Global Notes due November 18, 2033			T 33			New York Stock Exchange
AT&T Inc. 3.375% Global Notes due March 15, 2034			T 34			New York Stock Exchange
AT&T Inc. 2.450% Global Notes due March 15, 2035			T 35			New York Stock Exchange
AT&T Inc. 3.150% Global Notes due September 4, 2036			T 36A			New York Stock Exchange
AT&T Inc. 2.600% Global Notes due May 19, 2038			T 38C			New York Stock Exchange
AT&T Inc. 1.800% Global Notes due September 14, 2039			T 39B			New York Stock Exchange
AT&T Inc. 7.000% Global Notes due April 30, 2040			T 40			New York Stock Exchange
AT&T Inc. 4.250% Global Notes due June 1, 2043			T 43			New York Stock Exchange
AT&T Inc. 4.875% Global Notes due June 1, 2044			T 44			New York Stock Exchange
AT&T Inc. 4.000% Global Notes due June 1, 2049			T 49A			New York Stock Exchange
AT&T Inc. 4.250% Global Notes due March 1, 2050			T 50			New York Stock Exchange
AT&T Inc. 3.750% Global Notes due September 1, 2050			T 50A			New York Stock Exchange
AT&T Inc. 5.350% Global Notes due November 1, 2066			TBB			New York Stock Exchange
AT&T Inc. 5.625% Global Notes due August 1, 2067			TBC			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer			☒			Accelerated Filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

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

Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At July 28, 2022, there were 7,126 million common shares outstanding.

PART I - FINANCIAL INFORMATION

AT&T INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
			Three months ended												Six months ended
			June 30,												June 30,
			2022						2021						2022						2021
Operating Revenues
Service			$	24,268					$	30,651					$	48,267					$	61,093
Equipment			5,375						5,089						11,088						10,524
Total operating revenues			29,643						35,740						59,355						71,617
Operating Expenses
Cost of revenues
Equipment			5,534						5,315						11,570						10,841
Broadcast, programming and operations			—						3,397						—						6,989
Other cost of revenues (exclusive of depreciation and amortization shown separately below)			6,807						7,446						13,506						14,919
Selling, general and administrative			7,265						7,581						14,243						15,207
Asset impairments and abandonments and restructuring			631						—						631						—
Depreciation and amortization			4,450						4,429						8,912						8,895
Total operating expenses			24,687						28,168						48,862						56,851
Operating Income			4,956						7,572						10,493						14,766
Other Income (Expense)
Interest expense			(1,502)						(1,640)						(3,128)						(3,463)
Equity in net income (loss) of affiliates			504						(18)						1,025						(24)
Other income (expense) — net			2,302						1,206						4,459						5,436
Total other income (expense)			1,304						(452)						2,356						1,949
Income from Continuing Operations Before Income Taxes			6,260						7,120						12,849						16,715
Income tax expense on continuing operations			1,509						1,151						2,949						3,160
Income from Continuing Operations			4,751						5,969						9,900						13,555
Income (loss) from discontinued operations, net of tax			(214)						(4,095)						(199)						(3,739)
Net Income			4,537						1,874						9,701						9,816
Less: Net Income Attributable to Noncontrolling Interest			(380)						(304)						(734)						(696)
Net Income Attributable to AT&T			$	4,157					$	1,570					$	8,967					$	9,120
Less: Preferred Stock Dividends			(52)						(56)						(100)						(106)
Net Income Attributable to Common Stock			$	4,105					$	1,514					$	8,867					$	9,014
Basic Earnings Per Share from continuing operations			$	0.60					$	0.77					$	1.26					$	1.76
Basic Earnings Per Share from discontinued operations			$	(0.03)					$	(0.56)					$	(0.03)					$	(0.51)
Basic Earnings Per Share Attributable to Common Stock			$	0.57					$	0.21					$	1.23					$	1.25
Diluted Earnings Per Share from continuing operations			$	0.59					$	0.76					$	1.23					$	1.73
Diluted Earnings Per Share from discontinued operations			$	(0.03)					$	(0.54)					$	(0.02)					$	(0.49)
Diluted Earnings Per Share Attributable to Common Stock			$	0.56					$	0.22					$	1.21					$	1.24
Weighted Average Number of Common Shares Outstanding — Basic (in millions)			7,169						7,168						7,176						7,165
Weighted Average Number of Common Shares Outstanding — with Dilution (in millions)			7,611						7,484						7,584						7,483

See Notes to Consolidated Financial Statements.

AT&T INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in millions
(Unaudited)
			Three months ended												Six months ended
			June 30,												June 30,
			2022						2021						2022						2021
Net income			$	4,537					$	1,874					$	9,701					$	9,816
Other comprehensive income (loss), net of tax:
Foreign currency:
Translation adjustment (includes $0, $6, $0 and $2 attributable to noncontrolling interest), net of taxes of $58, $41, $63 and $4			229						301						248						192
Distribution of WarnerMedia, net of taxes of $(38), $0, $(38) and $0			(170)						—						(170)						—
Securities:
Net unrealized gains (losses), net of taxes of $(14), $6, $(37) and $(12)			(40)						20						(109)

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Dollars in millions except per share amounts

Operations and support expenses decreased in the second quarter and for the first six months of 2022, primarily due to our continued efforts to drive efficiencies in our network operations through automation and reductions in customer support expenses through digitization. Expense declines were also driven by lower amortization of deferred fulfillment costs, including our first-quarter 2022 updates to the estimated economic lives of subscribers, which decreased expense approximately $40 and $75 in the first quarter and for the first six months of 2022. The declines were partially offset by higher wholesale access network costs. As part of our transformation activities, we expect operations and support expense improvements in the second half of 2022 as we size our operations consistent with the strategic direction of the business.

Depreciation expense increased in the second quarter and for the first six months of 2022, primarily due to ongoing capital spending for network upgrades and expansion, partially offset by updates to extend the estimated lives of our fiber assets.

Operating income decreased in the second quarter and for the first six months of 2022. Our Business Wireline operating income margin in the second quarter decreased from 17.7% in 2021 to 12.7% in 2022 and for the first six months decreased from 17.8% in 2021 to 14.0% in 2022. Our Business Wireline EBITDA margin in the second quarter decreased from 39.0% in 2021 to 36.2% in 2022 and for the first six months decreased from 39.0% in 2021 to 37.2% in 2022.

Consumer Wireline Results
						Second Quarter																		Six-Month Period
																		Percent																		Percent
						2022						2021						Change						2022						2021						Change
Operating revenues
Broadband						$	2,393					$	2,266					5.6		%				$	4,748					$	4,471					6.2		%
Legacy voice and data services						445						504						(11.7)						905						1,023						(11.5)
Other service and equipment						336						370						(9.2)						682						744						(8.3)
Total Operating Revenues						3,174						3,140						1.1						6,335						6,238						1.6
Operating expenses
Operations and support						2,085						2,063						1.1						4,163						4,092						1.7
Depreciation and amortization						785						769						2.1						1,551						1,531						1.3
Total Operating Expenses						2,870						2,832						1.3						5,714						5,623						1.6
Operating Income						$	304					$	308					(1.3)		%				$	621					$	615					1.0		%

The following tables highlight other key measures of performance for Consumer Wireline:

Connections
																								June 30,												Percent
(in 000s)																								2022						2021						Change
Broadband Connections
Total Broadband and DSL Connections																								14,105						14,174						(0.5)		%
Broadband																								13,825						13,818						0.1
Fiber Broadband Connections																								6,597						5,432						21.4
Voice Connections
Retail Consumer Switched Access Lines																								2,228						2,631						(15.3)
U-verse Consumer VoIP Connections																								2,521						2,965						(15.0)
Total Retail Consumer Voice Connections																								4,749						5,596						(15.1)		%

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

Net Additions
						Second Quarter																		Six-Month Period
																		Percent																		Percent
(in 000s)						2022						2021						Change						2022						2021						Change
Broadband Net Additions
Total Broadband and DSL Net Additions						(43)						28						—		%				(55)						74						—		%
Broadband Net Additions						(25)						51						—						(20)						125						—
Fiber Broadband Net Additions						316						246						28.5		%				605						481						25.8		%

Broadband revenues increased in the second quarter and for the first six months of 2022, driven by an increase in fiber customers, which we expect to continue for the foreseeable future as we invest further in building our fiber footprint.

Legacy voice and data service revenues decreased in the second quarter and for the first six months of 2022, reflecting the continued decline in the number of customers, which we expect to continue.

Other service and equipment revenues decreased in the second quarter and for the first six months of 2022, reflecting the continued decline in the number of VoIP customers, which we expect to continue.

Operations and support expenses increased in the second quarter and for the first six months of 2022, primarily driven by higher network and technology costs, the elimination of CAF II government credits and higher advertising costs and bad debt expense. Partially offsetting these increases was our first-quarter 2022 updates to the estimated economic lives of broadband/fiber subscribers, which decreased expense approximately $40 in the second quarter and $80 for the first six months of 2022.

Depreciation expense increased in the second quarter and for the first six months of 2022, primarily due to ongoing capital spending for network upgrades and expansion, partially offset by updates to extend the estimated lives of our fiber assets.

Operating income decreased in the second quarter and increased for the first six months of 2022. Our Consumer Wireline operating income margin in the second quarter decreased from 9.8% in 2021 to 9.6% in 2022 and for the first six months decreased from 9.9% in 2021 to 9.8% in 2022. Our Consumer Wireline EBITDA margin in the second quarter was 34.3% in 2021 and 2022 and for the first six months decreased from 34.4% in 2021 to 34.3% in 2022.

LATIN AMERICA SEGMENT						Second Quarter																		Six-Month Period
						2022						2021						Percent Change						2022						2021						Percent Change
Segment Operating revenues
Service						$	534					$	447					19.5		%				$	1,024					$	886					15.6		%
Equipment						274						241						13.7						474						433						9.5
Total Segment Operating Revenues						808						688						17.4						1,498						1,319						13.6
Segment Operating expenses
Operations and support						721						667						8.1						1,352						1,287						5.1
Depreciation and amortization						169						150						12.7						330						295						11.9
Total Segment Operating Expenses						890						817						8.9						1,682						1,582						6.3
Operating Income (Loss)						(82)						(129)						36.4		%				(184)						(263)						30.0		%

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

The following tables highlight other key measures of performance for Mexico:

																								June 30,												Percent
(in 000s)																								2022						2021						Change
Mexico Wireless Subscribers
Postpaid																								4,835						4,745						1.9		%
Prepaid																								15,422						13,810						11.7
Reseller																								443						491						(9.8)
Total Mexico Wireless Subscribers																								20,700						19,046						8.7		%
						Second Quarter																		Six-Month Period
																		Percent																		Percent
(in 000s)						2022						2021						Change						2022						2021						Change
Mexico Wireless Net Additions
Postpaid						25						20						25.0		%				28						49						(42.9)		%
Prepaid						187						54						—						365						52						—
Reseller						(15)						(9)						(66.7)						(55)						2						—
Total Mexico Wireless Net Additions						197						65						—		%				338						103						—		%

Service revenues increased in the second quarter and for the first six months of 2022 reflecting improvements in subscriber growth and growth in other services.

Equipment revenues increased in the second quarter and for the first six months of 2022 due to higher equipment sales price.

Operations and support expenses increased in the second quarter and for the first six months of 2022 driven by equipment costs from customer growth and higher bad debt expense. Approximately 7% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortization expense increased in the second quarter and for the first six months of 2022, reflecting higher in-service assets and spectrum amortization.

Operating income improved in the second quarter and for the first six months of 2022. Our Mexico operating income margin in the second quarter increased from (18.8)% in 2021 to (10.1)% in 2022 and for the first six months increased from (19.9)% in 2021 to (12.3)% in 2022. Our Mexico EBITDA margin in the second quarter increased from 3.1% in 2021 to 10.8% in 2022 and for the first six months increased from 2.4% in 2021 to 9.7% in 2022.

OTHER BUSINESS MATTERS

Spectrum Auction On January 14, 2022, the Federal Communications Commission (FCC) announced that we were the winning bidder for 1,624 3.45 GHz licenses in Auction 110. We provided the FCC with an upfront deposit of $123 in the third quarter of 2021 and paid the remaining $8,956 in the first quarter of 2022, for a total of $9,079. We funded the purchase price using cash and short-term investments. We received the licenses in May 2022, and classified the auction deposits and related capitalized interest as “Licenses - Net” on our June 30, 2022 consolidated balance sheet. (See Note 8)

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

WarnerMedia On April 8, 2022, we completed the separation and distribution of our WarnerMedia business, and merger of Magallanes, Inc. (Spinco), an AT&T subsidiary formed to hold the WarnerMedia business, with a subsidiary of Discovery, Inc., which was renamed Warner Bros. Discovery Inc. (WBD). Each AT&T shareholder was entitled to receive 0.241917 shares of WBD common stock for each share of AT&T common stock held as of the record date, which represented approximately 71% of WBD. In connection with and in accordance with the terms of the Separation and Distribution Agreement (SDA), prior to the distribution and merger, AT&T received approximately $40,400, which includes $38,800 of Spinco cash and $1,600 of debt retained by WarnerMedia. During the second quarter, assets of approximately $121,100 and liabilities of $70,600 were removed from our balance sheet as well as $45,041 of retained earnings and $5,632 of additional paid-in capital associated with the transaction. Additionally, in August 2022, we and WBD finalized the post-closing adjustment, pursuant to section 1.3 of the SDA, which will result in a $1,200 payment to WBD in the third quarter and is reflected in the accompanying June 30, 2022 balance sheet as an adjustment to additional paid in capital. The payment will be accounted for as cash used in financing activities in our statement of cash flows in third quarter of 2022. (See Notes 8 and 13)

AT&T, Spinco and Discovery entered into a Tax Matters Agreement, which governs the parties’ rights, responsibilities and obligations with respect to tax liabilities and benefits, the preservation of the expected tax-free status of the transactions contemplated by the SDA, and other matters regarding taxes.

Additionally, we entered into an adjusted HBO Max agreement with WBD that provides us with expanded distribution rights and additional flexibility to market and sell the service in a cost-efficient manner. Under the terms of the agreement, beginning June 1, 2022, we will be permitted to include HBO MAX in our customer offerings in exchange for a licensing fee. Furthermore, AT&T has the right, but not the obligation, to market and distribute HBO Max to its customers in plans, bundles, and promotional offers.

Xandr On June 6, 2022, we completed the sale of the marketplace component of Xandr to Microsoft Corporation. Xandr was reflected in our historical financial statements as discontinued operations. (See Notes 8 and 13)

COMPETITIVE AND REGULATORY ENVIRONMENT

Overview AT&T subsidiaries operating within the United States are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided.

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. Nonetheless, over the ensuing two decades, the FCC and some state regulatory commissions have maintained or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. More recently, the FCC has pursued a more deregulatory agenda, eliminating a variety of antiquated and unnecessary regulations and streamlining its processes in a number of areas. We continue to support regulatory and legislative measures and efforts, at both the state and federal levels, to reduce inappropriate regulatory burdens that inhibit our ability to compete effectively and offer needed services to our customers, including initiatives to transition services from traditional networks to all IP-based networks. At the same time, we also seek to ensure that legacy regulations are not further extended to broadband or wireless services, which are subject to vigorous competition.

Communications Segment

Internet The FCC currently classifies fixed and mobile consumer broadband services as information services, subject to light-touch regulation. The D.C. Circuit upheld the FCC’s current classification, although it remanded three discrete issues to the FCC for further consideration. These issues related to the effect of the FCC’s decision to classify broadband services as information services on public safety, the regulation of pole attachments, and universal service support for low-income consumers through the Lifeline program. Because no party sought Supreme Court review of the D.C. Circuit’s decision to uphold the FCC’s classification of broadband as an information service, that decision is final.

In October 2020, the FCC adopted an order addressing the three issues remanded by the D.C. Circuit for further consideration. After considering those issues, the FCC concluded they provided no grounds to depart from its determination that fixed and mobile consumer broadband services should be classified as information services. An appeal of the FCC’s remand decision is pending.

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

Some states have adopted legislation or issued executive orders, including California, that would reimpose net neutrality rules repealed by the FCC. The California statute is now in effect, and challenges regarding other states’ net neutrality laws are pending. We expect that going forward additional states may seek to impose net neutrality requirements.

On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law. The legislation appropriates $65,000 to support broadband deployment and adoption. The National Telecommunications and Information Agency (NTIA) is responsible for distributing more than $48,000 of this funding, including $42,500 in state grants for broadband deployment projects in unserved and underserved areas, $1,000 for middle mile broadband infrastructure, and $1,500 for digital equity programs. On May 13, 2022 NTIA issued three Notices of Funding Opportunity for these initiatives – the Broadband Equity, Access, and Deployment Program, the Enabling Middle Mile Broadband Infrastructure Program, and the State Digital Equity Program. NTIA will continue to administer and implement these programs. The IIJA also appropriated $14,200 for establishment of the Affordable Connectivity Program (ACP), an FCC-administered monthly, low-income broadband benefit program, replacing the Emergency Broadband Benefit program (established in December 2020 by the Consolidated Appropriations Act 2021). Qualifying customers can receive up to thirty dollars per month (or seventy-five dollars per month for those on Tribal lands) to assist with their internet bill. AT&T is a participating provider in the ACP program and will consider participating in the deployment program where appropriate. The IIJA includes various provisions that have resulted in FCC proceedings regarding ACP program administration and consumer protection, reform of the existing universal support program, and broadband labeling and equal access.

Privacy-related legislation continues to be adopted or considered in a number of jurisdictions, including at the federal level. Legislative, regulatory and litigation actions could result in increased costs of compliance, further regulation or claims against broadband internet access service providers and others, and increased uncertainty in the value and availability of data.

Wireless Industry-wide network densification and 5G technology expansion efforts, which are needed to satisfy extensive demand for video and internet access, will involve significant deployment of “small cell” equipment. This increases the importance of local permitting processes that allow for the placement of small cell equipment in the public right-of-way on reasonable timelines and terms. Between 2018 and 2020, the FCC adopted multiple Orders streamlining federal, state, and local wireless structure review processes that had the tendency to delay and impede deployment of small cell and related infrastructure used to provide telecommunications and broadband services. The key elements of these orders have been affirmed on judicial review. During 2020-2021, we have also deployed 5G nationwide on “low band” spectrum on macro towers. Executing on the recent spectrum purchase, we announced on-going construction and continuing deployment of 5G on C-band spectrum in 2022 and beyond.

LIQUIDITY AND CAPITAL RESOURCES

Continuing operations for six months ended June 30,			2022						2021
Cash provided by operating activities			$	15,370					$	19,783
Cash used in investing activities			(17,311)						(30,329)
Cash (used in) provided by financing activities			(49,464)						12,103

			June 30,						December 31,
			2022						2021
Cash and cash equivalents			$	4,018					$	19,223
Total debt			135,957						175,631

We had $4,018 in cash and cash equivalents available at June 30, 2022. Cash and cash equivalents included cash of $1,040 and money market funds and other cash equivalents of $2,978. Approximately $1,054 of our cash and cash equivalents were held by our foreign entities in accounts predominantly outside of the U.S. and may be subject to restrictions on repatriation.

Cash and cash equivalents decreased $15,205 since December 31, 2021. With the close of the WarnerMedia/Discovery transaction, we expect our cash balances to return to historical thresholds. In the first six months of 2022, cash inflows were

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, cash received in connection with the separation and distribution of the WarnerMedia business, issuance of commercial paper and long-term debt and distributions from DIRECTV. These inflows were exceeded by cash used to meet the needs of the business, including, but not limited to, payment of operating expenses, spectrum acquisitions, funding capital expenditures and vendor financing payments, repayment of short-term borrowings and long-term debt and dividends to stockholders. We maintain availability under our credit facilities and our commercial paper program to meet our short-term liquidity requirements.

Cash Provided by Operating Activities from Continuing Operations

During the first six months of 2022, cash provided by operating activities was $15,370, compared to $19,783 for the first six months of 2021, reflecting working capital impacts including higher payments for wireless devices tied to accelerated subscriber growth and timing of customer collections in the second quarter of 2022. Although our credit policies have been stable over the last few years, customer collections were lower than expected in the latter half of the second quarter of 2022, as customers returned to pre-pandemic payment trends. Stimulus payments during the pandemic contributed to better collection and bad debt expense trends than historical levels. Specifically, while bad debt expense was slightly higher than 2021, partially due to growth in our account base, it was relatively consistent with 2019 (pre-pandemic) levels.

We actively manage the timing of our supplier payments for operating items to optimize the use of our cash. Among other things, we seek to make payments on 90-day or greater terms, while providing the suppliers with access to bank facilities that permit earlier payments at their cost. In addition, for payments to a key supplier, as part of our working capital initiatives, we have arrangements that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (referred to as supplier financing). The net impact of supplier financing was to decrease cash from operating activities $916 and $1,256 for the six months ended June 30, 2022 and 2021, respectively. All supplier financing payments are due within one year.

Cash Used in or Provided by Investing Activities from Continuing Operations

For the first six months of 2022, cash used in investing activities totaled $17,311, and consisted primarily of $9,476 (including interest during construction) for capital expenditures and $9,570 for acquisitions of spectrum licenses won in Auction 110 and associated capitalized interest. During the first six months of 2022, we received a return of investment of $1,638 from DIRECTV representing distributions in excess of cumulative equity in earnings from DIRECTV (see Note 11).

For capital improvements, we have negotiated favorable vendor payment terms of 120 days or more (referred to as vendor financing) with some of our vendors, which are excluded from capital expenditures and reported as financing activities. For the first six months of 2022, vendor financing payments were $3,337, compared to $2,994 for the first six months of 2021. Capital expenditures in the first six months of 2022 were $9,476, and when including $3,337 cash paid for vendor financing, capital investment was $12,813 ($2,238 higher than the prior-year comparable period).

The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first six months of 2022, we placed $2,012 of equipment in service under vendor financing arrangements (compared to $1,778 in the prior-year comparable period) and approximately $170 of assets related to the FirstNet build (compared to $450 in the prior-year comparable period). The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements.

Cash Provided by or Used in Financing Activities from Continuing Operations

For the first six months of 2022, cash used in financing activities totaled $49,464 and was comprised of debt issuances and repayments, payments of dividends, vendor financing payments, and stock repurchases. During the first six months of 2022, we also paid approximately $722 in cash on the note payable to DIRECTV, with $619 remaining due as of June 30, 2022.

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

A tabular summary of our debt activities for the six months ended June 30, 2022 is as follows:

			First Quarter			Second Quarter			Six months ended June 30, 2022
Net commercial paper borrowings			$	1,471		$	(5,219)		$	(3,748)
Issuance of Notes and Debentures:
Other			$	479		$	—		$	479
Debt Issuances			$	479		$	—		$	479
Repayments:
2021 Syndicated Term Loan			$	—		$	(7,350)		$	(7,350)
BAML Bilateral Term Loan - Tranche A			—			(1,000)			(1,000)
Private financing			—			(750)			(750)
Repayment of other short-term borrowings			$	—		$	(9,100)		$	(9,100)
USD notes1, 2, 3			$	(123)		$	(18,957)		$	(19,080)
Euro notes			—			(3,343)			(3,343)
BAML Bilateral Term Loan - Tranche B			—			(1,000)			(1,000)
Other			(667)			(123)			(790)
Repayments of long-term debt			$	(790)		$	(23,423)		$	(24,213)
1On March 31, 2022, we issued a notice for the redemption in full of all of the outstanding $1,962 aggregate principal amount of 3.000% Global Notes due June 30, 2022. We redeemed the notes on April 30, 2022 at 100% of the principal amount.
2On April 11, 2022, we issued notices for the redemption in full of all of the outstanding approximately $9,042 aggregate principal amount of various global notes due 2022 to 2026 with coupon rates ranging from 2.625% to 4.450% (Make-Whole Notes). The Make-Whole Notes were redeemed on the redemption dates set forth in the notices of redemption, at “make whole” redemption prices calculated as set forth in the respective redemption notices in the second quarter.
3Includes $7,954 of cash paid toward the $8,822 aggregate principal amount of various notes that were tendered for cash in May 2022. The notes had interest rates ranging between 3.100% and 8.750% and original maturities ranging from 2026 to 2061.

The weighted average interest rate of our entire long-term debt portfolio including credit agreement borrowings and the impact of derivatives, was approximately 4.0% as of June 30, 2022 and 3.8% as of December 31, 2021. We had $131,419 of total notes and debentures outstanding at June 30, 2022. This also included Euro, British pound sterling, Canadian dollar, Mexican peso, Australian dollar, and Swiss franc denominated debt that totaled approximately $35,189.

At June 30, 2022, we had $6,210 of debt maturing within one year, consisting of $2,860 of commercial paper borrowings and $3,350 of long-term debt issuances.

For the first six months of 2022, we paid $3,337 of cash under our vendor financing program, compared to $2,994 in the prior-year comparable period. Total vendor financing payables included in our June 30, 2022 consolidated balance sheet were $3,547, with $1,981 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

At June 30, 2022, we had approximately 144 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014. During the first six months of 2022, we repurchased approximately 34 million shares under the December 2014 authorization.

We paid dividends on common and preferred shares of $5,835 during the first six months of 2022, compared with $7,571 for the first six months of 2021.

Dividends on common stock declared by our Board of Directors totaled $0.5550 per share in the first six months of 2022 and $1.04 per share in the first six months of 2021. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. On February 1, 2022, we announced

AT&T INC.

JUNE 30, 2022

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued

Dollars in millions except per share amounts

that our Board of Directors approved an expected annual dividend level of $1.11 per common share, or approximately $8,000 per year, following the close of the WarnerMedia/Discovery transaction.

Credit Facilities

The following summary of our various credit and loan agreements does not purport to be complete and is qualified in its entirety by reference to each agreement filed as exhibits to our Annual Report on Form 10-K.

We use credit facilities as a tool in managing our liquidity status. In November 2020, we amended one of our $7,500 revolving credit agreements by extending the termination date. In total, we have two $7,500 revolving credit agreements, totaling $15,000, with one terminating on December 11, 2023 and the other terminating on November 17, 2025. No amounts were outstanding under either agreement as of June 30, 2022.

On January 29, 2021, we entered into a $14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with Bank of America, N.A., as agent. On March 23, 2021, we borrowed $7,350 under the 2021 Syndicated Term Loan and the remaining $7,350 of lenders’ commitments were terminated. In the first quarter of 2022, the maturity date of the 2021 Syndicated Term Loan was extended to December 31, 2022. On April 13, 2022, the 2021 Syndicated Term Loan was paid off and terminated.

In March 2021, we entered into and drew on a $2,000 term loan credit agreement (BAML Bilateral Term Loan) consisting of (i) a $1,000 facility originally due December 31, 2021 (BAML Tranche A Facility) and subsequently extended to December 31, 2022 in the fourth quarter of 2021, and (ii) a $1,000 facility due December 31, 2022 (BAML Tranche B Facility), with Bank of America, N.A., as agent. On April 13, 2022, the BAML Bilateral Term Loan was paid off and terminated.

We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases as well as a commercial paper program.

Each of our credit and loan agreements contains covenants that are customary for an issuer with an investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter through June 30, 2023, a ratio of not more than 4.0-to-1, and a ratio of not more than 3.5-to-1 for any fiscal quarter thereafter. As of June 30, 2022, we were in compliance with the covenants for our credit facilities.

Collateral Arrangements

Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover over 98% of our approximate $38,800 derivative portfolio, counterparties are still required to post collateral. During the first six months of 2022, we posted approximately $550 of cash collateral, on a net basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7)

Other

Our total capital consists of debt (long-term debt and debt maturing within one year) and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At June 30, 2022, our debt ratio was 50.1%, compared to 49.7% at June 30, 2021 and 48.9% at December 31, 2021. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances and repayments.

Dollars in millions except per share amounts

At June 30, 2022, we had no interest rate swaps.

We have fixed-to-fixed and floating-to-fixed cross-currency swaps on foreign currency-denominated debt instruments with a U.S. dollar notional value of $38,213 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow or fair value hedges with a net fair value of $(5,902) at June 30, 2022. We had no rate locks at June 30, 2022.

AT&T INC.

JUNE 30, 2022

We have foreign exchange contracts with a U.S. dollar notional value of $628 to provide currency at a fixed rate to hedge a portion of the exchange risk involved in foreign currency-denominated transactions. These foreign exchange contracts include fair value hedges with a total net fair value of $(27) at June 30, 2022.

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the SEC’s rules and forms. The Chief Executive Officer and Chief Financial Officer have performed an evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of June 30, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 2022.

There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

AT&T INC.

JUNE 30, 2022

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the “Risk Factors” section herein and in our most recent Form 10-K. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:

• The severity, magnitude and duration of the COVID-19 pandemic and containment, mitigation and other measures taken in response, including the potential impacts of these matters on our business and operations.

• Our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to impact our business operations, financial performance and results of operations.

• Adverse economic, political and/or capital access changes or war or other hostilities in the markets served by us or in countries in which we have investments and/or operations, including inflationary pressures, the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates and terms.

• Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates; adverse changes in mortality assumptions; adverse medical cost trends; and unfavorable or delayed implementation or repeal of healthcare legislation, regulations or related court decisions.

• The final outcome of FCC and other federal, state or foreign government agency proceedings (including judicial review, if any, of such proceedings) and legislative efforts involving issues that are important to our business, including, without limitation, pending Notices of Apparent Liability; the transition from legacy technologies to IP-based infrastructure, including the withdrawal of legacy TDM-based services; universal service; broadband deployment; wireless equipment siting regulations and, in particular, siting for 5G service; E911 services; competition policy; privacy; net neutrality; multichannel video programming distributor services and equipment; content licensing and copyright protection; availability of new spectrum on fair and balanced terms; and wireless and satellite license awards and renewals.

• Enactment of additional state, local, federal and/or foreign regulatory and tax laws and regulations, or changes to existing standards and actions by tax agencies and judicial authorities including the resolution of disputes with any taxing jurisdictions, pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.

• U.S. and foreign laws and regulations regarding intellectual property rights protection and privacy, personal data protection and user consent are complex and rapidly evolving and could result in adverse impacts to our business plans, increased costs, or claims against us that may harm our reputation.

• Our ability to compete in an increasingly competitive industry and against competitors that can offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including non-regulation of comparable alternative technologies and/or government-owned or subsidized networks.

• Disruption in our supply chain for a number of reasons, including, difficulties in obtaining export licenses for certain technology, inability to secure component parts, general business disruption, workforce shortage, natural disasters, safety issues, economic and political instability, including the outbreak of war or other hostilities, and public health emergencies.

• The continued development and delivery of attractive and profitable wireless and broadband offerings and devices; the extent to which regulatory and build-out requirements apply to our offerings; our ability to match speeds offered by our competitors; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.

• The availability and cost and our ability to adequately fund additional wireless spectrum and network development, deployment and maintenance; and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.

• Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.

• The outcome of pending, threatened or potential litigation (which includes arbitrations), including, without limitation, patent and product safety claims by or against third parties or claims based on alleged misconduct by employees.

• The impact from major equipment or software failures on our networks; the effect of security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; or severe weather conditions or other climate-related events including flooding and hurricanes, natural disasters including earthquakes and forest fires, pandemics, energy shortages, wars or terrorist attacks.

AT&T INC.

JUNE 30, 2022

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS - continued

• The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.

• Our response to competition and regulatory, legislative and technological developments.

• The uncertainty surrounding further congressional action regarding spending and taxation, which may result in changes in government spending and affect the ability and willingness of businesses and consumers to spend in general.

• Our ability to realize or sustain the expected benefits of our business transformation initiatives, which are designed to reduce costs, streamline distribution, remove redundancies and simplify and improve processes and support functions.

• Our ability to successfully complete divestitures, as well as achieve our expectations regarding the financial impact of the completed and/or pending transactions.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.

AT&T INC.

JUNE 30, 2022

PART II – OTHER INFORMATION

Dollars in millions except per share amounts

We discuss in our Annual Report on Form 10-K for the year ended December 31, 2021 various risks that may materially affect our business. We use this section to update this discussion to reflect material developments. For the second quarter of 2022, there were no such material developments.

PART II – OTHER INFORMATION - CONTINUED

Dollars in millions except per share amounts

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) A summary of our repurchases of common stock during the second quarter of 2022 is as follows:

						(a)						(b)						(c)						(d)
Period						Total Number of Shares (or Units) Purchased****1, 2, 3						Average Price Paid Per Share (or Unit)						Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs****1						Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs
April 1, 2022 - April 30, 2022						9,093,020						$	19.32					9,090,000						168,812,921
May 1, 2022 - May 31, 2022						25,667,231						19.39						25,080,949						143,731,972
June 1, 2022 - June 30, 2022						72,250						21.06						—						143,731,972
Total						34,832,501						$	19.38					34,170,949

1In March 2014, our Board of Directors approved an authorization to repurchase up to 300 million shares of our common stock. The authorization has no expiration date.

2Of the shares repurchased, 661,552 shares were acquired through the withholding of taxes on the vesting of restricted stock and performance shares or in respect of the exercise price of options.

3Of the shares repurchased, no shares were acquired through reimbursements from AT&T maintained Voluntary Employee Benefit Association (VEBA) trusts during the period.

AT&T INC.

JUNE 30, 2022

The following exhibits are filed or incorporated by reference as a part of this report:

Exhibit
Number						Exhibit Description
31						Rule 13a-14(a)/15d-14(a) Certifications
						31.1 Certification of Principal Executive Officer
						31.2 Certification of Principal Financial Officer
32						Section 1350 Certifications
101						The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, (formatted as Inline XBRL and contained in Exhibit 101).

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 thereunto duly authorized.

			AT&T Inc.
August 4, 2022			/s/ Pascal Desroches
			Pascal Desroches
			Senior Executive Vice President
			and Chief Financial Officer