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

Dollars in millions except per share amounts

Business Wireline Results
												First Quarter
																																				Percent
																								2024						2023						Change
Operating revenues
Service																								$	4,700					$	5,200					(9.6)		%
Equipment																								213						131						62.6
Total Operating Revenues																								4,913						5,331						(7.8)
Operating expenses
Operations and support																								3,487						3,623						(3.8)
Depreciation and amortization																								1,362						1,330						2.4
Total Operating Expenses																								4,849						4,953						(2.1)
Operating Income																								$	64					$	378					(83.1)		%

Service revenues decreased in the first quarter of 2024, driven by lower demand for legacy voice, data and network services along with product simplification, partially offset by growth in connectivity services. We expect these trends to continue.

Equipment revenues increased in the first quarter of 2024, driven by higher customer premises equipment sales, which are nonrecurring in nature.

Operations and support expenses decreased in the first quarter of 2024, primarily driven by lower personnel costs associated with ongoing transformation initiatives, lower marketing and customer support expenses, partially offset by higher equipment costs. As part of our transformation activities, we expect operations and support expense improvements through the remainder of 2024 as we further right size our operations in alignment with the strategic direction of the business.

Depreciation expense increased in the first quarter of 2024, primarily due to ongoing capital investment for strategic initiatives such as fiber, which we expect to continue through the remainder of 2024.

Operating income decreased in the first quarter of 2024. Our Business Wireline operating income margin in the first quarter decreased from 7.1% in 2023 to 1.3% in 2024. Our Business Wireline EBITDA margin in the first quarter decreased from 32.0% in 2023 to 29.0% in 2024.

Consumer Wireline Results
												First Quarter
																																				Percent
																								2024						2023						Change
Operating revenues
Broadband																								$	2,722					$	2,527					7.7		%
Legacy voice and data services																								342						396						(13.6)
Other service and equipment																								286						316						(9.5)
Total Operating Revenues																								3,350						3,239						3.4
Operating expenses
Operations and support																								2,256						2,284						(1.2)
Depreciation and amortization																								881						861						2.3
Total Operating Expenses																								3,137						3,145						(0.3)
Operating Income																								$	213					$	94					—		%

AT&T INC.

MARCH 31, 2024

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 Consumer Wireline:

Connections
																								March 31,												Percent
(in 000s)																								2024						2023						Change
Broadband Connections
Total Broadband and DSL Connections																								13,930						13,949						(0.1)		%
Broadband1																								13,784						13,730						0.4
Fiber Broadband Connections																								8,559						7,487						14.3
Voice Connections
Retail Consumer Switched Access Lines																								1,553						1,921						(19.2)
Consumer VoIP Connections																								1,869						2,212						(15.5)
Total Retail Consumer Voice Connections																								3,422						4,133						(17.2)		%
1Includes AT&T Internet Air.

Broadband Net Additions
																		First Quarter
																																				Percent
(in 000s)																								2024						2023						Change
Total Broadband and DSL Net Additions																								40						(42)						—		%
Broadband Net Additions1																								55						(23)						—
Fiber Broadband Net Additions																								252						272						(7.4)		%
1Includes AT&T Internet Air.

Broadband revenues increased in the first quarter of 2024, driven by an increase in fiber customers, which we expect to continue as we invest further in building our fiber footprint, and higher ARPU due to prior-year promotional pricing, partially offset by declines in copper-based broadband services.

Legacy voice and data service revenues decreased in the first quarter of 2024, reflecting the continued decline in demand for these services in favor of other technologies, such as wireless and fiber services.

Other service and equipment revenues decreased in the first quarter of 2024, reflecting the continued decline in the number of VoIP customers.

Operations and support expenses decreased in the first quarter of 2024. Expense decreases were primarily due to lower customer support costs, partially offset by higher network-related costs as our fiber build scales.

Depreciation expense increased in the first quarter of 2024, primarily due to ongoing capital spending for strategic initiatives such as fiber and network upgrades and expansion, which we expect to continue through the remainder of 2024.

Operating income increased in the first quarter of 2024. Our Consumer Wireline operating income margin in the first quarter increased from 2.9% in 2023 to 6.4% in 2024. Our Consumer Wireline EBITDA margin in the first quarter increased from 29.5% in 2023 to 32.7% in 2024.

AT&T INC.

MARCH 31, 2024

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

Dollars in millions except per share amounts

LATIN AMERICA SEGMENT												First Quarter
																								2024						2023						Percent Change
Segment Operating Revenues
Service																								$	690					$	591					16.8		%
Equipment																								373						292						27.7
Total Segment Operating Revenues																								1,063						883						20.4
Segment Operating Expenses
Operations and support																								883						738						19.6
Depreciation and amortization																								177						175						1.1
Total Segment Operating Expenses																								1,060						913						16.1
Operating Income (Loss)																								$	3					$	(30)					—		%

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

Subscribers
																								March 31,												Percent
(in 000s)																								2024						2023						Change
Mexico Wireless Subscribers
Postpaid																								5,352						4,973						7.6		%
Prepaid																								16,742						16,146						3.7
Reseller																								365						494						(26.1)
Total Mexico Wireless Subscribers																								22,459						21,613						3.9		%
Mexico Wireless Net Additions
												First Quarter
																																				Percent
(in 000s)																								2024						2023						Change
Mexico Wireless Net Additions
Postpaid																								116						49						—		%
Prepaid																								79						(58)						—
Reseller																								(52)						19						—
Total Mexico Wireless Net Additions																								143						10						—		%

Service revenues increased in the first quarter of 2024 reflecting favorable foreign exchange impacts and growth in subscribers.

Equipment revenues increased in the first quarter of 2024 driven by higher equipment sales and favorable foreign exchange impacts.

Operations and support expenses increased in the first quarter of 2024 driven by unfavorable impact of foreign exchange and increased equipment costs resulting from higher sales. Approximately 4% of Mexico expenses are U.S. dollar based, with the remainder in the local currency.

Depreciation and amortization expense increased in the first quarter of 2024 driven by unfavorable impact of foreign exchange partially offset by lower in-service assets.

AT&T INC.

MARCH 31, 2024

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

Dollars in millions except per share amounts

Operating income improved in the first quarter of 2024. Our Mexico operating income margin in the first quarter increased from (3.4)% in 2023 to 0.3% in 2024. Our Mexico EBITDA margin in the first quarter increased from 16.4% in 2023 to 16.9% in 2024.

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, since then, the FCC and some state regulatory commissions have maintained, re-imposed or expanded certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. Recently, the FCC’s regulatory approach has depended on control of the executive branch, eliminating a variety of antiquated and unnecessary regulations in a number of areas, while imposing or re-imposing regulations in other 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.

Until 2015, the FCC classified fixed and mobile consumer broadband internet access services as information services subject to minimal regulation. In 2015, the FCC reclassified such services as telecommunications services subject to broader regulation by the FCC and imposed “net neutrality rules.” Since then, the FCC has twice reversed course, most recently again reclassifying such services as telecommunications services subject to broader regulation by the FCC on April 25, 2024, in a yet-to-be released order.

Since 2018, some states have adopted legislation or issued executive orders that established state net neutrality rules. Suits were filed challenging two such laws in California and Vermont. The California statute is now in effect. The challenge to the Vermont statute was stayed pending resolution of a separate challenge to a New York statute raising similar preemption issues. On April 26, 2024, the Second Circuit overturned a lower court’s decision that the New York statute was preempted, which could have the effect of restarting the Vermont litigation. We expect additional states may seek to impose net neutrality and other requirements on broadband in the future.

On November 15, 2021, the Infrastructure Investment and Jobs Act (IIJA) was signed 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 through the Broadband, Equity, Access, and Deployment (BEAD) Programs. NTIA and states are in the process of administering these grants. Where appropriate, AT&T may apply for grants under this or other government infrastructure 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. Absent additional funding, on January 11, 2024 the FCC announced that it currently projects April 2024 to be the last month providers will be fully reimbursed for the ACP benefit provided to enrolled households and established February 7, 2024 as the last date for new enrollments into the program. On March 4, 2024, the FCC issued a Public Notice confirming that April 2024 is the last fully funded month for the ACP benefit.

On November 15, 2023, the FCC adopted rules to “facilitate” equal access to broadband and prevent digital discrimination in broadband access. The rules, which became effective March 22, 2024, prohibit covered entities from implementing policies or practices not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on prohibited characteristics (including income level, race, and ethnicity) or that have such differential impact, whether intentional or not. The rules broadly apply prospectively to all aspects of an ISP’s service that could impact a consumer’s ability to access broadband, including deployment, marketing, and credit checks, among other things. We may be required to answer complaints alleging that the company has violated the FCC rules and those complaints may seek relief, including changes to our business practices or civil forfeitures that could result in significant costs or reputational harm. It is currently uncertain how the FCC will implement and enforce these new rules. Several business and

AT&T INC.

MARCH 31, 2024

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

Dollars in millions except per share amounts

consumer-oriented associations have filed appeals challenging the rules and those appeals have been consolidated in the Eighth Circuit.

Privacy-related legislation continues to be adopted or considered in a number of jurisdictions. 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.

During 2020-2021, we deployed 5G nationwide on “low band” spectrum on macro towers. Executing on recent spectrum purchases, we announced ongoing construction and continuing deployment of 5G on 3.45 GHz and C-band spectrum in 2022 and beyond. Additional spectrum will be needed industrywide for 5G and future services. In 2023, the federal government released a national spectrum strategy that focused on spectrum sharing but did not include specific timelines to make additional spectrum bands available for 5G and future generations of service. As a result, the federal government’s ability and intent to make sufficient spectrum available to the industry in needed timeframes remains uncertain.

LIQUIDITY AND CAPITAL RESOURCES

For three months ended March 31,			2024						2023
Cash provided by operating activities			$	7,547					$	6,678
Cash used in investing activities			(2,961)						(3,818)
Cash used in financing activities			(7,815)						(3,711)

			March 31,						December 31,
			2024						2023
Cash and cash equivalents			$	3,520					$	6,722
Total debt			132,764						137,331

We had $3,520 in cash and cash equivalents available at March 31, 2024, decreasing $3,202 since December 31, 2023. Cash and cash equivalents included cash of $1,202 and money market funds and other cash equivalents of $2,318. Approximately $1,435 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.

For the first three months of 2024, cash inflows were primarily provided by cash receipts from operations, including cash from our sale and transfer of our receivables to third parties, issuance of commercial paper 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, repayment of short-term borrowings and long-term debt, funding capital expenditures and vendor financing payments, and dividend payments 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

During the first three months of 2024, cash provided by operating activities was $7,547, compared to $6,678 for the first three months of 2023, reflecting operational growth and timing of working capital, including the expansion of committed, cost-efficient receivable sales programs that were partially offset by higher device payments.

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 (referred to as supplier financing program). In addition, for payments to suppliers of handset inventory, 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 direct supplier financing). The net impact of direct supplier financing, including principal and interest payments, was to decrease cash from operating activities $1,584 and $432 for the three months ended March 31, 2024 and 2023, respectively. All supplier financing payments are due within one year. (See Note 10)

AT&T INC.

MARCH 31, 2024

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

Dollars in millions except per share amounts

Cash Used in Investing Activities

For the first three months of 2024, cash used in investing activities totaled $2,961 and consisted primarily of $3,758 (including interest during construction) for capital expenditures. During the first three months of 2024, we also paid $266 in cash on FirstNet sustainability payment. During the first three months of 2024, we received a return of investment of $194 from DIRECTV representing distributions in excess of cumulative equity in earnings from DIRECTV (see Note 9).

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 three months of 2024, vendor financing payments were $841, compared to $2,113 for the first three months of 2023. Capital expenditures for the first three months of 2024 were $3,758, and when including $841 cash paid for vendor financing, capital investment was $4,599 ($1,849 lower 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 three months of 2024, we placed $99 of equipment in service under vendor financing arrangements (compared to $1,021 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

For the first three months of 2024, cash used in financing activities totaled $7,815 and was comprised of debt issuances and repayments, payments of dividends and vendor financing payments.

A tabular summary of our debt activities for the three months ended March 31, 2024 is as follows:

												Three months ended March 31, 2024
Net commercial paper borrowings												$	428
Repayments
USD notes												$	(2,300)
EUR notes												(2,181)
Other												(204)
Repayments of long-term debt												$	(4,685)

The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of March 31, 2024 and December 31, 2023. We had $128,533 of total notes and debentures outstanding at March 31, 2024. This also included Euro, British pound sterling, Canadian dollar, Swiss franc, and Australian dollar denominated debt that totaled approximately $32,738.

At March 31, 2024, we had $7,060 of debt maturing within one year, consisting of $2,430 of commercial paper borrowings and $4,630 of long-term debt issuances. The weighted average interest rate on our outstanding short-term borrowings was approximately 5.5% as of March 31, 2024 and 6.0% as of December 31, 2023.

For the first three months of 2024, we paid $841 of cash under our vendor financing program, compared to $2,113 in the prior-year comparable period. Total vendor financing payables included in our March 31, 2024 consolidated balance sheet were $2,021, with $1,215 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”).

At March 31, 2024, we had approximately 144 million shares remaining from our share repurchase authorizations approved by the Board of Directors in 2014.

We paid dividends on common and preferred shares of $2,034 during the first three months of 2024, compared with $2,014 for the first three months of 2023.

AT&T INC.

MARCH 31, 2024

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

Dollars in millions except per share amounts

Dividends on common stock declared by our Board of Directors totaled $0.2775 per share in the first three months of 2024 and 2023. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities.

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. We currently have one $12,000 revolving credit agreement that terminates on November 18, 2028 (Revolving Credit Agreement). No amount was outstanding under the Revolving Credit Agreement as of March 31, 2024.

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.

Our Revolving Credit Agreement contains covenants that are customary for an issuer with 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, a ratio of not more than 3.75-to-1. As of March 31, 2024, 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 the majority of our approximate $37,600 derivative portfolio, counterparties are still required to post collateral. During the first three months of 2024, we received approximately $140 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), redeemable noncontrolling interest and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At March 31, 2024, our debt ratio was 52.4%, compared to 55.9% at March 31, 2023 and 53.5% at December 31, 2023. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and reclassifications related to redemption of noncontrolling interests.