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Full-Year 2015: 11% Consolidated Revenue Growth; Nearly 6% Adjusted EPS Growth; $15.9 Billion in Free Cash Flow

Highlights

• Fourth-quarter consolidated revenues of $42.1 billion, up 22% versus the year-earlier period primarily due to DIRECTV acquisition

• Fourth-quarter EPS of $0.65 as reported; $0.63 adjusted EPS, a 12.5% increase

• Adjusted consolidated margin expansion and best-ever fourth-quarter and full-year wireless service EBITDA margins

• Strong cash flows with $9.2 billion in reported cash from operations and $3.1 billion in free cash flow in fourth quarter; full-year reported cash from operations of $35.9 billion and free cash flow of $15.9 billion

• Full-year capital investment¹ of $20.7 billion

• 2.8 million wireless net adds; 1.6 million branded (postpaid and prepaid) net adds

• 4G LTE network coverage expands to 355 million POPs

• 2.2 million U.S. wireless net adds with gains in every category

• Postpaid churn of 1.18% and total churn of 1.50%, both down year over year

• 638,000 Mexico wireless branded net adds

• Business Solutions service revenues down slightly year over year

• Strategic business services revenues of $2.8 billion, up 10.3% and up 12.4% when adjusted for foreign exchange

• 214,000 U.S. DIRECTV net adds; total video subscribers down slightly

• 192,000 total IP broadband net adds

Note: AT&T's fourth-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, January 26, 2016. The webcast and related materials will be available on AT&T’s Investor Relations website at www.att.com/investor.relations .

DALLAS, January 26, 2016 **** — AT&T Inc. (NYSE:T) today reported 2.8 million wireless net adds and double-digit revenue, adjusted operating margin, adjusted EPS and free cash flow growth for the fourth quarter.

“We now have a unique set of capabilities that positions us for growth and also gives us a strategic advantage in providing consumers and businesses the integrated mobile, video and data solutions they want,” said Randall Stephenson, AT&T chairman and CEO. “Our DIRECTV integration is going well, and the customer response to our new integrated mobile and entertainment offers is strong. Throughout this year, we plan to launch a variety of new video entertainment packages that give customers even more choices.

“We’re also seeing terrific results from our expansion into the Mexican mobile market. Our LTE network now covers 355 million people and businesses, and in the quarter we had 2.8 million wireless net additions,” Stephenson said.

Consolidated Financial Results

AT&T's consolidated revenues for the fourth quarter totaled $42.1 billion, up more than 22% versus the year-earlier period largely due to the acquisition of DIRECTV. Compared with results for the fourth quarter of 2014, operating expenses were $34.6 billion versus $39.9 billion; operating income was $7.5 billion versus $(5.5) billion; and operating income margin was 17.9% versus (15.9)% in the year-ago quarter. When adjusting for amortization, merger- and integration-related costs and other expenses, operating income was $7.1 billion versus $5.0 billion; and operating income margin was 16.8%, up 230 basis points from a year ago.

Fourth-quarter 2015 net income attributable to AT&T totaled $4.0 billion, or $0.65 per share, compared to a net loss of $4.0 billion, or $(0.77) per share, in the year-ago quarter. Adjusting for the $0.22 non-cash actuarial gain on benefit plans from the annual remeasurement process and $0.20 of costs primarily for merger- and integration-related items, earnings per share was $0.63 compared to an adjusted $0.56 in the year-ago quarter, an increase of 12.5%.

Reported cash from operating activities was $9.2 billion in the fourth quarter, and capital expenditures totaled $6.1 billion, or $6.8 billion when including purchases in Mexico with favorable payment terms. Free cash flow — cash from operating activities minus capital expenditures — was $3.1 billion.

Full-Year Results

For full-year 2015, compared with 2014 results, AT&T's consolidated revenues totaled $146.8 billion versus $132.4 billion, up 10.8% for the year. Operating expenses reflect actuarial gains and losses on benefit plans and were $122.0 billion compared with $120.2 billion, up 1.5%; net income attributable to AT&T was $13.3 billion versus $6.4 billion; and earnings per diluted share was $2.37, compared with $1.24.

With adjustments for both years, operating income was $27.7 billion versus $23.1 billion; operating income margin was 18.8% versus 17.5%; and earnings per share totaled $2.71, compared with $2.56, an increase of 5.9%.

AT&T's full-year reported cash from operating activities was $35.9 billion, up from $31.3 billion in 2014. Capital expenditures, including capitalized interest, totaled $20.0 billion, or $20.7 billion when including purchases in Mexico with favorable payment terms, versus $21.4 billion in 2014. Full-year free cash flow was $15.9 billion compared to $9.9 billion in 2014, a 60% increase. The free cash flow dividend payout ratio for the full year was 64%.

Outlook

AT&T provided long-term guidance following its acquisition of DIRECTV, and there is no change to that guidance. Specifically, in 2016, the company expects:

• Double-digit consolidated revenue growth

• Adjusted EPS growth² in the mid-single digit range or better

• Stable consolidated margins with ramp in Mexico investment

• Capital spending in the $22 billion range

• Fee cash flow growth with a dividend payout ratio³ in the 70s%

For detailed segment results, please go to the Investor Briefing and Financial and Operational Results on the AT&T Investor Relations website .

*¹ * Includes purchases in Mexico with favorable payment terms.

*² * Expected range excludes adjustments for non-cash mark-to-market benefit plan adjustments, merger integration costs and other adjustments that are not reasonably estimable at this time.

*³ * Free cash flow dividend payout ratio is dividends divided by free cash flow.

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.