Updates Guidance Following FirstNet Award

• Consolidated revenues of $39.4 billion
• Operating income of $6.9 billion
• Net income attributable to AT&T of $3.5 billion
• Diluted EPS of $0.56 as reported and $0.74 as adjusted, compared to $0.61 and $0.72 in the year-ago quarter
• Cash from operations of $9.2 billion
• Free cash flow of $3.2 billion

• 2.7 million wireless net adds

  • 2.1 million U.S., driven by prepaid and connected devices
  • 633,000 Mexico

• U.S. wireless first-quarter results:

  • Best-ever first-quarter postpaid phone churn of 0.90%
  • Wireless postpaid churn of 1.12%, including pressure from tablets
  • Strong operating margin of 30.1%; best-ever EBITDA margin of 41.8%; EBITDA wireless service margin of 49.3%

• Entertainment Group first-quarter results:

  • Strong broadband gains with 242,000 IP broadband net adds; 115,000 total broadband net adds
  • 4.6 million AT&T Fiber customer locations with plans to add 2 million in 2017
  • DIRECTV NOW gains help offset linear TV subscriber decline

Note: AT&T's first-quarter earnings conference call will be webcast at 4:30 p.m. ET on Tuesday, April 25, 2017. The webcast and related materials will be available on AT&T’s Investor Relations website at www.att.com/investor.relations .

DALLAS, April 25, 2017 — AT&T Inc. (NYSE:T) today announced continued adjusted margin expansion and solid adjusted earnings growth for the first quarter. The quarter also was marked by several decisive strategic moves that helped broaden the company’s spectrum portfolio.

“In a very competitive quarter, we continued to execute on our goals of driving efficiencies in our business while growing adjusted earnings per share. But just as important, the strategic moves we’ve made over the last few months to expand our wireless capacity and fortify our 5G leadership will be felt for years to come,” said Randall Stephenson, AT&T Chairman and CEO. “FirstNet gives us access to 20 megahertz of valuable, low-band spectrum and allows us to deploy our spectrum assets more efficiently as we build a high-quality, mobile broadband network for our first responders. And our planned acquisitions of Fiber Tower and Straight Path will add valuable millimeter wave spectrum assets to our 5G tool kit as we lead the way to the next generation of wireless technology.”

Consolidated Financial Results

AT&T's consolidated revenues for the first quarter totaled $39.4 billion versus $40.5 billion in the year-ago quarter, primarily due to record-low equipment sales in wireless. Compared with results for the first quarter of 2016, operating expenses were $32.5 billion versus $33.4 billion; operating income was $6.9 billion versus $7.1 billion; and operating income margin was 17.4% versus 17.6%. When adjusting for amortization, merger- and integration-related and other items, operating income was $8.2 billion versus $8.1 billion; and operating income margin was 20.7%, up 80 basis points versus the year-ago quarter.

First-quarter net income attributable to AT&T totaled $3.5 billion, or $0.56 per diluted share, compared to $3.8 billion, or $0.61 per diluted share, in the year-ago quarter. Adjusting for $0.18 of costs for amortization, merger- and integration-related and other items, earnings per diluted share was $0.74 compared to an adjusted $0.72 in the year-ago quarter.

Cash from operating activities was $9.2 billion in the first quarter, and capital expenditures were $6.0 billion. Free cash flow — cash from operating activities minus capital expenditures — was $3.2 billion for the quarter.

Updated 2017 Outlook

The company is updating its 2017 guidance. On a business as usual basis without the impact of Time Warner, AT&T expects:

• Adjusted EPS growth in the mid-single digit range
• Adjusted operating margin expansion
• Capital expenditures in the $22 billion range
• Free cash flow in the $18 billion range

The company is no longer providing consolidated revenue guidance primarily due to the unpredictability of wireless handset sales.

Adjustments include non-cash mark-to-market benefit plan gain/loss, merger integration and amortization costs and other adjustments. Traditionally, the mark-to-market adjustment is the largest item, which is driven by interest rates and investment returns that are not reasonably estimable at this time. We expect amortization to be lower in 2017 compared to 2016.