Item 8.01 Other Events.
Throughout this document, AT&T Inc. is referred to as "we" or "AT&T." AT&T is a
holding company whose subsidiaries and affiliates operate worldwide in the
telecommunications and technology industries.
On April 8, 2022, we completed the previously announced separation of our
WarnerMedia business. With the separation and distribution, the WarnerMedia
business met the criteria for discontinued operations in the second quarter of
2022. For discontinued operations, we also evaluated transactions completed
during 2021 that were components of AT&T's single plan of a strategic shift,
including dispositions that previously did not individually meet the criteria
due to materiality, and have determined discontinued operations to be comprised
of WarnerMedia, Vrio, Xandr and Playdemic Ltd. (Playdemic). These businesses are
reflected in our historical financial statements as discontinued operations,
including for periods prior to the consummation of the WarnerMedia/Discovery
transaction. The information below refers only to our continuing operations and
does not include discussion of balances or activity of WarnerMedia, Vrio, Xandr
and Playdemic.
Overview
We announced on July 21, 2022 that second-quarter 2022 income from continuing
operations totaled $4.8 billion, or $0.59 per diluted share. Second-quarter 2022
income per diluted share included amounts totaling to $(306) million (pre-tax),
or $(0.06) per share, resulting from the following significant items: $(0.06)
per share for the noncash restructuring and impairment charges, $(0.04) per
share from our proportionate share of DIRECTV intangible amortization, $(0.09)
per share of other charges, including the impact from the adoption of Accounting
Standards Update (ASU) No. 2020-06 (ASU 2020-06), partially offset by an
actuarial gain on remeasurement of our pension benefit plan assets and
obligations of $0.13. These results compare with a reported net income from
continuing operations of $6.0 billion, or $0.76 per diluted share, in the second
quarter of 2021, which reflects our retrospective adoption of ASU 2020-06.
Operating revenues in the second quarter of 2022 were $29.6 billion, down 17.1
percent from the second quarter of 2021, reflecting the impact of our divested
Video business (sold in the third quarter of 2021) and other businesses that did
not qualify as discontinued operations, and lower Business Wireline revenues.
The declines were partially offset by higher Mobility, and, to a lesser extent,
increased Mexico and Consumer Wireline revenues.
Operating expenses in the second quarter of 2022 were $24.7 billion, down 12.4
percent, driven by impacts from divested businesses. Partially offsetting the
decreases were increased Mobility costs, including wireless equipment, as well
as the impact of noncash restructuring and impairment charges and higher bad
debt expense.
Operating income in the second quarter was $5.0 billion compared to $7.6 billion
in the comparable 2021 period, and AT&T's second-quarter operating income margin
was 16.7 percent, compared to 21.2 percent in the comparable 2021 period.
Cash from operating activities from continuing operations in the second quarter
of 2022 was $7.7 billion, down $2.4 billion when compared to 2021, reflecting
higher payments for wireless devices, and the timing of collections on
receivables. Capital expenditures in the second quarter of 2022 were $4.9
billion, and when including $1.8 billion cash paid for vendor financing, capital
investment was $6.7 billion, compared to prior-year second quarter capital
investment of $5.0 billion (capital expenditures of $3.7 billion and vendor
financing of $1.3 billion).
Segment Summary
We analyze our segments based on segment operating income, which excludes
acquisition-related costs and other significant items. Our reportable segments
are: Communications and Latin America.
In the first quarter of 2022, we reclassified into "Corporate" certain
administrative costs borne by AT&T where the business units do not influence
decision making. The March 2022 recast of our historical results increased
Corporate operations and support expenses and correspondingly lowered
administrative expenses at the Communications segment and Video, with no change
on a consolidated basis.
Communications
Our Communications segment consists of our Mobility, Business Wireline and
Consumer Wireline business units.
Second-quarter 2022 operating revenues were $28.7 billion, up 2.0 percent versus
second-quarter 2021, with segment operating income of $7.2 billion, down 2.1
percent versus the year-ago quarter. The Communications segment operating income
margin was 25.2 percent, compared to 26.3 percent in the year-earlier quarter.
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Mobility
Mobility revenues for the second quarter of 2022 were $19.9 billion, up 5.2
percent versus the second quarter of 2021, driven by service revenue growth from
subscriber growth, and equipment revenue growth from higher priced smartphone
sales. Mobility operating expenses totaled $13.7 billion, up 6.1 percent versus
the second quarter of 2021 due to higher equipment costs, network costs, bad
debt expense, amortization of customer acquisition costs, HBO Max content costs,
FirstNet costs, and the elimination of CAF II government credits. Mobility's
operating income margin was 31.2 percent compared to 31.7 percent in the
year-ago quarter.
In our Mobility business unit, during the second quarter of 2022, we reported a
net gain of 6.6 million wireless subscribers. At June 30, 2022, wireless
subscribers totaled 203.4 million (including approximately 3.7 million FirstNet
connections) compared to 191.6 million at June 30, 2021.
During the second quarter, total phone net adds (postpaid and prepaid) were
1,009,000 with total net adds by subscriber category as follows:
•Postpaid subscriber net adds were 1,058,000, with phone net adds of 813,000.
•Prepaid subscriber net adds were 231,000, with phone net adds of 196,000.
•Reseller net adds were 21,000.
•Connected device net adds were 5.3 million, 2.8 million of which were primarily
attributable to wholesale connected cars.
For the quarter ended June 30, 2022, postpaid phone-only ARPU increased 1.1
percent versus the year-earlier quarter.
Postpaid phone-only churn was 0.75 percent compared to 0.69 percent in the
second quarter of 2021. Total postpaid churn was 0.93 percent compared to 0.87
percent in the year-ago quarter.
Business Wireline
Business Wireline revenues for the second quarter of 2022 were $5.6 billion,
down 7.6 percent versus the year-ago quarter, primarily due to lower demand for
legacy voice and data services, a strategic decision to deemphasize non-core
services and lower revenues from the government sector. Business Wireline
operating expenses totaled $4.9 billion, down 2.0 percent when compared to the
second quarter of 2021 due to ongoing operational cost efficiencies and lower
amortization of deferred fulfillment costs, partially offset by higher wholesale
access network costs and depreciation expense. Business Wireline operating
income margin was 12.7 percent compared to 17.7 percent in the year-earlier
quarter.
Consumer Wireline
Consumer Wireline revenues for the second quarter of 2022 were $3.2 billion, up
1.1 percent versus the year-ago quarter, driven by growth in broadband revenues
attributable to fiber growth, partially offset by declines in legacy voice and
data services and other services. Consumer Wireline operating expenses totaled
$2.9 billion, up 1.3 percent versus the second quarter of 2021, largely driven
by higher network and technology costs, the elimination of CAF II government
credit, and higher advertising, bad debt and depreciation expenses, partially
offset by lower amortization of deferred fulfillment costs. Consumer Wireline
operating income margin was 9.6 percent compared to 9.8 percent in the
year-earlier quarter.
At June 30, 2022, Consumer Wireline had approximately 13.8 million broadband
connections compared to 13.8 million at June 30, 2021. During the second
quarter, broadband subscriber net losses were 25,000, with fiber broadband net
adds of 316,000. Total broadband and DSL connections were 14.1 million at
June 30, 2022, compared to 14.2 million at June 30, 2021.
Latin America
Our Latin America segment consists of our Mexico business unit and is subject to
foreign currency fluctuations.
Revenues were $808 million, up 17.4 percent when compared to the second quarter
of 2021, primarily due to increased service revenues driven by growth in other
services and subscribers. Equipment revenues also increased due to higher sales.
Operating expenses were $890 million, up 8.9 percent, driven by higher equipment
sales, and increased bad debt and depreciation expense. Mexico's operating
income margin was (10.1) percent, compared to (18.8) percent in the year-earlier
quarter.
We had approximately 20.7 million Mexico wireless subscribers at June 30, 2022
compared to 19.0 million at June 30, 2021. During the second quarter of 2022, we
had postpaid net adds of 25,000 and prepaid net adds of 187,000.
CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Information set forth in this filing contains financial estimates and other
forward-looking statements that are subject to risks and uncertainties. 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 or revise statements contained in this filing based on new
information or otherwise.
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Item 9.01 Financial Statements and Exhibits.
The following exhibits are furnished as part of this report:
(d) Exhibits
99.1 AT&T Inc. selected financial statements and operating data.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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