at&t analyst and investor day

AT&T Analyst and Investor Day

2021

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. 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 and revise statements contained in this presentation based on new information or otherwise.

This presentation may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available in the appendix of this presentation and on the company’s website at https://investors.att.com.

AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary2


2021

John StankeyChief Executive Officer

GROWCustomer

Relationships

Investing in strategic growth –5G, Fiber, HBO Max

Committed to sustaining dividend at current levels

Utilizing cash after dividendsto reduce debt

Our Shared 2021 Priority

DeliberateCapital Allocation

Broadband connectivity5G, Fiber

Software-based entertainmentHBO Max

Fantastic storytellingIndustry leader for 2020 Emmy wins

Our Market Focus

Continued portfolio review –restructuring non-core assets

Investing to drive growth in existing and expanding markets


AT&T Communications

WarnerMedia

Jeff McElfresh

Jason Kilar

Financial Overview John Stephens & Pascal Desroches

Question & Answer Team



2021

Jeff McElfreshCEO, AT&T Communications

73.9

317.7

1.3

5.6

Jan-

15

May

-15

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

May

-17

Sep-

17

Jan-

18

May

-18

Sep-

18

Jan-

19

May

-19

Sep-

19

Jan-

20

May

-20

2020

Broadband data usage steadily increases, jumps with pandemic


8

39

78

280

8

18

28

38

48

58

2015

38% CAGR

Fixed

Mobile

Downlink

Uplink

2020

35% CAGR

2015

COVID-19 COVID-19

Fixed and Mobile Broadband Usage Per Sub (GB)

Uplink and Downlink Broadband Usage Per Sub (GB)

Source: AT&T Labs Outlook

Customer connectivity usage continues to accelerate

10 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary

Expected Monthly Usage (Terabytes)

0.04 0.200.3

1.5

0.9

4.6

2020 2025

10:1 ~5:1Down / Uplink

Percentiles

50th

10th

90th

Today Future

Mobile 11 50 GB

Connected devices 13 32 devices

Evolving use cases

4K Content AR / VR GamingConferencing

Video streaming 3 5 hours

Source: AT&T Labs Outlook

AT&T optimally positioned to meet customers’ connectivity needs

AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary

GamerLow latency / high bandwidth

Small BusinessSimple / transactional

Enterprise / Public SectorDistributed and remote workers

HomeHD streaming / simultaneous viewing

TravelHighly mobile, distributed

Young Adult / StudentWireless first, gamers

141M U.S. console gamers (>1 hour week)1

~31.7M small businesses2

~20K enterprises (>500 emp.)2 ~128M households

28M between ages 19 – 253

45K average daily flights4

Fixed Wireless

Sources: 1Number of Gamers worldwide link 2U.S. Small Business Administration, Office of Advocacy link 3KFF Population by age link 4Federal Aviation Administration link

11

https://cdn.advocacy.sba.gov/wp-content/uploads/2020/06/04144224/2020-Small-Business-Economic-Profile-US.pdf

https://www.kff.org/other/state-indicator/distribution-by-age/?dataView=1&currentTimeframe=0&selectedDistributions=adults-19-25&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

https://www.faa.gov/air_traffic/by_the_numbers/

Fiber is foundational


Wholesale

Macro Cell SitesIntegrated planning

+3M customer locations1

Symmetrical speeds

Multi-Gig capable

Enterprise

Small Business

Neighborhood

Small Cell Sites

1. In 2021, we are planning to increase our current fiber footprint by expanding to 3M customer locations in more than 90 metro areas

12

80

38

22

15

7

20

20

20

23

High

C-band

Mid

Low

Complemented by strong spectrum position

AT&T Spectrum Holdings (MHz)


93

72America’s Best Network1

Nation’s Largest Network2

Nationwide 5G

FirstNet

700

700DE

FN

800/850

PCS

AWS1

AWS3

WCS

C-band

173MhzMid-Band

1040High mmWave

1. GWS awarded AT&T Best Network OneScore 2020. GWS conducts drive tests for AT&T and uses the data in its OneScore analysis; 2. Based on overall coverage in U.S. licensed/roaming areas

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

COVID-19 Impact


Wireless: Growing subscribers and EBITDA

14

33.5%

Share of Net Adds

FAST. RELIABLE. SECURE.

UNLIMITEDYOUR WAYSM

1. Represents AT&T postpaid voice share; Source: Externally reported financial statements

Churn

0.76%

AT&T share1

1Q18

Nationwide 5GLaunched HBO Max “Best Deals

for Everyone”

Unlimited Your Way

FirstNet in AT&T Retail to verified responders

1st 5G connection

New Unlimited Plans launched

4Q20

Differentiated Offer

Symmetrical Speeds

Broadband: Growing fiber subscribers and revenue


1. Penetration is based on a percentage of eligible living units in fiber footprint

8.2M

14.5M

0123456789

1011121314151617181920 ARPU

$58

Penetration1

34%

LaunchedHBO Max

DIRECTV Build requirements met

1G Fiber Pricing

1Q18 4Q20

Customer Locations

Improved marginal

economics

14M+

8M+


Business: Simplified portfolio maintains solid margins

16

Business fiber foundation

Focus marketapproach

Secure Connectivity

Voice & Collaboration

Edge

WirelessFiber

Customer experience focus – consistency and simplicity


Net Promoter Score

2018 2020

Postpaid Wireless

Fiber

Net Promoter® Score Lift1

Unlimited Unlimited + HBO Max

OR Fiber

~20points

Unlimited + HBO Max

+ Fiber

~15points

~10points

~10points

1. Net Promoter® is a registered trademark of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld; Data reflects affinity customers with Auto Bill Pay

17

AT&T expects continued market momentum

Network Wireless Fiber Business


Deploy and optimize spectrum portfolio

Plan to expand fiber to 3M customer locations

Grow subscribers

Grow service revenue

Grow EBITDA

Grow subscribers

Grow revenue

Simplify portfolio

Maintain solid margins


2021

Pascal DesrochesSenior Executive Vice President, Incoming CFO

John Stephens Chief Financial Officer

2021 Consolidated financial guidance (unchanged from 4Q20 Earnings call)


Key Assumptions

Revenue Growth 1% range Wireless service revenue growth of ~2%

Gradual theatrical improvement in WarnerMedia

EPS – Adjusted1 Stable with 2020Modest Mobility EBITDA growth

Increased HBO Max investment

Cost transformation reinvested in growth

Gross Capital Investment2

Capital Expenditures

$21B range

$18B range

Focus on fiber and wireless densification

Expect ~$2B in vendor financing payments and ~$1B in FirstNet reimbursements

Free Cash Flow3 $26B range Total dividend payout ratio in the high 50’s% range

Long-Term Debt Management

Utilizing cash after dividends to reduce net debt

Continued portfolio review for asset monetization

1. The company expects adjustments to 2021 reported diluted EPS to include merger-related amortization of about $4.3 billion and other adjustments, a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. Based on historical results, we expect the mark-to-market adjustment which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be a significant item. Our 2021 EPS estimates depend on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between our non-GAAP metrics and the reported GAAP metrics without unreasonable effort. 2. Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes expected FirstNet reimbursements3. Free cash flow total dividend payout ratio is total dividends paid divided by free cash flow. Free cash flow is cash from operating activities minus capital expenditures. Due to high variability and difficulty in predicting items that impact cash from operating activities and capital expenditures, the company is not able to provide a reconciliation between projected free cash flow and the most comparable GAAP metric without unreasonable effort.

$56.3$52.1

2019 2020

$153.8 $147.3

2019 2020

AT&T financials proforma (video deconsolidation)


Revenue

$ in billions

Video Impact1

$171.8$181.2

Deconsolidation Impact(-7%)

Adjusted EBITDAVideo Impact1

EBITDA Margin

$54.5

$59.3

31.8%32.7%

Expect to close in 2H 21

Revenue trajectory improves ~100 bps

EBITDA margin improvement ~300 bps

1. Excludes commercial agreements between New DIRECTV and AT&T

~300bps higher

ex Video

AT&T near-term business expectations


BroadbandStrong fiber subscriber growth

Higher speed adoption

Continue to invest in fiber

Declines in traditional products

WarnerMediaStrong HBO Max subscriber andrevenue growth

Increased investment in HBO Max

Improved advertising demand

2H recovery in theatrical

Transformation

Latin AmericaWireless subscriber growth

Increase wholesale relationships

Expense management

Improved profitability in Mexico

2020 Pro Forma

Adj. EBITDAComposition1,2

Mobility58%

Business Wireline

19%

WarnerMedia17%

Broadband9% Latin America

1%

MobilityGrowing postpaid base, lower churn

ARPU stability

Cost savings from transformation

Business WirelineContinued migration to strategic services

Emphasize higher margin products

1. Pro Forma adj. EBITDA composition representation excludes -$2B Corporate / Other2. Excludes commercial agreements between New DIRECTV and AT&T

C-band auction purchase financing


$0.6B$1.0B

$0.3B

$2.5B

20242020 20222021 2023

$23.0B

AT&T gross spend of $27.4B

AT&T Estimated Payments1

$27.4B

Total

1. Includes accelerated payment and relocation cost estimates

Cash YE2020 $9.7B

Bank Term Loan $14.7B

Commercial paper issuance $6.1B

Total >$30B

$1.05/MHz-pop

Near-nationwide footprint of ~80 MHz

2021 Financing Sources

Free cash flow & disposition of

non-strategic assets

$177

$148

$11

~$154

$23 $6

Goal

Leverage during 2024 at ~2.50x or lower

2021: Net Debt Increases ~$6B for Spectrum Purchase

Continue to evaluate and divest non-core assets

No share retirements

Debt plan overview


$ in billions

EOY2020

NetDebt

Net Debt / Adj. EBITDA

Jun2018

~2.8x

Free Cash Flow1 less Dividends

Spectrum

~2.7x

Other Financing Activities2

EOY 2021

~3.0x

1. Free cash flow is cash from operating activities minus capital expenditures. Dividends represent expectation to sustain quarterly dividends at current levels and are subject to approval by the board of directors.2. Includes proceeds contingent upon closing the DIRECTV transaction

DTV proceeds2 -$8B

Other asset sales - $2B

Vendor financing / Other +$4B

Focus on value creation

Invest in Customer Growth

Revenue Growth

StableDividend


Broadband (5G, Fiber)

HBO Max

Cost Transformation

Efficiencies

Restructuringnon-core assets

Improved Profit Trajectory

ReducedLeverage

Upside Potential in Growth Areas

Expectations: Focused growth, sustainable dividend, debt reduction

Grow Customer Relationships

Investment in Growth

Deliberate Capital Allocation


120 – 150 M Global HBO + HBO Max YE 25

Grow wireless, fiber

5G, Fiber

HBO Max

Sustain dividend at current level

Reduce debt

Appendix

APPENDIX: Non-GAAP reconciliations


1. Other is comprised of the Mobility, Broadband and Business Wireline business units in the Communications segments, the WarnerMedia and Latin America segments and Corporate and Other. Income taxes, interest expense and other income (expense) – net are managed only on a total company basis and are, accordingly, reflected only in the consolidated results. 2. Represents transitions between Video and the WarnerMedia segment that were considered intercompany and eliminated prior to deconsolidation of Video. 3. Excludes commercial agreements between New DIRECTV and AT&T.

$

As Reported Video Other1 AT&T Video Other1 AT&TNet Income (3,821)$ 14,975$ Additions:

Income tax (benefit) expense 965 3,493 Interest Expense 7,925 8,422 Equity in net (income) loss of affiliates (95) (6) Other (income) expense - net 1,431 1,071

Operating Income 1,729$ 4,676$ 6,405 2,064$ 25,891$ 27,955 Depreciation and amortization 2,262 26,254 28,516 2,461 25,756 28,217

EBITDA 3,991$ 30,930$ 34,921$ 4,525$ 51,647$ 56,172$

Adjustments:Impairments 18,880$ 1,458$ Employee separation costs and benefit-related loss 1,177 624 Gain on spectrum transactions (900) - Merger adjustments 468 1,033 Adjusted EBITDA 54,546$ 59,287$

Revenue 28,610$ 143,150$ 171,760$ 32,124$ 149,069$ 181,193$

Adjusted EBITDA Margin 31.8% 32.7%

Pro Forma3

AT&T Revenue as Reported 171,760$ 181,193$ Less: Video (28,610) (32,124)

Add: WarnerMedia sales to Video2 2,459 3,092

Add: Xandr advertising sales to external customers2 1,718 1,672 Pro Forma Revenues 147,327$ 153,833$

AT&T Adjusted EBITDA 54,546$ 59,287$ Less: Video (3,991) (4,525)

Add: Xandr advertising sales to external customers2 1,565 1,518 Pro Forma Adjusted EBITDA 52,120$ 56,280$

Pro Forma Adjusted EBITDA Margin 35.4% 36.6%

2020 2019

Net Debt to Adjusted EBITDA1

Dec 31, 2020 Jun 30, 2018Adjusted Annualized EBITDA 54,546$ 63,414$

Total Debt 157,245 190,167 Less: Cash and Cash Equivalents 9,740 13,523

Net Debt 147,505 176,644 Net Debt to Adjusted EBITDA Ratio 2.70 2.79

1 As reported in AT&T's Form 8-K filed January 27, 2021 and July 24, 2018.

$ in millions

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