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 separation of our WarnerMedia business and
recast historical financial results to present WarnerMedia and other business
dispositions that were components of AT&T's single plan of a strategic shift as
discontinued operations. The discussion below refers to our continuing
operations and includes the results of the U.S. Video business that was
separated in July 2021.
Overview
We announced on January 25, 2023 that fourth-quarter 2022 loss from continuing
operations totaled $(23.1) billion, or $(3.20) per share. Fourth-quarter 2022
loss per share includes amounts totaling to $(29.4) billion (pre-tax) resulting
from the following significant items (per share): $(3.57) of noncash impairment
and abandonment, and restructuring charges, $(0.19) of actuarial losses on
remeasurement of our pension and postemployment benefit plan assets and
obligations, $(0.04) of DIRECTV intangible amortization, $(0.04) of other
benefit related market-driven adjustments, partially offset by $0.04 of benefits
from tax items. The dilutive impact of $(0.01) from our adoption of Accounting
Standards Update (ASU) No. 2020-06 (ASU 2020-06), was not included in our
computation of earnings per share because their effect is antidilutive as a
result of the net loss. The results compare with a reported income from
continuing operations of $5.2 billion, or $0.66 per diluted share, in the fourth
quarter of 2021, which included $0.11 per share primarily related to actuarial
gains and $(0.01) per share from our retrospective adoption of ASU 2020-06. For
the full year 2022, loss from continuing operations was $(6.9) billion versus
income from continuing operations of $23.8 billion in 2021. Full-year 2022 loss
per share was $(1.10) and included the following significant items (per share):
$(3.59) of noncash impairment and abandonment, and restructuring charges,
$(0.16) of DIRECTV intangible amortization, $(0.19) of other benefit related
market-driven adjustments, partially offset by $0.20 of actuarial gains and
$0.13 of benefits from tax items. The dilutive impact of $(0.06) from our
adoption of ASU 2020-06, was not included in our computation of earnings per
share because their effect is antidilutive as a result of the net loss.
Full-year 2021 diluted earnings per share was $3.02 and included $0.42 per share
of actuarial gains, tax and other significant items, $0.22 per share from U.S.
Video and other dispositions and $(0.03) from the retrospective adoption of ASU
2020-06.
Operating revenues in the fourth quarter of 2022 were $31.3 billion, up 0.8
percent from the fourth quarter of 2021, and full-year 2022 revenues were $120.7
billion, down 9.9 percent from the previous full year. Revenue increases reflect
growth in Mobility and increased Mexico and Consumer Wireline revenues,
partially offset by lower Business Wireline revenues. Full-year 2022 revenue
declines reflect the impact of our divested U.S. Video business and other
businesses that did not qualify as discontinued operations.
Operating expenses in the fourth quarter of 2022 were $52.4 billion, compared to
$26.2 billion in the comparable 2021 period, and full-year 2022 operating
expenses were $125.3 billion, up 15.9 percent from the previous full year.
Operating expenses increased primarily due to $24.8 billion of noncash goodwill
impairments associated with our Business Wireline, Consumer Wireline and Mexico
reporting units, which were driven by higher discount rates consistent with the
macroeconomic environment, with secular declines also impacting Business
Wireline forecasted cash flows. Expenses also included $1.4 billion of wireline
conduit asset abandonments and $0.5 billion of restructuring and other
impairment charges. Also contributing to expense increases were higher bad debt
expense and increased depreciation, partially offset by lower wireless equipment
costs from lower volumes and the lack of 3G network shutdown costs in the fourth
quarter of 2022. Full-year 2022 expenses increases were partially offset by the
impact of our divested businesses.
Operating loss in the fourth quarter of 2022 was $(21.1) billion compared to
income of $4.9 billion in the comparable 2021 period, and full-year 2022
operating loss was $(4.6) billion compared to income of $25.9 billion for the
full-year 2021. AT&T's fourth-quarter operating income margin was (67.3)
percent, compared to 15.7 percent in the comparable 2021 period, and full-year
2022 operating income margin was (3.8) percent compared to 19.3 percent.
Other income (expense) - net in the fourth quarter of 2022 was $(0.9) billion
compared to $2.4 billion in the comparable 2021 period and full-year 2022 other
income (expense) - net was $5.8 billion compared to $9.4 billion for the
full-year 2021. The decrease reflects a $1.8 billion actuarial loss on pension
and postretirement benefits in the fourth quarter of 2022 versus a $1.1 billion
gain in the prior-year quarter. Fourth-quarter 2022 benefit expense also
included approximately $140 million favorable impact from a retirement benefit
plan change, with $115 million resulting from prior service credits from benefit
plan amendments. The full-year decrease reflects a $2.0 billion actuarial gain
on pension and postretirement benefits versus a $4.1 billion gain in the
prior-year.
Cash from operating activities for the full-year 2022 was $35.8 billion, down
$1.4 billion when compared to 2021, reflecting higher payments for wireless
devices and the separation of U.S. Video in 2021, partially offset by receivable
sales. Capital expenditures in 2022 were $19.6 billion, and when including $4.7
billion cash paid for vendor financing, capital investment was
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$24.3 billion, compared to prior-year capital investment of $20.1 billion
(capital expenditures of $15.5 billion and cash paid for vendor financing of
$4.6 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.
Communications
Our Communications segment consists of our Mobility, Business Wireline and
Consumer Wireline business units.
Operating revenues for the fourth quarter of 2022 were $30.4 billion, up 0.5
percent versus fourth-quarter 2021, with segment operating income of $7.2
billion, up 12.7 percent versus the year-ago quarter. The Communications segment
operating income margin was 23.8 percent, compared to 21.2 percent in the
year-earlier quarter. We present the impact of benefit plan amendments in our
business unit results, with the Communications segment operating income margins
including $115 million of operating expense reduction, with offset in Corporate
and no impact to consolidated operating income.
Mobility
Mobility revenues for the fourth quarter of 2022 were $21.5 billion, up 1.7
percent versus the fourth quarter of 2021, driven by service revenue growth from
subscriber and ARPU growth, partially offset by lower equipment revenue from
lower volumes. Mobility operating expenses totaled $15.5 billion, down 2.3
percent versus the fourth quarter of 2021 due to lower wireless equipment costs,
including the absence of 3G network shutdown costs versus the fourth quarter of
2021, a gain on tower sales, lower advertising costs and lower HBO Max licensing
fees. Partially offsetting the decreases were higher bad debt expense, increased
amortization of customer acquisition costs and the elimination of CAF II
government credits. Mobility's operating income margin was 28.1 percent compared
to 25.2 percent in the year-ago quarter.
In our Mobility business unit, during the fourth quarter of 2022, we reported a
net gain of 6.4 million wireless subscribers. At December 31, 2022, wireless
subscribers totaled 217.4 million (including approximately 4.4 million FirstNet
connections) compared to 201.8 million at December 31, 2021.
During the fourth quarter, total phone net adds (postpaid and prepaid) were
643,000, with total net adds by subscriber category as follows:
•Postpaid subscriber net adds were 1.1 million, with phone net adds of 656,000.
•Prepaid subscriber net losses were 9,000, with phone net losses of 13,000.
•Reseller net adds were 150,000.
•Connected device net adds were 5.1 million, 2.6 million of which were
attributable to wholesale connected cars.
For the quarter ended December 31, 2022, postpaid phone-only ARPU increased 2.5
percent versus the year-earlier quarter.
Postpaid phone-only churn was 0.84 percent compared to 0.85 percent in the
fourth quarter of 2021. Total postpaid churn was 1.01 percent compared to 1.02
percent in the year-ago quarter.
Business Wireline
Business Wireline revenues for the fourth quarter of 2022 were $5.6 billion,
down 4.5 percent versus the year-ago quarter, primarily due to lower demand for
legacy voice and data services and product simplification, partially offset by
growth in connectivity services and revenues of approximately $90 million from
intellectual property sales. Business Wireline operating expenses totaled $4.8
billion, down 3.8 percent when compared to the fourth quarter of 2021 due to
ongoing operational cost efficiencies, credits from a benefit plan change in the
third quarter of 2022, and lower amortization of deferred fulfillment costs,
partially offset by higher wholesale access network costs and depreciation
expense. Business Wireline operating income margin was 14.2 percent compared to
14.8 percent in the year-earlier quarter.
Consumer Wireline
Consumer Wireline revenues for the fourth quarter of 2022 were $3.2 billion, up
2.2 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, down 3.5 percent versus the fourth quarter of 2021, largely driven
by lower network and customer support costs, decreases in advertising expense
and HBO Max licensing fees, and credits associated with a retirement benefit
plan change in the third quarter of 2022. Partially offsetting the decreases was
the elimination of CAF II government credits, higher bad debt expense and
increased depreciation expense. Consumer Wireline operating income margin was
11.6 percent compared to 6.4 percent in the year-earlier quarter.
At December 31, 2022, Consumer Wireline had approximately 13.8 million broadband
connections compared to 13.8 million at December 31, 2021. During the fourth
quarter, broadband subscribers net losses were 43,000, with fiber broadband net
adds of
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280,000. Total broadband and DSL connections were 14.0 million at December 31,
2022, compared to 14.2 million at December 31, 2021.
Latin America
Our Latin America segment consists of our Mexico business unit and is subject to
foreign currency fluctuations.
Fourth-quarter 2022 operating revenues were $861 million, up 22.3 percent when
compared to the fourth quarter of 2021, primarily due to increased service
revenues driven by wholesale revenue and subscribers, higher equipment revenues
and the favorable impact of foreign exchange. Operating expenses were $940
million, up 14.5 percent, driven by higher equipment, sales and customer support
costs, and unfavorable impact of foreign exchange and network expense. Mexico's
operating income margin was (9.2) percent, compared to (16.6) percent in the
year-earlier quarter.
We had approximately 21.6 million Mexico wireless subscribers at December 31,
2022 compared to 20.4 million at December 31, 2021. During the fourth quarter of
2022, we had prepaid net adds of 515,000 and postpaid net adds of 71,000.
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
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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