Ladies and gentlemen, thank you for standing by and welcome to the AT&T second quarter 2017 earnings call. At this time, all lines are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. And as a reminder, this conference is being recorded. I'll now turn the conference over Senior Vice President, Investor Relations Michael Viola. Please go ahead, sir. Michael J. Viola - AT&T, Inc.: Okay. Thank you, Kathy, and good afternoon, everyone. Welcome to the second quarter conference call. Like Kathy said, I'm Mike Viola, Head of Investor Relations at AT&T. Joining me on the call today is John Stephens, AT&T's Chief Financial Officer. John is going to cover our results, and he'll also provide an update on technology and infrastructure as well as an update on Time Warner and the FirstNet process. And then we'll follow with a Q&A session. As always, our earnings materials are available on the new Investor Relations page of the AT&T website. That's going to include our news release, 8-K, investor briefing, associated schedules, et cetera. Before we begin, I'd like to call your attention our Safe Harbor statement that's on slide 2. The Safe Harbor statement says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties. Results may differ materially, and additional information is available on the Investor Relations website. So now let me turn the call over to AT&T's CFO, John Stephens. John J. Stephens - AT&T, Inc.: Thanks, Mike, and thank you all for joining us on the call today. Let's first look at our consolidated financial summary on slide 3. We included both a quarterly and a year-to-date view. While the second quarter provides a good snapshot, the year-do-date view…

Thank you. Our first question will come from Amir Rozwadowski with Barclays. Go ahead, please.

Hi, folks. John, I was wondering if we could chat a bit on the progress that you guys are seeing in bundling video and wireless. You folks saw a material reduction in postpaid phone-only churn. Is there any way to quantify how much benefit you've received from bundling DIRECTV NOW in those promotions? John J. Stephens - AT&T, Inc.: First of all, thanks for the question, Amir. I think the way to look at it, it's really as we displayed on slide five. You can see that overall reduction in the total postpaid phone churn, and you can see the dramatic improvement over the, if you will, two years since the merger. And in those two years, another major activity that's gone on is dramatically increased competition, pricing that's somewhat challenging, people giving away service for a year free. So I think that slide, that presentation, shows it. If you look up and see the details that we provided or the details I provided in my comments, it's pretty clear this ability to bundle, whether it be TV Everywhere, whether it's DTV NOW, whether it's the ability to get all of your video on your phone is making a huge difference.

Excellent, that's very helpful, and then just a quick follow-up, if I may. How should we think about the different puts and takes on the opportunity set for continuing to expand your margins? We continue to see improvement on wireless margins as a whole. It does seem as though there is an investment taking place on the video side with respect to DTV NOW, and then there is continued margin progress in the international operations. But if we think about the progress and the capabilities going forward, can you walk us through the opportunity set you still see going forward? John J. Stephens - AT&T, Inc.: Sure, let me go through it this way. On a longer-term view, we're going to continue to see wireless revenue opportunities in prepaid. We're going to continue to see them in connected devices. Quite frankly, for us we're going to continue to see real opportunity not only in the immediate future but over time in FirstNet and what it provides. So those will be very important. And quite frankly, when you have churn at these levels, if you can maintain it, it's a gift that keeps on giving with regard to revenues and margins. Secondly, if we think about this movement to equipment installment plans, we've essentially gone through that process and have completed that, which had some changes in our service revenue metrics. We've made it through the vast majority of that. So then you go through the next process we're going through with this move to unlimited, and we certainly have been through the higher dollar amounts, if you will, on the customer base by that because our customers are smart and they move quickly. And so that's occurred. Now we're going through the transition with more customers, some of which who…

Great, thanks very much for the incremental color. John J. Stephens - AT&T, Inc.: Sure.

Thank you. Our next question comes from Mike McCormack with Jefferies. Please go ahead.

Hey, guys. Thanks. John, maybe just a quick comment on the phone adds – phone losses rather on the postpaid side, a bit better than we were expecting there. But I was just thinking about the feature phone base generally. Is there a level at which you think the pressures will start to subside in a much more meaningful way and we can drive towards positive phone adds? And then maybe just a quick comment on the DIRECTV sub weakness you're seeing there. Obviously, you called out a few things. Where are those customers going? It seems like there's an investment in time and everything else to have the satellite put on the roof. Are these cord cutters, or are they moving to a cable offering? John J. Stephens - AT&T, Inc.: So let me take the first. First of all, Mike, and I don't want to be stirring turf (28:56) here, but AT&T added contract phone customers for the quarter because our postpaid phone adds in Mexico were positive 100,000 or more. And when you put those together with our domestic base, we were actually positive postpaid phone customers, just to clarify. On the domestic side, we did see significant improvement sequentially and year over year, over about 250,000 improvement sequentially and about 100,000 improvement in customer count year over year. And really we're seeing that from bundling of services and being able to put this video and other services together with it. So it's working well. As everyone knows, you saw it in the churn numbers. And the best customer is the one you've already got and the one you can hang on to, and that's the most efficient. With regard to feature phones, we are well through the process. I monitor, if you will, the percentage which…

And, John, just real quick on the NFL Sunday Ticket, obviously you're going to be coming up in the third quarter with NFL kicking off. Anything we can be expecting unique on the bundling with that particular product, whether it be with DIRECTV NOW or wireless or anything unique? John J. Stephens - AT&T, Inc.: Nothing to announce today, Mike.

Okay. John J. Stephens - AT&T, Inc.: It's a good question, but nothing to announce today, respectfully.

Okay. Thanks, John. John J. Stephens - AT&T, Inc.: Sure.

Thank you. Our next question comes from Phil Cusick with JPMorgan. Please go ahead.

Hi, John. Thanks. John J. Stephens - AT&T, Inc.: Hey, Phil.

First to follow up quickly, of the DTV NOW customers, how many of those are bundled with other products that you sell versus standalone? And are you reporting just paying customers, or is it all on the platform? And then second on FirstNet, with states that are opting in now, when could you start rolling out that new spectrum? And can you talk about the offer to public safety customers in those states? How do those compare to consumer prices? What should we be thinking about in terms of adds coming on as those FirstNet offers start to hit? Thanks. John J. Stephens - AT&T, Inc.: So the DTV NOW customer rates we're giving is paying customers that bundle with in many cases a large, large percentage of it, top of the head. But we can make sure we get that out appropriately in a post. But the vast majority of those are bundled with our wireless services. But as you know too, it gives us the opportunity. A significant amount of these, 50% or so are customers who have never had a paying video product before or haven't had a pay-TV product, so we're getting the opportunity to not only provide them video but provide them wireless, in some cases broadband, apartment dwellers and others. But we're counting paying customers, not promo customers. Secondly, we will have the capability to roll out the spectrum once the states opt in. The challenge will be to get the plans finalized and to incorporate the final agreements with the states on coverage and towers and build-out and some of the negotiated terms and make sure we have effective plans for those. But I would certainly expect that we will have the ability to start rolling out spectrum this year. Until the plans…

Okay. Thanks, John. John J. Stephens - AT&T, Inc.: Sure.

Thank you. And we'll go next to John Hodulik with UBS. Please go ahead.

Great, thank you. John, maybe first a quick question on the fall-off on the video side. How far through the involuntary churn on the DIRECTV satellite side do you think we are? And then with DIRECTV NOW, given the enhancements, the new content and the DVR, do you think you can get to a point where, given those two issues, you can start to see a blended video sub growth at some point? That's number one. And then maybe longer term, you guys have talked about a number of initiatives on this call, the spectrum deployment around 5G and FirstNet, edge computing, 14 million customer locations. And I know that SDN plays a role in this, but you spent $22 billion in CapEx it looked like this year, last year. Can you do everything you're talking about doing within that budget, or should we expect spending to ramp as we exit the year? Thanks. John J. Stephens - AT&T, Inc.: First and foremost, yes, I'd expect we can do it within those kinds of levels. I don't want to give guidance outside of this year, but I don't want to signal in any way, shape, or form any significant changes in CapEx. I certainly believe we can. I'll note to you that on the FirstNet side, there is a significant amount of efficiency that is achieved by doing this at once, all of the spectrum at once, all the tower climb, all the deployment and so forth. And then secondly, there's a significant co-pay from the FirstNet organization, $6.5 billion. So absolutely we're going to be in a position to do this. With regard to the video involuntary churn, I would expect we'll see some of this through the remainder of the year, and we would expect that it would…

Okay. Thanks, John. John J. Stephens - AT&T, Inc.: Sure.

Thank you. Our next question comes from Simon Flannery with Morgan Stanley. Go ahead, please. Simon Flannery - Morgan Stanley & Co. LLC: Great, thanks. Hi, John. John J. Stephens - AT&T, Inc.: Hi, Simon. Simon Flannery - Morgan Stanley & Co. LLC: On FirstNet, have you finalized how the accounting is going to work? You talked about the $6.5 billion co-pay. So how should we think about it? Is this is going to be grossed-up CapEx, how the puts and takes? I think you made some reference to a working capital impact maybe around the turn of the year. And then there were some media stories about potential org structures after the closing of Time Warner. Maybe you could just address that. Thank you. John J. Stephens - AT&T, Inc.: So let me just say this on the org structures. Randall Stephenson is still the Chairman and CEO of AT&T, and I expect him to do that for a long time. I don't expect any changes there before or after the Time Warner merger. With regards to the structure of the organization after Time Warner, I think Randall and Jeff Bewkes are going through that, working that process out. And I will definitely leave that to them I think to discuss. Oftentimes, stories are very premature. Those decisions are theirs, and we'll leave it at that. With regard to the FirstNet, what I expect that we would do is we would disclose the gross amount of CapEx we spend inclusive of FirstNet amounts, then show to the investment community the reimbursement amount that would be recorded – would be expected to be recorded as a, so to speak, contra-CapEx account or reducing the total amount because it's not a cash outflow. It will be a cash inflow to offset…

Thank you. Our next question is from Brett Feldman with Goldman Sachs. Please go ahead. Brett Feldman - Goldman Sachs & Co.: I'll go ahead and stick with the FirstNet theme. So thanks for taking the question. You talked a lot about the timing around starting to build out the network. With states already opting in and with you making your existing network available to the states, when can you actually start marketing the product and bring customers online? Essentially what has to happen between opt-in and going to market? And do you have any estimate for what the addressable market of incremental customers to your business could be over time? Thanks. John J. Stephens - AT&T, Inc.: So we can start selling into the states. We started making those sales calls right now into the states that have opted in, and they certainly have an organization that was already set up, already ready to run, so to speak, fully prepared to go in our Business Solutions organization, have a whole team ready to do that, and they've been working on it. So, if you will, those sales activities start now, and I will tell you the sales activities work with industry groups already. So that could involve already making contacts, meetings with sales pitches, maybe not specific proposals, but sales pitches to industry groups and departments across the country. So that's been a very active process. If you will, we haven't given out any specific numbers. I would tell you the opportunity is not only in the millions of potential customers out there with fire, police, safety, and other departments, but also quite frankly for all the related uses and whether we utilize this for a friends-and-family opportunity, whether we utilize this to sell smart cities, whether we utilize…

Thank you. Our next question is from David Barden with Bank of America. Please go ahead.

Hey, guys. Thanks for taking the questions. John, a question on ARPU, it was a noisier than normal quarter with the full quarter effect of the unlimited plus whatever benefits you're getting from tailwinds there, seasonal forces, the EIP migration. But the net of it was it picked up, and we saw one of those last year in the second quarter. I was wondering if you can unpack the moving parts and what we should expect to see that number potentially do over the course of the year, given where we are. And then the second, if I could, just a housekeeping item. I think, John, you called out two things, taxes and Brazil, as giving some tailwinds in the quarter that weren't normalized. If you could elaborate on those, that would be great. Thanks. John J. Stephens - AT&T, Inc.: So thanks, David. On Brazil, with regard to it, there was a Supreme Court ruling on a value-added tax matter that was not our case, but it was a case that we also had in front of them. It provided about – right around $60 million worth of benefit to us in the quarter. It's an item that we had been accruing and depositing cash for while we disputed it. We now determined that we should win that case based of the Brazil Supreme Court ruling, and we booked that through the international LatAm results. We did not receive the cash for that. But it is an item we had been accruing for some time. And the, if you will, expense pressures have been going through, some in 2017, but certainly the vast majority in prior years. So that was that call-out. That is really the major item. But in a company where you file 250,000 tax returns and…

Great. Thanks, John. John J. Stephens - AT&T, Inc.: Sure.

Thank you. Our next question is from Matthew Niknam with Deutsche Bank. Please go ahead.

Hey, guys. Thank you for taking the questions, just two, if I could. One on enterprise, particularly on the fixed side, you called out weakness in investment and some technology transitions. Just wondering if you can comment on what you're seeing on both the macro and competitive front. And then secondly on wireless upgrade rates, again you're at record lows. Maybe, John, just wondering if this is more of the new normal, or whether you're expecting maybe a bigger pickup later in the year given some pent-up demand? Thanks. John J. Stephens - AT&T, Inc.: Sure. So on the upgrade rates, you're right. They were low. They've been low for the six months. For the full year, I would suggest to you, I would expect a pickup in the second half of the year as new devices come out. But I would tell you once – and quite frankly, the longer we get through the equipment installment plan cycle, the more we get back to a normal level where there are enough phones that are three, four – whatever the term might be – years old and need to be replaced, whereas in the first couple of years the phones were still new, and so customers weren't necessarily needing to do it. Quite frankly, the transparency to customers with regard to what these things cost is impacting their decision-making. It's made it their pocketbook decision. While we would expect those to pick up in the second half of the year, and on overall basis, I wouldn't be surprised next year if it picks up from where it is today. But we would not expect it to go back to pre-equipment installment plan levels. I just wouldn't expect that to happen. For the rest of the year, predictions on what the…

Got it. Thanks very much, John. John J. Stephens - AT&T, Inc.: Sure.

Thank you. Our next question is from Amy Yong with Macquarie. Go ahead, please. Amy Yong - Macquarie Capital (USA), Inc.: Thanks. Maybe back to the bundle, can you talk about how adding content helps upsell your bundle, I guess specifically the HBO upsell that you started in April? And any early thoughts on what Time Warner brings, any proof points as to what content does for the bundle, and perhaps next steps to the deal and sticking points on conditions? Thank you. John J. Stephens - AT&T, Inc.: On the Time Warner deal, I won't talk about any sticking points to the transaction. We'll leave that for another day or to when we get it approved. I will make this comment with regard to – Time Warner has got great quality content. Everybody knows that. I think it's undisputed. And so that's going to be great for us to bundle with our products but also great for us to sell to others who may want to bundle their products. With regard to HBO, quite frankly, customers like it. Customers like the opportunity to have that with their phone. So we're just trying to provide what customers want. I would suggest to you – once again, I know this is simplistic, but the best proof we can give is the ability to look at that churn and see where that smartphone churn has gone, and knowing that a lot of that has to do particularly in this competitive environment. It's a very competitive environment, and why are people staying with us? I think in part it's because they like the ability to bundle, so we are seeing that quite well. Amy Yong - Macquarie Capital (USA), Inc.: Great, thank you. Michael J. Viola - AT&T, Inc.: Kathy, we'll take one more question.

All right, thank you. That will come from Tim Horan with Oppenheimer. Go ahead, please. Timothy Horan - Oppenheimer & Co., Inc.: Thanks, guys. Thanks, John. It sounds like out of region you want to go with a quad-play wireless product, obviously with DIRECTV. Any sense how long this might take? I know you've done a couple 5G trials, or maybe even can use LTE out of region. I know you said basically half the DIRECTV customers were not paying for TV before. Do you have a sense of maybe what percentage of the customers that are with DIRECTV NOW that are wireless-only? John J. Stephens - AT&T, Inc.: I don't know, so let me say this. You're hitting it right with the fact of the question of can we generally – I don't want to be on an absolute basis, but generally on a national basis, we use our wireless network starting with our LTE and LTE-LAA with carrier aggregation and so forth, can we provide a connection that would allow for sub (1:00:18) video transport? And we believe we can. The tests that we've done have shown that. Now those are just tests, they're trial markets, and we need to expand them. As you combine the FirstNet build with this, you get more opportunistic because you're going to be out in the network, and you can take advantage of that touches to do whatever else you need to do to improve those capabilities. Likewise, as we have talked about before, we are a big player in the CAF II funding, and are building a lot of that, and so there's a lot of other items to coordinate with FirstNet with our existing LTE network. We have the technology developments with, if you will, 5G Millimeter Wave, but yes,…

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and choosing AT&T Executive teleconference. You may now disconnect.