Ladies and gentlemen, thank you for standing by and welcome to the AT&T third 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 would now like to turn the conference over to our host, Michael Viola, Senior Vice President, Investor Relations. Please go ahead, sir. Michael J. Viola - AT&T, Inc.: Okay, thank you, Kathy, and good afternoon, everyone. Welcome to our third quarter conference call. I'm Mike Viola, Head of Investor Relations for AT&T. Joining me on the call today is John Stephens, AT&T's Chief Financial Officer. John is going to cover the third quarter results and then provide several business update. And we'll follow that with Q&A. As always, our earnings materials are available on the Investor Relations page of the AT&T website. That includes our news release, our 8-K, investor briefing, associated schedules. Now before we begin, I'd like to call your attention our Safe Harbor statement. That's on slide 2. The Safe Harbor statement says some of the comments today may be forward-looking. As such, they're subject to risks and uncertainties. Results may differ materially, and additional information is always available on the Investor Relations website. And so with that, I now would like to turn the call over to AT&T's CFO, John Stephens. John J. Stephens - AT&T, Inc.: Thanks, Mike, and thanks for everyone for joining us on the call today. Our financial summary is on slide 3. Before we get to the results, this was an unprecedented quarter when it comes to natural disasters. Hurricanes pounded Texas and Florida and caused historic damage to Puerto Rico and the U.S. Virgin Islands, and earthquakes and…

All right, thank you. Our first question will come from John Hodulik with UBS. Go ahead, please.

Great, thanks, a couple of questions on the wireless market. First, John, service revenues have been accelerating – or the decline has been accelerating for the last couple of quarters, but the sub trends have improved a bit. Can you talk a little bit about whether we should expect to see that line stabilize – the service revenues that is? And then talk a little bit about the competitive environment here in wireless as we head into the iPhone X launch. Do you think that's going to drive volumes and drive more promotions? Just what you're seeing in the market would be great. Thanks. John J. Stephens - AT&T, Inc.: So, John, let me take the first question. First of all when we came out with Unlimited – when Unlimited came out in the plans, we've got really smart customers, very direct, very simply we have real smart customers. Those that had overages quickly went to the Unlimited, and that's what generated some of the service revenue pressure. It's also generated high satisfaction and low churn, but it did generate some of the service revenue pressure. What we're also expecting is that some of the customers on some less expensive bucketed plans will buy up to the Unlimited plans and generate some revenue increases for those customers for us. That will come over time as data usage increases, as the capabilities of our network continue to improve and as well as customers use them. So we would expect that step-up and customer count step-ups to help service revenues going forward. Secondly, as you've seen in our reseller business, we have chosen not to pursue some reseller accounts and to make sure we kept capacity available for our business. It was a better use of it for our smartphone customers than for reseller customers. And so we saw some pressure this year from reseller revenues. We'd expect that to ebb as we go into 2018 and improve. So from both those perspectives, there's some optimism on service revenues and changing in that trend. With regard to the competitive environment, so far we've seen some rational activity through the iPhone 8 launch and most recently the activities that are going on, so we're optimistic. We're certainly ready. And as you can see, our margins are very solid and the performance has been great. But we believe we can compete and win based on our product offerings and that promotional activity of an extensive nature is not necessary.

Got it, great. Thanks, guys. John J. Stephens - AT&T, Inc.: Sure. Thank you, John.

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

Hi, John. Thanks. I wonder if we can talk about the video strategy. First, I guess the comment that traditional TV will improve in the fourth quarter, is that from typical seasonality, or do you plan to promote even more aggressively? Because it seems like you guys have been pretty aggressive for the last few months. John J. Stephens - AT&T, Inc.: So based on what we see in the marketplace, what our marketing studies tell us, it's also based on getting through the losses. About half the losses, or just under half the losses this quarter were from involuntary churn because we tightened our credit policies. They were from the storms and the customers that we lost because of the storms that we just did not – that we took off the rolls, because those houses were gone and so forth. And also because on the gross add basis, when we tightened credit policy, we shifted some of those gross adds towards DTV NOW as opposed to the linear. We see those impacts easing in the fourth quarter, as we also see some opportunities to grow the net add numbers – or improve, I should say, the net add numbers. I wouldn't suggest it's from a significant change or movement in our competitive process or offerings or promotions. It's just what we are seeing in the marketplace. As I say, one of the key things is that the unusual or high nature of this quarter's losses had to do with some management decisions with regard to credit metrics and cleaning up some involuntary churn matters.

Okay. And then if I can follow up, maybe the DIRECTV NOW side, how many of the new customers came in on that $10 add-in? I was surprised that 700,000 of those customers are new to AT&T. And so that would indicate that it didn't impact churn that much. So has this been more of a gross add engine than a retention engine? John J. Stephens - AT&T, Inc.: It has been more of a gross add engine, more than – I don't think we're giving out details, but I'll say this. More than half of those customers, for example, are not bundled with our wireless service. That's a real opportunity for us going forward, but they're not as of today. And I think 700,000 of the 800,000 are new, what I would call new to AT&T, so this is definitely that opportunity. We think as we look at it, of the customers that we have coming in, about half of them come from our competitors, switching off a paid TV service from our competitors. The other half – 10% or so come from ourselves, migrating from one of our services, U-verse or DTV. But the rest of it are cord-nevers or the MDU news (30:29), just a variety of opportunities that we had not previously tapped into. I would suggest to you, though, going forward, we may more assertively utilize this for calls into our call centers for the full DTV. For those customers of a certain credit quality, we might look to push them or move them towards DTV NOW, just like we've done in the past with our successful offering of prepay, where we've looked to make sure that we have value-conscious customer offerings in both wireless on the prepaid side and in the DTV NOW offering on the video side.

Okay, so you're seeing customers call up for existing DTV customers and moving to NOW, but that's only about 10% of NOW. John J. Stephens - AT&T, Inc.: Not extensively. You're right, what you just said is right generally. 10% of those customers we don't think of as a significant level at this current time. But yes, it was about 10% or so.

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

Thank you. Our next question is from Amir Rozwadowski with Barclays Capital. Please go ahead.

Thank you very much. John, I wonder if we can continue on discussing the video business a bit. If we think about the margin pressure we've seen on a year-over-year basis, one would assume that's due to some of the traditional video offers that you mentioned, and also the transition increasingly to an OTT-centric business model. How should we think about the margin trajectory for the business going forward? You had mentioned that there are some new service launches going forward, the opportunity set around advertising, so I would love to hear your thoughts around that. John J. Stephens - AT&T, Inc.: So on a long-term basis, when we come out with the new platform early in 2018, think about the opportunity on DTV NOW to get pay-per-view events, whether they be movies or some of the other events that are out there. Think about being able to provide features like cloud DVR, additional streams. And with all those opportunities go additional opportunities to raise revenues, and revenues that customers would be willing to pay for and improve the quality of the service. That gives us – that's how we're thinking about it long term. In addition, the ability to get the data insights, to learn about what customers are watching, what's necessary, will help us put together new packages and packages more directed towards what customers -we think that will help us take market share and also help improve the financial results as we structure those packages. And then third, all those data insights, whether it's information we take to improve our own marketing, we have a large marketing budget here. And if we could take that data insight and get that information and make it more effective, that's a huge opportunity for us for a company of our size, as well as selling digital ad insertion and doing digital advertising on the DTV NOW platform in selected situations. We believe that that is an opportunity. So those are all the things that we look to as we, more importantly, build this platform and get the volume base of this platform up as we approach – approaching 1 million customers here, as we close out the quarter 800,000, and then building on that and having the scale to effectively do these other things. That's how we're thinking about it on a long-term basis. I will tell you the quarter – your comment, Amir, on the video losses did affect the margins for the quarter is correct. The NFL coming out on a sequential basis, this being the NFL season, affects them. But I can also tell you we continue to spend money on platforms and improvement of the DTV NOW as well as our other activities. And so that as well as promotional activities also had an impact on margins, just to complete that story.

That's helpful, and then one question on the mobile side of the business. If we look at your year-over-year declines in phone-only net adds are easing, how should we think about the prospects for returning to growth, particularly as your smartphone base continues to expand? John J. Stephens - AT&T, Inc.: So on postpaid, we're growing customer base. If you look at postpaid phones, if you take out the feature phone losses, we're essentially at flat or slight growth. So if you think about it from that way, we believe that we are getting to that turning point when you – the reason for the slide that shows that 92% of our phones are smartphones comes down to the fact that our flow share on smartphones versus feature phones is about 95%. That differential used to be about 10 percentage points or 1,000 basis points. It's down to about 300 or 3%, so we're getting to that point. That leaves us – provides us great optimism about the health of the business and about moving it forward. And when you put on top of that the margins we're seeing, we're really encouraged. The bundling strategy, the video bundling with DTV is working, and we'll continue to use good judgment in providing customers what they want. But that's how I think about the mobile business. It's really quite stunning results when you think about EBITDA margins, EBITDA service margins, churn. It's really quite encouraging.

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

Thank you. We'll go next to Simon Flannery with Morgan Stanley. Please go ahead. Simon Flannery - Morgan Stanley & Co. LLC: Thanks a lot, good afternoon. John, can you talk a little bit about 5G in more detail? You've got a number of trials going on. It looks like you're basically committing to a nationwide rollout here. So how are the trial results going, and how should we think about the shape of your deployment 2018, 2019, and 2020? It looks like you're increasing your locations, the high-speed locations 20 million, 8 million of those come from fiber. The balance of 12 million is I guess a mix of some of the things you describe, but it seems like 5G is going to be a big part of that. So talk us through what we've seen so far that gives you the confidence. And then what's the shape of that and the investment over the next couple of years? Thanks. John J. Stephens - AT&T, Inc.: So we've done a couple of test overlays – more than a couple, a large number. We used LTE-LAA and other capabilities in our network out in San Francisco and got 750-meg speeds on the tests we did out there. Even if you take 10% of that to be normal fully loaded network speeds, you'd still have 75-meg speeds. We think that's pretty tremendous. We did a testing in Austin too, one in the same base where we combined carrier aggregation, MIMO, I think we used LTE-LAA there. And when we did that, we had phenomenal speeds, even I think as good if not better than we had in San Francisco. In addition, we did a millimeter wave, 28-gig millimeter wave test there and got a point-to-point test over 1-gig speed. So all…

Thank you. Our next question is from Vijay Jayant with Evercore ISI. Please go ahead.

Good afternoon, it's James Ratcliffe for Vijay., two if I could. First of all on targeted advertising, I understand in theory how you would target ads in the platforms you control. Can you talk about what the opportunity to target ads or improve CPMs is on the portion of TWX viewing that doesn't come over DIRECTV platforms? And secondly, any thoughts regarding potential consolidation in the satellite business, now that you're fully into DIRECTV? It seems like the DIRECTV satellite business is likely to be shrinking over time. Thanks. John J. Stephens - AT&T, Inc.: No comment on the satellite business. With regard to the advertising opportunity set, let me say this. With the data insights we have off of our satellite-delivered video, off our wireline or IP video, off our wireless-delivered content, and over our broadband networks, we have extensive data. We can now marry that with a data insights business capability that we've been building over four years, a big data company. We're now hiring those quality resources under Brian Lesser to get the quality and the talent that knows this business and takes this business and develops the products and services that we'll be able to first, quite frankly, use internally. We are a very large advertiser, if not the largest in the United States. And so the efficiency opportunity of taking this new information and using it effectively is enormous inside our four walls. But secondly, that also helps us with marketing activities. It helps us with efficiency in choosing content, making content choices, even marketing our programs, our films and so forth, because we have that knowledge. That's all internal and that's a very big deal. But if you think about the ad impressions that come over with Time Warner and add those to the impressions that we have on our network, they are literally, literally in the billions. If you want a proof point insight that's out there, you can just look at our advertising business, and it's growing in double digits. And that's from the initial use here of addressable advertising focus with some additional data. I'd suggest to you that's, if you will, the best way to think about it and the way to analyze it. If we could get those kinds of advertising revenues that we are getting on the DTV and U-verse IP platform growth on the Time Warner business, that would be very, very good. And that's just if we can, but I'm not going to give you specific targeted numbers. But I would suggest to you the indications are that this can be effective based on what we've seen in our Ad Tech business and our Entertainment group on the advertising side.

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

Thank you. Our next question is from Brett Feldman with Goldman Sachs. Please go ahead. Brett Feldman - Goldman Sachs & Co. LLC: Thanks, a couple follow-up questions around the broadband strategy that you outlined. I'll go slow here. You're talking about getting to delivering competitive speeds to 50 million customer locations. How many customer locations do you currently deliver those types of competitive speeds to? So in other words, how much do you think you're expanding your addressable market through the project? And then just along with that, can you break that down at all between in-footprint versus out-of-footprint? I've got to imagine some of that is outside your traditional footprint. And then the last part of it would be you have to do 12.5 million fiber locations. Is that where you're going to stop, or do you think of that 50 million, maybe more than 12.5 million will ultimately be served by fiber? Thank you. John J. Stephens - AT&T, Inc.: Sure. Sure, Brett. Let me try to answer this as directly as possible. First of all, we're going to do the 12.5 million because we committed to do that and we're on track and we're ahead of that schedule. Secondly, because of the way the 12.5 million is counted – and there are some limits on greenfield build, there are some limits on overbuild of existing capabilities and so on and so forth, I'd suggest when we're done with that we're going to be closer to 14 million. And I'm using that as a rounded number, but let's call it 14 million on that fiber-to-the-prem. Secondly, we're right now at about 8 million business customer locations, business locations that either have fiber that's active in their buildings or within the industry-standard 1,000 feet where it's very effective…

Thank you. And we now have a question from David Barden with Bank of America. Please go ahead.

Hi, guys. Thanks for taking the questions. I guess two, if I could. John, just a higher-level question, I think a lot of people who watched your go-to-market evolution over the course of the summer and are looking at these results here would say that it appears that you've been willing to make an investment on the entertainment and video side, perhaps at a loss, in order to try to create a gain on the wireless side in terms of improved postpaid phone net adds, margin, churn, et cetera. And I guess if that's accurate, I'm wondering if you could grade yourself. How happy are you now with what you've achieved? And then is this the strategy that you want to keep doing at the rate at which you're doing it on a go-forward basis, thinking ahead to Time Warner? And then the second question would be Business Services obviously is down year over year. But if you look first quarter to second quarter to third quarter, it's actually been pretty stable across the fixed line side of the house. So I was wondering if you could talk a little bit about if we've found a plateau in that, or if we should see some drop-off as other forces are at work. Thanks. John J. Stephens - AT&T, Inc.: So let me take the last one first. We are starting to see some green shoots with regard to the pricing activity in-business. I'd suggest to you that there's more to come, but we are starting to see that. We continue to be optimistic about our product portfolio. We have a challenging business because we've got a lot of legacy voice and legacy analog data. But we continue to be convicted with regard to – and convinced that our IP-based products…

And, John, if I could, just a very quick follow-up, so just to be clear, so when you bundle a $10 DTV NOW package that maybe has, many estimate, $30 or slightly higher in terms of content cost, that $20 a month that you're investing to subsidize that DTV NOW product, you're seeing the financial returns on the wireless side. John J. Stephens - AT&T, Inc.: Our wireless customers are really valuable in the extension of their life through the lowering of their churn, and the ability to get entire families or entire groups of phones is really important to us. And so we strongly believe that that is value-accretive to the total operations of the total organization, and we monitor it on a very regular basis. I will tell you, though, to make sure we have a – going back to a comment I think that Phil may have asked me about, and that is remember, these DTV NOW customers, much of them are new to us. And so not only do we have that new customer on the video side, but now we're going to get the opportunity to potentially get their wireless business and to potentially get their broadband business if we're in a position to do that. So we're very encouraged about that kind of opportunity that goes the other way, but we are convicted in the business proposition.

Perfect. Thanks, John. John J. Stephens - AT&T, Inc.: Thank you.

Thank you. Our next question is from Frank Louthan with Raymond James. Go ahead, please. Frank Garreth Louthan - Raymond James & Associates, Inc.: Great, thank you. Thank you very much. Can you give us an idea of your longer-term trends on the prepaid and on the wireless side in wholesale? Where are you trending? You said you made the decision to step away from some the wholesale providers. Are you looking to back off on that? And how quickly can you redeploy some of the network assets for your own brands? John J. Stephens - AT&T, Inc.: The capacity is immediately re-deployable as it changes, so that's ongoing. With regard to the prepaid trends, we're continuing to see, as you saw, strong growth in our prepaid numbers. What we are seeing, for example – and we mentioned this in the 8-K with the reclass of our customer counts, if you think about it, we built this platform of a connected car. So we have millions and millions of connected cars out there, over 10 million connected cars out there. So we built this platform, and those are down in our Internet of Things in our connected device category. But now what we're finding is that 65% of the people who drive cars aren't our wireless customers, so we're finding a real opportunity to connect tens of thousands of those, almost 100,000 this quarter, with a prepaid offering to the connected car. And when they do that, they will pay us. It's not a $4 or $5, it's a $15 or $20 connection. And so it not only gives us a really great revenue opportunity and high margin, and that's a lot better than a resale opportunity at a much lower, but it's also an opportunity to show them what we can do and then potentially get the rest of their wireless business or get the rest of their video business. So that's how we're thinking about prepaid. It's not just the continued growth in the smartphones and the continued expansion of the base, as we've shown, 3.5 million customers in the last two years, pretty good numbers, but also in now building on these other platforms that we've built and use that as the opportunity, just like DTV NOW, to go out and see if we can make those customers a bundled or a complete customer of AT&T. And that's an opportunity that we're going to continue to pursue. That's a real value-creating and a win-win for the customer and for the shareholder. Frank Garreth Louthan - Raymond James & Associates, Inc.: All right, thank you very much. Michael J. Viola - AT&T, Inc.: Sure. Kathy, we've got time for one more question, and then John will have some closing remarks.

All right, thank you. That will come from Matthew Niknam with Deutsche Bank. Please go ahead.

Hey, guys. Thank you for getting me in, just one on bundling. If you can, help us maybe first think through satellite video performance, how that differed inside and outside of your ILEC footprint. And then maybe more broadly, in order to better bundle with a broadband product outside your footprint, how do you think about accelerating efforts like your G.fast trials and 5G, which you talked about a little bit earlier, to maybe go to market with a broadband pipe beyond the ILEC footprint and potentially better bundle relative to maybe a video and wireless bundle? Thanks. John J. Stephens - AT&T, Inc.: Great. If I can, let me answer your question by just modifying it a little bit. It's not just inside or outside the footprint. It's really that ability, as you point out, as a standalone product, we have higher churn. As we pointed out in the slides, when we bundle satellite with wireless, the churn drops by 50%. When we bundle it with broadband, it drops by 30%. So either one of those, as you suggest, are very, very good strategies. From a wireless basis, we've got a national footprint, so the opportunity to do that is there. The need to continually improve speeds and throughput on the wireless network is there. But first, that gives us the solution to do that and some financial wherewithal to do that. So the network team is working very, very hard. That's why our finance guy can talk about the tests that they've already run in Austin and San Francisco and Indianapolis so easily because the network team has been on this. And that's exactly what they're thinking about. With regard to – and they'll do that across that national footprint. And then we will do inside. We believe that there's that opportunity to get these IP broadband speeds in that footprint, the 50 million build that we're talking, or 50 million potential or more really goes to exactly what you're talking about. So that is what we're trying. We're evaluating those builds on a regular basis. We're trying to balance capital needs and capacity capabilities as well as the desire to go out and build it once as opposed to build it with a tentative technology and then have to rip it out, as some would suggest, with regard to their claims to building out on millimeter wave even before standards are set. So it's balancing all of that. But you're right, that is what we're doing. That is our goal of enhancing speeds and coverage to more than 50 million locations.

Excellent. Thanks, John. John J. Stephens - AT&T, Inc.: Thank you. With that, folks, I want to thank you all again for being on the call today. In closing, we had a strong quarter, and our quarter and our year-to-date activities are on track to meet guidance. Our Wireless business is performing at record levels. Our DTV NOW offering is growing extremely rapidly. Almost 800,000 customers for a business that's less than a year old is pretty dramatic. We've got work to do and plans in place to improve our linear TV business. Our business solutions and our international continue to meet expectations and perform extremely well. And we're excited about the opportunity that our data insights ad tech business and Time Warner will provide. We continue to have strong cash flows, and we view that very positively, particularly as we have great coverage on our dividend. And as we go to that time of year, we want to make sure that we continue and we will be able to continue to provide our board the opportunity to continue raising our dividend if they so choose for the 34th consecutive year. We are positive about it, the future. We're optimistic. We've got to continue to work hard, but we believe strongly in what we're doing and our strategy. With that being said, we thank you for your time and look forward to working with you in the future. Take care.

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