Ladies and gentlemen, thank you for your patients and standing by, and welcome to the AT&T first quarter 2018 earnings call. At this time, all of your participant phone lines are in a listen-only mode. And later, there'll be an opportunity here for your questions. Instructions will be given at that time. I would now like to turn the conference over to our host, Michael Viola, Senior Vice President of Investor Relations. Please go ahead, sir. Michael J. Viola - AT&T, Inc.: Okay, thank you, Justin. Good afternoon, everyone. Welcome to our first quarter conference call. Like Justin said, this is Mike Viola. I'm Head of Investor Relations for AT&T. And joining me on the call today is John Stephens, AT&T's Chief Financial Officer. John's going to cover our results and provide business updates, which will include progress on FirstNet, and then we'll follow that up with a Q&A session. As always, our earnings materials are available on the Investor Relations page of the AT&T website. That includes our news release, investor briefing, 8-K and a variety of associated schedules. Before we begin, I want to call your attention to our Safe Harbor statement. That says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties, and those results may differ materially. And additional information is always available on the Investor Relations website. Also, I want to remind you that we're in the quiet period for the FCC CAF-II auction and so we can't address any questions about that today. And so now, I'd like to turn the call over to AT&T's CFO, John Stephens. John J. Stephens - AT&T, Inc.: Thanks, Mike, and thanks for joining us on the call today. Let me begin with our financial summary, which is on slide…

Certainly. Thank you. First, we have the line of John Hodulik of UBS. Your line is open.

Okay. Thanks, guys. Maybe first starting on Entertainment Group really on slide 5, John, I just want to make sure I'm reading this correctly in terms of the exhibit you put here. That everything left of that vertical line is historical accounting method. And if that's true the way I'm reading it, can you just confirm that? Yeah. John J. Stephens - AT&T, Inc.: Yeah. So the historical accounting method is effectively publishing first quarter 2018 results under the old rules, so you've got comparability with last year's first quarter.

Okay. And I guess, just doing that, it would seem that the Entertainment EBITDA is down in the range of about 19%, if you could confirm that, and then on an apples-to-apples basis. And then, if so, can you just talk about what's driving that pressure? You talked about DIRECTV satellite subs declining and some of the expenditures you're going through to stand up DIRECTV NOW and the marketing and maybe then move to the new platform. How should we expect those drivers to evolve over the course of the year? The satellite losses are like they're picking up on a year-over-year basis. Should we expect that to continue and put further pressure, I guess, on those margins from that new 22.8% level? John J. Stephens - AT&T, Inc.: Yes. So a couple of things, John. First of all, I think on a year-over-year basis, our linear video losses are actually less. As you can see on the chart in the middle there, they're actually going down, so that's improving. We've seen some improvement in our churn rate. And as for (24:21)

I was just looking at the – I was thinking of the satellite-over-satellite number. Like the – I think it was 188,000 versus I think zero you did a year ago. I guess, the outlook is – I guess, your traditional's got a little better, but how do you see the satellite stuff evolving over the next 12 months? John J. Stephens - AT&T, Inc.: I think we're going to continue to see challenges in the satellite in the linear pay-TV model as we've talked about. We'll continue to see real opportunities to shift to the over-the-top and continue to grow DTV NOW. And then, what we will see is, as we come out with our new platform along that's in beta and then, quite frankly, some updates that we would hope to have by the end of this year, where you'll start seeing things like cloud DVR revenues, pay-per-view revenues, both sports and movies, some of the opportunities for additional streams and then eventually, revenues for advertising and data insights. We'll see a replacement of the margins and a growth in those margins on an extremely low capital expenditure basis. So we'll transition through that. That's what our expectations on that. Am I answering your question, John? That's what I'm trying to do.

Yes. John J. Stephens - AT&T, Inc.: That's the process we're going through. It'll be challenging. It's hard work. It'll take us some time, not expect it to be completed this year. But we are optimistic about total video counts growing over 100,000 and the significant year-over-year improvement in total video, almost 300,000 improvement.

All right. I guess, John, what I'm trying to get at is the margin trajectory from here on new accounting methodology, 22.8%. Should we expect a similar trajectory from this new level as we look out to the year? Or would you expect it to stabilize as we move through the year, just given all the puts and takes? John J. Stephens - AT&T, Inc.: Yes. I think we'll see some pressure throughout the year, but starting to stabilize at the end of the year.

Okay, great. Thanks. John J. Stephens - AT&T, Inc.: I do believe we'll see some ongoing pressure through the year.

Okay. John J. Stephens - AT&T, Inc.: Thanks, John. Michael J. Viola - AT&T, Inc.: Take our next question, Justin.

Sure. We have the line of Amir Rozwadowski of Barclays. Your line is open.

Thank you very much. And afternoon, John and Mike. John J. Stephens - AT&T, Inc.: Hi, Amir.

Hi. Wanted to touch base on the Mobility segment. If we think about the competitive landscape and your approach to the competitive landscape at this point, how should we think about the trade-off of subscriber acquisition versus margins? To John's prior question, if we look at it on a like-for-like basis for Mobility, we did see some pressure on a year-over-year basis against the historical margin structure. And just trying to think about the prospects for improving that going forward or how we should think about the puts and takes there. John J. Stephens - AT&T, Inc.: Yes, Amir, it's a good question. What we're thinking about is we're making the investments in the customer base from, if you will, initial basis. So things like BOGOs or offers on equipment. Getting that and getting the customers in and then having that ability to retain them for what is now 120 months as opposed to moving towards a recruiting tool that would be based on service revenues that would occur every month. So we're taking that investment on an upfront basis where we can identify it, taking that pressure through margin certainly, but then knowing that we have this improving churn and this reliability and the ability then to add other services, whether it be broadband, whether it be video, whether it be wireless. That's how we're viewing it. So we've got kind of an ability to turn on and off our investment opportunity and our customer growth. We've, so to speak, had it turned on in fourth quarter last year and then first quarter this year, but I think you've seen that over 700,000 smartphone improvement in the last two quarters over the prior year's two quarters. So if this – take responsibility for that investment today and get it…

That's very helpful, John. And then, to your point on churn, we continue to see a decline on a year-over-year basis. What is your expectation through the course of the year? As you mentioned, we are seeing some changes in the competitive landscape. Is the expectation that you're able to continue to drive churn lower through the course of the year? John J. Stephens - AT&T, Inc.: We haven't given specific guidance to churn, but let me say this. We're striving to continue to improve churn on a year-over-year basis. Our strategy though really get to what we've seen is when we're able to bundle it with another service, a broadband, a video, wireless, any two or three of those together, we see better churn. And so we also have that and that's a differentiating viewpoint or differentiating capability that we have uniquely that others don't. And so when we can do that, we do have some optimism about the ability not only to maintain these great churn levels but even see some further improvement likely we did this quarter, both sequentially and year over year.

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

Next, we have the line of Simon Flannery of Morgan Stanley. Your line is open. Simon Flannery - Morgan Stanley & Co. LLC: Great. Thank you. Good afternoon, John. John J. Stephens - AT&T, Inc.: Hey, Simon. Simon Flannery - Morgan Stanley & Co. LLC: On the video programming, I think Randall had – was reportedly made their comment around introducing a AT&T watch offering for $15 bundled with wireless. Maybe you could just give us a little bit more color about that and what timing we have around that? And then coming back to wireless, I noted the upgrade rate ticked up to 4.3% from 3.9%. And I think you'd, in the past, talked about going through this period of very low upgrade rate and then it would start to normalize over time. So it'd be great just to understand was the 4.3% do you think you're getting back to a more normal rate right now and any other color around how long people are keeping handsets or renewing them. Thanks. John J. Stephens - AT&T, Inc.: Okay. Thanks, Simon. Good questions. So, first of all, our upgrade rate and quite frankly, both the upgrade and the gross adds number, so we had about 0.5 million more devices in the first quarter in the upgrade rates and the gross adds. So we had a big step up. I think that was due to a lot of enthusiasm due to our great offers that the team put out. I think there was some pent-up demand for new innovative devices. And there may have been some change in the fact that devices have gotten another quarter older and people wanted to upgrade. But I think the biggest driver was really our offers. That's one thing. Two, that's caused some pressure with…

Next we have Mike McCormack of Guggenheim. Your line is open.

Hey, guys. Thanks. John, maybe just circling back on the Entertainment Group and some of the pressures there, I was just thinking about – I think Randall recently was quoted as comparing it to the legacy wireline voice business of old. And I don't think there's much argument that linear is under tremendous pressure. But as you look at that unit or that segment, how much of the cost is variable? And as you think about the piece parts within that, which parts of it can you reduce with the sub counts versus more structural fixed costs? And then on the content cost side, which I presume is mostly variable, what benefits you guys are getting as far as cost goes or negotiating power goes with the programmers for the DIRECTV NOW product? John J. Stephens - AT&T, Inc.: Again, Mike, good question, a couple things. I guess I'd view the cost of this, sorry, on the video entertainment piece of it, on the video side, that content is variable with regard to the packages we sell. But I also think there's some opportunity going forward to be variable with regard to within the packages. And I think we've made reference to possibly some offers, possibly getting to a point where we have differentiated offers and different packages. We have some today continuing to do that. So I think there is some, not only just based on the volume of customers but also based on what the customers want to buy, and we'll continue to look for that. On the high-speed Internet side or the broadband side, I would suggest to you what we've been building into that 8 million fiber, quite frankly, is something we still have a lot of selling to do into. And so that capital has been spent and that capacity to serve is already out there. We're just in this process of growing this IP broadband base and serving it. So I would suggest to you that could be a change or provide new direction, particularly as we've gotten through the legacy DSL conversions, which has really been absorbing us for the last few years. On the legacy voice and data, those challenges continue to be there. Those costs either have been managed out or continue to be managed out. So that's how we think about this. But on the video side, the real growth here is going to be in these alternative services, whether it's cloud DVRs, pay-per-views, data insights, advertising, doing those kinds of things while growing broadband at a high-speed level and continuing the success we've had. And then as you look at that Entertainment Group, bundling the two of those together, but also bundling all that with wireless, and so that's the real strength in it. That's what makes it worth all the efforts that we're going through to transition it. So it's not just one individual piece, but it's the collection of those pieces that make this very attractive.

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

Next, we have Brett Feldman of Goldman Sachs. Your line is open. Brett Feldman - Goldman Sachs & Co. LLC: Hi, thanks for taking the question. The first one is just a quick housekeeping question. The new USF accounting, you noted that it's neutral to operating income. Can you clarify? Is it also neutral to EBITDA? I think that might help some comparability. And then just coming back to the Entertainment segment, the U-verse video base has been remarkably flat. Particularly, I think you added a customer – a couple customers this quarter. I was hoping maybe you could provide a little more insight as to why that is. And is that more directly tied to the adoption of your residential fiber product than perhaps what we're seeing in the satellite trends? Thanks. John J. Stephens - AT&T, Inc.: A couple of things. One, yes, on EBITDA, the USF revenue and expenses are both in the EBITDA calculations, so they will net to zero. It won't have any change to EBITDA. I will tell you, though, Brett, to be clear, in prior years that USF revenue was in service revenues. And so it impacted service EBITDA margins, not EBITDA itself as a number, but the margins. We believe this will give a better picture of what we actually collect from customers on our behalf versus what we collect on the government's behalf, much like sales taxes, which we had never previously counted as service revenues. So you're right. It does not affect EBITDA, operating income, or EBITDA. The starting point, though, would be, would it have an impact on service revenues. Brett Feldman - Goldman Sachs & Co. LLC: Got it. John J. Stephens - AT&T, Inc.: U-verse, I think essentially a couple different things. One, the fiber build and…

Next, we have the line of Phil Cusick of JPMorgan.

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

Hi, John. First, a follow-up. You were fairly aggressive in the first quarter in the wireless compared to previous first quarters, but a lot of these promotions fell away in April. Should we think about this as a new level of aggression for the full year or are you just changing up the seasonality? And then, a bigger question, John, the online and addressable advertising business seems to be under fire on a lot of fronts and there's some increased investor preference lately for online subscription businesses. How do the headlines impact your thinking around AT&T strategy of accruing content and the OTT transition and the trade you seem to be making of giving up subscription revenue to drive subscribers in an effort to build the targeted advertising opportunity? Thanks. John J. Stephens - AT&T, Inc.: So, Phil, with regard to aggressiveness, I would suggest you we have the capabilities to be aggressive in the first quarter. We did that. We tried different things. As you can tell, we did that in the fourth quarter, too. As you pointed out, we changed them as we've gone through to make sure what we were doing was working and was getting the results, not only just results but the results we wanted. And we're continuing to focus on data-informed decisions in that light. What I'd suggest you is we should continue to see us something like the three offers that we've, I guess, recently put out in the marketplace. In New York, where we're using video as an opportunity to attract customers; in Chicago, where we're using our capabilities with regard to broadband to attract customers; or in Los Angeles, where we're using wireless. We're trying to be market-directed, market-informed and trying to put offers out that'll, if you will, make a…

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

Next, we have the line of David Barden of Bank of America. Your line is open.

Hey, John. Thanks for taking the questions. John J. Stephens - AT&T, Inc.: Sure.

So first question would be, if you could kind of maybe elaborate a little bit more on where we are kind of on the FirstNet go-to-market process? Have you stood up a sales force, if you have, what exactly are they selling and to who? And when can we think about the market share opportunity that you have there starting to feather into your kind of gross add market share and net add share in the market? And then the second is, a year ago, first quarter, the postpaid phone net add market was a couple hundred thousand phones. If we look at what you and Verizon and Comcast have done and make a few educated guesses about T-Mobile and Sprint, year over year, that's going to be 3x to 4x this quarter. And if I look at last quarter, it was actually up 50% year over year. What do you think is kind of driving this phenomenon where the postpaid phone net add market just seems kind of growing out of thin air? Is it the economy? Is it prepaid to postpaid migration? Is it BYOD? I'd love your thought – your theories here to kind of explain it. And then, whether we can maybe assume it's going to continue for the rest of the year or whether this is kind of transitory effect? Thanks. John J. Stephens - AT&T, Inc.: So I think it depends, David. I don't doubt. Let me say it this way. For us, we're both growing that improved postpaid phone, improved 300,000, while we still had almost 200,000 – I think it was about 192,000, but almost 200,000 prepaid net adds. So, for us, we're seeing continued good – really good performance in prepaid, but really good performance in the smartphone. So we're seeing…

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

Next, we have the line of Amy Yong of Macquarie. Your line is open. Amy Yong - Macquarie Capital (USA), Inc.: Thank you. Maybe if you could talk a little bit more about the advertising opportunity and size up the near-term market opportunity for us. How quickly do you think you can wrap this up and then maybe some growth trends that we should be looking at for this year and next? And then just very quickly on the 5G fixed wireless trials, how big is the residential broadband marketing opportunity, as we think about 2019 and beyond? Thanks. John J. Stephens - AT&T, Inc.: So on the advertising, let me start. I'd point out, this quarter we were up 9% in revenues. We have a base of about $350 million a quarter, in that range. I don't have the specific number at my fingertips here. And we grew at about 9%. So the team is actually proving that this works already with our existing, if you will, inventory of ads that we get as the distributor from the content folks. So we're making it work. We're getting higher CPMs and getting higher revenue streams and making it more effective. We feel really good about that. As we go through this year, we hope to add a lot more inventory from underneath our umbrella of ownership companies to that, and we'd like to develop that. If you think about the overall digital market, I don't know the exact numbers, but I think last year, the overall digital advertising market in the U.S. was north of $60 billion, and some estimates will get it in the $80 billion range. We're not what I would call in that piece a significant player. We believe that we can be. We have the capabilities…

Certainly. Last, we have the line of Frank Louthan of Raymond James. Your line is open. Frank Garreth Louthan - Raymond James & Associates, Inc.: Great, thank you. Give us a little bit more color on maybe the free cash flow aspects in your Entertainment business as you're switching more to the DIRECTV NOW product. That would be great. And then on 5G, some of the devices being available late 2018, can you give us a little bit more color on exactly what devices you're waiting for before the launch? Thanks. John J. Stephens - AT&T, Inc.: Okay. With regard to the 5G, let me make this point. On the 5G Evolution, those devices are not only available now, many of our customers already have them. And so the speeds we get with 5G Evolution by putting up all our spectrum with regard to FirstNet, using 4-way carrier aggregation, which allows us to band the spectrum that we put up now all together, and having 4-way MIMO, which is, if you will, an efficient and quick way to let customers access the network and exit the network, those speeds are working today. And in our test in San Francisco, we got 750-meg speeds on our network. On a full network, that might be 10% to 20% of that level. But we believe we can get 100-meg speeds on our 5G Evolution network with handsets that are already out there today in people's hands, and they're coming through the rest of the handset manufacturer base over time. So I just want to point that out. That's one of the reasons why the FirstNet with the technology developments of carrier agg and 4-way MIMO and 256-QAM and all these other things combined as well as the new spectrum, Band 14, gives us…

Thank you. And that does conclude our conference for today. We thank you very much for your participation and for using AT&T's Executive Teleconference Service. You may now disconnect.