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, media and technology industries.
For the quarter ended March 31, 2021, due in part to our recent resizing and restructuring of operations, we anticipate total distributions from the pension plan will exceed the threshold of service and interest costs for 2021, requiring us to follow settlement accounting and remeasure our pension benefit obligation at each quarter-end in 2021. For the quarter ended March 31, 2021, we expect to record a non-cash pre-tax actuarial gain of approximately $2.8 billion, which is primarily due to an increase in the discount rate used to measure the obligation. We recognize actuarial gains and losses on pension and postretirement plan assets and obligations in our consolidated results as a component of other income (expense). This gain will be included in our reported results but excluded in adjusted earnings, consistent with our historical practice for actuarial gains and losses.
For the quarter ended March 31, 2021, our segment reporting will be updated as follows:
Communications segment results will be recast to remove the Video and Government Solutions held-for-sale businesses, instead reporting those results in Corporate and Other. Further updates include the following:
•Business Wireline business unit – Consistent with the way we will be managing the unit going forward, we will characterize revenues of Business Wireline as either “service” or “equipment” revenues. Accordingly, we have recast prior year revenues to conform to this presentation.
•Consumer Wireline business unit (formerly Broadband) – The Consumer Wireline and Video Businesses have historically been operated as a single business unit, which included our U-verse products that provide both video and broadband services to customers and run on a shared network infrastructure. With our 2020 annual report and fourth quarter earnings’ materials, we provided an estimate of the allocation of historical costs between those businesses. In conjunction with finalizing the deal terms of our previously announced Video transaction with TPG, we have refined these allocations, specifically shared infrastructure and deferred customer acquisition costs, to reflect how the businesses are being managed today. This recast will result in a reduction of Consumer Wireline operating income by approximately $100 million per quarter in 2020 with a corresponding increase to Video historical results.
WarnerMedia segment results will reflect our operation of WarnerMedia as one integrated organization, and as such, will report operating contribution at the segment level. Additionally, we will provide revenue and direct costs for the following areas:
•Basic Networks – comprised of the Turner business, including news and sports programming (formerly Turner business unit)
•Direct-to-Consumer (DTC) – Global HBO Max, HBO (formerly Home Box Office business unit including Cinemax)
•Theatrical, TV Content and Games Licensing – consisting of Warner Bros. (formerly Warner Bros. business unit)
With our first-quarter 2021 reporting, we will also provide additional HBO subscriber reporting.
As a convenience to investors who may want to consider the effects of these segment reporting updates on our historical results, including HBO subscriber reporting, we are providing quarterly segment results for 2019 and 2020 to reflect the changes described above in Exhibit 99.1 hereto.
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