For 2018, AT&T expects organic adjusted EPS growth in the low single digits, driven by improvements in wireless service revenue trends, improving profitability from its international operations, cost structure improvements from its software defined network/network function virtualization efforts and lower depreciation versus 2017. 1Stephens also discussed the company's investment plans for 2018. AT&T expects to invest $25 billion in capital in 2018, or $23 billion net of expected FirstNet reimbursements. AT&T's capital plans include $1 billion in incremental investment due to tax reform. At the same time, on a standalone basis, the company expects free cash flow of about $21 billion for the year. 1,2 Stephens discussed AT&T's financial stability, including a pension plan that, including the contribution of a preferred equity interest in AT&T Mobility, was more than 92% funded at the end of 2017, even with historically low interest rates. At historical 10-year average interest rates, AT&T's pension would be more than fully funded. AT&T does not expect it will be required to make any material cash contributions to its pension fund for at least the next five years. The company has also exercised discipline with regard to its debt portfolio. At the end of 2017, AT&T's weighted average maturity was 14.6 years at a weighted average interest rate of 4.4%. Given its strong financial position, Stephens said that even with continued investment, strong cash flows will give the company the flexibility to focus on retiring debt. 1 Adjustments include a non-cash mark-to-market benefit plan gain/loss, merger-related interest expense, merger integration and amortization costs and other adjustments. We expect the mark-to-market adjustment which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be the largest of these items. Accordingly, we cannot provide a reconciliation between forecasted adjusted diluted EPS and reported diluted EPS without unreasonable effort. 2 Free Cash Flow is defined as Cash from Operating Activities minus Capital Expenditures. *About AT&T AT&T Inc. (NYSE:T) is a holding company. AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information about AT&T Inc. is available at about.att.com.
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