4q09 att earnings slides_gray

8/10/2019 4Q09 ATT Earnings Slides_Gray

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AT&T Investor Update4Q09 Earnings Conference CallJanuary 28, 2010

2010 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other markscontained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies.All other marks contained herein are the property of their respective owners.


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Q and A

Rick LindnerSenior Executive Vice Presidentand Chief Financial Officer

Introduction Brooks McCorcleSenior Vice President, Investor Relations

Agenda

John StankeyPresident and Chief Executive Officer,AT&T Operations

Results

Network


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Cautionary Language ConcerningForward-Looking Statements

Information set forth in this presentation containsfinancial estimates and other forward-lookingstatements that are subject to risks and uncertainties,and actual results might differ materially.A discussion of factors that may affect futureresults is contained in AT&Ts filings withthe Securities and Exchange Commission.

AT&T disclaims any obligation to update andrevise statements contained in this presentationbased on new information or otherwise.

This presentation may contain certain non-GAAPfinancial measures. Reconciliations between thenon-GAAP financial measures and the GAAP financialmeasures are available on the companys Web siteat www.att.com/investor.relations .


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4Q09 Consolidated Financial Summary

Free cash flow is cash from operations less capitalexpenditures.

$30.9 billion consolidated revenues

Third straight quarter of modest

sequential improvement Continued wireless growth offset

by slower declines in wireline

Stable consolidated margins

Sharp focus on cost improvements

Strong cash flow full-year2009 totals:

$34.4 billion cash from operating

activities, up 2.3% versus 2008 $17.1 billion free cash flow,

up 28.4% from 2008

AT&T Diluted EPS

4Q094Q08

$0.41

$0.51

4Q09 EPS includes: $0.04 severance charge

$0.04 of benefits from tax auditsand judicial developments


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AT&T 4Q09 Highlights: Solid Execution,Positive Outlook

Solid Progress Across Key Growth Areas 2.7 million wireless net adds, 9.2% service revenue growth 248,000 U-verse TV net adds to >2 million in service 31.8% growth in wireline consumer IP revenues

(U-verse and broadband) 17.0% growth in strategic business revenues

Disciplined Execution on Cost Initiatives Sequential stability in already strong wireline margins Improved wireless margins, continuing opportunities

for further expansion

Strong Cash Flow

Cash from operations and free cash flow up substantially Strong dividend 26 consecutive years of increases Debt reduction total debt net of cash down $10.2 billion

over past six quarters

AT&T Profile: Leader in Mobile

Broadband

Premier BusinessCapabilities

Powerful IP-BasedPlatforms

Financial Strength


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Consolidated Revenue Trends

4Q09 Revenue Mix

Wireless100% owned 45%

Wireline Data/

Managed Services 25%Wireline Voice 25%

AdvertisingSolutions/Other 5%

Third consecutive quarter ofsequential improvement inconsolidated revenues reflecting:

Revenue mix increasingly weightedto wireless and wireline data andmanaged services:

70% of revenues in 4Q09 with6.5% year-over-year growth

60% of revenues in 4Q07

2Q09 3Q09 4Q094Q08 1Q09

Strong wireless growth U-verse growth Improved business comparisons

AT&T Consolidated Revenues($ in billions)

$30.9$31.1 $30.7$30.6 $30.9


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Continued Strong Wireless Service RevenueGrowth, Up 9.2%

AT&T Wireless Service Revenues($ in billions)

$11.5

2Q09 3Q09 4Q094Q08 1Q09

77.0

85.1

81.6

78.279.6

Total Wireless Subscribers (in millions)2.7 million total wireless net addsin 4Q09 second-highest quarterlytotal in companys history

Best-ever fourth-quarter churnlevels sixth consecutive quarter ofyear-over-year improvement in bothtotal and postpaid churn

2.6% growth in postpaid wirelesssubscriber ARPU eighth consecutivequarter with a year-over-year increase

Total 2.7 7.3

Postpaid 0.9 4.3

Emerging Devices >1.0 >2.0

4Q09 2009Net Adds (in millions)

Postpaid ARPU

$59.59 1.20%$61.13

4Q09 4Q09

1.19%

4Q084Q08

Postpaid Churn

$12.4

$11.7 $12.0$12.6


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26.3% Wireless Data Revenue Growth,Continued Strength in Mobile Broadband

Wireless DataRevenues($ in billions)

4Q08 4Q09

16.2

Total PostpaidIntegratedDevices(in millions)

30.2

4Q094Q08

$16.30

Postpaid Data ARPU

$3.1

$3.9

$19.16

Wireless data revenues up $805 million,or 26.3%, driven by integrated device

adoption, 3G growth, rich applicationsStrong volume growth Text messages up 70% Multimedia messages >doubled

over past year

Robust integrated device growth

3G integrated devices up more than4 million in 4Q09, more than 15 millionfor the full year 2009

Average ARPU for integrated devices

continues to be 1.8X nonintegrated-device base

Significant upside ahead, postpaidpenetration still below 50%


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Wireless Margin Expansion

Strong revenue growth

High-quality subscriber base

Continuing operationalimprovements in networkand support functions

Even with high integrated-device volumes, wireless OIBDAservice margin up sequentiallyand year over year, driven by:

OIBDA service margin is operating income before depreciationand amortization, divided by total service revenues.

AT&T Wireless OIBDAService Margin

38.8%35.8%

38.5%

Longer-termexpectation

Mid-40%Range

4Q08 4Q093Q09Trends reinforce confidencein longer-term margin target


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AT&T Wireless Network Capabilities

United States fastest 3Gnetwork today

United States broadest Wi-Ficoverage with ~20,000

hotspots nationwide

Voice and data service to97 percent of the U.S. population

GSM/UMTS technology: Predominant global network

standard for the next few years;broad R&D, wide range of devices

Simultaneous voice and dataconnectivity

Natural precursor to LTE withbackward compatibility

AT&Ts network supports twice thenumber of smartphones versusany of its competitors

AT&T is managing unprecedentedmobile broadband growth up more than 5,000% over thepast 3 years

AT&T Total MobileBroadband Usage >200%

in 2009


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Wireless Network Initiatives Drive ImprovedVoice and Data Performance

National 3G Voice CompositeQuality Index up 22% in 2009

Jan Dec

Dec08 Dec09

3G Dropped CallsDown 22% YOY

3G Blocked CallsDown 25% YOY

1.41%

1.05%

1.08%

Nov09

Dec08 Dec09

1.16%

0.91%

1.01%

Nov09

Jan Dec

Broadband Data Throughputup more than 19% in 2009

2009 Investments

~1,900 new cell sites

>100,000 new circuitsfor backhaul, 4X 2008deployment

Doubled number offiber-served cell sites

Completed 850 MHzspectrum conversionto the 3G platform

3G coverage expandedby >4,100 sites, nowcovers >360 cities


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Closing the Gap: Aggressive Program of NetworkEnhancements for High-Usage Markets

San Francisco3G Voice Composite Quality Index

New York City3G Voice Composite Quality Index

21% improvement in 3G VoiceComposite Quality Index in 4Q09

Adding RNC capacity

Three consecutive months of improvementin 3G Voice Composite Quality Index

RNC change-outs

Next 90 Days: Continued Enhancements to Drive Further Improvement Additional third- and fourth-carrier implementation Deploy Ethernet to the cell site to improve network backhaul Projects are under way, expect significant improvement in both markets

over the coming months

Sept Dec Sept Dec

San FranciscoNew York Metro

PerformanceObjective

PerformanceObjective

Manhattan


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HSPA 7.2 Deployment: Step Up in Speed,Major Competitive Differentiator

AT&Ts 3G Cell Sites Enabled Nationwide, Ahead of Schedule Improves consistency in accessing data sessions

Prepares the network for faster speeds Increases network efficiency Immediate benefit to millions of AT&T customers

Aggressive Backhaul Program Under Way

Supports doubling of theoretical peak speeds Expect majority of AT&Ts mobile data traffic on fiber-based backhaul

by end of 2010 Prepares network for LTE deployment: testing under way, nearing

vendor selection

Immediate Benefit to Millions of AT&T Customers AT&T currently offers 10 HSPA 7.2 enabled devices, including iPhone 3GS

Early Results Are Promising


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2010 Capital Plan Includes SubstantialIncrease in Wireless Investment

2009 2010Plan

AT&T Total CapitalExpenditures

$17.3B$18$19B

Wireless and Backhaul: ~$2B increase in 2010, which includes

wireless spend and wireline backhaul insupport of wireless networks

Focus on HSPA 7.2, groundwork for LTE,overall capacity and performance, intenseprogram for high-volume metros

Total Capital Expenditures expected to beup 5% 10% from 2009. Top priorities:

AT&T U-verse: on track to pass 30 millionliving units by the end of 2011

Enterprise: world-class service platform,applications ecosystem

One AT&T: better customer experience andmore efficient operations unified supportsystems, converged customer experience,common care portal


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Improving Wireline Consumer TrendsAT&T U-verse TV Subscribers(in millions)

AT&T U-verse revenues nearly tripledover past year, now approaching$3 billion annualized

>90% AT&T U-verse broadband attachrate, VoIP attach rate approaches 70%

>75% of U-verse subscribers havea triple or quad play

4Q08 1Q09

1.0

1.3

1.6

1.8

2.1

2Q09 3Q09 4Q09

Change inTotal ConsumerConnections

$63.32

(372)

4Q09

$65.68

4Q08(504)

Revenue PerHousehold

4Q08 4Q09

31.8% fourth-quarter growth inrevenues from consumer IP services AT&T U-verse and broadband

Eighth consecutive quarter of year-over-year growth in consumer revenuesper household

Third consecutive quarter of improvedyear-over-year comparisons for overallwireline consumer revenues

Positive impacts on consumer trends:


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AT&T Business Solutions

Total (0.4)% (5.5)%Services (excludes CPE) (0.4)% (4.9)%

IP Data 1.8% 7.3%

Strategic Services 4.1% 17.0%

AT&T Business Solutions Revenues($ in billions)

Consistent fundamental businesstrends reflecting economicactivity and continued strengthin strategic service, IP data

17.0% strategic business servicesrevenue growth

7.3% growth in businessIP revenues

VPN revenues up >20% Two-thirds of frame customers

have transitioned to IP

Largest economic impacts onvolumes in voice and legacydata products

Operational cost efficienciescontinue to support businessmarginsStrategic business services include the new-generation capabilities that

lead AT&Ts most advanced solutions including Ethernet, VPNs, hosting,IP conferencing and application services.

Year-Over-Year Change

SequentialChange

$1,058

2Q09 3Q09 4Q094Q08 1Q09

Strategic BusinessServices Revenues($ in millions)

$969

$1,006

$941

$1,101


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Stable Consolidated Margins

Sharp focus on cost discipline,operational improvementsacross the business

18.6%

AT&T ConsolidatedOperating Income Margin

2008 2009

17.5%

Major cost initiatives on track

Total force down ~20,000 forthe year

4Q wireline operating expensesdown 2.7% year over year

Continuing cost-improvementopportunities, including areassuch as organizational andsystems integration, orderand billing center consolidation

18.6%

Year-Over-YearNoncashPension/RetireeBenefit Pressure

Reported margins are in blue.


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Strong Cash Flow

Debt net of cash on hand reducedby $10.2 billion over past six quarters

Cash FromOperations($ in billions)

$33.7

$34.4

Free cash flow is cash from operations less capitalexpenditures.

20092008

Free CashFlow($ in billions)

$13.3

$17.1

Cash from Operating Activities $34.4

Capital Expenditures $17.3

Free Cash Flow $17.1

Dividends Paid $9.7

2009 Cash Profile

Debt Reduction

20092008


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4Q09 Summary, 2010 OutlookPremier Growth Platforms, Financial Strength Set AT&T Apart Leader in Wireless Broadband and Innovation HSPA 7.2 deployment

under way, investing for next generation of growth

Premier Business Capabilities great networks, expanding productportfolio, strength in strategic services

AT&T U-verse Gaining Scale changing consumer revenue profile

Financial Strength stable margins, strong cash flow, significant wirelinecontribution, full financial exposure to wireless with 100% ownership

Positive Outlook Stable consolidated revenues, with opportunities for stronger results

as the economy rebounds

Stable-to-improved margins and EPS

Expand full-year wireless OIBDA margins to low 40% range with a longer-term

expectation of reaching the mid-40% range Capital expenditures in the $18 to $19 billion range, with substantial increase

in wireless to further expand capacity and coverage

Continued strong free cash flow generally in line with 2008 results

Maintain financial strength while returning cash to shareowners


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AT&T Investor Update

4Q09 Earnings Conference CallJanuary 28, 2010

2010 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other markscontained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies.

All other marks contained herein are the property of their respective owners.

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