AT&T Inc. · NYSE:T
AT&T — Q3 2006 Earnings Presentation
23 slides from AT&T's earnings presentation, Oct 23, 2006
Slide 1: AT&T Investor Update
AT&T Investor Update 3Q06 Earnings Conference Call October 23, 2006
Slide 2: Agenda
Agenda Introduction Rich Dietz Senior Vice President - Investor Relations Results Rick Lindner Senior Executive Vice President and Chief Financial Officer Qs and As 2 AT&T Inc. 3Q06 Earnings Conference Call
Slide 3: Cautionary Language Concerning Forward-Looking Statements
Cautionary Language Concerning Forward-Looking Statements Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect futu
Slide 4: EPS Summary
EPS Summary 3Q06 3Q05 Reported EPS $0.56 $0.38 47% Adjustments: Cingular merger integration, storm and noncash intangible amortization costs 0.05 0.09 AT&T merger integration and noncash intangible amortization costs 0.02 0.00 Adjusted EPS $0.63 $0.47 34% Pre-tax adjustments to earnings: In 3Q05, $8
Slide 5: Rick Lindner
Rick Lindner Senior Executive Vice President and Chief Financial Officer AT&T Inc.
Slide 6: 3Q Highlights: Premier Assets, Strong Execution
3Q Highlights: Premier Assets, Strong Execution • 300 basis point sequential margin expansion • 1.4 million net adds, GSM network integration Wireless complete, ARPU up both YOY and sequentially • Double-digit YOY service revenue growth • Solid growth in small/medium business space Business • Enterp
Slide 7: EPS Growth
EPS Growth AT&T Inc. Adjusted Earnings Per Share by Quarter Sixth straight quarter of double-digit year-over- $0.63 year adjusted EPS growth $0.58 $0.52 • Growing contributions $0.47 $0.48 from Cingular Wireless • Strong wireline execution • Merger integration ahead YOY of original plan growth 24% 4
Slide 8: Wireless Customer Growth
Wireless Customer Growth Cingular Subscribers Continued strong subscriber End of period totals, in millions growth with 4.6 million gross Total Churn adds and 1.4 million net adds 58.7 Postpaid Churn in the third quarter 57.3 55.8 • Churn remains low despite 54.1 seasonality along with network and p
Slide 9: Wireless Revenue Growth
Wireless Revenue Growth Service Revenue Growth Strong Data Growth Cingular Service Revenues Average Monthly Data Revenue/User ($ in billions) $6.32 $8.66 $5.77 $5.22 $4.71 $8.30 $4.33 +46% $8.01 YOY $7.78 $7.72 3Q05 4Q05 1Q06 2Q06 3Q06 Service ARPU Growth YOY 7.9% 7.5% 12.2% growth 4.3% 8.1% Average
Slide 10: Wireless Margin Expansion
Wireless Margin Expansion Cingular OIBDA Margin Significant additional opportunity for margin Reported 35.6% expansion with network Adjusted 34.5% integration, IT and billing 32.6% systems progress 31.6% 31.5% • Nationwide GSM network integration completed the 28.5% first week of October 300 basis-p
Slide 11: Consolidated Margin Expansion
Consolidated Margin Expansion AT&T Inc. Adjusted Consolidated Operating Income Margin Six consecutive quarters with year-over-year adjusted 19.5% 19.0% 19.0% margin improvement 17.3% • Merger synergies ahead 16.3% of original schedule • Operational initiatives on plan +50 basis points • Full-year ad
Slide 12: AT&T/SBC Merger Integration Update
AT&T/SBC Merger Integration Update January 2006 guidance of Integration ahead of plan, operating expense savings run expense synergies expected rate from merger integration: at or slightly above the high ($ in billions) $2.2 - $2.4 end of most recent $700-$900 $1.6 - million target range for $1.9 th
Slide 13: Wireline Revenue Summary
Wireline Revenue Summary ($ in billions) 3Q06 Versus 3Q05 Revenues Pro Forma Six consecutive quarters Regional business $ 2.1 6.6% of midsingle-digit growth Regional consumer 3.7 0.7% Two consecutive quarters of Enterprise 4.4 (5.1)% nearly flat sequential results Wholesale 2.8 (6.6)% Reflects impac
Slide 14: Regional Business
Regional Business Regional Business Both voice and data continue Pro Forma for 2005 to grow. Innovative services ($ in billions) drive sustained revenue $2.08 growth. $2.05 $1.95 $1.99 • Double-digit revenue growth $1.95 in small/medium space • 12% year-over-year growth in data revenues, led by Ethe
Slide 15: Regional Consumer
Regional Consumer AT&T sustained its record of regional consumer revenue growth, driven by broadband High Speed Internet and bundling Penetration of Consumer Primary Lines • 376,000 consumer revenue connections added over past 31.3% year, up 1.1% year over year 29.5% 27.7% • Total broadband net adds
Slide 16: Living Units Passed
Living Units Passed Expect to pass approximately (in millions) 2.4 million living units by year-end 2006, plan supports 2.4 aggressive scaling in 2007 • Strong initial response • 85% taking higher-end video packages 1.3 • Houston will launch in late November with HDTV • Expect to launch approximatel
Slide 17: Enterprise
Enterprise AT&T Enterprise Revenue Continued progress toward Year over year versus pro forma enterprise revenue stability; growth in data services Total Enterprise • Voice revenue trends improving. as reported (5.1)% LD minutes and average revenue (6.8)% per minute nearly flat for the past (7.3)% th
Slide 18: Wholesale
Wholesale Total Wholesale Wholesale Data Revenues Revenues 3Q05 Pro Forma 3Q05 Pro Forma ($ in billions) ($ in billions) • Data services make up $2.98 $2.88 $1.18 $1.17 $1.15 41% of total wholesale $2.79 revenues • Strong volume growth in transport L/D 26%• Industry is moving minutes onto owned asse
Slide 19: Wireline Data Revenues
Wireline Data Revenues Total Data Revenues Year-Over-Year Pro Forma Growth Rates • Data accounts for more than 31% of total 3Q06 wireline revenues, 2.6% 2.8% 2.8% up from 29% in 3Q05 2.3% 2.4% • 3Q06 retail data revenues grew 4.7% year over year • Approximately three-fourths of AT&T’s data revenues
Slide 20: Directory
Directory Total Directory Revenues ($ in billions) Stable revenue, strong Adjusted* Operating Income Margin margins and cash flow generation $0.93 $0.93 $0.92 $0.93 $0.92 • Strength and scale in print directories 54.3% 55.3% 51.5% 53.0% 51.4% • YELLOWPAGES.COM leading brand in electronic media direc
Slide 21: Strong Cash Generation
Strong Cash Generation AT&T Inc. Cash from Strong cash from operations; on Operating Activities track to achieve target of full-year ($ in billions) $10.6 free cash flow after dividends in the mid $2 billion range $8.4 YTD 3Q06 2006 Outlook CAPEX $2.1B $6.2B at or slightly $3.4 above $8.5B $3.3 26.4
Slide 22: AT&T Outlook
AT&T Outlook • Double-digit adjusted* EPS growth in each of the next three years, starting in 2006 • 2006 adjusted* operating margin in the mid 18% range • Enterprise revenue returns to growth exiting 2008 • Following BellSouth merger, return to revenue growth in 2007 versus pro forma 2006 results •
Slide 23: AT&T Investor Update
AT&T Investor Update 3Q06 Earnings Conference Call October 23, 2006