2009q1 AT&T Earnings Slides


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2009q1 AT&T Earnings Slides

  1. AT&T Investor Update 1Q09 Earnings Conference Call April 22, 2009 © 2009 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other marks contained 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.
  2. 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 future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise. This presentation may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s Web site at www.att.com/investor.relations. 2
  3. 1Q09 Financial Summary Solid quarter, strong cost execution, results in line with full-year outlook: AT&T Diluted Earnings Per Share $0.53 EPS – includes $0.05 of pressure $0.57 from incremental noncash pension/retiree $0.53 benefits costs Stable consolidated revenues – (0.6)% versus 1Q08; continuing economic impacts largely offset by growth in wireless, U-verseSM, broadband and strategic business services Stable consolidated margins – 18.8% in 1Q09 versus 18.6% for full-year 2008 1Q08 1Q09 $4.6 billion in free cash flow before dividends 3
  4. AT&T 1Q09 Highlights • Strong wireless growth – 1.2 million total net adds; 875,000 postpaid net adds, up 24.1% versus 1Q08 • 1.6 million iPhone activations – >40% new to AT&T, ARPU and churn characteristics continue to be strong Strong execution, • 40.9% wireless OIBDA service margin – up more solid cost discipline, than 500 basis points sequentially • Strong U-verse TV growth – 284,000 net adds to reach continued advances 1.3 million, with strong broadband and VoIP attach rates in key growth areas • 471,000 increase in total broadband subscribers – significant step up from recent quarters for the future • 16.4% growth in wireline IP data revenues – driven by AT&T U-verse growth and continued double-digit gains in business IP revenues • Margin strength, on track with full-year outlook – driven by wireless improvement and disciplined execution of wireline cost initiatives 4 OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.
  5. Revenue Trends AT&T Consolidated Revenues $30.6 billion 1Q09 consolidated operating revenues, down 0.6% ($ in billions) $31.3 $30.9 $31.1 $30.7 $30.6 • Economic impacts primarily affecting wireline voice, which was down 12.2% • Growth in wireless and data services: Wireless Services +9.6% 1Q08 2Q08 3Q08 4Q08 1Q09 Wireline Data +5.3% 1Q09 Revenue Mix Wireline IP Data +16.4% Wireless – 100% owned 42% Wired Data/ Managed Services 24% Diversified mix with increased percentage of revenues coming Wired Voice 28% from wireless and data services Advertising Solutions/Other 6% 5
  6. Continued Strong Wireless Growth AT&T Wireless Service Revenues Wireless service revenues up ($ in billions) $11.7 $11.5 >$1 billion or 9.6% versus 1Q08 $11.3 $11.0 $10.6 Total wireless subscribers up 6.9 million over past year, led by strong postpaid gains Year-over-year postpaid subscriber metrics: 1Q08 2Q08 3Q08 4Q08 1Q09 Gross adds +9% Postpaid Postpaid Postpaid Net adds +24% Net Adds Subscriber Gross Adds ARPU (in thousands) (in millions) Data ARPU +27% $59.21 3.0 875 $58.02 2.8 705 Total ARPU +2% 1Q08 1Q09 1Q08 1Q09 1Q08 1Q09 6
  7. Continued Robust Wireless Data Growth, Up 38.6% Wireless data revenue growth Wireless Data driven by more data-capable Wireless Data ARPU Revenues devices, richer applications ($ in billions) $3.2 • Continued strong data ARPU $13.64 growth, up >25% year over year • >94 billion text messages sent in 1Q09, more than double 1Q08 $10.80 $2.3 • >40% growth in media bundles and Internet access revenues • Postpaid subscribers with data plans up 900 basis points over past year, approaching 50% 1Q08 1Q09 1Q08 1Q09 7
  8. Strong Integrated Device Growth, More Than 1.6 Million iPhone Activations AT&T Wireless Postpaid United States’ fastest 3G network – Integrated Devices in Service strong spectrum position, increased (in millions) use of 850 MHz for 3G 19.3 Percentage of Postpaid Subscribers with Integrated Devices 16.2 Broad array of attractive devices – Apple iPhone, BlackBerry® BoldTM, quick messaging devices, netbooks 13.1 31.7% 27.0% 10.3 Explosion of applications and 8.8 content – AT&T Apps Beta launched 22.3% in first quarter, largest catalog of mobile music among U.S. wireless companies 18.0% 15.8% 2Q08 3Q08 1Q08 4Q08 1Q09 8
  9. 40.9% Wireless OIBDA Service Margin Wireless margin expansion AT&T Wireless OIBDA on track with full-year outlook. Service Margin Major drivers: • ARPU and churn characteristics of 41.7% growing iPhone 3G customer base 41.2% 40.9% • Continuing operational improvements in network and iPhone 3G support functions launch 35.8% • >10 basis point year-over-year improvement in total churn 33.5% Continue to expect wireless OIBDA margin in the mid 40% range long term 2Q08 1Q08 4Q08 3Q08 1Q09 9 OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.
  10. Strong AT&T U-verse Growth AT&T U-verse TV Subscribers AT&T U-verse TV subscriber growth 1,329 (in thousands) delivering high broadband and VoIP 1,045 attach rates 781 • Double-digit U-verse TV penetration 549 of eligible living units 379 • Mid-teens penetration in areas marketed to for at least 18 months 1Q08 2Q08 3Q08 4Q08 1Q09 • Service includes a host of advanced Net Gain – AT&T U-verse TV Subscribers features including: (in thousands) – Total Home DVR 284 Net gain: AT&T U-verse VoIP – 100+ High Definition channels 264 – integrated voice and broadband 232 170 – AT&T U-verse voice launched 120 170 in 86% of markets 148 73 • Total video penetration of 27 4 households served at 12.6% 1Q08 2Q08 3Q08 4Q08 1Q09 10
  11. Step Up in Broadband Growth AT&T Total Broadband Connections Strong broadband growth driven Wireline Broadband Users Plus Wireless 3G by strength in wireline consumer LaptopConnect Users (in millions) connections • 471,000 first-quarter increase Net gain: AT&T U-verse high speed Internet subscribers in total broadband subscribers 16.7 16.3 • >50% sequential increase in wireline 16.0 15.6 broadband net adds 15.4 • AT&T U-verse high speed Internet 284 connections more than tripled 264 over the past year to 1.3 million 238 • Continued growth in wireless/ broadband bundles 168 • Industry’s largest Wi-Fi footprint, 148 with >20,000 U.S. hotspots 1Q08 4Q08 2Q08 3Q08 1Q09 11
  12. Wireline Consumer Revenue and Connections Trends Regional consumer revenues down 6.8% AT&T Regional Sequential Change In Regional Consumer Connections Consumer Revenue year over year; ARPU Per Household (in thousands) growth and improved Served connections trends driven by U-verse TV 1Q08 2Q08 3Q08 4Q08 1Q09 $63.50 and broadband $62.23 (98) • 2.0% increase in (196) consumer ARPU • 23.0% year-over-year (504) growth in consumer IP revenues (AT&T U-verse and broadband services) (870) • Improved connections (923) trends where AT&T U-verse TV is marketed 1Q08 1Q09 12
  13. AT&T Business Solutions Total business trends reflect AT&T Business Solutions Revenues strong growth in IP data and ($ in billions) strategic services, offset by Year-Over- continuing economic pressures, Year Growth 1Q09 primarily impacting voice Total $10.7 (4.0)% • Economic impacts focused on voice Services (Excludes CPE) $10.3 (2.8)% usage; largest impacts in financial, transportation and general IP Data $1.5 10.5% merchandise retailing sectors Strategic Business Services Revenues • Largest economic impacts in ($ in millions) low-margin areas such as CPE and $969 international voice, with cost offsets $941 $907 • New service adoption continues $873 to be solid $810 • 10.5% growth in business IP data revenues • 19.6% growth in strategic services 1Q08 2Q08 3Q08 4Q08 1Q09 – Ethernet and VPNs up >20% Strategic business services include the new-generation capabilities that – IP conferencing up >70% lead AT&T’s most advanced solutions – including Ethernet, VPNs, hosting, IP conferencing and applications services. 13
  14. Stable Consolidated Margin 1Q09 margin stable versus 2008 and on track with full-year outlook, AT&T Consolidated Operating Income Margin reflecting operational improvements in both wireless and wireline 18.8% 18.6% • Execution of major operational cost initiatives on track: – Consolidate support organizations – Integrate network planning and operations, business services – Total force down by 8,000 since year end 2008 • Further decline in dilution from iPhone 3G initiative along with improvements in wireless network and support costs Full Year 1Q09 2008 14
  15. Cash Flow, Balance Sheet Strength Free cash flow and AT&T Cash Summary capital expenditures in line ($ in billions) with previously outlined full-year outlook Cash From Operations Capital • Cash from operations $7.9 $3.4 Expenditures improvement reflects progress on cost initiatives and lower cash taxes Free Cash Flow $4.6 $5.0 • Full-year 2009 capital expenditures expected to be $2.4 Dividends Paid in the $17 – $18 billion range • Total debt reduced by Debt-to-Capital $5.8 billion over the past Ratio 43.2% three quarters 1Q08 1Q09 Totals may not foot due to rounding. 15 Free Cash Flow is defined as cash from operations less capital expenditures.
  16. 1Q09 Summary: Strong Execution, on Track with Full-Year Outlook • Cost discipline – expense initiatives on track, driving stable margins • Continued investment, strong ramp in major growth platforms – wireless, advanced business solutions, AT&T U-verse services • Strong wireless momentum, well positioned for next wave of wireless data growth – strong network, attractive device lineup, innovation in applications and new services • Solid U-verse TV ramp – with high broadband and VoIP attach rates helping drive improved consumer connection trends • Strong free cash flow – with sound balance sheet and credit metrics Clear focus: disciplined execution as economy works toward recovery; ramp capabilities and scale to lead in industry’s best growth areas 16
  17. AT&T Investor Update 1Q09 Earnings Conference Call April 22, 2009 © 2009 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other marks contained 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.