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2009q1 AT&T Earnings Slides
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2009q1 AT&T Earnings Slides


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  • 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 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.