2009q1 AT&T Earnings Slides
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Transcript of 2009q1 AT&T Earnings Slides
AT&T Investor Update
1Q09 Earnings Conference CallApril 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.
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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.
Cautionary Language Concerning Forward-Looking Statements
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1Q09 Financial Summary
1Q08 1Q09
$0.57
AT&T Diluted Earnings Per Share
$0.53 EPS – includes $0.05 of pressure from incremental noncash pension/retiree 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
$4.6 billion in free cash flow before dividends
Solid quarter, strong cost execution, results in line with full-year outlook:
$0.53
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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
• 40.9% wireless OIBDA service margin – up more than 500 basis points sequentially
• Strong U-verse TV growth – 284,000 net adds to reach 1.3 million, with strong broadband and VoIP attach rates
• 471,000 increase in total broadband subscribers –significant step up from recent quarters
• 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
Strong execution,
solid cost discipline,
continued advances
in key growth areas
for the future
OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.
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Revenue Trends
1Q09 Revenue Mix
Wireless – 100% owned 42%
Wired Data/Managed Services 24%
Wired Voice 28%
Advertising Solutions/Other 6%
• Economic impacts primarily affecting wireline voice, which was down 12.2%
• Growth in wireless and data services:
Wireless Services +9.6%
Wireline Data +5.3%
Wireline IP Data +16.4%
$30.6 billion 1Q09 consolidated operating revenues, down 0.6%
AT&T Consolidated Revenues($ in billions)
1Q08 2Q08 3Q08 4Q08 1Q09
$30.9 $31.3 $31.1$30.7 $30.6
Diversified mix with increased percentage of revenues coming from wireless and data services
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Continued Strong Wireless Growth
Postpaid Gross Adds
(in millions)
1Q08 1Q09
Postpaid Net Adds
(in thousands)
1Q08 1Q09
3.02.8
875
705
Postpaid Subscriber
ARPU
$58.02$59.21
1Q08 1Q09
Wireless service revenues up >$1 billion or 9.6% versus 1Q08
Total wireless subscribers up 6.9 million over past year, led by strong postpaid gains
Year-over-year postpaid subscriber metrics:
Gross adds +9%
Net adds +24%
Data ARPU +27%
Total ARPU +2%
AT&T Wireless Service Revenues($ in billions)
1Q08 2Q08 3Q08 4Q08 1Q09
$11.0$11.3 $11.5
$10.6
$11.7
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• Continued strong data ARPU growth, up >25% year over year
• >94 billion text messages sent in 1Q09, more than double 1Q08
• >40% growth in media bundles and Internet access revenues
• Postpaid subscribers with data plans up 900 basis points over past year, approaching 50%
Continued Robust Wireless Data Growth, Up 38.6%
Wireless data revenue growth driven by more data-capable devices, richer applications
$3.2
Wireless Data Revenues($ in billions)
$2.3
1Q08 1Q09
$13.64
Wireless Data ARPU
$10.80
1Q08 1Q09
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Strong Integrated Device Growth, More Than 1.6 Million iPhone Activations
AT&T Wireless Postpaid Integrated Devices in Service
(in millions)
4Q083Q081Q08 2Q08
8.8
19.3
16.2
31.7%
22.3%
15.8%
18.0%
Percentage of Postpaid Subscribers with Integrated Devices
10.3
13.1
27.0%
1Q09
Broad array of attractive devices –Apple iPhone, BlackBerry® BoldTM, quick messaging devices, netbooks
Explosion of applications and content – AT&T Apps Beta launched in first quarter, largest catalog of mobile music among U.S. wireless companies
United States’ fastest 3G network –strong spectrum position, increased use of 850 MHz for 3G
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40.9% Wireless OIBDA Service Margin
• ARPU and churn characteristics of growing iPhone 3G customer base
• Continuing operational improvements in network and support functions
• >10 basis point year-over-year improvement in total churn
Wireless margin expansion on track with full-year outlook.
Major drivers:
33.5%
35.8%
41.2% 40.9%41.7%
1Q08 4Q08 1Q093Q082Q08
AT&T Wireless OIBDA Service Margin
Continue to expect wireless OIBDA margin in the mid 40% range long term
iPhone 3G launch
OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.
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Strong AT&T U-verse Growth
AT&T U-verse TV Subscribers(in thousands)
1Q08 2Q08 3Q08 4Q08 1Q09
Net gain: AT&T U-verse VoIP
• Double-digit U-verse TV penetration of eligible living units
• Mid-teens penetration in areas marketed to for at least 18 months
• Service includes a host of advanced features including:– Total Home DVR– 100+ High Definition channels– integrated voice and broadband– AT&T U-verse voice launched
in 86% of markets
• Total video penetration of households served at 12.6%
AT&T U-verse TV subscriber growth delivering high broadband and VoIP attach rates
1Q08 2Q08 3Q08 4Q08 1Q09
120
73
427
170
264
232
148170
284
Net Gain – AT&T U-verse TV Subscribers(in thousands)
549
781
1,045
379
1,329
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Step Up in Broadband Growth
• 471,000 first-quarter increase in total broadband subscribers
• >50% sequential increase in wirelinebroadband net adds
• AT&T U-verse high speed Internet connections more than tripled over the past year to 1.3 million
• Continued growth in wireless/ broadband bundles
• Industry’s largest Wi-Fi footprint, with >20,000 U.S. hotspots
AT&T Total Broadband ConnectionsWireline Broadband Users Plus Wireless 3G
LaptopConnect Users(in millions)
4Q083Q081Q08 2Q08
15.4
16.3
15.616.0
Strong broadband growth driven by strength in wireline consumer connections
16.7
1Q09
264
238
148
168
284
Net gain: AT&T U-verse high speed Internet subscribers
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Regional consumer revenues down 6.8% year over year; ARPU growth and improved connections trends driven by U-verse TV and broadband
Wireline Consumer Revenue and Connections Trends
1Q08 2Q08 3Q08 4Q08
1Q08
AT&T Regional Consumer Revenue Per Household Served
1Q09
$62.23
$63.50 1Q09
Sequential Change In Regional Consumer Connections(in thousands)
(923)(870)
(504)
(98)
(196)• 2.0% increase in
consumer ARPU
• 23.0% year-over-year growth in consumer IP revenues (AT&T U-verse and broadband services)
• Improved connections trends where AT&T U-verse TV is marketed
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AT&T Business Solutions
Total $10.7 (4.0)%
Services (Excludes CPE) $10.3 (2.8)%
IP Data $1.5 10.5%
1Q09Year-Over-
Year Growth
AT&T Business Solutions Revenues($ in billions)
Total business trends reflect strong growth in IP data and strategic services, offset by continuing economic pressures, primarily impacting voice
• Economic impacts focused on voice usage; largest impacts in financial, transportation and general merchandise retailing sectors
• Largest economic impacts in low-margin areas such as CPE and international voice, with cost offsets
• New service adoption continues to be solid
• 10.5% growth in business IP data revenues
• 19.6% growth in strategic services
– Ethernet and VPNs up >20%
– IP conferencing up >70%
$969
$873
$810
$907
1Q08 2Q08 3Q08 4Q08 1Q09
Strategic Business Services Revenues($ in millions)
Strategic business services include the new-generation capabilities that lead AT&T’s most advanced solutions – including Ethernet, VPNs, hosting, IP conferencing and applications services.
$941
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Stable Consolidated Margin
1Q09 margin stable versus 2008 and on track with full-year outlook, reflecting operational improvements in both wireless and wireline
• 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 iPhone3G initiative along with improvements in wireless network and support costs
18.6%
AT&T Consolidated Operating Income Margin
Full Year2008
1Q09
18.8%
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Cash Flow, Balance Sheet Strength
• Cash from operations improvement reflects progress on cost initiatives and lower cash taxes
• Full-year 2009 capital expenditures expected to be in the $17 – $18 billion range
• Total debt reduced by $5.8 billion over the past three quarters
Free cash flow and capital expenditures in line with previously outlined full-year outlook
$7.9
Cash From Operations
$5.0
1Q08 1Q09
Dividends Paid $2.4
Free Cash Flow $4.6
AT&T Cash Summary($ in billions)
Capital Expenditures $3.4
Debt-to-Capital Ratio 43.2%
Totals may not foot due to rounding.
Free Cash Flow is defined as cash from operations less capital expenditures.
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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
AT&T Investor Update
1Q09 Earnings Conference CallApril 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.