4Q09 ATT Earnings Slides_Gray
Transcript of 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.