1 st Quarter Earnings Conference Call

Transcription

1 st Quarter Earnings Conference Call AT&T Investor Update April 22, 205

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 website at 2

3 Highlights: Executing on Plans Project VIP Network Transformation Nearing Completion LTE network covering 308 million people 57 million IP broadband customer locations, speed upgrades Fiber to 800,000 additional business locations Customer Transformation On Track 84% postpaid phone base on smartphones,~90% usage-based One-year anniversary of Mobile Share Value SM plans Cricket strengthens prepaid position; growth platforms for IoT Migration to IP services, both business and consumer Operational Transformation In Progress Digital First drives cost savings SDN initiatives underway; Network on Demand launched Automating service delivery and reducing cycle times Continued focus on capital structure and asset utilization 3

4 Positioned for Growth DIRECTV $2.5B in cost synergies, up from $.6B Mexico Unique opportunity in a growing market Spectrum Positioned for data growth driven by video Content efficiencies Supply-chain efficiencies Customer care Single billing and collections Single truck roll Near-nationwide footprint Leading spectrum position Positive macroeconomic trends and attractive regulatory environment Planning near completion and implementation underway Utilization of Leap spectrum, completing this year Only bidder to acquire near-nationwide 0x0 block of AWS spectrum Clear path to deploying additional spectrum, adding capacity 4

5 Financial Summary Adjusted Consolidated Revenues ($ in billions) $32.2 $32.6.2% Adjusted EPS* $0.7 $0.63 First-quarter adjusted consolidated revenues of $32.6 billion, up.2 percent Wireless revenues up.8 percent Adjusted wireline revenues down.2 percent First-quarter adjusted EPS of $0.63 Prior-year period includes 3 cents of EPS from divested assets Continued success of Mobile Share Value plans Reported EPS $0.70 $0.6 Adjustments: Merger-related costs $0.0 $0.04 Employee separation charges $0.03 Tax-related item ($0.05) *Adjusted EPS $0.7 $0.63 free cash flow of $2.8 billion; $4.0 billion of capex $2.4 billion dividends paid Ending cash balance of $4.4 billion Net debt-to-adjusted EBITDA of 2.9x includes merger-related costs for domestic wireless ($0.03) and DIRECTV/Mexico ($0.0). For comparability, revenues adjusted to exclude SNET in all periods. 5

6 Best-Ever First-Quarter Postpaid Churn The Internet of Things Drives Strong Subscriber Growth Postpaid Net Adds (in thousands) Postpaid Churn %.07%.02% Q3 Net Add Summary (in thousands) Connected Devices and Total Net Adds (in thousands), Connected Devices,062 Total Net Adds Postpaid Prepaid Voice Branded Net Adds Reseller (206) (266) Connected Devices Total Net Adds,062,28 Industry-leading postpaid churn of.02 percent.2 million total net adds, driven by tablets and connected cars 44,000 postpaid net adds, including about 700,000 tablets 98,000 prepaid net adds with strong Cricket smartphone sales 945,000 connected device net adds, including nearly 700,000 connected cars ~.2 million branded smartphones (postpaid and prepaid) added to base Solid smartphone gross adds and upgrades 6.2 million postpaid sales (gross adds and upgrades) Smartphones 84 percent of postpaid phone base, 94 percent of postpaid phone sales 6 Session-based data plans moved from Prepaid to Connected Devices. Prior periods restated. Wireless metrics presented do not include Mexico.

7 AT&T Next Take Rate Nears Two-Thirds of Smartphone Sales as Postpaid ARPU with Next Continues to Grow Sequentially Total Wireless Revenues ($ in billions) Equipment Revenues $7.9 $8.2 Mobile Share Connections (in millions) Accounts Wireless revenues continue to grow Equipment revenues up 36 percent as revenue mix shifts, tempered by success of BYOD Service revenues down 3.7 percent driven by the move to Mobile Share Value plans $2.5 $3.4 Postpaid ARPU Mix Phone-Only ARPU Phone-Only ARPU + Next $67.39 $ % $64.35 $65.63 $ % $ %.3 27% 2Q4 3Q4 4Q4 9.4 AT&T Next percent of smartphone base $65.87 $6.00 $66.4 $ % 2 Mobile Share accounts increase 72 percent year over year Mobile Share now more than 70 percent of postpaid base 20 percent of accounts are 5 GBs or larger Sequential growth in ARPU plus AT&T Next SM billings for third straight quarter 4. million Next adds 65 percent take rate; plus 33,000 BYOD 70 percent of adds unsubsidized More than 30 percent of smartphone base on Next; 60 percent on no-device-subsidy pricing 7 Postpaid phone-only ARPU + AT&T Next subscriber installment billings. 2 Includes ~$0.25 of pressure from the accounting impact of Data Rollover TM. Wireless metrics presented do not include Mexico.

8 Wireline Driven by Continued Strength in Strategic Business Services and Consumer 8 Adjusted Wireline Revenues ($ in billions) Wireline EBITDA Margin Adjusted Strategic Business Services and Consumer U-verse Revenues ($ in billions) $2.3 27% $ % $2.6 32% 5% Strategic Bus. Svcs. % of Business Revenues $4.5 $ % 27.5% 4Q4 $3.3 59% Cons. U-verse Rev. % of Consumer Rev. Strategic business services include VPN, Ethernet, cloud, hosting, IP conferencing, VoIP, MIS over Ethernet, U-verse and security services. $3.9 69% 9% Continued focus on profitability Wireline margins stabilizing Adjusted consumer revenues up 2. percent IP revenues approaching 70 percent of base IP broadband largely completed with nearly 90 percent of eligible base migrated Adjusted wireline business revenues down 3.3 percent, impacted by: FX and exiting of low-margin wholesale businesses, such as global hubbing Transformation to IP technologies continues Adjusted strategic business revenues up 5.4 percent, nearly one-third of wireline business revenues Adjusted consumer U-verse revenues up 9 percent; total broadband subs increase For comparability, revenues adjusted to exclude SNET in all periods. Net adds include SNET through date of sale.

9 Margin Summary Adjusted Wireless EBITDA Service Margin Postpaid Smartphone Gross Adds and Upgrades (M) 43.2% 45.5% 45.3% Q3 Stable adjusted wireless EBITDA service margin Consistent with prior year with help from AT&T Next sales Total wireless EBITDA margin year-over-year comparison reflects: Cricket operations Shift to no-device-subsidy pricing in advance of upgrades Adjusted Operating Income Margins,3 Consolidated Wireline 8.9% 9.6%.% 0.0% 8.5% 0.0% Consolidated margin reflects flat wireline margins and impact of wireless repositioning Project Agile initiatives gaining traction: Digital First and reduced call volumes Customer order-to-bill cycle times Expense savings from capex efficiencies and software-defined network rollout 9 Q3 and margins adjusted for wireless integration costs. 2 includes ~20 bps of pressure from the accounting impact of Data Rollover. 3 Consolidated margins adjusted for significant one-time items, including merger-related costs and employee separation charges.

10 Summary: Executing Well on All Plans, Full-Year Guidance on Track Industry-leading postpaid churn.2 million branded smartphones added Solid broadband gains Strong demand for strategic business services Positioned for growth with DIRECTV and Mexico Continued transition to no-device-subsidy model Growing AT&T Next and Mobile Share Value take rates, solid subscriber gains Further migration to IP technologies Transition to IP broadband nearing completion, strong strategic business services gains, with wireline margins stable Strategic investment and diversification Iusacell closed; Nextel Mexico/DIRECTV acquisitions on track; AWS spectrum auctions Strong cash flows and balance sheet Strong free cash flow, improving dividend coverage, financial strength to invest 0

11 st Quarter Earnings Conference Call