AT&T Investor Update Earnings Conference Call April 23, 2013 2013 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.
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 www.att.com/investor.relations. 2
Financial Summary Reported EPS $0.60 $0.67 Adjusted EPS $0.59 $0.64 Adjusted EPS up 8.5 percent excluding significant items and Ad Solutions up 11.7 percent year over year on a reported basis 11.7% 8.5% Consolidated revenues of $31.4 billion, up 0.9 percent year over year excluding Ad Solutions Wireless up 3.4 percent Wireline consumer up 2.0 percent Strong free cash flow $8.2 billion cash from operating activities $3.9 billion free cash flow Removal of Adv. Solutions Income tax settlement $0.01 $0.03 Returned more than $8.4 billion to shareholders in the quarter 3 Reported EPS $0.60 $0.67 Free cash flow is cash from operations minus capital expenditures.
Highlights: Solid Wireless Gains with Impressive U-verse Results Strong Earnings Per Share Growth and Solid Cash Flow 8.5 percent adjusted earnings per share growth Strong cash from operations and solid free cash flow IP-based broadband adds of more than 2 million (Wireless and Wireline) Mobile Internet Drives Wireless Gains Mobile data up 21.0 percent Wireless EBITDA service margins expand to 43.2 percent Transformation of postpaid base to smartphones continues U-verse Leads Wireline Best total broadband net adds in eight quarters, record high speed Internet gains, strong video net adds 10.8 percent growth in strategic business services revenues 4
Project VIP Update: The Nation s Fastest 4G LTE Network LTE build ahead of schedule Nearly 200 million POPs covered Nearly 90 percent of our 300 million POPs LTE buildout by year end AT&T has the nation s fastest 4G LTE network as supported by an independent third party AT&T s overall wireless network performance call, text, data ranked 1 st or tied for 1 st in 14 of 23 markets surveyed year to date 2013 by RootMetrics Strong U-verse performance adds confidence Record high speed Internet net adds Increasing video adds Double-digit strategic business services revenue growth 5
Mobile Data Revenue Growth Exceeds 20 Percent Total wireless revenues up 3.4 percent Service revenues up 3.4 percent Data revenue growth of 21.0 percent Data Revenues ($ in billions) Service Revenues ($ in billions) $14.6 $15.1 Total Wireless Revenues ($ in billions) $16.7 $16.1 3.4% Solid ARPU gains $5.1 3.4% Phone-only postpaid ARPU up 2.0 percent Postpaid data ARPU growing 18.0 percent $4.2 21% Total postpaid ARPU up ~1 percent 6
Smartphone Base Continues to Expand Postpaid Smartphone Devices (in millions) % of Postpaid Phone Base 48.3 Usage-Based Smartphones (in millions) Tiered Data Mobile Share Smartphone base increases by 1.2 million in the quarter 7.1 million in last 12 months 88 percent of postpaid phone sales Best-ever first-quarter smartphone sales of 6.0 million 41.2 Upgrade rate flat year over year 72% 25.1 33.5 Almost 70 percent of smartphone subscribers on usage-based plans 61% Almost 10 million Mobile Share subscribers More than a quarter of accounts taking 10 GB or higher plan >15 percent changing over from unlimited plans New high-tier plans introduced 7
Tablets Drive Postpaid Growth Total Subscribers (in millions) 103.9 107.3 Total Churn Postpaid Churn 1.47% 1.38% Solid postpaid and connected device gains Postpaid tablets up 365k 1.10% 1.04% More than 70 million postpaid subscribers Strong connected device adds including security and telematics Churn continues to improve Postpaid churn improves to 1.04 percent Net Add Summary (in thousands) Postpaid 296 Prepaid (184) Reseller (252) Total churn down year over year and sequentially Total churn improves even with high reseller disconnects Connected Devices 431 Total 291 8
Strong EBITDA Service Margin Expansion with Strong Sales Wireless EBITDA Service Margin Postpaid Smartphone Sales (in millions) 43.2% 42.3% Wireless EBITDA service margin of 43.2 percent, 90 basis point improvement year over year Strong smartphone and tablet sales 5.5 6.0 Improved operating efficiencies and revenue gains Higher postpaid ARPU and strong data growth Strong sales and margins provide solid foundation for growth during remainder of year 9
Record-Setting U-verse High Speed Broadband Net Adds Wireline Consumer and Business U-verse Revenues ($ in billions) $2.7 $2.0 Up 31.5% YOY Strong U-verse net adds drive growth: Total U-verse subscribers, both TV and broadband, reach 8.7 million Record 731,000 U-verse high speed broadband net adds Best U-verse TV net adds in nine quarters 232,000 $37 Total Broadband ARPU $40 Total U-verse Subscribers (in millions) 8.7 6.2 9% 41% Best total broadband net adds in eight quarters Total broadband ARPU up more than 9 percent year over year Wireline consumer revenues up 2.0 percent year over year Total consumer U-verse revenues up 30.8 percent IP data 62 percent of consumer revenues 10
Strategic Business Services Grows Despite Economic Pressure Strategic Business Services Revenues ($ in millions) $1,976 $1,784 $1,478 Up 10.8% YOY Strategic business services revenue growth at 10.8 percent Wireline business revenues down 3.4 percent Operating expenses decline 1Q11 Wireline business still impacted by economic pressure and uncertainty AT&T Wireline Business Service Revenue Growth 0% -2% -4% Year over Year Sequential -1.5% -3.5% Small business starts down year over year and sequentially Gross business fixed investment down Employment levels continue to underperform 2Q12 3Q12 4Q12 11 Strategic business services include the next-generation capabilities that lead AT&T s most advanced solutions including VPNs, Ethernet, hosting, IP conferencing, VoIP, MIS over Ethernet, U-verse and security services.
Leader in Network Solutions for Hosting and Cloud Services Product Rating Chart Network-centric integrated solution for hosting and cloud products Operates 38 global data centers Focus on wired and wireless cloud services and mobile applications One of the world s most powerful and advanced global MPLS networks, providing service to 187 countries Three-pronged cloud strategy AT&T Services Cloud Overall Product Rating Scores MPLS SIP Trunking/IPTF/Dedicated Voice Dedicated Internet Metro (SONET/Wavelength/Ethernet) Managed & Redundant Broadband Ethernet WAN Managed Routers Retail Cloud Network-Enabled Cloud Working with Akamai to provide suite of CDN applications 12
Consolidated and Wireline Margin Summary Operating Income Margin Consolidated Wireline 19.2% 18.9% Consolidated margin down slightly Wireless margin improvement due to revenue growth Pressure from wireline due to successbased Project VIP gains and business 11.5% 11.1% Corporate and new business initiatives from Other segment pressure consolidated margins Wireline operating income margin impacted by: Lower business revenues Higher success-based costs with U-verse adds Project VIP operating expenses Solid cost management 13
Strong Cash Flow and Balance Sheet AT&T Cash Summary ($ in billions) Cash From Operations $8.2 Capital Expenditures $4.3 Free Cash Flow $3.9 Debt-to-Capital Ratio 45.6% Net-Debt-to-EBITDA Ratio 1.68 Dividends Paid $2.5 Shares Repurchased $5.9 Total Returned to Shareowners $8.4 Free cash flow in line with previously outlined full-year outlook Strong cash from operations due to revenue growth and cost initiatives 2014 and 2015 capex guidance update ~$20 billion range each year Net-Debt-to-EBITDA ratio of 1.8x range or lower More than $8 billion returned to shareowners in quarter Dividends and share buybacks Strong balance sheet continues to be a priority Pension funding plan pending approval 14 Free cash flow is cash from operations less capital expenditures. Net debt is total debt less cash and cash equivalents. EBITDA is operating income before depreciation and amortization. Numbers may not foot due to rounding.
Summary: Solid Beginning to Year Strong free cash flow Solid wireless quarter Pacesetting U-verse results Award-winning LTE network Solid financial performance EPS growth and strong cash flows Mobile Internet leadership strong mobile data growth, higher margins, solid smartphone and tablet gains, LTE build ahead of schedule Excellent quarter for U-verse record high speed wireline IP broadband net adds and strong revenue growth Strong balance sheet strong credit metrics while returning more than $8 billion to shareowners 15
AT&T Investor Update Earnings Conference Call April 23, 2013 2013 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.