AT&T Investor

I t Update
U d t
3Q09 Earnings Conference Call
October 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.
 Agenda
g

Introduction Brooks McCorcle

Senior Vice President-Investor Relations

Results Rick Lindner

Senior Executive Vice President
and Chief Financial Officer

Wireless & Consumer Ralph de la Vega

President and Chief Executive Officer,
AT&T Mobility and Consumer Markets

Q and A

2
 Cautionary Language Concerning
Forward-Looking Statements
Information set forth in this presentation contains
fi
financial
i l estimates
ti t and d other
th forward-looking
f d l ki
statements that are subject to risks and uncertainties,
and actual results might differ materially.
A discussion of factors that may y 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.

3
 3Q09 AT&T Consolidated
Financial Summary

AT&T Diluted
Earnings Per Share
$30.9
$30 9 billi
billion consolidated
lid t d
revenues:
$0.55 $0.53 $0.54 $0.54 • (1.6)% versus 3Q08
$0.41
$
• +0.4% versus 2Q09

Stable consolidated operating

income margin – 17.5% versus
17.9% in year-earlier quarter
and in 2Q09

3Q08 4Q08 1Q09 2Q09 3Q09

Strong free cash flow
Versus the year-earlier third quarter, • 3Q: $5.5 billion versus
3Q09 results include $0.04 of pressure from $4.0 billion in 3Q08
$ Q
incremental noncash pension/OPEB expenses. • YTD: $13.9 billion versus
3Q09 EPS includes $0.03 of benefits $7.9 billion in first three
from resolution of tax issues, offset by $0.02 quarters of 2008
of pressure due to severance charges.

4 Free Cash Flow is defined as cash from operations less capital expenditures.
 AT&T 3Q09
Q Highlights
g g
• 2.0 million total wireless net subscriber additions
with record-low churn

• 4.3 million postpaid 3G integrated devices added

Solid execution to network, best-ever quarterly total

across the business, • 3.8% increase in postpaid ARPU with

1.7%
% sequentiall growth,
h d
driven b
by 33
33.6%
6% growth
h
good momentum
in wireless data revenues
in key growth areas,
• 38.5% wireless OIBDA service margin, up
sharp
p focus on cost sequentially and year over year
improvement • 240,000 AT&T U-verseSM TV net adds, up from
232,000 in 3Q08, to reach 1.8 million

• 16
16.6%
6% strategic business services revenue growth
with business IP-based revenues up 6.8%

• $13.9 billion free cash year to date versus

$7.9 billion over first three quarters
$ q of 2008

OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.
5 Free Cash Flow is defined as cash from operations less capital expenditures.
 Consolidated Revenue Trends

AT&T Consolidated Revenues Consolidated revenues declined

($ in billions)
1.6% versus ppeak level in 3Q08,
Q ,
$31.3 $31.1 with second consecutive quarter
$30.6 $30.7 $30.9
of sequential improvement
Sequential YOY

e ess Services
Wireless Se ces 3.5%
3 5% 10.0%
0 0%

Wireline Data 2.0% 5.4%

3Q08 4Q08 1Q09 2Q09 3Q09
Wireline IP Data 4.7% 18.7%
3Q09 Revenue Mix Wireline Voice (3.8)% (14.5)%

Wireless, 100% owned 44%

Diversified revenue mix
Wireline Data/ g y weighted
increasingly g to wireless
Managed d Services 24%
and data/managed services:
Wireline Voice 26%
• 68% of revenues in 3Q09
Advertising
Solutions/Other 6% • 58% of revenues in 3Q07

6
 3Q09 Highlights: Rapid Transformation
of AT&T Mobility and Consumer Business
Clear benefits from integrated device strategy and aggressive
expansion of wireless data network capabilities
• Strong subscriber gains
• Best-ever integrated device quarter
• High-quality, data-centric base
• Record-low
Record low churn
• Accelerated ARPU growth
• Robust wireless data growth

Good
G d momentumt in
i emergingi devices
d i – eReaders,
R d netbooks,
b k
navigation services, monitoring devices and more

Wireless network initiatives on track – HSPA 7.2 significantly

i
increases wireless
i l d
data
t speeds,
d first
fi t market
k t launches
l h planned
l d this
thi year

AT&T U-verse redefining consumer space – more than three-fourths

of U-verse TV subscribers have a triple- or quad-play, improved
customer retention,
retention ARPU growth

7
 Strong Wireless Subscriber Gains,
Accelerated Service Revenue Growth
AT&T Wireless Service Revenues
($ in billions)
$ 2
$12.4

$11.7
$12.0 10.0% year-over-year wireless
$11.5
$11.3 service revenue growth
• Up from 9.4% growth in 2Q09
• 3.5%
3 5% sequential growth

Best-ever third-quarter total

3Q08 4Q08 1Q09 2Q09 3Q09 subscriber gain of 2.0 million;
6 7 million increase over
6.7
AT&T Wireless Subscribers
(in millions) 81.6 past year
79.6
78.2
77.0
1.4 million retail postpaid
net adds
74.9
• Up 20% from 2Q09
• Second-highest third-quarter
total in company history
3Q08 4Q08 1Q09 2Q09 3Q09

8
 Record-Low Subscriber Churn,
Significant Step Up In ARPU
Total Postpaid
Subscriber ARPU Subscriber ARPU

$61.23 3.8% year-over-year postpaid

$51.21
$50.80 $58.99 ARPU growth:
• Seventh straight quarter of
year over year postpaid ARPU
year-over-year
growth
• 1.7% sequential growth
3Q08 3Q09 3Q08 3Q09

Total Postpaid Substantial year-over-year churn

Churn Churn improvement:
1.69%
1.43%
1.22% • Best-ever total churn – down
1 17%
1.17% >25 basis points year over year
• Best-ever third-quarter postpaid
churn, in some markets well
below 1%

3Q08 3Q09 3Q08 3Q09

9
 Strength in Integrated Devices,
33.6% Wireless Data Revenue Growth

Postpaid Wireless Data Independent

p data shows
Subscribers with Revenues twice as many smartphone
Integrated Devices ($ in billions)
customers have chosen AT&T
Postpaid Data ARPU
41.7% over any other competitor
$3.6
• 4.3 million increase in p
postpaid
p
3G integrated devices, highest
quarterly gain to date
$18.37
• >26 million integrated devices
$2.7 in service,, doubled over past
p year
y
22.3%
• >53% of postpaid subs now have
data plans
• 3.2 million iPhone activations,
$14.70 b t
best-ever t t l
total
• NPV for iPhone subs >2X average
postpaid sub
3Q08 3Q09 3Q08 3Q09

10
 Leadership in Emerging Devices,
Next Wave of Wireless Growth

eReaders • Kindle from Amazon.com

Amazon com
• Sony Daily Edition
• Plastic Logic QUETM
• Barnes and Noble nook

Personal • TomTom XL 340S LIVE

Navigation
• Garmin Nuvi 1690
Devices

Netbooks • Nokia • Acer

A
• Dell • Lenovo

11
 Wireless Network Initiatives on Track,
Delivering Benefits for Customers
3G dropped calls improved 12% over past year, Composite Quality Index
approaching 1%; 3G blocked calls improved 30% improved >25% over
past 10 months
Percentage of 3G Percentage of 3G
dropped calls blocked calls

2%

S
Sept 08 S
Sept 09 Sept 08 Sept 09 N
Nov 08 S
Sept 09

2009 initiatives on schedule:

• ~2,000 new cell sites
• ~100,000 new circuits for backhaul – doubling number of fiber-served cell sites
• 3G expansion to ~4,400 sites, covering more than 370 markets by end of year
• 850 MHz spectrum conversion to 3G >90% complete, in final city by end of 2009
• Wi
Wi-Fi
Fi connections up 4X over 3Q08 – >20,000 U.S. hotspots, 125,000 globally
Composite Quality Index is an overall view of 3G network performance that measures call success as well as
our customers’ ability to access and remain on AT&T’s 3G network.

12
 Next Major Wireless Network Deployments:
HSPA 7.2 and LTE (4G)
HSPA 7.2 platform is ready now,
Planned HSPA 7.2 d bl
doubles th
theoretical
ti l speedd for
f 3G
Launches in 4Q09 • Six 7.2-compatible handsets
available in 4Q, more to come
• Charlotte • Chicago
• Dallas • Houston • Provides better default speeds,
• Los Angeles bette customer
better c stome experience
e pe ience during
d ing
• Miami
transition to 4G
• Efficient deployment path to 4G
Plan to deploy HSPA 7.2
in 25 of 30 top markets by LTE 4G deployment
the end of 2Q10 • Plan trials in 2010, expect to begin
deployment in 2011
• AT&T has impressive inventory
p
Expect to cover ~90% of 700 MHz and AWS spectrum
of 3G POPs with HSPA 7.2 dedicated exclusively for LTE
by end of 2011
• This spectrum will cover 100%
of the top 200 U.S. markets

13
 Wireless Margin
g Expansion
p

AT&T Wireless OIBDA

Service Margin
Mid-40%
Range Wireless OIBDA service
margin up sequentially and
year over year, driven by:
38 3%
38.3% 38 5%
38.5%
• Strong revenue growth
33.5%
• High-quality subscriber base
• Continuing operational
improvements in network
and support functions

Trends reinforce confidence

in longer-term margin target

3Q08 2Q09 3Q09 Longer-term

expectation

14 OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.
 AT&T U-verse Innovation and Growth
AT&T U-verse’s broadband attach
AT&T U-verse TV ranked rate continues to run above 90%,
“Highest in Residential Television VoIP attach rate above 60%
Service Satisfaction in the
South and West Regions Two • >75% of U-verse subscribers have
Years in a Row” by J.D. Power a triple- or quad-play
and Associates
• U-verse TV penetration above 12%
companywide and above 20% overall
in areas marketed to for 24+ months
AT&T U-verse TV
Subscribers • Continue to roll out new features
1,817
(in thousands) including Multiview:
U-verse VoIP Subscribers 1,577
735
,
1,329
570
1,045

781 394

224

104

3Q08 4Q08 1Q09 2Q09 3Q09

AT&T U-verse received the highest numerical score among television service providers in the South and West in the proprietary J.D. Power and Associates 2008-2009
Residential Television Service Satisfaction StudiesSM. 2009 study based on 28,118 total responses from measuring providers in the South (13) and West (10) regions and
measures consumer satisfaction with television service. Proprietary study results are based on experiences and perceptions of consumers surveyed in
January, March and June 2009. Your experiences may vary. Visit jdpower.com

15
 AT&T U-verse Driving Directional
Improvement in Wireline Consumer Trends

32.1% year-over-year growth in

Regional Change in
Consumer Regional revenues from consumer IP-based
Revenue Per Consumer services, U-verse services and
Household Connections broadband. Key drivers:
Served (in thousands)
$65.26 YOY
O CChange
a ge
3Q08 3Q09 U-verse TV subscribers >1 million

$63.68 U-verse VoIP connections 631,000

Consumer wireline
broadband connections 821,000

(630) IP-based services – broadband,, VoIP

and AT&T U-verse TV – represented
(869) 32.4% of 3Q09 total wireline consumer
3Q08 3Q09 revenues – up from 23.2% 3Q08

16
 AT&T Business Solutions
AT&T Business Solutions Revenues Fundamental business trends
($ in billions)
Sequential Year-Over- consistent with 1H09: strong
Change Year Change growth in IP data and strategic
services offset by economic
Total (1.3)% (7.6)%
pressures
Services (excludes CPE) (1.3)% (6.4)%
IP Data 3.1% 6.8%
• Strategic business services
revenue growth led by Ethernet
Strategic Services 5.2% 16.6% and VPNs, both up ~20% year
over year
Strategic Business
Services Revenues $1,058 • Largest economic impacts on
($ in millions) $1,006
volumes in voice and legacy
$969 data products
$941
$907
• Operational cost efficiencies
continue to support business
margins
• Expect year-over-year business
3Q08 4Q08 1Q09 2Q09 3Q09 revenue comparisons will
Strategic business services include the new-generation capabilities that flatten/improve in 4Q09
g Ethernet,, VPNs,, hosting,
lead AT&T’s most advanced solutions – including g,
IP conferencing and application services.

17
 Stable Consolidated Margins
g

AT&T Consolidated Margins reflect continued sharp focus on

Operating Income Margin cost discipline,
di i li operational
i l improvements
i
in both wireless and wireline
18.6%
18.0% • 3Q consolidated operating expenses
down 1.0% year over year
• Wireline operating expenses down 2.8%
year over year

M j
Major costt initiatives
i iti ti on track:
t k
• Total force down ~18,000 year to date
• Continuing cost-improvement
opportunities, including areas such as
organizational and systems integration,
Full-Year YTD order and billing center consolidation
2008 3Q09

18
 Strong Cash Flow, Balance Sheet Strength

AT&T Cash Flow

($ in billions))
3Q09 YTD Cash Profile
Cash From Free Cash Cash from Operating Activities $25.5
Operating Flow
Activities
Capital Expenditures $11.6
$25 5
$25.5 $13 9
$13.9
Free Cash Flow $13.9
$22.8

Dividends Paid $7.3

$7.9
Debt Reductions

• Total debt reduced by $4.1 billion

in 3Q09
• Debt net of cash on hand reduced
by $12.0 billion over the past
YTD YTD YTD YTD five quarters
3Q08 3Q09 3Q08 3Q09

19 Free Cash Flow is defined as cash from operations less capital expenditures.
 3Q09 Summary: Solid Execution,
Good Momentum in Key Growth Areas

• Strong wireless growth – 10.0% increase in service revenues,

significant step up in postpaid ARPU, record-low churn

• Wireless margin expansion – driven by high-quality subscriber

base, operational improvements

• Wireless network initiatives on track – initial HSPA 7.2 market

launches in 4Q, natural progression to LTE/4G

• Solid U
U-verse
verse growth – high broadband and voice attach rates

• Continued growth in advanced business services – up 16.6%

• Stable margins – cost discipline across operations, wireline

operating expenses down

• Strong free cash flow – with sound balance sheet, improving

credit metrics

20
 AT&T Investor
I Update
U d

3Q09 Earnings Conference Call

October 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.