AT&T First-Quarter Earnings Package

1st QUARTER 2008

InvestorBriefing No. 260 | April 22, 2008

AT&T Inc. reported strong first-quarter results highlighted by a significant ramp in consolidated revenue growth, led by improved results in wireless and enterprise, and further expansion of wireless margins.• Wireless revenues increased 18.3 percent versus the year-earlier first quarter,

driven by strong subscriber gains and continued robust growth in wireless data services such as Internet access, e-mail, messaging, data access and media bundles. AT&T is the U.S. market leader in wireless with 71.4 million subscribers. Wireless margins expanded significantly, reflecting continued network and operational improvements.

• Enterprise customer revenue growth took another step up, led by a 22.9 percent increase in revenues from Internet Protocol (IP)-based data services such as virtual private networks (VPNs), hosting and managed Internet services. AT&T is the industry leader in serving large business customers on six continents.

AT&T Ramps Revenue Growth, Delivers Strong First-Quarter Results; Growth Highlighted by Gains in Wireless, Broadband and Enterprise Services

Results mark AT&T’s

12th consecutive quarter

of double-digit growth in

adjusted earnings per share.

First-Quarter EPS Reconciliation 1Q08 1Q07

Reported EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.57 $0.45

Adjustments to results:

Merger integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02

Noncash merger-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13 0.21

Gains from wireless transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.04)

Workforce reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.04

Adjusted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.74 $0.65

Pretax adjustments to earnings: in 1Q07, merger integration, noncash intangible amortization and purchase accounting effect totaling $2,306 million and a gain from wireless transactions of $(409) million; in 1Q08, noncash intangible amortization totaling $1,208 million and a workforce reduction charge of $374 million.Totals may not foot due to rounding.

331432_IB260_042108_830a.indd 1331432_IB260_042108_830a.indd 1 4/21/08 8:15:35 AM4/21/08 8:15:35 AM

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InvestorBriefing | 1Q 2008

• Broadband revenues continued their record of solid double-digit growth, reflecting subscriber gains and an increased number of subscribers who select higher-speed service. AT&T is the U.S. leader in broad-band service with 14.6 million connections.

• AT&T U-verseSM TV subscriber growth continued its strong ramp, with a first-quarter net gain of 148,000 to reach 379,000 in service. The company is on track to reach its target of more than 1 million AT&T U-verse TV subscribers by year-end 2008.

REVENUE GROWTH RAMP

For the quarter ended March 31, 2008, AT&T’s revenues totaled $30.7 billion, up 6.1 percent versus reported results in the year-earlier quarter and up 4.6 percent compared with first-quarter 2007 pro forma revenues, which exclude merger-related accounting impacts on directory revenues. This marks a substan-tial step up from year-over-year pro forma revenue growth of 2.9 percent in the fourth quarter of 2007 and 1.7 percent in the first quarter of 2007.

AT&T’s first-quarter revenue growth was driven by improved growth rates in wireless, enterprise and wholesale, combined with stable trends in regional revenues.

REPORTED RESULTS

Compared with results for the year-earlier quarter, AT&T’s reported operating expenses for the first quarter of 2008 were $24.8 billion, up from $24.3 billion; reported operating income was $6.0 billion, up from $4.7 billion; and AT&T’s reported operating income margin was 19.5 percent, up from 16.1 percent.

AT&T’s reported first-quarter 2008 net income totaled $3.5 billion, up 21.5 percent from $2.8 billion in the year-earlier quarter, and reported earnings per diluted share totaled $0.57, up 26.7 percent from $0.45 in the first quarter of 2007.

DOUBLE-DIGIT GROWTH IN ADJUSTED EARNINGS PER SHARE

AT&T’s adjusted results for the first quarter of 2008 exclude merger-related amortization expenses and costs associated with a workforce reduction. Adjusted results for the first quarter of 2007 excluded merger-related costs and accounting effects as well as gains from wireless transactions.

Compared with results for the year-earlier quarter, AT&T’s adjusted operating expenses for the first quarter of 2008 totaled $23.2 billion, versus $22.4 billion; adjusted operating income was $7.6 billion, up from $7.0 billion; and AT&T’s adjusted operating income margin was 24.6 percent, up from 23.7 percent.

AT&T’s adjusted first-quarter 2008 net income totaled $4.5 billion, up 10.3 percent from $4.1 billion in the year-earlier quarter, and adjusted earnings per diluted share totaled $0.74, up 13.8 percent from $0.65 in the first quarter of 2007.

AT&T’s merger integration and operational cost initiatives continue on schedule. For the full year 2007, operating expense savings from BellSouth and AT&T Corp. merger integration efforts and previously outlined operational initiatives totaled approximately $3.9 billion. AT&T expects these expense savings to grow in 2008 by more than $2 billion dollars.

4Q07 1Q08

1.7%

2.0%

Revenues for 2007 are adjusted to exclude merger-related directoryaccounting impacts. 2007 comparisons are to 2006 pro forma results, which combine revenues from AT&T, BellSouth and Cingular Wireless consistently for all periods.

AT&T CONSOLIDATED ADJUSTED REVENUE GROWTH RATES

Year-Over-Year, Pro Forma

1Q07 2Q07 3Q07

2.9%

4.6%

3.2%

AT&T continues to

accelerate growth

in consolidated

revenues, driven by

gains in wireless,

broadband and

enterprise services.



3

CASH FROM OPERATIONS, SHARE REPURCHASES

Compared with results in the year-earlier quarter, AT&T’s cash from operating activi-ties for the first quarter of 2008 totaled $5.0 billion, up from $4.6 billion; capital expenditures totaled $4.2 billion, versus $3.3 billion; and free cash flow (cash from operations minus capital expenditures) totaled $0.7 billion, compared with $1.3 billion.

As it invests in the future of its business, AT&T continues to return substantial value to shareowners through dividends and share repurchases. In the first quarter, dividends paid totaled $2.4 billion and shares repurchased totaled 111.6 million for $4.1 billion. AT&T ended the quarter with 5.9 billion shares outstanding.

STRONG BALANCE SHEET

AT&T’s balance sheet continues to be strong. At the end of the first quarter, AT&T’s long-term debt was $60.2 billion, and total debt was $73.5 billion. Cash and cash equivalents at the end of the quarter totaled $2.0 billion. AT&T’s first-quarter debt-to-total-capitali-zation ratio was 39.6 percent, and the company’s annualized debt-to-EBITDA was 1.6. AT&T expects its year-end 2008 debt-to-EBITDA ratio will be in the 1.3 to 1.5 range.

ADDITIONAL BACKGROUND ON ADJUSTED AND PRO FORMA RESULTS

AT&T’s adjusted earnings for the first quarter of 2008 exclude (1) noncash pretax amortization costs related to acquisitions totaling $1.2 billion, or $0.13 per diluted share, and (2) a charge of $374 million, or $0.04 per diluted share, associated with a workforce reduction previously disclosed in a Form 8-K filing.

Adjusted results for the first quarter of 2007 excluded: (1) pretax merger-related integration costs totaling $245 million, or $0.02 per diluted share; (2) noncash, pretax merger-related costs totaling $1.8 billion, or $0.18 per diluted share; (3) a merger-related directory accounting impact of $301 million, or $0.03 per diluted share; and (4) a gain of $409 million, or $0.04 per share, from wireless transactions.

Advertising & Publishing results for 2007 were affected by accounting adjustments following AT&T’s late 2006 acquisition of BellSouth. In accordance with purchase accounting rules, deferred revenues and expenses for all BellSouth directories delivered prior to the close of the merger were eliminated from 2007 consolidated results. This elimination of amortization reduced first-quarter 2007 consolidated revenues by $409 million and consolidated operating expenses by $108 million.

AT&T manages its print directory business using amortized results. As a result, 2007 amortized results are shown in the Advertising & Publishing segment on AT&T’s Statement of Segment Income. In 2008, consolidated and segment results reflect amortization accounting.

1Q07

16.1%Reported

2Q07

16.8%

3Q07

17.6%

4Q07

18.1%

1Q08

19.5%

23.7%23.9% 24.0%

Merger integration and amortization costs and other one-time items are excluded from adjusted operating income margins.

AT&T ADJUSTED OPERATING INCOME MARGIN

23.7%

24.6%

Revenue growth

and progress on

productivity initiatives

combined to further

expand margins in

the first quarter.



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WirelessAT&T delivered strong wireless growth in the first quarter, reflecting the company’s broad high-quality network, innovative services, attractive handset selection, extensive sales reach and continued improvements in operations. Results included improved revenue growth, expanded margins and strong growth in operating income.

ACCELERATED WIRELESS REVENUE GROWTH

AT&T’s first-quarter wireless revenues totaled $11.8 billion, up 18.3 percent versus the year-earlier quarter. This marked AT&T’s seventh consecutive quarter of improved wireless revenue growth. Wireless service revenues, which exclude handset and accessory sales, grew 17.1 percent to $10.6 billion.

Revenue growth was driven by strong subscriber gains and continued improvement in ARPU (average monthly revenues per subscriber). AT&T has now posted seven consecutive quarters of year-over-year growth in wireless service ARPU, which was $50.18 in the first quarter, up 2.0 percent versus the year-earlier quarter. Retail postpaid subscriber ARPU growth was even stronger, up approximately 5 percent.

IMPROVED SUBSCRIBER GAINS

AT&T’s first-quarter net gain in wireless subscribers totaled 1.3 million, up 104,000, or 8.7 percent, versus the year-earlier quarter. AT&T ended the quarter with 71.4 million subscribers in service. Total net adds in the first quarter were reduced by approximately 330,000 due to the shutdown of AT&T’s TDMA wireless network in late February. Retail postpaid net adds totaled 705,000 in the first quarter of 2008, up 3.7 percent versus net adds in the year-earlier first quarter.

AT&T continued its strong record of wireless subscriber flow share with 5.0 million first-quarter gross subscriber additions, up from 4.3 million in the year-earlier quarter. Total average monthly subscriber churn, which includes postpaid, prepaid and reseller subscribers, was 1.7 percent, flat with the year-earlier quarter and with the fourth quarter of 2007. Retail postpaid churn was 1.2 percent, down from 1.3 percent in the year-earlier quarter and flat with the fourth quarter of 2007.

ROBUST GROWTH IN WIRELESS DATA SERVICES

AT&T‘s wireless data revenues grew 57.3 percent versus results in the year-earlier quarter to $2.3 billion, reflecting robust increases in Internet access, e-mail, messaging, data access and media bundles. Data now represents 21.5 percent of AT&T’s total wireless service revenues, up from 16.0 percent in the first quarter of 2007 and 10.9 percent in the first quarter of 2006.

AT&T’s first-quarter wireless

results were highlighted

by strong double-digit

revenue growth driven

by solid subscriber gains

and robust growth in

wireless data services.



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During the first quarter, AT&T’s wireless customers sent more than 620 million multimedia messages and 44 billion text messages, both volumes more than double totals in the year-earlier quarter.

AT&T expects continued robust growth in wireless data services as more customers adopt integrated devices that deliver access to a broad array of applications and content. At the end of the first quarter, 16 percent of AT&T’s postpaid wireless subscribers had an integrated device, up from 6 percent one year earlier.

Data growth is also spurred by adoption of 3G-compatible devices. At the end of the first quarter, 11 million AT&T customers had 3G devices. AT&T’s 3G network now includes 272 U.S. metropolitan areas, and

AT&T WIRELESS REVENUES

Year-Over-Year Growth

1Q07 2Q07 3Q07 4Q07 1Q08

11.2%

12.7%

14.4%

16.3%

18.3%

1Q07 2Q07 3Q07 4Q07 1Q08

62.2

63.7

65.7

70.171.4

AT&T WIRELESS SUBSCRIBERS

In millions

Subscriber increase in 4Q07 included 1.7 million subscribers added through Dobson acquisition.

AT&T posted its

seventh consecutive

quarter of accelerated

wireless revenue

growth, reflecting

solid subscriber gains

and robust adoption

of data services.

AT&T increased its

wireless subscriber

base by more than

9 million over

the past year.

the company expects to deliver 3G services to nearly 350 leading U.S. markets by the end of 2008, including all of the nation’s 100 largest cities.

OPERATING INCOME GROWTH, MARGIN EXPANSION

Strong growth in wireless revenues, network efficiencies and operational improvements have driven substantial improvement in AT&T’s wireless operating income and margins.

On a reported basis, AT&T’s first-quarter wireless operating expenses totaled $8.9 billion, and operating income was $3.0 billion, up 94.1 percent from $1.5 billion in the first quarter of 2007.

On an adjusted basis, wireless operating expenses totaled $8.3 billion, and operating income was $3.5 billion, up 38.5 percent from $2.5 billion in the first quarter of 2007.

AT&T’s reported wireless operating income margin was 25.0 percent, up from 15.2 percent in the year-earlier quarter, and its adjusted wireless operating income margin was 29.8 percent, up from 25.5 percent in the year-earlier quarter.

AT&T’s first-quarter wireless OIBDA service margin was 41.7 percent, the highest ever achieved by the company’s wireless segment, up from an unadjusted 37.5 percent and an adjusted 38.9 percent in the year-earlier quarter. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

LEADER IN WIRELESS NETWORKS, SERVICE INNOVATION

AT&T operates the United States’ largest wireless digital voice and data network, and through roaming alliances around the world, provides the largest global presence among U.S. wireless carriers.

AT&T is moving quickly to create the next generation of wireless. In addition to its broad 3G network deployment, by the middle of this year, the company expects to complete its upgrade of the nation’s first High Speed Uplink Packet Access



6

1Q07 2Q07 3Q07 4Q07 1Q08

$1.5

$1.7$1.8

$2.3

AT&T WIRELESS DATA REVENUES

Dollars in billions

$2.0

1Q07

15.2%

1Q08

25.0%

1Q07

37.5%

1Q08

41.7%

25.5%

29.8%38.9%

41.7%

Merger integration and intangible amortization costs excluded from adjusted operating income margins: $1,022 million in 1Q07 and $568 million in 1Q08. Merger integration costs excluded from adjusted OIBDA service margins: $124 million in 1Q07.

AT&T ADJUSTED WIRELESS MARGINS

UnadjustedResults

Operating Income Margin OIBDA Service Margin

AT&T’s wireless data

revenues grew

57.3 percent year

over year and now

represent 21.5 percent

of total wireless

service revenues.

AT&T’s wireless

OIBDA service margin

expanded 280

basis points versus

adjusted results

for the first quarter

of 2007.

completed successful bids for prime B Block spectrum in the Federal Communications Commission’s Auction 73.

The complementary nature of the spectrum AT&T acquired through the FCC auction and from Aloha Partners gives AT&T the capacity to meet customer needs as the company moves to higher-speed 4G (fourth-generation) services. Upon final award of the auctioned B Block spectrum, AT&T’s 700 MHz spectrum will cover 100 percent of the top 200 markets and 87 percent of the U.S. population.

AT&T also sets the pace for innovation in wireless with a host of cutting-edge devices, content and services. In recent weeks, AT&T:• Added to its HSUPA device lineup with the

launch of two new LaptopConnect cards from Option, the GT Ultra and GT Ultra Express. The new cards deliver enhanced mobile broadband performance across two popular notebook computer formats, PC Card and ExpressCard. Both the GT Ultra and GT Ultra Express are compatible with Microsoft Windows Vista, Windows XP, Windows 2000 and Apple® Mac® OS X (version 10.4.10 or later) notebooks.

• Joined with MediaFLO USA Inc. to intro-duce AT&T Mobile TV with FLO, a mobile television service featuring high-quality live programming. The mobile TV service will launch in May 2008 on two new exclusive handsets, the LG Vu™ and the Samsung Access™. AT&T Mobile TV will deliver full-length television content and sporting events from top networks, including programming from leading entertainment brands CBS Mobile, Comedy Central, ESPN Mobile TV, FOX Mobile, MTV, NBC 2GO, NBC News2Go and Nickelodeon.

• Unveiled plans for a redesigned MEdia Mall, the company’s one-stop shopping destination for mobile content. Since launching on AT&T mobile handsets in December 2004, millions of customers have visited MEdia Mall to obtain

(HSUPA)-enabled network in current 3G markets. The network allows AT&T’s HSUPA-enabled laptop users to send large files faster and take full advantage of the latest interactive Internet and business applications.

AT&T also took major steps in the first quarter to add valuable wireless spectrum. In February, AT&T completed its acquisition of spectrum licenses covering 196 million people in 281 license areas from a subsidiary of Aloha Partners, L.P. In March, AT&T



7

ringtones, games, videos and other applications, generating more than $1 billion in sales and helping to spawn a wave of innovation among an ever-growing mobile developer community. Like its predecessor, MEdia Mall 2.0 will feature more than 90,000 choices from more than 115 content providers.

• Successfully launched a new unlimited voice plan targeted to wireless users who want the predictability of flat-rate pricing for unlimited minutes. The plan is available to new and existing wireless subscribers for $99.99 a month for unlimited U.S. calling with no domestic roaming or long distance charges.

• Introduced AT&T Navigator, a next-generation navigation service available on GPS-capable PDAs and handsets. AT&T Navigator is designed to provide clear and precise audible and visual turn-by-turn driving directions, including full-color moving maps, using GPS directly from a customer’s wireless phone. AT&T Navigator, which offers mobile

access to YELLOWPAGES.COM, real-time traffic updates and route information and is the only mobile phone-based GPS service that provides integrated speech recognition for address entry and points of interest search, is currently available on BlackBerry® devices.

• Announced BusinessTalk, a new wireless offer that brings the benefits of AT&T FamilyTalk plans to small businesses, enabling them to share monthly Anytime Minutes for up to 40 employees. BusinessTalk plans are designed to help small businesses better manage their monthly costs by reducing overage charges and simplifying billing. AT&T offers a wide range of wireless phones, smart devices, LaptopConnect solutions and other services for small businesses, including mobile e-mail, GPS navigation and Push To Talk technology.



8

WirelineFirst-quarter results in

AT&T’s wired operations

were highlighted by

improved enterprise growth,

a double-digit increase

in broadband revenues

and a further ramp in AT&T

U-verse TV subscribers.

First-quarter revenues in AT&T’s wireline segment totaled $17.6 billion versus $18.0 billion in the year-earlier quarter. This reflects a return to revenue growth in the company’s enterprise business, substantial improvement in wholesale revenue trends and stable revenue trends in regional business and consumer operations.

Excluding revenues from national mass markets, the small remainder of the former AT&T’s stand-alone long distance and local bundled business, wireline revenues increased slightly versus the year-earlier quarter and sequentially.

AT&T expects further stabilization in overall wireline revenue trends during the remainder of 2008 as enterprise continues to grow, wholesale trends show further improvement and AT&T U-verse services gain additional scale.

Compared with results for the year-earlier first quarter, on a reported basis, wireline operating expenses totaled $14.8 billion, versus $15.1 billion; operating income was $2.8 billion, versus $2.9 billion; and AT&T’s wireline operating income margin was 16.1 percent, which was unchanged versus the first quarter of 2007.

Adjusted wireline results for the first quarter of 2007 exclude merger-related integration and amortization expenses. Adjusted wireline results for the first quarter of 2008 exclude only merger-related amortization expenses.

Compared with results for the year-earlier first quarter, adjusted wireline operating expenses totaled $14.4 billion, unchanged from $14.4 billion; adjusted operating income was $3.3 billion, versus $3.6 billion; and AT&T’s adjusted wireline operating income margin was 18.5 percent, versus 20.1 percent.

Moving through 2008, AT&T expects wireline expenses and margins to benefit from ongoing cost initiatives and improved IP economics.

The following wireline highlights include ongoing shifts in customer categories to reflect AT&T’s management of customer relationships.

FURTHER STEP UP IN ENTERPRISE GROWTH

AT&T delivered further improvement in enterprise revenue growth in the first quarter, led by a 22.9 percent increase in enterprise IP data revenues, including areas such as VPNs, managed Internet services and hosting.

Total enterprise revenues continued their ramp and were up 1.2 percent versus results for the first quarter of 2007. This compares with year-over-year pro forma declines of 2.0 percent in the fourth quarter of 2007 and 3.9 percent in the first quarter of 2007.



9

Enterprise service revenues, which exclude CPE sales and acquisition impacts, grew 2.1 percent, following a 1.5 percent increase in the preceding quarter and a decline of 3.0 percent in the first quarter of 2007.

With solid demand and sales momentum, AT&T expects to deliver positive growth in total enterprise revenues throughout 2008.

AT&T is the premier provider for enterprise customers, delivering networking services and solutions to multinational corporations, U.S. governmental agencies and regionally based domestic companies. AT&T continues to take the initiative to expand and enhance its enterprise capabilities.

For example, in March AT&T announced that it plans to invest $1 billion in 2008 to extend its global network reach and capacity, globalize its portfolio of business services and embed the latest utility computing and other technologies in the network so that companies can deliver real-time applications to their customers, suppliers and partners. Major projects include new subsea fiber optic cable capacity to Japan and Asia, new core MPLS (MultiProtocol Label Switching) routers in Europe, Asia and the United States, and new network-to-network connections to extend network reach into high-growth markets in Asia Pacific, Eastern Europe and South America.

Also in the first quarter, AT&T announced it is joining forces with SAP America Inc. in a three-year marketing agreement under which AT&T will serve as a primary SAP® hosting partner, providing independent hosting services for large business customers headquartered in North America.

Recent major enterprise contract wins include a five-year agreement with Royal Dutch Shell, which calls for AT&T to provide, manage and maintain Shell’s worldwide communications infrastructure while also managing the company’s global mobility needs. This is one of the largest commercial contracts ever signed by AT&T and the largest agreement signed with a company headquartered in Europe. This agreement with Shell follows a series of other large wins in the past year, including deals with Starbucks, General Motors, the U.S. Department of the Treasury and IBM.

REGIONAL BUSINESS GROWTH

AT&T’s regional business revenues increased 2.6 percent in the first quarter to $3.2 billion, with continued growth in both voice and data services. Regional business service revenues, which exclude CPE sales, grew 3.4 percent.

Regional business data revenues, which make up 30.5 percent of the category, grew 6.3 percent, led by strong growth in Ethernet services and by 15.2 percent growth in IP data services, including gains in broad-band, managed Internet and VPN services.

Regional business revenues from small and midsize firms increased approximately 5 percent. AT&T’s broad portfolio of communications services for small and midsize businesses includes wireless, broadband Internet access, business e-mail services, Web hosting, unified messaging, remote data storage and network security options.

2007 comparisons are to 2006 pro forma results, which combine results from the former BellSouth and AT&T and exclude revenues from acquired operations.

AT&T TOTAL ENTERPRISE REVENUE GROWTH RATES

1Q07

(3.0)%

2Q07

(0.7)%

3Q07

0.4%

4Q07

1.5%

1Q08

2.1%

(3.9)%

(1.7)%

(0.2)%

(2.0)%

2

1

0

-1

-2

-3

-4

1.2%

Enterprise servicerevenue growth

AT&T’s enterprise

revenue growth

continues to be driven

by solid demand,

a premier global

network and a

broad portfolio of

advanced services.



10

1Q07 2Q07 3Q07 4Q07 1Q08

13

51

126

AT&T U-VERSE TV CONNECTIONS IN SERVICE

In thousands

231

379

1Q07 2Q07 3Q07 4Q07 1Q08

12.9

13.3

14.2

14.6

AT&T BROADBAND CONNECTIONS

In millions

13.8

AT&T ramped growth

in its advanced

IP-based TV service,

with a net gain of

148,000 subscribers

in the first quarter.

AT&T added 491,000

broadband connections

in the first quarter

and 1.8 million over

the past year.

In April, AT&T announced the availability of new turnkey Web hosting solutions and Web site design services developed specifi-cally for small and midsize businesses. Using these services, companies can easily and cost-effectively launch a new or improve an existing Web site, sell products or services online, build an online community, manage company e-mail, distribute digital content, host a gaming server or run many other business applications. The new offerings are targeted to organizations that need more than shared server space and applications but do not require the complex multiserver environment of enterprise hosting.

STABLE REGIONAL CONSUMER REVENUES, ACCELERATED VIDEO RAMP

First-quarter regional consumer results continued trends of recent quarters, with improved growth in broadband and Advanced TV services offsetting traditional voice access line pressures, resulting in stable revenues.

Regional consumer revenues totaled $5.5 billion, down 0.4 percent versus results for the year-earlier quarter.

Regional consumer revenue connections (retail voice, high speed Internet and video) totaled 49.3 million at the end of the first quarter of 2008. This compares with 49.3 million at the end of the first quarter 2007 and 49.4 million at the end of the fourth quarter of 2007. Gains in broadband and video connections totaled 2.6 million over the past year, and consumer IP data revenues, which include revenues from broadband and AT&T U-verse services, increased 18.5 percent versus results for the year-earlier quarter.

Reflecting growth in broadband and video, average monthly revenues per consumer primary line have increased steadily over the past several quarters, reaching $60.16 in the first quarter, up 5.4 percent year over year.

These offerings expanded in the first quarter with the launch of AT&T Business in a BoxSM, a service that harnesses the power of IP communications to simplify IT operations for smaller and midsize businesses and branch offices of large businesses. The service features a single device equipped with all necessary data ports and connectors and delivers VoIP functionality through AT&T Voice DNASM, Internet access routing with built-in firewall protection, VPN capabilities, Wi-Fi data access capabilities and local area network connectivity with Power Over Ethernet connections.



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Consumer broadband revenues continue to grow at a solid double-digit pace, and consumer broadband net adds improved from recent quarters, reflecting the success of new wireless/broadband bundles and the rapid expansion of AT&T U-verse services.

Growth in AT&T U-verse TV service, the company’s next-generation IP-based video service, continued its strong ramp during the first quarter, achieving a net subscriber gain of 148,000 to reach 379,000 in service. AT&T expects a further ramp in the quarters ahead and is on track to reach its target of more than 1 million subscribers by the end of 2008.

Total video connections, which include AT&T U-verse service and bundled satellite television service, increased by 264,000 in the quarter to reach 2.6 million.

AT&T also broke new ground in the first quarter by expanding its launch of AT&T U-verse Voice services in Sacramento, Kansas City, Austin, San Diego and Connecticut. The service offers a host of features that integrate AT&T wired and wireless services including: combined AT&T U-verse Voice and wireless voice mail with U-verse Messaging, which provides a single voice mailbox that can be accessed from any phone line or PC; U-verse Central, an online management portal that gives users the option to manage their call preferences, voice mail, contacts, call history and more

from any PC; an online voice mailbox so that customers can listen to, manage and forward voice mail from the online portal; and the ability to check call history or click-to-call from their U-verse TV screen.

BROADBAND GROWTH

AT&T continues to deliver solid double-digit growth in broadband. AT&T’s broadband revenues totaled $1.4 billion in the first quarter, up 13.2 percent versus the year-earlier quarter.

In the first quarter, total high speed Internet connections, which include DSL, U-verse enabled AT&T High Speed Internet and satellite broadband services, increased by 491,000, and AT&T ended the first quarter with 14.6 million consumer and business high speed Internet connections, up 1.8 million, or 13.9 percent, over the past year.

This growth reflects the quality and broad availability of AT&T’s broadband services, the ramp in AT&T U-verse service, which has a high broadband attach rate, and innovations such as the launch last year of a stand-alone high speed Internet service, also available as part of a new wireless and broadband service bundle.

To boost bandwidth choices, AT&T announced plans to offer AT&T High Speed Internet Max in February 2008. The new tier, available exclusively to AT&T U-verse customers across the country, will deliver more bandwidth with speeds up to 10 Mbps downstream and up to 1.5 Mbps upstream.

To add convenience and portability for broadband users, in January, AT&T and Starbucks announced plans to deliver AT&T Wi-FiSM service at more than 7,000 company-operated Starbucks locations across the United States. Starbucks and AT&T will offer a mix of free and paid Wi-Fi offerings at Starbucks stores. The initiative will further expand the AT&T Wi-Fi network, already the largest in the United States, to more than 17,000 U.S. hot spots and more than 71,000 globally.

1Q07 2Q07 3Q07 4Q07 1Q08

$57.08

$58.15$58.62

$60.16

AT&T AVERAGE MONTHLY REVENUES PER CONSUMER PRIMARY LINE

$59.14

AT&T’S regional

consumer ARPU has

ramped steadily over

the past several

quarters, reflecting

growth in broadband

and TV service.



12

WHOLESALE

AT&T is a leading global provider of whole-sale services, delivering a full portfolio of network, voice, data and IP solutions to carriers, wireless operators, cable providers, systems integrators, Internet service providers and content providers.

In the first quarter, AT&T delivered a significant improvement in wholesale revenue trends, with total wholesale revenues of $3.4 billion, representing a decline of 3.9 percent versus results for the year-earlier quarter. This marks a step up from declines in the 7 percent to 8 percent range over the past several quarters, as comparisons have reflected concessions associated with AT&T’s acquisition of BellSouth Corp. and industry shifts as major consolidated carriers move traffic to their own networks.

Volume demand from wireless carriers, Internet service providers and content providers continues to accelerate, and AT&T expects that wholesale revenues will continue to stabilize in 2008, as merger conditions pass their one-year anniversary and carrier traffic migration nears completion.

In addition, AT&T and IBM have announced an agreement that calls for AT&T to become the primary global network management services provider to IBM, which will use AT&T’s global telecommunications and network management services internally and provide these services to customers. As a result, AT&T expects to receive up to $5 billion of additional revenues over the five-year term of the agreement, largely in the wholesale customer category. These revenues are expected to ramp in mid-2008.

To capitalize on tremendous demand for additional data capacity and IP-related services, in February, AT&T announced that it is expanding capacity to deliver key services such as long-haul private line and Managed Internet Services in most of the 26 carrier-neutral hotels in which it has a presence nationwide. Carrier-neutral hotels are facilities at which multiple carriers interconnect and make their telecommunications services available to their customers.

In April, AT&T announced the availability of new Voice over Internet Protocol services for wholesale customers. These include a Gigabit Ethernet connectivity interface for AT&T Voice Over IP Connect Service and the AT&T BusinessDirect® portal for AT&T Global Hubbing IP Access customers.

NATIONAL MASS MARKETS

Mass market revenues totaled $730 million in the first quarter, representing a decline of 33.2 percent year over year. Results are as expected and reflect the 2004 decision to discontinue proactive marketing in this space and AT&T’s strategy of migrating customers within its regional footprint to its regional platforms to deliver better service and a broader array of service options.

National mass markets, which represented 4.1 percent of total wireline revenues in the first quarter, accounted for more than 100 percent of AT&T’s year-over-year decline in total wireline revenues.



13

WIRELINE VOICE SERVICES

AT&T’s first-quarter wireline voice revenues, which include retail local voice and long distance as well as wholesale voice, totaled $9.9 billion, representing a decline of 7.1 percent versus results for the first quarter of 2007. This comparison is consistent with results in recent quarters, reflecting the industrywide migration of voice usage from wired to wireless platforms, customer transitions to broadband and VoIP services and increased local voice competition.

PRODUCT CATEGORIES

WIRELINE DATA SERVICES

AT&T’s data revenues, which include results from several customer categories, grew 5.9 percent versus results for the year-earlier first quarter to $6.2 billion.

Data growth was led by an 18.2 percent increase in revenues from IP-based services, with continued gains in high speed Internet, managed Internet, VPN and hosting services. Data transport service revenues increased 0.7 percent, and packet switched data revenues, which include Frame Relay and ATM services, were down 10.7 percent, consistent with industry trends.

In the first quarter, 73.0 percent of AT&T’s data revenues came from retail business and consumer customers. These retail data revenues were up 7.9 percent versus results for the year-earlier quarter.



14

Advertising & Publishing

AT&T is a leader in local

search with more than

1,250 print directories and

YELLOWPAGES.COM,

its fast-growing online

search service.

AT&T’s Advertising & Publishing segment offers businesses a full suite of local search options including print and Internet Yellow Pages in addition to Web site design and search engine marketing.

AT&T’s Advertising & Publishing operations deliver print directories to more than 83 million residences and businesses in 22 states and have a premier online presence nationwide with YELLOWPAGES.COM, which offers consumers access to local business information, the latest business listings, city guides, maps and driving directions. Combined, these print and online products receive approximately 5 billion consumer searches a year for local business information and provide more than 1 million advertisers with valuable sales leads to help their businesses grow.

Advertising & Publishing revenue trends over the past several quarters have been generally stable, with print declines reflecting expected migration to electronic search, largely offset by rapid growth in YELLOWPAGES.COM. In the first quarter of 2008, Advertising & Publishing’s Internet revenues increased 41.1 percent versus the year-earlier quarter and 12.9 percent sequentially.

In March, AT&T announced a distribution agreement with Microsoft Corp. that will put YELLOWPAGES.COM’s comprehensive advertising listings and content in front of consumers who use Microsoft’s local search sites. The agreement, launched in early April, gives YELLOWPAGES.COM advertisers exposure through Microsoft’s search pages within the Live Search and Live Search Maps properties, including MSN Yellow Pages.

Compared with reported results in the year-earlier quarter, Advertising & Publishing revenues totaled $1.4 billion, unchanged from a reported $1.4 billion; operating expenses totaled $999 million, up from $976 million; and operating income totaled $418 million, compared with $467 million.

Adjusted results for Advertising & Publishing exclude merger-related noncash amortization costs in both quarters. Compared with results in the year-earlier quarter, first-quarter 2008 adjusted operating expenses totaled $797 million, up from $744 million, and operating income totaled $620 million, compared with $699 million.



15

OtherAT&T’s Other segment includes results from AT&T’s Sterling Commerce operations and AT&T’s customer information services operations, both of which are included in segment revenues and operating expenses. Customer information services include operator services and directory assistance. Sterling Commerce is one of the world’s largest providers of multienterprise collaboration solutions. The company serves the retail, consumer packaged goods, manufacturing, financial services, health care and telecommunications industries.

The Other segment includes AT&T’s proportionate share of results from Telmex and América Móvil, which are shown in the Equity in Net Income of Affiliates line for this segment. AT&T’s equity interest in each company is more than 8 percent.

América Móvil is one of the leading providers of telecommunications services in Latin America, with more than 153 million wireless subscribers in countries throughout the region, including 50 million in Mexico, at the end of 2007.

Telmex is the leading telecommunications company in Mexico. Telmex and its subsidiaries provide a wide range of telecommunications services, data and video transmission, Internet access and integrated telecommunications solutions. Telmex also offers telecommunications services through its international subsidiaries in countries including Argentina, Brazil, Chile, Colombia, Ecuador, Peru and Uruguay.

On a reported basis, Other segment income totaled $15 million in the first quarter, versus $252 million in the year-earlier quarter. Other segment results for the first quarter of 2008 include the company’s $374 million workforce reduction charge. Segment revenues totaled $544 million, unchanged from the first quarter of 2007. Equity in Net Income of Affiliates totaled $241 million, up from $172 million in the year-earlier quarter.

Adjusted Other segment income, which excludes merger-related and workforce reduction costs, was $406 million, compared with $287 million in the first quarter of 2007.

AT&T’s Other segment

includes results from its

Sterling Commerce unit,

customer information

services and equity

investments in Telmex

and América Móvil.



16

AT&T Inc.

Consolidated Statements of Income (Unaudited)

(Dollars in Millions, Except per Share Amounts)

Three Months Ended

3/31/08 3/31/07 % Change

Operating Revenues

Voice $ 9,693 $10,455 -7.3%

Data 5,972 5,655 5.6%

Wireless service 10,605 9,070 16.9%

Directory 1,398 1,022 36.8%

Other 3,076 2,767 11.2%

Total Operating Revenues 30,744 28,969 6.1%

Operating Expenses

Cost of services and sales (exclusive of depreciation

and amortization shown separately below) 11,775 11,252 4.6%

Selling, general and administrative 8,086 7,437 8.7%

Depreciation and amortization 4,903 5,616 -12.7%

Total Operating Expenses 24,764 24,305 1.9%

Operating Income 5,980 4,664 28.2%

Interest Expense 865 873 -0.9%

Equity in Net Income of Affiliates 243 173 40.5%

Other Income (Expense) – Net 33 504 -93.5%

Income Before Income Taxes 5,391 4,468 20.7%

Income Taxes 1,930 1,620 19.1%

Net Income $ 3,461 $ 2,848 21.5%

Basic Earnings Per Share $ 0.58 $ 0.46 26.1%

Weighted Average Common Shares Outstanding (000,000) 5,997 6,224 -3.6%

Diluted Earnings Per Share $ 0.57 $ 0.45 26.7%

Weighted Average Common Shares Outstanding

with Dilution (000,000) 6,033 6,266 -3.7%



17

AT&T Inc.

Statements of Segment Income (Unaudited)

(Dollars in Millions)

Three Months Ended

3/31/08 3/31/07 % Change

Wireless

Segment Operating Revenues

Service $10,645 $ 9,092 17.1%

Equipment 1,180 905 30.4%

Total Segment Operating Revenues 11,825 9,997 18.3%

Segment Operating Expenses

Cost of services and equipment sales 4,110 3,670 12.0%

Selling, general and administrative 3,279 2,913 12.6%


Total Segment Operating Expenses 8,869 8,474 4.7%

Segment Operating Income 2,956 1,523 94.1%

Equity in Net Income of Affiliates 2 7 -71.4%

Minority Interest (60) (48) -25.0%

Segment Income $ 2,898 $ 1,482 95.5%

Wireline

Segment Operating Revenues

Voice $ 9,919 $10,677 -7.1%

Data 6,205 5,862 5.9%

Other 1,500 1,447 3.7%

Total Segment Operating Revenues 17,624 17,986 -2.0%


Cost of sales 7,616 7,558 0.8%

Selling, general and administrative 4,005 4,093 -2.2%


Total Segment Operating Expenses 14,791 15,091 -2.0%

Segment Income $ 2,833 $ 2,895 -2.1%

Advertising & Publishing

Segment Operating Revenues $ 1,417 $ 1,443 -1.8%


Cost of sales 444 455 -2.4%

Selling, general and administrative 343 279 22.9%

Depreciation and amortization 212 242 -12.4%

Total Segment Operating Expenses 999 976 2.4%

Segment Income $ 418 $ 467 -10.5%

Other

Segment Operating Revenues $ 544 $ 544 —

Segment Operating Expenses 770 464 65.9%

Segment Operating Income (Loss) (226) 80 —

Equity in Net Income of Affiliates 241 172 40.1%

Segment Income $ 15 $ 252 -94.0%



18

AT&T Inc.

Consolidated Balance Sheets


3/31/08 12/31/07

Assets (Unaudited)

Current Assets

Cash and cash equivalents $ 1,963 $ 1,970

Accounts receivable – net of allowances for uncollectibles of $1,361 and $1,364 15,697 16,185

Prepaid expenses 1,610 1,524

Deferred income taxes 1,934 2,044

Other current assets 2,742 2,963

Total current assets 23,946 24,686

Property, Plant and Equipment – Net 96,238 95,890

Goodwill 70,815 70,713

Licenses 40,711 37,985

Customer Lists and Relationships – Net 13,692 14,505

Other Intangible Assets – Net 5,877 5,912

Investments in Equity Affiliates 2,578 2,270

Postemployment Benefit 17,645 17,291

Other Assets 6,697 6,392

Total Assets $278,199 $275,644

Liabilities and Stockholders’ Equity

Current Liabilities

Debt maturing within one year $ 13,301 $ 6,860

Accounts payable and accrued liabilities 18,590 21,399

Advanced billing and customer deposits 3,677 3,571

Accrued taxes 4,186 5,027

Dividends payable 2,375 2,417

Total current liabilities 42,129 39,274

Long-Term Debt 60,189 57,255

Deferred Credits and Other Noncurrent Liabilities

Deferred income taxes 25,203 24,939

Postemployment benefit obligation 24,510 24,011

Unamortized investment tax credits 144 150

Other noncurrent liabilities 13,766 14,648

Total deferred credits and other noncurrent liabilities 63,623 63,748

Stockholders’ Equity

Common shares issued ($1 par value) 6,495 6,495

Capital in excess of par value 91,598 91,638

Retained earnings 34,311 33,297

Treasury shares (at cost) (19,590) (15,683)

Accumulated other comprehensive loss (556) (380)

Total stockholders’ equity 112,258 115,367

Total Liabilities and Stockholders’ Equity $278,199 $275,644



19

AT&T Inc.

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Millions, Increase (Decrease) in Cash and Cash Equivalents)

Three Months Ended

3/31/08 3/31/07

Operating Activities

Net income $ 3,461 $ 2,848

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 4,903 5,616

Undistributed earnings from investments in equity affiliates (225) (156)

Provision for uncollectible accounts 480 376

Amortization of investment tax credits (6) (8)

Deferred income tax expense 569 65

Net gain on sales of investments (46) —

Gain on license exchange — (409)

Changes in operating assets and liabilities:

Accounts receivable (150) 237

Other current assets 142 (748)

Accounts payable and accrued liabilities (4,654) (3,232)

Stock-based compensation tax benefit (7) (47)

Other – net 490 71

Total adjustments 1,496 1,765

Net Cash Provided by Operating Activities 4,957 4,613

Investing Activities

Construction and capital expenditures (4,247) (3,338)

Acquisitions, net of cash acquired (3,662) (198)

Dispositions 47 209

Proceeds from sale of securities, net of investments 131 518

Other 32 7

Net Cash Used in Investing Activities (7,699) (2,802)

Financing Activities

Net change in short-term borrowings with original maturities of three months or less 5,786 (2,989)

Issuance of long-term debt 3,972 5,924

Repayment of long-term debt (613) (227)

Purchase of treasury shares (4,071) (3,005)

Issuance of treasury shares 103 687

Dividends paid (2,422) (2,218)

Stock-based compensation tax benefit 7 47

Other (27) (84)

Net Cash Provided by (Used in) Financing Activities 2,735 (1,865)

Net decrease in cash and cash equivalents (7) (54)

Cash and cash equivalents beginning of year 1,970 2,418

Cash and Cash Equivalents End of Period $ 1,963 $ 2,364



20

AT&T Inc.

Supplementary Operating and Financial Data (Unaudited)


Three Months Ended

3/31/08 3/31/07 % Change

Wireless

Wireless Customers (000) 71,367 62,217 14.7%

Net Customer Additions (000) 1,295 1,191 8.7%

M&A Activity, Partitioned Customers and Other Adjs. (000) 20 64 -68.8%

Postpaid Customers (000) 56,016 50,588 10.7%

Net Postpaid Customer Additions (000) 705 680 3.7%

Postpaid Churn 1.2% 1.3% -10 BP

Licensed POPs (000,000) 304 296 2.7%

In-Region Wireline1

Total Consumer Revenue Connections (000)8

Retail Consumer Primary Switched/VoIP connections2 30,316 32,315 -6.2%

Retail Consumer Additional Switched/VoIP connections2 3,866 4,345 -11.0%

Consumer Broadband Connections3 12,547 10,908 15.0%

Video Connections:4

Satellite Connections 2,232 1,684 32.5%

U-verse Video Connections 379 13 —

Total Consumer Revenue Connections (000) 49,340 49,265 0.2%

Net Consumer Revenue Connections Changes (000) (98) 404 —

Switched Access Lines (000)8

Retail Consumer – Primary 30,312 32,315 -6.2%

Retail Consumer – Additional 3,866 4,345 -11.0%

Retail Business 22,647 23,318 -2.9%

Retail 56,825 59,978 -5.3%

Wholesale5 3,407 5,136 -33.7%

Coin6 183 315 -41.9%

Total Switched Access Lines (000) 60,415 65,429 -7.7%

Net Switched Access Line Changes (000) (1,167) (1,040) 12.2%

Total Broadband Connections (000)3,8 14,647 12,861 13.9%

Net Broadband Connections Changes (000)3,8 491 691 -28.9%

Video Connections (000)4 2,611 1,697 53.9%

Net Video Connections Changes (000)4 264 187 41.2%

AT&T Inc.

Capital Expenditures $ 4,247 $ 3,338 27.2%

Dividends Declared per Share $ 0.4000 $ 0.3550 12.7%

End of Period Common Shares Outstanding (000,000) 5,939 6,186 -4.0%

Debt Ratio7 39.6% 35.4% 420 BP

Total Employees 310,070 301,760 2.8%1In-region wireline represents access lines served by AT&T’s incumbent local exchange companies.2Primarily switched access lines. Also includes VoIP.3Broadband connections include DSL lines, U-verse high speed Internet access and satellite broadband.4Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections.5Wholesale lines include 0.2 million lines purchased by AT&T Corp. at 03/31/08 and 1.1 million at 03/31/07.6Coin includes both retail and wholesale access lines.7Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders’ equity.8Prior year amounts restated to conform to current period reporting methodology.



21

Second-Quarter 2008 Earnings Date: July 23, 2008

AT&T will release second-quarter 2008 earnings on July 23, 2008, before the market opens.

The company’s InvestorBriefing and related earnings materials will be available on s materials will be available on

the AT&T Web site at the AT&T Web site at www.att.com/investor.relationswww.att.com/investor.relations by 8 a.m. Eastern time. by 8 a.m. Eastern time.

AT&T will also host a conference call to discuss the results at 1AT&T will also host a conference call to discuss the results at 10 a.m. Eastern time the

same day. Dial-in and replay information will be announced on First Call approximately

eight weeks before the call, which will also be broadcast live and will be available for

replay over the Internet at www.att.com/investor.relations.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this InvestorBriefing contains financial estimates and other

forward-looking statements that are subject to risks and uncertainties, and actual

results may 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 or revise statements contained in this

InvestorBriefing based on new information or otherwise.

This InvestorBriefing 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.

AT&T InvestorBriefing

The AT&T InvestorBriefing is published by the Investor Relations staff of AT&T Inc. Requests for further information may be directed to one of the Investor Relations managers by phone at 210-351-3327 or by fax at 210-351-2071.

Correspondence should be sent to:

Investor Relations AT&T Inc. Whitacre Tower 175 E. Houston, Room 8-A-60 San Antonio, TX 78205

E-mail address: [email protected]

Senior Vice President-

Investor Relations

Rich Dietz (retiring)Brooks McCorcle

Investor Relations Staff

Ray CarpenterKent EvansJeff FancherJerry HealyKim MainShelly Mathews

Angela OsteguinJerrell RossDamon SmithBlake StewardChris Womack


AT&T First-Quarter Earnings Package

Economy & Finance

Transcript of AT&T First-Quarter Earnings Package