10-KPeriod: FY2012

AT&T INC. Annual Report, Year Ended Dec 31, 2012

Filed February 22, 2013For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. in 2012 was a dominant telecommunications provider focused on integrating its wireless and wireline operations to offer a comprehensive suite of services to consumers and businesses. The company reported a strong performance in its Wireless segment, which constituted over half of its total segment operating revenue and a significant majority of its operating income. This segment served 107 million subscribers, driven by growing demand for wireless data services fueled by smartphone adoption and new data-centric devices. The Wireline segment, while facing declining traditional voice revenues, showed resilience through its expanding Data/Broadband and U-verse offerings. The company was making significant investments in network expansion and upgrades, most notably through Project VIP, aiming to enhance its LTE wireless network and wireline IP broadband capabilities. This strategic initiative signaled AT&T's commitment to future growth in IP-based services and mobile data, anticipating substantial capital expenditures over the next few years to support these advancements.

Financial Highlights

54 data points
Beta

Revenue

$127.43B

56.7% Gross Margin

Net Income

$7.26B

5.7% Net Margin

EPS (Diluted)

$1.25

Total Assets

$272.31B

Cash & Equivalents

$4.87B

Free Cash Flow

$19.71B

Financial Statements
Beta
Revenue$127.43B
Cost of Revenue$55.23B
Gross Profit$72.21B
SG&A Expenses$41.07B
Operating Expenses$114.44B
Operating Income$13.00B
Interest Expense$3.44B
Net Income$7.26B
EPS (Basic)$1.25
EPS (Diluted)$1.25
Shares Outstanding (Basic)5.80B
Shares Outstanding (Diluted)5.82B

Key Highlights

  • 1Wireless segment was the primary revenue and income generator, serving 107 million subscribers by year-end 2012.
  • 2Significant investment in network infrastructure via 'Project VIP' to expand LTE wireless and wireline IP broadband services.
  • 3Continued growth in wireless data revenues driven by increasing smartphone penetration and demand for data-centric devices.
  • 4Wireline segment revenue was impacted by declining traditional voice services but offset by growth in data and U-verse offerings.
  • 5AT&T completed a $300 million share repurchase program and authorized another for an additional 300 million shares in 2012.
  • 6The company was actively acquiring spectrum to address capacity constraints and improve network performance.
  • 7Focus on integrating wireline and wireless services to offer a converged communication and entertainment experience.

Frequently Asked Questions

AT&T's primary business segments for financial reporting in 2012 were Wireless, Wireline, and Other. The Wireless segment focused on wireless voice and data communications, while the Wireline segment provided landline voice, data/broadband, and video services, primarily to consumers and businesses. The 'Other' segment included corporate operations and equity investments.

AT&T's strategy centered on expanding and enhancing its wireless and wireline networks to support future IP data growth and new services. This included significant investments in LTE technology through Project VIP to improve wireless broadband capabilities and expanding its wireline IP broadband network. The company also aimed to offer integrated services combining wireline and wireless capabilities and capitalize on growing demand for data services.

Key challenges identified include significant spectrum and capacity constraints in its wireless network, potential material adverse effects from regulatory decisions impacting U-verse services, increasing competition from alternative technologies like VoIP and cable, and the ongoing decline in traditional wireline voice revenues. Labor negotiations and potential work stoppages were also a factor.

AT&T was actively seeking to address wireless spectrum and capacity constraints by acquiring new spectrum and by redeploying spectrum used for 2G services to support more advanced 3G and 4G networks. The company signed numerous deals to acquire spectrum in 2012 and planned to discontinue 2G network services by 2017. Obtaining sufficient spectrum from the FCC on fair terms was highlighted as a critical factor for future growth.