10-KPeriod: FY2013

AT&T INC. Annual Report, Year Ended Dec 31, 2013

Filed February 21, 2014For Securities:TT-PCTBBT-PA

Summary

AT&T Inc.'s 2013 10-K filing highlights a company actively evolving its business in a dynamic telecommunications landscape. The company emphasizes its strong position in wireless communications, with over 110 million subscribers and ongoing expansion of its LTE network. AT&T is strategically investing in data services and network capacity to meet growing demand, while also managing spectrum constraints through acquisitions and network upgrades, including the planned discontinuation of its 2G network by 2017. The wireline segment, while facing declining traditional voice revenues due to the shift towards wireless and VoIP, is increasingly focusing on IP-based data services and its AT&T U-verse offerings. The company is undertaking significant initiatives like Project Velocity IP (VIP) to expand its IP-broadband services, aiming to reach 57 million customer locations. AT&T is also navigating regulatory challenges, particularly concerning net neutrality and the classification of its IP-based services. Despite these complexities, AT&T demonstrates a commitment to shareholder returns through consistent dividend payments and ongoing share repurchase programs, reflecting confidence in its strategic direction and financial stability.

Financial Highlights

54 data points
Beta

Revenue

$128.75B

60.0% Gross Margin

Net Income

$18.42B

14.3% Net Margin

EPS (Diluted)

$3.42

Total Assets

$277.79B

Cash & Equivalents

$3.34B

Free Cash Flow

$13.85B

Financial Statements
Beta
Revenue$128.75B
Cost of Revenue$51.46B
Gross Profit$77.29B
SG&A Expenses$28.41B
Operating Expenses$98.27B
Operating Income$30.75B
Interest Expense$3.94B
Net Income$18.42B
EPS (Basic)$3.42
EPS (Diluted)$3.42
Shares Outstanding (Basic)5.37B
Shares Outstanding (Diluted)5.38B

Key Highlights

  • 1Strong growth in wireless subscribers (over 110 million) and continued expansion of LTE network coverage.
  • 2Strategic focus on expanding IP-based broadband services, including AT&T U-verse, with significant investment planned through Project Velocity IP (VIP).
  • 3Managing wireless spectrum constraints through active spectrum acquisition and network optimization, including the planned 2G network sunset by January 2017.
  • 4Wireline segment is shifting focus from declining voice services to growing IP-based data and U-verse offerings.
  • 5Consistent return of capital to shareholders via dividends and substantial share repurchase programs.
  • 6Navigating evolving regulatory landscape, including net neutrality rules and potential reclassification of broadband services.
  • 7Research and development investments are focused on IP networking, network security, and advanced speech technologies.

Frequently Asked Questions

AT&T operates through three main segments: Wireless, Wireline, and Other. The Wireless segment, driven by AT&T Mobility, is the largest revenue and income generator, accounting for approximately 54% of total segment operating revenues and 76% of total segment income in 2013, serving over 110 million subscribers. The Wireline segment contributed approximately 46% of revenues and 27% of income, with a strategic shift from declining voice services to growing IP-based data and U-verse offerings. The 'Other' segment represented less than 1% of revenues and incurred a loss.

The primary growth driver for AT&T's wireless business is the increasing demand for data services, fueled by smartphone adoption and new data-centric devices. The company is investing heavily in expanding its LTE network and acquiring spectrum to meet this demand. However, significant challenges include spectrum and capacity constraints in certain markets, which could impact service quality and the ability to launch new services. AT&T is actively addressing these by acquiring spectrum and redeploying existing spectrum resources.

AT&T is strategically transforming its Wireline segment by focusing on higher-growth IP-based services. This includes expanding its AT&T U-verse high-speed broadband and video offerings and developing integrated IP services that combine wireline and wireless capabilities. The company is also transitioning customers to IP-based technology, aiming to complete this by the end of 2020, while continuing to offer essential data and voice services to businesses and consumers.

AT&T demonstrates a strong commitment to returning capital to shareholders. The company consistently declares and pays quarterly dividends, totaling $1.81 per share in 2013. Additionally, AT&T has been actively engaged in share repurchases, completing significant buybacks under its authorized programs, funded through operating cash flow, borrowings, or asset dispositions.