10-QPeriod: Q3 FY2005

AT&T INC. Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 4, 2005For Securities:TT-PCTBBT-PA

Summary

SBC Communications Inc. reported total operating revenues of $10.32 billion for the third quarter of 2005, a slight increase of 0.3% year-over-year, and $30.9 billion for the first nine months, a 1.3% increase. Despite a continued decline in traditional voice revenues due to competition and evolving technology, the company saw growth in data and long-distance voice services. Operating income saw a healthy increase of 15.5% in the third quarter, driven by reduced operating expenses. The company is in the advanced stages of its proposed acquisition of AT&T Corp., having received clearance from the DOJ and FCC, with a targeted closing by late 2005. Upon closing, SBC Communications will adopt the AT&T Inc. name. Significant strategic initiatives include the ongoing deployment of Project Lightspeed, aimed at delivering integrated telecommunications, IP video, and super-high-speed broadband services. Cingular Wireless, SBC's wireless joint venture, continues to expand its customer base significantly following its acquisition of AT&T Wireless in late 2004.

Key Highlights

  • 1Total operating revenues for Q3 2005 reached $10.32 billion, a slight increase of 0.3% compared to the same period in 2004.
  • 2Operating income rose by 15.5% year-over-year to $1.96 billion in Q3 2005, driven by a 2.7% decrease in operating expenses.
  • 3The company is progressing with its acquisition of AT&T Corp., having received key regulatory approvals, and expects the transaction to close by late 2005, after which SBC will rebrand as AT&T Inc.
  • 4Cingular Wireless, SBC's joint venture, saw a significant increase in customers to 52.3 million, largely due to the acquisition of AT&T Wireless in late 2004.
  • 5Data revenues, driven by DSL growth, and long-distance voice revenues showed positive year-over-year increases for both the quarter and the nine-month period.
  • 6Declining traditional voice revenues continue to be a trend, attributed to competition from wireless, VoIP, and cable, as well as the phase-out of UNE-P rules.
  • 7SBC continues to invest in Project Lightspeed, its initiative to deploy next-generation broadband and IP video services, with initial market launches planned for late 2005 or early 2006.

Frequently Asked Questions

SBC Communications reported total operating revenues of $10.32 billion for the third quarter of 2005, a slight increase of 0.3% from the prior year. Operating income increased by 15.5% to $1.96 billion, mainly due to a 2.7% decrease in operating expenses. Net income for the quarter was $1.25 billion, a decrease from $2.09 billion in Q3 2004, largely due to the absence of discontinued operations income.

SBC Communications announced its agreement to acquire AT&T Corp. on January 30, 2005. By October 31, 2005, the company had received approval from the U.S. Department of Justice and the Federal Communications Commission, subject to certain conditions. Regulatory review by the California Public Utilities Commission was ongoing, with an expected vote in November 2005. The transaction was anticipated to close by late 2005. Upon completion, SBC Communications Inc. would adopt the corporate name AT&T Inc.

Cingular Wireless, SBC's 60% owned joint venture, reported a significant increase in customers, reaching approximately 52.3 million by September 30, 2005. This growth was largely driven by the acquisition of AT&T Wireless in October 2004. While Cingular's service revenues grew substantially, its operating income margin decreased compared to the prior year due to increased expenses related to network integration, customer growth, and the AT&T Wireless acquisition.

The wireline segment is experiencing a decline in traditional voice revenues due to increasing competition from wireless, VoIP, and cable technologies, as well as the ongoing phase-out of UNE-P rules. However, the segment is seeing growth in data revenues, driven by DSL expansion, and long-distance voice revenues, partly from bundled offerings. The company is also investing in Project Lightspeed to introduce next-generation broadband and IP video services.