10-QPeriod: Q2 FY2008

AT&T INC. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 6, 2008For Securities:TT-PCTBBT-PA

Summary

AT&T Inc.'s Q2 2008 filing shows robust top-line growth, with total operating revenues increasing by 4.7% year-over-year to $30.9 billion. This growth was primarily driven by a strong performance in the wireless segment, which saw revenues climb 15.8% to $12.0 billion, fueled by a significant increase in wireless subscribers and a surge in data revenue. The company also reported a substantial improvement in operating income, up 32.8% to $6.6 billion, largely due to the wireless segment's enhanced profitability and integration cost savings. Net income also saw a healthy increase of 29.9% to $3.8 billion. Despite the positive revenue and income trends, the wireline segment continues to face challenges, with revenues declining 2.1% due to ongoing shifts from traditional voice services to data and wireless alternatives. However, data revenue within the wireline segment showed resilience, growing 5.1%. Investors should note the significant increase in debt maturing within one year ($16.5 billion compared to $6.9 billion in the prior year), suggesting a potential focus on short-term financing. The company also continues to invest heavily in capital expenditures, particularly in wireless network expansion and U-verse deployment.

Key Highlights

  • 1Total operating revenues increased 4.7% to $30.9 billion, driven by strong wireless segment performance.
  • 2Wireless segment revenues grew 15.8% to $12.0 billion, with wireless subscribers increasing significantly.
  • 3Operating income surged 32.8% to $6.6 billion, reflecting improved wireless profitability and cost efficiencies.
  • 4Net income rose 29.9% to $3.8 billion, translating to a diluted EPS of $0.63.
  • 5Wireline segment revenues declined 2.1%, largely due to a decrease in voice services, though data revenue showed growth.
  • 6Debt maturing within one year increased substantially to $16.5 billion.
  • 7Capital expenditures remain high, focusing on wireless network expansion and U-verse deployment.

Frequently Asked Questions

The primary driver of AT&T's revenue growth in the second quarter of 2008 was its wireless segment. This segment experienced a 15.8% increase in revenue, largely due to a significant rise in wireless subscribers and strong growth in data services.

The wireline segment's operating revenues declined by 2.1%. The main challenge is the continued shift of customers away from traditional voice services towards wireless and Voice over Internet Protocol (VoIP) offerings. However, data revenues within the wireline segment are growing, indicating a transition towards newer services.

AT&T's debt maturing within one year significantly increased to $16.5 billion, up from $6.9 billion in the prior year. While the company generated substantial cash from operations, the increase in short-term debt requires attention. The company also reported a debt ratio of 41.7% at June 30, 2008, up from 35.6% a year prior.

AT&T is making significant capital expenditures, with a focus on expanding its wireless network capacity and upgrading its Universal Mobile Telecommunications System/High-Speed Packet Access network. Investments are also directed towards the deployment of its U-verse services, which include TV, high-speed broadband, and voice services.