10-QPeriod: Q2 FY2010

AT&T INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:TT-PCTBBT-PA

Summary

AT&T Inc.'s second quarter and first half of 2010 report shows modest revenue growth driven by its wireless segment, which continues to expand its subscriber base and data revenues. The company is navigating a challenging wireline market by focusing on data services like U-verse, while facing declines in traditional voice services. Cost management efforts, particularly in pension and employee benefits, are contributing to operating income growth. Significant events include the acquisition of certain Verizon Wireless properties and the planned divestiture of Sterling Operations, which is being treated as a discontinued operation. The company also highlighted its progress in expanding its 4G network and the ongoing strategic shift towards data-centric services and devices.

Financial Highlights

46 data points
Beta

Revenue

$30.81B

59.6% Gross Margin

Net Income

$4.00B

13.0% Net Margin

EPS (Diluted)

$0.67

Total Assets

$267.56B

Cash & Equivalents

$1.38B

Free Cash Flow

$8.57B

Financial Statements
Beta
Revenue$30.81B
Cost of Revenue$12.45B
Gross Profit$18.36B
SG&A Expenses$7.45B
Operating Expenses$24.73B
Operating Income$6.08B
Interest Expense$754.00M
Net Income$4.00B
EPS (Basic)$0.68
EPS (Diluted)$0.67
Shares Outstanding (Basic)5.91B
Shares Outstanding (Diluted)5.94B

Key Highlights

  • 1Total operating revenues increased slightly by 0.6% to $30.8 billion in Q2 2010 and 0.4% to $61.3 billion for the first six months of 2010 compared to the prior year periods.
  • 2Wireless service revenue grew by 10.3% in Q2 2010 and year-to-date, driven by subscriber growth and increasing data usage.
  • 3Wireline voice revenues continued to decline significantly (down 12.5% in Q2 2010), while data revenues showed robust growth (up 8.3% in Q2 2010), indicating a strategic shift.
  • 4Operating income saw a substantial increase of 11.2% in Q2 2010, attributed to wireless revenue growth and controlled operating expenses, particularly in pension and employee benefits.
  • 5Net income attributable to AT&T was $4.02 billion for Q2 2010, up 25.8% from $3.20 billion in Q2 2009, with diluted EPS at $0.68 compared to $0.54.
  • 6The company acquired certain wireless properties from Verizon Wireless for $2.37 billion in cash and plans to sell its Sterling subsidiary.
  • 7Cash provided by operating activities remained strong, totaling $15.81 billion for the first six months of 2010, comparable to the prior year.

Frequently Asked Questions

The primary driver of AT&T's revenue growth was the continued expansion of its Wireless segment, particularly in service revenues, fueled by subscriber growth and increasing demand for data services. While the Wireline segment experienced declines in voice revenue, its data revenue streams, especially from U-verse, showed positive growth.

AT&T is actively managing the decline in its Wireline voice business by focusing on offsetting these losses with growth in non-access-line-related revenues, such as data services (IP data, broadband, U-verse), and by leveraging opportunities to cross-sell wireless services. Cost reduction initiatives within the Wireline segment are also helping to mitigate the impact of revenue declines on operating income.

The company highlighted the acquisition of certain wireless properties from Verizon Wireless for $2.37 billion in cash. Additionally, AT&T announced the planned sale of its Sterling subsidiary, which is being treated as a discontinued operation, with an anticipated pre-tax gain of $800 million upon completion.

AT&T continued to invest significantly in its infrastructure. Capital expenditures were primarily directed towards wireless and wireline network upgrades and expansion. Specifically, spending increased for wireless network capacity, integration, and the initial deployment of 4G equipment for trials. Wireline capital expenditures focused on U-verse services, though at a slightly reduced pace compared to the prior year as upgrades matured.