10-QPeriod: Q3 FY2010

AT&T INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:TT-PCTBBT-PA

Summary

AT&T Inc.'s third quarter and nine-month period ending September 30, 2010, demonstrate continued revenue growth driven by its robust wireless segment, particularly from data services and increased subscriber numbers. While the wireline segment faces ongoing challenges with declining voice revenues, it is showing resilience through growth in data services like U-verse. The company's strategic acquisitions and disposals, such as the Verizon Wireless property acquisition and the sale of Sterling Commerce, are reshaping its portfolio to focus on core growth areas. Financially, AT&T reported a significant increase in net income attributable to AT&T for both the quarter and the year-to-date period, largely influenced by a substantial tax settlement with the IRS. This positive net income, coupled with effective management of operating expenses and debt, has improved key financial ratios such as the debt-to-capital ratio. The company continues to invest heavily in network infrastructure to support future growth, particularly in wireless data and broadband services, while also managing its dividend payouts to shareholders.

Financial Statements
Beta
Revenue$31.58B
Cost of Revenue$13.61B
Gross Profit$17.98B
SG&A Expenses$7.67B
Operating Expenses$26.15B
Operating Income$5.43B
Interest Expense$729.00M
Net Income$12.32B
EPS (Basic)$2.08
EPS (Diluted)$2.07
Shares Outstanding (Basic)5.91B
Shares Outstanding (Diluted)5.94B

Key Highlights

  • 1Total operating revenues increased by 2.8% for the quarter and 1.2% for the nine-month period, primarily driven by strong wireless service revenue growth.
  • 2Wireless service revenues saw a significant increase of 10.5% for the quarter and 10.4% for the nine months, fueled by subscriber growth and a substantial rise in wireless data revenue.
  • 3Net income attributable to AT&T more than doubled for both the quarter (from $3.192 billion to $12.339 billion) and the nine-month period (from $9.516 billion to $18.837 billion), significantly impacted by an $8.3 billion tax benefit from an IRS settlement.
  • 4The company successfully managed its debt levels, with the debt ratio decreasing to 37.8% from 42.1% year-over-year.
  • 5Capital expenditures remained substantial, totaling $13.170 billion for the nine months, primarily focused on wireless and wireline network upgrades and expansion.
  • 6The Wireline segment experienced a decline in voice revenues (-12.2% for the quarter, -12.3% for nine months) but saw growth in data revenues (+7.4% for the quarter, +7.1% for nine months), driven by U-verse expansion.
  • 7AT&T completed strategic transactions, including the acquisition of wireless properties from Verizon Wireless and the sale of its Sterling Commerce subsidiary.

Frequently Asked Questions

AT&T's revenue growth was primarily driven by its Wireless segment, which saw increased service revenues due to subscriber growth and a significant rise in wireless data revenue. The Wireline segment also contributed through growth in data services, notably U-verse.

The IRS settlement related to a wireless operations restructuring provided a substantial tax benefit of $8.3 billion, significantly boosting net income attributable to AT&T for the quarter and the nine-month period. This also contributed to a decrease in the company's debt-to-capital ratio.

The Wireline segment continues to face declining voice revenues due to the shift towards wireless and VoIP alternatives. However, AT&T is offsetting this by growing its data services, particularly U-verse TV and broadband, and strategic business services, demonstrating a focus on transitioning its revenue mix.

AT&T has reduced its debt ratio by increasing stockholders' equity, partly due to the tax settlement and effective debt repayment strategies. The company continues to make significant capital expenditures, particularly in its wireless and wireline networks, to support future growth in data and broadband services, funded through operations and debt.