10-QPeriod: Q1 FY2011

AT&T INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 6, 2011For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported solid financial results for the first quarter ended March 31, 2011, demonstrating revenue growth driven primarily by its wireless segment. Total operating revenues increased by 2.3% year-over-year, reaching $31.2 billion, with wireless service revenue showing a significant 8.6% increase. This growth was propelled by a substantial rise in data service revenues, reflecting higher smartphone penetration and increased data usage. The company also experienced growth in its wireline data services, particularly from U-verse expansion and IP data growth, though traditional voice revenues continued to decline. Despite an increase in operating expenses, notably in cost of services and sales due to higher wireless device sales and transitions, AT&T managed to increase its net income attributable to AT&T by a significant 38.9% to $3.4 billion. This improvement was partly due to a one-time charge related to healthcare legislation in the prior year. The company highlighted its ongoing investment in network infrastructure, including significant capital expenditures for wireless and wireline network upgrades, and the strategic acquisition of T-Mobile USA, which is expected to enhance its mobile broadband capabilities. AT&T's balance sheet remained strong, with a debt ratio of 36.6% at the end of the quarter, reflecting its financial stability and capacity for continued investment and shareholder returns.

Financial Highlights

47 data points
Beta

Revenue

$31.25B

59.0% Gross Margin

Net Income

$3.41B

10.9% Net Margin

EPS (Diluted)

$0.57

Total Assets

$268.08B

Cash & Equivalents

$1.39B

Free Cash Flow

$7.73B

Financial Statements
Beta
Revenue$31.25B
Cost of Revenue$12.81B
Gross Profit$18.43B
SG&A Expenses$8.04B
Operating Expenses$25.44B
Operating Income$5.81B
Interest Expense$846.00M
Net Income$3.41B
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)5.92B
Shares Outstanding (Diluted)5.95B

Key Highlights

  • 1Total operating revenues grew 2.3% to $31.2 billion, driven by a 2.3% increase in wireless service revenue.
  • 2Wireless data service revenues saw a strong increase of 23.9%, indicating a significant shift towards data consumption.
  • 3Net income attributable to AT&T rose significantly by 38.9% to $3.4 billion, aided by the prior year's one-time healthcare charge.
  • 4Capital expenditures increased, with significant investments in wireless network upgrades (including LTE deployment) and wireline expansion (U-verse).
  • 5AT&T announced a major agreement to acquire T-Mobile USA for approximately $39 billion, a strategic move to expand its mobile broadband infrastructure and spectrum holdings.
  • 6The company maintained a healthy cash flow from operations of $7.7 billion, supporting investments and dividends.
  • 7Wireline voice revenues continued their decline (-12.5%), offset by growth in wireline data revenues (+8.0%).

Frequently Asked Questions

The primary drivers of revenue growth were increases in wireless service revenues, largely fueled by a significant rise in data service revenues due to higher smartphone penetration and increased data usage. Additionally, wireline data revenues, particularly from U-verse expansion and IP data growth, contributed positively, partially offsetting the continued decline in traditional wireline voice revenues.

The acquisition of T-Mobile was announced on March 20, 2011, and is noted as a significant pending transaction. While it did not impact the financial statements for the period ending March 31, 2011, its terms, financing (including a $20 billion bridge loan), and potential implications for future operations and regulatory approvals are detailed in the report. The acquisition is expected to close in approximately one year and is subject to regulatory approvals.

AT&T reported growth in its total wireless subscriber base to 97.5 million. While overall net subscriber additions increased due to growth in connected devices and resellers, postpaid net additions saw a notable decline. The company noted that 64% of its postpaid subscribers now use advanced handsets, with 46% using smartphones, up from 35% a year prior. The shift towards data services and away from traditional voice services is a key trend impacting ARPU and subscriber strategies.

AT&T maintained a solid financial position with a debt ratio of 36.6% at the end of the quarter, down from 40.5% a year ago. The company generated $7.7 billion in cash from operations, which was used to fund capital expenditures ($4.1 billion, including significant investments in wireless and wireline networks), repay debt ($1.3 billion), and pay dividends ($2.5 billion). AT&T also secured a $20 billion bridge financing facility for the T-Mobile acquisition and issued new debt, demonstrating its ability to manage its capital structure and funding needs.