10-QPeriod: Q2 FY2011

AT&T INC. Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported solid revenue growth for the first six months of 2011, primarily driven by its wireless segment. Total operating revenues increased by 2.3% to $62.74 billion compared to the same period in 2010. The wireless division, in particular, showed robust performance with a 9.9% increase in segment operating revenues, propelled by strong growth in data services and equipment sales, reflecting the increasing demand for smartphones. This growth in wireless, alongside gains in wireline data services like U-verse, helped offset the persistent decline in traditional voice revenues. While overall operating income saw a slight decrease for the six-month period, net income attributable to AT&T rose by 8.4% to $6.999 billion. This improvement was significantly influenced by a substantial decrease in income tax expense, partly due to a large one-time charge in the prior year related to healthcare legislation. The company also highlighted significant progress on its proposed acquisition of T-Mobile USA, which is expected to enhance its mobile broadband infrastructure and LTE capabilities, though regulatory approvals remain a key factor. AT&T continued its strategic capital expenditures, with a focus on wireless network upgrades and wireline expansion, while also returning value to shareholders through dividend payments.

Financial Statements
Beta
Revenue$31.50B
Cost of Revenue$12.76B
Gross Profit$18.74B
SG&A Expenses$7.97B
Operating Expenses$25.33B
Operating Income$6.17B
Interest Expense$848.00M
Net Income$3.59B
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)5.93B
Shares Outstanding (Diluted)5.95B

Key Highlights

  • 1Total operating revenues increased by 2.3% to $62.74 billion for the six months ended June 30, 2011, compared to the prior year, primarily driven by wireless growth.
  • 2Wireless segment revenues grew by 9.9% for the six months ended June 30, 2011, fueled by increased data service revenues and equipment sales, indicating strong smartphone adoption.
  • 3Net income attributable to AT&T increased by 8.4% to $6.999 billion for the six months ended June 30, 2011, supported by lower income tax expenses.
  • 4The company is proceeding with the acquisition of T-Mobile USA, expecting it to strengthen its mobile broadband infrastructure and LTE network, pending regulatory approvals.
  • 5Capital expenditures remained substantial, totaling $9.4 billion for the six months ended June 30, 2011, focused on wireless network upgrades (including LTE deployment) and wireline expansion (including U-verse).
  • 6Dividends paid to stockholders increased to $5.082 billion for the first six months of 2011, reflecting a commitment to shareholder returns.
  • 7The debt ratio improved to 36.8% as of June 30, 2011, down from 40.4% in the prior year, indicating a strengthening balance sheet.

Frequently Asked Questions

The primary driver of AT&T's revenue growth was its Wireless segment, which saw a 9.9% increase in operating revenues. This growth was largely due to strong demand for smartphones, leading to higher data service revenues and equipment sales.

AT&T announced an agreement to acquire T-Mobile USA in March 2011. The transaction is subject to regulatory approvals, and AT&T has filed applications with relevant authorities. The company anticipates closing the transaction by the end of the first quarter of 2012, provided approvals are obtained.

Traditional voice revenues continue to decline across both wireless and wireline segments. This is attributed to customers switching to alternative technologies like wireless and VoIP for voice services, and a general decrease in landline connections.

AT&T continued significant capital expenditures in the first half of 2011, totaling $9.4 billion, primarily for wireless network upgrades and wireline expansion. The company's debt ratio improved to 36.8% as of June 30, 2011, from 40.4% a year prior, indicating a focus on deleveraging while funding strategic initiatives.