8-KOther EventsExhibits & Filings

AT&T INC. 8-K Report, Corporate Update (Jul 24, 2012)

Filed July 24, 2012For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its second-quarter 2012 financial results, showing an increase in net income attributable to AT&T to $3.9 billion, or $0.66 per diluted share, up from $3.6 billion, or $0.60 per diluted share, in the second quarter of 2011. This growth was achieved despite a slight decrease in total revenues, which were $31.6 billion, up marginally by $80 million year-over-year. The company's performance was significantly influenced by the divestiture of its Advertising Solutions segment on May 8, 2012, with operating results including this segment only through that date, and subsequently accounting for its 47% equity interest in the new entity, YP Holdings LLC. Key drivers of the improved profitability include strong performance from AT&T Mobility, which saw revenue growth and a significant increase in its subscriber base, particularly among high-value smartphone users. The wireless segment also benefited from improved operating efficiencies and a reduction in handset upgrade costs. While the wireline segment experienced a slight revenue decrease, driven by declines in traditional voice services, it saw growth in broadband and video revenues, with notable increases in U-verse subscribers and a sustained improvement in operating margin due to cost-reduction initiatives. Additionally, AT&T actively returned capital to shareholders, repurchasing $2.5 billion in common stock during the quarter.

Key Highlights

  • 1Second-quarter 2012 net income attributable to AT&T rose to $3.9 billion ($0.66 per diluted share) from $3.6 billion ($0.60 per diluted share) in Q2 2011.
  • 2Total revenues for Q2 2012 were $31.6 billion, a slight increase of $80 million compared to Q2 2011.
  • 3The sale of the Advertising Solutions segment to an affiliate of Cerberus Capital Management was completed on May 8, 2012, impacting reported segment revenues but contributing a 47% equity interest in YP Holdings LLC.
  • 4AT&T Mobility reported a 4.8% revenue increase to $16.4 billion, driven by net subscriber additions and strong data revenue growth.
  • 5AT&T Mobility added 1.3 million wireless subscribers in Q2 2012, bringing the total base to 105.2 million, with smartphone sales reaching 5.1 million.
  • 6Wireline revenues decreased slightly to $14.9 billion, with growth in broadband and video offsetting declines in voice services; U-verse subscribers saw significant growth.
  • 7The company repurchased $2.5 billion of its common stock during the second quarter of 2012.

Frequently Asked Questions

The sale of the Advertising Solutions segment on May 8, 2012, means that its results were only included in AT&T's consolidated statements through that date. Subsequently, AT&T accounts for its 47% equity interest in the new entity, YP Holdings LLC, as 'equity in net income of affiliates.' This divestiture impacted reported segment revenues but allowed AT&T to focus on its core communications businesses.

AT&T Mobility's revenue growth was primarily driven by an increase in net subscribers and strong expansion in data revenues. The company added 1.3 million net wireless subscribers in the quarter, boosted by strong smartphone sales, tablet adoption, and connected devices. Improved operating efficiencies and a higher proportion of high-value smartphone subscribers also contributed to a significant increase in the wireless operating income margin.

While overall Wireline revenues saw a slight decrease due to declines in traditional voice and circuit-based data services, the segment showed positive trends in broadband and video. Broadband connections remained stable overall, but U-verse High Speed Internet subscribers grew significantly, and U-verse video subscribers also saw a net gain. These growth areas are helping to offset declines in legacy services and improve the Wireline operating margin through cost-reduction initiatives.

The filing indicates that AT&T is actively returning capital to its shareholders. During the second quarter of 2012, the company repurchased approximately $2.5 billion of its common stock, totaling 75.8 million shares. This reflects a commitment to share buybacks as part of its capital allocation strategy.