Welcome Rich Dietz Senior Vice President-Investor Relations AT&T Inc. Cautionary Language Concerning Forward-Looking Statements
Information set forth in these presentations contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise.
These presentations may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s Web site at www.att.com/investor.relations. Randall Stephenson Chairman and Chief Executive Officer Strategy and Execution Ralph de la Vega President and CEO-AT&T Mobility Wireless Opportunities Ron Spears Group President-Global Business Services Enterprise and Wholesale
Agenda Break
John Stankey Infrastructure and Group President-Telecom Operations Regional Initiatives Ray Wilkins Group President-Diversified Businesses Advertising and Search Rick Lindner Senior Executive Vice President and Chief Financial Officer Financial Summary and Outlook Q and A Strategy and Execution Randall Stephenson Chairman and Chief Executive Officer AT&T Inc. Areas to Cover
CustomerCustomer trendstrends shapingshaping thethe industryindustry
AT&T’sAT&T’s uniqueunique positionposition toto addressaddress thesethese customercustomer trendstrends
AT&T’sAT&T’s businessbusiness modelmodel forfor next-generationnext-generation growthgrowth
TrackTrack recordrecord ofof leadershipleadership andand executionexecution
WhatWhat youyou cancan expectexpect fromfrom AT&TAT&T Trend: Voice Is Growing and Moving to Wireless
Wireline LD minutes of use Wireless minutes of use
Voice Minutes 1,250
Are Growing 1,000
10% Annually 750 With a Shift to Billions 500 Wireless 250 0 1995 1996 1997 1998 19992000 2001 2002 2003 2004 2005 2006
Sources: Chart: Sources: TIA, CTIA, NECA & FCC Trend: Dramatic Expansion in Storage Capacity
1,000
Worldwide 800 Storage 600
Capacity 400 104%104% Purchased Petabytes 200 84%84%
0 2004 2005 2006
Source: IDC, 2006 Trend: Consumer Broadband Volumes More Than Doubled Over the Past Two Years
AT&T Total Average Broadband Traffic Up more than 145% Per Day over past two years Terabytes
2005 2006 2007 Trend: Robust Business Data Traffic Growth
Terabytes/Day
60%
64%
63%
82%
2003 2004 2005 2006 2007 Trend: Wireless Data Growth Is Accelerating
AT&T Wireless Wireless Data Data Traffic Traffic Is Mbps in Millions Growing Exponentially, Usage Quadrupling Every Year 2004 2005 2006 2007 Trend: Wireless Smartphones Drive Data Growth Early in Adoption Curve for Media-Rich Devices, Huge Potential in Wireless Data
How early adopters are using their iPhones: 51% have watched a YouTube video 46% have watched a music video 34% have watched the news
Almost twice the usage versus prior to buying the iPhone Trend: Increased Globalization
Total Telecommunications AT&T International Traffic Spend — 2006 Gigabits Per Second
$345 Billion
$897 Billion Up ~~ 150% over past two years U.S. International
Sources: IDC, Gartner, Ovum, Merrill Nov. 2005 Nov. 2006 Nov. 2007 CustomerCustomer expectationsexpectations forfor mobilitymobility andand seamlessseamless interactivityinteractivity areare movingmoving higherhigher
AA GrowingGrowing CustomerCustomer demanddemand forfor bandwidthbandwidth IndustryIndustry isis increasingincreasing PoweredPowered GlobalizationGlobalization isis drivingdriving growthgrowth — — customerscustomers taketake U.S.U.S. expectationsexpectations forfor serviceservice byby WirelessWireless qualityquality andand functionalityfunctionality aroundaround thethe worldworld andand IPIP TheThe networknetwork isis increasinglyincreasingly relevantrelevant — — low-cost,low-cost, high-capacity,high-capacity, capablecapable ofof deliveringdelivering highhigh levelslevels ofof functionalityfunctionality andand securitysecurity Wireless
AT&T Wireless acquisition TransformingTransforming 100% wireless ownership through AT&T to Align BellSouth acquisition AT&T to Align More recent acquisitions including UniquelyUniquely Dobson and Aloha Strong wireless execution: 1,350 basis points WithWith CustomerCustomer of wireless margin expansion in 2½ years TrendsTrends Dramatic acceleration in subscriber growth Five straight quarters of wireless data revenue growth above 60% Wireless Enterprise
TransformingTransforming AT&T Corp. acquisition AT&TAT&T toto AlignAlign Great set of assets that we have transformed into a premier global network UniquelyUniquely with advanced product sets WithWith CustomerCustomer Deep sales and technical resources including AT&T labs TrendsTrends Return to positive enterprise revenue growth a year ahead of original plan Wireless Enterprise TransformingTransforming Broadband AT&TAT&T toto AlignAlign Industry’s largest broadband subscriber UniquelyUniquely base, approaching 14 million Nearly 6 million added over past WithWith CustomerCustomer two and a half years TrendsTrends Wireless Enterprise TransformingTransforming Broadband AT&TAT&T toto AlignAlign IP-Based Network UniquelyUniquely Moving to IP in backbone, wireless and wired WithWith CustomerCustomer IP makes possible converged wireless TrendsTrends and wired services
AT&T U-verseSM deployment expanded to reach 30 million customer locations by 2010 BusinessBusiness ModelModel IP-DrivenIP-Driven MobilityMobility forfor thethe NextNext SeamlessSeamless interactivityinteractivity GenerationGeneration IncreasedIncreased functionalityfunctionality ofof GrowthGrowth ScalabilityScalability LowLow costcost AT&T Platform Connections
MoreMore thanthan 11 billionbillion devicesdevices connectedconnected
Our Goal Connect more wireless and wired devices, applications and people to our network AT&T’s Vision
Connect people with their world, everywhere they live and work, and do it better than anyone else. Bill Blase Jim Callaway Jim Cicconi Cathy Coughlin Ralph de la Vega Rick Lindner Senior Executive Senior Executive Senior Executive Senior Executive President and CEO Senior Executive VP-Human VP-Executive VP-External and VP and Global AT&T Mobility VP and Chief Resources Operations Legislative Marketing Officer Financial Officer Affairs
Strong Executive Forrest Miller Ron Spears John Stankey Wayne Watts Ray Wilkins Group President Group President Group President Senior Executive Group President Corporate Global Business Telecom VP and General Diversified Team Strategy and Services Operations Counsel Businesses Development
Proven Leadership: diverse backgrounds, intensely focused on execution What You OperationalOperational executionexecution Can Expect CommitmentCommitment toto growthgrowth From AT&T ShareownerShareowner valuevalue What You Can Expect From AT&T
Operate as one company OperationalOperational with increased velocity ExecutionExecution in the marketplace Premier IP-based network
Commitment Converged services, to Growth seamless connectivity
Continuously elevate the Shareowner Value customer experience What You Can Expect From AT&T
10 Consecutive Quarters of Double-Digit Growth in Adjusted EPS Operational Execution
$0.71 $0.70 $0.65 $0.63 $0.61 CommitmentCommitment $0.58 toto GrowthGrowth $0.52 $0.47 $0.48 $0.43
Shareowner Value
2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 What You Can Expect From AT&T
Continued double-digit growth Operational Execution in adjusted earnings per share and strong free cash flow growth
CommitmentCommitment Results increasingly driven by toto GrowthGrowth top-line growth — expect to achieve revenue growth at mid-single-digit or better Shareowner Value What You Can Expect From AT&T
Invest for growth and Operational Execution economic value, return cash to shareowners
Commitment 12.7% dividend increase announced today, to Growth largest annual increase in our history New share repurchase authorization ShareownerShareowner Expect to return more than $19 billion to shareowners this year through dividends ValueValue and share buybacks UniqueUnique setset ofof assetsassets inin aa growthgrowth industryindustry
LeadLead inin mobilitymobility andand IPIP,,thethe industry’sindustry’s AT&T:AT&T: powerfulpowerful growthgrowth enginesengines OurOur TimeTime ProvenProven recordrecord ofof strongstrong IsIs NowNow operationaloperational executionexecution StrongStrong growthgrowth outlookoutlook
SubstantialSubstantial valuevalue returnedreturned toto shareownersshareowners Wireless Opportunities Ralph de la Vega President and CEO-AT&T Mobility AT&T Inc. Lead in Wireless
Objective: Market Share to be Flow Share number Revenue Profitability Customer Retention Strongest Set of Assets:
1. Strong spectrum holdings Average Spectrum Depth Top-100 Markets (MHz)
77 9 Aloha Partners 10 AWS
58 Cellular/PCS
AT&T Strongest Set of Assets:
1. Strong spectrum holdings Percent of Global Subscribers by Technology 2. The most widely GSM, UMTS deployed technology CDMA Other or HSPA 12% 2% 86%
2.7 Billion Subscribers
Source: 3G Americas Strongest Set of Assets:
1. Strong spectrum holdings Countries/Regions Covered for International Voice Roaming
2. The most widely GSM or CDMA deployed technology Additional coverage with GSM/CDMA dual-band phones 3. The largest international roaming footprint
196 193 162 162
28 28 AT&T T-Mobile Verizon Sprint Strongest Set of Assets:
1. Strong spectrum holdings Total Customers by Carrier 3Q07 2. The most widely (millions) deployed technology 67.3 63.7
3. The largest international 53.1 roaming footprint 4. The greatest number of customers 27.7
AT&T Verizon Sprint T-Mobile
AT&T shows pro forma customers including Dobson. Strongest Set of Assets:
1. Strong spectrum holdings
2. The most widely deployed technology 3. The largest international roaming footprint 4. The greatest number of customers 5. The most compelling products and services Rollover® Strongest Set of Assets:
1. Strong spectrum holdings
2. The most widely deployed technology 3. The largest international roaming footprint 4. The greatest number of customers 5. The most compelling products and services
6. The most complete provider Solid Momentum:
1 MarketMarket leaderleader inin totaltotal grossgross addsadds forfor 1111 straightstraight quartersquarters —— sincesince AT&TAT&T WirelessWireless mergermerger
Annual data revenue growth has exceeded 2 Annual data revenue growth has exceeded 60%60% forfor fivefive consecutiveconsecutive quartersquarters
3 ReturnReturn onon OperationsOperations —— 1,3501,350 basisbasis pointspoints ofof adjustedadjusted OIBDAOIBDA improvementimprovement sincesince AT&TAT&T WirelessWireless mergermerger
4 GreatestGreatest churnchurn improvementimprovement inin inindustrydustry overover lastlast threethree yearsyears Keys to Success: Strategic Imperatives
BuildBuild thethe AchieveAchieve aa EarnEarn CreateCreate DeliverDeliver BestBest CompetitiveCompetitive Industry-Industry- UnmatchedUnmatched CompellingCompelling NetworkNetwork CostCost LeadingLeading DistributionDistribution ProductsProducts andand StructureStructure RetentionRetention ServicesServices Build the Best Network: Expanding and Improving the Network
Wireless Coverage Dobson and Edge, Verizon Swap – Dobson: Adding >3,000 cell sites – Edge: Adding 360 cell sites – Verizon swap: Adding 160 cell sites
Aloha Partners – 700 MHz spectrum – Adding 12 MHz covering 196M POPs AT&T Edge – 72 of top 100 markets Roaming VZ Swap Dobson Build the Best Network: 3G Deployment — UMTS/HSPA
Number of Top-100 Cities With 3G Coverage 3G Expansion 96 89 92 - Cover 255 major metro areas including 89 of the top-100 cities - Plan to expand coverage in 2008
HSUPA Deployment - Faster 3G speeds
Downlink 600 – 1,400 600 – 1,400 600 – 1,400 - Deployed nationwide in 2Q08 Uplink 500 – 800 500 – 800 350 – 500
3G Speeds
Speed claims for devices with advanced receivers. Achieve a Competitive Cost Structure: Cost of Service Improvement
Cost of Service as a % of Wireless Service Revenue and Adjusted OIBDA 100 bps reduction in Cost of Service = ~ $400M annual savings 39.1% 35.6% 31.7% Key Actions: – TDMA sunset 29.6% 28.4% 24.0% – Dobson integration – Network rationalization – Improved capital utilization 3Q05 3Q06 3Q07 2008
Cost of Service % of Service Revenue Adjusted OIBDA Margin Earn Industry-Leading Retention: Closing the Gap
Competitive Postpaid Churn Rates
1.97% 1.90% 1.87% 1.80% 1.45% 1.54% 87 bps 1.49% 1.59% 1.32% 1.31% 1.22% 57 bps 35 bps
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
AT&T Sprint T-Mobile Verizon Earn Industry-Leading Retention: Closing the Gap
Current Churn Level
6-7 bps TDMA Sunset
2-3 bps Wired Bundles and Family Talk 35 bps 12-16 bps Network Improvements
8-12 bps Service Improvements
Industry-Leading Churn Create Unmatched Distribution
Industry-Leading Gross Adds (in millions) 5.5 Strong Direct Distribution 5.3 5.1 – 2,000 company-owned stores 4.7 4.7 4.6 4.5 – Dedicated business organization 4.34.4 4.4 4.3 – Strong sales from call centers – Largest volume of online sales
Unmatched Indirect Distribution – High-quality agent partners – #1 in national retail – Apple retail and online stores 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07
AT&T Verizon Strong Resale Partners Sprint T-Mobile
Source: UBS Create Unmatched Distribution: Experience Stores Create Unmatched Distribution: National Retail Leadership
National Retail Stores Selling #1 in National Retail GoPhones 48K – Wired and wireless
Strong in postpaid and prepaid
Well-positioned to maximize 20K the prepaid opportunity – Strong GoPhone brand –Good margins
2Q07 Current – Extensive distribution Compelling Products and Services: Exclusive Devices
AT&T Tilt
Pantech Samsung Duo a737 Samsung SLM BlackBerry 8820 iPhone
Expand capabilities Focus on exclusives Cool form factors Lead in PDAs Compelling Products and Services: Convergence through Wi-Fi
You are here Compelling Products and Services: Data Growth
Annualized data revenue is more than $7B with a growth rate of more than 60%
Wireless Data Revenue $1.8B Other SMS $1.1B E-Mail
Data Media Access Bundles 3Q06 3Q07 Compelling Products and Services: Data Growth
Postpaid ARPU Improves With Device Capabilities Increased ARPU with 3G and integrated devices
+120% Opportunity to increase penetration +20% – 11% of subs have 3G device – 14% of subs have integrated device
2G Devices 3G Devices Integrated Devices Open Access
Devices Operating Systems Applications
Allow any device on Support devices that run Download and use any network various operating systems applications from any source
AT&T is an open access AT&T provides customers AT&T offers the carrier that runs GSM — with a choice of six broadest selection a SIM-based standard operating systems of applications
Customers want good choices, good prices and an unconstrained ability to reach the people, information and entertainment they care about. the 4 R’s
RateRate ofof PenetrationPenetration R1R1 R2R2 RevenueRevenue IntensityIntensity
R3R3 Return on Operations R4R4 ReputationReputation Progress Report and Outlook
R1: Rate of Penetration R2: Revenue Intensity Total Net Adds (in 000s) Service Revenue Growth
13.7% 1,993 12.2%
1,358
867 4.3%
3Q05 3Q06 3Q07 3Q05 3Q06 3Q07 2008 Outlook: 2008 Outlook: AT&T maintains #1 Service revenue growth net flow share in the midteens Year-over-year growth rates for 3Q05 based on pro forma. Progress Report and Outlook
R3: Return on Operations R4: Reputation Adjusted OIBDA Margin Average Postpaid Churn
39.1% 2.0% 35.6% 31.7% 1.5% 1.3%
3Q05 3Q06 3Q07 3Q05 3Q06 3Q07
2008 Outlook: 2008 Outlook: OIBDA margins averaging Continued improvement in the low 40% range in postpaid and overall churn LeadLead inin WirelessWireless Focus on executionto: record fordelivering results We haveagreat plan andatrack deliver evenmore in2008 We hadagreat2007, andwe’ll – – – – – Deliver OIBDA margins inthe low40s Close gap toindustry-leading postpaid churn Continue reducingcost ofservice Deliver ondata togrowrevenue Maintain strong flowshare Enterprise and Wholesale Ron Spears Group President-Global Business Services AT&T Inc. Global Business Services
Enterprise Serves nearly 120,000 enterprise 57% and wholesale customers globally
Annual revenues of ~ $33B
~ 28% of consolidated revenues
More than 40,000 employees Wholesale 43% Operations in 164 countries Enterprise
Voice and Data Revenue Mix Traffic shifting from voice to data 37% 41% 47% Packet migration to IP continues Voice, transport and IP volumes are growing 63% 59% Revenue growth continues 53% to expand due to improving supply-and- 2005 2007 2009E demand characteristics Voice Data Wholesale
Revenue Segments Revenue pressure from carrier traffic migration largely complete Other 3% Wireless volumes continue to grow
Wireless and carrier clients comprise nearly 70% of customers and drive 80% of revenues
Data Voice Network assets and capabilities 47% 50% driving new growth Wholesale
% of Revenues by Customer Segment Revenue pressure from carrier traffic migration largely complete
SI/ISP/Other Carrier Wireless volumes continue to grow 21% 32% Wireless and carrier clients comprise nearly 70% of customers and drive 80% of revenues
Network assets and capabilities Wireless driving new growth 47% Market Trends
Globalization
Virtualization
Mobile Society Addressable Industry Revenue Projections
$ Billions 226
192 Overall addressable growth ~ 18% Application Approximately 75% of market Services U.S. and Global growth is from application services
Wireless Wireless accounts for U.S. Only ~ 20% of the growth IP/MPLS Core wireline is driving VoIP ~ 5% of the growth Core Wireline Wholesale Across both application services U.S. and Global and core wireline, global drives 2007 2010 ~ 20% of the growth
Collaborated forecast among AT&T, IDC, Yankee Group and Atlantic-ACM. Our Strategy
To help enterprises achieve velocity by delivering intelligent and secure networking, application-enabling platforms and business solutions expertise.
Deploying apps efficiently Applications — anywhere, anytime, to any device
Application Creating a platform for Infrastructure applications — eliminating Network complexity and reducing costs Services IP, MPLS, Optimizing availability VPN Intelligence and performance
Supporting fixed The Network and mobile devices Our Plan for Sustainable Growth Execute, Expand, Transform and Deliver
Execute Expand in core enterprise services business and markets
Transform Deliver business to world-class applications enabler customer experience Pivoting Our Portfolio Majority Data of AT&T Networking investment Hosting/Applications Services targeted to
Enterprise Voice high-value Converged (Local and LD) e-Capabilities Networking growth Domestic services IP Collaboration and Intl PL VPN
Business VoIP High Speed Mobility Content Distribution
High Low Investment Priority Core Execute Enterprise Business Execute Executing Core Enterprise Business With Excellence
Four Customer Examples (A,B,C,D) IP migration yields positive Managing Our impact to revenues A Core Portfolio B C VPN expansion
Expand Ethernet penetration
Globally consistent services New customer to AT&T D Leverage mobility Month 1 Month 14 IP/Packet Customer Revenue Growth Execute Leveraging Mobility
Deploy VPNs Driving Increase Wireless Share and Penetration and New Applications Drive Incremental Revenue Bandwidth Growth
Expand Mobility Boost Demand Applications for Bandwidth
Add Mobile Access to VPNs Expand Capture Growth Opportunities Wholesale Expand Wholesale Expand in Wholesale
ContentContent ProvidersProviders Wholesale WirelessWireless Initiatives Capitalize on Worldwide Carrier Growth Focus on Emerging GlobalGlobal CarriersCarriers Players Expand Targeted Growth Globally Expand Globally Targeted Global Growth
Targeted customer base
20 key markets (27 countries)
IBM enhances global applications capacity Hosting and Application Services IP Collaboration Transform Content Management Application Services and Delivery Transform Application Services
Hosting and Application Services
An AT&T Company Transform Application Services
Hosting and Application Services
ExpandingExpanding CapacityCapacity U.S.U.S. andand GloballyGlobally
ServicesServices InitiativesInitiatives toto ShiftShift thethe MixMix
Utility computing offering On-demand application services for small and medium businesses
New fully managed Virtual dedicated server hosting offering offer for small business Transform Application Services Unified Communications
AT&T Connect
Ron Spears (I am available) Meeting ID: 86317
MY CONTACTS
Contacts u Groups u
d (5)
9 Randall Stephenson
9 Bill Archer
- Mark Keiffer (Busy)
9 Kathie Morrissey
9 Paulino Barros
dOffline (3)
X Andy Geisse (Offline)
X Dan Fete (Offline)
L Kent Mathy (Away) Transform Application Services Content Management and Delivery
U.S. and Global Market Size Capturing Growth in Content $ Billions
1.8 Rapidly expand capacity
Enhance caching and streaming capabilities 0.9
Drive off of core strengths 0.3
2004 2007 2010
Collaborated forecast between AT&T and IDC. Transform Application Services Content Management and Delivery We Are Deploying Content Servers at Key Locations Throughout the World
Asia
Europe Our Plan for Sustainable Growth Execute, Expand, Transform and Deliver
Execute Expand in core enterprise services business and markets
Transform Deliver business to world-class applications enabler customer experience Industry-Leading Customer Experience Invest in Tools, Automation Outside-In Approach 2007 and 2008 Satisfaction survey ~ $100 million Competitive benchmarking Directed Investments
Customer information tools
Enterprise portal (BusinessDirect)
Global billing road map Multiyear Financial Outlook
With our strong business mix, GBS is positioned for growth Enterprise revenues will grow throughout 2008 and will achieve mid-single-digit growth in 2010
A significant ramp to positive wholesale growth in 2008 as the impacts of IBM agreement are realized
Long-term wholesale growth in the low-single-digit range Infrastructure and Regional Initiatives John Stankey Group President-Telecom Operations AT&T Inc. Small and Medium Business Key Strategies: Small and Medium Business
Differentiate with Bundles and Applications
Capitalize on Wireless advantage
Extend Broadband position
Deliver IP Solutions Increase Bundle Penetration Protecting Our Existing Base of Customers
Small Business Package Penetration Broad set of products to meet the needs of business customers 60% Long-standing customer 45% 42% relationships and term commitments
Simplified solutions for small business customers Mid-'07 2007 2008 2009 2010 – Remote Vault – Remote Monitoring Capitalize on Wireless Advantage
Total Monthly Churn Findings Bolt on wireless to wired packages to reduce churn
Seamless wireless- 2 X Lower wired solutions – Unified communications 4 X Lower – Integrated wireless and premise telephony solutions – All-access data cards Line Only W/DSL W/DSL + – Combined billing Wireless Unified account management Extend Broadband Position
DSL Speed Mix Broadband Share Shifting the mix to high speed – Driving revenue growth Valued-added functionality – QoS, VPN, Managed Services 3Q06 4Q06 1Q07 2Q07 3Q07 Launching 10 Mbps and higher broadband products 6MB Capitalizing on current Lightspeed 3MB build to serve SMB 1.5MB and Lower Reducing overall churn Grow IP Connections Drive Enterprise Offerings Down Market
MIS/VPN Orders Extensive IP Expertise Delivering core bundles 50% and competitive price points Increase Full range of solutions across the data continuum –VPN/MIS –IP Flex Reach –Hosted Voice – Ethernet AT&T has unmatched capabilities to serve all business customers 2006 2007 from small to large Small and Medium Business Summary
Broad Set of Solutions
Existing Customer Relationships
Extensive Broadband Reach
Unmatched in Wireless and IP Data Consumer Market Key Strategies: Consumer
Continue Connection growth Differentiate with Wireless Unmatched Distribution Extend Broadband position Dramatically grow Video Consumer Connections Video and Broadband Offset Voice
AT&T Connections Total consumer revenues and connections are growing Revenue per customer growing from upper $50s today to more than $70 by 2010
Flowshare of wired voice is improving in spite of increased cable competition
2007 2008 2009 2010 We will win at the local level Consumer Connections Capture a Higher Share of Inwards
Mover Opportunity 16% of the base will move each year Capturing movers within the AT&T footprint Better Identification Product focus
Higher AT&T-connected Conversion communities Rate
Movers have a higher propensity toward wireless and broadband Differentiate With Wireless Roll Out Anytime, Anywhere Solutions
AT&T Unity plan, nation’s largest calling community Goal: Free Wi-Fi with 3 and 6 Mbps Integrate wireless, broadband and wireless 3G Cards wired and Wi-Fi to enable Converged services: seamless connectivity – Web DVR Control – AT&T/Yahoo! Mail – Remote Home – CVoIP Preferred Monitoring Routing
DSL Direct offer combining broadband with wireless voice Unmatched Distribution Serve Customers the Way They Want to Be Served
Company-Owned Retail Unmatched presence with more In-store sales of wired products than 1,200 Company-Owned Retail locations in the 22-state footprint Consumer Centers take more 3X than 100 million customer contacts per year att.com was the fifth most visited retail site on Black Friday (11/23/07) Extensive and diverse set 2006 2007 of Alternate Channels and partners Extend Broadband Position Continue Growth Through Unique Position
Consumer Broadband Revenue Integration With Wireless – Seamless wired/3G/Wi-Fi customer experience Video Success – Currently seeing more than a 90% broadband attach rate with U-verse
2007 2008 2009 2010 – 40% are new broadband users Extend Broadband Position Competing in the Marketplace
Broadband Share AT&T Footprint Increasing Broadband Share with current offers, messaging and channel Cable 50% 47% execution
AT&T 42% 46% Launching in 2008 10 Mbps service utilizing U-verse
3Q06 3Q07 architecture
* Source: AT&T market research Dramatically Grow Video Capitalize on Market Potential
AT&T Has 1% Revenue Share Video Revenues of Growing Video Market Multibillion-dollar AT&T opportunity
AT&T’s Share Today $35 Billion Opportunity
In AT&T Footprint 2007 2008 2009 2010 Dramatically Grow Video AT&T Advanced TV Available to All Customers
Better Control Better Content Richer HD
DVR programming AT&T U-bar w/ More HD than cable with PC or wireless customized portal Two HD streams Four-stream DVR Photos and home (2Q08 – 3Q08) recording media (1Q08) Every STB we install Whole-home DVR NFL Network/Big 10 is HD-capable (2H08) YELLOWPAGES.COM searches Dramatically Grow Video Scale U-verse TV Sales and Operations
More than 1 million Installs per Week by the end of 2008 (000s) > 40 Weekly installs ramping to over 40,000 by end of 2008
Customer trouble contact > 10 rates have been cut in half in 2007
Managed home services 4Q07 1Q08 2Q08 3Q08 4Q08 opportunity with broadband and video offerings U-verse Penetration by Living Unit Age
Key Penetration Milestones
12 11.4% 10.2% 10
8 7.3%
6 5.1%
4
2
0 3 Months 6 Months 9 Months 12 Months Dramatically Grow Video Improving U-verse Operations Installation Times CPE Cost/Sub Technician Results by Tenure
6.4 hrs 5.7 hrs ~ $550 5.3 hrs < 5.0 hrs ~ $400
New Intermediate Experienced Target 2007 2010
Experienced techs completing CPE costs benefit from installs one hour faster than improving economies of scale new techs Regional Operations Summary Ubiquitous, feature-rich IP solutions Capitalizing on wireless Converged products with high- bandwidth access Unmatched distribution and end-to-end capabilities Improving Cost Structure Merger Integration on Track
AT&T and BellSouth > $3.5 billion merger savings Merger Cost Synergy Run Rates achieved through 2007, ~ 75% Expense and Capital expense and 25% capital ($ in billions) Labor savings on plan > $6.0 Incremental Target – AT&T/SBC – 90% complete Achieved > $5.0 – AT&T/BLS – 50% complete Network and traffic migration > $3.5 initiatives on track – > 60% Private line migration opportunity remaining $1.1 1H07 – > 80% Frame/ATM and IP migration remaining
2006 2007 2008 2009 Advertising, corporate efforts actual on track Further Cost Opportunities … Additional ~ $1.5 Billion Run-Rate Savings
~ $500M Network Operations
~ $250M Call Centers
~ $750M Corporate Shared Services Network Operations Opportunities: Additional ~ $500 Million Run-Rate Savings
Technology Transformation
– Lightspeed Deployment … shorter loops
– Increased Mechanization and Systems Integration … improving tech response
Consolidation and Standardization
– Mass Market and Enterprise Care Centers … nationalization and standardization
– Global Network Operations … create national, automated work flow Call Center Opportunities: Additional ~ $250 Million Run-Rate Savings
Shift to mechanization in Consumer, Regional Business, and Credit and Collection Centers
Unproductive call reduction −Simplify bills and customer offerings Increase self-service capabilities −Enhance call routing and Web capabilities Improve first call resolution −Integrate systems and information Corporate Shared Services Opportunities: Additional ~ $750 Million Run-Rate Savings
Strategic IT sourcing strategy – Rationalize and simplify delivery models – Compelling price points to achieve “best in class” cost structure – In-sourcing of midrange ops IT application rationalization IT automation and process improvements Procurement and corporate real estate initiatives $3.7 Billion Additional Expense Opportunity Over the Next Three Years
Expense Savings Run Rates $ in billions $7.3 $7.0
$5.9 Operational Initiatives
$3.6 BellSouth Merger Synergies $1.4 AT&T Merger Synergies
20072008 2009 2010 Network Strategy and Initiatives The Network Is Relevant: Race to Aggregate Volumes
– Wired/Wireless Voice Existing and – High Speed Internet Unmatched – Enterprise Data and IP Capabilities – Wholesale Transport –Video
– IP Access at the Edge Customers – Feature-Rich IP Services Demand – Seamless Network Integration The Network Is Relevant: AT&T IP Backbone Projected Traffic Growth
60,000 ~ 4 X Growth 50,000 Over 3 Years Web/HTTP Peer-to-Peer 40,000 Other Actual Projected Multimedia News 30,000 Business Mail 20,000 Games Terabytes/Day Web/HTTP
10,000 Peer-to-Peer
0 2004 2005 2006 2007 2008 2009 2010
10 terabytes equal the entire printed collection of the Library of Congress. Game Plan: Seamless IP Access at the Edge
Expanding next-generation (3G) wireless broadband network
High-bandwidth local access loops (U-verse)
Metro fiber-based services Seamless Network Access: Expand 3G Wireless Broadband Network
350 330 300 255 250 200 165 150
Major Metros 100
50
0 2006 2007 2008 Seamless Network Access: Continue Mobile Broadband Evolution
LTE (R8) Backward compatible 100 Mbps and beyond peak down migration on the HSPA+ (R7) – MIMO, 64QAM Potential 11.5 Mbps peak up existing global Potential 28 Mbps peak down standard HSUPA/HSPA – 500 to 800 Kbps up 1.5 Mbps peak up (potential 5.76M) 600 to 1400 Kbps down 3.6 Mbps peak down (potential 14.4M)
HSDPA – 400 to 700 Kbps 3.6 Mbps peak
UMTS – 150 to 180 Kbps Performance 384 Kbps peak
EDGE– 100 to 130 Kbps 200 Kbps peak Today
GPRS –25 to 40 Kbps 115 Kbps peak
Past Present Future Time Speeds are typical user throughput. Seamless Network Access: U-verse Expansion Targeted Living Units Passed FTTN/IPTV is best and lowest (Millions) cost route 35 U-verse to cover about 50% 30 of living units and 33% of businesses in 22 states 25
20 Cost per living unit passed to remain in the low-$300 range 15 Nearly doubling throughput 10 capabilities with pair bonding ... and reducing installation times 5 with iNID ... by 2H08 0 2006 2007 2008 2009 2010 U-verse Bandwidth Requirements
ServiceService ScenarioScenario Today Today Future Future HDHD StreamsStreams 1 1 4 4 SDSD StreamsStreams 3 3 0 0 OverheadsOverheads (Mbps)(Mbps) 2.3 2.3 4 4 HighHigh SpeedSpeed InternetInternet (Mbps)(Mbps) 6 6 10 10 CVoIPCVoIP (Lines)(Lines) 2 2 2 2 ThroughputThroughput RequiredRequired 21.4 21.4 36.4 36.4
2HD + 2SD + 10MB HSIA to 80% of footprint on a single pair and 4HD + 10MB HSIA to more than 80% of footprint with pair bonding*
*Does not include nine-state former BellSouth region. Seamless Network Access: Metro Fiber-Based Services
Deploying Fiber Services Where They Count
− Mobility et rn e th (Fiber to the Cell) E F Carrier Hotel iber − Enterprise Business (Ethernet) Interoffice Facility Dynamic Optical − Consumer/SMB d e Multiplexing e (Lightspeed) p ts h g − Wholesale Li (Fiber) Central Office Game Plan: Cost-Efficient Capacity in the Core
Increased backbone and access capacity
IP driving lower marginal cost
International reach following our business customers Next-Generation IP MPLS Backbone
STTLSTTL
PTLDPTLD
NY54NY54 CMBRCMBR
CHCGCHCG SCRMSCRM SLKCSLKC PHLAPHLA
SNFN DNVR SNFN DNVR CLEVCLEV KSCYKSCY WASHWASH
STLSSTLS
LA03LA03 NSVLNSVL RLGHRLGH ATLNATLN
SNDGSNDG PHNXPHNX
DLLSDLLS NWORNWOR Core Deployed
ORLD HSTNHSTN ORLD Completion 2007 – 2008 SNANSNAN Completed IP MPLS Driving Lower Marginal Costs
IP Backbone Cost- Transport Cost- Efficiencies Efficiencies (per Megabit) (per OC-192) 3:1 6:1
2005 2006 2007 2005 2006 2007 Investing for Growth in International Traffic Up 145% Since 2005
Existing Fiber Routes New Core Routers Existing IP POPs New POPs to Global Network New Undersea Fiber/Route Game Plan: Feature-Rich IP Services Content and Storage Management
Hosting and Application Services
Intelligent Network Routing
VPN
Network-Based Security Feature-Rich IP Services: Content and Storage Management
We are deploying content Enables managed servers at key locations delivery of streaming video and other content Content is stored at AT&T facility Content distribution is managed by the AT&T network Faster delivery of Web content Enables AT&T to manage investment levels on the network Feature-Rich IP Services: Hosting and Application Services
Capacity expansions Services initiatives to meet demand to shift the mix
Utility computing offering New fully managed hosting offering On-demand application services for SMB Seamless AT&T/USi integration Feature-Rich IP Services: Intelligent Overlay Routing
Differentiating Transport Services: Proprietary technology developed by AT&T Customer control through dynamic routing capabilities Application and location awareness
Customer Site 2 Customer Site 1 IP/MPLS Network
Customer Site 3 Feature-Rich IP Services: AT&T VPN Portfolio
11 We have the VPN options to meet our customers’ needs … − Network-Based − Premises-Based − Remote Access 22 … and they can access however they want to … − IP/Frame/ATM − Broadband/Ethernet − Wireless/Wi-Fi/Dial − Available Worldwide 33 … with a robust set of options that differentiate our portfolio … Value-Added Options Security Options − BusinessDirect e-Portal − Managed/personal − VoIP and Unified Communications firewalls − Multicast and other advanced routing − Internet Protect Feature-Rich IP Services: AT&T VPN Portfolio
“AT&T's IP VPN services ... are very threatening to competitors, because the carrier combines the reach and reliability of the AT&T Global Network with a comprehensive portfolio of IP VPN.” … Current Analysis Report: AT&T VPN Solutions Product Assessment - August 2007 Feature-Rich IP Services: AT&T VPN Portfolio
“AT&T hits leader stride in Global WAN Services.” … Forrester Wave, 6/28/07 Feature-Rich IP Services: Network-Based Security
Traditional Approach:
AT&T MPLS Network
Source Customer
Customer Edge Edge Security Perimeter
Expensive, Poor Scale, Dubious Threat Coverage, Complex Architecture Feature-Rich IP Services: Network-Based Security
AT&T’s Approach:
AT&T MPLS Network
Source Customer
Customer Edge Virtualized Security Perimeter
Amortized Costs, Massive Scale, Extensive Threat Coverage, Simplified Architecture Seamless Network Integration
Hosting IMS Content Core Management
Lightspeed IP Backbone Small With QoS Business
Home Wi-Fi Metro Ethernet Video Share Wi-Fi Coffee Shop Seamless Mobile Voice Seamless High Speed Data Seamless Content-Rich Media Summary
Focus on investing for the long term ... and leading the convergence to IP
Networks are evolving, converging and becoming more efficient and capable
Cost-reduction opportunities continue indefinitely
We are capturing growth opportunities in our SMB and consumer markets
Capex remains at midteens as a percent of revenue Advertising and Search Ray Wilkins Group President-Diversified Businesses AT&T Inc. Advertising and Search Assets
PrintPrint YELLOWPAGES.COMYELLOWPAGES.COM Internet/Internet/ WirelessWireless U-verseU-verse TVTV DistributeDistribute WebWeb PortalPortal Goal:Goal: 2B2B searchessearches 67M67M Goal:Goal: moremore thanthan in 2008 and 3B in 2010 14M14M wirelesswireless PassingPassing 17M17M 175 million in 2008 and 3B in 2010 175 million broadbandbroadband subscriberssubscribers livingliving unitsunits byby RealReal YellowYellow PagesPages subscriberssubscribers EOYEOY ‘08‘08 Advertising and Search Plan EBITDA margins in the mid 40% range over the next three years
YELLOWPAGES.COM revenue growth at a three year CAGR of Low- to Mid-Single-Digit Revenue Growth more than 30%
Three-screen advertising revenue to exceed 2010 2007 $500 million by 2010 Print YELLOWPAGES.COM Three-Screen Advertising AT&T Print Leadership
Sales return of $12 for every $1 invested Strong relationships with small and medium businesses Best sales force in industry — 4,300 sales reps Complementary to other advertising assets Local Search With YELLOWPAGES.COM
External AT&T Assets 2 billion Partnerships searches a year Pay-for-Performance
Consumer Access
Online Directories Advertiser Acquisition Mobile Search
Agency Directory Services
Self-Serve Print
Direct Sales U-verse YP Channel Mobile Local Search With YELLOWPAGES.COM Wireless provides largest opportunity for usage growth
Application available to download on 20M handsets
Preinstalled on 18M in 2008
SMS-enabled 411, GPS, speech recognition Mobile Local Search With YELLOWPAGES.COM YELLOWPAGES.COM Channel Advertising and Search Growth
> $1.5B Internet search and display revenue growth begins in 2008
Mobility advertising launches late 2008 $0.6B U-verse TV ad insertion begins in 2009
2007 2010 Revenues expected
YELLOWPAGES.COM Mobility Advertising to grow to more than Internet and Web U-verse Ad Insertion Portal Advertising $1.5 billion by 2010 Key Takeaways Advertising and Search
Best Assets and Capabilities Synergies among advertising assets - Largest Yellow Pages footprint in the U.S. - Local sales force Key Takeaways Advertising and Search
Best Assets and Capabilities Synergies among advertising assets Positioned to Capture Growth YELLOWPAGES.COM expected to grow at a three-year CAGR of more than 30% - Ingenio Pay-for-Performance Capabilities - Yahoo! Agreement Key Takeaways Advertising and Search
Best Assets and Capabilities Synergies among advertising assets
Positioned to Capture Growth YELLOWPAGES.COM expected to grow at a three-year CAGR of more than 30%
Attractive Margins EBITDA margins in the mid 40% range over the next three years Financial Summary and Outlook Rick Lindner Senior Executive Vice President and Chief Financial Officer AT&T Inc. An Execution Culture: Strong History of Delivering on Targets
Adjusted Wireless Service EBITDA Margin 1,350 Basis 39.1% Points of 35.6% wireless margin 31.7% expansion following 25.6% AT&T Wireless acquisition
1Q05 3Q05 3Q06 3Q07
Unadjusted wireless service EBITDA margins: 1Q05 – 24.2%, 3Q05 – 28.5%, 3Q06 – 34.6%, 3Q07 – 37.3%. An Execution Culture: Strong History of Delivering on Targets
Total Merger Synergies from AT&T Corp. Integration — On track to Expense and Capex more than $2.7 $3 billion in merger $2.0 synergies from former $1.1 AT&T integration 2006YTD Through Expected 3Q07 Full-Year 2007 An Execution Culture: Strong History of Delivering on Targets
Recurring Enterprise Service Revenues Year-Over-Year Growth Major Rate Excludes USi and CPE Sales turnaround 0.3%0.3% in enterprise revenue growth, (0.7)%(0.7)% a year ahead of schedule (3.0)%(3.0)% (3.5)%(3.5)% (3.9)%(3.9)%
3Q06 4Q061Q07 2Q07 3Q07
Total pro forma enterprise growth rates: 3Q06 (4.8%), 4Q06 (3.5%), 1Q07 (3.8%), 2Q07 (1.8%) and 3Q07 (0.3%). An Execution Culture: Strong History of Delivering on Targets
AT&T Adjusted Earnings Per Share 10 consecutive $0.70 $0.71 $0.65 quarters of $0.63 $0.61 double-digit $0.58
growth in $0.52 adjusted EPS $0.47 $0.48 $0.43
2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Reported EPS: $0.30 $0.38 $0.46 $0.37 $0.46$0.56 $0.50 $0.45 $0.47 $0.50 An Execution Culture: Strong History of Delivering on Targets
Consolidated Adjusted Revenue Growth Rates Five straight Year-Over-Year Pro Forma 3.2% quarters with continued ramp 2.0% 1.7% in revenue 1.3% growth 0.5%
3Q06 4Q06 1Q07 2Q07 3Q07
1Q07, 2Q07 and 3Q07 revenues adjusted to exclude Advertising & Publishing revenue deferral impacts of $409 million, $306 million and $196 million. AT&T: Strong Financial Profile
Financial discipline, innovation, execution to grow the business and deliver value for shareowners AT&T: Strong Financial Profile
Financial discipline, innovation, execution to grow the business and deliver value for shareowners
Strong cash flow to invest in the future of the business and return substantial value to shareowners AT&T: Strong Financial Profile
Financial discipline, innovation, execution to grow the business and deliver value for shareowners
Strong cash flow to invest in the future of the business and return substantial value to shareowners
Strong balance sheet with stable credit metrics AT&T: Strong Financial Profile
Financial discipline, innovation, execution to grow the business and deliver value for shareowners
Strong cash flow to invest in the future of the business and return substantial value to shareowners
Strong balance sheet with stable credit metrics
Capable of delivering strong results in the near term and over the long haul ExcellentExcellent HeadingHeading IntoInto MomentumMomentum 20082008 2008 Outlook
Mid-Single-Digit Revenue Growth
Solid midteens percentage growth in wireless revenues including Dobson
Total enterprise growth throughout 2008
Regional small/midsized business revenue growth in mid-single-digit range, consistent with recent results
Stable to modest growth in regional consumer revenues — expect to reach more than 1 million U-verse video subscribers in service by end of 2008 2008 Outlook
Adjusted Operating Income Margin Expansion to 25% – 26% Full-year 2008 wireless EBITDA margin in low 40% range Full-year 2008 wireline EBITDA margin consistent with 2007 results AT&T U-verse deployment expected to reduce 2008 EPS by an incremental $0.12 – $0.14 Run rate expense savings from merger synergies and other cost initiatives expected to increase by > $2 billion versus 2007 2008 Outlook
Strong Growth in Adjusted Earnings Per Share and Free Cash Flow
Continued double-digit growth in adjusted EPS
Capital expenditures continue in the midteens as a percentage of revenues
$16 billion to $17 billion in free cash flow before dividends 2008 Outlook
Substantial Value Returned to Shareowners
12.7% dividend increase announced today
New share repurchase authorization for 400 million shares through 2009 SustainedSustained AT&T’sAT&T’s StrongStrong GrowthGrowth MultiyearMultiyear FinancialFinancial BeyondBeyond 2008:2008: OutlookOutlook Multiyear Financial Outlook
With its strong asset mix and commitment to execution, AT&T is capable of delivering: Mid-single-digit or better consolidated revenue growth
Sustained double-digit growth in adjusted EPS with strong growth in free cash flow
Strong balance sheet with consistent credit metrics
Substantial return of value to shareowners through a growing dividend and share repurchases Substantial Revenue Growth Potential
Wireless: More than $40 billion annualized revenue stream WirelessWireless today, continued revenue 36%36% growth and further margin expansion ahead
Continued solid subscriber growth
Huge opportunities in wireless data AT&T Customer Large opportunities in Revenue Mix converged services 3Q07 results, adjusted for directory merger-related accounting effects Substantial Revenue Growth Potential
Enterprise
Revenue growth throughout 2008
Clear line of sight for mid-single- digit retail revenue growth by 2010
BusinessBusiness Regional Business 26%26% Continued mid-single-digit AT&T Customer revenue growth Revenue Mix Driven by IP data services 3Q07 results, adjusted for directory merger-related accounting effects Substantial Revenue Growth Potential
Premier networks and services for wholesale customers
WholesaleWholesale Expect wholesale to move beyond 12%12% impacts of industry traffic migration over next year
Return to stability and growth AT&T Customer moving through 2008 Revenue Mix 3Q07 results, adjusted for directory merger-related accounting effects Substantial Revenue Growth Potential
Expect positive regional consumer growth over RegionalRegional next few years ConsumerConsumer 18%18% Growth driven by video, broadband and converged services
U-verse has potential to be a multibillion-dollar revenue stream AT&T Customer over next two to three years Revenue Mix 3Q07 results, adjusted for directory merger-related accounting effects Substantial Revenue Growth Potential
Advertising & Publishing/Other 5% Significant growth potential in local search across broadband, video, mobile and print
YELLOWPAGES.COM — leading brand in local electronic search
Revenues from YELLOWPAGES.COM and content advertising across video, wireless and Internet could AT&T Customer exceed $1.5 billion by 2010 Revenue Mix 3Q07 results, adjusted for directory merger-related accounting effects Substantial Revenue Growth Potential
National Mass Markets 3%
Continue harvest and migration strategies
Migration nearing completion
AT&T Customer Revenue Mix 3Q07 results, adjusted for directory merger-related accounting effects Substantial Revenue Growth Potential
National Mass Markets
A&P/Other Nearly 80 percent of revenues come from wireless and sales to business customers Regional Consumer Wireless Expect to achieve revenue growth Wholesale in every category other than National Mass Markets Business Expect to deliver mid-single-digit or better consolidated revenue growth AT&T Customer over next few years Revenue Mix 3Q07 results, adjusted for directory merger-related accounting effects ExpandedExpanded CostCost Reduction,Reduction, OpportunitiesOpportunities forfor MarginMargin ExpansionExpansion Further Expansion in Wireless Margins
Wireless Adjusted EBITDA Margins Mid-40% range Major drivers:
39.1% Revenue growth
Improved network cost structure
IT systems improvements
3Q07 2009 More Than $7 Billion Total Expense Opportunity by 2009
Expense Savings Run Rates $ in billions $7.3 $7.0
$5.9 Operational Initiatives
$3.6 BellSouth Merger Synergies
$1.4 AT&T Merger Synergies
20072008 2009 2010 Capable of Delivering Continued Strong Growth in Free Cash Flow
Free Cash Flow Yield Trailing Four Quarters Through 3Q07
6.6% Major drivers: 5.7% 4.9% Revenue growth
3.2% 2.8% Cost initiatives
Return on investments
ComcastTime Verizon Sprint AT&T Warner Nextel Free cash flow yield is based upon cash from continuing Cable operations less capital expenditures as a percentage of market cap computed on 12/06/2007. Disciplined Investment
Invest for economic return — to drive growth and create value
Expect annual capital expenditures in midteens as a percentage of revenues
Expect continued dividend growth
Expect to maintain debt/EBITDA ratio in current 1.3 – 1.5 range
Continued substantial share repurchases in 2008 and beyond Expect to Deliver Substantial Improvement in ROIC
3Q07 Annualized Return on Invested Capital 10.3% Major drivers: 9.3% Revenue growth 6.4% 4.6% Cost initiatives 3.6% Disciplined, focused capital program
Sprint Time Comcast Verizon AT&T All calculations based on 3Q07 10-Q filings and adjusted to Nextel Warner exclude intangible amortization expense. Capital adjustment Cable for intangible amortization represents one-half of annualized after-tax amortization amounts. Strong Financial and Operational Profile
Premier assets with industry-leading scale
Smart alliances to speed innovation, expand reach
Intense commitment to execution with strong record of delivering on targets
Revenue growth ramp — with substantial potential in wireless, business services, broadband, video and advertising
Robust network strategy to deliver next-generation capabilities with low incremental costs
Large opportunities to eliminate costs and improve productivity, with multiple initiatives under way Connect people with their world, everywhere they live and work, and do it better than anyone else.