AT&T Inc. · NYSE:T
AT&T — Cingular Wireless — Q3 2006 Earnings Presentation
23 slides from AT&T's earnings presentation, Oct 19, 2006
Slide 1: Third Quarter 2006 Financial and Operational Results
Third Quarter 2006 Financial and Operational Results October 19, 2006
Slide 2: Agenda
Agenda Kent Evans Introduction Executive Director – Investor Relations Pete Ritcher Financial Results Chief Financial Officer Ralph de la Vega Operations Chief Operating Officer Q&A 2
Slide 3: Cautionary Language Concerning Forward-Looking Statements
Cautionary Language Concerning Forward-Looking Statements Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties. Discussion of factors that may affect future results of Cingular, and indirectly those o
Slide 4: Pete Ritcher, Chief Financial Officer
Pete Ritcher Chief Financial Officer
Slide 5: Financial Summary
Financial Summary Reported Sequential Annual 3Q06 Change Change Service Revenue (M) $8,661 4.4% 12.2% Total Revenue (M) $9,553 3.6% 9.2% Normalized OIBDA Margin 35.6% 300 bps 400 bps Normalized OI Margin 19.6% 320 bps 370 bps ARPU $49.76 1.9% 0.2% Postpaid Churn 1.5% 0 bps -50 bps Total Churn 1.8% 1
Slide 6: 3Q06 Normalizing Items
3Q06 Normalizing Items OIBDA Operating Income Amount (M) Margin1 Amount (M) Margin2 Reported $2,992 34.5% $1,416 14.8% Integration Costs $87 1.1% $139 1.5% Non-cash Intangible $0 0.0% $314 3.3% Amortization Costs Normalized $3,079 35.6% $1,869 19.6% 6 1As a % of Service Revenue. 2As a % of Total Rev
Slide 7: Continued Low Churn
Continued Low Churn Cingular Postpaid and Total Churn • Network quality continues to be the single largest driver 2.3% of reduced churn 2.1% 1.9% 1.8% 1.7% • Customer Care is improving 2.0% 1.9% 1.6% • Sequentially, overall churn up 1.5% 1.5% slightly due to: 50 bps YOY – Seasonality – Prepaid platf
Slide 8: Strong Subscriber Growth
Strong Subscriber Growth Total Net Additions (in thousands) • Continued strength in total Retail 1,820 1,679 Reseller 1,498 net adds 1,358 867 • Retail net adds increased to 87% of net additions – up from 75% in 2Q06 3Q05 4Q05 1Q06 2Q06 3Q06 • Retail net add growth driven by sequential improvement R
Slide 9: Revenue Growth
Revenue Growth Service Revenue Growth (year over year growth rates) • Major drivers of double-digit 12.2% service revenue growth: – Solid subscriber growth – ARPU stabilization 8.1% 7.9% – Strong contribution from 7.5% legacy data products • Robust pipeline of new 4.3% products and services will fue
Slide 10: Stabilizing ARPU
Stabilizing ARPU Service ARPU Data ARPU • Total ARPU up YOY and sequentially $49.65 $49.76 $6.32 – Data growth $48.86 $48.48 $48.84 $5.77 – Stabilizing voice $5.22 • Continued price discipline $4.71 $4.33 • Rate plan migrations are maturing 0.2% YOY 46% YOY • Strong growth in data revenue • UMTS/HSD
Slide 11: Margin Expansion
Margin Expansion Normalized OIBDA Margin1 (in millions) • 400 basis point improvement in Normalized OIBDA margin over $3,079 past twelve months $2,443 • Major OIBDA drivers: – Merger synergies are being extracted – ARPU and churn improvement 35.6% 31.6% – T-Mobile JV unwind progressing • Operating M
Slide 12: Summary
Summary Gross Adds Net Adds Normalized (millions) Total Churn (thousands) OIBDA Margin 2.3% 35.6% 4.6 1.8% 1,358 4.4 31.6% 867 3Q05 3Q06 3Q05 3Q06 3Q05 3Q06 3Q05 3Q06 • ARPU increased YOY due to voice stabilization and data growth • Strong sales momentum continues • Churn remains low despite seasona
Slide 13: Ralph de la Vega, Chief Operating Officer
Ralph de la Vega Chief Operating Officer
Slide 14: Key Integration Activities
Key Integration Activities 2005 2006 2007 COR Distribution Rationalization Call Center Integration and Optimization TDMA Integration GSM Network Integration TDMA Billing GSM Billing Conversions Conversions Legacy GSM TDMA Prepaid Sunset Prepaid Sunset Initial 3G Deployments T-Mobile Unwind 1414
Slide 15: Completed GSM Integration
Completed GSM Integration Percent of GSM Network Integration Complete • Completed on-time as committed 100% • Now operating a single, nationwide 88% GSM network 69% • Over 30K sites integrated or 60% decommissioned 41% • Improved coverage for customers • Improved network performance – Blocked calls
Slide 16: GSM Subscriber Growth
GSM Subscriber Growth Customer Growth By Technology 58.7M 52.3M 3.6 • 6.4M new customers YOY 47.2M 9.2 • 11.5M new customers 28.3M 20.4 since the merger 55.1 • 16.8M migrations from 43.1 TDMA to GSM 26.8 • Added 28.3M GSM customers since the merger 3Q04 3Q05 3Q06 TDMA Customers GSM and UMTS Customer
Slide 17: TDMA Customer Migration
TDMA Customer Migration • TDMA demand is declining Customers by Type – 6% of customers – 1% of minutes 1.2M Reseller • TDMA network will be sunset 0.4M Prepaid in early 2008 3.6M • Customer notifications 2.0M Postpaid underway 55.1M • Working with resellers GSM and UMTS TDMA Customers Customers • TD
Slide 18: Completed GSM Billing Conversion
Completed GSM Billing Conversion Percent of GSM Customers on • Completed on-time as committed End State Billing Systems • All GSM customers are on end state 100% billing systems 96% 87% • Additional cost savings will follow: 79% – Eliminate system support costs 68% – Leverage greater economies of sc
Slide 19: Completed GSM Prepaid Platform Rationalization
Completed GSM Prepaid Platform Rationalization Prepaid Prepaid Gross Adds Net Adds • Completed on-time as committed 1,136K 256K • 90% of prepaid subs now on our end state GSM platform 869K • 85% of legacy GSM customers who 232% migrated chose Pick Your Plan with over 25% higher ARPU 77K 31% • Strong
Slide 20: Customer Service
Customer Service Customer Service Calling Rate First Call Resolution as a % of Jan. ’05 Rate as a % of Jan. ’05 Rate 149% 100% 91% 133% 83% 121% 123% 79% 115% 71% 108% 68% 67% 66% 100% 103% 34% 49% Reduction Improvement Jan 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 Jan 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 '0
Slide 21: UMTS/HSDPA Deployment
UMTS/HSDPA Deployment Launched Cities Chandler, AZ Henderson, NV Vallejo, CA Gilbert, AZ North Las Vegas Wilmington, DE Glendale, AZ Las Vegas, NV Clearwater, FL Mesa, AZ Portland, OR Coral Springs, FL Peoria, AZ Arlington, TX Fort Lauderdale, FL Phoenix, AZ Austin, TX Hialeah, FL Scottsdale, AZ Tem
Slide 22: Data Growth
Data Growth Data Revenue as a Percent • Continued growth in data of Service Revenue customers and revenue 12.8% – Data revenue up 61% YOY 11.9% 10.9% 9.8% – Data customers up 27% YOY 8.9% • Broader 3G deployment will accelerate growth • Focus on robust, easy to use data capabilities – Cingular Music
Slide 23: Summary
Summary Customers Churn 58.7M 2.3% 52.3M • We have a great plan and are 1.8% executing well 6.4M 50 bps • We are delivering on commitments and driving results 3Q05 3Q06 3Q05 3Q06 • Strong customer growth with Normalized Normalized low churn Operating Income OIBDA Margin $1,869M 35.6% • Starting to r