AT&T Inc. · NYSE:T
AT&T — Cingular Wireless — Q1 2006 Earnings Presentation
25 slides from AT&T's earnings presentation, Apr 19, 2006
Slide 1: First Quarter 2006 Financial and Operational Results
First Quarter 2006 Financial and Operational Results April 19, 2006
Slide 2: Agenda
Agenda Kent Evans Introduction Executive Director – Investor Relations Pete Ritcher Financial Results Chief Financial Officer Operations Ralph de la Vega 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 1Q06 Change Change Service Revenue (M) $8,005 2.9% 7.9% Total Revenue (M) $8,980 1.5% 9.1% Normalized OIBDA Margin 31.9% 90 bps 640 bps Normalized OI Margin 15.6% 120 bps 700 bps ARPU $48.48 (0.8%) (2.3%) Postpaid Churn 1.6% -30 bps -30 bps Total Churn 1.
Slide 6: Normalizing Items – First Quarter 2006
Normalizing Items – First Quarter 2006 OIBDA Operating Income Amount Margin1 Amount ($M) Margin2 ($M) Reported $2,487 31.1% $807 9.0% Integration Costs $64 0.8% $234 2.6% Non-cash Intangible $0 0.0% $359 4.0% Amortization Costs Normalized $2,551 31.9% $1,400 15.6% 6 1As a % of Service Revenue. 2As a
Slide 7: Churn
Churn Cingular Total and Postpaid Churn • Total and Postpaid Churn at record 2.2% low levels during the first quarter • Major drivers: 1.9% 1.9% – Improved Network Quality – Enhanced Customer Service 1.6% – Compelling Products and Services 1Q05 1Q06 More Satisfied Postpaid Total Customers! 7
Slide 8: Margin Expansion
Margin Expansion Cingular Normalized • 640 basis point improvement in OIBDA Margin* ($ in millions) Normalized OIBDA margin over past twelve months $2,551 • Major drivers: – Merger synergies are being $1,894 extracted 31.9% – Stronger revenue growth – Continued churn reduction 25.5% – Improving acqu
Slide 9: Subscriber Growth
Subscriber Growth Cingular Gross Cingular Churn Cingular Net Subscriber Additions Subscriber Additions (in millions) (in thousands) 2.2% 1,679 4.7 4.7 1.9% 1,367 1Q05 1Q06 1Q05 1Q06 1Q05 1Q06 • Strong sales momentum continues despite distribution rationalization • Record low churn is fueling higher
Slide 10: Stabilizing ARPU
Stabilizing ARPU Service ARPU $49.60 $50.51 $49.65 $48.86 $48.48 • Continued price discipline • Rate plan migrations are maturing: 4Q05 1Q06 1Q05 2Q05 3Q05 4Q05 1Q06 Rollover Plans1 > 65% > 72% Service ARPU is stabilizing - down 2.3% yr/yr Region/Nation Plans1 > 75% > 82% Data ARPU $5.22 $4.71 $4.16
Slide 11: Revenue Growth
Revenue Growth Total Annual Revenue Growth • High single digit revenue growth (vs. prior year revenue) 9.4% • Double digit subscriber growth 9.1% • Service ARPU stabilization 6.2% • Strong contribution from legacy 5.3% 5.4% data products • Robust pipeline of new products and services will fuel futur
Slide 12: Summary
Summary • Our distribution channels continue to drive strong gross additions • Churn continues to improve as our customer experience gets better and better • Rebound in postpaid net add growth • Improved revenue growth continues to be fueled by growth in customers and data • Margins are expanding at
Slide 13: Ralph de la Vega, Chief Operating Officer
Ralph de la Vega Chief Operating Officer
Slide 14: Integration Progress
Integration Progress 2005 2006 2007 TDMA Rationalization Network GSM Integration T-Mobile Unwind IT Systems Billing System Conversions and IT Consolidation Customer Customer Service Integration Service Distribution Store Rationalization 14
Slide 15: Building the Best Network
Building the Best Network TDMA GSM Rationalization Integration Best Network • More coverage • Better performance • Enhanced capabilities • Lower costs T-Mobile New Site Unwind Build 3G Deployment 15
Slide 16: Network Integration
Network Integration Integration Status • Integration is on schedule Sites To Be Non-Overlap Integrated Sites • 51% of overlapping GSM cell sites are integrated 31% 36% • Most cost savings will be realized in 2H06 • Significant service 33% improvement Integrated Sites 16
Slide 17: Network Performance
Network Performance Georgia Before and After Integration Blocked Call Rate Dropped Call Rate Blue Before Orange Before Gold After 17
Slide 18: Network Modernization
Network Modernization UMTS/HSDPA Deployment • Launched 16 markets in 2005 • Most major markets in 2H06 • Launched Broadband Connect • First in the world to offer a single 3G PC card for domestic and international use • Launched UMTS handsets and Cingular Video • Simultaneous voice and data • Improve
Slide 19: IT Systems Integration
IT Systems Integration Percent of Subscriber Base by Billing System 100% • 88% of customers are on End State Billing Systems 75% • GSM conversions will be completed in 2006 50% • The number of IT systems are 25% down 25% since the merger • Cost savings tie to billing 0% Oct-04 1Q05 2Q05 3Q05 4Q05 1Q
Slide 20: Customer Service
Customer Service Customer Service Calls First Call Resolution as a % of Jan. ’05 Volume as a % of Jan. ’05 Rate 100% 91% 121% 123% 83% 115% 79% 108% 72% 100% 103% 68% 32% Reduction 23% Improvement Jan 1Q05 2Q05 3Q05 4Q05 1Q06 Jan 1Q05 2Q05 3Q05 4Q05 1Q06 '05 '05 20 Source of FCR data: WAVE Survey sc
Slide 21: Churn
Churn Churn is at an All Time Low 2.4% 2.3% 2.2% 2.2% 2.1% 1.9% 2.0% 1.9% 2.0% 1.9% 1.8% 1.6% 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 Postpaid Total 21
Slide 22: Subscriber Growth
Subscriber Growth Customer Growth By Technology (in Millions) 54.1 55.8 • Strong subscriber growth 51.4 52.3 50.3 5.9 9.2 7.4 – 5.5M new customers in the 14.1 11.5 13.7M last year • Success in moving subscribers 49.9 to GSM 46.7 39.9 43.1 36.2 – 89% of customers on GSM – 97% of minutes on GSM 1Q05 2
Slide 23: Data Growth
Data Growth Data Percent of Service Revenue Data Customers 10.9% 9.8% 24M 25M 8.5% 8.9% 22M 7.7% 20M 18M 320 bps Increase 39% Increase 1Q05 2Q05 3Q05 4Q05 1Q06 1Q05 2Q05 3Q05 4Q05 1Q06 • Continued growth in data customers, usage and revenue – 6.75B Text messages – 91M MMS messages 23
Slide 24: New Products and Services
New Products and Services • SLVR • HTC 8125 • Option PC Card • Cingular Video Video Player 24
Slide 25: Summary
Summary • Integration activities are on schedule and are improving margins • We will see additional margin improvements as integration continues • Network quality is improving • Customer Satisfaction is improving • Churn is at an all time low • Maintained strong growth while executing integration pl