At&t Inc. · NYSE:T
At&t — SBC Communications — Lehman Brothers Telecom Trends and Technology Conference 2003
31 slides from At&t's conference presentation, Dec 9, 2003
Slide 1: SBC Investor Update
SBC Investor Update Lehman Brothers Telecom Trends and Technology Conference Dec. 9, 2003 Randall Stephenson Senior Executive Vice President and Chief Financial Officer
Slide 2: 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. A discussion of factors that may affect future results is contained in SBC’s filings wit
Slide 3: Areas To Cover
Areas To Cover Opportunity Focus Execution 3
Slide 4: Key Focus Areas: Broaden the Bundle
Key Focus Areas 1. Broaden the Bundle • Expand service offerings – long distance, DSL, wireless, SBC DISH video starting early 2004 • Reduces access line churn • Increases ARPU 4
Slide 5: Key Focus Areas: Ramp Growth Products
Key Focus Areas 1. Broaden the Bundle 2. Ramp Growth Products • Long distance – Midwest launch covers 20 million access lines • DSL – expanded footprint, wide retail distribution 5
Slide 6: Key Focus Areas: Move Cingular Wireless to a Strong Growth Track
Key Focus Areas 1. Broaden the Bundle 2. Ramp Growth Products 3. Move Cingular Wireless to a Strong Growth Track • Solid subscriber growth • GSM network conversion ahead of schedule • Leader in wireless/wireline integration 6
Slide 7: Key Focus Areas: Expand in Large-Business Market
Key Focus Areas 1. Broaden the Bundle 2. Ramp Growth Products 3. Move Cingular Wireless to a Strong Growth Track 4. Expand in Large-Business Market • Nearly half of Fortune 500 companies have headquarters in SBC regions 7
Slide 8: Key Focus Areas: Deliver Value to Shareowners
Key Focus Areas 1. Broaden the Bundle 2. Ramp Growth Products 3. Move Cingular Wireless to a Strong Growth Track 4. Expand in Large-Business Market 5. Deliver Value to Shareowners 8
Slide 9: Key Focus Areas
Key Focus Areas 1. Broaden the Bundle 2. Ramp Growth Products 3. Move Cingular Wireless to a Strong Growth Track 4. Expand in Large-Business Market 5. Deliver Value to Shareowners 9
Slide 10: Expanded Bundling Capabilities
Expanded Bundling Capabilities Local LD DSL Wireless Video 55 Launched Broadband 80% SBC million in all states, footprint of Cingular DISH on access Midwest to reach Wireless track to lines states cover nearly subscribers launch in 20 80% of in wireline early 2004 million total parent access custome
Slide 11: Bundles Reduce Churn
Bundles Reduce Churn Key Product Bundles Reduced Churn Rate Customers with bundles, Consumer churn versus basic including one or more key bundle of an access line plus services (LD, DSL and wireless) two or more verticals (September 2003) 36% 31% LD 23% 9% DSL 19% 61% LD+ DSL 73% 4Q02 1Q03 2Q03 3Q03
Slide 12: Bundles Drive Higher ARPU
Bundles Drive Higher ARPU Consumer Revenue per Retail Access Line SBC Without Midwest $45 Midwest Rest of SBC ahead of Midwest region by approximately $6 in bundled LD and Data $25 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 12
Slide 13: Wireline Revenues Stabilizing
Wireline Revenues Stabilizing Revenue Mix Sequential Revenue 0.1% 0.3% 26% (1.4)% 38% (4.4)% 36% 4Q02 1Q03 2Q03 3Q03 Consumer Consumer (4.9)% (1.1)% (0.9)% (0.2)% Business Business (6.3)% 1.5% (0.7)% 1.2% Wholesale and Other
Slide 14: Business Access Line Trends
Business Access Line Trends Business Non-ISDN Lines (net change by quarter in thousands) West Southwest Midwest (40) (35) (40) (54) (86) (81) (88) (95) (103) (101) (107) (109) 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 14
Slide 15: Consumer Access Line Trends
Consumer Access Line Trends (net change in thousands) West Southwest Midwest (76) (112) (133) (128) (202) (217) (289) (332) (323) (388) (379) (398) 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 15
Slide 16: Wholesale Line Trends
Wholesale Line Trends Wholesale Access Lines (Resale and UNE-P) (net change by quarter in thousands) (1) 352 West Southwest Midwest 292 297 267 275 248 153 97 84 75 (45) (51) 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 4Q02 1Q03 2Q03 3Q03 (1) West’s 2Q03 change of 153K excludes a UNE-P disconnect adjust
Slide 17: Record Long Distance Growth
Record Long Distance Growth Consumer Retail Penetration • 11.5 million LD lines in service at end of 3Q, 5.4 million added in 32% last 3 quarters 54% • Midwest represents nearly 20 million local lines Consumer retail penetration equals SBC consumer LD lines divided by SBC consumer retail lines, and
Slide 18: Strong DSL Growth
Strong DSL Growth DSL Net Adds (in thousands) 365 • 7 consecutive quarters 304 of accelerated DSL line growth 270 245 • Largest DSL customer base 226 213 with 3.1 million lines 183 In-Service Subscriber Mix Consumer Business Wholesale 3Q03 73% 17% 10% 3Q02 65% 17% 18% 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3
Slide 19: Broadband Leadership
Broadband Leadership DSL Net Adds (in thousands) • Companywide penetration nearly 10%, 13% in California • SBC Yahoo! portal delivers 365 built-for-broadband 304 experience, small business portal launched this year 245 270 • Nearly half of DSL capable locations are able to achieve speeds of 4 to 6 M
Slide 20: Strong Cingular Wireless Growth
Strong Cingular Wireless Growth Quarterly Net Adds (in thousands) 745 • Strong 3Q results: Post-paid – 745,000 net adds Reseller – 2.7 million gross adds Prepaid 540 • High-quality subscriber growth: 189 – 92% of 3Q net adds post-paid in 3Q03 – 89% of subscriber base post-paid retail (121) 4Q02 1Q03
Slide 21: GSM/GPRS Network Conversion
GSM/GPRS Network Conversion Cingular Network Cumulative Nationwide GSM/GPRS Cingular GSM Coverage MOU Coverage Cingular has signed 100% 99% 30 new GSM roaming agreements 2004e this year 92% 93% • Covers ~50M POPs 2003 • Roaming rates less than half of TDMA 56% 2002 80% 21
Slide 22: Cingular Wireline Overlap
Cingular Wireline Overlap 236M Licensed POPs 23.4M Cellular/PCS Subscribers 80% In SBC/BLS Territories Cingular Spectrum (includes Salmon PCS and NextWave Acquisition) SBC and BLS States
Slide 23: Leader In Wireless/Wireline Integration
Leader In Wireless/Wireline Intergration Integrated 3G/SBC FreedomLink Wi-Fi Fast Forward Unified Communications Integrated Voice Mail PC – Wireless Messaging Future Offerings Current Offerings Single Bill 23
Slide 24: Business Opportunity: $140B Business Telecom Market
Business Opportunity $140B Business Telecom Market (voice and data) SBC’s immediate large-business target: companies with more than 50% of their locations in footprint; this 10% represents a $14B $34 billion annual SBC Market revenue opportunity Share Today $140 billion includes voice, data, managed
Slide 25: Large-Business Capabilities
Large-Business Capabilities Sales Service Network Products Organization Capabilities National ATM Broad range Single 4,300 and frame of flexible global Advanced backbone, bandwidth accounts data layer 3 IP solutions sales team certifications network Managed Single services contracts, service level V
Slide 26: Solid Data Revenues
Solid Data Revenues SBC Total Data Revenues (dollars in billions) $2.5 $2.5 $2.6 • $10 billion revenue $2.4 $2.4 stream over past four quarters • Data revenues represented 28% of the company’s total wireline revenues in 3Q DSL/Internet Integration Services Hi-cap 3Q02 4Q02 1Q03 2Q03 3Q03 26
Slide 27: Major Cost and Service Initiatives
Major Cost and Service Initiatives • Longer-term projects expected to save more Call Center than $1.3B in annual Transformation capital and expense 200 centers Network by 2006. located across Center regions Transformation • Force reduction of 3,000 to 4,000 600 centers expected in 4Q 2003. located a
Slide 28: Stable Cash Flow
Stable Cash Flow (dollars in millions) Cash From Capital Free Cash Operations Expenditures Flow(1) $10,742 $945 $10,083 $945 $5,744 $6,848 $4,998 $3,235 YTD YTD YTD YTD YTD YTD 2002 2003 2002 2003 2002 2003 $945 million pension and retiree medical pre-funding. 28 (1) Free cash flow is cash from oper
Slide 29: Value Returned To Owners
Value Returned To Owners • Cut debt, net of cash, nearly in half since the end of 2001 — from $25.5 billion to $13.3 billion • Strong dividend record … this year: – $.05 per share regular dividend increase, the company’s 19th consecutive year with a dividend increase – Additional dividends totaling
Slide 30: 2004 Expectations
2004 Expectations • Continuing improvement in revenue trends, with positive revenue growth, including proportionate Cingular results, by the end of 2004 • Stabilizing margins by the end of 2004, with continued pressures in near term • Capex of $5 billion, excluding Cingular 30
Slide 31: SBC Investor Update
SBC Investor Update Lehman Brothers Telecom Trends and Technology Conference Dec. 9, 2003 Randall Stephenson Senior Executive Vice President and Chief Financial Officer
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