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AT&T Posts Strong Second-Quarter Results Led by Accelerated Wireless Growth, Solid Regional Results and a Significant Improvement in Enterprise Trends
-- $0.47 reported earnings per diluted share, versus $0.46 in the year-earlier quarter
-- $0.70 adjusted earnings per diluted share, up from $0.58 in the second quarter of 2006
-- 1.5 million net gain in wireless subscribers to reach 63.7 million, with further improvement in wireless churn to 1.6 percent overall and 1.2 percent for postpaid subscribers
-- 14.9 percent growth in wireless service revenues with wireless data revenues up 66.9 percent and service ARPU (average revenues per user) up 3.6 percent
-- Substantial improvement in enterprise customer revenue trends driven by accelerated growth in IP-based data services
-- 200,000 net increase in satellite and AT&T U-verse(SM) video subscribers; U-verse video ramp to 51,000 subscribers at the end of June, up from 13,000 at the end of the first quarter
AT&T Inc. (NYSE:T) today posted its ninth consecutive quarter of double-digit growth in adjusted earnings per share as it ramped revenue growth and delivered continued strong execution in merger integration. Results were led by accelerated growth in wireless and IP (Internet Protocol)-based services along with substantial improvement in enterprise revenue trends.
AT&T is the United States' wireless leader, with 63.7 million subscribers, and one of the world's leading providers of business communications services, with high quality networks and a growing array of advanced services.
AT&T's second-quarter 2007 reported earnings per diluted share were $0.47 versus $0.46 in the year-earlier quarter. Adjusted earnings per share, which exclude costs and accounting effects related to major acquisitions, were $0.70, up 20.7 percent versus adjusted earnings per share of $0.58 in the year-earlier quarter.
"AT&T has a strong foundation for growth in wireless and IP-based services, and in the second quarter we improved our trajectory in key areas," said Randall Stephenson, AT&T chairman and chief executive officer. "Wireless revenue growth accelerated for the fourth consecutive quarter. Our U-verse video service has begun to ramp aggressively. And we took a major step up toward revenue growth in enterprise services, where AT&T has tremendous assets and great potential.
"Mobility is a major growth engine for AT&T," Stephenson said. "Our launch with Apple of the breakthrough iPhone has quickly redefined customer expectations for their wireless experience, initial response was unprecedented, and sales in July continue to be strong. On June 29, we also announced an agreement to acquire Dobson Communications, which will further expand our wireless coverage in key rural and suburban areas.
"At AT&T, our goals are to lead in innovation and drive sustainable growth across all our businesses," Stephenson said. "We have good momentum heading into the second half of the year, our assets position us well for the long term, and I am excited about the opportunities ahead."
Ramp in Revenue Growth
In the second quarter of 2007, AT&T reported revenues of $29.5 billion, up from $15.8 billion in the year-earlier quarter, prior to AT&T's acquisition of BellSouth Corporation and the accompanying consolidation of wireless results.
In addition to historical reported results, to provide further basis for comparison, AT&T provides pro forma results, which combine revenues from AT&T, BellSouth and Cingular Wireless consistently for all periods. On this basis, AT&T's second-quarter 2007 revenues totaled $29.8 billion, up 2.0 percent versus results for the year-earlier quarter. This increase is up from year- over-year pro forma revenue growth of 1.7 percent for the first quarter of 2007 and 1.3 percent for the quarter before that.
This ramp in revenue growth reflects AT&T's strengthened double-digit gain in wireless revenues along with substantially improved trends in enterprise services. In addition, AT&T's regional business revenues delivered continued solid growth, regional consumer revenues were up modestly reflecting growth in total consumer connections, and Advertising & Publishing revenues were stable. These results more than offset anticipated declines in wholesale and national mass markets, where trends were in line with recent quarters.
Continued Strong Growth in Adjusted Earnings Per Share
AT&T's reported net income for the second quarter totaled $2.9 billion, compared with $1.8 billion in the year-earlier quarter. Reported earnings per diluted share totaled $0.47 versus $0.46 in the second quarter of 2006.
Compared with reported results in the second quarter of 2006, AT&T's reported operating expenses were $24.5 billion, up from $13.2 billion; reported operating income was $4.9 billion, up from $2.6 billion; and AT&T's reported operating income margin was 16.8 percent versus 16.5 percent.
AT&T's adjusted second-quarter earnings, which exclude costs and accounting effects associated with major acquisitions, were $4.3 billion, or $0.70 per diluted share, up from $2.3 billion, or $0.58 per diluted share, in the year-earlier quarter. Second-quarter adjusted earnings per share reflect improved revenue trends combined with solid execution to realize merger synergies, with a one cent benefit from state tax law changes and a one cent benefit from the sale of non-strategic assets.
AT&T's adjusted operating income for the second quarter of 2007 was $7.1 billion, compared with $3.0 billion in the year-earlier quarter. AT&T's adjusted operating income margin was 23.9 percent, up from 19.0 percent in the second quarter of 2006. AT&T expects to continue to operate at the top end of its previously provided outlook for a 2007 adjusted operating income margin range of 23 percent to 24 percent.
Costs for AT&T's U-verse initiative, which delivers advanced television and high speed Internet services, continue to be in line with the company's previous outlook. AT&T's major merger integration initiatives continue on schedule, and merger synergies continue to run ahead of the company's original outlook. Cost savings from BellSouth and AT&T Corp. merger integration in the first half of 2007 totaled $1.9 billion, approximately one-third capital and two-thirds expense. AT&T continues to expect synergies from these mergers will reach more than $3 billion for the full year 2007, growing to more than $5 billion in 2008.
Share Repurchase Plan Completed Ahead of Schedule
AT&T repurchased 98 million of its shares in the second quarter for $3.9 billion and ended the quarter with 6.1 billion shares outstanding. In March 2006, AT&T announced a plan to buy back $10 billion of its common shares by the end of 2007. AT&T reached the $10 billion target ahead of schedule, in early July. AT&T has approximately 125 million shares remaining in its current repurchase authorization and expects to continue repurchases during the second half of 2007. The timing and nature of repurchases are subject to market conditions and applicable securities laws.
For more information: http://www.att.com/investor.relations
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