AT&T Inc.

AT & T Inc.

Siranun Roddon

ACC 615

Ceferino M. Fajardo, Jr. CPA

11/16/2009
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AT&T Inc. is the largest communications company in the United States and one of the

largest in the world. It is the no. 1 wireless provider in the United States with the largest

international coverage of any U.S. wireless carrier. AT&T has many attractive plans to offer to

consumers. Some of the popular offers are the unlimited calling mobile-to-mobile, mobile-to-

landline communities, and the rollover minutes program, which is only offered by AT&T in the

telecom industry. With the current modern technology, AT&T has one of the world’s most

advanced telecommunication networks such as, the 3G network. It provides services to many large

corporations with backing of 99.99 percents reliability. Moreover, AT&T has one of the best if the

best customer satisfaction and is widely recognized as the leader industry in providing services to

small and midsized businesses. In addition, AT&T’s IP (internet protocol) and broadband services

is one of the top providers of broadband services in the United States, providing advanced IP-based

services such as, IPTV, Wi-Fi, and satellite-based broadband. AT&T is ranked the highest for

telecommunications operator for business customers of IP services and recognized as one of the

leader in the consumer Internet services market.

2006 Pro Forma Revenue Sources by Customer*

34% 26% 12% 23% 5%

Wireless Business Wholesale Consumer Directory/Other

*Pro forma revenue reflects 100 percent of AT&T Inc., BellSouth and Cingular Wireless.
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: 2007 2006

Financial Data 1

Operating revenues $118,928 $ 63,055

Operating expenses $ 98,524 $ 52,767

Operating income $ 20,404 $ 10,288

Interest expense $ 3,507 $ 1,843

Equity in net income of affiliates $ 692 $ 2,043

Other income (expense) – net $ 615 $ 393

Income taxes $ 6,253 $ 3,525

Income from continuing operations $ 11,951 $ 7,356

Income before extraordinary item and

cumulative effect of accounting changes $ 11,951 $ 7,356

Net income5 $ 11,951 $ 7,356

Earnings per common share:

Income from continuing operations $ 1.95 $ 1.89

Income before extraordinary item and

cumulative effect of accounting changes $ 1.95 $ 1.89

Net income5 $ 1.95 $ 1.89

Earnings per common share – assuming dilution:

Income from continuing operations $ 1.94 $ 1.89

Income before extraordinary item and

cumulative effect of accounting changes $ 1.94 $ 1.89

Total assets $275,644 $270,634

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Long-term debt $ 57,255 $ 50,063

Construction and capital expenditures $ 17,717 $ 8,320

Dividends declared per common share6 $ 1.47 $ 1.35

Book value per common share $ 19.09 $ 18.52

Ratio of earnings to fixed charges 4.91 5.01

Debt ratio 35.7% 34.1%

Theyighted-average common shares

outstanding (000,000) 6,127 3,882

Theyighted-average common shares

outstanding with dilution (000,000) 6,170 3,902

End of period common shares outstanding 6,044 6,239

Operating Data

Wireless customers (000)7 70,052 60,962

In-region network access lines in service 61,582 66,469

Broadband connections (000)9 14,156 12,170

Number of employees 309,050 304,180

A) Before the business combination, as of December 31, 2006

Financial data in U.S. Dollars

Value in Millions (Except for per share items)

1) Shareholder’s equity amounts 2008 2007 2006

Redeemable Preferred Stock 0.0 0.0 0.0

Preferred Stock - Non Redeemable, Net 0.0 0.0 0.0

Common Stock 6,495.0 6,495.0 6,495.0

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Additional Paid-In Capital 91,728.0 91,638.0 91,352.0

Retained Earnings (Accumulated Deficit) 36,591.0 33,297.0 30,375.0

Treasury Stock – Common -21,410.0 -15,683.0 -7,368.0

Other Equity, Total -17,057.0 -380.0 -5,314.0

Total Equity 9 6,347.0 115,367.0 115,540.0

Ratio to their assets, as of December 31, 2006

Avg P/E Price/ Sale Price/ Book

15.60 2.21 1.93

Net Profit Margin (%) Book Value/Share Debt/ Equity

11.7 18.52 0.52

2) Profit and ROI

Return on Equity (%) Return on Assets (%) Interest Coverage OI

6.4 2.7 5.6

2008 2007 2006

Period End Date 12/31/2008 12/31/2007 12/31/2006

Period Length 12 Months 12 Months 12 Months

Stmt Source 10-K 10-K 10-K

Stmt Source Date 02/25/2009 02/25/2009 02/25/2009

Stmt Update Type Updated Reclassified Reclassified

Revenue 111,358.0 107,378.0 55,888.0

Other Revenue, Total 12,670.0 11,550.0 7,167.0

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Total Revenue 124,028.0 118,928.0 63,055.0

Cost of Revenue, Total 49,895.0 46,705.0 28,854.0

Gross Profit 61,463.0 60,673.0 27,034.0

Selling/General/Administrative Expenses,

Total 31,187.0 30,242.0 14,006.0

Research & Development 0.0 0.0 0.0

Depreciation/Amortization 19,883.0 21,577.0 9,907.0

Interest Expense (Income), Net Operating 0.0 0.0 0.0

Unusual Expense (Income) 467.0 0.0 0.0

Other Operating Expenses, Total 0.0 0.0 0.0

Operating Income 22,596.0 20,404.0 10,288.0

3) Market Value: Common Stock Price = $35.75 x Total Stock outstanding 6,238.75 = 223

billions

4) AT&T is a company with a tradition of delivering on their promises. Although the brand name

is very familiar and well recognized, there has been a long process before the current AT&T is

AT&T today. Back then there was a joint venture between SBC Communication and BellSouth.

The joint venture between the two companies became known as Cingular Inc. The previous

AT&T wireless was not doing so well and was later acquired by BellSouth. In December 2006,

Cingular decided to rebrand itself to the new AT&T after the acquisition. At December 31, 2006,

and for the period from December 29 through December 31, 2006, total assets and total revenues

subject to BellSouth’s internal control over financial reporting represented 27% and 0.2% of the

Company’s consolidated total assets and total revenues as of and for the year ended December 31,

2006, and total assets and total revenues subject to AT&T Mobility LLC’s internal control over
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financial reporting represented 36% and 0.3% of the Company’s consolidated total assets and total

revenues as of and for the year ended December 31, 2006. Their audit of internal control over

financial reporting of the Company also did not include an evaluation of the internal control over

financial reporting of BellSouth or AT&T Mobility LLC.

B). After the business combination, as of December 31, 2007,

Financial data in U.S. Dollars

Value in Millions (Except for per share items)

1) Shareholder’s equity amounts 2008 2007 2006

Redeemable Preferred Stock 0.0 0.0 0.0

Preferred Stock - Non Redeemable, Net 0.0 0.0 0.0

Common Stock 6,495.0 6,495.0 6,495.0

Additional Paid-In Capital 91,728.0 91,638.0 91,352.0

Retained Earnings (Accumulated Deficit) 36,591.0 33,297.0 30,375.0

Treasury Stock – Common -21,410.0 -15,683.0 -7,368.0

Other Equity, Total -17,057.0 -380.0 -5,314.0

Total Equity 9 6,347.0 115,367.0 115,540.0

Ratio to their assets, as of December 31, 2007,

Avg P/E Price/ Sale Price/ Book

20.30 2.16 2.18

Net Profit Margin (%) Book Value/Share Debt/ Equity

10.0 $19.09 0.56

2) Profit and ROI

Return on Equity (%) Return on Assets (%) Interest Coverage OI

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10.4 4.3 5.8

3) Cost of acquisition and amounts of goodwill and intangible assets as record initially with the

business combination.

2008 2007 2006

Property/Plant/Equipment, Total – Net 99,088.0 95,890.0 94,596.0

Goodwill, Net 71,829.0 70,713.0 67,657.0

Intangibles, Net 63,712.0 58,402.0 59,740.0

Long Term Investments 2,332.0 2,270.0 1,995.0

Note Receivable - Long Term 0.0 0.0 0.0

Other Long Term Assets, Tota l5,728.0 23,683.0 21,093.0

Other Assets, Total 0.0 0.0 0.0

C). Initial business strategy for the business combination, subsequent change, and your comments

on the business combination.

Business Strategy

AT&T provides variety of products to its customers. It is revolutionizing its company by

expanding its products base. It provides home phone service, home and traveling Internet service,

cable TV service, exclusive right to iPhone with 3G network, and the multi-national businesses.

Year after year since the beginning of the company, it has been providing quality products with

excellence customer care. It has a mission to become the world leader telecommunication company

while connecting people around the world with its products. It is fulfilling its vision through

innovation and developing new solutions for its consumers and potential clients in the industry. In

the IP-based communications services to businesses, it is recognized as one of the leading provider
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company. It also provides one of the nation’s fastest 3G networks which allow people to connect

to the internet service faster than ever before. With other great products such as, Wi-Fi network,

and high speed internet access, it has become one of the top providers and subscriber by consumer

in the United States today. Still, AT&T is not stopping from expanding and creating more

products available for consumer, it has expanded into the entertainment industry by offering video

that will include next-generation television services such as AT&T U-verse TV and

AT&T DIRECTV. It is part of its "three-screen" integration strategy to deliver services across the

three screens people rely on most — the mobile device, the PC and the TV. However, as the

company continues to break new ground and delivr new solutions, delivering the high-quality

customer service is still the main focus.

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References

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from http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=

TenYearSummary&Symbol=US%3aT

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http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=TenYearSummary

&Symbol=T

Reuters, T. (2009). Income Statement. AT&T Inc: Financial Statement. Retrieved November 3,

2009, from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?

Symbol=T&lstStatement=Income&stmtView=Ann

Reuters, T. (2009). Balance Sheet. AT&T Inc: Financial Statement. Retrieved November 3,

2009, from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?

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AT&T Knowledge Ventures. (2007). Chairman’s letter. Retrieved November 1, 2009, from

http://www.att.com/Investor/ATT_Annual/2006/