Connect people with their world, everywhere they live and work, and do it better than anyone else.

84 Pages·2009·5.35 MB·English

AT&T Inc. 2008 Annual Report
Connect people with their
world, everywhere they live
and work, and do it better
than anyone else.
Financial Results
Pro Forma
2008 Customer Revenue Mix Consolidated Revenues
Wireless 40%
37% Business
Local Search/Other 5%
8 1 9 0
Consumer 18% 16. 17. 19. 24.
$1 $1 $1 $1 In billions
*05 *06 *07 08
Wireless is AT&T’s largest AT&T’s revenues were up more
and fastest-growing area. than 3 percent in 2008.
*pro forma
Earnings Per Share Dividends Per
Common Share
2 9 4 6 0 5 7 1
4 8 9 1 3 3 4 6
1. 1. 1. 2. 1. 1. 1. 1.
$ $ $ $ $ $ $ $
05 06 07 08 05 06 07 08
AT&T’s fully diluted EPS grew AT&T has increased its quarterly
11.3 percent in 2008. dividend for 25 consecutive years,
reflecting the company’s commitment
to return value to stockholders.
AT&T Annual Report 2008
To AT&T Investors:
1
AT&T continued to set the pace for the industry in 2008. We grew
revenues and earnings per share. We strengthened our position
in key customer segments. And we returned value to stockholders
through share buybacks and a strong dividend.
But here’s what I’m most proud of: We delivered those strong results in a
very challenging economic environment. Despite the downturn, the demand to
stay connected — wirelessly and over the Internet — continues to grow globally.
And we are focused as never before on meeting that demand.
In fact, no company is better positioned to capitalize on this growth and deliver
on the vision I laid out in these pages last year — to connect people with their
world, everywhere they live and work, and do it better than anyone else.
My No. 1 job is to ensure that AT&T grows over the long term, and I’m confident
we have what it takes to do that. We have the best brand in telecom. We offer
superior networks, products and capabilities. And we’re investing significantly
in fast-growing areas to meet the increasing demand for connectivity.
The volatile economy demanded even more financial strength, flexibility
and disciplined execution, and we delivered. We spotted the economic
slowdown early in the year and quickly moved to reduce costs without
sacrificing growth opportunities or customer service. As a result, we
ended 2008 as we began it — financially strong, with world-class
operations and clear market leadership. In 2009, we plan to repeat that
performance, in what continues to be a challenging environment.
Our success is reflected in our 2008 financial highlights:
Reported consolidated revenues were up more than 4 percent
to $124 billion.
Reported earnings per share grew 11.3 percent to $2.16 per share.
We returned $15.6 billion to stockholders through dividends
and share repurchases.
We also delivered strong cash flow, enabling us to achieve our
25th consecutive year of dividend growth by increasing our
quarterly dividend 2.5 percent in December. Our commitment to
create long-term value for our owners underpins all our plans.
Randall Stephenson
Chairman, Chief Executive Officer
and President
AT&T Annual Report 2008
Delivering more of what Among our accomplishments In the first six months after launch,
customers want during the past year: we activated 4.3 million iPhone 3Gs.
Around the world, businesses and What’s more, about 40 percent of
2 Mobility
consumers are looking for more those customers were new to AT&T.
In 2008, AT&T added more wireless
mobility, connectivity and speed.
Another AT&T exclusive —
subscribers than any other U.S.
They are hungry for expanded
the BlackBerry® BoldTM — was
provider, led the industry in wireless
access to Internet applications
one of the top-rated business
data growth and had twice as many
and content and for seamless
wireless broadband devices
smartphones in service than any of
integration of devices, networks
introduced last year. It gave our
our competitors.
and services. They can’t get enough
customers a whole new level of
of the communications capabilities One of the keys to this growth
mobile connectivity.
that make their lives better and was the industry-shaping product
iPhone 3G and other wireless
their businesses more productive. launches that have become
data devices strengthened our
our hallmark. Our exclusive
leadership in mobile data. Our
AT&T is in the best position to satisfy U.S. launch of Apple iPhone 3G
full-year wireless data revenues
this demand. We’ve built our business was a blockbuster hit — and
grew 52.5 percent to more than
around the pillars of mobility, data arguably the most important
$10.5 billion. As customers
and Internet Protocol (IP) to provide consumer product rollout of
increasingly access data wirelessly,
the fully integrated, everywhere the past decade. This device
we’ve also seen per-subscriber
connectivity that our customers has dramatically redefined the
revenues rise. And as wireless
want and expect. wireless smartphone market.
AT&T Annual Report 2008
data usage continues to expand We’ve built our business around the pillars of
and as more devices can connect
mobility, data and Internet Protocol to provide
wirelessly, we’re investing
3
aggressively to build on our
the fully integrated, everywhere connectivity
industry leadership.
that our customers want and expect.
TV
More than 1 million customers
now subscribe to AT&T U-verseSM
AT&T Senior Officers
TV service. They were attracted to
Left to right: Jim Cicconi, Senior Executive Vice President-External and Legislative Affairs,
U-verse’s great features, such as AT&T Services, Inc.; John Stankey, President and Chief Executive Officer, AT&T Operations, Inc.;
Rick Lindner, Senior Executive Vice President and Chief Financial Officer; Bill Blase Jr.,
High Definition (HD) channels
Senior Executive Vice President-Human Resources; Cathy Coughlin, Senior Executive Vice
and Total Home DVR, which allows President and Global Marketing Officer; Randall Stephenson, Chairman, Chief
recordings to be accessed on Executive Officer and President; Ralph de la Vega, President and Chief Executive Officer,
AT&T Mobility and Consumer Markets; Wayne Watts, Senior Executive Vice President and
multiple TVs in a single home.
General Counsel; Jim Callaway, Senior Executive Vice President-Executive Operations;
Ray Wilkins Jr., Chief Executive Officer-AT&T Diversified Businesses; Forrest Miller, Group
We’re proud that U-verse ranked
President-Corporate Strategy and Development; Ron Spears, President and Chief
highest in customer satisfaction Executive Officer, AT&T Business Solutions.
in the North Central, South and
West regions according to the
J.D. Power and Associates 2008
Residential Television Service
Satisfaction StudySM.1
AT&T Annual Report 2008
Business
AT&T continues to set the standard for serving the complex connectivity
4 needs of businesses worldwide. We help them stay connected with
their employees and customers through a broad array of IP-based
networking solutions that allow them to extend their reach, reduce
costs and seize competitive advantage.
AT&T’s long-term
AT&T is the industry leader, serving millions of businesses, including all of
future remains
the Fortune 1000, and operating on six continents. And we built on this
No. 1 position last year — winning global contracts with such companies
very bright.
as Shell, Starbucks, Boeing, Smiths and Best Buy. We also captured
The underlying significant new regional business, including with the state governments
of Tennessee and Georgia. And we turned around our wholesale business
global demand with big wins made possible by our strategic alliance with IBM.
AT&T was recognized as a leader in serving businesses of all sizes
for connectivity
by industry analyst firms, including IDC and Compass Intelligence.
continues to
Local search
grow — and no
YELLOWPAGES.COM — which connects people with local businesses
company is better through wireless devices, PCs and AT&T U-verse TV — continues to
grow rapidly, with more than 1.8 billion local searches across the
positioned to YELLOWPAGES.COM network in 2008. AT&T also continues to lead
in print local search with AT&T Real Yellow Pages.
meet it than AT&T.
IP network bandwidth
To stay ahead of customer demand for mobility and speed, we
expanded our fastest-in-the-U.S. 3G wireless network to nearly
350 major metropolitan areas and strengthened our No. 1 position in
mobile data. We also extended our industry-leading Wi-Fi hotspot footprint
to nearly 20,000 U.S. hotspots and a total of more than 80,000 worldwide.
We more than doubled the living units passed by our AT&T U-verse
network to nearly 17 million.
We continued to invest in fixed-line broadband, launching a new
18-megabit-per-second broadband service in several U.S. markets
where we’ve deployed our U-verse network.
To support our customers’ growing desire to access data, software
applications and video at higher speeds, we completed the world’s largest
deployment of 40-gigabit-per-second transport — the fastest available
Internet backbone technology — across our entire U.S. network.
Across the board, we have significantly improved our ability to deliver
more for customers. In the process, AT&T has become a much different
company than we were just two years ago. Today, nearly two-thirds of
our revenues come from wireless and data — including IP, broadband
and video — areas where we expect robust growth in the years ahead.
AT&T Annual Report 2008
Disciplined leadership Investing in our communities, every customer segment.
and execution our environment As a result, we expect continued
No one knows for certain when the We remain committed to investing revenue growth in 2009.
5
economy will improve. But I can in our communities, too. That
When the economy rebounds,
promise you that we will continue includes bringing 3,000 jobs back
we will be ready to capitalize on
to follow a proven strategy to to our U.S. payrolls. It’s part of
our financial strength, our market
manage through downturns. our total commitment to return
leadership and our disciplined
We are pursuing every avenue 5,000 jobs, most of which were
investment strategy to accelerate
to control expenses and improve previously outsourced offshore
revenue growth beyond our
processes. We are prioritizing by our vendors.
current expectations.
investments to capitalize on our
growth opportunities. And we will As always, our employees reached
I’m also confident that the people
continue to maintain a strong out to help their neighbors, from
of AT&T — with their competitive
balance sheet. Behind these efforts rebuilding efforts in the wake of
drive, their passion to serve and
is a seasoned, disciplined leadership devastating storms to mentoring
their commitment to innovation
team that knows how to execute. students through job shadowing
— will be a significant competitive
Our objective is to drive cash flow, initiatives. And AT&T supports
advantage as we continue to lead
enabling us to create long-term their good work with charitable
our industry.
value for stockholders and invest dollars, including our $100 million
in AT&T’s future. I have every AT&T Aspire initiative to combat high
Our employees are a big reason why
confidence that we will emerge dropout rates in U.S. high schools.
AT&T has been named the world’s
stronger than our competitors
most admired telecommunications
when the economy recovers. We also recognize our responsibility
company by Fortune magazine nine
to minimize our impact on the
of the past 12 years. I thank them
I’m just as confident in our ability environment. So, we’re more
for all they do.
to generate long-term growth by committed than ever to sustainable
strategically investing in areas that operations. We formed an Energy
Finally, I thank you, our investors,
build on our industry leadership: Council, comprised of executives
for your continuing confidence.
across the company, to improve and
Adding mobility to meet our We have substantial opportunities
optimize energy efficiencies. We use
customers’ growing need to ahead of us to deliver more for our
alternative energy where possible
connect and access content and customers and to build value for
and have expanded the use of
applications anytime and from you. I look forward to reporting on
alternative-fuel vehicles in our fleet.
more places. our continuing progress.
Delivering more bandwidth to
What sets AT&T apart
support the exploding volume
Let me leave you with
Sincerely,
of traffic that travels over
a couple of thoughts:
our networks.
Our long-term future remains
Expanding our scale to provide
very bright. The underlying global
connectivity to more people in
demand for connectivity continues
more locations.
to grow — and no company is Randall Stephenson
Delivering additional value- better positioned to meet it than Chairman, Chief Executive Officer
added applications and services AT&T. My confidence flows from and President
efficiently and seamlessly over the knowledge that we offer the February 17, 2009
our networks. best products and services in
AT&T Annual Report 2008
6
Above: Great services. Great devices. Great networks.
They all work together to keep our customers
connected — anytime and in more places.
AT&T Annual Report 2008
Consumer Services
7
Wireless
The need to stay connected — with people, events, information —
Data Revenues
is integral to the way we live our lives. From the moment we get out of
bed to the second our head hits the pillow, we use a variety of devices
to check e-mail, text friends, share photos, download songs, update
social networking sites, surf the Web and watch movies and TV shows.
No wonder the demand for next few years, our wireless 6
anytime, anywhere connectivity networks will be even faster. $2.7 $4.3 $6.9 $10. In billions
continues to grow. And as it does, So as the demand for connectivity 05 06 07 08
no one is better positioned than grows, AT&T will be ready. Internet, messaging, e-mail and
video are driving strong data
AT&T to deliver that connectivity
revenue growth.
— from wireless and video to Great devices on a great network
wired broadband and Wi-Fi. A premier network attracts strong
Wireless Subscribers
alliances and terrific devices. That’s in Service
Fast connections why AT&T brings our customers the
in a wireless world hottest devices available today.
Today’s consumers expect
two things. They want to stay Two years ago, we worked with
connected wherever they are. Apple to introduce the iPhone, the
And they want to do that at world’s first truly mobile computing
broadband speeds. So mobility device. In 2008, we again joined
and speed are the cornerstones of with Apple to introduce iPhone 3G.
1 0 1 0
our consumer wireless business. Carried exclusively by AT&T in 54. 61. 70. 77. In millions
the U.S., iPhone 3G takes the 05 06 07 08
It starts with the best wireless mobile experience to a whole AT&T added 7.0 million
subscribers in 2008, more than
coverage worldwide — available new level — with faster speeds,
any other U.S. carrier, and
in more than 210 countries for more functionality and greater ended the year as the nation’s
largest wireless provider.
voice and more than 160 for data. computing capabilities. We’re proud
It continues with the nation’s that iPhone 3G is now the best-
fastest 3G network — available selling wireless device in the U.S.2
in nearly 350 major metropolitan
areas. And looking to the future, Another AT&T exclusive, the
we continue to invest in our BlackBerry Bold gives customers
networks to offer more speed who prefer a traditional keyboard
in more places. In 2009, we’ll another choice of a powerful
continue to expand and enhance 3G device. The Bold offers 3G
our 3G wireless network; we plan services in more than 65 countries,
to begin testing peak speeds 2G data services in more than
up to 20 megabits per second 160 countries and voice service
— about six times faster than in more than 210 countries.
today’s top speeds. Over the
AT&T Annual Report 2008
AT&T added more wireless subscribers Defining the future
Mobility isn’t just about people
in 2008 than any other U.S. carrier.
connecting with people. We
8
are quickly moving toward a
world in which any electronic
device can wirelessly connect
We also offer a full portfolio of That’s why we’re giving our to our network. To address
mobile phones to match every customers more content choices this opportunity, we created
need, lifestyle and pocketbook: — and delivering additional a new organization to bring
from GoPhone® prepaid phones capabilities to their wireless wireless connectivity to entirely
to a large lineup of devices handsets. By the end of last year, new classes of devices and
designed for easy texting, from our customers had access to more applications — including in-car
video-capable devices to a than 90,000 pieces of mobile entertainment, navigation systems,
full suite of smartphones. content — ranging from mobile cameras, book readers, gaming
banking and social networking devices and many more. By some
Doing more on the network services to local search with estimates, service revenues
Today, keeping people connected YELLOWPAGES.COM Mobile from these mobile Internet and
means helping them access their and international mapping and machine-to-machine devices could
favorite content and applications directions with AT&T Navigator. reach more than $90 billion by
— from wherever they are and on 2013.3 We will be positioned
whatever device they’re using. As customers used their wireless to capitalize on this growth.
devices to do more things, we
saw our wireless data revenues Today, more than 1 billion devices
grow by more than 50 percent connect to AT&T’s wired and
each quarter in 2008. Today, we wireless networks — and it took
are the leader in wireless data, us more than a century to get
and we remain focused on helping there. As we continue to pioneer
our customers do even more. new ways for people and devices
“I count on 7:30 a.m. 8 a.m.
My alarm Surfing the Web
goes off, and I start over breakfast to catch up
blasting Ludacris to wake on my favorite blogs and
AT&T all day.” myself up. check the weather. Hmm
… cloudy and 37 degrees
iPhone 3G alarm. today. Better grab my coat.
Music on iTunes.
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