AT&T Inc. today reported strong first-quarter results, highlighted by a significant ramp in consolidated revenue growth, led by improved results in wireless and enterprise, and further expansion of wireless and consolidated margins. This marked AT&T's 12th consecutive quarter of double-digit growth in adjusted earnings per share.
"We delivered an excellent first quarter and a solid start to the year," said Randall Stephenson, AT&T chairman and chief executive officer. "Revenue growth continues to ramp, we have good momentum across key growth areas, major cost initiatives are on track, and our operational results reinforce the confidence we have in our outlook.
"AT&T's goal is to innovate and lead in a communications world driven by mobility and interactivity," Stephenson said. "To that end, as we deliver strong earnings and return substantial value to shareowners, we are also taking important steps to expand our networks and product sets to drive continued growth in wireless, broadband and IP-based services.
"AT&T is moving quickly to create the next generation of wireless," Stephenson said. "The future of wireless has never been more promising, and I am very pleased that through our transaction with Aloha Partners and our successful bids in the recently completed auction, we have assembled the industry's premier, high-quality wireless spectrum position. This spectrum will provide a terrific foundation for new wireless and integrated services, and it significantly advances AT&T's long-term growth potential."
Reported Results: Ramp in Revenue Growth, Net Income Growth
For the quarter ended March 31, 2008, AT&T's revenues totaled $30.7 billion, up 6.1 percent versus reported results in the year-earlier quarter and up 4.6 percent compared with first-quarter 2007 pro forma revenues, which exclude merger-related accounting impacts on directory revenues. This marks a substantial step up from year-over-year pro forma revenue growth of 2.9 percent in the fourth quarter of 2007 and 1.7 percent in the first quarter of 2007.
Compared with results for the year-earlier first quarter, AT&T's reported operating expenses for the first quarter of 2008 were $24.8 billion, up from $24.3 billion; reported operating income was $6.0 billion, up from $4.7 billion; and AT&T's reported operating income margin was 19.5 percent, up from 16.1 percent.
AT&T's reported first-quarter 2008 net income totaled $3.5 billion, up 21.5 percent from $2.8 billion in the year-earlier first quarter, and reported earnings per diluted share totaled $0.57, up 26.7 percent from $0.45 in the first quarter of 2007.
Double-Digit Growth in Adjusted EPS
AT&T's adjusted results for the first quarter of 2008 exclude merger-related amortization expenses and costs associated with a workforce reduction. Adjusted results for the first quarter of 2007 excluded merger-related costs and accounting effects as well as gains from wireless transactions.
Compared with results for the year-earlier first quarter, AT&T's adjusted operating expenses for the first quarter of 2008 totaled $23.2 billion, versus $22.4 billion; adjusted operating income was $7.6 billion, up from $7.0 billion; and AT&T's adjusted operating income margin was 24.6 percent, up from 23.7 percent.
AT&T's adjusted first-quarter 2008 net income totaled $4.5 billion, up 10.3 percent from $4.1 billion in the year-earlier first quarter, and adjusted earnings per diluted share totaled $0.74, up 13.8 percent from $0.65 in the first quarter of 2007.
AT&T's merger integration and operational cost initiatives continue on schedule. For the full year 2007, operating expense savings from BellSouth and AT&T Corp. merger integration efforts and previously outlined operational initiatives totaled approximately $3.9 billion. AT&T expects these expense savings to grow in 2008 by more than $2 billion dollars.
Cash From Operations, Share Repurchases
Compared with results in the year-earlier first quarter, AT&T's cash from operating activities for the first quarter of 2008 totaled $5.0 billion, up from $4.6 billion; capital expenditures totaled $4.2 billion, versus $3.3 billion; and free cash flow (cash from operations minus capital expenditures) totaled $0.7 billion, compared with $1.3 billion.
As it invests in the future of its business, AT&T continues to return substantial value to shareowners through dividends and share repurchases. In the first quarter, dividends paid totaled $2.4 billion and shares repurchased totaled 111.6 million for $4.1 billion. AT&T ended the quarter with 5.9 billion shares outstanding.
First-Quarter Operational Highlights
AT&T delivered strong wireless growth in the first quarter, reflecting the company's high-quality network, innovative services, attractive handset selection, extensive sales reach and continued improvements in operations. First-quarter 2008 results included:
* Accelerated Wireless Revenue Growth. Total wireless revenues increased 18.3 percent versus the year-earlier first quarter to $11.8 billion. Wireless service revenues, which exclude handset and accessory sales, grew 17.1 percent to $10.6 billion. Revenue growth was driven by strong subscriber gains and continued improvement in ARPU (average monthly revenues per subscriber). AT&T has now posted seven consecutive quarters of year-over-year growth in wireless service ARPU, which was $50.18 in the first quarter, up 2.0 percent versus the year-earlier first quarter. Retail postpaid subscriber ARPU growth was even stronger, up approximately 5 percent.
* Robust Growth in Wireless Data Services. Wireless data revenues grew 57.3 percent versus results in the year-earlier first quarter to $2.3 billion, reflecting robust increases in Internet access, e-mail, messaging, data access and media bundles. Data now represents 21.5 percent of AT&T's total wireless service revenues, up from 16.0 percent in the first quarter of 2007 and 10.9 percent in the first quarter of 2006. During the first quarter, AT&T's wireless customers sent more than 620 million multimedia messages and 44 billion text messages, both volumes more than double totals in the year-earlier first quarter.
* Improved Wireless Subscriber Gains. AT&T's first-quarter net gain in wireless subscribers totaled 1.3 million, up 104,000, or 8.7 percent, versus net adds in the year-earlier first quarter. AT&T ended the quarter with 71.4 million subscribers in service. Total net adds in the first quarter were reduced by approximately 330,000 because of the shutdown of AT&T's TDMA wireless network in late February. Retail postpaid net adds totaled 705,000 in the first quarter, up 3.7 percent versus net adds in the year-earlier first quarter.
* Strong Gross Adds. AT&T continued its strong record of wireless subscriber flow share with 5.0 million first-quarter gross subscriber additions, up from 4.3 million in the year-earlier first quarter. Total average monthly subscriber churn, which includes postpaid, prepaid and reseller subscribers, was 1.7 percent, flat with the year-earlier first quarter and with the fourth quarter of 2007. Retail postpaid churn was 1.2 percent, down from 1.3 percent in the year-earlier first quarter and flat with the fourth quarter of 2007.
* Strong Wireless Operating Income Growth. On a reported basis, AT&T's first-quarter wireless operating expenses totaled $8.9 billion, and operating income was $3.0 billion, up 94.1 percent from $1.5 billion in the first quarter of 2007. On an adjusted basis, wireless operating expenses, which exclude merger-related costs, totaled $8.3 billion, and operating income was $3.5 billion, up 38.5 percent from $2.5 billion in the first quarter of 2007.
* Wireless Margin Expansion. AT&T's reported wireless operating income margin was 25.0 percent, up from 15.2 percent in the year-earlier first quarter, and its adjusted wireless operating income margin was 29.8 percent, up from 25.5 percent in the year-earlier first quarter. AT&T's first-quarter wireless OIBDA service margin was 41.7 percent, the highest ever achieved by the company's wireless segment, up from an unadjusted 37.5 percent and an adjusted 38.9 percent in the year-earlier first quarter. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.)