AT&T INC. annual report, FY2009

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AT&T Inc. — 2009 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2009. The filing is an annual report, not a standalone fourth-quarter report. The supplied text incorporates the annual report’s financial statements and MD&A by reference but does not include their detailed figures.

Business context and operating performance

AT&T provides wireless, wireline, broadband, video, business networking, wholesale, and directory advertising services. Its four reportable segments are Wireless, Wireline, Advertising Solutions, and Other.

  • At year-end, AT&T served 85.1 million wireless customers.
  • U-verse ended 2009 with approximately 2.065 million video customers. Its network passed 22.8 million living units, and services were marketed to almost 72% of them.
  • Wireline subsidiaries served approximately 26 million retail consumer, 20 million retail business, and 3 million wholesale access lines.
  • Wireless accounted for approximately 43% of segment operating revenues and 60% of segment income; Wireline accounted for approximately 52% and 36%, respectively. Advertising Solutions represented approximately 4% of segment revenues and 6% of segment income; Other represented approximately 1% and less than 1%.

Financial metrics and year-over-year comparisons

The supplied filing text does not provide clear consolidated values for revenue, net income, operating cash flow, margins, debt, cash, or liquidity. Those figures are incorporated by reference to the stockholder annual report, which is not included in the supplied text.

  • Revenue mix shifted toward wireless service: wireless service represented 40% of consolidated operating revenues in 2009, versus 36% in 2008 and 33% in 2007.
  • Wireline voice represented 27% of consolidated operating revenues in 2009, versus 31% in 2008 and 35% in 2007. Wireline data represented 22%, versus 20% in both 2008 and 2007.
  • Declared dividends totaled $1.65 per share in 2009, compared with $1.61 in 2008.
  • Research and development expense was $986 million in 2009, $832 million in 2008, and $985 million in 2007.

Outlook, management commentary, and risks

  • For 2010, AT&T planned to focus on wireless growth, business and wholesale customers, and expansion of U-verse and IP-based services. It announced plans to transition its wireless network to LTE in 2011. The supplied text provides no numeric earnings or revenue guidance.
  • Management identified customer retention, wireless data demand, network quality, device availability, and profitable service offerings as important to growth. Traditional wireline voice revenues faced continued pressure from customers switching to wireless, cable, and internet-based alternatives, as well as the recession.
  • U-verse deployment could be delayed by permitting, equipment or software availability, and regulatory disputes. Litigation and regulatory questions concerning video-service classification and public, educational, and governmental programming could raise costs or constrain deployment.
  • Other cited risks included competition and pricing pressure, regulation and litigation, spectrum availability and cost, network or supplier disruptions, benefit-plan costs, economic conditions, and labor negotiations.
  • Approximately 120,000 collectively bargained wireline employees had contracts that expired during 2009. New agreements had been ratified for approximately 86,000 employees; a tentative agreement covering approximately 30,000 employees in the former BellSouth region remained subject to ratification.
  • AT&T expected to settle EPA allegations involving backup power systems for penalties of $1–$3 million. A separate Philadelphia matter was settled in 2009 for less than $100,000. The company stated that it did not believe the identified environmental proceedings would materially adversely affect results.

Most important facts for investors to verify

  1. Review the incorporated annual report for 2009 and comparative revenue, earnings, cash flow, margins, debt, liquidity, capital expenditures, and segment results; these values are not clear in the supplied text.
  2. Assess whether wireless growth and data demand offset declines in traditional wireline voice, and examine customer churn and wireless network capacity.
  3. Check U-verse customer growth, deployment costs, permitting progress, and the outcomes of related regulatory and legal disputes.
  4. Verify final labor-agreement ratifications and the eventual resolution and cost of the EPA matter.
  5. Compare dividend commitments with reported cash generation and debt maturities using the full financial statements.