AT&T INC. annual report, FY2013

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AT&T Inc. 2013 Form 10-K Summary

Business context and reporting period

This is AT&T’s annual report for the fiscal year ended December 31, 2013, not a standalone fourth-quarter report. AT&T provides wireless, wireline, broadband, video, business networking, and wholesale services. Its reportable segments are Wireless, Wireline, and Other.

Financial and operating metrics

  • Financial statement values: The supplied filing text incorporates the company’s annual report for its consolidated financial statements and MD&A, but does not include those figures. Revenue, net income, margins, cash flow, debt, liquidity, and capital expenditure values therefore cannot be stated clearly from this text.
  • Segment mix: Wireless accounted for approximately 54% of 2013 segment operating revenues and 76% of segment income; Wireline accounted for approximately 46% of segment revenues and 27% of segment income. Other contributed less than 1% of segment revenues and recorded a segment loss.
  • Revenue composition: Wireless data represented 17% of consolidated revenue in 2013, up from 14% in 2012 and 12% in 2011. Wireless voice, text, and other service declined to 31%, from 32% and 33%. Wireline data rose to 26%, from 25% and 23%, while Wireline voice fell to 16%, from 18% and 20%.
  • Scale and reach: AT&T served more than 110 million wireless subscribers. It marketed U-verse to approximately 27 million locations and reported 10.7 million total U-verse subscribers, including 10.4 million Internet and 5.5 million video subscribers.
  • Capital returns: Dividends declared were $1.81 per share in 2013, versus $1.77 in 2012. AT&T repurchased 366 million shares for $13.028 billion in 2013; 371 million shares for $12.752 billion in 2012.
  • Research and development: Expense was $1.488 billion in 2013, compared with $1.278 billion in 2012 and $1.307 billion in 2011.

Material changes versus prior periods

The reported revenue mix continued shifting toward wireless and wireline data and away from traditional voice. Wireless data’s share increased three percentage points year over year, and Wireline data’s share increased one point; Wireline voice’s share declined two points. Dividends per share increased modestly, while share repurchases remained substantial. These are mix and capital-return comparisons, not changes in total revenue or earnings.

Outlook, commentary, risks, and unusual items

  • Management planned to continue expanding LTE coverage, targeting approximately 300 million people and near completion by summer 2014. It expected to discontinue 2G service around January 1, 2017; about 4% of postpaid subscribers used 2G-capable handsets at year-end 2013.
  • AT&T planned to expand IP broadband to approximately 57 million customer locations, including U-verse availability to 33 million, with substantial completion expected in the 2015–2016 timeframe. It also planned to transition wireline customers in its 22-state area to IP-based services by the end of 2020.
  • Management noted wireless spectrum and capacity constraints in some markets, with potential effects on service quality and new-service deployment if not addressed. It closed more than 60 spectrum and wireless-operation acquisition deals in 2013.
  • Key risks include competition and pressure on subscriber and access-line totals; network investment and spectrum availability; regulation of broadband, IP services, and U-verse; benefit-plan costs; litigation; and network outages, security breaches, severe weather, or supplier disruptions.
  • In December 2013, AT&T agreed to sell its Connecticut local exchange operations. The filing also describes environmental proceedings and U-verse regulatory disputes; management did not expect the disclosed environmental matters to have a material adverse effect.
  • The filing says AT&T Next could increase equipment revenue and proportionately reduce service revenue in 2014. Management expected the 2G transition not to materially affect operating results.

Important facts for investors to verify

  • Review the incorporated annual report’s financial statements and MD&A for actual revenue, earnings, margins, operating cash flow, capital spending, debt, and liquidity, which are not provided in the supplied text.
  • Check whether wireless data growth and U-verse/IP expansion offset traditional voice declines, and assess the related investment requirements and returns.
  • Verify the status and financial effects of the Connecticut sale and other announced transactions, including the Leap Wireless merger agreement.
  • Assess spectrum capacity, regulatory outcomes, and competition risks alongside management’s network and service-expansion plans.